EXHIBIT 3
FORM OF AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 14, 2001
BY AND AMONG
XXXXXX, INC.,
XXXXXX MERGER SUB CORP.
AND
XXXXXX TRAFFIC SYSTEMS, INC.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of
June 14, 2001 by and among Xxxxxx, Inc., a Delaware corporation ("Xxxxxx"),
Xxxxxx Merger Sub Corp., a Delaware corporation and a wholly-owned subsidiary of
Xxxxxx ("Merger Sub"), and Xxxxxx Traffic Systems, Inc., a Delaware corporation
("NTS").
w i t n e s s e t h:
WHEREAS, the Board of Directors of Xxxxxx (the "Xxxxxx
Board"), the Board of Directors of Merger Sub (the "Merger Sub Board"), and the
Board of Directors of NTS (the "NTS Board") have each determined that it is in
the best interests of their respective stockholders to effect a merger of Merger
Sub with and into NTS with the result that NTS shall be the surviving
corporation (the "Merger"), upon the terms and subject to the conditions set
forth herein and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"); and
WHEREAS, Xxxxxx owns 900,000 shares of NTS's common stock,
$.01 par value per share (the "NTS Common Stock"), representing 34.62% of the
capital shares issued and outstanding and entitled to vote of NTS; and
WHEREAS, the Xxxxxx Board, the Merger Sub Board and the NTS
Board have each approved the Merger in accordance with Delaware Law, upon the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants, agreements and conditions contained
herein, and in order to set forth the terms and conditions of the acquisition
and the mode of carrying the same into effect, the parties hereby agree as
follows:
Article I
The Merger
1.1 The Merger. Upon the terms and subject to the conditions
set forth in Article VI, and in accordance with Delaware Law, at the Effective
Time (as defined in Section 1.2 hereof) Merger Sub shall be merged with and into
NTS. As a result of the Merger, the separate corporate existence of Merger Sub
shall cease, and NTS shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
1.2 Filing; Effective Time. Subject to Section 5.4, and as
soon as practicable after the satisfaction or waiver of the conditions set forth
in Article VI hereof, Merger Sub and NTS will cause the Merger to be consummated
by filing a Certificate of Merger (the "Certificate of Merger") with the
Secretary of State of the State of the Delaware in accordance with the relevant
provisions of Delaware Law. The date and time of such filing is herein sometimes
referred to as the "Effective Time." Prior to such filing, a closing shall be
held at the offices of Xxxx Marks & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or such other place as the parties shall agree (the "Closing"), for
the purpose of confirming the satisfaction or waiver, as the case may be, of the
conditions set forth in Article VI. The parties agree that it is anticipated
that the Closing shall be held immediately (or as soon as practicable
thereafter) following the stockholders meeting at which NTS's stockholders are
to vote on the Merger (the "NTS Stockholders Meeting") and the stockholders
meeting at which Nestor's stockholders are to vote on the Merger (the "Xxxxxx
Stockholders Meeting").
1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of NTS and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of NTS and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of NTS as in effect immediately prior to the
Effective Time shall continue to be in full force and effect as the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided therein and Delaware Law.
1.5 Bylaws. At the Effective Time, the Bylaws of NTS as in
effect immediately prior to the Effective Time shall continue to be in full
force and effect as the Bylaws of the Surviving Corporation until thereafter
amended or repealed from time to time by the Board of Directors or the
shareholders of the Surviving Corporation.
1.6 Directors. At the Effective Time, the following
individuals shall be the members of the Board of Directors of the Surviving
Corporation: Xxxxx Xxx, Xxxxx X. Xxxxxxxxx, Xxxx X. Xxxxxx and Xxxxx Xxxxx. Each
such person shall hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, until their resignation
or their respective successors are duly elected or appointed and qualified.
1.7 Officers. At the Effective Time, the following individuals shall be the
officers of, and hold the following positions with, the Surviving Corporation,
until their resignation or their respective successors are duly elected or
appointed and qualified.
Xxxxx Xxx President and Chief Executive Officer
Xxxxx Xxxxxxx Executive Vice President and Chief Financial Officer
Xxxxxxx Xxxxxx Senior Vice President Strategic Analysis and Technology
Xxxxxxx Xxxxx Senior Vice President Operations and Engineering
Xxxxxxx Xxxxx Vice President System Engineering
Xxx Xxxxx Vice President Business Development
Xxxxxx Xxxx Vice President Administration
Xxxxxxx X. Xxxxxx Secretary
Article II
Conversion Of And Surrender And Payment For NTS Common Stock
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2.1 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of NTS or the holders of NTS
Common Stock:
(a) Each share of NTS Common Stock issued and outstanding and
owned by Xxxxxx shall be automatically cancelled without any consideration
therefor.
(b) Each share of NTS Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of, or rights to
convert into shares of, NTS Common Stock to be cancelled pursuant to Sections
2.1(a) and (c)) and any Dissenting Shares (as defined in and to the extent
provided in Section 2.3) shall be cancelled and extinguished and shall be
converted into and exchangeable for the right to receive, upon surrender of the
certificate or certificates representing such shares, 9.1655668 validly issued,
fully paid and nonassessable shares (the "Exchange Ratio") of common stock, $.01
par value per share, of Xxxxxx (the "Xxxxxx Common Stock"), with fractional
shares eliminated (the "Merger Consideration"). Such shares of Xxxxxx Common
Stock shall be issued to the holder of such shares of NTS Common Stock in the
manner provided in Section 2.5.
(c) Each of the outstanding rights with respect to the shares
of NTS Common Stock into which that certain Secured Note Agreement dated as of
January 9, 2001 made by NTS in favor of NTS Investors, LLC are convertible into
or exchangeable for, when converted or exchanged and subject to the receipt by
NTS of $4,000,000 all in accordance with the terms of the Secured Note
Agreement, shall become the right (i) to receive 33.34% of Xxxxxx Common Stock
on a basis fully diluted for the issuance of shares of Xxxxxx Common Stock and
all shares of Xxxxxx Common Stock underlying options, warrants or other claims
of ownership, except for the Common Stock Purchase Warrants issued to
Wand/Xxxxxx Investments L.P., Transactions Systems Architects, Inc. and others,
which in the aggregate are equal to approximately 5,090,696 warrants
(collectively, the "Outstanding Warrants"), and for employee stock options
issued by Xxxxxx and outstanding at the Effective Time; (ii) with respect to
options or warrants issued to, or for the benefit of, non-employee members of
the board of directors of either Xxxxxx or NTS, Xxxx X. Xxxxxx, Xxxxxxx X.
Xxxxxx and Xxxxxx X. Xxxxxxx outstanding at the Effective Time, a true and
complete list of which are set forth on Schedule 2.1(ii) (such Schedule shall be
updated immediately prior to the Effective Time) and the Outstanding Warrants
(collectively, the "Stock Rights"), to purchase for cash (or such other
consideration as is being paid for the exercise of such Stock Rights), at the
same exercise price at which such Stock Right has been exercised, such number of
additional shares of Xxxxxx Common Stock, equal to one half of the number of
shares of Xxxxxx Common Stock into which such Stock Right has been converted or
exchanged, as the case may be; and (iii) to purchase, for a period terminating
on the third anniversary date of the Effective Time, one million shares of
Xxxxxx Common Stock at a per share exercise price of $1.28.(1)
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(1) the references to 33.34% in subsection (i) and one third in subsection (ii)
will be proportionately reduced in the event that the Investors contribute less
than the full $4 million, as permitted by Section 21 of the Secured Note
Agreement.
