EXHIBIT 2.1
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
JUNE 5, 1997
BY AND AMONG
EXCEL COMMUNICATIONS, INC., NEW RES, INC.,
T-SUB, INC., E-SUB, INC.
AND
TELCO COMMUNICATIONS GROUP, INC.
TABLE OF CONTENTS
ARTICLE I - THE MERGERS..................................................... 2
SECTION 1.1 - The Mergers.................................................. 2
SECTION 1.2 - Effective Time............................................... 3
SECTION 1.3 - Effect of the Mergers........................................ 3
SECTION 1.4 - Subsequent Actions........................................... 3
SECTION 1.5 - Certificate of Incorporation; Bylaws; Directors and Officers
of Surviving Corporations........................... 4
ARTICLE II - EFFECT ON STOCK OF HOLDINGS, THE SURVIVING
CORPORATIONS AND THE MERGED CORPORATIONS.................................... 5
SECTION 2.1 - Conversion of Securities..................................... 5
SECTION 2.2 - Conversion of Shares......................................... 5
SECTION 2.3 - Cancellation of Treasury Shares and of Outstanding Holdings
Common Stock........................................ 5
SECTION 2.4 - Conversion of Common Stock of the Merged Corporations
into Common Stock of the Surviving Corporations..... 6
SECTION 2.5 - Exchange of Shares Other Than Treasury Shares................ 6
SECTION 2.6 - Transfer Books............................................... 8
SECTION 2.7 - No Fractional Share Certificates............................. 8
SECTION 2.8 - Options to Purchase Company Common Stock.....................10
SECTION 2.9 - Certain Adjustments..........................................11
ARTICLE III - CERTAIN MATTERS RELATED TO HOLDINGS...........................11
SECTION 3.1 - Certificate of Incorporation and Bylaws of Holdings..........11
SECTION 3.2 - Corporate Identity...........................................11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF Telco........................12
SECTION 4.1 - Organization and Qualification; Subsidiaries.................12
SECTION 4.2 - Certificate of Incorporation and Bylaws......................12
SECTION 4.3 - Capitalization...............................................12
SECTION 4.4 - Authority Relative to this Agreement.........................13
SECTION 4.5 - No Conflict; Required Filings and Consents...................14
SECTION 4.6 - SEC Filings; Financial Statements............................15
SECTION 4.7 - No Undisclosed Liabilities; Absence of Certain Changes or
Events..............................................15
SECTION 4.8 - Litigation...................................................16
SECTION 4.9 - No Violation of Law; Permits.................................16
SECTION 4.10 - Registration Statement; Joint Proxy Statement...............17
i
SECTION 4.11 - Employee Matters; ERISA.................................... 18
SECTION 4.12 - Labor Matters.............................................. 19
SECTION 4.13 - Environmental Matters...................................... 20
SECTION 4.14 - Board Action; Vote Required; Applicability of Article 14... 23
SECTION 4.15 - Opinion of Financial Advisor............................... 23
SECTION 4.16 - Brokers ................................................... 24
SECTION 4.17 - Tax Matters................................................ 24
SECTION 4.18 - Intellectual Property...................................... 26
SECTION 4.19 - Insurance.................................................. 26
SECTION 4.20 - Ownership of Securities.................................... 26
SECTION 4.21 - Certain Contracts.......................................... 27
SECTION 4.22 - Certain Regulatory Matters................................. 28
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF EXCEL AND THE MERGER
SUBSIDIARIES............................................................... 29
SECTION 5.1 - Organization and Qualification; Subsidiaries................ 29
SECTION 5.2 - Certificate of Incorporation and Bylaws..................... 29
SECTION 5.3 - Capitalization.............................................. 29
SECTION 5.4 - Authority Relative to this Agreement........................ 31
SECTION 5.5 - No Conflict; Required Filings and Consents.................. 31
SECTION 5.6 - SEC Filings; Financial Statements........................... 32
SECTION 5.7 - No Undisclosed Liabilities; Absence of Certain Changes
or Events.......................................... 32
SECTION 5.8 - No Violation of Law; Permits................................ 33
SECTION 5.9 - Registration Statement; Joint Proxy Statement............... 33
SECTION 5.10 - Board Action; Vote Required................................ 34
SECTION 5.11 - Opinion of Financial Advisor............................... 34
SECTION 5.12 - Brokers ................................................... 34
SECTION 5.13 - Ownership of Securities.................................... 35
SECTION 5.14 - Activities of Merger Subsidiaries.......................... 35
SECTION 5.15 - Financing.................................................. 35
SECTION 5.16 - Litigation................................................. 35
SECTION 5.17 - Employee Matters; ERISA.................................... 36
SECTION 5.18 - Tax Matters................................................ 37
SECTION 5.19 - Intellectual Property...................................... 38
SECTION 5.20 - Certain Contracts.......................................... 38
SECTION 5.21 - Certain Regulatory Matters................................. 39
ARTICLE VI - CONDUCT OF BUSINESS PENDING THE MERGERS........................40
SECTION 6.1 - Conduct of Business of Telco.................................40
ii
SECTION 6.2 - Conduct of Business of EXCEL. ............................. 44
SECTION 6.3 - No Solicitation............................................. 45
SECTION 6.4 - Subsequent Financial Statements............................. 47
SECTION 6.5 - Control of Operations....................................... 47
ARTICLE VII - ADDITIONAL AGREEMENTS.........................................47
SECTION 7.1 - Joint Proxy Statement and the Registration Statement.........47
SECTION 7.2 - EXCEL and Telco Stockholders' Meetings and Consummation
of the Mergers..................................... 48
SECTION 7.3 - Additional Agreements....................................... 49
SECTION 7.4 - Notification of Certain Matters............................. 50
SECTION 7.5 - Access to Information....................................... 50
SECTION 7.6 - Public Announcements........................................ 51
SECTION 7.7 - Indemnification; Directors' and Officers' Insurance......... 51
SECTION 7.8 - Employee Benefit Plans...................................... 52
SECTION 7.9 - Employment Arrangements..................................... 52
SECTION 7.10 - Stock Exchange Listing..................................... 53
SECTION 7.11 - Post-Merger Holdings Board of Directors.................... 53
SECTION 7.12 - Registration Rights........................................ 53
SECTION 7.13 - Affiliates................................................. 53
SECTION 7.14 - Blue Sky................................................... 53
SECTION 7.15 - Compliance................................................. 53
ARTICLE VIII - CONDITIONS TO MERGERS........................................54
SECTION 8.1 - Conditions to Obligations of Each Party to Effect the
Mergers.................................................. 54
SECTION 8.2 - Additional Conditions to Obligations of EXCEL................55
SECTION 8.3 - Additional Conditions to Obligations of Telco................57
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER..............................58
SECTION 9.1 - Termination..................................................58
SECTION 9.2 - Effect of Termination........................................60
SECTION 9.3 - Amendment....................................................61
SECTION 9.4 - Waiver ....................................................61
ARTICLE X - GENERAL PROVISIONS..............................................61
SECTION 10.1 - Non-Survival of Representations, Warranties and
Agreements..........................................61
SECTION 10.2 - Notices ....................................................62
SECTION 10.3 - Expenses................................................... 63
SECTION 10.4 - Certain Definitions........................................ 63
SECTION 10.5 - Headings................................................... 64
iii
SECTION 10.6 - Severability.............................................. 64
SECTION 10.7 - Entire Agreement; No Third-Party Beneficiaries............ 64
SECTION 10.8 - Assignment................................................ 65
SECTION 10.9 - Governing Law............................................. 65
SECTION 10.10 - Counterparts............................................. 65
iv
APPENDIX I Form of Holdings Certificate of Incorporation
APPENDIX II Form of Registration Rights Agreement
APPENDIX III Form of Tax Certificate (EXCEL)
APPENDIX IV Form of Opinion re: Regulatory Matters
APPENDIX V Form of Tax Certificate (Telco)
Schedule 4.1 Subsidiaries
Schedule 4.3 Option Plans; Equity Rights; Encumbrances on
Capital
Stock of Subsidiaries or Rights with respect
thereto;
Equity Interests in Others; Shareholders Agreements
Schedule 4.5 Conflicts; Filings; Consents
Schedule 4.7 Liabilities
Schedule 4.8 Litigation
Schedule 4.9 Investigations; Restrictions on Business
Schedule 4.11 Benefit Plans
Schedule 4.12 Labor Agreements; Union Matters; Labor Proceedings;
Indemnification
Agreements
Schedule 4.13 Environmental
Schedule 4.17 Tax Matters
Schedule 4.18 Intellectual Property
Schedule 4.19 Insurance
Schedule 4.20 Ownership of EXCEL Common Stock
v
Schedule 4.21 Contracts
Schedule 4.22 Regulatory Matters
Schedule 5.3 Option Plans; Issuance of Shares; Equity Rights;
Repurchase of Shares; Shareholders Agreements
Schedule 5.5 Conflicts; Filings; Consents
Schedule 5.7 Liabilities
Schedule 5.8 Investigations; Restrictions on Business
Schedule 5.16 Litigation
Schedule 5.17 Benefit Plans
Schedule 5.18 Tax Matters
Schedule 5.19 Intellectual Property
Schedule 5.20 Certain Contracts
Schedule 5.21 Regulatory Matters
Schedule 6.1 Conduct of Business of Telco
Schedule 6.2 Conduct of Business of EXCEL
Schedule 7.8 EXCEL Stock Plans
Schedule 8.2(g) Consents under Telco Agreements
vi
INDEX OF DEFINED TERMS
DEFINED TERM SECTION
1933 Act..............................................................10.4
Acquisition Proposal...................................................6.3
affiliate.............................................................10.4
Agreement..................................................First Paragraph
Bankruptcy Exception...................................................4.4
Cash Consideration.....................................................2.3
CERCLIS...............................................................4.13
Closing................................................................7.2
Closing Date...........................................................7.2
Code..............................................................Recitals
Common Shares Trust....................................................2.7
Confidentiality Agreement..............................................7.5
Consents...............................................................8.1
Contracts.............................................................4.21
control...............................................................10.4
Delaware Law...........................................................1.1
DLJ...................................................................4.15
Effective Time.........................................................1.2
Employment Agreements..................................................7.9
Environmental Claim...................................................4.13
Environmental Laws....................................................4.13
Environmental Permits.................................................4.13
ERISA.................................................................4.11
E-Sub......................................................First Paragraph
EXCEL......................................................First Paragraph
EXCEL Common Stock................................................Recitals
EXCEL Equity Rights....................................................5.3
EXCEL Exchange Ratio...................................................2.2
EXCEL Merger...........................................................1.1
EXCEL Merger Consideration.............................................1.1
EXCEL Required Permits.................................................5.8
EXCEL SEC Reports......................................................5.6
EXCEL Shareholders Agreement......................................Recitals
EXCEL Stock Plans......................................................7.8
EXCEL Stockholders' Approval..........................................5.10
Excess Shares..........................................................2.7
Exchange Act..........................................................10.4
vii
Exchange Agent.........................................................2.5
Exchange Fund..........................................................2.5
Exchange Ratios........................................................2.2
Financing.............................................................5.15
GAAP................................................................4.6(b)
Hazardous Materials...................................................4.13
Holdings...................................................First Paragraph
Holdings Common Stock..................................................2.2
Holdings Option........................................................2.8
HSR Act...............................................................10.4
IRS...................................................................4.11
Joint Proxy Statement.................................................4.10
knowledge.............................................................10.4
Legal Requirements.....................................................4.9
Xxxxxx Brothers.......................................................5.11
Material Adverse Effect...............................................10.4
Merged Corporation; Merged Corporations................................1.2
Merger; Mergers........................................................1.2
Merger Subsidiaries....................................................5.1
Non-Competition Agreements.............................................7.9
NPL...................................................................4.13
NYSE...................................................................2.7
Options................................................................2.8
Party; Parties.........................................................1.1
Party Representatives..................................................7.5
PBGC..................................................................4.11
PCBs..................................................................4.13
Permits................................................................4.9
person................................................................10.4
Pre-Surrender Dividends................................................2.5
Registration Statement................................................4.10
Release...............................................................4.13
Required Permits.......................................................4.9
Requisite Regulatory Approvals.........................................8.1
SEC....................................................................4.6
Shares.................................................................2.2
Stock Consideration....................................................2.3
Subsidiary............................................................10.4
Surviving Corporation; Surviving Corporations..........................1.1
Xxxxxxx & Berlin..................................................Recitals
Telco......................................................First Paragraph
viii
Telco Adjusted Exchange Ratio.........................................10.4
Telco Affiliate...................................................Recitals
Telco Affiliate Letter............................................Recitals
Telco Benefit Plans...................................................4.11
Telco Common Stock................................................Recitals
Telco Contracts.......................................................4.21
Telco Exchange Ratio...................................................2.2
Telco Equity Rights....................................................4.3
Telco Merger...........................................................1.1
Telco Merger Consideration.............................................2.3
Telco SEC Reports......................................................4.6
Telco Shares...........................................................2.2
Telco Shareholders Agreement......................................Recitals
Telco Stockholders' Approval..........................................4.14
Termination Date.......................................................9.1
Termination Fee........................................................9.2
T-Sub.............................................................Recitals
Virginia Law...........................................................1.1
ix
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 5, 1997 (the
"Agreement"), among EXCEL Communications, Inc., a Delaware corporation
("EXCEL"), New RES, Inc., a Delaware corporation and a wholly-owned subsidiary
of EXCEL ("Holdings"), E-Sub, Inc., a Delaware corporation and a wholly-owned
subsidiary of Holdings ("E-Sub"), T-Sub, Inc., a Virginia corporation and a
wholly-owned subsidiary of Holdings ("T-Sub"), and Telco Communications Group,
Inc., a Virginia corporation ("Telco").
W I T N E S S E T H
WHEREAS, the Boards of Directors of Telco and EXCEL have
each
determined that it is in the best interests of the stockholders of Telco and
EXCEL, respectively, that each such corporation become a Subsidiary of
Holdings
pursuant to the Mergers (as defined in Section 1.1 hereof) and desire to make
certain representations, warranties and agreements in connection with the
Mergers;
WHEREAS, EXCEL is unwilling to enter into this Agreement
(and
effect the transactions contemplated hereby) unless, contemporaneously with
the
execution and delivery hereof, (a) certain record and beneficial holders of
shares of the common stock, no par value, of Telco ("Telco Common Stock")
enter
into an agreement (the "Telco Shareholders Agreement") providing for certain
matters with respect to their shares of Telco Common Stock (including, without
limitation, subject to the express provisions and conditions of that
agreement,
to vote such shares in favor of the Telco Merger (as defined in Section 1.1
hereof)) and with respect to the shares of Holdings Common Stock (as defined
in
Section 2.2(a) hereof) into which such shares are to be converted pursuant to
Section 2.2(b) hereof and (b) certain members of Telco's management enter into
employment agreements and non-competition agreements as provided in Section
7.9
hereof;
WHEREAS, Telco is unwilling to enter into this Agreement
(and
effect the transactions contemplated hereby) unless, contemporaneously with
the
execution and delivery hereof, certain record and beneficial holders of shares
of the common stock, par value $0.001 per share, of EXCEL ("EXCEL Common
Stock")
enter into an agreement (the "EXCEL Shareholders Agreement") providing for
certain matters with respect to their shares of EXCEL Common Stock (including,
without limitation, subject to the express provisions
1
and conditions of that agreement, to vote such shares in favor of the EXCEL
Merger (as defined in Section 1.1 hereof));
WHEREAS, for federal income tax purposes, it is intended
that
the formation of Holdings and the Mergers shall constitute one or more
integrated tax-free transactions under the Internal Revenue Code of 1986, as
amended (the "Code");
WHEREAS, Telco has delivered to EXCEL and Holdings a letter
identifying all persons (each, a "Telco Affiliate") who are, at the date
hereof,
"affiliates" of Telco for purposes of Rule 145 under the 1933 Act (as defined
in
Section 10.4 hereof), and each Telco Affiliate has delivered to EXCEL and
Holdings a letter (each, a "Telco Affiliate Letter") relating to (i) the
transfer, prior to the Effective Time (as defined in Section 1.2 hereof), of
the
shares of Telco Common Stock beneficially owned by such Telco Affiliate on the
date hereof, (ii) the transfer of the shares of Holdings Common Stock to be
received by such Telco Affiliate in the Telco Merger and (iii) the obligations
of each such Telco Affiliate to deliver to Xxxxxxx & Berlin, Chartered,
Washington, D.C. ("Xxxxxxx & Berlin"), counsel to Telco, a certificate
requested
by such firm (if requested); and
WHEREAS, EXCEL has delivered to Telco and Holdings a letter
identifying all persons (each, an "EXCEL Affiliate") who are, at the date
hereof, "affiliates" of EXCEL for purposes of Rule 145 under the 1933 Act, and
each EXCEL Affiliate has delivered to Telco and Holdings a letter (each, an
"EXCEL Affiliate Letter") relating to (i) the transfer, prior to the Effective
Time, of the shares of EXCEL Common Stock beneficially owned by such EXCEL
Affiliate on the date hereof, (ii) the transfer of the shares of Holdings
Common
Stock to be received by such EXCEL Affiliate in the EXCEL Merger and (iii) the
obligations of each such EXCEL Affiliate to deliver to Weil, Gotshal & Xxxxxx
LLP, counsel to EXCEL, a certificate requested by such firm (if requested).
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE I - THE MERGERS
SECTION 1.1 - The Mergers. At the Effective Time and subject
-----------
to and upon the terms and conditions of this Agreement, (a) E-Sub shall be
merged with and into EXCEL in accordance with the Delaware General Corporation
Law ("Delaware Law"), the separate corporate existence of E-Sub shall cease,
and
EXCEL shall continue as the surviving
2
corporation (the "EXCEL Merger") and (b) T-Sub shall be merged with and into
Telco in accordance with the Virginia Stock Corporation Act ("Virginia Law"),
the separate corporate existence of T-Sub shall cease, and Telco shall
continue
as the surviving corporation (the "Telco Merger"). The EXCEL Merger and the
Telco Merger are herein collectively referred to as the "Mergers" and each
individually as a "Merger." EXCEL and Telco as the surviving corporations
after
the Mergers are herein sometimes collectively referred to as the "Surviving
Corporations" and each individually as a "Surviving Corporation" and E-Sub and
T-Sub as the non-surviving corporations after the Merger are herein sometimes
collectively referred to as the "Merged Corporations" and each individually as
a
"Merged Corporation." Holdings, EXCEL, Telco, E-Sub and T-Sub are herein
referred to collectively as the "Parties" and each individually as a "Party."
SECTION 1.2 - Effective Time. As promptly as practicable
after
--------------
the satisfaction or waiver of the conditions set forth in Article VIII hereof
and the consummation of the Closing referred to in Section 7.2(b) hereof, the
Parties shall cause the Mergers to be consummated concurrently by (a) filing a
Certificate of Merger with the Secretary of State of the State of Delaware
with
respect to the EXCEL Merger, in such form as required by, and executed in
accordance with, the relevant provisions of Delaware Law, and (b) filing
Articles of Merger with the Virginia State Corporation Commission with respect
to the Telco Merger, in such form as required by, and executed in accordance
with, the relevant provisions of Virginia Law (the effective time of such
filings being the "Effective Time").
