EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
MCLEODUSA INCORPORATED,
EASTSIDE ACQUISITION CO.
and
CONSOLIDATED COMMUNICATIONS INC.
Dated as of June 14, 1997
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER......................................................... 1
SECTION 1.01. The Merger................................................... 1
SECTION 1.02. Effective Time............................................... 2
SECTION 1.03. Effect of the Merger......................................... 2
SECTION 1.04. Certificate of Incorporation; Bylaws......................... 2
SECTION 1.05. Directors and Officers....................................... 2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF
CERTIFICATES.................................................. 3
SECTION 2.01. Conversion of Securities..................................... 3
SECTION 2.02. Exchange of Certificates..................................... 9
SECTION 2.03. Share Transfer Books........................................ 12
SECTION 2.04. Dissenting Shareholders..................................... 12
SECTION 2.05. Closing..................................................... 13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 13
SECTION 3.01. Organization and Standing................................... 13
SECTION 3.02. Subsidiaries................................................ 14
SECTION 3.03. Articles of Incorporation and Bylaws........................ 14
SECTION 3.04. Capitalization.............................................. 15
SECTION 3.05. Authority; Binding Obligation............................... 16
SECTION 3.06. No Conflict; Required Filings and Consents.................. 16
SECTION 3.07. Licenses; Compliance........................................ 17
SECTION 3.08. Financial Information....................................... 19
SECTION 3.09. Undisclosed Liabilities..................................... 19
SECTION 3.10. Absence of Certain Changes or Events........................ 20
SECTION 3.11. Litigation; Disputes........................................ 21
SECTION 3.12. Debt Instruments............................................ 22
SECTION 3.13. Leases...................................................... 22
SECTION 3.14. Other Agreements; No Default................................ 22
SECTION 3.15. Labor Relations............................................. 24
SECTION 3.16. Pension and Benefit Plans................................... 25
SECTION 3.17. Taxes and Tax Matters....................................... 30
SECTION 3.18. Customers................................................... 32
SECTION 3.19. Certain Business Practices.................................. 33
SECTION 3.20. Insurance................................................... 33
SECTION 3.21. Potential Conflicts of Interest............................. 34
SECTION 3.22. Receivables................................................. 35
SECTION 3.23. Real Property............................................... 35
SECTION 3.24. Books and Records........................................... 36
- i -
Page
----
SECTION 3.25. Assets...................................................... 36
SECTION 3.26. No Infringement or Contest.................................. 36
SECTION 3.27. Opinion of Financial Advisor................................ 37
SECTION 3.28. Board Recommendation........................................ 37
SECTION 3.29. Vote Required............................................... 37
SECTION 3.30. Banks; Attorneys-in-fact.................................... 37
SECTION 3.31. Investment Agreements....................................... 38
SECTION 3.32. Brokers..................................................... 38
SECTION 3.33. Environmental Matters....................................... 38
SECTION 3.34. Disclosure.................................................. 39
SECTION 3.35. Company Shareholders........................................ 39
SECTION 3.36. Directors and Officers...................................... 39
SECTION 3.37. Copies of Documents......................................... 40
SECTION 3.38. Operation of the Company's Business......................... 40
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB...... 40
SECTION 4.01. Organization and Qualification; Subsidiaries................ 41
SECTION 4.02. Articles of Incorporation and Bylaws........................ 41
SECTION 4.03. Authority; Binding Obligation............................... 41
SECTION 4.04. No Conflict; Required Filings and Consents.................. 42
SECTION 4.05. No Prior Activities of Acquiror Sub......................... 43
SECTION 4.06. Brokers..................................................... 43
SECTION 4.07. SEC Documents............................................... 43
SECTION 4.08. Acquiror Common Stock....................................... 44
SECTION 4.09. Capitalization.............................................. 44
SECTION 4.10. Absence of Registration Rights.............................. 45
SECTION 4.11. Absence of Dividends........................................ 45
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS......................... 45
SECTION 5.01. Conduct of Business of the Company.......................... 45
SECTION 5.02. Other Actions............................................... 48
SECTION 5.03. Certain Tax Matters......................................... 48
SECTION 5.04. Access and Information...................................... 49
SECTION 5.05. No Solicitation............................................. 49
ARTICLE VI ADDITIONAL AGREEMENTS............................................ 50
SECTION 6.01. Meeting of Shareholders..................................... 50
SECTION 6.02. Appropriate Action; Consents; Filings....................... 51
SECTION 6.03. Letters of Accountants...................................... 52
SECTION 6.04. Update Disclosure; Breaches................................. 52
SECTION 6.05. Investment Agreements....................................... 53
SECTION 6.06. Public Announcements........................................ 53
SECTION 6.07. Employee Matters............................................ 53
- ii -
Page
----
SECTION 6.08. Acquiror Information........................................ 54
SECTION 6.09. Obligations of Acquiror Sub................................. 54
SECTION 6.10. Unaudited Financial Information............................. 54
SECTION 6.11. Directors of Acquiror....................................... 54
SECTION 6.12. Environmental Matters....................................... 55
SECTION 6.13. Acquiror SEC Documents...................................... 55
SECTION 6.14. Directors' and Officers' Insurance;
Indemnification.......................................... 55
SECTION 6.15. Board of Directors of Illinois Consolidated
Telephone Company........................................ 56
SECTION 6.16. Officers.................................................... 57
SECTION 6.17. Post-Merger Operations...................................... 57
SECTION 6.18. Stockholders' Agreement..................................... 57
ARTICLE VII CONDITIONS PRECEDENT............................................ 58
SECTION 7.01. Conditions to Obligations of Each Party Under
This Merger Agreement.................................... 58
SECTION 7.02. Additional Conditions to Obligations of Acquiror
and Acquiror Sub......................................... 59
SECTION 7.03. Additional Conditions to Obligations of the
Company.................................................. 61
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.............................. 62
SECTION 8.01. Termination................................................. 62
SECTION 8.02. Effect of Termination....................................... 63
SECTION 8.03. Expenses.................................................... 64
SECTION 8.04. Amendment................................................... 64
SECTION 8.05. Extension; Waiver........................................... 65
ARTICLE IX GENERAL PROVISIONS............................................... 65
SECTION 9.01. Nonsurvival of Representations and Warranties............... 65
SECTION 9.02. Notices..................................................... 65
SECTION 9.03. Headings.................................................... 66
SECTION 9.04. Severability................................................ 66
SECTION 9.05. Entire Agreement............................................ 67
SECTION 9.06. Assignment.................................................. 67
SECTION 9.07. Parties in Interest......................................... 67
SECTION 9.08. Mutual Drafting............................................. 67
SECTION 9.09. Specific Performance........................................ 67
SECTION 9.10. Governing Law............................................... 68
SECTION 9.11. Counterparts................................................ 68
ARTICLE X DEFINITIONS....................................................... 68
- iii -
EXHIBITS
--------
EXHIBIT A FORM OF INVESTMENT AGREEMENT
EXHIBIT B FORM OF EMPLOYMENT, CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
EXHIBIT C FORM OF STOCK OPTION AGREEMENT
EXHIBIT D FORM OF OPINION OF XXXXXX XXXXXX & XXXXX
EXHIBIT E FORM OF OPINION OF XXXXX & XXXXXXX L.L.P.
McLeodUSA Incorporated agrees to furnish supplementally a copy of
any of the Exhibits listed above to the Commission upon request.
- iv -
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION, dated as of June 14, 1997 (this
"Merger Agreement"), among McLeodUSA Incorporated, a Delaware corporation
----------------
("Acquiror"), Eastside Acquisition Co., a Delaware corporation ("Acquiror Sub")
-------- ------------
and a wholly owned subsidiary of Acquiror, and Consolidated Communications Inc.,
an Illinois corporation (the "Company").
-------
WHEREAS, the Company, upon the terms and subject to the conditions of
this Merger Agreement and in accordance with the Business Corporation Act of
1983 of the State of Illinois ("Illinois Law") and the General Corporation Law
------------
of the State of Delaware ("Delaware Law"), will merge with and into Acquiror Sub
------------
(the "Merger");
------
WHEREAS, the Board of Directors of the Company has approved and
adopted this Merger Agreement and the transactions contemplated hereby and
recommended approval and adoption of this Merger Agreement by the shareholders
of the Company;
WHEREAS, the Board of Directors of Acquiror has determined that the
Merger is in the best interests of Acquiror and its stockholders and the Boards
of Directors of Acquiror and Acquiror Sub have approved and adopted this Merger
Agreement and the transactions contemplated hereby; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization under the provisions of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code");
----
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this Merger
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
Upon the terms and subject to the conditions set forth in this Merger
Agreement, and in accordance with Illinois Law and Delaware Law, at the
Effective Time (as defined in Section 1.02) the Company shall be merged with and
into Acquiror Sub. As a result of the Merger, the separate corporate existence
of the Company shall cease and Acquiror Sub shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
---------------------
SECTION 1.02. Effective Time.
Subject to the provisions of Section 2.05, as promptly as practicable
after the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing this Merger Agreement, articles of merger or other appropriate Documents
(as defined in Article X) (in any such case, the "Articles of Merger") with the
------------------
Secretary of State of the State of Illinois and the Secretary of State of the
State of Delaware, in such form as required by, and executed in accordance with
the relevant provisions of, Illinois Law and Delaware Law (the date and time of
such filing being the "Effective Time").
--------------
SECTION 1.03. Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided
in the applicable provisions of Illinois Law and Delaware Law. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of Acquiror Sub and the
Company shall vest in the Surviving Corporation, and all debts, liabilities and
duties of Acquiror Sub and the Company shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.04. Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Acquiror prior to the
Effective Time, at the Effective Time the certificate of incorporation of
Acquiror Sub, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the Surviving Corporation, until thereafter
amended as provided by Law (as defined in Article X) and such certificate of
incorporation; provided, however, that at the Effective Time, Article 1 of the
-------- -------
certificate of incorporation of the Surviving Corporation shall be amended to
read as follows: "The name of the corporation is Consolidated Communications
Inc."
(b) Unless otherwise determined by Acquiror prior to the
Effective Time, at the Effective Time the bylaws of Acquiror Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of the Surviving
Corporation until thereafter amended as provided by Law, the certificate of
incorporation of the Surviving Corporation and such bylaws.
SECTION 1.05. Directors and Officers.
The directors of Acquiror Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the certificate of incorporation and bylaws of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
-2-
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities.
The total aggregate consideration to be paid by Acquiror in the
Merger shall be 8,488,613 shares of Class A common stock, par value $.01 per
share, of Acquiror ("Acquiror Common Stock") and $155 million in cash, subject
---------------------
to Section 2.02(e). At the Effective Time, by virtue of the Merger and without
any action on the part of Acquiror Sub, the Company or holders of any of the
following securities:
(a) Company Common Shares. Subject to the other provisions
---------------------
of this Section 2.01(a), each share of common shares, par value $5.00
per share, of the Company ("Company Common Shares") issued and
---------------------
outstanding immediately prior to the Effective Time (other than any
shares of Company Common Shares to be canceled pursuant to Section
2.01(e) or any shares of Company Capital Stock (as defined in Section
3.04) ("Dissenting Shares") held by any shareholder of the Company
-----------------
who elects to exercise appraisal rights under Illinois Law) shall be
converted, subject to Section 2.02(e), into (i) the right to receive
an amount in cash, without interest (the "Per Share Common Share Cash
---------------------------
Amount"), determined by dividing (A) the sum (the "Pre-Election
------ ------------
Aggregate Value") of $155 million and the product of (1) 7,597,566
---------------
and (2) the closing price (the "Pre-Election Acquiror Common Stock
----------------------------------
Price") of a share of Acquiror Common Stock on The Nasdaq Stock
-----
Market's National Market ("Nasdaq") on the last trading day
------
immediately prior to the Election Deadline (as defined in Section
2.01(a)(vii)), by (B) the number of outstanding Company Common
Shares, (ii) the right to receive a number of shares of Acquiror
Common Stock (the "Common Share Exchange Ratio") determined by
---------------------------
dividing the Per Share Common Share Cash Amount by the Pre-Election
Acquiror Common Stock Price, or (iii) the right to receive a
combination of shares of Acquiror Common Stock and cash determined in
accordance with Section 2.01(a)(iii), Section 2.01(a)(iv) or Section
2.01(a)(v); provided, however, that, in any event, if between the
-------- -------
date of this Merger Agreement and the Effective Time the outstanding
shares of Acquiror Common Stock or Company Common Shares shall have
been changed into a different number of shares or a different class
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, or
Acquiror shall have declared, paid or set aside a cash dividend or
other distribution on the Acquiror Common Stock, the Common Share
Exchange Ratio and the Per Share Common Share Cash Amount shall
-3-
be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination,
exchange of shares, cash dividend or other distribution. Subject to
the foregoing proviso and to Section 2.02(e), the total outstanding
Company Common Shares shall be converted into an aggregate of
7,597,566 shares of Acquiror Common Stock and $155 million.
(i) The aggregate number of shares of Company
Common Shares to be converted into the right to receive
cash in the Merger (the "Cash Election Number") shall be
--------------------
equal to the product of (A) the total outstanding Company
Common Shares and (B) a fraction (the "Cash Election
-------------
Fraction") the numerator of which is $155 million and the
--------
denominator of which is the Pre-Election Aggregate Value,
and the aggregate number of shares of Company Common Shares
to be converted into the right to receive Acquiror Common
Stock in the Merger (the "Stock Election Number") shall be
---------------------
equal to a number determined by multiplying the total
outstanding Company Common Shares by a fraction equal to
one minus the Cash Election Fraction; provided, however,
-------- -------
that, in any event, if between the date of this Merger
Agreement and the Effective Time the outstanding shares of
Company Common Shares shall have been changed into a
different number of shares or a different class by reason
of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares,
or Acquiror shall have declared, paid or set aside a cash
dividend or other distribution, the Cash Election Number
and the Stock Election Number shall be correspondingly
adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or
exchange of shares, cash dividend or other distribution.
(ii) Within the limits of Section 2.01(a)(i) and
subject to the other provisions of this Section 2.01(a),
each record holder of shares of Company Common Shares
immediately prior to the Effective Time will be entitled
(A) to elect to receive all cash for such shares (a "Cash
----
Election"), (B) to elect to receive all Acquiror Common
--------
Stock for such shares (a "Stock Election"), (C) to elect to
--------------
receive a specific combination of cash and Acquiror Common
Stock for such shares (a "Mixed Election"), or (D) to
--------------
indicate that such record holder has no preference as to
the receipt of cash or Acquiror Common Stock for such
shares (a "Non-Election"). All such elections shall be made
------------
on a form designed for that purpose by Acquiror (a "Form of
-------
Election"). Holders of record of shares of Company Common
--------
Shares who hold such shares as nominees, trustees or in
other representative capacities (a "Representative") may
--------------
submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election
-4-
covers all the shares of Company Common Shares held by each
Representative for a particular beneficial owner.
(iii) If the aggregate number of shares of
Company Common Shares covered by Cash Elections and by the
cash portion of Mixed Elections (the "Cash Election
-------------
Shares") exceeds the Cash Election Number, each share of
------
Company Common Shares covered by Stock Elections and by the
stock portion of Mixed Elections (the "Stock Election
--------------
Shares") and each share of Company Common Shares covered by
------
Non-Elections (the "Non-Election Shares") shall be
-------------------
converted into the right to receive Acquiror Common Stock
at the Common Share Exchange Ratio pursuant to Section
2.01(a), and each Cash Election Share shall be converted
into the right to receive Acquiror Common Stock and cash in
the following manner: each Cash Election Share shall be
converted into the right to receive (A) an amount in cash,
without interest, equal to the product of (1) the Per Share
Common Share Cash Amount and (2) a fraction (the "Cash
----
Overelection Fraction"), the numerator of which shall be
---------------------
the Cash Election Number and the denominator of which shall
be the total number of Cash Election Shares, and (B) a
number of shares of Acquiror Common Stock, subject to
Section 2.02(e), equal to the product of (1) the Common
Share Exchange Ratio and (2) a fraction equal to one minus
the Cash Overelection Fraction.
(iv) If the aggregate number of Stock Election
Shares exceeds the Stock Election Number, each Cash
Election Share and each Non-Election Share shall be
converted into the right to receive the Per Share Common
Share Cash Amount pursuant to Section 2.01(a), and:
(A) if the aggregate number of Stock
Election Shares identified on the Form of
Election as being held by a Charitable Trust or
Charitable Remainder Trust exempt from federal
income tax under Section 501 or Section 604 of
the Code ("Charitable Trust Stock Election
-------------------------------
Shares") is less than the Stock Election Number,
------
then each Charitable Trust Stock Election Share
shall be converted into the right to receive
Acquiror Common Stock at the Common Share
Exchange Ratio pursuant to Section 2.01(a), and
each Stock Election Share other than a Charitable
Trust Stock Election Share shall be converted
into the right to receive Acquiror Common Stock
and cash in the following manner: each Stock
Election Share other than a Charitable Trust
Stock Election Share shall be converted into the
right to receive (1) a number of shares of
Acquiror Common Stock, subject to Section
2.02(e), equal to the product of (x) the Common
Share Exchange Ratio and (y) a fraction (the
"Stock
-----
-5-
Overelection Fraction"), the numerator of
---------------------
which shall be the excess of the Stock Election
Number over the number of Charitable Trust Stock
Election Shares and the denominator of which
shall be the total number of Stock Election
Shares other than Charitable Trust Stock Election
Shares, and (2) an amount in cash, without
interest, equal to the product of (x) the Per
Share Common Share Cash Amount and (y) a fraction
equal to one minus the Stock Overelection
Fraction; or
(B) if the aggregate number of
Charitable Trust Stock Election Shares is greater
than the Stock Election Number, then each Stock
Election Share other than a Charitable Trust
Stock Election Share shall be converted into the
right to receive the Per Share Common Share Cash
Amount pursuant to Section 2.01(a), and each
Charitable Trust Stock Election Share shall be
converted into the right to receive Acquiror
Common Stock and cash in the following manner:
each Charitable Trust Stock Election Share shall
be converted into the right to receive (1) a
number of shares of Acquiror Common Stock,
subject to Section 2.02(e), equal to the product
of (x) the Common Share Exchange Ratio and (y) a
fraction (the "Charitable Trust Stock
----------------------
Overelection Fraction"), the numerator of which
---------------------
shall be the Stock Election Number and the
denominator of which shall be the total number of
Charitable Trust Stock Election Shares, and (2)
an amount in cash, without interest, equal to the
product of (x) the Per Share Common Share Cash
Amount and (y) a fraction equal to one minus the
Charitable Trust Stock Overelection Fraction.
(v) In the event that neither Section
2.01(a)(iii) nor Section 2.01(a)(iv) above is applicable,
each Cash Election Share shall be converted into the right
to receive the Per Share Common Share Cash Amount and each
Stock Election Share shall be converted into the right to
receive Acquiror Common Stock at the Common Share Exchange
Ratio pursuant to Section 2.01(a), and each Non-Election
Share, if any, shall be converted into the right to receive
Acquiror Common Stock and cash in the following manner:
each Non-Election Share shall be converted into the right
to receive (A) an amount in cash, without interest, equal
to the product of (1) the Per Share Common Share Cash
Amount and (2) a fraction (the "Non-Election Fraction"),
---------------------
the numerator of which shall be the excess, if any, of the
Cash Election Number over the total number of Cash Election
Shares and the denominator of which shall be the excess of
(x) the number of shares of Company Common Shares
outstanding immediately prior to the Effective Time over
(y) the sum of the total number of Cash
-6-
Election Shares and the total number of Stock Election
Shares and (B) a number of shares of Acquiror Common Stock
equal to the product of (1) the Common Share Exchange Ratio
and (2) a fraction equal to one minus the Non-Election
Fraction.
(vi) Elections shall be made by holders of
Company Common Shares by mailing to the Exchange Agent (as
defined in Section 2.02(a)) a Form of Election. To be
effective, a Form of Election must be properly completed,
signed and submitted to the Exchange Agent prior to the
Election Deadline and accompanied by the certificates
representing the shares of Company Common Shares as to
which such Form of Election relates, duly endorsed in blank
or otherwise in a form acceptable for transfer on the books
of the Company (or by an appropriate guarantee of delivery
of such certificates as set forth in such Form of Election
from a commercial bank or trust company in the United
States or a member of a registered national securities
exchange or the NASD (as defined in Article X)).
(vii) Acquiror and the Company shall each use its
best efforts to mail the Form of Election to all holders of
record of Company Common Shares on the record date of the
Company Shareholders' Meeting (as defined in Section 6.01).
A Form of Election must be received by the Exchange Agent
by the close of business on the date three (3) business
days prior to the Effective Time (the "Election Deadline")
-----------------
in order to be effective. All elections may be revoked only
by written notice received by the Exchange Agent prior to
the Election Deadline.
(viii) For the purposes hereof, a holder of
Company Common Shares who does not submit a Form of
Election which is received by the Exchange Agent prior to
the Election Deadline shall be deemed to have made a
Non-Election. If Acquiror or the Exchange Agent shall
determine that any purported Cash Election, Mixed Election
or Stock Election was not properly made, such purported
Cash Election, Mixed Election or Stock Election shall be
deemed to be of no force and effect and the shareholder
making such purported Cash Election, Mixed Election or
Stock Election shall, for purposes hereof, be deemed to
have made a Non-Election.