(d) All shares of NTS Common Stock which are held by NTS as
treasury stock or which are owned of record or beneficially by any subsidiary of
NTS shall be cancelled and retired and cease to exist, without any conversion
thereof.
(e) Each share of Merger Sub issued and outstanding and owned
by Xxxxxx shall be converted into and shall become one share of common stock of
the Surviving Corporation.
2.2 Stock Options and Warrants.
(a) Prior to the Effective Time, the NTS Board (or, if
appropriate, any committee thereof) and the Xxxxxx Board (or, if appropriate,
any committee thereof) shall adopt appropriate resolutions and take all other
actions necessary to provide that:
(i) effective as of the date of this Agreement, all
outstanding stock options under the Xxxxxx Traffic Systems, Inc. 1999 Incentive
Stock Option Plan (the "NTS Stock Option Plan") shall become fully exercisable
and shall remain fully exercisable until immediately prior to the Effective
Time; provided that such full exercisability shall be subject to the condition
subsequent that the Merger shall have occurred and no payment with respect to
options under the NTS Stock Option Plan that have become fully exercisable by
virtue of this Agreement shall be accepted by Xxxxxx until immediately prior to
the Effective Time and any exercise of such options shall be effective
immediately prior to the Effective Time; and
(ii) effective as of the Effective Time, all the
outstanding stock options under the NTS Stock Option Plan which have not been
exercised (the "NTS Stock Options") shall be assumed by Xxxxxx and converted
automatically into options to purchase Xxxxxx Common Stock ("New Stock Options")
in an amount and, if applicable, at an exercise price determined as provided
below:
(A) The number of shares of Xxxxxx Common Stock to be
subject to each New Stock Option shall be equal to the product of (x) the
number of shares of NTS Common Stock remaining subject (immediately before
the Effective Time) to the original NTS Stock Option and (y) the Exchange
Ratio, provided that any fractional shares of Xxxxxx Common Stock
resulting from such multiplication shall be eliminated; and
(B) The exercise price per share of Xxxxxx Common
Stock under each New Stock Option shall be equal to the exercise price per
share of NTS Common Stock under the original NTS Stock Option divided by
the Exchange Ratio, provided that such exercise price shall be rounded up
to the nearest tenth of a cent and provided, further, that where an
individual exercises New Stock Options and the aggregate consideration
required to exercise such options is not a whole number, the aggregate
consideration required to be paid to Xxxxxx by such individual in order to
exercise such options shall be rounded up to the nearest cent.
On and after the Effective Time, each New Stock Option shall be exercisable and
shall vest upon, and will otherwise be subject to, the same terms and conditions
as were applicable to the related NTS Stock
Option immediately prior to the Effective Time, without regard to any
acceleration of the exercisability on account of Sections 15 or 16 of the NTS
Stock Option Plan and this Agreement (except that with regard to such New Stock
Option, any references to NTS shall be deemed, as appropriate, to include
Xxxxxx) and each New Stock Option shall be intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") or a nonqualified option, whichever was applicable to the related
NTS Stock Option.
(b) The Board of Directors of NTS shall take all actions
necessary to assure that all persons holding outstanding NTS Stock Options shall
be notified of the provisions of Section 2.2(a) hereof as soon as practicable
after the date of execution of this Agreement.
(c) NTS shall take all actions so that following the Effective
Time no holder of an NTS Stock Option or any participant in any stock option,
stock appreciation, performance unit or similar plan, agreement or arrangement
of NTS shall have any right thereunder to acquire capital stock of NTS or of the
Surviving Corporation. NTS will take all actions so that, as of the Effective
Time, neither NTS nor the Surviving Corporation is or will be bound by any NTS
Stock Options, or other options, warrants, rights or agreements which entitle
any person to own any capital stock of NTS or the Surviving Corporation or to
receive any payment in respect thereof.
(d) Unless at the Effective Time, the New Stock Options are
registered pursuant to an effective Xxxxxx registration statement, as soon as
practicable following the Effective Time, Xxxxxx shall prepare and file with the
SEC a registration statement on Form S-8 (or another appropriate form)
registering a number of Xxxxxx Common Stock equal to the number of shares
subject to the New Stock Options. Any such registration statement shall be kept
effective (and the current status of the initial offering prospectus or
prospectuses required thereby shall be maintained) for at least as long as any
New Stock Option remains outstanding.
(e) Prior to the Effective Time, the NTS Board and the Xxxxxx
Board shall adopt appropriate resolutions and take all other actions necessary
to provide that all unexercised warrants of NTS which are outstanding at the
Effective Time shall be assumed by Xxxxxx and converted automatically into
warrants to acquire Xxxxxx Common Stock ("New Warrants") in an amount and at an
exercise price determined as provided below:
(i) The number of shares of Xxxxxx Common Stock to be
subject to each New Warrant shall be equal to the product of (x) the number of
shares of NTS Common Stock subject to the outstanding NTS warrant and (y) the
Exchange Ratio, provided that any fractional share of Xxxxxx Common Stock
resulting from such multiplication shall be eliminated; and
(ii) The per share exercise price of each New Warrant
shall be equal to the exercise price per share of NTS Common Stock under the
outstanding NTS warrant divided by the Exchange Ratio, provided that such
exercise price shall be rounded up to the nearest tenth of a cent.
(f) Xxxxxx agrees that it shall take all action necessary,
on or prior to the Effective Time, to authorize and reserve a number of shares
of Xxxxxx Common Stock sufficient for issuance upon exercise of options or
warrants as contemplated by this Section 2.2.
2.3 Dissenting Shares. Notwithstanding the provisions of Section 2.1 or
any other provisions of this Agreement to the contrary, any share of NTS Common
Stock with respect to which dissenters' rights shall be properly perfected in
accordance with Section 262 of Delaware Law (the "Dissenting Shares") shall not
be cancelled or converted into the right to receive the Merger Consideration at
or after the Effective Time (but shall be converted into the right to receive
such payment from NTS as may be determined to be due with respect to such
Dissenting Shares pursuant to the applicable provisions of Delaware Law) unless
and until the dissenters' rights of the holder of such shares terminates (in
accordance with Section 262 of Delaware Law) or such holder otherwise becomes
ineligible for such payment from NTS. If a holder of Dissenting Shares shall
withdraw (in accordance with Section 262 of Delaware Law) such holder's demand
for such payment from NTS or shall become ineligible for such payment from NTS,
then as of the Effective Time or the occurrence of such event, whichever last
occurs, such holder's Dissenting Shares shall cease to be Dissenting Shares and
shall either be cancelled as provided in Section 2.1(a) or converted into and
represent the right to receive the Merger Consideration as provided in Section
2.1(b), upon surrender of certificates representing such shares in accordance
with Section 2.5 hereof. The Surviving Corporation shall comply with all of the
provisions contained herein and in Section 262 of Delaware Law with respect to
any Dissenting Shares and shall be solely responsible for the payment, if any,
to be made to the holder of any such Dissenting Shares.
2.4 Closing of Transfer Books. At the Effective Time, the stock transfer
books of NTS shall be closed and thereafter there shall be no further
registration of transfers of shares of NTS Common Stock. From and after the
Effective Time, the holders of shares of NTS Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares except as otherwise provided herein or by applicable law.
If, after the Effective Time, certificates previously representing NTS Common
Stock (other than certificates issued to Xxxxxx each of which were automatically
cancelled at the Effective Time pursuant to Section 2.1(a)) are, in accordance
with Section 2.5 hereof, presented to the Surviving Corporation, they shall be
exchanged for the Merger Consideration as provided in Section 2.1 hereof and
shall forthwith be cancelled.
