AGREEMENT AND PLAN OF MERGER
AMONG
DESTIA COMMUNICATIONS, INC.,
VIATEL ACQUISITION CORP.
AND
VIATEL, INC.
TABLE OF CONTENTS
PAGE
1. Definitions..........................................................2
2. The Transaction......................................................7
(a) The Merger..................................................7
(b) The Closing.................................................7
(c) Actions at the Closing......................................7
(d) Effect of Merger............................................8
(e) Procedure for Exchange.....................................10
(f) Closing of Transfer Records................................12
(g) Dissenters' Rights.........................................12
3. Representations and Warranties of the Company.......................12
(a) Organization, Qualification and Corporate Power............12
(b) Capitalization.............................................13
(c) Subsidiaries...............................................13
(d) Voting Arrangements........................................14
(e) Authorization of Transaction...............................14
(f) Noncontravention...........................................14
(g) Filings with the SEC.......................................15
(h) Financial Statements.......................................15
(i) Events Subsequent to June 30, 1999.........................15
(j) Compliance.................................................16
(k) Brokers' and Other Fees....................................16
(l) Litigation and Liabilities.................................16
(m) Taxes......................................................16
(n) Fairness Opinion...........................................17
(o) Employee Benefits..........................................17
(p) Delaware General Corporation Law...........................18
(q) Year 2000..................................................18
(r) Environmental Matters......................................19
(s) Intellectual Property......................................19
(t) Insurance..................................................20
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TABLE OF CONTENTS
(continued)
PAGE
(u) Certain Contracts..........................................20
4. Representations and Warranties of Parent and the Parent Subsidiary..20
(a) Organization, Qualification and Corporate Power............20
(b) Capitalization.............................................21
(c) Subsidiaries...............................................21
(d) Voting Arrangements........................................22
(e) Authorization of Transaction...............................22
(f) Noncontravention...........................................22
(g) Filings with the SEC.......................................22
(h) Financial Statements.......................................23
(i) Events Subsequent to June 30, 1999.........................23
(j) Compliance.................................................24
(k) Brokers' and Other Fees....................................24
(l) Litigation and Liabilities.................................24
(m) Taxes......................................................24
(n) Fairness Opinion...........................................25
(o) Employee Benefits..........................................25
(p) Year 2000..................................................26
(q) Environmental Matters......................................26
(r) Intellectual Property......................................27
(s) Insurance..................................................27
(t) Certain Contracts..........................................27
(u) Activities of Parent Subsidiary............................28
(v) Circe......................................................28
5. Covenants...........................................................28
(a) General....................................................28
(b) Notices and Consents.......................................28
(c) Regulatory Matters and Approvals...........................28
(d) Operation of the Company's Business........................31
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TABLE OF CONTENTS
(continued)
PAGE
(e) Operation of Parent's Business.............................33
(f) Access.....................................................35
(g) Notice of Developments.....................................35
(h) Company Exclusivity........................................36
(i) Parent Exclusivity.........................................37
(j) Insurance and Indemnification..............................40
(k) Financial Statements.......................................42
(l) Continuity of Business Enterprise..........................42
(m) Parent Board of Directors..................................42
(n) Rule 145 Affiliates........................................43
(o) Nasdaq Listing.............................................43
(p) Tax Free Treatment.........................................43
(q) Company Employee Plans.....................................43
(r) Notice of Adverse Circe Network Developments...............43
(s) Discount Notes.............................................44
(t) Year 2000 Budgets..........................................44
6. Conditions to Obligation to Close...................................44
(a) Conditions to Obligation of Parent and the Parent
Subsidiary.................................................44
(b) Conditions to Obligation of the Company....................45
7. Termination.........................................................47
(a) Termination of Agreement...................................47
(b) Effect of Termination......................................49
8. Miscellaneous.......................................................49
(a) Survival...................................................49
(b) Press Releases and Public Announcements....................49
(c) No Third-Party Beneficiaries...............................50
(d) Entire Agreement...........................................50
(e) Binding Effect; Assignment.................................50
(f) Counterparts...............................................50
(g) Headings...................................................50
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TABLE OF CONTENTS
(continued)
PAGE
(h) Notices....................................................50
(i) GOVERNING LAW..............................................52
(j) Amendments and Waivers.....................................52
(k) Severability...............................................52
(l) Expenses...................................................52
(m) Construction...............................................52
(n) Incorporation of Exhibits..................................52
(o) Definition of Knowledge....................................52
(p) WAIVER OF JURY TRIAL.......................................53
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") dated as of August 27, 1999,
by and among VIATEL, INC., a Delaware corporation ("PARENT"), VIATEL ACQUISITION
CORP., a Delaware corporation and a direct wholly-owned Subsidiary of Parent
(the "PARENT SUBSIDIARY"), and DESTIA COMMUNICATIONS, INC., a Delaware
corporation (the "COMPANY"). Parent, the Parent Subsidiary and the Company are
referred to collectively herein as the "PARTIES."
WITNESSETH:
WHEREAS, this Agreement contemplates a transaction in which Parent will
acquire all of the outstanding capital stock of the Company through a merger of
the Parent Subsidiary with and into the Company;
WHEREAS, the Board of Directors of each of Parent, the Parent Subsidiary
and the Company has approved the acquisition of the Company by Parent, including
the merger of the Parent Subsidiary with and into the Company (the "MERGER"),
upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has determined that the
Merger is advisable and is fair to and in the best interests of the holders of
the Company's voting common stock, par value $.01 per share (the "VOTING
SHARES"), and the holders of the Company's non-voting common stock, par value
$.01 per share (the "NONVOTING SHARES"), and together with the Voting Shares
(the "COMPANY SHARES"), and has resolved to recommend the approval of the Merger
and the adoption of this Agreement by the Company Stockholders (as defined in
ss.1 below);
WHEREAS, the Board of Directors of Parent has determined that the Merger is
advisable and is fair to and in the best interests of the holders of Parent's
common stock, par value $0.01 per share (the "PARENT SHARES");
WHEREAS, the Parent Shares are listed for trading on the Nasdaq National
Market ("NASDAQ") and the Board of Directors of the Parent has resolved to
recommend the approval of the issuance of Parent Shares in connection with the
Merger as provided in this Agreement by the Parent Stockholders (as defined in
ss.1 below) as required by the rules of Nasdaq and, if necessary, approval of an
amendment to the certificate of incorporation of Parent by the Parent
Stockholders to increase the authorized number of Parent Shares;
WHEREAS, to induce Parent and the Parent Subsidiary to enter into this
Agreement, Parent, the Parent Subsidiary and the Company have entered into a
Stockholder Agreement (each a "STOCKHOLDER AGREEMENT") with each of Xxxxxx Xxxx,
Xxxxxx Xxxx, Xxxx Xxxxx and PG Investors, L.P. (collectively, the
"STOCKHOLDERS," and individually, a "STOCKHOLDER");
WHEREAS, this Agreement contemplates that for U.S. Federal income tax
purposes the Merger will qualify as a reorganization within the meaning of Code
ss.368(a);
NOW, THEREFORE, in consideration of the premises and the mutual promises
set forth herein, and in consideration of the representations, warranties and
covenants set forth herein, the Parties agree as follows:
1. DEFINITIONS.
"ACQUISITION PROPOSAL" means any proposal or offer (including, without
limitation, any proposal or offer to the Company Stockholders) with respect to a
merger, acquisition, consolidation, recapitalization, reorganization,
liquidation, tender offer or exchange offer or similar transaction involving, or
any purchase of 25% or more of the consolidated assets of, or any equity
interest representing 25% or more of the outstanding shares of capital stock in,
the Company.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange --------- Act.
"AGREEMENT" has the meaning set forth in the preambles.
"BLUE SKY FILINGS" has the meaning set forth in ss.5(c)(i) below.
"CERTIFICATE OF MERGER" has the meaning set forth in ss.2(c) below.
"CIRCE NETWORK" means Parent's fiber-optic broadband networks completed or
being constructed, in Western Europe.
"CIRCE RIGHTS" means the authority, approvals, consents, franchises, rights
of way, way leaves, easements, permits, licenses and/or other rights
(contractual, governmental or otherwise) necessary for the construction and
operation of the Circe Network.
"CLOSING" has the meaning set forth in ss.2(b) below.
"CLOSING DATE" has the meaning set forth in ss.2(b) below.
"CLOSING SALES PRICE PER PARENT SHARE" means, on any day, the average of
the last reported sale price of one Parent Share on the Nasdaq Stock Market for
each of the five trading days immediately preceding such day.
"CODE" has the meaning set forth in ss.3(o)(ii) below.
"COMPANY" has the meaning set forth in the preambles.
"COMPANY 10-K" has the meaning set forth in ss.3(h) below.
"COMPANY 10-Q" has the meaning set forth in ss.3(h) below.
"COMPANY BENEFIT PLAN" and "COMPANY BENEFIT PLANS" have the meanings set
forth in ss.3(o)(i) below.
"COMPANY BOARD" means the board of directors of the Company.
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"COMPANY CONTRACTS" has the meaning set forth in ss.3(u) below.
"COMPANY DISCLOSURE LETTER" has the meaning set forth in ss.3(a) below.
"COMPANY EMPLOYEES" has the meaning set forth in ss.3(o)(i) below.
"COMPANY ERISA AFFILIATE" has the meaning set forth in ss.3(o)(iii) below.
"COMPANY FAIRNESS OPINION" means an opinion of Xxxxxx Xxxxxxx & Co.
Incorporated, addressed to the Company Board, as to the fairness of the Per
Share Merger Consideration to the Company Stockholders (other than Parent and
the Parent Subsidiary) from a financial point of view.
"COMPANY INTELLECTUAL PROPERTY" has the meaning set forth in ss.3(s) below.
"COMPANY MATERIAL ADVERSE EFFECT" has the meaning set forth in ss.3(a)
below.
"COMPANY PENSION PLAN" has the meaning set forth in ss.3(o)(ii) below.
"COMPANY REPORTS" has the meaning set forth in ss.3(g) below.
"COMPANY SHARES" has the meaning set forth in the preambles.
"COMPANY SPECIAL MEETING" has the meaning set forth in ss.5(c)(ii) below.
"COMPANY STOCKHOLDER" means any Person who or which holds any Company
Shares.
"CONFIDENTIALITY AGREEMENT" means the letter agreement dated August 4, 1999
between Parent and the Company, providing that, among other things, each Party
would maintain confidential certain information of the other Party.
"CONFIDENTIAL INFORMATION" means Information, as defined in the
Confidentiality Agreement.
"DELAWARE GENERAL CORPORATION LAW" means Title 8, Chapter 1 of the Delaware
Code, as amended.
"DISSENTING SHARES" has the meaning set forth in ss.2(g) below.
"EFFECTIVE TIME" has the meaning set forth in ss.2(d)(i) below.
"ENVIRONMENTAL LAW" has the meaning set forth in ss.3(r) below.
"ERISA" has the meaning set forth in ss.3(o)(i) below.
"EXCHANGE AGENT" has the meaning set forth in ss.2(e)(i) below.
"EXCHANGE FUND" has the meaning set forth in ss.2(e)(i) below.
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"FOREIGN COMPETITION LAWS" means foreign statutes, rules, regulations,
orders, decrees and administrative and judicial directives that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization, lessening of competition or restraint of trade.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"GOVERNMENT ENTITY" has the meaning set forth in ss.3(f) below.
"XXXX-XXXXX-XXXXXX ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"HAZARDOUS SUBSTANCE" has the meaning set forth in ss.3(r) below.
"INDEMNIFIED PARTY" has the meaning set forth in ss.5(j)(ii) below.
"JOINT PROXY STATEMENT/PROSPECTUS" has the meaning set forth in ss.5(c)(i)
below.
"MERGER" has the meaning set forth in the preambles.
"MERGER CONSIDERATION" has the meaning set forth in ss.5(d)(v) below.
"NASDAQ" has the meaning set forth in the preambles.
"NONVOTING SHARES" has the meaning set forth in the preambles.
"ORDER" has the meaning set forth in ss.6(a)(v) below.
"OUTSIDE DATE" has the meaning set forth in ss.7(a)(ii) below.
"PARENT" has the meaning set forth in the preambles.
"PARENT 10-K" has the meaning set forth in ss.4(h) below.
"PARENT 10-Q" has the meaning set forth in ss.4(h) below.
"PARENT ACQUISITION PROPOSAL" means any proposal or offer (including,
without limitation, any proposal or offer to Parent Stockholders) with respect
to a merger, acquisition, consolidation, recapitalization, reorganization,
liquidation, tender offer or exchange offer or similar transaction involving, or
any purchase of 25% or more of the consolidated assets of, or any equity
interest representing 25% or more of the outstanding shares of capital stock in,
Parent.
"PARENT BENEFIT PLAN" and "PARENT BENEFIT PLANS" have the
respective meanings set forth in ss.4(o)(i) below.
"PARENT BOARD" means the board of directors of Parent.
"PARENT CONTRACTS" has the meaning set forth in ss.4(t) below.
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"PARENT DISCLOSURE LETTER" has the meaning set forth in ss.4(a) below.
"PARENT EMPLOYEES" has the meaning set forth in ss.4(o)(i) below.
"PARENT ERISA AFFILIATE" has the meaning set forth in ss.4(o)(iii) below.
"PARENT FAIRNESS OPINION" means an opinion of ING Barings LLC, addressed to
the Parent Board, as to the fairness of the Merger to Parent from a financial
point of view.
"PARENT INTELLECTUAL PROPERTY" has the meaning set forth in ss.4(r) below.
"PARENT MATERIAL ADVERSE EFFECT" has the meaning set forth in ss.4(a)
below.
"PARENT PENSION PLAN" has the meaning set forth in ss.4(o)(ii) below.
"PARENT REPORTS" has the meaning set forth in ss.4(g) below.
"PARENT SHARES" has the meaning set forth in the preambles.
"PARENT SPECIAL MEETING" has the meaning set forth in ss.5(c)(ii) below.
"PARENT STOCKHOLDER" means any Person who or which holds any Parent Shares.
"PARENT SUBSIDIARY" has the meaning set forth in the preambles.
"PARENT SUPERIOR PROPOSAL" has the meaning set forth in ss.5(i)(ii) below.
"PARENT THIRD PARTY" means any Person (or group of Persons) other than the
Company or its respective Affiliates.
"PARTY" has the meaning set forth in the preambles.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"PER SHARE MERGER CONSIDERATION" has the meaning set forth in ss.2(d)(v)
below.
"PRIOR CONSULTATION" means oral or written notice to the chief executive
officer of the Company at least two (2) days (one of which must be a business
day) prior to the earlier of (x) taking the action or (y) committing to take the
action with respect to which Prior Consultation is necessary pursuant to ss.5(e)
below and subsequent to such notice making the chief executive officer of Parent
reasonably available to the chief executive officer of the Company to discuss
such action prior to taking such action.
"PROHIBITED PARENT ACQUISITION PROPOSAL" has the meaning set forth in
ss.5(i)(i) below.
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"REPRESENTATIVES" has the meaning set forth in ss.5(h)(i) below.
"REGISTRATION STATEMENT" has the meaning set forth in ss.5(c)(i) below.
"REQUIRED COMPANY CONSENT" has the meaning set forth in ss.3(f) below.
"REQUIRED PARENT CONSENT" has the meaning set forth in ss.4(f) below.
"REQUISITE STOCKHOLDER APPROVAL" means, with respect to the Company, the
affirmative vote of the holders of the outstanding Company Shares in favor of
the adoption of this Agreement in accordance with the Delaware General
Corporation Law or, with respect to Parent, the affirmative vote of the holders
of the outstanding Parent Shares in favor of (a) approval of the issuance of
Parent Shares in connection with the Merger as provided in this Agreement in
accordance with the rules of Nasdaq and (b) if, necessary, an amendment to
Parent's certificate of incorporation to increase the authorized capital stock
of Parent in accordance with the Delaware General Corporation Law.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge
or other security interest, OTHER THAN (a) mechanic's, materialman's and similar
liens; (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings; (c)
purchase money liens and liens securing rental payments under capital lease
arrangements; and (d) other liens arising in the ordinary course of business and
not incurred in connection with the borrowing of money.
"STOCK RIGHTS" means each option, warrant, purchase right, subscription
right, conversion right, exchange right or other contract, commitment or
security providing for the issuance or sale of any capital stock, or otherwise
causing to become outstanding any capital stock, including with respect to the
Company, the right of holders of Nonvoting Shares to exchange such shares for
Voting Shares.
"STOCKHOLDER" has the meaning set forth in the preambles.
"STOCKHOLDER AGREEMENT" has the meaning set forth in the preambles.
"SUBSIDIARY" of a specified Person means any corporation, limited liability
company, partnership, joint venture or other legal entity of which the specified
Person (either alone or together with any other Subsidiary of the specified
Person) owns, directly or indirectly, more than 50% of the stock or other
equity, partnership, limited liability company or equivalent interests, the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity, or
otherwise has the
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power to vote or direct the voting of sufficient securities to elect a majority
of such board of directors or other governing body.
"SUPERIOR PROPOSAL" has the meaning set forth in ss.5(h)(ii) below.
"SURVIVING CORPORATION" has the meaning set forth in ss.2(a) below.
"TAX RETURN" means any report, return, declaration or other information
required to be supplied to a taxing authority in connection with Taxes.
"TAXES" means all taxes or other like assessments including, without
limitation, income, withholding, gross receipts, excise, ad valorem, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes imposed by or payable to any federal, state,
county, local or foreign government, taxing authority, subdivision or agency
thereof, including interest, penalties, additions to tax or additional amounts
thereto.
"THIRD PARTY" means any Person (or group of Persons) other than Parent or
its respective Affiliates.
"VOTING SHARES" has the meaning set forth in the preambles.
"YEAR 2000 COMPLIANT" has the meaning set forth in ss.3(q) below.
2. THE TRANSACTION.
(a) THE MERGER. On and subject to the terms and conditions of this
Agreement, the Parent Subsidiary will merge with and into the Company at the
Effective Time. The Company shall be the corporation surviving the Merger (the
"SURVIVING CORPORATION").
(b) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxx Xxxx &
Xxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, commencing at 9:00 a.m. local
time on the third business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as the
Parties may mutually determine (the "Closing Date").
(c) ACTIONS AT THE CLOSING. At the Closing, (i) the Company will
deliver to Parent and the Parent Subsidiary the various certificates,
instruments and documents referred to in ss.6(a) below; (ii) Parent and the
Parent Subsidiary will deliver to the Company the various certificates,
instruments and documents referred to in ss.6(b) below; (iii) the Company and
the Parent Subsidiary will file with the Secretary of State of the State of
Delaware a Certificate of Merger in the form attached hereto as Exhibit A (the
"Certificate of Merger"); and (iv) Parent will deliver or cause to be delivered
the Exchange Fund to the Exchange Agent in the manner provided below in this
ss.2.
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(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time (the
"EFFECTIVE TIME") the Company and the Parent Subsidiary file the
Certificate of Merger with the Secretary of State of the State of
Delaware or at such later time as the Parties may agree and specify in
the Certificate of Merger. The Merger shall have the effects set forth
in the Delaware General Corporation Law. The Surviving Corporation
may, at any time after the Effective Time, take any action (including
executing and delivering any document) in the name and on behalf of
either the Company or the Parent Subsidiary in order to carry out and
effectuate the transactions contemplated by this Agreement.
