EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
AMONG
CORECOMM LIMITED,
CORECOMM ACQUISITION SUB, INC.
AND
MEGSINET, INC.
DATED AS OF FEBRUARY 17, 1999
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.................................................. 2
SECTION 1.2 Closing..................................................... 2
SECTION 1.3 Effective Time.............................................. 2
SECTION 1.4 Effects of the Merger....................................... 2
SECTION 1.5 Certificate of Incorporation and By-laws.................... 3
SECTION 1.6 Directors and Officers...................................... 3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock..................................... 3
SECTION 2.2 Exchange of Certificates.................................... 5
SECTION 2.3 Certain Adjustments......................................... 9
SECTION 2.4 Shares of Dissenting Stockholders........................... 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Megsinet.................. 11
SECTION 3.2 Representations and Warranties of CoreComm.................. 30
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business......................................... 38
SECTION 4.2 No Solicitation by Megsinet................................. 42
SECTION 4.3 Cooperation................................................. 43
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Megsinet Stockholders Meeting............................... 44
SECTION 5.2 Access to Information; Confidentiality...................... 45
PAGE
SECTION 5.3 Best Efforts................................................ 46
SECTION 5.4 Stock Options............................................... 47
SECTION 5.5 Megsinet Stock Plan and Certain Employee Matters............ 49
SECTION 5.6 Fees and Expenses........................................... 50
SECTION 5.7 Public Announcements........................................ 50
SECTION 5.8 NASDAQ Quotation............................................ 50
SECTION 5.9 Conveyance Taxes............................................ 50
SECTION 5.10 Proxy/Prospectus; Registration Statement................... 51
SECTION 5.11 Ascend Warrant............................................. 52
SECTION 5.12 Pequot Warrant............................................. 52
SECTION 5.13 Allocation Schedule........................................ 52
SECTION 5.14 Cisco Loan................................................. 52
SECTION 5.15 Cisco and Ascend Credit Facilities......................... 53
SECTION 5.16 Pequot Agreement........................................... 53
SECTION 5.17 Stockholders Agreement..................................... 53
SECTION 5.18 NASDAQ Listing............................................. 53
SECTION 5.19 GMV Network LLC............................................ 54
SECTION 5.20 Interested Contracts....................................... 54
SECTION 5.21 Personal Loans............................................. 54
SECTION 5.22 Xxxxxxx X. Xxxxxx.......................................... 54
SECTION 5.23 Ameritech Interconnection.................................. 55
SECTION 5.24 Alternative Financing...................................... 55
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.. 55
SECTION 6.2 Conditions to Obligations of CoreComm and Sub............... 56
SECTION 6.3 Conditions to Obligations of Megsinet....................... 58
SECTION 6.4 Frustration of Closing Conditions........................... 59
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination................................................. 59
SECTION 7.2 Effect of Termination....................................... 60
SECTION 7.3 Amendment................................................... 61
SECTION 7.4 Extension; Waiver........................................... 61
iii
PAGE
SECTION 7.5 Procedure for Termination, Amendment, Extension or Waiver... 61
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Survival and Indemnification................................ 62
SECTION 8.2 Notices..................................................... 65
SECTION 8.3 Definitions................................................. 66
SECTION 8.4 Interpretation.............................................. 67
SECTION 8.5 Counterparts................................................ 68
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.............. 68
SECTION 8.7 Governing Law............................................... 68
SECTION 8.8 Assignment.................................................. 68
SECTION 8.9 Consent to Jurisdiction..................................... 68
SECTION 8.10 Headings.................................................... 69
SECTION 8.11 Severability................................................ 69
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AGREEMENT AND PLAN OF MERGER dated as of FEBRUARY 17, 1999, among CORECOMM
LIMITED, a Bermuda corpora tion ("CoreComm"), CORECOMM ACQUISITION SUB, INC. a
Delaware corporation("Sub"), and MEGSINET INC., an Illinois corporation
("Megsinet").
WHEREAS, the respective Boards of Directors of CoreComm, Sub and Megsinet
have each approved the merger of Megsinet with and into Sub (the "Merger"), upon
the terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of common stock, without par value, of
Megsinet ("Megsinet Common Stock"), other than shares owned by CoreComm or
Megsinet, will be converted into the right to receive the Merger Consideration
(as defined in Section 2.1(b)) and the shares of Series 1998A Convertible
Preferred Stock, par value $.01 per share ("Series 0000X Xxxxxxxxx") and Series
A Convertible Preferred Stock, par value $.01 per share intended to be issued to
Pequot (as defined) ("Pequot Preferred") will be converted as set forth in
Section 2.1(d);
WHEREAS, the respective Boards of Directors of CoreComm, Sub and Megsinet
have each determined that the Merger and the other transactions contemplated
hereby are consistent with, and in furtherance of, their respective business
strategies and goals and are in the best interests of their respective
stockholders;
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under Section 368(a) of the Internal Revenue
Code, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements con tained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Illinois Business
Corporation Act (the "IBCA") and the Delaware General Corporation Law (the
"DGCL"), Megsinet shall be merged with and into Sub at the Effective Time (as
defined in Section 1.3). Following the Effective Time, Sub shall be the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Megsinet in accordance with the IBCA
and the DGCL.
SECTION 1.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VI, unless another time or date
is agreed to by the parties hereto. The Closing will be held at such location in
New York, New York as is agreed to by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement, as
soon as practicable on the Closing Date, the parties shall cause the Merger to
be consummated by filing articles of merger or other appropriate documents (in
any such case, the "Articles of Merger") executed in accordance with the
relevant provisions of the IBCA and the DGCL and shall make all other filings or
recordings required under the IBCA and the DGCL. The Merger shall become
effective at such time as the Articles of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such subsequent date or time
as Sub and Megsinet shall agree and specify in the Articles of Merger (the time
the Merger becomes effective being hereinafter referred to as the "Effective
Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set
forth in Section 5/11.50 of the IBCA and Section 259 of the DGCL.
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SECTION 1.5 Certificate of Incorporation and By-laws of the Surviving
Corporation. The certificate of incorporation of Sub, as in effect immediately
prior to the Effective Time, shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law. The by-laws of Sub, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.6 Directors and Officers. The directors of Sub and the officers
of Megsinet at the Effective Time shall, from and after the Effective Time, be
the directors and officers, respectively, of the Surviving Corporation until
their successors shall have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
certificate of incorporation and the by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Megsinet Common Stock, Series 1998A Preferred or Pequot Preferred (collectively,
"Megsinet Capital Stock"):
(a) Cancellation of Treasury Stock. Each share of Megsinet Capital Stock
that is owned by Megsinet shall automatically be cancelled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(b) Conversion of Megsinet Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of Megsinet Common Stock (other than shares to be
cancelled in accordance with Section 2.1(a)) shall be converted into the right
to receive either $2.50 in cash
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(the "Cash Consideration") or 0.21 (the "Exchange Ratio") validly issued, fully
paid and nonassessable shares of common stock, par value $.01 per share, and the
associated Series A Junior Participating Preferred Stock Purchase Rights
("CoreComm Common Stock"), of CoreComm, (the "Stock Consideration"). The
allocation of either the Cash Consideration or the Stock Consideration to each
share of Megsinet Common Stock shall be set forth on a schedule to be delivered
to the Exchange Agent at the Effective Time (the "Allocation Schedule"). The
consideration to be issued to holders of Megsinet Capital Stock in the aggregate
is referred to herein as the "Merger Consideration." As of the Effective Time,
all such shares of Megsinet Common Stock shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of Megsinet Common Stock
shall cease to have any rights with respect thereto, except the right to receive
Cash Consideration and/or Stock Consideration and any cash in lieu of fractional
shares of CoreComm Common Stock to be issued or paid in consideration therefor
upon surrender of such certificate in accordance with Section 2.2, without
interest.
(c) Conversion of Common Stock of Sub. Each issued and outstanding share of
common stock, par value $.01 per share, of Sub shall be converted into one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(d) Conversion of Megsinet Convertible Securities. Each issued and
outstanding share of Series 1998A Preferred and Pequot Preferred shall be
converted into the right to receive that amount of Cash Consideration and/or
Stock Consideration which would be allocable to the number of shares of Megsinet
Common Stock into which each such share of 1998A Preferred or Pequot Preferred
would be convertible if such Series 1998A Preferred and Pequot Preferred had
been converted into Megsinet Common Stock immediately prior to the Effective
Time. The allocation to the holders of Megsinet Convertible Securities of Cash
Consideration and/or Stock Consideration shall be included on the Allocation
Schedule. The Series 1998A Preferred and Pequot Preferred are referred to
collectively as the "Megsinet Convertible Securities."
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SECTION 2.2 Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, CoreComm shall deposit with the Exchange Agent (who will
mutually be acceptable to CoreComm and Megsinet), for the benefit of the holders
of shares of Megsinet Capital Stock, for exchange in accordance with this
Article II, through the Exchange Agent, the Cash Payment and certificates
representing the Stock Payment together with any dividends or distributions with
respect thereto with a record date after the Effective Time, and any additional
cash (pursuant to Section 2.2(e)), such cash and stock collectively being
hereinafter referred to as the "Exchange Fund" The Cash Payment shall equal
$2.50 multiplied by the product of (i) 0.50 and (ii)the Megsinet Selling Shares.
The Stock Payment shall equal the number of shares of CoreComm Common Stock
represented by 0.21 multiplied by the product of (i) 0.50 and (ii)the Megsinet
Selling Shares. The "Megsinet Selling Shares" shall equal the number of shares
of Megsinet Common Stock issued and outstanding immediately prior to the
Effective Time plus the number of Shares of Megsinet Common Stock into which the
Series 1998A Preferred and the Pequot Preferred would be convertible if
converted immediately prior to the Effective Time.
(b) Exchange Procedures. As soon as reason ably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Megsinet Capital Stock (the "Certificates")
whose shares were converted into the right to receive the Merger Consider ation
pursuant to Section 2.1, (i) a letter of transmit tal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Megsinet and CoreComm may
reasonably specify) and (ii) instructions for use in surrendering the
Certificates in exchange for the Merger Consider ation. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive
5
in exchange therefor the Merger Consideration in the form of cash or a
certificate representing that number of whole shares of CoreComm Common Stock
which such holder has the right to receive pursuant to the provisions of this
Article II and as set forth on the Allocation Schedule, certain dividends or
other distributions in accordance with Section 2.2(c) and cash in lieu of any
fractional share of CoreComm Common Stock in accordance with Section 2.2(e), and
the Certificate so surrendered shall forthwith be cancelled. In the event of a
surrender of a Certificate representing shares of Megsinet Capital Stock which
are not registered in the transfer records of Megsinet under the name of the
person surrendering such Certificate, a certificate representing the proper
number of shares of CoreComm Common Stock may be issued to a person other than
the person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance of shares of CoreComm Common Stock to a
person other than the registered holder of such Certificate or establish to the
satisfaction of CoreComm that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration which the holder thereof
has the right to receive in respect of such Certificate pursuant to the
provisions of this Article II and as set forth on the Allocation Schedule,
certain dividends or other distributions in accordance with Section 2.2(c) and
cash in lieu of any fractional share of CoreComm Common Stock in accordance with
Section 2.2(e). No interest shall be paid or will accrue on any cash payable to
holders of Certificates pursuant to the provisions of this Article II.
Notwithstanding the foregoing, the Exchange Agent will not mail any cash or
shares of CoreComm Common Stock prior to receipt of the Allocation Schedule.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to CoreComm Common Stock with a record date after the
Effective Time shall be paid to the holder of any
6
unsurrendered Certificate with respect to the shares of CoreComm Common Stock
represented thereby, and, in the case of Certificates representing the right to
receive a cash payment in lieu of fractional shares of CoreComm Common Stock, no
such cash payment shall be paid to any such holder pursuant to Section 2.2(e),
and all such dividends, other distributions and cash in lieu of fractional
shares of CoreComm Common Stock shall be paid by CoreComm to the Exchange Agent
and shall be included in the Exchange Fund, in each case until the surrender of
such Certificate in accordance with this Article II. Subject to the effect of
applicable escheat or similar laws, following surrender of any such Certificate
there shall be paid to the holder of the certificate represent ing whole shares
of CoreComm Common Stock issued in exchange therefor, without interest, (i) at
the time of such surrender, the amount of dividends or other distributions with
a record date after the Effective Time theretofore paid with respect to such
whole shares of CoreComm Common Stock and, in the case of Certificates
representing Megsinet Common Stock, the amount of any cash payable in lieu of a
fractional share of CoreComm Common Stock to which such holder is entitled
pursuant to Section 2.2(e) and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
and with a payment date subsequent to such surrender payable with respect to
such whole shares of CoreComm Common Stock.