2.5 Surrender of NTS Common Stock. NTS will deliver to Xxxxxx all
certificates (the "Certificates") which immediately prior to the Effective Time
represented all outstanding shares of NTS Common Stock (other then Dissenting
Shares), whose shares were either (i) cancelled pursuant to Section 2.1(a), or
(ii) converted into the right to receive the Merger Consideration pursuant to
Section 2.1(b), with duly and validly executed stock powers transferring such
Certificates to Xxxxxx. Except for shares of NTS Common Stock that were
automatically cancelled at the Effective Time in accordance with Section 2.1(a),
upon surrender of a Certificate for cancellation to Xxxxxx, Xxxxxx shall
promptly deliver to the holder thereof (other than a holder of Dissenting
Shares) the Merger Consideration which such holder is entitled hereunder, and
the Certificate so surrendered shall forthwith be cancelled. Until so
surrendered and exchanged, each Certificate that prior to the Effective Time
evidenced NTS Common Stock (other than shares of NTS Common Stock cancelled in
accordance with Section 2.1(a)) shall represent solely the right to receive the
Merger Consideration pursuant to Section 2.1(b) hereof.
2.6 No Fractional Shares. No certificates or scrip representing
fractional shares of Xxxxxx Common Stock shall be issued by virtue of the
Merger.
2.7 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section
368(a)(1)(B) of the Code and will be reported as such by NTS, Xxxxxx and the
Surviving Corporation for all purposes.
Article III
Representations And Warranties Of Xxxxxx And Merger Sub
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As a material inducement to NTS to enter into this Agreement,
Xxxxxx and Merger Sub, jointly and severally, represent and warrant to NTS as
follows:
3.1 Corporate Organization. Xxxxxx is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Merger Sub does not currently,
nor has it ever, conducted any material business operations. Each of Xxxxxx and
Merger Sub has all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as it is now being conducted,
except for such failure which, when taken together with all other such failures,
would not have a Material Adverse Effect (as defined below) on Xxxxxx. Each of
Xxxxxx and Merger Sub is qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed could, individually or in the aggregate, have a Material Adverse
Effect. When used in connection with Xxxxxx, the term "Material Adverse Effect"
means any change in or effect on the business of Xxxxxx and its Subsidiaries
that is, or is reasonably likely to be, materially adverse to the business,
results of operations or condition (financial or otherwise), liabilities or
regulatory status of Xxxxxx and its Subsidiaries taken as a whole. For purposes
of this Agreement, a "Subsidiary" of Xxxxxx means Merger Sub and any other
corporation or other legal entity of which Xxxxxx (either alone or through or
together with any other Subsidiary of Xxxxxx) owns, directly or indirectly, more
than fifty percent (50%) of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of, or otherwise control or direct, such corporation or
other legal entity.
3.2 Certificate of Incorporation and Bylaws. Complete and correct copies
of the Certificate of Incorporation and Bylaws, each as amended to the date
hereof, of Xxxxxx and the Merger Sub have been furnished to NTS. Each such
Certificate of Incorporation and Bylaws are in full force and effect. Neither
Xxxxxx nor any of its Subsidiaries is in violation of any of the provisions of
its Certificate of Incorporation or Bylaws.
3.3 Authority Relative to Agreement. Each of Xxxxxx and Merger Sub has
full corporate power, capacity and authority to execute and deliver this
Agreement and to consummate the Merger or any other transactions contemplated
hereby (the "Transactions"). The execution, delivery and performance by Xxxxxx
and Merger Sub of this Agreement and the consummation of the Transactions have
been duly authorized by all necessary corporate action on the part of Xxxxxx and
Merger Sub, respectively, subject to obtaining the necessary approval of Merger
Sub's sole stockholder. This Agreement has been duly executed and delivered by
Xxxxxx and Merger Sub and constitutes a legal, valid and binding agreement of
each of Xxxxxx and Merger Sub, enforceable against each of Xxxxxx and Merger Sub
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws from time to time in effect that
affect creditors' rights generally and subject to general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.4 No Violation; Required Filings and Consents. (a) The execution and
delivery of this Agreement by each of Xxxxxx and Merger Sub, does not, and the
performance of this Agreement by each of Xxxxxx and Merger Sub will not: (i)
subject to Section 3.4(b) hereof, conflict with or violate any law, regulation,
court order, judgment or decree applicable to either of Xxxxxx or Merger Sub or
by which any of their respective property or assets is bound or affected; (ii)
violate or conflict with either the Certificate of Incorporation or Bylaws of
Xxxxxx or Merger Sub; or (iii) result in any breach of or constitute a default
(or any event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination or cancellation of, or result
in the creation of any mortgage, pledge, lien, security interest, encumbrance,
charge or other claim of any kind on any of the property or assets of either of
Xxxxxx or Merger Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, instrument, permit, license or franchise to which either of
Xxxxxx or Merger Sub is a party or by which either of Xxxxxx or Merger Sub or
any of their respective property is bound or affected, except in the case of (i)
or (iii) above, for conflicts, violations, breaches or defaults which, in the
aggregate, would not (x) have a Material Adverse Effect, or (y) prevent or
materially interfere with each of Nestor's or Merger Sub's performance of its
material obligations hereunder. No consent or waiver of any obligation under any
such documents is necessary to permit each of Xxxxxx or Merger Sub to perform
its obligations under this Agreement, except for such consents and waivers as
may be required pursuant to any of Nestor's or Merger Sub's debt instruments,
and except for such consents and waivers which the failure to obtain would not
have a Material Adverse Effect.
(b) Except for applicable requirements, if any, of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), "blue sky" laws of
various states, and filing and recordation of appropriate merger documents as
required by Delaware Law, neither Xxxxxx nor Merger Sub is required to submit
any notice, report or other filing with, or obtain any waiver, consent, or
approval from, any governmental or regulatory authority, domestic or foreign, in
connection with the execution, delivery or performance of this Agreement or the
consummation of the Transactions contemplated by this Agreement, except where
the failure to take such action would not (i) prevent or materially interfere
with the consummation of the Merger and the Transactions, or (ii) have a
Material Adverse Effect.
3.5 Capitalization. The authorized capital stock of Xxxxxx consists of
30,000,000 shares of common stock, par value, $.01 per share, of which
17,754,763 shares are issued and outstanding, and 10,000,000 shares of preferred
stock, par value $1.00 per share, of which 235,000 shares are issued and
outstanding and designated as shares of Series B Convertible Preferred Stock. As
of May 31, 2001, Xxxxxx had reserved 1 million shares of Xxxxxx Common Stock for
issuance pursuant to Nestor's 1997 Incentive Stock Option Plan (the "1997 Plan")
and 53,613 of which have been exercised. As of May 31, 2001, an aggregate of
721,666 shares were subject to outstanding options under the 1997 Plan, and
224,721 shares are available for issuance under the 1997 Plan. As of May 31,
2001, Xxxxxx had reserved 2,450,000 shares of Xxxxxx Common Stock for issuance
pursuant to Nestor's 1984 Incentive Stock Option Plan (the "1984 Plan") and
160,198 of which have been exercised. As of May 31, 2001, an aggregate of
951,484 were subject to outstanding options under the 1984 Plan, and 1,338,318
shares are available for issuance under the 1984 Plan. As of May 31, 2001, an
aggregate of 4,999,040 shares were subject to outstanding warrants. The
authorized capital of Merger Sub consists of 1,000 shares of common stock, $.01
par value per share, of which 100 shares are issued and outstanding, and all of
which are owned beneficially and of record by Xxxxxx free and clear of all
liens, charges, pledges, encumbrances, restrictions, mortgages or other security
interests or preferential arrangements of whatever kind or nature (collectively,
"Liens"), options, agreements, voting trusts, proxies, rights of first refusal
or other encumbrances, arrangements or restrictions whatsoever. Merger Sub is
not a party to any agreements pursuant to which it may be required to issue
additional shares. All the outstanding capital shares of each of Xxxxxx and
Merger Sub are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights.
