DEFINITIVE MERGER AGREEMENT
BY AND AMONG
VERIZON COMMUNICATIONS, INC.,
SPHERE MERGER CORP.,
ONEPOINT COMMUNICATIONS CORP.,
VENTURES IN COMMUNICATIONS II, L.L.C.
AND
VENCOM, L.L.C.
August 4, 2000
TABLE OF CONTENTS
ARTICLE I............................................................................ 1
1.1 Merger.......................................................................... 1
1.2 Effective Time.................................................................. 2
1.3 Effects of the Merger........................................................... 2
1.4 Effect on Capital Stock......................................................... 2
1.5 Exchange Agent for Warrant Shares and the Warrants.............................. 3
ARTICLE II........................................................................... 4
2.1 Merger Consideration............................................................ 4
2.2 Allocation of Merger Consideration.............................................. 4
2.3 Payments of Merger Consideration................................................ 5
2.4 Closing......................................................................... 5
ARTICLE III.......................................................................... 5
3.1 Organization, Standing and Power................................................ 5
3.2 Capital Structure............................................................... 6
3.3 Authority....................................................................... 7
3.4 Financial Statements............................................................ 8
3.5 Compliance with Law............................................................. 8
3.6 No Defaults..................................................................... 8
3.7 Litigation...................................................................... 8
3.8 Absence of Certain Changes or Events............................................ 9
3.9 Absence of Undisclosed Liabilities.............................................. 10
3.10 SEC Documents and Other Reports................................................. 10
3.11 Certain Agreements.............................................................. 10
3.12 Employee Benefit Plans.......................................................... 10
3.13 Major Contracts................................................................. 12
3.14 Taxes........................................................................... 13
3.15 Transactions With Affiliates, Officers and Directors............................ 13
3.16 Intellectual Property........................................................... 14
3.17 Restrictions on Business Activities............................................. 16
3.18 Title to Properties; Absence of Liens and Encumbrances; Condition of Equipment.. 16
3.19 FCC Matters and Other Governmental Authorities.................................. 16
3.20 Environmental Matters........................................................... 17
3.21 Insurance....................................................................... 17
3.22 Board and Stockholder Consent................................................... 18
3.23 Labor Matters................................................................... 18
3.24 Questionable Payments and Contributions......................................... 18
3.25 Brokers......................................................................... 19
3.26 Relationships................................................................... 19
3.27 Disclosure...................................................................... 19
3.28 No Assignment................................................................... 19
ARTICLE IV........................................................................... 20
4.1 Organization; Standing and Power................................................ 20
4.2 Authority....................................................................... 20
4.3 Litigation...................................................................... 20
4.4 No Defaults..................................................................... 20
4.5 Brokers......................................................................... 21
4.6 Disclosure...................................................................... 21
-i-
ARTICLE V................................................................................. 21
5.1 Information and Access............................................................... 21
5.2 Conduct of Business of the Parties................................................... 21
5.3 Negotiation With Others.............................................................. 23
5.4 Preparation of Filings............................................................... 23
5.5 Advice of Changes.................................................................... 24
5.6 Stockholder Approval................................................................. 24
5.7 Agreements to Cooperate.............................................................. 24
5.8 Consents............................................................................. 25
5.9 Public Announcements................................................................. 25
5.10 Notification of Certain Matters...................................................... 25
5.11 Subsequent Amendments of Disclosure Schedules........................................ 25
5.12 Preparation of Tender Offer for the Senior Notes; Voting Agreement................... 26
5.13 Divestiture of Certain Ownership Interests and Termination of Certain Relationships.. 26
5.14 Obligations of Stockholder Group..................................................... 26
5.15 FIRPTA............................................................................... 26
5.16 Termination of InterLATA; Other Business Activities.................................. 26
5.17 Actions to be Taken with Respect to Employee Payments................................ 26
5.18 Equity Funding Obligations........................................................... 27
5.19 Equity Funding by V.C. .............................................................. 27
5.20 Loan Agreement....................................................................... 27
ARTICLE VI................................................................................ 27
6.1 Conditions to Each Party's Obligation to Effect the Agreement........................ 27
6.2 Conditions of Obligations of VC and Merger Sub....................................... 28
6.3 Conditions of Obligation of OP....................................................... 29
ARTICLE VII............................................................................... 30
7.1 Termination.......................................................................... 30
7.2 Amendment............................................................................ 31
7.3 Effect of Termination................................................................ 31
7.4 Fees and Expenses.................................................................... 31
ARTICLE VIII.............................................................................. 31
8.1 Indemnification...................................................................... 31
8.2 Survival............................................................................. 32
8.3 Limitations on Amount................................................................ 32
8.4 Notice of Claim...................................................................... 33
8.5 Escrowed Funds; Promissory Note...................................................... 34
ARTICLE IX................................................................................ 35
9.1 Extension; Waiver.................................................................... 35
9.2 Notices.............................................................................. 35
9.3 Interpretation....................................................................... 36
9.4 Counterparts......................................................................... 36
9.5 Entire Agreement..................................................................... 36
9.6 (S)1060 Allocation................................................................... 36
9.7 No Transfer.......................................................................... 37
9.8 Severability......................................................................... 37
9.9 Other Remedies....................................................................... 37
9.10 Further Assurances................................................................... 37
9.11 Absence of Third Party Beneficiary Rights............................................ 37
9.12 Mutual Drafting...................................................................... 37
9.13 Governing Law........................................................................ 37
9.14 Assignment........................................................................... 37
-ii-
LIST OF EXHIBITS AND SCHEDULES
Exhibit 6.2(g)
Employment/Noncompete Agreements.......................................... 32
Schedule 2.2
Adjustments to Merger Consideration....................................... 4
Schedule 3.1
List or Subsidiaries...................................................... 6
Schedule 3.1(a)
Jurisdiction Where Entities are Authorized to do Business................. 6
Schedule 3.2
Equity Securities Holders................................................. 7
Schedule 3.4(a)
OP Financial Statements...................................................
Schedule 3.7
Litigation................................................................ 9
Schedule 3.8(d)
Changes in Capital Stock.................................................. 10
Schedule 3.8(e)
Compensation or Benefits Payments......................................... 10
Schedule 3.8(f)
Benefits.................................................................. 10
Schedule 3.8(g)
Acquisitions.............................................................. 10
Schedule 3.8(h)
Alterations............................................................... 10
Schedule 3.8(m)
Intellectual Property Rights.............................................. 11
Schedule 3.11
Other Agreements.......................................................... 11
Schedule 3.12(a)
OP Plans.................................................................. 12
Schedule 3.12 (e)
Non-qualified of Plans.................................................... 12
Schedule 3.12(f)
Exceptions to Benefit Plans............................................... 12
Schedule 3.12 (h)
Non-qualified Benefit Payments............................................ 13
Schedule 3.13
OP Major Contracts........................................................ 13
Schedule 3.14
Tax Returns............................................................... 14
Schedule 3.15
Interests of Officers and Directors....................................... 15
Schedule 3.16(b)
OP Intellectual Property Rights........................................... 16
Schedule 3.16(g)
Patent Infringement....................................................... 16
Schedule 3.16(h)
OP Intellectual Property Rights Subject to Orders, etc.................... 17
-iii-
Schedule 3.16(i)
Licenses, Sublicences and Other Agreements................................ 17
Schedule 3.16(j)
List of Parties Receiving Source Code..................................... 17
Schedule 3.17
Non-competition Provisions................................................ 18
Schedule 3.19
FCC Matters and Other Governmental Authorities............................ 18
Schedule 3.19(a)(i)
FCC Licenses.............................................................. 18
Schedule 3.19(b)
Governmental Authorizations and Licenses.................................. 19
Schedule 3.20
OP Environmental Matters.................................................. 19
Schedule 3.21
Insurance Policies........................................................ 20
Schedule 3.23(1)
Labor Matters............................................................. 20
Schedule 3.23(2)
Employees................................................................. 20
Schedule 3.25
Brokers................................................................... 21
Schedule 3.26
Relationships with Customers and Suppliers................................ 21
Schedule 5.17
Schedule 5.19
Use of Proceeds of VC Equity Investment................................... 30
Employee Payments......................................................... 29
Schedule 8.1(i)
Indemnification Claims.................................................... 35
Schedule 8.5(b)
Promissory Note........................................................... 6
-iv-
LIST OF DEFINED TERMS
Agreement................................................................... 1
Certificate of Merger....................................................... 2
Claims...................................................................... 35
Closing..................................................................... 6
Closing Date................................................................ 6
Code........................................................................ 12
Common Stock................................................................ 1
Common Stock Net Consideration.............................................. 4
Communications Acts......................................................... 8
Company FCC Licenses........................................................ 18
Confidentiality Agreement................................................... 23
DGCL........................................................................ 1
Dissenting Stockholders..................................................... 3
Effective Time.............................................................. 2
Employee Payment............................................................ 5
Environmental Laws.......................................................... 19
Environmental Permits....................................................... 19
ERISA....................................................................... 12
Escrow Agreement............................................................ 38
Escrowed Funds.............................................................. 5
Equity Funding Obligation................................................... 30
Exchange Act................................................................ 8
Exchange Agent.............................................................. 3
Exchange Ratio.............................................................. 5
FAA......................................................................... 8
FCC......................................................................... 8
FCC Rights.................................................................. 8
Final Payment Date.......................................................... 38
GAAP........................................................................ 9
Governmental Entity......................................................... 8
Hazardous Material.......................................................... 19
Holdback Amount............................................................. 6
HSR Act..................................................................... 8
Indebtedness................................................................ 4
Indemnitors................................................................. 4
Insurance Policies.......................................................... 20
Knowledge................................................................... 9
Licenses.................................................................... 19
Merger...................................................................... 1
Merger Consideration........................................................ 4
Merger Sub.................................................................. 1
Millennium Compliant........................................................ 17
Northern Trust.............................................................. 4
NT Debt Repayment........................................................... 4
Notice of Claim............................................................. 37
Notice Period............................................................... 37
OP.......................................................................... 1
OP Disclosure Schedule...................................................... 6
OP Financial Statements..................................................... 9
OP Intellectual Property Rights............................................. 16
-v-
OP Plans.................................................................... 12
OP Returns.................................................................. 14
OP SAR Plans................................................................ 7
Other Filings............................................................... 26
Preferred Stock............................................................. 1
Preferred Stock Consideration............................................... 2
Processes................................................................... 17
Purchasers.................................................................. 1
SBC......................................................................... 5
SEC Documents............................................................... 11
SEC Filings................................................................. 26
Securities Act.............................................................. 7
Senior Notes................................................................ 28
Software.................................................................... 17
Stockholders Group.......................................................... 1
Subsidiary.................................................................. 6
Surviving Corporation....................................................... 2
Tax......................................................................... 15
Taxable..................................................................... 15
Taxing Authority............................................................ 15
Third Party Claims.......................................................... 35
VC.......................................................................... 1
VC Disclosure Schedule...................................................... 22
VC Fees and Expenses........................................................ 34
VenCom...................................................................... 1
VenCom Broker Fee........................................................... 4
VenCom Group Agreement...................................................... 4
VenCom Service Fee.......................................................... 5
XXX XX...................................................................... 1
XXX XX Shares............................................................... 7
Warrant Consideration....................................................... 3
Warrant Agreement........................................................... 3
Warrant Shares.............................................................. 3
Warrants.................................................................... 1
-vi-
DEFINITIVE MERGER AGREEMENT
THIS DEFINITIVE MERGER AGREEMENT (this "Agreement"), dated as of August 4,
2000, is by and among VERIZON COMMUNICATIONS, INC., a Delaware corporation
("VC"), SPHERE MERGER CORP., a Delaware corporation and a wholly owned indirect
subsidiary of VC or its designee ("Merger Sub") (Merger Sub and VC are
collectively referred to herein as the "Purchasers"), ONEPOINT COMMUNICATIONS
CORP., a Delaware corporation ("OP"), VENTURES IN COMMUNICATIONS II, L.L.C., a
Delaware limited liability company ("XXX XX"), and VENCOM, L.L.C., an Illinois
limited liability company ("VenCom") (XXX XX, and VenCom are, collectively, the
"Stockholders Group".)
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of VC, Merger Sub and OP, have
approved and declared advisable the reverse subsidiary merger of the Merger Sub
with and into OP (the "Merger"), upon the terms and conditions set forth
herein, whereby each issued and outstanding share of Preferred Stock, par value
$1.00 per share, of OP (the "Preferred Stock"), each issued and outstanding
share of Common Stock, par value $.01 per share, of OP (the "Common Stock") and
each common stock warrant to purchase 0.635 shares of Common Stock (each a
"Warrant"), will be converted in accordance with the provisions of Section 1.4
of this Agreement;
WHEREAS, the respective Boards of Directors of VC and OP have determined
that the Merger is in furtherance of and consistent with their respective long-
term business strategies and is in the best interest of their respective
stockholders;
WHEREAS, VenCom holds an 89.1% interest in, and is manager, of XXX XX and
XXX XX holds all of the Preferred Stock and 1,010,075 shares of the Common
Stock;
WHEREAS, VenCom has the right to cause XXX XX to vote and dispose of all of
the Preferred Stock and 1,010,075 shares of the Common Stock, and, in order to
induce VC and Merger Sub to enter into this Agreement, VenCom is entering into
this Agreement;
WHEREAS, VenCom has agreed to cause XXX XX to vote all of the shares of
Preferred Stock and Common Stock that it owns in favor of the Merger, and in
consideration for such approval, will receive cash as provided herein; and
WHEREAS, the Stockholders Group have substantial knowledge and experience in
respect of OP and the business conducted by OP, and will derive substantial
economic benefit from the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements herein contained and intending to be legally bound,
the parties agree as follows:
Article I
The Merger; Effect on The Merger on The Capital Stock of Constituent
Corporations; Exchange of Certificates
1.1 Merger. Subject to and in accordance with the terms and conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware, as amended (the "DGCL"), Merger Sub will be merged with and into
OP (the "Merger") at the Effective Time (as defined in Section 1.2). Following
the Merger, the separate existence of Merger Sub shall cease, and OP shall
continue as the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Merger Sub in
accordance with the DGCL and shall continue under the name OnePoint
Communications Corp.
1.2 Effective Time. Concurrently with the Closing (as defined in Section
2.4), VC, Merger Sub and OP will cause a certificate of merger (the
"Certificate of Merger") prepared, in accordance with Section 251 of the DGCL,
to be filed with the Secretary of State of the State of Delaware. The Merger
shall become effective on the date and at the time the Certificate of Merger
has been duly filed with the Secretary of State of the State of Delaware (the
"Effective Time").
1.3 Effects of the Merger. At the Effective Time, (i) the separate existence
of Merger Sub shall cease and Merger Sub shall be merged with and into OP, (ii)
the Certificate of Incorporation of Merger Sub in effect immediately prior to
the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation; provided, however, that at the Effective Time, the Certificate of
Incorporation shall be amended so that the name of the Surviving Corporation
will be OnePoint Communications Corp., (iii) the Bylaws of Merger Sub shall be
the Bylaws of the Surviving Corporation, (iv) the directors of Merger Sub shall
be the directors of the Surviving Corporation, (v) the officers of Merger Sub
shall be the initial officers of the Surviving Corporation; and (vi) the Merger
shall, from and after the Effective Time, have all the effects provided by
applicable law.
1.4 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub or OP or the holder of any of
the following securities:
(a) Each share of capital stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and non-assessable share of common stock, par value
$0.01 per share, of the Surviving Corporation.
(b) All shares of Common Stock and Preferred Stock that are owned or
held in the treasury of OP shall be cancelled and no consideration shall be
delivered in exchange therefor.
(c) Each share of Preferred Stock that is issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive cash in an amount of $1,000.00 per share of Preferred Stock (the
"Preferred Stock Consideration"). All such shares of Preferred Stock, when
so converted, shall no longer be outstanding and shall automatically be
cancelled and returned and each holder of a certificate representing any
such shares, shall cease to have any rights with respect thereto, except
the right to receive cash in accordance with Section 2.3.