SECTION 1.3 - Effect of the Mergers. At the Effective Time,
---------------------
the effect of the EXCEL Merger shall be as provided in the applicable
provisions
of Delaware Law and the effect of the Telco Merger shall be as provided in the
applicable provisions of Virginia Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, (a) all of the
property,
rights, privileges, powers and franchises of EXCEL and E-Sub shall continue
with, or vest in, as the case may be, EXCEL as the Surviving Corporation, and
all debts, liabilities and duties of EXCEL and E-Sub shall continue to be, or
become, as the case may be, the debts, liabilities and duties of EXCEL as the
Surviving Corporation and (b) all of the property, rights, privileges, powers
and franchises of Telco and T-Sub shall continue with, or vest in, as the case
may be, Telco as the Surviving Corporation, and all debts, liabilities and
duties of Telco and T-Sub shall continue to be, or become, as the case may be,
the debts, liabilities and duties of Telco as the Surviving Corporation. As of
the Effective Time, each of the Surviving Corporations shall be a direct,
wholly-owned Subsidiary of Holdings.
SECTION 1.4 - Subsequent Actions. If, at any time after the
------------------
Effective Time, either of the Surviving Corporations shall consider or be
advised that any deeds, bills of sale,
3
assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or confirm of record or otherwise in
such Surviving Corporation its right, title or interest in, to or under any of
the rights, properties, privileges, franchises or assets of either of its
constituent corporations acquired or to be acquired by such Surviving
Corporation as a result of, or in connection with, one of the Mergers or
otherwise to carry out this Agreement, the officers and directors of such
Surviving Corporation shall be directed and authorized to execute and deliver,
in the name and on behalf of either of such constituent corporations, all such
deeds, bills of sale, assignments and assurances and to take and do, in the
name
and on behalf of each of such corporations or otherwise, all such other
actions
and things as may be necessary or desirable to vest, perfect or confirm any
and
all right, title and interest in, to and under such rights, properties,
privileges, franchises or assets in such Surviving Corporation or otherwise to
carry out this Agreement.
SECTION 1.5 - Certificate of Incorporation; Bylaws; Directors
-----------------------------------------------
and Officers of Surviving Corporations. At the Effective Time:
--------------------------------------
(a) the Certificate of Incorporation of EXCEL as a Surviving
Corporation as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of EXCEL, and the Articles of Incorporation of
Telco (as such Articles may be amended and restated pursuant to the Articles
of
Merger with respect to the Telco Merger) as a Surviving Corporation shall be
the
Articles of Incorporation of Telco, in each case until thereafter amended as
provided by law and such Certificate of Incorporation or Articles of
Incorporation;
(b) the respective Bylaws of each of EXCEL and Telco as a
Surviving Corporation shall be the Bylaws of EXCEL and Telco, respectively,
immediately prior to the Effective Time, in each case until thereafter amended
as provided by law and the Certificate of Incorporation or Articles of
Incorporation and such Bylaws of such Surviving Corporation; and
(c) the officers of each of EXCEL and Telco shall be those
persons serving as the officers of EXCEL and Telco, respectively, immediately
prior to the Effective Time, and the directors of each of EXCEL and Telco
shall
be those persons designated by EXCEL to serve as the directors of EXCEL and
Telco, respectively, immediately prior to the Effective Time and, in each
case,
such persons shall continue to serve in their respective offices of their
respective Surviving Corporation from and after the Effective Time until their
successors are elected or appointed and qualified or until their resignation
or
removal.
4
ARTICLE II - EFFECT ON STOCK OF HOLDINGS, THE SURVIVING
CORPORATIONS AND THE MERGED CORPORATIONS
SECTION 2.1 - Conversion of Securities. The manner and basis
------------------------
of converting the shares of common stock of Holdings, the Surviving
Corporations
and of the Merged Corporations at the Effective Time, by virtue of the Mergers
and without any action on the part of any of the Parties or the holder of any
of
such securities, shall be as hereinafter set forth in this Article II.
SECTION 2.2 - Conversion of Shares. (a) Each share of EXCEL
--------------------
Common Stock issued and outstanding immediately before the Effective Time
(other
than those held in the treasury of EXCEL) and all rights in respect thereof,
shall at the Effective Time, without any action on the part of any holder
thereof, forthwith cease to exist and be converted into and become
exchangeable
for, one share of common stock, par value $0.001 per share ("Holdings Common
Stock"), of Holdings (the "EXCEL Merger Consideration", and such ratio of
EXCEL
Common Stock to Holdings Common Stock being herein referred to as the "EXCEL
Exchange Ratio").
(b) Each share of Telco Common Stock issued and outstanding
immediately before the Effective Time (other than those held in the treasury
of
Telco) and all rights in respect thereof, shall at the Effective Time, without
any action on the part of any holder thereof, forthwith cease to exist and be
converted into and become exchangeable for (i) 0.7595 shares (the "Stock
Consideration") of Holdings Common Stock (such ratio of Telco Common Stock to
Holdings Common Stock being herein referred to as the "Telco Exchange Ratio";
and the EXCEL Exchange Ratio and the Telco Exchange Ratio being referred to
herein collectively as the "Exchange Ratios") and (ii) $15.00 in cash (the
"Cash
Consideration" and, collectively with the Stock Consideration, the "Telco
Merger
Consideration").
(c) Commencing immediately after the Effective Time, each
certificate which, immediately prior to the Effective Time, represented issued
and outstanding shares of EXCEL Common Stock ("EXCEL Shares") or Telco Common
Stock ("Telco Shares" and, together with the EXCEL Shares, the "Shares"),
shall
evidence the right to receive the EXCEL Merger Consideration or the Telco
Merger
Consideration, as the case may be, on the basis hereinbefore set forth, but
subject to the limitations set forth in Sections 2.3, 2.5, 2.7, 2.8 and 2.9
hereof.
SECTION 2.3 - Cancellation of Treasury Shares and of
--------------------------------------
Outstanding Holdings Common Stock. (a) At the Effective Time, each share of
---------------------------------
EXCEL Common Stock held in
5
the treasury of EXCEL immediately prior to the Effective Time, and each share
of
Telco Common Stock held in the treasury of Telco immediately prior to the
Effective Time, shall be canceled and retired and no shares of stock or other
securities of Holdings or either of the Surviving Corporations shall be
issuable, and no payment or other consideration shall be made, with respect
thereto.
(b) At the Effective Time, the shares of Holdings Common
Stock
held by EXCEL shall be canceled and retired and no shares of stock or other
securities of Holdings or any other corporation shall be issuable, and no
payment or other consideration shall be made, with respect thereto.
SECTION 2.4 - Conversion of Common Stock of the Merged
----------------------------------------
Corporations into Common Stock of the Surviving Corporations. (a) At the
------------------------------------------------------------
Effective Time, each share of common stock of E-Sub issued and outstanding
immediately prior to the Effective Time, and all rights in respect thereof,
shall, without any action on the part of Holdings, forthwith cease to exist
and
be converted into 1,000 validly issued, fully paid and nonassessable shares of
common stock of EXCEL, as one of the Surviving Corporations (or such greater
number as EXCEL shall determine prior to the Effective Time). Immediately
after
the Effective Time and upon surrender by Holdings of the certificate
representing the shares of the common stock of E-Sub, EXCEL as one of the
Surviving Corporations shall deliver to Holdings an appropriate certificate or
certificates representing the common stock of EXCEL created by conversion of
the
common stock of E-Sub owned by Holdings as aforesaid.
(b) At the Effective Time, each share of common stock of
T-Sub
issued and outstanding immediately prior to the Effective Time, and all rights
in respect thereof, shall, without any action on the part of Holdings,
forthwith
cease to exist and be converted into such number of validly issued, fully paid
and nonassessable shares of common stock of Telco, as one of the Surviving
Corporations, equal to the number of issued and outstanding shares of Telco
Common Stock immediately prior to the Effective Time (or such lesser number as
EXCEL shall determine prior to the Effective Time) divided by the number of
issued and outstanding shares of T-Sub. Immediately after the Effective Time
and
upon surrender by Holdings of the certificate representing the shares of the
common stock of T-Sub, Telco as one of the Surviving Corporations shall
deliver
to Holdings an appropriate certificate or certificates representing the common
stock of Telco created by conversion of the common stock of T-Sub owned by
Holdings as aforesaid.
SECTION 2.5 - Exchange of Shares Other Than Treasury Shares.
---------------------------------------------
Subject to the terms and conditions hereof, at or prior to the Effective Time,
Holdings shall appoint an exchange agent to effect the exchange of Shares for
Holdings Common Stock and the Cash
6
Consideration in accordance with the provisions of this Article II (the
"Exchange Agent"). From time to time after the Effective Time, Holdings shall
deposit, or cause to be deposited, (i) certificates representing Holdings
Common
Stock for conversion of Shares in accordance with the provisions of Section
2.2
hereof and (ii) cash in the amount required to pay the Cash Consideration
(such
cash and such certificates, together with any dividends or distributions with
respect thereto, being herein referred to collectively as the "Exchange
Fund").
Commencing immediately after the Effective Time and until the appointment of
the
Exchange Agent shall be terminated, each holder of a certificate or
certificates
theretofore representing Shares may surrender the same to the Exchange Agent,
and, after the appointment of the Exchange Agent shall be terminated, any such
holder may surrender any such certificate to Holdings. Such holder shall be
entitled upon such surrender to receive in exchange therefor (a) a certificate
or certificates representing the number of full shares of Holdings Common
Stock
into which the Shares theretofore represented by the certificate or
certificates
so surrendered shall have been converted in accordance with the provisions of
Section 2.2 hereof, together with a cash payment in lieu of fractional shares,
if any, in accordance with Section 2.7 hereof, and (b) in the case of the
surrender of Telco Shares, cash in the amount of the Cash Consideration. All
such shares of Holdings Common Stock issued in accordance with the immediately
preceding sentence shall be deemed to have been issued at the Effective Time.
Until so surrendered and exchanged, each outstanding certificate which, prior
to
the Effective Time, represented issued and outstanding Shares shall be deemed
for all corporate purposes of the Parties, other than the payment of dividends
and other distributions, if any, to represent the right to receive the EXCEL
Merger Consideration or the Telco Merger Consideration, as the case may be.
Unless and until any such certificate theretofore representing Shares is so
surrendered, no dividend or other distribution, if any, payable to the holders
of record of Holdings Common Stock as of any date subsequent to the Effective
Time shall be paid to the holder of such certificate in respect thereof. Upon
the surrender of any such certificate theretofore representing Shares,
however,
the record holder of the certificate or certificates representing shares of
Holdings Common Stock issued in exchange therefor shall receive from the
Exchange Agent or from Holdings, as the case may be, payment of the amount of
dividends and other distributions, if any, which as of any date subsequent to
the Effective Time and until such surrender shall have become payable with
respect to such number of shares of Holdings Common Stock ("Pre-Surrender
Dividends"). No interest shall be payable with respect to the payment of
Pre-Surrender Dividends, Cash Consideration or cash in lieu of fractional
shares, upon the surrender of certificates theretofore representing Shares.
After the appointment of the Exchange Agent shall have been terminated, such
holders of Holdings Common Stock that have not received payment of
Pre-Surrender
Dividends, Cash Consideration or cash in lieu of fractional shares, shall look
only to Holdings for payment thereof. Notwithstanding the foregoing provisions
of this Section 2.5, neither the Exchange Agent nor any Party shall be liable
to
a holder of Shares
7
for any Holdings Common Stock or dividends or distributions thereon delivered
to
a public official pursuant to any applicable abandoned property, escheat or
similar law or to a transferee pursuant to Section 2.6 hereof.
SECTION 2.6 - Transfer Books. The stock transfer books of
--------------
EXCEL with respect to the EXCEL Shares and the stock transfer books of Telco
with respect to the Telco Shares shall each be closed at the Effective Time
and
no transfer of any Shares will thereafter be recorded on any of such stock
transfer books. In the event of a transfer of ownership of Shares that is not
registered in the stock transfer records of EXCEL or Telco, as the case may
be,
at the Effective Time, cash and/or a certificate or certificates representing
the number of full shares of Holdings Common Stock into which such Shares
shall
have been converted in accordance with Section 2.2 hereof shall be issued to
the
transferee together with a cash payment in lieu of fractional shares, if any,
in
accordance with Section 2.7 hereof, and a cash payment in the amount of
Pre-Surrender Dividends, if any, in accordance with Section 2.5 hereof, if the
certificate or certificates representing such Shares is or are surrendered as
provided in Section 2.5 hereof, accompanied by all documents required to
evidence and effect such transfer and by evidence of payment of any applicable
stock transfer tax.
SECTION 2.7 - No Fractional Share Certificates. (a) No scrip
--------------------------------
or fractional share certificate for Holdings Common Stock will be issued upon
the surrender for exchange of certificates evidencing Shares, and an
outstanding
fractional share interest will not entitle the owner thereof to vote, to
receive
dividends or to any rights of a stockholder of Holdings or of either of the
Surviving Corporations with respect to such fractional share interest.
(b) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (i) the number of full shares
of Holdings Common Stock to be issued and delivered to the Exchange Agent
pursuant to Section 2.5 hereof over (ii) the aggregate number of full shares
of
Holdings Common Stock to be distributed to holders of Telco Common Stock
pursuant to Section 2.5 hereof (such excess being herein called the "Excess
Shares"). As soon after the Effective Time as practicable, the Exchange Agent,
as agent for the holders of Telco Common Stock, shall sell the Excess Shares
at
then prevailing prices on the New York Stock Exchange, Inc. (the "NYSE"), all
in
the manner provided in subsection (c) of this Section 2.7.
(c) The sale of the Excess Shares by the Exchange Agent
shall
be executed on the NYSE through one or more member firms of the NYSE and shall
be executed in round lots to the extent practicable. The Exchange Agent shall
use all reasonable efforts to complete the sale of the Excess Shares as
promptly
following the Effective Time as, in the
8
Exchange Agent's reasonable judgment, is practicable consistent with obtaining
the best execution of such sales in light of prevailing market conditions.
Until
the proceeds of such sale or sales have been distributed to the holders of
Telco
Common Stock, the Exchange Agent will hold such proceeds in trust for the
holders of Telco Common Stock (the "Common Shares Trust"). Holdings shall pay
all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of the Excess Shares. The Exchange Agent shall
determine the portion of the Common Shares Trust to which each holder of Telco
Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Shares Trust by a fraction the
numerator of which is the amount of fractional share interests to which such
holder of Telco Common Stock is entitled (after taking into account all shares
of Telco Common Stock held at the Effective Time by such holder) and the
denominator of which is the aggregate amount of fractional share interests to
which all holders of Telco Common Stock are entitled.
(d) Notwithstanding the provisions of subsections (b) and
(c)
of this Section 2.7, Holdings may elect at any time prior to the Effective
Time,
in lieu of the issuance and sale of Excess Shares and the making of the
payments
contemplated in such subsections, to pay to the Exchange Agent an amount
sufficient for the Exchange Agent to pay each holder of Telco Common Stock an
amount in cash equal to the product obtained by multiplying (i) the fractional
share interest to which such holder would otherwise be entitled (after taking
into account all shares of Telco Common Stock held at the Effective Time by
such
holder) by (ii) the closing price for a share of Holdings Common Stock on the
NYSE Composite Transaction Tape on the first business day immediately
following
the Effective Time, and, in such case, all references herein to the cash
proceeds of the sale of the Excess Shares and similar references shall be
deemed
to mean and refer to the payments calculated as set forth in this subsection
(d). In such event, Excess Shares shall not be issued or otherwise transferred
to the Exchange Agent pursuant to Section 2.5 hereof.
(e) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Telco Common Stock with
respect
to any fractional share interests, the Exchange Agent shall make available
such
amounts, net of any required tax withholding, to such holders, subject to and
in
accordance with the terms of Section 2.5 hereof.
(f) Any portion of the Exchange Fund and the Common Shares
Trust which remains undistributed for six months after the Effective Time
shall
be delivered to Holdings, upon demand, and any holders of EXCEL Common Stock
or
Telco Common Stock who have not theretofore complied with the provisions of
this
Article II shall thereafter look only to
9
Holdings for satisfaction of their claims for the Cash Consideration, Holdings
Common Stock or any cash in lieu of fractional shares of Holdings Common Stock
and any Pre-Surrender Dividends.
(g) None of Holdings, EXCEL or Telco shall be liable to any
holder of Shares or Holdings Common Stock, as the case may be, for such shares
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund or Common Shares Trust delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 2.8 - Options to Purchase Company Common Stock. (a)
----------------------------------------
Except as otherwise provided in the Telco Shareholders Agreement, at the
Effective Time, each option granted by EXCEL to purchase shares of EXCEL
Common
Stock, or by Telco to purchase shares of Telco Common Stock, which is
outstanding and unexercised immediately prior to the Effective Time
(collectively, "Options"), shall be assumed by Holdings and converted into an
option (a "Holdings Option") to purchase shares of Holdings Common Stock in
such
amount and at such exercise price as provided below and otherwise having the
same terms and conditions as are in effect immediately prior to the Effective
Time:
(i) the number of shares of Holdings Common Stock to be
subject to the Holdings Option shall be equal to the product of (x) the number
of shares of EXCEL Common Stock or Telco Common Stock subject to the original
Option and (y) the EXCEL Exchange Ratio (if the original Option related to
EXCEL
Common Stock) or the Telco Adjusted Exchange Ratio (as defined in Section 10.4
hereof) (if the original Option related to Telco Common Stock), respectively;
(ii) the exercise price per share of Holdings Common Stock
under the Holdings Option shall be equal to (x) the exercise price per share
of
the EXCEL Common Stock or Telco Common Stock under the original Option divided
by (y) the EXCEL Exchange Ratio (if the original Option related to EXCEL
Common
Stock) or the Telco Adjusted Exchange Ratio (if the original Option related to
Telco Common Stock); and
(iii) upon each exercise of Holdings Options by a holder
thereof, the aggregate number of shares of Holdings Common Stock deliverable
upon such exercise shall be rounded down, if necessary, to the nearest whole
share and the aggregate exercise price shall be rounded up, if necessary, to
the
nearest cent.
10
The adjustments provided herein with respect to any Options which are
"incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code.
(b) Holdings shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Holdings Common Stock
for
delivery upon exercise of Holdings Options in accordance with this Section
2.8.
As soon as practicable (and in no event later than 30 days) after the
Effective
Time, Holdings shall file a registration statement on Form S-8 (or any
successor
or other appropriate forms), or another appropriate form with respect to the
shares of Holdings Common Stock subject to the Holdings Options and shall use
its best 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 the Holdings Options remain
outstanding.
SECTION 2.9 - Certain Adjustments. Without limiting any
other
-------------------
provision of this Agreement, if, between the date of this Agreement and the
Effective Time, the outstanding shares of EXCEL Common Stock or of Telco
Common
Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of
shares,
or any dividend payable in stock or other securities shall be declared thereon
with a record date within such period, the exchange ratio established pursuant
to the provisions of Section 2.2 hereof shall be adjusted accordingly to
provide
to the holders of EXCEL Common Stock and Telco Common Stock the same economic
effect as contemplated by this Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange or dividend.
ARTICLE III - CERTAIN MATTERS RELATED TO HOLDINGS
SECTION 3.1 - Certificate of Incorporation of Holdings.