3.6 Financial Statements and Reports. (a) Xxxxxx heretofore has
delivered to NTS true and complete copies of (i) its audited financial
statements for the fiscal year ended December 31, 2000 (the "2000 Audit"), (ii)
its Form 10-K for the year ended December 31, 2000 (the "Form 10-K") as filed
with the Securities and Exchange Commission (the "SEC"), and (iii) its quarterly
report for the period ended March 31, 2001 (the "Form 10-Q") as filed with the
SEC. The 2000 Audit, Form 10-K and the Form 10-Q shall sometimes be collectively
referred to herein as the "SEC Filings". As of their respective dates, the SEC
Filings did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and there has not been any material adverse change in the
assets, business, financial condition or results of operations of Xxxxxx, except
as set forth on Schedule 3.6.
(b) The financial statements of Xxxxxx included in the SEC
Filings were prepared in accordance with generally accepted accounting
principles ("GAAP"), as in effect as of the date and for each of the periods of
such financial statements, applied on a consistent basis and present fairly the
financial position, results of operations and cash flows of Xxxxxx, each as of
the dates and for the periods indicated, subject in the case of unaudited
interim financial statements to the absence of certain footnote disclosures and
normal year-end adjustments.
3.7 Litigation. Except as disclosed in the SEC Filings, there are no
actions, proceedings or investigations pending or, to the best knowledge of
Xxxxxx, threatened against Xxxxxx, or any of its Subsidiaries, before any court
or governmental or regulatory authority or body, which, if decided adversely
could, individually or in the aggregate, have a Material Adverse Effect. Neither
Xxxxxx nor any of its Subsidiaries nor any of their respective property is
subject to any order, judgment, injunction or decree, having a Material Adverse
Effect.
3.8 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.8, since December 31, 2000 (a) there has been no event or occurrence
which has or could reasonably be expected to have a Material Adverse Effect; (b)
Xxxxxx has not incurred any indebtedness for money borrowed; (c) Xxxxxx has not
assumed, guaranteed, endorsed or otherwise become responsible for the
obligations of any other individual, firm or corporation; (d) there has been no
creation or assumption by Xxxxxx of any Lien on any asset that has or could
reasonably be expected to have a Material Adverse Effect; (e) there has been no
loan, advance or capital contribution to or investment in any person by Xxxxxx,
including to the affiliates thereof; (f) there has been no change in any method
of accounting or accounting practice by Xxxxxx; (g) there has been no
repurchase, redemption or other acquisition by Xxxxxx of any outstanding shares
of capital stock or other ownership interest of Xxxxxx; (h) there has been no
declaration or payment of any dividend on, or other distribution with respect
to, any capital stock of Xxxxxx; and (i) Xxxxxx has not entered into any other
transaction other than in the ordinary course of business.
3.9 Material Contracts and other Agreements. Schedule 3.9 sets forth a
complete and accurate list of the following contracts and commitments to which
Xxxxxx is a party or by which any of its properties are bound: (a) collective
bargaining agreements and contracts with any labor union; (b) employment or
consulting agreements or any agreements providing for severance, termination or
similar payments; (c) leases, whether as lessor or lessee, involving real or
personal property with annual rental payments in excess of $100,000; (d) loan
agreements, mortgages, indentures, instruments or other evidence of indebtedness
or commitments in each case involving indebtedness (or available credit) for
borrowed money or money lent to others; (e) guaranty or suretyship, performance
bond, indemnification or contribution agreements; (f) written contracts with
customers or suppliers that require aggregate payments to or from Xxxxxx of more
than $100,000 in any one-year period, other than contracts issued in the
ordinary and usual course of business or terminable with 30 days or less notice
without premium or penalty; (g) joint venture, partnership, or other agreements
evidencing an ownership interest or a participation in or sharing of profits;
(h) agreements, contracts or commitments limiting the freedom of Xxxxxx to
engage in any line of business or compete with any other corporation,
partnership, joint venture, company or individual; and (i) contracts that are
terminable, or under which payments by Xxxxxx may be accelerated, upon a change
in control of Xxxxxx. Xxxxxx has furnished or made available accurate and
complete copies of the foregoing contracts and agreements to NTS. As to each
contract and commitment referred to above (i) there exists no breach or default,
and to the knowledge of Xxxxxx, no event has occurred which with the giving of
notice or the passage of time or both would constitute such a breach, default or
permit termination, notification or acceleration, on the part of Xxxxxx or, to
the knowledge of Xxxxxx, on the part of any third party which, with or without
the giving of notice, lapse of time or the happening of any other event or
condition, would have a Material Adverse Effect and (ii) as of the Effective
Time, no material third party consent, approval or authorization shall be
required for the consummation of the Transactions.
3.10 Compliance with Laws. Xxxxxx has complied and is in compliance with
applicable federal, state or local statutes, laws and regulations, except where
the failure to so comply would not have a Material Adverse Effect. Xxxxxx has
not (a) failed to obtain any license, permit, franchise or other governmental
authorization which is material to the operations of the business of Xxxxxx,
taken as a whole, or (b) received any notice of any alleged violation or breach
of any law or regulation or of any license, permit, franchise or authorization
which violation or breach would have a Material Adverse Effect.
3.11 Proprietary Property. Schedule 3.11 contains a complete and
accurate list of all material patents and patent applications, all trademarks,
service marks, trade dress, trade names and corporate names; all registered
copyrights; all registrations, applications and renewals for any of the
foregoing; and other material intellectual property rights (together with the
goodwill associated therewith, collectively the "Xxxxxx Proprietary Property"),
including, without limitation, all contracts, agreements and licenses relating
to any of the foregoing, owned by Xxxxxx or in which Xxxxxx has any rights. The
Transactions will not have a Material Adverse Effect on the right, title and
interest of Xxxxxx as of the Effective Time in and to Xxxxxx Proprietary
Property. To Nestor's knowledge, Xxxxxx has not interfered with, infringed or is
infringing on or otherwise come into conflict with any proprietary property
belonging to any other person, firm or corporation. Except as set forth on
Schedule 3.11, to the knowledge of Xxxxxx, no third party is interfering with,
infringing on or otherwise coming into conflict with Xxxxxx Proprietary
Property. Except as set forth on Schedule 3.11, Xxxxxx has not received any
written notice of material invalidity, interference, infringement or
misappropriation from any third party with respect to any of Xxxxxx Proprietary
Property.
3.12 No Undisclosed Liabilities. Except as set forth on Schedule 3.12,
there is no liability or obligation of Xxxxxx of any nature, whether absolute,
accrued, contingent or otherwise other than: (i) the liabilities and obligations
reflected in the financial statements included in the SEC Filings; (ii)
liabilities and obligations of Xxxxxx incurred since December 31, 2000 in the
ordinary and usual course of business; (iii) liabilities and obligations
relating to contracts not yet required to be performed; and (iv) liabilities and
obligations which individually or in the aggregate do not have a Material
Adverse Effect.
