AGREEMENT AND PLAN OF MERGER
By and Among
Action Telcom Co.,
Xxxxx X. Xxxxxxxx,
Xxxxxxx Xxxxxxx Bilberry,
Xxxx X Xxxxxxxx,
GST Action Telecom, Inc.
and
GST Telecommunications, Inc.
--------------------------
Dated as of May 31, 1997
--------------------------
TABLE OF CONTENTS
Page
ARTICLE I TRANSACTIONS AND TERMS OF THE MERGER.........................2
1.1 Merger ..................................................2
1.2 Time and Place of Closing................................2
1.3 Effective Time...........................................2
1.4 Charter..................................................2
1.5 Bylaws ..................................................2
1.6 Directors and Officers...................................2
1.7 Conversion of Shares.....................................3
1.8 Anti-Dilution Provisions.................................4
1.9 Shares Held in Treasury..................................4
1.10 Fractional Shares........................................4
1.11 Rights of Former Shareholders of the Company.............5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SELLERS..............................5
2.1 Corporate Organization; Requisite Authority
to Conduct Business; Articles of Incorporation
and By-Laws .............................................5
2.2 Capitalization...........................................6
2.3 Subsidiaries, Etc........................................6
2.4 Authority Relative to and Validity of Agreements.........6
2.5 Required Filings and Consents; No Conflict...............7
2.6 Financial Statements; Books of Account; Records..........7
2.7 No Undisclosed Liabilities...............................8
2.8 Absence of Certain Changes and Events....................8
2.9 Taxes and Tax Returns....................................9
2.10 Employee Benefit Plans...................................9
2.11 Title to Property.......................................10
2.12 Trademarks, Patents and Copyrights......................10
2.13 Legal Proceedings, Claims, Investigations, Etc..........11
2.14 Insurance...............................................12
2.15 Material Contracts......................................12
2.16 Certain Transactions....................................13
2.17 Broker .................................................13
2.18 Environmental Matters...................................13
2.19 Illegal Payments........................................14
2.20 Compliance with Law.....................................14
2.21 Receivables.............................................15
2.22 Labor .................................................15
2.23 Officers, Employees and Compensation....................16
2.24 Banks; Safe Deposit Boxes...............................17
2.25 Credit Terms............................................17
2.26 Tax and Regulatory Matters..............................17
2.27 Closing Date Effect.....................................17
2.28 Complete Disclosure.....................................17
2.29 Texas Articles and Plan of Merger.......................17
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PAGE
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ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE GST COMPANIES....................................18
3.1 Corporate Organization; Requisite Authority
to Conduct Business; Certificate of Incorporation
and By-Laws ............................................18
3.2 Execution and Delivery..................................18
3.3 No Conflicts; Absence of Defaults.......................19
3.4 Capitalization..........................................19
3.5 SEC Reports and Financial Statements....................19
3.6 Legal Proceedings, Claims, Etc..........................20
3.7 Broker .................................................20
3.8 Closing Date Effect.....................................20
3.9 Complete Disclosure.....................................20
ARTICLE IV ADDITIONAL REPRESENTATIONS
AND WARRANTIES OF THE SELLERS..........................21
4.1 Title to Shares; Authority..............................21
4.2 Authority Relative to and Validity of Agreements........21
4.3 Required Filings and Consents...........................21
4.4 Investment..............................................22
4.5 Exemption from Registration.............................22
4.6 Accredited Investor.....................................22
4.7 Available Information...................................22
4.8 Seller Representative...................................23
4.9 Transfer Restrictions...................................23
4.10 Legend .................................................24
4.11 Citizenship; Age; Residence.............................24
4.12 Finders.................................................24
4.13 Indebtedness............................................24
ARTICLE V COVENANTS OF THE COMPANY AND THE SELLERS....................25
5.1 Covenants of the Company Regarding Conduct of
Business Operations Pending the Closing.................25
5.2 No Other Negotiations...................................26
5.3 Approval by Sellers.....................................27
5.4 Outstanding Indebtedness................................27
5.5 Regulatory Approvals....................................27
ARTICLE VI ADDITIONAL COVENANTS.......................................27
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY AND THE SELLERS........................29
7.1 Representations and Warranties True....................29
7.2 Performance of Covenants...............................29
7.3 No Proceedings.........................................29
7.4 Ancillary Documents....................................29
7.5 Consents and Approvals.................................29
7.6 Opinion of Counsel to the GST Companies................30
7.7 Material Changes.......................................31
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PAGE
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ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE GST COMPANIES................................31
8.1 Representation and Warranties True.....................31
8.2 Performance of Covenants...............................31
8.3 No Proceedings.........................................31
8.4 Ancillary Documents....................................31
8.5 Consents and Approvals.................................31
8.6 Opinion of the Company's and Sellers' Counsel..........32
8.7 Material Changes.......................................33
8.8 Due Diligence..........................................33
8.9 Approval by the Sellers................................33
8.10 Appraisal Rights.......................................33
ARTICLE IX INDEMNIFICATION...........................................33
9.1 Indemnification by the Company and Sellers.............33
9.2 Indemnification by the GST Companies...................34
9.3 Survival...............................................34
9.4 Limitations............................................35
9.5 Third Party Claims.....................................36
9.6 Reduction for Insurance................................37
9.7 Materiality Interpretation.............................37
9.8 Notice of Claim; Dispute...............................37
ARTICLE X TERMINATION................................................38
10.1 Termination...........................................38
10.2 Effect of Termination.................................38
ARTICLE XI MISCELLANEOUS.............................................38
11.1 Expenses..............................................38
11.2 Notices...............................................38
11.3 Entire Agreement......................................39
11.4 Binding Effect, Benefits, Assignments.................39
11.5 Right of Set-off......................................40
11.6 Amendment; Waiver; Consent............................40
11.7 Governing Law.........................................40
11.8 Arbitration...........................................40
11.9 Severability..........................................41
11.10 Headings..............................................41
11.11 Counterparts..........................................41
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EXHIBITS
Exhibit A Form of Purchase Price Note
Exhibit B-1 Texas Articles of Merger
Exhibit B-2 Texas Plan of Merger
Exhibit C Form of Employment Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Amended Note
SCHEDULES
Schedule 2.3 Subsidiaries
Schedule 2.5 Required Filings and Consents; No Conflict
Schedule 2.6 Financial Statements; Books of Account;
Records
Schedule 2.7 No Undisclosed Liabilities
Schedule 2.8 Absence of Certain Changes and Events
Schedule 2.10 Employee Benefit Plans
Schedule 2.11 Title to Property
Schedule 2.12 Trademarks, Patents and Copyrights
Schedule 2.13 Legal Proceedings, Claims, Investigations,
Etc.
Schedule 2.14 Insurance
Schedule 2.15 Material Contracts
Schedule 2.16 Certain Transaction
Schedule 2.20 Compliance with Law
Schedule 2.23 Officers, Employees and Corporation
Schedule 2.24 Banks; Safe Deposit Boxes
Schedule 2.25 Credit Terms
Schedule 3.1 Corporate Organization; Requisite Authority
to Conduct Business; Certificate of
Incorporation and By-Laws
Schedule 3.2 Execution and Delivery
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AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of May 31,
1997, by and among ACTION TELCOM CO., a Texas corporation (the "Company"), Xxxxx
X. Xxxxxxxx, Xxxxxxx Xxxxxxx Bilberry, and Xxxx X Xxxxxxxx (each a "Seller" and
collectively the "Sellers"), GST ACTION TELECOM, INC., a Delaware corporation
("Sub"), and GST TELECOMMUNICATIONS, INC., a federally chartered Canadian
corporation ("GST" or the "Buyer").
Sub and GST are collectively the "GST Companies." Sub is a newly-formed
Delaware corporation that is a wholly-owned subsidiary of GST. GST is a public
company whose Common Shares, without par value (the "GST Common Shares"), are
traded on the American Stock Exchange (the "AMEX").
PREAMBLE
The Boards of Directors of the Company and the GST Companies are of the
opinion that the transactions described herein are in the best interests of the
parties and their respective shareholders. This Agreement provides for the
acquisition of the Company by GST pursuant to a merger whereby the Company
merges with and into Sub. At the Effective Time of the Merger (as such terms are
hereinafter defined), the outstanding shares of capital stock of the Company,
par value $1.00 per share (the "Company Stock") shall be converted into the
right to receive GST Common Shares and cash. As a result, each of the Sellers,
who are currently all of the Company's shareholders, shall become shareholders
of GST and Sub shall continue as a wholly-owned subsidiary of GST.
The transactions described in this Agreement have been approved by GST,
the sole shareholder of Sub, and are subject to obtaining certain regulatory
approvals and the satisfaction of certain other conditions described in this
Agreement. The Company intends promptly to submit this Agreement to the Sellers
for their approval.
The Sellers own the number of shares of Company Common Stock set forth
below, which constitutes all the outstanding capital stock of the Company:
Xxxxx X. Xxxxxxxx - 291 2/3 shares
Xxxxxxx Xxxxxxx Bilberry - 291 2/3 shares
Xxxx X Xxxxxxxx - 291 2/3 shares
It is the intention of the parties hereto that the Merger shall qualify
for federal income tax purposes as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual
warranties, representations, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I TRANSACTIONS AND TERMS OF THE MERGER
Section 1.1 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Company shall be merged with and into Sub,
in accordance with the provisions of Section 252 of the General Corporation Law
of the State of Delaware (the "Delaware Act") and Sections 5.01 through 5.04 of
the Texas Business Corporation Act (the "TBCA") (the "Merger"). Sub shall be the
surviving corporation of the Merger (the "Surviving Corporation") and a
wholly-owned subsidiary of GST and shall continue to be governed by the laws of
the State of Delaware. The Merger shall be consummated pursuant to the terms of
this Agreement, which has been approved and adopted by the respective Boards of
Directors of the Company and each of the GST Companies.
Section 1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place on the date that the
Effective Time occurs, or at such other time as GST and the Company, acting
through their authorized officers, may mutually agree (the date on which such
Closing occurs being hereinafter referred to as the "Closing Date"). The Closing
shall be held at the office of GST's counsel, Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx
LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx.
Section 1.3 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the certificate of merger reflecting the Merger (the "Certificate of
Merger") shall become effective with the Secretary of State of the State of
Delaware (the "Effective Time"). Subject to the terms and conditions hereof,
unless otherwise mutually agreed upon in writing by authorized officers of GST
and the Company, the parties shall use their reasonable efforts to cause the
Effective Time to occur within five business days following the satisfaction or
waiver of the last of the conditions precedent to the consummation of the
transactions contemplated hereby.
Section 1.4 CHARTER. The Certificate of Incorporation of Sub in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until otherwise amended or repealed.
Section 1.5 BYLAWS. The Bylaws of Sub in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
Section 1.6 DIRECTORS AND OFFICERS. The directors and officers of Sub
in office immediately prior to the Effective Time, together with such additional
persons as may thereafter be elected, shall serve as the respective directors
and officers of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation.
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Section 1.7 CONVERSION OF SHARES. Subject to the provisions of this
Section 1.7 through Section 1.10 hereof, at the Effective Time, by virtue of the
Merger and without any action on the part of the Company, the GST Companies or
the shareholders of any of the foregoing, the shares of the constituent
corporations to the Merger shall be converted as follows:
(a) Each GST Common Share issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
(b) Each share of common stock of Sub issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(c) All of the shares of Company Stock issued and outstanding
at the Effective Time shall cease to be outstanding and shall be
converted into the right to receive (i) 903,000 restricted GST Common
Shares (the "Exchange Shares"), subject to adjustment in accordance
with Section 1.7(c)(i) hereof, and (ii) $3,870,000 in cash (the "Cash
Payment" and together with the Exchange Shares, the "Consideration")
payable as set forth below.
