Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
dated as of
July 2, 2003
among
BTI TELECOM CORP.,
W,
ITC/\DELTACOM, INC.,
and
8DBC1 CORP.
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TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS..........................................................2
Section 1.01. Definitions................................................2
ARTICLE 2 PARENT SERIES B SALE; PLAN OF MERGER................................14
Section 2.01. The Parent Series B Sale; The Merger......................14
Section 2.02. Conversion of Shares......................................15
Section 2.03. Surrender and Payment.....................................17
Section 2.04. Lost, Stolen or Destroyed Certificates....................19
Section 2.05. Stock Options and Warrants................................19
Section 2.06. Certain Adjustments.......................................19
ARTICLE 3 THE SURVIVING CORPORATION...........................................19
Section 3.01. Articles of Incorporation.................................20
Section 3.02. Bylaws....................................................20
Section 3.03. Directors and Officers....................................20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES THE COMPANY..........................20
Section 4.01. Corporate Existence and Power.............................20
Section 4.02. Corporate Authorization...................................21
Section 4.03. Governmental Authorization................................21
Section 4.04. Non-contravention.........................................22
Section 4.05. Capitalization............................................22
Section 4.06. Subsidiaries..............................................23
Section 4.07. Financial Statements......................................24
Section 4.08. Absence of Certain Changes................................24
Section 4.09. No Undisclosed Liabilities................................26
Section 4.10. Litigation................................................26
Section 4.11. Taxes ....................................................27
Section 4.12. ERISA ....................................................28
Section 4.13. Labor Matters.............................................30
Section 4.14. Compliance with Laws......................................30
Section 4.15. Licenses and Permits......................................31
Section 4.16. Contracts.................................................31
Section 4.17. Intellectual Property.....................................32
Section 4.18. Environmental Matters.....................................33
Section 4.19. Agreements with Affiliates................................35
Section 4.20. Insurance.................................................35
Section 4.21. Real Property.............................................36
Section 4.22. Title to Property.........................................37
Section 4.23. Customers and Suppliers...................................37
Section 4.24. Corporate Records.........................................38
Section 4.25. Finders' Fees.............................................38
Section 4.26. Opinion of Company Financial Advisor......................38
Section 4.27. Board; Special Committee..................................38
Section 4.28. Inapplicability of Certain Restrictions...................38
Section 4.29. PUHCA.....................................................38
Section 4.30. Investment Company Act....................................38
Section 4.31. Call Termination..........................................38
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT............................40
Section 5.01. Corporate Existence and Power.............................40
Section 5.02. Corporate Authorization...................................40
Section 5.03. Governmental Authorization................................41
Section 5.04. Non-contravention.........................................42
Section 5.05. Capitalization............................................42
Section 5.06. Parent Subsidiaries.......................................43
Section 5.07. SEC Filings...............................................44
Section 5.08. Financial Statements......................................44
Section 5.09. Absence of Certain Changes................................44
Section 5.10. No Undisclosed Liabilities................................46
Section 5.11. Litigation................................................46
Section 5.12. Taxes ....................................................47
Section 5.13. ERISA ....................................................48
Section 5.14. Compliance with Laws......................................49
Section 5.15. Licenses and Permits......................................50
Section 5.16. Contracts.................................................50
Section 5.17. Environmental Matters.....................................51
Section 5.18. Intellectual Property.....................................52
Section 5.19. Real Property.............................................53
Section 5.20. Title to Property.........................................54
Section 5.21. Finders' Fees.............................................54
Section 5.22. Opinion of Parent Financial Advisor.......................54
Section 5.23. Merger Co.................................................54
Section 5.24. PUHCA ....................................................54
Section 5.25. Investment Company Act....................................54
Section 5.26. Offering of Parent Series B Preferred Stock...............54
Section 5.27. Agreements with Affiliates................................54
Section 5.28. Tax Treatment.............................................55
Section 5.29. Call Termination..........................................55
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF W.................................56
Section 6.01. Existence and Power.......................................56
Section 6.02. Authorization.............................................56
Section 6.03. Governmental Authorization................................57
Section 6.04. Non-contravention.........................................57
Section 6.05. Parent Transaction Securities To Be Held
For Investment................................. ..........57
Section 6.06. Ultimate Parent Entity....................................58
Section 6.07. Investment Company Act....................................58
Section 6.08. Sufficient Funds..........................................59
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ARTICLE 7 COVENANTS RELATING TO CONDUCT OF BUSINESS...........................59
Section 7.01. Conduct of the Company....................................59
Section 7.02. Conduct of Parent.........................................62
Section 7.03. Tax-free Reorganization...................................63
ARTICLE 8 ADDITIONAL AGREEMENTS...............................................63
Section 8.01. Government and Other Consents and Approvals;
Private Placement Memorandum; Company
Shareholder Meeting.......................................63
Section 8.02. Access to Information.....................................64
Section 8.03. No Solicitations..........................................65
Section 8.04. Notices of Certain Events.................................67
Section 8.05. Affiliate Transactions....................................68
Section 8.06. Agreement to Vote; Proxy; Transfer Restrictions...........68
Section 8.07. Reasonable Best Efforts...................................69
Section 8.08. Public Announcements......................................72
Section 8.09. Certain Indebtedness......................................72
Section 8.10. Further Assurances........................................73
Section 8.11. Confidentiality...........................................73
Section 8.12. Obligations of Merger Co..................................73
Section 8.13. Enter into Transaction Agreements.........................74
Section 8.14. Director and Officer Liability............................74
Section 8.15. Employee Benefits.........................................74
Section 8.16. Certificate of Designations...............................75
Section 8.17. Stockholders Meeting......................................75
Section 8.18. Reservation of Parent Common Shares.......................76
Section 8.19. Incentive Plans...........................................76
Section 8.20. Portfolio Company Actions.................................76
Section 8.21. Sale of Additional Shares of Parent Series B
Preferred Stock............................ ..............76
Section 8.22. Parent Stock Incentive Plan...............................78
Section 8.23. No Recourse...............................................78
Section 8.24. WCAS Consent..............................................78
ARTICLE 9 CONDITIONS TO THE CLOSING...........................................79
Section 9.01. Conditions to the Obligations of Each Party...............79
Section 9.02. Conditions to the Obligations of Parent and Merger Co.....80
Section 9.03. Condition to the Obligation of the Company................81
Section 9.04. Conditions to the Obligations of the WCAS
Securityholders............................... ...........82
ARTICLE 10 INDEMNIFICATION....................................................83
Section 10.01. General Indemnification...................................83
Section 10.02. Survival..................................................85
Section 10.03. Limitation on Liability...................................86
Section 10.04. Computation of Losses.....................................87
Section 10.05. Payment...................................................87
Section 10.06. Exclusive Remedy..........................................88
ARTICLE 11 TERMINATION........................................................89
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Section 11.01. Termination...............................................89
Section 11.02. Effect of Termination.....................................90
ARTICLE 12 MISCELLANEOUS......................................................91
Section 12.01. Notices...................................................91
Section 12.02. Amendments; No Waivers....................................93
Section 12.03. Expenses..................................................93
Section 12.04. Successors and Assigns; Benefit...........................93
Section 12.05. Governing Law.............................................94
Section 12.06. Submission to Jurisdiction................................94
Section 12.07. Severability..............................................94
Section 12.08. Interpretation............................................94
Section 12.09. Disclosure Schedules......................................94
Section 12.10. Counterparts; Effectiveness...............................95
Section 12.11. WAIVER OF JURY TRIAL......................................95
Section 12.12. Entire Agreement..........................................95
Section 12.13. Specific Performance......................................95
Section 12.14. Joint and Several Liability...............................96
Section 12.15. Definition of Knowledge...................................96
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Exhibit A Form of Governance Agreement
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Warrant Agreement
Exhibit D Form of Working Capital Worksheet
Exhibit E Form of Amended and Restated Articles of Incorporation of Surviving
Corporation
Exhibit F Form of By-Laws of Surviving Corporation
Exhibit G Form of Restated Certificate of Incorporation of Parent
Exhibit H Form of Amended and Restated Bylaws of Parent
Exhibit I Parent Credit Agreement Commitment Letter
Exhibit J Company Credit Agreement Commitment Letter
Exhibit K Form of Series B Certificate of Designations
Exhibit L Form of Amended Series A Registration Rights Agreement
Exhibit M Form of Amended Series A Certificate of Designations
Exhibit N Form of Amended Series A Warrant Agreement
Exhibit O Form of Legal Opinion of Xxxxx & Xxxxxxx L.L.P.
Exhibit P Form of Legal Opinion of Xxxxxxxx, Xxxxxx & Finger, P.A.
Annex I WCAS Securityholders Information
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of July 2,
2003 among BTI Telecom Corp., a North Carolina corporation (the "Company"), each
Person set forth on the signature pages hereof under the heading "WCAS
Securityholders" (each, a "WCAS Securityholder" and collectively, "W"),
ITC/\DeltaCom, Inc., a Delaware corporation ("Parent"), and 8DBC1 Corp., a North
Carolina corporation and a wholly owned direct subsidiary of Parent ("Merger
Co.").
WITNESSETH:
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WHEREAS, the Board of Directors of the Company has determined that it
is advisable and in the best interests of its shareholders, and consistent with
and in furtherance of its business strategies and goals, for Parent to acquire
all of the outstanding shares of the Company through the merger of Merger Co.
with and into the Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Board of Directors of Parent (the "Parent Board") and the
Board of Directors of Merger Co. have each unanimously determined that it is
advisable and in the best interests of its stockholders, and consistent with and
in furtherance of its business strategies and goals, for Parent to acquire
indirectly all of the outstanding shares of the Company through the merger of
Merger Co. with and into the Company upon the terms and subject to the
conditions set forth herein;
WHEREAS, as a condition of the willingness of Parent and Merger Co. to
enter into this Agreement and as an inducement thereto, at the Closing, W,
Parent and certain other persons shall enter into a governance agreement (the
"Governance Agreement") in substantially the form attached as Exhibit A hereto
and relating to the establishment of certain terms and conditions of the
corporate governance of Parent after the Effective Time and certain terms and
conditions relating to the acquisition and disposition of securities of Parent;
WHEREAS, as a condition of the willingness of Parent and Merger Co. to
enter into this Agreement and as an inducement thereto, at the Closing, W shall
purchase from Parent 350,000 shares of 8% Series B Convertible Redeemable
Preferred Stock, par value $0.01 per share (the "Parent Series B Preferred
Stock"), of Parent pursuant to this Agreement;
WHEREAS, the holders of a majority of the outstanding shares of
Parent's 8% Series A Convertible Redeemable Preferred Stock, par value $0.01 per
share (the "Parent Series A Preferred Stock"), have approved the creation and
issuance of the Parent Series B Preferred Stock;
WHEREAS, as a condition of the willingness of W to enter into this
Agreement and as an inducement thereto, at the Closing, W and Parent shall enter
into a registration rights agreement (the "Registration Rights Agreement") in
substantially the form attached hereto as Exhibit B;
WHEREAS, as a condition of the willingness of W to enter into this
Agreement and as an inducement thereto, at the Closing, Parent shall issue to W
warrants to purchase shares (each, a "Parent Common Share") of common stock, par
value $0.01 per share (the "Parent Common Stock"), of Parent at an exercise
price of $8.50 per share (the "Warrants") pursuant to a warrant agreement (the
"Warrant Agreement" and collectively with this Agreement, the Registration
Rights Agreement and the Governance Agreement, the "Transaction Agreements")
between Parent and the warrant agent thereunder (the "Warrant Agent"), in
substantially the form attached hereto as Exhibit C;
WHEREAS, in furtherance of such combination, the Boards of Directors
of Parent, Merger Co. and the Company have each adopted this Agreement providing
for the merger (the "Merger") of Merger Co. with and into the Company in
accordance with the applicable provisions of the North Carolina Business
Corporation Act (the "NCBCA" or "North Carolina Law"), and upon the terms and
subject to the conditions set forth herein;
WHEREAS, Parent, W and the Company intend the Merger to qualify as a
reorganization within the meaning of Section 368 of the Code; and
WHEREAS, Parent, W and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. Each of the following terms is defined
as follows:
"Affiliate" means, with respect to any Person, any other Person which directly
or indirectly controls, is controlled by or is under common control with such
Person; provided that, for purposes of this Agreement, (a) Parent, the Parent
Subsidiaries and Merger Co. shall not be treated as Affiliates of the Company or
W; (b) the Company and the Subsidiaries shall not be treated as an Affiliate of
any other party hereto; (c) W shall not be treated as an Affiliate of Parent,
the Parent Subsidiaries, Merger Co., the Company or the Subsidiaries; and (d) no
portfolio company of W or any of W's affiliated investment funds shall be
treated as an Affiliate of any other party hereto, the Parent Subsidiaries or
the Subsidiaries.
"Aggregate Article 2 Post-July 31 Shares" means the aggregate number of Article
2 Post-July 31 Shares for all WCAS Securityholders.
"Agreement" is defined in the preamble.
2
"Article 2 Post-July 31 Shares" means, with respect to each WCAS Securityholder,
the number of shares of Parent Series B Preferred Stock equal to the quotient of
(i) such WCAS Securityholder's Pro Rata Parent Series B Post-July 31 Reduction
Amount, divided by (ii) the Face Amount (such quotient to be rounded down to
eliminate fractional shares).
"Article 2 Shares" means, with respect to each WCAS Securityholder, the number
of shares of Parent Series B Preferred Stock equal to the quotient of (i) the
sum of (A) such WCAS Securityholder's Pro Rata Parent Series B Post-July 31
Reduction Amount, plus (B) such WCAS Securityholder's Pro Rata Parent Series B
Expenses Reduction Amount, divided by (ii) the Face Amount (such quotient to be
rounded down to eliminate fractional shares).
"Business Day" means any day except Saturday, Sunday and any legal holiday or a
day on which banking institutions in New York City, New York or the State of
Georgia generally are authorized or required by law or other governmental
actions to close.
"Capital Lease Facility" means, collectively, the Master Lease Agreement dated
as of December 29, 2000, as amended, between NTFC Capital Corporation, as
Lessor, and ITC/\DeltaCom Communications, Inc. and Interstate FiberNet, Inc., as
Lessees, and the Master Lease Agreement dated as of December 31, 2001, as
amended, between General Electric Capital Corporation, as Lessor, and
ITC/\DeltaCom Communications, Inc., as Lessee.
"Certificates" is defined in Section 2.02(h).
"Closing" is defined in Section 2.01(c).
"Closing Date" is defined in Section 2.01(c).
"Code" is defined in Section 2.03(g).
"Commitment Period" means the period (i) commencing on the Closing Date and (ii)
expiring at 5:00 p.m. (New York time) on the fifteen-month anniversary of the
Closing Date.
"Common Exchange Ratio" is defined in Section 2.02(c).
"Common Merger Consideration" is defined in Section 2.02(c).
"Common Share" is defined in Section 2.02(a).
"Company" is defined in the preamble.
"Company Acquisition Proposal" is defined in Section 8.03(a).
"Company Balance Sheet" is defined in Section 4.07(a).
"Company Balance Sheet Date" is defined in Section 4.07(a).
"Company Common Stock" is defined in Section 2.02(a).
3
"Company Confidentiality Agreement" is defined in Section 8.11.
"Company Credit Agreement" means the Credit Agreement dated as of March 31,
2001, as amended from time to time, among the Company, certain other credit
parties and the lenders signatories thereto.
"Company Disclosure Schedule" is defined in Section 2.05.
"Company Employees" is defined in Section 4.12(a).
"Company Financial Statements" is defined in Section 4.07(a).
"Company Plan" is defined in Section 4.12(a).
"Company Representatives" is defined in Section 8.02(b).
"Company Securities" is defined in Section 4.05.
"Company Shareholders Agreements" is defined in Section 4.05.
"Confidentiality Agreements" is defined in Section 8.11.
"Continuing Employees" is defined in Section 8.15.
"Contracts" is defined in Section 4.16.
"Controlled Group" is defined in Section 4.12(c).
"Cost of Services Contract" means any Contract of the Company or any Subsidiary
which constitutes a liability identified as "Costs of Services" in the Company
Financial Statements.
"Deductible Amount" is defined in Section 10.03(a).
"De Minimis Amount" is defined in Section 10.03(a).
"Designated Officer" is defined in Section 5.09(k).
"Dissenting Share" is defined in Section 2.02(g).
"DOJ" is defined in Section 8.07(b).
"Drawdown" means each occasion on which Parent elects to exercise its right to
deliver a Drawdown Notice requiring the WCAS Securityholders to purchase,
subject to the terms and conditions of Section 8.21, the number of shares of
Parent Series B Preferred Stock specified in such Drawdown Notice (subject to
the limitations set forth in Section 8.21(b)).
"Drawdown Closing" is defined in Section 8.21(c).
4
"Drawdown Closing Date" is defined in Section 8.21(c).
"Drawdown Conditions" means, with respect to each Drawdown, that (i) the
Effective Time shall have occurred, (ii) Parent's Unrestricted Cash at the time
the Drawdown Notice with respect to such Drawdown is delivered is less than
$20,000,000, (iii) Parent's proposed use for the proceeds of such Drawdown, as
set forth in such Drawdown Notice, is a Permitted Expenditure, and (iv) Parent
shall not be in material breach of any of its material obligations to any WCAS
Securityholder pursuant to the Series B Certificate of Designations or the
Governance Agreement.
"Drawdown Notice" means a written notice to the WCAS Securityholders which shall
be delivered at least 15 days prior to the applicable Drawdown Closing Date and
shall set forth (i) the aggregate number of shares of Parent Series B Preferred
Stock that the WCAS Securityholders shall become obligated to purchase pursuant
to a Drawdown and (ii) Parent's intended use for the proceeds of the Drawdown.
"Drawdown Shares" means the shares of Parent Series B Preferred Stock purchased
by the WCAS Securityholders pursuant to Section 8.21.
"Effective Time" is defined in Section 2.01(d).
"Environmental Laws" is defined in Section 4.18(d).
"Environmental Permits" is defined in Section 4.18(d).
"ERISA" is defined in Section 4.12(a).
"Exchange Act" is defined in Section 4.03.
"Exchange Agent" is defined in Section 2.03(a).
"Face Amount" means, $100 per share of Parent Series B Preferred Stock, such
amount to be equitably adjusted to account for any stock split, combination or
reclassification of, or similar event affecting, the Parent Series B Preferred
Stock.
"Fair Market Value" means, as of any date of determination, the volume weighted
average of the per share selling price of one Parent Common Share on the OTC
Bulletin Board (or if the Parent Common Shares are not traded on the OTC
Bulletin Board, on the principal securities exchange, interdealer quotation
system or other securities market on which the Parent Common Shares are then
traded) for the ten consecutive trading days ending on the second Business Day
prior to such date of determination, as reported by Bloomberg Financial Markets
(or such other source as W and Parent may agree); provided that if the Parent
Common Shares are so traded but the selling price thereof is not reported, the
average of the last bid and ask prices for one Parent Common Share for such
period of ten consecutive trading days.
"FCC" is defined in Section 4.29.
5
"FTC" is defined in Section 8.07(b).
"GAAP" is defined in Section 4.07(a).
"Governance Agreement" is defined in the recitals hereto.
"Hazardous Substances" is defined in Section 4.18(d).
"HSR Act" is defined in Section 4.03.
"Indebtedness" of any Person, means (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind; (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments; (c) all obligations of such Person upon which interest charges are
customarily paid (excluding accounts payable incurred in the ordinary course of
business); (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property acquired by such Person; (e) all
obligations of such Person in respect of the deferred purchase price of property
or services (excluding accounts payable); (f) all indebtedness of others secured
by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the indebtedness secured thereby has
been assumed; (g) all guarantees by such Person of indebtedness of others of the
type described in clauses (a) through (f) and (h); (h) all capital lease
obligations of such Person; and (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit (other than
letters of credit that are collateralized by cash) and letters of guaranty;
provided that all obligations of Business Telecom, Inc. to make cash or in-kind
contributions pursuant to the Performing Arts Center Agreement dated November
12, 1997, between Business Telecom, Inc. and the City of Raleigh, North
Carolina, shall not be considered Indebtedness for purposes of this Agreement.
The Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Party" is defined in Section 10.01(c).
"Indemnifying Party" is defined in Section 10.01(c).
"Intellectual Property Right" is defined in Section 4.17.
"IRUs" is defined in Section 4.21(b).
"knowledge" is defined in Section 12.15.
"Leased Real Property" is defined in Section 4.21(a).
"Lien" is defined in Section 4.04.
"Losses" is defined in Section 10.01(a).
6
"Material Adverse Effect" is defined in Section 4.01.
"Material Liens" means Liens which, individually or in the aggregate, materially
detract from, or materially interfere with, the marketability, value or present
use of the property or asset subject thereto or affected thereby.
"Maximum Amount" is defined in Section 10.03(b).
"Merger" is defined in the recitals hereto.
"Merger Co." is defined in the preamble.
"Merger Co. Common Stock" is defined in Section 2.02(b).
"Merger Consideration" is defined in Section 2.02(f).
"Minimum Drawdown Amount" means the lesser of (a) 10,000 shares of Parent Series
B Preferred Stock (such number of shares to be equitably adjusted to account for
any stock split, combination or reclassification of, or similar event affecting,
the Parent Series B Preferred Stock) and (b) the number of shares of Parent
Series B Preferred Stock which Parent is entitled to sell to the WCAS
Securityholders pursuant to Section 8.21 which have not yet been sold.
"NCBCA" is defined in the recitals hereto.
"North Carolina Law" is defined in the recitals hereto.
"Notice of Loss" is defined in Section 10.01(c).
"Order" is defined in Section 4.10.
"Other Acquisition Documentation" is defined in Section 8.03(c).
"Owned Real Property" is defined in Section 4.21(a).
"Parent" is defined in the preamble.
"Parent Balance Sheet" is defined in Section 5.08.
"Parent Balance Sheet Date" is defined in Section 5.08.
"Parent Board" is defined in the recitals hereto.
"Parent Common Share" is defined in the recitals hereto.
"Parent Common Stock" is defined in the recitals hereto.
7
"Parent Credit Agreement" means the Credit Agreement dated as of October 29,
2002, as amended from time to time, among Parent, certain other credit parties
and the lenders signatories thereto.
"Parent Current SEC Reports" is defined in Section 5.05.
"Parent Disclosure Schedule" is defined in Section 5.02.
"Parent Employees" is defined in Section 5.13(a).
"Parent Indemnified Parties" is defined in Section 10.01(a).
"Parent Leased Real Property" is defined in Section 5.19(a).
"Parent Material Adverse Effect" is defined in Section 5.01.
"Parent Owned Real Property" is defined in Section 5.19(a).
"Parent Permits" is defined in Section 5.15.
"Parent Plan" is defined in Section 5.13(a).
"Parent Preferred Shares" is defined in Section 5.05.
"Parent Representatives" is defined in Section 8.02(a).
"Parent SEC Reports" is defined in Section 5.07(a).
"Parent Securities" is defined in Section 5.05.
"Parent Series A Preferred Stock" is defined in the recitals hereto.
"Parent Series B Preferred Stock" is defined in the recitals hereto.
"Parent Series B Expenses Reduction Amount" means the aggregate amount of cash
loaned by W and its Affiliates to the Company and the Subsidiaries, as
contemplated by Section 8.09(c).
"Parent Series B Post-July 31 Reduction Amount" means the aggregate amount of
cash loaned by W and its Affiliates to the Company and the Subsidiaries, as
contemplated by Section 8.09(b), from July 31, 2003 to the Closing, provided
that, regardless of the amount of cash loaned by W and its Affiliates to the
Company and the Subsidiaries during such period, the Parent Series B Post-July
31 Reduction Amount shall not exceed $5,000,000.
"Parent Series B Sale" is defined in Section 2.01(a).
"Parent Stock Option" is defined in Section 2.05.
8
"Parent Subsidiary" is defined in Section 5.06(a).
"Parent Subsidiary Securities" is defined in Section 5.06(b).
"Parent 10-K" is defined in Section 5.05.
"Parent Transaction Securities" means, collectively, (i) the Parent Common
Shares issued or issuable as Merger Consideration, (ii) the shares of Parent
Series B Preferred Stock issued or issuable in the Parent Series B Sale, (iii)
the Drawdown Shares, (iv) any Parent Common Shares and shares of Parent Series B
Preferred Stock issued or issuable pursuant to Section 10.05, (v) any shares of
Parent Series B Preferred Stock issued or issuable as dividends pursuant to the
terms of the Series B Certificate of Designations, (vi) the Satisfaction Shares,
(vii) the Warrants, (viii) the Parent Common Shares issued or issuable upon
exercise of the Warrants, and (ix) the Parent Common Shares issued or issuable
upon conversion of the Parent Series B Preferred Stock referred to in clauses
(ii), (iii), (iv) and (v).
"Payment Demand Date" means the date by which the Company must receive demand
for payment under Section 55-13-23 of the NCBCA by any holder of a Share
desiring to exercise dissenters' rights under the NCBCA in connection with the
Merger, which date shall be specified in the notice to be given by the Company
pursuant to Article 13 of the NCBCA.
"Permits" is defined in Section 4.15.
"Permitted Expenditure" means any expenditure for the cost of services, selling,
operations and administrative expenses, capital expenditures, payment of
contingencies and other purposes which could reasonably be expected to be
incurred by Parent and the Parent Subsidiaries (including, without limitation,
the Company and the Company Subsidiaries) after the Closing in connection with
their ongoing business activities in the ordinary course of business (it being
understood that Permitted Expenditures shall not include (i) any capital
expenditures incurred in connection with any business combination transaction or
(ii) any capital expenditures in excess of $65,000,000 in any twelve month
period which begins after the Closing).
"Person" is defined in Section 2.03(d).
"Per Share Ratio" means a fraction, the numerator of which shall be 50,000 and
the denominator of which shall be the number of Common Shares outstanding as of
the Effective Time (after giving effect to the conversion of all shares of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
outstanding as of the Effective Time).
"PIU" is defined in Section 4.31(b).
"PLU" is defined in Section 4.31(b).
"Post-July 31 Notes" is defined in Section 8.09(b).
"PPM" is defined in Section 8.01(c).
"Pre-Closing Tax Period" is defined in Section 4.11(i).
9
"Preferred Stock" is defined in Section 4.05.
"Pro Rata Parent Series B Expenses Reduction Amount" means, with respect to each
WCAS Securityholder, such WCAS Securityholder's Pro Rata Ratio multiplied by the
Parent Series B Expenses Reduction Amount.
"Pro Rata Parent Series B Post-July 31 Reduction Amount" means, with respect to
each WCAS Securityholder, such WCAS Securityholder's Pro Rata Ratio multiplied
by the Parent Series B Post-July 31 Reduction Amount.
"Pro Rata Ratio" means, with respect to each WCAS Securityholder, the ratio
which the number of shares of Parent Series B Preferred Stock set forth next to
such WCAS Securityholder's name on Annex I hereto bears to the sum of the number
of shares of Parent Series B Preferred Stock set forth next to the names of all
of the WCAS Securityholders on Annex I hereto.
"PUHCA" is defined in Section 4.29.
"Registration Rights Agreement" is defined in the recitals hereto.
"Regulatory Law" is defined in Section 8.07(b).
"Release" is defined in Section 4.18(d).
"Remaining Shares" is defined in Section 2.02(g).
"Returns" is defined in Section 4.11(i).
"Revised Working Capital Worksheet" means the Working Capital Worksheet, which
shall have been revised as of the close of business on the Business Day
immediately preceding the Closing Date to include all changes to Working Capital
between May 2003 and the close of business on the Business Day immediately
preceding the Closing Date and to record all proceeds received by the Company
from the issuance of Transaction Expenses Notes as "Reserved Cash."
"Satisfaction Shares" is defined in Section 8.09(a).
"SEC" is defined in Section 5.07(a).
"Section 8.21 Transactions" means those transactions contemplated by Section
8.21.
"Securities Act" is defined in Section 4.03.
"Series A Consent" is defined in Section 5.02.
"Series A Preferred Exchange Ratio" is defined in Section 2.02(d).
"Series A Preferred Merger Consideration" is defined in Section 2.02(d).
10
"Series A Preferred Share" is defined in Section 2.02(d).
"Series A Preferred Stock" is defined in Section 2.02(d).
"Series B Certificate of Designations" is defined in Section 8.16.
"Series B Indemnification Value" is defined in Section 10.05(a).
"Series B Preferred Exchange Ratio" is defined in Section 2.02(e).
"Series B Preferred Merger Consideration" is defined in Section 2.02(e).
"Series B Preferred Share" is defined in Section 2.02(e).
"Series B Preferred Stock" is defined in Section 2.02(e).
"Series C Preferred Exchange Ratio" is defined in Section 2.02(f).
"Series C Preferred Merger Consideration" is defined in Section 2.02(f).
"Series C Preferred Share" is defined in Section 2.02(f).
"Series C Preferred Stock" is defined in Section 2.02(f).
"Shares" is defined in Section 2.02(f).
"Special Committee" is defined in Section 4.26.
"Specified Sale Amount" means the sum of (a) 100,000 shares of Parent Series B
Preferred Stock, such number of shares to be equitably adjusted to account for
any stock split, combination or reclassification of, or similar event affecting,
the Parent Series B Preferred Stock, plus (b) to the extent applicable, the
Aggregate Article 2 Post-July 31 Shares.
"Subsidiary" is defined in Section 4.06(a).
"Subsidiary Securities" is defined in Section 4.06(b).
"Superior Proposal" is defined in Section 8.03(b).
"Survival Period" is defined in Section 10.02.
"Surviving Corporation" is defined in Section 2.01(b).
"Surviving Corporation Common Stock" is defined in Section 2.02(b).
"Tax" means (i) any tax, governmental fee or other like assessment or charge of
any kind whatsoever (including, but not limited to, withholding on amounts paid
to or by any Person),
11
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority responsible for the imposition of any such
tax (domestic or foreign), (ii) liability for the payment of any amount of the
type described in clause (i) as a result of being or having been before the
Effective Time a member of an affiliated, consolidated, combined or unitary
group (other than such a group of which, with respect to Article IV, the Company
or any of the Subsidiaries, or, with respect to Article V, Parent or any of the
Parent Subsidiaries, is the common parent), or a party to any agreement or
arrangement, as a result of which liability of, with respect to Article IV, the
Company or any Subsidiary, or, with respect to Article V, Parent or any Parent
Subsidiary, to a taxing authority is determined or taken into account with
reference to the liability of any other Person, and (iii) liability of, with
respect to Article IV, the Company or any Subsidiary, or, with respect to
Article V, Parent or any Parent Subsidiary, for the payment of any amount as a
result of being party to any tax sharing agreement (or any similar contract or
arrangement) or with respect to the payment of any amount of the type described
in clause (i) or (ii) as a result of any existing express obligation (including,
but not limited to, an indemnification obligation).
"Tax Asset" is defined in Section 4.11(iv).
"Termination Date" is defined in Section 11.01(b).
"Termination Fee" means the fee payable pursuant to Section 11.02(b), such fee
to be in an amount equal to (x) $5,000,000 plus (y) all reasonable fees, costs
and expenses incurred by Parent in connection with this Agreement, the other
Transaction Agreements and the Transactions.
"Third Party Claim" is defined in Section 10.01(d).
"Transaction Agreements" is defined in the recitals hereto.
"Transaction Expenses" means (i) all restructuring expenses of the Company and
the Subsidiaries related to the Transactions, (ii) all severance expenses
incurred by the Company and the Subsidiaries in connection with the
Transactions, (iii) all expenses incurred by the Company and the Subsidiaries in
connection with the settlement of their dispute with Qwest Communications
Corporation under the IRU Agreement dated as of October 31, 1997, as amended
from time to time, between the Company and Qwest Communications Corporation (the
"Qwest Dispute"), and (iv) all other expenses mutually agreed upon by Parent and
Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P.; provided that, in each case for the
preceding clauses (i)-(iv), the specific item and amount of each such expense,
and any impact of such expense (and the proceeds of any related Transaction
Expenses Notes) on the calculation of Working Capital pursuant to this
Agreement, are mutually agreed upon by Parent and Welsh, Carson, Xxxxxxxx &
Xxxxx VIII, L.P., prior to the incurrence or payment of any such expense by the
Company or the Subsidiaries, pursuant to a side letter to be entered into by and
among Parent, Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P. and the Company after
the date hereof and prior to the Closing Date.
"Transaction Expenses Notes" is defined in Section 8.09(c).
12
"Transaction Securities" means, collectively, (i) the Parent Common Shares
issued or issuable as Merger Consideration, (ii) the shares of Parent Series B
Preferred Stock issued or issuable in the Parent Series B Sale, (iii) the
Satisfaction Shares, (iv) the Warrants and (v) the Drawdown Shares.
"Transactions" means the transactions contemplated by the Transaction
Agreements, including the Merger, the Parent Series B Sale and the issuance and
delivery of the Parent Transaction Securities pursuant to the terms of this
Agreement.