3.13 Title to Personal Property. Except as set forth on Schedule 3.13,
Xxxxxx has good title to or a valid and enforceable leasehold interest in all
personal property material to the operation of its business, free and clear of
all Liens other than Liens which are not reasonably expected to have a Material
Adverse Effect.
3.14 Taxes and Tax Returns. Xxxxxx: (a) has made or timely filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject or has obtained extensions
not yet expired with respect thereto; (b) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and by appropriate proceedings; and (c) has set aside on its books, provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of Xxxxxx know of no basis for any such
claim.
3.15 Employee Benefit Plans. Each employee benefit plan within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), maintained by Xxxxxx and/or any of its Subsidiaries or any
organization which, together with Xxxxxx and/or any such Subsidiary, would be
treated as a "single employer" within the meaning of Section 414(b) or (c) of
the Code or to which Xxxxxx or any such Subsidiary or organization contributes
(or has any obligation to contribute) or is a party (collectively, the "Xxxxxx
Benefit Plans") is listed on Schedule 3.15 attached hereto. Except as set forth
on such Schedule 3.15, or to the extent that any breach of the representations
set forth in this sentence would not have a material adverse effect on Xxxxxx:
(a) each Xxxxxx Benefit Plan is in compliance with applicable law and has been
administered and operated in all respects in accordance with its terms; (b) each
Xxxxxx Benefit Plan which is intended to be "qualified" within the meaning of
Section 401(a) of the Code, is a standardized prototype plan which has received
a favorable opinion letter from the Internal Revenue Service and, to the
knowledge of Xxxxxx, no event has occurred and no condition exists which could
reasonably be expected to adversely affect such qualified status; (c) no Xxxxxx
Benefit Plan is covered by Title IV of ERISA or subject to Section 412 of the
Code or Section 302 of ERISA; (d) neither Xxxxxx nor any of its Subsidiaries,
nor, to Nestor's knowledge, any other "disqualified person" or "party in
interest" (as defined in Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has engaged in any transactions in connection with any
Xxxxxx Benefit Plan that could reasonably be expected to result in the
imposition of a penalty pursuant to Section 502 of ERISA, damages pursuant to
Section 409 of ERISA or a tax pursuant to Section 4975 of the Code; (e) no
Xxxxxx Benefit Plan provides for post-employment or retiree welfare benefits,
except to the extent required by Part 6 of Subtitle B of Title I of ERISA or
Section 4980B of the Code; (f) no liability, claim, action or litigation, has
been made, commenced or, to Nestor's knowledge, threatened with respect to any
Xxxxxx Benefit Plan (other than routine claims for benefits payable in the
ordinary course, and appeals of denied such claims); and (g) none of the Xxxxxx
Benefit Plans promise or provide severance benefits or benefits contingent upon
a change in ownership or control, within the meaning of Section 280G of the Code
nor create any entitlement to receive any payment benefit or amount which may
constitute "Excess Parachute Payments" under the Code.
3.16 Labor Matters. Except as set forth in Schedule 3.16, (i) there are
no controversies pending or, to the best knowledge of Xxxxxx, threatened between
Xxxxxx or any Subsidiary and any of their respective employees; (ii) neither
Xxxxxx nor any Subsidiary is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by Xxxxxx or any
Subsidiary, nor, to the best knowledge of Xxxxxx are there any activities or
proceedings of any labor union to organize any such employees; (iii) there are
no unfair labor practice complaints pending against Xxxxxx or any Subsidiary
before the National Labor Relations Board or other governmental or
administrative body involving employees of Xxxxxx or any Subsidiary; and (iv)
there is no strike, slowdown, work stoppage or lockout, or, to the best
knowledge of Xxxxxx, threat thereof, by or with respect to any employees of
Xxxxxx or any Subsidiary.
3.17 Products Liability. Except as disclosed on Schedule 3.17, there is
no notice or claim involving any product manufactured, produced, distributed or
sold by or on behalf of Xxxxxx or its Subsidiaries resulting from an alleged
defect in design, manufacture, materials or workmanship, failure to perform for
the use intended or any alleged failure to warn, or from any breach of express
or implied warranties or representations, which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Xxxxxx and its Subsidiaries taken as a whole, without regard to any insurance
coverage. The product liability insurance policies maintained by Xxxxxx are in
full force and effect and are adequate for the business conducted by Xxxxxx.
Xxxxxx has not received any notice from any insurance carrier declining coverage
of any claim or canceling or threatening to cancel any such policy.
3.18 Joint Proxy Statement-Prospectus. None of the information supplied
in writing by Xxxxxx, its officers, directors, representatives, financial
advisors, agents or employees, for inclusion in the joint proxy
statement-prospectus (such joint proxy statement-prospectus, as amended or
supplemented, is herein referred to as the "Joint Proxy Statement-Prospectus")
will, on the date the Joint Proxy Statement-Prospectus is filed with the SEC,
first mailed to stockholders of NTS and Xxxxxx, at the time of the Xxxxxx
Stockholders Meeting to, among other things, consider the issuance of Xxxxxx
Common Stock in the Merger, at the time of the NTS Stockholders Meeting or at
the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it will be made, will be false or misleading with
respect to any material fact, or will omit to state any material fact necessary
in order to make the statements therein not false or misleading. To the extent
it contains information or statements pertaining to Xxxxxx or its Subsidiaries,
the Joint Proxy Statement-Prospectus will, when filed, comply as to form in all
material respects with the requirements of the Securities Act and the Exchange
Act. Notwithstanding the foregoing, Xxxxxx does not make any representation or
warranty with respect to any information that has been supplied by NTS or its
accountants, counsel or other authorized representatives for use in the Joint
Proxy Statement-Prospectus.
3.19 Xxxxxx Properties and Leases.
(a) Xxxxxx and the Subsidiaries have sufficient title to all
their properties and assets and have been issued all related permits, consents
and permissions necessary or appropriate to enable them to conduct their
respective businesses as currently conducted or as contemplated to be conducted.
(b) Except as set forth on Schedule 3.19(b), each parcel of real
property owned or leased by Xxxxxx or any Subsidiary (i) is owned or leased free
and clear of all Liens, other than (A) Liens for current taxes and assessments
not yet past due, (B) inchoate mechanics' and materialmen's Liens for
construction in progress, (C) workmen's, repairmen's, warehousemen's and
carriers' Liens arising in the ordinary course of business of Xxxxxx or such
Subsidiary consistent with past practice, and (D) all matters of record, Liens
and other imperfections of title and encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect (collectively, "Permitted
Liens"), and (ii) is neither subject to any governmental decree or order to be
sold nor is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor, to the best
knowledge of Xxxxxx, has any such condemnation, expropriation or taking been
proposed.
(c) All leases of real property leased for the use or benefit of
Xxxxxx or any Subsidiary to which Xxxxxx or any Subsidiary is a party requiring
rental payments in excess of $50,000 during the period of the lease and all
amendments and modifications thereto are in full force and effect and have not
been modified or amended, and there exists no default under any such lease by
Xxxxxx or any Subsidiary, nor any event which with the giving of notice or the
lapse of time or both would constitute a default thereunder by Xxxxxx or any
Subsidiary.