----------------------------------------
Immediately prior to the Effective Time, EXCEL shall cause the Certificate of
Incorporation of Holdings to be amended and restated to read as set forth in
Appendix I hereto.
SECTION 3.2 - Corporate Identity. EXCEL and Telco agree that
------------------
prior to or at the Effective Time, the corporate name of Holdings shall be
changed to "EXCEL Communications, Inc."
11
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF Telco
Telco hereby represents and warrants to EXCEL and Holdings as follows:
SECTION 4.1 - Organization and Qualification; Subsidiaries.
--------------------------------------------
Each of Telco and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of Telco and its Subsidiaries has the
requisite corporate power and authority and any necessary governmental
authority, franchise, license or permit to own, operate or lease the
properties
that it purports to own, operate or lease and to carry on its business as it
is
now being conducted, and is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, operated or leased or the nature of its activities makes
such qualification necessary, except for such failure which, when taken
together
with all other such failures, would not reasonably be expected to have a
Material Adverse Effect on Telco. Telco's Subsidiaries are listed on Schedule
4.1 hereto.
SECTION 4.2 - Certificate of Incorporation and Bylaws. Telco
---------------------------------------
has heretofore furnished, or otherwise made available, to EXCEL a complete and
correct copy of the Articles or Certificate of Incorporation and the Bylaws
(or
comparable governing documents), each as amended to the date hereof, of Telco
and each of its Subsidiaries. Such Articles or Certificates of Incorporation
and
Bylaws (or comparable governing documents) are in full force and effect.
Neither
Telco nor any of its Subsidiaries is in violation of any of the provisions of
its respective Articles of Incorporation or its Bylaws (or comparable
governing
documents).
SECTION 4.3 - Capitalization. (a) The authorized capital
stock
--------------
of Telco consists of (i) 15,000,000 shares of preferred stock, no par value,
none of which are outstanding and none of which are reserved for issuance and
(ii) 150,000,000 shares of Telco Common Stock, of which, as of May 31, 1997,
33,130,942 shares were issued and outstanding and 3,608,933 shares were
issuable
upon the exercise of options outstanding under the Telco option plans listed
on
Schedule 4.3 hereto. Since May 31, 1997, no shares of Telco Common Stock have
been issued, except upon the exercise of options described in the immediately
preceding sentence. Except as set forth on Schedule 4.3, there are no
outstanding Telco Equity Rights. For purposes of this Agreement, "Telco Equity
Rights" shall mean subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire from Telco or any of Telco's
Subsidiaries at any time, or upon the happening of any stated event, any
shares
of the capital stock of Telco. Schedule 4.3 sets forth a complete and accurate
list with respect to all outstanding Telco Equity Rights of the holder
thereof,
the
12
date of grant, the number of shares for which each such Telco Equity Right is
exercisable, the respective dates upon which each such Telco Equity Right
vests,
becomes exercisable and expires, and the exercise price of each such Telco
Equity Right.
(b) There are no outstanding obligations of Telco or any of
Telco's Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Telco.
(c) All of the issued and outstanding shares of Telco Common
Stock are validly issued, fully paid and nonassessable.
(d) All of the outstanding capital stock of each of Telco's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and, except as set forth on Schedule 4.3, is owned by Telco free and clear of
any liens, security interests, pledges, agreements, claims, charges or
encumbrances. Except as set forth on Schedule 4.3, there are no existing
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) to purchase
or
otherwise acquire from Telco or any of Telco's Subsidiaries at any time, or
upon
the happening of any stated event, any shares of the capital stock of any of
Telco's Subsidiaries, or any securities convertible into or exercisable for
shares of the capital stock of any of Telco's Subsidiaries, whether or not
presently issued or outstanding and there are no outstanding obligations of
Telco or any of Telco's Subsidiaries to repurchase, redeem or otherwise
acquire
any shares of capital stock of any of Telco's Subsidiaries. Except for equity
interests disclosed on Schedule 4.3 hereto and Subsidiaries listed on Schedule
4.1 hereto, Telco does not directly or indirectly own any equity interest in
any
other person. Each of Telco's Subsidiaries is a wholly-owned Subsidiary.
(e) Except as disclosed on Schedule 4.3 hereto, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which Telco is a party or to which it is bound relating to the voting or
registration of any shares of capital stock of Telco. Telco has not taken any
action that would result in, nor is Telco a party to any agreement,
arrangement
or understanding not disclosed on Schedule 4.3 hereto that would result in,
any
Options to purchase Telco Common Stock that are unvested becoming vested in
connection with or as a result of the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
SECTION 4.4 - Authority Relative to this Agreement. Telco
has
------------------------------------
the necessary corporate power and authority to enter into this Agreement and,
subject to obtaining any necessary stockholder approval of the Merger to which
it is a party, to carry out its obligations hereunder. The execution and
delivery of this Agreement by Telco and
13
the consummation by Telco of the transactions contemplated hereby have been
duly
authorized by all necessary corporate action on the part of Telco, subject to
the approval of this Agreement by Telco's stockholders. This Agreement has
been
duly executed and delivered by Telco and, assuming the due authorization,
execution and delivery thereof by the other Parties, constitutes a legal,
valid
and binding obligation of Telco, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles
of
equity (the "Bankruptcy Exception").
SECTION 4.5 - No Conflict; Required Filings and Consents.
(a)
------------------------------------------
Except as listed on Schedule 4.5 hereto, the execution and delivery of this
Agreement by Telco do not, and the performance of this Agreement by Telco will
not, (i) violate or conflict with the Articles of Incorporation or Bylaws of
Telco, (ii) conflict with or violate any law, regulation, court order,
judgment
or decree applicable to Telco or any of its Subsidiaries or by which any of
their respective property is bound or affected, (iii) violate or conflict with
the Articles or Certificate of Incorporation or Bylaws (or comparable
governing
documents) of any of Telco's Subsidiaries or (iv) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Telco or any of its Subsidiaries pursuant to,
result
in the loss of any material benefit under, or require the consent of any other
party to, any contract, instrument, permit, license or franchise to which
Telco
or any of its Subsidiaries is a party or by which Telco, any of such
Subsidiaries or any of their respective property is bound or affected, except,
in the case of clauses (ii), (iii) or (iv) above, for conflicts, violations,
breaches, defaults, results or consents which, individually or in the
aggregate,
would not have a Material Adverse Effect on Telco.
(b) Except as listed on Schedule 4.5 and except for
applicable
requirements, if any, of the Exchange Act (as defined on Section 10.4 hereof),
the premerger notification requirements of the HSR Act, filing and recordation
of appropriate merger or other documents as required by Virginia Law and any
filings required pursuant to any state securities or "blue sky" laws or the
rules of any applicable stock exchanges, neither Telco nor any of its
Subsidiaries is required to submit any notice, report or other filing with any
governmental authority, domestic or foreign, in connection with the execution,
delivery or performance of this Agreement. Except as set forth in the
immediately preceding sentence, no waiver, consent, approval or authorization
of
any governmental or regulatory authority, domestic or foreign, is required to
be
obtained by Telco or any of its Subsidiaries in connection with its execution,
delivery or performance of this Agreement.
14
SECTION 4.6 - SEC Filings; Financial Statements. (a) Telco
has
---------------------------------
filed all forms, reports and documents required to be filed with the
Securities
and Exchange Commission ("SEC") since August 9, 1996, and has heretofore
delivered or made available to EXCEL, in the form filed with the SEC, together
with any amendments thereto, its (i) Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, (ii) all proxy statements relating to Telco's
meetings of stockholders (whether annual or special) held since August 9,
1996,
(iii) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1997,
and (iv) all other reports or registration statements filed by Telco with the
SEC since August 9, 1996 (collectively, the "Telco SEC Reports"). The Telco
SEC
Reports (i) were prepared substantially in accordance with the requirements of
the 1933 Act (as defined in Section 10.4 hereof), or the Exchange Act as the
case may be, and the rules and regulations promulgated under each of such
respective acts, and (ii) did not at the time they were filed contain any
untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes
and
schedules, contained in the Telco SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of Telco and its
Subsidiaries as at the respective dates thereof and the consolidated results
of
operations and cash flows of Telco and its Subsidiaries for the periods
indicated in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the notes
thereto) and subject, in the case of interim financial statements, to normal
year-end adjustments.
(c) Telco has heretofore made available to EXCEL a complete
and correct copy of any material amendments or modifications, which have not
yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by Telco with the SEC pursuant to the Exchange Act.
SECTION 4.7 - No Undisclosed Liabilities; Absence of Certain
----------------------------------------------
Changes or Events. Except as and to the extent publicly disclosed by Telco in
-----------------
the Telco SEC Reports filed prior to the date of this Agreement, as of
December
31, 1996, none of Telco or its Subsidiaries had any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
and
whether due or to become due or asserted or unasserted, which would be
required
by GAAP to be reflected in, reserved against or otherwise described in the
consolidated balance sheet of Telco (including the notes thereto) as of such
date or which could reasonably be expected to have a Material Adverse Effect
on
Telco. Except as disclosed on Schedule 4.7 hereto, since December 31, 1996,
Telco and its Subsidiaries have
15
not incurred any material liability, except in the ordinary course of their
businesses consistent with their past practices, and there has not been any
change, or any event involving a prospective change, in the business,
financial
condition or results of operations of Telco or any of its Subsidiaries which
has
had, or is reasonably likely to have, a Material Adverse Effect on Telco, and
Telco and its Subsidiaries have conducted their respective businesses in the
ordinary course consistent with their past practices.
SECTION 4.8 - Litigation. Except as disclosed in Schedule
4.8
----------
hereto, there are no claims, actions, suits, proceedings or, to Telco's
knowledge, investigations pending or, to Telco's knowledge, threatened against
Telco or any of its Subsidiaries, or any properties or rights of Telco or any
of
its Subsidiaries, before any court, administrative, governmental, arbitral,
mediation or regulatory authority or body, domestic or foreign, (a) as of the
date hereof, as to which there is more than a remote possibility of an adverse
judgment or determination against Telco or any of its Subsidiaries or any
properties or rights of Telco or any of its Subsidiaries in excess of $1
million
or which otherwise could have a Material Adverse Effect on Telco, (b) as of
the
date hereof, which questions the validity of this Agreement or any action to
be
taken by Telco in connection with the consummation of the transactions
contemplated by this Agreement or could otherwise prevent or delay the
consummation of the transactions contemplated by this Agreement, or (c) as to
which there is reasonably likely to be an adverse judgment or determination
against Telco or any of its Subsidiaries or any properties or rights of Telco
or
any of its Subsidiaries in excess of $10 million or which otherwise could
reasonably be expected to have a Material Adverse Effect on Telco.
SECTION 4.9 - No Violation of Law; Permits. The business of
----------------------------
Telco and its Subsidiaries is not being conducted in violation of any statute,
law, ordinance, regulation, judgment, order or decree of any domestic or
foreign
governmental or judicial entity (including any stock exchange or other
self-regulatory body) ("Legal Requirements"), or in violation of any permits,
franchises, licenses, approvals, tariffs and other authorizations or consents
that are granted by any domestic or foreign government or judicial entity
(including any stock exchange or other self-regulatory body) ("Permits"),
except
for possible violations of Legal Requirements or Permits none of which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Telco. Telco and its Subsidiaries have all Permits
that are required in connection with the operation of their businesses
(collectively, "Required Permits"), and no proceedings are pending or, to the
knowledge of Telco, threatened to revoke or limit any Required Permit, except,
in each case, those the absence or violation of which do not and will not have
a
Material Adverse Effect on Telco. Except as set forth on Schedule 4.9 hereto,
(a) to Telco's knowledge, no investigation or review by any domestic or
foreign
governmental or regulatory entity
16
(including any stock exchange or other self-regulatory body) with respect to
Telco or its Subsidiaries in relation to any alleged violation of law or
regulation is pending or threatened, and (b) no governmental or regulatory
entity (including any stock exchange or other self-regulatory body) has
notified
Telco of its intention to conduct the same, except for such investigations
which, if they resulted in adverse findings, would not reasonably be expected
to
have, individually or in the aggregate, a Material Adverse Effect on Telco.
Except as set forth on Schedule 4.9 hereto, neither Telco nor any of its
Subsidiaries is subject to any cease and desist or other order, judgment,
injunction or decree issued by, or is a party to any written agreement,
consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any order or directive by,
or
has adopted any board resolutions at the request of, any court, governmental
entity or regulatory agency that materially restricts the conduct of its
business or which could reasonably be expected to have a Material Adverse
Effect
on Telco, or would prevent or delay the consummation of the transactions
contemplated by this Agreement, nor has Telco or any of its Subsidiaries been
advised that any court, governmental entity or regulatory agency is
considering
issuing or requesting any of the foregoing. Telco and each of its Subsidiaries
and affiliates has complied with all material federal and state regulatory
reporting requirements necessary for the lawful provision of the
telecommunications services currently offered by Telco or such Subsidiary or
affiliate.
SECTION 4.10 - Registration Statement; Joint Proxy
Statement.
---------------------------------------------
None of the information supplied or to be supplied by or on behalf of Telco
for
inclusion or incorporation by reference in the registration statement to be
filed with the SEC by Holdings in connection with the issuance of shares of
Holdings Common Stock in the Mergers (the "Registration Statement") will, at
the
time the Registration Statement becomes effective under the 1933 Act, contain
any untrue statement of a material fact or omit to state any 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. None of
the information supplied or to be supplied by or on behalf of Telco for
inclusion or incorporation by reference in the joint proxy statement, in
definitive form, relating to the meetings of Telco and EXCEL stockholders to
be
held in connection with the Mergers, or in the related proxy and notice of
meeting, or soliciting material used in connection therewith (referred to
herein
collectively as the "Joint Proxy Statement") will, at the dates mailed to
stockholders and at the times of the Telco stockholders' meeting and the EXCEL
stockholders' meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. If at any time prior to the Effective Time any event
with respect to Telco, its officers and directors or any of its Subsidiaries
should occur which is required to be described in an amendment of, or a
supplement to, the Registration
17
Statement or the Joint Proxy Statement, Telco shall promptly so advise EXCEL
and
such event shall be so described, and such amendment or supplement (which
EXCEL
shall have a reasonable opportunity to review) shall be promptly filed with
the
SEC and, as required by law, disseminated to the shareholders of Telco. The
Registration Statement and the Joint Proxy Statement (except for information
relating to EXCEL) will comply as to form in all material respects with the
provisions of the 1933 Act and the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 4.11 - Employee Matters; ERISA. (a) Set forth on
-----------------------
Schedule 4.11 hereto is a true and complete list of all employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), all deferred compensation, bonus or other
incentive compensation, stock options, restricted stock, stock purchase or
other
equity-based, severance or change in control, salary continuation, tuition
assistance, disability, leave of absence plans, policies or agreements, and
all
employment, consulting, management or other individual compensation agreements
with respect to any current or former employee (other than employees in
Telco's
commercial sales division who are not otherwise executive officers of Telco)
whose annual compensation exceeds $75,000, officer or director of Telco or any
of its Subsidiaries, which in each case Telco or any of its Subsidiaries has
any
obligation or liability, contingent or otherwise (collectively, the "Telco
Benefit Plans").
(b) All contributions and other payments required to be made
by Telco or any of its Subsidiaries to or under any Telco Benefit Plan (or to
any person pursuant to the terms thereof) have been timely made, except for
failures that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Telco. No Telco Benefit Plan is
subject
to Section 412 of the Code.
(c) Each of the Telco Benefit Plans intended to be
"qualified"
within the meaning of Section 401(a) of the Code has been determined by the
Internal Revenue Service (the "IRS") to be so qualified, and, to Telco's
knowledge, no circumstances exist that could reasonably be expected by Telco
to
result in the revocation of any such determination. Telco is in compliance
with,
and each of the Telco Benefit Plans is and has been operated in compliance
with,
all applicable Legal Requirements governing such plan, including, without
limitation, ERISA and the Code, except for such non-compliance which
individually or in the aggregate would not have a Material Adverse Effect on
Telco.
(d) Telco has made available to EXCEL with respect to each
Telco Benefit Plan a true, correct and complete copy of each of the following
documents where applicable (i) such plan and summary plan description, (ii)
the
most recent annual report filed with the
18
IRS, (iii) each related trust agreement, (iv) the most recent determination of
the IRS with respect to the qualification under any provision of the Code and
(v) the most recent actuarial report or valuation.
(e) Except as set forth on Schedule 4.11 hereto, the
consummation or announcement of any transaction contemplated by this Agreement
will not (either alone or upon the occurrence of any additional or further
acts
or events) result in any (i) payment (whether of severance pay or otherwise)
becoming due from Telco or any of its Subsidiaries to any current or former
officer, employee, former employee or director thereof, or to any other person
for the benefit of any such officer, employee or director, or (ii)
acceleration,
vesting or establishment of any benefit under any Telco Benefit Plan, or (iii)
disqualification of any of the Telco Benefit Plans intended to be qualified
under, result in a prohibited transaction or breach of fiduciary duty under,
or
otherwise violate, ERISA or the Code.
(f) Neither Telco nor any of its Subsidiaries has incurred,
and none of such entities reasonably expects to incur, any material liability
to
the PBGC (other than premiums which are not overdue) or pursuant to Title IV
of
ERISA with respect to any Telco Benefit Plan. Neither Telco nor any of its
Subsidiaries is an employer with respect to, and neither has incurred or
reasonably expects to incur, any withdrawal liability with respect to, any
"multiemployer plan" (as defined in Section 3(37) of ERISA).
(g) There are no pending or, to Telco's knowledge,
threatened
actions, claims or proceedings against any Telco Benefit Plan or its assets,
plan sponsor, plan administrator or fiduciaries with respect to the operation
of
such plan (other than routine benefit claims) which, if determined adversely
to
Telco, individually or in the aggregate would have a Material Adverse Effect
on
Telco.
SECTION 4.12 - Labor Matters. Except as disclosed on
Schedule
-------------
4.12 hereto, neither Telco nor any of its Subsidiaries is party to any
collective bargaining agreement or other labor agreement with any union or
labor
organization and no union or labor organization has been recognized by Telco
or
any of its Subsidiaries as an exclusive bargaining representative for
employees
of Telco or any of its Subsidiaries. Except as disclosed on Schedule 4.12
hereto, there is no current union representation question involving employees
of
Telco or any of Telco's Subsidiaries, nor does Telco have knowledge of any
significant activity or proceeding of any labor organization (or
representative
thereof) or employee group to organize any such employees. Neither Telco nor
any
of its Subsidiaries has made any commitment not in collective bargaining
agreements listed on Schedule 4.12 hereto that would require the application
of
the terms of any collective bargaining agreements entered into by Telco or any
of its Subsidiaries to EXCEL, Holdings, or any Subsidiary or
19
joint venture of either EXCEL or Holdings. Except as disclosed on Schedule
4.12
hereto, (i) there is no material active arbitration under any collective
bargaining agreement involving Telco or any of its Subsidiaries, (ii) there is
no material unfair labor practice, grievance, employment discrimination or
other
labor or employment related charge, complaint or claim against Telco or any of
its Subsidiaries pending before any court, arbitrator, mediator or
governmental
agency or tribunal, or threatened, (iii) there is no material strike,
picketing
or work stoppage by, or any lockout of, employees of Telco or any of its
Subsidiaries pending or, to Telco's knowledge, threatened, against or
involving
Telco or any of its Subsidiaries, (iv) there is no significant active
arbitration under any collective bargaining agreement involving Telco or any
of
its Subsidiaries regarding the employer's right to move work from one location
or entity to another, or to consolidate work locations, or involving other
similar restrictions on business operations, and (v) there is no material
proceeding, claim, suit, action or, to Telco's knowledge, governmental
investigation pending or, to Telco's knowledge, threatened, in respect of
which
any director, officer, employee or agent of Telco or any of its Subsidiaries
is
or may be entitled to claim indemnification from Telco or such Telco
Subsidiary
pursuant to their respective charters or bylaws or as provided in the
indemnification agreements, if any, listed on Schedule 4.12 hereto. For
purposes
of this Section 4.12, "material" refers to any liability which could
reasonably
be expected to exceed $1 million. A true, correct and complete copy has been
made available to EXCEL of each current or last, in the case where there is no
current, expired collective bargaining agreement to which Telco or any of its
Subsidiaries is a part or under which Telco or any of its Subsidiaries has
obligations.