(i) The Exchange Shares shall be delivered to the
Sellers on the Closing Date in exchange for certificates
representing all outstanding shares of Company Stock, duly
endorsed in blank or accompanied by stock powers executed in
blank. In the event that the average closing sale price of a
GST Common Share on the AMEX, or GST's then principal United
States trading market if other than the AMEX (the "Average
Closing Sales Price"), for the 10 consecutive trading days
ending three trading days prior to the first anniversary of
the Closing Date (the "First Anniversary") does not exceed $10
per GST Common Share, GST shall, no later than the First
Anniversary, deliver to the Sellers an additional 30,000
restricted GST Common Shares (the "Initial Additional
Payment"). In addition, in the event that the Average Closing
Sales Price for the 10 consecutive trading days ending three
trading days prior to the second anniversary of the Closing
Date (the "Second Anniversary") does not exceed $10 per GST
Common Share, GST shall, no later than the Second Anniversary,
deliver to the Sellers an additional 120,000 restricted GST
Common Shares (the "Second Additional Payment" and, together
with the Initial Additional Payment, the "Additional
Payments").
(ii) On each of the Closing Date, the First
Anniversary and the Second Anniversary, $1,290,000 of the Cash
Payment shall be paid to the Sellers by wire
3
transfer of immediately available funds in accordance with the
Sellers' written instructions; provided, However, that in
addition to the $1,290,000 to be paid on each of the First
Anniversary and Second Anniversary, the payments to be made on
each of such dates shall include an additional amount equal to
the interest accrued thereon at the rate of 8.5% per annum
from the Closing Date to the date of each respective payment.
GST's obligations to make the payments referred to in this
subparagraph (ii) shall be evidenced by a promissory note in
the principal amount of $860,000.00 in substantially the form
of Exhibit A attached hereto issued to each of the Sellers
(collectively, the "Purchase Price Notes").
Section 1.8 ANTI-DILUTION PROVISIONS. In the event GST changes the
number of GST Common Shares issued and outstanding prior to the Effective Time
(or subsequent to the Effective Time but prior to the First Anniversary or
Second Anniversary, as the case may be, if, by the terms of this Agreement,
Additional Payments are to be made on either or both of such dates) as a result
of a stock split, stock dividend or similar recapitalization with respect to
such stock (each a "Dilutive Event") and the record date therefor (in the case
of a stock dividend) or the effective date thereof (in the case of a stock split
or similar recapitalization for which a record date is not established) shall be
prior to the Effective Time (or subsequent to the Effective Time but prior to
the First Anniversary or Second Anniversary, as the case may be, if, by the
terms of this Agreement, Additional Payments are to be made on either or both of
such dates), the number of Exchange Shares (or GST Common Shares representing
one or more Additional Payments, as the case may be) payable to the Sellers
shall be adjusted to reflect the same ownership percentage as such Exchange
Shares (or GST Common Shares representing one or more Additional Payments, as
the case may be) would have represented immediately prior to such Dilutive
Event.
Section 1.9 SHARES HELD IN TREASURY. Each of the shares of Company
Stock held by the Company as treasury stock shall be cancelled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
Section 1.10 FRACTIONAL SHARES. Anything set forth in this Agreement to
the contrary notwithstanding, each holder of shares of Company Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a GST Common Share (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to (i) such fractional part of a GST Common Share
multiplied by (ii) the Average Closing Sales Price for the 10 consecutive
trading days ending three trading days prior to the time such GST Common Shares
would be payable in accordance with Section 1.7(c) hereof. No such holder will
be entitled to
4
dividends, voting rights, or any other rights as a shareholder in respect of any
fractional shares.
Section 1.11 RIGHTS OF FORMER SHAREHOLDERS OF THE COMPANY. At the
Effective Time, the stock transfer book of the Company shall be closed as to
holders of Company Stock immediately prior to the Effective Time and no transfer
of Company Stock by any such holder shall thereafter be made or recognized.
Until surrendered for exchange at the Closing, each certificate theretofore
representing shares of Company Stock (other than shares to be cancelled pursuant
to Section 1.9 hereof) shall from and after the Effective Time represent for all
purposes only the right to receive the Consideration in exchange therefor,
subject, however, to the Company's obligation to pay any dividends or make any
other distributions with a record date prior to the Effective Time which have
been declared or made by the Company in respect of such shares of Company Stock
in accordance with the terms of this Agreement and which remain unpaid at the
Effective Time. Whenever a dividend or other distribution is declared by GST on
the GST Common Shares, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all GST
Common Shares issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of GST Common Shares as of any
time subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Company Stock issued and outstanding at the
Effective Time unless such certificate is surrendered at the Closing.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SELLERS
The Company and each of the Sellers hereby, jointly and severally,
represents and warrants to the GST Companies as follows:
Section 2.1 CORPORATE ORGANIZATION; REQUISITE AUTHORITY TO CONDUCT
BUSINESS; ARTICLES OF INCORPORATION AND BY-LAWS. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas. The Company has provided GST with true and complete copies of
its Articles of Incorporation (certified by the Secretary of State of the State
of Texas) and By-laws (certified by the Secretary of the Company) as in effect
on the date hereof. Prior to the Closing, the minute books of the Company will
be delivered to the Buyer and will contain true and complete records of all
meetings and consents in lieu of meeting of the Company's Board of Directors and
of the Company's shareholders since the incorporation of the Company, which
accurately reflect in all material respects all transactions referred to in such
minutes and consents in lieu of meeting. The Company has all corporate power and
authority to own, operate and lease its properties and to carry on its business
as the same is
5
now being conducted. The Company is duly qualified or licensed to do business
and is in good standing as a foreign corporation in every jurisdiction in which
the conduct of its business or the ownership or leasing of its properties
requires it to be so qualified or licensed, except where the failure to be so
qualified or licensed would not have a material adverse effect on the business,
properties, assets, liabilities, condition (financial or otherwise), results of
operations or net worth of the Company (a "Company Material Adverse Effect").
Section 2.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000 shares of Company Stock, 875 of which are issued and
outstanding. The Sellers own all of the shares of Company Stock, which ownership
is held free and clear of all liens, claims or encumbrances. The capital stock
of the Company is duly authorized and all issued capital stock has been duly and
validly issued and is fully paid and non-assessable and free of preemptive or
similar rights. There is not outstanding, and the Company is not bound by or
subject to, any subscription, option, warrant, call, right, contract,
commitment, agreement, understanding or arrangement to issue any additional
shares of capital stock of the Company including, without limitation, any right
of conversion or exchange under any outstanding security or other instrument,
and no shares are reserved for issuance for any purpose. There are no voting
trusts or other agreements or understandings of any kind with respect to the
Company's outstanding capital stock.
Section 2.3 SUBSIDIARIES, ETC. Except as set forth on Schedule 2.3
hereto, the Company does not own (directly or indirectly) any equity interest in
any corporation, partnership, limited liability company, joint venture,
association or other entity.
Section 2.4 AUTHORITY RELATIVE TO AND VALIDITY OF AGREEMENTS. The
Company has the requisite corporate power and authority to execute and deliver
this Agreement and to assume and perform all of its obligations hereunder. The
execution and delivery of this Agreement by the Company and the performance by
the Company of its obligations hereunder has been duly authorized by its Board
of Directors and no further authorization on the part of the Company is
necessary to authorize the execution and delivery by it of, and the performance
of its obligations under, this Agreement. There are no corporate, contractual,
statutory or other restrictions of any kind upon the power and authority of the
Company to execute and deliver this Agreement and to consummate the transactions
contemplated hereunder and, except as set forth on Schedule 2.5 hereto, no
action, waiver or consent by any foreign, federal, state, municipal or other
governmental department, commission or agency (a "Governmental Authority") is
necessary to make this Agreement a valid instrument binding upon the Company in
accordance with its terms. This Agreement has been duly executed
6
and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms, except (i)
as such enforceability may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and (ii) as such obligations are subject to general
principles of equity.
Section 2.5 REQUIRED FILINGS AND CONSENTS; NO CONFLICT. (a) Except as
set forth on Schedule 2.5 hereto, the Company is not required to submit any
notice, report or other filing to any Governmental Authority in connection with
the execution, delivery or performance of this Agreement.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby do not and
will not (i) except as set forth in Schedule 2.5 hereto, conflict with or
violate any law, regulation, judgment, order or decree binding upon the Company,
(ii) conflict with or violate any provision of its Articles of Incorporation or
By-laws, or (iii) conflict with or result in a breach of any condition or
provision of, or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or result in the creation or
imposition of any lien, charge or encumbrance upon any properties or assets of
the Company pursuant to, or cause or permit the acceleration prior to maturity
of any amounts owing under, any indenture, loan agreement, mortgage, deed of
trust, lease, contract, license, franchise or other agreement or instrument to
which the Company is a party or which is or purports to be binding upon the
Company or by which any of its properties are bound, except for conflicts,
breaches, defaults, events, liens, charges, encumbrances or rights of
acceleration that would not have a Company Material Adverse Effect.
(c) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
(i) result in the loss of any license, franchise, legal privilege or permit
possessed by the Company or (ii) give a right of termination to any party to any
agreement or other instrument to which the Company is a party or by which any of
its properties are bound, except for losses or rights of termination that would
not have a Company Material Adverse Effect.
Section 2.6 FINANCIAL STATEMENTS; BOOKS OF ACCOUNT; RECORDS. Attached
hereto as Schedule 2.6 are true and complete copies of the Company's unaudited
balance sheets, income statements and statements of cash flow for the fiscal
years ended December 31, 1995 and 1996 and unaudited statements for the
three-month period ended March 31, 1997 and any financial statements available
after such date (together with the related notes, such year-end and interim
financial statements are referred to in this Agreement as
7
the "Financial Statements"). The Financial Statements have been prepared on a
"tax basis" method applied on a consistent basis throughout the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
the financial position of the Company as of the respective dates thereof and the
results of operations of the Company for the periods indicated. The general
ledgers, books of account and other records of the Company are complete and
correct, have been maintained in accordance with good business practices and the
matters contained therein are appropriately and accurately reflected in the
Financial Statements.
Section 2.7 NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule
2.7 hereto, the Company has no debt, liability or obligation of any nature
(whether liquidated, unliquidated, accrued, absolute, contingent or otherwise
and whether due or to become due) except:
(a) those set forth or reflected in the Financial Statements
and that have not been paid or discharged since the date thereof; and
(b) current liabilities arising in the ordinary and usual
course of business subsequent to March 31, 1997 that are accurately
reflected on its books and records in a manner consistent with past
practice.
Section 2.8 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth
in Schedule 2.8 hereto, since March 31, 1997, there has not been, with respect
to the Company, (i) any Company Material Adverse Effect; (ii) any strike,
picketing, work slowdown or labor disturbance; (iii) any material damage,
destruction or loss (whether or not covered by insurance) with respect to any
assets or properties; (iv) any redemption or other acquisition by it of Company
Stock or any declaration or payment of any dividend or other distribution in
cash, stock or property with respect thereto; (v) any entry into any commitment
or transaction (including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business or as contemplated by
this Agreement; (vi) any transfer of, or rights granted under, any leases,
licenses, agreements, patents, trademarks, trade names, or copyrights other than
those transferred or granted in the ordinary course of business and consistent
with past practice; (vii) any mortgage, pledge, security interest or imposition
of any other encumbrance on any assets or properties except in the ordinary
course of business; any payment of any debts, liabilities or obligations of any
kind other than those currently due; any cancellation of any debts or claims or
forgiveness of amounts owed to the Company; or (viii) any change in accounting
principles or methods. Since December 31, 1996, the Company has conducted its
business only in the ordinary course and in a manner consistent with past
practice and has not made any Material change in the conduct of its business or
operations.