(ii) CERTIFICATE OF INCORPORATION. At the Effective Time, the
certificate of incorporation of the Surviving Corporation shall be
amended to read in its entirety in the form of Exhibit B and, as so
amended, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended in accordance with its terms and
as provided by law.
(iii) BY-LAWS. The By-laws of the Surviving Corporation shall be
amended and restated at and as of the Effective Time to read in their
entirety as did the By-laws of the Parent Subsidiary in effect
immediately prior to the Effective Time and shall be the By-laws of
the Surviving Corporation (except that the name of the Surviving
Corporation will be changed to a name designated by Parent prior to
the Effective Time) until amended in accordance with their terms and
as provided by law.
(iv) DIRECTORS AND OFFICERS. The directors and officers of the
Parent Subsidiary immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation at and as of the
Effective Time (retaining their respective positions and terms of
office), until the earlier of their respective resignation, removal or
otherwise ceasing to be a director or officer, respectively, or until
their respective successors are duly elected and qualified, as the
case may be.
(v) CONVERSION OF COMPANY SHARES. At and as of the Effective
Time, (A) each issued and outstanding Company Share (other than any
Company Shares owned by Parent, the Parent Subsidiary or the Company)
shall be converted into the right to receive 0.445 Parent Shares (the
"PER SHARE MERGER CONSIDERATION"), and all such Company Shares shall
no longer be outstanding, shall be canceled and shall cease to exist,
and each holder of a certificate representing any such Company Shares
shall thereafter cease to have any rights with respect to such Company
Shares, except the right to receive the Per Share Merger Consideration
for each such Company Share and any unpaid dividends and
distributions, if any, to which the holder of such Company Shares is
entitled pursuant to ss.2(e) upon the surrender of such certificate in
accordance with ss.2(e) below (collectively, the "MERGER
CONSIDERATION"), provided, however, that the Per Share Merger
Consideration shall be subject to proportionate adjustment in the
event of any
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stock split, stock dividend or reverse stock split, and (B) each
Company Share owned by Parent, Parent Subsidiary or the Company shall
be canceled without payment therefor. No Company Share shall be deemed
to be outstanding or to have any rights other than those set forth
above in thisss.2(d)(v) after the Effective Time. Notwithstanding
anything to the contrary in thisss.2(d)(v), no fractional Parent
Shares shall be issued to then former holders of Company Shares. In
lieu thereof, each then former holder of a Company Share who would
otherwise have been entitled to receive a fraction of a Parent Share
(after taking into account all certificates delivered by such then
former holder at any one time) shall receive an amount in cash equal
to such fraction of a Parent Share multiplied by the Closing Sales
Price per Parent Share on the date of the Effective Time.
(vi) CONVERSION OF STOCK RIGHTS. The Company shall take all such
action as may be necessary to cause, at the Effective Time, each Stock
Right (but excluding rights of holders of Nonvoting Shares to exchange
such shares for Voting Shares) granted by the Company to purchase
Company Shares which is outstanding and unexercised immediately prior
thereto (whether or not vested or exercisable), to be converted
automatically into an equivalent Stock Right to purchase Parent Shares
in an amount and at an exercise price determined as follows:
(x) The number of Parent Shares to be subject to the new
Stock Right shall be equal to the product of the number of
Company Shares subject to the original Stock Right multiplied by
the Per Share Merger Consideration, provided that any fractional
Parent Shares resulting from such multiplication shall be rounded
as provided in the instrument governing such Stock Right or, if
there is no such instrument, up to the next whole share; and
(y) The exercise price per Parent Share under the new Stock
Right shall be equal to the quotient of the exercise price per
Company Share under the original Stock Right divided by the Per
Share Merger Consideration, provided that the exercise price
resulting from such division shall be rounded as provided in the
instrument governing such Stock Right or, if there is no such
instrument, up to the next whole cent.
The adjustments provided herein with respect to any original Stock
Rights which are "incentive stock options" (as defined in Section 422
of the Code) shall be and are intended to be effected in a manner
which is consistent with Section 424(a) of the Code. The option plan
of the Company under which the original Stock Rights were issued shall
be assumed by Parent, and the duration and other terms of the new
Stock Rights shall be the same as the original Stock Rights, except
that all references to the Company shall be deemed to be references to
Parent. At the Effective Time, Parent shall deliver to then former
holders of original Stock Rights appropriate agreements representing
the right to acquire Parent Shares on the terms and conditions set
forth in this ss. 2(d)(vi).
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The Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of Parent Shares for delivery upon
exercise of the new Stock Rights in accordance with this ss. 2(d)(vi).
At the Effective Time, Parent shall file a registration statement on
Form S-8 (or any successor form) or another appropriate form, and seek
to cause such Form S-8 to become effective at or as soon as
practicable after the Effective Time, with respect to Parent Shares
subject to new employee stock options included in the Stock Rights and
shall use reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the Securities Exchange
Act, Parent shall administer the option plans assumed pursuant to this
ss. 2(d)(vi) in a manner that complies with Rule 16b-3 promulgated
under the Securities Exchange Act to the extent the Company option
plan complied with such rule prior to the Merger. Prior to the
Effective Time, Parent shall take all actions as may be required to
cause the acquisition of equity securities of Parent, as contemplated
by this ss. 2(d)(vi), by any Person who is or will become a director
or officer of Parent to be eligible for exemption under Rule 16b-3(d)
promulgated under the Securities Exchange Act.
(vii) CONVERSION OF CAPITAL STOCK OF THE PARENT SUBSIDIARY. At
and as of the Effective Time, each share of common stock, $.01 par
value per share, of the Parent Subsidiary shall be converted into one
share of common stock, $.01 par value per share, of the Surviving
Corporation.
(e) PROCEDURE FOR EXCHANGE.
(i) Immediately after the Effective Time, (A) Parent will furnish to
The Bank of New York, its transfer agent, or such other bank or trust
company reasonably acceptable to the Company, to act as exchange agent (the
"EXCHANGE AGENT") a corpus (the "EXCHANGE FUND") consisting of Parent
Shares and cash sufficient to permit the Exchange Agent to make full
payment of the Merger Consideration to the holders of all of the issued and
outstanding Company Shares (other than any Company Shares owned by Parent,
Parent Subsidiary or the Company), and (B) Parent will cause the Exchange
Agent to mail a letter of transmittal (with instructions for its use) in a
form to be mutually agreed upon by the Company and Parent prior to Closing
to each holder of issued and outstanding Company Shares (other than any
Company Shares owned by Parent, the Parent Subsidiary or the Company) for
the holder to use in surrendering the certificates which, immediately prior
to the Effective Time, represented his or its Company Shares against
payment of the Merger Consideration to which such holder is entitled
pursuant toss.2(d)(v). Upon surrender to the Exchange Agent of such
certificates, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, Parent shall
promptly cause to be issued a certificate representing that number of whole
Parent Shares and a check representing the amount of cash in lieu of any
fractional shares and unpaid
- 10 -
dividends and distributions, if any, to which such Persons are entitled,
after giving effect to any required tax withholdings. No interest will be
paid or accrued on the cash in lieu of fractional shares and unpaid
dividends and distributions, if any, payable to recipients of Parent
Shares. If payment is to be made to a Person other than the registered
holder of the certificate surrendered, it shall be a condition of such
payment that the certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the Person requesting such
payment shall pay any transfer or other taxes required by reason of the
payment to a Person other than the registered holder of the certificate
surrendered or establish to the reasonable satisfaction of the Surviving
Corporation or the Exchange Agent that such tax has been paid or is not
applicable. In the event any certificate representing Company Shares shall
have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such certificate to be lost, stolen or
destroyed, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed certificate the Merger Consideration deliverable in respect
thereof; provided, however, the Person to whom such Merger Consideration is
paid shall, as a condition precedent to the payment thereof, give the
Surviving Corporation a bond in such sum as it may direct or otherwise
indemnify the Surviving Corporation in a manner reasonably satisfactory to
it against any claim that may be made against the Surviving Corporation
with respect to the certificate alleged to have been lost, stolen or
destroyed. No dividends or other distributions declared after the Effective
Time with respect to Parent Shares and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered certificate until
the holder thereof shall surrender such certificate in accordance with
thisss.2(e). After the surrender of a certificate in accordance with
thisss.2(e), the record holder thereof shall be entitled to receive any
such dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to the Parent Shares
represented by such certificate. No holder of an unsurrendered certificate
shall be entitled, until the surrender of such certificate, to vote the
Parent Shares into which his or its Company Shares shall have been
converted into the right to receive.
(ii) The Company will cause its transfer agent to furnish promptly to
the Parent Subsidiary a list, as of a recent date, of the record holders of
Company Shares and their addresses, as well as mailing labels containing
the names and addresses of all record holders of Company Shares and lists
of security positions of Company Shares held in stock depositories. The
Company will furnish the Parent Subsidiary with such additional information
(including, but not limited to, updated lists of holders of Company Shares
and their addresses, mailing labels and lists of security positions) and
such other assistance as Parent or the Parent Subsidiary or their agents
may reasonably request.
(iii) The Parent may cause the Exchange Agent to invest the cash
included in the Exchange Fund in one or more investments selected by
Parent; provided, however, that the terms and conditions of the investments
shall be such as to permit the Exchange Agent to make prompt payment of the
Merger Consideration as necessary. The Parent may cause the Exchange Agent
to pay
- 11 -
over to the Surviving Corporation any net earnings with respect to the
investments, and Parent will replace promptly any portion of the Exchange
Fund which the Exchange Agent loses through investments.
(iv) The Parent may cause the Exchange Agent to pay over to the
Surviving Corporation any portion of the Exchange Fund (including any
earnings thereon) remaining 180 days after the Effective Time, and
thereafter all former stockholders of the Company shall be entitled to look
to the Surviving Corporation (subject to abandoned property, escheat and
other similar laws) as general creditors thereof with respect to the Per
Share Merger Consideration and any cash payable upon surrender of their
certificates.
(v) The Parent shall pay, or shall cause the Surviving Corporation to
pay, all charges and expenses of the Exchange Agent.
(f) CLOSING OF TRANSFER RECORDS. After the Effective Time, no transfer
of Company Shares outstanding prior to the Effective Time shall be made on the
stock transfer books of the Surviving Corporation. If, after the Effective Time,
certificates representing such shares are presented for transfer to the Exchange
Agent, they shall be canceled and exchanged for certificates representing Parent
Shares, cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, as provided in ss.2(e).
(g) DISSENTERS' RIGHTS. The holders of Nonvoting Shares as to which
dissenters' rights shall have been duly demanded under applicable law (the
"DISSENTING SHARES"), if any, shall be entitled to payment by the Surviving
Corporation only of the fair value of such Nonvoting Shares plus accrued
interest to the extent permitted by and in accordance with the provisions of
applicable law; provided, however, that (i) if any holder of Dissenting Shares
shall, under the circumstances permitted by applicable law, subsequently deliver
a written withdrawal of such holder's demand or (ii) if any holder fails to
establish such holder's entitlement to rights of payment as provided under
applicable law, such holder or holders (as the case may be) shall forfeit such
right to payment for such Nonvoting Shares and such Nonvoting Shares shall
thereupon be deemed to have been converted into Parent Shares as of the
Effective Time.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to Parent and the Parent Subsidiary:
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware. If applicable to such country, each of the Company's Subsidiaries
operating in such country has been duly incorporated or otherwise organized, is
validly existing and, in jurisdictions where the concept is applicable, in good
standing under the laws of the jurisdiction of its incorporation or
organization. Each of the Company and its Subsidiaries is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification or failure to be in good standing would not reasonably be expected
to have a material adverse effect on the business, financial condition or
results of operations of the Company and its Subsidiaries taken as a whole or on
the ability of the Company to consummate the transactions contemplated by this
Agreement (a "COMPANY
- 12 -
MATERIAL ADVERSE EFFECT"). Each of the Company and its Subsidiaries has full
corporate power and corporate authority, and all foreign, federal, state and
local governmental permits, licenses and consents, required to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it, except for such permits, licenses and consents the failure of which
to have would not reasonably be expected to have a Company Material Adverse
Effect. The Company does not own any equity interest in any corporation,
partnership, limited liability company, joint venture or other legal entity
other than the Subsidiaries listed in ss.3(a) of the Company Disclosure Letter
accompanying this Agreement (the "COMPANY DISCLOSURE LETTER").
(b) CAPITALIZATION. The entire authorized capital stock of the Company
consists of 2,500,000 shares of preferred stock, $.01 par value per share, none
of which are issued and outstanding as of August 26, 1999, 75,000,000 Voting
Shares, of which 31,226,052 Voting Shares were issued and outstanding as of
August 26, 1999 and no Voting Shares were held in treasury as of August 26,
1999, and 500,000 Nonvoting Shares, of which 99,929 Nonvoting Shares were issued
and outstanding as of August 26, 1999 and no Nonvoting Shares were held in
treasury as of August 26, 1999. All of the issued and outstanding Company Shares
have been duly authorized and are validly issued, fully paid and nonassessable,
and none have been issued in violation of any preemptive or similar right. As of
August 26, 1999, 155,000 warrants of the Company were outstanding, each such
warrant entitling the holder thereof to purchase 8.485 Voting Shares at an
exercise price of $0.01 per Voting Share (the "WARRANTS"). As of August 26,
1999, 1,315,148 Voting Shares were subject to issuance pursuant to the Warrants
and 6,652,923 Voting Shares were subject to issuance pursuant to employee stock
options issued under Company Benefit Plans. Except as set forth above, neither
the Company nor any of its Subsidiaries has any outstanding or authorized Stock
Rights. Except for stock appreciation rights authorized under Company Benefit
Plans, of which none are outstanding as of August 26, 1999, there are no
outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company or any of its
Subsidiaries. Except as set forth in ss.3(b) of the Company Disclosure Letter,
there are no rights, contracts, commitments or arrangements obligating the
Company to redeem, purchase or acquire, or offer to purchase, redeem or acquire,
any outstanding shares of, or any outstanding options, warrants or rights of any
kind to acquire any shares of, or any outstanding securities that are
convertible into or exchangeable for any shares of, capital stock of the
Company.
(c) SUBSIDIARIES. The Company owns, directly or indirectly, 100% of
the outstanding shares of capital stock of each of its Subsidiaries free and
clear of any Security Interest and each such share of capital stock has been
duly authorized and is validly issued, fully paid and nonassessable, and none of
such shares of capital stock has been issued in violation of any preemptive or
similar right. No shares of capital stock of, or other equity interests in, any
Subsidiary of the Company are reserved for issuance, and there are no contracts,
agreements, commitments or arrangements obligating the Company or any of its
Subsidiaries (i) to offer, sell, issue, grant, pledge, dispose of or encumber
any shares of capital stock of, or other equity interests in, or any options,
warrants or rights of any kind to acquire any shares of capital stock of, or
other equity interests in, any of the Subsidiaries of the Company or (ii) to
redeem, purchase or acquire, or offer to purchase or acquire, any outstanding
shares of capital stock of, or other equity interests in, or any outstanding
options, warrants or rights of any kind to acquire any shares of capital stock
of, or other equity interest in, or any outstanding securities that are
- 13 -
convertible into or exchangeable for, any shares of capital stock of, or other
equity interests in, any of the Subsidiaries of the Company.
(d) VOTING ARRANGEMENTS. Except as set forth in ss.3(d) of the Company
Disclosure Letter or in Company Reports filed prior to the date hereof, there
are no voting trusts, proxies or other similar agreements or understandings to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound with respect to the voting of any shares of
capital stock of the Company or any of its Subsidiaries or with respect to the
registration of the offering, sale or delivery of any shares of capital stock of
the Company or any of its Subsidiaries under the Securities Act. There are no
issued or outstanding bonds, debentures, notes or other indebtedness of the
Company having the right to vote on any matters on which stockholders of the
Company may vote.
(e) AUTHORIZATION OF TRANSACTION. The Company has full power and
authority (including full corporate power and corporate authority), and has
taken all required action, necessary to properly execute and deliver this
Agreement and to perform its obligations hereunder, and this Agreement
constitutes the valid and legally binding obligation of the Company, enforceable
in accordance with its terms and conditions, except as limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii)
general principles of equity, regardless of whether asserted in a proceeding in
equity or at law; provided, however, that the Company cannot consummate the
Merger unless and until it receives the Requisite Stockholder Approval of the
Company Stockholders.
(f) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree or other restriction of any government, governmental agency or
court of competent jurisdiction (a "GOVERNMENT ENTITY") to which the Company or
any of its Subsidiaries is subject or any provision of the charter or by-laws of
the Company or any of its Subsidiaries or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which the Company or any of its Subsidiaries is a party or by which it is
bound or to which any of its assets is subject, except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, or failure to give notice would not reasonably be expected to have
a Company Material Adverse Effect or except as set forth in ss.3(f) of the
Company Disclosure Letter. Other than as required under the provisions of the
Xxxx-Xxxxx-Xxxxxx Act, Foreign Competition Laws, the Delaware General
Corporation Law, Nasdaq, the Securities Exchange Act, the Securities Act and
state securities laws, neither the Company nor any of its Subsidiaries needs to
give any notice to, make any filing with or obtain any authorization, consent or
approval of any Government Entity in order for the Parties to consummate the
transactions contemplated by this Agreement, except where the failure to give
notice, to file or to obtain any authorization, consent or approval would not
reasonably be expected to have a Company Material Adverse Effect or except as
set forth in ss.3(f) of the Company Disclosure Letter. "REQUIRED COMPANY
CONSENTS" means any authorization, consent or approval of a Government Entity or
other Third Party required to be obtained pursuant to any Foreign Competition
Laws or state securities laws or so that a matter set
- 14 -
forth in ss.3(f) of the Company Disclosure Letter would not be reasonably
expected to have a Company Material Adverse Effect for purposes of this ss.3(f).
(g) FILINGS WITH THE SEC. The Company has made all filings with the
SEC that it has been required to make under the Securities Act and the
Securities Exchange Act (collectively, the "COMPANY REPORTS"). Each of the
Company Reports has complied with the Securities Act and the Securities Exchange
Act in all material respects. None of the Company Reports, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(h) FINANCIAL STATEMENTS.
(i) The Company has filed an Annual Report on Form 10-K (the
"COMPANY 10-K") for the fiscal year ended December 31, 1998 and a
Quarterly Report on Form 10-Q (the "COMPANY 10-Q") for the fiscal
quarter ended June 30, 1999. The financial statements included in the
Company 10-K and the Company 10-Q (including the related notes and
schedules) have been prepared from the books and records of the
Company and its Subsidiaries in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, and present
fairly in all material respects the financial condition of the Company
and its Subsidiaries as of the indicated dates and the results of
operations and cash flows of the Company and its Subsidiaries for the
periods set forth therein, (subject in the case of quarterly financial
statements to the absence of complete footnotes and subject to normal
year-end audit adjustments).
(ii) From June 30, 1999 until the date of this Agreement, the
Company and its Subsidiaries have not incurred any liabilities that
are of a nature that would be required to be disclosed on a balance
sheet of the Company and its Subsidiaries or the footnotes thereto
prepared in conformity with GAAP, other than (A) liabilities incurred
in the ordinary course of business or (B) liabilities that would not,
individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect or (C) liabilities disclosed in
ss.3(h) of the Company Disclosure Letter or in Company Reports filed
prior to the date hereof.