(ix) Acquiror will have the sole discretion,
which it may delegate in whole or in part to the Exchange
Agent, to determine whether Forms of Election have been
properly completed, signed and submitted or revoked and to
disregard immaterial defects in Forms of Election. The
decision of Acquiror (or the Exchange Agent) in such
matters shall be conclusive and binding. Neither Acquiror
nor the
-7-
Exchange Agent will be under any obligation to notify any
Person (as defined in Article X) of any defect in a Form of
Election submitted to the Exchange Agent. The Exchange
Agent shall also make all computations contemplated by this
Section 2.01(a) and all such computations shall be
conclusive and binding on the holders of Company Common
Shares absent manifest error. Acquiror may make such rules
for the implementation of the elections provided for herein
as are consistent with this Section 2.01(a) and necessary
or desirable fully to effect such elections.
(b) Company Series A Cumulative Preferred Shares. Each
--------------------------------------------
share of Series A cumulative preferred shares, par value $100 per
share, of the Company ("Company Series A Preferred Shares") issued
---------------------------------
and outstanding immediately prior to the Effective Time (other than
any shares of Company Series A Preferred Shares to be canceled
pursuant to Section 2.01(e) or any Dissenting Shares), plus all
accrued and unpaid dividends thereon, shall be converted, subject to
Section 2.02(e), into the right to receive 4.2709 shares of Acquiror
Common Stock (the "Series A Exchange Ratio"); provided, however,
----------------------- -------- -------
that, in any event, if between the date of this Merger Agreement and
the Effective Time the outstanding shares of Acquiror Common Stock or
Company Series A Preferred Shares shall have been changed into a
different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, or Acquiror shall have made
a cash dividend or other distribution on the Acquiror Common Stock,
the Series A Exchange Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares, cash
dividend or other distribution.
(c) Company Series B Cumulative Preferred Shares. Each
--------------------------------------------
share of Series B cumulative preferred shares, par value $100 per
share, of the Company ("Company Series B Preferred Shares") issued
---------------------------------
and outstanding immediately prior to the Effective Time (other than
any shares of Company Series B Preferred Shares to be canceled
pursuant to Section 2.01(e) or any Dissenting Shares), plus all
accrued and unpaid dividends thereon, shall be converted, subject to
Section 2.02(e), into the right to receive 4.4271 shares of Acquiror
Common Stock (the "Series B Exchange Ratio"); provided, however,
----------------------- -------- -------
that, in any event, if between the date of this Merger Agreement and
the Effective Time the outstanding shares of Acquiror Common Stock or
Company Series B Preferred Shares shall have been changed into a
different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, or Acquiror shall have made
a cash dividend or other distribution on the Acquiror Common Stock,
the Series B Exchange Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision,
-8-
reclassification, recapitalization, split, combination, exchange of
shares, cash dividend or other distribution.
(d) Cancellation and Retirement of Company Capital Stock.
----------------------------------------------------
All such shares of Company Capital Stock referred to in Sections
2.01(a), 2.01(b) and 2.01(c) (other than any shares of Company
Capital Stock to be canceled pursuant to Section 2.01(e) or any
Dissenting Shares) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and
each certificate previously representing any such shares shall
thereafter represent the right to receive the shares of Acquiror
Common Stock and/or the amount of cash into which such Company
Capital Stock was converted in the Merger. The holders of
certificates previously representing such shares of Company Capital
Stock outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to such shares of Company Capital
Stock except as otherwise provided herein or by Law. Certificates
previously representing such shares of Company Capital Stock shall be
exchanged for the whole shares of Acquiror Common Stock to be issued
and/or the amount of cash to be paid in consideration therefor upon
the surrender of such certificates in accordance with the provisions
of Section 2.01(a) or Section 2.02, without interest. No fractional
share of Acquiror Common Stock shall be issued, and, in lieu thereof,
a cash payment shall be made pursuant to Section 2.02(e) hereof.
(e) Cancellation of Treasury Shares. Any shares of Company
-------------------------------
Capital Stock held in the treasury of the Company and any shares of
Company Capital Stock owned by Acquiror or any direct or indirect
wholly owned subsidiary of Acquiror or of the Company immediately
prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with
respect thereto.
SECTION 2.02. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Acquiror
--------------
shall deposit, or shall cause to be deposited, with a bank or trust company
designated by Acquiror (the "Exchange Agent"), for the benefit of the holders of
--------------
Company Capital Stock, for exchange through the Exchange Agent in accordance
with this Article II, (i) certificates representing the whole shares of Acquiror
Common Stock issuable pursuant to Section 2.01 in exchange for outstanding
shares of Company Capital Stock, (ii) cash in an amount sufficient to permit
payment of the cash payable pursuant to Section 2.01 in exchange for outstanding
shares of Company Capital Stock and (iii) cash in an amount sufficient to permit
payment of the cash payable in lieu of fractional shares pursuant to Section
2.02(e) (such certificates for shares of Acquiror Common Stock, together with
any dividends or distributions with respect thereto, and such amounts of cash,
being hereafter referred to as the "Exchange Fund"). The Exchange Agent shall,
-------------
pursuant to irrevocable instructions, deliver the
-9-
shares of Acquiror Common Stock to be issued and the amount of cash to be paid
pursuant to Section 2.01 out of the Exchange Fund.
(b) Exchange Procedures. Acquiror shall, at the time specified in
-------------------
Section 2.01(a)(vii), mail to each holder of record of a certificate or
certificates which immediately prior to the date of such mailing represented
outstanding shares of Company Capital Stock (the "Certificates") (i) a letter of
------------
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in customary form), (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for shares of Acquiror Common Stock and cash, and (iii) in the case of holders
of Company Common Shares, a Form of Election. Upon surrender of Certificates
therefor for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other Documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor, as soon as practicable after the Effective Time
(i) a certificate representing that number of whole shares of Acquiror Common
Stock which such holder has the right to receive in respect of the shares of
Company Capital Stock formerly represented by such Certificate (after taking
into account all shares of Company Capital Stock then held by such holder under
all such Certificates so surrendered), (ii) the amount of cash which such holder
has the right to receive in respect of the shares of Company Capital Stock
formerly represented by such Certificate (after taking into account all shares
of Company Capital Stock then held by such holder under all such Certificates so
surrendered), (iii) any dividends or other distributions to which such holder is
entitled pursuant to Section 2.02(c) and (iv) the amount of cash in lieu of
fractional shares of Acquiror Common Stock to which such holder is entitled
pursuant to Section 2.02(e). The Certificates so surrendered shall be canceled
forthwith following the Effective Time. In the event of a transfer of ownership
of shares of Company Capital Stock which is not registered in the transfer
records of the Company, the proper number of shares of Acquiror Common Stock may
be issued and the proper amount of cash may be paid to a transferee if the
Certificates representing such shares of Company Capital Stock, properly
endorsed or otherwise in proper form for transfer, are presented to the Exchange
Agent, accompanied by all Documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by Section 2.01(a) or this Section 2.02,
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the shares of Acquiror
Common Stock issuable and the amount of cash payable pursuant to Section 2.01 in
exchange therefor, together with any dividends or other distributions to which
such holder is entitled pursuant to Section 2.02(c) and cash in lieu of any
fractional shares of Acquiror Capital Stock to which such holder is entitled
pursuant to Section 2.02(e). No interest will be paid or will accrue on any cash
payable pursuant to Sections 2.02(c) or 2.02(e).
-10-
(c) Distributions with Respect to Unexchanged Shares of Acquiror
------------------------------------------------------------
Common Stock. No dividends or other distributions declared or made after the
------------
Effective Time with respect to Acquiror Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the whole shares of Acquiror Common Stock represented thereby
until the holder of such Certificate shall surrender such Certificate. Subject
to the effect of escheat, tax or other applicable Laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, (i) promptly, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Acquiror Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions, with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Acquiror
Common Stock.
(d) No Further Rights in Company Capital Stock. All shares of
------------------------------------------
Acquiror Common Stock issued and all cash paid upon conversion of the shares of
Company Capital Stock in accordance with the terms hereof (including any cash
paid pursuant to Sections 2.02(c) or (e)) shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to such shares of Company
Capital Stock.
(e) No Fractional Shares. No fractional shares of Acquiror Common
--------------------
Stock shall be issued upon surrender for exchange of the Certificates, and any
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Acquiror. Notwithstanding any other provision of
this Merger Agreement, each holder of shares of Company Capital Stock who would
otherwise be entitled to receive a fraction of a share of Acquiror Common Stock,
after aggregating all Certificates delivered by such holder, and rounding down
to the nearest whole share, shall receive, in lieu thereof, an amount in cash
equal to $24.00, multiplied by the fraction of a share of Acquiror Common Stock
to which such holder would otherwise be entitled. Such payment in lieu of
fractional shares shall be administered by the Exchange Agent pursuant to the
procedures set forth in Section 2.02(b).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed to the holders of Company Capital Stock for one (1)
year after the Effective Time shall be delivered to Acquiror, upon demand, and
any holders of Company Capital Stock who have not theretofore complied with this
Article II shall thereafter look only to Acquiror for the shares of Acquiror
Common Stock and cash to which they are entitled pursuant to Section 2.01, any
dividends or other distributions with respect to Acquiror Common Stock to which
they are entitled pursuant to Section 2.02(c) and any cash in lieu of fractional
shares of Acquiror Common Stock to which they are entitled pursuant to Section
2.02(e).
- 11 -
(g) No Liability. None of Acquiror, Acquiror Sub, the Company or
------------
the Exchange Agent shall be liable to any Person for any shares of Acquiror
Common Stock (or dividends or distributions with respect thereto) or cash
delivered to a public official pursuant to any abandoned property, escheat or
similar Law.
(h) Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
certificate evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificate, upon the making of an affidavit of that fact by
the holder thereof, such shares of Acquiror Common Stock and cash, including
cash for fractional shares, if any, as may be required pursuant to this Article
II; provided, however, that Acquiror may, in its reasonable discretion and as a
-------- -------
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Acquiror, the Surviving Corporation, or the Exchange Agent with respect to the
certificate alleged to have been lost, stolen or destroyed.
SECTION 2.03. Share Transfer Books.
At the Effective Time, the share transfer books of the Company shall
be closed and there shall be no further registration of transfers of shares of
Company Capital Stock thereafter on the records of the Company. From and after
the Effective Time, the holders of certificates representing shares of Company
Capital Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Company Capital Stock except as
otherwise provided herein or by Law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Acquiror for any reason shall be
converted into shares of Acquiror Common Stock and/or cash, including any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c) and any cash in lieu of fractional shares of
Acquiror Common Stock to which the holders thereof are entitled pursuant to
Section 2.02(e).
SECTION 2.04. Dissenting Shareholders.
Subject to the terms and conditions hereof, at and after the
Effective Time, any holder of shares of Company Capital Stock who complies with
Section 11.70 of Illinois Law (a "Dissenting Shareholder") shall be entitled to
---------- -----------
obtain payment from the Surviving Corporation of the fair value of such
Dissenting Shareholder's shares of Company Capital Stock as determined pursuant
to Section 11.70 of Illinois Law; provided, however, that no such payment shall
-------- -------
be made unless and until such Dissenting Shareholder has surrendered to the
Exchange Agent the Certificate representing the shares of Company Capital Stock
for which payment is being made. The Company shall give Acquiror prompt notice
of any demands for appraisal or withdrawals of demands for appraisal received by
the Company and
- 12 -
any other Documents obtained by the Company pursuant to the provisions of
Section 11.70 of Illinois Law, and, except with the prior written consent of
Acquiror, which shall not be unreasonably withheld, shall not settle or offer to
settle any such demands.
SECTION 2.05. Closing.
Subject to the terms and conditions of this Merger Agreement, the
closing of the Merger (the "Closing") will take place on the second business day
-------
immediately following the date on which the last of the conditions set forth in
Article VII hereof is satisfied or, if permissible, waived (the "Closing Date"),
------------
at the offices of Xxxxx & Xxxxxxx L.L.P., Columbia Square, 000 00xx Xxxxxx,
X.X., Xxxxxxxxxx, X.X. 00000, unless another date or place is agreed to in
writing by the parties hereto; provided, however, that the Closing may be
-------- -------
delayed not more than ten (10) business days by the Company or by Acquiror by
written notice to the other party.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the Disclosure Schedule delivered
by the Company to Acquiror prior to (except as otherwise permitted in this
Article III) the execution and delivery of this Merger Agreement (the "Company
-------
Disclosure Schedule") (with a disclosure with respect to a Section of this
---------- --------
Merger Agreement to require a specific reference in the Company Disclosure
Schedule to the Section of this Merger Agreement to which each such disclosure
applies, and no disclosure to be deemed to apply with respect to any Section to
which it does not expressly refer), the Company hereby represents and warrants
(which representation and warranty shall be deemed to include the disclosure
with respect thereto so specified in the Company Disclosure Schedule) to, and
covenants and agrees with, Acquiror and Acquiror Sub as follows, in each case as
of the date of this Merger Agreement, unless otherwise specifically set forth
herein or in the Company Disclosure Schedule:
SECTION 3.01. Organization and Standing.
The Company is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Illinois, and has the full and
unrestricted corporate power and authority to own, operate and lease its Assets
(as defined in Article X), to carry on its business as currently conducted, to
execute and deliver this Merger Agreement and to carry out the transactions
contemplated hereby. The Company is duly qualified to conduct business as a
foreign corporation and is in good standing in the states, countries and
territories listed in Section 3.01 of the Company Disclosure Schedule. The
Company is not qualified to conduct business in
- 13 -
any other jurisdiction, and neither the nature of the business conducted by the
Company nor the character of the Assets owned, leased or otherwise held by it
makes any such qualification necessary, except where the absence of such
qualification as a foreign corporation would not have a Company Material Adverse
Effect (as defined in Article X).
SECTION 3.02. Subsidiaries.
The Company has no Subsidiaries (as defined in Article X) and no
equity investment or other interest in, or advances or loans to, any
corporation, association, partnership, joint venture or other entity, except as
set forth in Section 3.02 of the Company Disclosure Schedule. The Company
Disclosure Schedule sets forth (a) the authorized capital stock or other equity
interests of each direct and indirect Subsidiary of the Company and the
percentage of the outstanding capital stock or other equity interests of each
Subsidiary directly or indirectly owned by the Company, and (b) the nature and
amount as of a recent date of any such equity investment, other interest or
advance. All of such shares of capital stock or other equity interests of
Subsidiaries directly or indirectly held by the Company have been duly
authorized and validly issued and are outstanding, fully paid and nonassessable.
The Company directly, or indirectly through wholly owned Subsidiaries, owns all
such shares of capital stock or other equity interests of the direct or indirect
Subsidiaries free and clear of all Encumbrances (as defined in Article X). Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of its state or jurisdiction of incorporation (as listed
in Section 3.02 of the Company Disclosure Schedule), and has the full and
unrestricted corporate power and authority to own, operate and lease its Assets
and to carry on its business as currently conducted. Each Subsidiary is
qualified to conduct business and is in good standing in the states, countries
and territories listed in Section 3.02 of the Company Disclosure Schedule. The
Subsidiaries are not qualified to conduct business in any other jurisdictions,
and neither the nature of their businesses nor the character of the Assets
owned, leased or otherwise held by them makes any such qualification necessary,
except where the absence of licensing or qualification as a foreign corporation
would not have a Company Material Adverse Effect.
SECTION 3.03. Articles of Incorporation and Bylaws.
The Company has furnished to Acquiror a true and complete copy of the
certificate or articles of incorporation of the Company and of each Subsidiary,
as currently in effect, certified as of a recent date by the Secretary of State
(or comparable Governmental Entity (as defined in Article X)) of the respective
jurisdictions of incorporation, and a true and complete copy of the bylaws of
the Company and of each Subsidiary, as currently in effect, certified by their
respective
- 14 -
corporate secretaries. Such certified copies are attached as exhibits to, and
constitutes an integral part of, the Company Disclosure Schedule.
SECTION 3.04. Capitalization.
The authorized capital stock of the Company consists of (a) 5,000,000
Company Common Shares, of which: (i) 1,559,149 shares are issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable; and (ii) no shares are held in the treasury of the Company; (b)
40,000 Company Series A Preferred Shares, of which: (i) 11,880 shares are issued
and outstanding, all of which are duly authorized, validly issued, fully paid
and nonassessable; and (ii) no shares are held in the treasury of the Company;
and (c) 189,811 Company Series B Preferred Shares, of which: (i) 189,811 shares
are issued and outstanding, all of which are duly authorized, validly issued,
fully paid and nonassessable; and (ii) no shares are held in the treasury of the
Company. The Company Common Shares, Company Series A Preferred Shares and
Company Series B Preferred Shares are referred to collectively in this Merger
Agreement as the "Company Capital Stock." No shares of Company Capital Stock
---------------------
have been reserved for any purpose. There are no outstanding securities
convertible into or exchangeable for Company Capital Stock, any other securities
of the Company, or any capital stock or other securities of any of the
Subsidiaries and no outstanding options, rights (preemptive or otherwise), or
warrants to purchase or to subscribe for any shares of such capital stock or
other securities of the Company or, except as set forth in Section 3.04 of the
Company Disclosure Schedule, any of the Subsidiaries. Except as set forth in
Section 3.04 of the Company Disclosure Schedule, there are no outstanding
Agreements (as defined in Article X) affecting or relating to the voting,
issuance, purchase, redemption, registration, repurchase or transfer of Company
Capital Stock, any other securities of the Company, or any capital stock or
other securities of any Subsidiary, except as contemplated hereunder. Since
December 31, 1996, no shares of Company Capital Stock have been issued by the
Company. Each of the outstanding shares of Company Capital Stock and of capital
stock of, or other equity interests in, the Subsidiaries was issued in
compliance with all applicable federal and state Laws concerning the issuance of
securities, and such shares or other equity interests owned by the Company or
any Subsidiary are owned free and clear of all Encumbrances. The names and
addresses of, and number of shares or other securities held by, all holders of
Company Capital Stock (the "Company Shareholders") and all holders of capital
--------------------
stock or other securities of the Subsidiaries are set forth in Section 3.04 of
the Company Disclosure Schedule. All of the outstanding shares of Company
Capital Stock are owned by the Company Shareholders, free and clear, to the
knowledge of the Company and the Subsidiaries, of all Encumbrances. Except as
set forth in Section 3.04 of the Company Disclosure Schedule, there are no
obligations, contingent or otherwise, of the Company or any Subsidiary to
provide funds to, make any investment (in the form of a loan, capital
contribution or otherwise) in, or
- 15 -
provide any guarantee with respect to, any Subsidiary or any other Person.
Except as set forth in Section 3.04 of the Company Disclosure Schedule, there
are no Agreements pursuant to which any Person is or may be entitled to receive
any of the revenues or earnings, or any payment based thereon or calculated in
accordance therewith, of the Company or any Subsidiary.
SECTION 3.05. Authority; Binding Obligation.
The execution and delivery by the Company of this Merger Agreement,
the execution and delivery by the Company and the Subsidiaries of all other
Documents contemplated hereby, and the consummation by the Company and the
Subsidiaries of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company or the Subsidiaries are necessary to authorize this
Merger Agreement and the other Documents contemplated hereby, or to consummate
the transactions contemplated hereby and thereby, other than the approval and
adoption of this Merger Agreement by the holders of two-thirds of the
outstanding Company Common Shares, the holders of two-thirds of the outstanding
Company Series A Preferred Shares and the holders of two-thirds of the
outstanding Company Series B Preferred Shares in accordance with Illinois Law
and the Company's articles of incorporation and bylaws. This Merger Agreement
has been duly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as such enforceability may be subject to the effects of any
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar Laws affecting creditors' rights generally and subject to
the effects of general equitable principles (whether considered in a proceeding
in equity or at law).
SECTION 3.06. No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance by the Company and
the Subsidiaries of this Merger Agreement and all other Documents contemplated
hereby, the fulfillment of and compliance with the respective terms and
provisions hereof and thereof, and the consummation by the Company and the
Subsidiaries of the transactions contemplated hereby and thereby, do not and
will not: (i) conflict with, or violate any provision of, the articles of
incorporation or bylaws of the Company or the certificate or articles of
incorporation or bylaws of any Subsidiary; (ii) subject to (A) obtaining the
requisite approval and adoption of this Merger Agreement by the holders of two-
thirds of the outstanding Company Common Shares, the holders of two-thirds of
the outstanding Company Series A Preferred Shares and the holders of two-thirds
of the outstanding Company Series B Preferred Shares in accordance with Illinois
Law and the Company's articles of incorporation and bylaws and (B) obtaining the
consents, approvals, authorizations and permits of, and making filings with or
notifications to, the applicable
- 16 -
Governmental Entity pursuant to the applicable requirements, if any, of the
Securities Act (as defined in Article X), Blue Sky Laws (as defined in Article
X), the HSR Act (as defined in Article X), the Communications Act (as defined in
Article X), the Federal Aviation Act (as defined in Article X), applicable state
utilities Laws, applicable municipal franchise Laws and the filing and
recordation of the Articles of Merger as required by Illinois Law and Delaware
Law, conflict with or violate any Law applicable to the Company or any
Subsidiary, or any of their respective Assets; (iii) conflict with, result in
any breach of, constitute a default (or an event that with notice or lapse of
time or both would become a default) under any Agreement to which the Company or
any Subsidiary is a party or by which the Company or any Subsidiary, or any of
their respective Assets, may be bound; or (iv) result in or require the creation
or imposition of, or result in the acceleration of, any indebtedness or any
Encumbrance of any nature upon, or with respect to, the Company or any
Subsidiary or any of the Assets now owned or hereafter acquired by the Company
or any Subsidiary; except for any such conflict or violation described in clause
(ii), any such conflict, breach or default described in clause (iii), or any
such creation, imposition or acceleration described in clause (iv) that would
not have a Company Material Adverse Effect.