(d) Each share of Common Stock that is issued and outstanding
immediately prior to the Effective Time, including all shares of Common
Stock owned by VC or any of its affiliates, (other than shares of Common
Stock to be cancelled pursuant to Section 1.4(b) or any shares held by any
Dissenting Stockholder (as defined in Section 1.4(f)) shall be converted
into the right to receive cash equal to the Exchange Ratio (as defined in
Section 2.2(d)) per share. All such shares of Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
cancelled and returned and each holder of a certificate representing any
such shares, shall cease to have any rights with respect thereto, except
the right to receive cash in accordance with Section 1.5 or 2.2.
(e) Each Warrant that is outstanding immediately prior to the Effective
Time shall become and represent the right to receive cash on the same terms
and conditions as are applicable under that certain Warrant Agreement dated
May 21, 1998 by and between OP and Xxxxxx Trust and Savings Bank (the
"Warrant Agreement") as if the holder of such Warrant had exercised the
Warrant into Common Stock immediately prior to the Effective Time, minus
the exercise price of such Warrant, (the "Warrant Consideration"). All such
Warrants, when so converted, shall no longer be outstanding and shall
automatically be cancelled and returned and each holder of certificate
representing any such Warrants, shall cease to have any rights with respect
thereto, except the right to receive cash in accordance with Section 1.5.
(f) Any issued and outstanding share of Common Stock or Preferred Stock
held by persons who object to the Merger and comply with all the provisions
of the law of the State of Delaware concerning the rights of holders of
Common Stock to dissent from the Merger and require appraisal of their
shares of
A-2
Common Stock ("Dissenting Stockholders") shall not be converted pursuant to
Section 1.4(d), but shall become the right to receive such consideration as
may be determined to be due to such Dissenting Stockholder pursuant to the
law of the State of Delaware; provided, however, that shares of Common
Stock or Preferred Stock issued and outstanding at the Effective Time and
held by any Dissenting Stockholder who shall, after the Effective Time,
withdraw his demand for appraisal or lose his right of appraisal as
provided in such law, shall be deemed to be converted, as of the Effective
Time, into the right to receive cash in accordance with Section 1.4(d). OP
will give VC prompt notice of its receipt of any written demands for
purchase of any shares of Common Stock, together with copies of such
demands. OP shall permit VC to participate in all negotiations and
proceedings with respect to demands for purchase of any shares of Common
Stock, as may be demanded under the DGCL. OP shall not, except with prior
written consent of VC or as required under applicable laws (in which case
OP will notify VC), voluntarily make any payment with respect to any
demands for the purchase of Common Stock or offer to settle or settle any
such demands.
(g) Each fractional share of Common Stock, each fractional Warrant share
and each fractional Warrant shall be converted into the right to receive
cash equal to the Exchange Ratio per share times the fraction representing
such fractional share of Common Stock, Warrant Share or Warrant.
(h) The Merger Consideration (as defined in Section 2.1) delivered upon
the surrender for exchange of shares of capital stock of OP and the
Warrants in accordance with the terms hereof shall be deemed to have been
delivered in full satisfaction of all rights pertaining to such shares of
capital stock of OP and such Warrants. There shall be no further
registration of transfers on the stock transfer books of the shares of
capital stock of OP or the Warrants which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any certificates
for shares of capital stock of OP or any Warrants are presented to OP for
any reason, they shall be cancelled and exchanged as provided in this
Article I.
1.5 Exchange Agent for Warrant Shares and the Warrants.
(a) Prior to the Effective Time, Merger Sub shall appoint an exchange
agent (the "Exchange Agent") in connection with the exchange of (i) any
issued and outstanding shares of Common Stock that have been issued by OP
prior to the Effective Time as a result of the exercise of any Warrant (the
"Warrant Shares") and (ii) any Warrants.
(b) Immediately prior to the Effective Time, VC shall cause Merger Sub
to be sufficiently capitalized to pay the Merger Consideration (as defined
in Section 2.1).
(c) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of Warrant Shares or Warrants (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to Warrant Shares or Warrants shall pass, only
upon delivery of Warrant Shares or the Warrants to the Exchange Agent and
shall be in such form and have such other provisions as VC or Merger Sub
may reasonably specify) and (ii) instructions for use in effecting the
surrender of certificates representing the Warrant Shares or the Warrants
in exchange for Merger Consideration. Upon surrender of a certificate
representing Warrant Shares or Warrants for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by VC or Merger
Sub, together with such letter of transmittal, duly executed, the holder of
such certificate for Warrant Shares or Warrants shall be entitled to
receive in exchange therefor the amount of cash to be paid for such shares
under Section 1.4(d) or for such Warrants under Section 1.4(e) computed to
be due under this Agreement. The certificates or Warrants so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of
Warrants Shares or Warrants which is not registered on the transfer records
of OP, the cash to be paid in exchange for such shares pursuant to Section
1.4(e) may be delivered to a transferee if the certificate representing
Warrant Shares or Warrants are presented to the Exchange Agent and
accompanied by all documents required to evidence and effect such transfer
and to evidence that any applicable stock transfer taxes have been paid.
Until surrendered as contemplated by this Section 1.5, each certificate or
Warrant shall be deemed at any time after the Effective Time to represent
the right to receive upon such surrender the cash in exchange for such
share pursuant to Section 1.4(e) as provided by this Article I and the
provisions of DGCL.
A-3
Article II
Merger Consideration
2.1 Merger Consideration. The aggregate merger consideration payable by
Merger Sub in consideration of all of the issued and outstanding shares of
Common Stock, Preferred Stock, the Warrant Shares and the Warrants shall be
either (a) if the Equity Funding Obligation (as defined in Section 5.18) has
not been triggered, Two Hundred Forty-One Million Nine Hundred Thousand and
No/100 Dollars ($241,900,000.00); or (b) if the Equity Funding Obligation has
been triggered Two Hundred Fifty Million and No/100 Dollars ($250,000,000.00)
(either (a) or (b), as applicable, the "Merger Consideration").
2.2 Allocation of Merger Consideration. On the satisfaction of the terms
and conditions contained in this Agreement, as consideration for the
consummation of the Merger and the transactions contemplated herein, on the
Closing Date the Merger Consideration shall be reduced and allocated as
follows:
(a) $35,000,000 shall be allocated to XXX XX as the Preferred Stock
Consideration;
(b) An amount shall be allocated to the Surviving Corporation to be paid
immediately after the Closing to the VenCom Group, Inc. equal to the amount
that OP or the Surviving Corporation are legally obligated to pay pursuant
to Sections 4, 5 and 6 of that certain Professional Services Agreement
dated May 15, 1998 (the "VenCom Group Agreement") by and between OP and The
VenCom Group, Inc. for acting as broker in connection with the Merger (the
"VenCom Broker Fee"), which shall be set forth on Schedule 2.2.
(c) The remaining amount will be reduced dollar for dollar by the
following amounts. (The net amount after such reduction will be the "Common
Stock Net Consideration").
(i) The amount of all indebtedness, including all principal,
interest and any other amounts due or owing (the "Indebtedness"), of OP
to The Northern Trust Company ("Northern Trust") pursuant to (A) the
Amended and Restated Call On Term-Term Note dated April 29, 1998, as
amended, for a principal amount of $9,000,000 and (B) Call On Term-Term
Note dated August 24, 1999 for a principal amount of $15,000,000 (the
"NT Debt Repayment"), which amount will be determined in accordance
with Schedule 2.2;
(ii) If the Equity Funding Obligation has not been triggered, the
amount of any fees accrued for services previously provided to OP
pursuant to the VenCom Group Agreement (the "VenCom Service Fee");
(iii) The amount of any and all payments made to redeem or pay off
SBC Communications, Inc. or any direct or indirect subsidiary or
affiliate of SBC Communications, Inc. ("SBC") for any liability
incurred by OP or any Subsidiary (as defined in Section 3.1), in order
to release SBC from any guarantees or outstanding letters of credit
(excluding the cost of the transfer or replacement of letters of credit
or the replacement of guaranties issued with respect to leases that
will be transferred to or assumed by VC or any of its affiliates), to
obtain SBC's consent to this Agreement, the Merger and the transactions
contemplated hereby and to purchase any equity or other interest or
right that SBC holds in any of OP or its Subsidiaries or any payments
under any employment or consulting agreements between SBC or any of its
affiliates and OP or any of its affiliates from the date hereof up to
and including the Closing Date;
(iv) The amount of all third party fees and expenses (excluding the
Warrant Consideration) payable in connection with the exchange and
cancellation of the Warrant Shares and Warrants, which amount shall be
determined in accordance with Schedule 2.2;
(v) An amount set forth on Schedule 2.2 to be retained by Merger Sub
to pay the amounts as set forth in Schedule 5.17 in accordance with
Section 5.17 of this Agreement (the "Employee Payment");
(vi) Any amounts paid or expenses incurred by OP or any Subsidiary
pursuant to Section 5.13, which amount shall be determined in
accordance with Schedule 2.2.
A-4
(d) The Common Stock Net Consideration will then be divided by the total
number of issued and outstanding shares of Common Stock immediately prior
to the Effective Time (which will include without limitation the 111,125
Warrant Shares). The result will be the "Exchange Ratio."
2.3 Payments of Merger Consideration. On the satisfaction of the terms and
conditions contained in this Agreement, as consideration for the consummation
of the Merger and the transactions contemplated herein, on the Closing Date, VC
and Merger Sub shall pay the following amounts or deliver the following items:
(a) To Northern Trust by wire transfer in immediately available funds,
the amount of the NT Debt Repayment in exchange for the acknowledgement by
Northern Trust of the full satisfaction of the Indebtedness, the
cancellation of all promissory notes from OP or any Subsidiary to Northern
Trust and such other documentation required to release any liens held by
Northern Trust on or against OP's assets or properties.
(b) To the Exchange Agent by wire transfer in immediately available
funds, the Warrant Consideration to be paid to the holders of the Warrant
Shares or Warrants pursuant to Section 1.5.
(c) To the Escrow Agent (as defined in Section 8.5), $8,100,000 (the
"Escrowed Funds").
(d) To Xxxx Atlantic Investments, Inc. ("BAI") by wire transfer in
immediately available funds, an amount equal to 19,570 times the Exchange
Ratio.
(e) To the VenCom Group, Inc. by wire transfer in immediately available
funds, an amount equal to the VenCom Service Fee and the VenCom Broker Fee.
(f) To XXX XX, (i) by wire transfer in immediately available funds a net
amount equal to the sum of (A) the Preferred Stock Consideration and (B)
1,010,075 times the Exchange Ratio less (v) $100,000,000 (the "Holdback
Amount"), (w) an amount equal to 1.9% of the VenCom Broker Fee, (x)
$153,900, (y) the amount, if any, of any settlement or ruling prior to the
Closing Date relating to any Dissenting Stockholder and (z) the amount of
the Escrowed Funds and (ii) the Promissory Note (as defined in Section
8.5(b)).
Any amounts of the Merger Consideration not paid as provided herein will be
retained by Merger Sub or any affiliate of VC.
2.4 Closing. The closing under this Agreement (the "Closing") will take
place as soon as practicable on the first business day after satisfaction or
waiver of the latest to occur of the conditions set forth in Article VI (the
"Closing Date"), at the offices of Xxxx Xxxxx Xxxxx & Xxxxxx LLP, 0000 Xxxxxxxx
Xxxx Xxxxx, Xxxxx 0000, Xxxxx Xxxxxx, Xxxxxxxx 00000, unless a different date
or place is agreed to in writing by the parties hereto.
Article III
Representations And Warranties of Op And The Stockholders Group
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which identifies the section
and subsection to which such disclosure relates and which is delivered by OP to
VC prior to the execution of this Agreement (the "OP Disclosure Schedule"), OP
and the Stockholders Group, jointly and severally, represent and warrant to VC
and Merger Sub, as of the date hereof and as of the Closing Date, as set forth
below. Any disclosure set forth in a specific item on one schedule of the OP
Disclosure Schedule shall not be deemed to be a disclosure of the same item or
any other item in any other schedule.
3.1 Organization, Standing and Power. OP is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. Section 3.1 of
the Disclosure Schedule
A-5
sets forth all Subsidiaries (as defined below) in which OP has an equity
ownership position, including the name of such Subsidiary, its state of
organization, the number of authorized and issued shares of all classes of
securities and the amounts of securities by class OP directly or indirectly
owns. Section 3.1 of the Disclosure Schedule lists each corporation,
partnership, limited liability company, joint venture or other legal entity in
which OP owns, directly or indirectly, any stock or other equity interest. OP
has no direct or indirect equity interest in or loans to any partnership,
corporation, joint venture, business association or other entity except as
disclosed in Section 3.1 of the Disclosure Schedule. Except as disclosed on
Section 3.1 of the OP Disclosure Schedule, each of OP and its Subsidiaries is
duly qualified as a foreign corporation or other entity, as the case may be,
and is in good standing in each jurisdiction in which it does business. Section
3.1(a) of the Disclosure Schedule lists each jurisdiction in which each of OP
and its Subsidiaries currently conducts business. OP has delivered to VC
complete and correct copies of (a) OP's Amended and Restated Certificate of
Incorporation and Bylaws and all minutes of the Board of Directors since
inception, in each case as amended to the date hereof and (b) the constitutive
documents of each Subsidiary. As used in this Agreement, the word "Subsidiary"
means any corporation, partnership, limited liability company, joint venture or
other legal entity of which OP (either alone or through or together with any
other Subsidiary), (i) owns, directly or indirectly, 10% or more 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
legal entity; provided, however, that with respect to entities in which OP owns
less than a 25% equity interest, "Subsidiary" shall include only those entities
in which OP has the power to nominate or appoint one or more directors or has
the right to consent, or withhold consent, to any actions to be taken by such
entity, (ii) is a general partner, trustee or other entity or person performing
similar functions or (iii) has control (as defined in Rule 405 under the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act")).
3.2 Capital Structure. The authorized capital stock of OP consists of (a)
2,000,000 shares of Common Stock, (b) 35,000 shares of Preferred Stock and (c)
175,000 Warrants. There are 1,029,645 shares of Common Stock outstanding,
35,000 shares of Preferred Stock outstanding, 175,000 Warrants outstanding and
no Warrant Shares outstanding. Section 3.2 of the Disclosure Schedule lists all
holders of Common Stock, Preferred Stock, the Warrants and the Warrant Shares
and the amount each holder has of each equity security. XXX XX is the sole
registered and beneficial owner of all of the Preferred Stock and 1,010,075
shares of Common Stock (the "XXX XX Shares"), and has good and marketable title
to the XXX XX Shares free and clear of all security interests, liens, pledges,
charges, escrows, options, rights of first refusal, mortgages, indentures,
security agreements or other encumbrances and with no restriction on the voting
rights, transfer rights and the other incidents of record and beneficial
ownership pertaining to the XXX XX Shares. No stock options have been issued by
OP or any Subsidiary. Section 3.2 lists all participants in the Stock
Appreciation Rights Program dated as of January 1, 1998 (the "OP SAR Plan")
including the name of each participant, the date of each of the OP Disclosure
Schedule SAR granted, the number of shares subject to each SAR, the expiration
date of each such SAR and the price at which each such SAR may be exercised
under the OP SAR Plan and whether each SAR is fully vested or exercisable. None
of the SARs listed on Section 3.2 of the OP Disclosure Schedule are vested or
exercisable. None of the execution and delivery of this Agreement, the Merger
or the consummation of the transactions contemplated herein will accelerate the
vesting of any SAR or otherwise cause any SAR to become exercisable. No
Triggering Event (as defined in the OP SAR Plan has occurred, and none of the
execution and delivery of this Agreement, the Merger or the consummation of the
transactions contemplated herein will cause or result in a Triggering Event to
occur. Except as set forth on Section 3.2 of the OP Disclosure Schedule, all
outstanding shares of Common Stock and Preferred Stock are validly issued,
fully paid and nonassessable and not subject to preemptive rights created by
statute, OP's Amended and Restated Certificate of Incorporation or Bylaws or
any agreement to which OP is a party or by which OP may be bound. All of the
outstanding capital stock or equity securities of each Subsidiary, whether
owned directly or indirectly, is duly authorized, validly issued, fully paid
and nonassessable and is owned, directly or indirectly, by OP free and clear of
any liens, security interests, pledges, agreements, claims, charges or
encumbrances. Except for 111,125 shares of Common Stock reserved for issuance
in connection with the exercise of the Warrants and rights held by BAI, there
are no other options, warrants, calls, conversion rights, commitments or
agreements of any character to which OP or any of its Subsidiaries is a party
or by which OP or any of its Subsidiaries may be bound that do
A-6
or may obligate OP or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock
of OP or any equity interest in any Subsidiary, as the case may be, or that do
or may obligate OP or any of its Subsidiaries to grant, extend or enter into
any such option, warrant, call, conversion right, commitment or agreement.