3.20 Environmental Matters. (a) Except as set forth on Schedule 3.20,
Xxxxxx and each Subsidiary is in compliance in all material respects with all
applicable Environmental Laws and has been issued and currently maintains all
required federal, state and local permits, licenses, certificates and approvals
except to the extent such non-compliance or the absence of any such permit,
license, certificate or approval would not be, singly or in the aggregate,
reasonably expected to have a Material Adverse Effect. Neither Xxxxxx nor any
Subsidiary has been notified of any pending or threatened action, suit,
proceeding or investigation and neither Xxxxxx nor any Subsidiary is aware of
any facts, which (i) call into question, or would reasonably be expected to call
into question, compliance by Xxxxxx or any Subsidiary with any Environmental
Laws, (ii) seeks, or would reasonably be expected to form the basis of a
meritorious proceeding to seek, to suspend, revoke or terminate any license,
permit or approval necessary for the operation of Nestor's or any Subsidiary's
business or facilities or for the generation, handling, storage, treatment or
disposal of any Hazardous Substances, or (iii) seeks to cause, or would
reasonably be expected to form the basis of a meritorious proceeding to cause,
any property of Xxxxxx or any Subsidiary to be subject to any restrictions on
ownership, use, occupancy or transferability under any Environmental Law, any of
which would reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 3.20 to the best knowledge of Xxxxxx, neither Xxxxxx nor
any of its Subsidiaries has caused or permitted its business or property
(whether real or personal, owned or leased and whether or not currently owned or
occupied by any such entity) to be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce, or process
Hazardous Substances, except in material compliance with all applicable
Environmental Laws.
(b) Except as set forth on Schedule 3.20, neither Xxxxxx nor any
Subsidiaries has received notice of any violation or notice of regulatory
requirements or has been notified of any threatened or pending action, suit,
proceeding or investigation which suggests that Xxxxxx or any of the its
Subsidiaries is a potentially responsible party with regard to any release or
threatened release of Hazardous Substances.
(c) Except as set forth on Schedule 3.20, neither Xxxxxx nor any of its
Subsidiaries has any liability of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, arising under or
relating to any Environmental Law, which liability would have a Material Adverse
Effect.
(d) For purposes of this Agreement, the term "Environmental Laws" means
any federal, state or local statute, common law, ordinance, code, rule,
regulation, order, decree, injunction, agreement or permit regulating, relating
to, or imposing liability or standards of conduct concerning, human health or
the environment, including the emission, discharge or release of pollutants,
contaminants, Hazardous Substances or wastes into the environment (which
includes, without limitation, ambient air, surface water, ground water, or
land), or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation thereof,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; the
Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Water Pollution Control Act,
33 U.S.C. Section 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section
300f et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2610 et seq.;
the Rivers and Harbors Act, 33 U.S.C. Section 401 et seq.; the Endangered
Species Act, 16 U.S.C. Section 1531 et seq.; the Occupational Safety and Health
Act, 29 U.S.C. Section 651 et seq.; and the Federal Technical Standards and
Corrective Action Requirements for Owners and Operators of Underground Storage
Tanks.
(e) For purposes of this Agreement, the term "Hazardous Substances"
means any and all dangerous, toxic, radioactive, caustic or otherwise hazardous
material, pollutant, contaminant, chemical, waste or substance defined, listed
or described as any of such in or governed by any Environmental Law, including
but not limited to urea-formaldehyde, polychlorinated biphenyls, asbestos or
asbestos-containing materials, radon, explosives, known carcinogens, petroleum
and its derivatives, petroleum products, or any substance which might cause any
injury to human health or safety or to the environment or might subject the
owner or operator of real property to any regulatory actions or claims.
"Hazardous Substances" shall include, without limitation, asbestos, airborne
asbestos, polychlorinated biphenyls (PCBs), petroleum products, lead-based paint
and urea-formaldehyde.
3.21 The Xxxxxx Board and the Merger Sub Board. Each of the Xxxxxx Board
and the Merger Sub Board has, as of the date of this Agreement, determined (i)
that the Merger is fair to, and in the best interests of Xxxxxx, Merger Sub and
their respective stockholders, and (ii) to recommend that the sole stockholder
of Merger Sub approves and adopts this Agreement and approves the Merger.
3.22 Fairness Opinion. The Xxxxxx Board has received a written opinion
from Aramar Capital Group, LLC to the effect that as of the date hereof, the
Exchange Ratio is fair to Xxxxxx from a financial point of view and has
delivered to NTS a copy of such opinion.
Article IV
Representations And Warranties Of NTS
As a material inducement to Xxxxxx and Merger Sub to enter
into this Agreement, NTS represents and warrants to Xxxxxx and Merger Sub as
follows:
4.1 Corporate Organization. NTS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. NTS has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being conducted, except for
such failure which, when taken together with all other such failures, would not
have a Material Adverse Effect (as defined below) on NTS. Except as set forth on
Schedule 4.1, NTS is qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed could, individually or in the aggregate, have a Material Adverse
Effect. NTS has no subsidiaries. When used in connection with NTS, the term
"Material Adverse Effect" means any change in or effect that is, or is
reasonably likely to be, materially adverse to the business, results of
operations or condition (financial or otherwise), liabilities or regulatory
status of NTS taken as a whole. NTS does not own, either directly or indirectly,
any equity investment or ownership interest in any corporation, partnership,
joint venture, business trust or other business entity.
4.2 Certificate of Incorporation and Bylaws. Complete and correct copies
of NTS's Certificate of Incorporation and Bylaws, each as amended to the date
hereof have been furnished to Xxxxxx. Such Certificate of Incorporation and
Bylaws are in full force and effect. NTS is not in violation of any of the
provisions of its Certificate of Incorporation or Bylaws.
4.3 Authority Relative to Agreement. NTS has full corporate power,
capacity and authority to execute and deliver this Agreement and to consummate
the Transactions. The execution, delivery and performance by NTS of this
Agreement, and the consummation of the Transactions have been duly authorized by
the NTS Board and no other corporate proceedings on the part of NTS are
necessary to authorize the execution and delivery of this Agreement by NTS,
subject to obtaining all necessary approvals by NTS's stockholders. This
Agreement has been duly executed and delivered by NTS and constitutes a legal,
valid and binding obligation of NTS, enforceable against it in accordance with
the terms hereof, subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect that affect
creditors' rights generally and subject to general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.4 No Violation; Required Filings and Consents. (a) The execution and
delivery of this Agreement by NTS does not, and the performance of this
Agreement by NTS will not: (i) subject to Section 4.4(b) hereof, conflict with
or violate any law, regulation, court order, judgment or decree applicable to
NTS or by which any of its property or assets is bound or affected; (ii) violate
or conflict with either the Certificate of Incorporation or Bylaws of NTS; or
(iii) except as set forth on Schedule 4.4, result in any breach of or constitute
a default (or any event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination or cancellation
of, or result in the creation of any Lien on any of the property or assets of
NTS pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, instrument, permit, license or franchise to which NTS is a party or by
which NTS or any of its property is bound or affected, except in the case of (i)
or (iii) above, for conflicts, violations, breaches or defaults which, in the
aggregate, would not (x) have a Material Adverse Effect, or (y) prevent or
materially interfere with NTS's performance of its material obligations
hereunder. No consent or waiver of any obligation under any such documents is
necessary to permit NTS to perform its obligations under this Agreement, except
for such consents and waivers as may be required pursuant to any of NTS's debt
instruments, except as set forth on Schedule 4.4, and except for such consents
and waivers which the failure to obtain would not have a Material Adverse
Effect.