(b) Except as set forth in Section 3.06(b) of the Company
Disclosure Schedule to be furnished by the Company to Acquiror within fifteen
(15) days after the date of this Merger Agreement, the execution, delivery and
performance by the Company and the Subsidiaries of this Merger Agreement and all
other Documents contemplated hereby, the fulfillment of and compliance with the
respective terms and provisions hereof and thereof, and the consummation by the
Company and the Subsidiaries of the transactions contemplated hereby and
thereby, do not and will not: (i) require any consent, approval, authorization
or permit of, or filing with or notification to, any Person not party to this
Merger Agreement, except (A) the approval and adoption of this Merger Agreement
by the holders of two-thirds of the outstanding Company Common Shares, the
holders of two-thirds of the outstanding Company Series A Preferred Shares and
the holders of two-thirds of the outstanding Company Series B Preferred Shares
in accordance with Illinois Law and the Company's articles of incorporation and
bylaws, (B) pursuant to the applicable requirements, if any, of the Securities
Act, Blue Sky Laws, the HSR Act, the Communications Act, the Federal Aviation
Act, applicable state utilities Laws and applicable municipal franchise Laws,
and (C) the filing and recordation of the Articles of Merger as required by
Illinois Law and Delaware Law; or (ii) result in or give rise to any penalty,
forfeiture, Agreement termination, right of termination, amendment or
cancellation, or restriction on business operations of Acquiror, the Company,
the Surviving Corporation or any Subsidiary.
SECTION 3.07. Licenses; Compliance.
(a) Each of the Company and each Subsidiary is in possession of
all Licenses necessary for the Company or any Subsidiary to own, lease and
operate its
- 17 -
Assets or to carry on its business as it is now being conducted (the "Company
-------
Licenses"), except where the failure to possess any such Company License would
--------
not have a Company Material Adverse Effect. All Company Licenses that are FCC,
FAA or state utilities Licenses or municipal franchises are listed and described
in Section 3.07(a)(1) of the Company Disclosure Schedule, and all other material
Company Licenses will be listed and described in Section 3.07(a)(2) of the
Company Disclosure Schedule to be furnished by the Company to Acquiror within
fifteen (15) days after the date of this Merger Agreement. All Company Licenses
are valid and in full force and effect through the respective dates indicated in
the Company Disclosure Schedule, except for any such invalidity or failure to be
in full force and effect that would not, alone or in the aggregate, have a
Company Material Adverse Effect, and no suspension, cancellation, complaint,
proceeding, order or investigation of or with respect to any Company License is
pending or, to the knowledge of the Company or any Subsidiary, threatened.
Neither the Company nor any Subsidiary is in violation of or default under any
Company License, except for any such violation or default that would not have a
Company Material Adverse Effect. Except as set forth in Section 3.07(a)(3) of
the Company Disclosure Schedule to be furnished by the Company to Acquiror
within fifteen (15) days after the date of this Merger Agreement, since December
31, 1995, neither the Company nor any Subsidiary has received written or, to the
knowledge of the Company or any Subsidiary, oral notice from any Governmental
Entity of any such violation or default.
(b) Neither the Company nor any Subsidiary is in violation of or
default under, nor has it breached, (i) any term or provision of its certificate
or articles of incorporation or bylaws or (ii) any Agreement or restriction to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary, or any of their respective Assets, is bound or affected, except for
any such violation, default or breach described in clause (ii) that would not
have a Company Material Adverse Effect. The Company and the Subsidiaries have
complied and are in full compliance with all Laws, except where the failure so
to comply would not have a Company Material Adverse Effect.
(c) All returns, reports, statements and other Documents required
to be filed by the Company or any Subsidiary with any Governmental Entity have
been filed and complied with and are true, correct and complete in all material
respects. All records of every type and nature relating to the Company Licenses
or the business, operations or Assets of the Company or any Subsidiary have been
maintained in all material respects in accordance with good business practices
and the rules of any Governmental Entity and are maintained at the Company or
the appropriate Subsidiary.
- 18 -
SECTION 3.08. Financial Information.
(a) The Company has prepared audited consolidated balance sheets
of the Company and the Subsidiaries as of the end of the fiscal year ending in
each of 1996, 1995 and 1994 (the "Audited Balance Sheets") and the related
----------------------
audited consolidated statements of income, shareholders' equity and cash flows
of the Company and the Subsidiaries for each of such fiscal years (the Audited
Balance Sheets and such audited consolidated statements of income, shareholders'
equity and cash flows are hereinafter referred to collectively as the "Audited
-------
Statements"), in each case, audited by Xxxxxx Xxxxxxxx LLP in accordance with
----------
generally accepted auditing standards and accompanied by the related report of
Xxxxxx Xxxxxxxx LLP. A true and complete copy of each of the Audited Statements
has been delivered to Acquiror and is attached as an exhibit to, and constitute
an integral part of, the Company Disclosure Schedule. The Company has also
prepared unaudited consolidated balance sheets of the Company and the
Subsidiaries as of the last day of each month ending after January 1, 1994
(including the unaudited consolidated balance sheets to be furnished to Acquiror
pursuant to Section 6.10, the "Unaudited Balance Sheets") and the unaudited
------------------------
consolidated statements of income and cash flows of the Company and the
Subsidiaries for the one-month periods then ended (the Unaudited Balance Sheets
and such statements of income and cash flows, including the unaudited
consolidated statements of income and cash flows to be furnished to Acquiror
pursuant to Section 6.10, are hereinafter referred to collectively as the
"Unaudited Statements" and, together with the Audited Statements, as the
--------------------
"Financial Statements").
--------------------
(b) The Financial Statements, including, without limitation, the
notes thereto, (i) are complete and correct in all material respects, (ii) have
been prepared in accordance with the books and records of the Company and the
Subsidiaries, and (iii) present fairly the consolidated financial position of
the Company and the Subsidiaries and their consolidated results of operations
and cash flows as of and for the respective dates and time periods in accordance
with GAAP applied on a basis consistent with prior accounting periods, except as
noted thereon and subject to, in the case of the Unaudited Statements, normal
and recurring year-end adjustments which were not or are not expected to be
material in amount. All changes in accounting methods (for financial accounting
purposes) made, agreed to, requested or required with respect to the Company or
any of the Subsidiaries since January 1, 1994 are reflected in the Financial
Statements.
SECTION 3.09. Undisclosed Liabilities.
There are no material liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown) of the Company or any
Subsidiary, including but not limited to liabilities for Taxes (as defined in
Article X), that are not reflected on, or reserved against in, the Financial
Statements. Except as described in Section 3.09 of the Company Disclosure
- 19 -
Schedule, since December 31, 1996, neither the Company nor any Subsidiary has
incurred any material liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown) other than in the Ordinary
Course of Business (as defined in Article X).
SECTION 3.10. Absence of Certain Changes or Events.
Other than as set forth in Section 3.10 to the Company Disclosure
Schedule, since December 31, 1996, there has been no material adverse change,
and no change except in the Ordinary Course of Business, in the business,
operations, prospects, condition (financial or otherwise), Assets or liabilities
of the Company or any Subsidiary. Except as set forth in Section 3.10 to the
Company Disclosure Schedule, since December 31, 1996, the Company and the
Subsidiaries have conducted their respective businesses substantially in the
manner heretofore conducted and only in the Ordinary Course of Business, and
neither the Company nor any Subsidiary has (a) incurred any material damage,
destruction or loss not covered by insurance with respect to any Assets of the
Company or of any such Subsidiary; (b) issued any capital stock or other equity
securities or granted any options, warrants or other rights calling for the
issuance thereof; (c) issued any bonds or other long-term debt instruments,
granted any options, warrants or other rights calling for the issuance thereof,
or borrowed any funds; (d) incurred, or become subject to, any material
obligation or liability (whether absolute or contingent, matured or unmatured,
known or unknown), except current liabilities incurred in the Ordinary Course of
Business; (e) discharged or satisfied any Encumbrance or paid any material
obligation or liability (whether absolute or contingent, matured or unmatured,
known or unknown) other than current liabilities shown in the Unaudited Balance
Sheets and current liabilities incurred since December 31, 1996 in the Ordinary
Course of Business; (f) declared or made payment of, or set aside for payment,
any dividends or distributions of any Assets, or purchased, redeemed or
otherwise acquired any of its capital stock, any securities convertible into
capital stock, or any other securities; (g) mortgaged, pledged or subjected to
any Encumbrance any of its Assets; (h) sold, exchanged, transferred or otherwise
disposed of any of its Assets, or canceled any debts or claims, except in each
case in the Ordinary Course of Business; (i) written down the value of any
Assets or written off as uncollectible any debt, notes or accounts receivable,
except where previously reserved against in the Financial Statements and not
material in amount, and except for write-downs and write-offs in the Ordinary
Course of Business, none of which, individually or in the aggregate, are
material; (j) entered into any transactions other than in the Ordinary Course of
Business; (k) increased the rate of compensation payable, or to become payable,
by it to any of its officers, employees, agents or independent contractors over
the rate being paid to them on December 31, 1996, except for any increase in the
rate of compensation payable, or to become payable, by it in the Ordinary Course
of Business to employees who are not directors or officers; (l) made or
permitted any amendment or termination of any
- 20 -
material Agreement to which it is a party; (m) through negotiation or otherwise
made any commitment or incurred any liability to any labor organization; (n)
made any accrual or arrangement for or payment of bonuses or special
compensation of any kind to any director, officer or employee, except for any
accrual or arrangement for or payment of bonuses or special compensation in the
Ordinary Course of Business to employees who are not directors or officers; (o)
directly or indirectly paid any severance or termination pay in excess of two
months' salary to any officer or employee with an annual salary in excess of
$100,000; (p) made capital expenditures, or entered into commitments therefor,
not provided for in the Company's capital budget for 1997 (a copy of which has
been furnished by the Company to Acquiror) or, if applicable, the Company's
capital budget for 1998 (which capital budget shall have been approved by
Acquiror as provided in Section 5.01(i)), except for capital expenditures
permitted by Section 5.01; (q) made any change in any method of accounting or
accounting practice; (r) entered into any transaction of the type described in
Section 3.19; (s) made any charitable contributions or pledges exceeding $50,000
individually or $300,000 in the aggregate; or (t) made any Agreement to do any
of the foregoing. At the Closing, the Company shall deliver to Acquiror an
updated Section 3.10 to the Company Disclosure Schedule in accordance with the
provisions of Section 6.04.
SECTION 3.11. Litigation; Disputes
(a) Except as disclosed in Section 3.11(a) of the Company
Disclosure Schedule, there are no actions, suits, claims, arbitrations,
proceedings or investigations pending or, to the knowledge of the Company or any
Subsidiary, threatened against, affecting or involving the Company or any
Subsidiary or their respective businesses or Assets, or the transactions
contemplated by this Merger Agreement, at law or in equity, or before or by any
court, arbitrator or Governmental Entity, domestic or foreign. Neither the
Company nor any Subsidiary is (i) operating under or subject to any order
(except for orders that Persons similarly situated, engaged in similar
businesses and owning similar Assets are operating under or subject to), award,
writ, injunction, decree or judgment of any court, arbitrator or Governmental
Entity, or (ii) in default with respect to any order, award, writ, injunction,
decree or judgment of any court, arbitrator or Governmental Entity.
(b) Except as set forth in Section 3.11(b) of the Company
Disclosure Schedule to be furnished by the Company to Acquiror within fifteen
(15) days after the date of this Merger Agreement, neither the Company nor any
Subsidiary is currently involved in, or to the knowledge of the Company or any
Subsidiary, reasonably anticipates any dispute with, any of its current or
former employees, agents, brokers, distributors, vendors, customers, business
consultants, franchisees, franchisors, representatives or independent
contractors (or any current or former employees of any of the foregoing Persons)
affecting the business or Assets of the Company or any Subsidiary, except for
any such dispute that, if resolved adversely
- 21 -
to the Company or any Subsidiary, would not have a Company Material Adverse
Effect.
SECTION 3.12. Debt Instruments.
Section 3.12 of the Company Disclosure Schedule lists all mortgages,
indentures, notes, guarantees and other Agreements for or relating to borrowed
money (including, without limitation, conditional sales agreements and capital
leases) to which the Company or any Subsidiary is a party or which have been
assumed by the Company or any Subsidiary or to which any Assets of the Company
or any Subsidiary are subject. The Company and the Subsidiaries have performed
all the material obligations required to be performed by any of them to date and
are not in default in any material respect under any of the foregoing, and there
has not occurred any event which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute such a
default.
SECTION 3.13. Leases.
Section 3.13 of the Company Disclosure Schedule, to be furnished by
the Company to Acquiror within fifteen (15) days after the date of this Merger
Agreement, will list all leases and other Agreements under which the Company or
any Subsidiary is lessee or lessor of any Asset, or holds, manages or operates
any Asset owned by any third party, or under which any Asset owned by the
Company or by any Subsidiary is held, operated or managed by a third party. The
Company and the Subsidiaries are the owners and holders of all the leasehold
estates purported to be granted to them by the Documents listed in Section 3.13
of the Company Disclosure Schedule. Each such lease and other Agreement is in
full force and effect and constitutes a legal, valid and binding obligation of,
and is legally enforceable against, the respective parties thereto and grants
the leasehold estate it purports to grant free and clear of all Encumbrances.
The Company and the Subsidiaries have in all respects performed all material
obligations thereunder required to be performed by any of them to date. No party
is in default in any material respect under any of the foregoing, and there has
not occurred any event which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) would constitute such a default.
All of the Assets subject to such leases and other Agreements are in a condition
adequate for the uses to which they are currently being used.
SECTION 3.14. Other Agreements; No Default.
(a) Section 3.14(a) of the Company Disclosure Schedule lists
(or, in the case of the Agreements specified in Section 3.14(a)(i), (ii), (iv),
(vii), (ix), (xi), (xii) and (xiii), will list within fifteen (15) days after
the date of this Merger Agreement)
- 22 -
each Agreement to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound, and which is:
(i) an Agreement for the employment of any director,
officer, employee, consultant or independent contractor, or providing for
severance payments to any such director, officer, employee, consultant or
independent contractor;
(ii) a license Agreement or distributor, dealer, sales
representative, sales agency, advertising, property management or brokerage
Agreement involving an annual payment in excess of $50,000;
(iii) an Agreement with any labor organization or other
collective bargaining unit;
(iv) an Agreement for the future purchase or lease of
materials, supplies, services, merchandise, equipment or other Assets
involving payments of more than $250,000 over its remaining term (including,
without limitation, periods covered by any option to renew by either party);
(v) a profit-sharing, bonus, incentive compensation,
deferred compensation, stock option, severance pay, stock purchase, employee
benefit, insurance, hospitalization, pension, retirement or other similar
plan or Agreement;
(vi) an Agreement for the sale of any of its material
Assets or the grant of any preferential rights to purchase any of its
material Assets or rights, other than in the Ordinary Course of Business;
(vii) an Agreement that contains any provisions requiring
the Company or any Subsidiary to indemnify any other party;
(viii) a joint venture Agreement or other Agreement
involving the sharing of revenues or profits;
(ix) an Agreement with an Affiliate of the Company or any
Subsidiary;
(x) an Agreement (including, without limitation, an
Agreement not to compete and an exclusivity Agreement) that reasonably could
be interpreted to impose any restriction on the business or operations of
the Company or any Subsidiary, or any of their respective Affiliates, prior
to the Effective Time, or on the business or operations of Acquiror or any
of its Affiliates after the Effective Time;
- 23 -
(xi) an Agreement with any Governmental Entity;
(xii) an Agreement with any customer of the
Company or any Subsidiary that was billed an aggregate of $1 million
during the year ended December 31, 1996 or $500,000 during the period
from January 1, 1997 through the date of this Merger Agreement;
(xiii) any other Agreement (A) that is material
to the Company and the Subsidiaries, taken as a whole, or to the
conduct of their businesses or operations, or (B) the absence of
which would have a Company Material Adverse Effect,
(the foregoing Agreements referred to herein as the "Company Contracts"). The
-----------------
Company has furnished (or, where specifically permitted pursuant to the terms of
this Merger Agreement, within fifteen (15) days after the date of this Merger
Agreement, will furnish) Acquiror with true and complete copies of each written
Company Contract (including any amendments thereto) and a complete written
summary of each oral Company Contract.
(b) Each Company Contract is in full force and effect
and constitutes a legal, valid and binding obligation of, and is legally
enforceable against, the respective parties thereto. All necessary approvals of
any Governmental Entity with respect thereto have been obtained (except where
the failure so to obtain any such approval would not have a Company Material
Adverse Effect), all necessary filings or registrations therefor have been made,
and there are no outstanding disputes thereunder and, to the knowledge of the
Company or any Subsidiary, no threatened cancellation or termination thereof.
The Company and the Subsidiaries have performed all material obligations
thereunder required to be performed by any of them to date. No party is in
default in any material respect under any of the Company Contracts, and there
has not occurred any event which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute such a
default. Except as specifically described in Section 3.14(a) of the Company
Disclosure Schedule, there has been no written or oral modification or amendment
to any Company Contract and there are no reasonably expected changes to any
Company Contract. At the Closing, the Company shall deliver to Acquiror an
updated Section 3.14(a) to the Company Disclosure Schedule in accordance with
the provisions of Section 6.04.
SECTION 3.15. Labor Relations.
Section 3.15(a) of the Company Disclosure Schedule lists all
collective bargaining or other labor union Agreements to which the Company or
any Subsidiary is a party. There are no strikes, work stoppages, union
organization efforts or other controversies (other than grievance proceedings)
pending, threatened or reasonably anticipated between the Company or any
Subsidiary and
-24-
(a) any current or former employees of the Company or of any Subsidiary or (b)
any union or other collective bargaining unit representing such employees. The
Company and the Subsidiaries have complied and are in compliance with all Laws
relating to employment or the workplace, including, without limitation, Laws
relating to wages, hours, collective bargaining, safety and health, work
authorization, equal employment opportunity, immigration, withholding,
unemployment compensation, worker's compensation, employee privacy and right to
know, except where the failure so to comply would not have a Company Material
Adverse Effect. Except as set forth in Section 3.15(b) of the Company Disclosure
Schedule to be furnished by the Company to Acquiror within fifteen (15) days
after the date of this Merger Agreement, neither the Company nor any Subsidiary
has been notified by any Governmental Agency or counsel to any claimant of any
unresolved violation or alleged violation of any Law relating to equal
employment opportunity, civil or human rights, or employment discrimination
generally. Except as set forth in Section 3.15(c) to the Company Disclosure
Schedule to be furnished by the Company to Acquiror within fifteen (15) days
after the date of this Merger Agreement, there are no employment Agreements
between the Company or any Subsidiary and any of their respective employees, or
professional service Agreements not terminable at will relating to the
businesses and Assets of the Company or of any Subsidiary. Except as set forth
in Section 3.15(d) to the Company Disclosure Schedule to be furnished by the
Company to Acquiror within fifteen (15) days after the date of this Merger
Agreement, the consummation of the transactions contemplated hereby will not
cause Acquiror, the Surviving Corporation, the Company or any Subsidiary to
incur or suffer any liability relating to, or obligation to pay, severance,
termination or other payments to any Person.
SECTION 3.16. Pension and Benefit Plans.
(a) Except as set forth in Section 3.16(a) to the
Company Disclosure Schedule to be furnished by the Company to Acquiror within
fifteen (15) days after the date of this Merger Agreement, neither the Company
nor any Subsidiary (i) maintains or has during the past six (6) years maintained
any Plan or Other Arrangement, (ii) is or has during the past six (6) years been
a party to any Plan or Other Arrangement or (iii) has obligations under any Plan
(as defined in Article X) or Other Arrangement (as defined in Article X).
(b) The Company will furnish to Acquiror within
fifteen (15) days after the date of this Merger Agreement true and complete
copies of each of the following Documents: (i) the Documents setting forth the
current terms of each Plan; (ii) all current related trust Agreements or annuity
Agreements (and any other current funding Document) for each Plan; (iii) for the
three most recent plan years, all annual reports (Form 5500 series) on each Plan
that have been filed with any Governmental Entity; (iv) the current summary plan
description and subsequent summaries of material modifications for each Title I
Plan (as defined in Article X); (v) all DOL (as defined in Article X) opinions
on any Plan; (vi) all
-25-
correspondence with the PBGC (as defined in Article X) on any Plan exchanged
during the past three (3) years; (vii) all IRS (as defined in Article X)
rulings, opinions or technical advice relating to any Plan and the current IRS
determination letter issued with respect to each Qualified Plan; and (viii) all
current Agreements with service providers or fiduciaries for providing services
on behalf of any Plan. For each Other Arrangement, the Company will furnish to
Acquiror within fifteen (15) days after the date of this Merger Agreement true
and complete copies of each policy, Agreement or other Document setting forth or
explaining the current terms of the Other Arrangement, all related trust
agreements or other funding Documents (including, without limitation, insurance
contracts, certificates of deposit, money market accounts, etc.), all
significant employee communications, all correspondence or other submissions
with any Governmental Entity exchanged during the past three (3) years, and all
current Agreements with service providers or fiduciaries for providing services
on behalf of any Other Arrangement.