(d) No Further Ownership Rights in Megsinet Capital Stock. All shares of
CoreComm Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II and any cash paid pursuant to this
Article II shall be deemed to have been issued (and paid) in full satisfaction
of all rights pertaining to the shares of Megsinet Capital Stock, theretofore
represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by Megsinet on such shares of Megsinet Common Stock which remain unpaid at
the Effective Time, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the shares of Megsinet
Capital Stock which
7
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be cancelled and exchanged as provided
in this Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of CoreComm Common Stock shall be issued upon the surrender
for exchange of Certificates, no dividend or distribution of CoreComm shall
relate to such fractional share interests and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a stockholder of
CoreComm.
(ii) As soon as practicable after receipt of the Allocation Schedule,
the Exchange Agent shall determine, for each former holder of Megsinet
Capital Stock entitled to receive shares of CoreComm Common Stock pursuant
to Article II, an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such former holder
(after taking into account all shares of Megsinet Capital Stock held at the
Effective Time by such holder and the Allocation Schedule) would otherwise
be entitled by (B) the average of the closing prices of the CoreComm Common
Stock as reported on NASDAQ during the ten trading days preceding the fifth
trading day prior to the Closing Date.
(iii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Certificates formerly representing
Megsinet Capital Stock with respect to any fractional share interests, the
Exchange Agent shall make available such amounts to such holders of
Certificates formerly representing Megsinet Capital Stock subject to and in
accordance with the terms of Section 2.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to CoreComm, upon
8
demand, and any holders of the Certificates who have not theretofore complied
with this Article II shall thereafter look only to CoreComm for payment of their
claim for Merger Consideration, any dividends or distributions with respect to
CoreComm Common Stock and any cash in lieu of fractional shares of CoreComm
Common Stock.
(g) No Liability. None of CoreComm, Sub, Megsinet, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect of
any shares of CoreComm Common Stock, any dividends or distributions with respect
thereto, any cash in lieu of fractional shares of CoreComm Common Stock or any
cash from the Exchange Fund, in each case delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by CoreComm, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
CoreComm.
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration and, if applicable, any unpaid dividends and distributions
on shares of CoreComm Common Stock deliverable in respect thereof and any cash
in lieu of fractional shares, in each case pursuant to this Agreement.
SECTION 2.3 Certain Adjustments. If between the date hereof and the
Effective Time, the outstanding shares of Megsinet Common Stock or of CoreComm
Common Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any
9
dividend payable in stock or other securities shall be declared thereon with a
record date within such period, the Exchange Ratio shall be adjusted accordingly
to provide to the holders of Megsinet Common Stock the same economic effect as
contemplated by this Agreement prior to such reclassification, recapitalization,
split-up, combination, exchange or dividend.
SECTION 2.4 Shares of Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, any shares of Megsinet Common Stock that are
issued and outstanding as of the Effective Time and that are held by a
stockholder who has exercised his right (to the extent such right is available
by law) to demand and to receive the fair value of such shares (the "Dissenting
Shares") under the IBCA shall not be converted into the right to receive the
Merger Consideration unless and until the holder shall have failed to perfect,
or shall have effectively withdrawn or lost, his right to dissent from the
Merger under the IBCA and to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to and subject to the
requirements of the IBCA. If any such holder shall have so failed to perfect or
have effectively withdrawn or lost such right, each share of such holder's
Megsinet Common Stock shall thereupon be deemed to have been converted into and
to have become, as of the Effective Time, without any interest thereon, the
right to receive the Merger Consideration, and, in such regard, shall be treated
as shares of Megsinet Common Stock for which Stock Consideration and Cash
Consideration are allocated on an equal basis without affecting the allocation
provided for on the Allocation Schedule. Megsinet shall give CoreComm (i) prompt
notice of any notice or demands for appraisal or payment for shares of Megsinet
Common Stock received by Megsinet and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands or
notices. Megsinet shall not, without the prior written consent of CoreComm, make
any payment with respect to, or settle, offer to settle or otherwise negotiate,
any such demands.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Megsinet. Except as disclosed
in the Disclosure Schedule delivered by Megsinet to CoreComm prior to the
execution of this Agreement (the "Megsinet Disclosure Schedule") and making
reference to the particular subsection of this Agreement to which exception is
being taken, Megsinet and, to the best of each of their knowledge the
Significant Stockholders, represents and warrants to CoreComm as follows:
(a) Organization, Standing and Corporate Power. (i) Each of Megsinet and
its subsidiaries (as defined in Section 8.3) is a corporation or other legal
entity duly organized, validly existing and in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the jurisdiction
in which it is organized and has the requisite corporate or other power, as the
case may be, and authority to carry on its business as now being conducted,
except, as to subsidiaries, for those jurisdictions where the failure to be so
organized, existing or in good standing individually or in the aggregate would
not have a material adverse effect (as defined in Section 8.3) on Megsinet. Each
of Megsinet and its subsidiaries is duly qualified or licensed to do business
and is in good standing (with respect to jurisdictions which recognize such
concept) in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing individually or in the aggregate
would not have a material adverse effect on Megsinet.
(ii) Megsinet has delivered to CoreComm prior to the execution of this
Agreement complete and correct copies of its articles of incorporation and
by-laws, as amended to date.
(iii) In all material respects, the minute books of Megsinet contain
accurate records of all
11
meetings and accurately reflect all other actions taken by the
stockholders, the Board of Directors and all committees of the Board of
Directors of Megsinet since January 1, 1995.
(b) Subsidiaries. Section 3.1(b) of the Megsinet Disclosure Schedule lists
all of the subsidiaries of Megsinet. All the outstanding shares of capital stock
of, or other equity interests in, each such subsidiary have been validly issued
and are fully paid and nonassessable and are owned directly or indirectly by
Megsinet, free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively, "Liens")
and free of any other restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests).
(c) Capital Structure. The authorized capital stock of Megsinet consists of
30,000,000 shares of Megsinet Common Stock and 3,000,000 shares of Megsinet
preferred stock. Section 3.1(c) of the Megsinet Disclosure Schedule sets forth
the capital structure of Megsinet and a complete and correct list, as of
February 2, 1999, of the number of shares of Megsinet capital stock issued and
outstanding, reserved for issuance, or subject to employee stock options or
other rights to purchase or receive Megsinet Common Stock granted to employees,
consultants or directors under the Megsinet Stock Plan and the non-qualified
plan or otherwise (collectively, "Megsinet Stock Options"), the dates of grant
and exercise prices thereof. All outstanding shares of capital stock of Megsinet
are, and all shares which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in this Section 3.1(c) or Section 3.1(c) of the
Megsinet Disclosure Schedule and except for changes since February 2, 1999
resulting from the issuance of shares of Megsinet Common Stock pursuant to the
Megsinet Stock Options or conversion of the Megsinet Convertible Securities, (x)
there are not issued, reserved for issuance or outstanding (A) any shares of
capital stock or other voting securities of Megsinet, (B) any securities of
Megsinet or any Megsinet subsidiary convertible into or exchangeable or
exercis-
12
able for shares of capital stock or voting securities of Megsinet, (C) any
warrants, calls, options or other rights to acquire from Megsinet or any
Megsinet subsidiary, and any obligation of Megsinet or any Megsinet subsidiary
to issue, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of Megsinet,
and (y) there are no outstanding obligations of Megsinet or any subsidiary of
Megsinet to repurchase, redeem or otherwise acquire any such securities or to
issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities. There are no outstanding (A) securities of Megsinet or any Megsinet
subsidiary convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities or ownership interests in any Megsinet
subsidiary, (B) warrants, calls, options or other rights to acquire from
Megsinet or any Megsinet subsidiary, and any obligation of Megsinet or any
Megsinet subsidiary to issue, any capital stock, voting securities or other
ownership interests in, or any securities convertible into or exchangeable or
exercisable for any capital stock, voting securities or ownership interests in,
any Megsinet subsidiary or (C) obligations of Megsinet or any Megsinet
subsidiary to repurchase, redeem or otherwise acquire any such outstanding
securities of Megsinet subsidiaries or to issue, deliver or sell, or cause to be
issued, delivered or sold, any such securities. Neither Megsinet nor any
Megsinet subsidiary is a party to any agreement restricting the transfer of,
relating to the voting of, requiring registration of, or granting any preemptive
or, except as provided by the terms of the Megsinet Stock Options and the
Megsinet Convertible Securities, antidilutive rights with respect to, any
securities of the type referred to in the two preceding sentences. Other than
the Megsinet subsidiaries, Megsinet does not directly or indirectly beneficially
own any securities or other beneficial ownership interests in any other entity
except for non-controlling investments made in the ordinary course of business
in entities which are not individually or in the aggregate material to Megsinet
and its subsidiaries as a whole.
(d) Authority; Noncontravention. Megsinet has all requisite corporate power
and authority to enter into
13
this Agreement and, subject, in the case of the Merger, to the Megsinet
Stockholder Approval (as defined in Section 3.1(k)) to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Megsinet and the consummation by Megsinet of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Megsinet, subject, in the case of the Merger, to
the Megsinet Stockholder Approval. This Agreement has been duly executed and
delivered by Megsinet and, assuming the due authorization, execution and
delivery by CoreComm and Sub, constitutes the legal, valid and binding
obligation of Megsinet, enforceable against Megsinet in accordance with its
terms. The execution and delivery of this Agreement do not, and the consummation
of the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of Megsinet or any of its subsidiaries under, (i) the
articles of organization or by-laws of Megsinet or the comparable organizational
documents of any of its subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to Megsinet
or any of its subsidiaries or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Megsinet or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not (x) have a material adverse effect on
Megsinet or (y) reasonably be expected to impair the ability of Megsinet to
perform its obligations under this Agreement. Except as may be required pursuant
to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, and the rules and
regulations thereunder, or any successor law, rules or regulations
00
(xxx "XXX Xxx") (as to which Megsinet makes no representations or warranties),
no consent, approval, order or authorization of, action by or in respect of, or
registration, declaration or filing with, any federal, state, local or foreign
government, any court, administrative, regulatory or other governmental agency,
commission or authority or any nongovernmental self-regulatory agency,
commission or authority (a "Governmental Entity") is required by or with respect
to Megsinet or any of its subsidiaries in connection with the execution and
delivery of this Agreement by Megsinet or the consummation by Megsinet of the
transactions contemplated by this Agreement, except for the filing of a
Registration Statement on Form S-4 with the Securities and Exchange Commission
("SEC") in accordance with the Securities Act of 1933, as amended (the
"Securities Act"), the filing of the Articles of Merger with the Secretary of
State of Illinois and the Secretary of State of Delaware and such filings with
Governmental Entities to satisfy the applicable requirements of state securities
or "blue sky" laws.
(e) Financial Statements; Undisclosed Liabilities. The audited and
unaudited financial statements of Megsinet provided on Schedule 3.1(e) of the
Megsinet Disclosure Schedule comply as to form, as of their respective dates, in
all material respects with applicable accounting requirements, have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of Megsinet and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and the absence of
footnotes). Except (i) as reflected in such financial statements or in the notes
thereto; (ii) for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby; (iii) for liabilities incurred in the ordinary
course from Cisco or Ascend neither Megsinet nor any of its subsidiaries has any
liabilities or obligations of any nature which, individually or in the
aggregate, would have a material adverse effect on Megsinet.
15
(f) Absence of Certain Changes or Events. Except for liabilities incurred
in connection with this Agreement or the transactions contemplated hereby and
except as permitted by Section 4.1(a), since September 30, 1998, Megsinet and
its subsidiaries have conducted their business only in the ordinary course and,
since January 1, 1998, there has not been (i) any material adverse change (as
defined in Section 8.3) in Megsinet, (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of Megsinet's capital stock, (iii) any split,
combination or reclassification of any of Megsinet's capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of Megsinet's capital stock, except
for issuances of Megsinet Common Stock upon conversion of Megsinet Convertible
Securities, upon the exercise of Megsinet Stock Options (awarded prior to the
date hereof) in accordance with their present terms, (iv)(A) any granting by
Megsinet or any of its subsidiaries to any current or former director, executive
officer or other key employee of Megsinet or its subsidiaries of any increase in
compensation, bonus or other benefits, except for normal increases as a result
of promotions, normal increases of base pay in the ordinary course of business
or as was required under any employment agreements in effect as of January 1,
1998, (B) any granting by Megsinet or any of its subsidiaries to any such
current or former director, executive officer or key employee of any increase in
severance or termination pay, or (C) any entry by Megsinet or any of its
subsidiaries into, or any amendment of, any employment, deferred compensation,
consulting, severance, termination or indemnification agreement with any such
current or former director, executive officer or key employee, (v) except
insofar as or required by a change in GAAP, any change in accounting methods,
principles or practices by Megsinet materially affecting its assets, liabilities
or business, (vi) any tax election that individually or in the aggregate would
have a material adverse effect on Megsinet or any of its tax attributes or any
settlement or compromise of any material income tax liability, or (vii) any
action taken by Megsinet or any of its subsidiaries during the period
16
from September 30, 1998 through the date of this Agreement that, if taken during
the period from the date of this Agreement through the Effective Time would
constitute a breach of Section 4.1(a).