(i) EVENTS SUBSEQUENT TO JUNE 30, 1999. From June 30, 1999 to the date
of this Agreement, except as disclosed in the Company Reports filed prior to the
date hereof or except as set forth in ss.3(i) of the Company Disclosure Letter,
(i) the Company and its Subsidiaries have conducted their respective businesses
only in, and have not engaged in any transaction other than according to, the
ordinary and usual course of such businesses, and (ii) there has not been (A)
any change in the financial condition, business or results of operations of the
Company or any of its Subsidiaries, or any development or combination of
developments relating to the Company or any of its Subsidiaries of which
management of the Company has knowledge, and which would reasonably be expected
to have a material adverse effect upon the business, financial condition or
results of operations of the Company and its Subsidiaries taken as a whole; (B)
any declaration, setting aside or payment of any dividend or other distribution
with respect to the capital stock of the Company, or any redemption, repurchase
or other
- 15 -
reacquisition of any of the capital stock of the Company; (C) any change by the
Company in accounting principles, practices or methods materially affecting the
reported consolidated assets, liabilities or results of operations of the
Company; (D) any increase in the compensation of any officer of the Company or
any of its Subsidiaries or grant of any general salary or benefits increase to
the employees of the Company or any of its Subsidiaries other than in the
ordinary course of business consistent with past practices; (E) any issuance or
sale of any capital stock or other securities (including any Stock Rights) by
the Company or any of its Subsidiaries of any kind, other than upon exercise of
Stock Rights issued by or binding upon the Company; (F) any modification,
amendment or change to the terms or conditions of any Stock Right; or (G) any
split, combination, reclassification, redemption, repurchase or other
reacquisition of any capital stock or other securities of the Company or any of
its Subsidiaries.
(j) COMPLIANCE. Except as set forth in ss.3(j) of the Company
Disclosure Letter or in Company Reports filed prior to the date hereof, the
Company and its Subsidiaries are in compliance with all applicable foreign,
federal, state and local laws, rules and regulations except where the failure to
be in compliance would not reasonably be expected to have a Company Material
Adverse Effect.
(k) BROKERS' AND OTHER FEES. Except as set forth in ss.3(k) of the
Company Disclosure Letter, none of the Company and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
(l) LITIGATION AND LIABILITIES. Except as disclosed in ss.3(l) of the
Company Disclosure Letter or in Company Reports filed prior to the date hereof,
there are (i) no actions, suits or proceedings pending or, to the knowledge of
the management of the Company, threatened against the Company or any of its
Subsidiaries, or any facts or circumstances known to the management of the
Company which may give rise to an action, suit or proceeding against the Company
or any of its Subsidiaries, which (x) would reasonably be expected to have a
Company Material Adverse Effect, and (ii) no obligations or liabilities of the
Company or any of its Subsidiaries, whether accrued, contingent or otherwise,
known to the management of the Company which would reasonably be expected to
have a material adverse effect upon the business, financial condition or results
of operations of the Company and its Subsidiaries taken as a whole.
(m) TAXES. Except as set forth in ss.3(m) of the Company Disclosure
Letter or in Company Reports filed prior to the date hereof, the Company and
each of its Subsidiaries have duly filed or caused to be duly filed on their
behalf all federal, state, local and foreign Tax Returns required to be filed by
them, and have duly paid, caused to be paid or made adequate provision for the
payment of all Taxes required to be paid in respect of the periods covered by
such Tax Returns, except where the failure to file such Tax Returns or to pay
such Taxes would not reasonably be expected to have a material adverse effect
upon the business, financial condition or results of operations of the Company
and its Subsidiaries taken as a whole. Except as set forth in ss.3(m) of the
Company Disclosure Letter, no claims for Taxes have been asserted against the
Company or any of its Subsidiaries and no material deficiency for any Taxes has
been proposed, asserted or assessed which has not been resolved or paid in full.
To the knowledge of the Company's management, no Tax Return or taxable period of
the Company or any of its
- 16 -
Subsidiaries is under examination by any taxing authority, and neither the
Company nor any of its Subsidiaries has received written notice of any pending
audit by any taxing authority. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax Return for
any period of the Company or any or its Subsidiaries. Except as set forth in
ss.3(m) of the Company Disclosure Letter, there are no tax liens other than
liens for Taxes not yet due and payable relating to the Company or any of its
Subsidiaries. The Company has no reason to believe that any conditions exist
that could reasonably be expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. Except as
provided in ss.3(m) of the Company Disclosure Letter, neither the Company nor
any of its Subsidiaries is a party to any agreement or contract which would
result in payment of any "excess parachute payment," within the meaning of
Section 280G of the Code, as of the date of this Agreement. Neither the Company
nor any of its Subsidiaries has filed any consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset owned by the Company or any of its
Subsidiaries. The Company has not been and is not a United Stated real property
holding company (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. None of the
Company or its Subsidiaries (x) has been a member of an "affiliated group,"
within the meaning of Section 1504(a) of the Code, other than a group the common
parent of which was the Company or (y) has any liability for the Taxes of any
person, other than any of the Company or its Subsidiaries under Treasury
Regulation ss.1.1502-6 (or any similar provision of state, local or foreign law)
as a transferee, successor, by contract or otherwise.
(n) FAIRNESS OPINION. Xxxxxx Xxxxxxx & Co. Incorporated has delivered
to the Company Board the Company Fairness Opinion, and a true and complete copy
thereof has been furnished to Parent.
(o) EMPLOYEE BENEFITS.
(i) All material pension, profit-sharing, deferred compensation,
savings, stock bonus and stock option plans, and all employee benefit
plans, whether or not covered by the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), which are sponsored by the
Company or any Company ERISA Affiliate (as defined below) of the
Company or to which the Company or any Company ERISA Affiliate of the
Company makes contributions, and which cover employees of the Company
(the "COMPANY EMPLOYEES") or former employees of the Company, all
employment or severance contracts with employees of the Company or its
Subsidiaries who receive more than $75,000 in total cash compensation
per annum, and any applicable "change of control" or similar
provisions in any plan, contract or arrangement that cover Company
Employees (collectively, "COMPANY BENEFIT PLANS" and individually a
"COMPANY BENEFIT PLAN") are accurately and completely listed in
ss.3(o) of the Company Disclosure Letter. No Company Benefit Plan is a
multi-employer plan, money purchase plan, defined benefit plan,
multiple employer plan or multiple employer welfare arrangement and no
Company Benefit Plan is covered by Title IV of ERISA. True and
complete copies of all Company Benefit Plans (other than medical and
other similar welfare plans made generally available to all Company
Employees) have been made available to Parent.
- 17 -
(ii) All Company Benefit Plans to the extent subject to ERISA,
are in compliance in all material respects with ERISA and the rules
and regulations promulgated thereunder. Each Company Benefit Plan
which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("COMPANY PENSION PLAN") and which is intended
to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "CODE"), has received a favorable determination
letter from the Internal Revenue Service, which determination letter
is currently in effect, and there are no proceedings pending or, to
the knowledge of the management of the Company, threatened, or any
facts or circumstances known to the management of the Company, which
are reasonably likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the
management of the Company, threatened litigation relating to the
Company Benefit Plans. Neither the Company nor any of its Subsidiaries
has engaged in a transaction with respect to any Company Benefit Plan
that, assuming the taxable period of such transaction expired as of
the date hereof, is reasonably likely to subject the Company or any of
its Subsidiaries to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA.
(iii) No liability under Title IV of ERISA has been or is
reasonably likely to be incurred by the Company or any of its
Subsidiaries with respect to any ongoing, frozen or terminated Company
Benefit Plan that is a "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any
of them, or the single-employer plan of any entity which is considered
a predecessor of the Company or one employer with the Company under
Section 4001 of ERISA (a "COMPANY ERISA AFFILIATE"). All contributions
required to be made under the terms of any Company Benefit Plan have
been timely made or reserves therefor on the balance sheet of the
Company have been established, which reserves are adequate. Except as
required by Part 6 of Title I of ERISA, the Company does not have any
unfunded obligations for retiree health and life benefits under any
Company Benefit Plan.
(p) DELAWARE GENERAL CORPORATION LAW. For purposes of Section 203 of
the Delaware General Corporation Law, the execution and delivery of this
Agreement and the Stockholder Agreements and consummation of transactions
contemplated hereby and thereby, including without limitation the purchase by
Parent of Company Shares or other securities issued by the Company, has received
the prior approval of the Board of Directors of the Company and, accordingly,
Parent will not be subject to the restrictions of Section 203(b) of the Delaware
General Corporation Law in the consummation of the Merger or this Agreement or
the Stockholder Agreements or the transactions contemplated by either thereof.
(q) YEAR 2000. Except as disclosed in the previously filed Company
Reports, the Company's products and information systems are Year 2000 Compliant
except to the extent that their failure to be Year 2000 Compliant would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, financial condition or results of operations of
the Company and its Subsidiaries taken as a whole. For purposes of this
Agreement, "YEAR 2000 COMPLIANT" shall mean that a Person's products and
information systems
- 18 -
accurately process date/time data (including, but not limited to, calculating,
comparing and sequencing) from, into and between the twentieth and twenty-first
centuries, and the years 1999 and 2000 and leap year calculations.
(r) ENVIRONMENTAL MATTERS. Except for such matters that, individually
or in the aggregate, are not reasonably likely to have a material adverse effect
on the business, financial condition or results of operations of the Company and
its Subsidiaries taken as a whole, or would not otherwise require disclosure
pursuant to the Securities Exchange Act, or are listed in ss.3(r) of the Company
Disclosure Letter or described in Company Reports filed prior to the date
hereof, (i) each of the Company and its Subsidiaries has complied and is in
compliance with all applicable Environmental Laws (as defined below); (ii) the
properties currently owned or operated by the Company or any of its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with Hazardous Substances (as defined below); (iii) neither the
Company nor any of its Subsidiaries is subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (iv) neither
the Company nor any or its Subsidiaries has had any release or threat of release
of any Hazardous Substance; (v) neither the Company nor any of its Subsidiaries
has received any notice, demand, threat, letter, claim or request for
information alleging that it or any of its Subsidiaries may be in violation of
or liable under any Environmental Law (including any claims relating to
electromagnetic fields or microwave transmissions); (vi) neither the Company nor
any of its Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any governmental or regulatory authority of competent
jurisdiction or is subject to any indemnity or other agreement with any third
party relating to liability under any Environmental Law or relating to Hazardous
Substances; and (vii) there are no circumstances or conditions involving the
Company or any of its Subsidiaries that would reasonably be expected to result
in any claims, liabilities, investigations, costs or restrictions on the
ownership, use or transfer of any of its properties pursuant to any
Environmental Law.
As used herein, the term "ENVIRONMENTAL LAW" means any federal, state,
local, foreign or other law (including common law), statutes, ordinances or
codes relating to: (i) the protection, investigation or restoration of the
environment, health, safety or natural resources, (ii) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance, or
(iii) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to person or property in connection with any Hazardous Substance.
As used herein, the term "HAZARDOUS SUBSTANCES" means any substance
that is listed, classified or regulated pursuant to any Environmental Law,
including any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon.
(s) INTELLECTUAL PROPERTY. Except as disclosed in ss.3(s) of the
Company Disclosure Letter or in the Company Reports filed prior to the date
hereof, the Company and its Subsidiaries have all right, title and interest in,
or a valid and binding license to use, all Company Intellectual Property (as
defined below). Except as disclosed in ss.3(s) of the Company Disclosure Letter
or in the Company Reports filed prior to the date hereof, the Company and its
Subsidiaries (i) have not defaulted in any material respect under any license to
use any Company Intellectual Property, (ii) are not the subject of any
proceeding or litigation for infringement of
- 19 -
any third party intellectual property, (iii) have no knowledge of circumstances
that would be reasonably expected to give rise to any such proceeding or
litigation and (iv) have no knowledge of circumstances that are causing or would
be reasonably expected to cause the loss or impairment of any Company
Intellectual Property, other than a default, proceeding, litigation, loss or
impairment that is not having or would not be reasonably expected to have,
individually or in the aggregate, a material adverse effect on the business,
financial condition or results of operation of the Company and its Subsidiaries
taken as a whole.
For purposes of this Agreement, "COMPANY INTELLECTUAL PROPERTY" means
patents and patent rights, trademarks and trademark rights, trade names and
trade name rights, service marks and service xxxx rights, copyrights and
copyright rights, trade secret and trade secret rights, and other intellectual
property rights, and all pending applications for and registrations of any of
the foregoing that are individually or in the aggregate material to the conduct
of the business of the Company and its Subsidiaries taken as a whole.
(t) INSURANCE. Except as set forth in ss.3(t) of the Company
Disclosure Letter, each of the Company and its Subsidiaries is insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting the business as conducted by
the Company and its Subsidiaries during such time period.
(u) CERTAIN CONTRACTS. Except as set forth in ss.3(u) of the Company
Disclosure Letter, all material contracts to which the Company or any of its
Subsidiaries is a party or may be bound that are required by Item 610(b)(10) of
Regulation S-K to be filed as exhibits to, or incorporated by reference in, the
Company 10-K or the Company 10-Q have been so filed or incorporated by
reference. All material contracts to which the Company or any of its
Subsidiaries is a party or may be bound that have been entered into as of the
date hereof and will be required by Item 610(b)(10) of Regulation S-K to be
filed or incorporated by reference into the Company's Quarterly Report on Form
10-Q for the period ending September 30, 1999, but which have not previously
been filed or incorporated by reference into any Company Report, are set forth
in ss.3(u) of the Company Disclosure Letter. All contracts, licenses, consents,
royalty or other agreements which are material to the Company and its
Subsidiaries, taken as a whole, to which the Company or any of its Subsidiaries
is a party (the "Company Contracts") are valid and in full force and effect on
the date hereof except to the extent they have previously expired in accordance
with their terms or, to the extent such invalidity would not reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of the Company and its Subsidiaries taken as a whole
and, to the Company's knowledge, neither the Company nor any of its Subsidiaries
has violated any provision of, or committed or failed to perform any act which
with or without notice, lapse of time or both would constitute a default under
the provisions of, any Company Contract, except for defaults which individually
and in the aggregate would not reasonably be expected to result in a material
adverse effect on the business, financial condition or results of operations of
the Company and its Subsidiaries taken as a whole.
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PARENT SUBSIDIARY. Each
of Parent and the Parent Subsidiary represents and warrants to the Company:
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each of Parent
and Parent Subsidiary has been duly incorporated and is validly existing as a
corporation in good
- 20 -
standing under the laws of the State of Delaware. If applicable to such country,
each of Parent's Subsidiaries operating in such country has been duly
incorporated or otherwise organized, is validly existing and, in jurisdictions
where the concept is applicable, in good standing under the laws of the
jurisdiction of its incorporation or organization. Each of Parent and its
Subsidiaries is duly authorized to conduct business and, if applicable to such
country, is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification or
failure to be in good standing would not reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of Parent and its Subsidiaries taken as a whole or on the ability of
the Parties to consummate the transactions contemplated by this Agreement (a
"Parent Material Adverse Effect"). Each of Parent and its Subsidiaries has full
corporate power and corporate authority, and all foreign, federal, state and
local governmental permits, licenses and consents, required to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it, except for such permits, licenses and consents the failure of which
to have would not reasonably be expected to have a Parent Material Adverse
Effect. Parent does not own any equity interest in any corporation, partnership,
limited liability company, joint venture or other entity other than the
Subsidiaries listed in ss.4(a) of Parent's disclosure letter accompanying this
Agreement (the "PARENT DISCLOSURe LETTER").
(b) CAPITALIZATION. The entire authorized capital stock of Parent
consists of 1,281,958 shares of preferred stock, $.01 par value per share, none
of which are issued and outstanding, and 50,000,000 Parent Shares, of which
32,601,087 Parent Shares were issued and outstanding as of August 23, 1999 and
no Parent Shares were held in treasury on August 23, 1999. All of the issued and
outstanding Parent Shares have been duly authorized and are validly issued,
fully paid and nonassessable, and none have been issued in violation of any
preemptive or similar right. Except as set forth in ss.4(b) of the Parent
Disclosure Letter, neither Parent nor any of its Subsidiaries has any
outstanding or authorized Stock Rights. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation or similar rights with
respect to Parent or any of its Subsidiaries. There are no rights, contracts,
commitments or arrangements obligating Parent or any of its Subsidiaries to
redeem, purchase or acquire, or offer to purchase, redeem or acquire, any
outstanding shares of, or any outstanding options, warrants or rights of any
kind to acquire any shares of, or any outstanding securities that are
convertible into or exchangeable for any shares of, capital stock of Parent.
(c) SUBSIDIARIES. Except as set forth in ss.4(a) of the Parent
Disclosure Letter, Parent, directly or indirectly, owns 100% of the outstanding
shares of capital stock of each of its Subsidiaries free and clear of any
Security Interest and each such share of capital stock has been duly authorized
and is validly issued, fully paid and nonassessable, and none of such shares of
capital stock has been issued in violation of any preemptive or similar right.
No shares of capital stock of, or other equity interests in, any Subsidiary of
Parent are reserved for issuance, and there are no contracts, agreements,
commitments or arrangements obligating Parent or any of its Subsidiaries (i) to
offer, sell, issue, grant, pledge, dispose of or encumber any shares of capital
stock of, or other equity interests in, or any options, warrants or rights of
any kind to acquire any shares of capital stock of, or other equity interests
in, any of the Subsidiaries of Parent or (ii) to redeem, purchase or acquire, or
offer to purchase or acquire, any outstanding shares of capital stock of, or
other equity interests in, or any outstanding options, warrants or rights of any
kind to acquire any shares of capital stock of, or other equity interest in, or
any outstanding securities
- 21 -
that are convertible into or exchangeable for, any shares of capital stock of,
or other equity interests in, any of the Subsidiaries of Parent.
(d) VOTING ARRANGEMENTS. There are no voting trusts, proxies or other
similar agreements or understandings to which Parent or any of its Subsidiaries
is a party or by which Parent or any of its Subsidiaries is bound with respect
to the voting of any shares of capital stock of Parent or any of its
Subsidiaries. There are no issued or outstanding bonds, debentures, notes or
other indebtedness of Parent having the right to vote on any matters on which
stockholders of Parent may vote.
(e) AUTHORIZATION OF TRANSACTION. Each of Parent and the Parent
Subsidiary has full power and authority (including full corporate power and
corporate authority), and has taken all required action, necessary to properly
execute and deliver this Agreement and to perform its obligations hereunder, and
this Agreement constitutes the valid and legally binding obligation of each of
Parent and the Parent Subsidiary, enforceable in accordance with its terms and
conditions, except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether asserted in a proceeding in equity or at law;
provided, however, that Parent cannot consummate the Merger unless and until it
receives the Requisite Stockholder Approval of the Parent Stockholders.
(f) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree or other restriction of any Government Entity to which Parent or
any of its Subsidiaries is subject or any provision of the charter or by-laws of
Parent or any of its Subsidiaries or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel or require any notice under
any agreement, contract, lease, license, instrument or other arrangement to
which either Parent or any of its Subsidiaries is a party or by which it is
bound or to which any of its assets is subject, except in the case of clause
(ii) where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation or failure to give notice would not reasonably be
expected to have a Parent Material Adverse Effect. Other than as required under
the provisions of the Xxxx-Xxxxx-Xxxxxx Act, Foreign Competition Laws, Nasdaq,
the Securities Exchange Act, the Securities Act and state securities laws,
neither Parent nor any of its Subsidiaries needs to give any notice to, make any
filing with or obtain any authorization, consent or approval of any Government
Entity in order for the Parties to consummate the transactions contemplated by
this Agreement, except where the failure to give notice, to file or to obtain
any authorization, consent or approval would not reasonably be expected to have
a Parent Material Adverse Effect or except as set forth in ss.4(f) of the Parent
Disclosure Letter. "Required Parent Consents" means any authorization, consent
or approval of a Government Entity or other Third Party required to be obtained
pursuant to any Foreign Competition Laws or state securities laws or so that a
matter set forth in ss. 4(f) of the Parent Disclosure Letter would not be
reasonably expected to have a Parent Material Adverse Effect for purposes of
this ss.4(f).