(b) Except for applicable requirements, if any, of the
Securities Act, the Exchange Act, "blue sky" laws of various states, and filing
and recordation of appropriate merger documents as required by Delaware Law, NTS
is not required to submit any notice, report or other filing with, or obtain any
waiver, consent, or approval from, any governmental or regulatory authority,
domestic or foreign, in connection with the execution, delivery or performance
of this Agreement or the consummation of the Transactions, except where the
failure to take such action would not (i) prevent or materially interfere with
the consummation of the Merger and the Transactions, or (ii) have a Material
Adverse Effect.
4.5 Capitalization. The authorized capital stock of NTS consists of
4,000,000 shares of common stock, of which 2,599,975 are issued and outstanding.
Subject to receipt of stockholder approval which is expected to be obtained
prior to the Effective Time, NTS has reserved 400,000 shares of NTS Common Stock
for issuance pursuant to the NTS Option Plan, none of which have been exercised.
As of May 31, 2001, an aggregate of 306,800 shares were subject to outstanding
options, and 93,200 shares were available for issuance under the NTS Option
Plan. As of May 31, 2001, an aggregate of 10,000 shares were subject to
outstanding warrants granted to First Albany Corporation on October 14, 1999.
Schedule 4.5 sets forth a complete and accurate list of (i) all stockholders of
NTS, indicating the number of shares of NTS Common Stock held by each
stockholder, and (ii) all holders of NTS Stock Options and the warrants,
indicating the number of shares of NTS Common Stock subject to NTS Stock Option
and warrant, and in the case of each NTS Stock Option, the date of grant,
exercise price per share, the date or dates upon which shares subject to the
option first become exercisable, whether the holder is an employee, director or
independent contractor of NTS and whether the option is an incentive stock
option under Section 422 of the Code or a nonqualified option. All of the
outstanding shares of capital stock of NTS are duly authorized, validly issued
and are fully paid and nonassessable and are not subject to preemptive rights.
Except as set forth on Schedule 4.5, there are no rights (including without,
limitation, statutory or contractual preemptive rights), subscriptions,
warrants, options, conversion rights or agreements or commitments of any kind
outstanding to purchase or otherwise acquire any shares of capital stock of NTS
or to acquire any securities or obligations of any kind convertible into or
exchangeable for any shares of capital stock of NTS to which NTS is a party or
any equity interest in NTS or its business or, to the best of NTS's knowledge,
to which any other person is a party. There are no agreements or other
obligations (contingent or otherwise) which may require NTS to repurchase or
otherwise acquire any shares of capital stock. There are no outstanding or
authorized stock appreciation or phantom stock or similar rights with respect to
NTS. Except as set forth on Schedule 4.5, there are no agreements or
arrangements among any shareholders of NTS with respect to voting or transfers.
4.6 Financial Statements. (a) Schedule 4.6(a) contains true and complete
copies of audited financial statements of NTS containing balance sheets,
statements of income and statements of cash flows as at and for the twelve
months ended December 31, 2000, (the "Balance Sheet"). The financial statements
referred to in this Section 4.6 present fairly and accurately the financial
position, results of operations and cash flows of NTS each as at and for the
period indicated, and were prepared in accordance with GAAP, as in effect as of
the date and for the period of such financial statements, applied on a
consistent basis.
(b) All of the accounts receivable reflected on the Balance
Sheet, and all accounts receivable of NTS that have arisen since December 31,
2000 (except accounts receivable that have been collected since such date) are
valid and enforceable claims, and constitute bona fide accounts receivable
resulting from the sale of goods and services in the ordinary course of business
and are collectible in the ordinary course of business. The accounts receivable
of NTS are not subject to any defenses, offsets, deductions, returns, allowances
or credits of any kind. NTS has no notice that any of the obligors thereunder is
refusing to pay the full amount or any portion thereof. Xxxxxx acknowledges
receipt of a list setting out all accounts receivable as of the close of
business on December 31, 2000, marked Schedule 4.6(b). Schedule 4.6(b) sets
forth the dollar amount of all accounts receivable of NTS, which are outstanding
as of December 31, 2000 at 30, 60 and 90 days from the date of billing to which
any outstanding invoice relates.
(c) All financial, business and accounting books, ledgers,
accounts and official and other records relating to NTS have been properly and
accurately kept and completed, and there are no material inaccuracies or
discrepancies contained or reflected therein. There are no records, systems,
contracts, agreements and other instruments, data or information of NTS,
recorded, stored, maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which are not under NTS's exclusive
ownership and direct control.
4.7 Litigation. Except as set forth on Schedule 4.7, there are no
actions, proceedings or investigations pending or, to the best knowledge of NTS,
threatened against NTS before any court or governmental or regulatory authority
or body, which, if decided adversely could, individually or in the aggregate,
have a Material Adverse Effect. Neither NTS nor any of its assets is subject to
any order, judgment, injunction or decree which would have a Material Adverse
Effect.
4.8 Absence of Certain Changes or Events. Except as set forth in
Schedule 4.8, since December 31, 2000 (a) there has been no event or occurrence
which has or could reasonably be expected to have a Material Adverse Effect; (b)
NTS has not incurred any indebtedness for money borrowed; (c) NTS has not
assumed, guaranteed, endorsed or otherwise become responsible for the
obligations of any other individual, firm or corporation; (d) there has been no
creation or assumption by NTS of any Lien on any asset that has or could
reasonably be expected to have a Material Adverse Effect; (e) there has been no
loan, advance or capital contribution to or investment in any person by NTS,
including to the affiliates thereof; (f) there has been no change in any method
of accounting or accounting practice by NTS; (g) there has been no repurchase,
redemption or other acquisition by NTS of any outstanding shares of capital
stock or other ownership interest of NTS; (h) there has been no declaration or
payment of any dividend on, or other distribution with respect to, any capital
stock of NTS; and (i) NTS has not entered into any other transaction other than
in the ordinary course of business.
4.9 Material Contracts and other Agreements. Schedule 4.9 sets forth a
complete and accurate list of the following contracts and commitments to which
NTS is a party or by which any of its properties are bound: (a) collective
bargaining agreements and contracts with any labor union; (b) employment or
consulting agreements or any agreements providing for severance, termination or
similar payments; (c) leases, whether as lessor or lessee, involving real or
personal property with annual rental payments in excess of $100,000; (d) loan
agreements, mortgages, indentures, instruments or other evidence of indebtedness
or commitments in each case involving indebtedness (or available credit) for
borrowed money or money lent to others; (e) guaranty or suretyship, performance
bond, indemnification or contribution agreements; (f) written contracts with
customers or suppliers that require aggregate payments to or from NTS of more
than $100,000 in any one-year period, other than contracts issued in the
ordinary and usual course of business or terminable with 30 days or less notice
without premium or penalty; (g) joint venture, partnership, or other agreements
evidencing an ownership interest or a participation in or sharing of profits;
(h) agreements, contracts or commitments limiting the freedom of NTS to engage
in any line of business or compete with any other corporation, partnership,
joint venture, company or individual; and (i) contracts that are terminable, or
under which payments by NTS may be accelerated, upon a change in control of NTS.
NTS has furnished or made available accurate and complete copies of the
foregoing contracts and agreements to Xxxxxx. As to each contract and commitment
referred to above (i) there exists no breach or default, and to the knowledge of
NTS, no event has occurred which with the giving of notice or the passage of
time or both would constitute such a breach, default or permit termination,
notification or acceleration, on the part of NTS or, to the knowledge of NTS, on
the part of any third party which, with or without the giving of notice, lapse
of time or the happening of any other event or condition, would have a Material
Adverse Effect and (ii) as of the Effective Time, no material third party
consent, approval or authorization shall be required for the consummation of the
Transactions.