(g) Compliance with Applicable Laws; Litigation. (i) Megsinet and its
subsidiaries hold all permits, licenses, variances, exemptions, orders,
registrations and approvals of all Governmental Entities which are required for
the operation of the businesses of Megsinet and its subsidiaries (the "Megsinet
Permits"), except where the failure to have any such Megsinet Permits
individually or in the aggregate would not have a material adverse effect on
Megsinet. Megsinet and its subsidiaries are in compliance with the terms of the
Megsinet Permits and all applicable statutes, laws, ordinances, rules and
regulations (including, without limitation, laws relating to environmental or
occupational health and safety conditions or standards), except where the
failure so to comply individually or in the aggregate would not have a material
adverse effect on Megsinet. As of the date of this Agreement, no action, demand,
requirement or investigation by any Governmental Entity and no suit, action or
proceeding by any person, in each case with respect to Megsinet or any of its
subsidiaries or any of their respective properties is pending or, to the
knowledge (as defined in Section 8.3) of Megsinet, threatened, other than, in
each case, those the outcome of which individually or in the aggregate would not
(A) have a material adverse effect on Megsinet or (B) reasonably be expected to
impair the ability of Megsinet to perform its obligations under this Agreement
or prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
(ii) Neither Megsinet nor any subsidiary of Megsinet is subject to any
outstanding order, injunction or decree which has had or, insofar as can be
reasonably foreseen, individually or in the aggregate will have a material
adverse effect on Megsinet.
(h) Absence of Changes in Benefit Plans. Megsinet has delivered to CoreComm
true and complete copies of (i) all severance and employment agreements of
17
Megsinet with directors, executive officers or employees, (ii) all severance or
termination pay programs and policies of each of Megsinet and each Megsinet
subsidiary, (iii) all plans or arrangements of Megsinet and each Megsinet
subsidiary relating to its employees which contain change in control or similar
provisions and (iv) all Megsinet Benefit Plans (as defined below). Since January
1, 1998 there has not been any adoption or amendment in any material respect by
Megsinet or any of its subsidiaries of any collective bargaining agreement,
employment agreement, consulting agreement, severance agreement or any material
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock bonus, stock option, phantom stock,
equity compensation, retirement, vacation, severance, life insurance,
disability, death benefit, hospitalization, medical, surgical or other plan,
arrangement or understanding providing benefits to any current or former
employee, officer or director of Megsinet or any of its wholly owned
subsidiaries including, without limitation, each "employee benefit plan" within
the meaning of Section 3(s) of ERISA (as defined below) sponsored, reinstalled,
contributed to by or required to be contributed by for the benefit of the
employees or former employees of Megsinet or a Megsinet subsidiary by Megsinet
or by any trade or business, whether or not incorporated (an "ERISA Affiliate")
that together with Megsinet would be deemed a Single Employer within the meaning
of Section 4001(b) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (collectively, the "Megsinet Benefit Plans"), or any material
change in any actuarial or other assumption used to calculate funding
obligations with respect to any Megsinet pension plans, or any material change
in the manner in which contributions to any Megsinet pension plans are made or
the basis an which such contributions are determined and there is no commitment,
plan or promise to make any such material change, other than as contemplated by
this Agreement.
(i) ERISA Compliance. (i) Except where such would not, individually or in
the aggregate, have a material adverse effect on Megsinet, with respect to the
Megsinet Benefit Plans, no event has occurred and, to the knowledge of Megsinet,
there exists no condition or set
18
of circumstances, in connection with which Megsinet or any of its subsidiaries
could be subject to any liability under the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Code or any other applicable law.
(ii) Except where such would not, individually or in the aggregate,
have a material adverse effect on Megsinet, each Megsinet Benefit Plan has
been administered in accordance with its terms. Megsinet, its subsidiaries
and all the Megsinet Benefit Plans have been operated, and are, in
compliance with the applicable provisions of ERISA, the Code and all other
applicable laws and the terms of all applicable collective bargaining
agreements, except for any failures to be in such compliance that
individually or in the aggregate would not have a material adverse effect
on Megsinet. Each Megsinet Benefit Plan that is intended to be qualified
under Section 401(a) or 401(k) of the Code has received a favorable
determination letter from the IRS that it is so qualified and each trust
established in connection with any Megsinet Benefit Plan that is intended
to be exempt from federal income taxation under Section 501(a) of the Code
has received a determination letter from the IRS that such trust is so
exempt. To the knowledge of Megsinet, no fact or event has occurred since
the date of any determination letter from the IRS which is reasonably
likely to affect adversely the qualified status of any such Megsinet
Benefit Plan or the exempt status of any such trust.
(iii) No Megsinet Benefit Plan or any "pension" plan fund or program
(within the meaning of Section 3(2) of ERISA) of an ERISA Affiliate is or
has ever been subject to Title IV of ERISA.
(iv) No Megsinet Benefit Plan provides medical benefits (whether or
not insured), with respect to current or former employees after retirement
or other termination of service (other than coverage mandated by applicable
law or benefits, the full cost of which is borne by the current or former
19
employee) other than individual arrangements the amounts of which are not
material.
(v) As of the date of this Agreement, neither Megsinet nor any of its
subsidiaries is a party to any collective bargaining or other labor union
contract applicable to persons employed by Megsinet or any of its
subsidiaries and no collective bargaining agreement is being negotiated by
Megsinet or any of its subsidiaries. As of the date of this Agreement,
there is no labor dispute, strike or work stoppage against Megsinet or any
of its subsidiaries pending or, to the knowledge of Megsinet, threatened
which may interfere with the respective business activities of Megsinet or
any of its subsidiaries, except where such dispute, strike or work stoppage
individually or in the aggregate would not have a material adverse effect
on Megsinet. As of the date of this Agreement, to the knowledge of
Megsinet, none of Megsinet, any of its subsidiaries or any of their
respective representatives or employees has committed any material unfair
labor practice in connection with the operation of the respective
businesses of Megsinet or any of its subsidiaries, and there is no material
charge or complaint against Megsinet or any of its subsidiaries by the
National Labor Relations Board or any comparable governmental agency
pending or, to the knowledge of Megsinet, threatened in writing.
(vi) No employee of Megsinet will be entitled to any material payment,
additional benefits or any acceleration of the time of payment or vesting
of any benefits under any Megsinet Benefit Plan as a result of the
transactions contemplated by this Agreement (either alone or in conjunction
with any other event such as a termination of employment)
(vii) Neither Megsinet, nor any subsidiary, any Megsinet Benefit Plan,
any trust created thereunder, or any trustee or administrator thereof has
engaged in a transaction in connection with which Megsinet or any
subsidiary, any Megsinet Benefit Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any
20
Megsinet Benefit Plan or any such trust could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code.
(viii) No amounts payable under the Megsinet Benefit Plans will fail
to be deductible for federal income tax purposes by virtue of Section
162(a)(1) or 162(m) of the Code.
(ix) There has been no material failure of a Megsinet Benefit Plan
that is a group health plan (as defined in Section 5000(b)(1) of the Code)
to meet the requirements of Section 4980B(f) of the Code with respect to a
qualified beneficiary (as defined in Section 4980B(g) of the Code). Neither
Megsinet nor any subsidiary has contributed to a nonconforming group health
plan (as defined in Section 5000(c) of the Code) and no ERISA Affiliate of
Megsinet or any subsidiary has incurred a tax under Section 5000(e) of the
Code which is or could become a liability of Megsinet or a subsidiary.
There are no pending, or to the knowledge of Megsinet, threatened or
anticipated claims by or on behalf of any Megsinet Benefit Plan, by any
employee or beneficiary covered under any such Megsinet Benefit Plan, or
otherwise involving any such Megsinet Benefit Plan (other than routine
claims for benefits).
(j) Taxes. (1) Megsinet and its subsidiaries have filed all material Tax
Returns (as defined herein) required to be filed by them and all such Tax
Returns are complete and correct in all material respects, or requests for
extensions to file such Tax Returns have been timely filed, granted and have not
expired. Megsinet and its subsidiaries have paid or have made provision for the
payment of all Taxes (as defined herein) shown as due on such Tax Returns.
Neither Megsinet nor its subsidiaries has made, or is subject to, an election
under Section 341 of the Code.
(2) No deficiencies for any Taxes have been proposed, asserted or
assessed against Megsinet or any of its subsidiaries that are not
adequately
21
reserved for, except for deficiencies that individually or in the aggregate
would not have a material adverse effect on Megsinet. No federal, state,
local or foreign audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes of Megsinet or
any of its subsidiaries.
(3) No claim has ever been made by an authority in a jurisdiction
where Megsinet has not filed Tax Returns that it or any of its subsidiaries
is or may be subject to taxation by that jurisdiction.
(4) Neither Megsinet nor any of its subsidiaries has any obligation to
make a payment that will not be deductible under Section 280G of the Code
or Megsinet will satisfy all the requirements of Section 280G(b)(5)(B) of
the Code and Prop. Treas. Reg. Section 1.280G-1(Q&A-7) such that Section
280G will not apply to any payments to be made by Megsinet or any of its
subsidiaries.
(5) Neither Megsinet nor any of its subsidiaries have (A) been a
member of an affiliated group as defined under Section 1504 of the Code
(other than an affiliated group of which the common parent was Megsinet)
and (B) any liability for Taxes of any person (other than Megsinet or any
of its subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(6) As used in this Agreement, "Taxes" shall include all (x) federal,
state, local or foreign income, property, occupation, sales, use, service
occupation, service use, leasing, leasing use, excise, withholding,
transfer, recording and other taxes or similar governmental charges,
including any interest, penalties or additions with respect thereto, and
(y) "Tax Return" shall mean any report, return, document, declaration,
information, return or filing (including any related or supporting
information) with respect to Taxes.
22
(7) (A) The aggregate fair market value of the Merger Consideration
(including any cash paid for fractional shares) will be approximately equal
to the fair market value of Megsinet stock surrendered therefor. The Merger
Consideration will be the sole consideration received for each such
shareholder's Megsinet Capital Stock, and the Megsinet Capital Stock
surrendered in exchange therefor will be the sole consideration delivered
by such shareholder for the Merger Consideration and the terms of such
exchange were arrived at through arm's length negotiations.
(B) There is no intercorporate indebtedness existing between CoreComm
(or any of its subsidiaries, including Sub) and Megsinet that was issued,
acquired, or will be settled at a discount.
(C) Megsinet is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(D) At the Effective Time, Sub will acquire at least 90 percent of the
fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by Megsinet immediately prior to the
Merger (for purposes of this representation, amounts used by Megsinet to
pay its reorganization expenses, cash paid in lieu of fractional shares,
and cash used to pay dissenters and to make all redemptions and
distributions by Megsinet immediately preceding the transfer will be
included as assets of Megsinet held immediately prior to the Merger) (the
"Substantially All Test").
(E) No assets of Megsinet have been or are proposed to be sold,
transferred or otherwise disposed of that would prevent Megsinet from
continuing the historic business of Megsinet or using a significant portion
of Megsinet's historic business assets in a business.
(F) The payment of cash in lieu of fractional shares of CoreComm
Common Stock is solely
23
for the purpose of avoiding the expense and inconvenience to CoreComm of
issuing fractional shares of CoreComm Common Stock and does not represent
separately bargained-for consideration. The total cash consideration to be
paid in the Merger in lieu of fractional shares of CoreComm capital stock
will not exceed one percent of the total consideration in the Merger.
(G) (I) none of the compensation for services to Megsinet received (or
to be received) by any shareholder of Megsinet will be separate
consideration for, or allocable to, any of his Megsinet Capital Stock; (II)
none of the CoreComm Common Stock received by any shareholder of Megsinet
pursuant to the Merger will be separate consideration for, or allocable to,
any employment, service or noncompetition agreement or arrangement; and
(III) the compensation paid to any shareholder of Megsinet who also
provides services to Megsinet will be commensurate with amounts that would
be paid to a third party bargaining at arm's length for similar services.