(g) Filings with the SEC. Parent has made all filings with the SEC
that it has been required to make under the Securities Act and the Securities
Exchange Act (collectively,
- 22 -
the "Parent Reports"). Each of the Parent Reports has complied with the
Securities Act and the Securities Exchange Act in all material respects. None of
the Parent Reports, as of their respective dates, contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
(h) FINANCIAL STATEMENTS.
(i) Parent has filed an Annual Report on Form 10-K (the "PARENT
10-K") for the fiscal year ended December 31, 1998 and a Quarterly
Report on Form 10-Q (the "PARENT 10-Q") for the fiscal quarter ended
June 30, 1999. The financial statements included in the Parent 10-K
and the Parent 10-Q (including the related notes and schedules) have
been prepared from the books and records of Parent and its
Subsidiaries in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, and present fairly in all
material respects the financial condition of Parent and its
Subsidiaries as of the indicated dates and the results of operations
and cash flows of Parent and its Subsidiaries for the periods set
forth therein, (subject in the case of quarterly financial statements
to the absence of complete footnotes and subject to normal year-end
audit adjustments).
(ii) From June 30, 1999 until the date of this Agreement, Parent
and its Subsidiaries have not incurred any liabilities that are of a
nature that would be required to be disclosed on a balance sheet of
Parent and its Subsidiaries or the footnotes thereto prepared in
conformity with GAAP, other than (A) liabilities incurred in the
ordinary course of business or (B) liabilities that would not,
individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect or (C) liabilities disclosed in ss.4(h)
of the Parent Disclosure Letter or in Parent Reports filed prior to
the date hereof.
(i) EVENTS SUBSEQUENT TO JUNE 30, 1999. From June 30, 1999 to the date
of this Agreement, except as disclosed in the Parent Reports filed prior to the
date hereof or except as set forth in ss. 4(i) of the Parent Disclosure Letter,
(i) Parent and its Subsidiaries have conducted their respective businesses only
in, and have not engaged in any transaction other than according to, the
ordinary and usual course of such businesses, and (ii) there has not been (A)
any change in the financial condition, business or results of operations of
Parent or any of its Subsidiaries, or any development or combination of
developments relating to Parent or any of its Subsidiaries of which management
of Parent has knowledge, and which would reasonably be expected to have a
material adverse effect upon the business, financial condition or results of
operations of Parent and its Subsidiaries taken as a whole; (B) any declaration,
setting aside or payment of any dividend or other distribution with respect to
the capital stock of Parent, or any redemption, repurchase or other
reacquisition of any of the capital stock of Parent; (C) any change by Parent in
accounting principles, practices or methods; (D) any increase in the
compensation of any officer of Parent or any of its Subsidiaries or grant of any
general salary or benefits increase to the employees of Parent or any of its
Subsidiaries other than in the ordinary course of business consistent with past
practices; (E) any issuance or sale of any capital stock or other securities
(including any Stock Rights) by Parent or any of its Subsidiaries of any kind,
- 23 -
other than upon exercise of Stock Rights issued by or binding upon Parent; (F)
any modification, amendment or change to the terms or conditions of any Stock
Right; or (G) any split, combination, reclassification, redemption, repurchase
or other reacquisition of any capital stock or other securities of Parent or any
of its Subsidiaries.
(j) COMPLIANCE. Except as set forth in ss.4(j) of the Parent
Disclosure Letter or in Parent Reports filed prior to the date hereof, Parent
and its Subsidiaries are in compliance with all applicable foreign, federal,
state and local laws, rules and regulations except where the failure to be in
compliance would not reasonably be expected to have a Parent Material Adverse
Effect.
(k) BROKERS' AND OTHER FEES. Except as set forth in ss.4(k) of the
Parent Disclosure Letter, none of Parent and its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
(l) LITIGATION AND LIABILITIES. Except as disclosed in ss.4(l) of the
Parent Disclosure Letter or in Parent Reports filed prior to the date hereof,
there are (i) no actions, suits or proceedings pending or, to the knowledge of
the management of Parent, threatened against Parent or any of its Subsidiaries,
or any facts or circumstances known to the management of Parent which may give
rise to an action, suit or proceeding against Parent or any of its Subsidiaries,
which (x) would reasonably be expected to have a Parent Material Adverse Effect
and (ii) no obligations or liabilities of Parent or any of its Subsidiaries,
whether accrued, contingent or otherwise, known to the management of Parent
which would reasonably be expected to have a material adverse effect upon the
business, financial condition or results of operations of Parent and its
Subsidiaries taken as a whole.
(m) TAXES. Except as set forth in ss.4(m) of the Parent Disclosure
Letter or in Parent Reports filed prior to the date hereof, Parent and each of
its Subsidiaries have duly filed or caused to be duly filed on their behalf all
federal, state, local and foreign Tax Returns required to be filed by them, and
have duly paid, caused to be paid or made adequate provision for the payment of
all Taxes required to be paid in respect of the periods covered by such Tax
Returns, except where the failure to file such Tax Returns or pay such Taxes
would not reasonably be expected to have a material adverse effect upon the
business, financial condition or results of operations of Parent and its
Subsidiaries taken as a whole. Except as set forth in ss.4(m) of the Parent
Disclosure Letter, no claims for Taxes have been asserted against Parent or any
of its Subsidiaries and no material deficiency for any Taxes has been proposed,
asserted or assessed which has not been resolved or paid in full. To the
knowledge of Parent's management, no Tax Return or taxable period of Parent or
any of its Subsidiaries is under examination by any taxing authority, and
neither Parent nor any of its Subsidiaries has received written notice of any
pending audit by any taxing authority. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any Tax
Return for any period of Parent or any or its Subsidiaries. Except as set forth
in ss.4(m) of the Parent Disclosure Letter, there are no tax liens other than
liens for Taxes not yet due and payable relating to Parent or any of its
Subsidiaries. Parent has no reason to believe that any conditions exist that
could reasonably be expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. Neither Parent
nor any of its Subsidiaries is a party to any agreement or contract which would
result in payment of any "excess parachute payment" within
- 24 -
the meaning of Section 280G of the Code as a result of the transactions
contemplated hereby. Neither Parent nor any of its Subsidiaries has filed any
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset owned
by Parent or any of its Subsidiaries. Parent has not been and is not a United
States real property holding company (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. None of Parent or its Subsidiaries (x) has been a member of an "affiliated
group," within the meaning of Section 1504(a) of the Code, other than a group
the common parent of which was Parent or (y) has any liability for the Taxes of
any person, other than any of Parent or its Subsidiaries under Treasury
Regulation ss.1.1502-6 (or any similar provision of state, local or foreign law)
as a transferee, successor, by contract or otherwise.
(n) FAIRNESS OPINION. ING Barings LLC has delivered to the Parent
Board the Parent Fairness Opinion, and a true and complete copy thereof has been
furnished to the Company.
(o) EMPLOYEE BENEFITS.
(i) All pension, profit-sharing, deferred compensation, savings,
stock bonus and stock option plans, and all employee benefit plans,
whether or not covered by ERISA which are sponsored by Parent or any
Parent ERISA Affiliate (as defined below) of Parent or to which Parent
or any Parent ERISA Affiliate of Parent makes contributions, and which
cover employees of Parent (the "PARENT EMPLOYEES") or former employees
of Parent, all employment or severance contracts with executive
officers of Parent, and any applicable "change of control" or similar
provisions in any plan, contract or arrangement that cover Employees
(collectively, "PARENT BENEFIT PLANS" and individually a "PARENT
BENEFIT PLAN") are accurately and completely listed inss.4(o) of the
Parent Disclosure Letter. No Parent Benefit Plan is a multi-employer
plan, money purchase plan, defined benefit plan, multiple employer
plan or multiple employer welfare arrangement and no Parent Benefit
Plan is covered by Title IV of ERISA. True and complete copies of all
Parent Benefit Plans (other than medical and other similar welfare
plans made generally available to all Parent Employees) have been made
available to the Company.
(ii) All Parent Benefit Plans to the extent subject to ERISA, are
in compliance in all material respects with ERISA and the rules and
regulations promulgated thereunder. Each Parent Benefit Plan which is
an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA ("PARENT PENSION PLAN") and which is intended to be qualified
under Section 401(a) of the Code, has received a favorable
determination letter from the Internal Revenue Service, which
determination letter is currently in effect, and there are no
proceedings pending or, to the knowledge of the management of Parent,
threatened, or any facts or circumstances known to the management of
Parent, which are reasonably likely to result in revocation of any
such favorable determination letter. There is no pending or, to the
knowledge of the management of Parent, threatened litigation relating
to the Parent Benefit Plans. Neither Parent
- 25 -
nor any of its Subsidiaries has engaged in a transaction with respect
to any Parent Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, is reasonably likely to
subject Parent or any of its Subsidiaries to a tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA.
(iii) No liability under Title IV of ERISA has been or is
reasonably likely to be incurred by Parent or any of its Subsidiaries
with respect to any ongoing, frozen or terminated Parent Benefit Plan
that is a "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered a
predecessor of Parent or one employer with Parent under Section 4001
of ERISA (a "PARENT ERISA AFFILIATE"). All contributions required to
be made under the terms of any Parent Benefit Plan have been timely
made or reserves therefor on the balance sheet of Parent have been
established, which reserves are adequate. Except as required by Part 6
of Title I of ERISA, Parent does not have any unfunded obligations for
retiree health and life benefits under any Parent Benefit Plan.
(p) YEAR 2000. Except as disclosed in the previously filed Parent
Reports, Parent's products and information systems are Year 2000 Compliant
except to the extent that their failure to be Year 2000 Compliant would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, financial condition or results of operations of
Parent and its Subsidiaries taken as a whole.
(q) ENVIRONMENTAL MATTERS. Except for such matters that, individually
or in the aggregate, are not reasonably likely to have a material adverse effect
on the business, financial condition or results of operations of Parent and its
Subsidiaries taken as a whole, or would not otherwise require disclosure
pursuant to the Securities Exchange Act, or are listed in ss.4(q) of the Parent
Disclosure Letter or described in Parent Reports filed prior to the date hereof,
(i) each of Parent and its Subsidiaries has complied and is in compliance with
all applicable Environmental Laws; (ii) the properties currently owned or
operated by Parent or any of its Subsidiaries (including soils, groundwater,
surface water, buildings or other structures) are not contaminated with
Hazardous Substances (as defined below); (iii) neither Parent nor any of its
Subsidiaries is subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (iv) neither Parent nor any or its
Subsidiaries has had any release or threat of release of any Hazardous
Substance; (v) neither Parent nor any of its Subsidiaries has received any
notice, demand, threat, letter, claim or request for information alleging that
it or any of its Subsidiaries may be in violation of or liable under any
Environmental Law (including any claims relating to electromagnetic fields or
microwave transmissions); (vi) neither Parent nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
governmental or regulatory authority of competent jurisdiction or is subject to
any indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances; and (vii) there
are no circumstances or conditions involving Parent or any of its Subsidiaries
that could reasonably be expected to result in any claims, liabilities,
investigations, costs or restrictions on the ownership, use or transfer of any
of its properties pursuant to any Environmental Law.
- 26 -
(r) INTELLECTUAL PROPERTY. Except as disclosed in ss.4(r) of the
Parent Disclosure Letter or in the Parent Reports filed prior to the date
hereof, Parent and its Subsidiaries have all right, title and interest in, or a
valid and binding license to use, all Parent Intellectual Property (as defined
below). Except as disclosed in ss.4(r) of the Parent Disclosure Letter or in the
Parent Reports filed prior to the date hereof, Parent and its Subsidiaries (i)
have not defaulted in any material respect under any license to use any Parent
Intellectual Property, (ii) are not the subject of any proceeding or litigation
for infringement of any third party intellectual property, (iii) have no
knowledge of circumstances that would be reasonably expected to give rise to any
such proceeding or litigation and (iv) have no knowledge of circumstances that
are causing or would be reasonably expected to cause the loss or impairment of
any Parent Intellectual Property, other than a default, proceeding, litigation,
loss or impairment that is not having or would not be reasonably expected to
have, individually or in the aggregate, a material adverse effect on the
business, financial condition or results of operation of Parent and its
Subsidiaries taken as a whole.
For purposes of this Agreement, "PARENT INTELLECTUAL PROPERTY" means
patents and patent rights, trademarks and trademark rights, trade names and
trade name rights, service marks and service xxxx rights, copyrights and
copyright rights, trade secret and trade secret rights, and other intellectual
property rights, and all pending applications for and registrations of any of
the foregoing that are individually or in the aggregate material to the conduct
of the business of Parent and its Subsidiaries taken as a whole.
(s) INSURANCE. Except as set forth in ss.4(s) of the Parent Disclosure
Letter, each of Parent and its Subsidiaries is insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary for companies conducting the business as conducted by Parent and its
Subsidiaries during such time period.
(t) CERTAIN CONTRACTS. Except as set forth in ss.4(t) of the Parent
Disclosure Letter, all material to which Parent or any of its Subsidiaries is a
party or may be bound that are required by Item 610(b)(10) of Regulation S-K to
be filed as exhibits to, or incorporated by reference in, the Parent 10-K or the
Parent 10-Q have been so filed or incorporated by reference. All material
contracts to which Parent or any of its Subsidiaries is a party or may be bound
that have been entered into as of the date hereof and will be required by Item
610(b)(10) of Regulation S-K to be filed or incorporated by reference into
Parent's Quarterly Report on Form 10-Q for the period ending September 30, 1999,
but which have not previously been filed or incorporated by reference into any
Parent Reports, are set forth in ss.4(t) of the Parent Disclosure Letter. All
contracts, licenses, consents, royalty or other agreements which are material to
Parent and its Subsidiaries, taken as a whole, to which Parent or any of its
Subsidiaries is a party (the "PARENT CONTRACTS") are valid and in full force and
effect on the date hereof except to the extent they have previously expired in
accordance with their terms or, to the extent such invalidity would not
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of Parent and its Subsidiaries
taken as a whole and, to Parent's knowledge, neither Parent nor any of its
Subsidiaries has violated any provision of, or committed or failed to perform
any act which with or without notice, lapse of time or both would constitute a
default under the provisions of, any Parent Contract, except for defaults which
individually and in the aggregate would not reasonably be expected to result in
a material adverse effect on the business,
- 27 -
financial condition or results of operations of Parent and its Subsidiaries
taken as a whole.
(u) ACTIVITIES OF PARENT SUBSIDIARY. Since the date of its
incorporation, Parent Subsidiary has not carried on any business or conducted
any operations other than the execution of this Agreement, the performance of
its obligations hereunder and matters ancillary thereto. Parent Subsidiary has a
positive net worth under GAAP.
(v) CIRCE. Parent and/or its Subsidiaries have all Circe Rights
necessary for the operation of Rings 1 and 2 of the Circe Network, except to the
extent the failure to have any such Circe Rights, would not, in the aggregate,
be reasonably expected to have a Parent Material Adverse Effect. All material
Circe Rights relating to Rings 1 and 2 have terms or are renewable without
material cost, for the entire expected useful life of such rings. To Parent's
knowledge, as of the date of this Agreement, there is no existing or anticipated
fact or circumstance that would be reasonably expected to cause a material delay
in the scheduled in-service date of Circe Rings 3, 4 or 5 as described in the
most recent Parent Reports filed prior to the date hereof.
5. COVENANTS. The Parties agree as follows with respect to the period from
and after the execution of this Agreement through and including the Effective
Time (except for ss.5(j), ss.5(l) and ss.5(q), which will apply from and after
the Effective Time in accordance with their respective terms and ss.5(p) which
will apply from the date hereof and shall survive after the Closing).
(a) GENERAL. Each of the Parties will use all reasonable efforts to
take all actions and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in ss.6
below).
(b) NOTICES AND CONSENTS. The Company and Parent will give any notices
(and will cause each of their respective Subsidiaries to give any notices) to
third parties, and will use all reasonable efforts to obtain (and will cause
each of their respective Subsidiaries to use all reasonable efforts to obtain)
any third-party consents, that may be required in connection with the matters
referred to in ss.3(f) and ss.4(f) above (regardless of whether the failure to
give such notice or obtain such consent would result in a Company Material
Adverse Effect or a Parent Material Adverse Effect).
(c) REGULATORY MATTERS AND APPROVALS. Each of the Parties, promptly
after the date hereof, will (and the Company, promptly after the date hereof,
will cause each of its Subsidiaries to) give any notices to, make any filings
with and use all reasonable efforts to obtain any authorizations, consents and
approvals of Government Entities in connection with the matters referred to in
ss.3(f) and ss.4(f) above. Without limiting the generality of the foregoing:
(i) FEDERAL SECURITIES LAWS. As promptly as practicable following
the date hereof, Parent and the Parent Subsidiary shall, in
cooperation with the Company, prepare and file with the SEC
preliminary proxy materials which shall constitute the Joint Proxy
Statement/Prospectus (such proxy statement/prospectus, and any
amendments or supplements thereto, the "JOINT PROXY
STATEMENT/PROSPECTUS") and a registration statement on Form S-4 with
respect to
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the issuance of Parent Shares in connection with the Merger (the
"REGISTRATION STATEMENT"), and file with state securities
administrators such registration statements or other documents as may
be required under applicable blue sky laws to qualify or register such
Parent Shares in such states as are designated by the Company (the
"BLUE SKY FILINGS"). The Joint Proxy Statement/Prospectus will be
included in the Registration Statement as Parent's prospectus. The
Registration Statement and the Joint Proxy Statement/Prospectus shall
comply as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and the rules
and regulations thereunder. Each of Parent and the Parent Subsidiary
shall use all reasonable efforts to have the Registration Statement
declared effective by the SEC as promptly as practicable after filing
with the SEC and to keep the Registration Statement effective as long
as is necessary to consummate the Merger. Parent and the Parent
Subsidiary agree that none of the information supplied or to be
supplied by Parent or the Parent Subsidiary for inclusion or
incorporation by reference in the Registration Statement and/or the
Joint Proxy Statement/Prospectus and each amendment or supplement
thereto, at the time of mailing thereof and at the time of the Company
Special Meeting (as defined below) or the Parent Special Meeting (as
defined below), will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
agrees that none of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus and each amendment or supplement thereto, at the
time of mailing thereof and at the time of the Company Special Meeting
or the Parent Special Meeting, will contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. For purposes
of the foregoing, it is understood and agreed that information
concerning or related to Parent and the Parent Special Meeting will be
deemed to have been supplied by Parent and information concerning or
related to the Company and the Company Special Meeting shall be deemed
to have been supplied by the Company. Parent will provide the Company
with a reasonable opportunity to review and comment on the Joint Proxy
Statement/Prospectus and any amendment or supplement thereto prior to
filing such with the SEC, will provide the Company with a copy of all
such filings made with the SEC and will notify the Company as promptly
as practicable after the receipt of any comments from the SEC or its
staff or from any state securities administrators and of any request
by the SEC or its staff or by any state securities administrators for
amendments or supplements to the Registration Statement or any Blue
Sky Filings or for additional information, and will supply the Company
and its legal counsel with copies of all correspondence between Parent
or any of its representatives, on the one hand, and the SEC, its staff
or any state securities administrators, on the other hand, with
respect to the Registration Statement. No change, amendment or
supplement to the information supplied by the Company for inclusion in
the Joint Proxy Statement/Prospectus shall be made without the
- 29 -
approval of the Company, which approval shall not be unreasonably
withheld or delayed. If, at any time prior to the Effective Time, any
event relating to the Company or Parent or any of their respective
Affiliates, officers or directors is discovered by the Company or
Parent, as the case may be, that is required by the Securities Act,
the Securities Exchange Act, or the rules or regulations thereunder,
to be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, the Company or
Parent, as the case may be, will as promptly as practicable inform the
other, and such amendment or supplement will be promptly filed with
the SEC and disseminated to the stockholders of the Company and
Parent, to the extent required by applicable securities laws. All
documents which the Company or Parent files or is responsible for
filing with the SEC and any other regulatory agency in connection with
the Merger (including, without limitation, the Registration Statement
and the Joint Proxy Statement/Prospectus) will comply as to form and
content in all material respects with the provisions of applicable
law. Notwithstanding the foregoing, the Company, on the one hand, and
Parent and the Parent Subsidiary, on the other hand, make no
representations or warranties with respect to any information that has
been supplied in writing by the other, or the other's auditors,
attorneys or financial advisors, specifically for use in the
Registration Statement or the Joint Proxy Statement/Prospectus, or in
any other documents to be filed with the SEC or any other regulatory
agency expressly for use in connection with the transactions
contemplated hereby.