SECTION 4.13 - Environmental Matters. Except as set forth
on
---------------------
Schedule 4.13 hereto:
(a) Telco and each of its Subsidiaries is in compliance in
all
material respects with all applicable Environmental Laws (as defined below)
and
neither Telco nor any of its Subsidiaries has received any written or oral
communication from any person or governmental authority that alleges that
Telco
or any of its Subsidiaries is not in compliance with applicable Environmental
Laws.
(b) Telco and each of its Subsidiaries has obtained or has
applied for all material environmental, health and safety permits, licenses,
variances, approvals and authorizations (collectively, the "Environmental
Permits") necessary for the construction of their facilities or the conduct of
their operations, and all such material Environmental Permits are effective
or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and Telco and its Subsidiaries are in material compliance
with
all terms and conditions of such Environmental Permits. There are no past or
present events, conditions,
20
circumstances, activities, practices, incidents, actions or plans that may
materially interfere with, or prevent, future continued material compliance on
the part of Telco or any of its Subsidiaries with such Environmental Permits.
Neither Telco nor any of its Subsidiaries has knowledge of matters or
conditions
that would preclude reissuance or transfer of any such Environmental Permit,
including amendment of such instrument, to Holdings or one of its
Subsidiaries,
where such action is necessary to maintain material compliance with
Environmental Laws.
(c) To Telco's knowledge, there is no currently existing
requirement to be imposed in the future by any Environmental Law or
Environmental Permit which could reasonably be expected to result in the
incurrence of a material cost by Telco or any of its Subsidiaries.
(d) There is no material Environmental Claim (as defined
below) pending or, to Telco's knowledge, threatened (i) against Telco or any
of
its Subsidiaries, (ii) against any person whose liability for any
Environmental
Claim Telco or any of its Subsidiaries has or may have retained or assumed
either contractually or by operation of law, or (iii) against any real or
personal property or operations which Telco or any of its Subsidiaries owns,
leases or manages, in whole or in part.
(e) There have been no Releases (as defined below) of any
Hazardous Material (as defined below) that would be reasonably likely to form
the basis of any material Environmental Claim against Telco or any of its
Subsidiaries, or against any person whose liability for any material
Environmental Claim Telco or any of its Subsidiaries has or may have retained
or
assumed either contractually or by operation of law.
(f) With respect to any predecessor of Telco or any of its
Subsidiaries, there is no material Environmental Claim pending or, to Telco's
knowledge, threatened, or any Release of Hazardous Materials that would be
reasonably likely to form the basis of any material Environmental Claim
against
Telco or any of its Subsidiaries.
(g) Telco has disclosed to EXCEL all material facts which
Telco reasonably believes form the basis of a material current or future cost
relating to any environmental matter affecting Telco and its Subsidiaries.
(h) Neither Telco nor any of its Subsidiaries, nor, to
Telco's
knowledge, any owner of premises leased or operated by Telco or any of its
Subsidiaries, has filed any notice with respect to such premises under
federal,
state, local or foreign law indicating past or present treatment, storage or
disposal of Hazardous Materials, as regulated under 40 C.F.R.
21
Parts 264-267 or any state, local or foreign equivalent or is engaging or has
engaged in business operations involving the generation, transportation,
treatment, recycle or disposal of any waste (excluding low level radioactive
tubes from central office equipment or typical smoke and fire alarm
components)
regulated under Environmental Laws pertaining to radioactive materials or the
nuclear power industry, including, without limitation, requirements of Volume
10
of the Code of Federal Regulations.
(i) None of the properties owned, leased or operated by
Telco,
its Subsidiaries or any predecessor thereof are now, or were in the past,
listed
on the National Priorities List of Superfund Sites (the "NPL"), the
Comprehensive Environmental Response, Compensation and Liability Information
System ("CERCLIS"), or any other comparable state or local environmental
database (excluding easements that transgress such Superfund or CERCLIS
sites).
(j) The Telco Merger will not require any governmental
approvals under the Environmental Laws, including those that are triggered by
sales or transfers of businesses or real property.
For purposes of this Section 4.13:
(i) "Environmental Claim" means any and all
administrative, regula- tory or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person (including any
federal, state, local or foreign governmental authority) alleging potential
liability (including, without limitation, potential responsibility for or
liability for enforcement, investigatory costs, cleanup costs, governmental
response costs, removal costs, remedial costs, natural resources damages,
property damages, personal injuries or penalties) arising out of, based on or
resulting from (A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or not owned,
operated, leased or managed by Telco or any of its Subsidiaries (including but
not limited to obligations to clean up contamination resulting from leaking
underground storage tanks); or (B) circumstances forming the basis of any
violation or alleged violation of any Environmental Law; or (C) any and all
claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
(ii) "Environmental Laws" means all applicable
foreign, federal, state and local laws (including the common law), rules,
requirements and regulations relating to pollution, the environment
(including,
without limitation, ambient air, surface water,
22
groundwater, land surface or subsurface strata) or protection of human health
as
it relates to the environment including, without limitation, laws and
regulations relating to Releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal,
transport or handling of Hazardous Materials or relating to management of
asbestos in buildings.
(iii) "Hazardous Materials" means (A) any petroleum
or any by- products or fractions thereof, asbestos in any form that is or
could
become friable, urea formaldehyde foam insulation, any form of natural gas,
explosives, and polychlorinated biphenyls ("PCBs"); (B) any chemicals,
materials
or substances, whether waste materials, raw materials or finished products,
which are now defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
substances," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," "contaminants," or words of similar import under
any
Environmental Law; and (C) any other chemical, material or substance, whether
waste materials, raw materials or finished products, regulated or forming the
basis of liability under any Environmental Law.
(iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including without limitation ambient air,
atmosphere, soil, surface water, groundwater or property).
SECTION 4.14 - Board Action; Vote Required; Applicability of
---------------------------------------------
Article 14. (a) The Board of Directors of Telco has unanimously determined
that
----------
the transactions contemplated by this Agreement are in the best interests of
Telco and its stockholders and has resolved to recommend to such stockholders
that they vote in favor thereof.
(b) The approval of the Merger of T-Sub into Telco by a
majority of the votes entitled to be cast by all holders of Telco Common Stock
(the "Telco Stockholders' Approval") is the only vote of the holders of any
class or series of the capital stock of Telco required to approve this
Agreement, the Mergers and the other transactions contemplated hereby.
(c) Neither the provisions of Article 14 of Virginia Law
(assuming the accuracy of the representations contained in Section 5.13 hereof
(without giving effect to the knowledge qualification therein)), nor of any
other state takeover statute or similar statute or regulation applies or
purports to apply to the Telco Merger, this Agreement or any of the
transactions
contemplated hereby.
23
SECTION 4.15 - Opinion of Financial Advisor. Telco has
----------------------------
received the written opinion, a copy of which has been provided to EXCEL, of
Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation ("DLJ") on the date
hereof,
to the effect that, as of the date hereof, the Telco Merger Consideration is
fair from a financial point of view to the holders of Telco Common Stock.
SECTION 4.16 - Brokers. Except for DLJ (the arrangements
with
-------
which have been disclosed to EXCEL prior to the date hereof), which has been
engaged by Telco, no broker, finder or investment banker is entitled to any
brokerage, finder's, investment banking or other fee or commission in
connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Telco or any of its Subsidiaries.
SECTION 4.17 - Tax Matters. Except as set forth on Schedule
-----------
4.17 hereto:
(a) Telco and its Subsidiaries, and each affiliated group
(within the meaning of Section 1504 of the Code) of which Telco or any
Subsidiary is or has been a member, has timely filed all federal and all
material state, local, foreign, income and franchise Tax Returns (as defined
below), and all other material Tax Returns required to be filed by them. All
such Tax Returns are true and correct in all material respects. Except to the
extent adequately reserved for in accordance with GAAP, all material Taxes due
and payable by Telco and its Subsidiaries have been timely paid in full. The
most recent consolidated financial statements contained in the Telco SEC
Reports
reflect an adequate reserve in accordance with GAAP for all Taxes payable by
Telco and its Subsidiaries for all taxable periods and portions thereof
through
the date of such financial statements.
(b) No material deficiencies for any Taxes have been
proposed,
asserted or assessed against Telco or any of its Subsidiaries that have not
been
fully paid or adequately provided for in the appropriate financial statements
of
Telco and its Subsidiaries, no requests for waivers of the time to assess any
Taxes are pending, and no power of attorney with respect to any Taxes has been
executed or filed with any taxing authority. No material issues relating to
Taxes have been raised in writing by any governmental authority during any
presently pending audit or examination.
(c) There are no material liens or encumbrances for Taxes on
any of the assets of Telco or its Subsidiaries (other than for current taxes
not
yet due and payable).
(d) Telco and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the
payment
and withholding of Taxes.
24
(e) None of Telco or its Subsidiaries has filed a consent
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
Code
apply.
(f) None of Telco or its Subsidiaries has made any payments,
nor is any of them obligated to make any payments, and is not a party to any
agreement that could obligate it to make any payments that would not be
deductible by reason of Sections 280G or 162(m) of the Code.
(g) None of Telco or its Subsidiaries is a party to any tax
allocation agreement, tax sharing agreement, tax indemnity agreement or
similar
agreement, arrangement or practice with respect to Taxes (including any
advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any taxing authority).
(h) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any federal income or material state, local or foreign Taxes or Tax
Returns of Telco or its Subsidiaries and neither Telco nor any of its
Subsidiaries has received a written notice of any pending audit or proceeding,
in any such case involving a material issue with respect to Taxes.
(i) Neither Telco nor any of its Subsidiaries has agreed to
or is required to make any material adjustment under Section 481(a) of the
Code.
(j) No property owned by Telco or any of its Subsidiaries
(i)
is property required to be treated as being owned by another person pursuant
to
the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986; (ii) constitutes "tax exempt use property" within the meaning of
Section 168(h)(1) of the Code; or (iii) is tax exempt bond financed property
within the meaning of Section 168(g) of the Code.
(k) For purpose of the Merger Agreement, (A) the terms "Tax"
or "Taxes" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any taxing authority (domestic or
foreign)
and shall include any transferee liability in respect of Taxes, any liability
in
respect of Taxes imposed by contract, tax sharing agreement, tax indemnity
agreement or any similar agreement and (B) the term "Tax
25
Return" shall mean any report, return, document, declaration or any other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any document with respect to or accompanying
payments or estimated Taxes, or with respect to or accompanying requests for
the
extension of time in which to file any such report, return document,
declaration
or other information.
SECTION 4.18 - Intellectual Property. Telco and its
---------------------
Subsidiaries own or possess all necessary licenses or other valid rights to
use
all material computer software and firmware, patents, patent rights,
trademarks,
trademark rights, trade names, trade name rights, brand names, copyrights,
service marks, trade secrets, applications for trademarks and for service
marks,
know-how and other proprietary rights and information used or held for use in
connection with the business of Telco and its Subsidiaries as currently
conducted or as contemplated to be conducted, and, to the knowledge of Telco,
except as described on Schedule 4.18 hereto, as of the date hereof, there has
been no assertion or claim challenging the ownership or validity of any of the
foregoing. Except as disclosed on Schedule 4.18 hereto, the conduct of the
business of Telco and its Subsidiaries as currently conducted does not, in any
material respect, conflict with or infringe any patent, patent right, license,
trademark, trademark right, trade name, trade name right, service xxxx,
copyright or any other intellectual property right of any third party. To the
knowledge of Telco, except as described on Schedule 4.18 hereto, there are no
infringements of any proprietary rights owned by or licensed by or to Telco or
any of its Subsidiaries.
SECTION 4.19 - Insurance. Except as set forth on Schedule
4.19
---------
hereto, each of Telco and each of its Subsidiaries is, and has been
continuously
since January 1, 1996 (or such later date as such Subsidiary was organized or
acquired by Telco), 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 Telco and its Subsidiaries during such
time period. Except as set forth on such Schedule 4.19, since January 1, 1996
neither Telco nor any of its Subsidiaries has received notice of cancellation
or
termination with respect to any material insurance policy of Telco or its
Subsidiaries. The insurance policies of Telco and its Subsidiaries are valid
and
enforceable policies.
SECTION 4.20 - Ownership of Securities. As of the date
hereof,
-----------------------
none of Telco or any of its affiliates or associates (as such terms are
defined
under the Exchange Act), (a)(i) beneficially owns, directly or indirectly, or
(ii) is party to any agreement, arrangement or understanding for the purpose
of
acquiring, holding, voting or disposing of, in each case, shares of capital
stock of EXCEL, which in the aggregate represent 10% or more of the
outstanding
shares of EXCEL Common Stock, or (b) is an "interested
26
stockholder" of EXCEL within the meaning of Section 203 of the Delaware Law.
Except as set forth on Schedule 4.20 hereto, neither Telco nor any of its
Subsidiaries owns any shares of EXCEL Common Stock.
SECTION 4.21 - Certain Contracts.
-----------------
(a) Telco has delivered or otherwise made available to EXCEL
true, correct and complete copies of all contracts and agreements (and all
amendments, modifications and supplements thereto and all side letters to
which
Telco is a party affecting the obligations of any party thereunder) to which
Telco or any of its Subsidiaries is a party or by which any of its properties
or
assets are bound that are material to the business, properties or assets of
Telco and its Subsidiaries taken as a whole, including, without limitation,
all:
(i) employment, consulting, non-competition, severance, golden parachute or
indemnification contracts (including, without limitation, any contract to
which
Telco is a party involving employees of Telco); (ii) contracts granting a
right
of first refusal or first negotiation; (iii) partnership or joint venture
agreements; (iv) agreements for the acquisition, sale or lease of material
properties or assets of Telco (by merger, purchase or sale of assets or stock
or
otherwise); (v) contracts or agreements with any governmental entity; (vi)
contracts relating to telecommunications facilities and/or with
facilities-based
carriers; (vii) contracts or arrangements limiting or restraining Holdings,
Telco, any of Telco's Subsidiaries or any successor thereto from engaging or
competing in any business; and (viii) all commitments and agreements to enter
into any of the foregoing (collectively, together with any such contracts
entered into in accordance with Section 6.1 hereof, the "Telco Contracts").
(b) Except as set forth on Schedule 4.21(b):
(i) There is no default under any Telco Contract either by
Telco or any of its Subsidiaries or, to the knowledge of Telco, by any other
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder by Telco or any
of its Subsidiaries or, to the knowledge of Telco, any other party, in any
such
case in which such default or event could reasonably be expected to have a
Material Adverse Effect on Telco.
(ii) No party to any such Telco Contract has given notice to
Telco of or made a claim against Telco with respect to any breach or default
thereunder, in any such case in which such breach or default could reasonably
be
expected to have a Material Adverse Effect on Telco.
27
(c) Set forth on Schedule 4.21(c) hereto is a list of each
material contract, agreement or arrangement to which Telco or any of its
Subsidiaries is a party or may be bound and under the terms of which any of
the
rights or obligations of a party thereto will be modified or altered
(including,
without limitation, any acceleration of rights or obligations thereunder
pursuant to the terms of any such contract, agreement or arrangement) as a
result of the transactions contemplated hereby.
SECTION 4.22 - Certain Regulatory Matters.
--------------------------
(a) Except as disclosed on Schedule 4.22 hereto and except
for
billing disputes with customers arising in the ordinary course of business
that
in the aggregate involve immaterial amounts, there are no proceedings or, to
Telco's knowledge, investigations pending or, to Telco's knowledge,
threatened,
before any domestic or foreign court, administrative, governmental or
regulatory
body in which any of the following matters are being considered which could
reasonably be expected to have a Material Adverse Effect on Telco, nor has
Telco
or any of its Subsidiaries received written notice or inquiry from any such
body, government official, consumer advocacy or similar organization or any
private party, indicating that any of such matters should be considered or may
become the object of consideration or investigation which could reasonably be
expected to have a Material Adverse Effect on Telco: (i) reduction of rates
charged to customers; (ii) reduction of earnings; (iii) refunds of amounts
previously charged to customers; or (iv) failure to meet any expense,
infrastructure, service quality or other commitments previously made to or
imposed by any administrative, governmental or regulatory body.
(b) Except as disclosed on Schedule 4.22 hereto, neither
Telco
nor any of its Subsidiaries has any outstanding commitments (and no such
obligations have been imposed upon Telco and remain outstanding) regarding (i)
reduction of rates charged to customers; (ii) reduction of earnings; (iii)
refunds of amounts previously charged to customers; or (iv) expenses,
infrastructure expenditures, service quality or other regulatory requirements,
to or by any domestic or foreign court, administrative, governmental or
regulatory body, government official, consumer advocacy or similar
organization,
in each case which could reasonably be expected to have a Material Adverse
Effect on Telco.
(c) Telco has not transferred, sold any interest in, or
otherwise diluted its control over, any federal or state regulatory licenses,
certificates, approvals or other authorizations under which it operates, and
the
transfer of such authorizations, subject to regulatory approval, would not
violate the terms of any agreement to which Telco is a party or by which Telco
is bound, or impinge the rights of any third party.
28
ARTICLE V - REPRESENTATIONS AND WARRANTIES
OF EXCEL AND THE MERGER SUBSIDIARIES
EXCEL and each Merger Subsidiary (as defined below) hereby
represent and warrant to Telco as follows:
SECTION 5.1 - Organization and Qualification; Subsidiaries.
--------------------------------------------
Each of EXCEL and each of Holdings, E-Sub and T-Sub (collectively, the "Merger
Subsidiaries" and each individually a "Merger Subsidiary") is a corporation
duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of EXCEL and the Merger
Subsidiaries has the requisite corporate power and authority and any necessary
governmental authority, franchise, license or permit to own, operate or lease
the properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction
where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failure which,
when taken together with all other such failures, would not reasonably be
expected to have a Material Adverse Effect on EXCEL.
SECTION 5.2 - Certificate of Incorporation and Bylaws. EXCEL
---------------------------------------
has heretofore furnished, or otherwise made available, to Telco a complete and
correct copy of the Articles or Certificate of Incorporation and the Bylaws
(or
comparable governing documents), each as amended to the date hereof, of EXCEL
and each of the Merger Subsidiaries. Such Articles or Certificates of
Incorporation and Bylaws (or comparable governing documents) are in full force
and effect. Neither EXCEL nor any of the Merger Subsidiaries is in violation
of
any of the provisions of its respective Articles or Certificate of
Incorporation
or its Bylaws (or comparable governing documents).