(H) Except as specifically set forth herein, Megsinet and the
shareholders of Megsinet will each pay their respective expenses, if any,
incurred in connection with the Merger and the transactions related hereto.
(I) (I) On the date hereof, there is no plan or intention on the part
of the Significant Stockholders, or to the knowledge of Megsinet or the
Significant Stockholders, any other shareholders of Megsinet to sell,
exchange, transfer by gift or otherwise dispose of any shares of CoreComm
Common Stock to be received pursuant to the Merger or to enter into any
transactions which would have the economic effect of a disposition of such
Shares including, but not limited to, any transactions described in Section
1259 of the Code or any other put, forward sale, short-sale or equity swap
types of arrangements, with respect to any such shares of CoreComm Common
Stock to be received pursuant to the Merger, (II) neither Megsinet nor any
person related
24
to Megsinet within the meaning of Treas. Reg. Section 1.368-1(e)(3), nor
any predecessor or successor of Megsinet within the meaning of Treas. Reg.
Section 1.368-1(e)(5), has acquired or will acquire Megsinet Capital Stock
in contemplation of, or as part of, the Merger, and (III) Megsinet has not
made and will not make any distributions with respect to its stock in
contemplation of, or with respect to the Merger.
(J) The liabilities of Megsinet to be assumed by Sub and the
liabilities to which the transferred assets of Megsinet are subject were
incurred by Megsinet in the ordinary course of its business.
(K) The fair market value of the assets of Megsinet transferred to Sub
will equal or exceed the sum of the liabilities assumed by Sub, plus the
amount of liabilities, if any, to which the transferred assets are subject.
(L) Megsinet is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(M) Megsinet has no plan or intention to issue additional shares of
its stock (or securities, options or instruments giving the holder right to
such stock) that would (or if exercised would) result in CoreComm losing
control of Megsinet within the meaning of Section 368(c) of the Code. At
the time of the Merger, Megsinet will not have outstanding any warrants,
options convertible securities or any other type of right pursuant to which
any person could acquire stock in Megsinet that, if exercised or converted,
would affect CoreComm's acquisition or retention of control of Megsinet or
its successor, as defined in Section 368(c) of the Code.
(N) Apart from the Megsinet Capital Stock, the Ascend Warrant, the
Pequot Warrant, and conversion rights held by CISCO Systems, Inc., and
25
the options described in Section 5.5 hereof, Megsinet has no outstanding
stock or debt that could be treated as equity for Federal income tax
purposes.
(O) Neither Megsinet nor any affiliate of Megsinet has any plan or
intention of taking any action prior to, at or after the Effective Time
that is contrary to any of representations of this Section 3.1(j)(7).
(k) Voting Requirements. The affirmative vote at the Megsinet Stockholders
Meeting (the "Megsinet Stockholder Approval") of the holders of two-thirds of
all outstanding shares of Megsinet Common Stock and 60% of all outstanding
shares of Series 1998A Preferred and 100% of the outstanding shares of Pequot
Preferred to adopt this Agreement are the only votes of the holders of any class
or series of Megsinet's capital stock necessary to approve and adopt this
Agreement and the transactions contemplated hereby, including the Merger. The
affirmation vote of the holders of a majority of all outstanding shares of
Megsinet Common Stock are the only votes of the holders of any class or series
of Megsinet's capital stock necessary to approve an amendment to Megsinet's
Articles of Incorporation necessary to reduce to a majority the number of shares
of Megsinet Common Stock required to vote affirmatively to adopt this Agreement
and the transactions contemplated hereby (the "Reduced Vote").
(l) Intellectual Property. Megsinet and its subsidiaries own or have a
valid license to use all trademarks, service marks, trade names, patents and
copyrights (including any registrations or applications for registration of any
of the foregoing) (collectively, the "Megsinet Intellectual Property") necessary
to carry on its business substantially as currently conducted, except for such
Megsinet Intellectual Property (i) the failure of which to own or validly
license individually or in the aggregate would not have a material adverse
effect on Megsinet or (ii) which is "off the shelf" or "shrink-wrapped"
software. Neither Megsinet nor any such subsidiary has received any notice of
infringement of or conflict with, and, to Megsinet's knowledge, there are no
26
infringements of or conflicts (i) with the rights of others with respect to the
use of, or (ii) by others with respect to, any Megsinet Intellectual Property
that individually or in the aggregate, in either such case, would have a
material adverse effect on Megsinet.
(m) Certain Contracts. Except for contracts and agreements set forth in
Section 3.1(m) of the Megsinet Disclosure Schedule, neither Megsinet nor any of
its subsidiaries is a party to or bound by (i) any contract providing for the
receipt or payment of more than $20,000 per 12 month period other than those
covered by the fourth sentence hereof, (ii) any lease of real or personal
property for more than $20,000 per 12 month period, (iii) any non-competition
agreement or any other agreement or obligation which purports to limit in any
material respect the manner in which, or the localities in which, all or any
material portion of the business of Megsinet and its subsidiaries (including,
for purposes of this Section 3.1(m), CoreComm and its subsidiaries, assuming the
Merger has taken place), taken as a whole, is or would be conducted, or (iv) any
contract or other agreement which would prohibit or materially delay the
consummation of the Merger or any of the transactions contemplated by this
Agreement (all contracts of the type described in clauses (i) and (ii) being
referred to herein as "Megsinet Material Contracts"). Each Megsinet Material
Contract is valid and binding on Megsinet (or, to the extent an Megsinet
subsidiary is a party, such subsidiary) and is in full force and effect, and
Megsinet and each Megsinet subsidiary have in all material respects performed
all obligations required to be performed by them to date under each Megsinet
Material Contract, except where such noncompliance, individually or in the
aggregate, would not have a material adverse effect on Megsinet. Neither
Megsinet nor any Megsinet subsidiary knows of, or has received notice of, any
violation or default under (nor, to the knowledge of Megsinet, does there exist
any condition which with the passage of time or the giving of notice or both
would result in such a violation or default under) any Megsinet Material
Contract except where such violation or default would not have a material
adverse effect on Megsinet. In addition, Megsinet has provided to CoreComm a
complete list as of December 31, 1998 of all charges related to Megsinet's
27
circuits which includes all charges incurred under any interconnection and/or
service agreements between Megsinet and any telecommunications company (the
"Circuit Schedule"). Megsinet has also provided in Section 3.1(m) of the
Megsinet Disclosure Schedule, a complete list of any provisions of any
agreements reflected on the Circuit Schedule that provide for (i) materially
different pricing terms than the majority of the agreements on the Circuit
Schedule; (ii) "take or pay" commitments over $100,000 annually; (iii) payment
of more than $75,000 per 12 month period or (iv) terms that could, individually
or in the aggregate, have a material adverse effect on Megsinet.
(n) Subscribers. As of the Effective Time, Megsinet will have at least
40,000 Subscribers. As used herein, the term "Subscriber" means a customer of
Megsinet who (i) is currently connected to and receiving internet access
services from the system and (ii) is being charged and is paying for such
services.
(o) Fixed Assets. Schedule 3.1(o) to the Megsinet Disclosure Schedule sets
forth a summary by category of all fixed assets owned by Megsinet. Such assets
are owned by Megsinet free and clear of any Liens, except for such Liens or
defects which, individually or in the aggregate, would not have a material
adverse effect on Megsinet.
(p) Brokers; Legal Expenses. No broker, investment banker, financial
advisor or other person, other than Xxxxxxxx Xxxxx, the fees and expenses of
which will be paid by Megsinet's stockholders and will not exceed $250,000, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Megsinet or any stockholder of
Megsinet. In addition, the fees payable to the law firm of Gallop Xxxxxxx and
Xxxxxx X.X. related to the transactions comtemplated herein shall be paid by
Megsinet's stockholders.
(q) Registration Statement; Proxy/Prospectus. The information supplied by
Megsinet for inclusion in the
28
registration statement on Form S-4 pursuant to which shares of CoreComm Common
Stock issued in the Merger will be registered with the SEC (the "Registration
Statement"), shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material fact or omit to
state any material fact required to be stated in the Registration Statement or
necessary in order to make the statements in the Registration Statement, in
light of the circumstances under which they were made, not misleading. The
information supplied by Megsinet for inclusion in the Proxy/Prospectus (the
"Proxy/Prospectus") to be sent to the stockholders of Megsinet in connection
with the solicitation of votes to approve and adopt this Agreement shall not, on
the date the Proxy/Prospectus is first mailed to stockholders of Megsinet or at
the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it is made, is false or misleading with respect to
any material fact, or omit to state any material fact necessary in order to make
the statements made in the Proxy/Prospectus not false or misleading or necessary
to correct any statement in any earlier communication with respect to the
solicitation of votes which has become false or misleading.
(r) Escrow of Irrevocable Proxies. As of the date hereof, the certificates
of shares of Megsinet Common Stock representing all of the shares of Megsinet
Common Stock that are subject to irrevocable proxies entered into between
certain Megsinet stockholders and CoreComm (the "Voting Proxies"), other than
for shares owned by Xxxxxxx Xxxxx, have been delivered to Xxxxxxx X. Xxxxx as
escrow agent. A certification of such physical possession by Xxxxxxx X. Xxxxx is
attached hereto as Annex B.
(s) Voting Proxies. The Voting Proxies obtained by CoreComm when combined
with the shares intended to be issued to Pequot represent more than 50% of the
shares of Megsinet Common Stock entitled to vote on the Merger.
(t) Year 2000 Readiness Disclosure. Other
than "off the shelf" or "shrink wrapped" products, all of
the computer software programs (including without limita-
29
tion software provided by Technology Applications Incorporated or Sun
Microsystems), databases, and compilations, computer firmware; computer hardware
(whether general or special purpose), and other similar or related items of
automated, computerized, and/or software system(s) that are to be used or relied
on by Megsinet or any of its subsidiaries in the conduct of their respective
businesses will not malfunction, will not cease to function, will not generate
incorrect data, and will not provide incorrect results when processing,
providing, and/or receiving date-related data into and between the twentieth and
twenty-first centuries as a result of the transition between such centuries.
SECTION 3.2 Representations and Warranties of CoreComm. Except as disclosed
in the CoreComm SEC Documents (as defined in Section 3.2(e)) or as set forth on
the Disclosure Schedule delivered by CoreComm to Megsinet prior to the execution
of this Agreement (the "CoreComm Disclosure Schedule") and making reference to
the particular subsection of this Agreement to which exception is being taken,
CoreComm represents and warrants to Megsinet as follows:
(a) Organization, Standing and Corporate Power. Each of CoreComm and its
subsidiaries (including Sub) is a corporation or other legal entity duly
organized, validly existing and in good standing (with respect to jurisdictions
which recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted, except, as to
subsidiaries, for those jurisdictions where the failure to be so organized,
existing or in good standing individually or in the aggregate would not have a
material adverse effect on CoreComm. Each of CoreComm and its subsidiaries is
duly qualified or licensed to do business and is in good standing (with respect
to jurisdictions which recognize such concept) in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except for those jurisdictions
where the failure to be so qualified or licensed or to be in good
30
standing individually or in the aggregate would not have a material adverse
effect on CoreComm.
(b) Subsidiaries. All the outstanding shares of capital stock of, or other
equity interests in, each Subsidiary of CoreComm have been validly issued and
are fully paid and nonassessable and are owned directly or indirectly by
CoreComm, free and clear of all Liens and free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests).