"Unrestricted Cash" means, as of any date, cash in an amount which, in
accordance with GAAP, is immediately available for use and is recorded on the
consolidated balance sheet of Parent (which shall be prepared in accordance with
GAAP applied on a consistent basis) as of the calendar month ended immediately
prior to such date as "cash and cash equivalents" and shall exclude the amount
of cash which, in accordance with GAAP, is required to be recorded on such
consolidated balance sheet of Parent as "restricted cash."
"W" is defined in the preamble.
"W Indemnified Parties" is defined in Section 10.01(b).
"W Representatives" is defined in Section 8.02(b).
"Warrants" is defined in the recitals hereto.
"Warrant Agent" is defined in the recitals hereto.
"Warrant Agreement" is defined in the recitals hereto.
"WCAS Confidentiality Agreement" is defined in Section 8.11.
"WCAS Securityholder" is defined in the preamble.
"Working Capital" of the Company and the Subsidiaries means the aggregate
current assets of the Company and the Subsidiaries as of any date minus the
aggregate current liabilities (other than Indebtedness owed to W or its
Affiliates that will be terminated, cancelled, surrendered or eliminated
pursuant to this Agreement) of the Company and the Subsidiaries as of such date,
calculated in accordance with and in a manner consistent with the policies and
procedures used in preparing the Working Capital Worksheet; provided that
short-term debt incurred under existing debt facilities, accrued interest and
Working Capital Excluded Items shall be excluded from the calculation of Working
Capital; and provided, further, that any accrued fees and expenses (other than
Working Capital Excluded Items) incurred by the Company or its Subsidiaries in
connection with the Transactions shall be included in the calculation of Working
Capital as current liabilities.
"Working Capital Excluded Items" means current assets reflected on the Revised
Working Capital Worksheet as "Reserved Cash" and liabilities related to
Transaction Expenses (other than liabilities related to the matter involving
Qwest Communications Corp.) that would otherwise be
13
reflected on the Revised Working Capital Worksheet as current liabilities
incurred or accrued by the Company or the Subsidiaries.
"Working Capital Worksheet" means the working capital calculation attached
hereto as Exhibit D.
ARTICLE 2
PARENT SERIES B SALE; PLAN OF Merger
Section 2.01. The Parent Series B Sale; The Merger. (a) (i) Upon the
basis of the representations and warranties herein contained of each WCAS
Securityholder and subject to the terms and conditions hereinafter stated,
Parent agrees to sell to each WCAS Securityholder, and each WCAS Securityholder,
upon the basis of the representations and warranties herein contained of Parent
and subject to the terms and conditions hereinafter stated, agrees to purchase
from Parent immediately prior to the Effective Time at the Closing, shares of
the Parent Series B Preferred Stock for a purchase price per share equal to the
Face Amount and for the aggregate purchase price set forth opposite the name of
such WCAS Securityholder on Annex I hereto, with the cash payment of such
purchase price subject to reduction as described in Section 2.01(a)(ii) (such
purchase and sale, the "Parent Series B Sale").
(ii) The cash payment to be made by each WCAS Securityholder to
purchase shares of Parent Series B Preferred Stock (but not the number of
shares of Parent Series B Preferred Stock to be acquired by such WCAS
Securityholder) pursuant to Section 2.01(a)(i) shall be reduced by (A) such
WCAS Securityholder's Pro Rata Parent Series B Expenses Reduction Amount
and (B) if the Closing occurs after July 31, 2003, such WCAS
Securityholder's Pro Rata Parent Series B Post-July 31 Reduction Amount.
Annex I hereto shall be revised at or prior to the Closing in order to
reflect any changes made in connection with this Section 2.01(a)(ii).
(b) At the Effective Time (as defined below), Merger Co. shall be
merged with and into the Company in accordance with the NCBCA, whereupon the
separate existence of Merger Co. shall cease, and the Company shall be the
surviving corporation (the "Surviving Corporation").
(c) The closing of the Merger and the Parent Series B Sale (the
"Closing") shall be held at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, as soon as practicable, but in no event
later than two Business Days, after satisfaction or, to the extent permitted
hereunder, waiver of each condition set forth in Article 9, or at such other
time and place as the parties hereto shall agree. The date on which the Closing
occurs is referred to herein as the "Closing Date." At the Closing, the
following actions shall be taken in the following order:
(i) (A) each WCAS Securityholder shall deliver to Parent (x) by wire
transfer to an account designated by Parent not later than three Business
Days prior to the Closing Date, an amount, in immediately available funds,
equal to the aggregate cash purchase
14
price of the shares of Parent Series B Preferred Stock being purchased by
such WCAS Securityholder from Parent for cash after giving effect to
Section 2.01(a)(ii), if applicable, and (y) if applicable, in combination
with such delivery of cash, Post-July 31 Notes and Transaction Expenses
Notes with an aggregate principal amount equal to the aggregate purchase
price of such WCAS Securityholder's Article 2 Shares pursuant to Section
2.01(a)(ii), and (B) Parent shall deliver to each WCAS Securityholder,
against payment of the purchase price by such WCAS Securityholder to
Parent, certificates evidencing the shares of Parent Series B Preferred
Stock being purchased by such WCAS Securityholder from Parent in definitive
form and registered in such names as such WCAS Securityholder shall request
not later than two Business Days prior to the Closing Date; and
(ii) immediately thereafter, the Company and Merger Co. shall duly
execute and deliver articles of merger to the Secretary of State of the
State of North Carolina for filing under Section 55-11-05 of the NCBCA and
make all other filings or recordings required by the NCBCA in connection
with the Merger. Articles 2 and 3 of this Agreement shall constitute a plan
of merger under Section 55-11-01 of the NCBCA.
(d) The Merger shall become effective at such time as the articles of
merger are duly filed with the Secretary of State of the State of North Carolina
or at such later date or time as is specified in the articles of merger (the
"Effective Time"). From and after the Effective Time, the Surviving Corporation
shall possess all the property, rights, privileges, immunities, powers and
franchises and be subject to all of the debts, liabilities, obligations,
restrictions, disabilities and duties of the Company and Merger Co., all as
provided under this Agreement and the NCBCA.
Section 2.02. Conversion of Shares. At the Effective Time:
(a) each share (each, a "Common Share") of common stock, no par value
per share, of the Company (the "Company Common Stock") held by the Company as
treasury stock or owned by Parent or any subsidiary of Parent immediately prior
to the Effective Time shall be cancelled and retired, and no payment shall be
made with respect thereto;
(b) each share of common stock, no par value per share, of Merger Co.
("Merger Co. Common Stock") outstanding immediately prior to the Effective Time
shall be converted into and become one share of common stock, no par value per
share (the "Surviving Corporation Common Stock"), of the Surviving Corporation
with the same rights, powers and privileges as the shares so converted;
(c) each Common Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Section 2.02(a) and Section 2.02(g),
be converted into the right to receive from Parent a number of fully paid and
nonassessable Parent Common Shares equal to the Per Share Ratio (the "Common
Exchange Ratio") (together with any cash paid in respect of fractional shares,
the "Common Merger Consideration");
(d) each share (each a "Series A Preferred Share") of Series A
Preferred Stock, par value $0.01 per share, of the Company (the "Series A
Preferred Stock") outstanding
15
immediately prior to the Effective Time shall, except as otherwise provided in
Section 2.02(g), be converted into the right to receive from Parent a number of
shares of fully paid and nonassessable Parent Common Shares equal to the Per
Share Ratio, multiplied by the number of Common Shares into which such Series A
Preferred Share is convertible as of the Effective Time (the "Series A Preferred
Exchange Ratio") (together with any cash paid in respect of fractional shares,
the "Series A Preferred Merger Consideration");
(e) each share (each a "Series B Preferred Share") of Series B
Preferred Stock, par value $0.01 per share, of the Company (the "Series B
Preferred Stock") outstanding immediately prior to the Effective Time shall,
except as otherwise provided in Section 2.02(g), be converted into the right to
receive from Parent a number of shares of fully paid and nonassessable Parent
Common Shares equal to the Per Share Ratio, multiplied by the number of Common
Shares into which such Series B Preferred Share is convertible as of the
Effective Time (the "Series B Preferred Exchange Ratio") (together with any cash
paid in respect of fractional shares, the "Series B Preferred Merger
Consideration"); and
(f) each share (each a "Series C Preferred Share" and together with
the Common Shares, the Series A Preferred Shares and the Series B Preferred
Shares, the "Shares") of Series C Preferred Stock, par value $0.01 per share, of
the Company (the "Series C Preferred Stock") outstanding immediately prior to
the Effective Time shall, except as otherwise provided in Section 2.02(g), be
converted into the right to receive from Parent a number of shares of fully paid
and nonassessable Parent Common Shares equal to the Per Share Ratio, multiplied
by the number of Common Shares into which such Series C Preferred Share is
convertible as of the Effective Time (the "Series C Preferred Exchange Ratio")
(together with any cash paid in respect of fractional shares, the "Series C
Preferred Merger Consideration" and together with the Common Merger
Consideration, the Series A Preferred Merger Consideration and the Series B
Preferred Merger Consideration, the "Merger Consideration").
(g) Notwithstanding anything in this Agreement to the contrary, each
Share which is held by a holder who has not, as of the Effective Time, voted in
favor of the Merger or consented thereto in writing, shall not be converted and
retired pursuant to the foregoing provisions of this Section 2.02 at the
Effective Time (such shares, the "Remaining Shares"). From and after the
Effective Time, each certificate representing a Remaining Share shall represent
solely the right to receive the respective amounts set forth in this Section
2.02(g) and (i) if the holder of any Remaining Share effectively dissents from
the Merger and perfects such holder's dissenter's rights pursuant to the
procedure set forth in Article 13 of the NCBCA on or prior to the Payment Demand
Date (each such share, a "Dissenting Share"), then such holder shall be entitled
to payment from the Surviving Corporation of the fair value of such Dissenting
Share in accordance with Article 13 of the NCBCA; provided that if any such
holder shall effectively withdraw or lose such rights, each Dissenting Share
held by such holder shall thereupon be converted into the right to receive the
applicable Merger Consideration issuable in respect of such Remaining Share and
retired in the manner set forth in the foregoing provisions of this Section 2.02
and (ii) each Remaining Share which does not become a Dissenting Share on or
prior to the Payment Demand Date, shall be converted into the applicable Merger
Consideration issuable in respect of such Remaining Share and retired on the
first Business Day following the Payment Demand Date in the manner set forth in
the foregoing provisions of this Section 2.02. The Company shall give Parent (A)
prompt notice of any written notice of intent
16
to dissent and demand payment and written demand for payment pursuant to Article
13 of the NCBCA and any withdrawals of demands for payment and other related
communications received by the Company prior to the Closing Date, and (B) the
opportunity to direct all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for dissenter's rights
or settle or offer to settle any demand.
(h) No certificates or scrip representing less than one Parent Common
Share shall be issued in exchange for Shares upon the surrender for exchange of
a certificate which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"). In lieu of any such fractional share,
each holder of Shares who would otherwise have been entitled to a fraction of a
Parent Common Share upon surrender of Certificates for exchange shall be paid
upon such surrender (and after taking into account all Certificates surrendered
by such holder) cash (without interest) in an amount equal to such fraction
multiplied by the volume weighted average of the per share selling price of one
Parent Common Share on the OTC Bulletin Board (or if the Parent Common Shares
are not traded on the OTC Bulletin Board, on the principal securities exchange,
interdealer quotation system or other securities market on which the Parent
Common Shares are then traded) for the ten consecutive trading days ending on
the second Business Day prior to the Effective Time, as reported by Bloomberg
Financial Markets (or such other source as W and Parent may agree); provided
that if the Parent Common Shares are so traded but the selling price thereof is
not reported, such fraction shall be multiplied by the average of the last bid
and ask prices for one Parent Common Share for such period of ten consecutive
trading days.
Section 2.03. Surrender and Payment. (a) Parent shall appoint an
agent (the "Exchange Agent") for the purpose of exchanging certificates
representing Shares for the Merger Consideration. Parent shall cause Merger Co.
to make available to the Exchange Agent, immediately prior to the Effective
Time, the Merger Consideration to be exchanged or paid in respect of the Shares.
The Surviving Corporation shall send, or shall cause the Exchange Agent to send,
to each holder of Shares, at the same time that the PPM is sent or given to such
holders, (i) a letter of transmittal for use in such exchange (which shall be in
form and substance reasonably satisfactory to the Company and shall specify that
the delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the certificates representing Shares to the Exchange Agent)
and (ii) instructions to effect the surrender of the Certificates in exchange
for the Merger Consideration.
(b) Each holder of Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to the Exchange Agent of a
Certificate or Certificates representing such Shares, together with a properly
completed letter of transmittal covering such Shares, shall be entitled to
receive the Merger Consideration payable in respect of such Shares. The holder
of such Certificate, upon its exchange for Parent Common Shares, shall also
receive any dividends or other distributions to which such holder is entitled
pursuant to Section 2.03(c). Certificates surrendered shall forthwith be
cancelled following the Effective Time. Until so surrendered, each such
Certificate, following the Effective Time, shall represent for all purposes only
the right to receive such Merger Consideration.
17
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the Parent Common Shares such holder is entitled to receive until the
holder of such Certificate shall surrender such Certificate in accordance with
the provisions of this Section 2.03. Subject to applicable law, following
surrender of any such Certificate, there shall be paid to the record holder of
the Certificates representing whole Parent Common Shares issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole Parent Common Shares.
(d) If any Certificate for Parent Common Shares is to be issued in a
name other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition to the issuance therefor that the
Certificate or Certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting such
exchange shall have paid to the Exchange Agent any transfer or other taxes
required as a result of the issuance of a Certificate for Parent Common Shares
in any name other than that of the registered holder of such Shares, or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable. For purposes of this Agreement, "Person" means an individual,
a corporation, a limited liability company, a partnership, an association, a
trust or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
(e) After the Effective Time, there shall be no further registration
of transfers of Shares. If, after the Effective Time, Certificates representing
Shares are presented to the Surviving Corporation, they shall be cancelled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article 2.
(f) None of Parent, Merger Co., W or the Company or any of their
respective Affiliates shall be liable to any holder of Shares for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) The Exchange Agent shall be entitled to deduct and withhold from
the Merger Consideration otherwise payable pursuant to the Agreement to any
holder of Shares, and from any cash dividends or other distributions that the
holder is entitled to receive under Section 2.03(c), such amounts as the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder ("Code"), or any provision of state,
local or non-United States tax law. To the extent that amounts are so withheld
by the Exchange Agent, such portion of the Merger Consideration and other such
amounts payable under Section 2.03(c) that are withheld shall be treated for all
purposes of this Agreement as having been received by the holder of the Shares
in respect of which such deduction and withholding was made by the Exchange
Agent.
(h) Any portion of the Certificates evidencing the Parent Common
Shares, the cash to be paid in respect of fractional shares and the cash or
other property in respect of dividends or other distributions supplied to the
Exchange Agent which remains unclaimed by the holders of Shares six months after
the Effective Time shall be returned to Parent, upon demand,
18
and any such holder who has not exchanged his Shares for the Merger
Consideration in accordance with this Section 2.03 prior to that time shall
thereafter look only to Parent for payment of the Merger Consideration and any
dividends or distributions with respect to Parent Common Shares.
Section 2.04. Lost, Stolen or Destroyed Certificates. In the
event any Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed Certificates,
upon the making of an affidavit of that fact by the holder thereof, such Merger
Consideration and any dividends or other distributions as may be required
pursuant to this Article 2; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
Section 2.05. Stock Options and Warrants. Following the Effective
Time, each option to purchase Parent Common Shares (a "Parent Stock Option")
outstanding as of the Effective Time shall continue in effect in accordance with
the terms and conditions of each such Parent Stock Option. Except as set forth
in Section 2.05 of the written disclosure schedule previously delivered by the
Company to Parent (the "Company Disclosure Schedule"), at or immediately prior
to the Effective Time, each stock option and warrant to purchase Shares or any
other capital stock of the Company or any of the Subsidiaries outstanding,
whether or not vested or exercisable, and each commitment or agreement to issue
Shares or any other capital stock of the Company or any of the Subsidiaries,
including without limitation, all such stock options, warrants and commitments
or agreements to issue Shares or any other capital stock of the Company or any
of the Subsidiaries set forth in Section 4.05 and Section 4.06 of the Company
Disclosure Schedule, shall be cancelled without the payment of any
consideration, and the Company and the Subsidiaries shall obtain all consents
and approvals necessary to effect such cancellation.
Section 2.06. Certain Adjustments. If, between the date of this
Agreement and the Effective Time, the outstanding Company Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Parent
Common Shares shall have been changed into a different number of shares or
different class by reason of any reclassification, recapitalization, stock
split, split up, combination or exchange of shares or a stock dividend or
dividend payable in any securities shall be declared with a record date within
such period, or any similar event shall have occurred, the Common Exchange
Ratio, Series A Preferred Exchange Ratio, Series B Preferred Exchange Ratio,
Series C Preferred Exchange Ratio and the Merger Consideration, as the case may
be, shall be appropriately adjusted to provide to the holders of Company Common
Stock and Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock the same economic effect as contemplated by this Agreement prior
to such event.
ARTICLE 3
THE SURVIVING CORPORATION
19
Section 3.01. Articles of Incorporation. The articles of
incorporation of the Surviving Corporation shall be the articles of
incorporation of the Company, which shall be amended and restated at the
Effective Time as set forth in Exhibit E attached hereto, which is incorporated
by reference herein, until such articles of incorporation are further amended in
accordance with applicable law.
Section 3.02. Bylaws. The bylaws of the Merger Co., as set forth in
Exhibit F attached hereto, in effect at the Effective Time shall be the bylaws
of the Surviving Corporation until amended in accordance with applicable law.
Section 3.03. Directors and Officers. From and after the Effective
Time, until successors are duly elected or appointed and qualified in accordance
with applicable law, (a) the directors of Merger Co. at the Effective Time shall
be the directors of the Surviving Corporation, and (b) the officers of the
Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES THE COMPANY
The Company represents and warrants to Parent as of the date hereof
and as of the Effective Time that:
Section 4.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of North Carolina, and has all corporate power and authority
to own, lease and operate its properties and assets and to carry on its business
as now conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified, individually or in the aggregate, has not and would not reasonably
be expected to have a material adverse effect on (i) the condition (financial or
otherwise), business, assets, liabilities or results of operations of the
Company and the Subsidiaries, taken as a whole; provided, however, that for
purposes of this Agreement none of the following shall be deemed to constitute,
and none of the following shall be taken into account in determining whether
there has been, a Material Adverse Effect unless, in each such case, any such
item has a disproportionate effect on the condition (financial or otherwise),
business, assets, liabilities or results of operations of the Company and the
Subsidiaries, taken as a whole, (a) any adverse change, event, development or
effect arising from or relating to (1) general business or economic conditions,
(2) national or international political or social conditions, including the
engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or
terrorist attack, (3) financial, banking or securities markets (including any
disruption thereof and any decline in the price of any security or any market
index), (4) changes in GAAP, or (5) changes in law, rules, relations, orders or
other binding directives issued by any governmental entity, (b) any adverse
change generally applicable to the telecommunications industry, or (c) any
effect arising from compliance by Parent, the Company or W with the terms of
this
20
Agreement or the other Transaction Agreements; or (ii) the Company's ability to
perform its obligations under this Agreement ("Material Adverse Effect"). The
Company has heretofore delivered to Parent or the Parent Representatives true
and complete copies of the Company's articles of incorporation and bylaws as
currently in effect. Such articles of incorporation and bylaws are in full force
and effect and no other organizational documents are applicable to or binding
upon the Company.
Section 4.02. Corporate Authorization. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the transactions
contemplated hereby are within the Company's powers and have been duly and
validly authorized by all necessary corporate action under the Company's
constituent documents and applicable provisions of North Carolina Law (other
than the approval of this Agreement and the Merger by the shareholders of the
Company and the filing with the Secretary of State of the State of North
Carolina of the articles of merger as required by North Carolina Law). The
approval of this Agreement by W at a shareholders' meeting of the Company, or by
written consent, constitutes the only action necessary by shareholders of the
Company required by law or otherwise in order to adopt this Agreement and
approve the Merger. This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement constitutes a legal, valid
and binding agreement of the other parties hereto, constitutes a legal, valid
and binding agreement of the Company enforceable against it in accordance with
its terms, except as such enforcement is limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally and
for limitations imposed by general principles of equity.
Section 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby including the Merger do not and will not
require any action by or in respect of, consent or approval of, or filing with,
any governmental body, agency, official or authority other than (a) the filing
of articles of merger in accordance with North Carolina Law; (b) compliance with
any applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"); (c) compliance with any applicable
requirements of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), and any applicable state "blue sky" laws; (d)
as set forth in Section 4.03 of the Company Disclosure Schedule; (e) filings
pursuant to the Uniform Commercial Code or otherwise in connection with the
release of Liens in connection with the arrangements relating to the Parent
Credit Agreement and the Company Credit Agreement; (f) as may be necessary as a
result of any facts or circumstances relating solely to Parent, Merger Co. or
the other Parent Subsidiaries; and (g) other actions, consents, approvals,
filings and notifications, the failure of which to make or obtain would not
prevent or materially delay the Company from performing its obligations under
this Agreement, or that are otherwise immaterial to the Company and the
Subsidiaries, taken as a whole, and the consummation of the Transactions.
21
Section 4.04. Non-contravention. Except as set forth in Section 4.04
of the Company Disclosure Schedule, the execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby including the Merger do not and will not (a)
contravene or conflict with the articles of incorporation or bylaws of the
Company or the equivalent organizational documents of the Subsidiaries, (b)
assuming compliance with the matters referred to in Section 4.03, contravene or
conflict with or constitute a violation of any provision of any law, rule,
regulation, judgment, writ, injunction, order or decree of any court or
governmental authority binding upon or applicable to the Company or any
Subsidiary or any of their respective properties or assets, (c) constitute a
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of the Company or any Subsidiary or to a
loss of any benefit to which the Company or any Subsidiary is entitled under any
provision of any agreement, contract or other instrument binding upon the
Company or any Subsidiary or any of their respective properties or assets or any
license, franchise, permit or other similar authorization held by the Company or
any Subsidiary, or (d) result in the creation or imposition of any Lien on any
property or asset of the Company or any Subsidiary, except in the case of
clauses 4.04(b), 4.04(c) and 4.04(d) for any such violation, failure to obtain
any such consent or other action, default, right, loss or Lien that,
individually or in the aggregate, does not and would not reasonably be expected
to have a Material Adverse Effect. For purposes of this Agreement, "Lien" means,
with respect to any property or asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such property or
asset.
Section 4.05. Capitalization. The authorized capital stock of the
Company consists of 500,000,000 shares of Company Common Stock and 10,000,000
shares of preferred stock, par value $0.01 per share (the "Preferred Stock"). As
of the date hereof, there are outstanding 92,742,455 shares of Company Common
Stock, 200,000 shares of Series A Preferred Stock, 67,142 shares of Series B
Preferred Stock and 123,962 shares of Series C Preferred Stock. As of the date
hereof, there are outstanding options or rights to purchase an aggregate of
25,960,105 shares of Company Common Stock (of which options or rights to
purchase an aggregate of 25,953,609 shares of Company Common Stock are
exercisable). As of the date hereof, W owns of record no Common Shares and owns
beneficially no Common Shares (other than the Common Shares issuable upon
conversion of the Series A Preferred Shares, Series B Preferred Shares and
Series C Preferred Shares or exercise of the Warrants, in each case, in
accordance with their respective terms, owned beneficially and of record by W as
of the date hereof). As of the date hereof, W owns beneficially and of record
200,000 Series A Preferred Shares, 57,143 Series B Preferred Shares and 123,962
Series C Preferred Shares, in each case free and clear of all Liens and all
other limitations or restrictions (including any restriction on the right to
vote, sell or otherwise dispose of such Shares), except as set forth in the
Third Amended and Restated Shareholders Agreement among the Company and the
shareholders named therein dated as of December 11, 2001, as amended, and the
Third Amended and Restated Investors' Rights Agreement dated as of December 11,
2001, by and among W and the investors named therein, as amended (such
agreements, the "Company Shareholders Agreements"), which represent at least a
majority of the outstanding Shares on a fully-diluted basis (assuming the
exercise or conversion of all then outstanding rights, warrants, options,
convertible securities or indebtedness, exchangeable securities or indebtedness,
or other rights exercisable for or convertible or exchangeable into, directly or
indirectly, Company Common Stock whether at the time of issue or upon the
passage of time or the occurrence of some future event) and at least a
22
majority of the voting power represented by the outstanding Shares. All
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights. Except as set forth in Section
4.05 of the Company Disclosure Schedule, the Company Shareholder Agreements, the
Company's articles of incorporation and this Section 4.05, as of the date
hereof, there are outstanding (a) no shares of capital stock or other voting
securities of the Company, (b) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(c) no options, warrants, rights of first refusal or other rights to acquire
from any of W, the Company, any Subsidiary or any of their respective
Affiliates, and no obligation of any of W, the Company, any Subsidiary or any of
their respective Affiliates to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company or any Subsidiary and (d) no equity equivalents,
interests in the ownership or earnings of the Company or any Subsidiary or any
similar rights (the items in clauses 4.05(a), 4.05(b), 4.05(c) and 4.05(d) being
referred to collectively as the "Company Securities"). Except as set forth in
Section 4.05 of the Company Disclosure Schedule and in the Company Shareholder
Agreements, there are no outstanding obligations of any of W, the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any Company Securities and
there are no preemptive or similar rights with respect to any Company
Securities. Except as set forth in Section 4.05 of the Company Disclosure
Schedule, there are no bonds, debentures, notes or other Indebtedness of the
Company or any of the Subsidiaries having, or convertible into other securities
having, the right to vote on any matters on which shareholders may vote.
Section 4.06. Subsidiaries. (a) Each Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as now
conducted and is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where failure to be so qualified,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect. For purposes of this Agreement,
"Subsidiary" means any corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are directly or
indirectly owned by the Company and/or one or more Subsidiaries. All
Subsidiaries and their respective jurisdictions of incorporation are identified
in Section 4.06 of the Company Disclosure Schedule.
(b) Except as set forth in Section 4.06 of the Company Disclosure
Schedule, all of the outstanding capital stock of, or other ownership interests
in, each Subsidiary, is owned by the Company, directly or indirectly, free and
clear of any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). All outstanding shares of capital stock of
the Subsidiaries have been duly authorized and validly issued and are fully paid
and nonassessable and were not issued in violation of any preemptive or similar
rights. Except as set forth in Section 4.06 of the Company Disclosure Schedule,
there are outstanding (i) no securities of the Company or any Subsidiary
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Subsidiary, and (ii) no options,
warrants, rights of first refusal or
23
other rights to acquire from the Company or any Subsidiary, and no obligation of
the Company or any Subsidiary to issue, any capital stock, voting securities or
other ownership interests in, or any securities convertible into or exchangeable
for any capital stock, voting securities or ownership interests in, any
Subsidiary (the items in clauses 4.06(b)(i) and 4.06(b)(ii) being referred to
collectively as the "Subsidiary Securities"). There are no outstanding
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
acquire any outstanding Subsidiary Securities and there are no preemptive or
similar rights with respect to any Subsidiary Securities. Except as set forth in
Section 4.06 of the Company Disclosure Schedule, neither the Company nor any of
the Subsidiaries, directly or indirectly, owns any equity or similar interest
in, or any interest convertible into or exchangeable for, any corporation,
partnership, limited liability company, joint venture or other business
association or entity (other than the Subsidiaries).
Section 4.07. Financial Statements. (a) The audited consolidated
financial statements of the Company for the fiscal year ended December 31, 2002
delivered to Parent or the Parent Representatives prior to the date hereof (the
"Company Financial Statements") fairly present, in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis (except as
may be indicated in the notes thereto), the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended. For purposes of this Agreement, "Company Balance Sheet"
means the consolidated balance sheet of the Company as of December 31, 2002 and
"Company Balance Sheet Date" means December 31, 2002.
(b) Except as set forth in Section 4.07(b) of the Company Disclosure
Schedule, as of the date hereof, neither the Company nor any of the Subsidiaries
has any Indebtedness.
Section 4.08. Absence of Certain Changes. Except as set forth in
Section 4.08 of the Company Disclosure Schedule and except as otherwise
contemplated by the Transaction Agreements, since the Company Balance Sheet Date
the Company and the Subsidiaries have conducted their business in the ordinary
course consistent with past practice and there has not been:
(a) any event, occurrence or development of a state of circumstances
or facts which, individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect;
(b) as of the date hereof, any revaluation by the Company of any of
its assets that would be included in or otherwise impact the calculation of
Working Capital as of any date, including but not limited to, writing down the
value of inventory or equipment or writing off notes or accounts receivable, in
each case, other than in the ordinary course of business consistent with past
practice;
(c) except for dividends paid in capital stock of the Company in
respect of the preferred stock of the Company outstanding on the date hereof in
accordance with its present terms, any declaration, setting aside or payment of
any dividend or other distribution with respect to any shares of capital stock
of the Company (whether in cash, stock or property), any split,
24
combination or reclassification of any of its capital stock, or any repurchase,
redemption or other acquisition by the Company or any Subsidiary of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company or any Subsidiary;
(d) any amendment of any term of any outstanding security of the
Company or any Subsidiary;
(e) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money in excess of $100,000 in the
aggregate (other than with respect to indebtedness for borrowed money owing to W
or any of its Affiliates);
(f) any creation or assumption by the Company or any Subsidiary of any
Lien on any material asset other than in the ordinary course of business
consistent with past practice;
(g) any making of any loan, advance or capital contributions to or
investment (other than investments in cash or cash equivalents in the ordinary
course of business) in any Person other than (i) loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries made in the
ordinary course of business consistent with past practice and (ii) routine
salary, travel and expense advances to Company Employees in the ordinary course
of business;
(h) any material damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of the Company or
any Subsidiary;
(i) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary relating to its assets or
business (including the acquisition or disposition of any assets) in excess of
$100,000 (or, with respect to switch software upgrades for purposes of
compliance with the Communication Assistance for Law Enforcement Act,
$1,000,000), or any relinquishment by the Company or any Subsidiary of any
material contract or other right other than transactions and commitments in the
ordinary course of business consistent with past practice and those contemplated
by this Agreement;
(j) as of the date hereof, any change in any method of accounting or
accounting practice by the Company or any Subsidiary, except for any such change
required by reason of a concurrent change in GAAP as concurred with by the
Company's independent auditors, or any Tax election;
(k) any (i) increase in the compensation or fringe benefits of any
present or former director, officer or employee of the Company or any Subsidiary
(except for (x) increases in salary or wages in the ordinary course of business
consistent with past practice and (y) stay bonuses or similar retention payments
in an amount not to exceed $10,000 with respect to any individual payment and
$100,000 in the aggregate with respect to all such payments), (ii) grant of any
severance or termination pay to any present or former director, officer or
employee of the Company or any Subsidiary, (iii) loan or advance of money or
other property by the Company or any Subsidiary to any of their present or
former directors, officers or employees (other than routine salary, travel and
expense advances to Company Employees in the ordinary course of business), (iv)
establishment, adoption, entrance into, amendment or termination of any Company
Plan or collective bargaining agreement (other than as may be required by the
terms of an existing Company Plan or collective bargaining agreement, or as may
be required by
25
applicable law or in order to qualify under Sections 401 and 501 of the Code) or
(v) grants of any equity or equity-based awards, other than in the case of
clauses (i) through (v) pursuant to commitments of the Company or any Subsidiary
existing on the date hereof required by contracts set forth in Section 4.08(k)
or 4.12 of the Company Disclosure Schedule;
(l) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company or any Subsidiary, which employees were
not subject to a collective bargaining agreement at the Company Balance Sheet
Date, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by
or with respect to such employees;
(m) any cancellation of any material licenses, sublicenses,
franchises, permits or similar agreements to which the Company or any Subsidiary
is a party, or any written notification to the Company or any Subsidiary that
any party to any such arrangements intends to cancel or not renew such
arrangements beyond its expiration date as in effect on the date hereof; or
(n) since February 28, 2003, any repayments of principal to W or its
Affiliates in respect of Indebtedness owed to W or its Affiliates or any payment
of interest accrued in respect of such Indebtedness.
Section 4.09. No Undisclosed Liabilities. Except as set forth in
Section 4.09 of the Company Disclosure Schedule, there are no liabilities of the
Company or any Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, and there is no existing
condition, situation or set of circumstances which would reasonably be expected
to result in such a liability, other than:
(a) liabilities disclosed or provided for in the Company Balance Sheet
or the notes thereto;
(b) liabilities incurred in the ordinary course of business and
consistent with past practice since the Company Balance Sheet Date;
(c) liabilities under this Agreement;
(d) other undisclosed liabilities which, individually or in the
aggregate, are not material to the Company and the Subsidiaries, taken as a
whole;
(e) liabilities not required under GAAP to be shown on the Company
Balance Sheet (other than by reason of the contingent nature thereof or the
difficulty of determining the amount thereof), unless such liabilities obligate,
or could reasonably be expected to obligate, the Company or any Subsidiary for
the payment of money; and
(f) ordinary course contractual liabilities under contracts entered
into prior to the Company Balance Sheet Date.