(c) No Plan is a Multiemployer Plan (as defined in
Article X).
(d) No Plan is an ESOP (as defined in Article X).
(e) The funding method used under each Minimum-
Funding Plan (as defined in Article X) does not violate the funding requirements
in Title I, Subtitle B, Part 3, of ERISA (as defined in Article X). For each
Defined Benefit Plan (as defined in Article X), the Company has furnished to
Acquiror a true and complete copy of the actuarial valuation reports issued by
the actuaries of that Defined Benefit Plan for the three (3) most recent plan
years, setting forth: (i) the actuarial present value (based upon the same
actuarial assumptions as were used for that period for funding purposes) of all
vested and nonvested accrued benefits under that Defined Benefit Plan; (ii) the
actuarial present value (based upon the same actuarial assumptions, other than
turnover assumptions, as were used for that period for funding purposes) of
vested benefits under that Defined Benefit Plan; (iii) the net fair market value
of that Defined Benefit Plan's Assets; and (iv) a detailed description of the
funding method used under that Defined Benefit Plan.
(f) No "accumulated funding deficiency" as defined in
Section 302(a)(2) of ERISA or Section 412 of the Code, whether or not waived,
and no "unfunded current liability" as determined under Section 412(l) of the
Code exists with respect to any Minimum-Funding Plan. No security is required
under Section 401(a)(29) of the Code as to any Minimum-Funding Plan. Section
3.16(f) of the Company Disclosure Schedule, to be furnished by the Company to
Acquiror within fifteen (15) days after the date of this Merger Agreement, will
set forth all unpaid obligations and liabilities of the Company and the
Subsidiaries to provide contributions currently due with respect to any Minimum-
Funding Plan.
(g) Section 3.16(g) of the Disclosure Schedule, to be
furnished by the Company to Acquiror within fifteen (15) days after the date of
this Merger
-26-
Agreement, will set forth the contributions that (i) the Company or any
Subsidiary has promised or is otherwise obligated to make under each Individual
Account Plan that is a Statutory-Waiver Plan (as defined in Article X) and (ii)
are due and unpaid as of the date of this Merger Agreement.
(h) The Company and the Subsidiaries have made all
contributions and other payments required by and due under the terms of each
Plan and Other Arrangement and have taken no action during the past three (3)
years (other than actions required by Law) relating to any Plan or Other
Arrangement that will increase Acquiror's, the Surviving Corporation's, the
Company's or any Subsidiary's obligation under any Plan or Other Arrangement.
(i) Section 3.16(i) of the Company Disclosure
Schedule, to be furnished by the Company to Acquiror within fifteen (15) days
after the date of this Merger Agreement, will set forth a list of all Qualified
Plans (as defined in Article X). All Qualified Plans and any related trust
Agreements or annuity Agreements (or any other funding Document) comply and have
complied with ERISA, the Code (including, without limitation, the requirements
for Tax qualification described in Section 401 thereof), and all other Laws,
except where the failure so to comply would not have a Company Material Adverse
Effect. The trusts established under such Plans are exempt from federal income
taxes under Section 501(a) of the Code. The Company and the Subsidiaries have
received determination letters issued by the IRS with respect to each Qualified
Plan, and the Company will furnish to Acquiror within fifteen (15) days after
the date of this Merger Agreement true and complete copies of the most recent
determination letter for each Qualified Plan. All statements made by or on
behalf of the Company or any Subsidiary to the IRS in connection with
applications for such determination letters with respect to each Qualified Plan
were true and complete when made and continue to be true and complete. To the
knowledge of the Company and the Subsidiaries, nothing has occurred since the
date of the most recent applicable determination letter that would adversely
affect the tax-qualified status of any Qualified Plan.
(j) To their knowledge, the Company and the
Subsidiaries have complied in all material respects with all applicable
provisions of the Code, ERISA, the National Labor Relations Act, Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Fair
Labor Standards Act, the Securities Act, the Exchange Act (as defined in Article
X), and all other Laws pertaining to the Plans, Other Arrangements and other
employee or employment related benefits, and all premiums and assessments
relating to all Plans or Other Arrangements. Neither the Company nor any
Subsidiary has any liability for any delinquent contributions within the meaning
of Section 515 of ERISA (including, without limitation, related attorneys' fees,
costs, liquidated damages and interest) or for any arrearages of wages. Neither
the Company nor any Subsidiary has any pending unfair labor practice charges,
contract grievances under any collective bargaining agreement, other
administrative charges, claims, grievances or lawsuits before any
-27-
court, arbiter or Governmental Entity arising under any Law governing any Plan,
and to the knowledge of the Company and the Subsidiaries there exist no facts
that could give rise to such a claim.
(k) To their knowledge, none of the Company or any
Subsidiary or any of the Plans has engaged in violation of Section 406(a) or
406(b) of ERISA for which no exemption exists under Section 408 of ERISA or any
"prohibited transactions" (as such term is defined in Section 4975(c)(1) of the
Code), for which no exemption exists under Section 4975(c)(2) or 4975(d) of the
Code. Neither the Company nor any Subsidiary has requested a prohibited
transaction exemption with respect to any Plan.
(l) The Company and the Subsidiaries have paid all
premiums (and interest charges and penalties for late payment, if applicable)
due to the PBGC for each Defined Benefit Plan. The Company has reflected (or
shall reflect) in each of the Financial Statements the current value of such
premium obligation that is accrued and unsatisfied as of the date of each such
Financial Statement. Section 3.16(l) of the Company Disclosure Schedule, to be
furnished by the Company to Acquiror within fifteen (15) days after the date of
this Merger Agreement, will set forth the amount of all such unpaid premium
obligations (including, without limitation, proportionate partial accruals for
the current year). Other than being required to make and making premium payments
when due, no liability to the PBGC has been incurred by the Company or by any
Common Control Entity (as defined in Article X) on account of Title IV of ERISA.
During the past three years, no filing has been made by, or required of, the
Company or any Common Control Entity with the PBGC, the PBGC has not started any
proceeding to terminate any Defined Benefit Plan that was or is maintained or
wholly or partially funded by the Company or any Common Control Entity, and to
the knowledge of the Company and the Subsidiaries no facts exist that would
permit the PBGC to begin such a proceeding. Neither the Company nor any Common
Control Entity has, or will have as a result of the transactions contemplated
hereby, (i) withdrawn as a substantial employer so as to become subject to
Section 4063 of ERISA; or (ii) ceased making contributions to any Pension Plan
that is subject to Section 4064(a) of ERISA to which the Company or any Common
Control Entity made contributions during the past five years.
(m) Section 3.16(m) of the Company Disclosure
Schedule, to be furnished by the Company to Acquiror within fifteen (15) days
after the date of this Merger Agreement, will identify any terminated Plan that
covered any current or former employees of the Company or any Subsidiary, and
any other Plan that has been terminated, during the past three (3) years. The
Company has furnished to Acquiror true and complete copies of all filings with
any Governmental Entity, employee communications, board minutes and all other
Documents relating to each such Plan termination.
-28-
(n) Except as set forth in Section 3.16(n) of the
Company Disclosure Schedule to be furnished by the Company to Acquiror within
fifteen (15) days after the date of this Merger Agreement, no Plan or Other
Arrangement, individually or collectively, provides for any payment by the
Company or any Subsidiary to any employee or independent contractor that is not
deductible under Section 162(a)(1) or 404 of the Code or that is an "excess
parachute payment" pursuant to Section 280G of the Code.
(o) No Plan has, within the past three (3) years,
experienced a "reportable event" (as such term is defined in Section 4043(b) of
ERISA) that is not subject to an administrative or statutory waiver from the
reporting requirement.
(p) No Plan is a "qualified foreign plan" (as such
term is defined in Section 404A(e) of the Code), and no Plan is subject to the
Laws of any jurisdiction other than the United States of America or one of its
political subdivisions.
(q) The Company and the Subsidiaries have timely
filed and the Company has furnished to Acquiror true and complete copies of each
Form 5330 (Return of Excise Taxes Related to Employee Benefit Plans) that the
Company or any Subsidiary filed on any Plan during the past three (3) years. To
their knowledge, the Company and the Subsidiaries have no liability for Taxes
required to be reported on Form 5330.
(r) Section 3.16(r) of the Company Disclosure
Schedule, to be furnished by the Company to Acquiror within fifteen (15) days
after the date of this Merger Agreement, will list all funded Welfare Plans (as
defined in Article X) that provide benefits to current or former employees of
the Company or any Subsidiary, or to their beneficiaries. The funding under each
Welfare Plan does not exceed and has not exceeded the limitations under Sections
419A(b) and 419A(c) of the Code. To their knowledge, the Company and the
Subsidiaries are not subject to taxation on the income of any Welfare Plan's
welfare benefit fund (as such term is defined in Section 419(e) of the Code)
under Section 419A(g) of the Code.
(s) Section 3.16(s) of the Company Disclosure
Schedule, to be furnished by the Company to Acquiror within fifteen (15) days
after the date of this Merger Agreement, will (i) identify all post-retirement
medical, life insurance or other benefits promised, provided or otherwise due
now or in the future to current, former or retired employees of the Company or
any Subsidiary, (ii) identify the method of funding (including, without
limitation, any individual accounting) for all such benefits, (iii) disclose the
funded status of the Plans providing or promising such benefits and (iv) set
forth the method of accounting for such benefits to any key employees (as
defined in Section 416(i) of the Code) of the Company or any Subsidiary.
(t) All Welfare Plans and the related trusts that are
subject to Section 4980B(f) of the Code and Sections 601 through 607 of ERISA
comply in all
-29-
material respects with and have been administered in compliance with the health
care continuation-coverage requirements for tax-favored status under Section
4980B(f) of the Code (formerly Section 162(k) of the Code), Sections 601 through
607 of ERISA, and all proposed or final regulations under Section 162 of the
Code explaining those requirements.
(u) The Company and the Subsidiaries have (i) filed or
caused to be filed all returns and reports on the Plans that they are required
to file and (ii) paid or made adequate provision for all fees, interest,
penalties, assessments or deficiencies that have become due pursuant to those
returns or reports or pursuant to any assessment or adjustment that has been
made relating to those returns or reports. All other fees, interest, penalties
and assessments that are due and payable by or for the Company or any Subsidiary
with respect to any Plan have been timely reported, fully paid and discharged.
There are no unpaid fees, penalties, interest or assessments due from the
Company or any Subsidiary or from any other Person that are or could become an
Encumbrance on any Asset of the Company or any Subsidiary or could otherwise
have a Company Material Adverse Effect. The Company and the Subsidiaries have
collected or withheld all amounts that are required to be collected or withheld
by them to discharge their obligations with respect to each Plan, and all of
those amounts have been paid to the appropriate Governmental Entity or set aside
in appropriate accounts for future payment when due.
SECTION 3.17. Taxes and Tax Matters.
(a) The Company and the Subsidiaries have (or, in the case of
Company Tax Returns (as defined in Article X) becoming due after the date hereof
and before the Effective Time, will have prior to the Effective Time) duly filed
all Company Tax Returns required to be filed by the Company and the Subsidiaries
since January 1, 1989 at or before the Effective Time with respect to all
applicable material Taxes. No material penalties or other charges are or will
become due with respect to any such Company Tax Returns as the result of the
late filing thereof. All such Company Tax Returns are (or, in the case of
returns becoming due after the date hereof and before the Effective Time, will
be) true and complete in all material respects. The Company and the
Subsidiaries: (i) have paid all Taxes due or claimed to be due by any Taxing
authority in connection with any such Company Tax Returns (without regard to
whether or not such Taxes are shown as due on such Company Tax Returns); or (ii)
have established (or, in the case of amounts becoming due after the date hereof,
prior to the Effective Time will have paid or established) in the Financial
Statements adequate reserves (in conformity with GAAP consistently applied) for
the payment of such Taxes. The amounts set up as reserves for Taxes in the
Financial Statements are sufficient for the payment of all unpaid Taxes, whether
or not such Taxes are disputed or are yet due and payable, for or with respect
to the applicable period, and for which the Company or any Subsidiary may be
liable in its own right (including, without limitation, by reason
-30-
of being a member of the same affiliated group) or as a transferee of the Assets
of, or successor to, any Person.
(b) Neither the Company nor any Subsidiary, either in its own
right (including, without limitation, by reason of being a member of the same
affiliated group) or as a transferee, has or at the Effective Time will have any
liability for Taxes payable for or with respect to any periods prior to and
including the Effective Time in excess of the amounts actually paid prior to the
Effective Time or reserved for in the Financial Statements, except for any Taxes
due in connection with the Merger.
(c) Except as set forth in Section 3.17(c) of the Company
Disclosure Schedule, all federal, Illinois, Indiana and Missouri Company Tax
Returns have been examined by the relevant Taxing authorities, or closed without
audit by applicable Law, and all deficiencies proposed as a result of such
examinations have been paid or settled, for all taxable years prior to and
including the taxable year ended December 31, 1992. Except as set forth in
Section 3.17(c) of the Company Disclosure Schedule, there is no action, suit,
proceeding, audit, investigation or claim pending or, to the knowledge of the
Company or any Subsidiary, threatened in respect of any Taxes for which the
Company or any Subsidiary is or may become liable, nor has any deficiency or
claim for any such Taxes been proposed, asserted or, to the knowledge of the
Company or any Subsidiary, threatened. Except as set forth in Section 3.17(c) of
the Company Disclosure Schedule, neither the Company nor any Subsidiary has
consented to any waivers or extensions of any statute of limitations with
respect to any taxable year of the Company or any Subsidiary. Except as set
forth in Section 3.17(c) of the Company Disclosure Schedule, there is no
Agreement, waiver or consent providing for an extension of time with respect to
the assessment or collection of any Taxes against the Company or any Subsidiary,
and no power of attorney granted by the Company or any Subsidiary with respect
to any Tax matters is currently in force.
(d) The Company has furnished to Acquiror true and complete
copies of all Company Tax Returns and all written communications with any
Governmental Entity relating to any such Company Tax Returns or to any
deficiency or claim proposed or asserted, irrespective of the outcome of such
matter, but only to the extent such items relate to Tax years (i) which are
subject to an audit, investigation, examination or other proceeding, or (ii)
with respect to which the statute of limitations has not expired.
(e) Section 3.17(e) of the Company Disclosure Schedule sets
forth (i) all federal Tax elections that currently are in effect with respect to
the Company or any Subsidiary, and (ii) all elections for purposes of foreign,
state or local Taxes and all consents or Agreements for purposes of federal,
foreign, state or local Taxes in each case that reasonably could be expected to
affect or be binding upon the Surviving Corporation or any Subsidiary or their
respective Assets or operations
-31-
after the Effective Time. Section 3.17(e) of the Company Disclosure Schedule
sets forth all changes in accounting methods for Tax purposes made, agreed to,
requested or required with respect to the Company or any of the Subsidiaries
since January 1, 1994.
(f) Except as set forth in Section 3.17(f) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary (i) is or has, since
January 1, 1989, been a partner in a partnership or an owner of an interest in
an entity treated as a partnership for federal income Tax purposes; (ii) since
January 1, 1989, has executed or filed with the IRS any consent to have the
provisions of Section 341(f) of the Code apply to it; (iii) is subject to
Section 999 of the Code; (iv) is a passive foreign investment company as defined
in Section 1296(a) of the Code; or (v) is a party to an Agreement relating to
the sharing, allocation or payment of, or indemnity for, Taxes (other than an
Agreement the only parties to which are the Company and the Subsidiaries).
(g) The Company and the Subsidiaries have no knowledge of, and
believe that there does not exist, any plan or intention on the part of the
Company Shareholders (a "Shareholder Plan") to engage in a sale, exchange,
----------------
transfer, distribution (including, without limitation, a distribution by a
partnership to its partners or by a corporation to its shareholders), pledge,
disposition or any other transaction which results in a reduction in the risk of
ownership or a direct or indirect disposition (a "Sale") of a number of shares
----
of Acquiror Common Stock to be issued to such Company Shareholders in the
Merger, which would reduce the Company Shareholders' ownership of Acquiror
Common Stock to a number of shares having an aggregate fair market value, as of
the Effective Time, of less than forty-five percent (45%) of the aggregate fair
market value, immediately prior to the Merger, of all outstanding shares of the
Company Capital Stock. For purposes of this paragraph, (i) shares of Company
Capital Stock with respect to which a Company Shareholder receives consideration
in the Merger other than Acquiror Common Stock (including, without limitation,
cash received pursuant to the exercise of dissenters' rights or in lieu of
fractional shares of Acquiror Common Stock) and/or (ii) shares of Company
Capital Stock with respect to which a Sale occurs prior to and in contemplation
of the Merger, shall be considered shares of outstanding Company Capital Stock
exchanged for Acquiror Common Stock in the Merger and then disposed of pursuant
to a Shareholder Plan.
SECTION 3.18. Customers.
To the knowledge of the Company and the Subsidiaries, the
relationships of the Company and the Subsidiaries with their customers are good
commercial working relationships. Except as set forth in Section 3.18 of the
Company Disclosure Schedule to be furnished by the Company to Acquiror within
fifteen (15) days after the date of this Merger Agreement, during the twelve
(12) months prior to the date of this Merger Agreement, no customer of the
Company or any
-32-
Subsidiary which accounted for in excess of $50,000 of the revenues of the
Company and the Subsidiaries during such twelve (12) months has canceled or
otherwise terminated its relationship with the Company or any Subsidiary.
SECTION 3.19. Certain Business Practices.
Neither the Company, the Subsidiaries nor any of their officers or
directors or, to the knowledge of the Company or any Subsidiary, any of their
employees or agents (or shareholders, distributors, representatives or other
persons acting on the express, implied or apparent authority of the Company or
of any Subsidiary) have paid, given or received or have offered or promised to
pay, give or receive, any bribe or other unlawful, questionable payment of money
or other thing of value, any unlawful extraordinary discount, or any other
unlawful inducement, to or from any Person or Governmental Entity in the United
States or elsewhere in connection with or in furtherance of the business of the
Company or any Subsidiary (including, without limitation, any offer, payment or
promise to pay money or other thing of value (a) to any foreign official or
political party (or official thereof) for the purposes of influencing any act,
decision or omission in order to assist the Company or any Subsidiary in
obtaining business for or with, or directing business to, any Person, or (b) to
any Person, while knowing that all or a portion of such money or other thing of
value will be offered, given or promised to any such official or party for such
purposes). The business of the Company and the Subsidiaries is not in any manner
dependent upon the making or receipt of such payments, discounts or other
inducements.
SECTION 3.20. Insurance.
Section 3.20 of the Company Disclosure Schedule, to be furnished by
the Company to Acquiror within fifteen (15) days after the date of this Merger
Agreement, will list and briefly describe all policies of title, Asset, fire,
hazard, casualty, liability, life, worker's compensation and other forms of
insurance of any kind owned or held by the Company or any Subsidiary. All such
policies: (a) are with insurance companies reasonably believed by the Company to
be financially sound and reputable; (b) are in full force and effect; (c) are
sufficient for compliance by the Company and by each Subsidiary with all
requirements of Law and of all Agreements to which the Company or any Subsidiary
is a party; (d) are valid and outstanding policies enforceable against the
insurer; (e) insure against risks of the kind customarily insured against and in
amounts customarily carried by companies similarly situated and by companies
engaged in similar businesses and owning similar Assets, and provide adequate
insurance coverage for the businesses and Assets of the Company and the
Subsidiaries; and (f) provide that they will remain in full force and effect
through the respective dates set forth in Section 3.20 of the Company Disclosure
Schedule.
-33-
SECTION 3.21. Potential Conflicts of Interest.