(c) Capital Structure. The authorized capital stock of CoreComm consists of
75,000,000 shares of CoreComm Common Stock, par value $.01 per share and
1,000,000 shares of Series A Junior Participating Preferred Stock, par value
$.01 per share. At the close of business on February 3, 1999: (i) 13,199,586
shares of CoreComm Common Stock were issued and outstanding; (ii) zero shares of
CoreComm Common Stock were held by CoreComm in its treasury; (iii) 1,603,878
shares of CoreComm Common Stock were subject to options issued under CoreComm
employee option plans or agreements; and (iv) 2,735,125 shares of CoreComm
Common Stock were subject to warrants issued under a CoreComm employee option
plans or agreements. All outstanding shares of capital stock of CoreComm are,
and all shares which may be issued pursuant to this Agreement or otherwise will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except as set forth in this Section 3.2(c)
and except for changes since resulting from the issuance of shares of CoreComm
Common Stock pursuant to the CoreComm option plans, as of the date hereof, (x)
there are not issued, reserved for issuance or outstanding (A) any shares of
capital stock or other voting securities of CoreComm, (B) any securities of
CoreComm or any CoreComm subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or voting securities of CoreComm, (C)
any warrants, calls, options or other rights to acquire from CoreComm or any
CoreComm subsidiary, and any obligation of CoreComm or any CoreComm subsidiary
to issue, any capital stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of
31
CoreComm, and (y) there are no outstanding obligations of CoreComm or any
CoreComm subsidiary to repurchase, redeem or otherwise acquire any such
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities. As of the date hereof, there are no outstanding (A)
securities of CoreComm or any CoreComm subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities or ownership interests in any CoreComm subsidiary, (B) warrants,
calls, options or other rights to acquire from CoreComm or any CoreComm
subsidiary, and any obligation of CoreComm or any CoreComm subsidiary to issue,
any capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable or exercisable for any capital
stock, voting securities or ownership interests in, any CoreComm subsidiary or
(C) obligations of CoreComm or any CoreComm subsidiary to repurchase, redeem or
otherwise acquire any such outstanding securities of CoreComm subsidiaries or to
issue, deliver or sell, or cause to be issued, delivered or sold, any such
securities.
(d) Authority; Noncontravention. CoreComm and Sub each has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by each of CoreComm and Sub and the consummation by each of CoreComm
and Sub of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of CoreComm and Sub.
This Agreement has been duly executed and delivered by each of CoreComm and Sub
and, assuming the due authorization, execution and delivery by Megsinet,
constitutes the legal, valid and binding obligations of each of CoreComm and
Sub, enforceable against each of CoreComm and Sub in accordance with its terms.
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of a benefit under, or result in the creation of any Lien upon any of the
properties or assets of
32
CoreComm or any of its subsidiaries (including Sub) under, (i) the memorandum of
association or by-laws of CoreComm or the comparable organizational documents of
any of its subsidiaries (including Sub), (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or similar authorization applicable to CoreComm
or any of its subsidiaries (including Sub) or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to CoreComm or any of its subsidiaries
(including Sub) or their respective properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not (x) have
a material adverse effect on CoreComm or (y) reasonably be expected to impair
the ability of CoreComm to perform its obligations under this Agreement. To the
best of CoreComm's knowledge, except as may be required pursuant to the HSR Act,
and the rules and regulations thereunder, and the Bermuda Exchange Control Act
of 1972, no consent, approval, order or authorization of, action by, or in
respect of, or registration, declaration or filing with, any Governmental Entity
is required by or with respect to CoreComm or any of its subsidiaries (including
Sub) in connection with the execution and delivery of this Agreement by each of
CoreComm or Sub or the consummation by CoreComm and Sub of the transactions
contemplated by this Agreement, except for (1) the filing of the Articles of
Merger with the Secretary of State of Illinois and the Secretary of State of
Delaware such filings with Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; (2) the filing of a
Registration Statement on Form S-4 with the SEC in accordance with the
Securities Act; (3) such filings with and approvals of the NASDAQ to permit the
shares of CoreComm Common Stock that are to be issued in the Merger to be
authorized for quotation on the NASDAQ; and (4) such consents, approvals, orders
or authorizations the failure of which to be made or obtained individually or in
the aggregate would not (x) have a material adverse effect on CoreComm or (y)
reasonably be expected to impair the
33
ability of CoreComm to perform its obligations under this Agreement.
(e) SEC Documents; Undisclosed Liabilities. CoreComm has filed all required
registration statements, prospectuses, reports, schedules, forms, statements and
other documents (including exhibits and all other information incorporated
therein) with the SEC since August 31, 1998 (together with CoreComm's Form 10/A
filed on August 31, 1998, the "CoreComm SEC Documents"). As of their respective
dates, the CoreComm SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
CoreComm SEC Documents, and none of the CoreComm SEC Documents when filed
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of CoreComm included in the CoreComm SEC
Documents comply as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of CoreComm and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except (i) as
reflected in such financial statements or in the notes thereto or (ii) for
liabilities incurred in connection with this Agreement or the transactions
contemplated hereby, neither CoreComm nor any of its subsidiaries has any
liabilities or obligations of any nature which, individually or in the
aggregate, would have a material adverse effect on CoreComm.
(f) Absence of Certain Changes or Events. Except for liabilities incurred
in connection with this
34
Agreement or the transactions contemplated hereby, and except as permitted by
Section 4.1(b), since September 2, 1998, CoreComm and its subsidiaries have
conducted their business only in the ordinary course or as disclosed in any
CoreComm SEC Document filed since such date and prior to the date hereof, and
there has not been (i) any material adverse change in CoreComm, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of CoreComm's capital
stock, (iii) any split, combination or reclassification of any of CoreComm's
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of CoreComm's
capital stock, except for issuances of CoreComm Common Stock upon exercise of
CoreComm Stock Options, in each case, awarded prior to the date hereof in
accordance with their present terms or issued pursuant to Section 4.1(b), (iv)
except insofar as may have been disclosed in CoreComm SEC Documents filed and
publicly available prior to the date of this Agreement or required by a change
in GAAP, any change in accounting methods, principles or practices by CoreComm
materially affecting its assets, liabilities or business, (v) except insofar as
may have been disclosed in the CoreComm Filed SEC Documents, any tax election
that individually or in the aggregate would have a material adverse effect on
CoreComm or any of its tax attributes or any settlement or compromise of any
material income tax liability or (vi) any action taken by CoreComm or any of the
CoreComm subsidiaries during the period from September 2, 1998 through the date
of this Agreement that, if taken during the period from the date of this
Agreement through the Effective Time would constitute a breach of Section
4.1(b).
(g) Brokers. Other than Xxxxxxxxx & Company, which will be paid by
CoreComm, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of CoreComm.
(h) Taxes. (1) Prior to the Merger, CoreComm will be in control of Sub
within the meaning of Section
35
368(c)(1) of the Code. Following the Merger, CoreComm has no plan or intention
for Sub to issue additional shares of its stock that would result in CoreComm
losing control of Sub within the meaning of Section 368(c)(1) of the Code.
(2) The aggregate fair market value of the Merger Consideration
(including any cash paid for fractional shares) will be approximately equal
to the fair market value of Megsinet stock surrendered therefor. The Merger
Consideration will be the sole consideration received for each such
shareholder's Megsinet Capital Stock, and the Megsinet Capital Stock
surrendered in exchange therefor will be the sole consideration delivered
by such shareholder for the Merger Consideration, and the terms of such
exchange were arrived at through arm's length negotiations.
(3) There is no intercorporate indebtedness existing between CoreComm
or any of its subsidiaries (including Sub) and Megsinet that was issued,
acquired, or will be settled at a discount.
(4) Neither CoreComm nor Sub is an investment company as defined in
Section 368(a)(2)(F) (iii) and (iv) or the Code.
(5) Neither CoreComm nor any related person (within the meaning of
Treasury Regulations Section 1.368-1(e)(3)) has any plan or intention to
redeem or, actually or in substance directly or indirectly, acquire after
the date of the Merger any of the CoreComm Common Stock to be issued in the
Merger. CoreComm has no stock repurchase plan in effect and has no intent
to create such a plan. After the Merger, no dividends or distributions will
be made to the former owners of Megsinet, other than regular, normal
dividends or distributions made to all holders of CoreComm Common Stock.
(6) CoreComm has no plan or intention to liquidate Sub, to merge Sub
with and into any other corporation, to sell or otherwise dispose of the
stock of Sub or to cause Sub to sell or otherwise
36
dispose of any assets of Megsinet acquired in the Merger, except for
dispositions made in the ordinary course of business or transfers described
in Section 368(a)(2)(C) of the Code, in which latter case the foregoing
representations shall be deemed to apply to any transferee. Following the
Merger, CoreComm will not take any action that would cause Sub to fail the
Substantially All Test.
(7) Following the Merger, CoreComm will continue the historic business
of Megsinet or use a significant portion of Megsinet's business assets in a
business.
(8) The payment of cash in lieu of fractional shares of CoreComm
Common Stock is solely for the purpose of avoiding the expense and
inconvenience to CoreComm of issuing fractional shares of CoreComm Common
Stock and does not represent separately bargained-for consideration. The
total cash consideration to be paid in the Merger in lieu of fractional
shares of CoreComm Capital Stock will not exceed 1% of the total
consideration in the Merger.
(9) (a) none of the compensation received (or to be received) by any
shareholder of Megsinet will be separate consideration for, or allocable
to, any of his Megsinet Capital Stock; (b) none of the CoreComm Common
Stock received by any shareholder of Megsinet pursuant to the Merger will
be separate consideration for, or allocable to, any employment, services or
noncompetition agreement or arrangement; and (c) the compensation paid to
any shareholder of Megsinet who provides services to Megsinet will be
commensurate with amounts that would be paid to a third party bargaining at
arm's length for similar services.
(10) Except as otherwise specifically set forth herein, Megsinet, Sub,
CoreComm and the shareholders of Megsinet will each pay their respective
expenses, if any, incurred in connection with the Merger and the
transactions related thereto.
37
(11) Prior to the Effective Time, CoreComm will be in control of Sub
within the meaning of Section 368(c) of the Code. No Sub capital stock will
be issued in the Merger. At no time prior to the Merger will has, or will
Sub have had, assets (other than nominal assets contributed upon the
formation of Sub, which assets will have been held by Sub following the
Merger) or conducted any business activities or operations.
(12) CoreComm has plan or intention to issue additional Sub stock (or
securities, options, warrants or instruments giving the holder the right to
Sub stock) that would (or if exercised would) result in CoreComm owning
less than an amount of stock constituting control under Section 368(c) of
the Code.
(13) Neither CoreComm nor any of its subsidiaries (including Sub), nor
any entity in which CoreComm owns an equity interest, owns any stock of
Megsinet.
(14) Except as expressly provided herein, neither CoreComm nor any
affiliate of CoreComm has any plan or intention of taking any action prior
to, at or after the Effective Time that is contrary to any of
representations of this Section 3.2(h).
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business. Except as set forth in Section 4.1(a) of
the Megsinet Disclosure Schedule, as otherwise expressly contemplated by this
Agreement or as consented to by CoreComm in writing, such consent not to be
unreasonably withheld or delayed, during the period from the date of this
Agreement to the Effective Time, Megsinet shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice and in compliance in all material respects with
all applicable laws and regulations and, to the extent consistent there-
38
with, use all reasonable efforts to preserve intact their current business
organizations, use reasonable efforts to keep available the services of their
current officers and other key employees and preserve their relationships with
those persons having business dealings with them to the end that their goodwill
and ongoing businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing (but subject to the above exceptions),
during the period from the date of this Agreement to the Effective Time,
Megsinet shall not, and shall not permit any of its subsidiaries to:
(i) other than dividends and distributions by a direct or indirect
wholly owned subsidiary of Megsinet to its parent, or by a subsidiary that
is partially owned by Megsinet or any of its subsidiaries, provided that
Megsinet or any such subsidiary receives or is to receive its proportionate
share thereof, (x) declare, set aside or pay any dividends on, make any
other distributions in respect of, or enter into any agreement with respect
to the voting of, any of its capital stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock, except for issuances of Megsinet Common Stock
upon conversion of Megsinet Convertible Securities or upon the exercise of
Megsinet Stock Options, in each case, outstanding as of the date hereof in
accordance with their present terms, or (z) purchase, redeem or otherwise
acquire any shares of capital stock of Megsinet or any of its subsidiaries
or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or subject to
any Lien any shares of its capital stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities
(other than (x) the issuance of Megsinet Common Stock upon conversion of
Megsinet Convertible Securities in
39
accordance with their present terms at the option of the holders thereof,
and (y) the issuance of Megsinet Common Stock upon the exercise of Megsinet
Stock Options, in each case, outstanding as of the date hereof in
accordance with their present terms);
(iii) amend its articles of organization, by-laws or other comparable
organizational documents;
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any person;
(v) acquire or agree to acquire any assets with a value greater than
$20,000;
(vi) take any action to expand the states in which any of its
businesses currently operate, other than pursuant to public announcements
made prior to the date hereof or as may be required under agreements
entered into prior to the date hereof;
(vii) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets
(including securitizations), other than in the ordinary course of business
consistent with past practice;
(viii) take any action that would cause the representations and
warranties set forth in Section 3.1(f) (with each reference therein to
"ordinary course of business" being deemed for purposes of this Section
4.1(a)(vi) to be immediately followed by "consistent with past practice")
to no longer be true and correct;
(ix) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for the obligations of any person for
borrowed money;
40
(x) other than for normal merit increases and for payment of any
previously disclosed year-end bonus, increase the benefits or compensation
of, or pay any bonus to, any employee of Megsinet, agree to do any of the
foregoing, or amend or enter into any other agreement or arrangement with
respect to employment or compensation or agreement with respect to
consultants; or
(xi) authorize, or commit or agree to take, any of the foregoing
actions;
provided that the limitations set forth in this Section 4.1(a) (other than
clause (iii)) shall not apply to any transaction between Megsinet and any wholly
owned subsidiary or between any wholly owned subsidiaries of Megsinet.