SECTION 5.3 - Capitalization. (a) The authorized capital
stock
--------------
of EXCEL consists of (i) 10,000,000 shares of Preferred Stock, par value
$0.001
per share, none of which are outstanding and none of which are reserved for
issuance and (ii) 500,000,000 shares of EXCEL Common Stock, of which, as of
May
31, 1997, 108,159,956 shares were issued and outstanding, 1,429,379 shares
were
held in the treasury of EXCEL and 4,402,540 shares were issuable upon the
exercise of options outstanding under the EXCEL option plans listed on
Schedule
5.3 hereto. Except as set forth on Schedule 5.3 hereto, (i) from May 31, 1997
through the date hereof, no shares of EXCEL Common Stock have been issued,
except upon the exercise of options described in the immediately preceding
sentence, and (ii) as of the date hereof, there are no outstanding "EXCEL
Equity
Rights". For purposes of this Agreement, EXCEL Equity Rights shall mean
subscriptions, options, warrants, calls,
29
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) to purchase or otherwise acquire from EXCEL or any
of
EXCEL's Subsidiaries at any time, or upon the happening of any stated event,
any
shares of the capital stock of EXCEL). Schedule 5.3 hereto sets forth a
complete
and accurate list with respect to all outstanding EXCEL Equity Rights as of
May
31, 1997 of the holder thereof, the date of grant, the number of shares for
which each such EXCEL Equity Right is exercisable, the respective dates upon
which each such EXCEL Equity Right vests, becomes exercisable and expires, and
the exercise price of each such EXCEL Equity Right.
(b) Except as set forth on Schedule 5.3(b), there are no
outstanding obligations of EXCEL or any of EXCEL's Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of EXCEL.
(c) All of the issued and outstanding shares of EXCEL Common
Stock are validly issued, fully paid and nonassessable.
(d) The authorized capital stock of Holdings consists of
200,000,000 shares of Common Stock, par value $.001 per share, of which 1,000
shares are validly issued and outstanding. All of the issued and outstanding
capital stock of Holdings is, and at the Effective Time will be, owned by
EXCEL
free and clear of any liens, security interests, pledges, agreements, claims,
charges or encumbrances, and there are (i) no other shares of capital stock or
other voting securities of Holdings, (ii) no securities of Holdings
convertible
into or exchangeable for shares of capital stock or other voting securities of
Holdings and (iii) no options or other rights to acquire from Holdings, and no
obligations of Holdings to issue, any capital stock, other voting securities
or
securities convertible into or exchangeable for capital stock or other voting
securities of Holdings. All of the issued and outstanding capital stock of
each
of E-Sub and T-Sub is duly authorized, validly issued, fully paid and
nonassessable, and is owned by Holdings free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances.
(e) Except as disclosed on Schedule 5.3 hereto, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which EXCEL is a party or to which it is bound relating to the voting or
registration of any shares of capital stock of EXCEL. EXCEL has not taken any
action that would result in any Options to purchase EXCEL Common Stock that
are
unvested becoming vested in connection with or as a result of the execution
and
delivery of this Agreement or the consummation of the transactions
contemplated
hereby.
30
SECTION 5.4 - Authority Relative to this Agreement. Each of
------------------------------------
EXCEL and each Merger Subsidiary has the necessary corporate power and
authority
to enter into this Agreement and, subject to obtaining any necessary
stockholder
approval of the Merger to which it is a party, to carry out its obligations
hereunder. The execution and delivery of this Agreement by each of EXCEL and
each Merger Subsidiary and the consummation by each such Party of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of each such Party, subject to the approval of
this
Agreement by EXCEL's stockholders. This Agreement has been duly executed and
delivered by each of EXCEL and each Merger Subsidiary and, assuming the due
authorization, execution and delivery thereof by the other Parties,
constitutes
a legal, valid and binding obligation of each such Party, enforceable against
it
in accordance with its terms, subject to the Bankruptcy Exception.
SECTION 5.5 - No Conflict; Required Filings and Consents.
(a)
------------------------------------------
Except as listed on Schedule 5.5 hereto, the execution and delivery of this
Agreement by each of EXCEL and each Merger Subsidiary do not, and the
performance of this Agreement by each of EXCEL and each Merger Subsidiary will
not, (i) violate or conflict with the Certificate of Incorporation or Bylaws
of
EXCEL, (ii) conflict with or violate any law, regulation, court order,
judgment
or decree applicable to EXCEL or any of its Subsidiaries or by which any of
their respective property is bound or affected, (iii) violate or conflict with
the Articles or Certificate of Incorporation or Bylaws (or comparable
governing
documents) of any of EXCEL's Subsidiaries, or (iv) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of EXCEL or any of its Subsidiaries pursuant to,
result
in the loss of any material benefit under, or require the consent of any other
party to, any contract, instrument, permit, license or franchise to which
EXCEL
or any of its Subsidiaries is a party or by which EXCEL, any of such
Subsidiaries or any of their respective property is bound or affected except,
in
the case of clauses (ii), (iii) or (iv) above, for conflicts, violations,
breaches, defaults, results or consents which, individually or in the
aggregate,
would not have a Material Adverse Effect on EXCEL.
(b) Except as listed on Schedule 5.5 and except for
applicable
requirements, if any, of the Exchange Act, the premerger notification
requirements of the HSR Act, filing and recordation of appropriate merger or
other documents as required by Delaware Law or Virginia Law and any filings
required pursuant to any state securities or "blue sky" laws or the rules of
any
applicable stock exchanges, neither EXCEL nor any of its Subsidiaries is
required to submit any notice, report or other filing with any governmental
authority, domestic or foreign, in connection with the execution, delivery or
performance of this
31
Agreement. Except as set forth in the immediately preceding sentence, no
waiver,
consent, approval or authorization of any governmental or regulatory
authority,
domestic or foreign, is required to be obtained by EXCEL or any of its
Subsidiaries in connection with its execution, delivery or performance of this
Agreement.
SECTION 5.6 - SEC Filings; Financial Statements. (a) EXCEL
has
---------------------------------
filed all forms, reports and documents required to be filed with the SEC since
May 9, 1996, and has heretofore delivered or made available to Telco, in the
form filed with the SEC, together with any amendments thereto, its (i) Annual
Report on Form 10-K for the fiscal year ended December 31, 1996, (ii) all
proxy
statements relating to EXCEL's meetings of stockholders (whether annual or
special) held since May 9, 1996, (iii) Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1997, and (iv) all other reports or
registration
statements filed by EXCEL with the SEC since May 9, 1996 (collectively, the
"EXCEL SEC Reports"). The EXCEL SEC Reports (i) were prepared substantially in
accordance with the requirements of the 1933 Act or the Exchange Act, as the
case may be, and the rules and regulations promulgated under each of such
respective acts, and (ii) did not at the time they were filed contain any
untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes
and
schedules, contained in the EXCEL SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of EXCEL and its
Subsidiaries as at the respective dates thereof and the consolidated results
of
operations and cash flows of EXCEL and its Subsidiaries for the periods
indicated in accordance with GAAP applied on a consistent basis throughout the
periods involved (except for changes in accounting principles disclosed in the
notes thereto) and subject in the case of interim financial statements to
normal
year-end adjustments.
(c) EXCEL has heretofore made available to Telco a complete
and correct copy of any material amendments or modifications, which have not
yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by EXCEL with the SEC pursuant to the Exchange Act.
SECTION 5.7 - No Undisclosed Liabilities; Absence of Certain
----------------------------------------------
Changes or Events. Except as and to the extent publicly disclosed by EXCEL in
-----------------
the EXCEL SEC Reports filed prior to the date of this Agreement, as of
December
31, 1996, none of EXCEL or its Subsidiaries had any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
and
whether due or to become due or asserted or
32
unasserted, which would be required by GAAP to be reflected in, reserved
against
or otherwise described in the consolidated balance sheet of EXCEL (including
the
notes thereto) as of such date or which could reasonably be expected to have a
Material Adverse Effect on EXCEL. Except as disclosed on Schedule 5.7 hereto,
since December 31, 1996, there has not been any change, or any event involving
a
prospective change, in the business, financial condition or results of
operations of EXCEL or any of its Subsidiaries which has had, or is reasonably
likely to have, a Material Adverse Effect on EXCEL.
SECTION 5.8 - No Violation of Law; Permits. The business of
----------------------------
EXCEL and its Subsidiaries is not being conducted in violation of any Legal
Requirements, or in violation of any Permits, except for possible violations
none of which, individually or in the aggregate, could reasonably be expected
to
have a Material Adverse Effect on EXCEL. EXCEL and its Subsidiaries have all
Permits that are required in connection with the operation of their businesses
(collectively, "EXCEL Required Permits"), and no proceedings are pending or,
to
the knowledge of EXCEL, threatened to revoke or limit any EXCEL Required
Permit,
except, in each case, those the absence or violation of which do not and will
not have a Material Adverse Effect on EXCEL. Except as set forth on Schedule
5.8
hereto, (a) to EXCEL's knowledge, no investigation or review by any domestic
or
foreign governmental or regulatory entity (including any stock exchange or
other
self-regulatory body) with respect to EXCEL or its Subsidiaries in relation to
any alleged violation of law or regulation is pending or threatened, and (b)
no
governmental or regulatory entity (including any stock exchange or other
self-regulatory body) has notified EXCEL of its intention to conduct the same,
except for such investigations which, if they resulted in adverse findings,
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on EXCEL. Except as set forth on Schedule 5.8 hereto,
neither EXCEL nor any of its Subsidiaries is subject to any cease and desist
or
other order, judgment, injunction or decree issued by, or is a party to any
written agreement, consent agreement or memorandum of understanding with, or
is
a party to any commitment letter or similar undertaking to, or is subject to
any
order or directive by, or has adopted any board resolutions at the request of,
any court, governmental entity or regulatory agency that materially restricts
the conduct of its business or which could reasonably be expected to have a
Material Adverse Effect on EXCEL, or would prevent or delay the consummation
of
the transactions contemplated by this Agreement, nor has EXCEL or any of its
Subsidiaries been advised that any court, governmental entity or regulatory
agency is considering issuing or requesting any of the foregoing. EXCEL and
each
of its Subsidiaries and affiliates has complied with all material federal and
state regulatory reporting requirements necessary for the lawful provision of
the telecommunications services currently offered by EXCEL or such Subsidiary
or
affiliate.
33
SECTION 5.9 - Registration Statement; Joint Proxy Statement.
---------------------------------------------
None of the information supplied or to be supplied by or on behalf of EXCEL
for
inclusion or incorporation by reference in the Registration Statement will, at
the time the Registration Statement becomes effective under the 1933 Act,
contain any untrue statement of a material fact or omit to state any 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. None
of the information supplied or to be supplied by or on behalf of EXCEL for
inclusion or incorporation by reference in the Joint Proxy Statement will, at
the dates mailed to stockholders and at the times of the Telco stockholders'
meeting and the EXCEL stockholders' meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior
to
the Effective Time any event with respect to EXCEL, its officers and directors
or any of its Subsidiaries should occur which is required to be described in
an
amendment of, or a supplement to, the Registration Statement or the Joint
Proxy
Statement, EXCEL shall promptly so advise Telco and such event shall be so
described, and such amendment or supplement (which Telco shall have a
reasonable
opportunity to review) shall be promptly filed with the SEC and, as required
by
law, disseminated to the shareholders of EXCEL. The Registration Statement and
the Joint Proxy Statement (except for information relating to Telco) will
comply
as to form in all material respects with the provisions of the 1933 Act and
the
Exchange Act and the rules and regulations promulgated thereunder.
SECTION 5.10 - Board Action; Vote Required. (a) The Board of
---------------------------
Directors of EXCEL has unanimously determined that the transactions
contemplated
by this Agreement are in the best interests of EXCEL and its stockholders and
has resolved to recommend to such stockholders that they vote in favor
thereof.
(b) The approval of the Merger of E-Sub into EXCEL by a
majority of the votes entitled to be cast by all holders of EXCEL Common Stock
(the "EXCEL Stockholders' Approval") is the only vote of the holders of any
class or series of the capital stock of EXCEL required to approve this
Agreement, the Mergers and the other transactions contemplated hereby.
SECTION 5.11 - Opinion of Financial Advisor. EXCEL has
----------------------------
received the oral opinion of Xxxxxx Brothers Inc. ("Xxxxxx Brothers") on the
date hereof, to the effect that, as of the date hereof, the EXCEL Exchange
Ratio
is fair from a financial point of view to the stockholders of EXCEL, and the
Telco Merger Consideration is fair from a financial point of view to EXCEL,
and
will, within two business days of the date hereof, have received the written
opinion of Xxxxxx Brothers to such effect.
34
SECTION 5.12 - Brokers. Except for Xxxxxx Brothers (the
-------
arrangements with which have been disclosed to Telco prior to the date
hereof),
which has been engaged by EXCEL, no broker, finder or investment banker is
entitled to any brokerage, finder's, investment banking or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of EXCEL or any of its
Subsidiaries.
SECTION 5.13 - Ownership of Securities. As of the date
hereof,
-----------------------
neither EXCEL nor, to EXCEL's knowledge, any of its affiliates or associates
(as
such terms are defined under the Exchange Act), (a)(i) beneficially owns,
directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of,
in
each case, shares of capital stock of Telco, which in the aggregate represent
10% or more of the outstanding shares of Telco Common Stock, nor (b) is an
"interested shareholder" of Telco within the meaning of Article 14 of Virginia
Law. EXCEL owns no shares of Telco Common Stock.
SECTION 5.14 - Activities of Merger Subsidiaries. None of
the
---------------------------------
Merger Subsidiaries have conducted any activities other than in connection
with
the organization thereof, the negotiation and execution of this Agreement and
the consummation of the transactions contemplated hereby.
SECTION 5.15 - Financing. EXCEL has received an executed
---------
commitment letter, a copy of which has been delivered to Telco, from Xxxxxx
Commercial Paper Inc. to provide, subject to the conditions specified therein,
senior loan financing of up to $1,000,000,000 to finance the Mergers, to
refinance existing indebtedness of the Parties and for general corporate
purposes (the "Financing").
SECTION 5.16 - Litigation. Except as disclosed in Schedule
----------
5.16 hereto, there are no claims, actions, suits, proceedings or, to EXCEL's
knowledge, investigations pending or, to EXCEL's knowledge, threatened against
EXCEL or any of its Subsidiaries, or any properties or rights of EXCEL or any
of
its Subsidiaries, before any court, administrative, governmental, arbitral,
mediation or regulatory authority or body, domestic or foreign, (a) as of the
date hereof, as to which there is more than a remote possibility of an adverse
judgment or determination against EXCEL or any of its Subsidiaries or any
properties or rights of EXCEL or any of its Subsidiaries in excess of $5
million
or which otherwise could have a Material Adverse Effect on EXCEL, (b) as of
the
date hereof, which questions the validity of this Agreement or any action to
be
taken by EXCEL in connection with the consummation of the transactions
contemplated by this Agreement or could otherwise prevent or delay the
consummation of the transactions contemplated by this
35
Agreement, or (c) as to which there is reasonably likely to be an adverse
judgment or determination against EXCEL or any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect on EXCEL.
SECTION 5.17 - Employee Matters; ERISA. (i) All
contributions
-----------------------
and other payments required to be made by EXCEL or any of its Subsidiaries to
or
under any employee benefit plan within the meaning of Section 3(3) of ERISA
maintained or contributed to by EXCEL or its Subsidiaries (collectively, the
"EXCEL Benefit Plans") (or to any person pursuant to the terms thereof) have
been timely made, except for failures that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on EXCEL. No
EXCEL Benefit Plan is subject to Section 412 of the Code.
(ii) Each of the EXCEL Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code has been
determined
by the IRS to be so qualified, and, to EXCEL's knowledge, no circumstances
exist
that could reasonably be expected by EXCEL to result in the revocation of any
such determination. EXCEL is in compliance with, and each of the EXCEL Benefit
Plans is and has been operated in compliance with, all applicable Legal
Requirements governing such plan, including, without limitation, ERISA and the
Code, except for such non-compliance which individually or in the aggregate
would not have a Material Adverse Effect on EXCEL.
(iii) Except as set forth on Schedule 5.17 hereto, the
consummation or announcement of any transaction contemplated by this Agreement
will not (either alone or upon the occurrence of any additional or further
acts
or events) result in any (i) payment (whether of severance pay or otherwise)
becoming due from EXCEL or any of its Subsidiaries to any current or former
officer, employee, former employee or director thereof, or to any other person
for the benefit of any such officer, employee or director, or (ii)
acceleration,
vesting or establishment of any benefit under any EXCEL Benefit Plan, or (iii)
disqualification of any of the EXCEL Benefit Plans intended to be qualified
under, result in a prohibited transaction or breach of fiduciary duty under,
or
otherwise violate, ERISA or the Code.
(iv) Neither EXCEL nor any of its Subsidiaries has incurred,
and none of such entities reasonably expects to incur, any material liability
to
the PBGC (other than premiums which are not overdue) or pursuant to Title IV
of
ERISA with respect to any EXCEL Benefit Plan. Neither EXCEL nor any of its
Subsidiaries is an employer with respect to, and neither has incurred or
reasonably expects to incur, any withdrawal liability with respect to any
"multiemployer plan" (as defined in Section 3(37) of ERISA).
36
(v) There are no pending or, to EXCEL's knowledge,
threatened
actions, claims or proceedings against any EXCEL Benefit Plan or its assets,
plan sponsor, plan administrator or fiduciaries with respect to the operation
of
such plan (other than routine benefit claims) which, if determined adversely
to
EXCEL, individually or in the aggregate would have a Material Adverse Effect
on
EXCEL.
SECTION 5.18 - Tax Matters. Except as set forth on Schedule
-----------
5.18 hereto:
(a) EXCEL and its Subsidiaries, and each affiliated group
(within the meaning of Section 1504 of the Code) of which EXCEL or any
Subsidiary is or has been a member, has timely filed all federal and all
material state, local, foreign, income and franchise Tax Returns (as defined
below), and all other material Tax Returns required to be filed by them. All
such Tax Returns are true and correct in all material respects. Except to the
extent adequately reserved for in accordance with GAAP, all material Taxes due
and payable by EXCEL and its Subsidiaries have been timely paid in full. The
most recent consolidated financial statements contained in the EXCEL SEC
Reports
reflect an adequate reserve in accordance with GAAP for all Taxes payable by
EXCEL and its Subsidiaries for all taxable periods and portions thereof
through
the date of such financial statements.
(b) No material deficiencies for any Taxes have been
proposed,
asserted or assessed against EXCEL or any of its Subsidiaries that have not
been
fully paid or adequately provided for in the appropriate financial statements
of
EXCEL and its Subsidiaries, no requests for waivers of the time to assess any
Taxes are pending, and no power of attorney with respect to any Taxes has been
executed or filed with any taxing authority. No material issues relating to
Taxes have been raised in writing by any governmental authority during any
presently pending audit or examination.
(c) There are no material liens or encumbrances for Taxes on
any of the assets of EXCEL or its Subsidiaries (other than for current taxes
not
yet due and payable).