(ii) DELAWARE GENERAL CORPORATION LAW. The Company will take all
action, to the extent necessary in accordance with applicable law, its
certificate of incorporation and by-laws to convene a special meeting
of its stockholders (the "COMPANY SPECIAL MEETING"), as soon as
reasonably practicable in order that the stockholders may consider and
vote upon the adoption of this Agreement and the approval of the
Merger in accordance with the Delaware General Corporation Law. Parent
will take all action, to the extent necessary in accordance with
applicable law, its certificate of incorporation and by-laws to
convene a special meeting of its stockholders (the "PARENT SPECIAL
MEETING"), as soon as reasonably practicable in order that the
stockholders may consider and vote upon the issuance of Parent Shares
in connection with the Merger as provided in the Agreement as required
by the rules of Nasdaq and, if necessary, an amendment to the
certificate of incorporation of Parent to increase the number of
authorized Parent Shares. The Company and Parent shall mail the Joint
Proxy Statement/Prospectus to their respective stockholders
simultaneously and as soon as reasonably practicable. Subject to
ss.5(h)(iv) and ss.5(i)(iv) below, the Joint Proxy
Statement/Prospectus shall contain the affirmative unanimous
recommendations of the Company Board in favor of the adoption of this
Agreement and the approval of the Merger and of the Parent Board in
favor of issuance of Parent Shares in connection with the Merger as
provided in the Agreement as required by the rules of Nasdaq and, if
necessary, increase the number of authorized Purchaser Shares in
accordance with the Delaware General Corporation Law.
- 30 -
(iii) XXXX-XXXXX-XXXXXX ACT. As soon as possible after the date
hereof, each of the Parties will file any Notification and Report
Forms and related material that it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Xxxx-Xxxxx-Xxxxxx Act, will use
all reasonable efforts to obtain (and the Company will cause each of
its Subsidiaries to use all reasonable efforts to obtain) an early
termination of the applicable waiting period, and will make any
further filings pursuant thereto that may be necessary.
(iv) PERIODIC REPORTS. Parent and the Parent Subsidiary, and
their counsel, shall be given an opportunity to review each Form 10-K
and Form 10-Q (and any amendments thereto) to be filed by the Company
under the Securities Exchange Act prior to their being filed with the
SEC and Nasdaq, and shall be provided with final copies thereof
concurrently with their filing with the SEC.
(v) TELECOMMUNICATIONS LAWS. Parent shall be responsible for
preparing and filing the appropriate applications, notifications and
other documentation necessary or appropriate to request from
Government Entities with jurisdiction over the telecommunications
industry all necessary authorizations, consents and approvals to the
Merger and the transactions contemplated hereby. The Company, at its
sole cost and expense, will cooperate with Parent in this regard,
providing such assistance as Parent shall reasonably request. Parent
shall provide the Company with drafts of all applications and other
documents to be filed with any such regulatory authority prior to such
filing and shall give Company a reasonable opportunity to review and
comment thereon.
(d) OPERATION OF THE COMPANY'S BUSINESS. Except as set forth in
ss.5(d) of the Company Disclosure Letter or as otherwise expressly contemplated
by this Agreement, the Company will not (and will not cause or permit any of its
Subsidiaries to), without the written consent of Parent, take any action or
enter into any transaction other than in the ordinary course of business
consistent with past practice. Without limiting the generality of the foregoing,
except as expressly provided in this Agreement or ss.5(d) of the Company
Disclosure Letter, without the written consent of Parent:
(i) none of the Company and its Subsidiaries will authorize or
effect any change in its charter or by-laws or comparable
organizational document;
(ii) none of the Company and its Subsidiaries will grant any
Stock Rights or issue, sell, authorize or otherwise dispose of any of
its capital stock, (x) except upon the conversion or exercise of Stock
Rights outstanding as of the date of this Agreement and (y) except for
stock options issued to employees of the Company and its Subsidiaries
in a manner consistent with past practice which (I) do not provide for
the issuance of more than 250,000 Company Shares in any calendar
quarter, (II) are issued only to new employees and employees promoted
after the date hereof, (III) are issued at not less than the market
price of the Company Stock on the date of grant and (IV) are not
issued to any executive officer or director of the Company;
- 31 -
(iii) none of the Company and its Subsidiaries will sell, lease,
encumber or otherwise dispose of, or otherwise agree to sell, lease,
encumber or otherwise dispose of, any of its assets which are
material, individually or in the aggregate, to the Company and its
Subsidiaries, taken as a whole;
(iv) none of the Company and its Subsidiaries (other than
wholly-owned Subsidiaries) will declare, set aside or pay any dividend
or distribution with respect to its capital stock (whether in cash or
in kind);
(v) none of the Company and its Subsidiaries will split, combine
or reclassify any of its capital stock or redeem, repurchase or
otherwise acquire any of its capital stock;
(vi) none of the Company and its Subsidiaries will acquire or
agree to acquire by merger or consolidation with, or by purchasing a
substantial equity interest in or a substantial portion of the assets
of, or by any other manner, any business of any Person or division
thereof or otherwise acquire or agree to acquire any assets (other
than assets used in the operation of the business of the Company and
its Subsidiaries in the ordinary course consistent with past
practice);
(vii) none of Company or its Subsidiaries will incur or commit to
any capital expenditures other than capital expenditures incurred or
committed to in the ordinary course of business consistent with past
practice and which, together with all such expenditures incurred or
committed since January 1, 1999, are not in excess of the respective
amounts by category or in the aggregate set forth in the Company's
capital expenditure budget, as previously disclosed to Parent or, if
the Closing Date has not occurred prior to December 31, 1999, such
additional amounts for any subsequent period as may be consented to by
Parent, such consent not to be unreasonably withheld, or, if Parent
shall not have so consented, an amount not greater than an amount
equal to a pro rata portion of the Company's 1999 capital expenditure
budget;
(viii) none of the Company or its Subsidiaries will (x) other
than in connection with actions permitted byss.5(d)(vi), make any
loans, advances or capital contributions to, or investments in, any
other Person, other than by the Company or a Subsidiary of the Company
to or in the Company or any Subsidiary of the Company and other than
loans and advances to employees in an aggregate outstanding amount not
to exceed $100,000 at any time, (y) pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than payments, discharges
or satisfactions incurred or committed to in the ordinary course of
business consistent with past practice or (z) other than in connection
with actions permitted byss.5(d)(vi), create, incur, assume or suffer
to exist any indebtedness, issuances of debt securities, guarantees,
Security Interests, loans or advances not in existence as of the date
of this Agreement except pursuant to the credit facilities, indentures
and other arrangements in existence on the date of this Agreement and
incurred in the ordinary course of business consistent with past
practice, and any
- 32 -
other indebtedness existing on the date of this Agreement, in each
case as such credit facilities, indentures, other arrangements and
other existing indebtedness may be amended, extended, modified,
refunded, renewed or refinanced after the date of this Agreement, but
only if the aggregate principal amount thereof is not increased
thereby, the term thereof is not extended thereby and the other terms
and conditions thereof, taken as a whole, are not less advantageous to
the Company and its Subsidiaries than those in existence as of the
date of this Agreement;
(ix) none of the Company and its Subsidiaries will make any
change in employment terms for any of its directors, officers and
employees other than (A) customary increases to employees whose total
annual cash compensation is less than $75,000 awarded in the ordinary
course of business consistent with past practices, and (B) customary
employee bonuses (including to employees who are officers) approved by
the Company Board and paid in the ordinary course of business
consistent with past practices and (C) immaterial changes to Company
Benefit Plans;
(x) except as disclosed in the Company Reports filed prior to the
date of this Agreement, the Company will not change its methods of
accounting in effect at June 30, 1999 in a manner materially affecting
the consolidated assets, liabilities or results of operations of the
Company, except as required by changes in GAAP as concurred in by the
Company's independent auditors, and the Company will not (i) change
its fiscal year or (ii) make any material tax election, other than in
the ordinary course of business consistent with past practice; and
(xi) none of the Company and its Subsidiaries will resolve or
commit to any of the foregoing.
In the event the Company shall request Parent to consent in writing to
an action otherwise prohibited by this ss.5(d), Parent shall use reasonable
efforts to respond in a prompt and timely fashion (but in no event later than
ten (10) business days following such request), but may otherwise respond
affirmatively or negatively in its sole discretion.
(e) OPERATION OF PARENT'S BUSINESS. Except as set forth in ss.5(e) of
the Parent Disclosure Letter or as otherwise contemplated by this Agreement
(i) none of Parent and its Subsidiaries will authorize or effect
any change in its charter or by-laws or comparable organizational
document except for such amendments to its charter, by-laws or other
comparable charter or organizational documents that do not have an
adverse affect on the Merger and the other transactions contemplated
hereby;
(ii) without Prior Consultation, none of Parent and its
Subsidiaries will grant any Stock Rights or issue, sell, authorize or
otherwise dispose of any of its capital stock (except (A) employee
stock option grants made in the ordinary course consistent with past
practice, (B) Stock Rights and capital stock issued as
- 33 -
consideration for acquisitions permitted by ss.5(e) and (C) upon the
conversion or exercise of Stock Rights outstanding as of the date of
this Agreement or issued pursuant to the preceding clauses (A) or
(B));
(iii) none of Parent and its Subsidiaries will sell or otherwise
dispose of, or otherwise agree to sell or otherwise dispose of, in any
individual transaction or series of related transactions (other than a
capacity or fiber (either lit or dark) sale) any of its assets having
a fair market value greater than $100,000,000;
(iv) none of Parent and its Subsidiaries (other than wholly owned
Subsidiaries) will declare, set aside or pay any dividend or
distribution with respect to its capital stock (whether in cash or in
kind);
(v) none of Parent and its Subsidiaries will split, combine or
reclassify any of its capital stock or redeem, repurchase or otherwise
acquire any of its capital stock;
(vi) without Prior Consultation, none of Parent or its
Subsidiaries will incur or commit to any capital expenditures other
than capital expenditures incurred or committed to in the ordinary
course of business consistent with past practice;
(vii) none of Parent and its Subsidiaries will acquire or agree
to acquire by merger or consolidation with, or by purchasing a
substantial equity interest in or a substantial portion of the assets
of, or by any other manner, any business of any Person or division
thereof or otherwise acquire or agree to acquire any substantial
assets in a single transaction or series of related transactions
either outside the telecommunications services industry or in a
geographic region other than North America and Europe;
(viii) without Prior Consultation, none of Parent and its
Subsidiaries will acquire or agree to acquire by merger or
consolidation with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any
business of any Person or division thereof or otherwise acquire or
agree to acquire any assets in a single transaction or series of
related transactions for consideration having a fair market value in
excess of $50,000,000;
(ix) without Prior Consultation, none of Parent or its
Subsidiaries will (x) other than in connection with actions permitted
by ss.5(e)(vii), make any loans, advances or capital contributions to,
or investments in, any other Person, other than by Parent or a
Subsidiary of Parent to or in Parent or any Subsidiary of Parent, (y)
pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise)
in excess of $25,000,000 in each instance, other than loans, advances,
capital contributions, investments, payments, discharges or
satisfactions incurred or committed to in the ordinary course of
business consistent with past practice or (z) other than in connection
- 34 -
with actions permitted byss.5(e)(vii), create, incur, assume or suffer
to exist any indebtedness, issuances of debt securities, guarantees,
Security Interests, loans or advances not in existence as of the date
of this Agreement except pursuant to the credit facilities, indentures
and other arrangements in existence on the date of this Agreement and
incurred in the ordinary course of business consistent with past
practice, and any other indebtedness existing on the date of this
Agreement, in each case as such credit facilities, indentures, other
arrangements and other existing indebtedness may be amended, extended,
exchanged, modified, refunded, renewed or refinanced after the date of
this Agreement, but only if the aggregate principal amount thereof is
not increased thereby, the term thereof is not extended thereby and
the other terms and conditions thereof, taken as a whole, are not less
advantageous to Parent and its Subsidiaries than those in existence as
of the date of this Agreement;
(x) without Prior Consultation, Parent will not change its
methods of accounting in effect at June 30, 1999 in a manner
materially affecting the consolidated assets, liabilities or operating
results of Parent, except as required by changes in GAAP as concurred
in by Parent's independent auditors, and Parent will not (i) change
its fiscal year or (ii) make any material tax election, other than in
the ordinary course of business consistent with past practice; and
(xi) none of Parent and its Subsidiaries will resolve or commit
to any of the foregoing (A) which requires the Company's consent
unless it has obtained such consent or (B) which requires Prior
Consultation unless it has afforded Prior Consultation.
In the event Parent shall request the Company to consent in writing to
an action otherwise prohibited by this ss. 5(e), the Company shall use
reasonable efforts to respond in a prompt and timely fashion (but in no event
later than ten (10) business days following such request), but may otherwise
respond affirmatively or negatively in its sole discretion.
(f) ACCESS. Each Party will (and will cause each of its Subsidiaries
to) permit representatives of the other Party to have access at all reasonable
times and in a manner so as not to materially interfere with the normal business
operations of the Company and its Subsidiaries, or Parent and its Subsidiaries,
as applicable, to all premises, properties, personnel, books, records (including
without limitation tax and financial records), contracts and documents of or
pertaining to such Party. Each Party and all of its respective representatives
will treat and hold as such any Confidential Information it receives from the
other Party or any of its representatives in accordance with the Confidentiality
Agreement.
(g) NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice
to the others of any material adverse development causing a breach of any of its
own representations and warranties in ss.3 and ss.4 above. No disclosure by any
Party pursuant to this ss.5(g), however, shall be deemed to amend or supplement
the Company Disclosure Letter or Parent Disclosure Letter or to prevent or cure
any misrepresentation, breach of warranty or breach of covenant.
- 35 -
(h) COMPANY EXCLUSIVITY.
(i) The Company shall, and shall cause its Subsidiaries and
Representatives to, immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or
negotiation with any Persons conducted heretofore by the Company, its
Subsidiaries or any of their respective Affiliates, officers,
directors, employees, financial advisors, agents or representatives
(each a "REPRESENTATIVE") with respect to any proposed, potential or
contemplated Acquisition Proposal.
(ii) From and after the date hereof, without the prior written
consent of Parent, the Company will not authorize or permit any of its
Subsidiaries to, and shall cause any and all of its Representatives
not to, directly or indirectly, (A) solicit, initiate, or encourage
any inquiries or proposals that constitute, or could reasonably be
expected to lead to, an Acquisition Proposal, or (B) engage in
negotiations or discussions with any Third Party concerning, or
provide any non-public information to any person or entity relating
to, an Acquisition Proposal, or (C) enter into any letter of intent,
agreement in principle or any acquisition agreement or other similar
agreement with respect to any Acquisition Proposal; provided, however,
that nothing contained in thisss.5(h)(ii) shall prevent the Company or
the Company Board prior to receipt of the Requisite Stockholder
Approval of the Company Stockholders, from furnishing non-public
information to, or entering into discussions or negotiations with, any
Third Party in connection with an unsolicited, bona fide written
proposal for an Acquisition Proposal by such Third Party, if and only
to the extent that (1) such Third Party has made a written proposal to
the Company Board to consummate an Acquisition Proposal, (2) the
Company Board determines in good faith, based upon the advice of a
financial advisor of nationally recognized reputation, that such
Acquisition Proposal is reasonably capable of being completed on
substantially the terms proposed, and would, if consummated, result in
a transaction that would provide greater value to the holders of the
Company Shares than the transaction contemplated by this Agreement (a
"SUPERIOR PROPOSAL"), (3) the failure to take such action would, in
the reasonable good faith judgment of the Company Board, based upon a
written opinion of Company outside legal counsel, be a violation of
its fiduciary duties to the Company's stockholders under applicable
law, and (4) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such Person, the
Company Board receives from such Person an executed confidentiality
agreement with material terms no less favorable to the Company than
those contained in the Confidentiality Agreement and provides prior
notice of its decision to take such action to the Parent. The Company
agrees not to release any Third Party from, or waive any provision of,
any standstill agreement to which it is a party or any confidentiality
agreement between it and another Person who has made, or who may
reasonably be considered likely to make, an Acquisition Proposal,
unless the failure to take such action would, in the reasonable good
faith judgment of the Company Board, based upon written opinion of
Company outside legal counsel, be a violation of its fiduciary duties
to the Company's stockholders under applicable law and such action is
taken prior to
- 36 -
receipt of the Requisite Stockholder Approval of the Company
Stockholders. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the preceding sentence
by any Representative of the Company or any of its Subsidiaries shall
be deemed to be a breach of thisss.5(h) by the Company.
(iii) The Company shall notify Parent promptly after receipt by
the Company or the Company's knowledge of the receipt by any of its
Representatives of any Acquisition Proposal or any request for
non-public information in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company by any
Person that informs such party that it is considering making or has
made an Acquisition Proposal. Such notice shall be made orally and in
writing and shall indicate the identity of the offeror and the terms
and conditions of such proposal, inquiry or contact. The Company shall
keep Parent informed of the status (including any change to the
material terms) of any such Acquisition Proposal or request for
non-public information.
(iv) The Company Board may not withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by the Company Board of this Agreement or the Merger
unless, following the receipt of a Superior Proposal and prior to
receipt of the Requisite Stockholder Approval of the Company
Stockholders, in the reasonable good faith judgment of the Company
Board, based upon the written opinion of Company's outside legal
counsel, the failure to do so would be a violation of the Company
Board's fiduciary duties to the Company's stockholders under
applicable law; provided, however, that, the Company Board shall
submit this Agreement and the Merger to the Company's stockholders for
adoption and approval, whether or not the Company Board at any time
subsequent to the date hereof determines that this Agreement is no
longer advisable or recommends that the stockholders of the Company
reject it or otherwise modifies or withdraws its recommendation.