Except any securities for which a registration is already effective, neither OP
nor any of its Subsidiaries are under any obligation to register under the
Securities Act of 1933, as amended (the "Securities Act") any of its presently
outstanding securities or any securities that may subsequently be issued.
3.3 Authority. Each of OP and the Stockholder Group has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder, and, subject to approval of this Agreement by the
stockholders of OP, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, the performance by OP and the
Stockholder Group of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of OP and the Stockholder Group, as the
case may be, except for approval of this Agreement by the stockholders of OP,
and have been unanimously approved by the Board of Directors of OP. No other
corporate proceeding on the part of OP, XXX XX or VenCom is necessary to
authorize this Agreement or the performance of OP's or the Stockholder Group's
obligations hereunder or the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by OP and the
Stockholder Group and constitutes the legal, valid and binding obligation each
of OP and the Stockholder Group enforceable against each of OP and the
Stockholder Group in accordance with its respective terms, except as
enforcement may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies is subject to discretion of the court before
which any proceeding therefor may be brought. Subject to satisfaction of the
conditions set forth in Article VI, the execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated
hereby will not conflict with or result in any violation of any material
statute, law, rule, regulation, judgment, order, decree, or ordinance
applicable to OP, its Subsidiaries or the Stockholder Group or their respective
properties or assets, or conflict with or result in any breach or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of a material lien or
encumbrance on any of the properties or assets of OP or its Subsidiaries
pursuant to (a) any provision of OP's Amended and Restated Certificate of
Incorporation or Bylaws, (b) the Operating Agreement dated as of April 29, 1998
of XXX XX, or (c) any material agreement, contract, note, mortgage, indenture,
lease, instrument, permit, concession, franchise or license to which OP or any
of its Subsidiaries or the Stockholder Group is a party or by which OP or any
of its Subsidiaries or the Stockholder Group or any of their respective
properties or assets may be bound or affected, except where such conflict,
violation, breach or default would not have a material effect on OP or any of
its Subsidiaries or the consummation of the transaction contemplated herein. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency, commission, regulatory authority
or other governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required by or with respect to OP or any of its
Subsidiaries or the Stockholder Group in connection with the execution and
delivery of this Agreement by OP or the Stockholder Group or the consummation
by OP or the Stockholder Group of the transactions contemplated hereby except
for, (s) to the extent applicable, the filing of a premerger notification
report by OP under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (t) compliance with any applicable requirements with
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (u) any
regulatory approval under the Communications Act of 1934 and the
Telecommunications Act of 1996 ("Communications Acts"), together with the
rules, regulations and published decisions of the Federal Communications
Commission ("FCC"), (v) compliance with Federal Aviation Administration ("FAA")
regulations, (w) compliance with any applicable requirements of state and local
public utility commissions or similar entities, (y) the approval of OP's
stockholders, (x) any appropriate documents with the relevant authorities of
other states in which OP and its Subsidiaries are qualified to do business, (y)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under the laws of
A-7
any foreign country, and (z) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made (individually or in
the aggregate) would not have a material adverse effect on OP.
3.4 Financial Statements. OP has furnished VC with audited balance sheets of
OP as of its fiscal year end for 1997, 1998 and 1999, and audited statements of
income for the fiscal years then ended as disclosed on Section 3.4 of the OP
Disclosure Schedule and the unaudited balance sheets as of March 31, 2000, and
unaudited statements of income for the quarter March 31, 2000 then ended and
from the preceding comparative year's quarters (collectively, the "OP Financial
Statements"). The OP Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied ("GAAP") (except
as may be indicated in the notes thereto), and fairly present in all material
respects the financial position of OP as at the dates thereof and the results
of their operations and changes in financial position for the periods then
ended, except in the case of the unaudited financial statements, for the
omission of footnote information and for customary year-end adjustments. The
reserves set forth in the OP Financial Statements were established in
accordance with GAAP, and to the Knowledge of OP, are adequate. There has been
no change in OP's accounting policies, except as described in the notes to the
OP Financial Statements.
3.5 Compliance with Law. Each of OP and its Subsidiaries is in material
compliance and have conducted its business so as to materially comply with all
laws, rules and regulations, judgments, decrees or orders of any Governmental
Entity applicable to its operations or with respect to which compliance is a
condition of engaging in the business thereof. Except for violations which do
not, or could not reasonably be expected to have a material adverse impact on
OP's or any Subsidiary's business, operations or financial condition and which
can be remedied through routine filings without penalty or costs exceeding
$2,000 for any individual filing or $50,000 in the aggregate, none of OP or its
Subsidiaries are in violation of any permits, franchises, licenses,
authorizations, certificates, variances, exemptions, orders, registrations or
consents that are granted by any Governmental Entity. There are no judgments or
orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration) against OP or any of its
Subsidiaries or against any of its respective properties or businesses. To the
Knowledge of OP and each of its Subsidiaries, no investigation or review by any
Governmental Entity with respect to OP or any of its Subsidiaries in relation
to any alleged violation of law or regulation is pending or threatened, nor has
any Governmental Entity indicated an intention to conduct the same. As used in
this Agreement, "Knowledge" shall mean the knowledge of each of Xxxxx X.
Xxxxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx, Xxxxxx
Xxxx, Xxx Xxxxxxx, Xxxxxxxx Xxxxxxx and Xxxxxxx Xxxxxxxx, as the case may be,
assuming in each case reasonable investigation.
3.6 No Defaults. Neither OP nor any of its Subsidiaries have received notice
that OP or such Subsidiary is currently or would be with the passage of time,
(i) in violation of any provision of its applicable constituency documents or
(ii) in default or violation of any term, condition or provision of (A) any
judgment, decree, order, injunction or stipulation applicable to OP or its
Subsidiaries or (B) any material agreement, note, mortgage, indenture,
contract, lease or instrument, permit, concession, franchise or license to
which OP or its Subsidiaries is a party or by which OP's or any Subsidiary's
properties or assets may be bound.
3.7 Litigation. Except as shown on Section 3.7 of the OP Disclosure
Schedule, there is no action, suit, proceeding, claim or investigation pending
or, to the Knowledge of OP or any Subsidiary, threatened, against OP or any of
its Subsidiaries or that challenges or seeks to prevent, enjoin, alter or delay
the Merger or any of the transactions contemplated hereby. Section 3.7 of the
OP Disclosure Schedule sets forth with respect to each pending action, suit,
proceeding, claim or investigation to which OP or any Subsidiary is a party to
the extent that the aggregate damages claimed for all such complaints exceed
$50,000, the forum, the parties thereto, a brief description of the subject
matter thereof and the amount of damages claimed. OP has made available to VC
correct and complete copies of all correspondence prepared by its counsel for
OP's independent public accountants in connection with the last three completed
audits of OP's financial statements and any such correspondence since the date
of the last such audit. Except as set forth on Section 3.7 of the OP
Disclosure Schedule, neither OP nor any of its Subsidiaries are 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
A-8
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 Governmental Entity, nor
has OP or any of its Subsidiaries been advised that any Governmental Entity is
considering issuing or requesting any of the foregoing.
3.8 Absence of Certain Changes or Events. Since March 31, 2000, each of OP
and its Subsidiaries has conducted its business in the ordinary course and
there has not occurred:
(a) Any material change with respect to OP or its Subsidiaries or their
respective business, operations, assets or financial condition;
(b) Any amendments or changes in the Amended and Restated Certificate of
Incorporation or Bylaws of OP or the constituency documents of any
Subsidiary other than in connection with a consolidation of its business
units prior to the date of this Agreement in the manner previously
disclosed to VC;
(c) Any damage, destruction or loss, whether covered by insurance or
not, in excess of $250,000 in the aggregate or $50,000 for any single
occurance ;
(d) Except as set forth on Section 3.8(d) of the OP Disclosure Schedule,
any redemption, repurchase or other acquisition of shares of capital stock
of OP or any Subsidiary or any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any equity securities of OP or such Subsidiary;
(e) Except as set forth on Section 3.8(e) of the OP Disclosure Schedule,
any increase in or modification of the compensation or benefits payable or
to become payable by OP or its Subsidiaries to any of its directors or
employees, except in the ordinary course of business consistent with past
practice;
(f) Except as set forth in Section 3.8(f) of the OP Disclosure Schedule,
any increase in or modification of any bonus, pension, insurance or other
employee benefit plan, payment or arrangement (including, but not limited
to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of its employees, except in
the ordinary course of business consistent with OP's past practice;
(g) Except as set forth in Section 3.8(g) of the OP Disclosure Schedule,
any acquisition or sale of a material amount of property or assets of OP or
any of its Subsidiaries;
(h) Except as set forth in Section 3.8(h) of the OP Disclosure Schedule,
any alteration in any term of any outstanding security of OP or any of its
Subsidiaries or the issuance of any equity interest or any agreement to
issue any equity interest in OP or any of its Subsidiaries;
(i) Any (A) incurrence, assumption or guarantee by OP or any of its
Subsidiaries of any debt for borrowed money; (B) issuance or sale of any
securities convertible into or exchangeable for debt securities of OP or
any of its Subsidiaries; or (C) issuance or sale of options or other rights
by OP or any Subsidiary or any affiliate of OP or any Subsidiary to acquire
from OP or such Subsidiary, directly or indirectly, debt securities of OP
or any of its Subsidiaries or any securities convertible into or
exchangeable for any such debt securities;
(j) Any creation or assumption by OP or any of its Subsidiaries of any
mortgage, pledge, security interest or lien or other encumbrance on any
asset of OP or any of its Subsidiaries (other than liens arising under
existing lease financing arrangements or liens arising in the ordinary
course of OP's or any of its Subsidiaries' business which in the aggregate
are not material and liens for taxes not yet due and payable) which are
being contested in good faith and for which adequate reserves have been
established;
(k) Any making of any loan, advance or capital contribution to or
investment in any person, other than (A) travel loans or advances made in
the ordinary course of business of OP or any of its Subsidiaries or (B)
loans to entities affiliated with its employees prior to the date of this
Agreement which do not exceed in the aggregate $25,000;
A-9
(l) Any entry into, amendment of, relinquishment, termination or non-
renewal by OP or any of its Subsidiaries of any contract, lease
transaction, commitment or other right or obligation requiring aggregate
payments by OP or any of its Subsidiaries in excess of $25,000 other than
in the ordinary course of business;
(m) Except as set forth on Schedule 3.8(m), any transfer or grant of a
right under the OP Intellectual Property Rights (as defined in Section
3.16), other than those transferred or granted in the ordinary course of
business consistent with past practice;
(n) Except in connection with the consummation of the transactions
contemplated under the Illinois Cable Agreement (as defined in Section
5.2(a)(vi)), any transfer or grant of a right under the FCC Rights (as
defined in Section 3.19);
(o) Any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to
organize any employees of OP or any of its Subsidiaries; or
(p) Any agreement or arrangement made by OP or any of its Subsidiaries
to take any action which, if taken prior to the date hereof, would have
made any representation or warranty set forth in this Section 3.8 untrue or
incorrect as of the date when made.
3.9 Absence of Undisclosed Liabilities. None of OP, any of its Subsidiaries
or any of its affiliates have any liabilities or obligations (whether absolute,
accrued or contingent, and whether or not determined or determinable), of a
character which, under generally accepted accounting principles, should be
accrued, shown or disclosed on a balance sheet of OP (including the footnotes
thereto) except liabilities (i) adequately provided for in the OP Balance
Sheet, (ii) incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected on the OP Balance
Sheet or (iii) incurred since the date of the OP Balance Sheet which are not,
individually or in the aggregate, material.
3.10 SEC Documents and Other Reports. OP has filed all required documents
with the SEC since September 9, 1998 (the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and, at the respective times they were filed, none of the SEC Documents
contained any untrue statement of a material fact or omitted 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 consolidated financial statements (including, in each case, any
notes thereto) of OP included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as of their respective
dates of filing, were prepared in accordance with generally accepted accounting
principles ("GAAP") (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto).
3.11 Certain Agreements. Except as set forth in Section 3.11 of the
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby or thereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, bonus or otherwise) becoming due to any director, officer,
employee or Consultant of OP or any of its Subsidiaries, under any OP Plan (as
defined in Section 3.12) or otherwise (ii) increase any benefits otherwise
payable under any OP Plan, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
3.12 Employee Benefit Plans.
(a) Section 3.12(a) of the OP Disclosure Schedule contains a true and
complete list of each deferred compensation, incentive compensation and
equity compensation plan; "welfare" plan, fund or program (within the
meaning of section 3(a) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")); "pension" plan, fund or program (within the
meaning of section 3(2) of ERISA); each employment or termination
agreement; each severance agreement; and each other employee benefit plan,
A-10
fund, program, agreement, or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by OP or its
Subsidiaries, whether written or to the Knowledge of OP or any Subsidiaries
or any of their respective officers and directors oral, for the benefit of
any employee or former employee of OP or its Subsidiaries (collectively,
the "OP Plans").
(b) With respect to each OP Plan, OP has heretofore delivered or made
available to VC true and complete copies of OP Plan and any amendments
thereto (or if OP Plan is not a written OP Plan, a description thereof),
any related trust or other funding vehicle, any service provider agreement
or investment management agreement the most recently filed IRS Form 5500
(including all attachments), and the most recent determination letter, if
any, received from the Internal Revenue Service with respect to each OP
Plan intended to qualify under section 401 of the Internal Revenue Code of
1986, as amended, (the "Code".) OP has no unfunded liabilities with respect
to any OP Plan as of the end of OP's most recent fiscal year or quarter
that are not reflected on OP's financial statements for such fiscal year or
quarter.
(c) OP has not at any time maintained, or contributed to, any defined
benefit plan covered by Title IV of ERISA, or incurred any liability under
Title IV of ERISA, and the transactions contemplated by this Agreement will
not subject OP to any liability under Title IV of ERISA. OP has not at any
time maintained, or contributed to, any multiemployer plan described in
section 3(37) of ERISA, or incurred any withdrawal liability under ERISA,
and the transactions contemplated by this Agreement will not subject OP to
any withdrawal liability under ERISA.
(d) Each OP Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including, but
not limited to, ERISA and the Code.
(e) Except as set forth in Section 3.12(e) of the OP Disclosure
Schedule, each OP Plan intended to be "qualified" within the meaning of
section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service, and nothing has occurred since the date
of such determination that would adversely affect the qualified status of
any such OP Plan.
(f) Except as set forth in Section 3.12(f) or 3.12(a) of the OP
Disclosure Schedule, no OP Plan provides medical, surgical,
hospitalization, or death or similar benefits (whether or not insured) for
employees or former employees of OP or any Subsidiary for periods extending
beyond their retirement or other termination of service, other than (i)
coverage mandated by applicable law, (ii) death benefits under any "pension
plan," or (iii) benefits the full cost of which is borne by the current or
former employee (or his or her beneficiary).
(g) There are no pending, or to the Knowledge of OP or any of its
Subsidiaries, anticipated claims by or on behalf of any OP Plan, by any
participant, beneficiary or fiduciary covered under any such OP Plan, or
otherwise involving any such OP Plan (other than routine claims for
benefits). To the Knowledge of OP or any of its Subsidiaries, no proceeding
of any governmental entity, and no OP Plan is the subject of any pending
application for administrative relief under any voluntary compliance
program or closing agreement program of the Internal Revenue Service or the
Department of Labor. To the Knowledge of OP or any of its Subsidiaries, no
person or entity has engaged in any "prohibited transaction" (as such term
is defined in ERISA and the Code) with respect to any OP Plan. OP has
remitted or paid all contributions to any OP Plan within the time required
by applicable law, and if applicable, within the deadline for claiming a
tax deduction for the year with respect to the contribution.