(d) EXCEL and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the
payment
and withholding of Taxes.
(e) None of EXCEL or its Subsidiaries has filed a consent
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
Code
apply.
(f) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any federal income or material state, local or foreign Taxes or Tax
Returns of EXCEL or its Subsidiaries and
37
neither EXCEL nor any of its Subsidiaries has received a written notice of any
pending audit or proceeding, in any such case involving a material issue with
respect to Taxes.
(g) Neither EXCEL nor any of its Subsidiaries has agreed to
or is required to make any material adjustment under Section 481(a) of the
Code.
(h) None of EXCEL or its Subsidiaries has made any payments,
nor is any of them obligated to make any payments, and is not party to any
agreement that would obligate it to make any payments that would not be
deductible by reason of Section 162(m) of the Code other than any such
payments
that would not result in an increase in EXCEL's tax liabilities in an amount
which is material to Excel and its Subsidiaries, taken as a whole.
SECTION 5.19 - Intellectual Property. EXCEL and its
---------------------
Subsidiaries own or possess all necessary licenses or other valid rights to
use
all material computer software and firmware, patents, patent rights,
trademarks,
trademark rights, trade names, trade name rights, brand names, copyrights,
service marks, trade secrets, applications for trademarks and for service
marks,
know-how and other proprietary rights and information used or held for use in
connection with the business of EXCEL and its Subsidiaries as currently
conducted or as contemplated to be conducted, and, to the knowledge of EXCEL,
except as described on Schedule 5.19 hereto, as of the date hereof, there has
been no assertion or claim challenging the ownership or validity of any of the
foregoing. Except as disclosed on Schedule 5.19 hereto, the conduct of the
business of EXCEL and its Subsidiaries as currently conducted does not, in any
material respect, conflict with or infringe any patent, patent right, license,
trademark, trademark right, trade name, trade name right, service xxxx,
copyright or any other intellectual property right of any third party. To the
knowledge of EXCEL, except as described on Schedule 5.19 hereto, there are no
infringements of any proprietary rights owned by or licensed by or to EXCEL or
any of its Subsidiaries.
SECTION 5.20 - Certain Contracts.
(a) Except for such contracts as are filed publicly in the
EXCEL SEC Reports, EXCEL has delivered or otherwise made available to Telco
true, correct and complete copies of all contracts and agreements (and all
amendments, modifications and supplements thereto and all side letters to
which
EXCEL is a party affecting the obligations of any party thereunder) to which
EXCEL or any of its Subsidiaries is a party or by which any of its properties
or
assets are bound that are material to the business, properties or assets of
EXCEL and its Subsidiaries taken as a whole, including, without limitation,
all:
(i) employment, consulting, non-competition, severance, golden parachute or
indemnification contracts (including, without limitation, any contract to
which
EXCEL is a party involving
38
employees of EXCEL); (ii) contracts granting a right of first refusal or first
negotiation; (iii) partnership or joint venture agreements; (iv) agreements
for
the acquisition, sale or lease of material properties or assets of EXCEL (by
merger, purchase or sale of assets or stock or otherwise); (v) contracts or
agreements with any governmental entity; (vi) contracts relating to
telecommunications facilities and/or with facilities-based carriers; (vii)
contracts or arrangements limiting or restraining Holdings, EXCEL, any of
EXCEL's Subsidiaries or any successor thereto from engaging or competing in
any
business; and (viii) all commitments and agreements to enter into any of the
foregoing (collectively, together with any such contracts entered into in
accordance with Section 6.2 hereof, the "EXCEL Contracts").
(b) Except as set forth on Schedule 5.20(b):
(i) There is no default under any EXCEL Contract either by
EXCEL or any of its Subsidiaries or, to the knowledge of EXCEL, by any other
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder by EXCEL or any
of its Subsidiaries or, to the knowledge of EXCEL, any other party, in any
such
case in which such default or event could reasonably be expected to have a
Material Adverse Effect on EXCEL.
(ii) No party to any such EXCEL Contract has given notice to
EXCEL of or made a claim against EXCEL with respect to any breach or default
thereunder, in any such case in which such breach or default could reasonably
be
expected to have a Material Adverse Effect on EXCEL.
(c) Set forth on Schedule 5.20(c) hereto is a list of each
material contract, agreement or arrangement to which EXCEL or any of its
Subsidiaries is a party or may be bound and under the terms of which any of
the
rights or obligations of a party thereto will be modified or altered
(including,
without limitation, any acceleration of rights or obligations thereunder
pursuant to the terms of any such contract, agreement or arrangement) as a
result of the transactions contemplated hereby.
SECTION 5.21 - Certain Regulatory Matters.
--------------------------
(a) Except as disclosed on Schedule 5.21 hereto and except
for
billing disputes with customers arising in the ordinary course of business
that
in the aggregate involve immaterial amounts, there are no proceedings or, to
EXCEL's knowledge, investigations pending or, to EXCEL's knowledge,
threatened,
before any domestic or foreign court, administrative, governmental or
regulatory
body in which any of the following matters are being considered which could
reasonably be expected to have a Material Adverse
39
Effect on EXCEL, nor has EXCEL or any of its Subsidiaries received written
notice or inquiry from any such body, government official, consumer advocacy
or
similar organization or any private party, indicating that any of such matters
should be considered or may become the object of consideration or
investigation
which could reasonably be expected to have a Material Adverse Effect on EXCEL:
(i) reduction of rates charged to customers; (ii) reduction of earnings; (iii)
refunds of amounts previously charged to customers; or (iv) failure to meet
any
expense, infrastructure, service quality or other commitments previously made
to
or imposed by any administrative, governmental or regulatory body.
(b) Except as disclosed on Schedule 5.21 hereto, neither
EXCEL
nor any of its Subsidiaries has any outstanding commitments (and no such
obligations have been imposed upon EXCEL and remain outstanding) regarding (i)
reduction of rates charged to customers; (ii) reduction of earnings; (iii)
refunds of amounts previously charged to customers; or (iv) expenses,
infrastructure expenditures, service quality or other regulatory requirements,
to or by any domestic or foreign court, administrative, governmental or
regulatory body, government official, consumer advocacy or similar
organization,
in each case which could reasonably be expected to have a Material Adverse
Effect on EXCEL.
(c) EXCEL has not transferred, sold any interest in, or
otherwise diluted its control over, any federal or state regulatory licenses,
certificates, approvals or other authorizations under which it operates, and
the
transfer of such authorizations, subject to regulatory approval, would not
violate the terms of any agreement to which EXCEL is a party or by which EXCEL
is bound, or impinge the rights of any third party.
ARTICLE VI - CONDUCT OF
BUSINESS PENDING THE MERGERS
SECTION 6.1 - Conduct of Business of Telco. Telco covenants
----------------------------
and agrees that, between the date of this Agreement and the Effective Time,
unless EXCEL shall otherwise consent in writing, and except as described on
Schedule 6.1 hereto or as otherwise expressly contemplated hereby, the
business
of Telco and its Subsidiaries shall be conducted only in, and such entities
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice; and Telco and its Subsidiaries will use
their commercially reasonable efforts to preserve substantially intact their
business organizations, to keep available the services of those of their
present
officers, employees and consultants who are integral to the operation of their
businesses as presently conducted and to preserve their present relationships
with significant customers, significant suppliers and with other persons with
whom they have significant business relations. By way of amplification and not
40
limitation, except as set forth on Schedule 6.1 hereto or as otherwise
expressly
contemplated by this Agreement, Telco agrees on behalf of itself and its
Subsidiaries that they will not, between the date of this Agreement and the
Effective Time, directly or indirectly, do any of the following without the
prior written consent of EXCEL:
(a) (i) except for (A) the issuance of Telco Common Stock in
order to satisfy obligations under employee benefit plans disclosed in
Schedule
4.11; (B) grants of stock options with respect to Telco Common Stock as set
forth in Schedule 6.1; and (C) the issuance of securities by a Subsidiary to
any
person which is directly or indirectly wholly-owned by Telco: issue, sell,
pledge, dispose of, encumber, authorize, or propose the issuance, sale,
pledge,
disposition, encumbrance or authorization of any shares of capital stock of
any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock of, or any other ownership
interest
in, Telco or any of its Subsidiaries; (ii) amend or propose to amend the
Articles of Incorporation or Bylaws of Telco or any of its Subsidiaries or
adopt
any shareholder rights plan or related rights agreement; (iii) split, combine
or
reclassify any outstanding shares of Telco Common Stock, or declare, set aside
or pay any dividend or distribution payable in cash, stock, property or
otherwise with respect to such shares; (iv) redeem, purchase or otherwise
acquire or offer to redeem, purchase or otherwise acquire any shares of its
capital stock; or (v) authorize or propose or enter into any contract,
agreement, commitment or arrangement with respect to any of the matters
prohibited by this Section 6.1(a);
(b) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization
or
division thereof or make any investment in another entity other than an entity
which is a wholly-owned Subsidiary of Telco as of the date hereof, except for
investments which do not exceed $5,000,000 for any single investment or series
of related investments, or $20,000,000 in the aggregate for all such
investments
in any 12-month period; (ii) except in the ordinary course of business and in
a
manner consistent with past practice, sell, pledge, dispose of, or encumber or
authorize or propose the sale, pledge, disposition or encumbrance of any
assets
of Telco or any of its Subsidiaries; (iii) authorize or make capital
expenditures which are in excess of the amounts shown in Schedule 6.1 hereto;
(iv) enter into any agreement, contract or commitment for the leasing of fiber
for a term in excess of 12 months or which involves payments by Telco or any
of
its Subsidiaries in an amount in excess of $5,000,000 individually or as part
of
a series of related transactions, except for agreements, contracts and
commitments of a type referred to in another clause of this subsection (b) and
not prohibited thereby because of the amount of such contract; or (v)
authorize,
enter into or amend any contract, agreement, commitment or arrangement with
respect to any of the matters prohibited by this Section 6.1(b);
41
(c) (i) incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly,
contingently or otherwise) for the obligations of any other person or issue or
sell any debt securities or warrants or rights to acquire any debt securities
of
Telco or any of its Subsidiaries or guarantee any debt securities of others
(other than Telco or any of its wholly-owned Subsidiaries) or enter into or
amend any contract, agreement, commitment or arrangement with respect to any
of
the foregoing, other than (A) in replacement for existing or maturing debt,
(B)
borrowings by Telco under its lines of credit existing on the date hereof up
to
the maximum amount permitted thereunder (as such maximum amount may be reduced
from time to time in accordance with the terms thereof) or (C) capital leases
or
other vendor financing for capital assets the acquisition of which is
otherwise
permitted under this Agreement; (ii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to the
wholly-owned subsidiaries of Telco or customary loans or advances to employees
in the ordinary course of business consistent with past practice and in
amounts
not material to the maker of such loan or advance); or (iii) mortgage or
pledge
any of its material assets, tangible or intangible, or create or suffer to
exist
any material lien thereupon;
(d) enter into (i) leveraged derivative contracts (defined
as
contracts that use a factor to multiply the underlying index exposure), or
(ii)
other derivative contracts except for the purpose of hedging known interest
rate
and foreign exchange exposures or otherwise reducing such Party's cost of
financing;
(e) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of Telco or any of its Subsidiaries (other than the Telco
Merger);
(f) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any Subsidiary;
(g) except as may be required by law or as contemplated by
this Agreement, enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation
right, restricted stock, performance unit, stock equivalent, stock purchase
agreement, pension, retirement, deferred compensation, employment, severance
or
other employee benefit agreement, trust, plan, fund, award or other
arrangement
(other than the hiring of employees in the ordinary course of business and not
pursuant to any employment contract) for the benefit or welfare of any
director,
officer or employee in any manner, or (except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a
42
material increase in benefits or compensation expense to Telco, and as
required
under existing agreements or in the ordinary course of business generally
consistent with past practice) increase in any manner the compensation or
fringe
benefits of any director, officer or employee or pay any benefit not required
by
any plan and arrangement as in effect as of the date hereof (including,
without
limitation, the granting of stock appreciation rights or performance units);
(h) make any payments (except in the ordinary course of
business and in amounts and in a manner consistent with past practice or as
otherwise required by Legal Requirements or the provisions of any Telco
Benefit
Plan) under any Telco Benefit Plan to any director or employee of, or
independent contractor or consultant to, Telco or any of its Subsidiaries,
adopt
or amend (except for amendments required by Legal Requirements) any Telco
Benefit Plan or enter into or amend any employment or consulting agreement or
grant or establish any new awards under any such existing Telco Benefit Plan
or
agreement;
(i) change in any material respect its tax or accounting
policies, methods or procedures except as required by GAAP;
(j) do any act or omit to do any act which would cause a
material breach of any material contract, commitment or obligation;
(k) take any action which could reasonably be expected to
adversely affect or delay the ability of any of the Parties to obtain any
approval of any governmental or regulatory body required to consummate the
transactions contemplated hereby;
(l) other than pursuant to this Agreement, take any action
to
cause the Telco Common Stock to cease to be quoted on the Nasdaq Stock Market;
(m) (i) issue SARs, new performance shares, restricted
stock,
or similar equity based rights; (ii) materially modify (with materiality to be
determined with respect to the Benefit Plan in question) any actuarial cost
method, assumption or practice used in determining benefit obligations, annual
expense and funding for any Benefit Plan, except to the extent required by
GAAP;
(iii) materially modify (with materiality to be determined with respect to the
Benefit Plan trust in question) the investment philosophy of the Benefit Plan
trusts or maintain an asset allocation which is not consistent with such
philosophy, subject to any ERISA fiduciary obligation; (iv) subject to any
ERISA
fiduciary obligation, enter into any outsourcing agreement, or any other
material contract relating to the Benefit Plans or management of the Benefit
Plan trusts; (v) offer any new or extend any existing retirement incentive,
"window" or similar benefit program; (vi) grant any ad hoc pension increase;
(vii)
43
establish any new or fund any existing "rabbi" or similar trust (except in
accordance with the current terms of such trust), or enter into any other
arrangement for the purpose of securing non-qualified benefits or deferred
compensation; (viii) adopt or implement any corporate owned life insurance; or
(ix) adopt, implement or maintain any "split dollar" life insurance program;
(n) take any action which would cause its representations
and
warranties contained herein to become inaccurate in any material respect;
(o) revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary course of
business or as required by GAAP;
(p) make or revoke any tax election or settle or compromise
any tax liability material to Telco and its Subsidiaries taken as a whole or
change (or make a request to any taxing authority to change) any material
aspect
of its method of accounting for tax purposes, other than as required by
applicable Legal Requirements;
(q) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes thereto)
of
Telco and its Subsidiaries or incurred in the ordinary course of business
consistent with past practice; or
(r) settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby.
SECTION 6.2 - Conduct of Business of EXCEL. (a) EXCEL
----------------------------
covenants and agrees that, between the date of this Agreement and the
Effective
Time, unless Telco shall otherwise consent in writing, and except as described
on Schedule 6.2 hereto or as otherwise expressly contemplated hereby, EXCEL
and
its Subsidiaries will use their commercially reasonable efforts to preserve
substantially intact their business organizations, to keep available the
services of those of their present officers, employees and consultants who are
integral to the operation of their businesses as presently conducted and to
preserve their present relationships with significant customers, significant
suppliers and with other persons with whom they have significant business
relations. In addition, EXCEL agrees that it will not split, combine or
reclassify any outstanding shares of EXCEL Common Stock, or
44
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise with respect to such shares.
(b)(i) EXCEL further covenants and agrees that it shall give
Telco not less than three business days' prior written notice (which notice
shall include such information as, in the reasonable judgment of EXCEL, is
reasonably necessary to evaluate the Proposed Activity) if EXCEL intends to
take
or engage in any of the following actions or activities (a "Proposed
Activity")
between the date of this Agreement and the Effective Time:
(A) except for the issuance of shares of EXCEL Common Stock
in
order to satisfy obligations under the EXCEL Stock Plans, issue any
shares of EXCEL Common Stock for, or any options, warrants,
convertible
securities or other rights of any kind to acquire shares of EXCEL
Common Stock which have an exercise or conversion price per share
that
is, less than the fair market value of such shares at the date of
issuance (which date of issuance shall, in the case of any
convertible
security, be the date of the issuance of such convertible security);
(B)(i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation or partnership or any equity
interest
therein, or any business, except for acquisitions involving
consideration that does not exceed $100,000,000 for any acquisition
or
series of related acquisitions; or (ii) sell or dispose of any assets
of EXCEL or any of its Subsidiaries in a single transaction or group
of
related transactions for consideration having a fair market value (as
determined by the Board of Directors of EXCEL in good faith) of more
than $100,000,000;
(C) adopt a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other reorganization
of
EXCEL or any of its Subsidiaries (other than the EXCEL Merger); or
(D) enter into any contract that would prevent or materially
delay migration of "1+ long distance traffic" to Telco's networks
following the Effective Time.
(ii) If Telco objects to any Proposed Activity of EXCEL set forth in
any notice delivered pursuant to clause (i) above, Telco may, within three
business days of its receipt of any such notice, notify EXCEL in writing of
such
objection. If EXCEL shall take or engage in, or enter into any binding written
agreement or letter of intent with respect to, a Proposed Activity with
respect
to which Telco shall have delivered a written notice of objection pursuant to
and in accordance with this Section 6.2(b)(ii) (written notice of which shall
be
given by EXCEL to Telco within three business days following the consummation
of
such
45
Proposed Activity or execution of such agreement or letter), Telco may, upon
five days' prior written notice to EXCEL, terminate this Agreement in
accordance
with Section 9.1(i) hereof unless, prior to the expiration of such five-day
period, EXCEL shall have notified Telco in writing that it has terminated or
rescinded the Proposed Activity; provided, however, that Telco must give the
required notice of its election to exercise such termination right, if at all,
within three business days following receipt of written notice from EXCEL that
it has taken or engaged in, or entered into any binding written agreement or
letter of intent with respect to, the Proposed Activity. Notwithstanding the
foregoing, nothing contained in this Section 6.2(b) shall prohibit or restrict
the ability of EXCEL to take or engage in any Proposed Activity.