Section 4.10. Litigation. Except as set forth in Section 4.10 of the
Company Disclosure Schedule, there is no action, suit, hearing, arbitration,
proceeding or, to the
26
knowledge of the Company, investigation pending against, affecting or, to the
knowledge of the Company, threatened against the Company or any Subsidiary or
any of their respective properties or assets before any court, arbitrator or any
governmental body, agency or official which, individually or in the aggregate,
if determined or resolved adversely, could reasonably be expected to have a
Material Adverse Effect. Except as set forth in Section 4.10 of the Company
Disclosure Schedule, neither the Company nor any of the Subsidiaries nor any of
their respective properties or assets is or are subject to any order, writ,
judgment, injunction, decree, determination, award or settlement agreement (each
an "Order"), except for such Orders as, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect.
Section 4.11. Taxes. Except as set forth in the Company Balance Sheet
(including the notes thereto) or Section 4.11 of the Company Disclosure
Schedule:
(i) all Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports)
(collectively, the "Returns") that are material and required to be filed
with any Taxing authority with respect to any Tax period (or portion
thereof) ending on or before the Effective Time (a "Pre-Closing Tax
Period") by or on behalf of the Company or any Subsidiary, have been or
will be filed when due (including any applicable extension periods) in
accordance with all applicable laws, and as of the time of filing, the
Returns were true and complete in all material respects;
(ii) the Company and the Subsidiaries have timely paid, or withheld
and remitted to the appropriate Taxing authority, all material Taxes due
and payable whether or not shown on any Returns;
(iii) the charges, accruals and reserves for Taxes with respect to
the Company and any Subsidiary for any Pre-Closing Tax Period (including
any Pre-Closing Tax Period for which no Return has yet been filed)
reflected on the Company Balance Sheet (excluding any provision for
deferred income Taxes) are adequate in accordance with GAAP to cover such
Taxes as of the Company Balance Sheet Date;
(iv) there is no material claim (including under any indemnification
or Tax sharing agreement), audit, action, suit, proceeding, or, to the
knowledge of the Company, investigation now pending or threatened in
writing against or in respect of any material Tax or Tax Asset of the
Company or any Subsidiary. "Tax Asset" means any net operating loss, net
capital loss, investment Tax credit, foreign Tax credit, charitable
deduction or any other credit or Tax attribute which could be carried
forward or back to reduce Taxes;
(v) there are no Liens for Taxes upon the assets of the Company or
the Subsidiaries except for Liens for current Taxes not yet due or that are
being contested in good faith by appropriate proceedings;
(vi) since December 31, 2002, neither the Company nor any of the
Subsidiaries has distributed to its shareholders or security holders stock
or securities of a controlled
27
corporation in a transaction that was purported or represented on any
Return to be governed by Section 355(a) of the Code;
(vii) neither the Company nor any Subsidiary is currently under any
obligation to pay any amounts of the type described in clause (ii) or (iii)
of the definition of "Tax," regardless of whether such Tax is imposed on
the Company or any Subsidiary; and
(viii) neither the Company nor any of the Subsidiaries has filed a
consent under Section 341(f) of the Code concerning collapsible
corporations. Neither the Company nor any of the Subsidiaries is a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code. Neither the Company nor any of the Subsidiaries is a
party to or bound by any Tax allocation or sharing agreement. Neither the
Company nor any of the Subsidiaries (A) has been a member of an affiliated
group (within the meaning of Section 1504(a) of the Code or any similar
provision of state, local or foreign law) filing a consolidated federal
income Tax Return (other than a group the common parent of which was the
Company) or (B) has any liability for the Taxes of any person (other than
the Company or any of the Subsidiaries) under Section 1.1502-6 of the
Treasury Regulations (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise. Neither the
Company nor any of the Subsidiaries has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a
Tax assessment or deficiency. Except as set forth in Section 4.11 of the
Company Disclosure Schedule, as of the date hereof, neither the Company nor
any of the Subsidiaries currently is the beneficiary of any extension of
time within which to file any Tax Return. There are no current or pending
claims by an authority in a jurisdiction in which the Company or any of the
Subsidiaries does not file Tax Returns that the Company or any Subsidiary
is or may be subject to Taxation by that jurisdiction.
Section 4.12. ERISA. (a) Section 4.12 of the Company Disclosure
Schedule contains a true and complete list of each Company Plan (other than
Company Plans that are unwritten and immaterial, provided that employment,
severance or consulting agreements with directors, officers or key employees
shall be deemed to be material for purposes of this Section 4.12(a)). "Company
Plan" shall mean each "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, multiemployer plans within the meaning
of Section 3(37) of ERISA), and all stock purchase, stock option, severance,
employment, change-in-control, fringe benefit, collective bargaining, bonus,
incentive, deferred compensation, employee loan and all other employee benefit
plans, agreements, programs, policies or other arrangements, whether or not
subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the transactions contemplated by this
Agreement or otherwise), whether formal or informal, oral or written, under
which (i) any current or former employee, director or consultant of the Company
or the Subsidiaries (the "Company Employees") has any present or future right to
benefits and which are contributed to, sponsored by or maintained by the Company
or any of the Subsidiaries or (ii) the Company or any of the Subsidiaries has
had or has any present or future liability.
28
(b) With respect to each written Company Plan, the Company has
provided, or made available, to Parent or the Parent Representatives a current,
accurate and complete copy thereof and, to the extent applicable: (i) any
related trust agreement or other funding instrument; (ii) the most recent
determination letter; (iii) any summary plan description and other material
written communications by the Company or any of the Subsidiaries to the Company
Employees concerning the extent of the benefits provided under a Company Plan;
(iv) a summary of any proposed amendments or changes anticipated to be made to
the Company Plans at any time within the twelve months immediately following the
date hereof; and (v) for the two most recent years (A) the Form 5500 and
attached schedules, (B) audited financial statements and (C) actuarial valuation
reports, if any.
(c) (i) No Company Plan is subject to Title IV of ERISA and neither
the Company, any Subsidiary nor any member of their Controlled Group (as defined
below) has incurred any liability pursuant to Title IV of ERISA that remains
unsatisfied; (ii) each Company Plan has been established and administered
substantially in accordance with its terms, and, in compliance in all material
respects with the applicable provisions of ERISA, the Code and other applicable
laws, rules and regulations; (iii) no event has occurred and no condition exists
with respect to any Company Plan subject to the requirements of Section 401(a)
of the Code that would subject the Company or the Subsidiaries, either directly
or by reason of their affiliation with any member of their "Controlled Group"
(defined as any organization which is a member of a controlled group of
organizations within the meaning of Section 414(b), (c), (m) or (o) of the
Code), to any Tax, fine, lien, penalty or other liability imposed by ERISA, the
Code or other applicable laws, rules and regulations; and (iv) for each Company
Plan with respect to which a Form 5500 has been filed, no material adverse
change has occurred with respect to the matters covered by the most recent Form
since the date thereof.
(d) With respect to any Company Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending or,
to the knowledge of the Company, threatened and (ii) to the knowledge of the
Company, no facts or circumstances exist that would be reasonably likely to give
rise to any such actions, suits or claims in either case where such actions,
suits or claims would reasonably be expected to result in a material unfunded
liability to the Company or its Affiliates.
(e) Except as set forth in Section 4.12(e) of the Company Disclosure
Schedule, no Company Plan exists that, as a result of the execution of this
Agreement or the Transactions (whether alone or in connection with any
subsequent event(s)), would be reasonably likely to result in (i) the payment to
any Company Employee of any money or other property, (ii) the provision of any
benefits or other rights to any Company Employee or (iii) the increase,
acceleration or provision of any payments, benefits or other rights to any
Company Employee, whether or not any such payment, right or benefit would
constitute a "parachute payment" within the meaning of Section 280G of the Code.
(f) Except as set forth in Section 4.12(f) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary has any liability in respect of
post-retirement health, medical or life insurance benefits for retired, former
or current employees of the Company or the Subsidiaries except for coverage
required under Section 4980B of the Code.
29
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its Affiliates
relating to, or change in employee participation or coverage under, a Company
Plan which would increase the expense of maintaining such Company Plan above the
level of the expense incurred in respect thereof for the fiscal year ended
December 31, 2002, except for any such increase which, individually or in the
aggregate, has not had and would not reasonably be expected to have a Material
Adverse Effect.
(h) Neither the Company nor any Subsidiary is a party to or subject
to, or is currently negotiating in connection with entering into, any collective
bargaining agreement or other contract or understanding with a labor union or
labor organization.
Section 4.13. Labor Matters.
(a) Except as set forth in Section 4.13 of the Company Disclosure
Schedule, there are no (i) labor strikes, disputes, slowdowns, representation or
certification campaigns known to the Company or work stoppages or other
concerted activities with respect to employees of any of the Company or any
Subsidiary pending, or to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary, (ii) grievance or arbitration
proceedings, decisions, side letters, letter agreements, letters of
understanding or settlement agreements, in each case, arising out of collective
bargaining agreements to which the Company or any Subsidiary is a party, or
(iii) to the knowledge of the Company, activities or proceedings of any labor
union or employee association to organize any such employees.
(b) Except to the extent set forth in Section 4.13 of the Company
Disclosure Schedule and except for such matters as, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect, there are no pending administrative matters with any federal,
provincial, state or local agencies regarding (i) violations or alleged
violations of any federal, provincial, state or local wage and hour law or any
federal, provincial, state or local law with respect to discrimination on the
basis of race, color, creed, national origin, religion or any other basis under
such federal, provincial, state or local law, (ii) any claimed violation of
Title VII of the 1964 Civil Rights Act, as amended, (iii) any allegation or
claim arising out of Executive Order 11246 or any other applicable order
relating to governmental contractors or state contractors, or (iv) any violation
or alleged violation of the Age Discrimination and Employment Act, as amended,
or any other federal, provincial, state or local statute or ordinance, or any
other applicable laws with respect to wages, hours, employment practices and
terms and conditions of employment.
Section 4.14. Compliance with Laws. Except to the extent set forth in
Section 4.14 of the Company Disclosure Schedule, neither the Company nor any
Subsidiary is in violation of, or has since January 1, 1999 violated, and to the
knowledge of the Company none is under investigation with respect to or has been
threatened to be charged with or given notice of any violation of, any
applicable law, rule, regulation, judgment, injunction, order or decree, except
for violations that, individually or in the aggregate, have not had and would
not reasonably be expected to have a Material Adverse Effect.
30
Section 4.15. Licenses and Permits. Except as set forth in Section
4.15 of the Company Disclosure Schedule or as, individually or in the aggregate,
has not had and would not reasonably be expected to have a Material Adverse
Effect, (i) the Company or the Subsidiaries own, hold or possess adequate right
to use all licenses, certificates, consents, orders, franchises, permits,
certificates, approvals or other similar authorizations (the "Permits") required
in connection with the operation of the business of the Company and the
Subsidiaries in the same manner as currently operated, (ii) the Company and the
Subsidiaries are in compliance with the Permits, (iii) the Permits are valid and
in full force and effect, (iv) neither the Company nor any Subsidiary is in
default under, and no condition exists that with notice or lapse of time or both
would constitute a default under, the Permits and (v) none of the Permits will
be terminated or impaired or become terminable, in whole or in part, as a result
of the Transactions.
Section 4.16. Contracts. Section 4.16 of the Company Disclosure
Schedule lists, as of the date hereof, all contracts, commitments,
understandings and agreements (whether written or oral) (collectively,
"Contracts") to which the Company or any Subsidiary is a party which fall within
any of the following categories: (a) Contracts that (i) involved aggregate
expenditures or receipts in excess of $500,000 (or with respect to any Costs of
Services Contract, $1,000,000) in the aggregate in fiscal 2002 or (ii) are
expected to involve aggregate expenditures or receipts in excess of $500,000 (or
with respect to any Costs of Services Contract, $1,000,000) in the aggregate in
fiscal year 2003; (b) joint venture, partnership and like Contracts; (c)
Contracts containing covenants purporting to limit (or that would limit after
the Effective Time) the freedom of the Company or any Subsidiary or Affiliate to
compete in any line of business or with any Person in any geographic area; (d)
Contracts which contain minimum purchase conditions of greater than $250,000 (or
with respect to any Costs of Services Contract, $1,000,000) in the aggregate in
any twelve month period, all or part of which minimum purchase condition remains
unsatisfied at May 31, 2003; (e) Contracts relating to any outstanding
non-cancelable commitment for capital expenditures of the Company or any
Subsidiary in excess of $250,000 (or with respect to Contracts relating to any
switch software upgrades for purposes of compliance with the Communications
Assistance for Law Enforcement Act, $1,000,000) in the aggregate in any twelve
month period; (f) indentures, mortgages, promissory notes, loan agreements,
guarantees, letters of credit or other agreements or instruments of the Company
or any Subsidiary with commitments for the borrowing or the lending of amounts,
by the Company or any Subsidiary; (g) any Contract, note or bond under which the
Company or any of the Subsidiaries has, directly or indirectly, made any
advance, loan, extension of credit or capital contribution to, or other
investment in, any Person (other than the Company or one of the wholly-owned
Subsidiaries); (h) any Contract creating or granting any Lien upon any of the
properties or assets of the Company or any of the Subsidiaries; (i) any
currently effective Contract, or any expired or terminated Contract which has
surviving provisions, providing for indemnification of any Person with respect
to liabilities relating to any current or former business of the Company, any of
the Subsidiaries or any predecessor Person, other than (1) indemnification
agreements between the Company or any Subsidiary and any of their respective
officers and directors that are otherwise set forth in Section 4.12 of the
Company Disclosure Schedule, (2) any confidentiality or non-disclosure
agreements or (3) any such indemnification agreements entered into in the
ordinary course of business; (j) any lease, sublease or similar Contract with
any Person (other than the Company or one of the Subsidiaries) under which the
Company or one of the Subsidiaries is a lessor or sublessor of, or makes
available for use to any person (other than the Company or one of the
Subsidiaries), (A) any Leased Real Property or (B)
31
any portion of any premises otherwise occupied by the Company or one of the
Subsidiaries; (k) any Contract relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise) which
is material to the Company and the Subsidiaries, taken as a whole; (l) any
Contract (other than any Permit) with any governmental authority or with any
labor union; (m) any Contract containing a most favored customer clause or
similar provision which involved aggregate expenditures or receipts in excess of
$100,000 in the twelve months prior to the date hereof, and all other Contracts
containing a most favored customer clause or similar provision which, in the
aggregate, involved aggregate expenditures or receipts in excess of $500,000 in
the twelve months prior to the date hereof; (n) the top ten wholesale accounts
relating to the provision of private line services, reseller services or carrier
services (based on revenue generated in the twelve months prior to the date
hereof), top thirty retail accounts (based on revenue generated in the twelve
months prior to the date hereof) and the Contracts relating to such wholesale
and retail accounts; (o) any other Contract not in the ordinary course of
business consistent with past practice that is material to the Company and the
Subsidiaries, taken as whole or (p) any Contracts included in the foregoing
clauses (a)-(o) (i) that are with dealers that have terms that vary materially
from the terms set forth in the forms attached hereto as Section 4.16(p)(i) of
the Company Disclosure Schedule, (ii) that are with associations that have terms
that vary materially from the terms set forth in the forms attached hereto as
Section 4.16(p)(ii) of the Company Disclosure Schedule, (iii) that are referral
partner or referral agent agreements that have terms that vary materially from
the terms set forth in the forms attached hereto as Section 4.16(p)(iii) of the
Company Disclosure Schedule, (iv) that are private line agreements that have
terms that vary materially from the terms set forth in the forms attached hereto
as Section 4.16(p)(iv) of the Company Disclosure Schedule, or (v) that are
operator service agreements that have terms that vary materially from the terms
set forth in the forms attached hereto as Section 4.16(p)(v) of the Company
Disclosure Schedule. Complete and correct copies of all Contracts referred to in
this Section 4.16 of the Company Disclosure Schedule have been made available to
Parent or the Parent Representatives by the Company. All Contracts referred to
in this Section 4.16 of the Company Disclosure Schedule are valid, binding and
in full force and effect and are enforceable by the Company in accordance with
their terms. Except as set forth in Section 4.16 of the Company Disclosure
Schedule, and except as, individually or in the aggregate, has not had and would
not reasonably be expected to have a Material Adverse Effect, none of the
Company, any Subsidiary nor, to the knowledge of the Company, any other party
thereto, is or is alleged to be in violation of or in default in respect of, nor
has there occurred any event or condition which (with or without notice or lapse
of time or both) would constitute a violation of or default under, any such
Contract. None of the counterparties to any such Contracts has given notice of
termination of, or is seeking to amend, any such Contract. No holder of the
outstanding 10 1/2 % Senior Notes due 2007 of the Company has, prior to the
consummation of the Transactions, or will have, as a result of or after the
consummation of the Transactions, the right at such holder's option to be
prepaid any amount of such notes held by such holder, whether as a result of
sales of assets by the Company or the Subsidiaries, as a result of a change of
control of the Company or otherwise.
Section 4.17. Intellectual Property. The Company has identified in
Section 4.17 of the Company Disclosure Schedule all material common law
trademarks and service marks, all registered trademarks and service marks and
registered trade names as well as all trademarks, service marks or trade names
for which applications for registration have been filed, all registered
copyrights, all issued patents and patent applications that are owned by the
Company and the Subsidiaries, all domain names that are owned by the Company
32
and the Subsidiaries, all material software used by the Company and the
Subsidiaries and all software licenses granted in connection with such material
software to the Company and the Subsidiaries (other than, with respect to such
software and such software licenses, off-the-shelf commercial or shrinkwrap
software and excluding all software or other material that is distributed as
"free software," "open source software" or under a similar licensing or
distribution model (such as the GNU General Public License (GPL), GNU Lesser
General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the
Artistic License, the Netscape Public License, the Sun Community Source License
(SCSL), the Sun Industry Standards License (SISL) and the Apache License)). The
Company and the Subsidiaries have not distributed to any third party any
internally developed software that includes any such "open source software."
Except as set forth in Section 4.17 of the Company Disclosure Schedule, (a) the
Company and the Subsidiaries own or possess adequate licenses or other rights to
use all Intellectual Property Rights necessary to conduct the business now
operated by them, except where the failure to own or possess such licenses or
rights, individually or in the aggregate, has not had and would not reasonably
be expected to have a Material Adverse Effect, (b) the Intellectual Property
Rights owned by the Company and the Subsidiaries are free from Material Liens,
and, (c) to the knowledge of the Company, the Intellectual Property Rights of
the Company and the Subsidiaries do not conflict with, infringe upon or
misappropriate any Intellectual Property Rights of others and are not being
infringed upon or misappropriated by any third party, in each case to the extent
that, if sustained, such conflict or infringement, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect. For purposes of this Agreement, "Intellectual Property Right" means any
trademark, service xxxx, trade name, mask work, copyright, patent, software
license, other data base, invention, trade secret, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right. All material
software used by the Company and the Subsidiaries has been (i) licensed to the
Company and the Subsidiaries, as applicable, (ii) developed by employees of the
Company or the Subsidiaries within the scope of their employment, or (iii)
developed by a third party and assigned to the Company or the Subsidiaries so
that, in the case of clause (iii), the Company or the Subsidiaries are now the
exclusive owner of such software. To the knowledge of the Company, the Company
and the Subsidiaries have not disclosed to any third party material confidential
information of the Company and the Subsidiaries except pursuant to a Contract
that governs the use or disclosure of confidential information of the Company
and the Subsidiaries. The Company and the Subsidiaries (a) comply in all
material respects with the privacy policy published on the Company's website. To
the knowledge of the Company, no claims or controversies have arisen regarding
its privacy policy or the implementation thereof.
Section 4.18. Environmental Matters. (a) Except for such matters as,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect:
(i) except as set forth in Section 4.18(a)(i) of the Company
Disclosure Schedule, no notice, notification, demand, lien, request for
information, citation, summons, complaint or order has been received by the
Company or any Subsidiary, and no penalty has been assessed and no action,
claim, suit, or proceeding or review is pending or, to the knowledge of the
Company, is threatened by any governmental entity or other Person
33
against or directed at (as the case may be) the Company or any Subsidiary,
and relating to or arising under any Environmental Law;
(ii) except as set forth in Section 4.18(a)(ii) of the Company
Disclosure Schedule, to the knowledge of the Company, no investigation is
threatened or pending by any governmental entity or any Person with respect
to the Company or the Subsidiaries which relates to or arises under any
Environmental Law;
(iii) except as set forth in Section 4.18(a)(iii) of the Company
Disclosure Schedule, there are no liabilities of the Company or any
Subsidiary under any Environmental Law of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and
there is no existing condition, situation or set of circumstances which
would be reasonably expected to result in any such liability;
(iv) except as set forth in Section 4.18(a)(iv) of the Company
Disclosure Schedule, the Company and the Subsidiaries are and have been in
compliance with all applicable Environmental Laws and have obtained and are
in compliance with all applicable Environmental Permits and have timely
filed all applications and renewals for all applicable Environmental
Permits; such Environmental Permits are valid and in full force and effect
and will not be terminated or impaired or become terminable, in whole or in
part, as a result of the transactions contemplated hereby;
(v) except as set forth in Section 4.18(a)(v) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary has arranged,
by contract, agreement or otherwise, for the treatment, storage or disposal
of Hazardous Substances; and
(vi) except as set forth in Section 4.18(a)(vi) of the Company
Disclosure Schedule, no Hazardous Substance has been Released by the
Company or any Subsidiary at any property now or previously owned, operated
or leased by the Company or any Subsidiary.
(b) Prior to the date hereof, the Company has made available to Parent
or the Parent Representatives copies of all environmental assessments, reports
and audits (and other documents that Parent or the Parent Representatives has
requested for review) in its possession or under its control and that relate to
the Company's or any Subsidiary's compliance with Environmental Laws, or the
environmental condition of any real property that the Company or any Subsidiary
has owned, operated, or leased. To the knowledge of the Company, any such
documents are accurate and complete.
(c) Except as set forth in Section 4.18(c) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary owns, leases or operates any
real property, in New Jersey or Connecticut.
(d) For purposes of this Agreement, the following terms shall have the
meanings set forth below:
"Environmental Laws" means any federal, state, provincial, local and
foreign law (including, without limitation, common law), treaty, judicial
decision, regulation, rule, judgment,
34
order, decree, injunction, permit or governmental restriction or requirement or
any agreement or contract with any governmental authority, relating to human
health and safety, the environment or to pollutants, contaminants, wastes or
chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise
hazardous substances, wastes or materials.
"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities required of, as applicable, either (i) the Company or any Subsidiary
or (ii) Parent or any Parent Subsidiary by applicable Environmental Laws to
conduct their businesses and operations, as currently conducted.
"Hazardous Substances" means any pollutant, contaminant, waste or
chemical (including, without limitation, petroleum, its derivatives, by-products
and other hydrocarbons); any toxic, radioactive, ignitable, corrosive, reactive
or otherwise hazardous substance, waste or material; and any other substance
which is regulated by, listed under, or for which liability is imposed under,
any applicable Environmental Laws.
"Release" means any presence, emission, spill, seepage, leak, escape,
leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal,
migration, or release of Hazardous Substances.
Section 4.19. Agreements with Affiliates(a). (a) Section 4.19(a) of
the Company Disclosure Schedule sets forth a true and correct list, as of the
date hereof, of (i) each contract, commitment, agreement or understanding
between any of W or any of its Affiliates, on the one hand, and the Company or
any Subsidiary, on the other hand, (ii) each contract, commitment, agreement or
understanding between any portfolio company of W or any of W's affiliated
investment funds, on the one hand, and the Company or any Subsidiary, on the
other hand, which, in each case, involves an amount in excess of $100,000 and
(iii) any amendments, waivers or relinquishments of any rights relating to any
such contract, commitment, agreement or understanding referred to in clause (i)
or (ii) that will remain outstanding after the Closing in accordance with
Section 8.05 that have occurred or been agreed to since the Company Balance
Sheet Date. All such agreements, amendments, waivers and relinquishments were
entered into by the Company or a Subsidiary, as applicable, on arm's length
terms and in the ordinary course of business.
(b) Section 4.19(b) of the Company Disclosure Schedule lists the
following information about any extensions of credit in the form of a personal
loan, within the meaning of the Xxxxxxxx-Xxxxx Act of 2002, by the Company or
any Subsidiary to any executive officer and director of the Company or any
Subsidiary outstanding as of the date hereof: (i) the date of such loan; (ii)
the nature of such loan; (iii) the maturity date of such loan; (iv) the
principal amount outstanding and amortization schedule of such loan; and (v) the
interest rate and interest payment schedule of such loan.
Section 4.20. Insurance. The Company and the Subsidiaries carry, or
are covered by, insurance with insurers that are financially sound and reputable
and in such amounts with such deductibles and against such risks and losses as
are reasonable for the business and assets of the Company and the Subsidiaries
and is customary for companies similarly situated. Except as set forth in
Section 4.20 of the Company Disclosure Schedule, the insurance policies to which
35
this Section 4.20 refers are in full force and effect, and all premiums thereon
have been paid. Except as set forth in Section 4.20 of the Company Disclosure
Schedule, no insurer under any such policy has cancelled or generally disclaimed
liability under any such policy or indicated any intent to do so or to
materially increase the premiums payable under or not renew any such policy.
Neither the Company nor any of the Subsidiaries is in material breach or
default, and neither the Company or any of the Subsidiaries has taken any action
or failed to take any action which, with notice or the lapse of time or both,
would constitute such a breach or default, or permit termination or modification
of any of such insurance policies, except, in each case, as set forth in Section
4.20 of the Company Disclosure Schedule.
Section 4.21. Real Property. (a) Section 4.21(a) of the Company
Disclosure Schedule contains a brief description of (i) each parcel of real
property owned by the Company or the Subsidiaries (the "Owned Real Property")
and (ii) each option held by the Company or the Subsidiaries to acquire any real
property. Section 4.21(a) of the Company Disclosure Schedule sets forth a list
of each lease or similar agreement under which the Company or any of the
Subsidiaries is lessee of, or holds or operates, any real property owned by any
third Person, except those which are terminable by the Company or such
Subsidiary without penalty on 30 days' or less notice or which provide for
annual lease payments of less than $75,000 (the "Leased Real Property").
(b) Except for such matters as, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
or as set forth in Section 4.21(b) of the Company Disclosure Schedule:
(i) the Owned Real Property is in conformance with all deed
restrictions and other covenants and conditions recorded or running with
the land. The current use and operation of the Owned Real Property is in
conformity with the certificate(s) of occupancy issued for such Owned Real
Property. All the buildings, structures, equipment and other tangible
assets of the Company and the Subsidiaries located on the Owned Real
Property are in good condition and repair and are sufficient to support the
conduct of their business by the Company and the Subsidiaries after the
Effective Time. No portion of the Owned Real Property is situated within an
area designated (or to be designated) as a "flood plain" or "flood hazard
zone" by any governmental body nor is it subject to a predictable flow of
floodwaters or within the boundaries of any proposed floodway program. All
streets adjacent to or abutting the Owned Real Property have been dedicated
as "public streets" and have been accepted by the governmental body
possessing jurisdictions thereover;
(ii) neither the whole nor any part of any of the Owned Real
Property or any Leased Real Property is subject to any pending suit for
condemnation or other taking by any governmental body, and, to the
knowledge of the Company, no such condemnation or other taking is
threatened; and
(iii) the Company and the Subsidiaries have all conduits, leases, fee
interests, licenses, rights of way, authorizations, permits (including
permits for highway, railroad and waterway crossings and any necessary
permits or authorizations such as environmental permits) and/or other
agreements or rights necessary for (i) the granting of
36
the indefeasible rights of use ("IRUs") previously granted to their
customers, (ii) the installation, use and access to the fibers and any
related property that are the subject of the IRUs granted to their
customers and (iii) the ownership, possession and use of their network.
Section 4.22. Title to Property. Except as set forth in Section 4.22
of the Company Disclosure Schedule, the Company and the Subsidiaries have good,
valid and marketable title to each item of Owned Real Property and material
owned personal property and a valid leasehold interest in each item of Leased
Real Property and material leased personal property, in each case, free and
clear of all Material Liens.
Section 4.23. Customers and Suppliers. (a) Except as set forth in
Section 4.23(a) of the Company Disclosure Schedule, neither the Company nor any
Subsidiary has received notice from any customer, or group of customers that are
under common ownership or control, that (i) accounted for at least $250,000 (or
with respect to any customer, or group of customers that are under common
ownership or control, that is a party to any Costs of Services Contract,
$1,000,000) of the aggregate products and services furnished by the Company and
the Subsidiaries in fiscal year 2002 or (ii) that is expected to account for at
least $250,000 (or with respect to any customer, or group of customers that are
under common ownership or control, that is a party to any Costs of Services
Contract, $1,000,000) of the aggregate products and services to be furnished by
the Company and the Subsidiaries in fiscal year 2003, that such customer (or
such group of customers) has stopped or intends to stop purchasing, or has
materially reduced or will materially reduce purchases of, or has sought or is
seeking to materially reduce the price it will pay for, the Company's or a
Subsidiary's products or services, nor has the Company or a Subsidiary received
notice from any supplier, or group of suppliers that are under common ownership
or control, that (x) accounted for at least $250,000 (or with respect to any
supplier, or group of suppliers that are under common ownership or control, that
is a party to any Costs of Services Contract, $1,000,000) of the aggregate goods
and services purchased by the Company in fiscal year 2002 or (y) that is
expected to account for at least $250,000 (or with respect to any supplier, or
group of suppliers that are under common ownership or control, that is a party
to any Costs of Services Contract, $1,000,000) of the aggregate goods and
services purchased by the Company and the Subsidiaries in fiscal year 2003, that
such supplier (or such group of suppliers) has stopped or intends to stop
providing goods or services to the Company, or has materially reduced or will
materially reduce the supply of, or has sought or is seeking to materially
increase the price it charges for, goods or services supplied to the Company or
a Subsidiary.
(b) Except as set forth in Section 4.23(b) of the Company Disclosure
Schedule, and except for requests for call detail records for billing purposes,
neither the Company nor any of the Subsidiaries is currently involved in any
dispute with, or has received any notice of an intention to dispute from, or has
received any request for audit, accounting or review from, any Person (including
a group of Persons that are under common ownership or control) with whom the
Company or any of the Subsidiaries does business (i) which involves an aggregate
amount in excess of $250,000 in fiscal year 2002 or (ii) is expected to involve
an aggregate amount in excess of $250,000 in fiscal year 2003, relating to any
transactions or commitments made, or any contracts or agreements entered into,
by the Company or any Subsidiary, on one hand, and such Person, on the other
hand.
37
Section 4.24. Corporate Records. The respective minute books of the
Company and the Subsidiaries have previously been made available to Parent or
the Parent Representatives in their entirety.
Section 4.25. Finders' Fees. Except for Xxxxxxxxx & Company, Inc.,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of the Company or any
Subsidiary who is or might be entitled to any fee or commission from Parent or
any of its Affiliates upon consummation of the Transactions.
Section 4.26. Opinion of Company Financial Advisor. The special
committee of the Board of Directors of the Company comprised of Xxxxxx X. Xxxxxx
and Xxxxx Xxxxxxxx (the "Special Committee") has received the opinion of
Xxxxxxxxx & Company, Inc., dated June 26, 2003, to the effect that, as of such
date, the Merger Consideration is fair, from a financial point of view, to the
holders of the Shares (other than W and its Affiliates), a copy of which opinion
has been shown to Parent.
Section 4.27. Board; Special Committee. The Board of Directors of the
Company, at a meeting duly called and held of the Board of Directors of the
Company and acting on the unanimous recommendation of the Special Committee, has
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interest of the Company's
shareholders, (ii) adopted this Agreement and the transactions contemplated
hereby, including the Merger, in accordance with the requirements of Section
55-11-01 and Section 55-11-03 of the NCBCA with respect to the transactions
contemplated hereby and (iii) adopted resolutions recommending to the Company's
shareholders approval of the transactions contemplated herein, including the
Merger.
Section 4.28. Inapplicability of Certain Restrictions. Neither the
business combination restrictions of Article 9 of the NCBCA nor the control
share acquisition restrictions of Article 9A of the NCBCA are applicable to the
Merger, this Agreement or the other transactions contemplated by this Agreement
and no other state takeover law is or purports to be applicable to the Merger,
this Agreement or the Transactions.