(h) Except as set forth in Section 3.12(h) of the OP Disclosure
Schedule, the consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee or officer of OP to severance pay,
unemployment compensation or any other payment, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee or officer, (iii) require assets to be set aside or other forms of
security to be provided with respect to any liability under any OP Plan, or
(iv) result in any "excess parachute payment" (within the meaning of
Section 280G of the Code) under any OP Plan.
A-11
3.13 Major Contracts. Except as shown on Section 3.13 of the OP Disclosure
Schedule, neither OP nor any of its Subsidiaries are a party to or subject to:
(a) Any union contract or any employment contract or arrangement
providing for future annual compensation greater than $25,000 per year,
written or oral, with any officer, consultant, director or employee which
is not terminable by it on 30 days' notice or less without penalty or
obligation to make payments related to such termination, other than (A) (in
the case of employees other than executive officers) such agreements as are
not materially different from standard arrangements offered to employees
generally in the ordinary course of business consistent with OP's past
practices, copies of which have been provided to VC and (B) such agreements
as may be imposed or implied by law;
(b) Any plans, contracts or arrangements which require payments by OP or
its Subsidiaries whether written or oral, providing for bonuses, pensions,
deferred compensation, severance pay or benefits, retirement payments,
profit-sharing, or the like;
(c) Except for any agreement with parties owning multi-residential unit
properties permitting OP or any Subsidiary the right to access such
property to offer and provide certain services, any joint venture contracts
or arrangements or any other agreements which have involved or are expected
to involve a sharing of profits with other persons;
(d) Any existing agreement, distribution agreement, volume purchase
agreement, or other similar agreement in which the annual amount involved
in 1999 exceeded or is expected to exceed in fiscal 2000 in the aggregate
$50,000 in amount or pursuant to which OP has granted or received exclusive
marketing rights related to any product, group of products or territory;
(e) Any lease for real property or personal property in which the amount
of payments which OP or any Subsidiary is required to make on an annual
basis exceeds $10,000;
(f) Any material agreement, contract, mortgage, indenture, lease,
instrument, license, franchise, permit, concession, arrangement, commitment
or authorization which may be, by its terms, terminated or breached by
reason of the execution of this Agreement, or the transactions contemplated
hereby or thereby;
(g) Except for trade indebtedness incurred in the ordinary course of
business, any instrument evidencing or related in any way to indebtedness
in excess of $100,000 incurred in the acquisition of companies or other
entities or indebtedness in excess of $100,000 for borrowed money by way of
direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, or otherwise;
(h) Any license agreement, either as licensor or licensee (excluding
nonexclusive licenses granted to customers or end-users in the ordinary
course of business) expected by management to involve the payment of at
least $10,000 in the aggregate;
(i) Any contract containing covenants purporting to limit OP or any
Subsidiary's ability to compete in any line of its business in any
geographic area;
(j) Any written management agreement or consulting agreement; or
(k) Any other agreement, contract or commitment which is material to OP
aggregating on an annual basis of over $50,000.
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license and commitment listed on
Section 3.13 of the OP Disclosure Schedules is valid and binding on OP or its
Subsidiaries, as the case may be, and is in full force and effect, and neither
OP nor any of its Subsidiaries, nor to the Knowledge of OP or any of its
Subsidiaries, any other party thereto, has breached any material provision of,
or is in material default under the terms of, any such agreement, contract,
mortgage, indenture, plan, lease, instrument, permit, concession, franchise,
arrangement, license or commitment.
A-12
3.14 Taxes.
(a) Except as shown on Section 3.14 of the OP Disclosure Schedule all
Tax (as defined below) returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports)
required to be filed with any Taxing Authority (as defined below) with
respect to any Taxable period ending on or before the Closing Date, by or
on behalf of OP (collectively, the "OP Returns"), have been or will be
filed when due in accordance with all applicable laws (including any
extensions of such due date), and all amounts shown due thereon have been
paid or have been fully accrued on the OP Financial Statements in
accordance with generally accepted accounting principles. Except to the
extent provided for or disclosed in the OP Financial Statements (including
notes thereto), the OP Returns correctly reflect in all material respects
(and, as to any OP Returns not filed as of the date hereof but filed prior
to the Closing, will correctly reflect in all material respects) the Tax
liability and status of OP. OP has withheld and paid to the applicable
financial institution or Taxing Authority all amounts required to be
withheld. None of the OP Returns pertaining to U.S. federal income tax
filed with respect to Taxable years of OP have been examined. OP (or any
member of any affiliated or combined group of which OP has been a member)
has not granted any extension or waiver of the limitation period applicable
to any OP Returns which are still open for assessment. There is no claim,
audit, action, suit, proceeding, or investigation now pending or, to the
Knowledge of OP, threatened against or with respect to OP in respect of any
Tax or assessment. No notice of deficiency or similar document of any Tax
Authority has been received by OP, and there are no liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon
and related expenses) with respect to the issues that have been raised (and
are currently pending) by any Tax Authority that could, if determined
adversely to OP, materially affect the liability of OP for Taxes in other
Taxable (as defined below) periods. Neither OP, nor any other person on
behalf of OP, has entered into nor will it enter into any agreement or
consent pursuant to Section 341(f) of the Code. There are no liens for
Taxes upon the assets of OP except liens for current Taxes not yet due. OP
has not been nor will be required to include any material adjustment in
Taxable income for any Tax period (or portion thereof) pursuant to Section
481 or 263A of the Code or any comparable provision under state or foreign
Tax laws as a result of transactions, events or accounting methods employed
prior to the Closing Date. There is no contract, agreement, plan or
arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of OP that, individually or
collectively, could give rise to the payment of any amount that would not
be deductible pursuant to Section 162 (as unreasonable compensation) or
pursuant to Section 280G of the Code. OP has provided or made available to
VC or its designated representative true and correct copies of all material
Tax Returns, and, as reasonably requested by VC prior to or following the
date hereof, information statements, reports, work papers, Tax opinions and
memoranda and other Tax data and documents. OP has not been within the five
year period preceding the date hereof a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code.
OP is not a party to (or obligated under) any Tax allocation, Tax
distribution, tax sharing, tax indemnity or similar agreement or
arrangement with respect to any tax (including without limitation any such
agreement or arrangement imposed by operation of law).
(b) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (A) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any Governmental Entity (a
"Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign), (B) any liability for the payment of any amounts of
the type described in (A) as a result of being a member of an affiliated,
consolidated, combined or unitary group for any Taxable period and (C) any
liability for the payment of any amounts of the type described in (A) or
(B) as a result of any express or implied obligation to indemnify any other
person.
3.15 Transactions With Affiliates, Officers and Directors. Except (i) as set
forth on Section 3.15 of the OP Disclosure Schedule and (ii) for normal
advances to employees consistent with past practices, payment of
A-13
compensation for employment to employees consistent with past practices, and
participation in scheduled OP Plans, OP has not purchased, acquired or leased
any property or services from, or sold, transferred or leased any property or
services to, or loaned or advanced any money to, or borrowed any money from, or
entered into or been subject to any management, consulting or similar agreement
with, or engaged in any other significant transaction with any officer,
director or stockholder of OP, any Subsidiary or any of their respective
affiliates except on such terms and conditions similar to those entered into on
an arm's length transaction. Except as set forth on Section 3.15 of the OP
Disclosure Schedule, no affiliate of OP is indebted to OP for money borrowed or
other loans or advances, and OP is not indebted to any such affiliate except on
such terms and conditions similar to those entered into on an arm's length
transaction. Except as set forth on Section 3.15 of the OP Disclosure Schedule,
no officer or director of OP or any "affiliate" or "associate" (as those terms
are defined in Rule 405 promulgated under the Securities Act) of any such
person has had, either directly or indirectly, interest in: (i) any person or
entity which purchases from or sells, licenses or furnishes to OP and any
Subsidiary any goods, property, technology or intellectual or other property
rights or services; (ii) any contract or agreement to which OP or any
Subsidiary is a party or by which it may be bound or affected; or (iii) any
property, real or personal, tangible or intangible, used in or pertaining to
its business, including any interest in the OP Intellectual Property Rights or
OP FCC Rights, except for rights as a stockholder, and except for rights under
any OP Plan.
3.16 Intellectual Property.
(a) OP or its Subsidiaries own, or are licensed or otherwise entitled to
exercise, without restriction, all rights to, all patents, trademarks,
trade names, service marks, copyrights, master work rights, trade secret
rights and other intellectual property rights, and any applications or
registrations therefor, and all master works, net lists, schematics,
technology, source code, know-how, computer software programs and all other
tangible and intangible information or material, that are used or currently
proposed to be used in the business of OP as currently conducted or as
currently proposed to be conducted (collectively, the "OP Intellectual
Property Rights").
(b) Section 3.16(b) of the OP Disclosure Schedule lists all patents,
registered and material unregistered copyrights, trade names, trademarks,
service marks and other company, product or service identifiers and mask
work rights, and any applications or registrations therefor, included in
the OP Intellectual Property Rights, together with a list of all of OP's
currently marketed products and an indication as to which, if any, of such
products have been registered for copyright protection with the United
States Copyright Office and any foreign offices. Schedule 3.16(b) contains
a complete and accurate list of all licenses and sublicenses pertaining to
any OP Intellectual Property Rights other than (i) "shrink-wrap" and (ii)
other licenses for software (A) which are not customized or modified to a
specific user's requirements, (B) which are made available in the market-
place for a standard, fixed fee, (C) for which the parties customarily
execute a standard form of license agreement for which total payments of
such license do not exceed $1,000 and (D) as to which if for any reason
such license may be terminated or is terminable, OP or VC could reasonably
obtain a license from the licensor.
(c) Neither OP nor any of its Subsidiaries are, nor as a result of the
execution and delivery of this Agreement or the performance of OP's or such
Subsidiary's obligations hereunder will be, in violation of, or lose any
rights pursuant to any license, sublicense or agreement described in the OP
Disclosure Schedule.
(d) OP or OP Affiliates is the owner or licensee of, with all necessary
right, title and interest in and to (free and clear of any liens,
encumbrances or security interests), the OP Intellectual Property Rights
and has rights (and except as set forth in the OP Disclosure Schedule is
not contractually obligated to pay any compensation to any third party in
respect thereof) in an amount in excess of $10,000 to the use thereof or
the material covered thereby in connection with the services or products in
respect of which the OP Intellectual Property Rights are being used.
(e) No claims with respect to the OP Intellectual Property Rights have
been asserted or, to the Knowledge of OP, after reasonable investigation,
are threatened by any person, and OP knows of no
A-14
claims (i) to the effect that the manufacture, sale or use of any product
as now used or offered or proposed for use or sale by OP or OP Affiliates
infringes any copyright, patent, trade secret, or other intellectual
property right, (ii) against the use by OP or its Subsidiaries of any OP
Intellectual Property Rights, or (iii) challenging the ownership, validity
or effectiveness of any of the OP Intellectual Property Rights.
(f) All patents and registered trademarks, service marks, and other
company, product or service identifiers and registered copyrights held by
OP are valid and subsisting.
(g) Except as set forth on Section 3.16(g) of the OP Disclosure
Schedule, to the Knowledge of OP, there has not been and there is not now
any material unauthorized use, infringement or misappropriation of any of
the OP Intellectual Property Rights by any third party, including without
limitation any employee or former employee of OP; neither OP nor any of its
Subsidiaries have been sued or charged in writing as a defendant in any
claim, suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or other intellectual
property rights and which has not been finally terminated prior to the date
hereof; there are no such charges or claims outstanding; and to the
Knowledge of OP, neither OP nor any of its Subsidiaries have no
infringement liability with respect to any patent, trademark, service xxxx,
copyright or other intellectual property right of another.
(h) Except as set forth on Section 3.16(h) of the OP Disclosure
Schedule, no OP Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting in any manner
the licensing thereof by OP. Neither OP nor any of its Subsidiaries have
entered into any agreement to indemnify any other person against any charge
of infringement of any OP Intellectual Property Right. OP and its
Subsidiaries have not entered into any agreement granting any third party
the right to bring infringement actions with respect to, or otherwise to
enforce rights with respect to, any OP Intellectual Property Right. OP has
the exclusive right to file, prosecute and maintain all applications and
registrations with respect to the OP Intellectual Property Rights.
(i) Section 3.16(i) of the OP Disclosure Schedule is a list of all
licenses, sublicenses and other agreements as to which OP or its
Subsidiaries are a party and pursuant to which OP or its Subsidiaries or
any other person is authorized to use any OP Intellectual Property Right,
or OP or its Subsidiaries is using any third-party technology rights,
including the identity of all parties thereto, a description of the nature
and subject matter thereof, the applicable royalty or other consideration
and the term thereof, and including the extent to which rights with respect
to OP Intellectual Property Rights survive termination or expiration
thereof (copies of all licenses, sublicenses, and other agreements
identified pursuant to this clause (i) have previously been delivered by OP
to VC).
(j) Section 3.16(j) of the OP Disclosure Schedule is a list of all
parties to whom OP or its Subsidiaries has delivered copies of OP source
code, whether pursuant to an escrow arrangement or otherwise, or parties
who have the right to receive such source code.
(k) Each item of computer software and programs (excluding personal
computer software generally available to the public), software in process,
computer operating systems and applications used in OP's business
("Software") is "Millennium Compliant". For the purposes of this Agreement,
"Millennium Compliant" means:
(i) the functions, calculations and other computing processes of the
Software (collectively, "Processes") perform in an accurate manner
regardless of the date in time on which the Processes are actually
performed and regardless of the date input to the Software, whether
before, on or after January 1, 2000, and whether or not the dates are
affected by leap years;
(ii) the Software accepts, stores, sorts, extracts, sequences and
otherwise manipulates date inputs and date values, and return and
display date values, in an accurate manner regardless of the dates used
on or after January 1, 2000;
(iii) the Software will function without interruptions caused by the
date in time on which the Processes are actually performed or by the
date input to the Software on or after January 1, 2000;
A-15
(iv) the Software accepts and responds to two (2) digit year and
four (4) digit year date input in a manner that resolves any
ambiguities as to the century in a defined, predetermined and accurate
manner;
(v) he Software displays, prints and provides electronic output of
date information in ways that are ambiguous as to the determination of
the century; and
(vi) the Software has been tested to determine whether it is
Millennium Compliant. OP shall notify VC immediately of the results of
any tests or any claim or other information that indicates the Software
is not Millennium Compliant.
3.17 Restrictions on Business Activities. Except as set forth on Schedule
3.17 of the OP Disclosure Schedule, there is no material agreement, judgment,
injunction, order or decree binding upon OP or any of its Subsidiaries which
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of OP or its Subsidiaries, any
acquisition of property by OP or any of its Subsidiaries or the conduct of
business by OP or its Subsidiaries as currently conducted or as currently
proposed to be conducted by OP or its Subsidiaries. None of the matters
disclosed on Section 3.17 of the OP Disclosure Schedule will have an adverse
impact on OP's or any Subsidiary's ability to conduct its business, as
identified in the business plan described in Section 3.27 or in the business
plan developed jointly by VC and OP nor would any covenants not to compete be
applicable to VC or any affiliate of VC other than OP or any Subsidiary.
3.18 Title to Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) OP or its Subsidiaries have good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of their
tangible properties and assets, real, personal and mixed, used in their
business, free and clear of any liens, charges, pledges, security interests
or other encumbrances, except as reflected in the OP Financial Statements
or except for such imperfections of title and encumbrances, if any, which
are not substantial in character, amount or extent, and which do not
materially detract from the value, or interfere with the present use, of
the property subject thereto or affected thereby. OP or any Subsidiary does
not own any interest in any real property.
(b) The equipment owned or leased by OP or its Subsidiaries is, taken as
a whole, (A) adequate for the conduct of the business of OP or its
Subsidiaries consistent with their past practice, (B) suitable for the uses
to which it is currently employed, (C) in good operating condition, (D)
regularly and properly maintained, (E) not obsolete, dangerous or in need
of renewal or replacement, except for renewal or replacement in the
ordinary course of business, and (F) free from any defects.
3.19 FCC Matters and Other Governmental Authorities.
(a) FCC Matters.
(i) Except as set forth on Section 3.19 of the OP Disclosure
Schedule, OP and its Subsidiaries and affiliates hold, and are
qualified and eligible to hold, all licenses, permits and other
authorizations issued by the FCC, or any state or local public utility
commissions or similar entities that are listed in Section 3.19(a)(i)
of the OP Disclosure Schedule (the "Company FCC Licenses"), and OP FCC
Licenses comprise all licenses, permits and other authorizations issued
to OP by the FCC or any state or local public utility commission or
similar entities ("FCC Rights"). Neither OP nor any of its Subsidiaries
have applications for a license, permit, or other authorization or for
approval or consent pending before the FCC.
(ii) OP FCC Licenses are valid and in full force and effect as set
forth in Section 3.19(a)(i) of the OP Disclosure Schedule, and OP is
not and has not been delinquent in payment on or in default under any
installment obligation owed to the United States Treasury or the FCC in
connection with OP FCC Licenses.
(iii) All reports and applications required by the Communications
Acts or required to be filed with the FCC by OP or its Subsidiaries
have been filed and are accurate and complete in all material respects.
A-16
(iv) OP or its Subsidiaries are, and have been, in compliance in all
material respects with OP FCC Licenses and the Communications Acts.
(v) Except as set forth on Section 3.19 of the OP Disclosure
Schedule, there is not pending as of the date hereof any application,
petition, objection, pleading or proceeding with the FCC or any public
service commission or similar body having jurisdiction or authority
over OP or its Subsidiaries which questions the validity of or contests
any Company FCC License or which, if accepted or granted, or concluded
adversely, could result in (as applicable) the revocation,
cancellation, suspension, dismissal, denial or any materially adverse
modification of any Company FCC License or imposition of any
substantial fine or forfeiture against OP or such Subsidiary.
(b) Other Governmental Authorizations and Licenses. Section 3.19(b) of
the OP Disclosure Schedule lists all other governmental authorizations and
licenses held by OP, its Subsidiaries and any of its affiliate. OP or such
Subsidiary is the holder of all licenses, authorizations, permits,
concessions, certificates and other franchises of any Governmental Entity
required to operate its business, (collectively, the "Licenses"). The
Licenses are in full force and effect. There is not now pending, or to the
Knowledge of OP is there threatened, any action, suit, investigation or
proceeding against OP, any such Subsidiary or affiliate before any
Governmental Entity with respect to the Licenses, nor is there any issued
or outstanding notice, order or complaint with respect to the violation by
OP, any Subsidiary or affiliate of the terms of any License or any rule or
regulation applicable thereto.
3.20 Environmental Matters. Except as shown on Schedule 3.20:
(a) There is no substance that is regulated by any Governmental Entity
or that has been designated by any Governmental Entity to be radioactive,
toxic, hazardous or otherwise a danger to health or the environment (a
"Hazardous Material") present in, on or under any property that OP or any
Subsidiary or any affiliate has at any time owned, operated, occupied or
leased. Neither OP nor any of its Subsidiaries has caused any Hazardous
Material to be present in, on or under any property that OP or any
Subsidiary or any affiliate has leased, operated or occupied. To its
knowledge, no Hazardous Material are or ever have been present in, on or
under any property leased, operated or occupied by OP, any Subsidiary or
any affiliate.
(b) None of OP, its Subsidiaries or affiliates have transported, stored,
used, manufactured, released or exposed its employees or any other person
to any Hazardous Material in violation of any applicable statute, rule,
regulation, order or law. There have been no releases or leakages or other
discharge from the above-ground tanks identified on Schedule 3.20.
(c) Each of OP, its Subsidiaries and affiliates has obtained all
permits, licenses and other authorizations ("Environmental Permits")
required to be obtained by any of them under the laws of any Governmental
Entity relating to pollution or protection of the environment
(collectively, "Environmental Laws"). All Environmental Permits are in full
force and effect. Each of OP, its Subsidiaries and affiliates is (A) in
compliance with all terms and conditions of the Environmental Permits and
(B) in compliance in all respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules
and timetables contained in the Environmental Laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder. None of OP, its
Subsidiaries or affiliates have not received any notice or is aware of any
past or present condition or practice of the businesses conducted by OP,
its Subsidiaries or affiliates which forms or could form the basis of any
claim, action, suit, proceeding, hearing or investigation against OP, its
Subsidiaries or affiliates arising out of the manufacture, processing,
distribution, use, treatment, storage, spill, disposal, transport, or
handling, or the emission, discharge, release or threatened release into
the environment, of any Hazardous Material.
3.21 Insurance. Section 3.21 of the OP Disclosure Schedule is a list of all
insurance policies and fidelity bonds OP or its Subsidiaries maintains covering
the assets, business, equipment, properties, operations,
A-17
employees, officers and directors of OP (collectively, the "Insurance
Policies"). Except as set forth on Section 3.21 of the OP Disclosure Schedule,
each of OP and the Subsidiaries is, (and has been continuously since its
organization or acquisition by OP), 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 OP and the Subsidiaries
during such time period. There is no claim by OP or any of its Subsidiaries
pending under any of the material Insurance Policies as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums payable under all such Insurance Policies have been paid,
and OP and its Subsidiaries are otherwise in compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). None of OP or its Subsidiaries knows of any threatened
termination of, or material premium increase with respect to, any of its
Insurance Policies, other than ordinary increases measured based solely upon
increases in the number of employees of OP and its Subsidiaries.
3.22 Board and Stockholder Consent. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved and declared advisable by the board of directors
of OP. The board of directors of OP has directed that this Agreement and the
transactions contemplated hereby be submitted to OP's stockholders for adoption
at a stockholders meeting or by written consent as permitted under its Bylaws
and the DGCL and, except for the adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of OP Common Stock,
no other corporate proceeding on the part of OP is necessary to approve and
adopt this Agreement and to consummate the transactions contemplated hereby and
thereby.
3.23 Labor Matters. Except as shown on Section 3.23(1) of the OP Disclosure
Schedule, each of OP and its Subsidiaries is in compliance in all respects with
all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment and wages and
hours and occupational safety and health and employment practices, and is not
engaged in any unfair labor practice. Except as shown in Section 3.23(l) of the
OP Disclosure Schedule, in the past three years, none of OP or its Subsidiaries
has received any notice from any Governmental Entity, and there has not been
asserted before any Governmental Entity, any claim, action or proceeding to
which OP or its Subsidiaries is a party or involving OP or its Subsidiaries,
and there is neither pending nor, to the Knowledge of OP or any of its
Subsidiaries, threatened any investigation or hearing concerning OP or its
Subsidiaries arising out of or based upon any such laws, regulations or
practices. Section 3.23(2) of the OP Disclosure Schedule is a complete list of
all employees of OP or its Subsidiaries along with their present compensation.
Neither OP or any Subsidiary is subject of any material proceeding seeking to
compel it to bargain with any labor union or labor organization nor is there
pending or, to the Knowledge of OP, threatened in writing, nor has there been
for the past five years, any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving it or any of its or their subsidiaries, except
in each case as is not, individually or in the aggregate, reasonably likely to
have a material adverse effect on OP or its Subsidiaries.
3.24 Questionable Payments and Contributions. Neither OP or its Subsidiaries
nor, to the Knowledge of OP or any of its Subsidiaries, any director, officer
or other employee of OP or its Subsidiaries, has: (i) made any payments or
provided services or other favors in the United States of America or in any
foreign country in order to obtain preferential treatment or consideration by
any Governmental Entity or commercial entity whether an United States of
America or foreign entity with respect to any aspect of the business of OP or
its Subsidiaries; or (ii) made any political contributions which would not be
lawful under the laws of the United States and the foreign country in which
such payments were made. Neither OP or its Subsidiaries nor to the Knowledge of
OP or any of its Subsidiaries, any director, officer or other employee of OP or
any of its Subsidiaries nor, to the Knowledge of OP or any of its Subsidiaries,
any customer or supplier of OP has been the subject of any inquiry or
investigation by any Governmental Entity in connection with payments or
benefits or other favors to or for the benefit of any governmental or armed
services official, agent, representative or employee with respect to any aspect
of the business of OP with respect to any political contribution.
A-18
3.25 Brokers. Except as disclosed on Schedule 3.25, there is no broker,
finder or investment banker engaged by OP that is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement.
3.26 Relationships. Except as shown on Section 3.26 of the OP Disclosure
Schedule, OP's or any Subsidiary's relationships with its customers and
suppliers are continuing and satisfactory. Neither OP nor any of its
Subsidiaries have Knowledge or information concerning any loss or potential
loss in excess of $250,000 in the aggregate of any business to OP or any
Subsidiary.
3.27 Disclosure. (a) No representation or warranty made by OP, its
Subsidiaries or the Stockholder Group in this Agreement, nor any document,
written information, statement, financial statement, certificate, schedule or
exhibit prepared and furnished or to be prepared and furnished by OP, its
Subsidiaries or the Stockholder Group or their respective representatives
pursuant hereto or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading in light of the circumstances under
which they were furnished. There is no event, fact or condition that has
resulted in, or could reasonably be expected to result in, to be detrimental to
OP, its Subsidiaries or any of its affiliates that has not been set forth in
this Agreement or in the OP Disclosure Schedule.
(b) Assuming that the transactions contemplated hereby are not
consummated, and all actions related to such transactions had not occurred
and without regard to any changes in OP's business which may be required
under this Agreement, and further assuming OP was able to obtain debt and
equity financing contemplated in such projections, the OP financial
projections delivered to VC on or before the date hereof constituted as of
that date a reasonable estimate of the information purported to be shown
therein and OP reasonably believed that there was a reasonable basis for
such projections and was not aware of any fact or information that would
lead it to believe that such projections were incorrect or misleading in
any material respect.
3.28 No Assignment. Neither the execution or delivery of this Agreement or
the consummation of the transactions contemplated herein will constitute an
assignment of any agreement or instrument to which OP or any of its
Subsidiaries are a party under any federal or state law applicable to OP and
its Subsidiaries or their respective business, property and assets.
A-19
Article IV
Representations and Warranties of VC and Merger Sub
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which identifies the section
and subsection to which such disclosure relates and which is delivered by VC to
OP prior to the execution of this Agreement (the "VC Disclosure Schedule"), VC
and Merger Sub represent and warrant, as of the date hereof and as of the
Closing Date, as follows:
4.1 Organization; Standing and Power. Each of VC and Merger Sub is a
corporation validly existing and in good standing under the laws of its state
of incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted.
4.2 Authority. VC and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by VC of this Agreement, and by
Merger Sub of this Agreement, and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of VC and Merger Sub. This Agreement has been duly
executed and delivered by VC and Merger Sub and constitutes a valid and binding
obligation of VC and Merger Sub enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, or other
similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought. Subject to
satisfaction of the conditions set forth in Article VI, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in any
violation of any material statute, law, rule, regulation, judgment, order,
decree or ordinance applicable to VC or Merger Sub or their respective
properties or assets, or conflict with or result in any breach or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit, under (i) any provision of the Certificate of Incorporation
or Bylaws of VC or Merger Sub or (ii) any material agreement, contract, note,
mortgage, indenture, lease, instrument, permit, concession, franchise or
license to which VC or Merger Sub is a party or by which VC or Merger Sub or
their respective properties or assets may be bound or affected. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to VC or Merger
Sub in connection with the execution and delivery of this Agreement or the
consummation by VC and Merger Sub of the transactions contemplated hereby or
thereby, except for (t) to the extent required the filing of a premerger
notification report by VC and Merger Sub under the HSR Act, (u) the filing
reports under the Exchange Act, as are required in connection with the
transactions contemplated by this Agreement, (v) any regulatory approval from
the FCC, (w) compliance with FAA regulations, (x) compliance with any
applicable requirements of state and local public utility commissions or
similar entities, (y) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of
any foreign country and (z) such other consents, authorizations, filings,
approvals and registrations.
4.3 Litigation. There is no action, suit, proceeding, investigation or claim
pending or, to the Knowledge of VC, threatened against VC or Merger Sub which
could, individually or in the aggregate, have a material effect on the ability
of VC to consummate the Merger or the transaction contemplated herein or which
in any manner challenges or seeks to prevent, enjoin, alter or materially delay
any of the transactions contemplated hereby.
4.4 No Defaults. Neither VC nor Merger Sub is, or has received notice that
it would be with the passage of time, (i) in violation of any provision of the
Certificate of Incorporation or Bylaws of VC or Merger Sub; or (ii) in default
or violation of any material term, condition or provision of (A) any material
judgment, decree, order, injunction or stipulation applicable to VC or Merger
Sub or (B) any material agreement, note, mortgage, indenture, contract, lease
or instrument, permit, concession, franchise or license to which VC or Merger
Sub is a party or by which VC or Merger Sub or their properties or assets may
be bound.
A-20
4.5 Brokers. No broker or finder is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by
this Agreement.
4.6 Disclosure. No representation or warranty made by VC in this Agreement,
nor any document, written information, statement, financial statement,
certificate, schedule or exhibit prepared and furnished or to be prepared and
furnished by VC or its representatives pursuant hereto or in connection with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were furnished. To
the Knowledge of VC after reasonable inquiry, there is no event, fact or
condition that has resulted in, or could reasonably be expected to result in, a
material adverse effect that has not been set forth in this Agreement or in the
VC Disclosure Schedule.
Article V
Conduct and Transactions Prior to
Effective Time; Additional Agreements
5.1 Information and Access. Subject to and in accordance with the terms and
conditions of that certain Non-Disclosure Agreement between VC and OP dated
April 13, 1999, as amended May 2, 2000 (the "Confidentiality Agreement"), from
the date of this Agreement and continuing until the Effective Time, each party
shall afford and, with respect to clause (b) below, such party shall cause its
independent auditors to afford, (a) upon and subject to execution of this
Agreement as may be required by the independent accountants of VC and OP, to
the officers, independent auditors, counsel and other representatives of VC
reasonable access to the properties, books, records (including Tax returns
filed and those in preparation) and personnel of OP and its Subsidiaries in
order that VC may have a full opportunity to make such investigation as it
reasonably desires to make of OP and its Subsidiaries and (b) to the
independent auditors of VC, reasonable access to the audit work papers and
other records of the independent auditors of OP and its Subsidiaries.
Additionally, OP and its Subsidiaries will permit VC to make such reasonable
inspections of OP and its Subsidiaries and their respective operations during
normal business hours as VC may reasonably require and OP and its Subsidiaries
will cause its officers to furnish VC with such financial and operating data
and other information with respect to the business and properties of OP and its
Subsidiaries as VC may from time to time reasonably request.
No investigation pursuant to this Section 5.1 shall affect or otherwise
obviate or diminish any representations and warranties of any party or
conditions to the obligations of any party.
5.2 Conduct of Business of the Parties. During the period from the date of
this Agreement and continuing until the Effective Time or until the termination
of this Agreement pursuant to Section 7.1, the parties agree that (except to
the extent that the other parties have given their prior written consent):
(a) OP Conduct. Except in connection with or in contemplation of the
transactions contemplated by this Agreement, OP and its Subsidiaries shall
conduct their business in the ordinary and usual course consistent with
past practice and shall use reasonable efforts to maintain and preserve
intact its business organizations, keep available the services of its
officers and employees and to maintain satisfactory relations with
licensors, licensees, suppliers, contractors, distributors, customers and
others having business relationships with it. Without limiting the
generality of the foregoing and except as expressly contemplated by this
Agreement, prior to the Effective Time, OP shall not, nor shall any of its
Subsidiaries without the prior written consent of VC:
(i) declare, set aside or pay any dividends on or make any other
distribution (whether in cash, stock or property) in respect of any of
its capital stock except as permitted by subsection (iii) below;
(ii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance or authorization of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or repurchase, redeem or otherwise acquire any shares
of its capital stock;
A-21
(iii) except as provided for in Section 5.18, issue, deliver,
pledge, encumber or sell, or authorize or propose the issuance,
delivery, pledge, encumbrance or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible
into, or rights, warrants or options to acquire, any such shares of
capital stock or other convertible securities (other than the issuance
of such capital stock upon the exercise or conversion of the warrants,
outstanding on the date of this Agreement in accordance with their
present terms); accelerate, amend or change the period of
exercisability of the Warrants or OP SAR Plan or any other options,
warrants or other convertible securities or authorize or propose any
change in its equity capitalization;
(iv) cause or permit any amendments to its Amended and Restated
Certificate of Incorporation or Bylaws or other charter documents;
(v) acquire or agree to acquire by merging or consolidating with, or
by purchasing any material portion of the capital stock or assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the business condition of OP or
its Subsidiaries;
(vi) sell, lease, pledge, license or otherwise dispose of or
encumber any of its assets or properties, except in the ordinary course
of business consistent with past practice (including, without
limitation, any indebtedness owed to it or any claims held by it)
except (a) to consummate the transactions contemplated under that
certain Asset Purchase Agreement dated June 16, 2000 among 21st Century
Cable TV of Chicago, Inc., OP and OnePoint Communications-Illinois,
L.L.C. (the "Illinois Cable Agreement") provided, however, neither OP
or any Subsidiary will fail to observe any term, condition, covenant or
other obligation set forth in the Illinois Cable Agreement if such
failure could reasonably be expected to cause or result in a claim
being asserted or made such agreement or (b) OnePoint Communications
Holdings LLC shall be permitted to sell or permit the redemption of its
equity interest in Mid-Atlantic Telcom Plus Holding, L.L.C. in
accordance with Section 5.13 of this Agreement;
(vii) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any of its debt securities or
guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of others, or make loans or advances (A) in excess
of $20 million during the first three month period commencing on the
date hereof and (B) in excess of $10 million during each month of the
next three month period up to an aggregate amount of $30 million during
the second three month period after the date hereof; provided that the
incurrence of such additional indebtedness, together with any
obligations entered into pursuant to clause (xvi) is permitted under
the terms of the Senior Notes;
(viii) pay, discharge or satisfy any claims, liabilities or
obligations (whether absolute, accrued, contingent or otherwise), other
than the payment, discharge or satisfaction of liabilities in the
ordinary course of business consistent with past practice of
liabilities reflected or reserved against in the consolidated financial
statements (or the notes thereto) of OP and its Subsidiaries;
(ix) adopt or amend any OP Plan, or enter into or amend any
employment, severance, special pay arrangement with respect to
termination of employment or other similar arrangements or agreements
with any of its directors, officers or employees or increase the
salaries or wage rates of its employees except as required by law or
pursuant to scheduled employee reviews under OP's normal employee
review cycle consistent with OP's past practices;
(x) except in the ordinary course of business consistent with past
practices, transfer to any person or entity any rights to the OP
Intellectual Property Rights or the FCC Rights;
(xi) enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or other rights of any type or
scope with respect to any products of OP;
A-22
(xii) except in the ordinary course of business with prior notice to
VC, violate, amend or otherwise modify the terms of any of the
contracts set forth on the OP Disclosure Schedule;
(xiii) commence a lawsuit other than for the routine collection of
bills;
(xiv) change the accounting methods or practices followed by OP,
including any change in any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve, except as may
be required by changes in generally accepted accounting principles make
or change any material Tax election except as may be required by
applicable law, adopt or change any Tax accounting method, file any
material Tax return or any amendment to a material Tax return provided,
however, that VC shall have the right to review such Tax return before
it is filed and have the right to make objections, enter into any
material closing agreement, settle any material Tax claim or
assessment, or consent to any extension or waiver of the limitation
period applicable to any material Tax claim or assessment, without the
prior consent of VC, which consent will not be unreasonably withheld
(for purposes of this covenant a "material" Tax Return, closing
agreement, Tax claim or assessment shall mean a Tax liability with
respect to each such item in excess of $50,000);
(xv) take any action that would result in any of the representations
and warranties of OP or any Subsidiary set forth in this Agreement
becoming untrue or in any of the conditions set forth in Article VI not
being satisfied;
(xvi) enter into any capital commitment or long term obligation (A)
in excess of $5 million during the first three month period commencing
on the date hereof and (B) in excess of $10 million during the next
three month period; provided that the entering into such obligations,
together with any amounts incurred under clause (vii) is permitted
under the terms of the Senior Notes; or
(xvii) authorize or propose any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of the
foregoing.
(b) VC Conduct. VC agrees not to take action that would prevent the
transactions contemplated herein from being consummated.
5.3 Negotiation With Others. Each of OP and the Stockholders Group agrees
that it shall not, nor shall it permit any of its Subsidiaries, directly or
indirectly, through any officer, director, other stockholder, affiliate or
agent of OP or otherwise, solicit, initiate, entertain, encourage or negotiate
any proposals or offers from any third party, including without limitation,
SBC, relating to the merger or acquisition of OP or any of its Subsidiaries or
a material portion of its assets or capital stock of OP or any of its
Subsidiaries, including the acquisition of Common Stock (or voting agreements
or proxies with respect thereto) owned directly or indirectly by the
Stockholder Group, nor will OP, any of its Subsidiaries or any of the
Stockholders Group participate in any negotiations regarding, or furnish to any
person any information with respect to, or otherwise cooperate with, facilitate
or encourage any effort or attempt by any person to do or seek any such
transaction. OP and the Stockholder Group shall immediately cease and cause to
be terminated all such negotiations with the third parties (other than VC)
which have occurred prior to the date of this Agreement.
5.4 Preparation of Filings. In the event that VC determines in its sole
discretion to make any filings that may be required under the Securities Act or
the Exchange Act ("SEC Filings"), if requested by VC or its representatives, as
promptly as practicable after the date of this Agreement, OP shall provide to
VC and its counsel for inclusion in any SEC Filings in form and substance
satisfactory to VC and its counsel, such information concerning OP, its
operations, capitalization, technology, share ownership and other material as
VC or representatives may reasonably request. As promptly as practicable after
the date of this Agreement, VC and OP shall prepare and file any other filings
required relating to the transactions contemplated by this Agreement,
including, without limitation, under the HSR Act, FCC Filings, state and local
public utility commissions or similar entities or other governmental entity
filings (the "Other Filings"). Each of OP and VC agree to notify the other
promptly of the receipt of any written comments from any government officials
with respect to the filing or any request for amendments or supplements to the
HSR Filings, the FCC Filings and Other Filings or
A-23
for additional information and will supply the other with copies of all
correspondence between VC and OP, as the case may be, or any of its
representatives, on the one hand, and the government officials, on the other
hand, with respect to the HSR Filings, the FCC Filings and Other Filings. The
HRS Filings, FCC Filings and the Other Filings shall comply in all material
respects with all applicable requirements of law. Whenever any event occurs
which should be set forth in an amendment or supplement to the HSR Filings, FCC
Filings or any Other Filings, VC or OP, as the case may be, shall promptly
inform the other of such occurrence and cooperate in filing with the FCC or its
staff or any other government officials.
5.5 Advice of Changes. OP shall confer with VC on a regular and frequent
basis which shall be at least weekly, report on operational matters and
promptly advise orally and in writing of any change or event having, or which,
insofar as can reasonably be foreseen, could result in, a material adverse
effect with respect to OP. Each party hereto shall promptly provide the other
parties hereto (or its counsel) copies of all filings made by such party with
any Governmental Entity in connection with this Agreement and the transactions
contemplated hereby and thereby.
5.6 Stockholder Approval. OP will call, give notice and hold a meeting of
its stockholders in accordance with DGCL (S)251 for the purpose of obtaining
the stockholder approval required in connection with the transactions
contemplated hereby and shall use all reasonable efforts to obtain such
approval. XXX XX, and VenCom, as manager of XXX XX, hereby agrees to vote or
cause to be voted all of the shares of Preferred Stock and all the shares of
Common Stock held by it in favor of the Merger, the adoption of this Agreement
and the consummation of the transactions contemplated hereunder.
5.7 Agreements to Cooperate.
(a) OP shall take all reasonable actions necessary to comply promptly
with all legal requirements which may be imposed on OP or its Subsidiaries
with respect to the Agreement (including furnishing all information
required under the HSR Act) and shall take all reasonable actions necessary
to cooperate promptly with and furnish information to VC in connection with
any such requirements imposed upon VC or Merger Sub in connection with the
Agreements or the obtaining of consents or Governmental Entity approvals.
OP shall take all reasonable actions necessary (i) to obtain (and will take
all reasonable actions necessary to promptly cooperate with VC or Merger
Sub in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity, or other third party, required to be
obtained or made by OP (or by VC or Merger Sub) in connection with the
taking of any action contemplated by this Agreement; (ii) to lift, rescind
or mitigate the effect of any injunction or restraining order or other
order adversely affecting the ability of OP to consummate the Merger and
the transactions contemplated hereby; (iii) to fulfill all conditions
applicable to OP pursuant to this Agreement; and (iv) to prevent, with
respect to a threatened or pending temporary, preliminary or permanent
injunction or other order, decree or ruling or statute, rule, regulation or
executive order, the entry, enactment or promulgation thereof, as the case
may be.
(b) VC and Merger Sub shall take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on them or
their Subsidiaries with respect to the Agreement (including furnishing all
information if required under the HSR Act) and shall take all reasonable
actions necessary to cooperate promptly with and furnish information to OP
in connection with any such requirements imposed upon OP in connection with
the Agreements or the obtaining of consents or Governmental Entity
approvals. VC and Merger Sub shall take all reasonable actions necessary
(i) to obtain (and will take all reasonable actions necessary to promptly
cooperate with OP in obtaining) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity, or other third
party, required to be obtained or made by VC or Merger Sub or any of their
Subsidiaries (or by OP) in connection with the taking of any action
contemplated by this Agreement; (ii) to lift, rescind or mitigate the
effect of any injunction or restraining order or other order adversely
affecting the ability of VC or Merger Sub to consummate the transactions
contemplated hereby; (iii) to fulfill all conditions applicable to VC or
Merger Sub pursuant to this Agreement; and (iv) to prevent, with respect to
a threatened or pending
A-24
temporary, preliminary or permanent injunction or other order, decree or
ruling or statute, rule, regulation or executive order, the entry,
enactment or promulgation thereof, as the case may be; provided, however,
that VC shall not be obligated to, nor shall VC be obligated to cause its
Subsidiaries to, dispose of or hold separate or otherwise relinquish all or
a material portion of the business or assets either of OP or of VC and its
Subsidiaries, taken as a whole, or to change its business in any material
way.
(c) Subject to the terms and conditions of this Agreement, each of the
parties shall use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, subject to the appropriate approval of the stockholders of VC
and OP. If required the parties hereto will consult and cooperate with one
another, and consider in good faith the views of one another, in connection
with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any
party hereto in connection with proceedings under or relating to the
Communications Act, state or local public utility commissions or similar
entities, HSR Act or any other federal or state antitrust or fair trade
law.
5.8 Consents. VC, Merger Sub and OP shall each use all reasonable efforts to
obtain the consent and approval of, or effect the notification of or filing
with, each person or authority whose consent or approval is required in order
to permit the consummation of the Merger and the transactions contemplated
herein and the transactions contemplated by this Agreement to conduct and
operate the business of OP substantially as presently conducted and as
contemplated to be conducted.
5.9 Public Announcements. VC and OP shall cooperate with each other prior to
releasing information concerning this Agreement and the transactions
contemplated hereby, shall furnish to the other drafts of all press releases or
other public announcements prior to publication and shall obtain the consent of
the other prior to the issuance of press releases or the release of other
public announcements; provided that any party hereto shall have the right, with
prior written notice delivered to such other party where a written response is
required (i) to furnish any information to any Governmental Entity or (ii) to
issue any other release, in each case when in the reasonable opinion of its
counsel it is legally required to do so.
5.10 Notification of Certain Matters. OP shall give prompt notice to VC
within five (5) business days, and VC and Merger Sub shall give prompt notice
to OP within five (5) business days, of the occurrence, or failure to occur, of
any event, which occurrence or failure to occur would be likely to cause (a)
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Effective Time, or (b) any material failure of OP or VC and Merger Sub,
as the case may be, or of any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement.
5.11 Subsequent Amendments of Disclosure Schedules. OP shall update the
Disclosure Schedule as of and including the Closing Date including any updated
schedules contemplated under Section 5.11, exhibits or deliveries hereunder,
but in no event beyond the Closing Date. OP shall use its reasonable best
efforts to identify the holders of the Warrants and shall update Section 3.2 of
the OP Disclosure Schedule to reflect the names of the holders of the Warrants.
Prior to the Closing Date, OP shall have the right after the date hereof to
deliver to VC written amendments or updates to the applicable Sections of the
OP Disclosure Schedule; provided, that any such disclosure is as of, and may
not include events or actions subsequent to, the date of such updated Schedule.
To the extent that VC or Merger Sub furnish any Disclosure Schedule pertaining
to the applicable Section of this Agreement, it shall make such disclosures to
make the representations and warranties true and correct. To the extent that
any such amendment shall not disclose any event or condition that, individually
or in the aggregate, could be reasonably likely to have a material adverse
effect on OP, such amendment shall be deemed accepted by the other party if the
other party does not object within ten (10) days after receipt and the relevant
Section of the Disclosure Schedule shall be deemed amended or updated
accordingly thereby. In the event that an amendment could be reasonably likely
to have a material adverse
A-25
effect on OP or if VC objects to any other amendment within the 10 day period,
VC agrees to discuss such amendment with OP. Such schedule, however, will not
be amended unless VC affirmatively consents in writing to such amendment.
5.12 Preparation of Tender Offer for the Senior Notes; Voting Agreement. (a)
As promptly as practicable after the execution of this Agreement, VC and OP
shall prepare a cash tender offer for the 14 1/2% Senior Notes (the "Senior
Notes") in compliance with the terms of Section 4.15 of the Indenture dated May
21, 1998 by and between Xxxxxx Trust and Savings Bank and OP (the "Indenture")
and an amendment to the Indenture in form and substance to VC's sole
satisfaction. As promptly as practicable and no later than ten business days
after the Closing Date, VC and the Surviving Corporation will cause the cash
tender offer materials together with the amendment to the Indenture to be
mailed to each of the holders of the outstanding Senior Notes. All expenses,
fees and costs incurred by OP or any of its Subsidiaries in connection with
this section shall be paid by VC in accordance with the terms and conditions of
the Escrow Agreement. The Stockholders Group hereby agrees, and shall cause
Xxxxx X. Xxxxxxxxx and any of his affiliates to agree to tender to VC any
Senior Notes such person or entity may hold, if any, at a price equal to 107%
of the principal amount of such Senior Notes.
(b) On request by VC, OP shall take all necessary actions in connection
with (i) a covenant defeasance under Article VIII of the Indenture or (ii)
such amendment to the Indentures under Article IX, each of which will be
conditioned on the consummation of the transactions contemplated on such
terms and in such amounts as may be determined by VC. In the event that VC
elects to take any action under this Section 5.12(b), VC shall cause the
Merger Sub to be adequately capitalized to take any actions required in
connection with such request. All expenses, fees and costs incurred by OP
or any of its Subsidiaries in connection with this Section will be paid by
VC in accordance with the terms and conditions of the Escrow Agreement. The
Stockholders Group hereby agrees, and shall cause Xxxxx X. Xxxxxxxxx and
any of his affiliates to agree to vote in favor of such action.
5.13 Divestiture of Certain Ownership Interests and Termination of Certain
Relationships. On or before the Closing Date, if requested by VC, OP and its
Subsidiaries and the Stockholder Group shall cause all equity interests or
rights to purchase or otherwise obtain any equity interest in or to OP or any
of its Subsidiaries to be redeemed by OP or one of its Subsidiaries or
otherwise cancelled or terminated, including without limitation, any interests
owned by third person, including SBC, in OnePoint Services, L.L.C., Mid-
Atlantic RMTS Holding, L.L.C., VIC1-RMTS, L.L.C. and VIC-RMTS-DC, L.L.C. All of
the equity securities or any rights thereto of any Subsidiary owned directly or
indirectly by Xxxxxxxxx shall be contributed by him to OP for no additional
consideration prior to or contemporaneously with the Closing. In addition, on
or before the Closing Date, OP and each Subsidiary shall terminate any and all
management or other agreements between OP or any of its Subsidiaries and one or
more of SBC, Ventures in Communications, L.L.C., XXX XX, VenCom or Xxxxxxxxx,
except as otherwise contemplated herein.
5.14 Obligations of Stockholder Group. Neither XXX XX nor VenCom will sell
or otherwise transfer or agree to or permit the transfer of any equity interest
in OP, XXX XX, VenCom from the date of this Agreement until the Effective Time
except as expressly permitted in Section 5.18. In addition, until the Final
Payment Date defined in Section 8.5, Xxxxxxxxx and VenCom agree not to dissolve
or liquidate XXX XX or VenCom.
5.15 FIRPTA. If required, OP shall deliver to the Internal Revenue Service a
notice regarding foreign investment in real property, in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2).
5.16 Termination of InterLATA; Other Business Activities. Except as
otherwise directed by VC, OP and its Subsidiaries shall divest or otherwise
terminate their InterLATA operations in VC's region or such other business
operations or activities as deemed necessary by VC in connection with obtaining
regulatory approval or any other approval required by a Governmental Entity.
5.17 Actions to be Taken with Respect to Employee Payments. Within 30 days
after the date of this Agreement, OP will deliver to VC Schedule 5.17 which
shall set forth (i) the portion of the Employee Payment which will be divided
by the number of outstanding OP SARs and divided pro rata among each holder of
SARs
A-26
and (ii) the remaining portion of the Employee Payment divided among other
employees of OP to be identified and approved by VC. Schedule 5.17 shall be
subject to VC's acceptance, which acceptance will not be unreasonably withheld.
Prior to the Closing Date, OP shall (i) terminate the OP SAR Plan, (ii) cause
each participant in the OP SAR Plan to execute and deliver documentation
relating to the termination of the OP SAR Plan in form and substance to VC's
reasonable satisfaction, and (iii) adopt an incentive compensation plan that
will pay the amounts set forth in Schedule 5.17 to those employees listed on
Schedule 5.17 over a two-year period commencing on the Closing Date, provided
that no person shall receive any payments under such plan, unless such person
is an employee of the Surviving Corporation or a Subsidiary of the Surviving
Corporation on the date such payment is required to be made under the terms of
the plan. Prior to adopting such plan, VC must have approved the terms and
conditions of such plan and the list of recipients of awards to be made under
such plan.
5.18 Equity Funding Obligations. If the Closing has not occurred within (90)
days of the date of this Agreement, VC may require VenCom to and VenCom shall
within fifteen (15) days after receipt of notice, invest $12,879,480 into OP
and OP shall issue 91,957 shares of Common Stock (or the appropriate number of
shares of Preferred Stock to the extent OP has authorized but unissued shares
of Preferred Stock available) to the Stockholders Group as consideration for
such investment (such investment and issuance of common stock the "Equity
Funding Obligation"). If the Equity Funding Obligation is triggered, VenCom may
propose an alternate investor to satisfy the Equity Funding Obligation on the
same terms and conditions set forth in this Section 5.18 (and such alternate
investor must agree to tender the shares acquired by it pursuant to the terms
and conditions of this Agreement and otherwise be bound as if it were a member
of the Stockholders Group), and VC will consider in good faith, whether to
accept the alternate purchaser (and will accept any alternate purchaser that is
already a member of the Stockholders Group).
5.19 Equity Funding by V.C. VC shall have the right, but shall not be
obligated, to purchase shares of Common Stock before the closing Date;
provided, however, that the proceeds received by OP in connection with the
purchase shall be used by OP as provided in Schedule 5.19.
5.20 Loan Agreement. OP shall use good faith, commercially reasonable
efforts to attempt to amend or obtain a waiver under Sections 5.4. and 8.1 of
that certain Loan Agreement dated July 26, 2000 by and between OP and Lucent
Technologies Inc.
Article VI
Conditions Precedent
6.1 Conditions to Each Party's Obligation to Effect the Agreement. The
respective obligation of each party to consummate the Merger and the
transactions contemplated hereby shall be subject to the satisfaction prior to
the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the affirmative vote or consent of the holders of at least a
majority of the issued and outstanding shares of Common Stock and Preferred
Stock.
(b) HSR Act. A filing is required so the applicable waiting period
required to the consummation of the Agreement under the HSR Act shall have
expired or been terminated or received formal approval.
(c) FCC. To the extent that consents to transfer Company FCC Licenses
require approval, then such approvals shall have been obtained.
(d) State and Local Public Utility Commissions. To the extent that
approvals are required from any state or local public utility commission or
similar entity, those approvals shall have been obtained.
(e) Other Governmental Entity Approvals. All material authorizations,
consents, orders or approvals of, or declarations or filings with, or
expiration of waiting periods imposed by, any other Governmental
A-27
Entity necessary for the consummation of the transactions contemplated by
this Agreement shall have been filed, expired or been obtained.
(f) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transaction shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign,
seeking any of the foregoing be pending; and there shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced
or deemed applicable to the transaction, which would (i) make the
consummation of the transaction illegal or (ii) render VC, Merger Sub or OP
unable to consummate the transaction, except for any waiting period
provisions.
6.2 Conditions of Obligations of VC and Merger Sub. The obligations of VC
and Merger Sub to consummate the Merger and consummate all of the transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by VC and Merger Sub:
(a) Representations and Warranties. The representations and warranties
of OP set forth in this Agreement shall be true and correct in all material
respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which
representations and warranties as so qualified shall be true in all
respects) (i) as of the date of this Agreement and (ii) as of the Closing
Date, as though made on and as of the Closing Date (provided that in the
cases of clauses (i) and (ii) any such representation and warranty made as
of a specific date shall be true and correct in all material respects as of
such specific date), and as of the date of this Agreement and as of the
Closing Date, (i) there shall have been no breach by OP of any of the
representations or warranties made in Sections 3.1, 3.2, 3.3, 3.5, 3.6,
3.10, 3.17, 3.20, or 3.22, and (ii) there shall have been no breach of any
other representation or warranty (considered without regard to any
materiality qualifiers set forth in a specific representation or warranty)
which breach would result in a material adverse effect on the financial
condition or the operating results of OP and its subsidiaries taken as a
whole. VC and Merger Sub shall have received a certificate signed by the
chief executive officer and the chief financial officer of OP to such
effect on the Closing Date.
(b) Performance of Obligations of OP. OP shall have performed (i) in all
respects all obligations and covenants required to be performed by it under
Section 5.2(a)(i) through (iv), 5.2(a)(xi), 5.3, 5.6, 5.14, 5.17 and 5.18
prior to or as of the Closing Date, and (ii) in all material respects all
other obligations and covenants required to be performed by it under this
Agreement prior to or as of the Closing Date (considered without regard to
any materiality qualifiers set forth in a specific covenant or obligation),
and VC and Merger Sub shall have received a certificate signed by the chief
executive officer and the chief financial officer of OP to such effect.
(c) Opinions of OP's Counsel. VC shall have received an opinion of
Xxxxxxxx & Xxxxx, LLP counsel to OP, dated the Closing Date, in form and
substance reasonably satisfactory to VC and OP. VC shall have received an
opinion from regulatory counsel for OP in form and substance reasonable
satisfactory to VC and OP.
(d) Consents. VC and Merger Sub shall have received duly executed copies
of all third-party consents and approvals contemplated by this Agreement
including consent or assignment of contracts or agreements listed on
Section 3.13 of the OP Disclosure Schedule where such consent or assignment
is required under any change of control or similar provision or the OP
Disclosure Schedule in form and substance reasonably satisfactory to VC and
Merger Sub.
(e) Resignations and Terminations. VC shall have received executed
resignations or terminations from all Directors and any corporate officers
of OP and each Subsidiary, as requested by VC.
(f) Payoff Letter and Lien Releases. Northern Trust shall have delivered
to VC pay-off letters acknowledging the repayment in full of the
Indebtedness and waiving and releasing any further rights or claims each
may have against OP's assets. OP shall cause Northern Trust to acknowledge
the full satisfaction of the Indebtedness, to cancel all promissory notes
from OP to Northern Trust and to deliver
A-28
to VC documentation to the satisfaction of VC and signed by Northern Trust
to release all liens and mortgages on or against any of OP's assets. All
liens and mortgages on OP's properties, including but not limited to any
liens or mortgages held by Northern Trust, shall have been released by the
secured parties and appropriate releases and satisfaction pieces, in form
and substance satisfactory to VC, shall have been properly filed or
recorded in all appropriate filing offices or delivered to VC.
(g) Employment Agreements. The Employment Agreements and Noncompetition
and Nondisclosure Agreements of certain employees of OP, in the form as
attached hereto as Exhibit 6.2(g), shall be executed and delivered by Xxxxx
X. Xxxxxxxxx and such other employees of OP as set forth on Exhibit 6.2(g).
(h) Conditional Approvals. VC and Merger Sub shall be satisfied in their
sole and absolute discretion that any conditions of approvals from the FCC,
FAA, FTC, Department of Justice, any state or local public utility
commission or Other Governmental Entities, placed upon VC or Merger Sub,
will not have an adverse effect on the business, operations, financial
performance or prospects of any of VC, Merger Sub or OP from and after the
Closing.
(i) Escrow Agreement. The Escrow Agreement shall be executed and
delivered by the Stockholders Group.
(j) Termination of InterLATA; Other Business Activities. VC shall have
received evidence to its satisfaction reached in good faith of the
termination of interLATA services or other business activities or
operations pursuant to Section 5.16.
(k) Divestiture of Interests. VC shall have received evidence to its
satisfaction reached in good faith that OP shall have performed any
obligations required to be performed by it under Section 5.13.
(l) Employee Payments. VC shall have received evidence to its
satisfaction in good faith that OP has performed all obligations requested
to be performed by it under Section 5.17.
(m) Senior Notes. If any action is requested to be taken by OP under
Section 5.12(b), VC shall have received evidence to its good faith
satisfaction that all necessary actions have been taken and that all
necessary conditions set forth in the documentation relating to such action
and the Indenture have been satisfied such that the closing of a
transaction under Section 5.12(b) shall occur simultaneously with the
Closing.
(n) Other Documents. VC shall have received such other certificates,
documents or other information in connection with the transactions
contemplated hereby as VC may reasonably request.
6.3 Conditions of Obligation of OP. The obligation of OP to close this
Agreement is subject to the satisfaction of the following conditions, unless
waived by OP:
(a) Representations and Warranties. The representations and warranties
of VC and Merger Sub set forth in this Agreement shall be true and correct
in all respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which
representations and warranties as so qualified shall be true in all
respects) (i) as of the date of this Agreement and (ii) as of the Closing
Date, as though made on and as of the Closing Date (provided that in the
cases of clauses (i) and (ii) any such representation and warranty made as
of a specific date shall be true and correct in all respects as of such
specific date), and there shall have been no breach by VC or any of its
representations or warranties made in the Agreement. OP shall have received
a certificate signed by an appropriate officer of VC and the president of
Merger Sub to such effect on the Closing Date.
(b) Performance of Obligations of VC and Merger Sub. VC and Merger Sub
shall have performed in all material respects all obligations and covenants
required to be performed by them under this Agreement prior to or as of the
Closing Date, and OP shall have received a certificate signed by an
appropriate officer of VC and the president of Merger Sub to such effect.
A-29
(c) Opinion of VC's and Merger Sub's Counsel. OP shall have received an
opinion dated the Closing Date of Xxxx Xxxxx Xxxxx & Xxxxxx LLP, counsel
for VC and Merger Sub, in form and substance reasonably satisfactory to OP.
(d) Consents. OP shall have received duly executed copies of all
material third-party consents and approvals contemplated by this Agreement
and the VC Disclosure Schedule in form and substance satisfactory to OP.
(e) Employment Agreements. VC or the Merger Sub shall have made offers
of employment to the OP employees as set forth on Exhibit 6.2(g).
(f) Opinion of OP's Counsel. OP shall have received an opinion dated the
Closing Date of Xxxxxxxx & Xxxxx LLP, counsel for the stockholders of OP,
in form and substance reasonably satisfactory to OP.
(g) Promissory Note. The Promissory Note shall be executed and
delivered.
Article VII
Termination
7.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date, whether before or after approval of the stockholders of OP:
(a) by mutual written agreement of VC, Merger Sub and OP;
(b) by VC, (i) if there has been a material breach by OP, any of its
Subsidiaries or any of the Stockholders Group of any covenant or agreement
set forth in this Agreement on the part of OP, any of its Subsidiaries or
any of the Stockholders Group or (ii) if any representation or warranty of
OP, any of its Subsidiaries or any of the Stockholders Group shall be or
shall have become untrue, in either case such that the condition set forth
in Sections 6.2(a) or 6.2(b) would not be satisfied, as of the time of such
breach or as of the time such representation or warranty shall have become
untrue and which breach or inaccuracy OP, any of its Subsidiaries or any of
the Stockholders Group fails to cure within fifteen (15) days after notice
thereof is given by VC (except that no cure period shall be provided for a
breach by OP or inaccuracy which by its nature cannot be cured) or if the
conditions under Section 6.2(a) or 6.2(b) cannot be satisfied;
(c) by OP, if there has been a breach by VC or Merger Sub of any
representation, warranty, covenant or agreement set forth in this Agreement
on the part of VC or Merger Sub or if any representation or warranty of VC
or Merger Sub shall have become untrue, in either case such that the
condition set forth in Sections 6.3(a) or 6.3(b) would not be satisfied as
of the time of such breach or as of the time such representation or
warranty shall have become untrue and which breach or inaccuracy VC or
Merger Sub, as the case may be, fails to cure within fifteen (15) days
after notice thereof is given by OP (except that no cure period shall be
provided for a breach by VC or Merger Sub which by its nature cannot be
cured);
(d) by VC or OP unless they have mutually agreed to extend the Closing
Date, if the Agreement shall not have been consummated on or before three
months from the date hereof (other than delays attributable to concluding
the HSR Act waiting period if required, or awaiting consents of either FCC
or state or local public utility commission or similar entity, provided,
however, that either OP or VC may elect to extend this period for two
additional successive one month periods in order to obtain any consents
required from any Governmental Entity or to satisfy any conditions imposed
by such Governmental Entity to such consents or approvals;
(e) by VC if the required approval of the stockholders of OP shall not
have been obtained;
(f) by VC or OP if any permanent injunction or other order of a court or
other competent authority preventing the transactions contemplated hereby
shall have become final and nonappealable; or
A-30
(g) by VC, if SBC or any affiliate of SBC exercises any right under any
agreement to purchase any equity interest in OP or any of its Subsidiaries,
asserts any rights that has or may have the effect of either acquiring or
continuing any equity interest in OP or any Subsidiary which has not been
terminated or waived to be reasonable satisfaction of VC on or before the
Closing Date or obtains an injunction, temporary restraining order or other
order from a Governmental Entity delaying or enjoining the Merger or the
transactions contemplated herein.
7.2 Amendment. This Agreement may be amended in writing by the parties
hereto; provided that following approval of the Agreement by the stockholders
of OP, no amendment shall be made which by law requires the further approval of
such stockholders without obtaining such further approval.
7.3 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 7.1, this Agreement shall forthwith become void and there
shall be no liability on the part of any party hereto except that (i) that the
provisions of the Confidentiality Agreement and Section 3.25, Section 3.30 and
Article VIII of this Agreement shall survive the termination of this Agreement
and (ii) nothing herein shall relieve any party from liability for any breach
of this Agreement.
7.4 Fees and Expenses. (a) Except as set forth in this Section 7.4 or
elsewhere in this Agreement, all fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
(b) If this Agreement is terminated pursuant to Section 7.1(g), OP shall
(i) reimburse VC upon demand for all out-of-pocket fees and expenses ("VC
Fees and Expenses") incurred or paid by or on behalf of VC or any
Subsidiary of VC in connection with this Agreement and the transactions
contemplated herein, including all fees and expenses of counsel,
accountants and consultants; provided, however, the OP shall not be
obligated to reimburse VC for any VC Fees and Expenses in excess of
$500,000 in the aggregate.
(c) If this Agreement is terminated pursuant to Section 7.1(g) and in
the event that SBC or any SBC affiliate directly or indirectly purchases
more than 50% of the capital stock of OP, more than 50% of the assets of
OP, any of its subsidiaries on a consolidated basis or merges with or into
OP, XXX XX or VenCom within one year from the date hereof, OP, XXX XX or
VenCom or any of their successors or assigns shall pay to VC a termination
fee of $25,000,000 by wire transfer within one business day after
consummation of such transaction.
(d) If one party fails to promptly pay to the other any fee or expense
due hereunder, the defaulting party shall pay the costs and expenses
(including 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 in the Wall Street Journal from the date such
fee was required to be paid.
Article VIII
Indemnification
8.1 Indemnification. Subject to the terms and conditions of this Article
VIII, the Stockholders Group, jointly and severally hereby agree to indemnify,
defend and hold VC and the Surviving Corporation and their respective
successors and assigns harmless from and against any and all claims, losses,
obligations, demands, actions or causes of action, assessments, damages,
judgments, liabilities, costs and expenses (including, without limitation,
costs of court and reasonable attorney and accounting fees) of every kind and
nature (collectively "Claims") asserted against, imposed upon or incurred by VC
and the Surviving Corporation or their respective successors and assigns,
directly or indirectly by reason of or resulting from:
(a) Claims of or liabilities and obligations to parties other than the
VC, Merger Sub or OP ("Third Party Claims") (whether absolute, accrued,
contingent or otherwise) existing as of the Closing Date or
A-31
arising out of facts or circumstances existing as of the Closing Date or
prior thereto, whether or not known at the Closing Date by OP or any of the
Stockholders Group.
(b) Any inaccuracy or incompleteness of any representation or warranty
of OP, its Subsidiaries or the Stockholders Group contained in this
Agreement or any Schedule or document related to this Agreement.
(c) Any breach or nonperformance of the covenants and obligations to be
performed by OP, its Subsidiaries or the Stockholders Group under this
Agreement.
(d) Any Claims, expenses or fees relating the exchange of the Warrant
Shares and the Warrants and any costs incurred in connection with any
Dissenting Stockholder exercising rights of appraisal hereunder.
(e) Any Claims relating to Mid-Atlantic Telcom Plus, L.L.C., Mid-
Atlantic Telcom Plus Holding, L.L.C. or One Point Communications Illinois,
L.L.C.
(f) Claims by SBC or any affiliate thereof for any action relating to or
arising out of this Agreement, the Merger or the transactions contemplated
hereby. The parties hereto agree that this provision shall survive this
Agreement even if the Agreement is terminated under Article VII.
(g) Claims by any person relating to the OP SAR Plan or the termination
of the OP SAR Plan.
(h) Notwithstanding anything herein to the contrary, neither VC nor the
Surviving Corporation shall have and be entitled to no claims of
contribution from OP with respect to matters arising under Section 3.2.
(i) Claims set forth on Schedule 8.1(i). Notwithstanding anything else
contained herein to the contrary, the claims set out on Schedule 8.1(i)
shall be outside the indemnification limitations, and the Final Payment
Date (as defined in Section 8.5) shall be extended until all items under
Schedule 8.1(i) have been resolved by the payment by the Stockholders Group
to BAC and Merger Sub for the amount of Claims relating to such items on
the Schedule 8.1(i) or the matters have been satisfactorily resolved to
BAC's and Merger Sub's reasonable satisfaction or no payments are due to be
paid by OP, its Subsidiaries or the Stockholders Group to third parties.
(j) Except to the extent otherwise provided in Article VIII and except
for remedies based upon fraud or willful breach and except for equitable
remedies, the rights and remedies of VC and the Surviving Corporation in
this Article VIII exclusive and in lieu of any and all other rights and
remedies which VC and Surviving Corporation may have under this Agreement
or otherwise for monetary relief.
8.2 Survival. All covenants and obligations of the Stockholders Group shall
survive the Closing. The representation and warranty made by OP, the
Subsidiaries and the Stockholders Group in Section 3.27(b) shall terminate
immediately after the Effective Time. The representations and warranties made
by OP, the Subsidiaries and the Stockholders Group in Section 3.14 (Taxes), 3.7
(Litigation), 3.12 (Employee Benefit Plans) and 3.20 (Environmental Matters)
shall survive for a period equal to the applicable statute of limitations with
respect to any taxes referred to therein, and the representations and
warranties made by OP, the Subsidiaries and the Stockholders Group in Section
3.2 shall survive indefinitely. All other representations and warranties made
by OP, the Subsidiaries and the Stockholders Group and which are contained in
this Agreement or in any certificate or other document delivered pursuant
hereto, shall survive until the Final Payment Date (as defined in Section 8.5).
The expiration or termination of any representation or warranty shall not
affect any of the Stockholders Group's obligations under Section 8.1 if XXX XX
has received proper notice of the claim or event for which indemnification is
sought prior to such expiration, termination or extinguishment.
8.3 Limitations on Amount. (a) The Stockholders Group shall not have any
obligation to indemnify VC or the Surviving Corporation from and against any
Claims resulting from, arising out of, relating to, in the nature of, or caused
by the breach of any representation or warranty until VC and Merger Sub have
suffered such Claims by reason of breaches in the aggregate equal to or
exceeding One Million Dollars ($1,000,000) (after which point the Stockholders
Group will be obligated to indemnify VC and the Surviving Corporation from and
against all such further Claims). Notwithstanding the foregoing sentence, the
Stockholders Group
A-32
shall be obligated to indemnify VC and the Surviving Corporation for any
individual breach of any representation or warranty equal to or exceeding One
Hundred Thousand Dollars ($100,000) without regard to the $1,000,000
deductible. Any amounts payable under Section 8.1(g) will be excluded from the
foregoing deductible or the $100,000 threshold and VC or the Surviving
Corporation may seek reimbursement for any claims arising out of Section 8.1(g)
immediately.
(b) With respect to Claims based on breaches of representations and
warranties set forth in Section 3.14, 3.7, 3.12 and 3.2, the Stockholders
Groups' liability to VC or to the Surviving Corporation shall not exceed,
in the aggregate, One Hundred Million Dollars ($100,000,000), which will be
reduced by an amount equal to $100,000,000 minus all Claims paid. With
respect to all other Claims relating to any other representations or
warrantees, the liability of the Stockholders Group will be limited to the
then outstanding principal amount of the Promissory Note.
(c) The limitations set forth in Section 8.3(a) and Section 8.3(b) will
not apply to any willful breach by OP, any Subsidiary or any of the
Stockholders Group of any covenant, representation or warranty contained in
this Agreement, for any damages based on claims of fraud or claims based on
the untruthfulness, an inaccuracy or the incompleteness of the
representations and warranties set forth in Section 3.2 or for Claims under
Section 8.1(d).
8.4 Notice of Claim.
(a) In the event VC or the Surviving Corporation shall have a claim
against the Stockholders Group that does not involve a claim or demand
being asserted against or sought to be collected from it by a third party,
VC or the Surviving Corporation shall promptly give notice of such claim or
demand promptly to XXX XX, which notices shall specify the nature of such
claim or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final
amount of such claim and demand) (the "Notice of Claim").
(b) XXX XX shall have fifteen (15) days from the personal delivery or
mailing of the Notice of Claim (the "Notice Period") to notify VC or the
Surviving Corporation whether or not any of the Stockholders Group dispute
the Claim. A "Disputed Claim" shall mean (i) any Claim for which notice of
a dispute has been received and (ii) any Claim for which a Notice of Claim
has been delivered or mailed but for which Claim the 15 day Notice Period
has not yet lapsed. If XXX XX does not notify VC or the Surviving
Corporation within the Notice Period that it disputes such Claim, (after
the expiration of the Notice Period, an "Undisputed Claim"), the amount of
such Undisputed Claim shall be conclusively deemed a liability that is
subject to indemnification by the Stockholders Group hereunder.
(c) The omission or delay of any indemnified party to give an
indemnifying party a Notice of Claim shall not relieve the indemnifying
party from any liability in respect of such claim, demand or action which
it may have to such indemnified party on account of the indemnity agreement
of such indemnifying party contained in this Article VIII, except to the
extent such indemnifying party can establish actual prejudice and direct
damages as a result thereof.
(d) Nothing contained herein shall be deemed to prevent VC or the
Surviving Corporation from making a claim hereunder for potential or
contingent claims or demands.
(e) Whenever any Claim covered by OP's indemnification obligation
pursuant to Section 8.1 is made by any person not a party to this
Agreement, VC or Merger Sub shall mail a Notice to Claim to XXX XX within
thirty (30) days after either VC or Merger Sub has received written notice
of the facts constituting the basis for such Third Party Claim.
(f) The Stockholders Group shall have the right to assume and thereafter
conduct the defense of any Third Party Claim with counsel of its choice,
which counsel shall be reasonably satisfactory to VC or Merger Sub;
provided, however, that the Stockholders Group shall not consent to the of
any judgment or enter into any settlement with respect to such Third Party
Claim without the prior written consent of VC or Merger Sub, which consent
shall not be unreasonably withheld, but such consent shall not be required
if
A-33
the judgment or proposed settlement involves only the payment of money
damages and does not impose an injunction or other equitable relief upon VC
or Merger Sub. The Stockholders Group assumption and conduct of such
defense shall be deemed to be an acknowledgment of their indemnification
obligation under Section 8.1(a) and shall be liable for any final
adjudication. Unless and until or one or more of the Stockholders Group
assumes the defense of the Third Party Claim as provided herein, VC or
Merger Sub may defend against the Third Party Claim in any manner they
reasonably may deem appropriate. In no event shall VC or Merger Sub consent
to the entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the Stockholders
Group, which consent shall not be unreasonably withheld; provided, however,
if the Stockholders Group withhold their consent, they shall explain in
writing their reasons for withholding consent, and upon receipt of such
written explanation, VC or Merger Sub shall nevertheless be authorized to
consent to the entry of any judgment or enter into any settlement, the
terms of which are reasonable. The Stockholders Group shall, within ten
(10) business days of their being notified of the proposed consent judgment
or settlement, provide their consent or their written explanation of the
reasons for refusing to consent.
(g) The parties shall undertake, in good faith, to resolve any dispute
with respect to any Disputed Claim. If the parties are unable to agree on
such resolution with thirty (30) days after OP receives the Notice of
Claim, the respective rights of the parties shall be determined in
accordance with the rules of the American Arbitration Association, unless
the issue of the Stockholders Group's indemnification obligation pursuant
to Section 8.1 has been or will be decided in litigation involving a Third
Party Claim in which one or more of the following, OP, its Subsidiaries or
the Stockholders Group and VC or Merger Sub are parties. The arbitration
shall be conducted in the Washington, D.C. area by three arbitrators, each
of whom shall have experience reasonably related to the business of OP, and
each of VC or Merger Sub and the Stockholders Group shall have the right to
designate one of the arbitrators. The third arbitrator shall be designated
by mutual agreement of the parties or, if they cannot agree, by mutual
agreement of the two arbitrators. The decision of the arbitrators in any
arbitration pursuant to this Section 8.4(g) will be final and binding upon
the parties, and the judgment of a court of competent jurisdiction may be
entered thereon. Fees of the arbitrators and costs of arbitration shall be
borne by the parties in such manner as shall be determined by the
arbitrators.
(h) Gross Up. If any indemnification payment is determined to be taxable
to either of VC or Merger Sub by any taxing authority, Indemnitor's shall
also indemnify VC or Merger Sub for any Taxes incurred by reason of the
receipt or accrual of such payment (taking into account any actual
reduction in tax liability to the recipient) and any costs and expenses
(including reasonable attorneys' fees) incurred by VC or Merger Sub in
connection with such Taxes (or any asserted deficiency, claim, demand,
dispute, action, suit, proceeding, judgment or assessment, including the
defense or settlement thereof, relating to such Taxes). The amount
recoverable by VC or Merger Sub shall take into account the value of any
insurance recoveries or actual reduction in Tax liability realized by VC
and arising from the same incident or set of facts or circumstances giving
rise to the claim for indemnity.
8.5 Escrowed Funds; Promissory Note.
(a) At Closing, Merger Sub will deliver $8,100,000 to the Escrow Agent
in accordance withSection 2.3(c) hereof, to be administered in accordance
with the terms and conditions of an escrow agreement mutually agreeable to
OP and VC (the "Escrow Agreement") which shall provide that the Escrowed
Funds will not be released from Escrow until such time that the Senior
Notes are no longer issued and outstanding and upon the expiration or
redemption of the Senior Notes, any remaining amounts shall be paid to the
XXX XX.
(b) At Closing, BAI shall execute a Promissory Note in favor of XXX XX
for a principal amount of $100,000,000 with interest at an annual rate of
10% compounded monthly (the "Promissory Note") in the form as attached
hereto as Exhibit 8.5(b). "Final Payment Date" shall be the date on which
the last amount of principal and interest are paid pursuant to the terms of
the Promissory Note.
A-34
Article IX
General Provisions
9.1 Extension; Waiver. At any time prior to the Effective Time, each of OP
and VC, by action taken by its Board of Directors, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other, (ii) waive any inaccuracies in the representations and
warranties made to it contained herein or in any document delivered pursuant
hereto and (iii) waive compliance with any of the agreements or conditions for
the benefit of it contained herein. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or sent by telecopy,
confirmation received, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified
by like notice):
(a) if to VC or Merger Sub, to:
Xxxxxxx X. Xxxxx
Verizon Communications, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a required copy to:
Xxxxxx X. Xxxx
Verizon Communications, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Xxxxxx Xxxxxxxxx, Xx., Esquire
Xxxx Xxxxx Xxxxx & Xxxxxx LLP
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) if to OP, to:
Xxxxx X. Xxxxxxxxx
OnePoint Communications Corporation
Two Xxxxxx Park
000 Xxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
A-35
Xxxxxxx X. Xxxxxx
OnePoint Communications Corp.
Two Xxxxxx Park
000 Xxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a required copy to:
Xxxxxxx X. Xxxxxxxx, P.C.
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(c) if to Stockholders Group, to:
Xxxxx X. Xxxxxxxxx
OnePoint Communications Corporation
Two Xxxxxx Park
000 Xxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a required copy to:
Xxxxxxx X. Xxxxxxxx, P.C.
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
9.3 Interpretation. When a reference is made in this Agreement to Sections
or Exhibits, such reference shall be to a Section or Exhibit to this Agreement
unless otherwise indicated. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts; (including a facsimile)
have been signed by each of the parties and delivered to the other party.
9.5 Entire Agreement. This Agreement, the Confidentiality Agreement and the
documents and instruments and other agreements among the parties delivered
pursuant hereto constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and are not intended to confer upon any other person any
rights or remedies hereunder except as otherwise expressly provided herein.
9.6 (S)1060 Allocation. VC shall have the sole right to allocate the Merger
Consideration pursuant to (S)1060 of the Code and if required OP and
Stockholders Group shall sign the Form 8594 of the IRS and any other forms
whether federal or state required or necessary to comply with the intent of
this provision.
A-36
9.7 No Transfer. This Agreement and the rights and obligations set forth
herein may not be transferred or assigned by operation of law or otherwise
without the consent of each party hereto. This Agreement is binding upon and
will inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
9.8 Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
9.9 Other Remedies. Except as otherwise provided herein and to the extent
that liabilities are limited by the terms of this Agreement (it being
understood that the provisions of this Agreement set forth monetary damages, as
the exclusive remedies for a breach of the representations and warranties set
forth in Article III and a breach of the covenants and agreements in Article
V), any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by
law or equity on such party, and the exercise of any one remedy will not
preclude the exercise of any other.
9.10 Further Assurances. Each party agrees to cooperate fully with the other
parties and to execute such further instruments, documents and agreements and
to give such further written assurances as may be reasonably requested by any
other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
9.11 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will be interpreted, to provide to create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, employee, partner or any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between
the parties to this Agreement.
9.12 Mutual Drafting. This Agreement is the joint product of VC and OP, and
each provision hereof has been subject to the mutual consultation, negotiation
and agreement of VC and OP, and shall not be construed for or against any party
hereto.
9.13 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware (without giving effect to its choice of law principles).
9.14 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the
other parties, and any attempted assignment thereof without such consent shall
be null and void. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
A-37
IN WITNESS WHEREOF, VC, Merger Sub, OP and the Stockholders Group, the
parties here to have caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of the date first written above.
Verizon Communications, Inc.
By: _________________________________
Print: ______________________________
Title: ______________________________
Sphere Merger Corp.
By: _________________________________
Print: ______________________________
Title: ______________________________
One Point Communications Corp.
By: _________________________________
Print: ______________________________
Title: ______________________________
Ventures In Communications II,
L.L.C.
By: _________________________________
Print: ______________________________
Title: ______________________________
Vencom, L.L.C.
By: _________________________________
Print: ______________________________
Title: ______________________________
A-38