(b) Other Actions. Except as required by law, Megsinet and CoreComm shall
not, and shall not permit any of their respective subsidiaries to, voluntarily
take any action that would, or that could reasonably be expected to, result in
(i) any of the representations and warranties of such party set forth in this
Agreement that are qualified as to materiality becoming untrue at the Effective
Time, (ii) any of such representations and warranties that are not so qualified
becoming untrue in any material respect at the Effective Time, or (iii) any of
the conditions to the Merger set forth in Article VI not being satisfied.
(c) Advice of Changes. Megsinet and CoreComm shall promptly advise the
other party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply in any
material respect with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement and
(iii) any change or event having, or which, insofar as can reasonably be
foreseen, could reasonably be expected to have a material adverse effect on such
party or on the truth of their respective representations
41
and warranties or the ability of the conditions set forth in Article VI to be
satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement.
SECTION 4.2 No Solicitation by Megsinet. (a) Megsinet shall not, nor shall
it permit any of its subsidiaries to, nor shall it authorize or permit any of
its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Megsinet Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any Megsinet Takeover
Proposal. For purposes of this Agreement, "Megsinet Takeover Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of a business that constitutes 10% or more of the net
revenues, net income or the assets of Megsinet and its subsidiaries, taken as a
whole, or 10% or any equity securities of Megsinet, any tender offer or exchange
offer that if consummated would result in any person beneficially owning any
equity securities of Megsinet, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Megsinet (or any Megsinet subsidiary whose business constitutes 10% or
more of the net revenues, net income or the assets of Megsinet and its
subsidiaries, taken as whole) or the Megsinet Common Stock, other than the
transactions contemplated by this Agreement.
(b) Neither the Board of Directors of Megsinet nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to CoreComm, the approval or recommendation by such Board of Directors
or such committee of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Megsinet Takeover
42
Proposal, or (iii) cause Megsinet to enter into any letter of intent, agreement
in principle, acquisition agreement or other similar agreement (each, an
"Megsinet Acquisition Agreement") related to any Megsinet Takeover Proposal.
Notwithstanding the foregoing, nothing shall prohibit Megsinet from entering
into an agreement for the sale of the Pequot Preferred to Pequot Private Equity
Fund, L.P. and Pequot Offshore Private Equity Fund, Inc. (collectively "Pequot"
and any such agreement a "Pequot Transaction") provided such agreement complies
with the requirements of Section 5.16.
(c) In addition to the obligations of Megsinet set forth in paragraphs (a)
and (b) of this Section 4.2, Megsinet shall immediately advise CoreComm orally
and in writing of any request for information or of any Megsinet Takeover
Proposal, the material terms and conditions of such request or Megsinet Takeover
Proposal and the identity of the person making such request or Megsinet Takeover
Proposal. Megsinet will keep CoreComm reasonably informed of the status and
details (including amendments or proposed amendments) of any such request or
Megsinet Takeover Proposal.
SECTION 4.3 Cooperation. CoreComm shall have the right to have its
designated representatives, as provided to Megsinet from time to time, (the
"Designated Purchaser Representatives") present within normal business hours and
without material disruption to the business of Megsinet for consultation at
Megsinet's principal offices from the date hereof until the Closing Date. Such
Designated Purchaser Representatives shall have the right to review and become
familiar with the conduct of the business of Megsinet and shall be available to
be consulted and shall have authority on behalf of CoreComm in regard to
consultation in regard to Material Decisions (as defined below in this Section
4.3). CoreComm shall take all reasonable actions necessary to ensure that its
Designated Purchaser Representatives will be readily available during normal
business hours. Without notice to and consultation with the Designated Purchaser
Representatives, Megsinet shall not take any action involving any Material
Decision. "Material Decision" shall mean, for purposes of this Agreement, any of
the following to the extent the same may affect the assets, the obliga-
43
tions or the business of Megsinet following the date hereof: (i) any entering
into, termination or material amendment of, or waiver of any Megsinet's rights
in respect of, any Megsinet Material Contracts; (ii) any purchase order in
excess of $20,000 in any instance to be delivered, or the payment for which
shall become due, after the Closing Date; (iii) the acceptance of any material
customer contract that deviates from the terms and conditions of current pricing
policies; (iv) any action to respond to any material customer or regulatory
complaint outside of the ordinary course of business; (v) any general
communication with customers related to the business or to the Merger; or (vi) a
material change in pricing, promotional, marketing or any other decision that
would affect any Megsinet's customary profit margins.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Megsinet Stockholders Meeting.
(i) Megsinet shall as promptly as practicable duly call, give notice
of, convene and hold a meeting of its stockholders (the "Megsinet
Stockholders Meeting") in accordance with the IBCA, and applicable federal
securities laws, for the purpose of obtaining the Megsinet Stockholder
Approval and shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement, the Merger and
the other transactions contemplated hereby. At the Megsinet Stockholders
Meeting, Megsinet shall recommend to its stockholders the approval and
adoption of an amendment to Megsinet's Articles of Incorporation providing
for the Reduced Vote. Such amendment shall be presented and entered into in
such a manner so as to be effective prior to obtaining the Megsinet
Stockholders Approval. Without limiting the generality of the foregoing,
Megsinet agrees that its obligations pursuant to the first sentence of this
Section 5.1 shall not be affected by the commencement, proposal, disclosure
or communication to Megsinet of any Megsinet Takeover Proposal.
44
(ii) If necessary to satisfy the representation supplied in Section
3.1(j)(iv), a stockholder vote satisfying the requirements of Section
280G(b)(5)(B) of the Code and Prop. Treas. Reg. Section 1.280G-1(Q&A-7)
shall be conducted.
SECTION 5.2 Access to Information; Confidentiality. (a) Subject to the
provisions of Section 5.2(b) (the "Confidentiality Agreement"), and subject to
restrictions contained in confidentiality agreements to which such party is
subject (which such party will use its best efforts to have waived) and
applicable law, each of Megsinet and CoreComm shall, and shall cause each of its
respective subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours during the
period prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, each of
Megsinet and CoreComm shall, and shall cause each of its respective subsidiaries
to, furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (b) all
other information concerning its business, properties and personnel as such
other party may reasonably request. No review pursuant to this Section 5.2 shall
affect any representation or warranty given by the other party hereto. Each of
Megsinet and CoreComm will hold, and will cause its respective officers,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to hold, any nonpublic information in accordance with the terms
of the Confidentiality Agreement.
(b) Each of Megsinet and CoreComm shall, and shall cause each of its
respective subsidiaries to, agree not to use one another's Evaluation Material
for any purpose other than in connection with this Agreement and the provisions
herein. Except as may otherwise be re quired under applicable law, the
Evaluation Material of each party shall remain confidential and shall not be
disclosed to any other party other than such party's representatives for the
purpose of fulfilling the provi-
45
sions contained in this agreement. Each party shall use its best efforts to
ensure that it is not obligated to disclose any of the other party's Evaluation
Material for any purpose.
"Evaluation Material" shall mean, with respect to each party, any
information which is non-public, confidential or proprietary in nature and which
has been made available to the other party (or any of its subsidiaries) in
connection with the signing of this Agreement and the transactions contemplated
hereby.
SECTION 5.3 Best Efforts. (a) Upon the terms and subject to the conditions
set forth in this Agreement, each of the parties agrees to use best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
by this Agreement, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity vacated or reversed, and
(iv) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement.
(b) In connection with and without limiting the foregoing, Megsinet and
CoreComm shall (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Merger,
this Agreement, or any of the other transactions contemplated by this Agreement
and (ii) if any
46
state takeover statute or similar statute or regulation becomes applicable to
the Merger, this Agreement, or any other transaction contemplated by this
Agreement, take all action necessary to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
SECTION 5.4 Stock Options. (a) As soon as practicable following the date of
this Agreement, the Board of Directors of Megsinet (or, if appropriate, a
committee of the Megsinet Board of Directors) shall adopt such resolutions or
take such other actions as may be required to effect the following:
(i) adjust the terms of all outstanding Megsinet Stock Options,
whether vested or unvested, as necessary to provide that, at the Effective
Time, each Megsinet Stock Option outstanding immediately prior to the
Effective Time shall be adjusted and thereafter represent an option to
acquire, on the same terms and conditions as were applicable under such
Megsinet Stock Option, the same number of shares of CoreComm Common Stock
as the holder of such Megsinet Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such Megsinet
Stock Option in full immediately prior to the Effective Time, with any
fractional shares of CoreComm Common Stock resulting from such calculation
being rounded down to the nearest whole share, at a price per share of
CoreComm Common Stock equal to (A) the aggregate exercise price for the
shares of Megsinet Common Stock otherwise purchasable pursuant to such
Megsinet Employee Stock Option divided by (B) the aggregate number of
shares of CoreComm Common Stock deemed purchasable pursuant to such
Megsinet Employee Stock Option, rounding the exercise price thus determined
down to the nearest whole cent (each, as so adjusted, an "Adjusted
Option"); and
47
(ii) take such other actions relating to the Megsinet Stock Plan as
Megsinet and CoreComm may agree are appropriate to give effect to the
Merger, including as provided in Section 5.7.
(b) As soon as practicable after the Effective Time, CoreComm shall deliver
to the holders of Megsinet Employee Stock Options appropriate notices setting
forth such holders' rights pursuant to the Megsinet Stock Plan and the
agreements evidencing the grants of such Megsinet Stock Options and that such
Megsinet Stock Options and agreements shall be assumed by CoreComm and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 5.6 after giving effect to the Merger).
(c) A holder of an Adjusted Option may exercise such Adjusted Option in
whole or in part in accordance with its terms by delivering a properly executed
notice of exercise to CoreComm, together with the consideration therefor and the
federal withholding tax information, if any, required in accordance with the
Megsinet Stock Plan.
(d) Except as otherwise contemplated by this Section 5.5 and
notwithstanding any terms of the Megsinet Stock Options to the contrary, all
restrictions or limitations on transfer and vesting with respect to Megsinet
Stock Options awarded under the Megsinet Stock Plan or any other plan, program
or arrangement of Megsinet or any of its subsidiaries, to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in full
force and effect with respect to such options after giving effect to the Merger
and the assumption by CoreComm as set forth above. Prior to the Effective Time,
Megsinet shall obtain, in a form reasonably acceptable to CoreComm, the consent
of each holder of a Megsinet Stock Option to the treatment set forth in this
Section 5.4, including, without limitation, a waiver by each such optionee of
any provision of any Megsinet Stock Option or any related agreement (including
any employment agreement) which would otherwise result in any lapse of
restrictions or acceleration of vesting or exercisability upon the signing of
this Agreement, the consummation of
48
the transactions contemplated hereby, or any other related event.
SECTION 5.5 Megsinet Stock Plan and Certain Employee Matters. (a) At the
Effective Time, by virtue of the Merger, each outstanding and unexercised
Megsinet Stock Option shall be assumed by CoreComm, with the result that all
obligations of Megsinet under such Megsinet Stock Options shall be obligations
of CoreComm following the Effective Time. Prior to the Effective Time, CoreComm
shall take all necessary actions (including, if required to comply with Section
162(m) or 422 of the Code (and the regulations thereunder) or applicable law or
rule of the NASDAQ, obtaining the approval of its stockholders at the next
regularly scheduled CoreComm stockholders meeting) for the assumption of the
Megsinet Stock Plan, including the reservation, issuance and authorization of
CoreComm Common Stock in a number at least equal to (x) the number of shares of
CoreComm Common Stock that will be subject to Adjusted Options and (y) the
product of the Exchange Ratio and the number of shares of Megsinet Common Stock
available for future awards under the Megsinet Stock Plan immediately prior to
the Effective Time. If necessary, CoreComm shall prepare and file with the SEC a
registration statement on Form S-8 (or another appropriate form) registering a
number of shares of CoreComm Common Stock determined in accordance with the
preceding sentence. A valid registration statement shall be kept effective at
least for so long as Adjusted Options remain outstanding and until such time as
the shares of CoreComm Common Stock subject to such Adjusted Options are no
longer subject to resale restrictions under the Securities Act.