Except as set forth in Section 3.21 of the Company Disclosure
Schedule to be furnished by the Company to Acquiror within fifteen (15) days
after the date of this Merger Agreement, neither any present or, to the
knowledge of the Company or any Subsidiary, former director, officer, employee
with a salary in excess of $100,000 or shareholder of the Company or any
Subsidiary, nor any Affiliate of such director, officer, employee or
shareholder:
(a) owns, directly or indirectly, any interest in (except
for holdings in securities that are listed on a national securities
exchange, quoted on a national automated quotation system or
regularly traded in the over-the-counter market, where such holdings
are not in excess of two percent (2%) of the outstanding class of
such securities and are held solely for investment purposes), or is a
shareholder, partner, other holder of equity interests, director,
officer, employee, consultant or agent of any Person that is a
competitor, lessor, lessee or customer of, or supplier of goods or
services to, the Company or any Subsidiary, except where the value to
such individual of any such arrangement with the Company or any
Subsidiary has been less than $60,000 in the last twelve (12) months;
(b) owns, directly or indirectly, in whole or in part, any
Assets with a fair market value of $60,000 or more which the Company
or any Subsidiary currently uses in its business;
(c) has any cause of action or other suit, action or claim
whatsoever against, or owes any amount to, the Company or any
Subsidiary, except for claims arising in the Ordinary Course of
Business from any such Person's service to the Company or any
Subsidiary as a director, officer or employee;
(d) has sold or leased to, or purchased or leased from, the
Company or any Subsidiary any Assets for consideration in excess of
$60,000 in the aggregate since January 1, 1994;
(e) is a party to any Agreement pursuant to which the
Company or any Subsidiary provides office space to any such Person,
or provides services of any nature to any such Person, other than in
the Ordinary Course of Business in connection with the employment of
such Person by the Company or any Subsidiary; or
(f) has, since January 1, 1994, engaged in any other
material transaction with the Company or any Subsidiary involving in
excess of $60,000, other than (i) in the Ordinary Course of Business
in connection with the employment of such Person by the Company or
any Subsidiary, and (ii) dividends, distributions and stock issuances
to all common and preferred shareholders (as applicable) on a pro
rata basis.
-34-
SECTION 3.22. Receivables.
The accounts receivable of the Company and the Subsidiaries shown on
the Audited Balance Sheets and the Unaudited Balance Sheets, or thereafter
acquired by any of them, arose in the Ordinary Course of Business and represent
amounts owed by an account debtor for goods sold or services rendered by the
Company and the Subsidiaries, and the allowance for doubtful accounts shown on
such Audited Balance Sheets and Unaudited Balance Sheets was established in
accordance with past practice.
SECTION 3.23. Real Property.
(a) Section 3.23(a) of the Company Disclosure Schedule, to be
furnished by the Company to Acquiror within fifteen (15) days after the date of
this Merger Agreement, will list all the Real Property (as defined in Article
X), specifying the owner of each parcel thereof, and all such Real Property is
suitable and adequate for the uses for which it is currently being used.
(b) Except as set forth in Section 3.23(b) of the Company Disclosure
Schedule, the Company and the Subsidiaries are the sole owners of good, valid,
fee simple, marketable and insurable (at standard rates) title to the Real
Property respectively owned by them, including, without limitation, all
buildings, structures, fixtures and improvements thereon, in each case free and
clear of all Encumbrances.
(c) All buildings, structures, fixtures and other improvements on
the Real Property are fit for the uses to which they are currently devoted. All
such buildings, structures, fixtures and improvements on the Real Property
conform in all material respects to all Laws, except for any such non-
conformance that would not have a Company Material Adverse Effect.
(d) None of the Real Property is subject to any Agreement or other
restriction of any nature whatsoever (recorded or unrecorded) preventing or
limiting the Company's or any Subsidiary's right to use it in the manner in
which it is currently being used, and except as set forth in Section 3.23(d) of
the Company Disclosure Schedule to be furnished by the Company to Acquiror
within fifteen (15) days after the date of this Merger Agreement, none of the
material Real Property is subject to any Agreement preventing or limiting the
Company's or any Subsidiary's right to convey it.
(e) No portion of the Real Property or any building, structure,
fixture or improvement thereon is the subject of any condemnation, eminent
domain or inverse condemnation proceeding currently instituted or pending, and
neither the Company nor any Subsidiary has any knowledge that any of the
foregoing are, or will be, the subject of any such proceeding.
-35-
(f) The Real Property has access to adequate electric, gas, water,
sewer and telephone lines, all of which are adequate for the uses to which the
Real Property is currently devoted.
SECTION 3.24. Books and Records.
The books of account, stock records, minute books and other corporate
and financial records of the Company are complete and correct in all material
respects and have been maintained in accordance with good business practices,
and the matters contained therein are appropriately and accurately reflected in
all material respects in the Financial Statements.
SECTION 3.25. Assets.
Except as set forth in Section 3.25 of the Company Disclosure
Schedule, the Company and the Subsidiaries have good, valid and marketable title
to all material Assets respectively owned by them, including, without
limitation, all material Assets reflected in the Audited Balance Sheets and in
the Unaudited Balance Sheets and all material Assets purchased by the Company or
by any Subsidiary since December 31, 1996 (except for Assets reflected in such
Audited Balance Sheets and Unaudited Balance Sheets or acquired since December
31, 1996 which have been sold or otherwise disposed of in the Ordinary Course of
Business), free and clear of all Encumbrances. All personal property of the
Company and the Subsidiaries is in a condition adequate for the uses for which
it is currently being used.
SECTION 3.26. No Infringement or Contest.
Section 3.26 of the Company Disclosure Schedule, to be furnished by
the Company to Acquiror within fifteen (15) days after the date of this Merger
Agreement, will set forth (i) all trademarks, service marks, trade names, trade
styles and all registrations or applications therefor, (ii) all patents,
inventions and all registrations or applications therefor, (iii) all proprietary
software used by the Company or any Subsidiary, and (iv) all Agreements to which
the Company or any Subsidiary is a party, either as licensee or licensor,
relating to any of the foregoing, in each case owned, licensed or used by the
Company or any Subsidiary (including specification of whether each such item
listed is owned, licensed or used by the Company or any Subsidiary). With
respect to the material Intellectual Property (as defined in Article X) that is
owned by the Company or any Subsidiary, the Company and the Subsidiaries have
the right to bring action for infringement of such Intellectual Property. With
respect to the Intellectual Property that is licensed to the Company or any
Subsidiary, such Intellectual Property can be used by the Company and the
Subsidiaries in their respective businesses as currently conducted by them in
accordance with the terms and conditions of such licenses. As used in
-36-
businesses of the Company and the Subsidiaries as currently conducted, none of
the Company's or any Subsidiary's Intellectual Property infringes or
misappropriates or otherwise violates any Intellectual Property of any other
Person, nor is the Company or any Subsidiary otherwise in the conduct of their
respective businesses infringing upon, or alleged to be infringing upon, any
Intellectual Property of any other Person. The Company and the Subsidiaries own
or possess adequate rights to use all Intellectual Property necessary to the
conduct of the respective businesses of the Company and the Subsidiaries as
currently conducted.
SECTION 3.27. Opinion of Financial Advisor.
The Company has received the written opinion of Xxxxxxx Xxxxx &
Company ("Xxxxxxx Xxxxx") on or prior to the date of this Merger Agreement, to
-------------
the effect that, as of the date of such opinion, the consideration to be
received pursuant to the transactions contemplated under this Merger Agreement
is fair to the Company Shareholders from a financial point of view, and the
Company will promptly, after the date of this Merger Agreement, deliver a copy
of such opinion to Acquiror.
SECTION 3.28. Board Recommendation.
At a meeting duly called and held in compliance with Illinois Law,
the Board of Directors of the Company has adopted by unanimous vote a resolution
approving and adopting this Merger Agreement and the transactions contemplated
hereby and recommending approval and adoption of this Merger Agreement and the
transactions contemplated hereby by the Company Shareholders.
SECTION 3.29. Vote Required.
The affirmative vote of the holders of two-thirds of the outstanding
Company Common Shares, the holders of two-thirds of the outstanding Company
Series A Preferred Shares and the holders of two-thirds of the outstanding
Company Series B Preferred Shares are the only votes of the holders of any class
or series of capital stock of the Company necessary to approve the transactions
contemplated by this Merger Agreement.
SECTION 3.30. Banks; Attorneys-in-fact.
Section 3.30 of the Company Disclosure Schedule sets forth a complete
list showing the name of each bank or other financial institution in which the
Company or any Subsidiary has accounts (including a description of the names of
all Persons authorized to draw thereon or to have access thereto). Such list
also shows the name of each Person holding a power of attorney from the Company
or any Subsidiary and a brief description thereof.
-37-
SECTION 3.31. Investment Agreements.
In accordance with Section 6.05, Investment Agreements in the form
attached hereto as Exhibit A (the "Investment Agreements") will be executed and
--------- ---------------------
delivered to Acquiror by the Company Shareholders and each such Investment
Agreement constitutes a legal, valid and binding obligation of the respective
Company Shareholder who is a party thereto, enforceable against such Company
Shareholder in accordance with its terms.
SECTION 3.32. Brokers.
No broker, finder or investment banker (other than Xxxxxxx Xxxxx) is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Merger Agreement based upon
arrangements made by or on behalf of the Company or any Subsidiary. Prior to the
date of this Merger Agreement, the Company has furnished to Acquiror a complete
and correct copy of all Agreements between the Company and Xxxxxxx Xxxxx
pursuant to which such firm will be entitled to any payment relating to the
transactions contemplated by this Merger Agreement.
SECTION 3.33. Environmental Matters.
(a) The Company has complied and is in compliance with, and the
Real Property and all improvements thereon are in compliance with, all
Environmental Laws (as defined in Article X), except where the failure so to
comply would not have a Company Material Adverse Effect.
(b) Except as set forth in Section 3.33(b) of the Company
Disclosure Schedule to be furnished by the Company to Acquiror within fifteen
(15) days after the date of this Merger Agreement, there are no pending or
threatened actions, suits, claims, legal proceedings or other proceedings based
on, and neither the Company or any Subsidiary has received since January 1, 1992
any formal or informal notice of any complaint, order, directive, citation,
notice of responsibility, notice of potential responsibility, or information
request from any Governmental Entity or any other Person or knows any fact(s)
which might form the basis for any such actions or notices arising out of or
attributable to: (i) the current or past presence at any part of the Real
Property of Hazardous Materials (as defined in Article X) or any substances that
pose a hazard to human health or an impediment to working conditions; (ii) the
current or past release or threatened release into the environment from the Real
Property (including, without limitation, into any storm drain, sewer, septic
system or publicly owned treatment works) of any Hazardous Materials or any
substances that pose a hazard to human health or an impediment to working
conditions; (iii) the off-site disposal of Hazardous Materials originating on or
from the Real Property or the businesses or Assets of the Company or any
Subsidiary; (iv) any facility operations, procedures or designs of the Company
or
-38-
any Subsidiary which do not conform to requirements of the Environmental Laws;
or (v) any violation of Environmental Laws at any part of the Real Property or
otherwise arising from the Company's or any Subsidiary's activities (or the
activities of the Company's or any Subsidiary's predecessors in title) involving
Hazardous Materials.
(c) The Company and the Subsidiaries have been duly issued, and
currently have and will maintain through the Effective Time, all Licenses
required under any Environmental Law. A true and complete list of such Licenses,
all of which are valid and in full force and effect, will be set out in Section
3.33(c) of the Company Disclosure Schedule, to be furnished by the Company to
Acquiror within fifteen (15) days after the date of this Merger Agreement.
Except in accordance with such permits, licenses, certificates and approvals or
as described in Section 3.33(c) of the Company Disclosure Schedule, there has
been no Hazardous Discharge (as defined below) or discharge of any other
material regulated by such Licenses.
(d) Except as set forth in Section 3.33(d) of the Company
Disclosure Schedule to be furnished by the Company to Acquiror within fifteen
(15) days after the date of this Merger Agreement, the Real Property contains no
underground storage tanks, or underground piping associated with such tanks,
used currently or in the past for the storage, throughput or other management of
Hazardous Materials.
SECTION 3.34. Disclosure.
No representation or warranty by the Company, and no Document
furnished or to be furnished to Acquiror pursuant to this Merger Agreement or
otherwise in connection herewith or with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make the statements
contained therein, in light of the circumstances under which made, not
misleading. As of the date of this Agreement, the Company believes that, based
upon the assumptions contained therein, it has a reasonable likelihood of
attaining the results of its 5-year financial forecast, as furnished to
Acquiror.
SECTION 3.35. Company Shareholders.
Except as set forth in Section 3.35 of the Company Disclosure
Schedule, all holders of Company Capital Stock are residents of the State of
Illinois.
SECTION 3.36. Directors and Officers.
Section 3.36 of the Company Disclosure Schedule lists all current
directors and officers of the Company and the Subsidiaries, showing each such
person's
-39-
name, positions, and annual remuneration, bonuses and fringe benefits paid by
the Company or any Subsidiary for the current fiscal year and the most recently
completed fiscal year.
SECTION 3.37. Copies of Documents.
True and complete copies of all Documents listed in the Company
Disclosure Schedule have been or will be, within fifteen (15) days after the
date of this Merger Agreement, furnished to Acquiror.
SECTION 3.38. Operation of the Company's Business.
(a) Section 3.38(a) of the Company Disclosure Schedule sets
forth all complaints filed with the FCC or the ICC (as defined in Article X)
regarding "slamming" (as such term is understood in the telephone industry) by
the Company, any Subsidiary or any of their respective employees, resellers,
agents or representatives; and
(b) Section 3.38(b) of the Company Disclosure Schedule, to be
furnished by the Company to Acquiror within fifteen (15) days after the date of
this Merger Agreement, will set forth all filings by the Company or any
Subsidiary with the FCC, the ICC or the FAA since January 1, 1996.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
Except as specifically set forth in the Disclosure Schedule delivered
by Acquiror and Acquiror Sub to the Company prior to the execution and delivery
of this Merger Agreement (the "Acquiror Disclosure Schedule") (with a disclosure
----------------------------
with respect to a Section of this Merger Agreement to require a specific
reference in the Acquiror Disclosure Schedule to the Section of this Merger
Agreement to which each such disclosure applies, and no disclosure to be deemed
to apply with respect to any Section to which it does not expressly refer),
Acquiror and Acquiror Sub hereby jointly and severally represent and warrant
(which representation and warranty shall be deemed to include the disclosure
with respect thereto so specified in the Acquiror Disclosure Schedule) to the
Company as follows, in each case as of the date of this Merger Agreement, unless
otherwise specifically set forth herein or in the Acquiror Disclosure Schedule:
-40-
SECTION 4.01. Organization and Qualification; Subsidiaries.
Each of Acquiror, Acquiror Sub and Acquiror's Significant
Subsidiaries (as defined in Article X) is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, and has the full and unrestricted corporate power
and authority to own, operate and lease its Assets, and to carry on its business
as currently conducted. Each of Acquiror and its Significant Subsidiaries is
duly qualified to conduct business as a foreign corporation and is in good
standing in the states, countries and territories in which the nature of the
business conducted by it or the character of the Assets owned, leased or
otherwise held by it makes such qualification necessary, except where the
absence of such qualification as a foreign corporation would not have an
Acquiror Material Adverse Effect (as defined in Article X).
SECTION 4.02. Articles of Incorporation and Bylaws.
Acquiror has furnished to the Company a true and complete copy of the
Amended and Restated Certificate of Incorporation of Acquiror and the articles
of incorporation of Acquiror Sub, as currently in effect, certified as of a
recent date by the Secretary of State (or comparable Governmental Entity) of
their respective jurisdictions of incorporation, and a true and complete copy of
the Amended and Restated Bylaws of Acquiror and the bylaws of Acquiror Sub, as
currently in effect, certified by their respective corporate secretaries. Such
certified copies are attached as exhibits to, and constitute an integral part
of, the Acquiror Disclosure Schedule.
SECTION 4.03. Authority; Binding Obligation.
Each of Acquiror and Acquiror Sub has the full and unrestricted
corporate power and authority to execute and deliver this Merger Agreement and
to carry out the transactions contemplated hereby. The execution and delivery by
Acquiror and Acquiror Sub of this Merger Agreement and all other Documents
contemplated hereby, and the consummation by Acquiror and Acquiror Sub of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Acquiror or Acquiror Sub are necessary to authorize this Merger Agreement and
the other Documents contemplated hereby, or to consummate the transactions
contemplated hereby and thereby. This Merger Agreement has been duly executed
and delivered by Acquiror and Acquiror Sub and constitutes a legal, valid and
binding obligation of Acquiror and Acquiror Sub in accordance with its terms,
except as such enforceability may be subject to the effect of any applicable
bankruptcy, insolvency fraudulent conveyance, reorganization, moratorium or
similar Laws affecting creditors' rights generally and subject to the effect of
general equitable principles (whether considered in a proceeding in equity or at
law).
-41-
SECTION 4.04. No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance by Acquiror and
Acquiror Sub of this Merger Agreement and all other Documents contemplated
hereby, the fulfillment of and compliance with the respective terms and
provisions hereof and thereof, and the consummation by Acquiror and Acquiror Sub
of the transactions contemplated hereby and thereby, do not and will not: (i)
conflict with, or violate any provision of, the Amended and Restated Certificate
of Incorporation or the Amended and Restated Bylaws of Acquiror, or the
certificate or articles of incorporation or bylaws of Acquiror Sub or any of
Acquiror's Significant Subsidiaries; or (ii) subject to obtaining the consents,
approvals, authorizations and permits of, and making filings with or
notifications to, the applicable Governmental Entity pursuant to the applicable
requirements, if any, of the Securities Act, Blue Sky Laws, the HSR Act, the
Communications Act, the Federal Aviation Act, applicable state utilities Laws
and applicable municipal franchise Laws, and the filing and recordation of the
Articles of Merger as required by Illinois Law and Delaware Law, conflict with
or violate any Law applicable to Acquiror, Acquiror Sub or any of Acquiror's
Significant Subsidiaries, or any of their respective Assets; (iii) conflict
with, result in any breach of, constitute a default (or an event that with
notice or lapse of time or both would become a default) under any Agreement to
which Acquiror, Acquiror Sub or any of Acquiror's Significant Subsidiaries is a
party or by which Acquiror, Acquiror Sub or any of Acquiror's Significant
Subsidiaries, or any of their respective Assets, may be bound; or (iv) result in
or require the creation or imposition of, or result in the acceleration of, any
indebtedness or any Encumbrance of any nature upon, or with respect to,
Acquiror, Acquiror Sub or any of Acquiror's Significant Subsidiaries or any of
the Assets of Acquiror, Acquiror Sub or any of Acquiror's Significant
Subsidiaries; except for any such conflict or violation described in clause
(ii), any such conflict, breach or default described in clause (iii), or any
such creation, imposition or acceleration described in clause (iv) that would
not have an Acquiror Material Adverse Effect.
(b) Except as set forth in Section 4.04(b) of the Acquiror
Disclosure Schedule, the execution, delivery and performance by Acquiror and
Acquiror Sub of this Merger Agreement and all other Documents contemplated
hereby, the fulfillment of and compliance with the respective terms and
provisions hereof and thereof, and the consummation by Acquiror and Acquiror Sub
of the transactions contemplated hereby and thereby, do not and will not: (i)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Person not party to this Merger Agreement, except (A)
pursuant to the applicable requirements, if any, of the Securities Act, Blue Sky
Laws, the HSR Act, the Communications Act, the Federal Aviation Act, applicable
state utilities Laws and applicable municipal franchise Laws, and (B) the filing
and recordation of the Articles of Merger as required by Illinois Law and
Delaware Law; or (ii) result in or give rise to any penalty, forfeiture,
Agreement termination, right of termination,
-42-
amendment or cancellation, or restriction on business operations of Acquiror,
the Surviving Corporation or any of Acquiror's Significant Subsidiaries.
SECTION 4.05. No Prior Activities of Acquiror Sub.
Acquiror Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Merger Agreement and has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
SECTION 4.06. Brokers.
No broker or finder or investment banker (other than Salomon Brothers
Inc) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Merger Agreement based
upon arrangements made by or on behalf of Acquiror.
SECTION 4.07. SEC Documents.
Acquiror has filed all required reports, schedules, forms, statements
and other Documents with the SEC (as defined in Article X) since January 1, 1996
(including the Post-Signing SEC Documents (as defined in Section 6.13), the
"Acquiror SEC Documents"). As of their respective dates, the Acquiror SEC
----------------------
Documents complied or, in the case of the Post-Signing SEC Documents, will
comply 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 none of the
Acquiror SEC Documents contained or, in the case of the Post-Signing SEC
Documents, will contain, any untrue statement of a material fact or omitted or,
in the case of the Post-Signing SEC Documents, will omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Acquiror included in the Acquiror SEC
Documents comply or, in the case of the Post-Signing SEC Documents, will comply
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
or, in the case of the Post-Signing SEC Documents, will have been prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
the consolidated financial position of Acquiror and its consolidated
subsidiaries as of the dates thereof and the consolidated results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
-43-
SECTION 4.08. Acquiror Common Stock.
The Acquiror Common Stock, when issued and delivered to the Company
Shareholders pursuant to the Merger, will be duly authorized, validly issued,
fully paid and nonassessable, and will have been approved for listing by Nasdaq.
SECTION 4.09. Capitalization.
The authorized capital stock of Acquiror consists of (a) 250,000,000
shares of Acquiror Common Shares, of which, as of June 13, 1997: (i) 52,652,741
shares were issued and outstanding, all of which were duly authorized, validly
issued, fully paid and nonassessable; (ii) no shares were held in the treasury
of Acquiror; and (iii) 8,191,797 shares were reserved for issuance pursuant to
outstanding options to purchase Acquiror Common Stock granted to employees and
certain other Persons; (b) 22,000,000 shares of Class B common stock, par value
$.01 per share ("Acquiror Class B Common Stock"), of which, as of June 13, 1997:
-----------------------------
(i) no shares were issued and outstanding; (ii) no shares were held in the
treasury of Acquiror; and (iii) 1,300,688 shares were reserved for issuance
pursuant to outstanding options to purchase Acquiror Class B Common Stock
granted to a significant stockholder of Acquiror; and (c) 2,000,000 shares of
serial preferred stock, par value $.01 per share, of which: (i) no shares are
issued and outstanding; and (ii) no shares are held in the treasury of Acquiror.