Unless the Company Board has withdrawn its recommendation of this
Agreement in compliance herewith, the Company shall use its best
efforts to solicit from the Company stockholders proxies in favor of
the adoption and approval of this Agreement and the Merger and to
secure the vote or consent of the Company's stockholders required by
the Delaware General Corporation Law and its certificate of
incorporation and by-laws to adopt and approve this Agreement and the
Merger.
(i) PARENT EXCLUSIVITY.
(i) Parent shall, and shall cause its Subsidiaries and
Representatives to, immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or
negotiation with any Persons conducted heretofore by Parent, its
Subsidiaries or any of its Representatives with respect to any
proposed, potential or contemplated Parent Acquisition Proposal the
consummation of which would (x) not be consistent with this Agreement
or the
- 37 -
Merger and the other transactions contemplated by this Agreement, (y)
result in a material delay in the Effective Time or (z) materially and
adversely impact the likelihood of obtaining any Required Company
Consent or Required Parent Consent other than those the failures to
obtain would not result in either a Company Material Adverse Effect or
a Parent Material Adverse Effect (a "PROHIBITED PARENT ACQUISITION
PROPOSAL").
(ii) From and after the date hereof, Parent will notify the
Company of any Parent Acquisition Proposal of which notice is given to
the Parent Board. Such notice to the Company will be made promptly
after such notice to the Parent Board, but will be conditional upon an
appropriate confidentiality agreement. Without the prior written
consent of the Company, Parent will not authorize or permit any of its
Subsidiaries to, and shall cause any and all of its Representatives
not to, directly or indirectly, (A) solicit, initiate, or encourage
any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a Prohibited Parent Acquisition Proposal, or (B)
engage in negotiations or discussions with any Parent Third Party
concerning, or provide any nonpublic information to any person or
entity relating to, a Prohibited Parent Acquisition Proposal, or (C)
enter into any letter of intent, agreement in principle or any
acquisition agreement or other similar agreement with respect to any
Prohibited Parent Acquisition Proposal; provided, however, that
nothing contained in thisss.5(i)(ii) shall prevent Parent or the
Parent Board from, prior to receipt of the Requisite Stockholder
Approval of the Parent Stockholders, furnishing nonpublic information
to, or entering into discussions or negotiations with, any Parent
Third Party in connection with an unsolicited, bona fide written
proposal for a Prohibited Parent Acquisition Proposal by such Parent
Third Party, if and only to the extent that (1) such Parent Third
Party has made a written proposal to the Parent Board to consummate a
Prohibited Parent Acquisition Proposal, (2) the Parent Board
determines in good faith, based upon the advice of a financial advisor
of nationally recognized reputation, that such Prohibited Parent
Acquisition Proposal is reasonably capable of being completed on
substantially the terms proposed, and would, if consummated, result in
a transaction that would provide greater value to the holders of the
Parent Shares than the transaction contemplated by this Agreement (a
"PARENT SUPERIOR PROPOSAL"), (3) the failure to take such action
would, in the reasonable good faith judgment of the Parent Board,
based upon a written opinion of Parent's outside legal counsel, be a
violation of its fiduciary duties to the Parent's stockholders under
applicable law, and (4) prior to furnishing such nonpublic information
to, or entering into discussions or negotiations with, such Person,
the Parent Board receives from such Person an executed confidentiality
agreement with material terms no less favorable to Parent than those
contained in the Confidentiality Agreement. Parent agrees not to
release any Parent Third Party from, or waive any provision of, any
standstill agreement to which it is a party or any confidentiality
agreement between it and another Person who has made, or who may
reasonably be considered likely to make, a Prohibited Parent
Acquisition Proposal, unless the failure to take such action would, in
the reasonable good faith judgment of the Parent Board, based upon the
written opinion of Parent's outside legal counsel, be a violation of
its
- 38 -
fiduciary duties to the Parent's stockholders under applicable law and
such action is taken prior to receipt of the Requisite Stockholder
Approval of the Parent Stockholders. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth in
the preceding sentence by any Representative of Parent or any of its
Subsidiaries shall be deemed to be a breach of thisss.5(i)(ii) by
Parent. A Parent Acquisition Proposal shall be deemed a Prohibited
Parent Acquisition Proposal at the time (and not before) the Parent
Board is first notified of such Parent Acquisition Proposal, and at
any time that the Parent Board is notified of a significant
development with respect to such Parent Acquisition Proposal, unless
the Parent Board in good faith determines that such Parent Acquisition
Proposal is not, and is not reasonably likely to become, a Prohibited
Parent Acquisition Proposal.
(iii) Parent shall notify the Company promptly after receipt by
Parent or Parent's knowledge of the receipt by any of its
Representatives of any Prohibited Parent Acquisition Proposal or any
request for non-public information in connection with a Prohibited
Parent Acquisition Proposal or for access to the properties, books or
records of Parent by any Person that informs such party that it is
considering making or has made a Prohibited Parent Acquisition
Proposal. Such notice shall be made orally and in writing and shall
indicate the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact. Parent shall keep the Company
informed of the status (including any change to the material terms) of
any such Prohibited Parent Acquisition Proposal or request for
nonpublic information.
(iv) The Parent Board may not withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Company, the approval
or recommendation by the Parent Board of this Agreement or the Merger
unless, following the receipt of a Parent Superior Proposal but prior
to receipt of the Requisite Stockholder Approval of the Parent
Stockholders, in the reasonable good faith judgment of the Parent
Board, based upon the written opinion of Parent's outside legal
counsel, the failure to do so would be a violation of the Parent
Board's fiduciary duties to the Parent's stockholders under applicable
law; provided, however, that the Parent Board shall submit the Merger
to Parent's stockholders for adoption and approval, whether or not the
Parent Board at any time subsequent to the date hereof determines that
this Agreement is no longer advisable or recommends that the
stockholders of Parent reject the Merger or otherwise modifies or
withdraws its recommendation. Unless the Parent Board has withdrawn
its recommendation of the Merger in compliance herewith, Parent shall
use its best efforts to solicit from the Parent stockholders proxies
in favor of the adoption and approval of the Merger and to secure the
vote or consent of Parent's stockholders required by Nasdaq and the
Delaware General Corporation Law.
(v) Prior to taking any action with respect to a Parent
Acquisition Proposal which is not a Prohibited Parent Acquisition
Proposal equivalent to those permitted by clauses (A), (B) or (C) of
ss.5(i)(ii), Parent shall notify each
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Parent Third Party which is the object of or a party to such action of
the limitation on Prohibited Parent Acquisition Proposals set forth in
this ss.5(i), and Parent shall not enter into any letter of intent,
agreement in principle or any acquisition agreement or other similar
agreement with respect to any Parent Acquisition Proposal unless such
letter or agreement includes a covenant of the applicable Parent Third
Party not to take any action which would cause such Parent Acquisition
Proposal to become a Prohibited Parent Acquisition Proposal.
(j) INSURANCE AND INDEMNIFICATION.
(i) Parent will provide each individual who served as a director
or officer of the Company at any time prior to the Effective Time with
liability insurance for a period of six years after the Effective Time
no less favorable in coverage and amount than any applicable insurance
of the Company in effect immediately prior to the Effective Time
provided, however, if the existing liability insurance expires, or is
terminated or canceled by the insurance carrier during such six year
period, the Surviving Corporation will use its best efforts to obtain
as much liability insurance (no less favorable in coverage) as can be
obtained for the remainder of such period for a premium not in excess
(on an annualized basis) of 200% of the last annual premium paid prior
to the date hereof.
(ii) After the Effective Time, Parent (A) will not take or permit
to be taken any action to alter or impair any exculpatory or
indemnification provisions now existing in the certificate of
incorporation, by-laws or indemnification and employment agreements of
the Company or any of its Subsidiaries for the benefit of any
individual who served as a director or officer of the Company or any
of its Subsidiaries (an "INDEMNIFIED PARTY") at any time prior to the
Effective Time (except as may be required by applicable law), and (B)
shall cause the Surviving Corporation to honor and fulfill such
provisions until the date which is six years from the Effective Time
(except as may be required by applicable law); provided, however, in
the event any claim or claims are asserted within such period, all
rights to indemnification in respect of such claim or claims shall
continue until the final disposition thereof.
(iii) To the extent clauses (i) and (ii) above shall not serve to
indemnify and hold harmless an Indemnified Party, Parent, subject to
the terms and conditions of this clause (iii), will indemnify, for a
period of six years from the Effective Time, to the fullest extent
permitted under applicable law, each Indemnified Party from and
against any and all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, liabilities, obligations, taxes,
liens, losses, expenses and fees, including all court costs and
reasonable attorneys' fees and expenses, resulting from, arising out
of, relating to or caused by this Agreement or any of the transactions
contemplated herein; provided, however, in the event any claim or
claims are asserted or threatened within such six-year period, all
rights to
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indemnification in respect of any such claim or claims shall continue
until final disposition of any and all such claims. Any Indemnified
Party wishing to claim indemnification under this clause (iii),
notwithstanding anything to the contrary in the provisions set forth
in the Company's certificate of incorporation, by-laws or other
agreements respecting indemnification of directors or officers, upon
learning of any such claim, action, suit, proceeding or investigation,
shall promptly notify Parent thereof, but the failure to so notify
shall not relieve Parent of any liability it may have to such
Indemnified Party if such failure does not materially prejudice
Parent. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time),
(A) Parent or the Surviving Corporation shall have the right following
the Effective Time to assume the defense thereof and Parent shall not
be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except
that if Parent or the Surviving Corporation fails to assume such
defense or counsel for Parent advises that there are issues which
raise conflicts of interest between Parent or the Surviving
Corporation, on the one hand, and the Indemnified Parties, on the
other hand, the Indemnified Parties may retain counsel satisfactory to
them, and the Company, Parent or the Parent Subsidiary shall pay all
reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided,
however, that Parent shall be obligated to pay for only one firm of
counsel for all Indemnified Parties in any jurisdiction unless the use
of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest, in which case Parent need only pay for
separate counsel to the extent necessary to resolve such conflict; (B)
the Indemnified Parties will reasonably cooperate in the defense of
any such matter; and (C) Parent shall not be liable for any settlement
effectuated without its prior written consent, which consent shall not
be unreasonably withheld or delayed. Parent shall not settle any
action or claim identified in thisss.5(j)(iii) in any manner that
would impose any liability or penalty on an Indemnified Party not paid
by Parent or the Surviving Corporation without such Indemnified
Party's prior written consent, which consent shall not be unreasonably
withheld or delayed.
(iv) Notwithstanding anything contained in clause (iii) above,
Parent shall not have any obligation hereunder to any Indemnified
Party (A) if the indemnification of such Indemnified Party by Parent
in the manner contemplated hereby is prohibited by applicable law, (B)
the conduct of the Indemnified Party relating to the matter for which
indemnification is sought involved bad faith or willful misconduct of
such Indemnified Party, or (C) with respect to actions taken by any
such Indemnified Party in his or its individual capacity, including,
without limitations, with respect to any matters relating, directly or
indirectly, to the purchase, sale or trading of securities issued by
the Company other than a tender or sale pursuant to a stock tender
agreement or (D) if such Indemnified Party shall have breached its
obligation to cooperate with Parent in the defense of any claim in
respect of which indemnification is sought and such breach (x)
materially and adversely affects Parent's defense of such claim or (y)
will materially and
- 41 -
adversely affect Parent's defense of such claim if such breach is not
cured within ten days after notice of such breach is delivered to the
Indemnified Party and such breach is not cured during such period.
(k) FINANCIAL STATEMENTS.
(i) As soon as they are made available to and reviewed by senior
management of the Company, the Company shall make available to Parent
the internally generated monthly, quarterly (including quarterly
statements for the three-month period ended September 30, 1999) and
annual financial statements of the Company, consisting of consolidated
balance sheets, and consolidated statements of income and of cash
flows.
(ii) As soon as they are made available to and reviewed by senior
management of Parent, Parent shall make available to the Company the
internally generated monthly, quarterly (including, quarterly
statements for the three-month period ended September 30, 1999) and
annual financial statements, consisting of consolidated balance
sheets, and consolidated statements of income and of cash flows.
(l) CONTINUITY OF BUSINESS ENTERPRISE. Parent, Surviving Corporation
or any other member of the qualified group (as defined in Treasury Regulation
ss.1.368-1(d)) shall, for the foreseeable future, continue at least one
significant historic business line of the Company or use at least a significant
portion of the Company's historic business assets in a business, in each case
within the meaning of Treasury Regulation ss.1.368-1(d).
(m) PARENT BOARD OF DIRECTORS. At or before the Effective Time, the
Board of Directors of Parent will take all action necessary to expand the size
of the Parent Board of Directors by five directors and to:
(i) Elect the Chairman of the Board of the Company as a Class C
director, to serve until the annual meeting of the Parent Stockholders
in 2002;
(ii) Elect one independent director (as defined in National
Association of Securities Dealers Rule 4200(a)(13)) designated by the
Parent Board and one independent director (as so defined in relation
to the Company) designated by Xxxxxx Xxxx, who is currently serving on
the Company Board, as Class B directors, to serve until the annual
meeting of the Parent Stockholders in 2001; and
(iii) Elect the Chief Operating Officer of the Company and one
person designated by the Parent Board (who need not qualify as an
independent director) as Class A directors, to serve until the annual
meeting of the Parent Stockholders in 2000.
In the event the Chairman of the Board of the Company is so elected and agrees
to serve as a director of Parent, the Parent Board of Directors will appoint him
as Vice Chairman of the Board of Parent.
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(n) RULE 145 AFFILIATES. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who were, at the date of the
Company Special Meeting, "affiliates" of the Company for purposes of Rule 145
under the Securities Act. The Company shall use its reasonable efforts to cause
each such person to deliver to Parent on or prior to the Closing Date a written
agreement substantially in the form attached as Exhibit C.
(o) NASDAQ LISTING. Parent shall use all reasonable efforts to cause
the Parent Shares to be issued in connection with the Merger and under the
Company Benefit Plans to be approved for listing on Nasdaq, subject to official
notice of issuance, prior to the Closing Date.
(p) TAX FREE TREATMENT. The Parties intend the Merger to qualify as a
reorganization under Section 368(a) of the Code. Each Party and its Affiliates
shall use reasonable efforts to cause the Merger to so qualify and to obtain the
opinion referred to in ss. 6(b)(vii). For purposes of the tax opinion described
in ss. 6(b)(vii), Parent and the Company shall provide customary representation
letters substantially in the form of Exhibits D and E, each dated on or about
the date that is two business days prior to the date the Joint Proxy
Statement/Prospectus is mailed to the stockholders of Parent and the Company and
reissued as of the Closing Date. Each of Parent, Parent Subsidiary and the
Company and each of their respective Affiliates shall not take any action and
shall not fail to take any action or suffer to exist any condition which action
or failure to act or condition would prevent, or would be reasonably likely to
prevent, the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(q) COMPANY EMPLOYEE PLANS. After the Effective Time, Parent shall
arrange for each employee participating in any of the Company Benefits Plans to
participate in any counterpart benefit plans of Parent or its Subsidiaries (as
appropriate) in accordance with the eligibility criteria thereof, provided that
(i) such participants shall receive full credit for years of service with the
Company or any of its Subsidiaries prior to the Effective Time for all purposes
for which such service was recognized under the Company Benefit Plans and (ii)
such participants shall participate in the Parent Benefit Plans on terms no less
favorable than those offered by Parent to similarly situated employees of Parent
or its Subsidiaries. Parent shall give credit under its applicable employee
welfare benefit plans for all copayments, deductibles and out-of-pocket maximums
satisfied by employees (and their eligible dependents) of the Company (and its
Subsidiaries), in respect of the calendar year in which the Closing Date occurs.
Parent shall waive all pre-existing conditions (to the extent waived under the
applicable employee welfare benefit plans of the Company and its Subsidiaries)
otherwise applicable to employees of the Company and its Subsidiaries under
Parent's employee welfare benefit plans in which employees of the Company (and
its Subsidiaries) become eligible to participate on or following the Closing.
Notwithstanding the foregoing, Parent may continue (or cause the Surviving
Corporation to continue) one or more of the Company Benefit Plans, in which case
Parent shall have satisfied its obligations hereunder with respect to the
benefits so provided if the terms of the Company Benefit Plans which are
continued are no less favorable than the terms of the counterpart plans of
Parent and its Subsidiaries (as applicable).
(r) NOTICE OF ADVERSE CIRCE NETWORK DEVELOPMENTS. Parent will notify
Company promptly after it becomes aware of any fact or circumstance that would
be reasonably expected to materially delay or prevent the completion in all
material respects of the Circe
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Network within the periods described in the most recent Parent Report filed
prior to the date hereof.
(s) DISCOUNT NOTES. Parent and the Company agree to cooperate and use
their reasonable efforts to obtain within 60 days after the date hereof any
necessary consents, waivers or other modifications of the indenture dated as of
April 8, 1998, between the Company and The Bank of New York, as trustee,
governing the 11% Senior Discount Notes due 2008 issued by the Company, so as to
avoid the obligation to conduct an Offer to Purchase pursuant to Section 4.12
thereof as a result of the transactions contemplated by this Agreement, provided
that in connection with obtaining such consents, waivers or modifications
neither the Company nor Parent will be required to make any payment or take any
other action which is not commercially reasonable. The Company and Parent each
shall pay one-half of all fees and expenses, including fees paid to holders of
such notes, incurred by the Parties pursuant to this ss.5(s). If such consent,
waiver or modification is not obtained within such 60 day period, the Parties
may mutually agree to modify the terms of this Agreement so as to achieve the
results of the transactions contemplated hereby in a manner that will not
require such an Offer to Purchase to be undertaken.
(t) YEAR 2000 BUDGETS. Each of Parent and the Company shall, and shall
seek to cause its executive officers to, (a) cooperate in good faith to develop
a year 2000 combined budget for Parent and (b) provide such assistance as the
other Party may reasonably require to develop a year 2000 combined budget.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF PARENT AND THE PARENT SUBSIDIARY. The
obligation of each of Parent and the Parent Subsidiary to consummate the Merger
is subject to satisfaction or waiver by Parent or Parent Subsidiary of the
following conditions at or prior to the Closing Date:
(i) this Agreement and the Merger shall have received the
Requisite Stockholder Approvals;
(ii) the Company and its Subsidiaries shall have obtained the
Required Company Consents, other than those Required Company Consents
the failure of which to obtain would not reasonably be expected to
have a Company Material Adverse Effect and the Purchaser shall have
obtained the Required Parent Consents, other than those Required
Parent Consents the failure of which to obtain would not reasonably be
expected to have a Parent Material Adverse Effect;
(iii) the representations and warranties set forth in ss.3 above
shall be true and correct in all material respects at and as of the
Closing Date, except for those representations and warranties which
address matters only as of a particular date (which shall have been
true and correct as of such date);
(iv) the Company shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
- 44 -
(v) neither any statute, rule, regulation, order, stipulation or
injunction (each an "ORDER") shall be enacted, promulgated, entered,
enforced or deemed applicable to the Merger nor any other action shall
have been taken by any Government Entity (A) which prohibits the
consummation of the transactions contemplated by the Merger; (B) which
prohibits Parent's or the Parent Subsidiary's ownership or operation
of all or any material portion of their or the Company's business or
assets, or which compels Parent or the Parent Subsidiary to dispose of
or hold separate all or any material portion of Parent's or the Parent
Subsidiary's or the Company's business or assets as a result of the
transactions contemplated by the Merger; (C) which makes the purchase
of, or payment for, some or all of the Company Shares illegal; (D)
which imposes material limitations on the ability of Parent or the
Parent Subsidiary to acquire or hold or to exercise effectively all
rights of ownership of Company Shares, including, without limitation,
the right to vote any Company Shares purchased by Parent on all
matters properly presented to the Company Stockholders; or (E) which
imposes any limitations on the ability of Parent or the Parent
Subsidiary, or any of their respective Subsidiaries, effectively to
control in any material respect the business or operations of the
Company or any of its Subsidiaries;
(vi) the Company shall have delivered to Parent and the Parent
Subsidiary a certificate to the effect that each of the conditions
specified above in ss.6(a)(i)-ss.6(a)(iv) is satisfied in all
respects; provided, however, with respect to ss.6(a)(i), the Company
shall only be required to certify that this Agreement and the Merger
received the Requisite Stockholder Approval of the Company
Stockholders;
(vii) all applicable waiting periods (and any extensions thereof)
under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or otherwise been
terminated;
(viii) the Parent Shares to be issued in connection with the
Merger shall have been approved upon official notice of issuance for
quotation on Nasdaq, subject to official notice of issuance; and
(ix) the Registration Statement shall have been declared
effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have
been initiated or threatened by the SEC.