(b) Following the Effective Time, CoreComm will honor all obligations of
Megsinet or its subsidiaries under the employment agreements in effect as of the
effective date of each such agreement, between Megsinet and each of Xxxxxxx
Xxxxx, Xxxxx Xxxxx and Xxxxx Xxxxxx (the "Retained Executives"). However, the
titles and duties of these individuals may vary from those set forth in each of
their respective agreements, and Megsinet shall, prior to the Effective Time,
obtain agreements from the Retained Executives that such changes will not
constitute "Good Reason" as defined in the applicable
49
employment agreements. In addition, as soon as practicable after the date hereof
but at least 14 business days prior to the Closing Date, the Significant
Stockholders and CoreComm will agree to an amendment to each Significant
Stockholder's employment agreement providing for, customary "non-compete"
provisions and customary "no solicitation" provisions, each with a duration of 5
years. CoreComm and each of the Significant Stockholders shall negotiate the
precise terms of such amendments in good faith, subject to the above general
provisions. Other than as specified in this Section 5.5(b), CoreComm does not
intend to seek material amendments to the Retained Executive's employment
agreements.
SECTION 5.6 Fees and Expenses. Except as provided for in Section 3.1(p),
all fees and expenses incurred in connection with the Merger, this Agreement,
and the transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
SECTION 5.7 Public Announcements. CoreComm shall issue a press release
regarding this Agreement and the transactions contemplated hereby at such time
as CoreComm deems appropriate and in order to comply with applicable law.
Megsinet agrees not to make any public announcement regarding this Agreement or
the transactions contemplated hereby without prior consent from CoreComm.
SECTION 5.8 NASDAQ Quotation. CoreComm shall use best efforts to cause the
CoreComm Common Stock issuable under Article II and upon exercise of Adjusted
Options pursuant to Section 5.6 to be approved for quotation on the NASDAQ,
subject to official notice of issuance, within 12 months from the Effective
Time.
SECTION 5.9 Conveyance Taxes. CoreComm and Megsinet shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees or any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be
50
filed on or before the Effective Time. CoreComm and Megsinet shall each pay
their own such taxes and fees.
SECTION 5.10 Proxy/Prospectus; Registration Statement.
(a) As promptly as practical after the execution of this Agreement,
Megsinet and CoreComm shall prepare and CoreComm shall file with the SEC the
Registration Statement and the Proxy/Prospectus to be included therein as a
prospectus. Megsinet and CoreComm shall use all reasonable efforts to cause the
Registration Statement to become effective as soon after such filing as
practicable. The Proxy/Prospectus shall include the recommendation of the Board
of Directors of Megsinet in favor of the Agreement. Megsinet shall furnish
CoreComm with all information concerning Megsinet and the holders of its capital
stock and shall take such other action as CoreComm may reasonably request in
connection with the Registration Statement and the issuance of the shares of
CoreComm Common Stock. If at any time prior to the Effective Time any event or
circumstance relating to Megsinet, CoreComm or any of their respective
Subsidiaries, affiliates, officers or directors should be discovered by such
party which should be set forth in an amendment or a supplement to the
Registration Statement or Proxy/Prospectus, such party shall promptly inform the
other thereof and take appropriate action in respect thereof. Megsinet shall
make available to CoreComm as soon as practicable after the date hereof audited
financial statements for Megsinet for 1998, and, if necessary, for 1997, each
for inclusion in the Registration Statement and each in conformity with SEC
rules and regulations.
(b) Megsinet and CoreComm shall make any necessary filings with respect to
the Merger under the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules and regulations thereunder and
CoreComm shall use its reasonable best efforts to take any action required to be
taken under state securities or "blue sky" laws in connection with the issuance
of the shares of CoreComm Common Stock in accordance with the provisions of this
Agreement.
51
SECTION 5.11 Ascend Warrant. Prior to the Effective Time, Megsinet will
amend the terms of the outstanding warrant issued to Ascend Communications, Inc.
(the "Ascend Warrant") such that Ascend will receive, upon the consummation of
the Merger, in exchange for its existing warrant, a warrant to purchase shares
of CoreComm Common Stock in which the exercise price and number of shares shall
be equitably determined to reflect the original terms of the Ascend Warrant. The
form of the amendment to the Ascend Warrant to be presented to Ascend by
Megsinet is attached hereto in Annex A.
SECTION 5.12 Pequot Warrant. Prior to the Effective Time, Megsinet will
ensure that or amend the terms of any warrant issued to Pequot (the "Pequot
Warrant"), such that (i) the Pequot Warrant shall be cancelled on or before the
Effective Time; (ii) Pequot will receive in exchange for such cancellation
35,000 shares of CoreComm Common Stock to be delivered to Pequot directly by
CoreComm which shares shall not be included in the Allocation Schedule or be
deemed part of the Stock Payment; and (iii)Pequot shall sign the Stockholders
Agreement contemplated by Section 5.17. The shares of CoreComm Common Stock to
be issued to Pequot pursuant to this section shall be included in the
Registration Statement and shall be issued only after the Registration Statement
has been declared effective.
SECTION 5.13 Allocation Schedule. As soon as practicable, Megsinet shall
deliver to CoreComm and to the Exchange Agent the Allocation Schedule. Megsinet
will take sole responsibility for producing such schedule. Other than for
dissenting shares, shares issued pursuant to Section 5.13, and fractional shares
or cash in lieu of fractional shares, the amount of Cash Consideration allocated
to Megsinet shareholders on the Allocation Schedule shall be equal to the Cash
Payment (as defined in Section 2.2(a)) and the Stock Consideration allocated to
Megsinet shareholders on the Allocation Schedule shall be equal to the Stock
Payment (as defined in Section 2.2(a)).
SECTION 5.14 Cisco Loan. CoreComm will, on or before the Effective time use
its best efforts to cause the release of the security interest held by Cisco in
52
Megsinet Common Stock owned by Xxxxxxx Xxxxx, on terms acceptable to Cisco.
SECTION 5.15 Cisco and Ascend Credit Facilities. As soon as practicable
after the date hereof, but in no event later than seven days prior to the
Closing Date, Megsinet and the Significant Stockholders shall take all actions
necessary to amend each of (i) the letter agreement from Cisco Systems Capital
Corporation, dated as of September 29, 1998, and (ii) the Secured Promissory
Note issued to Ascend Communications, Inc., dated as of August 27, 1998, such
that each covenant (either affirmative or negative) set forth in such agreements
is satisfactory to CoreComm in its good faith business judgment. Forms of such
amendments are attached hereto in Annex A.
SECTION 5.16 Pequot Agreement. Megsinet will amend the terms of any and all
outstanding agreements and other instruments between Megsinet and Pequot,
including, but not limited to, the Pequot Preferred and the Pequot Warrants, or
ensure that in any agreement to be entered into, Pequot will not have any rights
superior or in addition to the other holders of Megsinet Common Stock, and all
covenants, representations, warranties, indemnifications and all other
provisions that survive the closing of the Pequot Transaction shall be
terminated and not survive the closing of the Merger. In no event will the
number of shares of Megsinet Common Stock into which the Pequot Preferred can
convert exceed 2 million.
SECTION 5.17 Stockholders Agreement. Prior to the closing, Megsinet shall
obtain the signatures of each holder of Megsinet Capital Stock that will receive
shares of CoreComm Common Stock pursuant to this Agreement, on a stockholders
agreement (the "Stockholders Agreement") providing that each such stockholder
shall not sell, transfer or otherwise dispose of any such shares of CoreComm
Common Stock for a period of 12 months from the Effective Time.
SECTION 5.18 NASDAQ Listing. CoreComm shall use its reasonable best efforts
to have authorized for listing on the NASDAQ National Market, upon official
notice of issuance, the shares of CoreComm Common Stock
53
to be issued pursuant to Article II or Adjusted Options, within 12 months from
the Effective Time.
SECTION 5.19 GMV Network LLC. As soon as practicable following the date
hereof, but in no event later than seven days prior to the Closing Date, each of
Megsinet and the Significant Stockholders shall divest any interest he or it
owns, whether directly or indirectly, in GMV Network, LLC.
SECTION 5.20 Interested Contracts. As soon as practicable following the
date hereof, but in no event later than seven days prior to the Closing Date,
Megsinet and the Significant Stockholders shall take all actions necessary to
amend the terms of any agreement or other instrument between Megsinet and
Capital Internet, L.L.C. or any other entity controlled by any Megsinet officer
or director or shareholder (including such persons) such that the terms of any
such agreements or instruments are revised, to the satisfaction of CoreComm, to
eliminate any conflict of interest or preferential treatment that might create a
conflict of interest.
SECTION 5.21 Personal Loans. As soon as practicable following the date
hereof, but in no event later than seven days prior to the Closing Date,
Megsinet and the Significant Stockholders shall take all actions necessary to,
and shall obtain full repayment of, any personal loans made by Megsinet to any
individuals, including, but not limited to, the parents of Xxxxxxx Xxxxx.
SECTION 5.22 Xxxxxxx X. Xxxxxx. Megsinet shall have, on or before the
Closing Date, taken all steps to resolve in its favor any claim, whether
threatened or pending, brought by Xxxxxxx X. Xxxxxx. The Significant
Stockholders agree that they will indemnify CoreComm for any breach of this
Section 5.22 or any claim brought by Xxxxxxx X. Xxxxxx regarding Megsinet Common
Stock pursuant to the terms of Article VIII herein and that for purposes of this
Section 5.22 and any claim brought by Xxxxxxx Xxxxxx, the Minimum, as otherwise
defined in Article VIII, shall be $100,000.
54
SECTION 5.23 Ameritech Interconnection. Megsinet shall use its best efforts
to (i) maintain the Interconnection Agreement, dated as of October 28, 1996,
between Megsinet and Ameritech Information Industry Services (the "Ameritech
Agreement") on terms and conditions no less favorable than those in the
Ameritech Agreement as it exists on the date hereof; and (ii) obtain actual
physical interconnection as promptly as practicable with the facilities of
Ameritech Corporation in its Chicago, Illinois facilities under the terms of the
Ameritech Agreement or otherwise.
SECTION 5.24 Alternative Financing. In the event that the Pequot
Transaction does not occur, CoreComm will, at its sole election, provide a loan
to Megsinet in exchange for a Convertible Promissory Note, in a form mutually
agreed upon by the parties, which will provide for, among other things, the
right of CoreComm to convert such note into at least 4.5 million shares of
Megsinet Common Stock for total consideration consistent with this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Megsinet Stockholder Approval. The Megsinet Stockholder Approval shall
have been obtained, and no stockholder of Megsinet shall have demanded appraisal
under the IBCA.
(b) HSR Act. The HSR Act shall not be applicable to the Merger or, if
applicable, any waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or shall have expired.
(c) Governmental and Regulatory Approvals. Other than the filing provided
for under Section 1.3 and
55
filings pursuant to the HSR Act (which are addressed in Section 6.1(b)), all
consents, approvals and actions of, filings with and notices to any Governmental
Entity required of Megsinet, CoreComm or any of their subsidiaries to consummate
the Merger and the other transactions contemplated hereby, the failure of which
to be obtained or taken (i) is reasonably expected to have a material adverse
effect on the Surviving Corporation and its prospective subsidiaries, taken as a
whole, or (ii) will result in a violation of any laws, shall have been obtained,
all in form and substance reasonably satisfactory to Megsinet and CoreComm.
(d) No Injunctions or Restraints. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued
by any court or other Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints") shall be in effect
(i) preventing the consummation of the Merger, or (ii) which otherwise is
reasonably likely to have a material adverse effect on Megsinet or CoreComm, as
applicable; provided, however, that each of the parties shall have used its best
efforts to prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered.
(e) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
SECTION 6.2 Conditions to Obligations of CoreComm and Sub. The obligations
of CoreComm and Sub to effect the Merger are further subject to satisfaction or
waiver of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Megsinet set forth herein shall be true and correct both when made and at and as
of the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limita-
56
tion as to "materiality" or "material adverse effect" set forth therein) does
not have, and is not likely to have, individually or in the aggregate, a
material adverse effect on Megsinet.
(b) Performance of Obligations of Megsinet. Megsinet shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date.
(c) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change relating to
Megsinet.
(d) Megsinet Stock Options. As of the Effective Time, the Megsinet Employee
Stock Options shall have been amended pursuant to Section 5.4(a).
(e) Megsinet Warrants. As of the Effective Time, the terms of the Ascend
Warrant and the Pequot Warrants shall have been amended pursuant to Section 5.12
and 5.13 respectively.