Except for the options set forth in clauses (a)(iii) and (b)(iii) above, as of
June 13, 1997, there were no outstanding securities convertible into or
exchangeable for capital stock or any other securities of Acquiror, or any
capital stock or other securities of any of Acquiror's Significant Subsidiaries
and no outstanding options, rights (preemptive or otherwise), or warrants to
purchase or to subscribe for any shares of such capital stock or other
securities of Acquiror or any of Acquiror's Significant Subsidiaries. Except as
set forth in Section 4.09(a) of the Acquiror Disclosure Schedule and except for
Agreements relating to the options specified in clauses (a)(iii) and (b)(iii)
above, there are no outstanding Agreements to which Acquiror or any of its
Significant Subsidiaries is a party affecting or relating to the voting,
issuance, purchase, redemption, registration, repurchase or transfer of capital
stock or any other securities of Acquiror, or any capital stock or other
securities of any of Acquiror's Significant Subsidiaries, except as contemplated
hereunder. Except as set forth in Section 4.09(b) of the Acquiror Disclosure
Schedule and except pursuant to the exercise of options to purchase Acquiror
Common Stock granted to employees and certain other Persons, since March 31,
1997, no shares of capital stock of Acquiror have been issued by Acquiror. Each
of the outstanding shares of Acquiror Common Stock and Acquiror Class B Common
Stock, and of capital stock of, or other equity interests in, Acquiror's
Significant Subsidiaries was issued in compliance with all applicable federal
and state Laws concerning the issuance of securities, and, except as set forth
in Section 4.09(c) of the Acquiror Disclosure Schedule, such shares or other
equity interests owned by Acquiror or any of its Significant Subsidiaries are
owned free and clear of all Encumbrances. There are no obligations, contingent
or otherwise, of Acquiror or
-44-
any of its Significant Subsidiaries to provide funds to, make any investment (in
the form of a loan, capital contribution or otherwise) in, or provide any
guarantee with respect to, any of Acquiror's Significant Subsidiaries or any
other Person. Except as set forth in Section 4.09(d) of the Acquiror Disclosure
Schedule, there are no Agreements pursuant to which any Person is or may be
entitled to receive any of the revenues or earnings, or any payment based
thereon or calculated in accordance therewith, of Acquiror or any of its
Significant Subsidiaries.
SECTION 4.10. Absence of Registration Rights.
Except as provided in the Stockholders' Agreement (as defined in
Article X), no holders of capital stock of Acquiror have rights to the
registration of such capital stock with the SEC.
SECTION 4.11. Absence of Dividends.
Since March 31, 1997, Acquiror has not declared or made payment of,
or set aside for payment, any dividends on, or any other distribution in respect
of, the outstanding shares of its capital stock.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business of the Company.
The Company hereby covenants and agrees that, from the date of this
Merger Agreement until the Effective Time, the Company, unless otherwise
expressly contemplated by this Merger Agreement or consented to in writing by
Acquiror, will, and will cause the Subsidiaries to, carry on their respective
businesses only in the Ordinary Course of Business, use their respective best
efforts to preserve intact their business organizations and Assets, maintain
their rights and franchises, retain the services of their officers and key
employees and maintain their relationships with customers, suppliers, licensors,
licensees and others having business dealings with them, and use their
respective best efforts to keep in full force and effect liability insurance and
bonds comparable in amount and scope of coverage to that currently maintained.
Without limiting the generality of the foregoing, except as otherwise expressly
contemplated by this Merger Agreement, from the date of this Merger Agreement
until the Effective Time the Company shall not, and shall not permit any of the
Subsidiaries to:
(a) (i) increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or employee,
except for increases or bonuses in the Ordinary Course of Business to
employees who are not
-45-
directors or officers; (ii) grant any severance or termination pay
(other than pursuant to the normal severance policy of the Company or
any Subsidiary in effect on the date of this Merger Agreement) to, or
enter into any severance Agreement with, any director, officer or
employee, or enter into any employment Agreement with any director,
officer or employee; (iii) establish, adopt, enter into or amend any
Plan or Other Arrangement, except as may be required to comply with
applicable Law; (iv) pay any benefit not provided for under any Plan
or Other Arrangement; (v) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or
Plan or Other Arrangement (including the grant of stock options,
stock appreciation rights, stock-based or stock-related awards,
performance units or restricted stock, or the removal of existing
restrictions in any Plan or Other Arrangement or Agreement or awards
made thereunder), except for grants in the Ordinary Course of
Business; or (vi) except as set forth in Schedule 5.01(a), take any
----------------
action to fund or in any other way secure the payment of compensation
or benefits under any Agreement, Plan or Other Arrangement;
(b) except for dividends and other distributions set out in
Schedule 5.01(b), declare, set aside or pay any dividend on, or make
----------------
any other distribution in respect of, outstanding shares of capital
stock;
(c) (i) redeem, purchase or otherwise acquire any shares of
capital stock of the Company or any Subsidiary or any securities or
obligations convertible into or exchangeable for any shares of
capital stock of the Company or any Subsidiary, or any options,
warrants or conversion or other rights to acquire any shares of
capital stock of the Company or any Subsidiary or any such securities
or obligations, or any other securities thereof; (ii) effect any
reorganization or recapitalization; or (iii) split, combine or
reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock;
(d) issue, deliver, award, grant or sell, or authorize the
issuance, delivery, award, grant or sale (including the grant of any
limitations in voting rights or other Encumbrances) of, any shares of
any class of its capital stock (including shares held in treasury),
any securities convertible into or exercisable or exchangeable for
any such shares, or any rights, warrants or options to acquire, any
such shares, or amend or otherwise modify the terms of any such
rights, warrants or options the effect of which shall be to make such
terms more favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a portion
of the Assets of, or by any other manner, any business or any
corporation, partnership, association or other
-46-
business organization or division thereof, or otherwise acquire or
agree to acquire any Assets of any other Person (other than the
purchase of assets from suppliers or vendors in the Ordinary Course
of Business);
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise subject to any Encumbrance or otherwise dispose of, or
agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise subject to any Encumbrance or otherwise dispose of, any of
its Assets, except for (i) dispositions in the Ordinary Course of
Business, (ii) distributions of the Assets set out in Schedule
--------
5.01(b) and (iii) dispositions of the Assets set forth in Schedule
------- --------
5.01(f);
-------
(g) adopt any amendments to its articles or certificate of
incorporation, bylaws or other comparable charter or organizational
documents;
(h) make or rescind any express or deemed election relating
to Taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating
to Taxes, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year
ending December 31, 1995, except in either case as may be required by
Law, the IRS or GAAP;
(i) make or agree to make any new capital expenditure or
expenditures which are not included in the Company's 1997 capital
budget, a copy of which was furnished to Acquiror (and, if the
Effective Time has not occurred prior to January 1, 1998, the
Company's capital budget for 1998, which budget shall have been
approved by Acquiror (such approval not to be unreasonably
withheld)), and which are, individually, in excess of $50,000 or, in
the aggregate, in excess of $500,000;
(j) (i) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any Subsidiary, guarantee any debt
securities of another Person, enter into any "keep well" or other
Agreement to maintain any financial statement condition of another
Person or enter into any Agreement having the economic effect of any
of the foregoing, except for short-term borrowings incurred in the
Ordinary Course of Business, or (ii) except as set out in Schedule
--------
5.01(j), make any loans, advances or capital contributions to, or
-------
investments in, any other Person other than intra-group loans,
advances, capital contributions or investments between or among the
Company and any of its wholly owned Subsidiaries;
-47-
(k) pay, discharge, settle or satisfy any claims,
liabilities or obligations (whether absolute or contingent, matured
or unmatured, known or unknown), other than the payment, discharge or
satisfaction, in the Ordinary Course of Business or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent Financial Statement or incurred in
the Ordinary Course of Business, or waive any material benefits of,
or agree to modify in any material respect, any confidentiality,
standstill or similar Agreements to which the Company or any
Subsidiary is a party;
(l) except in the Ordinary Course of Business, waive,
release or assign any rights or claims, or modify, amend or terminate
any Agreement to which the Company or any Subsidiary is a party;
(m) make any change in any method of accounting or
accounting practice or policy other than those required by GAAP;
(n) take any action or fail to take any action which could
reasonably be expected to have a Company Material Adverse Effect
prior to or after the Effective Time or an Acquiror Material Adverse
Effect after the Effective Time, or that could reasonably be expected
to adversely effect the ability of the Company or any Subsidiary
prior to the Effective Time, or Acquiror or any of its subsidiaries
after the Effective Time, to obtain consents of third parties or
approvals of Governmental Entities required to consummate the
transactions contemplated in this Merger Agreement; or
(o) authorize, or commit or agree to do any of the
foregoing.
SECTION 5.02. Other Actions.
The Company and Acquiror shall not, and shall not permit any of their
respective Affiliates to, take any action that would, or that could reasonably
be expected to, result in (a) any of the representations and warranties of such
party set forth in this Merger Agreement becoming untrue, or (b) any of the
conditions to the Merger set forth in Article VII not being satisfied.
SECTION 5.03. Certain Tax Matters.
From the date hereof until the Effective Time, the Company and the
Subsidiaries (a) will accurately prepare and timely file with the relevant
Taxing authority all Company Tax Returns ("Post-Signing Returns") required to be
--------------------
filed, (b) will timely pay all Taxes due and payable with respect to such
Post-Signing Returns, (c) will pay or otherwise make adequate provision for all
Taxes payable by the Company and the Subsidiaries for which no Post-Signing
Return is due prior to the Effective Time, and (d) will promptly notify Acquiror
of any action, suit,
-48-
proceeding, claim or audit pending against or with respect to the Company or any
Subsidiary in respect of any Taxes.
SECTION 5.04. Access and Information.
For so long as this Merger Agreement is in effect, the Company shall,
and shall cause each Subsidiary to, (a) afford to Acquiror and its officers,
employees, accountants, consultants, legal counsel and other representatives
reasonable access during normal business hours to all of their respective
properties, Agreements, books, records and personnel and (b) furnish promptly to
Acquiror (i) a copy of each Document filed with, or received from any
Governmental Entity and (ii) all other information concerning their respective
businesses, operations, prospects, conditions (financial or otherwise), Assets,
liabilities and personnel as Acquiror may reasonably request.
SECTION 5.05. No Solicitation.
(a) The Company and its directors, officers, employees,
representatives and agents shall, and shall cause the Subsidiaries and their
respective directors, officers, employees, representatives and agents to,
immediately cease any discussions or negotiations with any Person that may be
ongoing with respect to a Competing Transaction (as defined in this Section
5.05(a)). The Company shall not, and shall cause the Subsidiaries not to,
initiate, solicit or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into discussions or furnish any information or
negotiate with any Person or otherwise cooperate in any way in furtherance of
such inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize any of the directors, officers, employees,
agents or representatives of the Company or any Subsidiary to take any such
action, and the Company shall, and shall cause the Subsidiaries to, direct and
instruct and use its or their best efforts to cause the directors, officers,
employees, agents and representatives of the Company and the Subsidiaries
(including, without limitation, any investment banker, financial advisor,
attorney or accountant retained by the Company or any Subsidiary) not to take
any such action, and the Company shall promptly notify Acquiror if any such
inquiries or proposals are received by the Company or any Subsidiary, or any of
its or their respective directors, officers, employees, agents, investment
bankers, financial advisors, attorneys, accountants or other representatives,
and the Company shall promptly inform Acquiror as to the material terms of such
inquiry or proposal and, if in writing, promptly deliver or cause to be
delivered to Acquiror a copy of such inquiry or proposal, and the Company shall
keep Acquiror informed, on a current basis, of the nature of any such inquiries
and the status and terms of any such proposals. For purposes of this
-00-
Xxxxxx Xxxxxxxxx, "Competing Transaction" shall mean any of the following
---------------------
involving the Company or the Subsidiaries (other than the transactions
contemplated by this Merger Agreement): (i) any merger, consolidation, share
exchange, business combination, or other similar transaction; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of ten percent
(10%) or more of the Assets of the Company and the Subsidiaries, taken as a
whole, or issuance of ten percent (10%) or more of the outstanding voting
securities of the Company or any Subsidiary in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for ten percent (10%) or
more of the outstanding shares of capital stock of the Company or any Subsidiary
or the filing of a registration statement under the Securities Act in connection
therewith; (iv) any solicitation of proxies in opposition to approval by the
Company Shareholders of the Merger; (v) any Person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act) shall
-----
have been formed which beneficially owns or has the right to acquire beneficial
ownership of, ten percent (10%) or more of the then outstanding shares of
capital stock of the Company or any Subsidiary; or (vi) any Agreement to, or
public announcement by the Company or any other Person of a proposal, plan or
intention to, do any of the foregoing.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Acquiror or Acquiror Sub, the approval or
recommendation by such Board of Directors or any such committee of this Merger
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Competing Transaction or (iii) enter into any Agreement with
respect to any Competing Transaction.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Meeting of Shareholders.
The Company shall promptly after the date of this Merger Agreement
take all action necessary in accordance with Illinois Law and its articles of
incorporation and bylaws to convene a meeting of the Company Shareholders to
consider the Merger (the "Company Shareholders' Meeting"), and the Company shall
-----------------------------
consult with Acquiror in connection therewith. The Company shall deliver to each
Company Shareholder the Acquiror Information (as defined in Article X) prior to
the Company Shareholders' Meeting. Prior to the distribution thereof to the
Company Shareholders, the Company shall make available to Acquiror all Documents
to be distributed to the Company Shareholders in connection with the
solicitation of shareholder approval of the Merger, and shall only distribute
-50-
Documents which Acquiror has approved in advance, such approval not to be
unreasonably withheld. The Company shall take all actions necessary or advisable
to secure the vote or consent of the Company Shareholders required by Illinois
Law to approve the Merger.
SECTION 6.02. Appropriate Action; Consents; Filings.
(a) Upon the terms and subject to the conditions set
forth in this Merger Agreement, the Company and Acquiror shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, and
do, or cause to be done, and to assist and cooperate with the other parties in
doing all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the transactions contemplated by this
Merger Agreement as promptly as practicable, including (i) executing and
delivering any additional instruments necessary, proper or advisable to
consummate the transactions contemplated by, and to carry out fully the purposes
of, this Merger Agreement, (ii) obtaining from any Governmental Entities any
Licenses required to be obtained or made by Acquiror or the Company or any of
their subsidiaries in connection with the authorization, execution and delivery
of this Merger Agreement and the consummation of the transactions contemplated
herein, including, without limitation, the Merger, and (iii) making all
necessary filings, and thereafter make any other required submissions, with
respect to this Merger Agreement and the Merger required under (A) the
Securities Act and any other applicable federal or state securities Laws, (B)
the HSR Act and (C) any other applicable Law; provided that Acquiror and the
--------
Company shall cooperate with each other in connection with the making of all
such filings, including providing copies of all such Documents to the non-filing
party and its advisors prior to filing and, if requested, accepting all
reasonable additions, deletions or changes suggested in connection therewith.
The Company and Acquiror shall furnish to each other all information required
for any application or other filing to be made pursuant to the rules and
regulations of any applicable Law in connection with the transactions
contemplated by this Merger Agreement.
(b) (i) The Company and Acquiror shall give (or shall
cause their respective subsidiaries to give) any notices to third parties, and
use, and cause their respective subsidiaries to use, all reasonable efforts to
obtain any third party consents, approvals or waivers (A) necessary, proper or
advisable to consummate the transactions contemplated in this Merger Agreement,
(B) disclosed or required to be disclosed in the Company Disclosure Schedule or
the Acquiror Disclosure Schedule, as the case may be, or (C) required to prevent
a Company Material Adverse Effect from occurring prior to or after the Effective
Time or an Acquiror Material Adverse Effect from occurring after the Effective
Time.
(ii) In the event that any party shall fail to obtain
any third party consent, approval or waiver described in subsection (b)(i)
above, such party shall use all reasonable efforts, and shall take any such
actions reasonably
-51-
requested by the other parties hereto, to minimize any adverse effect upon the
Company and Acquiror, their respective subsidiaries, and their respective
businesses resulting, or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent, approval or waiver.
(c) From the date of this Merger Agreement until the Effective
Time, the Company and Acquiror shall promptly notify each other in writing of
any pending or, to the knowledge of the Company or Acquiror (or their respective
subsidiaries), threatened action, proceeding or investigation by any
Governmental Entity or any other Person (i) challenging or seeking damages in
connection with the Merger or the conversion of the Company Capital Stock into
Acquiror Common Stock pursuant to the Merger or (ii) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the right of Acquiror
or its subsidiaries to own or operate all or any portion of the businesses or
Assets of the Company or any Subsidiary. The Company and Acquiror shall
cooperate with each other in defending any such action, proceeding or
investigation, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed.
SECTION 6.03. Letters of Accountants.
The Company shall use its best efforts to cause to be delivered to
Acquiror a "cold comfort" letter of Xxxxxx Xxxxxxxx LLP, its independent public
accountant, dated as of the Effective Time, and addressed to Acquiror,
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Merger Agreement.
SECTION 6.04. Update Disclosure; Breaches.
From and after the date of this Merger Agreement until the Effective
Time, each party hereto shall promptly notify the other parties hereto by
written update to its Disclosure Schedule of (i) any representation or warranty
made by it in connection with this Merger Agreement becoming untrue or
inaccurate, (ii) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any condition to the
obligations of any party to effect the Merger and the other transactions
contemplated by this Merger Agreement not to be satisfied, or (iii) the failure
of the Company or Acquiror, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it pursuant
to this Merger Agreement which would be likely to result in any condition to the
obligations of any party to effect the Merger and the other transactions
contemplated by this Merger Agreement not to be satisfied; provided, however,
-------- -------
that the delivery of any notice pursuant to this Section 6.04 shall not cure any
breach of any representation or warranty requiring disclosure of such matter
prior to the date of this Merger Agreement (or, in the case of disclosures
permitted
-52-
to be made within fifteen (15) days after the date of this Merger Agreement,
shall not cure any breach of any representation or warranty requiring disclosure
of such matter prior to such later date) or otherwise limit or affect the rights
and remedies available hereunder to the party receiving such notice. The Company
shall deliver to Acquiror updated versions of Sections 3.10 and 3.14(a) of the
Company Disclosure Schedule as of the Closing Date, solely to reflect events
occurring between the date of this Merger Agreement (or, in the case of
disclosures permitted to be made within fifteen (15) days after the date of this
Merger Agreement, between such later date) and the Closing Date, or shall have
notified Acquiror that no changes to such Sections of the Company Disclosure
Schedule are required.
SECTION 6.05. Investment Agreements.
Prior to the Effective Time, the Company shall obtain Investment
Agreements from each Company Shareholder who is to receive shares of Acquiror
Common Stock in the Merger; provided that the Company shall use its best efforts
--------
to obtain such Investment Agreements from each such Company Shareholder as soon
as practicable after the date of this Merger Agreement.
SECTION 6.06. Public Announcements.
Acquiror and the Company shall consult with each other before issuing
or making, and shall give each other the opportunity to review and comment upon,
any press release or other public statement with respect to the Merger and the
other transactions contemplated in this Merger Agreement, and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by Law or any listing agreement with the
NASD.
SECTION 6.07. Employee Matters.
The Company, the Subsidiaries and Acquiror shall use their respective
best efforts to cause the officers and employees of the Company and the
Subsidiaries listed in Schedule 6.07 to this Merger Agreement and each other key
-------------
employee of the Company and the Subsidiaries designated by Acquiror and
consented to by the Company (such consent not to be unreasonably withheld) (the
"Company Key Employees") to enter into employment, confidentiality and
---------------------
non-competition agreements, in the form of Acquiror's standard Employment,
Confidentiality and Non-Competition Agreement, a copy of which is attached
hereto as Exhibit B (the "Employment Agreements"), at or prior to the Effective
--------- ---------------------
Time. At the Effective Time, Acquiror shall grant to each Company Key Employee
who so executes and delivers an Employment Agreement an option (an "Acquiror
--------
Option" and collectively, the "Acquiror Options") to purchase a number of shares
------ ----------------
of Acquiror Common Stock determined by Acquiror after consultation with the
Company. Acquiror and the Company anticipate that a maximum of 1.5 million
shares of
-00-
Xxxxxxxx Xxxxxx Stock shall be subject to the Acquiror Options, assuming all of
the Company Key Employees execute and deliver Employment Agreements. The
Acquiror Options (a) shall have an exercise price per share of Acquiror Common
Stock equal to the fair market value of the Acquiror Common Stock on the date of
grant, determined in accordance with Acquiror's 1996 Employee Stock Option Plan
(the "Acquiror Stock Option Plan"), (b) shall vest in accordance with the
--------------------------
vesting schedule set forth in Schedule 6.07 hereto, and (c) shall have such
-------------
other terms as are specified in Acquiror's form of Stock Option Agreement for
senior management employees, a copy of which is attached hereto as Exhibit C,
---------
and in the Acquiror Stock Option Plan.
SECTION 6.08. Acquiror Information.
Acquiror shall provide to the Company and its attorneys, accountants
and other representatives all information reasonably requested by any such
Person in connection with the preparation of a disclosure document to be
utilized in the solicitation of proxies in favor of the Merger from the Company
Shareholders.
SECTION 6.09. Obligations of Acquiror Sub.
Acquiror shall take all action necessary to cause Acquiror Sub to
perform its obligations under this Merger Agreement and to consummate the Merger
on the terms and conditions set forth in this Merger Agreement.
SECTION 6.10. Unaudited Financial Information.
The Company will cause to be prepared and will furnish to Acquiror as
promptly as possible an unaudited consolidated balance sheet of the Company and
the Subsidiaries as of the last day of each month ending after March 31, 1997
and the unaudited consolidated statements of income and cash flows of the
Company and the Subsidiaries for the one-month periods then ended. The Company
will ensure that such Unaudited Statements are complete and correct in all
material respects, have been prepared in accordance with the books and records
of the Company and the Subsidiaries, and present fairly the consolidated
financial position of the Company and the Subsidiaries and their consolidated
results of operations and cash flows as of and for the respective dates and time
periods in accordance with GAAP applied on a basis consistent with prior
accounting periods, except as noted thereon and subject to normal and recurring
year-end adjustments which are not expected to be material in amount.
SECTION 6.11. Directors of Acquiror.
Immediately following the Effective Time, the Board of Directors of
Acquiror shall be expanded to include two additional directors, and shall
initially consist of
-54-
(i) the directors serving immediately prior to the Effective Time, (ii) Xx.
Xxxxxxx X. Xxxxxxx and (iii) Xx. Xxxxxx X. Xxxxxx.
SECTION 6.12. Environmental Matters.
(a) The Company will provide access to Acquiror, within fifteen
(15) days after the date of this Merger Agreement, to all information in the
possession of the Company or any Subsidiary that pertains to the environmental
history of the Real Property and the operations of the Company and the
Subsidiaries.
(b) The Company will promptly furnish to Acquiror written
notice of any Hazardous Discharge or of any actions or notices described in
Section 3.33(b).
(c) The Company will, at its expense, cause to be prepared and
delivered to Acquiror prior to the Closing Date a Phase I environmental report
on each parcel of the Real Property designated by Acquiror and, if recommended
under the Phase I environmental report and so requested by Acquiror, a Phase II
environmental report, in each case prepared by an environmental consultant
acceptable to Acquiror (the "Environmental Reports"). If any such Environmental
---------------------
Report discloses the presence of any Hazardous Materials or the risk of
contamination from any off-site Hazardous Materials, such Environmental Report
shall include an estimate of the cost of any related remediation.
SECTION 6.13. Acquiror SEC Documents.
Acquiror will file with the SEC all reports, schedules, forms,
statements and other Documents required to be filed after the date of this
Merger Agreement but before the Effective Time (the "Post-Signing SEC
----------------
Documents").
---------
SECTION 6.14. Directors' and Officers' Insurance; Indemnification.
Acquiror agrees that for the entire period from the Effective Time
until at least six (6) years after the Effective Time, (a) Acquiror will cause
the Surviving Corporation to maintain the Company's current directors' and
officers' insurance and indemnification policy and related arrangements, or an
equivalent policy and related arrangements, subject in either case to terms and
conditions no less advantageous to the present and former directors and officers
of the Company than those contained in the policy and arrangements in effect on
the date hereof, for all present and former directors and officers of the
Company, covering claims made and insurable events occurring prior to or within
six (6) years after the Effective Time (provided that the Surviving Corporation
will not be required to maintain such policy except to the extent that the
aggregate annual cost of maintaining such policy is not in excess of two hundred
percent (200%) of the current annual cost, in which case the Surviving
Corporation shall maintain such policies up to an annual cost of two hundred
percent (200%) of the current annual cost); and (b) Acquiror will
-55-
cause the Surviving Corporation to maintain indemnification provisions for
present and former officers and directors in the Surviving Corporation's
certificate of incorporation and bylaws to the fullest extent permitted by
Delaware Law. In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit proceeding or
investigation in which any of the present or former officers or directors (the
"Managers") of the Company is, or is threatened to be, made a party by reason of
--------
the fact that such Manager is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other entity, whether before or after the Effective Time, the parties
hereto agree to cooperate and use their best efforts to defend against and
respond thereto. It is understood and agreed that the Company shall indemnify
and hold harmless, and after the Effective Time each of the Surviving
Corporation and Acquiror shall indemnify and hold harmless, as and to the full
extent that the Surviving Corporation would be permitted by applicable Law (and
as to matters arising from or relating to this Merger Agreement and the possible
change in control of the Company, to the full extent that Acquiror would be
permitted under applicable Law), each such Manager against any losses, claims,
damages, liabilities, costs, expenses (including reasonable attorneys' fees),
judgments, fines and amounts paid in settlement in connection with any such
claim, action, suit, proceeding or investigation; and in the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) the Managers may retain counsel satisfactory to
them, and the Company, or the Surviving Corporation and Acquiror after the
Effective Time, shall pay all reasonable fees and expenses of such counsel for
the Managers promptly as statements therefor are received and (ii) the Company,
or the Surviving Corporation and Acquiror after the Effective Time, will use
their respective best efforts to assist in the vigorous defense of any such
matter; provided that neither the Company nor the Surviving Corporation or
Acquiror shall be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld); and provided further
that the Company and the Surviving Corporation and Acquiror shall have only such
obligation hereunder as is permitted by applicable Law to any Manager when and
if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such Manager in the manner contemplated is prohibited by applicable Law.
SECTION 6.15. Board of Directors of Illinois Consolidated Telephone
Company.
Immediately following the Effective Time, the Board of Directors of
Illinois Consolidated Telephone Company ("Telephone Sub") shall be reconstituted
-------------
to
-56-
include a total of three (3) directors, and shall initially consist of Xx. Xxxxx
X. XxXxxx, Xx. Xxxxxxx X. Xxxx and Xx. Xxxxxxx X. Xxxxxxx.
SECTION 6.16. Officers.
Immediately following the Effective Time, Xx. Xxxxxxx X. Xxxxxxx
shall become the Vice Chairman of the Board of Directors of Acquiror, to serve
in such officer position at the discretion of the Board of Directors of
Acquiror, and shall become the Chairman of the Board of Directors and Chief
Executive Officer of Telephone Sub, to serve in such officer positions at the
discretion of the Board of Directors of Telephone Sub.
SECTION 6.17. Post-Merger Operations.
It is the present intention of Acquiror that, following the Effective
Time:
(a) the principal corporate office of Telephone Sub will
continue to be located in Mattoon, Illinois.
(b) Telephone Sub will continue its separate corporate
existence, operating under the name "Illinois Consolidated Telephone
Company."
(c) Acquiror will continue to provide charitable contributions
and community support within the service areas of the parties and
each of their respective subsidiaries at levels substantially
comparable to the levels of charitable contributions and community
support provided by the parties and their respective subsidiaries
within their service areas during the two-year period immediately
prior to the date of this Merger Agreement, and, in the case of the
charitable contributions and community support to be provided in the
service area of the Company and the Subsidiaries, Acquiror will
continue to support certain of the specific charities currently
receiving support from the Company and the Subsidiaries, including
the Special Olympics.
SECTION 6.18. Stockholders' Agreement.
The Company shall use its best efforts to cause to be delivered to
Acquiror on behalf of each of the Company Shareholders that are not parties to
the Stockholders' Agreement as of the date hereof an executed Document binding
each such Company Shareholder to the Stockholders' Agreement within fifteen (15)
days after the date of this Merger Agreement.
-57-
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Obligations of Each Party Under This
Merger Agreement.
The respective obligations of each party to effect the Merger and the
other transactions contemplated herein shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions, any or all of which
may be waived by agreement of Acquiror and the Company, in whole or in part, to
the extent permitted by applicable Law:
(a) Shareholder Approval. This Merger Agreement and the Merger
--------------------
shall have been approved and adopted by the requisite vote of the
Company Shareholders.
(b) No Order. No Governmental Entity or federal or state court
--------
of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, judgment, injunction or other order (whether temporary,
preliminary or permanent), in any case which is in effect and which
prevents or prohibits consummation of the Merger; provided, however,
-------- -------
that each of the parties shall use their best efforts to cause any
such decree, judgment, injunction or other order to be vacated or
lifted.
(c) HSR Act. The applicable waiting period, together with any
-------
extensions thereof, under the HSR Act shall have expired or been
terminated.
(d) Other Approvals. All consents, waivers, approvals and
---------------
authorizations required to be obtained, and all filings or notices
required to be made, by Acquiror and the Company prior to
consummation of the transactions contemplated in this Merger
Agreement (other than the filing of the Articles of Merger in
accordance with Illinois Law and Delaware Law) shall have been
obtained from and made with all required Governmental Entities,
except for such consents, waivers, approvals or authorizations which
the failure to obtain, or such filings or notices which the failure
to make, would not have a Company Material Adverse Effect or an
Acquiror Material Adverse Effect or be reasonably likely to subject
the Company, any Subsidiary, Acquiror, Acquiror Sub or any of their
respective directors of officers to criminal liability or substantial
penalties.
-58-
SECTION 7.02. Additional Conditions to Obligations of Acquiror and
Acquiror Sub.
The obligations of Acquiror and Acquiror Sub to effect the Merger and
the other transactions contemplated herein are also subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived by Acquiror, in whole or in part, to the extent permitted by
applicable Law:
(a) Representations and Warranties. Each of the
------------------------------
representations and warranties of the Company contained in this
Merger Agreement shall be true and correct as of the date of this
Merger Agreement and shall be true and correct in all material
respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement
shall be true and correct in all respects giving effect to such
standard) as of the Effective Time as though made as of the Effective
Time, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct in
all material respects (except that where any statement in a
representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects
giving effect to such standard) as of such date, and except (A) for
changes permitted or contemplated by this Merger Agreement or (B) in
a representation and warranty that does not expressly include a
standard of materiality, any untrue or incorrect statements therein
that, considered in the aggregate, do not indicate a Company Material
Adverse Effect. Acquiror shall have received a certificate of the
chief executive officer or chief financial officer of the Company to
that effect.
(b) Updated Company Disclosure Schedule. The revised
-----------------------------------
versions of Sections 3.10 and 3.14(a) of the Company Disclosure
Schedule delivered to Acquiror pursuant to Section 6.04 shall not
disclose any Company Material Adverse Effect as compared to such
Sections of the Company Disclosure Schedule as of the date of this
Merger Agreement.
(c) Agreements and Covenants. The Company shall have
------------------------
performed or complied in all material respects with all agreements
and covenants required by this Merger Agreement to be performed or
complied with by it on or prior to the Effective Time. Acquiror shall
have received a certificate of the chief executive officer or chief
financial officer of the Company to that effect.
(d) Consents Under Agreements. The Company or the
-------------------------
appropriate Subsidiary shall have obtained the consent or approval of
each Person whose consent or approval shall be required in connection
with the Merger under all Agreements to which the Company or any
Subsidiary is a party, except where the failure to obtain any such
consents or approvals, considered in the
-59-
aggregate, would not have a Company Material Adverse Effect or an
Acquiror Material Adverse Effect.
(e) Opinion of Counsel. Acquiror shall have received from
------------------
Xxxxxx Xxxxxx & Xxxxx, counsel to the Company, an opinion dated the
Closing Date, substantially in the form attached hereto as Exhibit D.
(f) Dissenters. No more than five percent (5%) of the
----------
Company Capital Stock issued and outstanding immediately prior to the
Effective Time shall be Dissenting Shares.
(g) No Challenge. There shall not be pending any action,
------------
proceeding or investigation by any Governmental Entity (i)
challenging or seeking material damages in connection with the Merger
or the conversion of Company Capital Stock into Acquiror Common Stock
pursuant to the Merger, or seeking to place limitations on the
ownership of shares of Company Capital Stock (or shares of common
stock of the Surviving Corporation) by Acquiror or Acquiror Sub, (ii)
seeking to restrain or prohibit the consummation of the Merger or
otherwise limit the right of the Company, any Subsidiary, Acquiror or
any of its subsidiaries to own or operate all or any portion of the
business or Assets of the Company and the Subsidiaries or (iii) which
otherwise is likely to have a Company Material Adverse Effect or an
Acquiror Material Adverse Effect.
(h) Accountant Letters. Acquiror shall have received from
------------------
the Company a "cold comfort" letter of Xxxxxx Xxxxxxxx LLP, dated the
Effective Time and addressed to Acquiror, reasonably customary in
scope and substance for letters delivered by independent public
accountants in connection with transactions such as those
contemplated by this Merger Agreement.
(i) Investment Agreements. Acquiror shall have received
---------------------
from each Company Shareholder that is to receive shares of Acquiror
Common Stock in the Merger a signed Investment Agreement. The number
of Company Shareholders that are to receive shares of Acquiror Common
Stock in the Merger and that are not "accredited investors" within
the meaning of Rule 501(a) under the Securities Act, shall not exceed
thirty-five (35), and each Company Shareholder that is not an
accredited investor shall have such knowledge and experience in
financial and business matters, either alone or with an appropriate
purchaser representative that has been appointed by such Company
Shareholder, that it is capable of evaluating the merits and risks of
the Merger.
(j) Employment Agreements. Acquiror shall have received
---------------------
executed copies of Employment Agreements from Xx. Xxxxxxx X. Xxxxxxx,
Xx. Xxxxxx X. Xxxxxx, Mr. J. Xxxx Xxxxxxx and Mr. Xxxx Xxxx, except
where
-60-
the failure to receive an executed Employment Agreement from
any such Company Key Employee is the result of the death or
disability of such Company Key Employee.
(k) Company Material Adverse Effect. Since December 31,
-------------------------------
1996, there shall not have occurred a Company Material Adverse Effect
(or any development that, insofar as reasonably can be foreseen, is
likely to result in any Company Material Adverse Effect).
(l) Stockholders' Agreement. Acquiror shall have received
-----------------------
executed copies of the Stockholders' Agreement from or binding upon
each of the Company Shareholders that are not parties to the
Stockholders' Agreement as of the date hereof.
(m) Environmental Matters. The Environmental Reports shall
---------------------
indicate that the Real Property does not contain any Hazardous
Materials and is not subject to any risk of contamination from any
off-site Hazardous Materials, except to the extent that the presence
of any such Hazardous Materials or the risk of such contamination
would not have a Company Material Adverse Effect or an Acquiror
Material Adverse Effect.
SECTION 7.03. Additional Conditions to Obligations of the Company.
The obligations of the Company to effect the Merger and the other
transactions contemplated herein are also subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived by the Company, in whole or in part, to the extent permitted by
applicable Law:
(a) Representations and Warranties. Each of the
------------------------------
representations and warranties of Acquiror contained in this Merger
Agreement shall be true and correct as of the date of this Merger
Agreement and shall be true and correct in all material respects
(except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall be
true and correct in all respects giving effect to such standard) as
of the Effective Time as though made as of the Effective Time, except
that those representations and warranties which address matters only
as of a particular date shall remain true and correct in all material
respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement
shall be true and correct in all respects giving effect to such
standard) as of such date, and except (A) for changes permitted or
contemplated by this Merger Agreement or (B) in a representation and
warranty that does not expressly include a standard of materiality,
any untrue or incorrect statements therein that, considered in the
aggregate, do not indicate an Acquiror Material Adverse Effect. The
-61-
Company shall have received a certificate of the chief executive
officer or chief financial officer of Acquiror to that effect.
(b) Agreements and Covenants. Acquiror shall have performed
------------------------
or complied in all material respects with all agreements and
covenants required by this Merger Agreement to be performed or
complied with by it on or prior to the Effective Time. The Company
shall have received a certificate of the chief executive officer or
chief financial officer of Acquiror to that effect.
(c) Opinion of Counsel. The Company shall have received
------------------
from Xxxxx & Xxxxxxx L.L.P. an opinion dated the Closing Date,
substantially in the form attached hereto as Exhibit E.
(d) No Challenge. There shall not be pending any action,
------------
proceeding or investigation by any Governmental Entity (i)
challenging or seeking material damages in connection with the Merger
or the conversion of Company Capital Stock into Acquiror Common Stock
pursuant to the Merger, or (ii) seeking to restrain or prohibit the
consummation of the Merger.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.
This Merger Agreement may be terminated at any time (except where
otherwise indicated) prior to the Effective Time, whether before or after
approval of this Merger Agreement and the Merger by the Company Shareholders:
(a) by mutual written consent of Acquiror and the Company;
(b) (i) by Acquiror, if there has been a breach by the
Company of any of their representations, warranties, covenants or
agreements contained in this Merger Agreement, or any such
representation and warranty shall have become untrue, in any such
case such that Section 7.02(a) or Section 7.02(c) will not be
satisfied and such breach or condition has not been promptly cured
within ten (10) days following receipt by the Company of written
notice of such breach;
(ii) by the Company, if there has been a breach by the
Acquiror of any of its representations, warranties, covenants or
agreements contained in this Merger Agreement, or any such
representation and warranty shall have become untrue, in any such
case such that Section 7.03(a) or Section 7.03(b) will not be
satisfied and such breach or condition
-62-
has not been promptly cured within ten (10) days following receipt by
Acquiror of written notice of such breach;
(c) by Acquiror, within forty-five (45) days after the date
of this Merger Agreement, upon Acquiror's determination, based on its
due diligence investigation and review of the Company and the
Subsidiaries, that (i) there is or is reasonably likely to be any
material diminution in the benefits expected to be derived by
Acquiror as a result of the transactions contemplated by this Merger
Agreement or (ii) any development has occurred or information been
discovered that has, or is reasonably likely to have, or that
indicates a Company Material Adverse Effect;
(d) by either Acquiror or the Company if any decree,
permanent injunction, judgment, order or other action by any court of
competent jurisdiction or any Governmental Entity preventing or
prohibiting consummation of the Merger shall have become final and
non-appealable;
(e) by either Acquiror or the Company if the Agreement
shall fail to receive the requisite vote for approval and adoption by
the Company Shareholders at the Company Shareholders' Meeting; and
(f) by either Acquiror or the Company if the Merger shall
not have been consummated by March 31, 1998; provided, however, that
this Merger Agreement may be extended not more than sixty (60) days
by Acquiror by written notice to the Company if the Merger shall not
have been consummated as a direct result of the Company having failed
by such date to receive all regulatory approvals or consents required
to be obtained by the Company with respect to the Merger; provided
further, that the right to terminate this Merger Agreement under this
Section 8.01(f) shall not be available to (i) Acquiror, where
Acquiror's willful failure to fulfill any obligation under this
Merger Agreement has been the cause of, or resulted in, the failure
of the Effective Time to occur on or before such date, or (ii) the
Company, where the Company's willful failure to fulfill any
obligation under this Merger Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before
such date.
SECTION 8.02. Effect of Termination.
In the event of termination of this Merger Agreement by either
Acquiror or the Company as provided in Section 8.01, this Merger Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Acquiror, Acquiror Sub or the Company or any of their respective directors or
officers except (i) as set forth in Sections 8.03 and 9.01 hereof, (ii) nothing
herein shall relieve any party from liability for any breach hereof, (iii) each
party shall be entitled to any remedies at law or in equity for such breach and
(iv) Sections 8.02 and 8.03
-63-
and Article IX shall remain in full force and effect and survive any termination
of this Merger Agreement.
SECTION 8.03. Expenses.
(a) Subject to subsections (b) and (c) of this Section 8.03,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Merger Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expense.
(b) (i) If this Merger Agreement is terminated pursuant to
Section 8.01(b)(i) or Section 8.01(e), then the Company shall promptly pay to
Acquiror a termination fee of $5 million plus reasonable fees and expenses
incurred by Acquiror in connection with this Merger Agreement and the
transactions contemplated hereby, not to exceed $1 million.
(ii) If this Merger Agreement is terminated pursuant to
Section 8.01(b)(ii), then Acquiror shall promptly pay to the Company a
termination fee of $5 million plus reasonable fees and expenses incurred by the
Company in connection with this Merger Agreement and the transactions
contemplated hereby, not to exceed $1 million.
(c) (i) If this Merger Agreement is terminated by the Company
pursuant to Section 8.01(f) and the willful failure of Acquiror to fulfill any
obligation under this Merger Agreement has been the cause of, or resulted in,
such termination, then Acquiror shall promptly pay to the Company a termination
fee of $5 million plus reasonable fees and expenses incurred by the Company in
connection with this Merger Agreement and the transactions contemplated hereby,
not to exceed $1 million.
(ii) If this Merger Agreement is terminated by Acquiror
pursuant to Section 8.01(f) and the willful failure of the Company to fulfill
any obligation under this Merger Agreement has been the cause of, or resulted
in, such termination, then the Company shall promptly pay to Acquiror a
termination fee of $5 million plus reasonable fees and expenses incurred by
Acquiror in connection with this Merger Agreement and the transactions
contemplated hereby, not to exceed $1 million.
SECTION 8.04. Amendment.
This Merger Agreement may be amended by the parties hereto at any
time prior to the Effective Time; provided, however, that, after approval of the
-------- -------
Merger by the Company Shareholders, no amendment may be made which would reduce
the amount or change the type of consideration into which each share of Company
Capital Stock shall be converted pursuant to this Merger Agreement upon
-64-
consummation of the Merger. This Merger Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
SECTION 8.05. Extension; Waiver.
At any time prior to the Effective Time, the parties hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any Document delivered pursuant hereto and (c)
subject to the proviso of Section 8.04, waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties to
be bound thereby. The failure of any party to assert any of its rights under
this Merger Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Nonsurvival of Representations and Warranties.
None of the representations, warranties covenants and agreements in
Article III or Article IV shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. Notices.
All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered, mailed or transmitted if delivered personally, mailed by
registered or certified mail (postage prepaid, return receipt requested) or sent
by overnight courier (providing proof of delivery) to the parties at the
following addresses or sent by electronic transmission to the following
telecopier numbers (or at such other address or telecopy number for a party as
shall be specified by like notice):
-65-
(a) If to Acquiror or Acquiror Sub:
McLeodUSA Incorporated
McLeodUSA Technology Park
0000 X Xxxxxx XX
XX Xxx 0000
Xxxxx Xxxxxx, Xxxx 00000-0000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx
With a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
Columbia Square
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Xx.
(b) If to the Company:
Consolidated Communications Inc.
000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
With a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxx & Xxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx
SECTION 9.03. Headings.
The headings contained in this Merger Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Merger Agreement.
SECTION 9.04. Severability.
If any term or other provision of this Merger Agreement is invalid, illegal
or incapable of being enforced by any rule of Law or public policy, all other
conditions
-66-
and provisions of this Merger Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Merger 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 9.05. Entire Agreement.
This Merger Agreement (together with the Exhibits, Schedules, the Company
Disclosure Schedule and the Acquiror Disclosure Schedule and the other Documents
delivered pursuant hereto) and the Confidentiality Agreement (as defined in
Article X) constitute the entire agreement of the parties and supersede all
prior agreements and undertakings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein, are not intended to confer upon any other
Person any rights or remedies hereunder.
SECTION 9.06. Assignment.
This Merger Agreement shall not be assigned by operation of Law or
otherwise.
SECTION 9.07. Parties in Interest.
This Merger Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Merger Agreement, express or implied,
other than the right to receive the consideration payable in the Merger pursuant
to Article II, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this Merger
Agreement.
SECTION 9.08. Mutual Drafting.
Each party hereto has participated in the drafting of this Merger
Agreement, which each party acknowledges is the result of extensive negotiations
between the parties.
SECTION 9.09. Specific Performance.
In addition to any other remedies which Acquiror may have at law or in
equity, the Company hereby acknowledges that the Company Capital Stock and the
Company and the Subsidiaries are unique, and that the harm to Acquiror resulting
-67-
from breaches by the Company of its obligations cannot be adequately compensated
by damages. Accordingly, the Company agrees that Acquiror shall have the right
to have all obligations, undertakings, Agreements, covenants and other
provisions of this Merger Agreement specifically performed by the Company and
that Acquiror shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States of America or of any state
or other political subdivision thereof.
SECTION 9.10. Governing Law.
This Merger Agreement shall be governed by, and construed in accordance
with, the Laws of the State of Delaware, regardless of the Laws that might
otherwise govern under applicable principles of conflicts of law.
SECTION 9.11. Counterparts.
This Merger Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
ARTICLE X
DEFINITIONS
For purposes of this Merger Agreement, the following terms, and the
singular and plural thereof, shall have the meanings set forth below:
"Acquiror" is defined in the Preamble to this Merger Agreement.
--------
"Acquiror Class B Common Stock" is defined in Section 4.09.
-----------------------------
"Acquiror Common Stock" is defined in Section 2.01.
---------------------
"Acquiror Disclosure Schedule" is defined in Article IV.
----------------------------
"Acquiror Information" means (a) Acquiror's Annual Report on Form 10-K for
--------------------
the fiscal year ended December 31, 1996, (b) Acquiror's definitive proxy
statement dated April 21, 1997 and (c) Acquiror's quarterly report on Form 10-Q
for the period ending March 31, 1997.
"Acquiror Material Adverse Effect" means any event, change or effect that,
--------------------------------
individually or when taken together with all other such events, changes or
effects, is or is reasonably likely to be materially adverse to the business,
operations,
-68-
financial condition, Assets or liabilities of Acquiror and its subsidiaries,
taken as a whole.
"Acquiror Options" is defined in Section 6.07.
----------------
"Acquiror SEC Documents" is defined in Section 4.07.
----------------------
"Acquiror Stock Option Plan" is defined in Section 6.07.
--------------------------
"Acquiror Sub" is defined in the Preamble to this Merger Agreement.
------------
"Affiliate" means: (a) with respect to an individual, any member of such
---------
individual's family; (b) with respect to an entity, any officer, director,
shareholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a person or entity, any person or entity
which directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such person or entity.
"affiliate" means, with respect to any Person, a Person that directly or
---------
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such Person;
"Agreement" means any concurrence of understanding and intention between
---------
two or more Persons with respect to their relative rights and/or obligations or
with respect to a thing done or to be done (whether or not conditional,
executory, express, implied, in writing or meeting the requirements of
contract), including, without limitation, contracts, leases, promissory notes,
covenants, easements, rights of way, covenants, commitments, arrangements and
understandings.
"Articles of Merger" is defined in Section 1.02.
------------------
"Assets" means assets of every kind and everything that is or may be
------
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"Audited Balance Sheets" is defined in Section 3.08(a).
----------------------
"Audited Statements" is defined in Section 3.08(a).
------------------
"beneficial owner" means, with respect to any shares of Company Capital
----------------
Stock, a Person who shall be deemed to be the beneficial owner of such shares
(i) which such Person or any of its affiliates or associates beneficially owns,
directly or indirectly, (ii) which such Person or any of its affiliates or
associates (as such term is defined in Rule 12b-2 under the Exchange Act) has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
Agreement or upon the exercise of conversion rights, exchange rights, warrants
or options, or otherwise, or (B) the right to vote
-69-
pursuant to any Agreement, (iii) which are beneficially owned, directly or
indirectly, by any other Persons with whom such Person or any of its affiliates
or associates has any Agreement for the purpose of acquiring, holding, voting or
disposing of any such shares or (iv) pursuant to Section 13(d) of the Exchange
Act and any rules or regulations promulgated thereunder.
"business day" means a day other than a Saturday, a Sunday or any other day
------------
on which commercial banks in the State of Illinois and in the State of Iowa are
authorized or obligated to be closed.
"Blue Sky Laws" means state securities or blue sky laws and the rules and
-------------
regulations thereunder.
"Cash Election" is defined in Section 2.01(a)(ii).
-------------
"Cash Election Fraction" is defined in Section 2.01(a)(i).
----------------------
"Cash Election Number" is defined in Section 2.01(a)(i).
--------------------
"Cash Election Shares" is defined in Section 2.01(a)(iii).
--------------------
"Cash Overelection Fraction" is defined in Section 2.01(a)(iii).
--------------------------
"Certificates" is defined in Section 2.02(b).
------------
"Charitable Trust Stock Election Shares" is defined in Section
--------------------------------------
2.01(a)(iv)(A).
"Charitable Trust Stock Overelection Fraction" is defined in Section
--------------------------------------------
2.01(a)(iv)(B).
"Closing" is defined in Section 2.05.
-------
"Closing Date" is defined in Section 2.05.
------------
"Code" is defined in the Preamble to this Merger Agreement.
----
"Common Control Entity" means any trade or business under common control
-----------------------
(as such term is defined in Section 414(b) or 414(c) of the Code) with the
Company or any Subsidiary.
"Common Share Exchange Ratio" is defined in Section 2.01(a).
---------------------------
"Communications Act" means the Communications Act of 1934, as amended, and
------------------
all Laws promulgated pursuant thereto or in connection therewith.
"Company" is defined in the Preamble to this Merger Agreement.
-------
"Company Capital Stock" is defined in Section 3.04.
---------------------
-70-
"Company Common Shares" is defined in Section 2.01(a).
---------------------
"Company Contracts" is defined in Section 3.14(a).
-----------------
"Company Disclosure Schedule" is defined in Article III.
---------------------------
"Company Key Employees" is defined in Section 6.07.
---------------------
"Company Licenses" is defined in Section 3.07(a).
----------------
"Company Material Adverse Effect" means any event, change or effect that,
-------------------------------
individually or when taken together with all other such events, changes or
effects, is or is reasonably likely to be materially adverse to the business,
operations, financial condition, Assets or liabilities of the Company and the
Subsidiaries, taken as a whole.
"Company Series A Preferred Shares" is defined in Section 2.01(b).
---------------------------------
"Company Series B Preferred Shares" is defined in Section 2.01(c).
---------------------------------
"Company Shareholders" is defined in Section 3.04.
--------------------
"Company Shareholders' Meeting" is defined in Section 6.01.
-----------------------------
"Company Tax Returns" means all Tax Returns required to be filed by the
-------------------
Company or any of the Subsidiaries (without regard to extensions of time
permitted by law or otherwise).
"Competing Transaction" is defined in Section 5.05(a).
---------------------
"Confidentiality Agreement" means the confidentiality agreement dated
-------------------------
November 13, 1996 between Acquiror and the Company.
"Control" (including the terms "Controlled by" and "under common Control
------- ------------- --------------------
with") means, as used with respect to any Person, possession, directly or
----
indirectly or as a trustee or executor, of power to direct or cause the
direction of management or policies of such Person (whether through ownership of
voting securities, as trustee or executor, by Agreement or otherwise).
"Defined Benefit Plan" means a Plan that is or was a "defined benefit
----------------------
plan" as such term is defined in Section 3(35) of ERISA.
"Delaware Law" is defined in the Preamble to this Merger Agreement.
------------
"Dissenting Shareholder" is defined in Section 2.04.
----------------------
"Dissenting Shares" is defined in Section 2.01(a).
-----------------
-71-
"Documents" means any paper or other material (including, without
---------
limitation, computer storage media) on which is recorded (by letters, numbers or
other marks) information that may be evidentially used, including, without
limitation, legal opinions, mortgages, indentures, notes, instruments, leases,
Agreements, insurance policies, reports, studies, financial statements
(including, without limitation, the notes thereto), other written financial
information, schedules, certificates, charts, maps, plans, photographs, letters,
memoranda and all similar materials.
"DOL" means the United States Department of Labor and its successors.
---
"Effective Time" is defined in Section 1.02.
--------------
"Election Deadline" is defined in Section 2.01(a)(vii).
-----------------
"Employment Agreements" is defined in Section 6.07.
---------------------
"Encumbrance" means any mortgage, lien, pledge, encumbrance, security
-----------
interest, deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Agreement, claim or equity of any
kind, other than: (i) Taxes not yet due or the validity of which is being
contested in good faith by appropriate proceedings, and as to which the Company
shall, if appropriate under GAAP, have set aside on its books and records
adequate reserves; (ii) deposits under workmen's compensation, unemployment
insurance, social security and other similar Laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds in the ordinary course of
business; (iii) liens securing claims or demands of mechanics or materialmen;
(iv) liens which arise by operation of Law; (v) zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of the Real
Property; and (vi) liens securing purchase money security interests.
"Environmental Laws" means any Laws (including, without limitation,
------------------
the Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans, other criteria, or guidelines promulgated pursuant to such
Laws, now or hereafter in effect relating to Hazardous Materials generation,
production, use, storage, treatment, transportation or disposal, or noise
control, or the protection of human health or the environment.
"Environmental Reports" is defined in Section 6.12.
---------------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and all Laws promulgated pursuant thereto or in connection therewith.
-72-
"ESOP" means an "employee stock ownership plan" as such term is
----
defined in Section 407(d)(6) of ERISA or Section 4975(e)(7) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and all Laws promulgated pursuant thereto or in connection therewith.
"Exchange Agent" is defined in Section 2.02(a).
--------------
"Exchange Fund" is defined in Section 2.02(a).
-------------
"FAA" means the United States Federal Aviation Administration and its
---
successors.
"FCC" means the United States Federal Communications Commission and
---
its successors.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as
--------------------
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"Financial Statements" is defined in Section 3.08(a).
--------------------
"Form of Election" is defined in Section 2.01(a)(ii).
----------------
"GAAP" means United States generally accepted accounting principles.
----
"Governmental Entities" means any governmental, quasi-governmental or
---------------------
regulatory authority, whether domestic or foreign.
"group" is defined in Section 5.05(a).
-----
"Hazardous Discharge" means any emission, spill, release or discharge
-------------------
(whether on Real Property, on property adjacent to the Real Property, or at any
other location or disposal site) into or upon the air, soil or improvements,
surface water or groundwater, or the sewer, septic system, or waste treatment,
storage or disposal systems servicing the Real Property, in each case of
Hazardous Materials used, stored, generated, treated or disposed of at the Real
Property.
"Hazardous Materials" means any wastes, substances or materials
-------------------
(whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants
or contaminants, including, without limitation, substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive materials," or
other similar designations in, or otherwise subject to regulation under, any
Environmental Laws. "Hazardous Materials" includes polychlorinated biphenyls
-------------------
(PCBs), asbestos, lead-based paints, and petroleum and petroleum products
(including, without limitation, crude oil or any fraction thereof).
-00-
"XXX Xxx" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
-------
1976, as amended, and all Laws promulgated pursuant thereto or in connection
therewith.
"ICC" means the Illinois Commerce Commission and its successors.
---
"Illinois Law" is defined in the Preamble to this Merger Agreement.
------------
"Individual Account Plan" means a Plan that is or was an "individual
-----------------------
account plan" as such term is defined in Section 3(34) of ERISA.
"Intellectual Property" means (i) all fictitious business names,
---------------------
trademarks, service marks, trade names, trade styles, brands, private labels,
copyrights and all registrations or applications therefor, (ii) all patents,
inventions, discoveries, industrial models, processes, designs and all
registrations or applications therefor, (iii) all trade secrets, know-how and
other technical data, (iv) all general intangibles of like nature, and (v) all
Agreements relating to any of the foregoing.
"Investment Agreements" is defined in Section 3.31.
---------------------
"IRS" means the United States Internal Revenue Service and its
---
successors.
"knowledge" will be deemed to be present with respect to the Company
---------
and the Subsidiaries or Acquiror, when the matter in question was brought to the
attention of or, if due diligence had been exercised, would have been brought to
the attention of, any officer or responsible employee of the Company or any
Subsidiary, on the one hand, or Acquiror, on the other hand.
"Laws" means all foreign, federal, state and local statutes, laws,
----
ordinances, regulations, rules, resolutions, orders, tariffs, determinations,
writs, injunctions, awards (including, without limitation, awards of any
arbitrator), judgments and decrees applicable to the specified Person and to the
businesses and Assets thereof (including, without limitation, Laws relating to
securities registration and regulation; the sale, leasing, ownership or
management of real property; employment practices, terms and conditions, and
wages and hours; building standards, land use and zoning; safety, health and
fire prevention; and environmental protection, including Environmental Laws).
"License" means any franchise, grant, authorization, license, tariff,
-------
permit, easement, variance, exemption, consent, certificate, approval or order
of any Governmental Entity.
"Manager" is defined in Section 6.14.
-------
"Merger" is defined in the Preamble to this Merger Agreement.
------
"Merger Agreement" is defined in the Preamble to this Merger
----------------
Agreement.
-74-
"Minimum-Funding Plan" means a Pension Plan that is subject to Title
--------------------
I, Subtitle B, Part 3, of ERISA (concerning "funding").
"Mixed Election" is defined in Section 2.01(a)(ii).
--------------
"Multiemployer Plan" means a "multiemployer plan" as such term is
------------------
defined in Section 3(37) of ERISA.
"NASD" means the National Association of Securities Dealers, Inc.
----
"Nasdaq" is defined in Section 2.01(a).
------
"Non-Election" is defined in Section 2.01(a)(ii).
------------
"Non-Election Fraction" is defined in Section 2.01(a)(v).
---------------------
"Non-Election Shares" is defined in Section 2.01(a)(iii).
-------------------
"Other Arrangement" means a benefit program or practice providing for
-----------------
bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not a Plan.
"Ordinary Course of Business" means ordinary course of business
---------------------------
consistent with past practices and prudent business operations.
"PBGC" means the Pension Benefit Guaranty Corporation or its
----
successors.
"Pension Plan" means an "employee pension benefit plan" as such term
------------
is defined in Section 3(2) of ERISA.
"Per Share Common Share Cash Amount" is defined in Section 2.01(a).
----------------------------------
"Person" means an individual, corporation, partnership, joint
------
venture, trust, unincorporated organization or other entity, or a Governmental
Entity.
"Plan" means any plan, program or arrangement, whether or not
----
written, that is or was an "employee benefit plan" as such term is defined in
Section 3(3) of ERISA and (a) which was or is established or maintained by the
Company or any Subsidiary; (b) to which the Company or any Subsidiary
contributed or was obligated to contribute or to fund or provide benefits; or
(c) which provides or promises benefits to any person who performs or who has
performed services for the Company or any Subsidiary and because of those
services is or has been (i) a participant therein or (ii) entitled to benefits
thereunder.
-75-
"Post-Signing Returns" is defined in Section 5.03.
--------------------
"Post-Signing SEC Documents" is defined in Section 6.13.
--------------------------
"Pre-Election Acquiror Common Stock Price" is defined in Section
----------------------------------------
2.01(a).
"Pre-Election Aggregate Value" is defined in Section 2.01(a).
----------------------------
"Qualified Plan" means a Pension Plan that satisfies, or is intended
--------------
by the Company to satisfy, the requirements for Tax qualification described in
Section 401 of the Code.
"Real Property" means the real property (other than easements and
-------------
rights of way) owned or used by the Company and the Subsidiaries as of December
31, 1996, and any additional real property (other than easements and rights of
way) owned or used since that date.
"Representative" is defined in Section 2.01(a)(ii).
--------------
"Sale" is defined in Section 3.17(g).
----
"SEC" means the United States Securities and Exchange Commission and
---
its successors.
"Securities Act" means the Securities Act of 1933, as amended, and
--------------
all Laws promulgated pursuant thereto or in connection therewith.
"Series A Exchange Ratio" is defined in Section 2.01(b).
-----------------------
"Series B Exchange Ratio" is defined in Section 2.01(c).
-----------------------
"Shareholder Plan" is defined in Section 3.17(g).
----------------
"Significant Subsidiary" means any subsidiary of Acquiror disclosed
----------------------
in its most recent Annual Report on Form 10-K, and any other subsidiary that
would constitute a "Significant Subsidiary" of Acquiror within the meaning of
Rule 1-02 of Regulation S-X of the SEC.
"Statutory-Waiver Plan" means a Pension Plan that is not subject to
---------------------
Title I, Subtitle B, Part 3, of ERISA (concerning "funding").
"Stock Election" is defined in Section 2.01(a)(ii).
--------------
"Stock Election Number" is defined in Section 2.01(a)(i).
---------------------
"Stock Election Shares" is defined in Section 2.01(a)(iii).
---------------------
"Stock Overelection Fraction" is defined in Section 2.01(a)(iv)(A).
---------------------------
-76-
"Stockholders' Agreement" means the Stockholders' Agreement dated as
-----------------------
of the date hereof among Acquiror, Xx. Xxxxx X. XxXxxx, Xxx. Xxxx X. XxXxxx,
Midwest Capital Group, Inc., MWR Investments Inc., IES Investments Inc. and
certain of the Company Shareholders.
"Subsidiary" means a corporation, partnership, joint venture or other
----------
entity of which the Company owns, directly or indirectly, at least 50% of the
outstanding securities or other interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body or otherwise exercise Control of such entity.
"Surviving Corporation" is defined in Section 1.01.
---------------------
"Taxes" means all federal, state, local and foreign taxes (including,
-----
without limitation, income, profit, franchise, sales, use, real property,
personal property, ad valorem, excise, employment, social security and wage
withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or description
imposed by any Governmental Entity, and any interest, penalties or additions to
tax imposed thereon or in connection therewith.
"Tax Returns" means all federal, state, local, foreign and other
-----------
applicable returns, declarations, reports and information statements with
respect to Taxes required to be filed with the IRS or any other Governmental
Entity or Tax authority or agency, including, without limitation, consolidated,
combined and unitary tax returns.
"Telephone Sub" is defined in Section 6.15.
-------------
"Title I Plan" means a Plan that is subject to Title I of ERISA.
------------
"Unaudited Balance Sheets" is defined in Section 3.08(a).
------------------------
"Unaudited Statements" is defined in Section 3.08(a).
--------------------
"Welfare Plan" means an "employee welfare benefit plan" as such term
------------
is defined in Section 3(1) of ERISA.
"Xxxxxxx Xxxxx" is defined in Section 3.27.
-------------
-77-
IN WITNESS WHEREOF, Acquiror, Acquiror Sub and the Company have
caused this Merger Agreement to be executed and delivered as of the date first
written above.
MCLEODUSA INCORPORATED
By: /s/ Xxxxx X. XxXxxx
-----------------------------------
Name: Xxxxx X. XxXxxx
Title: Chairman and Chief
Executive Officer
EASTSIDE ACQUISITION CO.
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxxx X. Xxxx
Title: President
CONSOLIDATED COMMUNICATIONS INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title:
-78-