SECTION 6.3 - No Solicitation. From and after the date
hereof,
---------------
Telco, without the prior written consent of EXCEL, will not, and will not
authorize or permit any of its Party Representatives (as defined in Section
7.5(b) hereof) to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information) or take any other action to
facilitate any inquiries or the making of any proposal which constitutes or
may
reasonably be expected to lead to an Acquisition Proposal (as defined below)
from any person, or engage in any discussion or negotiations relating thereto
or
accept any Acquisition Proposal; provided, however, that notwithstanding any
-------- -------
other provision hereof, Telco may (i) at any time prior to the time its
stockholders shall have voted to approve this Agreement, respond to, or engage
in discussions or negotiations with, a third party who (without any
solicitation, initiation, encouragement, discussion or negotiation, directly
or
indirectly, by or with Telco or its Party Representatives after the date
hereof)
seeks to initiate such discussions or negotiations and may furnish such third
party information concerning Telco and its business, properties and assets if,
and only to the extent that, (A)(x) the third party has first made a bona fide
Acquisition Proposal and (y) the Board of Directors of Telco shall conclude in
good faith, after considering applicable law, on the basis of oral or written
advice of outside counsel, that such action is necessary for the Board of
Directors of Telco to act in a manner consistent with its fiduciary duties
under
applicable law and (B) prior to first furnishing such information to or
entering
into discussions or negotiations with such person, Telco (x) provides prompt
notice to EXCEL to the effect that it is furnishing information to or entering
into discussions or negotiations with such person or entity and (y) receives
from such person or entity an executed confidentiality agreement in reasonably
customary form on terms not in the aggregate materially more favorable to such
person or entity than the terms contained in the Confidentiality Agreement (as
defined in Section 7.5(b) hereof), (ii) comply with Rule 14e-2 promulgated
under
the Exchange Act with regard to a tender or exchange offer, and/or (iii)
provided Telco terminates this Agreement pursuant to Section 9.1(h) hereof,
accept an Acquisition Proposal from a third party. Consistent with the
foregoing
provisions of this Section 6.3, Telco shall immediately cease and terminate
any
currently
46
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any persons conducted heretofore by Telco or its
Representatives with respect to the foregoing. Telco 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 Board of Directors of Telco shall conclude in good faith,
after considering applicable law, on the basis of oral or written advice of
outside counsel, that such action is necessary for the Board of Directors to
act
in a manner consistent with its fiduciary duties. Telco shall notify EXCEL
orally and in writing of any such inquiries, offers or proposals (including,
without limitation, the terms and conditions of any such proposal and the
identity of the person making it), within 48 hours of the receipt thereof,
shall
keep EXCEL informed of the status and details of any such inquiry, offer or
proposal, and shall give EXCEL two business days' advance notice of any
agreement to be entered into with any person making such inquiry, offer or
proposal. As used herein, "Acquisition Proposal" shall mean a proposal or
offer
for a tender or exchange offer, merger, consolidation or other business
combination involving Telco or any proposal to acquire in any manner a
substantial equity interest in, or all or substantially all of the assets of,
Telco. Notwithstanding the foregoing, Telco shall not be precluded from
informing a credible potential acquiror or its representative of the
requirements of this Section 6.3 upon receipt of an unsolicited inquiry from
such potential acquiror or representative.
SECTION 6.4 - Subsequent Financial Statements. Prior to the
-------------------------------
Effective Time, Telco shall (a) prior to making publicly available its
financial
results for any period, provide a copy of such financial results to EXCEL and
(b) timely file with the SEC each Annual Report on Form 10-K, Quarterly Report
on Form 10-Q and Current Report on Form 8-K required to be filed by it under
the
Exchange Act and the rules and regulations promulgated thereunder, and, prior
to
the filing thereof, provide a copy to EXCEL, and will promptly deliver to
EXCEL
copies of each such report filed with the SEC. As of their respective dates,
none of such reports shall contain any 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 respective audited financial statements and
unaudited
interim financial statements of Telco included in such reports will fairly
present the financial position of Telco and its Subsidiaries as at the dates
thereof and the results of their operations and cash flows for the periods
then
ended in accordance with GAAP applied on a consistent basis and, subject, in
the
case of unaudited interim financial statements, to normal year-end adjustments
and any other adjustments described therein.
47
SECTION 6.5 - Control of Operations. Nothing contained in
this
---------------------
Agreement shall give EXCEL or Telco, directly or indirectly, the right to
control or direct the operations of the other prior to the Effective Time.
Prior
to the Effective Time, each of EXCEL and Telco shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
ARTICLE VII - ADDITIONAL AGREEMENTS
SECTION 7.1 - Joint Proxy Statement and the Registration
------------------------------------------
Statement. (a) As promptly as practicable after the execution and delivery of
---------
this Agreement, the Parties shall prepare and file with the SEC, and shall use
all reasonable efforts to have cleared by the SEC, and promptly thereafter
shall
mail to the holders of record of shares of Telco Common Stock and EXCEL Common
Stock, the Joint Proxy Statement, provided, however, that EXCEL and Telco
shall
-------- -------
not mail or otherwise furnish the Joint Proxy Statement to their respective
stockholders unless and until:
(i) they have received notice from the SEC that
the
Registration Statement is effective under the 1933 Act;
(ii) Telco shall have received a letter from DLJ,
dated within two business days of the date of the first mailing of the Joint
Proxy Statement, to the effect set forth in Section 4.15 hereof;
(iii) EXCEL shall have received a letter from
Xxxxxx
Brothers, dated within two business days of the date of the first mailing of
the
Joint Proxy Statement, to the effect set forth in Section 5.11 hereof;
(iv) Telco shall have received a letter of Xxxxxx
Xxxxxxxx LLP, dated a date within two business days prior to the date of the
first mailing of the Joint Proxy Statement, and addressed to Telco, in form
and
substance reasonably satisfactory to Telco and customary in scope and
substance
for "cold comfort" letters delivered by independent public accountants in
connection with registration statements on Form S-4 with respect to the
financial statements of EXCEL included in the Joint Proxy Statement and the
Registration Statement; and
(v) EXCEL shall have received a letter of
Deloitte
& Touche, dated a date within two business days prior to the date of the first
mailing of the Joint Proxy Statement, and addressed to EXCEL, in form and
substance reasonably satisfactory to
48
EXCEL and customary in scope and substance for "cold comfort" letters
delivered
by independent public accountants in connection with registration statements
on
Form S-4 with respect to the financial statements of Telco included in the
Joint
Proxy Statement and the Registration Statement.
(b) The Parties will use their respective best efforts to
cause the letters referred to in clauses (iv) and (v) above to be delivered
and
will cooperate in the preparation of the Joint Proxy Statement and the
Registration Statement and in having the Registration Statement declared
effective as soon as practicable.
SECTION 7.2 - EXCEL and Telco Stockholders' Meetings and
------------------------------------------
Consummation of the Mergers. (a) At the earliest reasonably practicable time
---------------------------
following the execution and delivery of this Agreement, each of EXCEL and
Telco
shall promptly take all action necessary in accordance with Delaware Law and
Virginia Law, respectively, and its Certificate or Articles of Incorporation
and
Bylaws, to convene a meeting of their respective stockholders (each, a
"Stockholders Meeting"). The stockholder vote or consent required for approval
of each of the Mergers will be no greater than that contemplated by Sections
4.14(b) and 5.10(b) hereof. Each of EXCEL and Telco shall use all commercially
reasonable efforts to solicit from its respective stockholders proxies to be
voted at its Stockholders Meeting in favor of this Agreement pursuant to the
Joint Proxy Statement and each of EXCEL and Telco shall include in the Joint
Proxy Statement the recommendation of its Board of Directors in favor of this
Agreement and the Mergers; provided, however, that either Board of Directors
may
withdraw its recommendation if such Board of Directors shall conclude in good
faith, after considering applicable law, on the basis of oral or written
advice
of outside counsel, that such action is necessary for such Board of Directors
to
act in a manner consistent with its fiduciary duties. Each of the Parties
shall
take all other action necessary or, in the opinion of the other Parties,
reasonably advisable to promptly and expeditiously secure any vote or consent
of
stockholders required by Delaware Law or Virginia Law, as the case may be, and
such Party's Certificate or Articles of Incorporation and Bylaws, to effect
the
Mergers.
(b) Upon the terms and subject to the conditions hereof and
as
soon as practicable after the conditions set forth in Article VIII hereof have
been fulfilled or waived, each of the Parties shall execute in the manner
required by Delaware Law or Virginia Law, as the case may be, and deliver to
and
file with the Secretary of State of the State of Delaware or the Virginia
State
Corporation Commission, as the case may be, such instruments and agreements as
may be required by Delaware Law or Virginia Law, as the case may be, and the
Parties shall take all such other and further actions as may be required by
law
to make the Mergers effective. Prior to the filings referred to in this
Section
7.2(b),
49
a closing (the "Closing") will be held at the offices of Weil, Gotshal &
Xxxxxx
LLP (or such other place as EXCEL and Telco may mutually agree upon) for the
purpose of confirming all the foregoing. The Closing will take place upon the
fulfillment or waiver of all of the conditions to closing set forth in Article
VIII of this Agreement, or as soon thereafter as practicable (the date of the
Closing being herein referred to as the "Closing Date").
SECTION 7.3 - Additional Agreements. (a) Each of the Parties
---------------------
will comply in all material respects with all applicable laws and with all
applicable rules and regulations of any governmental authority in connection
with its execution, delivery and performance of this Agreement and the
transactions contemplated hereby. Each of the Parties agrees to use all
commercially reasonable efforts to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings, and to use all commercially reasonable efforts to take, or cause to
be
taken, all other actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement. Without limiting
the generality of the foregoing, each of EXCEL and Telco shall promptly
prepare
and file a Premerger Notification in accordance with the HSR Act, shall
promptly
comply with any requests for additional information, and shall use its
commercially reasonable efforts to obtain termination of the waiting period
thereunder as promptly as practicable. The Parties shall cooperate in
responding
to inquiries from, and making presentations to, regulatory authorities.
(b) Upon reasonable advance notice, Telco shall use its best
efforts to cause its senior management to attend (at the expense of EXCEL) and
participate in meetings with prospective members of and participants in any
syndicate of financial institutions being assembled to provide the Financing.
SECTION 7.4 - Notification of Certain Matters. Each of EXCEL
-------------------------------
and Telco shall give prompt notice to the other of the following:
(a) the occurrence or nonoccurrence of any event whose
occurrence or nonoccurrence would be likely to cause either (i) any
representation or warranty of such Party contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof
to
the Effective Time, or (ii) directly or indirectly, any Material Adverse
Effect
with respect to such Party;
(b) any material failure of such Party, or any officer,
director, employee or agent of any thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder;
50
(c) any facts relating to such Party which would make it
necessary or advisable to amend the Joint Proxy Statement or the Registration
Statement in order to make the statements therein not misleading or to comply
with applicable law;
(d) any notice of, or other communication relating to, a
default or event which, with notice or lapse of time or both, would become a
default, received by it or any of its Subsidiaries subsequent to the date of
this Agreement and prior to the Effective Time, under any contract or
agreement
material to the financial condition, properties, businesses or results of
operations of it and its Subsidiaries taken as a whole to which it or any of
its
Subsidiaries is a party or is subject; and
(e) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement;
provided, however, that the delivery of any notice pursuant to this Section
7.4
-----------------
shall not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice.
SECTION 7.5 - Access to Information. (a) From the date
hereof
---------------------
to the Effective Time, each of EXCEL and Telco shall, and shall cause its
respective Subsidiaries, and its and their officers, directors, employees,
auditors, counsel and agents to afford the officers, employees, auditors,
counsel and agents of the other Party complete access at all reasonable times
to
such Party's and its Subsidiaries' officers, employees, auditors, counsel
agents, properties, offices and other facilities and to all of their
respective
books and records, and shall furnish the other with all financial, operating
and
other data and information as such other Party may reasonably request.
(b) Each of EXCEL and Telco agrees that all information so
received from the other Party shall be deemed received pursuant to the
confidentiality agreement, dated May 7, 1997, heretofore executed and
delivered
by EXCEL and Telco (the "Confidentiality Agreement") and such Party shall, and
shall cause its Subsidiaries and each of its and their respective officers,
directors, employees, financial advisors and agents ("Party Representatives"),
to comply with the provisions of the Confidentiality Agreement with respect to
such information and the provisions of the Confidentiality Agreement are
hereby
incorporated herein by reference with the same effect as if fully set forth
herein.
SECTION 7.6 - Public Announcements. Except as required by
--------------------
applicable law or stock exchange requirements, EXCEL and Telco shall provide
the
other Party with a
51
reasonable opportunity to review and comment on all press releases and other
public statements with respect to the transactions contemplated hereby.
SECTION 7.7 - Indemnification; Directors' and Officers'Insurance.
--------------------------------------------------
(a) For a period of six years after the Effective Time, (i)
Holdings and Telco jointly and severally shall indemnify the directors and
officers of Telco who hold such positions at any time during the period from
the
date hereof through the Effective Time to the fullest extent to which Telco is
permitted to indemnify such officers and directors under its Articles of
Incorporation and Bylaws and applicable law (including, without limitation,
indemnification for actions in the right of Telco) and (ii) Holdings and EXCEL
jointly and severally shall indemnify the directors and officers of EXCEL who
hold such positions at any time during the period from the date hereof through
the Effective Time to the fullest extent to which EXCEL is permitted to
indemnify such officers and directors under its Certificate of Incorporation
and
Bylaws and applicable law.
(b) For a period of four years after the Effective Time,
Holdings shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Telco (provided
that
Holdings may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are no less advantageous) with
respect to claims arising from facts or events which occurred before the
Effective Time; provided, however, that Holdings shall not be obligated to
make
-----------------
annual premium payments for such insurance to the extent such premiums exceed
200% of the premiums paid as of the date hereof by Telco for such insurance
(which premium Telco represents and warrants to be $192,500 in the aggregate).
Notwithstanding anything to the contrary contained elsewhere herein, Holdings'
agreement set forth in Section 7.7(a) shall cover claims only to the extent
that
those claims are not covered under Telco's directors' and officers' insurance
policies (or any substitute policies permitted by this Section 7.7(b)).
SECTION 7.8 - Employee Benefit Plans.
----------------------
(a) Except as otherwise set forth in Section 2.8 hereof or
in
the Telco Shareholders Agreement, in the case of the EXCEL Benefit Plans
listed
on Schedule 7.8 hereto ("EXCEL Stock Plans") and the Telco Benefit Plans under
which the employees' interests are based upon EXCEL Common Stock and Telco
Common Stock, respectively, or the respective market prices thereof (but which
interests do not constitute stock options),
52
EXCEL and Telco agree that such interests shall, from and after the Effective
Time, be based on Holdings Common Stock in accordance with the EXCEL Exchange
Ratio (with respect to EXCEL Stock Plans) and the Telco Adjusted Exchange
Ratio
(with respect to Telco Benefit Plans).
(b) With respect to any EXCEL Stock Plans or Telco Benefit
Plans maintained or contributed to outside the United States for the benefit
of
non-United States citizens or residents, the principles set forth in this
Section 7.8 and on Schedule 6.1 shall apply to the extent the application of
such principles does not violate applicable foreign law.
(c) Without limiting the applicability of Sections 2.8 and
2.9
hereof, each of the Parties shall take all actions as are necessary to ensure
that EXCEL and Telco will not be at the Effective Time bound by any options,
SARs, warrants or other rights or agreements which would entitle any person,
other than Holdings, to own any capital stock of the Surviving Corporations or
to receive any payment in respect thereof, and all EXCEL Stock Plans and Telco
Benefit Plans conferring any rights with respect to Shares or other capital
stock of EXCEL or Telco, as the case may be, shall be deemed hereby to be
amended to be in conformity with this Section 7.8.
SECTION 7.9 - Employment Arrangements. Each of Xxxxx X.
Xxxxx,
-----------------------
Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx
(collectively, the "Principal Officers") shall, as of or prior to the
Effective
Time, enter into separate employment agreements with Telco and non-competition
agreements with Holdings in substantially the forms previously agreed by the
Parties (the "Employment Agreements" and the "Non-Competition Agreements",
respectively). None of the Principal Officers shall have any right, remedy or
cause of action under this Section 7.9, nor shall they be third party
beneficiaries of this Section 7.9.
SECTION 7.10 - Stock Exchange Listing. EXCEL shall use its
----------------------
best efforts to obtain, prior to the Effective Time, the approval for listing
on
the NYSE, effective upon official notice of issuance, of the shares of
Holdings
Common Stock into which the Shares will be converted pursuant to Article II
hereof and which will be issuable upon exercise of options pursuant to Section
2.8 hereof.
SECTION 7.11 - Post-Merger Holdings Board of Directors.
---------------------------------------
Following the Effective Time, the Board of Directors of Holdings shall consist
of the Board of Directors of EXCEL immediately prior to the Effective Time,
together with Xxxxx X. Xxxxx and Xxxxxx X. Xxxxx.
53
SECTION 7.12 - Registration Rights. Holdings shall not be
-------------------
required to amend or maintain the effectiveness of the Registration Statement
for the purpose of permitting resale of the shares of Holdings Common Stock
received pursuant hereto by the persons who may be deemed to be "affiliates"
of
EXCEL or Telco within the meaning of Rule 145 promulgated under the 1933 Act.
Notwithstanding the foregoing, at the Effective Time, Holdings will enter into
a
Registration Rights Agreement in substantially the form annexed hereto as
Appendix II with the parties listed therein.
SECTION 7.13 - Affiliates. Each of EXCEL and Telco (i) has
----------
disclosed to the other all persons who are, or may be, at the time this
Agreement is executed its "affiliates" for purposes of Rule 145 under the
Securities Act, and (ii) has delivered, or caused each person who is so
identified as an "affiliate" of it to deliver, to the other as promptly as
practicable but in no event later than the Closing Date, an EXCEL Affiliate
Letter or a Telco Affiliate Letter, as the case may be. EXCEL and Telco shall
notify each other from time to time of any other persons who then are, or may
be, such an "affiliate" and use all reasonable efforts to cause each
additional
person who is identified as an "affiliate" to execute an EXCEL Affiliate
Letter
or a Telco Affiliate Letter, as the case may be.
SECTION 7.14 - Blue Sky. EXCEL and Telco will use their best
--------
efforts to obtain prior to the Effective Time all necessary blue sky permits
and
approvals required to permit the distribution of the shares of Holdings Common
Stock to be issued in accordance with the provisions of this Agreement.
SECTION 7.15 - Compliance. (a) In consummating the Telco
----------
Merger and the transactions contemplated hereby, Telco shall comply in all
material respects with the provisions of the Exchange Act and the 1933 Act and
shall comply, and/or cause its subsidiaries to comply or to be in compliance,
in
all material respects, with all other applicable Laws.
(b) In consummating the EXCEL Merger and the transactions
contemplated hereby, EXCEL shall comply in all material respects with the
provisions of the Exchange Act and the 1933 Act and shall comply, and/or cause
its subsidiaries to comply or to be in compliance, in all material respects,
with all other applicable Laws.