Section 4.29. PUHCA. The Company, together with its affiliates (as
defined in section 2(a)(11)(B) of the Public Utility Holding Company Act of
1935, as amended ("PUHCA") (15 U.S.C. Section 79b(a)(11)(B))), is engaged
exclusively in the business of providing telecommunications services,
information services, other services or products subject to the jurisdiction of
the Federal Communications Commission ("FCC") or products or services that are
related or incidental to the provision of any of the foregoing products or
services, within the meaning of Section 34(a)(1) of PUHCA (15 U.S.C. Section
79z-5c(a)(1)) and the rules and regulations thereunder.
Section 4.30. Investment Company Act. Neither the Company nor any of
the Subsidiaries is an "investment company" as defined in the Investment Company
Act of 1940, as amended.
Section 4.31. Call Termination.
38
(a) Except as set forth in Section 4.31(a) of the Company Disclosure
Schedule, the Company and the Subsidiaries have been and are currently in
compliance with all representations, warranties and covenants set forth in any
third party agreements with respect to the call termination obligations and
activities of the Company and the Subsidiaries, except for any noncompliance
which, individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect.
(b) Except where the failure to report or to calculate the percentage
of interstate usage ("PIU") and percentage of local usage ("PLU"), individually
or in the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect, with respect to any third party used by the Company or
the Subsidiaries to terminate telecommunications traffic, to the knowledge of
the Company, the Company and the Subsidiaries have been and are properly
reporting the PIU and PLU with respect to the calls terminated through such
third party, and the PIU and PLU have been and are calculated properly in
accordance with applicable FCC and state regulatory policies and regulations,
and in accordance with the tariffs, where applicable, and the applicable
representations, warranties and covenants set forth in the agreements with such
third party.
(c) With respect to any third party used by the Company or the
Subsidiaries to terminate telecommunications traffic, to the knowledge of the
Company, the Company and the Subsidiaries have been and are accurately providing
applicable call data for each call transferred to such third party where such
call data are known, or, where such call data are not known, such calls are
being identified for purposes of calculating the PIU and PLU in accordance with
applicable FCC and state regulatory policy and regulations, and in accordance
with the tariffs, where applicable, and the applicable representations,
warranties and covenants set forth in any agreements with such third party,
except where the failure to do so, individually or in the aggregate, has not had
and would not reasonably be expected to have a Material Adverse Effect.
(d) With respect to any call transferred by a carrier to the Company
or any of the Subsidiaries with or without any call data, the Company and the
Subsidiaries have no knowledge that the actual classification (whether
Interstate, Intrastate IntraLATA, Local or other) of such call is or was
different than the Company or such Subsidiary (or any third party engaged by the
Company or such Subsidiary to terminate such call) has been or is reporting it
to be, and the Company and the Subsidiaries have not entered into any agreement,
understanding or arrangement with any carrier with the knowledge or suspicion by
the Company that a call is to be intentionally misidentified or under which the
call data are to be intentionally removed from the call by the carrier, or any
other carrier interconnecting with the carrier or the Company, except where such
misclassification, misidentification and/or removal, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect.
(e) To the knowledge of the Company, except for requests from
customers (including both users and carriers) of the Company's or any
Subsidiary's services for call detail records to verify the Company's or any
Subsidiary's xxxx, or as set forth in Section 4.31(e) of the Company Disclosure
Schedule, there have not been and are no outstanding demands or requests for or
complaints to a regulator requesting an accounting or an investigation arising
out of, related to or resulting from the PIU and/or PLU classification or from
the origination, transport, delivery, and/or termination of telecommunications
traffic (including the use of enhanced
39
extended links), and neither the Company nor any Subsidiary has received notice
of any regulatory investigation or accounting or written notice of any customer
requesting a regulatory investigation or accounting, except where such demands,
complaints or requests, individually or in the aggregate, have not had and would
not reasonably be expected to have a Material Adverse Effect.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and each WCAS
Securityholder as of the date hereof and as of the Effective Time that:
Section 5.01. Corporate Existence and Power. Each of Parent and
Merger Co. is a corporation duly incorporated, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and has
all corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now conducted. Each of Parent and Merger
Co. is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified,
individually or in the aggregate, has not and would not reasonably be expected
to have a material adverse effect on (i) the condition (financial or otherwise),
business, assets, liabilities or results of operations of Parent and the Parent
Subsidiaries, taken as a whole; provided, however, that for purposes of this
Agreement none of the following shall be deemed to constitute, and none of the
following shall be taken into account in determining whether there has been, a
Parent Material Adverse Effect unless in each such case any such item has a
disproportionate effect on the condition (financial or otherwise), business,
assets, liabilities or results of operations of the Parent and the Parent
Subsidiaries, taken as a whole, (a) any adverse change, event, development or
effect arising from or relating to (1) general business or economic conditions,
(2) national or international political or social conditions, including the
engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or
terrorist attack, (3) financial, banking or securities markets (including any
disruption thereof and any decline in the price of any security or any market
index), (4) changes in GAAP, or (5) changes in law, rules, relations, orders or
other binding directives issued by any governmental entity, (b) any adverse
change generally applicable to the telecommunications industry, or (c) any
effect arising from compliance by Parent, the Company or W with the terms of
this Agreement or the other Transaction Agreements; or (ii) Parent's ability to
perform its obligations under this Agreement ("Parent Material Adverse Effect").
Parent has heretofore delivered to the Company or the Company Representatives
true and complete copies of Parent's and Merger Co.'s respective certificates or
articles of incorporation and bylaws as currently in effect. Such certificates
or articles of incorporation and bylaws are in full force and effect and no
other organizational documents are applicable to or binding upon Parent or
Merger Co.
Section 5.02. Corporate Authorization. Each of Parent and Merger Co.
has all necessary corporate power and authority to execute and deliver this
Agreement and the other
40
Transaction Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the Transactions. Except as set forth
in Section 5.02 of the written disclosure schedule previously delivered by
Parent to the Company (the "Parent Disclosure Schedule"), the execution,
delivery and performance by each of Parent and Merger Co. of this Agreement and
the other Transaction Agreements to which it is a party and the consummation by
Parent and Merger Co. of the Transactions are within the corporate powers of
Parent and Merger Co. and have been duly and validly authorized by all necessary
corporate and stockholder action (other than by Parent as the sole stockholder
of Merger Sub, which will be obtained prior to the Effective Time) under
Parent's and Merger Co.'s certificates or articles of incorporation and bylaws
and applicable provisions of Delaware and North Carolina Law (including the
receipt of approval by the holders of a majority of the outstanding shares of
the Parent Series A Preferred Stock of the creation and issuance of the Parent
Series B Preferred Stock (the "Series A Consent")), other than the filing with
the Secretary of State of the State of North Carolina of the articles of merger
as required by North Carolina Law. The Board of Directors of Parent has
approved, and recommended to the Parent stockholders the adoption of, the
Restated Certificate of Incorporation attached as Exhibit G hereto, and such
approval and recommendation have not been rescinded or revoked. This Agreement
has been duly and validly executed and delivered by each of Parent and Merger
Co. and the other Transaction Agreements and the Warrants will have been duly
and validly executed and delivered by Parent prior to the Effective Time.
Assuming this Agreement constitutes and the other Transaction Agreements when
executed and delivered prior to the Effective Time will constitute legal, valid
and binding agreements of the other parties hereto and thereto, this Agreement
constitutes a legal, valid and binding agreement of Parent and Merger Co., and
each of the other Transaction Agreements and the Warrants when executed and
delivered prior to the Effective Time will constitute legal, valid and binding
agreements of Parent, in each case, enforceable against Parent or Merger Co., as
applicable, in accordance with their respective terms, except as such
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally and for limitations
imposed by general principles of equity.
Section 5.03. Governmental Authorization. The execution, delivery and
performance by each of Parent and Merger Co. of this Agreement and the other
Transaction Agreements to which it is a party and the consummation by each of
Parent and Merger Co. of the Transactions do not and will not require any action
by or in respect of, consent or approval of, or filing with, any governmental
body, agency, official or authority other than (a) the filing of articles of
merger in accordance with North Carolina Law, (b) compliance with any applicable
requirements of the HSR Act, (c) compliance with any applicable requirements of
the Securities Act and the Exchange Act and any applicable state "blue sky"
laws, (d) as set forth in Section 5.03 of the Parent Disclosure Schedule, (e)
filings pursuant to the Uniform Commercial Code or otherwise in connection with
Liens to be granted in connection with the arrangements relating to the Parent
Credit Agreement, the Company Credit Agreement and the Capital Lease Facility;
(f) as may be necessary as a result of any facts or circumstances relating
solely to the Company, the Subsidiaries, W or any of its Affiliates; and (g)
other actions, consents, approvals, filings and notifications, the failure of
which to make or obtain would not prevent or materially delay Parent from
performing its obligations under this Agreement, or that are otherwise
immaterial to the Parent and the Parent Subsidiaries, taken as a whole, and the
consummation of the Transactions.
41
Section 5.04. Non-contravention. Except as set forth in Section 5.04
of the Parent Disclosure Schedule, the execution, delivery and performance by
each of Parent and Merger Co. of this Agreement and the other Transaction
Agreements to which it is a party and the consummation by each of Parent and
Merger Co. of the Transactions do not and will not (a) contravene or conflict
with the certificate of incorporation or bylaws of Parent or the equivalent
organizational documents of the Parent Subsidiaries (including Merger Co.), (b)
assuming compliance with the matters referred to in Section 5.03, contravene or
conflict with or constitute a violation of any provision of any law, rule,
regulation, judgment, writ, injunction, order or decree of any court or
governmental authority binding upon or applicable to Parent or any Parent
Subsidiary or any of their respective properties or assets, (c) constitute a
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of Parent or any Parent Subsidiary or to
a loss of any benefit to which Parent or any Parent Subsidiary is entitled under
any provision of any agreement, contract or other instrument binding upon Parent
or any Parent Subsidiary or any of their respective properties or assets or any
license, franchise, permit or other similar authorization held by Parent or any
Parent Subsidiary, or (d) result in the creation or imposition of any Lien on
any property or asset of Parent, Merger Co. or any Parent Subsidiary, except in
the case of clauses 5.04(b), 5.04(c) and 5.04(d) for any such violation, failure
to obtain any such consent or other action, default, right, loss or Lien that,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Parent Material Adverse Effect.
Section 5.05. Capitalization. The authorized capital stock of Parent
consists of 250,000,000 Parent Common Shares and 5,000,000 shares of preferred
stock, par value $0.01 per share (the "Parent Preferred Shares"). As of the date
hereof, there are outstanding 44,848,300 Parent Common Shares and 316,498.2372
shares of Parent Series A Preferred Stock. As of the date hereof, there are
outstanding options or rights to purchase an aggregate of 2,940,328 Parent
Common Shares (of which options or rights to purchase an aggregate of 640,429
Parent Common Shares were exercisable). All outstanding shares of capital stock
of Parent have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. Except as set forth in Section 5.05 of the Parent Disclosure Schedule or
this Section 5.05, and except as disclosed in Parent's Annual Report on Form
10-K for the year ended December 31, 2002 (the "Parent 10-K") or the Parent SEC
Reports filed after the date of the Parent 10-K but prior to the date hereof
(the Parent 10-K and such Parent SEC Reports, the "Parent Current SEC Reports"),
as of the date hereof there are outstanding (a) no shares of capital stock or
other voting securities of the Parent, (b) no securities of Parent convertible
into or exchangeable for shares of capital stock or voting securities of Parent,
(c) no options, warrants, rights of first refusal or other rights to acquire
from Parent or any Parent Subsidiary, and no obligation of Parent or any Parent
Subsidiary to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Parent and (d) no equity equivalents, interests in the ownership or earnings of
Parent or any similar rights (the items in clauses 5.05(a), 5.05(b), 5.05(c) and
5.05(d) being referred to collectively as the "Parent Securities"). Except as
set forth in Section 5.05 of the Parent Disclosure Schedule or as disclosed in
the Parent Current SEC Reports, as of the date hereof, there are no outstanding
obligations of Parent or any Parent Subsidiary to repurchase, redeem or
otherwise acquire any Parent Securities and there are no preemptive or similar
rights with respect to any Parent Securities, and there are no bonds,
debentures, notes or other Indebtedness of Parent or any Parent Subsidiary
having, or convertible into other securities having, the right to
42
vote on any matters on which stockholders may vote. The Parent Transaction
Securities have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, and in the case of the Parent
Series B Preferred Stock, the Series B Certificate of Designations, and, in the
case of the Warrants, the Warrant Agreement, will have been validly issued and
will be fully paid and nonassessable free and clear of all Liens other than as
set forth in the Transaction Agreements, and the issuance thereof will not be
subject to any preemptive or other similar right.
Section 5.06. Parent Subsidiaries. (a) Each Parent Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has all corporate power and authority
to own, lease and operate its properties and assets and to carry on its business
as now conducted, and is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where failure to be so qualified,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Parent Material Adverse Effect. For purposes of this
Agreement, "Parent Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are directly or indirectly owned by Parent and/or one or more Parent
Subsidiaries. Except as set forth in Section 5.06(a) of the Parent Disclosure
Schedule, all of Parent's "significant" subsidiaries, as defined in Regulation
S-X, and their respective jurisdictions of incorporation are identified in the
Parent Current SEC Reports.
(b) Except as set forth in Section 5.06(b) of the Parent Disclosure
Schedule or as disclosed in the Parent Current SEC Reports, all of the
outstanding capital stock of, or other ownership interests in, each Parent
Subsidiary is owned by Parent, directly or indirectly, free and clear of any
Lien and free of any other limitation or restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests). All outstanding shares of capital stock of the Parent
Subsidiaries have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. As of the date hereof, there are outstanding (i) no securities of Parent
or any Parent Subsidiary convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any Parent
Subsidiary, and (ii) no options, warrants, rights of first refusal or other
rights to acquire from Parent or any Parent Subsidiary, and no obligation of
Parent or any Parent Subsidiary to issue, any capital stock, voting securities
or other ownership interests in, or any securities convertible into or
exchangeable for any capital stock, voting securities or ownership interests in,
any Parent Subsidiary (the items in clauses 5.06(b)(i) and 5.06(b)(ii) being
referred to collectively as the "Parent Subsidiary Securities"), and there are
no outstanding obligations of Parent or any Parent Subsidiary to repurchase,
redeem or otherwise acquire any outstanding Parent Subsidiary Securities and
there are no preemptive or similar rights with respect to any Parent Subsidiary
Securities. Except as set forth in Section 5.06(b) of the Parent Disclosure
Schedule, as of the date hereof, neither Parent nor any Parent Subsidiary,
directly or indirectly, owns any equity or similar interest in, or any interest
convertible into or exchangeable for, any corporation, partnership, limited
liability company, joint venture or other business association or entity (other
than the Parent Subsidiaries).
43
Section 5.07. SEC Filings. (a) Parent has filed with the Securities
and Exchange Commission ("SEC") all reports, schedules, forms, statements and
other documents (including all exhibits thereto) required to be filed by Parent
with the SEC under the Securities Act and the Exchange Act since January 1, 2002
(collectively, the "Parent SEC Reports").
(b) All Parent SEC Reports were prepared in all material respects in
accordance with, and complied as to form in all material respects with, the
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and did not, as of their respective filing dates, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
Section 5.08. Financial Statements. The audited consolidated
financial statements of Parent included in the Parent 10-K fairly present, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of Parent and its
consolidated subsidiaries as of the dates thereof and their consolidated results
of operations and changes in financial position for the periods then ended. For
purposes of this Agreement, "Parent Balance Sheet" means the consolidated
balance sheet of Parent as of December 31, 2002 set forth in the Parent 10-K and
"Parent Balance Sheet Date" means December 31, 2002.
Section 5.09. Absence of Certain Changes. Except as set forth in
Section 5.09 of the Parent Disclosure Schedule or in the Parent Current SEC
Reports, and except as otherwise contemplated by the Transaction Agreements,
since the Parent Balance Sheet Date Parent and the Parent Subsidiaries have
conducted their business in the ordinary course consistent with past practice
and there has not been:
(a) any event, occurrence or development of a state of circumstances
or facts which, individually or in the aggregate, has had or would reasonably be
expected to have a Parent Material Adverse Effect;
(b) as of the date hereof, any revaluation by Parent of any of its
assets that would be included in the calculation of its working capital as of
any date, including but not limited to, writing down the value of inventory or
equipment or writing off notes or accounts receivable, in each case, other than
in the ordinary course of business consistent with past practice;
(c) as of the date hereof, except for dividends paid in capital stock
of Parent in respect of the preferred stock of Parent outstanding on the date
hereof in accordance with its present terms, any declaration, setting aside or
payment of any dividend or other distribution with respect to any shares of
capital stock of Parent (whether in cash, stock or property), any split,
combination or reclassification of any of its capital stock, or any repurchase,
redemption or other acquisition by Parent or any Parent Subsidiary of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, Parent or any Parent Subsidiary;
(d) any amendment of any term of any outstanding equity security of
Parent or any Parent Subsidiary;
44
(e) as of the date hereof, any incurrence, assumption or guarantee by
Parent or any Parent Subsidiary of any indebtedness for borrowed money in excess
of $1,000,000 in the aggregate;
(f) as of the date hereof, any creation or assumption by Parent or any
Parent Subsidiary of any Lien on any material asset other than in the ordinary
course of business consistent with past practice;
(g) as of the date hereof, any making of any loan, advance or capital
contributions to or investment (other than investments in cash or cash
equivalents in the ordinary course of business) in any Person other than (i)
loans, advances or capital contributions to or investments in wholly-owned
Parent Subsidiaries made in the ordinary course of business consistent with past
practice and (ii) routine travel, salary and expense advances to Parent
Employees in the ordinary course of business;
(h) any material damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of Parent or any
Parent Subsidiary;
(i) as of the date hereof, any transaction or commitment made, or any
contract or agreement entered into, by Parent or any Parent Subsidiary relating
to its assets or business (including the acquisition or disposition of any
assets) in excess of $150,000, or any relinquishment by Parent or any Parent
Subsidiary of any material contract or other right other than transactions and
commitments in the ordinary course of business consistent with past practice and
those contemplated by this Agreement;
(j) as of the date hereof, any change in any method of accounting or
accounting practice by Parent or any Parent Subsidiary, except for any such
change required by reason of a concurrent change in GAAP as concurred with by
Parent's independent auditors, or any Tax election;
(k) any (i) increase in the compensation or fringe benefits of any
present or former director or chief executive officer, chief operating officer,
chief financial officer or any other senior vice-president (each, a "Designated
Officer") of Parent or any Parent Subsidiary (except for (x) increases in salary
or wages in the ordinary course of business consistent with past practice and
(y) stay bonuses or similar retention payments in an amount not to exceed
$10,000 with respect to any individual payment and $100,000 in the aggregate
with respect to all such payments), (ii) grant of any severance or termination
pay to any present or former director or Designated Officer of Parent or any
Parent Subsidiary, other than any such severance or termination pay that is
consistent with past practice (iii) loan or advance of money or other property
by Parent or any Parent Subsidiary to any of their present or former directors
or Designated Officers (other than routine travel, salary and expense advances
to Parent Employees in the ordinary course of business), (iv) establishment,
adoption, entrance into, amendment or termination of any broad-based option plan
(other than as may be required by the terms of an existing Parent Plan, or as
may be required by applicable law or in order to qualify under Sections 401 and
501 of the Code) or individual employment agreement with any director or senior
vice-president of Parent or the Parent Subsidiaries or (v) grants of any equity
or equity-based awards to any director or Designated Officer of Parent or any
Parent Subsidiary, other than
45
any such grants that are consistent with past practice, other than in the case
of clauses (i) through (v) pursuant to commitments of Parent existing on the
date hereof required by contracts set forth in Section 5.09(k) or 5.13 of the
Parent Disclosure Schedule;
(l) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of Parent or any Parent Subsidiary, which employees were
not subject to a collective bargaining agreement at the Parent Balance Sheet
Date, or any lockouts, strikes, slowdowns, work stoppages or threats thereof by
or with respect to such employees; or
(m) as of the date hereof, any cancellation of any licenses,
sublicenses, franchises, permits or similar agreements to which Parent or any
Parent Subsidiary is a party, or any written notification to Parent or any
Parent Subsidiary that any party to any such arrangements intends to cancel or
not renew such arrangements beyond its expiration date as in effect on the date
hereof.
Section 5.10. No Undisclosed Liabilities. Except as set forth in
Section 5.10 of the Parent Disclosure Schedule or as disclosed in the Parent
Current SEC Reports, there are no liabilities of Parent or any Parent Subsidiary
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set
of circumstances which would reasonably be expected to result in such a
liability, other than:
(a) liabilities disclosed or provided for in the Parent Balance Sheet
or the notes thereto;
(b) liabilities incurred in the ordinary course of business and
consistent with past practice since the Parent Balance Sheet Date;
(c) liabilities under this Agreement or the other Transaction
Agreements;
(d) other undisclosed liabilities which, individually or in the
aggregate, are not material to the Parent and the Parent Subsidiaries, taken as
a whole;
(e) liabilities not required under GAAP to be shown on the Parent
Balance Sheet (other than by reason of the contingent nature thereof or the
difficulty of determining the amount thereof), unless such liabilities obligate,
or could reasonably be expected to obligate, Parent or any Parent Subsidiary for
the payment of money; and
(f) ordinary course contractual liabilities under contracts entered
into prior to the Parent Balance Sheet Date.
Section 5.11. Litigation. Except as set forth in Section 5.11 of the
Parent Disclosure Schedule or as disclosed in the Parent Current SEC Reports,
there is no action, suit, hearing, arbitration, proceeding or, to the knowledge
of Parent, investigation pending against, affecting or, to the knowledge of
Parent, threatened against, Parent or any Parent Subsidiary or any of their
respective properties or assets before any court, arbitrator or any governmental
body, agency or official which, individually or in the aggregate, if determined
or resolved adversely,
46
could reasonably be expected to have a Parent Material Adverse Effect. Neither
Parent nor any of the Parent Subsidiaries nor any of their respective properties
or assets is or are subject to any Order, except for such Orders as,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Parent Material Adverse Effect.
Section 5.12. Taxes. Except as set forth in the Parent Balance Sheet
(including the notes thereto) or Section 5.12 of the Parent Disclosure Schedule:
(i) all Returns that are material and required to be filed with any
Taxing authority with respect to a Pre-Closing Tax Period by or on behalf
of Parent or any Parent Subsidiary have been or will be filed when due
(including any applicable extension periods) in accordance with all
applicable laws, and as of the time of filing, the Returns were true and
complete in all material respects;
(ii) Parent and the Parent Subsidiaries have timely paid, or
withheld and remitted to the appropriate Taxing authority, all material
Taxes due and payable whether or not shown on any Returns;
(iii) the charges, accruals and reserves for Taxes with respect to
Parent and the Parent Subsidiaries for any Pre-Closing Tax Period
(including any Pre-Closing Tax Period for which no Return has yet been
filed) reflected on the Parent Balance Sheet (excluding any provision for
deferred income Taxes) are adequate in accordance with GAAP to cover such
Taxes as of the Parent Balance Sheet Date;
(iv) there is no material claim (including under any indemnification
or Tax sharing agreement), audit, action, suit, proceeding, or, to the
knowledge of Parent, investigation now pending or threatened in writing
against or in respect of any material Tax or Tax Asset of Parent or any
Parent Subsidiary;
(v) there are no Liens for Taxes upon the assets of any Parent
Subsidiary except for Liens for current Taxes not yet due or that are being
contested in good faith by appropriate proceedings;
(vi) since December 31, 2002, neither Parent nor any Parent
Subsidiary has distributed to its stockholders or security holders stock or
securities of a controlled corporation in a transaction that was purported
or represented on any Return to be governed by Section 355(a) of the Code;
(vii) neither Parent nor any Parent Subsidiary is currently under any
obligation to pay any amounts of the type described in clause (ii) or (iii)
of the definition of "Tax," regardless of whether such Tax is imposed on
Parent or any Parent Subsidiary; and
(viii) neither Parent nor any Parent Subsidiary has filed a consent
under Section 341(f) of the Code concerning collapsible corporations.
Neither Parent nor any Parent Subsidiary is a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code.
Neither Parent nor any Parent Subsidiary is a party to or bound by any Tax
allocation or sharing agreement. Neither Parent nor any Parent Subsidiary
(A) has been a member of an affiliated group (within the meaning of
47
Section 1504(a) of the Code or any similar provision of state, local or
foreign law) filing a consolidated federal income Tax Return (other than a
group the common parent of which was Parent) or (B) has any liability for
the Taxes of any person (other than Parent or any Parent Subsidiary) under
Section 1.1502-6 of the Treasury Regulations (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract,
or otherwise. Neither Parent nor any Parent Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency. As of the date hereof,
neither the Parent nor any Parent Subsidiary currently is the beneficiary
of any extension of time within which to file any Tax Return. There are no
current or pending claims by an authority in a jurisdiction in which Parent
or any Parent Subsidiary does not file Tax Returns that Parent or any
Parent Subsidiary is or may be subject to Taxation by that jurisdiction.
Section 5.13. ERISA. Section 5.13 of the Parent Disclosure Schedule
contains, as of the date hereof, a true and complete list of each Parent Plan
(other than Parent Plans that are unwritten and immaterial, provided that
employment, severance or consulting agreements with directors, officers or key
employees shall be deemed to be material for purposes of this Section 5.13(a)).
"Parent Plan" shall mean each "employee benefit plan" (within the meaning of
Section 3(3) of ERISA, including, without limitation, multiemployer plans within
the meaning of Section 3(37) of ERISA), and all stock purchase, stock option,
severance, employment, change-in-control, fringe benefit, collective bargaining,
bonus, incentive, deferred compensation, employee loan and all other employee
benefit plans, agreements, programs, policies or other arrangements, whether or
not subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the Transactions or otherwise), whether
formal or informal, oral or written under which (i) any current or former
employee, director or consultant of Parent or the Parent Subsidiaries (the
"Parent Employees") has any present or future right to benefits and which are
contributed to, sponsored by or maintained by Parent or any Parent Subsidiaries
or (ii) Parent or any Parent Subsidiaries has had or has any present or future
liability.
(b) With respect to each written Parent Plan, Parent has provided, or
made available, to the Company or the Company Representatives and W a current,
accurate and complete copy thereof and, to the extent applicable: (i) any
related trust agreement or other funding instrument; (ii) the most recent
determination letter; (iii) any summary plan description and other material
written communications by Parent or any of the Parent Subsidiaries to the Parent
Employees concerning the extent of the benefits provided under a Parent Plan;
(iv) a summary of any proposed amendments or changes anticipated to be made to
the Parent Plans at any time within the twelve months immediately following the
date hereof; and (v) for the two most recent years (A) the Form 5500 and
attached schedules, (B) audited financial statements and (C) actuarial valuation
reports, if any.
(c) (i) No Parent Plan is subject to Title IV of ERISA and neither
Parent, any Parent Subsidiary nor any member of their Controlled Group has
incurred any liability pursuant to Title IV of ERISA that remains unsatisfied;
(ii) each Parent Plan has been established and administered substantially in
accordance with its terms and in compliance in all material respects with the
applicable provisions of ERISA, the Code and other applicable laws, rules and
regulations; (iii) no event has occurred and no condition exists with respect to
any Parent Plan
48
subject to the requirements of Section 401(a) of the Code that would subject the
Parent or the Parent Subsidiaries, either directly or by reason of their
affiliation with any member of their Controlled Group, to any Tax, fine, lien,
penalty or other liability imposed by ERISA, the Code or other applicable laws,
rules and regulations; and (iv) for each Parent Plan with respect to which a
Form 5500 has been filed, no material adverse change has occurred with respect
to the matters covered by the most recent Form since the date thereof.
(d) With respect to any Parent Plan, (i) no actions, suits or claims
(other than routine claims for benefits in the ordinary course) are pending or,
to the knowledge of Parent, threatened and (ii) no facts or circumstances exist
that would be reasonably likely to give rise to any such actions, suits or
claims in either case where such actions, suits or claims would reasonably be
expected to result in a material unfunded liability to Parent or its Affiliates.
(e) Except as set forth in Section 5.13(e) of the Parent Disclosure
Schedule, no Parent Plan exists that, as a result of the execution of this
Agreement or the Transactions (whether alone or in connection with any
subsequent event(s)), would be reasonably likely to result in (i) the payment to
any Parent Employee of any money or other property, (ii) the provision of any
benefits or other rights of any Parent Employee or (iii) the increase,
acceleration or provision of any payments, benefits or other rights to any
Parent Employee, whether or not any such payment, right or benefit would
constitute a "parachute payment" within the meaning of Section 280G of the Code.
(f) Except as set forth in Section 5.13(f) of the Parent Disclosure
Schedule, neither Parent nor any Parent Subsidiary has any liability in respect
of post-retirement health, medical or life insurance benefits for retired,
former or current employees of Parent or any Parent Subsidiary except for
coverage required under Section 4980B of the Code.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by Parent or any of its Affiliates
relating to, or change in employee participation or coverage under, a Parent
Plan which would increase the expense of maintaining such Parent Plan above the
level of the expense incurred in respect thereof for the fiscal year ended
December 31, 2002, except for any such increase which, individually or in the
aggregate, has not had and would not reasonably be expected to have a Parent
Material Adverse Effect.
(h) As of the date hereof, neither Parent nor any Parent Subsidiary is
a party to or subject to, or is currently negotiating in connection with
entering into, any collective bargaining agreement or other contract or
understanding with a labor union or labor organization.
Section 5.14. Compliance with Laws. Except to the extent set forth
in Section 5.14 of the Parent Disclosure Schedule or as disclosed in the Parent
Current SEC Reports, neither Parent nor any Parent Subsidiary is in violation
of, or has since January 1, 1999 violated, and to the knowledge of Parent none
is under investigation with respect to or has been threatened to be charged with
or given notice of any violation of, any applicable law, rule, regulation,
judgment, injunction, order or decree, except for violations that, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Parent Material Adverse Effect.
49
Section 5.15. Licenses and Permits. Except as set forth in Section
5.15 of the Parent Disclosure Schedule or as disclosed in the Parent Current SEC
Reports, and except as, individually or in the aggregate, has not had and would
not reasonably be expected to have a Parent Material Adverse Effect, (i) Parent
or the Parent Subsidiaries own, hold or possess adequate right to use all
licenses, certificates, consents, orders, franchises, permits, certificates,
approvals or other similar authorizations (the "Parent Permits") required in
connection with the operation of the business of Parent and the Parent
Subsidiaries in the same manner as currently operated, (ii) Parent and the
Parent Subsidiaries are in compliance with the Parent Permits, (iii) the Parent
Permits are valid and in full force and effect, (iv) neither Parent nor any
Parent Subsidiary is in default under, and no condition exists that with notice
or lapse of time or both would constitute a default under, the Parent Permits
and (v) none of the Parent Permits will be terminated or impaired or become
terminable, in whole or in part, as a result of the Transactions.
Section 5.16. Contracts. Section 5.16 of the Parent Disclosure
Schedule lists, as of the date hereof, all Contracts to which Parent or any
Parent Subsidiary is a party which fall within any of the following categories:
(a) Contracts that (i) involved aggregate expenditures or receipts in excess of
$1,000,000 in the aggregate in fiscal year 2002 or (ii) are expected to involve
aggregate expenditures or receipts in excess of $1,000,000 in the aggregate in
fiscal year 2003; (b) joint venture, partnership and like Contracts; (c)
Contracts containing covenants purporting to limit (or that would limit after
the Effective Time) the freedom of Parent or any Parent Subsidiary or Affiliate
to compete in any line of business or with any Person in any geographic area;
(d) Contracts which contain minimum purchase conditions of greater than
$1,000,000 in the aggregate in any twelve month period, all or part of which
minimum purchase condition remains unsatisfied at May 31, 2003; (e) Contracts
relating to any outstanding non-cancelable commitment for capital expenditures
of Parent or any Parent Subsidiary in excess of $1,000,000 in the aggregate in
any twelve month period; (f) indentures, mortgages, promissory notes, loan
agreements, guarantees, letters of credit or other agreements or instruments of
Parent or any Parent Subsidiary with commitments for the borrowing or the
lending of amounts, by Parent or any Parent Subsidiary; (g) any Contract, note
or bond under which Parent or any Parent Subsidiary has, directly or indirectly,
made any advance, loan, extension of credit or capital contribution to, or other
investment in, any Person (other than Parent or one of the wholly-owned Parent
Subsidiaries); (h) any Contract creating or granting any Lien upon any of the
properties or assets of Parent or any Parent Subsidiary; (i) any currently
effective Contract, or any expired or terminated Contract which has surviving
provisions, providing for indemnification of any Person with respect to
liabilities relating to any current or former business of Parent, any Parent
Subsidiary or any predecessor Person, other than (1) indemnification agreements
between Parent or any Parent Subsidiary and any of their respective officers and
directors that are otherwise set forth in Section 5.13 of the Parent Disclosure
Schedule, (2) any confidentiality or non-disclosure agreements or (3) any such
indemnification agreements entered into in the ordinary course of business; (j)
any lease, sublease or similar Contract with any Person (other than Parent or a
Parent Subsidiary) under which Parent or a Parent Subsidiary is a lessor or
sublessor of, or makes available for use to any person (other than Parent or a
Parent Subsidiary), (A) any Leased Real Property or (B) any portion of any
premises otherwise occupied by Parent or a Parent Subsidiary; (k) any Contract
relating to the acquisition or disposition of any business (whether by merger,
sale of stock, sale of assets or otherwise) which is material to Parent and the
Parent Subsidiaries, taken as a whole; (l) any Contract (other than any Permit)
with any governmental authority or with any labor union; or (m) any other
Contract not in the ordinary course of
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business consistent with past practice that is material to Parent and the Parent
Subsidiaries, taken as whole. Complete and correct copies of all Contracts
referred to in this Section 5.16 of the Parent Disclosure Schedule have been
made available to the Company or the Company Representatives and W by Parent.