(f) Tax Opinion. CoreComm shall have received an opinion of Skadden, Arps,
Slate, Xxxxxxx & Xxxx Illinois, special tax counsel to CoreComm, in form and
substance reasonably satisfactory to CoreComm, dated as of the Effective Time,
substantially to the effect that, on the basis of certain facts, representations
and assumptions set forth in such opinion, which are consistent with the state
of facts existing at the Effective Time, (A) the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and (B) CoreComm, Sub, and Megsinet will each be a party to
that reorganization within the meaning of Section 368(b) of the Code. In
rendering the opinion described in the preceding sentence, such counsel may
require and rely upon representations contained in certificates or other
writings delivered by CoreComm, Sub, Megsinet, or shareholders of Megsinet.
(g) Megsinet Opinion. CoreComm shall have received an opinion from Xxx
Xxxxx, Esq. in form and
57
substance reasonably satisfactory to CoreComm, dated as of the Effective Time,
substantially to the effect that, on the basis of certain facts, representations
and assumptions set forth in such opinion, which are consistent with the state
of facts existing at the Effective Time, that: (i) Megsinet and its subsidiaries
have all necessary Megsinet Permits (as defined in Section 3.1(g), and (ii) that
the execution and the delivery of this Agreement by Megsinet, and the
consummation of the transactions contemplated herein will not conflict with or
result in any violation of any judgement order, decree, statute, law, ordinance,
rule or regulation applicable to Megsinet or any of its subsidiaries or their
respective properties or assets, other than any such conflicts or violations
that individually or in the aggregate would not (x) have a material adverse
effect on Megsinet or (y) reasonably be expected to impair the ability of
Megsinet to perform its obligations under this Agreement.
(h) Stockholders Agreement. Each holder of Megsinet Capital Stock that will
receive shares of CoreComm Common Stock pursuant to this Agreement shall have
signed the Stockholders Agreement prior to the Effective Time.
SECTION 6.3 Conditions to Obligations of Megsinet. The obligation of
Megsinet to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and warranties of
CoreComm set forth herein shall be true and correct both when made and at and as
of the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality," or
"material adverse effect" set forth therein) does not have, and is not likely to
have, individually or in the aggregate, a material adverse effect on CoreComm.
(b) Performance of Obligations of CoreComm. CoreComm shall have performed
in all material respects
58
all obligations required to be performed by it under this Agreement at or prior
to the Closing Date.
(c) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change relating to
CoreComm.
SECTION 6.4 Frustration of Closing Conditions. Neither CoreComm nor
Megsinet may rely on the failure of any condition set forth in Section 6.1, 6.2
or 6.3, as the case may be, to be satisfied if such failure was caused by such
party's failure to use best efforts to consummate the Merger and the other
transactions contemplated by this Agreement, as required by and subject to
Section 5.3.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after the Megsinet Stockholder
Approval:
(a) by mutual written consent of CoreComm and Megsinet;
(b) by either CoreComm or Megsinet:
(i) if the Merger shall not have been consummated by June 15, 1999,
provided, however, that the right to terminate this Agreement pursuant to
this Section 7.1(b)(i) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the failure
of the Merger to be consummated by such time; provided, however, that this
Agreement may be extended not more than 30 days by either party by written
notice to the other party if the Merger shall not have been consummated as
a direct result of CoreComm or Megsinet having failed to receive all
regulatory approvals required to be obtained with respect to
59
the Merger (an "Extension"). Notwithstanding anything to the contrary
herein, CoreComm may extend this Agreement for up to three months following
June 15, 1999 or any existing Extension.
(ii) if the Megsinet Stockholder Approval shall not have been obtained
at a Megsinet Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof;
(iii) if any Restraint having any of the effects set forth in Section
6.1(d) shall be in effect and shall have become final and nonappealable;
provided, that the party seeking to terminate this Agreement pursuant to
this Section 7.1(b)(iii) shall have used best efforts to prevent the entry
of and to remove such Restraint;
(c) by CoreComm, if Megsinet shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (A)
would give rise to the failure of a condition set forth in Section 6.2(a) or
(b), and (B) is incapable of being cured by Megsinet or is not cured within 45
days of written notice thereof.
(d) by Megsinet, if CoreComm shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (A)
would give rise to the failure of a condition set forth in Section 6.3(a) or
(b), and (B) is incapable of being cured by CoreComm or is not cured within 45
days of written notice thereof.
SECTION 7.2 Effect of Termination. In the event of termination of this
Agreement by either Megsinet or CoreComm as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of CoreComm or Megsinet, other than the provisions of
Section 3.1(n), Section 3.2(g), the last sentence of Section 5.2, Section 5.7,
this Section 7.2 and Article VIII, which provisions survive such termination,
and except to the extent that
60
such termination results from the willful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement. If this Agreement is terminated by CoreComm pursuant to Section
7.1(b)(ii), Megsinet shall pay to CoreComm a termination fee of $1.5 million,
within two business days from the date of such termination.
SECTION 7.3 Amendment. This Agreement may be amended by the parties at any
time before or after the Megsinet Stockholder Approval provided, however, that
after any such approval, there shall not be made any amendment that by law
requires further approval by the stockholders of Megsinet without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 7.3, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.5 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective, require, in the case of CoreComm or
Megsinet, action by its Board of Directors or, with respect to any amendment to
this Agreement, the duly authorized committee of its Board of Directors to the
extent permitted by law.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Survival and Indemnification.
(a) Survival
(i) The representations and warranties of Megsinet and the Significant
Stockholders contained in this Agreement shall survive the Closing for a
period of one year and shall terminate and be of no further force or effect
as of the date one year after the Effective Time.
(ii) The respective covenants and agreements of Megsinet and the
Significant Stockholders contained in this Agreement shall survive the
Closing and shall be fully effective and enforceable for the periods
therein indicated or where not indicated, forever.
(iii) CoreComm shall not be entitled to any indemnification under
Section 8.1(b), with respect to any breach of a representation or warranty,
covenant or agreement after the termination thereof pursuant to Sections
8.1(a) (i) or (ii), except for claims previously asserted pursuant to
Section 8.1(c).
(b) Indemnification by the Significant Stockholders.
(i) The Significant Stockholders shall, jointly and severally,
indemnify CoreComm and its affiliates and their respective officers,
directors, employees and agents against and hold them harmless from any
loss, liability, damage, demand, claim, cost, suit, action or cause of
action, judgment, award, assessment, interest, penalty or expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' and consultants' fees) (any of the foregoing being
hereinafter referred to individually as a "Loss" and
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collectively, as "Losses") suffered or incurred by CoreComm for or on
account of or arising from or in connection with (i) any breach of any
representation or warranty of Megsinet contained in this Agreement or (ii)
any breach of any covenant or agreement of Megsinet contained in this
Agreement.
(ii) No indemnification for any Loss shall be made by the Significant
Stockholders pursuant to Section 8.1(b)(i) until the aggregate amount of
all Losses suffered or incurred by CoreComm or any of its affiliates or
their respective officers, directors, employees or agents first exceeds
$350,000 (the "Minimum"), in which event the Significant Stockholders shall
be liable for the aggregate amount of such Losses, which amount shall not
include the Minimum; provided, however, that the Maximum amount for which
any individual Significant Stockholder shall be liable shall be the amount
of Merger Consideration received by each such Significant Stockholder
pursuant to Article II, including any cash in lieu of fractional shares.
Such limitation shall not effect the joint and several nature of this
indemnification and shall be applied individually, not jointly.
(iii) Signing of this Agreement by the Significant Stockholders shall
constitute such stockholders' express assumption of their respective
obligations pursuant to this Article VIII.
(c) Procedures Relating to Indemnification.
(i) CoreComm shall give prompt written notice to the Significant
Stockholders (the "Indemnifying Party") of any Loss in respect of which
such Indemnifying Party has a duty to indemnify CoreComm under Section
8.1(b) (a "Claim"), specifying in reasonable detail the nature of the Loss
for which indemnification is sought, the section or sections of this
Agreement to which the Claim relates and the amount of the Loss involved
(or, if not then determinable, a reasonable good faith estimate of the
amount of the Loss involved), except that any delay
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or failure so to notify the Indemnifying Party shall only relieve the
Indemnifying Party of its obligations hereunder to the extent, if at all,
that it is prejudiced by reason of such delay or failure.
(ii) If a Claim results from any claim, suit, action or cause of
action brought or asserted by a third party (a "Third Party Claim"), the
Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to CoreComm and the payment
of all expenses. CoreComm shall have the right to employ separate counsel
in such Third Party Claim and participate in such defense thereof, but the
fees and expenses of such counsel shall be at the expense of CoreComm. If
the Indemnifying Party fails to assume the defense of any Third Party Claim
within 10 days after notice thereof, CoreComm shall have the right to
undertake the defense, compromise or settlement of such Third Party Claim
for the account of the Indemnifying Party, subject to the right of the
Indemnifying Party to assume the defense of such Third Party Claim with
counsel reasonably satisfactory to CoreComm at any time prior to the
compromise, settlement or final determination thereof Anything in this
Section 8.1(c) to the contrary notwithstanding, the Indemnifying Party
shall not, without CoreComm's prior written consent, settle or compromise
any Third Party Claim or consent to the entry of any judgment with respect
to any Third Party Claim which would have an adverse effect on CoreComm.
The Indemnifying Party may, without CoreComm's prior written consent,
compromise or settle any such Third Party Claim or consent to entry of any
judgment with respect to any Third Party Claim which requires solely money
damages paid by the Indemnifying Party, and which includes as an
unconditional term thereof the release by the claimant or the plaintiff of
CoreComm from all liability in respect of such Third Party Claim.
(iii) With respect to any Claim other than a Third Party Claim, the
Indemnifying Party shall have ten days from receipt of notice from
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CoreComm of such Claim within which to respond thereto. If the Indemnifying
Party does not respond within such ten-day period, the Indemnifying Party
shall be deemed to have accepted responsibility to make payment and shall
have no further right to contest the validity of such Claim. If the
Indemnifying Party notifies CoreComm within such ten-day period that it
rejects such Claim in whole or in part, CoreComm shall be free to pursue
such remedies as may be available to CoreComm under applicable law.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to CoreComm or Sub, to:
CoreComm Limited
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No. (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(b) if to Megsinet, to
Megsinet, Inc.
000 Xxxx Xxxx Xxxxxx Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
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with a copy to:
Gallop, Xxxxxxx & Xxxxxx X.X.
Interco Corporate Tower
000 Xxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
SECTION 8.3 Definitions. For purposes of this Agreement:
(a) except for purposes of Section 5.11, an "affiliate" of any person means
another person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such first person,
where "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a person, whether
through the ownership of voting securities, by contract, as trustee or executor,
or otherwise;
(b) "material adverse change" or "material adverse effect" means, when used
in connection with Megsinet or CoreComm, any change, effect, event, occurrence
or state of facts that is, or would reasonably be expected to be, materially
adverse to the business, financial condition or results of operations of such
party and its subsidiaries taken as a whole; and the terms "material" and
"materially" have correlative meanings;
(c) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(d) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity inter-
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ests of which) is owned directly or indirectly by such first person; and
(e) "knowledge" of any person which is not an individual means the
knowledge of such person's executive officers or senior management of such
person's operating divisions and segments, in each case after reasonable
inquiry.
(f) The "Significant Stockholders" are Xxxxxxx Xxxxx, Xxxxx X. Xxxxx and
Xxxxx X. Xxxxxx and have signed this Agreement.
SECTION 8.4 Interpretation. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
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SECTION 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article II, Section 5.6 and Section 5.8, are not intended to
confer upon any person other than the parties any rights or remedies.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.9 Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of New York or any New York state court, in either case in
the County of New York, in the event any dispute arises out of this Agreement or
any of the transactions contemplated by this Agreement, (b) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court,
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and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal court sitting in the State of New York or a New York state court, in
either case in the County of New York.
SECTION 8.10 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.11 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an accept able manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, CoreComm, Sub and Megsinet have caused this Agreement
to be signed by their respec tive officers thereunto duly authorized, all as of
the date first written above.
CORECOMM LIMITED
By: /s/ J. Xxxxxxx Xxxxx
--------------------------------------
Title: Chief Executive Officer
CORECOMM ACQUISITION SUB, INC.
By: /s/ J. Xxxxxxx Xxxxx
--------------------------------------
Title: Chief Executive Officer
MEGSINET INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------------------
Title: Chief Executive Officer
Xxxxxxx Xxxxx
/s/ Xxxxxxx Xxxxx
-----------------------------------------
Xxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxx
-----------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
-----------------------------------------
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