54
ARTICLE VIII - CONDITIONS TO MERGERS
SECTION 8.1 - Conditions to Obligations of Each Party to
------------------------------------------
Effect the Mergers. The respective obligations of each Party to effect the
------------------
Mergers shall be subject to the following conditions:
(a) Stockholder Approval. The Mergers and this Agreement
--------------------
shall have been approved and adopted by the requisite vote of the stockholders
of each of EXCEL and Telco in accordance with Delaware Law and Virginia Law,
respectively;
(b) Legality. No federal, state or foreign statute, rule,
--------
regulation, executive order, decree or injunction shall have been enacted,
entered, promulgated or enforced by any court or governmental authority which
is
in effect and has the effect of making the Mergers illegal or otherwise
prohibiting the consummation of the Mergers;
(c) HSR Act. Any waiting period applicable to the
-------
consummation of the Mergers under the HSR Act shall have expired or been
terminated;
(d) Regulatory Matters. All authorizations, consents, orders
------------------
or approvals of, or declarations or filings with, and all expirations of
waiting
periods imposed by, any governmental body, agency or official (all of the
foregoing, "Consents") which are necessary for the consummation of the
transactions contemplated hereby, other than immaterial Consents the failure
to
obtain which would have no material adverse effect on the consummation of the
transactions contemplated hereby and no Material Adverse Effect on Holdings or
either of the Surviving Corporations, shall have been filed, have occurred or
have been obtained (all such permits, approvals, filings and consents and the
lapse of all such waiting periods being referred to as the "Requisite
Regulatory
Approvals") and all such Requisite Regulatory Approvals shall be in full force
and effect, provided, however, that a Requisite Regulatory Approval shall not
be
deemed to have been obtained if in connection with the grant thereof there
shall
have been an imposition by any state or federal governmental body, agency or
official of any condition, requirement, restriction or change of regulation,
or
any other action directly or indirectly related to such grant taken by such
governmental body, which would reasonably be expected to either (i) have a
Material Adverse Effect on any of Holdings or either of the Surviving
Corporations, or (ii) prevent the Parties from realizing in all material
respects the economic benefits of the transactions contemplated by this
Agreement that such Parties currently anticipate receiving therefrom;
(e) Registration Statement Effective. The Registration
--------------------------------
Statement shall have become effective prior to the mailing by each of EXCEL
and
Telco of the Joint Proxy
55
Statement to its respective stockholders, no stop order suspending the
effectiveness of the Registration Statement shall then be in effect, and no
proceedings for that purpose shall then be threatened by the SEC or shall have
been initiated by the SEC and not concluded or withdrawn;
(f) Blue Sky. All state securities or blue sky permits or
--------
approvals required to carry out the transactions contemplated hereby shall
have
been received; and
(g) Stock Exchange Listing. The shares of Holdings Common
----------------------
Stock into which the Shares will be converted pursuant to Article II hereof
and
the shares of Holdings Common Stock issuable upon the exercise of options
pursuant to Section 2.8 hereof shall have been duly approved for listing on
the
NYSE, subject to official notice of issuance.
SECTION 8.2 - Additional Conditions to Obligations of EXCEL.
---------------------------------------------
The obligations of EXCEL to effect the Mergers are also subject to the
fulfillment of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Telco contained in this Agreement shall be true and correct on
the
date hereof and (except to the extent such representations and warranties
speak
as of an earlier date) shall also be true and correct on and as of the Closing
Date, except for changes expressly contemplated by this Agreement, with the
same
force and effect as if made on and as of the Closing Date;
(b) Agreements, Conditions and Covenants. Telco
------------------------------------
shall have performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or
complied
with by Telco on or before the Effective Time;
(c) Certificates. EXCEL shall have received a certificate
------------
of an executive officer of Telco to the effect set forth in paragraphs (a)
and (b) above;
(d) Opinions. (i) EXCEL shall have received an opinion of
--------
Weil, Gotshal & Xxxxxx LLP, special counsel to EXCEL, dated as of the Closing
Date, in form and substance reasonably satisfactory to EXCEL, substantially to
the effect that, on the basis of the facts, representations and assumptions
set
forth in such opinion: (A) no gain or loss will be recognized for federal
income
tax purposes by Holdings, EXCEL or E-Sub as a result of the formation of
Holdings and E-Sub and the Merger of E-Sub with and into EXCEL; and (B) no
gain
or loss will be recognized for federal income tax purposes by the stockholders
of EXCEL upon their exchange of EXCEL Common Stock solely for Holdings Common
Stock pursuant to such Merger. In rendering such opinion, Weil, Gotshal &
Xxxxxx
LLP may
56
require and rely upon representations and covenants including those contained
in
certificates of officers of Holdings, EXCEL, Telco and others substantially in
the form attached hereto as Appendix III;
(ii) Telco shall have received the opinion
described
in Section 8.3(d)(i) hereof, in form and substance reasonably satisfactory to
EXCEL; and
(iii) EXCEL shall have received an opinion of
Xxxxxxx
& Berlin, special counsel to Telco, dated as of the Closing Date,
substantially
to the effect set forth in Appendix IV hereto.
(e) Affiliate Agreements. EXCEL shall have received the
--------------------
agreements required by Section 7.13 hereof to be delivered by the Telco
"affiliates," duly executed by each "affiliate" of Telco;
(f) No Material Adverse Change. Since December 31, 1996,
--------------------------
there shall not have occurred any event that has had or could reasonably be
expected to have a Material Adverse Effect on Telco or Holdings;
(g) Consents Under Telco Agreements. Telco shall have
obtained
-------------------------------
the consents listed on Schedule 8.2(g) hereto, as well as the consent or
approval of each other person whose consent or approval shall be required
under
any agreement or instrument in order to permit the consummation of the
transactions contemplated hereby except those which the failure to obtain
would
not, individually or in the aggregate, have a Material Adverse Effect on
Holdings or either of the Surviving Corporations; and
(h) Employment and Non-Competition Agreements. The
Employment
-----------------------------------------
Agreements and Non-Competition Agreements shall be in full force and effect.
SECTION 8.3 - Additional Conditions to Obligations of Telco.
---------------------------------------------
The obligations of Telco to effect the Mergers are also subject to the
fulfillment of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of EXCEL contained in this Agreement shall be true and correct on
the
date hereof and (except to the extent such representations and warranties
speak
as of an earlier date) shall also be true and correct on and as of the Closing
Date, except for changes expressly contemplated by this Agreement, with the
same
force and effect as if made on and as of the Closing Date;
57
(b) Agreements, Conditions and Covenants. EXCEL shall have
------------------------------------
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by
EXCEL on or before the Effective Time;
(c) Certificates. Telco shall have received a certificate
of
------------
an executive officer of EXCEL to the effect set forth in paragraphs (a) and
(b)
above;
(d) Tax Opinion. (i) Telco shall have received an opinion of
-----------
Xxxxxxx & Berlin, special counsel to Telco, dated as of the Closing Date, in
form and substance reasonably satisfactory to Telco, substantially to the
effect
that, on the basis of the facts, representations and assumptions set forth in
such opinion: (A) no gain or loss will be recognized for federal income tax
purposes by Holdings, Telco or T-Sub as a result of the formation of Holdings
and T-Sub and the Merger of T-Sub with and into Telco; and (B) no gain or loss
will be recognized for federal income tax purposes by the stockholders of
Telco
upon their exchange of Telco Common Stock for the Telco Merger Consideration
pursuant to such Merger, except (i) gain, if any, shall be recognized to the
extent of the Cash Consideration received, and (ii) with respect to cash
received in lieu of a fractional share interest in Holdings Common Stock. In
rendering such opinion, Xxxxxxx & Berlin may require and rely upon
representations and covenants including those contained in certificates of
officers of Holdings, Telco and EXCEL and others substantially in the form
attached hereto as Appendix V; and
(ii) EXCEL shall have received the opinion
described
in Section 8.2(d)(i) hereof, in form and substance reasonably satisfactory to
Telco;
(e) Affiliate Agreements. Telco shall have received the
--------------------
agreements required by Section 7.13 hereof to be delivered by the EXCEL
"affiliates," duly executed by each "affiliate" of EXCEL;
(f) No Material Adverse Change. Since December 31, 1996,
--------------------------
there shall not have occurred any event that has had or could reasonably be
expected to have a Material Adverse Effect on EXCEL or Holdings; and
(g) Consents Under EXCEL Agreements. EXCEL shall have
obtained
-------------------------------
the consent or approval of each person whose consent or approval shall be
required under any agreement or instrument in order to permit the consummation
of the transactions contemplated hereby except those which the failure to
obtain
would not, individually or in
58
the aggregate, have a Material Adverse Effect on Holdings or either of the
Surviving Corporations.
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 - Termination. This Agreement may be terminated
at
-----------
any time before the Effective Time, in each case as authorized by the
respective
Board of Directors of EXCEL or Telco:
(a) By mutual written consent of each of EXCEL and Telco;
(b) By either EXCEL or Telco if the Mergers shall not have
been consummated on or before December 31, 1997 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this
Section
-----------------
9.1(b) shall not be available to any Party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the Termination Date; and
provided, further, that if on the Termination Date the conditions to the
Closing
-----------------
set forth in Section 8.1(d) shall not have been fulfilled, but all other
conditions to the Closing shall be fulfilled or shall be capable of being
fulfilled, then the Termination Date shall be extended to May 31, 1998;
(c) By either EXCEL or Telco if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the Parties shall use their commercially reasonable
efforts to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable;
(d) By either EXCEL or Telco if the other shall have
breached,
or failed to comply with, in any material respect any of its obligations under
this Agreement or any representation or warranty made by such other Party
shall
have been incorrect in any material respect when made or shall have since
ceased
to be true and correct in any material respect, and such breach, failure or
misrepresentation is not cured within 30 days after notice thereof and such
breaches, failures or misrepresentations, individually or in the aggregate and
without regard to materiality qualifiers contained therein, results or would
reasonably be expected to result in a Material Adverse Effect on Holdings,
EXCEL
or Telco;
59
(e) By either EXCEL or Telco upon the occurrence of a
Material
Adverse Effect on the other or on Holdings or an event which could reasonably
be
expected to result in a Material Adverse Effect on the other or on Holdings;
(f) By either EXCEL or Telco if the Board of Directors of
the
other or any committee of the Board of Directors of the other (i) shall
withdraw
or modify in any adverse manner its approval or recommendation of this
Agreement
or the Mergers, (ii) shall fail to reaffirm such approval or recommendation
upon
such Party's request, (iii) shall approve or recommend any acquisition of the
other or a material portion of its assets or any tender offer for shares of
its
capital stock, in each case, other than by a Party or an affiliate thereof, or
(iv) shall resolve to take any of the actions specified in clause (i) above;
(g) By either EXCEL or Telco if any of the required
approvals
of the stockholders of EXCEL or of Telco shall fail to have been obtained at a
duly held stockholders meeting of either of such companies, including any
adjournments thereof;
(h) By Telco, prior to the approval of this Agreement by the
stockholders of Telco, upon two business days' prior notice to EXCEL, if, as a
result of an Acquisition Proposal (as defined in Section 6.3 hereof) received
by
Telco from a person other than a Party to this Agreement or any of its
affiliates, the Board of Directors of Telco determines in good faith, on the
basis of oral or written advice of outside counsel, that their fiduciary
obligations under applicable law require that such Acquisition Proposal be
accepted; provided, however, that (i) the Board of Directors of Telco shall
have
concluded in good faith, after considering applicable provisions of law, on
the
basis of oral or written advice of outside counsel, that such action is
necessary for the Board of Directors to act in a manner consistent with its
fiduciary duties under applicable law and (ii) prior to any such termination,
Telco shall, and shall cause its respective financial and legal advisors to,
negotiate with EXCEL to adjust the terms and conditions of this Agreement to
provide the opportunity for Telco to proceed with the transactions
contemplated
hereby; or
(i) By Telco, under the circumstances and in the manner
described in Section 6.2(b)(ii);
provided, however, that no termination shall be effective pursuant to Sections
-----------------
9.1(f), (g) or (h) under circumstances in which a Termination Fee is payable
by
Telco under Section 9.2(b) unless concurrently with such termination, such
termination fee is paid in full by Telco in accordance with the provisions of
Sections 9.2(b).
60
SECTION 9.2 - Effect of Termination. (a) In the event of
---------------------
termination of this Agreement as provided in Section 9.1 hereof, and subject
to
the provisions of Section 10.1 hereof, this Agreement shall forthwith become
void and there shall be no liability on the part of any of the Parties, except
(i) as set forth in this Section 9.2 and in Sections 4.10, 4.16, 5.9, 5.12 and
10.3 hereof, and (ii) nothing herein shall relieve any Party from liability
for
any willful breach hereof.
(b) If (i) this Agreement (A) is terminated by EXCEL
pursuant
to Sections 9.1(f) hereof or EXCEL or Telco pursuant to Section 9.1(g) hereof
because of the failure to obtain the required approval from the Telco
stockholders or by Telco pursuant to Section 9.1(h) hereof, or (B) is
terminated
as a result of Telco's material breach of Section 7.2 hereof which is not
cured
within 30 days after notice thereof to Telco, and (ii) at the time of such
termination or prior to the meeting of Telco's stockholders there shall have
been an Acquisition Proposal involving Telco or any of its Subsidiaries
(whether
or not such offer shall have been rejected or shall have been withdrawn prior
to
the time of such termination or of the meeting), Telco shall pay to EXCEL a
termination fee of $20 million (the "Termination Fee"). The Termination Fee
payable under this Section 9.2(b) shall be payable in cash at the date of
termination.
(c) Telco agrees that the agreements contained in Section
9.2(b) above are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. If Telco fails
to
promptly pay to EXCEL any fee due under such Section 9.2(b), Telco shall pay
the
costs and expenses (including reasonable legal fees and expenses) in
connection
with any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of any unpaid
fee
at the publicly announced prime rate of Citibank, N.A. from the date such fee
was required to be paid.
SECTION 9.3 - Amendment. This Agreement may be amended by
the
---------
Parties pursuant to a writing adopted by action taken by all of the Parties at
any time before the Effective Time; provided, however, that, after approval of
-----------------
the Mergers by the stockholders of EXCEL or Telco, whichever shall occur
first,
no amendment may be made which would (a) alter or change the amount or kinds
of
consideration to be received by the holders of Shares upon consummation of the
Mergers, (b) alter or change any term of the Certificate of Incorporation of
either of the Surviving Corporations or Holdings, or (c) alter or change any
of
the terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of securities of EXCEL or
Telco. This Agreement may not be amended except by an instrument in writing
signed by the Parties.
61
SECTION 9.4 - Waiver. At any time before the Effective Time,
------
any Party may (a) extend the time for the performance of any of the
obligations
or other acts of the other Parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a Party to any such
extension or waiver shall be valid only as against such Party and only if set
forth in an instrument in writing signed by such Party.
ARTICLE X - GENERAL PROVISIONS
SECTION 10.1 - Non-Survival of Representations, Warranties
and
-----------------------------------------------
Agreements. The representations, warranties and agreements in this Agreement
----------
shall terminate at the Effective Time or upon the termination of this
Agreement
pursuant to Section 9.1 hereof, as the case may be, except that (a) the
agreements set forth in Article I and Sections 2.4, 2.5, 2.6, 2.7, 7.7, 7.8
and
7.11 hereof and this Section 10.1 shall survive the Effective Time
indefinitely,
(b) the agreements and representations set forth in Sections 4.10, 4.16, 5.9,
5.12, 7.5(b), 9.2 and 10.3 hereof and this Section 10.1 shall survive
termination indefinitely and (c) nothing contained herein shall limit any
covenant or agreement of the Parties which by its terms contemplates
performance
after the Effective Time.
SECTION 10.2 - Notices. All notices and other communications
-------
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made as of the date of receipt and shall be delivered
personally or mailed by registered or certified mail (postage prepaid, return
receipt requested), sent by overnight courier or sent by telecopy, to the
Parties at the following addresses or telecopy numbers (or at such other
address
or telecopy number for a Party as shall be specified by like notice):
(a) if to EXCEL or any Merger Subsidiary:
EXCEL Communications, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: X. Xxxxxxxxxxx Dance, Esq.
Telecopy No.: (000) 000-0000
62
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxxx, Esq. and Xxxxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) if to Telco:
Telco Communications Group, Inc.
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxx & Berlin, Chartered, Washington, D.C.
0000 X Xxxxxx, X.X. Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
SECTION 10.3 - Expenses. Except as otherwise provided
herein,
--------
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Party incurring such
costs
and expenses, except that those expenses incurred in connection with the
printing of the Joint Proxy Statement and the Registration Statement, as well
as
the filing fees related thereto and any filing fee required in connection with
the filing of Premerger Notifications under the HSR Act, shall be shared
equally
by EXCEL and Telco.
SECTION 10.4 - Certain Definitions. For purposes of this
-------------------
Agreement, the following terms shall have the following meanings:
(a) "1933 Act" means the Securities Act of 1933, as the same
may be amended from time to time, and "Exchange Act" means the Securities
Exchange Act of 1934, as the same may be amended from time to time.
63
(b) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person.
(c) "control" (including the terms "controlled by" and
"under
common control with") means the possession, direct or indirect, of the power
to
direct or cause the direction of the management and policies of a person,
whether through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise.
(d) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as the same may be amended from time to time.
(e) "knowledge" of any Party shall mean the actual knowledge
of the executive officers of such Party.
(f) "Material Adverse Effect" means any change in or effect
on
the business of the referenced corporation or any of its Subsidiaries that is
or
will be materially adverse to the business, operations (including the income
statement), properties (including intangible properties), condition (financial
or otherwise), assets, liabilities or regulatory status of such referenced
corporation and its Subsidiaries taken as a whole, but shall not include the
effects of changes that are generally applicable in (A) the United States
economy or (B) the United States securities markets if, in any of (A) or (B),
the effect on EXCEL or Telco (as the case may be) and its respective
Subsidiaries, taken as a whole, is not disproportionate relative to the effect
on the other and its Subsidiaries, taken as a whole.
(g) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, entity or group (as defined
in
the Exchange Act).
(h) "Subsidiary" means any corporation or other legal entity
of which EXCEL or Telco, as the case may be (either alone or through or
together
with any other Subsidiary or Subsidiaries), owns, directly or indirectly, more
than 50% of the stock or other equity 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.
(i) "Telco Adjusted Exchange Ratio" means two times the
Telco
Exchange Ratio.
64
SECTION 10.5 - Headings. The headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 10.6 - Severability. If any term or other provision
of
------------
this Agreement is invalid, illegal or incapable of being enforced by any rule
of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties
shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the
end
that the transactions contemplated hereby are fulfilled to the maximum extent
possible.
SECTION 10.7 - Entire Agreement; No Third-Party
Beneficiaries
----------------------------------------------.
This Agreement constitutes the entire agreement and, except as expressly set
forth herein, supersedes any and all other prior agreements and undertakings,
both written and oral, among the Parties, or any of them, with respect to the
subject matter hereof and, except for Section 7.7 (Indemnification; Directors'
and Officers' Insurance), is not intended to confer upon any person other than
EXCEL, Telco, Holdings, E-Sub and T-Sub and, after the Effective Time, their
respective stockholders, any rights or remedies hereunder.
SECTION 10.8 - Assignment. This Agreement shall not be
----------
assigned by operation of law or otherwise.
SECTION 10.9 - Governing Law. This Agreement shall be
governed
-------------
by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed entirely within that
State, without regard to the conflicts of laws provisions thereof.
SECTION 10.10 - Counterparts. This Agreement may be executed
------------
in one or more counterparts, and by the different Parties in separate
counterparts, each of which when executed shall be deemed to be an original,
but
all of which shall constitute one and the same agreement.
65
IN WITNESS WHEREOF, the undersigned have caused this
Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
EXCEL COMMUNICATIONS, INC.
By: /s/ Xxxx X. XxXxxxx
---------------------------
Name: Xxxx X. XxXxxxx
Title: Executive Vice President
and Chief Financial Officer
NEW RES, INC.
By: /s/ Xxxx X. XxXxxxx
---------------------------
Name: Xxxx X. XxXxxxx
Title: Executive Vice President
TELCO COMMUNICATIONS GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------
Name: Xxxxxx X. Xxxxx
Title: President and Chief
Executive Officer
66
T-SUB, INC.
By: /s/ Xxxx X. XxXxxxx
--------------------------
Name: Xxxx X. XxXxxxx
Title: Executive Vice President
E-SUB, INC.
By: /s/ Xxxx X. XxXxxxx
--------------------------
Name: Xxxx X. XxXxxxx
Title: Executive Vice President
67
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