8
Section 2.9 TAXES AND TAX RETURNS. (a) For purposes of this Agreement,
(i) the term "Taxes" shall mean all taxes, charges, fees, levies or other
assessments including, without limitation, income, gross receipts, excise,
property, sales, license, payroll and franchise taxes, imposed by the United
States, or any state, local or foreign government or subdivision or agency
thereof whether computed on a unitary, combined or any other basis; and such
term shall include any interest and penalties or additions to tax; and (ii) the
term "Tax Return" shall mean any report, return or other information required to
be filed with, supplied to or otherwise made available to a taxing authority in
connection with Taxes.
(b) The Company has (i) duly filed with the appropriate taxing
authorities all Tax Returns required to be filed by or with respect to the
Company, and all such duly filed Tax Returns are true, correct and complete in
all respects, and (ii) paid in full or made adequate provisions for on its
balance sheet all Taxes shown to be due on such Tax Returns. There are no liens
for Taxes upon the assets of the Company, except for statutory liens for current
Taxes not yet due and payable or that may thereafter be paid without penalty or
are being contested in good faith. The Company has not received any notice of
audit, is not undergoing any audit of its Tax Returns, and has not received any
notice of deficiency or assessment from any taxing authority with respect to
liability for Taxes of the Company, which has not been fully paid or finally
settled. There have been no waivers of statutes of limitations by the Company
with respect to any Tax Returns that relate to the Company. The Company has not
filed a request with the Internal Revenue Service for changes in accounting
methods within the last two years, which change would affect the accounting for
tax purposes, directly or indirectly, of the Company.
Section 2.10 EMPLOYEE BENEFIT PLANS. Schedule 2.10 hereto comprises a
listing of each bonus, stock option, stock purchase, benefit, profit sharing,
savings, retirement, liability, insurance, incentive, deferred compensation, and
other similar fringe or employee benefit plans, programs or arrangements for the
benefit of or relating to, any employee of, or independent contractor or
consultant to, and all other compensation practices, policies, terms or
conditions, whether written or unwritten (the "Company Employee Plans") which
the Company presently maintains, to which the Company presently contributes or
under which the Company has any liability and which relate to employees or
independent contractors of the Company. Company Employee Plans administered by
the Company have been administered in all material respects in accordance with
all requirements of applicable law and all terms of each such plan. Each Company
Employee Plan that is required or intended to be qualified under applicable law
or registered or approved by a governmental agency or authority, has been so
qualified, registered or approved by the appropriate governmental agency or
authority and nothing has occurred since the date of the
9
last qualification, registration or approval to adversely affect, or cause, the
appropriate governmental agency or authority to revoke such qualification,
registration or approval. All contributions (including premiums) required by law
or contract to have been made or approved by the Company under or with respect
to Company Employee Plans have been paid or accrued by the Company. Without
limiting the foregoing, there are no unfunded liabilities under any Company
Employee Plan. The Company has not received notice of any investigations,
litigation or other enforcement actions against the Company with respect to any
of the Company Employee Plans. There are no pending actions, suits or claims by
former or present employees of the Company (or their beneficiaries) with respect
to the Company Employee Plans or the assets or fiduciaries thereof (other than
routine claims for benefits).
Section 2.11 TITLE TO PROPERTY. The Company has good and marketable
title, or valid leasehold rights (in the case of leased property), to all real
property and all personal property purported to be owned or leased by it or used
in the operation of its business and necessary to the operation of its business,
free and clear of all liens, claims or encumbrances, excluding (i) liens for
taxes, fees, levies, imposts, duties or governmental charges of any kind that
are not yet delinquent or are being contested in good faith by appropriate
proceedings that suspend the collection thereof; (ii) liens for mechanics,
materialmen, laborers, employees, suppliers or others that are not yet
delinquent or are being contested in good faith by appropriate proceedings;
(iii) liens created in the ordinary course of business in connection with the
leasing or financing of office, computer and related equipment and supplies; and
(iv) easements and similar encumbrances ordinarily created for xxxxxx
utilization and enjoyment of property. All of such owned or leased property with
a value in excess of $10,000 is listed on Schedule 2.11 hereto.
Section 2.12 TRADEMARKS, PATENTS AND COPYRIGHTS.
(a) For purposes of this Agreement, the term "Company Rights" shall
mean all intellectual property rights including, without limitation, each
patent, patent rights, license, patent application, trade name, trademark, trade
name and trademark registration, copyright, copyright registration, copyright
application, service xxxx, brand xxxx and brand name, trade secrets relating to
or arising from any proprietary process, formula, source or object code, owned
or possessed by the Company necessary for the conduct of the Company's business.
The Company owns or has the right to use, sell or license all Company Rights and
such Company Rights are sufficient for the conduct of the Company's businesses
as being conducted as of the date hereof. Schedule 2.12 hereto lists each
patent, patent right, patent application, tradename registration, trademark
registration, copyright registration, copyright application, source and object
code owned or possessed by the Company.
10
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any Company Rights, will not
cause the forfeiture or termination or give rise to a right of forfeiture or
termination of any Company Rights or impair the right of the Company to use,
sell or license any Company Rights or any portion thereof, except for breaches,
forfeitures, terminations, rights of forfeiture or termination, or impairments
that would not have a Company Material Adverse Effect.
(c) Neither the manufacture, marketing, license, sale or intended use
of any product currently licensed or sold by the Company or currently under
development by the Company violates any license or agreement between the Company
and any third party relating to such product or, to the best knowledge of the
Company, infringes any intellectual property right of any other party, and there
is no pending or, to the best knowledge of the Company, threatened claim or
litigation contesting the validity, ownership or right to use, sell, license or
dispose of any Company Right nor, to the best knowledge of the Company, is there
any basis for any such claim, nor has the Company received any notice asserting
that any Company Right or the proposed use, sale, license or disposition thereof
conflicts or will conflict with the rights of any other party, nor, to the best
knowledge of the Company, is there any basis for any such assertion.
(d) No current or prior officers, employees or consultants of the
Company claim an ownership interest in any Company Rights as a result of having
been involved in the development of such property while employed by or
consulting to the Company or otherwise.
Section 2.13 LEGAL PROCEEDINGS, CLAIMS, INVESTIGATIONS, ETC.
(a) Except as set forth on Schedule 2.13 hereto, there is no legal,
administrative, arbitration or other action or proceeding or governmental
investigation pending, or to the best knowledge of the Company, threatened,
against the Company or any director, officer or employee thereof relating to the
Company's business.
(b) Except as set forth on Schedule 2.13 hereto, the Company is not in
violation of, or default under, any laws, ordinances, regulations, judgments,
injunctions, orders or decrees (including without limitation, any immigration
laws or regulations) of any court, governmental department, commission, agency,
instrumentality or arbitrator applicable to the business of the Company.
11
(c) The Company is not currently subject to any judgment, order,
injunction or decree of any court, arbitral authority, administrative agency or
other governmental authority.
Section 2.14 INSURANCE. Schedule 2.14 hereto sets forth a list and
brief description of all existing insurance policies maintained by the Company
pertaining to its business properties, personnel or assets. The Company is not
in default with respect to any provision contained in any insurance policy, and
has not failed to give any notice or present any claim under any insurance
policy in due and timely fashion, except where such default, failure to give
notice or failure to present a claim would not have a Company Material Adverse
Effect. All such policies shall have been delivered to the GST Companies prior
to the Closing and at all times prior to the Closing shall be in full force and
effect. All payments with respect to such policies are current and the Company
has not received any notice threatening a suspension, revocation, modification
or cancellation of any such policy.
Section 2.15 MATERIAL CONTRACTS. (a) Except as set forth in Schedule
2.15 hereto, the Company is not a party to and is not bound by any contract or
has any commitment, whether written or oral, which has a term in excess of one
year and will result in payments in excess of $10,000 or require material
performance on the part of the Company, other than (i) contracts or commitments
entered into in the ordinary course of business with vendors and customers and
(ii) contracts or commitments cancelable upon not more than 30 days' notice.
Each of the contracts and commitments set forth in Schedule 2.15 hereto and each
of the other contracts and commitments to which the Company is a party, is valid
and existing, in full force and effect and enforceable in accordance with its
terms (subject to equitable principles and limitations on indemnity) and there
is no default or claim of default against the Company or any notice of
termination with respect thereto. The Company has complied in all material
respects with all requirements of, and performed all of its material obligations
under, such contracts and commitments. In addition, no other party to any such
contract or commitment is, to the best knowledge of the Company, in default
under or in breach of any term or provision thereof, and there exists no
condition or event which, after notice or lapse of time or both, would
constitute a default by any party to any such contract or commitment that would
have a Company Material Adverse Effect. Except as indicated in Schedule 2.15,
all consents required from the parties to the contracts and commitments set
forth on Schedule 2.15 hereto in connection with the transactions contemplated
by this Agreement have been obtained. Copies of all the written documents and a
synopsis of all oral contracts and commitments described in Schedule 2.15 hereto
have heretofore been made available to the Buyer and are true and complete and
include all amendments and supplements thereto and modifications thereof to and
including the date hereof.
12
(b) Except as set forth in Schedule 2.15 hereto, the Company is not a
party to any oral or written (i) agreement with any consultant, executive
officer or other key employee the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of the transactions
contemplated by this Agreement or (ii) agreement or plan, including any stock
option plan and the like, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of the
transactions contemplated by this Agreement.
Section 2.16 CERTAIN TRANSACTIONS. Except as set forth on Schedule 2.16
hereto, no officer, director or any employee of the Company, or any member of
any such person's immediate family, is presently a party to any transaction with
the Company relating to the business of the Company including, without
limitation, any contract, agreement or other arrangement (i) providing for the
furnishing of services by, (ii) providing for the rental of real or personal
property from, or (ii) otherwise requiring payments to (other than for services
as officers, directors or employees of the Company), any such person or any
corporation, partnership, trust or other entity in which any such person has a
substantial interest as a stockholder, officer, director, trustee or partner.
Except as set forth on Schedule 2.16 hereto, no shareholder or director and no
"affiliate" or "associate" (as such terms are defined in the rules and
regulations promulgated under the Securities Act of 1933, as amended (the
"Securities Act")) thereof holds any position or office with or has any material
financial interest, direct or indirect, in any supplier, customer or account of,
or other outside business that has material transactions with, the Company.
Section 2.17 BROKER. Except for the engagement by the Sellers of Access
Group, whose fees are to be paid solely by the Sellers, no broker, finder or
investment banker is entitled to any brokerage or finder's fee or other
commission in connection with the transactions contemplated hereby based on any
agreements, arrangements or understandings reached or made by, with or on behalf
of the Company or the Sellers.
Section 2.18 ENVIRONMENTAL MATTERS.
(a) The Company is not the subject of, or to the best knowledge of the
Company, being threatened to be the subject of, (i) any enforcement proceeding
or (ii) any investigation, brought in either case under any federal, state or
local environmental law, rule, regulation, or ordinance at any time in effect or
(iii) any third party claim relating to environmental conditions on or off the
properties of the Company. The Company has not been notified that it must obtain
any permits and licenses or file documents for the operation of its business
under federal, state and local laws relating to pollution protection of the
environment. To the best knowledge of the Company, no conditions exist on or off
the
13
properties of the Company that will give rise to any liabilities, known or
unknown, under any federal, state or local environmental law, rule, regulation
or ordinance, or as the result of any claim of any third party. For the purposes
of this Section 2.18, an investigation shall include, without limitation, any
written notice received by the Company that relates to the onsite or offsite
disposal, release, discharge or spill of any waste, waste water, pollutant or
contaminants.