All Contracts referred to in this Section 5.16 of the Parent Disclosure Schedule
are valid, binding and in full force and effect and are enforceable by Parent in
accordance with their terms. Except as, individually or in the aggregate, has
not had and would not reasonably be expected to have a Parent Material Adverse
Effect, none of Parent, any Parent Subsidiary nor, to the knowledge of Parent,
any other party thereto, is or is alleged to be in violation of or in default in
respect of, nor has there occurred any event or condition which (with or without
notice or lapse of time or both) would constitute a violation of or default
under, any such Contract. Except as set forth in Section 5.16 of the Parent
Disclosure Schedule, none of the counterparties to any such Contracts has given
notice of termination of, or is seeking to amend, any such Contract.
Section 5.17. Environmental Matters. Except for such matters as,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Parent Material Adverse Effect, and except as disclosed in
the Parent Current SEC Reports:
(i) except as set forth in Section 5.17(a)(i) of the Parent
Disclosure Schedule, no notice, notification, demand, lien, request for
information, citation, summons, complaint or order has been received by
Parent or any Parent Subsidiary, and no penalty has been assessed and no
action, claim, suit, or proceeding or review is pending or, to the
knowledge of Parent, is threatened by any governmental entity or other
Person against or directed at (as the case may be) the Parent or any Parent
Subsidiary, and relating to or arising under any Environmental Law;
(ii) except as set forth in Section 5.17(a)(ii) of the Parent
Disclosure Schedule, to the knowledge of Parent, no investigation is
threatened or pending by any governmental entity or any Person with respect
to Parent or the Parent Subsidiaries which relates to or arises under any
Environmental Law;
(iii) except as set forth in Section 5.17(a)(iii) of the Parent
Disclosure Schedule, there are no liabilities of Parent or any Parent
Subsidiary under any Environmental Law of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and
there is no existing condition, situation or set of circumstances which
would be reasonably expected to result in any such liability;
(iv) Parent and the Parent Subsidiaries are and have been in
compliance with all applicable Environmental Laws and have obtained and are
in compliance with all applicable Environmental Permits and have timely
filed all applications and renewals for all applicable Environmental
Permits; such Environmental Permits are valid and in full force and effect
and will not be terminated or impaired or become terminable, in whole or in
part, as a result of the transactions contemplated hereby.
(v) neither Parent nor any Parent Subsidiary has arranged, by
contract, agreement or otherwise, for the treatment, storage or disposal of
Hazardous Substances; and
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(vi) no Hazardous Substance has been Released by Parent or any Parent
Subsidiary at any property now or previously owned, operated or leased by
Parent or any Parent Subsidiary.
(b) Prior to the date hereof, Parent has made available to the
Company or the Company Representatives or W copies of all environmental
assessments, reports and audits (and other documents that the Company or the
Company Representatives or W has requested for review) in its possession or
under its control and that relate to Parent's or any Parent Subsidiary's
compliance with Environmental Laws, or the environmental condition of any real
property that Parent or any Parent Subsidiary has owned, operated, or leased. To
the knowledge of Parent, any such documents are accurate and complete.
(c) Neither Parent nor any Parent Subsidiary owns, leases or
operates any real property, in New Jersey or Connecticut.
Section 5.18. Intellectual Property. Parent has identified in Section
5.18 of the Parent Disclosure Schedule, as of the date hereof, all material
common law trademarks and service marks, all registered trademarks and service
marks and registered trade names as well as all trademarks, service marks or
trade names for which applications for registration have been filed, all
registered copyrights, all issued patents and patent applications that are owned
by Parent and the Parent Subsidiaries, all domain names that are owned by Parent
and the Parent Subsidiaries, all material software used by Parent and the Parent
Subsidiaries, and all software licenses granted in connection with such material
software to Parent and the Parent Subsidiaries (other than, with respect to such
software and such software licenses, off-the-shelf commercial or shrinkwrap
software and excluding all software or other material that is distributed as
"free software," "open source software" or under a similar licensing or
distribution model (such as the GNU General Public License (GPL), GNU Lesser
General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the
Artistic License, the Netscape Public License, the Sun Community Source License
(SCSL), the Sun Industry Standards License (SISL) and the Apache License)).
Parent and the Parent Subsidiaries have not distributed to any third party any
internally developed software that includes any such "open source software."
Except as set forth in Section 5.18 of the Parent Disclosure Schedule or as
disclosed in the Parent Current SEC Reports, (a) Parent and the Parent
Subsidiaries own or possess adequate licenses or other rights to use all
Intellectual Property Rights necessary to conduct the business now operated by
them, except where the failure to own or possess such licenses or rights,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Parent Material Adverse Effect, (b) the Intellectual Property
Rights owned by Parent and the Parent Subsidiaries are free from Material Liens,
and, (c) to the knowledge of Parent, the Intellectual Property Rights of Parent
and the Parent Subsidiaries do not conflict with or infringe upon any
Intellectual Property Rights of others and are not being infringed upon by any
third party, in each case to the extent that, if sustained, such conflict or
infringement, individually or in the aggregate, has had or would reasonably be
expected to have a Parent Material Adverse Effect. All material software used by
Parent and the Parent Subsidiaries has been (i) licensed to Parent and the
Parent Subsidiaries, as applicable, (ii) developed by employees of Parent or the
Parent Subsidiaries within the scope of their employment, or (iii) developed by
a third party and assigned to Parent or the Parent Subsidiaries so that, in the
case of clause (iii), Parent or the Parent Subsidiaries are now the exclusive
owner of such software. To the knowledge of Parent, Parent and the Parent
52
Subsidiaries have not disclosed, as of the date hereof, to any third party
material confidential information of Parent and the Parent Subsidiaries except
pursuant to a Contract that governs the use or disclosure of confidential
information of Parent and the Parent Subsidiaries. Parent and the Parent
Subsidiaries comply in all material respects with the privacy policy published
on Parent's website. To the knowledge of Parent, no claims or controversies have
arisen regarding its privacy policy or the implementation thereof.
Section 5.19. Real Property. (a) Section 5.19(a) of the Parent
Disclosure Schedule contains, as of the date hereof, a brief description of (i)
each parcel of real property owned by Parent or a Parent Subsidiary (the "Parent
Owned Real Property") and (ii) each option held by Parent or a Parent Subsidiary
to acquire any real property. Section 5.19(a) of the Parent Disclosure Schedule
sets forth, as of the date hereof, a list of each lease or similar agreement
under which Parent or a Parent Subsidiary is lessee of, or holds or operates,
any real property owned by any third Person, except those which are terminable
by Parent or such Parent Subsidiary without penalty on 30 days' or less notice
or which provide for annual lease payments of less than $112,500 (the "Parent
Leased Real Property").
(b) Except for such matters as, individually or in the aggregate,
have not had and would not reasonably be expected to have a Parent Material
Adverse Effect or as set forth in Section 5.19(b) of the Parent Disclosure
Schedule:
(i) the Parent Owned Real Property is in conformance with all deed
restrictions and other covenants and conditions recorded or running with
the land. The current use and operation of the Parent Owned Real Property
is in conformity with the certificate(s) of occupancy issued for such
Parent Owned Real Property. All the buildings, structures, equipment and
other tangible assets of Parent and the Parent Subsidiaries located on the
Parent Owned Real Property are in good condition and repair and are
sufficient to support the conduct of their business by Parent and the
Parent Subsidiaries after the Effective Time. No portion of the Parent
Owned Real Property is situated within an area designated (or to be
designated) as a "flood plain" or "flood hazard zone" by any governmental
body nor is it subject to a predictable flow of floodwaters or within the
boundaries of any proposed floodway program. All streets adjacent to or
abutting the Parent Owned Real Property have been dedicated as "public
streets" and have been accepted by the governmental body possessing
jurisdictions thereover;
(ii) neither the whole nor any part of any of the Parent Owned Real
Property or any Parent Leased Real Property is subject to any pending suit
for condemnation or other taking by any governmental body, and, to the
knowledge of Parent, no such condemnation or other taking is threatened;
and
(iii) Parent and the Parent Subsidiaries have all conduits, leases,
fee interests, licenses, rights of way, authorizations, permits (including
permits for highway, railroad and waterway crossings and any necessary
permits or authorizations such as environmental permits) and/or other
agreements or rights necessary for (i) the granting of the IRUs previously
granted to their customers, (ii) the installation, use and access to the
fibers and any related property that are the subject of the IRUs granted to
their customers and (iii) the ownership, possession and use of their
network.
53
Section 5.20. Title to Property. Except as set forth in Section 5.20
of the Parent Disclosure Schedule, Parent and the Parent Subsidiaries have good,
valid and marketable title to each item of Parent Owned Real Property and
material owned personal property and a valid leasehold interest in each item of
Parent Leased Real Property and material leased personal property, in each case,
free and clear of all Material Liens.
Section 5.21. Finders' Fees. Except for Xxxxxx Xxxxxxx & Co.
Incorporated and BNY Capital Markets, Inc., there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Parent or any Parent Subsidiary who is or might be entitled
to any fee or commission from Parent or any of its Affiliates upon consummation
of the Transactions.
Section 5.22. Opinion of Parent Financial Advisor. Parent has
received the opinion of each of Xxxxxx Xxxxxxx & Co. Incorporated and BNY
Capital Markets, Inc., dated the date of this Agreement, copies of which
opinions have been made available to the Company.
Section 5.23. Merger Co. Merger Co. is a direct, wholly owned
subsidiary of Parent. Merger Co. was formed solely for the purpose of engaging
in the transactions contemplated by this Agreement.
Section 5.24. PUHCA. Parent, together with its affiliates (as defined
in section 2(a)(11)(B) of PUHCA (15 U.S.C. Section 79b(a)(11)(B))), is engaged
exclusively in the business of providing telecommunications services,
information services, other services or products subject to the jurisdiction of
the FCC or products or services that are related or incidental to the provision
of any of the foregoing products or services, within the meaning of Section
34(a)(1) of PUHCA (15 U.S.C. Section 79z-5c(a)(1)) and the rules and regulations
thereunder.
Section 5.25. Investment Company Act. Neither Parent nor any Parent
Subsidiary is an "investment company" as defined in the Investment Company Act
of 1940, as amended.
Section 5.26. Offering of Parent Series B Preferred Stock. Neither
Parent nor any Person acting on its behalf has taken or will take any action
(including, without limitation, any offering of any securities of Parent under
circumstances which would require, under the Securities Act, the integration of
such offering with the offering of the Parent Transaction Securities) which
might subject the offering, issuance or sale of the Parent Transaction
Securities to the registration requirements of Section 5 of the Securities Act.
Section 5.27. Agreements with Affiliates. Section 5.27 of the Parent
Disclosure Schedule sets forth a true and correct list, as of the date hereof,
of each contract, commitment, agreement or understanding between Parent or any
Parent Subsidiary, on the one hand, and any Affiliate of Parent or any Parent
Subsidiary (other than any such Affiliate that is a Parent Subsidiary, a WCAS
Securityholder or any Affiliate of a WCAS Securityholder), on the other hand.
All such agreements, amendments, waivers and relinquishments were entered into
by Parent or a Parent Subsidiary, as applicable, on arms' length terms and in
the ordinary course of business.
54
Section 5.28. Tax Treatment. Neither Parent nor any Parent Subsidiary
has taken or agreed to take any action, or is aware of any fact or circumstance,
that would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code.
Section 5.29. Call Termination. (a) Parent and the Parent
Subsidiaries have been and are currently in compliance with all representations,
warranties and covenants set forth in any third party agreements with respect to
the call termination obligations and activities of Parent and the Parent
Subsidiaries, except for any noncompliance that, individually or in the
aggregate, has not had and would not reasonably be expected to have a Parent
Material Adverse Effect.
(b) Except where the failure to report or to calculate the PIU and
PLU, individually or in the aggregate, has not had and would not reasonably be
expected to have a Parent Material Adverse Effect, with respect to any third
party used by Parent or the Parent Subsidiaries to terminate telecommunications
traffic, to the knowledge of Parent, Parent and the Parent Subsidiaries have
been and are properly reporting the PIU and PLU with respect to the calls
terminated through such third party, and that the PIU and PLU have been and are
calculated properly in accordance with applicable FCC and state regulatory
policies and regulations, and in accordance with the tariffs, where applicable,
and the applicable representations, warranties and covenants set forth in the
agreements with such third party.
(c) With respect to any third party used by Parent or the Parent
Subsidiaries to terminate telecommunications traffic, to the knowledge of
Parent, Parent and the Parent Subsidiaries have been and are accurately
providing applicable call data for each call transferred to such third party
where such call data is known, or, where such call data is not known, such calls
are being identified for purposes of calculating the PIU and PLU in accordance
with applicable FCC and state regulatory policy and regulations, and in
accordance with the tariffs, where applicable, and the applicable
representations, warranties and covenants set forth in any agreements with such
third party, except where the failure to do so, individually or in the
aggregate, has not had and would not reasonably be expected to have a Parent
Material Adverse Effect.
(d) With respect to any call transferred by a carrier to Parent or
any of the Parent Subsidiaries with or without any call data, Parent and the
Parent Subsidiaries have no knowledge that the actual classification (whether
Interstate, Intrastate IntraLATA, Local or otherwise) of such call is or was
different than Parent or such Parent Subsidiary (or any third party engaged by
Parent or such Parent Subsidiary to terminate such call) has been or is
reporting it to be, and Parent and the Parent Subsidiaries have not entered into
any agreement, understanding or arrangement with any carrier with the knowledge
or suspicion by Parent that a call is to be intentionally misidentified or under
which the call data is to be intentionally removed from the call by the carrier,
or any other carrier interconnecting with the carrier or Parent, except where
such misclassification, misidentification or and/or removal, individually or in
the aggregate, has not had and would not reasonably be expected to have a Parent
Material Adverse Effect.
(e) To the knowledge of Parent, except for requests from customers
(including both users and carriers) of Parent's or any Parent Subsidiary's
services for call detail records to verify Parent's or any Parent Subsidiary's
xxxx or as set forth in Section 5.29 of the Parent Disclosure Schedule, there
have not been and are no outstanding demands or requests for or
55
complaints to a regulator requesting an accounting or an investigation arising
out of, related to or resulting from the PIU and/or PLU classification or from
the origination, transport, delivery, and/or termination of telecommunications
traffic (including the use of enhanced extended links), and neither Parent nor
any Parent Subsidiary has received notice of any regulatory investigation or
accounting or written notice from any customer requesting a regulatory
investigation or accounting, except where such demands, complaints or requests
have not had and would not reasonably be expected to have a Parent Material
Adverse Effect.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF W
Each WCAS Securityholder represents and warrants, severally and not
jointly (except with respect to the representation and warranty in Section 6.08,
which is made jointly and severally), to Parent as of the date hereof and as of
the Effective Time that:
Section 6.01. Existence and Power. Such WCAS Securityholder (other
than any WCAS Securityholder that is a natural person) is a limited partnership
or limited liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all partnership or
limited liability company power and authority to own, lease and operate its
properties and assets and to carry on its business as now conducted. Such WCAS
Securityholder (other than any WCAS Securityholder that is a natural person) is
duly qualified to do business as a foreign partnership or limited liability
company and is in good standing in each jurisdiction where the character of the
property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified, individually or in the aggregate, has not and would not reasonably
be expected to have a material adverse effect on such WCAS Securityholder or
such WCAS Securityholder's ability to perform its obligations under any
Transaction Agreement to which it is a party.
Section 6.02. Authorization. Such WCAS Securityholder (other than any
WCAS Securityholder that is a natural person) has all necessary partnership or
limited liability company power and authority to execute and deliver this
Agreement and the other Transaction Agreements to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
Transactions. The execution, delivery and performance by such WCAS
Securityholder (other than any WCAS Securityholder that is a natural person) of
this Agreement and the other Transaction Agreements to which it is a party, and
the consummation by such WCAS Securityholder (other than any WCAS Securityholder
that is a natural person) of the Transactions are within such WCAS
Securityholder's powers and have been duly and validly authorized by all
necessary partnership or limited liability company action. This Agreement has
been duly and validly executed and delivered by such WCAS Securityholder and the
other Transaction Agreements to which such WCAS Securityholder is a party will
have been duly and validly executed and delivered by such WCAS Securityholder
prior to the Effective Time. Assuming this Agreement constitutes and the other
Transaction Agreements to which such WCAS Securityholder is a party when
executed prior to the Effective Time will constitute legal, valid and binding
agreements of the other parties hereto and thereto, this Agreement constitutes a
legal, valid and binding agreement of such WCAS Securityholder and each of the
other
56
Transaction Agreements to which such WCAS Securityholder is a party when
executed and delivered prior to the Effective Time will constitute a legal,
valid and binding agreement of such WCAS Securityholder, in each case
enforceable against such WCAS Securityholder in accordance with its terms,
except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and for
limitations imposed by general principles of equity.
Section 6.03. Governmental Authorization. The execution, delivery and
performance by such WCAS Securityholder of this Agreement and the other
Transaction Agreements to which it is a party and the consummation of the
Transactions do not and will not require any action by or in respect of, consent
or approval of, or filing with, any governmental body, agency, official or
authority other than (a) the filing of articles of merger in accordance with
North Carolina Law, (b) compliance with any applicable requirements of the HSR
Act, (c) compliance with any applicable requirements of the Securities Act, the
Exchange Act and any applicable state "blue sky" laws, (d) as disclosed in
Section 4.03 of the Company Disclosure Schedule, (e) as may be necessary as a
result of any facts or circumstances relating solely to the Company, Parent or
Merger Co. and (f) other filings, notifications and consents that are immaterial
to the consummation of the Transactions.
Section 6.04. Non-contravention. The execution, delivery and
performance by such WCAS Securityholder of this Agreement and the other
Transaction Agreements to which it is a party and the consummation by such WCAS
Securityholder of the Transactions do not and will not (a) if such WCAS
Securityholder is not a natural person, contravene or conflict with the
organizational documents of such WCAS Securityholder, (b) assuming compliance
with the matters referred to in Section 6.03, contravene or conflict with or
constitute a violation of any provision of any law, rule, regulation, judgment,
writ, injunction, order or decree of any court or governmental authority binding
upon or applicable to such WCAS Securityholder or any of its properties or
assets, or (c) contravene or constitute a default under any provision of any
agreement, contract or other instrument binding upon such WCAS Securityholder or
any of its properties or assets.
Section 6.05. Parent Transaction Securities To Be Held For
Investment. (a) Such WCAS Securityholder is aware that no Parent Transaction
Securities to be received by such WCAS Securityholder in the Transactions are
registered under the Securities Act or under any state securities laws. Such
WCAS Securityholder is acquiring the Parent Transaction Securities to be
received by it in the Transactions for its own account, for investment and not
with a view to, or for sale in connection with, the distribution thereof within
the meaning of the Securities Act.
(b) Such WCAS Securityholder is an "accredited investor," as that
term is defined in Rule 501(a) of Regulation D under the Securities Act and was
not organized for the specific purpose of acquiring the Parent Transaction
Securities. Such WCAS Securityholder has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Parent Transaction Securities and is capable of
bearing the economic risks of such investment. Such WCAS Securityholder
understands that its investment in the Parent Transaction Securities involves a
significant degree of risk.
57
(c) Such WCAS Securityholder and its advisers have been furnished
with all materials relating to the business, finances and operations of Parent
and the Parent Subsidiaries and materials relating to the issuance of the Parent
Transaction Securities which have been requested by such WCAS Securityholder or
its respective advisers. Such WCAS Securityholder and its advisers have been
afforded the opportunity to ask questions of Parent's management concerning
Parent and the Parent Subsidiaries and the Parent Transaction Securities. Such
WCAS Securityholder has been provided with copies of, and has carefully
reviewed, the Parent SEC Reports. Such WCAS Securityholder understands that no
governmental entity has passed upon or made any recommendation or endorsement of
the Parent Transaction Securities.
(d) Each WCAS Securityholder understands that (i) except as provided
in the Registration Rights Agreement, the sale or re-sale of the Parent
Transaction Securities has not been and will not be registered under the
Securities Act or any applicable state securities laws, and the Parent
Transaction Securities may not be sold, distributed or otherwise transferred
unless (a) the Parent Transaction Securities are sold, distributed or
transferred pursuant to an effective registration statement under the Securities
Act and applicable state securities laws, (b) W or such other stockholder shall
have delivered to Parent an opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the Parent Transaction Securities to be sold,
distributed or transferred may be sold, distributed or transferred pursuant to
an exemption from such registration, or (c) the Parent Transaction Securities
are sold pursuant to Rule 144 under the Securities Act; (ii) any sale of the
Parent Transaction Securities made in reliance on Rule 144 may be made only in
accordance with the terms of such Rule and further, if such Rule is not
applicable, any sale of the Parent Transaction Securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the Securities Act) may require
compliance with another exemption under the Securities Act; and (iii) neither
Parent nor any other Person is under any obligation to register the Parent
Transaction Securities under the Securities Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder (in each
case, other than pursuant to the Registration Rights Agreement).
(e) If such WCAS Securityholder is not a natural person, the
principal offices of such WCAS Securityholder and the offices of such WCAS
Securityholder in which it made its decision to acquire the Parent Transaction
Securities are located in the State of New York, and if such WCAS Securityholder
is a natural person, such WCAS Securityholder's principal residence and the
place in which such natural person made the decision to acquire the Parent
Transaction Securities is located in the jurisdiction set forth opposite the
name of such WCAS Securityholder in Annex I hereto.
Section 6.06. Ultimate Parent Entity. Welsh, Carson, Xxxxxxxx & Xxxxx
VIII, L.P. is the only "ultimate parent entity" (as determined in accordance
with the HSR Act and the rules promulgated thereunder) of the Company and will
be the only "ultimate parent entity" of the Company at, and at all times prior
to, the Effective Time.
Section 6.07. Investment Company Act. Such WCAS Securityholder is not
an "investment company" as defined in the Investment Company Act of 1940, as
amended.
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Section 6.08. Sufficient Funds. The WCAS Securityholders collectively
have commitments for sufficient funds to pay in immediately available funds the
purchase price, in the aggregate amount of $45,000,000, of the shares of Parent
Series B Preferred Stock to be purchased by the WCAS Securityholders in (a) the
Parent Series B Sale and (b) any Section 8.21 Transaction.
ARTICLE 7
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 7.01. Conduct of the Company. From the date hereof until the
Closing, the Company and the Subsidiaries shall conduct their business in the
ordinary course consistent with past practice in compliance with all applicable
laws and shall use their reasonable best efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing and
except as expressly contemplated by this Agreement or the other Transaction
Agreements, as may result from the consummation of the Transactions, as set
forth in Section 7.01 of the Company Disclosure Schedule, or as otherwise
consented to in writing by Parent (except if such consent would be inconsistent
with applicable law), such consent not to be unreasonably withheld with respect
to the granting of IRUs in fiber and/or conduit by the Company or the
Subsidiaries, the Company shall not and shall cause the Subsidiaries not to:
(a) adopt or propose any change in its articles of incorporation,
bylaws or other organizational documents;
(b) issue, deliver, sell, pledge or transfer or authorize or propose
the issuance, delivery, sale, pledge or transfer of any shares of its capital
stock of any class or any securities convertible into or exercisable for, or any
rights, warrants, options or other rights to acquire, any such shares or enter
into any agreement with respect to the foregoing other than (i) the issuance of
Company Common Stock upon exercise of stock options or warrants, or conversion
of Preferred Stock, outstanding on the date hereof in accordance with their
present terms, (ii) as required by Contracts in effect as of the date of this
Agreement that are listed in Section 4.05 of the Company Disclosure Schedule and
(iii) the issuance of capital stock of the Company as a dividend in respect of
Preferred Stock outstanding on the date hereof in accordance with its present
terms;
(c) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof, (ii) sell, lease or otherwise dispose of a Subsidiary or (iii) sell,
lease or otherwise dispose of an amount of assets or securities, including IRUs,
for an amount in excess of $100,000 (or, with respect to switch software
upgrades for purposes of compliance with the Communication Assistance for Law
Enforcement Act, $1,000,000), except for transactions in the ordinary course
consistent with past practice;
(d) merge or consolidate with any other Person;
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(e) make any investment, whether by purchase of stock or securities,
contributions to capital or any property transfer (other than investments in
cash or cash equivalents with a maturity of less than 90 days or investments in
wholly-owned Subsidiaries made, in each case, in the ordinary course of business
consistent with past practice), or purchase for an amount in excess of $100,000
(or, with respect to switch software upgrades for purposes of compliance with
the Communication Assistance for Law Enforcement Act, $1,000,000), any property
or assets of any other individual or entity, except for inventory purchased for
resale in the ordinary course of business consistent with past practice;
(f) enter into any agreement or arrangement that limits or otherwise
restricts the Company or any of the Subsidiaries or any of their respective
Affiliates or successors thereto or that by its terms could, after the Effective
Time, limit or restrict Parent or the Company or any of their respective
Affiliates or any successor thereto, from engaging or competing in any line of
business or in any geographic area;
(g) other than in the ordinary course of business consistent with
past practice, waive, release or relinquish any material right;
(h) other than in the ordinary course of business consistent with
past practice, modify or change in any material respect any existing material
license, lease, contract, or other agreement;
(i) enter into any agreements involving aggregate expenditures or
receipts of more than $100,000 individually or $500,000 in the aggregate (or,
with respect to (i) any Cost of Services Contract, $1,000,000 and (ii) switch
software upgrades for purposes of compliance with the Communication Assistance
for Law Enforcement Act, $1,000,000), other than any agreements in the ordinary
course of business consistent with past practice, including but not limited to
installation fees and customer premise equipment, in each case, associated with
new customers and in the ordinary course of business consistent with past
practice;
(j) create, incur or assume, or execute any new guarantee of, any
Indebtedness in excess of $100,000 in the aggregate (other than indebtedness for
borrowed money owing to W or any of its Affiliates) or prepay any Indebtedness;
(k) other than pursuant to arrangements existing on the date hereof,
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for obligations of any other person (other
than any Subsidiary) in an amount in excess of $100,000;
(l) make any loans or advances other than (i) loans or advances to
wholly-owned Subsidiaries made in the ordinary course of business consistent
with past practice and (ii) routine salary, travel and expense advances to
Company Employees in the ordinary course of business consistent with past
practice;
(m) (i) engage in any transaction, or enter into any contract,
agreement or arrangement (other than this Agreement, the Transactions and the
incurrence of indebtedness for borrowed money owing to W or any of its
Affiliates and transactions pursuant to any such contract, agreement or
arrangement entered into on or prior to the date hereof), with any
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Affiliate, (ii) engage in any transaction, or enter into any contract, agreement
or arrangement, with any portfolio company of W that is not on arm's length
terms and in the ordinary course of business, or (iii) amend, waive or
relinquish any rights relating to any such transaction, contract, agreement or
arrangement referred to in clause (i) or (ii) that will remain outstanding after
the Closing in accordance with Section 8.05;
(n) authorize any new capital expenditures which, individually, are
greater than $100,000 or, in the aggregate, would cause total capital
expenditures for year ending December 31, 2003 to exceed $500,000 (or, with
respect to switch software upgrades for purposes of compliance with the
Communication Assistance for Law Enforcement Act, $1,000,000), other than any
capital expenditures in the ordinary course of business consistent with past
practice;
(o) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
other than (i) cash dividends and distributions by a wholly-owned Subsidiary to
the Company or to a Subsidiary all of the capital stock which is owned directly
or indirectly by the Company or (ii) the issuance of Company Common Stock upon
exercise of stock options or warrants, or conversion of Preferred Stock,
outstanding on the date hereof in accordance with their present terms; or
redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or
otherwise acquire any of its securities or any securities of the Subsidiaries;
(p) (i) increase the compensation or fringe benefits of any Company
Employee (except for (x) increases in salary or wages in the ordinary course of
business consistent with past practice, (y) the payment of accrued or earned but
unpaid bonuses and (z) stay bonuses or similar retention payments in an amount
not to exceed $10,000 with respect to any individual payment and $100,000 in the
aggregate with respect to all such payments), (ii) grant any severance or
termination pay to any Company Employee, (iii) loan or advance any money or
other property to any Company Employee (other than routine salary, travel and
expense advances to Company Employees in the ordinary course of business and
consistent with past practice), (iv) establish, adopt, enter into, amend or
terminate any Company Plan, collective bargaining or labor agreement or any
plan, agreement, program, policy, trust, fund or other arrangement that would be
a Company Plan if it were in existence as of the date of this Agreement (other
than as may be required by the terms of an existing Company Plan or collective
bargaining agreement, or as may be required by applicable law or in order to
qualify under Sections 401 and 501 of the Code), or (v) grant any equity or
equity-based awards, other than in the cases of clauses (i) through (v) pursuant
to commitments of the Company or any Subsidiary existing on the date hereof
required by contracts set forth in Section 4.08(k) or Section 4.12 of the
Company Disclosure Schedule;
(q) pay, discharge or satisfy any claims, liabilities or obligations
(whether absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the consolidated
financial statements of the Company referred to in Section 4.07 or liabilities
incurred in the ordinary course of business;
61
(r) make or change any tax election or settle or compromise any
income tax liability;
(s) other than in the ordinary course of business consistent with
past practice, change any method of accounting, accounting policy or accounting
practice, except for any such change required by reason of a concurrent change
in GAAP as concurred with by the Company's independent auditors;
(t) fail to maintain insurance coverage at presently existing
levels;
(u) make any repayments of principal to W or its Affiliates in
respect of any Indebtedness owed to W or its Affiliates or any payment of
interest accrued in respect of such Indebtedness;
(v) agree or commit to do any of the foregoing; or
(w) knowingly take or agree or commit to take any action that would
make any representation and warranty of W or the Company hereunder inaccurate in
any material respect at, or as of any time prior to, the Closing, except for any
representations or warranties that are made as of a specified date.
Section 7.02. Conduct of Parent. From the date hereof until the
Closing, Parent and the Parent Subsidiaries shall conduct their business in the
ordinary course consistent with past practice in compliance with all applicable
laws and shall use their reasonable best efforts to preserve intact their
business organizations and relationships with third parties and to keep
available the services of their present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing and
except as expressly contemplated by this Agreement or the other Transaction
Agreements, as may result from the consummation of the Transactions, as set
forth in Section 7.02 of the Parent Disclosure Schedule, or as otherwise
consented to in writing by the Company and W (except if such consent would be
inconsistent with applicable law), such consent not to be unreasonably withheld
with respect to the granting of IRUs in fiber and/or conduit by Parent or the
Parent Subsidiaries, Parent shall not and shall cause the Parent Subsidiaries
not to:
(a) adopt or propose any change in its certificate of incorporation,
bylaws or other organizational documents;
(b) issue, deliver, sell, pledge or transfer or authorize or propose
the issuance, delivery, sale, pledge or transfer of any shares of its capital
stock of any class or any securities convertible into or exercisable for, or any
rights, warrants, options or other rights to acquire, any such shares or any
other ownership interest in Parent or enter into any agreement with respect to
the foregoing, in each case, if such issuance, delivery, sale or authorization
would require Parent stockholder approval other than the issuance of Parent
Common Shares or warrants upon or in connection with exercise or conversion of
stock options, restricted stock units, warrants or preferred stock outstanding
on the date hereof in accordance with their present terms;
(c) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or sell, lease or
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otherwise dispose of a Parent Subsidiary or an amount of assets or securities,
in each case, if such acquisition, sale, lease or disposition would require
Parent stockholder approval;
(d) merge or consolidate with any Person;
(e) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
other than dividends in shares of Parent Series A Preferred Stock on outstanding
shares of the Parent Series A Preferred Stock and cash dividends and
distributions by a wholly-owned subsidiary of Parent to Parent or to a
subsidiary all of the capital stock of which is owned directly or indirectly by
Parent, or, other than consistent with its past practice of acquiring Parent
Common Shares to meet its obligation to reserve and issue Parent Common Shares
under any stock option or compensation plan or arrangement of Parent, redeem,
repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise
acquire any of its securities or any securities of the Parent Subsidiaries;
(f) other than in the ordinary course of business consistent with
past practice, change any method of accounting, accounting policy or accounting
practice, except for any such change required by reason of a concurrent change
in GAAP as concurred with by Parent's independent auditors;
(g) agree or commit to do any of the foregoing; or
(h) knowingly take or agree or commit to take any action that would
make any representation and warranty of Parent hereunder inaccurate in any
material respect at, or as of any time prior to, the Closing, except for any
representations and warranties that are made as of a specified date.