Subject to the provisions of applicable law, Parent and the Parent
Subsidiary may waive, in whole or in part, any condition specified in this
ss.6(a) if they execute a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to consummate the Merger is subject to satisfaction or waiver by the
Company of the following conditions at or prior to the Closing Date:
- 45 -
(i) this Agreement and the Merger shall have received the
Requisite Stockholder Approvals;
(ii) Parent and its Subsidiaries shall have obtained the Required
Parent Consents, other than those Required Parent Consents the failure
of which to obtain would not reasonably be expected to have a Parent
Material Adverse Effect, and the Company and its Subsidiaries shall
have obtained the Required Company Consents other than those Required
Company Consents the failure of which to obtain would not reasonably
be expected to have a material adverse effect on the business,
financial condition or results of operations of Parent, the Surviving
Corporation and their Affiliates taken as a whole;
(iii) the representations and warranties set forth in ss.4 above
shall be true and correct in all material respects at and as of the
Closing Date, except for those representations and warranties which
address matters only as of a particular date (which shall have been
true and correct as of such date);
(iv) each of Parent and the Parent Subsidiary shall have
performed and complied with all of its covenants hereunder in all
material respects through the Closing;
(v) neither any Order shall be enacted, promulgated, entered,
enforced or deemed applicable to the Merger nor any other action shall
have been taken by any Government Entity (A) which prohibits the
consummation of the transactions contemplated by the Merger; (B) which
prohibits Parent's or the Parent Subsidiary's ownership or operation
of all or any material portion of their or the Company's business or
assets, or which compels Parent or the Parent Subsidiary to dispose of
or hold separate all or any material portion of Parent's or the Parent
Subsidiary's or the Company's business or assets as a result of the
transactions contemplated by the Merger; or (C) which makes the
purchase of, or payment for, some or all of the Company Shares
illegal;
(vi) each of Parent and the Parent Subsidiary shall have
delivered to the Company a certificate to the effect that each of the
conditions specified above in ss.6(b)(i)-(iv) is satisfied in all
respects; provided, however, with respect to ss.6(b)(i), each of
Parent and the Parent Subsidiary shall only be required to certify
that this Agreement and the Merger received the Requisite Stockholder
Approval of the Parent Stockholders;
(vii) The Company shall have received a written opinion, dated as
of the Closing Date, from Cravath, Swaine & Xxxxx, counsel to the
Company, to the effect that the Merger will be treated for U.S.
Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, and that Parent, Parent Subsidiary and the
Company will each be a party to that reorganization within the meaning
of Section 368(b) of the Code; it being understood that in rendering
such opinion, such tax counsel shall be entitled to rely upon
customary
- 46 -
representations provided by the Parties substantially in the form of
Exhibits D and E;
(viii) all applicable waiting periods (and any extensions
thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or
otherwise been terminated;
(ix) the Parent Shares to be issued in connection with the Merger
shall have been approved upon official notice of issuance for
quotation on Nasdaq, subject to official notice of issuance; and
(x) the Registration Statement shall have been declared effective
by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Registration Statement shall have been issued by
the SEC and no proceedings for that purpose shall have been initiated
or threatened by the SEC.
Subject to the provisions of applicable law, the Company may waive, in
whole or in part, any condition specified in this ss.6(b) if it executes a
writing so stating at or prior to the Closing.
7. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
with the prior authorization of their respective board of directors as provided
below:
(i) The Parties may terminate this Agreement, and the Merger may
be abandoned, by mutual written consent at any time prior to the
Effective Time before or after the approval by the Company
Stockholders, the Parent Subsidiary stockholder or the Parent
Stockholders;
(ii) This Agreement may be terminated and the Merger may be
abandoned by action of the Board of Directors of either Parent or the
Company, before or after the approval by the Company Stockholders, the
Parent Subsidiary stockholders or the Parent Stockholders, (A) if the
Effective Time shall not have occurred by June 30, 2000 (the "OUTSIDE
DATE") (unless the failure to consummate the Merger by such date is
due to the action or failure to act of the Party seeking to terminate)
or (B) if any condition to the obligation of the terminating Party to
consummate the Merger shall have become incapable of being satisfied
prior to the Outside Date as of a result of an Order that is final and
non-appealable;
(iii) This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the
approval by the Company Stockholders, the Parent Subsidiary
stockholder or the Parent Stockholders, by action of the Company
Board, in the event that Parent or the Parent Subsidiary shall have
breached any of their representations, warranties or covenants under
this Agreement which breach (A) would give rise to the failure of a
condition set forth in ss.6(b) above, and (B) cannot be or has not
been cured within 30 days after the giving of written notice by the
Company to Parent of such
- 47 -
breach (provided that the Company is not then in material breach of
any representation, warranty or covenant contained in this Agreement);
(iv) This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the
approval by the Company Stockholders, the Parent Subsidiary
stockholder or the Parent Stockholders, by action of the Parent Board,
in the event that the Company shall have breached any of its
representations, warranties or covenants under this Agreement which
breach (A) would give rise to the failure of a condition set forth in
ss.6(a) above, and (B) cannot be or has not been cured within 30 days
after the giving of written notice by the Parent to the Company of
such breach (provided that Parent is not then in material breach of
any representation, warranty or covenant contained in this Agreement);
(v) This Agreement may be terminated by Parent, and the Merger
may be abandoned, (A) if the Company Board (i) enters into or publicly
announces its intention to enter into an agreement or agreement in
principle with respect to an Acquisition Proposal, (ii) withdraws its
recommendation to the Company Stockholders of this Agreement or the
Merger or (iii) after the receipt of an Acquisition Proposal, fails to
confirm publicly, within ten days after the request of Parent, its
recommendation to the Company Stockholders that the Company
Stockholders adopt and approve this Agreement and the Merger or (B) if
the Company or any of its Representatives takes any of the actions
that would be proscribed byss.5(h) above, but for the exceptions
therein allowing certain actions to be taken pursuant to the proviso
in the first sentence ofss.5(h)(ii) above;
(vi) This Agreement may be terminated by the Company, and the
Merger may be abandoned, (A) if the Parent Board (i) enters into or
publicly announces its intention to enter into an agreement or
agreement in principle with respect to a Prohibited Parent Acquisition
Proposal, (ii) withdraws its recommendation to the Parent Stockholders
that the Parent Stockholders approve the issuance of Parent Shares in
connection with the Merger as provided by the Agreement or, if
necessary, that the Parent Stockholders approve an amendment to the
certificate of incorporation of Parent to increase the authorized
number of Parent Shares or (iii) after receipt of a Parent Acquisition
Proposal, fails to publicly confirm, within ten days after the request
of the Company, its recommendation to the Parent Stockholders
described in the foregoing clause (ii) or (B) if Parent or any of its
Representatives takes any of the actions that would be proscribed
byss.5(i) but for the exceptions therein allowing certain actions to
be taken pursuant to the proviso in the first sentence ofss.5(i)(ii);
(vii) This Agreement may be terminated by the Company, and the
Merger may be abandoned, in the event that the Closing Sales Price per
Parent Share on the Closing Date is less than $25;
(viii) Any Party may terminate this Agreement, and the Merger may
be abandoned, by giving written notice to the other Parties at any
time after the
- 48 -
Company Special Meeting in the event that this Agreement and the
Merger fail to receive the Requisite Stockholder Approval by the
Company Stockholders; or
(ix) Any Party may terminate this Agreement, and the Merger may
be abandoned, by giving written notice to the other Parties at any
time after the Parent Special Meeting in the event that this Agreement
and the Merger fail to receive the Requisite Stockholder Approval by
the Parent Stockholders.
(b) EFFECT OF TERMINATION.
(i) Except as provided in clauses (ii) or (iii) of this ss.7(b),
if any Party terminates this Agreement pursuant to ss.7(a) above, all
rights and obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party (except for any
liability of any Party then in breach); provided, however, that the
provisions of the Confidentiality Agreement, this ss.7(b) and ss.8
below, shall survive any such termination.
(ii) If this Agreement is terminated (A) by the Company pursuant
to ss.7(a)(viii) or (B) by Parent pursuant to ss.7(a)(v) or
ss.7(a)(viii), or (C) any Person makes an Acquisition Proposal that
remains in effect on the date 60 days prior to the Outside Date and
the Requisite Stockholder Approval of the Company Stockholders is not
obtained prior to termination of this Agreement pursuant to
ss.7(a)(ii), then, within five (5) days after such termination, the
Company shall pay Parent the sum of $30,000,000 in immediately
available funds.
(iii) If (A) this Agreement is terminated pursuant toss.7(a)(vi)
or (B) any person makes a Prohibited Parent Acquisition Proposal that
was publicly disclosed prior to the Parent Special Meeting but not
publicly withdrawn more than ten days prior to the date of the Parent
Special Meeting and thereafter this Agreement is terminated pursuant
toss.7(a)(ix) or (C) any person makes a Prohibited Parent Acquisition
Proposal that remains in effect on the date 60 days prior to the
Outside Date and the Requisite Stockholder Approval of the Parent
Stockholders is not obtained prior to termination of this Agreement
pursuant toss.7(a)(ii), then, within five (5) days after such
termination, Parent shall pay the Company the sum of $75,000,000 in
immediately available funds. If this Agreement is terminated pursuant
to ss.7(a)(ix) and clause (B) or the preceding sentence is not
applicable, then, within five (5) days after such termination, Parent
shall pay the Company the sum of $30,000,000 in immediately available
funds.
8. MISCELLANEOUS.
(a) SURVIVAL. None of the representations, warranties and covenants of
the Parties (other than the provisions in ss.2 concerning payment of the Merger
Consideration, the provisions in ss.5(j), ss.5(l), ss.5(m), ss.5(p) and ss.5(q)
shall survive the Effective Time.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Parties;
provided, however, that any Party may
- 49 -
make any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use all reasonable efforts
to advise the other Parties prior to making the disclosure).
(c) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns; provided, however, that (i) the provisions in
ss.2 above (A) concerning payment of the Merger Consideration are intended for
the benefit of the Company Stockholders and (B) concerning the conversion of the
stock options are intended for the benefit of the holders of such stock options,
(ii) the provisions in ss.5(j) above concerning insurance and indemnification
are intended for the benefit of the individuals specified therein and their
respective legal representatives and (iii) the provisions of ss.5(l), ss.5(m)
and ss.5(p) are intended for the benefit of the Company Stockholders.
(d) ENTIRE AGREEMENT. This Agreement (including the Confidentiality
Agreement and the other documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements
or representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
(e) BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign or delegate either this Agreement or any
of its rights, interests or obligations hereunder, by operation of law or
otherwise, without the prior written approval of the other Parties. Any
purported assignment or delegation without such approval shall be void and of no
effect.
(f) COUNTERPARTS. This Agreement may be executed (including by
facsimile) in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below:
- 50 -
IF TO THE COMPANY: Destia Communications, Inc.
00 Xxxxx 00 Xxxxx
Xxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
WITH A COPY TO: Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxx
Facsimile: (000) 000-0000
IF TO PARENT: Viatel, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
WITH A COPY TO: Xxxxxx Xxxx & Xxxxxx XXX
0 Xxxxxxxx Xxxxx
000 Xxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
IF TO THE PARENT SUBSIDIARY: Viatel, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
WITH A COPY TO: Xxxxxx Xxxx & Xxxxxx XXX
0 Xxxxxxxx Xxxxx
000 Xxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using
personal delivery, expedited courier, messenger service, telecopy or ordinary
mail, but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
intended recipient. Any Party may change the address to which notices, requests,
demands, claims and other communications hereunder are to be delivered by giving
the other Parties notice in the manner set forth in this ss.8(h), provided that
no such change of address shall be effective until it actually is received by
the intended recipient.
- 51 -
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE
OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(j) AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided, however,
that any amendment effected subsequent to Requisite Stockholder Approval will be
subject to the restrictions contained in the Delaware General Corporation Law,
to the extent applicable. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by all of the Parties.
No waiver by any Party of any default, misrepresentation or breach of warranty
or covenant hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) EXPENSES. Except as expressly set forth elsewhere in this
Agreement, each of the Parties will bear its own costs and expenses (including
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation. The phrase "business
day" shall mean any day other than a day on which banks in the State of New York
are required or authorized to be closed. Any disclosure made with reference to
one or more sections of the Company Disclosure Letter shall be deemed disclosed
with respect to each other section therein as to which such disclosure is
relevant provided that such relevance is reasonably apparent. Disclosure of any
matter in the Company Disclosure Letter or the Parent Disclosure Letter shall
not be deemed an admission that such matter is material.
(n) INCORPORATION OF EXHIBITS. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
(o) DEFINITION OF KNOWLEDGE. As used herein, the words "knowledge",
"best knowledge" or "known" shall, (i) with respect to the Company or Company
management, mean the actual knowledge of the corporate executive officers of the
Company, in each case after such
- 52 -
individuals have made due and diligent inquiry as to the matters which are the
subject of the statements which are "known" by the Company or made to the
"knowledge" or "best knowledge" of the Company, (ii) with respect to Parent or
Parent management, mean the actual knowledge of the corporate executive officers
of Parent, in each case after such individuals have made due and diligent
inquiry as to the matters which are the subject of the statements which are
"known" by Parent or made to the "knowledge" or "best knowledge" of Parent, and
(iii) with respect to the Parent Subsidiary or the Parent Subsidiary management,
mean the actual knowledge of the corporate executive officers of Parent or the
Parent Subsidiary, in each case after such individuals have made due and
diligent inquiry as to the matters which are the subject of the statements which
are "known" by the Parent Subsidiary or made to the "knowledge" or "best
knowledge" of the Parent Subsidiary.
(p) WAIVER OF JURY TRIAL. EACH OF PARENT, THE PARENT SUBSIDIARY AND
THE COMPANY, AND EACH INDEMNIFIED PARTY, HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
- 53 -
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
DESTIA COMMUNICATIONS, INC.
By:________________________________________
Name:
Title:
VIATEL ACQUISITION CORP.
By:________________________________________
Name:
Title:
VIATEL, INC.
By:________________________________________
Name:
Title:
- 54 -
EXHIBIT A
CERTIFICATE OF MERGER
OF
VIATEL ACQUISITION CORP.
AND
DESTIA COMMUNICATIONS, INC.
It is hereby certified that:
1. The constituent business corporations participating in the merger
herein certified are:
(i) Viatel Acquisition Corp., which is incorporated under the laws of
the State of Delaware; and
(ii) Destia Communications, Inc., which is incorporated under the laws
of the State of Delaware.
2. An Agreement and Plan of Merger has been approved, adopted,
certified, executed, and acknowledged by each of the aforesaid constituent
corporations in accordance with the provisions of subsection (c) of Section 251
of the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation in the merger herein
certified is Destia Communications, Inc., which will continue its existence as
said surviving corporation under the name [NAME TO BE DETERMINED] upon the
effective date of said merger pursuant to the provisions of the General
Corporation Law of the State of Delaware.
4. The Certificate of Incorporation of Destia Communications, Inc., as
now in force and effect, shall continue to be the Certificate of Incorporation
of said surviving corporation until amended and changed pursuant to the
provisions of the General Corporation Law of the State of Delaware.
5. The executed Agreement and Plan of Merger between the aforesaid
constituent corporations is on file at an office of the aforesaid surviving
corporation, the address of which is as follows:
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
6. A copy of the aforesaid Agreement and Plan of Merger will be
furnished by the aforesaid surviving corporation, on request, and without cost,
to any stockholder of each of the aforesaid constituent corporations.
7. The Agreement and Plan of Merger between the aforesaid constituent
corporations provides that the merger herein certified shall be effective on
___________________, 1999.
Dated:
VIATEL ACQUISITION CORP.
By:_______________________________
Name:
Title:
Dated:
DESTIA COMMUNICATIONS, INC.
By:_______________________________
Name:
Title:
EXHIBIT B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
VIATEL ACQUISITION CORP.
It is hereby certified that:
1. The present name of the corporation is Viatel Acquisition Corp.
(the "Corporation"), which is the name under which the Corporation was
originally incorporated, and the date of filing of the original Certificate of
Incorporation of the Corporation with the Secretary of State of the State of
Delaware is August 25, 1999.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article First thereof and by substituting in lieu
thereof new Article First which is set forth in the Restated Certificate of
Incorporation hereinafter provided for.
3. The provisions of the Certificate of Incorporation of the
Corporation, as herein amended, are hereby restated and integrated into the
single instrument that is hereinafter set forth, and that is entitled "Restated
Certificate of Incorporation of [NAME TO BE DETERMINED]" without any further
amendments other than the amendment herein certified and without any discrepancy
between the provisions of the Certificate of Incorporation as heretofore amended
and supplemented and the provisions of the said single instrument hereinafter
set forth.
4. The amendment and the restatement of the Restated Certificate of
Incorporation herein certified have been duly adopted by the stockholders of the
Corporation in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware.
5. The certificate of incorporation of the corporation, as amended and
restated herein, shall at the effective time of the restated certificate of
Incorporation, read as follows:
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
[NAME TO BE DETERMINED]
FIRST: The name of the corporation is [NAME TO BE DETERMINED] (the
"Corporation").
SECOND: The address of its registered office in the State of Delaware
is Corporate Service Company, 1013 Centre Road, in the City of Xxxxxxxxxx 00000,
County of New Castle. The name of its registered agent at such address is
Corporate Service Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is One Thousand (1,000) shares of Common Stock,
par value $.01 per share.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The power to adopt, amend or repeal the Corporation's By-Laws
is conferred upon the Board of Directors, but this shall not divest the
stockholders of the power, nor limit their power, to adopt, amend or repeal the
Corporation's By-Laws.
SEVENTH: Elections of directors need not be by ballot unless the
By-Laws of the Corporation shall so provide, and the meetings of stockholders
may be held within or without the State of Delaware, as the By-Laws may provide.
EIGHTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
shareholders herein are granted subject to this reservation.
NINTH: No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of such director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which a director derives an
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. No repea
or modification of this Article TENTH shall adversely affect any right of or
protection afforded to a director of the Corporation existing immediately prior
to such repeal or modification.
TENTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said Section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such
Section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
Signed on , 1999
_________________________________
Name:
Title:
EXHIBIT C
FORM OF COMPANY AFFILIATE LETTER
Dear Sirs:
The undersigned refers to the Agreement and Plan of Merger (the
"MERGER AGREEMENT") dated as of August 27, 1999, among Viatel, Inc., a Delaware
corporation, Viatel Acquisition Corp., a Delaware corporation, and Destia
Communications, Inc., a Delaware corporation. Capitalized terms used but not
defined in this letter have the meanings given such terms in the Merger
Agreement.
The undersigned, a holder of Company Shares, is entitled to receive
Parent Shares in connection with the Merger. The undersigned acknowledges that
the undersigned may be deemed an "affiliate" of the Company within the meaning
of Rule 145 ("RULE 145") promulgated under the Securities Act, although nothing
contained herein should be construed as an admission of such fact.
If in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Parent Shares received by
the undersigned in exchange for any Company Shares pursuant to the Merger may be
restricted unless such transaction is registered under the Act or an exemption
from such registration is available. The undersigned (i) understands that such
exemptions are limited and (ii) has obtained advice of counsel as to the nature
and conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d) promulgated
under the Securities Act.
The undersigned hereby represents to and covenants with Parent that
the undersigned will not sell, assign or transfer any of the Parent Shares
received by the undersigned in exchange for Company Shares pursuant to the
Merger except (i) pursuant to an effective registration statement under the
Securities Act or (ii) in a transaction that, in the opinion of independent
counsel (the reasonable fees of which counsel will be paid by Parent) or as
described in a "no-action" or interpretive letter from the Staff of the SEC, is
not required to be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned
pursuant to Rule 145, of Parent Shares received by the undersigned in the
Merger, the undersigned will supply Parent with evidence of compliance with such
Rule, in the form of a letter in the form of Annex I hereto and the opinion of
counsel or no-action letter referred to above. The undersigned understands that
Parent may instruct its transfer agent to withhold the transfer of any Parent
Securities disposed of by the undersigned, but that upon receipt of such
evidence of compliance the transfer agent shall effectuate the transfer of the
Parent Shares sold as indicated in the letter.
The undersigned acknowledges and agrees that appropriate legends will
be placed on any certificates representing Parent Shares received by the
undersigned in the Merger or held by a transferee thereof, which legends will be
removed by delivery of substitute certificates upon
receipt of an opinion in form and substance reasonably satisfactory to Parent
from independent counsel (the reasonable fees of which counsel will be paid by
Parent) to the effect that such legends are no longer required for purposes of
the Securities Act.
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of the Parent
Shares and (ii) the receipt by Parent of this letter is an inducement and a
condition to Parent's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO EXHIBIT C
VIATEL, INC.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
On , the undersigned sold the securities of Viatel, Inc.
("PARENT") described below in the space provided for that purpose (the
"SECURITIES"). The Securities were received by the undersigned in connection
with the merger of Viatel Acquisition Corp., a subsidiary of Parent, with and
into Destia Communications, Inc.
Based upon the most recent report or statement filed by Parent with
the Securities and Exchange Commission, the Securities sold by the undersigned
were within the prescribed limitations set forth in Rule 144(e) promulgated
under the Securities Act of 1933, as amended (the "SECURITIES ACT").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Securities Act
or in transactions directly with a "market maker" as that term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended. The
undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
Dated:
[Space to be provided for description of securities.]
EXHIBIT D
[Letterhead of VIATEL, INC.]
, 1999
Cravath, Swaine & Xxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
In connection with the opinion to be delivered pursuant to Section
6(b)(vii) of the Agreement and Plan of Merger (the "Merger Agreement") dated as
of August 27, 1999, among VIATEL, INC., a Delaware corporation (the "Parent"),
VIATEL ACQUISITION CORP., a Delaware corporation and a direct wholly owned
subsidiary of the Parent (the "Parent Subsidiary"), and DESTIA COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), and in connection with the filing
with the Securities and Exchange Commission (the "SEC") of the registration
statement on Form S-4 (the "Registration Statement"), which includes the Joint
Proxy Statement/Prospectus of the Parent and the Company, the undersigned
certifies and represents on behalf of the Parent and the Parent Subsidiary and
as to the Parent and the Parent Subsidiary, after due inquiry and investigation,
as follows (any capitalized term used but not defined herein having the meaning
given to such term in the Merger Agreement):
1. The facts relating to the contemplated merger of the Parent
Subsidiary with and into the Company (the "Merger") as described in the
Registration Statement and the documents described in the Registration Statement
are, insofar as such facts pertain to the Parent and the Parent Subsidiary,
true, correct and complete in all material respects. The Merger will be
consummated in accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which
each issued and outstanding share of voting common stock, par value $.01 per
share, of the Company (the "Voting Shares") and each issued and outstanding
share of non-voting common stock, par value $.01 per share, of the Company (the
"Nonvoting Shares" and, together with the Voting Shares, the "Company Shares")
will be converted into common shares of the Parent (the "Parent Shares") is the
result of arm's length bargaining.
3. Cash payments to be made to stockholders of the Company in lieu of
fractional shares of Parent Shares that would otherwise be issued to such
stockholders in the Merger will be made for the purpose of saving the Parent the
expense and inconvenience of issuing and transferring fractional shares of
Parent Shares, and do not represent separately bargained for consideration. The
total cash consideration that will be paid in the Merger to stockholders of the
Company in lieu of fractional shares of Parent Shares is not expected to exceed
one percent of the total consideration that will be issued in the Merger to
stockholders of the Company in exchange for their shares of Company Shares.
4. (i) The Parent has no present plan or intention, following the
Merger, to reacquire, or to cause any corporation that is related to the Parent
to acquire, any Parent Shares, except for repurchases of Parent Shares by the
Parent in connection with a repurchase program meeting the requirements of
Section 4.05(1)(b) of Revenue Procedure 96-30, which program was not entered
into or amended in any way in contemplation of or connection with the Merger. To
the best knowledge of the management of the Parent, no corporation that is
related to the Parent has a plan or intention to purchase any Parent Shares.
(ii) For purposes of this representation letter, a corporation shall
be treated as related to the Parent if such corporation is related to The Parent
within the meaning of Treasury Regulation Section 1.368-1(e)(3).
5. The Parent has no present plan or intention to make any
distributions after the Merger to holders of Parent Shares (other than dividends
made in the ordinary course of business).
6. Neither the Parent nor the Parent Subsidiary (nor any other
subsidiary of the Parent) has acquired, or, except as a result of the Merger,
will acquire, or has owned in the past five years, any Company Shares.
7. Prior to the Merger, the Parent will own all the capital stock of
the Parent Subsidiary. The Parent has no present plan or intention to cause the
Company to issue additional shares of its stock that would result in the Parent
owning less than all the capital stock of the Company after the Merger.
8. The Parent has no present plan or intention, following the Merger,
to liquidate the Company, to merge the Company with and into another
corporation, to sell or otherwise dispose of any of the stock of the Company, to
cause the Company to distribute to the Parent or any of its subsidiaries any
assets of the Company or the proceeds of any borrowings incurred by the Company,
or to cause the Company to sell or otherwise dispose of any of the assets held
by the Company at the time of the Merger, except for dispositions of such assets
in the ordinary course of business and transfers described in Section
368(a)(2)(C) of the Internal Revenue Code of 1986, as amended (the "Code") or
Treasury Regulation Section 1.368-2(k).
9. Immediately following the Merger, the Company will hold (i) at
least 90% of the fair market value of the net assets and at least 70% of the
fair market value of the gross assets that were held by the Company immediately
prior to the Merger and (ii) at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets that were held by the Parent Subsidiary immediately prior to the
Merger. For purposes of this representation, amounts paid by the Company or by
the Parent Subsidiary to stockholders who receive cash or other property
(including cash in lieu of fractional shares of Parent Shares and cash paid with
respect to Dissenting Shares) in connection with the Merger, assets of the
Company used to pay its reorganization expenses and all redemptions and
distributions made by the Company (other than dividends made in the ordinary
course of business) immediately preceding, or in contemplation of, the Merger
will be included as assets held by the Company immediately prior to the Merger.
10. Except as otherwise specifically contemplated under the Merger
Agreement, the Parent, the Parent Subsidiary, the Company and holders of Company
Shares will each pay their respective expenses, if any, incurred in connection
with the Merger. Except to the extent specifically contemplated under the Merger
Agreement or the Stockholder Agreements, neither the Parent nor the Parent
Subsidiary has paid, directly or indirectly, or has agreed to assume any expense
or other liability, whether fixed or contingent, incurred or to be incurred by
the Company or any holder of Company Shares in connection with or as part of the
Merger or any related transactions.
11. Following the Merger, the Parent intends to cause the Company to
continue its "historic business" or to use a significant portion of its
"historic business assets" in a business (as such terms are defined in Treasury
Regulation Section 1.368-1(d)).
12. Neither the Parent nor the Parent Subsidiary is an investment
company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
13. Neither the Parent nor the Parent Subsidiary will take any
position on any Federal, state or local income or franchise tax return, or take
any other tax reporting position, that is inconsistent with the treatment of the
Merger as a reorganization within the meaning of Section 368(a) of the Code,
unless otherwise required by a "determination" (as defined in Section 1313(a)(1)
of the Code) or by applicable state or local tax law (and then only to the
extent required by such applicable state or local tax law).
14. None of the compensation received by any stockholder-employee of
the Company in respect of periods at or prior to the Effective Time represents
separate consideration for any of its Company Shares. None of the Parent Shares
that will be received by any stockholder-employee of the Company in the Merger
represents separately bargained for consideration which is allocable to any
employment agreement or arrangement. The compensation paid to any
stockholder-employees will be for services actually rendered and will be
determined by bargaining at arm's-length.
15. There is no intercorporate indebtedness existing between the
Parent (or any of its subsidiaries, including the Parent Subsidiary) and the
Company (or any of its subsidiaries) that was issued or acquired, or will be
settled, at a discount.
16. Neither the Parent nor the Parent Subsidiary is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
17. In connection with the Merger, Company Shares will be converted
solely into Parent Shares (except for cash paid in lieu of fractional shares of
Parent Shares or cash paid with respect to Dissenting Shares). For purposes of
this representation, Company Shares (including Dissenting Shares) redeemed for
cash or other property furnished, directly or indirectly, by the Parent will be
considered as exchanged for other than Parent Shares. Further, no liabilities of
the Company or any of the holders of Company Shares will be assumed by the
Parent, nor will any of the Company Shares acquired by the Parent in connection
with the Merger be subject to any liabilities.
18. Any payments with respect to Dissenting Shares shall be made
solely by the Company or the Surviving Corporation, and no cash or other
property shall be furnished, directly or indirectly, by the Parent to the
Company, the Surviving Corporation or to any holder of Dissenting Shares with
respect to any Dissenting Shares. The total fair market value of all Company
Nonvoting Shares issued and outstanding as of the date of the Merger Agreement
is equal to (i) less than 1% of the fair market value of the net assets and (ii)
less than 1% the fair market value of the gross assets that were held by the
Company immediately prior to the Merger.
19. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of the Parent and the Parent Subsidiary with respect to the
Merger.
20. The Parent Subsidiary is a corporation newly formed for the
purpose of participating in the Merger and at no time prior to the Merger has
had assets (other than nominal assets contributed upon the formation of the
Parent Subsidiary, which assets will be held by the Parent Subsidiary following
the Merger) or business operations.
21. The Merger is being undertaken for purposes of enhancing the
business of the Parent and for other good and valid business purposes of the
Parent.
22. The undersigned is authorized to make all the representations set
forth herein on behalf of the Parent and the Parent Subsidiary.
The undersigned acknowledges that (i) the opinion to be delivered
pursuant to Section [6(b)(vii)] of the Merger Agreement will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) such opinion will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any such covenants or
obligations are not satisfied in all material respects.
The undersigned acknowledges that such opinion will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
Very truly yours,
VIATEL, INC.
By_________________________________
Name:
Title:
EXHIBIT E
[Letterhead of DESTIA COMMUNICATIONS, INC.]
, 1999
Cravath, Swaine & Xxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
In connection with the opinion to be delivered pursuant to Section
6(b)(vii) of the Agreement and Plan of Merger (the "Merger Agreement"), dated as
of August 27, 1999, among VIATEL, INC., a Delaware corporation (the "Parent"),
VIATEL ACQUISITION CORP., a Delaware corporation and a direct, wholly owned
subsidiary of the Parent (the "Parent Subsidiary"), and DESTIA COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), and in connection with the filing
with the Securities and Exchange Commission (the "SEC") of the registration
statement on Form S-4 (the "Registration Statement"), which includes the Joint
Proxy Statement/Prospectus of the Parent and the Company, the undersigned
certifies and represents on behalf of the Company and as to the Company, after
due inquiry and investigation, as follows (any capitalized term used but not
defined herein shall have the meaning given to such term in the Merger
Agreement):
1. The facts relating to the contemplated merger of the Parent
Subsidiary with and into the Company (the "Merger") as described in the
Registration Statement and the documents described in the Registration Statement
are, insofar as such facts pertain to the Company, true, correct and complete in
all material respects. The Merger will be consummated in accordance with the
Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which
each issued and outstanding share of voting common stock, par value $.01 per
share, of the Company (the "Voting Shares"), and each issued and outstanding
share of non-voting common stock, par value $.01 per share, of the Company (the
"Nonvoting Shares" and, together with the Voting Shares, the "Company Shares")
will be converted into common shares of the Parent (the "Parent Shares") is the
result of arm's length bargaining.
3. Cash payments to be made to stockholders of the Company in lieu of
fractional shares of Parent Shares that would otherwise be issued to such
stockholders in the Merger will be made for the purpose of saving the Parent the
expense and inconvenience of issuing and transferring fractional shares of
Parent Shares, and do not represent separately bargained for consideration. The
total cash consideration that will be paid in the Merger to stockholders of the
Company in lieu of fractional shares of Parent Shares is not expected to exceed
one percent of the total consideration that will be issued in the Merger to
stockholders of the Company in exchange for their Company Shares.
4. (i) Neither the Company nor any corporation related to the Company
has acquired or has any present plan or intention to acquire any Company Shares
in contemplation of the Merger, or otherwise as part of a plan of which the
Merger is a part, other than Nonvoting Shares with respect to which dissenters'
rights have been duly demanded under applicable law ("Dissenting Shares").
(ii) For purposes of this representation letter, a corporation shall
be treated as related to the Company if such corporation is related to the
Company within the meaning of Treasury Regulation Section 1.368-1(e)(3).
5. The Company has not made and does not have any present plan or
intention to make any distributions (other than dividends made in the ordinary
course of business) prior to, in contemplation of, or otherwise in connection
with, the Merger.
6. Except as otherwise specifically contemplated under the Merger
Agreement, the Parent, the Parent Subsidiary, the Company and holders of Company
Shares will each pay their respective expenses, if any, incurred in connection
with the Merger. The Company has not agreed to assume, nor will it directly or
indirectly assume, any expense or other liability, whether fixed or contingent,
of any holder of Company Shares. Except to the extent specifically contemplated
under the Merger Agreement or the Stockholder Agreements, the Company has not
entered into any arrangement pursuant to which the Parent or the Parent
Subsidiary has agreed to assume, directly or indirectly, any expense or other
liability, whether fixed or contingent, of the Company or any holder of Company
Shares.
7. Immediately following the Merger the Company will hold (i) at least
90% of the fair market value of the net assets and at least 70% of the fair
market value of the gross assets that were held by the Company immediately prior
to the Merger and (ii) at least 90% of the fair market value of the net assets
and at least 70% of the fair market value of the gross assets that were held by
the Parent Subsidiary immediately prior to the Merger. For purposes of this
representation, amounts paid by the Company or by the Parent Subsidiary to
stockholders who receive cash or other property (including cash in lieu of
fractional shares of Parent Shares and cash paid with respect to Dissenting
Shares) in connection with the Merger, assets of the Company used to pay its
reorganization expenses and all redemptions and distributions made by the
Company (other than dividends made in the ordinary course of business)
immediately preceding, or in contemplation of, the Merger will be included as
assets held by the Company immediately prior to the Merger.
8. Except as provided in the Merger Agreement, immediately prior to
the time of the Merger the Company will not have outstanding any warrants,
options, convertible securities or any other type of right pursuant to which any
person could acquire Company Shares.
9. In connection with the Merger, Company Shares will be converted
solely into Parent Shares (except for cash paid in lieu of fractional shares of
Parent Shares or cash paid with respect to Dissenting Shares). For purposes of
this representation, Company Shares (including Dissenting Shares) redeemed for
cash or other property furnished, directly or indirectly, by the Parent will be
considered as exchanged for other than Parent Shares. Further, no liabilities of
the Company or any of the holders of Company Shares will be assumed by the
Parent, nor will any of the Company Shares acquired by the Parent in connection
with the Merger be subject to any liabilities.
10. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code of 1986, as amended (the
"Code").
11. The Company will not take, and to the best knowledge of the
management of the Company there is no present plan or intention by stockholders
of the Company to take, any position on any Federal, state or local income or
franchise tax return, or to take any other tax reporting position, that is
inconsistent with the treatment of the Merger as a reorganization within the
meaning of Section 368(a) of the Code, unless otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code) or by applicable
state or local tax law (and then only to the extent required by such applicable
state or local tax law).
12. None of the compensation received by any stockholder-employee of
the Company in respect of periods at or prior to the Effective Time represents
separate consideration for any of its Company Shares. None of the Parent Shares
that will be received by any stockholder-employee of the Company in the Merger
represents separately bargained for consideration which is allocable to any
employment agreement or arrangement. The compensation paid to any
stockholder-employees will be for services actually rendered and will be
determined by bargaining at arm's-length.
13. There is no intercorporate indebtedness existing between the
Parent (or any of its subsidiaries, including the Parent Subsidiary) and the
Company (or any of its subsidiaries) that was issued, acquired, or will be
settled, at a discount.
14. The Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of the Company with respect to the Merger.
16. No assets of the Company have been sold, transferred or otherwise
disposed of which would prevent the Parent from continuing the "historic
business" of the Company or from using a significant portion of the "historic
business assets" of the Company in a business following the Merger (as such
terms are defined in Treasury Regulation Section 1.368-1(d)).
17. On the date of the Merger, the fair market value of the assets of
the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which such assets are subject.
18. No holders of Voting Shares have dissenter's rights with respect
to the Merger under applicable law. Any payments with respect to Dissenting
Shares shall be made solely by the Company or the Surviving Corporation, and no
cash or other property shall be furnished, directly or indirectly by the Parent
to the Company, the Surviving Corporation or to any holder of Dissenting Shares
with respect to any Dissenting Shares.
19. The total fair market value of all Company Nonvoting Shares issued
and outstanding as of the date of the Merger Agreement is equal to (i) less than
1% of the fair market value of the net assets and (ii) less than 1% the fair
market value of the gross assets that were held by the Company immediately prior
to the Merger.
20. The undersigned is authorized to make all the representations set
forth herein on behalf of the Company.
The undersigned acknowledges that (i) the opinion to be delivered
pursuant to Section 6(b)(vii) of the Merger Agreement will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) such opinion will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
The undersigned acknowledges that such opinion will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinion.
Very truly yours,
DESTIA COMMUNICATIONS, INC.
By____________________________________
Name:
Title:
