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EXHIBIT 2.3
MERGER AGREEMENT
DATED AS OF NOVEMBER 15, 1999
BY AND AMONG
SONUS COMMUNICATION HOLDINGS, INC.
EOT ACQUISITION CORPORATION
EMPIRE ONE TELECOMMUNICATIONS, INC.
AND
THE STOCKHOLDERS NAMED HEREIN
FOR THE MERGER OF
EMPIRE ONE TELECOMMUNICATIONS
WITH AND INTO
EOT ACQUISITION CORPORATION
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 2 MERGER; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.2 Conversion of Target Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.3 Conversion of Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.4 Issuance of Merger Shares into Escrow Upon Signing of this Agreement. . . . . . . . . . . . 11
Section 2.5 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.6 Escrow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.7 Release of Escrow Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.8 Confirmation of Equity Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.9 Xxxx Xxxxxxx Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.10 Assumption of Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF TARGET AND PRINCIPAL
STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.1 Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.2 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.3 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4 Subsidiaries; Officers and Directors; Charter and Bylaws. . . . . . . . . . . . . . . . . . 13
Section 3.5 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.6 Governmental Approvals and Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.7 Minute Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.9 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.10 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.12 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.13 Compliance with Laws and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.14 Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.15 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.16 Tangible Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.17 Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.18 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.19 Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.21 Affiliate Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.22 Employees, Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.23 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.24 Substantial Customers and Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.25 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.26 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.27 Other Negotiations; Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.28 Restrictions on Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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Section 3.29 Bank and Brokerage Accounts; Investment Assets . . . . . . . . . . . . . . . . . . . . . 28
Section 3.30 Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.31 Business Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.32 Investment Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.33 Certain Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.34 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND SONUS . . . . . . . . . . . . . . . . . . . . . 30
Section 4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.3 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.4 Governmental Approvals and Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.5 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.6 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.7 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.8 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.9 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.10 Restrictions on Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.11 Business Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.12 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 5 CERTAIN AGREEMENTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.1 Conduct of Business Prior to the Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.3 Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.5 Regulatory and Other Authorizations; Consents. . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.6 No Solicitation of Offers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.7 Notice of Certain Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.8 Interim Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.9 Principal Stockholders' Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.10 Further Action, Related Assets and Properties. . . . . . . . . . . . . . . . . . . . . . 40
Section 5.11 Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.12 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 6 CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.1 Conditions to Obligations of Target and the Principal Stockholders. . . . . . . . . . . . . 40
Section 6.2 Conditions to Obligations of Sonus and Acquisition. . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . 44
Section 7.1 Survival of Representations, Warranties, Covenants and Agreements. . . . . . . . . . . . . 44
ARTICLE 8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.1 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.2 Method of Asserting Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 9 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.1 Grounds for Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.3 Payment of Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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ARTICLE 10 ARBITRATION OF DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.1 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.2 Procedure for Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 11 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.2 Entire Agreement, Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.3 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.4 Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.5 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.6 No Assignment, Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.7 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.9 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 11.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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LIST OF SCHEDULES AND EXHIBITS
TARGET DISCLOSURE SCHEDULE
No. Description
--- -----------
1.1 Permitted Liens
3.1 Jurisdictions in which Target is Qualified to do Business
3.2 Holders of Target Stock
3.4 Subsidiaries (capitalization; qualification); and Directors and Officers of Target and Subsidiaries
3.5 Conflicts, Violations and Breaches
3.6 Governmental Approvals and Filings
3.8 Financial Statements
3.9 Absence of Changes
3.10 Certain Liabilities
3.11 Taxes
3.12 Legal Proceedings
3.14 Plans
3.15 Real Property
3.16 Tangible Personal Property
3.17 Intellectual Property
3.18 Contracts
3.19 Permits and Licenses
3.20 Insurance
3.21 Affiliate Transactions
3.22 Employees; Labor Relations
3.23 Environmental Matters
3.24 Largest Customers and Suppliers
3.29 Bank and Brokerage Accounts; Investment Assets
4.4 Target Governmental Approvals and Filings
6.2(d) Required Consents - Acquisition Condition
8.1(b) Personal Guarantees
9.3(g) Target's Costs and Fees
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SONUS DISCLOSURE SCHEDULE
No. Description
--- -----------
4.3 Conflicts, Violations and Breaches
4.4 Governmental Approvals and Filings
4.5 Options
4.6 Legal Proceedings
4.7 Absence of Changes
4.8 Certain Liabilities
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EXHIBITS
Exhibit Description
------- -----------
Exhibit A1 Certificate of Merger to be filed with the Secretary of State of Delaware
Exhibit A2 Certificate of Merger to be filed with the Department of State of New York
Exhibit B Merger Shares Escrow Agreement
Exhibit C Principal Stockholders' Escrow Agreement
Exhibit D Registration Rights Agreement
Exhibit E Reserved
Exhibit F Employment Agreements
Exhibit G Reserved
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MERGER AGREEMENT
This Merger Agreement (this "Agreement"), dated as of November 15,
1999, is entered into by and among Sonus Communication Holdings, Inc., a
Delaware corporation ("Sonus"), EOT Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of Sonus ("Acquisition"), Empire One
Telecommunications, Inc., a New York corporation ("Target"), Xxxx X. Xxxxxxxx
("Xxxxxxxx"), Xxxx X. Xxxxxx ("Xxxxxx"), and Xxxxxxx X. Xxxxx ("Xxxxx" and,
together with Xxxxxxxx and Xxxxxx, the "Principal Stockholders").
BACKGROUND
The parties to this Agreement desire to merge Target with and into
Acquisition at the Effective Time (as defined below), pursuant to which, at the
Effective Time: (i) Target will cease to exist and Acquisition will be the
surviving corporation following the merger (the "Merger"); (ii) all of the
issued and outstanding shares of capital stock of Target will automatically
convert into shares of common stock, par value $.0001 per share, of Sonus (the
"Sonus Common Stock"), in accordance with the terms and conditions of this
Agreement; and (iii) Acquisition will change its name to Empire One
Telecommunications, Inc., all in accordance with the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, the
following defined terms shall have the meanings indicated below:
"AAA" has the meaning ascribed to it in Section 10.1.
"Acquisition" has the meaning ascribed to it in the forepart of this
Agreement.
"Acquisition Indemnitees" has the meaning ascribed to it in Section
8.1(a).
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with
that Person, (b) any other Person that owns or controls five percent (5%) or
more of any class of equity securities (including any equity securities
issuable upon the exercise of any option or convertible security) of that
Person or any of its Affiliates, or (c) any director, partner, officer, agent,
employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
ownership of voting securities or by contract or otherwise.
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"Agreement" means this Merger Agreement, the Exhibits, the Target
Disclosure Schedule, the Sonus Disclosure Schedule and the certificates
delivered in connection herewith, as the same may be amended from time to time
in accordance with the terms hereof.
"Assets and Properties" of any Person means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill related
thereto, operated, owned or leased by such Person, including without limitation
cash, cash equivalents, Investment Assets, accounts and notes receivable,
chattel paper, documents, instruments, general intangibles, real estate,
equipment, inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Balance Sheet" has the meaning ascribed to it in Section 3.8.
"Balance Sheet Date" means September 30, 1999.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to Target and the Subsidiaries, including without
limitation financial statements, Tax Returns and related work papers and
letters from accountants, budgets, pricing guidelines, ledgers, journals,
deeds, title policies, minute books, stock certificates and books, stock
transfer ledgers, Contracts, Permits, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental
studies, audits, reports and plans.
"Business Combination" means with respect to any Person any (i)
merger, amalgamation, consolidation or combination to which such Person is a
party, (ii) any sale, dividend, split or other disposition of any capital stock
or other equity interests of such Person, (iii) any tender offer (including
without limitation a self-tender), exchange offer, recapitalization,
liquidation, dissolution or similar transaction, (iv) any sale (including,
without limitation, a bulk sale), dividend or other disposition of all or a
material portion of the Assets and Properties of such Person or (v) the
entering into of any agreement or understanding, or the granting of any rights
or options, with respect to any of the foregoing.
"Business or Condition" means, with respect to any Person, the
business, operations, assets, Liabilities, condition (financial or otherwise),
results of operations, Assets and Properties and prospects of such Person or
its Subsidiaries.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in New York, New York are authorized or obligated to close.
"Certificates of Merger" shall have the meaning ascribed such terms in
Section 2.1 of this Agreement.
"Claim Notice" means written notification pursuant to Section 8.2(a)
of a Third Party Claim as to which indemnity under Section 8.1 is sought by an
Indemnified Party, enclosing a copy of all papers served, if any, on the
Indemnified Party and otherwise describing the Indemnified Party's claim
against the Indemnifying Party under Section 8.1.
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"Closing" has the meaning ascribed to it in Section 2.5.
"Closing Date" has the meaning ascribed to it in Section 2.5.
"Competing Transaction" has the meaning ascribed to it in Section 9.3.
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract,
commitment or understanding (whether written or oral).
"Conversion Ratio" has the meaning ascribed to it in Section 2.2.
"Dispute" has the meaning ascribed to it in Section 10.1.
"Dispute Period" means the period ending thirty (30) calendar days
following receipt by an Indemnifying Party of an Indemnity Notice.
"Dollar(s)" or "$" means lawful currency of the United States of
America.
"Effective Time" has the meaning ascribed to it in Section 2.1.
"Employees" has the meaning ascribed to it in Section 3.14(a).
"Employment Agreements" means the employment agreements to be executed
and delivered on or prior to Closing by the Principal Stockholders in the form
of Exhibit F.
"Environment" means all air, surface water (including, without
limitation, navigable waters and ocean waters), groundwater, drinking water
supplies, stream sediments or land (including land surface or subsurface),
including all fish, wildlife, biota and all other natural resources.
"Environmental Claim" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal, penal or civil, pursuant to
or relating to any applicable Environmental Law by any person (including but
not limited to any Governmental or Regulatory Authority, private person and
citizens' group) based upon, alleging, asserting, or claiming any actual or
potential (i) violation of or Liability under any Environmental Law, (ii)
violation of any Environmental Permit, or (iii) Liability for investigatory
costs, cleanup costs, removal costs, remedial costs, response costs, natural
resource damages, property damage, personal injury, fines, or penalties arising
out of, based on, resulting from, or related to the presence, Release, or
threatened Release into the Environment, of any Hazardous Substances at any
location, including but not limited to any off-Site location to which Hazardous
Substances or materials containing Hazardous Substances were sent for handling,
storage, treatment, or disposal.
"Environmental Law" means any and all current and future civil, penal
and criminal Laws (including administrative and judicial interpretations of
these Laws by any Governmental or Regulatory Authority), statutes, ordinances,
orders, codes, treaties, rules, regulations, Environmental Permits, policies,
guidance documents, judgments, decrees, injunctions, or agreements of or with
any Governmental or Regulatory Authority, relating to the protection of health
and the Environment, worker health and safety, and/or governing the handling,
use, generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling, or Release of Hazardous
Substances, whether now existing or subsequently amended or enacted, and the
foreign analogies thereof, all as amended or superseded from time to time; and
any common law doctrine, including but not limited
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to, negligence, nuisance, trespass, personal injury, or property damage related
to or arising out of the presence, Release, or exposure to a Hazardous
Substance.
"Environmental Liabilities" means Liabilities of a Person that arise
under any Environmental Law, including, but not limited to, all financial
responsibility under any Environmental Law for site assessments, investigatory
and testing costs, clean-up costs or corrective actions (including, without
limitation, for any removal, remedial or other response actions), and any other
costs, fines and penalties.
"Environmental Permit" means any United States federal, state, or
local permits, licenses, approvals, consents or authorizations required by any
Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"Equity Value" means $3,197,493, reflecting the equity value of Target
on September 30, 1999, calculated by taking $3,209,119 (the equity value of
Target on June 30, 1999) and reducing (or increasing) it, Dollar for Dollar,
for (1) increases (decreases) in working capital deficit from June 30, 1999,
(2) increases (decreases) in before tax assets from June 30, 1999, (3)
increases (decreases) in working capital required in the ordinary course of
business, from $500,000, and (4) increases (decreases) in long-term debt and
liabilities from June 30, 1999.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Escrow Agent" means McGuire, Woods, Battle & Xxxxxx LLP.
"Escrow Amount" has the meaning ascribed to it in Section 2.6.
"Escrow Shares" has the meaning ascribed to it in Section 2.6.
"Financial Statements" has the meaning ascribed to it in Section 3.8.
"GAAP" means United States generally accepted accounting principles
(as defined by the United States Financial Accounting Standards Board),
consistently applied.
"Governmental or Regulatory Authority" means (i) the United States of
America, any state, commonwealth, territory, city, county, possession, or any
other political subdivision or quasi-governmental authority of any of the same,
including, but not limited to, any court, tribunal, arbitrator, authority,
department, ministry, commission, board, bureau, agency, county, municipality,
province, parish and other instrumentality or other regulatory body or entity,
and shall include, without limitation, any stock exchange, quotation service,
and the National Association of Securities Dealers, and (ii) any foreign (as to
the United States of America) sovereign entity, including, but not limited to,
nations, states, republics, kingdoms and principalities, any state, province,
commonwealth, territory or possession thereof, and any political subdivision,
quasi-governmental authority or instrumentality of any of the same.
"Hazardous Substances" means all contaminants, pollutants, chemicals,
deleterious substances, wastes or industrial, toxic or hazardous wastes or
substances including, without limitation, petroleum and petroleum products,
asbestos in any form that is or could become friable, urea, formaldehyde, foam
insulation and transformers or other equipment that contain dielectric fluid
levels of polychlorinated biphenyls ("PCBs"), flammable material or radioactive
materials (or any other chemical, material, substance or waste, exposure to
which is now or hereafter prohibited, limited or regulated by any
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Governmental or Regulatory Authority), issued or discharged into the
Environment in a greater quantity or concentration than that provided for in
any Environmental Law or the presence of which in the Environment is prohibited
pursuant to any Environmental Law. For the purposes of this definition,
"contaminants" means any solid, liquid or gaseous matter, microorganism, sound,
vibration, ray, heat, water, radiation or a combination of any of them that
adversely alters the quality of the Environment.
"Indebtedness" of any Person means, at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services (other than trade accounts payable arising in the ordinary
course of business), (iv) all capital lease obligations of such Person, (v) all
obligations of such Person to purchase securities or other property which arise
out of or in connection with the sale of the same or substantially similar
securities or property, (vi) all obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit,
bankers' acceptance or similar instrument, (vii) all obligations of others
secured by a Lien on any asset of such Person, whether or not such obligation
is assumed by such Person or for which such Person would be liable therefor
under applicable law or any agreement or instrument by virtue of such Person's
ownership interest in or other relationship with such entity, (viii) all
obligations of others guaranteed by such Person, and (ix) with respect to any
swaps, puts calls, collars, caps or other derivative transactions with respect
to or in connection with any of the foregoing.
"Indemnified Party" means any Person claiming indemnification in
accordance with any provision of Article 8.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted in accordance with any provision of Article
8.
"Indemnity Notice" means written notification pursuant to Section
8.2(c) of a claim for indemnity under Article 8 by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim.
"Intellectual Property" means (i) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications, (ii) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (iii) national (including the United States) and multinational
statutory invention registrations, patents, patent registrations and patent
applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights therein
provided by international treaties or conventions and all improvements to the
inventions disclosed in each such registration, patent or application, (iv)
trademarks, service marks, trade dress, logos, trade names and corporate names,
whether or not registered, including all common law rights, and registrations
and applications for registration thereof, including, but not limited to, all
marks registered in the United States Patent and Trademark Office, the
Trademark Offices of the States and Territories of the United States of America
and the Trademark Offices of other nations throughout the world, and all rights
therein provided by international treaties or conventions, (v) copyrights
(registered or otherwise) and registrations and applications for registration
thereof, and all rights provided by international treaties or conventions, (vi)
computer software, including, without limitation, source code, operating
systems and specifications, data, data bases, files, documentation and other
materials related thereto, (vii) trade secrets and confidential, technical and
business information (including ideas, formulas, compositions, inventions and
conceptions of inventions whether patentable or unpatentable and whether or not
reduced to practice), (viii) whether or not confidential, technology (including
know-how and show-how), manufacturing and
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production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (ix) copies and tangible embodiments of all the foregoing, in
whatever form or medium, (x) all rights to obtain and rights to apply for
patents, and to register trademarks and copyrights, and (xi) all rights to xxx
or recover and retain damages and costs and attorneys' fees for present and
past infringement of any of the foregoing.
"Intellectual Property License Agreements" has the meaning ascribed to
it in Section 3.17(a).
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures, limited liability companies and general and limited partnerships,
mortgage loans and other investment or portfolio assets owned of record or
beneficially by Target or any Subsidiary.
"IRS" means the Internal Revenue Service of the United States.
"Judgment" means any judgment, writ, order, injunction, award or
decree of any court, judge, justice or magistrate, including any bankruptcy
court or judge, and any order of or by any Governmental Authority.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any state, county, province, territory, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Leased Real Property" has the meaning ascribed to it in Section
3.15(a).
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, order, technical or other
standard, requirement or procedure enacted, adopted, promulgated or applied by
any Governmental Authority, including Judgments.
"Liabilities" means all Indebtedness, obligations and other
liabilities (or contingencies that have not yet become liabilities) of a Person
(whether absolute, accrued, contingent (or based upon any contingency), known
or unknown, fixed or otherwise, or whether due or to become due), including,
without limitation, any fines, penalties, judgments, awards, settlements
respecting any judicial, administrative or arbitration proceedings, damages,
losses, claims or demands with respect to any Law.
"Liens" means any liens, security interests, valid claims, pledges,
deposits, bills of sale, hypothecations, encumbrances of every kind,
arrangements for the retention of title and any other restriction, right,
interest, power or arrangement of any nature having the purpose or effect of
providing security for, or otherwise protecting against default in respect of,
the obligations of any Person, other than (i) ad valorem Taxes not currently
due and payable, and (ii) purchase money security interests.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, diminution in value of investment, losses and expenses, including
without limitation, interest, reasonable expenses of investigation, court
costs, reasonable fees and expenses of attorneys, accountants and other experts
or other expenses of litigation, arbitration or other proceedings or of any
claim, default or assessment (such
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fees and expenses to include without limitation all fees and expenses of
attorneys incurred in connection with (i) the investigation or defense of any
Third Party Claims or (ii) asserting or disputing any rights under this
Agreement against any party hereto or otherwise).
"Merger" means the merger contemplated by this Agreement.
"Merger Share Certificates" has the meaning ascribed to it in Section
2.2.
"Merger Shares" means all of the shares of Sonus Common Stock to be
issued to the shareholders of Target in connection with the Merger.
"Merger Shares Escrow Agreement" has the meaning ascribed to it in
Section 2.4.
"Old Target Certificate" or "Old Target Certificates" has the meaning
ascribed to it in Section 2.2.
"Operative Agreements" means this Agreement, the Merger Shares Escrow
Agreement, the Principal Stockholder Escrow Agreement, the Registration Rights
Agreement and any other agreements to be entered into in connection with the
transactions contemplated by this Agreement.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including without
limitation any rights to participate in the equity, income or election of
directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Other Stockholders" means holders of capital stock of Target other
than the Principal Stockholders.
"Owned Real Property" has the meaning ascribed to it in Section
3.15(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for
Taxes the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens of landlords and Liens of carriers,
contractors, warehousemen, mechanics, materialmen and other similar Persons
imposed by applicable Law and incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith and which, in the case
of Owned Real Property, shall have been discharged before the Closing; (iii)
Liens relating to deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types
of social security or to secure the performance of leases, trade contracts or
other similar agreements; (iv) Liens specifically identified in the Balance
Sheet; (v) Liens
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securing executory obligations under any lease that constitutes an "operating
lease" under GAAP; and (vi) other Liens set forth in Section 1.1 of the Target
Disclosure Schedule; provided, however, that with respect to each of the
foregoing clauses (i) through (v), to the extent that any such Lien arose on or
prior to the date of the Balance Sheet and relates to, or secures the payment
of, a Liability that is required to be accrued under GAAP, such Lien shall not
be a Permitted Lien unless adequate accruals for such Liability have been
established therefor on such Balance Sheet in conformity with GAAP.
Notwithstanding the foregoing, no Lien arising under the Internal Revenuer Code
shall be a Permitted Lien.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Personal Guarantees" has the meaning ascribed to it in Section
8.1(b).
"Plan" means all employee pension plans, any bonus, incentive
compensation, deferred compensation, profit sharing, retirement, savings, stock
purchase, stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, medical, dental, health, accident, disability,
workers' compensation or other insurance, severance, separation or other
employee benefit plan, practice, policy, program or arrangement of any kind
providing money (other than as current salary or wages), services, property or
other benefits, written or oral, funded or unfunded, and including all that
have been frozen or terminated, and all trust, escrow or similar agreements
related thereto, funded or unfunded, which are maintained by Target or any
Subsidiary with respect to any of its present or former employees, independent
contractors, directors, officers or shareholders or with respect to which
Target or any Subsidiary has made or is required to make payments, transfers or
contributions or is required to administer and make regulatory filings.
"Principal Stockholder" or "Principal Stockholders" has the meaning
ascribed to it in the forepart of this Agreement.
"Principal Stockholders' Escrow Agreement" has the meaning ascribed to
it in Section 2.6.
"Principal Stockholder Indemnitees" has the meaning ascribed to it in
Section 8.1 (b).
"Real Property Leases" has the meaning ascribed to it in Section
3.15(a).
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of
a Hazardous Substance into the Environment.
"Release Date" has the meaning ascribed to it in Section 2.7.
"Representatives" means, with respect to any Person, such Person and
its Affiliates and each of their respective officers, employees, agents,
counsel, accountants, financial advisors, consultants and other
representatives.
"Resolution Period" means the period ending thirty (30) calendar days
following receipt by an Indemnified Party of an Arbitration Notice.
"Sale" has the meaning ascribed to it in Section 5.6(a).
"Securities Act" means the (United States) Securities Act of 1933, as
amended, and the rules and regulations thereunder.
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"Site" means any of the real properties currently or previously owned,
leased or operated by Target or any Subsidiary, any predecessors of Target or
any Subsidiary or any entities previously owned by Target or any Subsidiary,
including all soil, subsoil, surface waters and groundwater thereat.
"Sonus Common Stock" means the common stock of Sonus, par value $.0001
per share.
"Sonus Disclosure Schedule" means the schedules delivered to Principal
Stockholders by or on behalf of Sonus.
"Stockholder Indebtedness" has the meaning ascribed to it in Section
2.11.
"Subsidiary" means, with respect to Target or Sonus (i) those
corporations identified by name in Section 3.4 hereof or Section 3.4 of the
Target Disclosure Schedule with respect to Target, or Section 4.3 hereof or
Section 4.3 of the Sonus Disclosure Schedule with respect to Sonus, (ii) any
other corporation as to which more than ten percent (10%) of the outstanding
stock having ordinary voting rights or power (and excluding stock having voting
rights only upon the occurrence of a contingency unless and until such
contingency occurs and such rights may be exercised) is owned or controlled,
directly or indirectly, by Target or Sonus, as the case may be and/or by one or
more of Target's or Sonus' Subsidiaries, and (iii) any partnership, joint
venture or other similar relationship between Target or Sonus (or any
Subsidiary thereof), as the case may be and any other Person (whether pursuant
to a written agreement or otherwise) and any limited liability company, in each
case if Target or Sonus, as the case may be has a ten percent (10%) or more
equity interest therein.
"Target" has the meaning ascribed to it in the forepart of this
Agreement (and, unless the context otherwise requires, shall include any
predecessor of Target).
"Target Disclosure Schedule" means the schedules delivered to
Acquisition and Sonus by or on behalf of Target and the Principal Stockholders.
"Target Share" or "Target Stock" has the meaning ascribed to it in
Section 2.2.
"Tax" or "Taxes" means all United States and foreign federal, state,
territorial, provincial or local net or gross income, gross receipts, net
proceeds, sales, use, franchise, ad valorem, real or personal property
(tangible and intangible), value added, transfer, franchise, stamp, leasing,
lease, user, transfer, fuel, excess profits, undistributed profits, windfall
profits, blank share, issued share, bearer share, capital stock, customs
duties, recapture, license, employee income withholding, dividend withholding,
interest withholding, other withholding, payroll, employment, unemployment,
social security, pension, health, old age security, unemployment, excise,
property, disability, severance, alternative or add-on minimum, environmental,
or other taxes, assessments, duties, fees, levies or other charges of any
nature whatever imposed by any Governmental Authority, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
"Tax Returns" means any United States, and foreign federal, state,
territorial, provincial or local returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means the IRS and any governmental agency, board,
bureau, body, department or authority of any United States federal, state,
territorial, provincial or local jurisdiction or any foreign jurisdiction,
having or purporting to exercise jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 8.2(a).
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"Warranty Obligations" has the meaning ascribed to it in Section 3.30.
SECTION 1.2 INTERPRETATION. As used in this Agreement, the word
"including" means without limitation; the word "or" is not exclusive; and the
words "herein", "hereof', "hereby", "hereto" and "hereunder" refer to this
Agreement as a whole. Any reference to any applicable Law shall be deemed also
to refer to all rules and regulations promulgated thereunder unless the context
otherwise requires. Whenever required by the context, any gender shall include
any other gender, the singular shall include the plural and the plural shall
include the singular. Unless the context otherwise requires, references
herein: (i) to Articles, Sections, Exhibits and Schedules mean the Articles and
Sections of and the Exhibits and Schedules attached to this Agreement; and (ii)
to an agreement, instrument or other document means such agreement, instrument
or other document as amended, supplemented and modified through the date hereof
unless the context otherwise requires and thereafter from time to time to the
extent permitted by this Agreement. The Schedules and Exhibits referred to
herein shall be construed with and as an integral part of this Agreement to the
same extent as if they were set forth verbatim herein. The Table of Contents
and titles to Articles and headings of Sections or Schedules are inserted for
convenience of reference only and shall not be deemed a part of or to affect
the meaning or interpretation of this Agreement.
ARTICLE 2
MERGER; CLOSING
SECTION 2.1 MERGER. At the time both of the Certificates of
Merger attached hereto as Exhibit A1 and Exhibit A2 (the "Certificates of
Merger") have been properly filed with the appropriate Delaware and New York
authorities and accepted thereby (the "Effective Time"), Target shall merge
with and into Acquisition. Acquisition will be the surviving corporation
following the Merger and the separate existence of Target shall cease, except
insofar as continued by statute, all in accordance with the Certificates of
Merger. The Merger shall have the effects set forth in Section 259 of the
Delaware General Corporation Law, Section 906 of the New York Business
Corporation Law, and in this Agreement.
SECTION 2.2 CONVERSION OF TARGET SHARES. At the Effective Time,
each one (1) share of common stock of Target, par value $.0001 per share,
issued and outstanding at the Effective Time (each such share being
collectively referred to herein as a "Target Share" and collectively the
"Target Stock"), shall be automatically converted, by operation of law, into
that number of shares of Sonus Common Stock as is equal to one (1) multiplied
by a fraction (the "Conversion Ratio"), the numerator of which is the Equity
Value divided by three (3), and the denominator of which is 159,250, without
any further act on the part of the holder thereof, Target or Sonus. In the
event the foregoing calculation and conversion would result in the issuance of
a fraction of a share to any Target stockholder, the number of shares of Sonus
Common Stock to be issued such Target stockholder in the Merger shall be
rounded up to the nearest whole number. No other property, shares, other
securities or consideration of any type will be distributed or issued in
connection with or as a result of the Merger. At the Effective Time,
Acquisition shall assume all of the rights and obligations of Target. All
stock certificates issued by Target and representing any Target Shares (each an
"Old Target Certificate" and collectively the "Old Target Certificates"), shall
be deemed from and after the Effective Time to represent such number of shares
of Sonus Common Stock as is equal to the number of Target Shares represented by
such Old Target Certificate immediately prior to the Effective Time multiplied
by the Conversion Ratio and, upon surrender of any Old Target Certificate by
holders thereof to Sonus, such holders shall be entitled to one or more new
stock certificates to be issued by Sonus representing such number of shares of
Sonus Common Stock (the "Merger Share Certificates").
SECTION 2.3 RESERVED.
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SECTION 2.4 ESCROW OF MERGER SHARES. Concurrently with the
execution and delivery of this Agreement, Sonus shall execute and deliver the
Merger Shares Escrow Agreement in substantially the form attached hereto as
Exhibit B. Within five (5) days after the execution and delivery of the Merger
Shares Escrow Agreement, Sonus shall cause the Merger Shares to be issued and
deposited into escrow with its counsel in accordance with the Escrow Agreement
attached hereto as Exhibit B (the "Merger Shares Escrow Agreement").
SECTION 2.5 CLOSING. The closing (the "Closing") of the Merger
and the transactions contemplated hereby will take place at the offices of
McGuire, Woods, Battle & Xxxxxx LLP, Seven Saint Xxxx Street, Baltimore,
Maryland 21202, at 10:00 A.M. local time, on the third Business Day following
the date on which the last of the conditions set forth in Sections 6.1 and 6.2
have been satisfied or waived by the party or parties entitled to waive the
same (the date and time of the Closing are herein referred to as the "Closing
Date"). At Closing: (i) Target and Acquisition shall execute and deliver the
Certificates of Merger substantially in the form attached hereto as Exhibit A1
and Exhibit A2, (ii) Sonus and each of the Principal Stockholders shall execute
and deliver a Principal Stockholders' Escrow Agreement in substantially the
form attached hereto as Exhibit C, (iii) Sonus shall execute and, within 5 days
thereafter, deliver the Registration Rights Agreement in substantially the form
attached hereto as Exhibit D to each of the Principal Stockholders and each of
the Other Stockholders having properly elected to receive registration rights,
(iv) Acquisition and each of the Principal Stockholders shall execute and
deliver the Employment Agreements in substantially the form attached hereto as
Exhibit F, (v) Acquisition shall file the Certificates of Merger with the
Secretary of State of Delaware and the Department of State of New York, (vi)
Sonus shall cause the Merger Shares to be delivered to the stockholders of
Target set forth in Section 3.2 of the Target Disclosure Schedule in the
respective amounts set forth opposite their name thereon in accordance with
this Agreement (except for the Escrow Shares), and (vii) there shall also be
delivered by Sonus, Acquisition, Target and the Principal Stockholders the
certificates and other agreements, documents and instruments to be delivered
pursuant to Sections 6.1 and 6.2 hereof.
SECTION 2.6 PRINCIPAL STOCKHOLDERS' ESCROW. On the Closing Date
upon receipt of their Merger Shares, the Principal Stockholders, as collateral
security for any Liability of the Principal Stockholders to Acquisition or
Sonus under this Agreement shall deposit with the Escrow Agent that number of
Merger Shares as is equal to fifteen percent (15%) of the Merger Shares into
which their Target Shares are convertible in connection with the Merger (the
"Escrow Shares"), and the indemnification provided in Section 8.1(a) shall be
limited to the value of the Escrow Shares as herein calculated.
SECTION 2.7 RELEASE OF ESCROW SHARES. The Escrow Shares shall be
held by the Escrow Agent until Target's audited financial statements covering
fiscal years 1999 and 2000 are delivered to Sonus and thereafter as provided in
the Principal Stockholders Escrow Agreement (the "Release Date"). The Escrow
Shares shall be released on the Release Date in accordance with the Principal
Stockholders' Escrow Agreement provided there are no claims, Actions or
Proceedings initiated against Target or the Principal Stockholders, as the case
may be, alleging that either Target or the Principal Stockholders (i) is then
in breach of the terms of this Agreement or (ii) was in breach of this
Agreement prior to the Release Date and such breach remained uncured in excess
of ten (10) days after written notice of such breach was received from Sonus.
On the Release Date, if and to the extent that there is any Action or
Proceeding alleging that Target or any of the Principal Stockholders is in
breach of this Agreement or was in breach prior to the Release Date beyond the
cure period provided in this Section 2.7, and damages alleged in such Action or
Proceeding (together with all costs, fees (including reasonable attorneys'
fees) and other expenses expected to be incurred by Sonus or Acquisition in its
reasonable determination) exceed the amount of Thirty-Seven Thousand Five
Hundred Dollars ($37,500), the Escrow Agent shall retain and hold the Escrow
Shares in accordance with the terms of the Principal Stockholders' Escrow
Agreement as security pending the final determination of all such Actions or
Proceedings, and the Escrow Shares shall
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be cancelled (based upon a price of $3.00 per share) in satisfaction of any
amounts to which Sonus becomes entitled in respect of any such Action or
Proceeding.
SECTION 2.8 CONFIRMATION OF EQUITY VALUE. In connection with the
calculation of Equity Value on the Balance Sheet Date, Target shall afford
Sonus, Acquisition and their Representatives reasonable access to all books,
records and work papers used by Target to prepare the Balance Sheet or
otherwise necessary for Sonus' or Acquisition's Representatives to conduct
their review of the Balance Sheet.
SECTION 2.9 XXXX XXXXXXX OPTIONS. At Closing, Xxxx Xxxxxxx shall
receive options or warrants to purchase up to thirty thousand (30,000) shares
of Sonus common stock at an exercise price of Three Dollars ($3.00) per share,
vesting upon issuance, which may be exercised on a cashless basis. Such
options shall terminate on the seventh anniversary of the Closing Date.
SECTION 2.10 ASSUMPTION OF DEBT. Acquisition will assume all
Indebtedness disclosed in Target's Financial Statements except for Indebtedness
of Target to Principal Stockholders or other holders of Target Stock or their
respective affiliates (the "Stockholder Indebtedness"). The Stockholder
Indebtedness will be cancelled by each such Principal Stockholder or holder of
Target Stock prior to the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TARGET AND PRINCIPAL STOCKHOLDERS
As an inducement to Sonus and Acquisition to enter into this Agreement
and to consummate the transactions contemplated herein, except as set forth in
the Target Disclosure Schedule (with Section references corresponding to those
set forth below), Target and each of the Principal Stockholders hereby
represents, warrants, covenants and agrees, jointly and severally (except with
respect to representations and warranties relating or pertaining specifically
to the Principal Stockholders, which are made by each Principal Stockholder as
to himself only) to Sonus and Acquisition as follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION. Target is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its Assets and Properties. Target is duly qualified, licensed or
admitted to do business and is in good standing in the jurisdictions listed in
Section 3.1 of the Target Disclosure Schedule, which are the only jurisdictions
in which the ownership, use or leasing of its Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary. The business now being conducted by Target or any
Subsidiary has not been conducted under any other name.
SECTION 3.2 CAPITAL STOCK. The authorized capital stock of
Target consists of 1,000,000 shares of common stock, par value $.0001 per
share. The only issued and outstanding shares of capital stock are the 159,250
shares of Target Stock, all of which are validly issued, fully paid and
nonassessable, and the issuance thereof was in compliance with all applicable
Laws. Except for such Target Stock, no shares of the capital stock of Target
have been issued or reserved for issuance. There are no outstanding Options
relating to the capital stock of Target or agreements, arrangements or
understandings to issue Options relating to the capital stock of Target and
there are no preemptive rights or agreements, arrangements or understandings to
issue preemptive rights with respect to the issuance or sale of Target's
capital stock or any Options. The Principal Stockholders are the record and
beneficial owners of the Target Shares set forth in Section 3.2 of the Target
Disclosure Schedule, free and clear of all Liens except as set forth in Section
3.2 of the Target Disclosure Schedule. Section 3.2 of the Target Disclosure
Schedule sets forth a true, correct and complete list of all holders of Target
Stock and, with respect to
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each such holder, the number of shares of Target Stock held by such holder.
The share ledger of Target accurately reflects all issuances and transfers of
Target's capital stock since the incorporation of Target.
SECTION 3.3 AUTHORITY. Target and each of the Principal
Stockholders represents, severally but not jointly, that (i) he and Target have
the full legal capacity to execute and deliver this Agreement and the Operative
Agreements to which he or Target is a party and to perform his obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby, (ii) the execution, delivery and performance of this Agreement and
the Operative Agreements by him and Target and the consummation by him and
Target of the transactions contemplated hereby and thereby have been duly and
validly approved by such Principal Stockholder and Target, and no other action
on the part of any of such Principal Stockholder or Target is necessary to
authorize the execution, delivery and performance of this Agreement and the
Operative Agreements and the consummation by him and Target of the transactions
contemplated hereby and thereby (except for the approval of Target's
stockholders); (iii) this Agreement has been duly and validly executed and
delivered by Target and such Principal Stockholder and this Agreement
constitutes, and each of the Operative Agreements to which Target or such
Principal Stockholder is a party (when so executed and delivered) will
constitute, legal, valid and binding obligations of such Principal Stockholder
and Target enforceable against him and Target in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
SECTION 3.4 SUBSIDIARIES; OFFICERS AND DIRECTORS; CHARTER AND BYLAWS.
(a) Section 3.4 of the Target Disclosure Schedule lists
the name of each Subsidiary of Target. The Subsidiaries are EOT
Telecommunications of Canada, Inc., a New Brunswick corporation and Empire One
Power, Inc., a New York Corporation. Each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the Province
of New Brunswick and the State of New York, respectively, and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its Assets and Property. Each Subsidiary
is duly qualified, licensed or admitted to do business and is in good standing
in the jurisdictions listed in Section 3.4 of the Target Disclosure Schedule,
which are the only jurisdictions in which the ownership, use or leasing of its
Assets and Properties or the conduct or nature of its business makes such
qualification, licensing or admission necessary. Section 3.4 of the Target
Disclosure Schedule lists for each Subsidiary the amount of its authorized and
outstanding capital stock. All of the outstanding capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid and
non-assessable, are wholly owned, beneficially and of record, by Target, in
each case free and clear of all Liens. There are no outstanding Options with
the respect to the capital stock of any Subsidiary or agreements, arrangements
or understandings to issue Options with respect to the capital stock of any
Subsidiary and there are no preemptive rights, agreements, arrangements or
understandings to issue preemptive fights with respect to the issuance or sale
of any capital stock of any Subsidiary. Except for the Subsidiaries, Target
and the Subsidiaries hold no equity, partnership, limited liability company,
joint venture or other interest in any Person.
(b) The name of each director and officer of Target and
each Subsidiary on the date hereof, and the position with Target and the
Subsidiaries, are listed in Section 3.4 of the Disclosure Statement.
(c) Target has, prior to the execution of this Agreement,
delivered to Sonus and Acquisition true and complete copies of the Certificate
or Articles of Incorporation and Bylaws of Target and each Subsidiary.
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SECTION 3.5 NO CONFLICTS. Each of the Principal Stockholders
represents and warrants that the execution and delivery by such Principal
Stockholder and Target of this Agreement do not, and the execution and delivery
by such Principal Stockholder and Target of the Operative Agreements to which
either of them is a party, the performance by Target and such Principal
Stockholder of his and its respective obligations under this Agreement and such
Operative Agreements and the consummation of the transactions contemplated
hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the Certificate or Articles of
Incorporation or Bylaws of Target or any of the Subsidiaries or of any
agreement of the shareholders of Target or any Subsidiary;
(b) subject to obtaining the consents and approvals and
making the filings and giving the notices referred to in Section 3.6 below or
described in Section 3.6 of the Target Disclosure Schedule, if any, conflict
with or result in a violation or breach of any term or provision of any Law or
Order applicable to Target, any of its Subsidiaries or any of their respective
Assets and Properties; or
(c) except as described in Section 3.5 of the Target
Disclosure Schedule, (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a default
under, (iii) require Target, any of the Subsidiaries or such Principal
Stockholder to obtain any consent, approval or action of, make any filing with
or give any notice to, any Person as a result or under the terms of, (iv)
result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to
any Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under, or (vi) result in the creation or
imposition of any Lien upon the Target Shares or any of the Subsidiaries or any
of their respective Assets and Properties under, any Contract or Permit to
which Target, any Subsidiary or such Principal Stockholder is a party or by
which any of their respective Assets and Properties is bound.
SECTION 3.6 GOVERNMENTAL APPROVALS AND FILINGS. Except as
described in Section 3.6 of the Target Disclosure Schedule, no permits,
consents or approvals by, or filing with or notice to, any federal, provincial,
territorial, local or foreign Governmental Authority, as applicable, including,
without limitation, any consents or approvals under the applicable United
States federal or foreign investment laws and other federal, provincial,
territorial, local or foreign competition and antitrust laws and under any
Environmental Law, is required on the part of Target, any of the Subsidiaries
or any of the Principal Stockholders in connection with the execution, delivery
and performance of this Agreement or any of the Operative Agreements to which
he, she or it is a party or the consummation of transactions contemplated
hereby or thereby.
SECTION 3.7 MINUTE BOOKS AND RECORDS. The minute books and other
similar records of Target and the Subsidiaries provided to Sonus or Acquisition
prior to the execution of this Agreement contain a true and complete record, in
all material respects, of all action taken at all meetings and by all written
consents in lieu of meetings of the stockholders, the boards of directors and
committees of the boards of directors of Target and the Subsidiaries.
SECTION 3.8 FINANCIAL STATEMENTS Attached hereto as Section 3.8
of the Target Disclosure Schedule are true and complete copies of the
consolidated balance sheets of Target and the Subsidiaries as of the Balance
Sheet Date (the "Balance Sheet") and as of December 31, 1998 and the related
consolidated statements of operations and cash flow for such year then ended,
with the audit report thereon of Target's accountants (the "Audited Financials"
and, together with the Balance Sheet, the "Financial Statements"). The
Financial Statements are true and correct in all material respects and were (i)
prepared from the books of account or other financial records of Target and the
Subsidiaries, (ii) prepared in accordance with GAAP consistently applied
throughout the periods involved, and (iii) fairly
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present the consolidated financial condition, results of operations and cash
flow of Target and the Subsidiaries on a consolidated basis as of the dates
thereof and for the periods covered thereby.
SECTION 3.9 ABSENCE OF CHANGES. Except as set forth in Section
3.9 of the Target Disclosure Schedule, since the Balance Sheet Date, Target and
the Subsidiaries have been operated in the ordinary course of business
consistent with past practice and there has not been any material adverse
change, or any event or development which, individually or together with other
such events or developments, could reasonably be expected to result in a
material adverse change, in the Business or Condition of Target. None of the
other representations or warranties set forth in this Agreement shall be deemed
to limit the foregoing. In addition, without limiting the foregoing, except as
disclosed in Section 3.9 of the Target Disclosure Schedule, there has not
occurred since the Balance Sheet Date:
(a) any amendment or change to the Articles or
Certificate of Incorporation of Target or any of the Subsidiaries or their
respective Bylaws;
(b) any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock of Target, or
any direct or indirect redemption, purchase or other acquisition by Target or
any Subsidiary of any such capital stock of Target;
(c) any authorization, issuance, sale or other
disposition by Target or any Subsidiary of any shares of capital stock of
Target or any Subsidiary, or any Option relating to such capital stock or any
modification or amendment of any right of any holder of any outstanding shares
of capital stock of Target or any Subsidiary;
(d) (i) any payment of a regular, special or year end
bonus to any employee or officer or director of Target or any Subsidiary, or
any increase in salary, rate of commissions or rate of consulting fees of any
director, officer, employee or consultant of Target or any Subsidiary, other
than salary increases to non-management employees in the ordinary course of
business and consistent with past practices; (ii) any payment of consideration
of any nature whatsoever (other than salary, commissions or consulting fees
paid in the ordinary course of business consistent with past practices) to any
officer, director, stockholder (including the Principal Stockholders), employee
or consultant of Target or any Subsidiary; (iii) any establishment or
modification of (A) targets, goals, pools, formula or similar provisions under
any Plan, employment contract or other employee compensation arrangement of
Target or any Subsidiary, or (B) salary ranges, guidelines or similar
provisions in respect of any Plan, employment contract or other employee
compensation arrangement of Target or any Subsidiary; (iv) any grant of any
severance, continuation or termination pay to any director, officer,
stockholder (including the Principal Stockholders) or employee of Target or any
Subsidiary; or (v) any adoption, entering into, amendment, modification or
termination (partial or complete) of any Plan or employment contract of Target
or any Subsidiary;
(e) (i) incurrences by Target or any Subsidiary of
Indebtedness or (ii) any voluntary purchase, cancellation, prepayment or
complete or partial discharge in advance of a scheduled payment date with
respect to, or waiver of any right of Target or any Subsidiary under, any
Indebtedness of or owing to Target or any Subsidiary;
(f) any change in or incurrence of any Liability of
Target or any Subsidiary other than in the ordinary course of business
consistent with past practices;
(g) any physical damage, destruction or other casualty
loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of Target or any Subsidiary in an aggregate
amount exceeding Fifteen Thousand Dollars ($15,000);
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(h) any write-off or write-down of or any determination
to write off or write down any of the Assets and Properties of Target or any
Subsidiary in an aggregate amount exceeding Fifteen Thousand Dollars ($15,000);
(i) any purchase of any Assets and Properties of any
Person or any sale, license or other disposition of, or incurrence of a Lien
(other than a Permitted Lien) on, any Assets and Properties of Target or any
Subsidiary, other than acquisitions or dispositions in the ordinary course of
business of Target or any Subsidiary consistent with past practice and the
terms of this Agreement and the Operative Agreements;
(j) any entering into, amendment, modification,
termination (partial or complete) or granting of a waiver under or giving any
consent with respect to (i) any Contract which is required (or had it been in
effect on the date hereof would have been required) to be disclosed in the
Target Disclosure Schedule pursuant to Section 3.18, (ii) any Permit held by
Target or any Subsidiary, or (iii) any Intellectual Property owned, held or
used by Target or any Subsidiary;
(k) any capital expenditures or commitments for additions
to property, plant, equipment or Intellectual Property of Target or any
Subsidiary in an aggregate amount exceeding Fifteen Thousand Dollars ($15,000);
(l) any commencement or termination by Target or any
Subsidiary of any line of business;
(m) any transaction by Target or any Subsidiary with any
officer, director, stockholder (including any Principal Stockholder), Affiliate
or Associate of Target or any Subsidiary, other than pursuant to any Contract
in effect on the Balance Sheet Date and disclosed to Acquisition pursuant to
Section 3.18(a)(viii) or other than pursuant to any contract of employment
listed pursuant to Section 3.18(a)(I) of the Target Disclosure Schedule;
(n) the commencement or notice or threat of commencement
of any lawsuit or proceedings against, or investigation of, Target or any
Subsidiary or their affairs which could reasonably be expected to have a
material adverse effect on Target or any Subsidiary or their respective
business or financial condition;
(o) any notice of any claim of ownership by a third party
of the Intellectual Property of Target or any Subsidiary or notice of
infringement by Target or any Subsidiary of any third party's Intellectual
Property rights;
(p) any change in pricing or royalties set or charged by
Target or any Subsidiary to clients, customers or licensees or in pricing or
royalties set or charged by Persons who have licensed Intellectual Property to
Target or any Subsidiary;
(q) any loan or advance by Target or any Subsidiary to
any Person or entity, except for advances to employees for travel and business
expenses in the ordinary course of business consistent with past practice;
(r) any change in the accounting methods or procedures of
Target or any Subsidiary;
(s) any other material transaction involving Target or
any Subsidiary outside the ordinary course of business consistent with past
practice; or
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(t) any entering into of an agreement to do or engage in
any of the foregoing, including without limitation with respect to any Business
Combination not otherwise restricted by the foregoing paragraphs.
SECTION 3.10 NO UNDISCLOSED LIABILITIES. Except as specifically
reflected or reserved against in the Balance Sheet or as described in Section
3.10 of the Target Disclosure Schedule, there are no Liabilities of, relating
to or affecting Target or any Subsidiary or any of their respective Assets and
Properties (whether or not required to be reflected in financial statements in
accordance with GAAP), other than Liabilities incurred in the ordinary course
of business consistent with past practice since the date of the Balance Sheet
and in accordance with the provisions of this Agreement and the Operative
Agreements, which in the aggregate are not material to the Business or
Condition of Target and are not for tort or for breach of contract.
SECTION 3.11 TAXES.
(a) All Tax Returns (including, without limitation, all
United States federal, state, local and other applicable income, goods and
services, and sales Tax Returns) required to have been filed by or with respect
to Target or any Subsidiary have been duly and timely filed, and such Tax
Returns shall be duly and timely filed through the period from the date hereof
to the Closing Date, unless extensions have been granted or the Taxes are being
contested in good faith. Each such Tax Return correctly and completely
reflects the Tax Liability and all other information required to be reported
thereon. All Taxes due and payable by Target or any Subsidiary have been paid
(whether or not shown on any Tax Return), including all payments of estimated
Taxes (taking into account any duly obtained extensions).
(b) The provisions for Taxes due by Target and the
Subsidiaries (including those for which Tax Returns are not yet required to be
filed) in the Financial Statements for the period ended on the date of the
Balance Sheet are sufficient for all unpaid Taxes of Target and the
Subsidiaries.
(c) Except as set forth in Section 3.11 of the Target
Disclosure Schedule, neither Target nor any Subsidiary is a party to any
agreement extending the time within which to file any Tax Return. No claim has
ever been made by any jurisdiction in which Target or any Subsidiary does not
file Tax Returns that it is or may be subject to taxation by that jurisdiction.
(d) Target and the Subsidiaries have withheld or deducted
all Taxes required by Law to have been withheld or deducted in connection with
amounts paid or owing to any present or former employee, officer, director,
shareholder, creditor, licensor, licensee, distributor, independent contractor
or other third party, and Target and the Subsidiary have duly paid all amounts
so withheld or deducted to the proper recipients thereof within the times and
in the manner required by such Laws.
(e) Section 3.11 of the Target Disclosure Schedule
indicates those Tax Returns, if any, of Target or any Subsidiary that has been
audited by IRS or and any other Taxing Authorities, and indicates those Tax
Returns of Target and the Subsidiaries that are currently the subject of audit.
No deficiencies, adjustments or changes in assessments for any Taxes have been
proposed, asserted or assessed against Target or any of the Subsidiaries, and
neither Target nor any Subsidiary expect any Taxing Authority to assess
additional Taxes against or in respect of it for any past period. Except as
disclosed in Section 3.11 of the Target Disclosure Schedule, (i) there are no
investigations, examinations, reassessments, claims, actions, suits or
proceedings threatened or pending against Target or any Subsidiary in respect
of any Taxes, nor are there any matters under discussion with the IRS or any
other Taxing Authorities relating to any Taxes imposed, levied or assessed by
any such Taxing Authority; and (ii) there is no dispute concerning any Tax
Liability of Target or any Subsidiary either threatened, claimed
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or raised by any Taxing Authority or of which Target, any Subsidiary or any
Principal Stockholder is or reasonably should be aware. There are no Liens for
Taxes upon the Assets or Properties of Target or any Subsidiary. The Principal
Stockholders have delivered to Sonus complete and correct copies of all
federal, state, local and foreign income Tax Returns filed by Target and the
Subsidiaries and all Tax examination reports since 1995. No issue has been
raised since that date by the IRS or any other Taxing Authority in any audit of
Target or any of the Subsidiaries which, by application of similar principles,
could be expected to result in a material proposed deficiency for any period
not yet audited or for periods under audit.
(f) Neither Target nor any Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to any Tax assessment or deficiency.
(g) Neither Target nor any Subsidiary has received any
written ruling related to Taxes or entered into any written and legally binding
agreement with the IRS or any other Taxing Authority relating to Taxes.
(h) Neither Target nor any Subsidiary has any Liability
for Taxes of any Person other than Target and the Subsidiaries (i) as a
transferee or successor, (ii) by reason of Section 1.1502-6 of the United
States Treasury Regulations or any similar provision of any other Law, (iii) by
contract or (iv) otherwise.
(i) Neither Target nor any Subsidiary has been a member
of a consolidated, combined, affiliated or unitary group (other than a group
consisting of Target and the Subsidiaries) and neither Target nor any
Subsidiary has filed or consented to the filing of any federal, state, or local
consolidated, combined, affiliated or unitary or similar return with any entity
other than Target and the Subsidiaries. Neither Target nor any Subsidiary is a
party to or is bound by any obligations under any Tax sharing, Tax indemnity or
similar agreement or arrangement. Neither Target nor any Subsidiary is a party
to any joint venture, partnership or other arrangement that is treated as a
partnership for any federal, state, or local Tax purposes.
(j) Neither Target nor any Subsidiary has made any
payments, or is obligated to make any payments, or is a party to any Contract
that could, contingently or otherwise, obligate it to make any payment that
would, pursuant to Section 280G of the Internal Revenue Code, not be
deductible, except as otherwise provided in this Agreement or as otherwise
disclosed in Section 3.11 of the Target Disclosure Schedule.
(k) Neither Target nor any Subsidiary has filed a consent
under Section 341(f) of the Code.
(l) Neither Target nor any Subsidiary is a United States
real property holding corporation within the meaning of Section 897(c)(2) of
the Code during the applicable period specified in Section 897(c)(1)(A)(ii).
SECTION 3.12 LEGAL PROCEEDINGS
(a) Except as disclosed in Section 3.12(a) of the Target
Disclosure Schedule (with paragraph references corresponding to those set forth
below):
(i) there are no Actions or Proceedings
pending or, to the knowledge of Target, any Subsidiary or any Principal
Stockholder, threatened against, relating to or affecting Target, any Subsidiary
or any Principal Stockholder (in his, her or its capacity as a stockholder of
Target), or any
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of their respective Assets and Properties or this Agreement and the
transactions contemplated hereby which does or could reasonably be expected,
individually or in the aggregate, to have a material adverse effect on Target
or any Subsidiary or their respective business or financial condition;
(ii) there are no facts or circumstances known to
Target, any Subsidiary or any Principal Stockholder that could reasonably be
expected to give rise to any Action or Proceeding that would be required to be
disclosed pursuant to clause (a) (i) above; and
(iii) neither Target, any Subsidiary nor any
Principal Stockholder has received notice, or is aware, of any Orders
outstanding against Target, any Subsidiary or any Principal Stockholder
(relating to Target, any Subsidiary or this Agreement).
SECTION 3.13 COMPLIANCE WITH LAWS AND ORDERS. Neither Target nor
any Subsidiary is, nor has Target or any Subsidiary been at any time, in
material violation of or in material default under any Law or Order applicable
to Target, any Subsidiary or any of their respective Assets and Properties. In
furtherance and not limitation of the foregoing, neither Target nor any
Subsidiary has violated any federal, provincial or territorial or United States
securities Law in connection with the offer, sale or purchase of any
securities.
SECTION 3.14 PLANS.
(a) Set forth in Section 3.14(a) of the Target Disclosure
Schedule is a complete and correct list of all Plans maintained or contributed
to by Target or any Subsidiary, Plans pursuant to which Target or any
Subsidiary may have any Liability, and Plans covering employees or former or
retired employees of Target or any Subsidiary ("Employees") with respect to
their employment with Target and the Subsidiaries. Except as disclosed in
Section 3.14(a) of the Target Disclosure Schedule, each Plan is in writing and
true and complete copies of such Plans and any trust, custodial or other
funding agreement, including all amendments thereto relating to such Plans,
have heretofore been delivered to Sonus.
(b) As to each of the Plans that is a retirement, savings
or other pension plan as defined in Section 3(2) of ERISA, Target has complied,
in all material respects, with all applicable laws and regulations in
administering such plans, including specifically the provisions of ERISA and
the qualification provisions of Section 401 of the Internal Revenue Code. No
non-exempt prohibited transaction, as defined in Section 4975 of the Internal
Revenue Code, has occurred with respect to any such Plans and no such Plan has
incurred any accumulated funding deficiency, as defined in Section 412 of the
Internal Revenue Code, whether or not waived. There has not been, with regard
to any such Plan, any reportable event, as defined in Section 4043(b) of ERISA,
that is required to be reported to the PBGC by law or regulation. The fair
market value of the assets of each such Plan that is subject to Title IV of
ERISA equals or exceeds the present value of all benefits accrued under such
Plan, whether or not vested, based on the actuarial assumptions that would be
used by the PGBC if the Plan were terminated as of the date of this Agreement
and as of the Closing Date. As to each of the Plans that is a health,
severance, insurance, disability and other employee welfare Plan, and all other
employee benefit plans and programs as defined in Section 3(1) of ERISA
(including without limitation the plans listed in Section 3.14(a)), Target has
complied, in all material respects, with all applicable laws and regulations in
the administration thereof including, without limitation, the provisions of
ERISA when applicable. Target has not terminated any Plan or incurred any
material liability to the PBGC under Title IV of ERISA and, to the knowledge of
each of the Principal Stockholders, no condition exists that could reasonably
be expected to cause Acquisition or Sonus to incur any such liability. All
premiums payable to the PBGC have been paid when due.
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(c) All required employer contributions, premium payments
and source-deducted Employee contributions under the Plans have been made or
will be timely made and remitted to the funding agents thereunder. All such
contributions to the Plans for any period ending before the Closing Date that
are not yet, but will be, required to be made, are properly accrued and
reflected on the Balance Sheet or are disclosed in Section 3.14 (c) of the
Target Disclosure Schedule. No oral or written promise, commitment or
representation has been made by any Principal Stockholder, Target or any
Subsidiary (i) to amend any of the Plans or to provide increased benefits
thereunder to any of Target's or any Subsidiary's present or former employees,
independent contractors, directors, officers or shareholders, except pursuant
to the requirements, if any, of the Plans or any collective bargaining
agreements, (ii) to establish any new Plans, or (iii) to fund or continue any
Plan beyond the Closing Date. Except as set forth in Section 3.14 (c) of the
Target Disclosure Schedule, each Plan can be terminated on the Closing Date
without making any additional contribution to such Plan other than normal
contributions with respect to the current plan year.
(d) Except as set forth in Section 3.14(d) of the Target
Disclosure Schedule, each Plan has been maintained, operated and administered
in compliance with its terms and all related documents or agreements and in
compliance with all applicable Laws, and all filings required to be made with
any Governmental or Regulatory Authority with respect to each Plan have been
duly and timely filed, including without limitation annual reports on Form 5500
Series. Any non-compliance or failure properly to administer a Plan or related
trust or fund has not exposed such Plan or related trust or fund or Target or
any Subsidiary, nor could it result in any exposure of Acquisition or Sonus, to
any Taxes, penalties or Liabilities to any Person, or expose the Plan to
disqualification or the trust or fund to loss of tax exempt status.
(e) There is no pending or threatened claim (other than
claims for benefits in the ordinary course), assessment, complaint, proceeding
or investigation of any kind before any Governmental or Regulatory Authority
with respect to any Plan.
(f) All insurance premiums required with respect to any
Plan up to the Closing Date have been or shall be paid on or prior to the
Closing Date, and, with respect to any such insurance policy, there shall be no
Liability of either Target, any Subsidiary or Acquisition or Sonus in the
nature of a retroactive rate adjustment, loss sharing arrangement or other
actual or contingent Liability arising wholly or partially out of events
occurring prior to the Closing Date.
(g) All benefits, expenses and other amounts due and
payable to or under any Plan, and all contributions, transfers or payments
required to be made to any Plan, have been paid when due.
(h) No Plan provides benefits, including, without
limitation, death or medical benefits, beyond termination of service or
retirement other then (i) coverage mandated by Law, (ii) death or retirement
benefits under any Plan that is a pension plan as defined in Section 3(2) of
ERISA, or (iii) deferred compensation benefits reflected on the books of Target
or any Subsidiary and described in Section 3.14(h) of the Target Disclosure
Schedule.
(i) Neither Target, any Subsidiary nor any Plan has
agreed to guarantee or indemnify the performance of any Person with respect to
any Plan.
(j) Except with respect to the issuance of options to
Xxxxxxx in accordance with this Agreement, as a result of the merger of Target
into Acquisition, neither Target, any Subsidiary, Acquisition nor Sonus shall
be obligated to make a payment to any individual with respect to severance or
compensation for personal services (other than salary and benefits at current
rates for services performed),
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nor shall any benefit under any Plan be accelerated or become vested, including
without limitation any Options or similar rights to stock.
SECTION 3.15 REAL PROPERTY.
(a) Section 13.15(a) of the Target Disclosure Schedule
contains a true and correct list of (i) all real property owned by Target
("Owned Real Property"), (ii) all real property leased, subleased or otherwise
occupied by Target or any Subsidiary (as lessor or lessee), together with a
brief description of the terms thereof (the "Leased Real Property", and the
leases relating thereto are herein called the "Real Property Leases", and the
Leased Real Property and Owned Real Property collectively the "Real Property"),
and (iii) all Liens relating to or affecting all or any of the Real Property
Leases. Neither Target nor any Subsidiary owns, nor has it ever owned, any
real property.
(b) Target and each of the Subsidiaries has fee simple
title in and to, and is the record owner of, the Owned Real Property, free of
any Lien other than Permitted Liens. Subject to the terms of the Real Property
Leases and except as set forth in Section 3.15 of the Target Disclosure
Schedule, Target and each of the Subsidiaries has a valid and subsisting
leasehold estate in and the right to quiet enjoyment of each of the Leased Real
Properties leased by it for the full term of the lease thereof. Each Real
Property Lease is in full force and effect and is a legal, valid and binding
agreement, enforceable in accordance with its terms against the parties
thereto, and except as set forth in Section 3.15(b) of the Target Disclosure
Schedule, there is no, nor has Target, any Subsidiary or any Principal
Stockholder received notice of any, default (or any condition or event which,
after notice or lapse of time or both, would constitute a default) thereunder.
Neither Target nor any Subsidiary owes brokerage, commissions or finders fees
with respect to any such Real Property Lease or Leased Real Property, except to
the extent that Target or a Subsidiary may renew the term of any such Real
Property Lease, in which case, any such commissions and fees would be in
amounts that are reasonable and customary for premises similar to those leased,
given their intended use and terms. Neither Target nor any Subsidiary has
assigned, sublet, transferred, hypothecated or otherwise disposed of any
interest in any Real Property Lease.
(c) Target has delivered to Sonus prior to the execution
of this Agreement true and complete copies of all Real Property Leases
(including any amendments and renewal letters).
(d) The improvements on the Leased Real Property subject
to the Real Property Leases and on the Owned Real Property are in good
operating condition and in a state of good maintenance and repair, ordinary
wear and tear excepted, and are adequate and suitable for the purposes for
which they are presently being used.
(e) Except as disclosed in Section 3.15(e) of the Target
Disclosure Schedule, neither Target, any Subsidiary nor any Principal
Stockholder has received notice of any pending zoning or other land use
regulation Actions or Proceedings nor has any knowledge of any proposed change
in any applicable Laws, which could reasonably be expected to detrimentally
affect the use or operation of any Real Property, nor has any such party
received notice of any special assessment proceedings affecting the Real
Property, or applied for any change to the zoning or land use status of the
Real Property.
(f) Except as disclosed in Section 3.15(f) of the Target
Disclosure Schedule, the current use and operation of all Real Property is in
compliance with all applicable Laws (including without limitation all
Environmental Laws and Laws relating to zoning and land use) and public and
private covenants, restrictions and easements, and neither Target, any
Subsidiary nor any Principal Stockholder has received notice of noncompliance
with any applicable Laws.
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(g) Target and the Subsidiaries have obtained all
licenses, permits, approvals, easements and rights of way (and all such items
are currently in full force and effect) required from any Governmental or
Regulatory Authority having jurisdiction over each parcel of Real Property or
from private parties for the current use and operation by Target and the
Subsidiaries of each parcel of Real Property.
(h) No Principal Stockholder is a "foreign person," as
defined in the federal Foreign Investment in Real Property Tax Act of 1980 and
the 1984 Tax Reform Act, as amended.
SECTION 3.16 TANGIBLE PERSONAL PROPERTY. Target and each of the
Subsidiaries is in possession of and has good and marketable title to, or has
valid leasehold interests in or valid rights under Contract to use, all
tangible personal property used in the conduct of their respective businesses,
including all tangible personal property reflected on the Financial Statements
for the period ended on the Balance Sheet Date and tangible personal property
acquired since that date, other than property disposed of since such date in
the ordinary course of business consistent with past practice and the terms of
this Agreement and the Operative Agreements. The principal items of such
tangible personal property (which for the purpose of this Agreement shall mean
those having an original purchase price of Five Thousand Dollars ($5,000) or
more are listed in Section 3.16 of the Target Disclosure Schedule. All such
tangible personal property is free and clear of all Liens, other than Permitted
Liens, and are adequate and suitable for the conduct by Target and the
Subsidiaries of the business presently conducted by them, and are in good
working order and condition, ordinary wear and tear excepted, and their use
complies in all material respects with all applicable Laws.
SECTION 3.17 INTELLECTUAL PROPERTY RIGHTS.
(a) The only Intellectual Property owned or licensed for
use or otherwise used by Target and the Subsidiaries is disclosed in Section
3.17 of the Target Disclosure Schedule. No other Intellectual Property is used
or necessary in the conduct of the business of Target and the Subsidiaries.
Target or a Subsidiary owns all right, title and interest in each item of such
Intellectual Property disclosed in Section 3.17 of the Target Disclosure
Schedule, and none constitute "work-made-for-hire" for customers or clients,
except for those items of software identified in Section 3.17 of the Target
Disclosure Schedule which have been exclusively (other than "shrinkwrap" or
similar commercial end user licenses) and irrevocably licensed to Target or a
Subsidiary in perpetuity under valid and binding license agreements, true and
correct copies of which have been provided to Sonus, which license agreements
are in full force and effect (the "Intellectual Property License Agreements").
The consummation of the transactions contemplated by this Agreement will
neither violate nor result in the breach, modification, cancellation,
termination or suspension of the Intellectual Property License Agreements, and
Target and the Subsidiaries are in compliance with, and have not breached (or
would breach after notice or lapse of time) any term of, the Intellectual
Property License Agreements and, to the knowledge of Target, any Subsidiary and
the Principal Stockholders, all of the other parties to such Intellectual
Property License Agreements are in compliance with, and have not breached, any
of the terms thereof. There is no dispute between Target or any Subsidiary and
any licensor of such Intellectual Property regarding the scope of the license
or performance under any applicable Intellectual Property License Agreement,
including with respect to any payments to be made by Target or any Subsidiary
thereunder.
(b) Except as disclosed in Section 3.17 of the Target
Disclosure Schedule, all such Intellectual Property disclosed in Section 3.17
of the Target Disclosure Schedule is free and clear of any and all Liens, other
than Permitted Liens. Section 3.17 of the Target Disclosure Schedule lists all
of Target's and the Subsidiaries' United States, Canadian or foreign
registrations or applications issued by, filed with or recorded by any
Governmental Regulatory Authority with respect to the Intellectual Property
listed in Section 3.17 of the Target Disclosure Schedule (including patent,
trademark, copyright and other
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registrations and applications), and all of such registrations and applications
are valid and in full force and effect and all necessary registration,
maintenance and renewal fees in connection therewith have been made and all
necessary documents and certificates in connection therewith have been filed
with the relevant patent, copyright, trademark or other authority in the United
States, or foreign jurisdictions, as the case may be, for the purpose of
maintaining the registrations or applications for registration of such
Intellectual Property. Except as described in Section 3.17 of the Target
Disclosure Schedule, (i) there are no restrictions on the direct or indirect
transfer of any such Intellectual Property subject to the terms of any license
described in Section 3.17 of the Target Disclosure Schedule, (ii) to the extent
requested by Sonus and to the extent such documentation exists and is available
to Target and the Subsidiaries, Target and the Subsidiaries have made available
to Acquisition prior to the execution of this Agreement documentation with
respect to any invention, process, design, computer software and program or
other know-how or trade secret or proprietary information included in such
Intellectual Property, which documentation is accurate in all material respects
and reasonably sufficient in detail and content to identify and explain such
invention, process, design, computer software and programs or other know-how or
trade secret or proprietary information, (iii) Target and any Subsidiary have
taken reasonable security measures to protect the secrecy, confidentiality and
value of their trade secrets and proprietary information, and (iv) Target and
the Subsidiaries have not granted to any Person any license, agreement or other
permission to use such Intellectual Property. Neither Target, any Subsidiary
nor any Principal Stockholder has any knowledge that such Intellectual Property
is being infringed by any other Person. Neither Target nor any Subsidiary is
infringing any Intellectual Property of any other Person, and no claim is
pending or, to the knowledge of Target, any Subsidiary or any Principal
Stockholder, has been threatened to such effect or with respect to the
ownership, validity, license or use of, or any infringement resulting from,
Target's or Subsidiaries' Intellectual Property, or the sale of any products or
services by Target or any Subsidiary.
(c) No (i) product, service or publication of Target or
any Subsidiary, (ii) material published or distributed by Target or any
Subsidiary, or (iii) conduct or statement of Target or any Subsidiary,
constitutes obscene material, a defamatory statement or material, or violates
any rights, including rights of publicity or privacy, of any Person.
(d) Except as disclosed in Section 3.17 of the Target
Disclosure Schedule, the information systems (including all computer hardware
and software) owned, licensed or otherwise used by Target and the Subsidiaries,
all products and services presently being purchased or acquired by Target or
any Subsidiary or which Target or any Subsidiary has any Contract to purchase
or acquire or are planning to purchase or acquire, and all products and
services which Target or any Subsidiary currently produces, sells or supplies,
has previously produced, sold or supplied, or are planning to produce, sell or
supply, are free of any "Year 2000 Problem" and any "leap year problem" such
that such systems, products and services do not and will not, without requiring
any modifications, experience any malfunctions or other usage problems in
connection with the year 2000 (and later years) as distinct from 1900s years
and any leap year.
SECTION 3.18 CONTRACTS.
(a) Section 3.18 of the Target Disclosure Schedule
contains a true and complete list of each of the following Contracts or other
arrangements (true and complete copies or, if not in writing, reasonably
complete and accurate written descriptions of which, together with all
amendments and supplements thereto and all waivers of any terms thereof, have
been delivered to Sonus prior to the execution of this Agreement), to which
Target or any Subsidiary (or any Principal Stockholder on behalf of Target or
any Subsidiary) is a party or by which any of their respective Assets and
Properties is bound:
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(i) (A) all Contracts (excluding Plans which are
listed on Section 3.14 of the Target Disclosure Schedule) providing for a
commitment of employment or consultation services for a specified or
unspecified term, specifying the name, position and rate of compensation of
each Person party to such a Contract and the expiration date of each such
Contract; and (B) any written or unwritten representations, commitments,
promises, communications or courses of conduct involving an obligation of
Target or any Subsidiary to make severance or other payments (with or without
notice, passage of time or both) to any Person in connection with, or as a
consequence of, the transactions contemplated hereby or by the Operative
Agreements or to any employee who is disclosed on Section 3.22(a) of the Target
Disclosure Schedule, other than with respect to salary payments in the ordinary
course of business consistent with past practice;
(ii) all Contracts with any Person containing any
provision or covenant prohibiting or limiting the ability of Target, any
Subsidiary or any Principal Stockholder (to the extent the restriction directly
or indirectly affects Target or any Subsidiary) to engage in any business
activity or compete with any Person or prohibiting or limiting the ability of
any Person to compete with Target or any Subsidiary (including, without
limitation, any restriction respecting the provision of services to customers
or potential customers or any class of customers, in any geographic area,
during any period of time or in any segment of the market), or prohibiting or
limiting disclosure of confidential or proprietary information;
(iii) all partnership, joint venture, shareholders'
or other similar Contracts with any Person;
(iv) all Contracts relating to Indebtedness of
Target or any Subsidiary and all guarantees of any Indebtedness or other
obligations by Target or any Subsidiary of any third Person;
(v) all Contracts with independent contractors,
distributors, dealers, manufacturers' representatives, sales agencies or
franchisees;
(vi) all Contracts respecting any Intellectual
Property;
(vii) all Contracts relating to (A) the future
disposition or acquisition of any Assets and Properties, and (B) any Business
Combination;
(viii) all Contracts between or among Target or any
Subsidiary, on the one hand, and any current or former officer, director,
stockholder (including any Principal Stockholder), Affiliate or Associate of
Target or any Associate of any such officer, director, stockholder or Affiliate
(other than Target), on the other hand, other than Contracts disclosed pursuant
to Section 3.18(a)(i);
(ix) all collective bargaining or similar labor
Contracts;
(x) all leases of personal property;
(xi) any Contract for the sale, purchase or lease
of goods, services or capital assets which involved the payment of more than
Five Thousand Dollars ($5,000) in 1998 or which Target or any Subsidiary
anticipates will involve the payment of more than Five Thousand Dollars
($5,000) in 1999 or which extends beyond 1999;
(xii) any fidelity or surety bond or completion
bond;
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(xiii) all Contracts that (A) limit or contain
restrictions on the ability of Target or any Subsidiary to declare or pay
dividends on, to make any other distribution in respect of, or to issue or
purchase, redeem or otherwise acquire, its capital stock, to incur
Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any
Assets and Properties, to change the lines of business in which it participates
or engages or to engage in any Business Combination, (B) require Target or any
Subsidiary to maintain specified financial ratios or levels of net worth or
other indicia of financial condition or (C) require Target or any Subsidiary to
maintain insurance in certain amounts or with certain coverages;
(xiv) all powers of attorney or comparable
delegations of authority;
(xv) all Contracts which are not in the ordinary
course of business or which are material to Target or any Subsidiary; and
(xvi) all other Contracts, including but not
limited to, Contracts with clients or customers, that involve the payment or
potential payment pursuant to the terms of any such Contract, by or to Target
or any Subsidiary of more than Ten Thousand Dollars ($10,000) or which is not
cancelable without penalty within thirty (30) days.
(b) Each Contract required to be disclosed in Section
3.18 of the Target Disclosure Schedule is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in accordance
with its terms, of each party thereto; and neither Target, any Subsidiary nor
any Principal Stockholder, or to the knowledge of Target, any Subsidiary or any
Principal Stockholder, any other party to such Contract is, or has received
notice that it is, in violation or breach of or default in any material respect
under any such Contract (or with notice or lapse of time or both, would be in
violation or breach of or default in any material respect under any such
Contract).
SECTION 3.19 PERMITS AND LICENSES Section 3.19 of the Target
Disclosure Schedule contains a true and complete list of all Permits issued to
or used in the business or operations of Target and each Subsidiary, setting
forth the owner, the function and the expiration and renewal date of each.
Prior to the execution of this Agreement, Target has delivered to Sonus true
and complete copies of all such Permits. Except as disclosed in Section 3.19
of the Target Disclosure Schedule:
(a) Target and the Subsidiaries own or validly hold all
Permits that are required to conduct, or are material to, their respective
business or operations as currently conducted or to own their respective Assets
and Property;
(b) each Permit listed in Section 3.19 of the Target
Disclosure Schedule is valid, binding and in full force and effect; and
(c) neither Target nor any Subsidiary is, nor has it
received any notice that it is, in default (or with the giving of notice or
lapse of time or both, would be in default) under any such Permit.
SECTION 3.20 INSURANCE. Section 3.20 of the Target Disclosure
Schedule contains a true and complete list (including the names and addresses
of the insurers, the expiration dates thereof, the annual premiums and payment
terms thereof, the period of time covered thereby and a brief description of
the interests insured thereby) of all liability, property, workers'
compensation, fidelity, directors' and officers' liability and other insurance
policies currently in effect that insure the business, operations or employees
of Target and the Subsidiaries or affect or relate to the ownership, use or
operation of any of the Assets and Properties of Target and the Subsidiaries
and that (i) have been issued to Target or a Subsidiary or (ii) have been
issued to any Person (other than Target or any Subsidiary) for the benefit of
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Target or any Subsidiary. The insurance coverage provided by the policies
described in clause (i) above will not terminate or lapse by reason of any of
the transactions contemplated by this Agreement or the Operative Agreements.
Each policy listed in Section 3.20 of the Target Disclosure Schedule is valid
and binding and in full force and effect, all premiums due thereunder have been
paid when due and neither Target, any Subsidiary nor any Principal Stockholder,
nor the Person to whom such policy has been issued, has received any notice of
cancellation or termination in respect of any such policy or is in default
thereunder (or would be in default with notice or upon lapse of time), and
neither Target, any Subsidiary nor any Principal Stockholder knows of any
reason or state of facts that could reasonably lead to the cancellation of such
policies. The insurance policies listed in Section 3.20 of the Target
Disclosure Schedule (i) in light of the business, operations and Assets and
Properties of Target and the Subsidiaries are in amounts and have coverages
that are reasonable and customary for Persons engaged in such businesses and
operations and having such Assets and Properties and (ii) are in amounts and
have coverages as required by any Contract to which Target or any Subsidiary is
a party. Section 3.20 of the Target Disclosure Schedule contains a list of all
claims made under any insurance policies covering Target or any Subsidiary
since 1997. Neither Target, any Subsidiary nor any Principal Stockholder has
received notice that any insurer under any policy referred to in this Section
is denying liability with respect to a claim thereunder or defending under a
reservation of rights clause. Since 1997, Target and the Subsidiaries have, in
light of its business, location, operations, Assets and Properties, maintained
at all times without interruption appropriate insurance, in scope and amount of
coverages.
SECTION 3.21 AFFILIATE TRANSACTIONS.
(a) Except as disclosed in Section 3.21 of the Target
Disclosure Schedule (i) there are no Liabilities between Target or any
Subsidiary on the one hand, and any current or former officer, director,
stockholder (including any Principal Stockholder), Affiliate (other than
Target) or Associate of Target or any Associate of any such officer, director,
stockholder or Affiliate on the other, (ii) neither Target nor any Subsidiary
provides or causes to be provided any assets, services or facilities to any
such current or former officer, director, stockholder (including any Principal
Stockholder), or any such Affiliate or Associate, (iii) no current or former
officer, director, stockholder (including any Principal Stockholder) or any
such Affiliate or Associate has any interest, directly or indirectly, in any
entity which furnishes or sells any goods or services or provides any
facilities to Target or any Subsidiary, except that ownership of no more than
two percent (2%) of the outstanding capital stock of a publicly traded
corporation shall not be deemed to be an interest for the purposes of this
Section 3.21, and (iv) neither Target nor any Subsidiary beneficially owns,
directly or indirectly, any Investment Assets of any such current or former
officer, director, stockholder (including any Principal Stockholder), Affiliate
or Associate.
(b) Except as disclosed in Section 3.21of the Target
Disclosure Schedule, each of the Liabilities and transactions listed in Section
3.21 of the Target Disclosure Schedule was incurred or engaged in, as the case
may be, on an arm's-length basis on competitive terms.
SECTION 3.22 EMPLOYEES, LABOR RELATIONS.
(a) Section 3.22 of the Target Disclosure Schedule
contains a list of the name of each (i) officer, employee and consultant of
Target and each Subsidiary, together with such person's position or function,
years of employment, annual base salary or wages and any incentives or bonus
arrangement with respect to such person; and (ii) all of such employees and all
former employees of Target who are disabled or are receiving workers
compensation benefits or any Plans, together with their respective entitlement
under such Plans. Neither Target, any Subsidiary nor any Principal Stockholder
has received any information that would lead him, her or it to believe that any
such individual will or may cease to be engaged by Target or the relevant
Subsidiary, or will refuse offers of engagement by Target,
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for any reason, including, without limitation, because of the consummation of
the transactions contemplated by this Agreement and the Operative Agreements.
(b) Except as disclosed in Section 3.22 of the Target
Disclosure Schedule, (i) to the knowledge of Target, any Subsidiary or any
Principal Stockholder, there are no material controversies between Target or
any Subsidiary, on the one hand, and any employee or consultant of Target or
any Subsidiary, on the other hand, (ii) neither Target nor any Subsidiary is a
party to or bound by any collective bargaining agreement or any other agreement
with, or commitment to, any union of employees, and, to the knowledge of
Target, any Subsidiary or any Principal Stockholder, there are no threatened or
contemplated attempts to organize for collective bargaining purposes any of the
employees of Target or any Subsidiary, and (iii) no unfair labor practice
complaint or sex or age discrimination or harassment claim has been brought
against Target or any Subsidiary before any Governmental or Regulatory
Authority and there are no facts or circumstances known to Target, any
Subsidiary or any Principal Stockholder that could reasonably be expected to
give rise to such complaint or claim. There has been no work stoppage, strike
or other concerted action by employees of Target or any Subsidiary. Target and
the Subsidiaries have complied in all material respects with all applicable
Laws relating to the employment of labor, including without limitation those
relating to wages, hours and collective bargaining.
SECTION 3.23 ENVIRONMENTAL MATTERS
Except as set forth in Section 3.23 of the Target Disclosure Schedule (with
paragraph references corresponding to those set forth below):
(a) Target and the Subsidiaries have obtained and hold
all necessary Environmental Permits.
(b) Target and the Subsidiaries, and the activities of
Target and the Subsidiaries and the operation and use of the Leased Real
Property, have been and are in compliance with all terms, conditions and
provisions of all applicable (i) Environmental Permits and (ii) Environmental
Laws.
(c) There are no past, pending, or threatened material
Environmental Claims or material Environmental Liabilities against Target or
any Subsidiary, and neither Target, any Subsidiary nor any Principal
Stockholder is aware of any facts or circumstances which could reasonably be
expected to form the basis for any Environmental Claim or Environmental
Liability against Target or any Subsidiary.
(d) No Releases of Hazardous Substances have occurred at,
from, in, to, on, or under any Site and no Hazardous Substances are present in,
on, about or migrating to or from any Site that could give rise to a material
Environmental Claim or material Environmental Liability against Target or any
Subsidiary.
(e) Neither Target, any Subsidiary nor any predecessor of
Target or any Subsidiary, nor any entity previously owned by Target or any
Subsidiary has transported or arranged for the treatment, storage, handling,
disposal, or transportation of any Hazardous Substances to any off-Site
location which could result in an Environmental Claim or an Environmental
Liability against Target or any Subsidiary.
(f) To the best of each of the Principal Stockholders'
knowledge, there are no (ii) underground storage tanks, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, or (iii) asbestos
containing material at any Site.
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(g) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, on behalf of,
or which are in the possession of Target, any Subsidiary or any Principal
Stockholder with respect to any Site which have not been delivered to
Acquisition prior to execution of this Agreement.
SECTION 3.24 RESERVED.
SECTION 3.25 ACCOUNTS RECEIVABLE. The accounts and notes
receivable of Target reflected on the Balance Sheet and all accounts and notes
receivable arising subsequent to the date of the Balance Sheet, (i) arose from
bona fide sales transactions in the ordinary course of business consistent with
past practice and are payable on ordinary trade terms, (ii) are legal, valid
and binding obligations of the respective debtors enforceable in accordance
with their respective terms, (iii) are not subject to any valid set-off or
counterclaim, (iv) are collectible in the ordinary course of business
consistent with past practice in the aggregate recorded amounts thereof, net of
any applicable reserve reflected in the Balance Sheet, as such reserve has been
adjusted on the books of Target and the Subsidiaries since the Balance Sheet
Date in the ordinary course of business consistent with past practices, (v)
except as set forth in Section 3.12 of the Target Disclosure Schedule, are not
the subject of any Actions or Proceedings brought by or on behalf of Target or
any Subsidiary or by the account debtor, and (vi) except as set forth in
Section 3.12 of the Target Disclosure Schedule, have not been pledged as
collateral by Target or any Subsidiary
SECTION 3.26 RESERVED.
SECTION 3.27 OTHER NEGOTIATIONS; BROKERS. No agent, broker,
finder, investment banker, financial advisor or other similar Person will be
entitled to any fee, commission or other compensation in connection with the
transactions contemplated by this Agreement or the Operative Agreements on the
basis of any act or statement made by Target, any Subsidiary, any Principal
Stockholder, any of their respective Affiliates, or any investment banker,
financial advisor, attorney, accountant or other Person retained by or acting
for or on behalf of Target, any Subsidiary, any Principal Stockholder or any
such Affiliate.
SECTION 3.28 RESTRICTIONS ON CONDUCT OF BUSINESS. Neither Target
nor any Subsidiary is prohibited or otherwise restricted from conducting its
business as presently conducted or intended to be conducted by any Contract,
any Governmental or Regulatory Authority or any Law.
SECTION 3.29 BANK AND BROKERAGE ACCOUNTS; INVESTMENT ASSETS.
Section 3.29 of the Target Disclosure Schedule sets forth (a) a true and
complete list of the names and locations of all banks, trust companies,
securities brokers and other financial institutions at which Target or any
Subsidiary has an account or safe deposit box or maintains a banking,
custodial, trading or other similar relationship; (b) a true and complete list
and description of each such account, box and relationship, indicating in each
case the account number and the names of the respective officers, employees,
agents or other similar representatives of Target or any Subsidiary having
signatory power with respect thereto; and (c) a list of each Investment Asset,
the name of the record and beneficial owner thereof, the location of the
certificates, if any, therefor, the maturity date, if any, and any stock or
bond powers or other authority for transfer granted with respect thereto.
SECTION 3.30 WARRANTIES. Except as set forth in its public
tarriffs, Target has provided no written warranties, guarantees or warranty
policies to any Person.
SECTION 3.31 BUSINESS PLAN. The Principal Stockholders have
provided to Sonus a current business plan for the planned operations of Target
and the Subsidiaries during calendar years 1999, which includes, without
limitation, a description of the capital requirements and staffing needs of
Target and the
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Subsidiaries, and a pro forma income statement. Target used reasonable care in
preparing such business plan and the assumptions and projections therein are
reasonable.
SECTION 3.32 INVESTMENT REPRESENTATIONS. Each Principal
Stockholder represents, warrants and agrees with Acquisition that:
(a) He, she or it has been advised by Sonus that the
Sonus Common Stock to be acquired pursuant to this Agreement will not be
registered under the Securities Act except as provided herein and the issuance
to such Principal Stockholder of such stock is being made on the basis of an
exemption afforded under the Securities Act and Sonus' reliance on such
statutory exemption is based in part on the representations made herein by such
Principal Stockholder.
(b) He, she or it is either an "Accredited Investor", as
defined in Rule 501 of Regulation D promulgated under the Securities Act ("Reg.
D") or has been advised by a "Purchaser Representative" (as defined in Reg. D)
in connection with the issuance of the Merger Stock pursuant to this Agreement.
Such Principal Stockholder, or if he, she or it is not an Accredited Investor,
as advised by his, her or its Purchaser Representative, has such knowledge and
experience in financial and business matters that he, she or it is capable of
evaluating the merits and risk of Merger Stock, and is able to bear the
economic risk of such investment.
(c) He, she or it, or if he, she or it is not an
Accredited Investor, his, her or its Purchaser Representative, is familiar with
the condition, financial or otherwise of Sonus and its affairs as he, she or it
has deemed necessary to evaluate the merits and risk of becoming a stockholder
of Sonus and acknowledges that Sonus has offered to make available and has,
when requested, made available, such additional information that would be
provided in a registration statement under the Securities Act and granted
access to such reasonable additional information necessary to verify the
accuracy of all information famished.
(d) He, she or it, as advised by legal counsel, (i) is
familiar with the nature of the limitations imposed by the Securities Act, and
the rules and regulations promulgated thereunder, on the transfer of the Sonus
Common Stock, (ii) understands that the Sonus Common Stock must be held
indefinitely unless a disposition thereof is registered under the Securities
Act, or in the opinion of counsel to such Principal Stockholder (reasonably
acceptable to Sonus) in form and substance satisfactory to Sonus' counsel (a
signed copy of which opinion shall have been delivered to Sonus prior to the
disposition of any shares of Sonus Common Stock), is exempt from registration
under the Securities Act, including a disposition in accordance with all the
requirements and limitations of Rule 144 promulgated under the Securities Act,
and complies with other applicable federal and state securities Laws;
(e) He, she or it will acquire the Sonus Common Stock for
his, her or its own account, for investment and not with a view to the
distribution or resale thereof within the meaning of the Securities Act, nor
with any present intention of selling or distributing the same.
(f) He, she or it will not transfer any shares of Sonus
Common Stock except in compliance with the terms and provisions of this Section
3.32 and with the provisions of the Shareholders Agreement.
(g) He, she or it agrees that each certificate to be
received by him, her or it representing shares of Sonus Common Stock will bear
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
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UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
OTHER APPLICABLE SECURITIES LAWS."
In addition to marking the certificates with the above legend,
the Principal Stockholders agree that Sonus is authorized to notify its
transfer agent of the status of the shares of Sonus Common Stock and to take
such action, including stop transfer instructions, as Sonus in its sole
discretion may deem necessary or proper to prevent the violation of the
Securities Act or other securities Laws and to assure compliance with the terms
of this Agreement.
SECTION 3.33 CERTAIN PRACTICES. No shareholder, director,
officer, employee or agent of the Principal Stockholder or Target has, directly
or indirectly, made or agreed to make, any improper or illegal payment, gift or
political contribution to, or taken any other improper or illegal action, for
the benefit of any customer, supplier, governmental employee or other Person
who is or may be in a position to assist or hinder the business of Target.
SECTION 3.34 DISCLOSURE. No representation or warranty of Target
or the Principal Stockholders contained in this Agreement, and no statement
contained in the Target Disclosure Schedule or in any certificate, list or
other writing furnished to Sonus or Acquisition pursuant to any provision of
this Agreement (including without limitation the Financial Statements) contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements herein or therein, in the light of
the circumstances under which they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND SONUS
As an inducement to Target and the Principal Stockholders to enter
into this Agreement and to consummate the transactions contemplated herein,
except as set forth in the Sonus Disclosure Schedule (with Section references
corresponding to those set forth below), Sonus and Acquisition hereby
represent, warrant, covenant and agree, jointly and severally, to Target and
the Principal Stockholders as follows:
SECTION 4.1 ORGANIZATION. Acquisition and Sonus are corporations
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
SECTION 4.2 AUTHORITY. Acquisition and Sonus have full corporate
power and authority to enter into this Agreement and the Operative Agreements
to which they are parties and to perform their obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Operative
Agreements to which they are parties by Acquisition and Sonus and the
consummation by Acquisition and Sonus of the transactions contemplated hereby
and thereby have been duly and validly approved by its board of directors and
no other corporate proceedings on the part of Acquisition or Sonus or its
stockholders are necessary to authorize the execution, delivery and performance
of this Agreement and the Operative Agreements to which they are parties by
Acquisition and Sonus and the consummation by Acquisition and Sonus of the
transaction contemplated hereby and thereby. This Agreement has been duly and
validly executed and delivered by Acquisition and Sonus and constitutes, and
the Operative Agreements to which Acquisition and Sonus are parties (when so
executed and delivered) will constitute, the legal, valid and binding
obligation of Acquisition and Sonus enforceable against Acquisition and Sonus
in accordance with their respective terms, except as enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
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SECTION 4.3 NO CONFLICT. Except as set forth in Section 4.3 of
the Sonus Disclosure Schedule, the execution and delivery by Acquisition and
Sonus of this Agreement do not, and the execution and delivery by Acquisition
and Sonus of the Operative Agreements to which they are parties, the
performance by Acquisition and Sonus of its obligations under this Agreement
and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby did not, do not and will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the Certificate of Incorporation
or Bylaws of Acquisition or Sonus;
(b) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to Acquisition or Sonus or
any of their Assets and Properties, the effect of which, individually or in the
aggregate, would reasonably be expected to have a materially adverse effect on
the ability of Acquisition to consummate the transactions contemplated hereby
or would materially hinder or delay such consummation; or
(c) (x) conflict with or result in a violation or breach
of, (y) constitute (with or without notice or lapse of time or both) a default
under or (z) require Acquisition or Sonus to obtain any consent, approval or
action of, make any filing with or give any notice (other than filings, if any,
with the Securities and Exchange Commission and the Stock Exchange) to any
Person as a result or under the terms of, any Contract or Permit to which
Acquisition or Sonus is a party or by which its Assets and Properties are
bound, the effect of which, individually or in the aggregate, would reasonably
be expected to have a material adverse effect on the ability of Acquisition to
consummate the transactions contemplated by this Agreement or would materially
hinder or delay such consummation.
SECTION 4.4 GOVERNMENTAL APPROVALS AND FILINGS. Except as
disclosed in Section 4.4 of the Sonus Disclosure Schedule, no consent, approval
or action of, filing with or notice to any Governmental or Regulatory Authority
on the part of Acquisition or Sonus is required in connection with the
execution, delivery and performance of this Agreement or the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
SECTION 4.5 CAPITAL STRUCTURE. As of the date hereof, the
authorized capital stock of Sonus consists of 100,000,000 shares of Sonus
Common Stock, par value $.0001 per share, of which 3,592,385 shares are issued
and outstanding as of the date hereof. Such outstanding shares of Sonus Common
Stock are, and the shares of Sonus Common Stock to be issued pursuant to this
Agreement will be, upon consummation of the Merger in accordance with this
Agreement, validly issued, fully paid and nonassessable and not subject to
preemptive rights. As of the date hereof, there are no Options, except as set
forth in Section 4.5 of the Sonus Disclosure Schedule, to which Sonus is a
party or by which it is bound obligating Sonus to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of
Sonus.
SECTION 4.6 LEGAL PROCEEDINGS. Except as set forth in Section
4.6 of the Sonus Disclosure Schedule, there are no Actions or Proceedings
pending or, to the knowledge of Acquisition or Sonus, threatened against,
relating to or affecting Acquisition, Sonus or any of their respective Assets
and Properties which (i) could reasonably be expected to result in the issuance
of an Order restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
any of the Operative Agreements or (ii) could reasonably be expected,
individually or in the aggregate with other such Actions or Proceedings, to
have a material adverse effect on the ability of Acquisition or Sonus to
consummate the transactions contemplated by this Agreement or would materially
hinder or delay such consummation.
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SECTION 4.7 BROKERS. Except with respect to fees of Xxxxxx,
Xxxxx Xxxxx, Incorporated, no agent, broker, finder, investment banker,
financial advisor or other similar Person will be entitled to any fee,
commission or other compensation in connection with any of the transactions
contemplated by this Agreement or the Operative Agreements on the basis of any
act or statement made by Acquisition or Sonus.
SECTION 4.8 ABSENCE OF CHANGES. Except as set forth in Section
4.8 of the Sonus Disclosure Schedule, since the balance sheet of Sonus (the
"Sonus Balance Sheet") dated September 30, 1999 (the "Sonus Balance Sheet
Date"), Sonus and its Subsidiaries have been operated in the ordinary course of
business consistent with past practice and there has not been any material
adverse change, or any event or development which, individually or together
with other such events or developments, could reasonably be expected to result
in a material adverse change, in the Business or Condition of Sonus. In
addition, without limiting the foregoing, except as disclosed in Section 4.8 of
the Sonus Disclosure Schedule, there has not occurred since the Sonus Balance
Sheet Date:
(a) any amendment or change to the Articles or
Certificate of Incorporation of Sonus or any of its Subsidiaries or their
respective Bylaws;
(b) any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock of Sonus, or any
direct or indirect redemption, purchase or other acquisition by Sonus or any
Subsidiary of any such capital stock of Sonus;
(c) any authorization, issuance, sale or other
disposition by Sonus or its Subsidiaries of any shares of capital stock of
Sonus or any Subsidiary, or any Option relating to such capital stock or any
modification or amendment of any right of any holder of any outstanding shares
of capital stock of Sonus or any Subsidiary;
(d) (i) any payment of a regular, special or year end
bonus to any employee or officer or director of Sonus or any Subsidiary, or any
increase in salary, rate of commissions or rate of consulting fees of any
director, officer, employee or consultant of Sonus or any Subsidiary, other
than salary increases to non-management employees in the ordinary course of
business and consistent with past practices; (ii) any payment of consideration
of any nature whatsoever (other than salary, commissions or consulting fees
paid in the ordinary course of business consistent with past practices) to any
officer, director, stockholder (including the Principal Stockholders), employee
or consultant of Sonus or any Subsidiary; (iii) any establishment or
modification of (A) targets, goals, pools, formula or similar provisions under
any Plan, employment contract or other employee compensation arrangement of
Sonus or any Subsidiary, or (B) salary ranges, guidelines or similar provisions
in respect of any Plan, employment contract or other employee compensation
arrangement of Sonus or any Subsidiary; (iv) any grant of any severance,
continuation or termination pay to any director, officer, stockholder
(including the Principal Stockholders) or employee of Sonus or any Subsidiary;
or (v) any adoption, entering into, amendment, modification or termination
(partial or complete) of any Plan or employment contract of Sonus or any
Subsidiary;
(e) (i) incurrences by Sonus or any Subsidiary of
Indebtedness or (ii) any voluntary purchase, cancellation, prepayment or
complete or partial discharge in advance of a scheduled payment date with
respect to, or waiver of any right of Sonus or any Subsidiary under, any
Indebtedness of or owing to Sonus or any Subsidiary;
(f) any change in or incurrence of any Liability of Sonus
or any Subsidiary other than in the ordinary course of business consistent with
past practices;
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(g) any physical damage, destruction or other casualty
loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of Sonus or any Subsidiary in an aggregate
amount exceeding Fifteen Thousand Dollars ($15,000);
(h) any write-off or write-down of or any determination
to write off or write down any of the Assets and Properties of Sonus or any
Subsidiary in an aggregate amount exceeding Fifteen Thousand Dollars ($15,000);
(i) any purchase of any Assets and Properties of any
Person or any sale, license or other disposition of, or incurrence of a Lien
(other than a Permitted Lien) on, any Assets and Properties of Sonus or any
Subsidiary, other than acquisitions or dispositions in the ordinary course of
business of Sonus or any Subsidiary consistent with past practice and the terms
of this Agreement and the Operative Agreements;
(j) any entering into, amendment, modification,
termination (partial or complete) or granting of a waiver under or giving any
consent with respect to (i) any material Contract, (ii) any Permit held by
Sonus or any Subsidiary, or (iii) any Intellectual Property owned, held or used
by Sonus or any Subsidiary;
(k) any capital expenditures or commitments for additions
to property, plant, equipment or Intellectual Property of Sonus or any
Subsidiary in an aggregate amount exceeding Fifteen Thousand Dollars ($15,000);
(l) any commencement or termination by Sonus or any
Subsidiary of any line of business;
(m) any transaction by Sonus or any Subsidiary with any
officer, director, stockholder (including any Principal Stockholder), Affiliate
or Associate of Sonus or any Subsidiary, other than pursuant to any Contract in
effect on the date of the Sonus Balance Sheet and disclosed to Target pursuant
to Section 4.8 of the Sonus Disclosure Schedule;
(n) the commencement or notice or threat of commencement
of any lawsuit or proceedings against, or investigation of, Sonus or any
Subsidiary or their affairs;
(o) any notice of any claim of ownership by a third party
of the Intellectual Property of Sonus or any Subsidiary or notice of
infringement by Sonus or any Subsidiary of any third party's Intellectual
Property rights;
(p) any change in pricing or royalties set or charged by
Sonus or any Subsidiary to clients, customers or licensees or in pricing or
royalties set or charged by Persons who have licensed Intellectual Property to
Sonus or any Subsidiary;
(q) any loan or advance by Sonus or any Subsidiary to any
Person or entity, except for advances to employees for travel and business
expenses in the ordinary course of business consistent with past practice;
(r) any change in the accounting methods or procedures of
Sonus or its Subsidiaries;
(s) any other material transaction involving Sonus or any
Subsidiary outside the ordinary course of business consistent with past
practice; or
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(t) any entering into of an agreement to do or engage in
any of the foregoing, including without limitation with respect to any Business
Combination not otherwise restricted by the foregoing paragraphs.
SECTION 4.9 NO UNDISCLOSED LIABILITIES. Except as specifically
reflected or reserved against in the Balance Sheet or as described in Section
4.9 of the Sonus Disclosure Schedule, there are no Liabilities of, relating to
or affecting Sonus or any Subsidiary or any of their respective Assets and
Properties (whether or not required to be reflected in financial statements in
accordance with GAAP), other than Liabilities incurred in the ordinary course
of business consistent with past practice since the date of the Sonus Balance
Sheet and in accordance with the provisions of this Agreement and the Operative
Agreements, which in the aggregate are not material to the Business or
Condition of Sonus and are not for tort or for breach of contract.
SECTION 4.10 RESTRICTIONS ON CONDUCT OF BUSINESS. Except as set
forth in Section 4.10 of the Sonus Disclosure Schedule, neither Sonus nor any
Subsidiary is prohibited or otherwise restricted from conducting its business
as presently conducted or intended to be conducted by any Contract, any
Governmental or Regulatory Authority or any Law.
SECTION 4.11 BUSINESS PLAN. Sonus has provided to Target a current
business plan for the planned operations of Sonus and the Subsidiaries during
calendar years 1999, which includes, without limitation, a description of the
capital requirements and staffing needs of Sonus and the Subsidiaries, and a
pro forma income statement. Sonus used reasonable care in preparing such
business plan and the assumptions and projections therein are reasonable.
SECTION 4.12 DISCLOSURE. No representation or warranty of Sonus
or Acquisition contained in this Agreement, and no statement contained in the
Sonus Disclosure Schedule or in any certificate, list or other writing
furnished to Target or the Principal Stockholders pursuant to any provision of
this Agreement (including without limitation the Financial Statements) contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements herein or therein, in the light of
the circumstances under which they were made, not misleading.
ARTICLE 5
CERTAIN AGREEMENTS OF THE PARTIES
SECTION 5.1 CONDUCT OF BUSINESS PRIOR TO THE CLOSING.
(a) The Principal Stockholders, jointly and severally,
covenant and agree that between the date hereof and the Closing Date, they
shall cause Target and the Subsidiaries to conduct their business in the
ordinary course and consistent with past practice.
(b) The Principal Stockholders, jointly and severally,
covenant and agree that prior to the Closing Date, and without making any
commitment on Sonus' or Acquisition's behalf, they will cause Target and the
Subsidiaries to use all reasonable efforts to preserve substantially intact the
business organization of Target and the Subsidiaries, to keep available to
Sonus and Acquisition the services of the employees of Target and the
Subsidiaries and to preserve the current relationships of Target and the
Subsidiaries with its clients, customers, suppliers and other persons with
which Target and the Subsidiaries have significant business relationships.
(c) The Principal Stockholders, jointly and severally,
covenant and agree that prior to the Closing Date, they will cause Target and
the Subsidiaries to maintain their books and records in the usual, regular and
ordinary manner consistent with past practices; to use all reasonable efforts
to continue
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in full force and effect the policies of insurance listed in Section 3.20 of
the Target Disclosure Schedule or comparable substitute policies and will
promptly notify Sonus of any cancellation or non-renewal of such insurance; and
to use all reasonable efforts to maintain all of Target's and Subsidiaries'
Assets and Properties in good repair, working order and operating condition
(subject only to ordinary wear and tear).
(d) The Principal Stockholders, jointly and severally,
covenant and agree that prior to the Closing Date, they will not permit Target
or any Subsidiary to amend its Certificate or Articles of Incorporation or
Bylaws or merge, amalgamate or consolidate or sell all or substantially all of
its Assets and Property, or obligate itself to do so, with or into or to any
other entity, without the prior written consent of Sonus.
(e) The Principal Stockholders, jointly and severally,
covenant and agree that prior to the Closing Date, they will cause Target and
their Subsidiaries to (i) comply with all material applicable Laws, (ii) file
all Tax Returns required to be filed with any Governmental or Regulatory
Authority and make timely payments of applicable Taxes when due; and (iii) take
all reasonable actions necessary to be in compliance with, and to maintain the
effectiveness of, all material Permits.
(f) The Principal Stockholders, jointly and severally,
covenant and agree that without the prior written consent of Sonus, they will
not permit Target or any Subsidiary prior to the Closing Date to:
(i) amend its Articles or Certificate of
Incorporation or Bylaws;
(ii) change its accounting methods, principles or
practices, except to the extent required by GAAP and concurred in by Target's
independent accountants;
(iii) declare, set aside or pay any dividend or
other distribution (whether in cash, stock, property or any combination
thereof) in respect of the capital stock of Target or any other securities or
redeem, repurchase or otherwise acquire any equity securities of Target or any
Subsidiary;
(iv) revalue any of its assets, including, without
limitation, writing off notes or accounts receivable, other than in the
ordinary course of business consistent with past practice;
(v) establish any new, or amend or modify any
existing, Plan; pay any bonus or other payment to any employee, officer or
director except salary payments at current rates; or increase the compensation
payable or to become payable to any directors, officers or employees of Target
or any Subsidiary, except salary increases as may be required by Law, and
salary increases to non-management employees in the ordinary course of business
consistent with past practice and not in excess of Thirty Five Thousand Dollars
($35,000) per annum in the aggregate;
(vi) enter into any employment or severance
agreement with any of its directors, officers or employees (whether new hires
or existing employees) or establish, adopt or enter into any collective
bargaining agreement;
(vii) create, incur, assume, maintain or permit to
exist any Lien on any Asset or Property of Target or any Subsidiary other than
Permitted Liens;
(viii) create, incur or assume any Indebtedness,
including obligations in respect of capital leases, or guarantee any
Indebtedness or any other obligation of any other Person;
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(ix) pay or discharge any material claim,
Liability or Lien (whether absolute, accrued, contingent or otherwise), or
waive any right, other than in the ordinary course of business consistent with
past practice or pursuant to binding contractual obligations of Target or the
Subsidiaries in existence on the date hereof;
(x) transfer to any Person any rights to the
Intellectual Property of Target or any Subsidiary, other than as reasonably
necessary in the ordinary course of business consistent with past practice in
rendering services to clients and customers;
(xi) enter into any agreement granting marketing,
distribution or similar rights of any type or scope with respect to any
products or services of Target or any Subsidiary;
(xii) commence any litigation except in the
ordinary course of business;
(xiii) hire any new employees, agents or
consultants, except employees earning less than $70,000 per annum to replace
employees who have left the employ of Target or any Subsidiary;
(xiv) authorize or make any capital expenditure in
excess of Ten Thousand Dollars ($10,000) on any one item, or in excess of
Twenty Thousand Dollars ($20,000) in the aggregate;
(xv) issue or agree to issue any shares of its
capital stock or Options with respect to such stock;
(xvi) become a party to any agreement which, if it
existed on the date hereof, would be required to be listed in the Target
Disclosure Schedule, or amend or terminate any Contact listed on the Target
Disclosure Schedule;
(xvii) acquire or agree to acquire by merging,
amalgamating or consolidating with, or by purchasing any assets or equity
securities of, or by any other manner, any business or any corporation, limited
liability company, partnership 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 its business;
(xviii) sell, lease, license, or otherwise dispose of
any material item of its Assets and Property or any item of Intellectual
Property (except as described in subsection (x) above);
(xix) make or change any material election in
respect of Taxes, adopt or change any accounting method in respect of Taxes,
enter into any closing agreement, settle any claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(xx) abandon, modify, waive, terminate or
other-wise change any of the Permits described in Section 3.19 of the Target
Disclosure Schedule;
(xxi) settle or compromise any material claims
against Target or any Subsidiary;
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(xxii) take any action or course of action
inconsistent with compliance with the covenants and agreements contained in
this Agreement; or
(xxiii) take or agree to commit to take any action
that would make any representation or warranty of the Principal Stockholders
contained herein inaccurate in any material respect at the Closing or omit to
take any action necessary to prevent any such representation or warranty from
being inaccurate in any material respect at such time or which would diminish
the value of Target or the Subsidiaries as going concerns.
SECTION 5.2 ACCESS TO INFORMATION From the date hereof until the
Closing, upon reasonable notice, each party hereto shall, and shall cause such
party's officers, directors, employees, auditors and agents to (i) afford the
Representatives of the other parties reasonable access, during normal business
hours, to the offices, properties, books and records of such party and such
party's officers, employees, agents, accountants and actuaries, and (ii)
furnish to the Representatives of such party such additional financial and
operating data and other information regarding the assets, properties, goodwill
and business of such party as the requesting party may from time to time
reasonably request; provided, however, that such investigation shall not
unreasonably interfere with the business or operations of any party upon whom
such request is served. No investigation or access to information pursuant to
this Section 5.2 shall affect any representation or warranty made by Sonus,
Target or the Principal Stockholders hereunder or otherwise affect the rights
and remedies available to any party hereunder.
SECTION 5.3 RESERVED.
SECTION 5.4 CONFIDENTIALITY.
(a) The information which Sonus acquires about Target and
the Subsidiaries as a result of the investigations permitted by this Agreement
is termed "Evaluation Material." Sonus agrees that neither it nor any of its
Representatives will use any such material for any purpose not related to the
transactions contemplated by this Agreement and will not disclose any such
material to anyone except its Representatives who may need such information to
perform their respective duties and have been informed of its confidential
nature and directed to treat it confidentially. If the transactions
contemplated by this Agreement are not consummated, Sonus agrees that it and
its Representatives will return any written Evaluation Material in their
possession, or will destroy and will not retain any such material, any copies
thereof or any notes or memoranda made using such material.
(b) The confidentiality agreement contained herein will
terminate upon the earlier of two years after the date hereof or upon
consummation of the transactions contemplated hereby.
(c) The parties agree that monetary damages alone would
not be a satisfactory remedy for a breach of that portion of the
confidentiality agreement contained herein which relate to the proprietary
processes employed by Target and the Subsidiaries in the provision of its
services, and that if that provision is breached, Target and the Principal
Stockholders shall be entitled to injunctive relief as well as monetary
damages.
(d) Notwithstanding the foregoing, Sonus and its
Representatives may use and disclose Evaluation Material and information
obtained from the Evaluation Material to the extent that (i) they acquired such
information on a non-confidential basis prior to receipt thereof from Target or
its Representative, (ii) such information has become generally available to the
public, or (iii) such information is provided to the Person using or disclosing
it by a Person who obtained such information other than as a result of a breach
of this Agreement. Furthermore, Sonus and its Representatives may disclose
such information to the extent that they are required to do so to comply with a
governmental or
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judicial order or decree, but upon receiving notice that any such order or
decree has been issued or is being sought, they will promptly notify Target and
will, at Target's expense, cooperate with Target's efforts to contest the
issuance of such order or decree.
(e) Each of the Principal Stockholders and Target will
hold in strict confidence and shall cause each of their respective
Representatives to hold in strict confidence from any Person (other than any
Affiliate of Sonus or any Representative of Sonus or such Affiliate), unless
compelled to disclose by judicial or administrative process (including without
limitation in connection with obtaining the necessary approvals of this
Agreement and the transactions contemplated hereby of Governmental or
Regulatory Authorities) or by other requirements of Law, all documents and
information concerning Acquisition, Sonus or any of their respective
Affiliates, except to the extent that such documents or information can be
shown to have been (i) previously known by the party receiving such documents
or information, (ii) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (iii) later acquired by the receiving party from another
source if the receiving party is not aware that such source is under an
obligation to another party hereto to keep such documents and information
confidential.
SECTION 5.5 REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) Each of the Principal Stockholders, Target, Sonus and
Acquisition will use their best efforts to obtain all authorizations, consents,
orders and approvals of all federal, state, and local and all foreign
regulatory bodies and officials that may be or become necessary for its
execution and delivery of, and the performance of its obligations pursuant to,
this Agreement, including without limitation, F.C.C., New York Public Service
Commission and California Public Utilities Commision authorizations, consents,
orders and approvals, and will cooperate fully with the other parties in
promptly seeking to obtain all such authorizations, consents, orders and
approvals, subject to the proviso in Section 5.5(b).
(b) Acquisition, Sonus, Target and the Principal
Stockholders will each use their best efforts to assist one another in
obtaining the consents referred to in Sections 6.1 (c), 6.2 (c) and, if any,
the consents referred to in Section 6.2(d); provided, however, that Acquisition
shall not be obligated with respect to such assistance to expend any material
amount of funds except the payment of the fees and expenses of any applicable
attorneys, consultants or other advisors retained by it and applicable filing
fees.
SECTION 5.6 NO SOLICITATION OF OFFERS, ETC.
(a) Prior to the termination of this Agreement in
accordance with its terms, the Principal Stockholders and their Affiliates,
including Target and the Subsidiaries, shall not, nor shall they authorize or
permit any officer, director, employee, investment banker, attorney, accountant
or other representative of or Person retained by them to, directly or
indirectly, take any action to knowingly solicit, encourage or facilitate any
action that might lead to, or accept any offers, initiate or participate in
negotiations or discussions with, or provide any non-public information to, or
enter into any letter of intent, preliminary agreement or definitive agreement
with any Person with respect to, any possible merger, amalgamation,
acquisition, reorganization, exchange offer or any sale of all or substantially
all of the Assets and Properties, purchase or sale of capital stock (whether
outstanding shares, treasury or other shares) or change in control of, or any
similar transaction or transactions involving, directly or indirectly, Target
or any Subsidiary (collectively, a "Sale"). The Principal Stockholders and
Target shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
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(b) The Principal Stockholders and Target acknowledge and
agree that a violation by any of them of Section 5.6(a) will cause irreparable
damage to Sonus and Acquisition. Accordingly, each of the Principal
Stockholders and Target agree that, in the event of a breach of Section 5.6(a),
Sonus and Acquisition shall be entitled to a temporary or permanent injunction
or restraining order to prevent breaches of Section 5.6(a) and to specifically
enforce the terms and provisions thereof without the need to post any security
or bond, such rights to be cumulative and in addition to whatever other
remedies at law or in equity or otherwise Sonus and Acquisition may have
pursuant to this Agreement.
SECTION 5.7 NOTICE OF CERTAIN MATTERS.
(a) Target and the Principal Stockholders, jointly and
severally, covenant and agree to give prompt notice in writing to Sonus of: (i)
any information that indicates that any representation or warranty of Target or
the Principal Stockholders contained in this Agreement was not true and correct
as of the date hereof or will not be true and correct as of the Closing Date,
(ii) the occurrence of any event which will result, or has a reasonable
prospect of resulting, in the failure to satisfy a condition specified in
Article 6 hereof, (iii) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, (iv) any
notice of, or other communication relating to, any default or event which, with
notice or lapse of time or both, would become a default under any Contract
listed on the Target Disclosure Schedule, and (v) any change in the officers or
directors of Target or any Subsidiary.
(b) The Principal Stockholders, jointly and severally,
covenant and agree to (i) promptly advise Sonus of any fact, condition or
change that, individually or in the aggregate, has or results in a material
adverse effect on the Business or Condition of Target, and (ii) notify Sonus of
any governmental complaint, investigation or hearing (or communications
indicating that the same may be contemplated) or adjudicatory proceeding
involving Target, any Subsidiary or any of their respective Assets and
Property, and will keep Sonus fully informed of such events and permit Sonus'
Representatives reasonable access to all materials prepared in connection
therewith.
(c) The giving of any such notice under this Section 5.7
or the providing of the financial statements contemplated by Section 5.8 shall
in no way change or modify Target or the Principal Stockholders'
representations and warranties or the conditions to Sonus' or Acquisition's
obligations contained herein or otherwise affect the remedies available to
Sonus or Acquisition hereunder.
SECTION 5.8 INTERIM FINANCIAL STATEMENTS. Target and Sonus shall
prepare and deliver to each other copies of the customary form of interim
financial statements promptly upon the completion of such interim statements,
and the Principal Stockholders shall use their best efforts to cause Target and
the Subsidiaries to prepare and deliver such financial statements. All such
interim financial statements will fairly present, in all material respects, the
financial condition of Target and the Subsidiaries or Sonus, as the case may
be.
SECTION 5.9 PRINCIPAL STOCKHOLDERS' OBLIGATIONS. Each Principal
Stockholder hereby agrees that in each instance in this Agreement where Target
or any Subsidiary is obligated to act or refrain from acting under this
Agreement during the period prior to the Closing, each such Principal
Stockholder individually, or together with the other Principal Stockholders,
shall cause Target and the Subsidiaries to fulfill such obligations. The
Principal Stockholders also agree to vote in favor of the transactions
contemplated by this Agreement and to use reasonable efforts to ensure that all
corporate and stockholder approvals of the transactions contemplated hereby
necessary by Target or its shareholders will be taken and adopted.
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SECTION 5.10 FURTHER ACTION, RELATED ASSETS AND PROPERTIES. Each
of the parties hereto shall execute and deliver such documents and other papers
and take such further actions as may be reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated hereby. At
any time or from time to time after the Closing, the Principal Stockholders
and/or Target shall execute and deliver to Acquisition and/or Sonus such other
documents and instruments, provide such materials and information and take such
other actions as Acquisition or Sonus may reasonably request to consummate the
transactions contemplated by this Agreement and the Operative Agreements and
otherwise to cause Target and the Principal Stockholders to fulfill each of
their respective obligations under this Agreement and the Operative Agreements.
Each Principal Stockholder hereby agrees at Closing to transfer, convey, assign
and deliver to Target and the Subsidiaries, free and clear of all Liens (except
as noted on the Target Disclosure Schedule), all of such Principal
Stockholder's respective Assets and Properties, if any, used, held for use or
related to the business or operations of Target and the Subsidiaries (other
than personal items purchased by or given to the Principal Stockholders not in
excess of $200 per item).
SECTION 5.11 RESERVED.
SECTION 5.12 PUBLICITY. Each party agrees that he or it will not
release any information relating to the transactions without the prior
agreement of the other parties, except as may be required by law.
Notwithstanding the foregoing: (i) the parties expect that a public
announcement will be made regarding this transaction on the signing of an
Agreement and the closing thereof, and (ii) if Sonus concludes that it is
required to do so to comply with its disclosure obligations under the federal
securities laws, it will make a public announcement and may file a copy of that
public announcement with the Securities and Exchange Commission on a Form 8-K
or any other applicable form.
ARTICLE 6
CONDITIONS TO CLOSING
SECTION 6.1 CONDITIONS TO OBLIGATIONS OF TARGET AND THE PRINCIPAL
STOCKHOLDERS. The obligations of Target and the Principal Stockholders to
consummate the transactions contemplated by this Agreement at the Closing shall
be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations and Warranties; Covenants and
Agreements. The representations and warranties of Acquisition and Sonus
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date, with the same force and effect as if made as of the
Closing Date, other than such representations and warranties as are made as of
another date, which shall be true and correct as of such date; provided,
however, that if any such portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section 6.1
(a) has been satisfied with respect to such portion of such representation or
warranty, such portion of such representation or warranty as so qualified must
be true and correct in all respects; and all the agreements, undertakings,
covenants and obligations contained in this Agreement to be complied with by
Sonus and Acquisition on or before the Closing Date shall have been complied
with in all material respects, and Target shall have received a certificate of
Sonus and Acquisition to such effect signed by a duly authorized officer
thereof.
(b) No Order or Suit. No Governmental or Regulatory
Authority shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions; provided, however, that the
parties hereto shall use their reasonable best efforts to have any
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such order or injunction vacated.
(c) Governmental Filings and Consents. All governmental
orders, approvals and consents to the transactions contemplated by this
Agreement shall have been obtained and be in effect on the Closing Date, in
form and substance reasonably acceptable to Target and the Principal
Stockholders except to the extent that the failure to obtain any such consent
would not have the effect of making the transactions contemplated by this
Agreement illegal or otherwise restrain or prohibit consummation of such
transactions.
(d) Target Stockholder Approval. The stockholders of
Target shall have approved the Merger to the extent required by applicable New
York Business Corporation Law or the articles of incorporation of Target.
(e) Incumbency Certificate. Target and the Principal
Stockholders shall have received a certificate of the Secretary or an Assistant
Secretary of Sonus and Acquisition certifying the names and signatures of the
officers of Sonus and Acquisition authorized to sign this Agreement, the
Operative Documents to which Sonus and Acquisition are parties and any other
document required to be delivered hereunder.
(f) Proceedings. All proceedings, corporate or
otherwise, taken by Acquisition and Sonus in connection with the transactions
contemplated hereby and all instruments and documents incident thereto shall be
reasonably satisfactory in form and substance to the Principal Stockholders and
their counsel.
(g) Organizational Documents. Target and the Principal
Stockholders shall have received a copy of (i) the Certificate of Incorporation
of Sonus and Acquisition, certified by the Secretary of State or another
appropriate official of the appropriate jurisdiction of incorporation, as of a
date not earlier than ten Business Days prior to the Closing Date and
accompanied by a certificate of the Secretary or an Assistant Secretary of
Sonus and Acquisition, dated as of the Closing Date, stating that no amendments
have been made to such document since such date, and (ii) the Bylaws of Sonus
and Acquisition and each Subsidiary, certified by the Secretary or an Assistant
Secretary of Sonus and Acquisition and each Subsidiary, respectively.
(h) Good Standing. Target and the Principal Stockholders
shall have received a Certificate of Good Standing for Sonus and Acquisition
and a certificate to the effect that all franchise and other taxes shall have
been paid up to date by Sonus and Acquisition and each Subsidiary from the
appropriate official of the appropriate jurisdiction of incorporation, dated as
of a date not earlier than ten Business Days prior to the Closing Date.
(i) Release of Personal Guarantee of Citizens' Loan. The
personal guarantees of each of the Principal Stockholders relating to the
Citizens' loan in the approximate amount of $384,000 (the "Citizens' Loan")
shall be released on or prior to the Closing Date, or such other arrangement
with respect to the personal guarantees shall have been reached as is
reasonably acceptable to the Principal Stockholders.
(j) Other Agreements. Acquisition shall have executed
and delivered to each Principal Stockholder an Employment Agreement in
substantially the form attached hereto as Exhibit F, Sonus shall have executed
and delivered a Principal Stockholders Escrow Agreement in substantially the
form attached hereto as Exhibit C, and Acquisition shall have executed and
delivered the Certificates of Merger in substantially the forms attached hereto
as Exhibit A1 and Exhibit A2.
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SECTION 6.2 CONDITIONS TO OBLIGATIONS OF SONUS AND ACQUISITION.
The obligations of Sonus and Acquisition to consummate the transactions
contemplated by this Agreement at the Closing shall be subject to the
fulfillment, at or prior to the Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. Without
giving effect to any matter disclosed to Sonus or Acquisition between the date
hereof and the Closing Date, the representations and warranties of Target and
the Principal Stockholders contained in this Agreement shall be true and
correct in all material respects as of the Closing Date with the same force and
effect as if made as of the Closing Date, other than such representations and
warranties as are made as of another date, which shall be true and correct as
of such date; provided, however, that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 6.2(a) has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or
warranty as so qualified must be true and correct in all respects; and all the
agreements, undertakings, covenants and obligations contained in this Agreement
to be complied with by Principal Stockholders, Target and the Subsidiaries on
or before the Closing shall have been complied with in all material respects,
and Acquisition shall have received certificates of the Principal Stockholders
and Target to such effect signed by a duly authorized officer of Target and by
each Principal Stockholder.
(b) No Order or Suit. No Governmental or Regulatory
Authority shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and has the effect of making the
transactions contemplated by this Agreement illegal or otherwise restraining or
prohibiting consummation of such transactions or which would have a material
adverse effect on the Business or Condition of Target; in addition, no Action
or Proceeding before any Governmental or Regulatory Authority shall be pending
or threatened and no investigation by any Governmental or Regulatory Authority
shall have commenced seeking to restrain or prohibit (or questioning the
validity or legality of) the transactions contemplated by this Agreement or
seeking to restrict in any material respect the effective operation of the
business of Target or any Subsidiary after the Closing or seeking material
damages from Target or any Subsidiary or seeking material damages from
Acquisition in connection with this Agreement, which Acquisition, in good faith
and with the advice of counsel, believes makes it undesirable to proceed with
the consummation of the transactions contemplated hereby; provided, however,
that the parties hereto shall use their reasonable best efforts to have any
such order or injunction vacated.
(c) Governmental Filings and Consents. All governmental
orders, approvals and consents to the transactions contemplated by this
Agreement shall have been obtained and be in effect on the Closing Date, in
form and substance reasonably acceptable to Sonus and Acquisition and the
waiting period (if any), including extensions thereof, applicable to the
consummation of the transactions contemplated hereunder shall have either
expired or been previously terminated, and such approvals as shall have been
obtained shall not impose upon Acquisition, Target or any Subsidiary any
conditions or other requirements which would cause any thereof any material
additional costs or materially interfere with the continued operations of the
business of Sonus, Acquisition, Target or any Subsidiary as currently conducted
or materially and adversely affect the Business and Condition of Target.
(d) Third Party Consents. Sonus and Acquisition shall
have received the third party consents, approvals, authorizations or actions to
the transactions contemplated by this Agreement, if any, in form and substance
reasonably satisfactory to Sonus and Acquisition from the parties listed in
Section 6.2(d) of the Sonus Disclosure Schedule.
(e) Limitation on Non-Accredited Investors. The
Principal Stockholders who are not "accredited investors" within the meaning of
Rule 501 of Regulation D promulgated under the Securities
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Act, together with the Other Stockholders who are not "accredited investors"
(within the meaning of such Rule), shall not number in the aggregate in excess
of thirty five (35) as of the Closing Date.
(f) Resignation of Directors and Officers of Target.
Sonus shall have received the resignations, effective as of the Closing Date,
of all the directors of Target and of all of the officers of Target.
(g) Organizational Documents. Sonus shall have received
a copy of (i) the Certificate or Articles of Incorporation of Target and each
Subsidiary, certified by the Secretary of State or another appropriate official
of the appropriate jurisdiction of incorporation, as of a date not earlier than
ten Business Days prior to the Closing Date and accompanied by a certificate of
the Secretary or an Assistant Secretary of Target and each Subsidiary, dated as
of the Closing Date, stating that no amendments have been made to such document
since such date, and (ii) the Bylaws of Target and each Subsidiary, certified
by the Secretary or an Assistant Secretary of Target and each Subsidiary,
respectively.
(h) Good Standing. Sonus shall have received a
Certificate of Good Standing for and a certificate to the effect that all
franchise and other taxes shall have been paid up to date by Target and each
Subsidiary from the appropriate official of the appropriate jurisdiction of
incorporation, dated as of a date not earlier than ten Business Days prior to
the Closing Date.
(i) Incumbency Certificate. Sonus shall have received a
certificate of an officer of Target certifying the names and signatures of the
officers of Target authorized to sign any document required to be delivered by
Target hereunder.
(j) Accounting Method. Acquisition and/or Sonus shall
have the availability of pooling accounting treatment with respect to the
transactions contemplated by this Agreement.
(k) Other Agreements. Each of the Principal Stockholders
shall have executed and delivered an Employment Agreement in substantially the
form attached hereto as Exhibit F, and a Principal Stockholders Escrow
Agreement in substantially the form attached hereto as Exhibit C. Target shall
have executed and delivered the Certificates of Merger in substantially the
forms attached hereto as Exhibit A1 and A2.
(l) Repayment of Indebtedness. All Principal
Stockholders who are indebted to Target or any Subsidiary shall have repaid
such indebtedness in full with interest thereon to the date of payment.
(m) Discharge of Liens; Citizens' Loan. All Liens on the
Property and Assets of Target and the Subsidiaries, other than Permitted Liens,
shall have been fully satisfied, terminated and discharged as evidenced by
releases or satisfactions satisfactory to Sonus including but not limited to
the Stockholder Indebtedness. The personal guarantees of each of the Principal
Stockholders relating to the Citizens' Loan shall be released on or prior to
the Closing Date such that the Escrow Shares are free of all Liens at the
Closing, or such other arrangement with respect to the Escrow Shares shall have
been reached as is reasonably acceptable to Sonus.
(n) Proceedings. All proceedings, corporate or
otherwise, taken by the Principal Stockholders and Target in connection with
the transactions contemplated hereby and all instruments and documents incident
thereto shall be reasonably satisfactory in form and substance to Sonus and its
counsel.
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(o) Customer Churn Rate. The cumulative customer
turnover rate of Target is not materially greater than five and one-half
percent (5-1/2%) for the period from January 1, 1999 through and including the
Closing Date.
(p) Cash Flow. Target's utilization of cash for
operations during any month in the third quarter of 1999 shall not be more than
twenty-five percent (25%) greater than cash receipts during such respective
month.
(q) Stockholder's Equity. As of the Closing Date, Target
shall have a stockholder's equity of not less than negative Three Hundred Fifty
Thousand Dollars (-$350,000).
(r) Cancellation of Shareholders Agreement. Each of the
Principal Stockholders shall have terminated their employment agreements with
Target as well as that certain shareholders agreement by and between Target and
Xxxxxxxx, Xxxxxx and Xxxxx, all effective immediately prior to Closing.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
SECTION 7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS. Notwithstanding any right of Sonus and its Affiliates (whether
or not exercised) to investigate the affairs of each Principal Stockholder,
Target or the Subsidiaries or any right of any party (whether or not exercised)
to investigate the accuracy of the representations and warranties of the other
party contained in this Agreement or the waiver of any provision hereof, each
Principal Stockholder, on the one hand, and Sonus and Acquisition, on the
other, have the right to rely fully upon the representations, warranties,
covenants and agreements of the other contained in this Agreement. The
representations, warranties, covenants and agreements of Target, the Principal
Stockholders, Sonus and Acquisition contained in this Agreement shall survive
the Closing (a) for a period equal to the applicable statute of limitations
with respect to the representations and warranties contained in Sections 3.6,
3.11, 3.13, 3.14, 3.19 and 3.23; and (b) for a period of two (2) years after
the Closing Date with respect to all other representations and warranties;
provided, however, that any representation, warranty, covenant or agreement
that would otherwise terminate will continue to survive if a Claim Notice or
Indemnity Notice (as applicable) shall have been timely given under Article 8
on or prior to such termination date, until the related claim for
indemnification has been satisfied or otherwise resolved as provided in Article
10, but only with respect to matters described in the Claim Notice or Indemnity
Notice.
ARTICLE 8
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION.
(a) Each of the Principal Stockholders, jointly and
severally, shall indemnify Acquisition, Sonus and their respective stockholders
and the officers, directors, employees, agents and Affiliates of each of them
(in each case, other than the Principal Stockholders) (collectively, the
"Acquisition Indemnitees"), in respect of, and hold each of them harmless from
and against, and shall pay any and all Losses suffered, incurred or sustained
by any of them or to which any of them becomes subject, resulting from, arising
out of or relating to any misrepresentation or breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part
of Target, any Subsidiary or any of the Principal Stockholders contained in
this Agreement or any of the Operative Agreements (including, without
limitation, any certificate delivered in connection herewith or therewith)
during any
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applicable survival period pursuant to Section 7.1 above in an amount up to and
including the value of the Escrow Shares, to be satisfied by cancellation of
the Escrow Shares to the extent necessary to satisfy the Principal Stockholders
indemnity obligations hereunder.
(b) Sonus agrees to indemnify the Principal Stockholders
and the Other Stockholders and their respective heirs, executors, personal
representatives, successors and assigns (the "Principal Stockholder
Indemnitees"') in respect of, and hold each of them harmless from and against,
and shall pay any and all Losses suffered, incurred or sustained by any of them
or to which any of them becomes subject, resulting from, arising out of or
relating to (i) any misrepresentation or breach of warranty or nonfulfillment
of or failure to perform any covenant or agreement on the part of Acquisition
or Sonus contained in this Agreement or the Operative Agreements (including,
without limitation, any certificate delivered in connection herewith or
therewith) during any applicable survival period pursuant to Section 7.1 above,
and (ii) the personal guarantees (the "Personal Guarantees") described on, and
guaranteeing the amounts listed in, Section 8.1(b) of the Target Disclosure
Schedule, to the extent such Losses arise from the act or omission of Sonus or
Acquisition after the Closing Date. The indemnities provided herein are
provided up to and including, but shall not exceed, an amount equal to the
value of the Merger Shares multiplied by 15/100.
(c) No amounts of indemnity shall be payable as a result
of a claim under Section 8.1(a) unless and until the Acquisition Indemnitees
have suffered, incurred, sustained or become subject to Losses with respect
thereto in excess of $37,500 in the aggregate, in which case the Acquisition
Indemnitees shall be entitled to seek indemnity for the amount of such Losses
incurred from and after Thirty-Seven Thousand Five Hundred Dollars ($37,500).
(d) No amounts of indemnity shall be payable as a result
of a claim under Section 8.1(b) unless and until the Principal Stockholder
Indemnitees have suffered, incurred, sustained or become subject to Losses with
respect thereto in excess of $37,500 in the aggregate, in which case the
Principal Stockholder Indemnitees shall be entitled to seek indemnity for the
amount of such Losses incurred from and after Thirty-Seven Thousand Five
Hundred Dollars ($37,500).
SECTION 8.2 METHOD OF ASSERTING CLAIMS. All claims for
indemnification by any Indemnified Party under Section 8.1 will be asserted and
resolved as follows:
(a) In order for an Indemnified Party to be entitled to
any indemnification provided for under Section 8.1 in respect of, arising out
of or involving a claim or demand made by any Person not a party to this
Agreement against the Indemnified Party (a "Third Party Claim"), the
Indemnified Party must deliver a claim notice to the Indemnifying Party within
thirty (30) Business Days after receipt by such Indemnified Party of written
notice of the Third Party Claim ("Claim Notice"); provided, however, that
failure to give such Claim Notice shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure.
(b) If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party shall be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Party, which counsel must be reasonably
satisfactory to the Indemnified Party, provided that all Indemnifying Parties
with respect to such Third Party Claim jointly acknowledge to the Indemnified
Party its right to indemnity pursuant hereto in respect of the entirety of such
claim (as such claim may be modified through written agreement of the parties
or arbitration hereunder) and provide assurances reasonably satisfactory to the
Indemnified Party that the Indemnifying Parties will be financially able to
satisfy such claim in full if it is decided adversely. Should the Indemnifying
Party so elect to assume the defense of a Third Party Claim, the Indemnifying
Party shall not be liable to the Indemnified Party for legal expenses
subsequently incurred by the
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Indemnified Party in connection with the defense thereof (except as hereinafter
provided), but shall continue to pay for any expenses of investigation or any
Loss suffered. If the Indemnifying Party assumes such defense, the Indemnified
Party shall have the right to participate in the defense thereof and to employ
counsel, at its own expense (except as hereinafter provided), separate from the
counsel employed by the Indemnifying Party. Notwithstanding the foregoing, if
(i) the Indemnifying Party shall not assume the defense of a Third Party Claim
with counsel reasonably satisfactory to the Indemnified Party within five
Business Days of any Claim Notice, or (ii) legal counsel for the Indemnified
Party notifies the Indemnifying Party that there are or may be legal defenses
available to the Indemnified Party or to other Indemnified Parties which are
different from or additional to those available to the Indemnifying Party,
which, if the Indemnified Party and the Indemnifying Party were to be
represented by the same counsel, would constitute a conflict of interest for
such counsel or prejudice prosecution of the defenses available to such
Indemnified Party, or (iii) if the Indemnifying Party shall assume the defense
of a Third Party Claim and fail to diligently and vigorously prosecute such
defense in a timely manner after due notice, then in each such case the
Indemnified Party, by notice to the Indemnifying Party, may employ its own
counsel and control the defense of the Third Party Claim and the Indemnifying
Party shall be liable for the reasonable fees, charges and disbursements of
counsel employed by the Indemnified Party; and the Indemnified Party shall be
promptly reimbursed for any such fees, charges and disbursements, as and when
incurred. Whether the Indemnifying Party or the Indemnified Party control the
defense of any Third Party Claim, the parties hereto shall cooperate in the
defense thereof. Such cooperation shall include the retention and provision to
the counsel of the controlling party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Indemnifying Party shall
have the right to settle, compromise or discharge a Third Party Claim (other
than any such Third Party Claim in which criminal conduct is alleged) without
the Indemnified Party's consent if such settlement, compromise or discharge (i)
constitutes a complete and unconditional discharge and release of all
Indemnified Parties, and (ii) provides for no relief other than the payment of
monetary damages and such monetary damages are paid in full by the Indemnifying
Party, and in all other cases may not so settle without the prior written
consent of the Indemnified Party.
(c) In the event any Indemnified Party should have a
claim under Section 8.1 against any Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any
Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that an Indemnifying Party demonstrates
that it has been actually prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim described in
such Indemnity Notice or fails to notify the Indemnified Party within the
Dispute Period as to whether the Indemnifying Party disputes the claim
described in such Indemnity Notice, the Loss in the amount specified in the
Indemnity Notice will be conclusively deemed a Liability of the Indemnifying
Party under Section 8.1 and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its Liability with respect to such claim, the Indemnifying Party and
the Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by arbitration as provided in Article
10.
(d) The rights accorded to Indemnified Parties hereunder
shall be in addition to any rights that any Indemnified Party may have at law
or in equity, under federal or state securities Laws or by separate agreement
(including, without limitation, under the Operative Agreements).
(e) Notwithstanding anything contained in this Agreement
to the contrary, at and after the Closing, and notwithstanding any right any
Principal Stockholder may have at law or in equity or
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pursuant to any Laws, no Principal Stockholder shall be entitled to any
indemnification, right of contribution or other right of recovery from Target
or any Subsidiary in connection with any claim made by or which could be made
by an Indemnified Party against Target or any Principal Stockholder or which
Target or any Subsidiary could be liable for, all of which are irrevocably
waived and released by each Principal Stockholder.
(f) Any payment under this Article 8 shall be treated for
tax purposes as an adjustment of the Purchase Price to the extent such
characterization is proper and permissible under relevant Tax authorities,
including court decisions, statutes, regulations and administrative
promulgations or, alternatively, by Acquisition or Sonus as an offset to a Tax
benefit item, if such characterization is permissible under such Tax
Authorities.
ARTICLE 9
TERMINATION
SECTION 9.1 GROUNDS FOR TERMINATION. This Agreement may be
terminated at any time prior to the Closing under the following provisions:
(a) by mutual written agreement of Sonus and Target;
(b) by Sonus after written notice to Principal
Stockholders if Sonus is not then in material breach of any provision of this
Agreement and there has been any one or more misrepresentations in or breaches
of the representations or warranties made by Target or the Principal
Stockholders contained herein that, if not cured on or prior to the Closing
Date, could be reasonably expected to give Sonus grounds not to close under
Section 6.2 when taken into account with all other uncured misrepresentations
in or breaches of such representation or warranties as to which Sonus shall
have given notice to Target as provided in this paragraph (b); a termination
pursuant to this paragraph (b) shall become effective (i) fifteen (15) days
after such notice with respect to such a misrepresentation or breach that is
not capable of being cured on or prior to the Closing Date, or (ii) immediately
prior to the Closing with respect to such a misrepresentation or breach that is
capable of being cured, but is not cured, on or prior to the Closing Date;
(c) by Sonus if Sonus is not then in material breach of
any provision of this Agreement after written notice to Target and the
Principal Stockholders of the failure by Principal Stockholders or Target to
perform and satisfy in any material respect any of their respective material
obligations required to be performed and satisfied by Principal Stockholders or
Target on or prior to the Closing Date, if the aggregate of all such failures
shall be material; a termination pursuant to this paragraph (c) shall become
effective (i) fifteen (15) days after such notice with respect to such a
failure that is not capable of being cured on or prior to the Closing Date, or
(ii) immediately prior to the Closing with respect to such a failure that is
capable of being cured, but is not cured, on or prior to the Closing Date;
(d) by the Principal Stockholders after written notice by
the Principal Stockholders to Sonus if the Principal Stockholders are not then
in material breach of any material provision of this Agreement and there has
been one or more material misrepresentations in or material breaches of the
representations or warranties made by Sonus herein which, if not cured on or
prior to the Closing Date, could be reasonably expected to give the Principal
Stockholders grounds not to close under Section 6.1 when taken into account
with all other uncured misrepresentations in or breaches of such
representations or warranties as to which the Principal Stockholders shall have
given notice to Sonus as provided in this paragraph (d); a termination pursuant
to this paragraph (d) shall become effective (i) fifteen (15) days after such
notice with respect to such a misrepresentation or breach that is not capable
of being cured on
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or prior to the Closing Date, or (ii) immediately prior to the Closing Date
with respect to such a misrepresentation or breach that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(e) by the Principal Stockholders if the Principal
Stockholders are not then in material breach of any material provision of this
Agreement after written notice by the Principal Stockholders to Sonus of Sonus'
failure to perform and satisfy in any material respect any of its material
obligations under this Agreement required to be performed and satisfied by
Sonus on or prior to the Closing Date, if the aggregate of all such failures
shall be material; a termination pursuant to this paragraph (e) shall become
effective (i) fifteen (15) days after such notice with respect to such a
failure that is not capable of being cured on or prior to the Closing Date, or
(ii) immediately prior to the Closing Date with respect to such a failure that
is capable of being cured, but is not cured, on or prior to the Closing Date;
(f) by Sonus, Target or the Principal Stockholders, if
the Closing shall not have been consummated by April 1, 2000; provided,
however, that no party may terminate this Agreement pursuant to this paragraph
(f) if the Closing shall not have been consummated within such time period by
reason of the failure of such party or any of its Affiliates to perform in all
material respects any of its or their respective covenants or agreements
contained in this Agreement; and
(g) by Sonus or Target, if any United States federal or
state, Law or any rule or regulation thereunder shall hereafter be enacted or
become applicable that makes the transactions contemplated hereby or the
consummation of the Closing illegal or otherwise prohibited, or if any
judgment, injunction, order or decree enjoining any party hereto from
consummating the transactions contemplated hereby is entered and such judgment,
injunction, order or decree shall become final and nonappealable.
The party desiring to terminate this Agreement pursuant to the
foregoing provisions shall give written notice of such termination to the other
party.
SECTION 9.2 EFFECT OF TERMINATION. If termination results from
the breach by any party of its representations, warranties or covenants
contained in this Agreement, such party shall be fully liable for any and all
Losses incurred or suffered by the other parties as a result of such failure or
breach and such termination shall not be deemed to be an election of remedies.
The provisions of Sections 5.4, 5.6, Articles 8, 9 and 10 shall survive any
termination of this Agreement pursuant to this Article 9, and each party hereto
shall be fully responsible for any breach of Sections 5.4 or 5.6, Articles 8, 9
and 10, whether or not such breach occurs prior to the termination of this
Agreement.
SECTION 9.3 PAYMENT OF FEES AND EXPENSES.
(a) Except because of a failure of a condition precedent
to Target's consummation of the Merger (which conditions are set forth in this
Agreement), in the event that Target fails to consummate the Merger despite
Sonus' willingness to proceed with the Merger, Target shall, to the extent not
already paid by Target, pay all of Sonus' documented and reasonable expenses in
connection with the Merger, including but not limited to reasonable attorneys'
fees, up to One Hundred Thousand Dollars ($100,000).
(b) Unless Target has satisfied any of the conditions set
forth in Section 6.2(o through q) hereof and except because of a failure of a
condition precedent to Sonus' consummation of the Merger (which conditions are
set forth in this Agreement), in the event that Sonus fails to consummate the
Merger despite Target's willingness to proceed with the Merger, Sonus shall, to
the extent not already
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paid by Sonus, pay all of Target's documented and reasonable expenses in
connection with the Merger, including but not limited to reasonable attorneys'
fees, up to Fifty Thousand Dollars ($50,000).
(c) Except because of a failure of a condition precedent
to Target's consummation of the Merger (which condition precedent is set forth
in this Agreement), in the event that Target fails to consummate the Merger
despite Sonus' willingness to proceed with the Merger and Target subsequently
consummates any sale, transfer or assignment of its business, operations or
assets, whether by stock issuance or sale, asset sale, merger, consolidation,
reorganization, recapitalization or other means, whether directly or
indirectly, in one or more transactions, or the Principal Stockholders sell,
assign or transfer in excess of a majority of their shares of Target, directly
or indirectly, whether in one or more transactions (any such transaction being
referred to hereinafter as a "Competing Transaction") within six (6) months
following the date upon which Target failed to agree to Sonus' or Acquisition's
written request to proceed to Closing, Target agrees to pay Sonus the amount of
Four Hundred Fifty Thousand Dollars ($450,000) plus pay, to the extent not
already paid by Target, all of Sonus' documented and reasonable expenses,
including but not limited to reasonable attorneys' fees, up to One Hundred
Thousand Dollars ($100,000) in connection with the Merger, on or prior to the
first closing in connection with the Competing Transaction
(d) Anything to the contrary in this Agreement
notwithstanding, no party hereto shall be responsible for paying any fees or
expenses pursuant to this Section 9.3 as a result of the unavailability of
pooling accounting treatment with respect to the Merger.
(e) On the Closing Date, if Target has not satisfied the
conditions set forth in Section 6.2(o)(p) or (q), Target shall pay, to the
extent not already paid by Target, all of Sonus' and Acquisition's documented
and reasonable expenses, including but not limited to attorneys' fees up to One
Hundred Thousand Dollars ($100,000).
(f) The failure of any party's board of directors or
stockholders to approve the Merger and the transactions contemplated by this
Agreement shall not release such party from any obligation to pay fees and
expenses in accordance with this Section 9.3.
(g) In the event the Merger closes as contemplated by
this Agreement, except as otherwise provided herein, Sonus agrees to pay the
costs and fees incurred by Target in connection with the Merger, to the extent
such costs and fees are set forth in Section 9.3(g) of the Target Disclosure
Schedule or are incurred after the date of this Agreement in the ordinary
course consistent with legal or accounting fees normally incurred in
transactions of this type.
ARTICLE 10
ARBITRATION OF DISPUTES
SECTION 10.1 ARBITRATION. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association by an arbitration panel consisting of three persons, one
selected by Sonus, one selected by the Principal Stockholders and the third
selected by mutual agreement of the first two arbitrators selected, and
judgement upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
SECTION 10.2 PROCEDURE FOR ARBITRATION.
(a) The arbitration shall be held in Washington, D.C. if
brought by Target or any of the Principal Stockholders and in New York City if
brought by Acquisition or Sonus.
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(b) All fees, costs and expenses (including reasonable
attorneys' fees and expenses) incurred by a party that prevails on any issue in
any arbitration commenced hereunder or in any judicial proceeding seeking to
enforce this Agreement to arbitrate disputes or seeking to enforce any order or
award of any arbitration hereunder shall be assessed against the party or
parties that do not prevail on such issue or issues.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1 NOTICES. All notices, requests and other
communications hereunder must be in writing and will be deemed to have been
duly given only if delivered personally against written receipt or by facsimile
transmission or mailed by prepaid first class certified mail, return receipt
requested, or delivered by a nationally recognized overnight courier service
prepaid, to the parties at the following addresses or facsimile numbers:
(a) If to Sonus or Acquisition, to:
Sonus Communication Holdings, Inc.
0000 Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxx
Telecopier: 000-000-0000
with a copy to:
Xxxxx X. Xxxxxx, III, Esquire
McGuire, Woods, Battle & Xxxxxx LLP
0 Xx. Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxx 00000
Telecopier: 000-000-0000
(b) If to Target or the Principal Stockholders, to:
Empire One Telecommunications, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
Telecopier: 000-000-0000
with a copy to:
Xxxxx X. Xxxxxxxx, Esquire
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: 000-000-0000
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number
as provided for in this Section, be deemed given upon receipt, (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given on the earlier
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of the fourth Business Day following mailing or upon receipt and (iv) if
delivered by overnight courier to the address as provided for in this Section,
be deemed given on the earlier of the first Business Day following the date
sent by such overnight courier or upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
SECTION 11.2 ENTIRE AGREEMENT, AMENDMENT. This Agreement, the
Exhibits hereto, the Target Disclosure Schedule and the Operative Agreements
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof and contain the sole and entire
agreement between the parties hereto with respect to the subject matter hereof
and thereof. This Agreement may be amended, supplemented or modified only by a
written instrument duly executed by or on behalf of Sonus and the Principal
Stockholders. The terms and provisions of this Agreement are intended solely
for the benefit of each party hereto and their respective successors or
permitted assigns, and it is not the intention of the parties to confer
third-party beneficiary rights, and this Agreement does not confer any such
rights, upon any other Person other than any Person entitled to indemnity under
Article 8.
SECTION 11.3 EXPENSES. Except as otherwise expressly provided in
this Agreement (including without limitation as provided in Article 8 and
Section 9.3), the respective corporate entities will pay their own costs and
expenses and the costs and expenses of their Affiliates incurred in connection
with this Agreement, the Operative Agreements, and the transactions
contemplated hereby and thereby.
SECTION 11.4 CUMULATIVE REMEDIES. The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
SECTION 11.5 WAIVER. Any term or condition of this Agreement may
be waived at any time by the party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term.
SECTION 11.6 NO ASSIGNMENT, BINDING EFFECT. Neither this
Agreement nor any right, interest or obligation hereunder may be assigned (by
operation of law or otherwise) by any party hereto without the prior written
consent of the other parties hereto, and any attempt to do so will be void.
Subject to the preceding sentence, this Agreement is binding upon, inures to
the benefit of and is enforceable by the parties hereto and their respective
heirs, executors, personal representatives, successors and assigns.
SECTION 11.7 INVALID PROVISIONS. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any present or
future Law, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (a) such
provision will be fully severable, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance here from and (d) in
lieu of such illegal, invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
SECTION 11.8 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware,
without giving effect to any choice of law or
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conflict of law provision or rule (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
SECTION 11.9 CONSTRUCTION.
(a) The parties hereto intend that each representation,
warranty, and covenant contained herein shall have independent significance.
If any party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) that the party has not breached shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
(b) The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
SECTION 11.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument. This Agreement and
the Operative Agreements may be executed and delivered by facsimile
transmission.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be duly executed as of the day and year first above written.
EOT ACQUISITION CORP.
By:
-----------------------------------
Name:
Title:
SONUS COMMUNICATION HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
EMPIRE ONE TELECOMMUNICATIONS, INC.
By:
-----------------------------------
Name:
Title:
PRINCIPAL STOCKHOLDERS:
--------------------------------------
Xxxx X. Xxxxxxxx
--------------------------------------
Xxxx X. Xxxxxx
--------------------------------------
Xxxxxxx X. Xxxxx
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