Section 7.03. Tax-free Reorganization. Prior to the Effective Time,
Parent and the Parent Subsidiaries and the Company and the Subsidiaries shall
each use reasonable best efforts to cause the Merger to qualify as a
reorganization under the provisions of Section 368 of the Code, and shall not
take any action reasonably likely to cause the Merger not to so qualify. Parent
and the Parent Subsidiaries shall not take, or cause the Company to take, any
action after the Effective Time reasonably likely to cause the Merger not to
qualify as a reorganization under the provisions of Section 368 of the Code.
ARTICLE 8
ADDITIONAL AGREEMENTS
Section 8.01. Government and Other Consents and Approvals; Private
Placement Memorandum; Company Shareholder Meeting.
(a) The Company, Parent and W shall cooperate with one another (i)
in determining whether any action by or in respect of, or filing with, any
governmental body, agency or official, or authority is required, or any actions,
consents, approvals or waivers are
63
required to be obtained from parties to any material contracts, in connection
with or as a result of the consummation of the Transactions and (ii) in seeking
any such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such actions, consents, approvals or waivers.
(b) The Company shall, as promptly as reasonably practicable
following the date on which the PPM is finalized, (i) duly take all lawful
action to call, give notice of, convene and hold a meeting of its shareholders
or circulate a written consent to its shareholders, in either case for the
purpose of obtaining a vote or consent of its shareholders with respect to
adoption of this Agreement and approval of the transactions contemplated hereby,
including the Merger, and (ii) use its reasonable best efforts to obtain the
necessary approval with respect to adoption of this Agreement and approval of
the transactions contemplated hereby, including the Merger. In connection with
such shareholders' meeting or written consent, the Company shall comply with all
disclosure and other obligations to its shareholders under the NBCA and any
other applicable laws, including providing necessary notice to each shareholder
of the Company in connection with such shareholders' dissenters' rights. The PPM
and any notice, solicitation or similar disclosure circulated to the
shareholders of the Company shall, subject to Section 8.03(b), include the
recommendation of the Board of Directors of the Company that the shareholders of
the Company vote in favor of adoption of this Agreement and approval of the
transactions contemplated hereby, including the Merger, and the written opinion
of the Special Committee's financial advisor referred to in Section 4.26 that,
as of the date of such opinion, the Merger Consideration is fair, from a
financial point of view to the holders of the Shares (other than W and its
Affiliates). Notwithstanding the foregoing, nothing herein shall limit a party's
right to terminate this Agreement pursuant to Section 11.01.
(c) As promptly as practicable after the execution hereof, Parent
and the Company shall prepare a Private Placement Memorandum in form and
substance satisfactory to Parent, the Company and W (the "PPM"), which shall be
sent to the Company's shareholders in connection with the adoption of this
Agreement and approval of the Merger pursuant to the vote of the shareholders at
such shareholders' meeting or such written consent, as applicable. Parent shall
cooperate with the Company in connection with the distribution of the PPM to the
Company's shareholders.
Section 8.02. Access to Information.
(a) From the date hereof until the Closing, the Company shall (i)
give Parent and its counsel, financial advisors, auditors and other authorized
representatives (collectively, the "Parent Representatives") reasonable access
during normal business hours to the offices, properties, books and records of
the Company and the Subsidiaries, (ii) furnish to Parent and the Parent
Representatives such financial and operating data and other information as such
Persons may reasonably request and (iii) instruct its employees, counsel and
financial advisors to cooperate with Parent in its investigation of its business
and the business of the Subsidiaries; provided that (x) any information provided
to Parent or the Parent Representatives pursuant to this Section 8.02(a) shall
be subject to the Company Confidentiality Agreement and (y) Parent shall inform
the Parent Representatives receiving such information of the terms of the
Confidentiality Agreements and shall be responsible for any breach by such
Parent Representatives of the Confidentiality Agreements; and provided further
that no investigation
64
pursuant to this Section 8.02(a) shall affect any representation or warranty
given by W or the Company hereunder. Any investigation pursuant to this Section
8.02(a) shall be conducted in such manner as not to interfere unreasonably with
the conduct of the business of the Company and the Subsidiaries. Notwithstanding
the foregoing, Parent shall not have access to personnel records of the Company
and the Subsidiaries relating to individual performance or evaluation records,
medical histories or other information which in the Company's good faith opinion
is sensitive or the disclosure of which could subject the Company or any
Subsidiary to risk of liability.
(b) From the date hereof until the Closing, Parent shall (i) give
the Company and its counsel, financial advisors, auditors and other authorized
representatives other than W and W's authorized representatives (collectively,
the "Company Representatives") and W and its counsel, financial advisors,
auditors and other representatives (collectively, the "W Representatives")
reasonable access during normal business hours to the offices, properties, books
and records of Parent and the Parent Subsidiaries, (ii) furnish to the Company,
the Company Representatives, W and the W Representatives such financial and
operating data and other information as such Persons may reasonably request and
(iii) instruct its employees, counsel and financial advisors to cooperate with
the Company, the Company Representatives, W and the W Representatives in their
investigation of its business and the business of the Parent Subsidiaries;
provided that (w) any information provided to the Company or the Company
Representatives pursuant to this Section 8.02(b) shall be subject to the Company
Confidentiality Agreement, (x) any information provided to W or the W
Representatives pursuant to this Section 8.02(b) shall be subject to the W
Confidentiality Agreement, (y) the Company shall inform the Company
Representatives receiving such information of the terms of the Company
Confidentiality Agreement and shall be responsible for any breach by such
Company Representatives of the Company Confidentiality Agreement, and (z) W
shall inform the W Representatives receiving such information of the terms of
the W Confidentiality Agreement and shall be responsible for any breach by such
W Representatives of the W Confidentiality Agreement; and provided further that
no investigation pursuant to this Section 8.02(b) shall affect any
representation or warranty given by Parent hereunder. Any investigation pursuant
to this Section 8.02(b) shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Parent and the Parent
Subsidiaries. Notwithstanding the foregoing, none of the Company, the Company
Representatives, W or the W Representatives shall have access to personnel
records of Parent and the Parent Subsidiaries relating to individual performance
or evaluation records, medical histories or other information which in Parent's
good faith opinion is sensitive or the disclosure of which could subject Parent
or any Parent Subsidiary to risk of liability.
Section 8.03. No Solicitations. (a) None of W, the Company or any of
their respective Affiliates shall (whether directly or indirectly through
Affiliates, directors, officers, employees, advisors, agents or other
intermediaries), nor shall (directly or indirectly) any of W, the Company or any
of their respective Affiliates authorize or permit any of its or their officers,
directors, agents, representatives, advisors or Subsidiaries to, (i) solicit,
initiate or take any action to facilitate or encourage the submission of
inquiries, proposals or offers from any Person (as defined below) (other than
Parent) relating to any Company Acquisition Proposal, or agree to or endorse any
Company Acquisition Proposal; (ii) enter into any agreement to (w) facilitate or
further the consummation of, or consummate, any Company Acquisition Proposal,
(x) facilitate
65
the making of any inquiry with respect to any Company Acquisition Proposal, (y)
approve or endorse any Company Acquisition Proposal or (z) in connection with
any Company Acquisition Proposal, require it to abandon, terminate or fail to
consummate the Merger or any of the other Transactions; (iii) enter into or
participate in any discussions or negotiations in connection with any Company
Acquisition Proposal or inquiry with respect to a Company Acquisition Proposal,
or furnish to any Person any information with respect to its business,
properties or assets in connection with any Company Acquisition Proposal or
inquiry with respect to a Company Acquisition Proposal; or (iv) agree to resolve
or take any of the actions prohibited by clause (i), (ii) or (iii) of this
sentence. Each of W and the Company shall immediately cease, and cause their
respective advisors, agents and other intermediaries to immediately cease, any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing and shall demand the
return or destruction of any information previously provided with respect to
such activities, discussion, or negotiations. For purposes of this Section 8.03,
the term "Person" means any person, corporation, entity or "group," as defined
in Section 13(d) of the Exchange Act, other than Parent or any Parent
Subsidiaries.
"Company Acquisition Proposal" means any offer or proposal for a
merger, reorganization, recapitalization, consolidation, share exchange,
business combination or other similar transaction involving the Company or any
of the Subsidiaries or any proposal or offer to acquire, directly or indirectly,
securities representing more than 20% of the voting power of the Company or more
than 20% of the assets of the Company and the Subsidiaries taken as a whole,
other than the Merger contemplated by this Agreement.
(b) Notwithstanding the foregoing, the Board of Directors of the
Company, directly or indirectly through advisors, agents or other
intermediaries, may (i) engage in negotiations or discussions with any Person
that has made an unsolicited bona fide Company Acquisition Proposal not
resulting from or arising out of a breach of Section 8.03(a), (ii) furnish to
such Person nonpublic information relating to the Company or any of the
Subsidiaries pursuant to a confidentiality agreement with terms no less
favorable to the Company than those contained in the Company Confidentiality
Agreement (a copy of which shall be provided for informational purposes only to
Parent not later than the notice required pursuant to Section 8.03(c) or, if
executed after such notice, as promptly as practicable after execution) and/or
(iii) if prior to the Company shareholder meeting or the taking of the written
consent referred to in Section 8.01(b), withdraw or modify or change in a manner
adverse to Parent its approval or recommendation of this Agreement or the Merger
and recommend a Superior Proposal; provided that the Board of Directors of the
Company shall be permitted to take an action described in any of the foregoing
clauses (i), (ii) or (iii) if, and only if, prior to taking such particular
action, the Board of Directors of the Company has determined in good faith by a
majority vote that (x) such Company Acquisition Proposal would result in, or
would reasonably be expected to result in, a Superior Proposal, in the case of
any of the foregoing clauses (i) and (ii), or constitutes a Superior Proposal,
in the case of the foregoing clause (iii), and (y) the Board of Directors of the
Company (after considering the advice of outside legal counsel) is required to
take such particular action to comply with its fiduciary duties under applicable
law.
"Superior Proposal" means any unsolicited bona fide Company
Acquisition Proposal to acquire all or substantially all of the outstanding
Shares or all or substantially all of the assets of the Company and its
Subsidiaries, taken as a whole, on terms that the Board of
66
Directors of the Company determines in its good faith judgment (after
consultation with an independent nationally recognized financial advisor, taking
into account all the terms and conditions of the Company Acquisition Proposal,
including any break-up fees, expense reimbursement provisions and conditions to
consummation) are more favorable to the Company's shareholders than this
Agreement and the Merger, taken as a whole, and that is reasonably capable of
being completed (including with respect to the need for and ability of such
third party to obtain any external financing). Reference to "this Agreement" and
"the Merger" in this paragraph shall be deemed to include any proposed
alteration of the terms of this Agreement or the Merger that are agreed to by
Parent after it receives written notice from the Company pursuant to Section
8.03(c) of the existence of, the identity of the Person making, and the terms
and conditions of, any Company Acquisition Proposal.
(c) The Company shall notify Parent promptly (but in any event
within 24 hours) after receipt or occurrence of (i) any Company Acquisition
Proposal, (ii) any request for information with respect to any Company
Acquisition Proposal, (iii) any inquiry, proposal, discussions or negotiation
with respect to any Company Acquisition Proposal, and (iv) the material terms
and conditions of any such Company Acquisition Proposal, request for
information, inquiry, proposal, discussion or negotiation and the identity of
the Person making any such Company Acquisition Proposal, request for
information, inquiry or proposal or with whom discussions or negotiations are
taking place. In addition, the Company shall promptly (but in any event within
24 hours) after the receipt thereof, provide to Parent copies of any written
documentation material to understanding such Company Acquisition Proposal,
request for information, inquiry, proposal, discussion or negotiation ("Other
Acquisition Documentation") which is received by the Company from the Person (or
from any representatives or agents of such Person) making such Company
Acquisition Proposal, request for information, inquiry or proposal or with whom
such discussions or negotiations are taking place. The Company shall keep Parent
fully informed of the status and details (including any amendments or proposed
amendments) of any such Company Acquisition Proposal or request for information
and keep Parent fully informed as to the material details of any information
requested of or provided by the Company and as to the material details of all
discussions or negotiations with respect to any such Company Acquisition
Proposal, request for information, inquiry or proposal and shall provide to
Parent within one Business Day after receipt thereof all copies of any
additional Other Acquisition Documentation received by the Company from the
Person (or from any representatives or agents of such Person) making such
Company Acquisition Proposal, request for information, inquiry or proposal or
with whom such discussions or negotiations are taking place. The Company shall
promptly provide to Parent any non-public information concerning the Company
provided to any other Person in connection with any Company Acquisition Proposal
that was not previously provided to Parent. The Board of Directors of the
Company shall promptly consider in good faith (in consultation with its outside
legal counsel and financial advisors) any proposed alteration of the terms of
this Agreement or the Merger proposed by Parent in response to any Company
Acquisition Proposal.
Section 8.04. Notices of Certain Events.
(a) W and the Company shall promptly notify Parent of:
67
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
Transactions;
(ii) any notice or other material communication from any governmental
or regulatory agency or authority in connection with the Transactions; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of the knowledge of W and the Company threatened
against, relating to or involving or otherwise affecting W, the Company or
any Subsidiary which, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Section 4.10 or which
relate to the consummation of the Transactions.
(b) Parent shall promptly notify the Company and W of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
Transactions;
(ii) any notice or other material communication from any governmental
or regulatory agency or authority in connection with the Transactions; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting Parent or any of the Parent
Subsidiaries which, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Section 5.11 or which
relate to the consummation of the Transactions.
Section 8.05. Affiliate Transactions. Subject to Section 8.09,
immediately prior to the Closing, W, the Company and each of their respective
Affiliates agree that, other than the Contracts listed in Section 8.05 of the
Company Disclosure Schedule, all Contracts (including, for the avoidance of
doubt, all notes, bonds and other instruments evidencing Indebtedness of any
kind) between W or any of its Affiliates, on the one hand, and the Company or
any of the Subsidiaries, on the other hand, shall be terminated or settled
(without any post-Closing payments by Parent, any Parent Subsidiary, the Company
or any Subsidiary or resulting obligations or liabilities of Parent, any Parent
Subsidiary, the Company or any Subsidiary), as the case may be, and be of no
further force or effect, notwithstanding any terms thereof to the contrary.
Section 8.06. Agreement to Vote; Proxy; Transfer Restrictions.
(a) Voting. W hereby agrees that prior to the Effective Time, unless
this Agreement is terminated pursuant to Section 11.01, at any meeting of the
shareholders of the Company, however called (including the Company shareholder
meeting, if any, called pursuant to Section 8.01(b)), or in connection with any
written consent of the shareholders of the Company, W shall vote (or cause to be
voted) the Shares held of record or beneficially by it (i) to ensure the
adoption of this Agreement and the approval of the transactions contemplated
hereby, including the Merger, by the holders of Shares; (ii) against any action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of W or the Company under this
Agreement; and (iii) except as specifically requested
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in writing by Parent in advance and except as otherwise specified in clause (i)
above, against the following actions (other than this Agreement, the Merger and
the other Transactions): (1) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or any
of the Subsidiaries; (2) a sale, lease or transfer of a material amount of
assets of the Company or any of the Subsidiaries or a reorganization,
recapitalization, dissolution or liquidation of the Company or any of the
Subsidiaries; or (3)(a) any change in the majority of the board of directors of
the Company, except to the extent that following such change designees of W
comprise a majority of the board of directors of the Company or (b) any other
action which, is intended, or could reasonably be expected, to impede, interfere
with, delay, postpone, discourage or materially adversely affect the Merger or
the other Transactions or the contemplated economic benefits of any of the
foregoing. W shall not enter into any agreement or understanding with any person
or entity to vote or give instructions in any manner inconsistent with clause
(i), (ii) or (iii) of the preceding sentence. In addition, W hereby agrees not
to seek to exercise any dissenter's rights with respect to its Shares in
connection with this Agreement, the Merger and the other Transactions and waives
any such rights that it may have under the NCBCA or otherwise.
(b) PROXY. W HEREBY GRANTS TO, AND APPOINTS, PARENT AND EACH OF
XXXXX X. XXXXXXXX, XXXXXXX X. XXXXXXX AND J. XXXXXX XXXXXX OF PARENT, IN THEIR
RESPECTIVE CAPACITIES AS OFFICERS OF PARENT, AND ANY INDIVIDUAL WHO SHALL
HEREAFTER SUCCEED TO ANY SUCH OFFICE OF PARENT, AND ANY OTHER DESIGNEE OF
PARENT, EACH OF THEM INDIVIDUALLY, W'S IRREVOCABLE (UNTIL THE DATE THIS
AGREEMENT IS TERMINATED PURSUANT TO SECTION 11.01) PROXY AND ATTORNEY-IN-FACT
(WITH FULL POWER OF SUBSTITUTION) TO VOTE THE SHARES IN THE MANNER, AND WITH
RESPECT TO THE MATTERS, REFERRED TO IN SECTION 8.06(a). W INTENDS THIS PROXY TO
BE IRREVOCABLE AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION
AND EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT
OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY W WITH RESPECT
TO W'S SHARES.
(c) Except in accordance with the terms of this Agreement, W hereby
covenants and agrees that from the date hereof until the earlier of the
Effective Time or the termination of this Agreement pursuant to Section 11.01, W
shall not, directly or indirectly, (i) offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, enforce or permit the
execution of the provisions of any redemption agreement with the Company with
respect to, or enter into any contract, option or other arrangement or
understanding with respect to or consent to, the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
W's Shares or any interest therein; (ii) except as contemplated hereby, grant
any proxies or powers of attorney, deposit any Shares into a voting trust or
enter into a voting agreement with respect to any Shares; or (iii) intentionally
take any action that would make any representation or warranty of W contained
herein untrue or incorrect in any material respect or have the effect of
preventing or disabling W from performing its obligations under this Agreement.
Section 8.07. Reasonable Best Efforts.
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(a) Subject to the terms and conditions of this Agreement, each
party shall use its reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the Merger and the
Parent Series B Sale as soon as practicable after the date hereof, including (i)
preparing and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings, tax ruling requests and
other documents and to obtain as promptly as practicable all consents, waivers,
licenses, orders, registrations, approvals, permits, tax rulings and
authorizations necessary or advisable to be obtained from any third party and/or
governmental entity in order to consummate the Merger or any of the other
Transactions and (ii) taking all reasonable steps as may be necessary to obtain
all such material consents, waivers, licenses, orders, registrations, approvals,
permits, tax rulings, and authorizations. Without limiting the foregoing, each
party and its Board of Directors shall use their reasonable best efforts to (x)
take all action necessary so that no state takeover statute or similar statute
or regulation is or becomes applicable to the Merger or any of the other
Transactions and (y) if any state takeover statute or similar statute or
regulation becomes applicable to any of the foregoing, take all action necessary
so that the Merger and the other Transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and the other
Transaction Agreements and otherwise to minimize the effect of such statute or
regulation on the Merger and the other Transactions. In furtherance and not in
limitation of the foregoing, if required by the HSR Act or other Regulatory Law,
each of Parent, W and the Company shall make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act and any other application
or notice required by Regulatory Law with respect to the Transactions as
promptly as practicable after the date hereof and shall supply as promptly as
practicable any additional information and documentary materials that may be
requested pursuant to the HSR Act as soon as possible and shall timely file any
other documents, or timely make any appearances, required by Regulatory Law and
shall use their reasonable best efforts to take all other actions necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act and any other Regulatory Law. Nothing in this Section 8.07 shall require
any of Parent and the Parent Subsidiaries or the Company and the Subsidiaries to
sell, hold separate or otherwise dispose of or conduct their business in a
specified manner, or agree to sell, hold separate or otherwise dispose of or
conduct their business in a specified manner, or permit the sale, holding
separate or other disposition of any assets of Parent and the Parent
Subsidiaries or the Company and the Subsidiaries or the conduct of their
business in a specified manner, whether as a condition to obtaining any approval
from a governmental entity or any other Person or for any other reason.
(b) Each of Parent, W and the Company shall, in connection with the
efforts referenced in Section 8.07(a) to obtain all requisite material approvals
and authorizations for the Transactions under the HSR Act or any other
Regulatory Law, use its reasonable best efforts to (i) cooperate in all respects
with each other in connection with any filing or submission in connection with
any investigation or other inquiry, including any proceeding initiated by a
private party, (ii) promptly inform the other parties of any material
communication received by such party from, or given by such party to, the
Antitrust Division of the Department of Justice (the "DOJ"), the Federal Trade
Commission (the "FTC") or any other governmental entity and of any material
communication received or given in connection with any proceeding by a private
party, in each case regarding any of the Transactions, and (iii) permit the
other parties to review any communication given by it to, and consult with each
other in advance of any meeting or
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conference with, the DOJ, the FTC or any such other governmental entity or, in
connection with any proceeding by a private party, with any other Person, and to
the extent permitted by the DOJ, the FTC or such other applicable governmental
entity or other Person, give the other party the opportunity to attend and
participate in such meetings and conferences. For purposes of this Agreement,
"Regulatory Law" means the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended,
the HSR Act, the Federal Trade Commission Act, as amended, and all other
federal, state and foreign, if any, statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines and other laws that are designed
or intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade or lessening of competition.
(c) Subject to the terms and conditions of this Agreement, in
furtherance and not in limitation of the covenants of the parties contained in
Sections 8.07(a) and 8.07(b), if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any Transaction as violative of any
Regulatory Law, each of Parent, W and the Company shall cooperate in all
respects with each other and use its respective reasonable best efforts to
contest and resist any such action or proceeding and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that prohibits,
prevents or restricts consummation of the Transactions. Notwithstanding the
foregoing or any other provision of this Agreement, nothing in this Section 8.07
shall limit a party's rights to terminate this Agreement pursuant to Section
11.01.
(d) If any objections are asserted with respect to the Transactions
under any Regulatory Law or if any suit is instituted by any governmental entity
or any private party challenging any of the Transactions as violative of any
Regulatory Law, each of Parent, W and the Company shall use its reasonable best
efforts to resolve any such objections or challenge as such governmental entity
or private party may have to such Transactions under such Regulatory Law so as
to permit consummation of the Transactions.
(e) Nothing in this Section 8.07 shall require Parent or any Parent
Subsidiary to agree to any material modification of any material provision of
the Parent Credit Agreement or any security agreement related to the Parent
Credit Agreement; provided that a material modification shall not be deemed to
include (i) the payment by Parent or any Parent Subsidiary of a customary
consent or waiver fee under the Parent Credit Agreement or (ii) the amendment of
any terms and conditions in the Parent Credit Agreement or of any security
agreement related to the Parent Credit Agreement that are consistent in all
material respects with the commitment letter attached hereto as Exhibit I.
(f) Nothing in this Section 8.07 shall require W, the Company or any
Subsidiary to agree to any material modification of any material provision of
the Company Credit Agreement (such modification to be reflected in the new
Company credit agreement to be entered into upon termination of the Company
Credit Agreement as referred to in Section 9.01(g)) or any security agreement
related to the Company Credit Agreement; provided that a material modification
shall not be deemed to include (i) the payment by the Company or any Subsidiary
of a customary consent or waiver fee under the Company Credit Agreement or (ii)
the amendment of any terms and conditions of the new Company credit agreement to
be entered into after termination of the Company Credit Agreement as referred to
in Section 9.01(g) or of any
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security agreement related to such new Company credit agreement that are
consistent in all material respects with the commitment letter attached hereto
as Exhibit J.
Section 8.08. Public Announcements. On or prior to Closing, no party
hereto shall make any press release, public statement or public announcement
with respect to this Agreement, the other Transaction Agreements or the
Transactions without the prior written consent of (i) Parent if such press
release, public statement or announcement is made by W or the Company, (ii)
Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P., if the press release or public
statement or announcement is made by Parent, and (iii) the Company if the press
release or public statement or announcement is made by Parent; provided,
however, that each party hereto may make any press release, public statement or
public announcement which such party determines, after consultation with its
outside legal counsel, is required by applicable law or any listing agreement
with any national securities exchange or The NASDAQ Stock Market, Inc., in which
case, the party desiring to make such disclosure or announcement shall use its
reasonable best efforts to consult with the other parties hereto prior to making
such disclosure or announcement. Following the Closing, Parent and the Surviving
Corporation, on the one hand, and W, on the other hand, shall consult with each
other prior to making any press release, public statement or public announcement
with respect to this Agreement, the other Transaction Agreements or the
Transactions, provided that any such press release, public statement or public
announcement made by Parent or the Surviving Corporation that includes the name
of any WCAS Securityholder shall require the prior consent of Welsh, Carson,
Xxxxxxxx & Xxxxx VIII, L.P. (provided that if such press release, public
statement or public announcement is required by applicable law or any listing
agreement with any national securities exchange or The NASDAQ Stock Market,
Inc., Parent or the Surviving Corporation, as applicable, shall not be obligated
to obtain Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P.'s prior consent but shall
use its reasonable best efforts to consult with Welsh, Carson, Xxxxxxxx & Xxxxx
VIII, L.P. prior to making such disclosure or announcement). Nothing in this
Section 8.08 shall limit the ability of W or the Company, consistent with their
respective obligations under the Confidentiality Agreements, to communicate with
its partners, investors or shareholders (A) as required by applicable law, (B)
in the ordinary course of business or (C) in connection with the approval and
consummation of the Transactions.
Section 8.09. Certain Indebtedness.
(a) At the Closing, (i) each WCAS Securityholder listed on Schedule
8.09 shall (x) surrender to the Company all promissory notes (other than the
Post-July 31 Notes and the Transaction Expenses Notes) representing the
Indebtedness of the Company and the Subsidiaries owing to such WCAS
Securityholder and (y) deliver to the Company all releases, instruments or other
documentation reasonably satisfactory to Parent evidencing the release of any
and all Liens securing such Indebtedness, and (ii) Parent shall, in full
satisfaction of such Indebtedness and release of Liens, deliver to each WCAS
Securityholder listed on Schedule 8.09 registered in the name of such WCAS
Securityholder (x) stock certificates representing the number of Parent Common
Shares set forth opposite the name of each WCAS Securityholder on Schedule 8.09
(the "Satisfaction Shares") and (y) Warrants exercisable for the number of
Parent Common Shares set forth opposite the name of each WCAS Securityholder on
Schedule 8.09.
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(b) If the Closing occurs after July 31, 2003, any cash
contributions or other funding of the Company and the Subsidiaries by W and its
Affiliates (other than for purposes of paying Transaction Expenses) shall be
effected pursuant to the issuance of promissory notes (the "Post-July 31 Notes")
by the Company and the Subsidiaries to W and its Affiliates. The Post-July 31
Notes shall represent Indebtedness of the Company and the Subsidiaries incurred
after July 31, 2003 owing to W and its Affiliates and shall not provide for any
cash payments in respect of any principal or interest accrued thereon other than
subsequent to the termination of this Agreement in accordance with Article 11.
(c) Any cash contributions or other funding of the Company and the
Subsidiaries by W and its Affiliates for purposes of paying Transaction Expenses
shall be (or, in the case of any such cash contribution or other funding prior
to the date hereof, have been) effected pursuant to the issuance of promissory
notes (the "Transaction Expenses Notes") by the Company and the Subsidiaries to
W and its Affiliates. Such Transaction Expenses Notes shall not provide for any
cash payments in respect of any principal or interest accrued thereon other than
subsequent to the termination of this Agreement in accordance with Article 11.
Section 8.10. Further Assurances. At and after the Effective Time,
the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company, any deeds, bills
of sale, assignments or assurances and to take and do, in the name and on behalf
of the Company, any other actions and things to vest, perfect or confirm of
record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of the Company
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger. Each of the parties hereto shall execute and
deliver such documents and other papers and take such further action as may be
reasonably required to carry out the provisions of this Agreement and the other
Transaction Agreements and to make effective the Transactions.
Section 8.11. Confidentiality. The Confidentiality Agreement dated
November 26, 2002 between the Company and Parent (the "Company Confidentiality
Agreement") and the Confidentiality Agreement dated November 26, 2002 between W
and Parent (the "WCAS Confidentiality Agreement" and, together with the Company
Confidentiality Agreement, the "Confidentiality Agreements") shall continue in
full force and effect prior to the Effective Time and after any termination of
this Agreement. Notwithstanding anything in the Confidentiality Agreements or
the Transaction Agreements to the contrary, any party to this Agreement (and any
employee, representative, or other agent of any party to this Agreement) may
disclose to any and all Persons, without limitation of any kind, the tax
treatment and tax structure of the Transactions and all materials of any kind
(including opinions or other tax analyses) that are provided to it relating to
such tax treatment and tax structure. However, any such information relating to
the tax treatment or tax structure shall be kept confidential to the extent
necessary to comply with any applicable federal or state securities laws.
Section 8.12. Obligations of Merger Co. Parent shall take all action
necessary to cause Merger Co. to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
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Section 8.13. Enter into Transaction Agreements. Each party hereto
shall enter into the Transaction Agreements to which this Agreement contemplates
it will become a party at or prior to the Closing.
Section 8.14. Director and Officer Liability. (a) For six years after
the Effective Time, Parent shall cause the Surviving Corporation to, and the
Surviving Corporation hereby agrees that it shall, indemnify and hold harmless
the present and former officers and directors of the Company in respect of acts
or omissions occurring at or prior to the Effective Time to the fullest extent
permitted by North Carolina Law or any other applicable laws and as provided
under the Company's articles of incorporation and bylaws in effect on the date
hereof; provided that such indemnification shall be subject to any limitation
imposed from time to time under applicable law.
(b) For six years after the Effective Time, the Surviving
Corporation shall provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering each
such person currently covered by the Company's officers' and directors'
liability insurance policy on terms with respect to coverage and in such amount
that are no less favorable than those of such policy in effect on the date
hereof; provided that the Surviving Corporation shall only be required to comply
with this covenant if it is able to procure such insurance policy for an
aggregate amount that does not exceed $900,000; provided further, that if the
cost of such insurance policy exceeds such amount, the Surviving Corporation
shall be obligated to obtain a policy with the greatest coverage available for a
cost not exceeding such amount.
(c) If Parent, the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 8.14.
(d) The rights of each Indemnified Person under this Section 8.14
shall be in addition to any rights such Person may have under the articles of
incorporation or bylaws of the Company or the equivalent organizational
documents of any of the Subsidiaries, or under North Carolina Law or any other
applicable laws or under any agreement of any Indemnified Person with the
Company or any of the Subsidiaries. These rights shall survive consummation of
the Merger and are intended to benefit, and shall be enforceable by, each
Indemnified Party and the heirs and representatives of such Indemnified Party.
Section 8.15. Employee Benefits. Subject to Section 2.05, following
the Effective Time, Parent shall, or shall cause the Surviving Corporation to,
(i) honor all obligations under employment, severance, change of control or
similar agreements of the Company in accordance with the terms thereof and (ii)
pay all benefits accrued through the Effective Time under employee benefit
plans, programs, policies and arrangements of the Company in accordance with the
terms thereof. In furtherance and not in limitation of the foregoing, Parent
agrees to provide, or cause the Surviving Corporation to provide, employees of
the Company and
74
the Subsidiaries as of the Closing who are employees of Parent or any Parent
Subsidiary (including the Surviving Corporation and any subsidiary thereof) on
the date that is six months following the Closing Date (the "Continuing
Employees") with employee benefits that are no less favorable in the aggregate
than the employee benefits provided to similarly situated employees of Parent or
the Parent Subsidiaries, and such Continuing Employees shall be given credit for
all purposes (other than benefit accrual under any defined benefit pension plan)
under the terms of employee benefit plans, policies, programs and arrangements
of Parent in which such Continuing Employees participate for all prior service
with the Company and the Subsidiaries to the same extent such service was
recognized under similar plans at the Company or the Subsidiaries. Without
limiting the generality of the foregoing, Parent and the Parent Subsidiaries
shall honor all vacation, personal and sick days accrued by Continuing Employees
during the calendar year in which the Effective Time occurs (but not any days
accrued in any period prior to such calendar year) under the plans, policies,
programs and arrangements of the Company and the Subsidiaries in effect
immediately prior to the Effective Time. In addition to the foregoing, for a
period of six months following the Effective Time, Parent shall, or shall cause
the Surviving Corporation to, provide severance and termination benefits to each
individual who is an employee of the Company and the Subsidiaries immediately
prior to the Effective Time, which are no less favorable than the severance and
termination benefits such employee was entitled to receive under the plans and
arrangements of the Company and the Subsidiaries in effect as of the date of
this Agreement as described in Section 8.15 of the Company Disclosure Schedule.