(b) To the best knowledge of the Company, there are no toxic wastes or
other toxic or hazardous substances or materials, pollutants or contaminants
that the Company (or, to the best knowledge of the Company, any previous
occupant of the Company's facilities) has used, stored or otherwise held in or
on any of the facilities of the Company, which, are present at or have migrated
from the facilities, whether contained in ambient air, surface water,
groundwater, land surface or subsurface strata. To the best knowledge of the
Company, such facilities have been maintained by the Company in compliance with
all environmental protection, occupational, health and safety or similar laws,
ordinances, restrictions, licenses, and regulations. The Company has not
disposed of or arranged (by contract, agreement or otherwise) for the disposal
of any material or substance that was generated or used by the Company at any
off-site location that has been or is listed or proposed for inclusion on any
list promulgated by any Governmental Authority for the purpose of identifying
sites that pose a danger to health and safety. There have been no environmental
studies, reports and analyses made or prepared in the last five years relating
to the facilities of the Company. The Company has not installed any underground
storage tanks in any of its facilities and, to the best knowledge of the
Company, none of such facilities contain any underground storage tanks.
Section 2.19 ILLEGAL PAYMENTS. The Company and the Sellers have not,
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item of property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
that is in any manner related to the business or operations of the Company, that
the Company knows or has reason to believe to have been illegal under any
federal, state or local laws or the laws of any other country having
jurisdiction. The Company and the Sellers have not participated, directly or
indirectly, in any boycotts affecting any of the Company's actual or potential
customers.
Section 2.20 COMPLIANCE WITH LAW. Except as disclosed on Schedule 2.20,
the Company has complied in all respects with all laws, rules, regulations,
arbitral determinations, orders, writs, decrees and injunctions that are
applicable to or binding upon the Company or its properties. Schedule 2.20 lists
all franchises, licenses, permits, consents, authorizations, approvals and
certificates of any regulatory, administrative or other
14
governmental agency or body used in conducting the Company's business. Each of
such permits is currently valid and in full force and effect and, except as
disclosed in Schedule 2.20, such permits constitute all franchises, licenses,
permits, consents, authorizations, approvals, and certificates of any
regulatory, administrative or other governmental agency or body necessary to the
conduct of the Company's business. The Company is not in violation of such
permits. Except as disclosed on Schedule 2.20, there is no pending or, to the
best knowledge of the Company, threatened proceeding that could result in the
revocation or cancellation of, or inability of the Company to renew, any such
permit.
Section 2.21 RECEIVABLES. Each account receivable reflected on the
balance sheet of the Company for the year ended December 31, 1996 and the
three-month period ended March 31, 1997 constitutes a bona fide receivable
resulting from a bona fide sale to a customer in the ordinary course of
business, the account of which was actually due on the date hereof and has been
or will be collected in the ordinary course of business. The books and records
of the Company state correctly the facts with respect to each account receivable
of the Company and the balance due thereon. Each payment reflected on such books
and records as having been made on each such account receivable was made by the
respective account debtor and not directly or indirectly by any director,
officer, employee or agent of the Company unless such person is shown on said
books and records as such account debtor. Each document and instrument
evidencing, securing or relating to each account receivable including, without
limitation, each insurance policy, certificate, xxxx or statement, is correct
and complete in all respects, is genuine and valid and is enforceable in
accordance with its terms. To the best knowledge of the Company, there are no
defenses, claims of disabilities, counterclaims, offsets, refusals to pay or
other rights of set-off against any accounts receivable and there is no
threatened, intended or proposed defense, claim or disability, counterclaim,
offset, refusal to pay or other right of set-off with respect thereto. Each
account receivable, each document and instrument and each transaction underlying
or relating thereto conforms in all respects, including, without limitation, in
respect of interest rates charged, notices given and disclosures made, to the
requirements and provisions of each applicable law, rule or regulation relating
to credit or consumer requirements.
Section 2.22 LABOR. The Company is not a party to any representation or
labor contract. The Company has not received any notice from any labor union or
group of employees that such union or group represents or believes or claims it
represents or intends to represent any of the employees of the Company; no
strike or work interruption by any of its employees is planned, under
consideration, threatened or imminent; and neither the Company nor any officer
or director thereof has made any loan or given anything of value, directly or
indirectly, to any officer, official, agent
15
or representative of any labor union or group of employees. At no time during
the past five years has the Company experienced any threats of strikes, work
stoppages or demands for collective bargaining by any union or labor
organization or any other group or other organization of employees, any
grievances, disputes or controversies with any union or any other group or other
organization of employees, or any pending or threatened court of arbitration
proceedings involving an employment grievance, dispute or controversy. The
Company is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to the date hereof or amounts required to be reimbursed to
such employees. In the event of termination of the employment of any said
employees, neither the Company nor the GST Companies will by reason of anything
done prior to the Closing be liable to any of said employees for so-called
"severance pay" or any other payments. The Company is in compliance with all
federal, state and local laws and regulations respecting labor, employment and
employment practices, terms and conditions of employment and wages and hours and
there is no unfair labor practice complaint against the Company pending before
the National Labor Relations Board or any comparable state or local agency.
Section 2.23 OFFICERS, EMPLOYEES AND COMPENSATION. Schedule 2.23 hereto
lists and describes as of March 31, 1997, the base salary, fringe benefits and
perquisites of any current employee or independent contractor of the Company
whose total current base salary exceeds or exceeded in any of the last three
years $25,000 annually. Except as disclosed on Schedule 2.23 hereto, there are
no other forms of compensation paid by the Company to any such officer or
employee. The provisions for wages and salaries accrued on the Financial
Statements are and will be adequate to reflect all obligations for wages and
salaries and other compensation to the Company's employees through March 31,
1997 including, without limitation, vacation pay, sick pay, and all commissions
and other fees due and payable to agents, salesmen and other employees of the
Company. The Company is not obligated, directly or indirectly, to any director
or shareholder of the Company or any person related to such person by blood or
marriage, except for current liability for compensation. None of the Sellers or
the Company has any agreements or understandings with any officer, employee or
representative of Sellers or the Company that would influence any such person
not to remain associated with the Company or to become associated with the GST
Companies from and after the Closing Date or from serving the Company or the GST
Companies in a capacity similar to the capacity currently held. Schedule 2.23
hereto sets forth the Company's present severance policy and the names, amounts
and payment schedules relating to persons currently receiving severance payments
or retiree medical benefits.
16
Section 2.24 BANKS; SAFE DEPOSIT BOXES. Schedule 2.24 hereto lists the
names and locations of all banks at which the Company has an account and/or safe
deposit boxes, the numbers of any such accounts and the names of all persons
authorized to draw thereon or to have access thereto.
Section 2.25 CREDIT TERMS. Schedule 2.25 hereto sets forth all the
material terms and conditions of credit greater than "net 30" given to any
customer of the Company and all discounts given by the Company to its customers.
Schedule 2.25 hereto sets forth a copy of the Company's standard warranties and
guarantees and any material departures therefrom.
Section 2.26 TAX AND REGULATORY MATTERS. Except as may otherwise be
disclosed herein, neither the Company nor the Sellers have taken any action or
have any knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or (ii) materially impede or delay receipt of any
consents of Governmental Authorities or result in the imposition of a condition
or restriction of the type which in the reasonable judgment of the Board of
Directors of the GST Companies would materially adversely impact the economic or
business benefits of the transaction contemplated by this Agreement that, had
such condition or requirement been known, the GST Companies would not have
entered into this Agreement.
Section 2.27 CLOSING DATE EFFECT. All of the representations and
warranties of the Sellers and the Company are true and correct as of the date
hereof and shall be true and correct on and as of the Closing Date with the same
force and effect as if such representations and warranties were made by the
Sellers and the Company to the GST Companies on the Closing Date.
Section 2.28 COMPLETE DISCLOSURE. No representation or warranty made by
the Company or the Sellers in this Agreement, and no exhibit, schedule,
statement, certificate or other writing furnished to the Buyer by or on behalf
of the Company or any Seller pursuant to this Agreement or in connection with
the transactions contemplated hereby, contains or will contain, any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein not misleading.
Section 2.29 TEXAS ARTICLES AND PLAN OF MERGER. The Articles of Merger
and Plan of Merger attached as Exhibits B-1 and B-2, respectively, are in proper
form and substance for filing under the TBCA and the filing thereof with the
Secretary of State of Texas shall result in the effectiveness of the Merger
under applicable Texas law.
17
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE GST COMPANIES
Each of the GST Companies hereby, jointly and severally, represents and
warrants to the Company as follows:
Section 3.1 CORPORATE ORGANIZATION; REQUISITE AUTHORITY TO CONDUCT
BUSINESS; CERTIFICATE OF INCORPORATION AND BY-LAWS. Each of the GST Companies is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each of the GST Companies has
provided the Company with true and complete copies of its certificate of
incorporation (certified by the Secretary of State of the State of Delaware and
the Deputy Director under the Canada Business Corporations Act, respectively)
and By-laws (certified by the Secretary of each of the GST Companies,
respectively) as in effect on the date hereof. Each of the GST Companies has the
requisite corporate power and authority to execute and deliver this Agreement,
the employment agreements substantially in the form of Exhibit C hereto with
each of the Sellers (the "Employment Agreements"), the Purchase Price Notes and
the registration rights agreement substantially in the form of Exhibit D hereto
(the "Registration Rights Agreement" and together with this Agreement, the
Employment Agreements and the Purchase Price Notes, the "GST Transaction
Documents") to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby to
the extent it is a party thereto; and each of the GST Transaction Documents has
been duly authorized and approved by its Board of Directors and no further
action on the part of the GST Companies is necessary to authorize the execution
and delivery by them of, and the performance of its obligations under, the GST
Transaction Documents to which it is a party. There are no corporate,
contractual, statutory or other restrictions of any kind upon the power and
authority of the GST Companies to execute and deliver the GST Transaction
Documents to which it is a party and to consummate the transactions contemplated
thereunder and, except as set forth on Schedule 3.1 hereto, no action, waiver or
consent by any Governmental Authority is necessary to make the GST Transaction
Documents to which it is a party a valid instrument binding upon the GST
Companies in accordance with its terms.
Section 3.2 EXECUTION AND DELIVERY. Except as set forth on Schedule 3.2
hereto and as contemplated by the Registration Rights Agreement, none of the GST
Companies are required to submit any notice, report or other filing to any
Governmental Authority in connection with the execution, delivery or performance
of the GST Transaction Documents (other than state "Blue Sky" laws relating to
the issuance of the Exchange Shares and the Additional Payments). This Agreement
has been duly executed and delivered by the GST Companies and constitutes, and
the Employment Agreements, the Purchase Price Notes and the Registration Rights
Agreement, when
18
executed and delivered by the GST Companies parties thereto in accordance with
their respective terms will constitute, legal, valid and binding obligations of
the GST Companies, enforceable against the GST Companies in accordance with its
terms to the extent it is a party thereto, except (i) as such enforceability may
be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and (ii)
as such obligations are subject to general principles of equity.
Section 3.3 NO CONFLICTS; ABSENCE OF DEFAULTS. The execution, delivery
and performance of the GST Transaction Documents to which its party by the GST
Companies, and the consummation of the transactions contemplated thereby do not
and will not conflict with or violate (a) any of the GST Companies' Certificate
of Incorporation or By-laws or (b) any agreement governing the organization,
management, business or affairs of the GST Companies or, in any material
respect, any agreement or instrument to which the GST Companies are bound, or
(c) any material law, administrative regulation or rule or court order, judgment
or decree applicable to the GST Companies; nor will the execution and delivery
of the GST Transaction Documents or the consummation of the transactions
contemplated thereby constitute a material breach of, or any event of default
under, any material contract or agreement to which the GST Companies may be
bound or affected.