Furthermore, with respect to medical benefits provided to Continuing Employees
at or after the Effective Time under Parent's medical benefit plans, Parent
agrees that it shall, or it shall cause the Parent Subsidiaries to, waive
waiting periods and pre-existing condition requirements under such plans (to the
extent that such waiting periods and conditions would not have applied under the
terms of the similar medical benefit plan of the Company), and will give
Continuing Employees credit for any co-payments and deductibles actually paid by
such employees under the medical plans of the Company and the Subsidiaries
during the calendar year in which the Continuing Employees first begin
participation in the medical plan(s) of Parent or the Parent Subsidiaries.
Nothing in this Section 8.15 shall limit the Parent or the Surviving
Corporation's right to terminate the employment of any employee of the Company
or any of the Subsidiaries (including any Continued Employees) at any time.
Section 8.16. Certificate of Designations. Prior to the Closing, (i)
the Board of Directors of Parent shall approve and adopt the certificate of
designations of the Parent Series B Preferred Stock substantially in the form
attached hereto as Exhibit K (the "Series B Certificate of Designations")
authorizing the Parent Series B Preferred Stock, and (ii) Parent shall cause
such Series B Certificate of Designations to be filed with the Secretary of
State of the State of Delaware in accordance with the laws of the State of
Delaware.
Section 8.17. Stockholders Meeting. No later than 30 days following
the Effective Time, Parent shall file with the SEC preliminary proxy materials
to be mailed to its stockholders in connection with an annual meeting of its
stockholders. As soon as reasonably practicable after Parent shall have the
right under SEC regulations to mail definitive proxy materials for such annual
meeting, Parent shall duly call, give notice of, convene and hold such annual
meeting. At such meeting, Parent shall present to its stockholders for adoption,
and the Board of Directors of Parent shall recommend the adoption of, the
Restated Certificate of Incorporation in substantially the form attached as
Exhibit G hereto. Following such adoption,
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Parent shall immediately file such Restated Certificate of Incorporation with
the Secretary of State of the State of Delaware in accordance with the law of
the State of Delaware.
Section 8.18. Reservation of Parent Common Shares. For so long as any
shares of the Parent Series B Preferred Stock or Warrants are outstanding,
Parent at all times shall reserve and keep available, free of preemptive rights,
solely for issuance and delivery upon conversion of the Parent Series B
Preferred Stock and exercise of the Warrants, the number of Parent Common Shares
from time to time issuable upon conversion of all of the Parent Series B
Preferred Stock and exercise of all of the Warrants at the time outstanding.
Section 8.19. Incentive Plans. W shall cause the Company to terminate
each equity incentive plan (other than the Long-Term Incentive Plan) maintained
by the Company or any Subsidiary for the benefit of employees and directors of
the Company or any Subsidiary and all rights of all persons under or related to
such plans. The Company shall obtain all consents and approvals necessary for
such terminations and shall not pay any consideration to obtain such consents.
Section 8.20. Portfolio Company Actions. Notwithstanding any
provision of this Agreement to the contrary, (i) each WCAS Securityholder agrees
that it shall use its reasonable best efforts not to (and shall use its
reasonable best efforts to cause its Affiliates not to) direct, encourage or
facilitate the taking of any action by any portfolio company of such WCAS
Securityholder or Affiliate of such WCAS Securityholder to the extent that such
action would be prohibited by the terms of this Agreement if taken directly by
such WCAS Securityholder, and (ii) no provision of this Agreement shall bind any
portfolio company of any WCAS Securityholder and, except as provided in clause
(i) above, no WCAS Securityholder shall be liable for any action taken by any
such portfolio company.
Section 8.21. Sale of Additional Shares of Parent Series B Preferred
Stock. (a) Upon the terms and subject to the conditions set forth in this
Section 8.21, pursuant to a Drawdown Notice delivered during the Commitment
Period, in addition to the shares of Parent Series B Preferred Stock sold by
Parent to the WCAS Securityholders pursuant to Article 2, and provided that the
Drawdown Conditions have then been satisfied, Parent may, at its option, sell
from time to time to the WCAS Securityholders, and the WCAS Securityholders
shall be required to purchase from Parent for cash, up to a number of shares of
Parent Series B Preferred Stock equal to the Specified Sale Amount for a
purchase price per share equal to the Face Amount.
(b) Drawdowns.
(i) Upon the terms and subject to the conditions set forth in
Section 8.21(c), on any Business Day during the Commitment Period on which
the Drawdown Conditions have been satisfied or waived by the WCAS
Securityholders, Parent may effect a Drawdown by the delivery of a Drawdown
Notice to the WCAS Securityholders; provided that, subject to the terms of
this Section 8.21, Parent may effect a Drawdown on any Business Day after
expiration of the Commitment Period up to the nineteen-month anniversary of
the Closing Date, so long as the Drawdown Notice was delivered by Parent to
the WCAS Securityholders prior to the expiration of the Commitment Period;
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(ii) The aggregate number of shares of Parent Series B Preferred
Stock subject to each Drawdown, as specified in the corresponding Drawdown
Notice, shall not be less than the Minimum Drawdown Amount.
(iii) The aggregate number of shares of Parent Series B Preferred
Stock subject to each Drawdown, as specified in the corresponding Drawdown
Notice, shall not exceed (A) the Specified Sale Amount, minus (B) the
aggregate number of shares of Parent Series B Preferred Stock previously
issued and sold pursuant to Drawdowns.
(c) Drawdown Closings.
(i) Each closing of a Drawdown (a "Drawdown Closing") shall take
place at the principal executive offices of Parent at 10:00 a.m. on the
fifteenth day following the receipt by the WCAS Securityholders of a
Drawdown Notice (or (x) if such day is not a Business Day, on the next
succeeding Business Day and (y) if the conditions specified in Section
8.21(c)(ii)(B)-(D) are not satisfied on such date, on the first Business
Day on which such conditions are satisfied), or at such other place, time
or date as shall be mutually agreed upon by Parent and the WCAS
Securityholders; provided that (without the consent of the WCAS
Securityholders) Parent may specify in such Drawdown Notice that the
applicable Drawdown Closing shall take place on any Business Day following
such fifteenth day through and including the first Business Day of the
first quarterly period commencing after expiration of the quarterly period
in which such fifteenth day occurs; provided, further, that if a Drawdown
Closing takes place on the first Business Day of such subsequent quarterly
period, and such Business Day is not the first day of such quarterly
period, Parent may elect to treat the Drawdown Shares issued at such
Drawdown Closing as having been issued on the first day of such quarterly
period. Notwithstanding the first sentence of this Section 8.21(c)(i), no
Drawdown Closing shall be effected after the date that is the
nineteen-month anniversary of the Closing Date. The date of each Drawdown
Closing is referred to herein as a "Drawdown Closing Date." Unless mutually
agreed by Parent and the WCAS Securityholders, no Drawdown Closing Date
shall take place earlier than the 30th day after a prior Drawdown Closing
Date.
(ii) Each Drawdown Closing shall only be held if (A) Parent shall
have represented and warranted (in a certificate signed by the President or
any Vice President of Parent), as of the Drawdown Closing Date, to each
WCAS Securityholder purchasing shares of Parent Series B Preferred Stock in
such Drawdown that such shares have been duly authorized and validly issued
and are fully paid and nonassessable, free and clear of all Liens other
than as set forth in the Governance Agreement and the issuance thereof is
not subject to any preemptive or other similar right, (B) such Drawdown
would not otherwise violate or cause the violation of, any applicable law,
statute, ordinance rule or regulation, (C) any applicable waiting period
under the HSR Act has expired or been terminated, and (D) no material
judgment, order, writ, injunction, ruling or decree of any governmental
entity shall have been enacted, entered into, or enforced by any
governmental entity which prohibits delivery of the shares of Parent Series
B Preferred Stock; provided, however, that each of the WCAS Securityholders
and Parent shall use their reasonable best efforts to (x) promptly make and
process all necessary filings and applications and obtain all consents,
approvals, orders, authorizations, registrations and
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declarations or expiration or termination of any required waiting periods
and to comply with all applicable laws and (y) have any such judgments,
orders, writs, injunctions, rulings or decrees vacated or reversed. In the
event that a Drawdown Closing is delayed pursuant to clause (B), (C) or (D)
above, Parent shall not be obligated to issue any shares of Parent Series B
Preferred Stock, and, subject to Section 8.21(c)(i), such Drawdown Closing
shall take place on the fifteenth day (or if such day is not a Business
Day, on the first Business Day following such fifteenth day) following the
satisfaction of the condition specified in clause (B), (C) or (D), as the
case may be.
(d) Deliveries. At each Drawdown Closing, Parent shall deliver to
each WCAS Securityholder a stock certificate in definitive form registered in
the name of such WCAS Securityholder representing the shares of Parent Series B
Preferred Stock being purchased by such WCAS Securityholder at such Drawdown
Closing. Delivery of such stock certificates shall be made against receipt by
Parent of the purchase price payable therefor, which shall be paid by wire
transfer of immediately available funds to an account designated in writing by
Parent to the WCAS Securityholders at least three Business Days prior to the
applicable Drawdown Closing Date.
(e) Use of Proceeds. Parent shall use the proceeds from each
Drawdown for, and only for, Permitted Expenditures.
Section 8.22. Parent Stock Incentive Plan. Parent agrees that, in
connection with the Transactions, Parent's Stock Incentive Plan shall continue,
and all options previously granted under Parent's Stock Incentive Plan shall be
deemed to be assumed for purposes of Section 17(c) of Parent's Stock Incentive
Plan.
Section 8.23. No Recourse. Notwithstanding any provision in this
Agreement, each of the WCAS Securityholders hereby irrevocably waives any and
all claims and right to recourse against the Company or the Surviving
Corporation, or any of their respective officers, directors and employees, with
respect to any misrepresentation or breach of any representation, warranty or
indemnity, or noncompliance with any conditions, covenants or agreements, given
or made by the Company in this Agreement, any other Transaction Agreement or any
other agreements and documents executed or to be executed in order to consummate
the Transactions. No WCAS Securityholder shall be entitled to contribution from,
subrogation to or recovery against the Company or the Surviving Corporation with
respect to any liability of any WCAS Securityholder that may arise under or
pursuant to this Agreement, any other Transaction Agreement or any other
agreements or documents executed or to be executed by the Parties hereto in
connection therewith.
Section 8.24. WCAS Consent. Each of the WCAS Securityholders hereby
consents to (and waives any right to notice or approval of) the execution,
delivery and performance by the Company of this Agreement and the consummation
of the Transactions, including the Merger, under or pursuant to the promissory
notes and note purchase agreements set forth in Section 8.24 of the Company
Disclosure Schedule.
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ARTICLE 9
CONDITIONS TO THE CLOSING
Section 9.01. Conditions to the Obligations of Each Party. The
obligations of the parties to consummate the Closing are subject to the
satisfaction or waiver at or prior to the Closing of the following conditions:
(a) any applicable waiting period under the HSR Act relating to the
Closing shall have expired or been terminated;
(b) this Agreement and the plan of merger set forth herein shall
have been adopted by the Company's shareholders in accordance with North
Carolina Law;
(c) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit or restrain the
consummation of the Closing; provided, however, that W, the Company and Parent
shall each use their respective reasonable best efforts to have any such
judgment, order, decree or injunction vacated;
(d) there shall not be instituted or pending any action or
proceeding by any government or governmental authority or agency, (i)
challenging or seeking to make illegal, to delay materially or otherwise
directly or indirectly to restrain or prohibit the consummation of the Closing
or seeking to obtain material damages or otherwise directly or indirectly
relating to the Transactions, (ii) seeking to restrain or prohibit the ownership
or operation by Parent or the Parent Subsidiaries (or by the Company or the
Subsidiaries) of all or any material portion of the business, properties or
assets of the Company and the Subsidiaries, taken as a whole, or of Parent and
the Parent Subsidiaries, taken as a whole, or to compel Parent or any of the
Parent Subsidiaries to dispose of or hold separate all or any material portion
of the business, properties or assets of the Company and the Subsidiaries, taken
as a whole, or of Parent and Parent Subsidiaries, taken as a whole, (iii)
seeking to impose or confirm material limitations on the ability of Parent or
any of the Parent Subsidiaries to effectively control the business or operations
of the Company and the Subsidiaries, taken as a whole, or the ability of Parent
or any of the Parent Subsidiaries effectively to exercise full rights of
ownership of any shares of the Company or any of the Subsidiaries on all matters
properly presented to the Company's shareholders, or (iv) seeking to require
divestiture by Parent or any of the Parent Subsidiaries of any shares of capital
stock of the Company, and no court, arbitrator or governmental body, agency or
official shall have issued any judgment, order, decree or injunction, and there
shall not be any statute, rule or regulation proposed, adopted or enacted, that
is likely, directly or indirectly, to result in any of the consequences referred
to in the preceding clauses (i) through (iv);
(e) all consents, approvals and licenses of any governmental or
other regulatory body set forth in Section 9.01(e) of the Company Disclosure
Schedule and Section 9.01(e) of the Parent Disclosure Schedule shall have been
obtained and shall be considered final and effective, notwithstanding the
availability of administrative procedures to reconsider, revise or review the
granting of any such consent or approval or the issuances of any such license;
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(f) any consent, approval, agreement or other action required under
the agreements, contracts or other instruments listed on Section 9.01(f) of the
Company Disclosure Schedule and Section 9.01(f) of the Parent Disclosure
Schedule shall have been received by the Company or Parent, as the case may be,
and no such consent, approval, agreement or other action shall have been
revoked;
(g) the Parent Credit Agreement shall have been amended and restated
and shall have terms substantially as provided in the commitment letter attached
hereto as Exhibit I, (ii) the Company Credit Agreement shall have been
terminated and replaced by a new credit agreement having terms substantially
consistent with those provided in the commitment letter attached hereto as
Exhibit J, and (iii) the Parent Credit Agreement as so amended and restated and
such new credit agreement replacing the Company Credit Agreement shall permit
the consummation of the Transactions as contemplated by the Transaction
Agreements and shall not impair the ability of any Person to perform its
obligations, or impair the ability of any Person (other than Parent and the
Parent Subsidiaries) to exercise any of its rights, under the Transaction
Agreements, the Warrants, the Series B Certificate of Designations, the Restated
Certificate of Incorporation attached hereto as Exhibit G or the Amended and
Restated Bylaws attached hereto as Exhibit H;
(h) the holders of the Parent Series A Preferred Stock listed on
Section 9.01(h) of the Parent Disclosure Schedule shall have executed and
delivered to Parent an amendment to their registration rights agreements with
Parent in substantially the form attached hereto as Exhibit L; and
(i) the certificate of designations of the Parent Series A Preferred
Stock shall have been duly amended to be in substantially in the form attached
as Exhibit M hereto, and such amended certificate of designations shall be in
full force and effect.
Section 9.02. Conditions to the Obligations of Parent and Merger Co.
The obligations of Parent and Merger Co. to consummate the Transactions are
subject to the satisfaction or waiver by Parent at or prior to the Closing of
the following further conditions:
(a) (i) each of the Company and W shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Closing Date, (ii) the representations and warranties of
the Company and W contained in this Agreement and in any certificate or other
writing delivered by the Company or W pursuant hereto (x) that are qualified by
materiality, material adverse effect or Material Adverse Effect shall be true
and correct at and as of the Closing as if made at and as of such time, and (y)
that are not qualified by materiality, material adverse effect or Material
Adverse Effect shall be true and correct in all material respects at and as of
the Closing as if made at and as of such time (except in each case in respect of
representations made as of a specified date, which shall be required to be true
and correct or true and correct in all material respects, as the case may be, as
of such specified date), and (iii) Parent shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer, Chief Financial
Officer or any Vice President of the Company with respect to the Company's
obligations, representations and warranties to the foregoing effect and a
certificate signed on behalf of W by WCAS VIII Associates, LLC, the General
Partner of Welsh,
80
Xxxxxx, Xxxxxxxx & Xxxxx VIII, L.P., with respect to W's obligations,
representations and warranties to the foregoing effect;
(b) (i) the Company and the Subsidiaries shall not have Indebtedness
in the aggregate in excess of $112,500,000 immediately prior to the Effective
Time, provided that, solely for purposes of this Section 9.02(b), the definition
of "Indebtedness" shall be modified to (x) delete the phrase "or with respect to
deposit or advances of any kind" in clause (a) of such definition, (y) delete
clause (c) of such definition, and (z) exclude any Indebtedness of the Company
or its Subsidiaries owing to any WCAS Securityholder that will be terminated,
cancelled, surrendered or eliminated at the Closing pursuant to Section 8.09,
and (ii) Parent shall have received a certificate signed on behalf of the
Company by the Chief Executive Officer, Chief Financial Officer or any Vice
President of the Company with respect to the Indebtedness of the Company and the
Subsidiaries to the foregoing effect;
(c) W shall have executed and delivered the Governance Agreement to
Parent;
(d) W shall have executed and delivered the Registration Rights
Agreement to Parent;
(e) (i) the Company and the Subsidiaries shall have an aggregate
amount of Working Capital as of the close of business on the Business Day
immediately preceding the Closing Date equal to or greater than the sum of (x)
negative $6,000,000 plus (y) the amount (which shall, in any case, be a positive
number) if any, by which any liability set forth on the Working Capital
Worksheet relating to the matter involving Qwest Communications Corp. has been
reduced or paid using the proceeds of Transaction Expenses Notes, and (ii)
Parent shall have received the Revised Working Capital Worksheet and a
certificate signed on behalf of the Company by the Chief Executive Officer,
Chief Financial Officer or any Vice President of the Company with respect to the
amount of Working Capital of the Company and the Subsidiaries to the foregoing
effect; and
(f) each of Parent and Merger Co shall have received all documents
reasonably requested by it relating to the existence of the Company and each
WCAS Securityholder (other than any WCAS Securityholder that is a natural
person), and the corporate or other authority for the Company's and each WCAS
Securityholder's entering into this Agreement and the other Transaction
Agreements, all in form and substance reasonably satisfactory to it.
(g) No more than 35 of the holders of Shares entitled to receive
Merger Consideration (other than cash for a fractional share) shall not be an
"accredited investor," as that term is defined in Rule 501(a) of Regulation D
under the Securities Act.
Section 9.03. Condition to the Obligation of the Company. The
obligation of the Company to consummate the Closing is subject to the
satisfaction or waiver by the Company at or prior to the Closing of the
following further condition:
(a) Each of Parent and Merger Co. shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Closing Date, (b) the representations and warranties of
Parent contained in this Agreement and in any certificate or other writing
delivered by Parent pursuant hereto (i) that are qualified by materiality,
material
81
adverse effect or Parent Material Adverse Effect shall be true and correct at
and as of the Closing as if made at and as of such time and (ii) that are not
qualified by materiality or Parent Material Adverse Effect shall be true and
correct in all material respects at and as of the Closing as if made at and as
of such time (except in each case in respect of representations made as of a
specified date which shall be required to be true and correct or true and
correct in all material respects, as the case may be, as of such specified
date), and (c) the Company shall have received a certificate signed by the
President or any Vice President of Parent to the foregoing effect.
Section 9.04. Conditions to the Obligations of the WCAS
Securityholders. The obligation of each WCAS Securityholder to consummate the
Closing is subject to the satisfaction or waiver by such WCAS Securityholder at
or prior to the Closing of the following further conditions:
(a) (i) each of Parent and Merger Co. shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Closing Date, (ii) the representations and warranties of
Parent contained in this Agreement and in any certificate or other writing
delivered by Parent pursuant hereto (x) that are qualified by materiality or
Parent Material Adverse Effect shall be true and correct at and as of the
Closing as if made at and as of such time and (y) that are not qualified by
materiality or Parent Material Adverse Effect shall be true and correct in all
material respects at and as of the Closing as if made at and as of such time
(except in each case in respect of representations made as of a specified date
which shall be required to be true and correct or true and correct in all
material respects, as the case may be, as of such specified date), and (iii) the
WCAS Securityholders shall have received a certificate signed by the President
or any Vice President of Parent to the foregoing effect;
(b) Parent and the Warrant Agent shall each have executed and
delivered the Warrant Agreement, and Parent shall have duly issued, executed and
delivered the Warrants pursuant to Section 8.09;
(c) the Satisfaction Shares shall have been duly issued pursuant to
Section 8.09;
(d) each party to the Governance Agreement other than the WCAS
Securityholders shall have executed and delivered to such WCAS Securityholder
the Governance Agreement;
(e) each party to the Registration Rights Agreement other than the
WCAS Securityholders shall have executed and delivered to such WCAS
Securityholder the Registration Rights Agreement;
(f) the Series B Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware in accordance with the law
of the State of Delaware, such WCAS Securityholder shall have received evidence
of such filing and the Series B Certificate of Designations shall be in full
force and effect;
(g) Parent shall have duly amended its bylaws to be in substantially
the form of the Amended and Restated Bylaws attached hereto as Exhibit H, such
WCAS Securityholder
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shall have received evidence of such amendment and such Amended and Restated
Bylaws shall be in full force and effect;
(h) the warrant agreement dated as of October 29, 2002 between
Parent and the warrant agent thereunder shall have been duly amended to be in
substantially the form attached as Exhibit N hereto, such WCAS Securityholder
shall have received evidence of such amendment and such amended warrant
agreement shall be in full force and effect;
(i) such WCAS Securityholder shall have received legal opinions,
dated the Closing Date, of counsel to Parent, substantially in the forms
attached hereto as Exhibit O and Exhibit P; and
(j) such WCAS Securityholder shall have received all documents
reasonably requested by it relating to the existence of Parent and the corporate
authority for Parent's entering into this Agreement and the other Transaction
Agreements, all in form and substance reasonably satisfactory to it.
ARTICLE 10
INDEMNIFICATION
Section 10.01. General Indemnification.
(a) Subject to Sections 10.02 and 10.03, from and after the Closing,
W hereby agrees to indemnify, defend and hold harmless Parent and its Affiliates
(other than W and its Affiliates), and each of their respective directors,
officers, employees and agents (collectively, the "Parent Indemnified Parties")
from and against any and all losses, expenses (including attorneys' fees and
expenses), damages, liabilities, fines, penalties, judgments, actions, claims
and costs (collectively, "Losses") incurred or suffered by the Parent
Indemnified Parties arising out of, based upon or resulting from (i) any breach
of any representation or warranty contained in or referred to in Article 4 or 6
or in any schedule or exhibit or in the certificate delivered by or on behalf of
W and the Company pursuant to Section 9.02(a), in each case, without regard for
any exception for materiality, material adverse effect or Material Adverse
Effect contained therein (except that any exception for materiality, material
adverse effect or Material Adverse Effect contained in the representations and
warranties set forth in Sections 4.08(a), 4.09(d), 4.12(b)(iii), 4.16(p),
4.17(b), 4.22 and 4.23 and the certificate delivered pursuant to Section
9.02(a)(iii) shall not be disregarded for purposes of this Section 10.01(a)(i)),
and (ii) any breach by W or the Company of, or any failure of W or the Company
to perform, any of the covenants, agreements or obligations contained in or made
pursuant to this Agreement.
(b) Subject to Sections 10.02 and 10.03, from and after the Closing,
Parent hereby agrees to indemnify, defend and hold harmless each WCAS
Securityholder and its Affiliates, and each of their respective directors,
officers, partners, employees and agents (collectively, the "W Indemnified
Parties") from and against any and all Losses incurred or suffered by the W
Indemnified Parties arising out of, based upon or resulting from (i) any breach
of any representation or warranty contained in or referred to in Article 5 or in
any schedule or
83
exhibit or in any certificate delivered by or on behalf of Parent pursuant to
Section 9.03(c) or 8.21(c), in each case, without regard for any exception for
materiality, material adverse effect or Parent Material Adverse Effect contained
therein (except that any exception for materiality, material adverse effect or
Parent Material Adverse Effect contained in the representations and warranties
set forth in Sections 5.09(a), 5.10(d), 5.13(b)(iii), 5.18(b) and 5.20 and the
certificates delivered pursuant to Section 9.03(c) and 9.04(a)(iii) shall not be
disregarded for purposes of this Section 10.01(b)(i)), and (ii) any breach by
Parent or Merger Co. of, or any failure of Parent or Merger Co. to perform, any
of the covenants, agreements or obligations contained in or made pursuant to
this Agreement.
(c) In the event that a Person entitled to indemnification under
this Article 10 (the "Indemnified Party") shall incur or suffer any Losses in
respect of which indemnification may be sought under this Article 10 against the
Person required to provide indemnification under this Article 10 (the
"Indemnifying Party"), the Indemnified Party shall assert a claim for
indemnification by providing a written notice (the "Notice of Loss") to the
Indemnifying Party stating the nature and basis of such Notice of Loss. The
Notice of Loss shall be provided to the Indemnifying Party as soon as
practicable after the Indemnified Party becomes aware that it has incurred or
suffered a Loss. Notwithstanding the foregoing, any failure to provide the
Indemnifying Party with a Notice of Loss, or any failure to provide a Notice of
Loss in a timely manner as aforesaid, shall not relieve the Indemnifying Party
from any liability that it may have to the Indemnified Party under this Section
10.01 except to the extent that the Indemnifying Party's ability to defend such
claim is materially prejudiced by the Indemnified Party's failure to give such
Notice of Loss. If the Notice of Loss relates to a Third Party Claim, then the
procedures set forth in Section 10.01(d) shall be applicable. If the Notice of
Loss does not relate to a Third Party Claim, then the Indemnifying Party shall
have 30 days from the date of receipt of such Notice of Loss to object to any of
the subject matter and any of the amounts of the Losses set forth in the Notice
of Loss, as the case may be, by delivering written notice of objection thereof
to the Indemnified Party. If the Indemnifying Party fails to send a notice of
objection to the Notice of Loss within such 30 day period, then the Indemnifying
Party shall be deemed to have agreed to the Notice of Loss and shall be
obligated to pay to the Indemnified Party the portion of the amount specified in
the Notice of Loss to which the Indemnifying Party has not objected. If the
Indemnifying Party sends a timely notice of objection, then the Indemnifying
Party and the Indemnified Party shall use their commercially reasonable efforts
to settle (without an obligation to settle) such claim for indemnification. If
the Indemnifying Party and the Indemnified Party do not settle such dispute
within 30 days after the Indemnified Party's receipt of the Indemnifying Party's
notice of objection, then each of the Indemnifying Party and the Indemnified
Party shall be entitled to seek enforcement of their respective rights under
this Article 10.
(d) Promptly after receipt by an Indemnified Party of notice of the
assertion of any claim or the commencement of any action, suit or proceeding by
a third Person (a "Third Party Claim") in respect of which the Indemnified Party
will seek indemnification hereunder, the Indemnified Party shall so notify in
writing the Indemnifying Party, but any failure so to notify the Indemnifying
Party shall not relieve it from any liability that it may have to the
Indemnified Party under this Section 10.01 except to the extent that the
Indemnifying Party's ability to defend the Third Party Claim is materially
prejudiced by the Indemnified Party's failure to give such notice. In no event
shall the Indemnified Party admit any liability with respect thereto or settle,
84
compromise, pay or discharge such Third Party Claim without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld. With respect to any such claim as to which the Indemnifying Party
shall have acknowledged in writing the obligation to indemnify the Indemnified
Party hereunder, the Indemnifying Party shall have the right to assume the
defense (at the Indemnifying Party's expense) of any such claim through counsel
of the Indemnifying Party's own choosing by so notifying the Indemnified Party
within 30 days of the receipt by the Indemnifying Party of such notice from the
Indemnified Party; provided, however, that any such counsel shall be reasonably
satisfactory to the Indemnified Party. If the Indemnifying Party assumes such
defense, the Indemnified Party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party; provided, however, that the
Indemnified Party shall have the right to employ counsel to represent it at the
Indemnifying Party's expense if the Indemnified Party has been advised by its
counsel that there are one or more legal defenses available to it that are
different from or additional to those available to the Indemnifying Party or
that there is otherwise a potential conflict between the interests of the
Indemnified Party and the Indemnifying Party, and in that event the reasonable
fees and expenses of such separate counsel shall be paid by the Indemnifying
Party. The parties each agree to render to the other party such assistance as
may reasonably be requested in order to ensure the proper and adequate defense
of any such claim, which assistance shall include, to the extent reasonably
requested by a party, the retention, and the provision to such party, of records
and information reasonably relevant to such Third Party Claim, and making
employees of the other party available on a mutually convenient basis to provide
additional information and explanation of any materials provided hereunder. The
Indemnifying Party may not settle or otherwise dispose of any Third Party Claim
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld unless such settlement includes only the payment of
monetary damages (which are fully paid by the Indemnifying Party), does not
impose any injunction or equitable relief upon the Indemnified Party, does not
require any admission or acknowledgment of liability or fault of the Indemnified
Party and contains an unconditional release of the Indemnified Party in respect
of such claim. None of the Indemnified Party or any of its Affiliates may settle
or otherwise dispose of any Third Party Claim for which the Indemnifying Party
may have a liability under this Agreement without the prior written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld.
(e) With respect to any claim as to which the Indemnifying Party
shall have acknowledged in writing the obligation to indemnify the Indemnified
Party hereunder, after written notice by the Indemnifying Party to the
Indemnified Party of its election to assume control of the defense of any such
Third Party Claim, the Indemnifying Party shall not be liable to such
Indemnified Party hereunder for any costs or fees subsequently incurred by such
Indemnified Party in connection with the defense thereof except if the
Indemnified Party has the right to employ counsel to represent it at the
Indemnifying Party's expense as set forth in Section 10.01(d). If the
Indemnifying Party does not assume control of the defense of such Third Party
Claim within 30 days after the Indemnifying Party's receipt of the notice
required pursuant to Section 10.01(d), then the Indemnified Party shall have the
right to defend such claim in such manner as it may deem appropriate at the
reasonable cost and expense of the Indemnifying Party.
Section 10.02. Survival. The rights of the Parent Indemnified Parties
to assert a claim
85
under Section 10.01(a)(i), and the rights of the W Indemnified Parties to assert
a claim under Section 10.01(b)(i), shall survive the Closing Date for a period
(the "Survival Period") beginning at the Closing Date and ending on the
fifteen-month anniversary of the Closing Date, and thereafter shall terminate
and expire, except with respect to liabilities for any item as to which, prior
to the expiration of the Survival Period, a Parent Indemnified Party or a W
Indemnified Party, as applicable, shall have asserted a claim in writing as
required pursuant to the provisions of this Article 10, in which case the
liability for such claim shall continue until such claim shall have been finally
settled, decided or adjudicated.
Section 10.03. Limitation on Liability.
(a) Subject to Section 10.03(e), W shall not have any liability
under Section 10.01(a) with respect to any individual item of Loss or items of
Losses arising out of substantially similar facts and circumstances, unless such
item or items of Losses exceed $35,000 (the "De Minimis Amount") and W shall not
have any liability under Section 10.01(a) until the aggregate Losses under
Section 10.01(a) (excluding any individual item of Loss or items of Losses
arising out of substantially similar facts and circumstances that do not exceed
the De Minimis Amount) exceed an amount equal to $2,500,000 (the "Deductible
Amount"), whereupon W shall be liable for indemnification for all Losses in
excess of the Deductible Amount up to the Maximum Amount.
(b) Subject to Section 10.03(e), the maximum monetary liability of W
under Section 10.01(a) of this Agreement shall not exceed an amount equal to
$15,000,000 (the "Maximum Amount").
(c) Subject to Section 10.03(f), Parent shall not have any liability
under Section 10.01(b) with respect to any individual item of Loss or items of
Losses arising out of substantially similar facts and circumstances, unless such
item or items of Losses exceed the De Minimis Amount, and Parent shall not have
any liability under Section 10.01(b) until the aggregate Losses under Section
10.01(b) (excluding any individual item of Loss or items of Losses arising out
of substantially similar facts and circumstances that do not exceed the De
Minimis Amount) exceed an amount equal to the Deductible Amount, whereupon
Parent shall be liable for indemnification for all Losses in excess of the
Deductible Amount up to the Maximum Amount.
(d) Subject to Section 10.03(f), the maximum monetary liability of
Parent under Section 10.01(b) of this Agreement shall not exceed the Maximum
Amount.
(e) The limitations on liability set forth in Section 10.03(a) or
(b) shall not apply with respect to (i) any breach of a representation or
warranty contained in or referred to in Article 4 or 6 or in any schedule or
exhibit or in the certificate delivered by or on behalf of W or the Company
pursuant to Section 9.02(a), or (ii) any breach by W or the Company of, or any
failure of W or the Company to perform, any of the covenants, agreements or
obligations contained in or made pursuant to this Agreement, in each case, in
the event that any of the individuals listed in Section 10.03(e) of the Company
Disclosure Schedule had actual knowledge of such breach or actual knowledge of
conduct that could reasonably be expected to constitute a breach.
86
(f) The limitations on liability set forth in Section 10.03(c) or
(d) shall not apply with respect to (i) any breach of a representation or
warranty contained in or referred to in Article 5 or in any schedule or exhibit
or in any certificate delivered by or on behalf of Parent pursuant to Section
9.03(a) or 8.21(c), or (ii) any breach by Parent of, or any failure of Parent to
perform, any of the covenants, agreements or obligations contained in or made
pursuant to this Agreement, in each case, in the event that any of the
individuals listed in Section 10.03(f) of the Parent Disclosure Schedule had
actual knowledge of such breach or actual knowledge of conduct that could
reasonably be expected to constitute a breach.
(g) No Indemnifying Party shall be obligated under this Agreement to
indemnify any Indemnified Person for any lost profits or consequential,
incidental or punitive damages suffered or incurred by any Indemnified Party,
except to the extent any such damages are recovered against such Indemnified
Party in connection with a Third Party Claim.
Section 10.04. Computation of Losses. Notwithstanding anything in this
Agreement to the contrary, the amount of any Losses otherwise payable to an
Indemnified Party shall be reduced by the amount of net insurance proceeds
actually received by such Indemnified Party as compensation for the damage or
Losses caused by the act, or omission, fact or circumstance giving rise to the
Losses.
Section 10.05. Payment. (a) Any payment by W under this Article 10
shall be made, at the option of W, in cash or by surrendering up to 6,984,500
Parent Common Shares to Parent, which shall be valued at their Fair Market Value
as of the date of payment; provided that in no event shall any election by W to
satisfy an indemnification obligation in cash in lieu of surrendering Parent
Common Shares obligate W to make any cash payment in excess of the Fair Market
Value of the Parent Common Shares that W would otherwise have surrendered had W
not made such election (provided that no such election by W shall limit in any
way its obligation to surrender shares of Parent Series B Preferred Stock (or
cash in lieu thereof) in accordance with this Article 10). If W makes any
payment under this Article 10, in whole or in part, by surrendering the entire
6,984,500 Parent Common Shares, and the aggregate Fair Market Value of the
6,984,500 Parent Common Shares on the date of payment is insufficient to satisfy
W's indemnification obligations under this Article 10, any additional payment by
W under this Article 10 shall be made, at W's option, in cash or by surrendering
shares of Parent Series B Preferred Stock to Parent, which shares shall be
valued at the Face Amount of such shares plus any Accumulated Dividends and
Current Period Dividends (as such terms are defined in the Series B Certificate
of Designations) with respect to such shares accrued to, and not including, the
payment date and unpaid as of the payment date (such Face Amount plus such
dividends, the "Series B Indemnification Value"); provided that in no event
shall any election by W to satisfy an indemnification obligation in cash in lieu
of surrendering Parent Series B Preferred Stock obligate W to make any cash
payment in excess of the Series B Indemnification Value of the shares of Parent
Series B Preferred Stock that W would otherwise have surrendered (for purposes
of this proviso, any shares of Parent Series B Preferred Stock that have been
previously redeemed by Parent pursuant to the terms of the Parent Series B
Preferred Stock shall not be deemed to represent shares of Series B Preferred
Stock that W would otherwise have surrendered) had W not made such election
(provided that no such election by W shall limit in any way its obligations to
make indemnity payments in the amounts required under this Article 10). W hereby
agrees that it shall either (i) retain ownership of a sufficient number of
Parent
87
Common Shares and shares of Parent Series B Preferred Stock to satisfy any
indemnification obligations it may have under this Article 10 until the
fifteen-month anniversary of the Closing Date or, in the event that a claim
under Section 10.01(a) is pending at such time, until the resolution of such
claim, or (ii) prior to disposing of any Parent Common Shares or any shares of
Parent Series B Preferred Stock (other than pursuant to a redemption of any
shares of Parent Series B Preferred Stock pursuant to the terms thereof),
provide a written agreement to Parent that it will make all future payments
under this Article 10 in cash to the extent of the Fair Market Value or Series B
Indemnification Value, as applicable, of any such Parent Common Shares or shares
of Parent Series B Preferred Stock that W has disposed of and that would have
been subject to W's indemnification obligations under this Article 10 if such
disposition had not occurred. W hereby represents and warrants that it has
adequate resources, or the ability to call upon adequate resources, required to
satisfy its indemnity obligations under this Article 10. In the event that any
of Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P., WCAS Capital Partners III, L.P.
or WCAS Information Partners, L.P. liquidates, dissolves or otherwise terminates
its existence, such WCAS Securityholder shall, prior to such liquidation,
dissolution or termination, make adequate provision on terms reasonably
satisfactory to Parent to ensure that its obligations under this Article 10 are
or will be satisfied. Any reference to "6,984,500 Parent Common Shares" in this
Section 10.05 shall be deemed to mean 6,984,500 Parent Common Shares, as such
number may be adjusted appropriately to account for any stock split,
combination, recapitalization or similar event.
(b) Any payment by Parent under this Article 10 shall be made, at
the option of Parent, (i) in cash, (ii) by issuing Parent Common Shares to W,
which shall be valued at their Fair Market Value as of the date of payment, or
(iii) by issuing shares of Parent Series B Preferred Stock to W on the terms and
conditions set forth in the Series B Certificate of Designations, which shall be
valued at the Face Amount of such shares. All payments by Parent under this
Article 10 shall be made to Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P. for the
benefit of all WCAS Securityholders; provided however, that Parent shall be
permitted to make payment to the W Indemnified Parties in cash under this
Section 10.05(b) only to the extent that the sum of (x) the aggregate amount of
such cash plus (y) the total value of the Warrants received by W under Section
8.09 does not exceed 20% of the total value, as of the Closing Date, of the
6,984,500 Parent Common Shares and the Warrants received by W under Section
8.09. For purposes of the immediately preceding sentence, the total value of the
6,984,500 Parent Common Shares shall be the Fair Market Value of such 6,984,500
Parent Common Shares as of the Closing Date. In connection with any payment by
Parent under this Article 10 that shall be made by issuing Parent Common Shares
or shares of Parent Series B Preferred Stock, each of Parent and each WCAS
Securityholder shall cooperate in good faith and use its reasonable best efforts
to promptly make and process all necessary filings and applications and obtain
all consents, approvals, orders, authorizations, registrations and declarations
or expiration or termination of any required waiting periods and to comply with
all applicable laws necessary for Parent to make such payment.
Section 10.06. Exclusive Remedy. From and after Closing,
indemnification pursuant to this Article 10 shall be the exclusive remedy of the
parties hereto for any Loss or Losses arising out of or related to the
transactions contemplated by this Agreement, except in the case of fraud or a
willful breach of this Agreement (provided that (a) with respect to a willful
breach of this Agreement by W or the Company, an individual listed in Section
10.03(e) of the
88
Company Disclosure Schedule had actual knowledge of such breach), and (b) with
respect to a willful breach of this Agreement by Parent, an individual listed in
Section 10.03(f) of the Parent Disclosure Schedule had actual knowledge of such
breach).
ARTICLE 11
TERMINATION
Section 11.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Closing:
(a) by mutual written consent of the parties hereto;
(b) by any party, if the Closing has not occurred by November 30,
2003 (the "Termination Date"), provided that the party seeking to exercise such
right is not then in material breach of any of its obligations under this
Agreement;
(c) by any party, if there shall be any law or regulation that makes
consummation of the Transactions illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining Parent, the Company or W from
consummating the Transactions is entered and such judgment, injunction, order or
decree shall become final and nonappealable;
(d) by Parent, the Company or W, if the adoption of this Agreement
and approval of the Merger by the shareholders of the Company, in accordance
with the applicable provisions of North Carolina Law, shall not have been
obtained at the time such adoption and approval are sought; provided that
neither the Company nor W may terminate this Agreement pursuant to this Section
11.01(d) if the failure of the Company's shareholders to adopt this Agreement
and approve the Merger results from any breach of this Agreement by the Company
or W;
(e) by Parent, if there shall have been a breach of any
representation, warranty, covenant or agreement on the part of W or the Company
contained in this Agreement such that the conditions set forth in Sections
9.02(a) would not be satisfied and (i) such breach is not reasonably capable of
being cured prior to the Termination Date or (ii) in the case of a breach of a
covenant or agreement, if such breach is reasonably capable of being cured prior
to the Termination Date, such breach shall not have been cured prior to the
Termination Date; provided that Parent shall not have the right to terminate
this Agreement pursuant to this Section 11.01(e) if Parent is then in material
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement;
(f) by the Company or W, if there shall have been a breach of any
representation, warranty, covenant or agreement on the part of Parent or Merger
Co. contained in this Agreement such that the conditions set forth in Section
9.03(a) would not be satisfied and (i) such breach is not reasonably capable of
being cured prior to the Termination Date or (ii) if such breach is reasonably
capable of being cured prior to the Termination Date, such breach shall not have
been cured prior to the Termination Date; provided that the Company shall not
have the right to terminate this Agreement pursuant to this Section 11.01(f) if
W or the Company is then
89
in material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement;
(g) by the Company, if, prior to the Company shareholder meeting or
the taking of the written consent referred to in Section 8.01(b), the Board of
Directors of the Company determines in good faith, after consultation with its
outside legal counsel and financial advisors, in response to an unsolicited
Company Acquisition Proposal that did not otherwise result from a breach of
Section 8.03, that such proposal is a Superior Proposal; provided, however, that
the Company shall not be permitted to terminate this Agreement or the Merger
under this Section 11.01(g), and any purported termination under this Section
11.01(g) shall be void and of no force or effect, unless (i) prior to or
concurrently with such termination, the Company pays to Parent the Termination
Fee in accordance with the terms of Section 11.02(b) and enters into a
definitive agreement concerning a Superior Proposal; (ii) the Company has
complied in all material respects with Section 8.03; (iii) the Company has
notified Parent in writing at least two Business Days prior to such termination
of its intention to terminate this Agreement and to enter into a binding written
agreement concerning a Company Acquisition Proposal that constitutes a Superior
Proposal, attaching to such written notice the most current version of such
agreement (it being understood and agreed that any amendment to the amount or
form of consideration to be involved in the Superior Proposal shall require a
new notice and a new two Business Day period); (iv) during such two Business Day
period, the Company engages in good faith negotiations with Parent with respect
to any alteration of the terms of this Agreement or the Transactions as Parent
may propose; and (v) Parent does not make prior to such termination of this
Agreement an offer that the Board of Directors of the Company determines, in
good faith after consultation with its outside legal counsel and financial
advisors, is at least as favorable to the shareholders of the Company as such
Superior Proposal, it being understood that the Company shall not enter into any
such definitive agreement concerning a Superior Proposal during such two
Business Day period;
(h) by Parent, if, prior to the Company shareholder meeting or the
taking of the written consent referred to in Section 8.01(b), the Board of
Directors of the Company shall have failed to recommend or shall have withdrawn
or modified or changed in a manner adverse to Parent its approval or
recommendation of this Agreement or the Merger or shall have recommended a
Superior Proposal (or the Board of Directors of the Company resolves to do any
of the foregoing); or
(i) by Parent, if either the Company or W shall have intentionally
and materially breached any of its obligations under Section 8.03.
Section 11.02. Effect of Termination.
(a) If this Agreement is validly terminated pursuant to Section
11.01, this Agreement shall become void and of no effect with no liability on
the part of any party hereto, except that termination of this Agreement shall be
without prejudice to any rights any party may have hereunder against any other
party for an intentional breach of any covenant, agreement or obligation
contained in or made pursuant to this Agreement or any knowing breach of any
representation or warranty contained in or referred to in this Agreement or in
any schedule, exhibit or certificate delivered hereunder. The agreements
contained in this Section 11.02 and
90
Sections 8.11, 12.03, 12.05, 12.06, 12.07, 12.08, 12.11 and 12.14 shall survive
the termination hereof.
(b) In the event that this Agreement is terminated by the Company
pursuant to Section 11.01(g) or by Parent pursuant to Section 11.01(h), then the
Company shall pay the Termination Fee to Parent prior to or concurrently with
such termination, in the case of termination by the Company pursuant to Section
11.01(g), or within two days of receipt by the Company of notice from Parent of
such termination, in the case of termination by Parent pursuant to Section
11.01(h), such Termination Fee to be payable, in each case, by wire transfer of
immediately available funds to an account designated by Parent. In the event
this Agreement is terminated by Parent pursuant to Section 11.01(d), 11.01(e) or
11.01(i) and (A) after the date hereof and prior to such termination, there
shall have been made and publicly announced or publicly communicated to the
Company's shareholders a Company Acquisition Proposal (which shall not have been
withdrawn in good faith) and (B) concurrently with or within twelve months of
the date of such termination, the Company enters into a definitive agreement
with respect to a Company Acquisition Proposal (which is subsequently
consummated) or a Company Acquisition Proposal is consummated, then the Company
shall pay to Parent the Termination Fee within two days of the consummation of
the Company Acquisition Proposal.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to Parent or Merger Co. or to the Company after the Effective Time,
to:
ITC/\DeltaCom, Inc.
0000 X.X. Xxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: 000-000-0000
with copies to:
ITC/\DeltaCom, Inc.
0000 Xxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxx Xxxxxx
Facsimile: 000-000-0000
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
91
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: 000-000-0000
if to the Company prior to the Effective Time, to:
BTI Telecom Corp.
0000 Xxx Xxxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, III, CFO/COO
Facsimile: 000-000-0000
with copies to:
BTI Telecom Corp.
0000 Xxx Xxxxx Xxxx
Xxxxxxx, XX 00000
Attention.: Legal Department
Facsimile: 000-000-0000
Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile: 000-000-0000
if to any WCAS Securityholder, to:
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Rather
Facsimile: 000-000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Facsimile: 212-450-3800
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate telecopy confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
92
Section 12.02. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Effective Time if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by each party to this Agreement or in the case of a waiver, by the party against
whom the waiver is to be effective; provided that after the adoption of this
Agreement by the shareholders of the Company, no such amendment or waiver shall,
without the further approval of such shareholders, alter or change (i) the
amount or kind of consideration to be received in exchange for any shares of
capital stock of the Company or (ii) any of the terms or conditions of this
Agreement if such alteration or change would adversely affect the rights of the
holders of any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 12.03. Expenses. Except as otherwise contemplated by this
Agreement, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
Section 12.04. Successors and Assigns; Benefit. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign
(other than by operation of law following the Closing), delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto except that (a) Parent and Merger Co. may
make such an assignment to one or more direct or indirect wholly-owned Parent
Subsidiaries, but any such assignment shall not relieve Parent or Merger Co. of
its obligations hereunder, and (b) the WCAS Securityholders may assign to any
Person the right to purchase in the aggregate up to 10% of the Parent Series B
Preferred Stock that the WCAS Securityholders have agreed to purchase in the
Parent Series B Sale, but any such assignment shall not relieve the assigning
WCAS Securityholder of its obligations hereunder. In connection with any such
assignment pursuant to clause (b), each assignee shall agree to be a party to
and be bound by the provisions of this Agreement as a WCAS Securityholder
hereunder and shall be deemed to have made the representations and warranties
set forth in Article 6 (other than Section 6.06). Subsequent to the Effective
Time, in the event that any capital stock or other securities are issued in
respect of, in exchange for, or in substitution of, any Parent Common Shares or
shares of Parent Series B Preferred Stock by reason of any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, distribution to
holders of Parent Common Shares and/or Parent Series B Preferred Stock or
combination of the Parent Common Shares or Parent Series B Preferred Stock, or
any other change in capital structure of Parent, appropriate adjustments shall
be made with respect to the relevant provisions of this Agreement so as to
fairly and equitably preserve, to the extent practicable, the original rights
and obligations of the parties hereto under this Agreement. Nothing in this
Agreement, expressed or implied, shall confer on any Person other than the
parties hereto, and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except that Section 8.14 is
93
intended to confer rights and remedies to the officers and directors of the
Company as and to the extent set forth therein.
Section 12.05. Governing Law. All matters arising out of or relating
to this Agreement shall be construed in accordance with and governed by the
internal laws of the State of New York, except insofar as the Merger is governed
by North Carolina Law.
Section 12.06. Submission to Jurisdiction. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York located in the borough of Manhattan
in the City of New York, or if such court does not have jurisdiction, to the
exclusive jurisdiction of the Supreme Court of the State of New York, New York
County, for the purposes of any suit, action or other proceeding arising out of
this Agreement or any transaction contemplated hereby. Each of the parties
hereto further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth in Section
12.01 shall be effective service of process for any action, suit or proceeding
in New York with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Each of
the parties hereto irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (a) the United States District Court
for the Southern District of New York or (b) the Supreme Court of the State of
New York, New York County, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
Section 12.07. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
Section 12.08. Interpretation. When a reference is made in this
Agreement to Sections, subsections, Schedules or Exhibits, such reference shall
be to a Section, subsection, Schedule or Exhibit to this Agreement unless
otherwise indicated. The words "include", "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation". The word "herein" and similar references mean, except where a
specific Section or Article reference is expressly indicated, the entire
Agreement rather than any specific Section or Article. The table of contents and
the headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Section 12.09. Disclosure Schedules. Notwithstanding anything in this
Agreement or the Company Disclosure Schedule or Parent Disclosure Schedule to
the contrary, (i) the Company and Parent acknowledge that the disclosure by the
Company or Parent of any
94
matter such schedules shall not be deemed to constitute an acknowledgement by
the Company or Parent, as applicable, that the matter is required to be
disclosed by the terms of this Agreement or that it is material and (ii) if any
Section of the Company Disclosure Schedule or Parent Disclosure Schedule lists
an item or information in such a way as to make its relevance to the disclosure
required in another Section readily apparent, the matter shall be deemed to have
been disclosed in such other Section, notwithstanding the omission of an
appropriate cross-reference to such other Section.
Section 12.10. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Section 12.11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 12.12. Entire Agreement. This Agreement, the other Transaction
Agreements and the Confidentiality Agreements constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.
Section 12.13. Specific Performance. (a) The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof in
the United States District Court for the Southern District Court of New York or
the Supreme Court of the State of New York, New York County, in addition to any
other remedy to which they are entitled at law or in equity.
(b) W hereby agrees to take all action within its control necessary
to cause the Company and each of the Subsidiaries, as applicable, to perform all
of their respective agreements, covenants and obligations under this Agreement
to be performed at or prior to the Effective Time, and whenever this Agreement
requires the Company or any Subsidiary to take any action, or refrain from
taking any action, at or prior to the Effective Time, such requirement shall be
deemed to include an undertaking of W to take all action within its control
necessary to cause the Company and each Subsidiary to take such action or
refrain from taking such action, as applicable; provided that in no event shall
W or its Affiliates (i) be required to take any action that, after being advised
by counsel, would constitute a breach of its fiduciary duty, (ii) be deemed to
be in breach of this Section 12.13(b) as a result of actions taken or not taken
by or at the recommendation of the Special Committee or (iii) be required to
take any action (including any action to dissolve the Special Committee) to
nullify or modify any actions taken or not taken by or at the recommendation of
the Special Committee.
95
Section 12.14. Joint and Several Liability.
(a) Parent and Merger Co. hereby agree that they will be jointly and
severally liable for all covenants, agreements, obligations and representations
and warranties made by either of them in this Agreement.
(b) Each of the WCAS Securityholders hereby agrees that they will be
jointly and severally liable for all covenants, agreements, obligations and
representations and warranties made by any of them in this Agreement. Welsh,
Carson, Xxxxxxxx & Xxxxx VIII, L.P. shall act as the representative of W for
purposes of this Agreement and Parent shall be entitled to deal exclusively with
Welsh, Xxxxxx Xxxxxxxx & Xxxxx VIII, L.P. in respect of all matters arising out
of or relating to this Agreement or any of the other Transaction Agreements.
Section 12.15. Definition of Knowledge. As used herein, the words
"knowledge", "best knowledge" or "known" shall, with respect to (i) the Company
or any Subsidiary or (ii) Parent or any Parent Subsidiary, as the case may be,
mean the actual knowledge after reasonable inquiry of those persons listed in
Section 12.15 of the Company Disclosure Schedule or the Parent Disclosure
Schedule, respectively.
96
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
ITC/\DELTACOM, INC.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxx
---------------------------
Title: Chairman & CEO
--------------------------
BTI TELECOM CORP.
By: /s/ Xxxx X. Xxxxxxxx, III
--------------------------------
Name: Xxxx X. Xxxxxxxx, III
---------------------------
Title: CFO/COO
--------------------------
8DBC1 CORP.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxxx
---------------------------
Title: President
--------------------------
WCAS SECURITYHOLDERS:
WCAS CAPITAL PARTNERS III, L.P.
By: WCAS CP III Associates L.L.C.,
General Partner
By: /s/ Xxxxxxxx X. Rather
--------------------------------
Name: Xxxxxxxx X. Rather
---------------------------
Title: Managing Member
---------------------------
WELSH, CARSON, XXXXXXXX & XXXXX
VIII, L.P.
By: WCAS VIII Associates LLC,
General Partner
By: /s/ Xxxxxxxx X. Rather
--------------------------------
Name: Xxxxxxxx X. Rather
Title: Managing Member
WCAS INFORMATION PARTNERS, L.P.
By: WCAS Info Partners,
General Partner
By: /s/ Xxxxxxxx X. Rather
--------------------------------
Name: Xxxxxxxx X. Rather
Title: Attorney-in-fact
Individual investors and trusts:
By: /s/ Xxxxxxxx X. Rather
--------------------------------
Xxxxxxxx X. Rather, as Attorney-
in-fact for the individual
investors listed below:
Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxx
Xxxxxx X. XxXxxxxxx
Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. xx Xxxxxx
Xxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxxx
The Estate of Xxxxxxx X. Xxxxxx
D. Xxxxx Xxxxxxx
Xxxxxx Xxxxx
2
Xxxxx XxxXxxxx
Xxxx Xxxxxxx
Xxxx Xxxxxxx
Xxxx X. Xxx
Xxxxxxxx X. Rather
Xxxxx X. Xxxxxxxx
XXX f/b/o Xxxxx X. Xxxxxxxx
XXX f/b/o Xxxxxxxx X. Rather
3
Exhibit 2.1 (continued)
AGREEMENT AND AMENDMENT NO. 1
TO AGREEMENT AND PLAN OF MERGER
Agreement and Amendment No. 1 dated as of July 31, 2003 (this "Agreement
and Amendment No. 1") to the Agreement and Plan of Merger (as amended from time
to time, the "Merger Agreement") dated as of July 2, 2003 among BTI Telecom
Corp., ITC DeltaCom, Inc., 8DBC1 Corp. and the WCAS Securityholders named
therein. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Merger Agreement.
The parties hereto agree as follows:
1. Pursuant to the definition of "Transaction Expenses" set forth in
Section 1.01 of the Merger Agreement, the parties hereto agree that (i) the
aggregate of $444,000 of expenses set forth on Annex A hereto under the heading
"Severance" ("Severance Transaction Expenses") and the aggregate of $64,500 of
expenses set forth on Annex A hereto under the heading "Vac. Payout" ("Vacation
Transaction Expenses") shall be Transaction Expenses for all purposes of the
Merger Agreement in accordance with this Agreement and Amendment No. 1, (ii)
$1,434,100 of expenses set forth in Annex B hereto under the heading "Qwest
Settlement Expenses" ("Qwest Transaction Expenses") shall be Transaction
Expenses for all purposes of the Merger Agreement in accordance with this
Agreement and Amendment No. 1, (iii) all Severance Transaction Expenses,
Vacation Transaction Expenses and Qwest Transaction Expenses shall be funded or
paid solely out of proceeds of Transaction Expenses Notes issue in respect
thereof and (iv) the following items shall be "Working Capital Excluded Items":
(A) liabilities relating to the Severance Transaction Expenses, (B) liabilities
relating to the Vacation Transaction Expenses not to exceed an aggregate amount
of $19,300/1/ and (C) the proceeds of any Transaction Expenses Notes issued in
respect of the Severance Transaction Expenses and the Vacation Transaction
Expenses (whether such Transaction Expenses Notes are issued before, after or
concurrently with the payment of such Transaction Expenses).
2. The Merger Agreement is hereby amended by adding a new definition of
"Vacation Transaction Expenses" to Section 1.01 of the Merger Agreement in
appropriate alphabetical order to read as follows:
""Accrued Vacation Transaction Expenses" shall mean "Vacation
Transaction Expenses" (as defined in paragraph 1 of the Agreement and
Amendment No. 1 to Agreement and Plan of Merger dated
----------
/1/ Number corresponds to the unaccrued portion of the vacation payout.
as of July 15, 2003 among the parties hereto) in an aggregate amount equal
to $45,200./2/"
3. The definition of "Working Capital Excluded Items" in Section 1.01 of
the Merger Agreement is hereby amended and restated in its entirety to read as
follows:
""Working Capital Excluded Items" means current assets reflected on
the Revised Working Capital Worksheet as "Reserved Cash" and liabilities
related to Transaction Expenses (other than liabilities related to the
Accrued Vacation Transaction Expenses or the matter involving Qwest
Communications Corp.) that would otherwise be reflected on the Revised
Working Capital Worksheet as current liabilities incurred or accrued by the
Company or the Subsidiaries."
4. Section 9.02(e) of the Merger Agreement is hereby amended and restated
in its entirety to read as follows:
"(e)(i) the Company and the Subsidiaries shall have an aggregate
amount of Working Capital as of the close of business on the Business Day
immediately preceding the Closing Date equal to or greater than the sum of
(x) negative $6,000,000 plus (y) the amount (which shall, in any case, be a
positive number) if any, by which any liability set forth on the Working
Capital Worksheet relating to the Accrued Vacation Transaction Expenses or
the matter involving Qwest Communications Corp. has been reduced or paid
using the proceeds of Transaction Expenses Notes, and (ii) Parent shall
have received the Revised Working Capital Worksheet and a certificate
signed on behalf of the Company by the Chief Executive Officer, Chief
Financial Officer or any Vice President of the Company with respect to the
amount of Working Capital of the Company and the Subsidiaries to the
foregoing effect; and"
5. Any provision of this Agreement and Amendment No. 1 may be amended or
waived only with the written consent of each party hereto. This Agreement and
Amendment No. 1 shall not constitute an amendment or modification of any
provision of the Merger Agreement not expressly referred to herein. Except as
expressly amended or modified herein, the provisions of the Merger Agreement are
and shall remain in full force and effect. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Merger Agreement shall refer to the Merger Agreement as amended hereby.
----------
/2/ Number corresponds to the accrued portion of the vacation payout.
6. This Agreement and Amendment No. 1 and the rights of the parties under
it will be governed by and construed in all respects in accordance with the laws
of the state of New York. The parties hereto hereby irrevocably waive any and
all rights to trial by jury in any legal proceeding arising out of or related to
this Agreement and Amendment No. 1.
[SIGNATURE PAGES TO AGREEMENT
AND AMENDMENT NO. 1]
Very truly yours,
ITC/\DELTACOM, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President/Chief
Financial Officer
BTI TELECOM CORP.
By: /s/ Xxxx X. Xxxxxxxx, III
------------------------------------
Name: Xxxx X. Xxxxxxxx, III
Title: Chief Financial Officer
8DBC1 CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: /s/ Xxxxxxx X. Xxxxxxx
Title: Senior Vice President/Chief
Financial Officer
WCAS SECURITYHOLDERS:
WCAS CAPITAL PARTNERS III, L.P.
By: WCAS CP III Associates L.L.C.,
General Partner
By: /s/ Xxxxxxxx X. Rather
------------------------------------
Name: Xxxxxxxx X. Rather
Title: Managing Member
WELSH, CARSON, XXXXXXXX &
XXXXX VIII, L.P.
By: WCAS VIII Associates LLC, General
Partner
By: /s/ Xxxxxxxx X. Rather
------------------------------------
Name: Xxxxxxxx X. Rather
Title: Managing Member
WCAS INFORMATION PARTNERS, L.P.
By: WCAS Info Partners, General Partner
By: /s/ Xxxxxxxx X. Rather
------------------------------------
Name: Xxxxxxxx X. Rather
Title: Attorney-in-fact
Individual investors and trusts:
By: /s/ Xxxxxxxx X. Rather
------------------------------------
Xxxxxxxx X. Rather, as
Attorney-in-fact for the individual
investors listed below:
Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxx
Xxxxxx X. XxXxxxxxx
Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. xx Xxxxxx
Xxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxxx
The Estate of Xxxxxxx X. Xxxxxx
D. Xxxxx Xxxxxxx
Xxxxxx Xxxxx
Xxxxx XxxXxxxx
Xxxx Xxxxxxx
Xxxx Xxxxxxx
Xxxx X. Xxx
Xxxxxxxx X. Rather
Xxxxx X. Xxxxxxxx
XXX f/b/o Xxxxx X. Xxxxxxxx
XXX f/b/o Xxxxxxxx X. Rather
Exhibit 2.1 (continued)
AGREEMENT AND AMENDMENT NO. 2
TO AGREEMENT AND PLAN OF MERGER
Agreement and Amendment No. 2 dated as of September 29, 2003 (this
"Agreement") relating to the Agreement and Plan of Merger (as amended from time
to time, the "Merger Agreement") dated as of July 2, 2003 among BTI Telecom
Corp., ITC DeltaCom, Inc., 8DBC1 Corp. and the WCAS Securityholders named
therein. Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Merger Agreement.
The parties hereto agree as follows:
1. Pursuant to the definition of "Transaction Expenses" set forth in
Section 1.01 of the Merger Agreement, the parties hereto agree that (i) in
addition to any Transaction Expenses referred to in Agreement and Amendment No.
1 dated as of July 31, 2003 to Agreement and Plan of Merger, an aggregate of
$603,901 of expenses set forth on Annex A hereto under the heading "Qwest
Settlement Expenses" ("Qwest Transaction Expenses") shall be Transaction
Expenses for all purposes of the Merger Agreement in accordance with this
Agreement and Amendment No. 2 and (ii) all Qwest Transaction Expenses shall be
funded or paid solely out of proceeds of Transaction Expenses Notes issued in
respect thereof.
2. Clause (i)(z) of Section 9.02(b) of the Merger Agreement is hereby
amended and restated to read in its entirety as follows:
"(z) exclude any Indebtedness of the Company or its Subsidiaries owing
to any WCAS Securityholder that will be terminated, cancelled, surrendered
or eliminated at the Closing pursuant to Section 2.01(c)(i) and Section
8.09, and"
3. Any provision of this Agreement and Amendment No. 2 may be amended or
waived only with the written consent of each party hereto. This Agreement and
Amendment No. 2 shall not constitute an amendment or modification of any
provision of the Merger Agreement not expressly referred to herein. Except as
expressly amended or modified herein, the provisions of the Merger Agreement are
and shall remain in full force and effect. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Merger Agreement shall refer to the Merger Agreement as amended hereby.
4. This Agreement and Amendment No. 2 and the rights of the parties under
it will be governed by and construed in all respects in accordance with the laws
of the state of New York. The parties hereto hereby irrevocably waive any and
all rights to trial by jury in any legal proceeding arising out of or related to
this Agreement and Amendment No. 2.
[SIGNATURE PAGES TO AGREEMENT
AND AMENDMENT NO. 2]
Very truly yours,
ITC/\DELTACOM, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President/Chief
Financial Officer
BTI TELECOM CORP.
By: /s/ Xxxx X. Xxxxxxxx, III
------------------------------------
Name: Xxxx X. Xxxxxxxx, III
Title: Chief Financial Officer
8DBC1 CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: /s/ Xxxxxxx X. Xxxxxxx
Title: Senior Vice President/Chief
Financial Officer
WCAS SECURITYHOLDERS:
WCAS CAPITAL PARTNERS III, L.P.
By: WCAS CP III Associates L.L.C.,
General Partner
By: /s/ Xxxxxxxx X. Rather
------------------------------------
Name: Xxxxxxxx X. Rather
Title: Managing Member
WELSH, CARSON, XXXXXXXX &
XXXXX VIII, L.P.
By: WCAS VIII Associates LLC,
General Partner
By: /s/ Xxxxxxxx X. Rather
------------------------------------
Name: Xxxxxxxx X. Rather
Title: Managing Member
WCAS INFORMATION PARTNERS, L.P.
By: WCAS Info Partners, General Partner
By: /s/ Xxxxxxxx X. Rather
------------------------------------
Name: Xxxxxxxx X. Rather
Title: Attorney-in-fact
Individual investors and trusts:
By: /s/ Xxxxxxxx X. Rather
------------------------------------
Xxxxxxxx X. Rather, as
Attorney-in-fact for the individual
investors listed below:
Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxx
Xxxxxx X. XxXxxxxxx
Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. xx Xxxxxx
Xxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxxx
The Estate of Xxxxxxx X. Xxxxxx
D. Xxxxx Xxxxxxx
Xxxxxx Xxxxx
Xxxxx XxxXxxxx
Xxxx Xxxxxxx
Xxxx Xxxxxxx
Xxxx X. Xxx
Xxxxxxxx X. Rather
Xxxxx X. Xxxxxxxx
XXX f/b/o Xxxxx X. Xxxxxxxx
XXX f/b/o Xxxxxxxx X. Rather