Section 3.4 CAPITALIZATION. The authorized capital stock of GST
consists of an unlimited number of GST Common Shares and 10,000,000 Preference
Shares, 25,803,334 shares and 500 shares of which were issued and outstanding at
May 20, 1997, respectively. The Exchange Shares are duly authorized and when
issued in accordance with the terms and conditions of this Agreement shall be
validly issued, fully paid and nonassessable. The Exchange Shares are not
subject to any preemptive rights or other similar restrictions.
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. GST has filed with
the Securities and Exchange Commission (the "SEC"), and has heretofore provided
to the Sellers true and complete copies of all forms, reports, schedules,
statements and other documents required to be filed by it under the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
since September 30, 1995 (as such documents have been amended or supplemented
since the time of their filing, collectively, the "SEC Reports"). As of their
respective dates, the SEC Reports (including, without limitation, any financial
statements or schedules included therein) (a) did not contain any untrue
statement of a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading and (b) complied in all material respects with the
applicable requirements
19
of the Securities Act and Exchange Act (as the case may be) and all applicable
rules and regulations of the SEC promulgated thereunder. Each of the
consolidated financial statements included in the SEC Reports has been prepared
from, and is in accordance with, the books and records of GST, complies in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, has been prepared in
accordance with United States generally accepted accounting principals ("U.S.
GAAP") applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly presents in all material respects
the consolidated results of operations and cash flows (and changes in financial
position, if any) of GST as at the dates thereof or for the periods presented
therein.
Section 3.6 LEGAL PROCEEDINGS, CLAIMS, ETC. There is no legal,
administrative, arbitration or other action or proceeding or governmental
investigation pending, or to the best knowledge of the GST Companies,
threatened, against the GST Companies or any director, officer or employee
thereof relating to this Agreement or the transactions contemplated hereby. None
of the GST Companies is in violation of, or default under, any laws, ordinances,
regulations, judgements, injunctions, orders or decrees of any Governmental
Authority. Except as set forth in the SEC Reports, none of the GST Companies are
subject to any judgment, order, injunction or decree of any court, arbitral
authority or Governmental Authority that would have a material adverse effect on
the business properties, assets, liabilities, conditions (financial or
otherwise), results of operations or net worth of GST (a "GST Material Adverse
Effect").
Section 3.7 BROKER. No broker, finder or investment banker is entitled
to any brokerage or finder's fee or other commission in connection with the
transactions contemplated hereby based on any agreements, arrangements or
understandings reached or made by, with or on behalf of the GST Companies.
Section 3.8 CLOSING DATE EFFECT. All of the representations and
warranties of the GST Companies are true and correct as of the date hereof and
shall be true and correct on and as of the Closing Date with the same force and
effect as if such representations and warranties were made by the GST Companies
to the Company and the Sellers on the Closing Date.
Section 3.9 COMPLETE DISCLOSURE. No representation or warranty made by
the GST Companies in this Agreement, and no exhibit, schedule, statement,
certificate or other writing furnished to the Company by or on behalf of the GST
Companies pursuant to this Agreement or in connection with the transactions
contemplated hereby, contains or will contain, any untrue statement of a
material fact or omits or will omit to state a material fact
20
necessary to make the statements contained herein and therein not misleading.
ARTICLE IV ADDITIONAL REPRESENTATIONS
AND WARRANTIES OF THE SELLERS
Each Seller (for himself individually and not as a representative of
any other Seller) hereby severally represents and warrants to the GST Companies
as of the date of this Agreement, as follows:
Section 4.1 TITLE TO SHARES; AUTHORITY. Such Seller owns the shares of
Common Stock set forth opposite his name in the Preamble hereof, free and clear
of all liens, claims or encumbrances. Such Seller has full right, power, legal
capacity and authority to transfer and deliver such Shares pursuant to this
Agreement.
Section 4.2 AUTHORITY RELATIVE TO AND VALIDITY OF AGREEMENTS. Such
Seller has full power and authority to execute and deliver this Agreement, the
Registration Rights Agreement and the Employment Agreement to which such Seller
is a party and to assume and perform all of his obligations hereunder and
thereunder. There are no contractual, statutory, regulatory or other
restrictions of any kind upon the power and authority of such Seller to execute
and deliver this Agreement, the Registration Rights Agreement or Employment
Agreement to which such Seller is a party and to consummate the transactions
contemplated hereunder and thereunder. This Agreement has been duly executed and
delivered by such Seller and constitutes, and the Registration Rights Agreement
and the Employment Agreement to which such Seller is a party, when executed and
delivered by such Seller in accordance with their terms will constitute, legal,
valid and binding obligations of such Seller, enforceable in accordance with
their terms, except (i) as such enforceability may be limited by or subject to
any bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, (ii) as such obligations are subject to
general principles of equity and (iii) as rights to indemnity may be limited by
federal or state securities laws or by public policy.
Section 4.3 REQUIRED FILINGS AND CONSENTS. Such Seller is not required
to submit any notice, report or other filing with any Governmental Authority in
connection with the execution, delivery or performance of this Agreement, the
Registration Rights Agreement or the Employment Agreement to which such Seller
is a party (other than such Seller's requirement to participate as a joint
applicant with the Buyer in any waiver and application for transfer approval to
be filed with the Federal Communications Commission, the Public Utilities
Commission of Oklahoma or the State Corporation Commission of New Mexico
described in Schedule 2.5 hereto). The execution, delivery and performance of
this
21
Agreement, the Registration Rights Agreement and the Employment Agreement to
which such Seller is a party do not and will not conflict with or violate any
law, regulation, order or decree binding upon such Seller.
Section 4.4 INVESTMENT. Such Seller is acquiring the Exchange Shares
and the Additional Payments for his own account as principal, not as a nominee
or agent, for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof in whole or in part and no other
person or entity has a direct or indirect beneficial interest in such Exchange
Shares or Additional Payments (other than any right the spouse of such Seller
may have through any applicable community property laws). Such Seller does not
have any contract, undertaking, agreement or arrangement with any person or
entity to sell, transfer or grant participations to such person or entity or to
any third person or entity with respect to any of such Exchange Shares or
Additional Payments.
Section 4.5 EXEMPTION FROM REGISTRATION. Such Seller acknowledges that
the issuances of the Exchange Shares and the Additional Payments (the
"Issuances") are intended to be exempt from registration under the Securities
Act of 1933, as amended (the "Securities Act"), by virtue of Section 4(2) of the
Securities Act and the provisions of Regulation D promulgated thereunder
("Regulation D"). In furtherance thereof, such Seller represents and warrants to
the GST Companies as follows:
(i) Such Seller realizes that the basis for the exemption may
not be present if, notwithstanding any representations and/or
warranties to the contrary herein contained, such Seller has
in mind merely acquiring the Exchange Shares and the
Additional Payments for a fixed or determinable period in the
future, or for a market rise, or for sale if the market does
not rise; and
(ii) Such Seller has the financial ability to bear the
economic risk of his investment, has adequate means for
providing for his current needs and personal contingencies and
has no need for liquidity with respect to his investment in
GST;
Section 4.6 ACCREDITED INVESTOR. Such Seller is an "accredited
investor," as that term is defined in Rule 501 of Regulation D.
Section 4.7 AVAILABLE INFORMATION. Such Seller:
(i) Has been furnished by GST Companies with any and all
documents regarding the GST Companies reasonably requested by
such Seller prior to the date hereof;
22
(ii) Has been provided opportunities prior to the date hereof
to obtain additional information concerning the Issuances and
the GST Companies;
(iii) Has been given the opportunity prior to the date hereof
to ask questions of, and receive answers from, the GST
Companies or their representatives concerning the terms and
conditions of the Issuances and other matters pertaining to an
investment in the Exchange Shares and the Additional Payments,
or that which was otherwise provided in order for them to
evaluate the merits and risks of Exchange Shares and the
Additional Payments;
(iv) Has not been furnished with any oral representation or
oral information in connection with the Issuances; and
(v) Has determined that the Exchange Shares and the Additional
Payments are a suitable investment for such Seller and that at
this time such Seller could bear a complete loss of such
investment.
Section 4.8 SELLER REPRESENTATIVE. Such Seller is not relying on any
statements or representations made by the GST Companies or their affiliates with
respect to economic considerations involved in an investment in the Exchange
Shares and the Additional Payments. Such Seller is capable of evaluating the
merits and risks of an investment in the Exchange Shares and the Additional
Payments on the terms and conditions set forth herein.
Section 4.9 TRANSFER RESTRICTIONS. Such Seller will not sell or
otherwise transfer the Exchange Shares or Additional Payment Shares without
registration under the Securities Act or an exemption therefrom and such Seller
fully understands and agrees that such Seller must bear the economic risk of
such Seller's acquisition thereof because, among other reasons, the Exchange
Shares and the Additional Payments have not been registered under the Securities
Act or under the securities laws of any state and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of unless they are subsequently
registered under the Securities Act and under the applicable securities laws of
such states, or unless exemptions from such registration requirements are
available. In particular, such Seller is aware that the Exchange Shares and the
Additional Payments are "restricted securities," as such term is defined in Rule
144 promulgated under the Securities Act ("Rule 144"), and they may not be sold
pursuant to Rule 144 unless all of the conditions of Rule 144 are met. Such
Seller also understands that the GST Companies are under no obligation to
register the Exchange Shares and the Additional Payments on such Seller's behalf
or to assist such Seller in complying with any exemption from the registration
requirements of the Securities Act or applicable state securities laws, except
as otherwise provided in the Registration Rights Agreement. Such
23
Seller further understands that sales or transfers of the Exchange Shares and
the Additional Payments are further restricted by state securities laws and the
provisions of the Registration Rights Agreement.
Section 4.10 LEGEND. The Seller understands and acknowledges that the
certificates for the Exchange Shares and the certificates representing the
Additional Payments shall bear a legend substantially as follows until (i) such
securities shall have been registered under the Securities Act and effectively
been disposed of in accordance with an effective registration statement
thereunder; or (ii) in the opinion of counsel for GST such securities may be
sold without registration under the Securities Act as well as any applicable
"Blue Sky" or state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS
CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO
A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE
WRITTEN OPINION OF COUNSEL TO GST TELECOMMUNICATIONS, INC.
(THE "CORPORATION"), OR OTHER COUNSEL REASONABLY ACCEPTABLE TO
THE CORPORATION, THAT THE PROPOSED DISPOSITION IS CONSISTENT
WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL
AS ANY APPLICABLE "BLUE SKY" OR OTHER STATE SECURITIES LAW."
Section 4.11 CITIZENSHIP; AGE; RESIDENCE. The Seller is a citizen of
the United States and is at least 21 years of age. The address set forth next to
the Seller's name on the signature pages to this Agreement is the Seller's
correct home address.
Section 4.12 FINDERS. Such Seller represents and warrants that such
Seller has not retained any finder, broker, agent, financial advisor, investment
banker or other intermediary, other than the Access Group, Newport Beach,
California, in connection with the transactions contemplated by this Agreement.
Section 4.13 INDEBTEDNESS. As of the Closing Date, the total amount of
indebtedness for borrowed money or otherwise owed by the Company to Xxxxx X.
Xxxxxxxx will be $48,223.10, to Xxxxxxx Xxxxxxx Bilberry will be $48,733.26, to
Xxxx X Xxxxxxxx will be $13,518.69 and to Xxxx Xxxxxxxx will be $14,395.16 (plus
interest accrued on each such amount at 6.5% per annum since May 15, 1997), all
of which indebtedness shall be converted into term loans pursuant to Section 5.4
hereof.
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ARTICLE V COVENANTS OF THE COMPANY AND THE SELLERS
Section 5.1 COVENANTS OF THE COMPANY REGARDING CONDUCT OF BUSINESS
OPERATIONS PENDING THE CLOSING. The Company covenants and agrees that between
the date hereof and the Closing Date, the Company will carry on its business in
the ordinary course consistent with past practice, will use its best efforts to
(i) preserve its business organization intact, (ii) retain the services of its
present employees and (iii) preserve the goodwill of its suppliers and
customers, and will not, except in the ordinary course of business, purchase,
sell, lease or dispose of any property or assets or incur any liability or enter
into any other extraordinary transaction. By way of amplification and not
limitation, the Company shall not, between the date of this Agreement and the
Closing Date, directly or indirectly, do any of the following without the prior
written consent of the Buyer:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or authorization of
any shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
or any other ownership interest, of the Company; (ii) amend or propose to amend
its Articles of Incorporation; (iii) split, combine or reclassify any of its
outstanding shares, or declare, set aside, pay or make any dividend or other
distribution payable in cash, stock, property or otherwise with respect thereto;
or (iv) redeem, purchase or otherwise acquire any shares of its capital stock;
(b) (i) make any acquisition (by merger, consolidation, or acquisition
of stock or assets) of any corporation, partnership or other business
organization or division thereof; (ii) except in the ordinary course of business
and in a manner consistent with past practice, sell, pledge, dispose of, or
encumber or authorize or propose the sale, pledge, disposition or encumbrance of
any of its assets; (iii) incur any indebtedness for borrowed money, assume,
guarantee, endorse or otherwise become responsible for the obligations of any
other individual, partnership, firm or corporation, or make any loans or
advances to any individual, partnership, firm or corporation, or enter into any
contract or agreement to do so, except in the ordinary course of business and
consistent with past practice; (iv) authorize any single capital expenditure or
series of related capital expenditures in excess of $10,000; or (v) release or
assign any indebtedness owed to it or any claims held by it, except in the
ordinary course of business and consistent with past practice;
(c) take any action other than in the ordinary course of business and
in a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to the grant of any severance or
termination pay (otherwise than pursuant
25
to its policies in effect on the date hereof) or with respect to any increase of
benefits payable under its severance or termination pay policies in effect on
the date hereof;
(d) make any payments (except in the ordinary course of business and in
amounts and in a manner consistent with past practice) under any Company
Employee Plan to any employee, independent contractor or consultant, enter into
any new Company Employee Plan or any new consulting agreement, grant or
establish any awards under such Company Employee Plan or agreement, in any such
case providing for payments of more than $10,000, or adopt or otherwise amend
any of the foregoing;
(e) take any action except in the ordinary course of business and in a
manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to accounting policies or procedures;
(f) enter into or terminate any material contract or agreement or make
any material change in any of its material contracts or agreements, other than
(i) in the ordinary course of business, (ii) relating to indebtedness incurred
in clause (b)(iii) of this Section 4.1 and (iii) agreements, if any, relating to
the transactions contemplated hereby;
(g) enter into any material agreement or commitment in respect of
network capacity services, switching equipment or services;
(h) waive any rights of material value or cancel any material debts or
claims;
(i) make any significant organizational or executive personnel changes
including, without limitation, to the entry into employment agreements, the
material modification of existing employment agreements, or any general or
executive officer compensation increases not in accordance with past practices;
or
(j) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action which would make any of its representations or
warranties contained in this Agreement untrue or incorrect in any material
respect as of the date when made or as of a future date.
Section 5.2 NO OTHER NEGOTIATIONS. The Company agrees that, between the
date hereof and the Effective Time, the Company will not, nor will it permit any
of its Affiliates (as such term is defined in the rules and regulations
promulgated under the Securities Act), officers, directors, employees, financial
advisors, brokers, stockholders or any other person acting on their behalf to,
(i) enter into any agreement with a third party with respect to the acquisition,
directly or indirectly, of shares or
26
other securities of the Company or a material part of its assets or any merger,
business combination, consolidation or reorganization, (ii) enter into
discussions or negotiations with a third party regarding such an agreement, or
(iii) provide a third party with general access to their books, records or
employees for the purpose of enabling such third party to conduct a purchase
investigation of the legal, financial or business condition of them.
Section 5.3 APPROVAL BY SELLERS. The Company will use its best efforts
to ensure that, at the Effective Time, the Merger shall have been duly
authorized, and this Agreement shall have been duly adopted, by the Sellers in
accordance with the TBCA.
Section 5.4 OUTSTANDING INDEBTEDNESS. On the Closing Date, loans in the
principal amounts of $48,223.10, $48,733.26 and $13,518.69 made by Xxxxx X.
Xxxxxxxx, Xxxxxxx Xxxxxxx Bilberry and Xxxx X Xxxxxxxx, respectively, to the
Company shall be converted into term loans, which term loans shall be evidenced
by promissory notes issuable to each of the Sellers in substantially the form of
Exhibit E hereto (collectively, the "Amended Notes").
Section 5.5 REGULATORY APPROVALS. Each of the Sellers agrees to
cooperate with the GST Companies and to proceed diligently and to use their best
effort to take or cause to be taken all actions, to sign such applications and
to do or cause to be done all such other things reasonably requested by the GST
Companies in connection with obtaining the approvals of the Governmental
Authorities described in Schedule 2.5 hereto.
ARTICLE VI ADDITIONAL COVENANTS
Each of the Company and the GST Companies covenants and agrees:
(a) BEST EFFORTS. To proceed diligently and use its best efforts to
take or cause to be taken all actions and to do or cause to be done all things
necessary, proper and advisable to consummate the transactions contemplated by
this Agreement, including the execution and delivery of the Employment
Agreements.
(b) COMPLIANCE. To comply in all material respects with all applicable
rules and regulations of any Governmental Authority in connection with the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby; to use all reasonable efforts to obtain in a timely manner
all necessary waivers, consents and approvals and to take, or cause to be taken,
all other actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement.
27
(c) NOTICE. To give prompt notice to the other party of (i) the
occurrence, or failure to occur, of any event whose occurrence or failure to
occur, would be likely to cause any representation or warranty contained in this
Agreement to be untrue or incorrect in any respect at any time from the date
hereof to the Closing Date and (ii) any material failure on its part, or on the
part of any of its officers, directors, employees or agents, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any such notice shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
(d) ACCESS. Subject to the confidentiality arrangement provided in (e)
below, to cause its Affiliates, officers, directors, employees, auditors and
agents to afford the officers, employees and agents of the other parties hereto
complete access at all reasonable times and upon reasonable notice to its
properties, offices and other facilities and to all books and records, and shall
furnish such other parties with all financial, operating and other data and
information as the other party through its officers, employees or agents, may
reasonably request, provided that the party providing such access and furnishing
such data and information to the other party incurs no cost in doing so.
(e) CONFIDENTIALITY. To hold in strict confidence all data and
information obtained from any other party hereto or any subsidiary, division,
associate, representative, agent or Affiliate of any such party (unless such
information is or becomes publicly available without the fault of any
representative of such party, or public disclosure of such information is
required by law in the opinion of counsel to such party) that is confidential
and shall insure that such representatives do not disclose information to others
without the prior written consent of the other parties hereto, and in the event
of the termination of this Agreement, to cause its representatives to return
promptly every document furnished by the other party hereto or any subsidiary,
division, associate, representative, agent or Affiliate of any such party in
connection with the transactions contemplated hereby and any copies thereof
which may have been made, other than documents which are publicly available.
(f) ANNOUNCEMENTS. That all announcements, reports, statements and
press releases to the public, the trade or the press or any other third party
concerning the transactions contemplated by this Agreement shall be mutually
agreed to by the Company and the Buyer before the issuance or the making thereof
and, subject to the advice of counsel, no party shall issue any such press
releases or make any such public statement prior to such mutual agreement,
except as may be required by law. Copies of any such announcement, report,
statements or press release, including any announcement or
28
disclosure required by law or by any Governmental Authority, shall be delivered
to each of the parties hereto prior to release.
(g) TAX FREE REORGANIZATION. To use its reasonable efforts to cause the
Merger to, and to take no action which would cause the Merger not to, qualify
for federal income tax purposes as a "reorganization" within the meaning of
Section 368(a) of the Code.
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY AND THE SELLERS
The obligations of the Company and the Sellers under this Agreement are
subject to satisfaction, on or prior to the Closing Date, unless waived in
writing by the Company and the Sellers of each of the following conditions:
Section 7.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the GST Companies contained in this Agreement shall be true
and correct in all respects as of the date when made and at and as of the
Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, with the same force and effect as
if made on and as of the Closing Date, and the Company shall have received a
certificate to that effect and as to the matters set forth in Section 7.2
hereof, dated the Closing Date, from the President or Chief Executive Officer of
each of the GST Companies.
Section 7.2 PERFORMANCE OF COVENANTS. Each of the GST Companies shall
have performed or complied in all respects with all agreements, conditions and
covenants required by this Agreement to be performed or complied with by it on
or before the Closing Date.
Section 7.3 NO PROCEEDINGS. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any federal, state or
local court or other governmental agency or of any foreign jurisdiction which
prohibits the consummation of the transactions which are the subject of this
Agreement or prohibits the Merger shall have been issued or entered and remain
in effect.
Section 7.4 ANCILLARY DOCUMENTS. The Employment Agreements shall have
been executed and delivered by Sub and the Sellers and the Purchase Price Notes
and the Registration Rights Agreement shall have been executed and delivered by
the Sellers and GST, respectively.
Section 7.5 CONSENTS AND APPROVALS. All filings and registrations with,
and notifications to, all federal, state, local and foreign authorities required
for consummation of the
29
transactions contemplated by this Agreement shall have been made, and all
consents, approvals and authorizations of all federal, state, local and foreign
authorities and parties to material contracts, licenses, agreements or
instruments required for consummation of the transactions contemplated by this
Agreement shall have been received and shall be in full force and effect.
Section 7.6 OPINION OF COUNSEL TO THE GST COMPANIES. The Sellers shall
have received the opinion of Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP ("OGF&R"),
counsel to the GST Companies (who may rely, as to matters not governed by the
laws of New York, United States federal law or the Delaware General Corporation
Law, on opinions of other counsel reasonably acceptable to OGF&R), dated the
Closing Date, in form reasonably satisfactory to the Sellers, substantially to
the effect that: (a) the GST Companies are corporations duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of incorporation; (b) the GST Companies have the corporate power to enter into
the GST Transaction Documents to which it is party and to consummate the
transactions contemplated thereby; (c) the execution and delivery of the GST
Transaction Documents, and the consummation of the transactions contemplated
thereby, have been duly authorized by all requisite corporate action on the part
of the GST Companies party thereto; (d) each of the GST Transaction Documents
has been duly executed and delivered by the GST Companies party thereto and
(assuming that each is a valid and binding obligation of the other parties
thereto) is a valid and binding obligation of the GST Companies party thereto,
enforceable against the GST Companies party thereto in accordance with its
terms, except (i) as enforceability may be limited by any bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the enforcement
of creditors' rights generally and (ii) as such enforceability is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); (e) the Exchange Shares are
duly authorized, and when issued will be validly issued, fully-paid and
nonassessable and the Common Shares constituting the Additional Payments have
been duly authorized and, when issued pursuant to the terms of this Agreement,
will be validly issued, fully paid and nonassessable; and (f) none of the
execution, delivery or performance of the GST Transaction Documents by the GST
Companies party thereto or the consummation by the GST Companies party thereto
of the transactions therein contemplated, to the best of such counsel's
knowledge, conflict with or result in a breach of, or default under, the GST
Companies' articles or certificates of incorporation or By-laws or any material
indenture, mortgage, deed of trust, voting trust agreement, shareholders'
agreement, note agreement or other material agreement or other material
instrument to which the GST Companies are a party or by which the GST Companies
are bound or to which any of the property of the GST Companies are subject or
contravene any law, rule or regulation applicable to the GST Companies. For
purposes of its opinion described in clause (d)
30
above, OGF&R may assume that the governing law of the GST Transaction Documents
is the same as the law of the State of New York.
Section 7.7 MATERIAL CHANGES. Since the date hereof, there shall not
have been any GST Material Adverse Effect.
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE GST COMPANIES
The obligations of the GST Companies under this Agreement are subject
to satisfaction, on or prior to the Closing Date, unless waived in writing by
the GST Companies, of each of the following conditions:
Section 8.1 REPRESENTATION AND WARRANTIES TRUE. The representations and
warranties of the Company and the Sellers contained in this Agreement, shall be
true and correct in all respects as of the date when made and at and as of the
Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, with the same force and effect as
if made on and as of the Closing Date, and the Buyer shall have received a
certificate to that effect and as to the matters set forth in Section 8.2
hereof, dated the Closing Date, from the President or Chief Executive Officer of
the Company.
Section 8.2 PERFORMANCE OF COVENANTS. The Company and each of the
Sellers shall have performed or complied in all respects with all agreements,
conditions and covenants required by this Agreement to be performed or complied
with by them on or before the Closing Date.
Section 8.3 NO PROCEEDINGS. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any federal, state or
local court or other governmental agency or of any foreign jurisdiction which
prohibits the consummation of the transactions which are the subject of this
Agreement or prohibits the Merger or operation of the Company's business shall
have been issued or entered and remain in effect.
Section 8.4 ANCILLARY DOCUMENTS. The Employment Agreements and the
Promissory Notes, and the Registration Rights Agreement, shall have been
executed and delivered by the Company and GST, respectively.
Section 8.5 CONSENTS AND APPROVALS. Except as set forth in Schedule 2.5
hereto, all filings and registrations with, and notifications to, all federal,
state, local and foreign authorities required for consummation of the
transactions contemplated by this
31
Agreement shall have been made, and all consents, approvals and authorizations
of all federal, state, local and foreign authorities and parties to material
contracts, licenses, agreements or instruments required for consummation of the
transactions contemplated by this Agreement shall have been received and shall
be in full force and effect.
Section 8.6 OPINION OF THE COMPANY'S AND SELLERS' COUNSEL. The Buyer
shall have received the opinion of McMahon, Surovik, Suttle, Buhrmann, Xxxxx &
Xxxx, PC ("MSSBHG"), counsel to the Company and the Sellers (who may rely as to
matters not governed by the laws of the State of Texas or United States federal
law, on opinions of other counsel reasonably acceptable to MSSBHG), dated the
Closing Date, in form reasonably satisfactory to the Buyer, substantially to the
effect that: (a) the Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas; (b) the Company has
the corporate power to enter into this Agreement and to consummate the
transactions contemplated hereby; (c) the execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby have
been duly authorized by requisite corporate action on the part of the Company;
(d) each of this Agreement, the Registration Rights Agreement and each
Employment Agreement to which a Seller is a party, has been duly executed and
delivered by the Company and the Sellers (as the case may be) and (assuming that
it is a valid and binding obligation of the other parties thereto) is a valid
and binding obligation of the Company and such Sellers, enforceable against the
Company and the Sellers (as the case may be) in accordance with their respective
terms, except (i) as enforceability may be limited by any bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the enforcement
of creditors' rights generally and (ii) as such enforceability is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); (e) the Company Stock is duly
authorized, validly issued, fully paid and nonassessable, (f) none of the
execution, delivery or performance of this Agreement, the Registration Rights
Agreement and the Employment Agreement to which each Seller is a party by the
Company or the Sellers or the consummation by the Company and the Sellers of the
transactions herein or therein contemplated, to the best of such counsel's
knowledge, conflict with or result in a breach of, or default under, the
Company's Articles of Incorporation or By-laws or any indenture, mortgage, deed
of trust, voting trust agreement, shareholders' agreement, note agreement or
other agreement or other material instrument to which the Company is a party or
by which the Company is bound or to which any of the property of the Company is
subject or contravene any law, rule or regulation applicable to the Company
(except as otherwise disclosed in this Agreement), (g) to the best of such
counsel's knowledge, there is no action, suit or proceeding pending, or
threatened, against or affecting the Company before any court or arbitrator or
governmental body, agency or
32
official (or any basis thereof known to such counsel) in which there is a
reasonable possibility of an adverse decision which may result in a Company
Material Adverse Effect, which could adversely affect the present or prospective
ability of the Company to perform its obligations under this Agreement or which
in any manner draws into question the validity or enforceability of this
Agreement. For purposes of the opinion described in clause (d) above, MSSBHG may
assume that the governing law of this Agreement is the same as the law of the
State of Texas.
Section 8.7 MATERIAL CHANGES. Since the date hereof, there shall not
have been any Company Material Adverse Effect.
Section 8.8 DUE DILIGENCE. The satisfactory completion of a due
diligence review of the Company by Buyer and its representatives.
Section 8.9 APPROVAL BY THE SELLERS. This Agreement shall have been
approved and adopted by the requisite affirmative vote of the Sellers in
accordance with the TBCA.
Section 8.10 APPRAISAL RIGHTS. No holder or holders of Company Stock
representing more than 2% of the aggregate outstanding number of shares of
Company Stock shall have properly exercised, and shall have not failed to take
any steps theretofore necessary to perfect or shall have not otherwise
subsequently withdrawn or lost, his appraisal rights with respect to such
shares.
ARTICLE IX INDEMNIFICATION
Section 9.1 INDEMNIFICATION BY THE COMPANY AND SELLERS. Subject to the
limitations set forth in this Article IX, the Company and each of the Sellers,
jointly and severally, agrees to indemnify, defend and hold harmless the GST
Companies and each of their directors, officers and Affiliates from and against
any and all loss, liability, damage, costs and expenses (including interest,
penalties and attorneys' fees) (collectively, "Losses") that the GST Companies
or any of their Affiliates may incur or become subject to arising out of or due
to the following (individually, an "Indemnifiable Claim" and collectively,
"Indemnifiable Claims" when used in the context of the Company and the Sellers,
on the one hand, and the GST Companies, on the other hand, as the Indemnified
Party (as hereinafter defined): (a) the claims of any broker or finder engaged
by the Company and/or the Sellers, (b) any inaccuracy of any representation or
the breach of any warranty of the Company or any Seller contained in Articles II
and IV hereof or any schedule hereto, (c) any of the matters disclosed in
Schedules 2.5, 2.13 and 2.20 hereto, (d) any liabilities or payments required to
be made to LEC #1, LEC #2, Carrier #1, LEC #3 or Carrier #2 described in
Schedule 2.7 hereto
33
in an aggregate amount not to exceed $105,430, (e) the assertion against the GST
Companies of any known liability or obligations of the Company, any Seller or
any of their Affiliates relating to the Company's operations or any of its
assets prior to the Closing Date and not otherwise disclosed herein, whether
absolute or contingent, matured or unmatured and (f) any personal injury, death
or property damage attributable to products manufactured, processed or sold by
the Company and which were sold to any third party prior to the Closing Date, to
the extent that the GST Companies do not recover therefor under the Company's
applicable insurance policies. The Company and/or the Sellers will reimburse the
GST Companies and each Affiliate thereof for any reasonable and documented legal
or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or proceeding
subject to the limitations set forth in Section 9.4 hereof. The obligations of
the Company and Sellers under this Section 9.1 shall be enforceable regardless
of whether the GST Companies or any of their directors or employees had
knowledge of any inaccuracy of any representation or the breach of any warranty
of the Company or any Seller contained in Article II hereof or any schedule
hereto.
Section 9.2 INDEMNIFICATION BY THE GST COMPANIES. Subject to the
limitations set forth in this Article IX, each of the GST Companies agrees to
indemnify, defend and hold harmless the Company and each of the Sellers from and
against any and all Losses that the Company, its Affiliates or any of the
Sellers may incur or become subject to arising out of or due to the following
(a) the claims of any broker or finder engaged by the GST Companies, (b) any
inaccuracy of any representation or the breach of any warranty of the GST
Companies contained in Article III hereof or any schedule hereto and (c) any
personal injury, death or property damage attributable to products manufactured,
processed or sold by the Company and which are sold to any third party after the
Closing Date. The GST Companies will reimburse the Company and/or each of the
Sellers for any reasonable and documented legal or other expenses reasonably
incurred by it or them in connection with investigating or defending any such
loss, claim, liability, action or proceeding. The obligations of the GST
Companies under this Section 9.2 shall be enforceable regardless of whether the
Company or any Seller had any knowledge of any inaccuracy of any representation
or the breach of any warranty of the GST Companies contained in Article III
hereof or any schedule hereto.
Section 9.3 SURVIVAL. The representation and warranties of the parties
hereto and the obligation of indemnity provided herein shall survive the Closing
and terminate on the second anniversary of this Agreement PROVIDED, however,
that the representations and warranties of the Company and the Sellers contained
in Section 2.9 shall survive the Closing and terminate on the third anniversary
of the date of this Agreement.
34
Section 9.4 LIMITATIONS. The rights of indemnity provided herein are
limited as follows:
(a) The GST Companies shall not assert any claim against the Company or
any of the Sellers for indemnification hereunder unless and until the amount of
all such Indemnifiable Claims shall exceed $150,000.
(b) No Seller shall assert any claim against any GST Company for
indemnification hereunder unless and until the amount of all such Indemnifiable
Claims shall exceed $100,000.
(c) Following provisions shall be applicable with respect to any
inaccuracy of any of the following representations and warranties of the Company
and the Sellers:
(i) The representations and warranties contained in Section
2.5(a) to the extent that any such inaccuracy relates solely
to a conflict with or violation of any law, regulation,
judgment, order or decree relating specifically to the status
or activities of the Company as a provider of
telecommunications services;
(ii) The representations and warranties contained in Section
2.5(c)(i) to the extent that such inaccuracy relates solely to
the loss of any license, franchise, legal privilege or permit
relating specifically to the status or activities of the
Company as a provider of telecommunications services;
(iii) The representations and warranties contained in Section
2.13(b) to the extent that such inaccuracy relates solely to
any laws, ordinances, regulations, judgments, injunctions,
orders or decrees relating specifically to the status or
activities of the Company as a provider of telecommunications
services; and
(iv) The representations and warranties contained in Section
2.20 to the extent that such inaccuracy relates solely to (A)
laws, rules, regulations, arbitral determinations, orders,
writs, decrees and injunctions relating to telecommunications
or (B) franchises, licenses, permits, consents,
authorizations, approvals and certificates of any regulatory,
administrative or other governmental agency relating
specifically to the status or activities of the Company as a
provider of telecommunications services.
At such time as the amount of all Indemnifiable Claims asserted by the GST
Companies exceeds $150,000, the GST Companies may assert Indemnifiable Claims in
respect of the Regulatory Representations against the Sellers. At such time as
$150,000 of Losses arising
35
out of Indemnifiable Claims in respect of the Regulatory Representations have
either been applied to satisfy the $150,000 minimum referred to in Section
9.4(a) or reimbursed to the GST Companies by the Sellers, the GST Companies may
no longer assert Indemnifiable Claims in respect of the Regulatory
Representations against the Sellers.
(d) In case any event shall occur which would otherwise entitle any
party hereto to assert an Indemnifiable Claim hereunder, no loss, damage or
expense shall be deemed to have been sustained by such party to the extent of
any tax savings realized by such party with respect thereto.
Section 9.5 THIRD PARTY CLAIMS. In order for a party seeking
indemnification (the "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of, or involving a
claim, demand or written notice made by any third party against the Indemnified
Party (a "Third Party Claim") after the Closing Date, such Indemnified Party
must notify the party from whom indemnification is sought (the "Indemnifying
Party") in writing of the Third Party Claim within 30 days after receipt by such
Indemnified Party of written notice of the Third Party Claim; provided that the
failure of any Indemnified Party to give timely notice shall not affect his
right of indemnification hereunder except to the extent the Indemnifying Party
has actually been prejudiced or damaged thereby. If a Third Party Claim is made
against an Indemnified Party, the Indemnifying Party shall be entitled, if it so
chooses, to assume the defense thereof with counsel selected by the Indemnifying
Party (which counsel shall be reasonably satisfactory to the Indemnified Party).
The Indemnifying Party may, in its discretion, effect any settlement of any
pending or threatened suit or proceeding which it controls; PROVIDED, HOWEVER,
that the Indemnifying Party shall not effect any settlement of any such pending
or threatened suit or proceeding (a) without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld) or (b)
unless such settlement includes (i) an unconditional release of such Indemnified
Party from all liability on claims that are the subject matter of such suit or
proceeding, (ii) no admission or acknowledgment of culpability or wrongdoing by
such Indemnified Party and (iii) no provision for any nonmonetary relief to any
person to be performed by such Indemnified Party. If an Indemnifying Party shall
not have assumed the defense of such pending or threatened suit or proceeding as
provided hereunder, such Indemnified Party may effect any settlement of such
pending or threatened suit or proceeding only with the Indemnifying Party's
prior consent (which consent shall not be unreasonably withheld). If the
Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified
Party will cooperate in all reasonable respects with the Indemnifying Party in
connection with such defense and shall have the right to participate in such
defense with counsel selected by it. The fees and disbursements of such counsel,
however, shall be at the expense of the Indemnified Party;
36
provided, however, that, in the case of any Third Party Claim of which the
Indemnifying Party has not employed counsel to assume the defense, the fees and
disbursements of such counsel shall be at the expense of the Indemnifying Party.
Section 9.6 REDUCTION FOR INSURANCE. The gross amount which an
Indemnifying Party is liable to, for, or on behalf of the Indemnified Party
pursuant to this Article IX (the "Indemnifiable Loss") shall be reduced
(including, without limitation, retroactively) by any insurance proceeds
actually recovered by or on behalf of such Indemnified Party related to the
Indemnifiable Loss. If an Indemnified Party shall have received or shall have
had paid on its behalf an indemnity payment in respect of an Indemnifiable Loss
and shall subsequently receive directly or indirectly insurance proceeds in
respect of such Indemnifiable Loss, then such Indemnified Party shall pay to
such Indemnifying Party the net amount of such insurance proceeds or, if less,
the amount of such indemnity payment.
Section 9.7 MATERIALITY INTERPRETATION. Solely for purposes of this
Article IX, and in determining compliance with the condition(s) set forth in
this Article IX, the representations and warranties made by the Company and the
Sellers in Article II, shall be read and interpreted as if qualifications stated
therein with respect to materiality or Company Material Adverse Effect were not
contained therein.
Section 9.8 NOTICE OF CLAIM; DISPUTE. In order for an Indemnified Party
to be entitled to any indemnification provided for under this Agreement, and as
a prerequisite to any recovery pursuant to any such indemnification, the
Indemnified Party shall, upon obtaining knowledge thereof, promptly notify the
Indemnifying Party in writing of any damage, claim, loss, liability or expense
which the Indemnified Party has determined constitutes an Indemnifiable Claim
pursuant to this Article IX (such written notice being hereinafter referred to
as "Notice of Claim"). A Notice of Claim shall specify, in reasonable detail,
the nature of any such Indemnifiable Claim which gives rise to a right of
indemnification. Upon receipt of a Notice of Claim, the Indemnifying Party shall
have 20 days to, at Indemnifying Party's sole discretion, either (a) accept the
Indemnifiable Claim and undertake proper remedial actions or (b) dispute such
Indemnifiable Claim by providing written notice to the Indemnified Party which
specified, in reasonable detail, why such Claim does not constitute an
Indemnifiable Claim (such written notice being hereinafter referred to as a
"Dispute Notice"). In the event a Dispute Notice is issued, the parties shall
exercise their best efforts to reach a mutually acceptable resolution of such
dispute within 30 days after the issuance of such Dispute Notice. In the event
the parties are unable to resolve such dispute within the requisite period, such
dispute shall be settled by final and binding arbitration in accordance with
Section 11.8 hereof.
37
ARTICLE X TERMINATION
Section 10.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing:
(a) By mutual written consent of the Buyer and the Sellers;
(b) By either the Buyer or the Sellers if the transactions contemplated
by this Agreement shall not have been consummated on or before June 13, 1997;
(c) By the Sellers if any condition specified in Article VI hereof has
not been met or waived by the Sellers at such time as such condition can no
longer be satisfied; or
(d) By the Buyer if any condition specified in Article VII hereof has
not been met or waived by the Buyer at such time as such condition can no longer
be satisfied; or
(e) By either the Buyer or the Sellers if a court of competent
jurisdiction or Governmental Authority shall have issued a final, non-appealable
order, decree or ruling or taken any other action (which order, decree or ruling
the parties hereto shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement.
Section 10.2 EFFECT OF TERMINATION. The termination of this Agreement
in accordance with Section 9.1 hereof shall have no effect on whatever rights
and remedies the parties hereto may have against one another by reason of such
termination.
ARTICLE XI MISCELLANEOUS
Section 11.1 EXPENSES. Except as otherwise provided herein, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and expenses
regardless of the termination of this Agreement or the failure to consummate the
transactions contemplated hereby; PROVIDED, HOWEVER, that if such transactions
are consummated, Sub shall bear the accountable legal expenses of the Sellers
not to exceed $30,000.
Section 11.2 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered personally
or by facsimile transmission, in either case with receipt acknowledged, or five
days after being
38
sent by registered or certified mail, return receipt requested, postage prepaid:
(a) IF TO THE GST COMPANIES TO:
GST Telecommunications, Inc.
0000 X.X. Xxxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
WITH A COPY TO:
Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
(b) IF TO THE SELLERS OR THE COMPANY TO:
Action Telcom Co.
000 Xxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
WITH A COPY TO:
McMahon, Surovik, Suttle,
Buhrmann, Xxxxx & Xxxx
000 Xxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
or to such other address as any party shall have specified by notice in writing
to the other in compliance with this Section 11.2.
Section 11.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, representations and understandings among the
parties hereto.
Section 11.4 BINDING EFFECT, BENEFITS, ASSIGNMENTS. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns; nothing in this Agreement, expressed or
implied, is intended to
39
confer on any other person, other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement. This Agreement may not be assigned without the
prior written consent of the other parties hereto.
Section 11.5 RIGHT OF SET-OFF. The Sellers agree that GST shall have
the right at any time and from time to time, upon five days' written notice to
the Sellers (any other such notice being expressly waived by Sellers) and to the
fullest extent permitted by applicable law, to set off and apply any and all
amounts at any time owed by the GST Companies under this Agreement and the
Purchase Price Notes against any and all obligations of the Company or the
Sellers to the GST Companies now or hereafter existing under this Agreement.
Section 11.6 AMENDMENT; WAIVER; CONSENT. This Agreement may not be
changed, amended, terminated, augmented, rescinded or discharged (other than by
performance), in whole or in part, except by a writing executed by each of the
parties hereto, and no waiver of any of the provisions or conditions of this
Agreement or any of the rights of a party hereto shall be effective or binding
unless such waiver shall be in writing and signed by the party claimed to have
given or consented thereto. Except to the extent that a party hereto may have
otherwise agreed to in writing, no waiver by that party of any condition of this
Agreement or breach by any other party of any of its obligations,
representations or warranties hereunder shall be deemed to be a waiver of any
other condition or subsequent or prior breach of the same or any other
obligation or representation or warranty by such other party, nor shall any
forbearance by the first party to seek a remedy for any noncompliance or breach
by such other party be deemed to be a waiver by the first party of its rights
and remedies with respect to such noncompliance or breach.
Section 11.7 GOVERNING LAW. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to principles of conflicts of
laws.
Section 11.8 ARBITRATION.
(a) Each of the parties hereto hereby irrevocably consents to
arbitration of any dispute, controversy or claim arising out of or relating to
this Agreement. Each of the parties hereto hereby irrevocably waives, to the
fullest extent legally possible, any objection to the use of arbitration to
resolve any such dispute, controversy or claim. If the parties in good faith
cannot resolve any controversy or claim arising out of or related to this
Agreement or in connection with a breach thereof within 30 days after the
claimant gives written notice of such controversy or claim to the other parties,
any party hereto may demand and
40
commence arbitration of the controversy or claim. In the event of a demand for
arbitration, the Sellers and Buyer shall each select one arbitrator within 30
days after such demand shall have been given (the "Demand Date") and the two
arbitrators, within 60 days following the Demand Date shall select a third
arbitrator. If the third arbitrator shall not be selected within 60 days after
the Demand Date, either the Sellers or Buyer may apply to the American
Arbitration Association (or any successor thereto) for the appointment of an
arbitrator in Denver, Colorado and the parties shall be bound by the
appointments made by such Association. The arbitration shall be held in Denver,
Colorado as promptly as practicable thereafter under the Commercial Arbitration
Rules of the American Arbitration Association in effect at the time such
controversy, claim or breach is submitted to arbitration, as the same may be
modified by agreement of the parties. The award or decision made in accordance
with such rules shall be delivered in writing to the parties hereto and shall be
final, binding and conclusive upon them in the absence of fraud and judgment
upon such award or decision may be entered in any court having jurisdiction
thereof. The Sellers, on the one hand, and Buyer, on the other hand, shall bear
equally the cost of such arbitration.
(b) Notwithstanding the provisions of Section 10.7(a) hereof, the
parties hereto shall have the right to seek and obtain from a court of competent
jurisdiction a temporary restraining order, injunction, specific performance or
other equitable relief to enforce the provisions of this Agreement.
Section 11.9 SEVERABILITY. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section 11.10 HEADINGS. The headings and captions in this Agreement are
included for purposes of convenience only and shall not affect the construction
or interpretation of any of its provisions.
Section 11.11 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
41
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first set forth.
GST ACTION TELECOM, INC.
By:/s/ Xxxx Xxxxx
------------------------------------
Xxxx Xxxxx
Chairman
GST TELECOMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title:Senior Vice President
ACTION TELCOM CO.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx
President
/s/ Xxxxx X. Xxxxxxxx
------------------------------------
XXXXX X. XXXXXXXX
/s/ Xxxxxxx Xxxxxxx Bilberry
------------------------------------
XXXXXXX XXXXXXX BILBERRY
/s/ Xxxx X Xxxxxxxx
------------------------------------
XXXX X XXXXXXXX
42
The Registrant hereby undertakes to furnish supplementally to the
Commission upon request a copy of any omitted schedule to the Agreement and Plan
of Merger dated as of May 31, 1997, by and among Action Telcom Co., Xxxxx X.
Xxxxxxxx, Xxxxxxx Xxxxxxx Bilberry, Xxxx X Xxxxxxxx, GST Action Telecom, Inc.
and the Registrant.