4.10 Compliance with Laws. NTS has complied and is in compliance with
applicable federal, state or local statutes, laws and regulations, except where
the failure to so comply would not have a Material Adverse Effect. NTS has not
(a) failed to obtain any license, permit, franchise or other governmental
authorization which is material to the operations of the business of NTS, taken
as a whole, or (b) received any notice of any alleged violation or breach of any
law or regulation or of any license, permit, franchise or authorization which
violation or breach would have a Material Adverse Effect.
4.11 Proprietary Property. Schedule 4.11 contains a complete and
accurate list of all material patents and patent applications, all trademarks,
service marks, trade dress, trade names and corporate names; all registered
copyrights; all registrations, applications and renewals for any of the
foregoing; and other material intellectual property rights (together with the
goodwill associated therewith, collectively the "NTS Proprietary Property"),
including, without limitation, all contracts, agreements and licenses relating
to any of the foregoing, owned by NTS or in which NTS has any rights. The
Transactions will not have a Material Adverse Effect on the right, title and
interest of NTS as of the Effective Time in and to the NTS Proprietary Property.
Except as set forth on Schedule 4.11, to NTS's knowledge, NTS has not interfered
with, infringed or is infringing on or otherwise come into conflict with any
proprietary property belonging to any other person, firm or corporation. Except
as set forth on Schedule 4.11, to the knowledge of NTS, no third party is
interfering with, infringing on or otherwise coming into conflict with the NTS
Proprietary Property. Except as set forth on Schedule 4.11, NTS has not received
any written notice of material invalidity, interference, infringement or
misappropriation from any third party with respect to any of NTS Proprietary
Property.
4.12 No Undisclosed Liabilities. Except as set forth on Schedule 4.12,
there is no liability or obligation of NTS of any nature, whether absolute,
accrued, contingent or otherwise other than: (i) the liabilities and obligations
reflected on the Balance Sheet; (ii) liabilities and obligations of NTS incurred
since December 31, 2000 in the ordinary and usual course of business; (iii)
liabilities and obligations relating to contracts not yet required to be
performed; and (iv) liabilities and obligations which individually or in the
aggregate do not have a Material Adverse Effect.
4.13 Title to Personal Property. Except as set forth on Schedule 4.13,
NTS has good title to or a valid and enforceable leasehold interest in all
personal property material to the operation of its business, free and clear of
all Liens other than Liens which are not reasonably expected to have a Material
Adverse Effect.
4.14 Taxes and Tax Returns. NTS: (a) has made or timely filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject or has obtained extensions
not yet expired with respect thereto; (b) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and by appropriate proceedings; and (c) has set aside on its books, provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of NTS know of no basis for any such claim.
4.15 Employee Benefit Plans. Each employee benefit plan within the
meaning of Section 3(3) of ERISA, maintained by NTS or any organization which,
together with NTS, would be treated as a "single employer" within the meaning of
Section 414(b) or (c) of the Code or to which NTS or such organization
contributes (or has any obligation to contribute) or is a party (collectively,
the "NTS Benefit Plans") is listed on Schedule 4.15 attached hereto. Except as
set forth on such Schedule 4.15, or to the extent that any breach of the
representations set forth in this sentence would not have a material adverse
effect on NTS: (a) each NTS Benefit Plan is in compliance with applicable law
and has been administered and operated in all respects in accordance with its
terms; (b) each NTS Benefit Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code, is a standardized prototype plan which
has received a favorable opinion letter from the Internal Revenue Service and,
to the knowledge of the NTS, no event has occurred and no condition exists which
could reasonably be expected to adversely affect such qualified status; (c) no
NTS Benefit Plan is covered by Title IV of ERISA or subject to Section 412 of
the Code or Section 302 of ERISA; (d) neither NTS nor, to NTS's knowledge, any
other "disqualified person" or "party in interest" (as defined in Section
4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has engaged in
any transactions in connection with any NTS Benefit Plan that could reasonably
be expected to result in the imposition of a penalty pursuant to Section 502 of
ERISA, damages pursuant to Section 409 of ERISA or a tax pursuant to Section
4975 of the Code; (e) no NTS Benefit Plan provides for post-employment or
retiree welfare benefits, except to the extent required by Part 6 of Subtitle B
of Title I of ERISA or Section 4980B of the Code; (f) no liability, claim,
action or litigation, has been made, commenced or, to NTS's knowledge,
threatened with respect to any NTS Benefit Plan (other than routine claims for
benefits payable in the ordinary course, and appeals of denied such claims); and
(g) none of the NTS Benefit Plans promise or provide severance benefits or
benefits contingent upon a change in ownership or control, within the meaning of
Section 280G of the Code nor create any entitlement to receive any payment
benefit or amount which may constitute "Excess Parachute Payments" under the
Code.
4.16 Labor Matters. Except as set forth in Schedule 4.16, (i) there are
no controversies pending or, to the best knowledge of NTS, threatened between
NTS and any of its employees; (ii) NTS is not a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by NTS, nor, to the best knowledge of NTS are there any activities or
proceedings of any labor union to organize any such employees; (iii) there are
no unfair labor practice complaints pending against NTS before the National
Labor Relations Board or other governmental or administrative body involving
employees of NTS; and (iv) there is no strike, slowdown, work stoppage or
lockout, or, to the best knowledge of NTS, threat thereof, by or with respect to
any employees of NTS.
4.17 Products Liability. Except as disclosed on Schedule 4.17, there is
no notice or claim involving any product manufactured, produced, distributed or
sold by or on behalf of NTS resulting from an alleged defect in design,
manufacture, materials or workmanship, failure to perform for the use intended
or any alleged failure to warn, or from any breach of express or implied
warranties or representations, which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on NTS taken as a
whole, without regard to any insurance coverage. The product liability insurance
policies maintained by NTS are in full force and effect and are adequate for the
business conducted by NTS. NTS has not received any notice from any insurance
carrier declining coverage of any claim or canceling or threatening to cancel
any such policy.
4.18 Joint Proxy Statement-Prospectus. None of the information supplied
in writing by NTS, its officers, directors, representatives, financial advisors,
agents or employees, for inclusion in the Joint Proxy Statement Prospectus will,
on the date the Joint Proxy Statement-Prospectus is filed with the SEC, first
mailed to stockholders of NTS in connection with the NTS Stockholders Meeting,
at the time of the Xxxxxx Stockholders Meeting to, among other things, consider
the issuance of Xxxxxx Common Stock in the Merger, at the time of the NTS
Stockholders Meeting or at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it will be made, will be
false or misleading with respect to any material fact, or will omit to state any
material fact necessary in order to make the statements therein not false or
misleading. To the extent it contains information or statements pertaining to
NTS, the Joint Proxy Statement-Prospectus will, when filed, comply as to form in
all material respects with the requirements of the Securities Act and the
Exchange Act. Notwithstanding the foregoing, NTS does not make any
representation or warranty with respect to any information that has been
supplied by Xxxxxx or its accountants, counsel or other authorized
representatives for use in the Joint Proxy Statement-Prospectus.
4.19 NTS Properties and Leases.
(a) NTS has sufficient title to all its properties and assets
and has been issued all related permits, consents and permissions necessary or
appropriate to enable it to conduct its business as currently conducted or as
contemplated to be conducted.
(b) Except as set forth on Schedule 4.19(b), each parcel of real
property owned or leased by NTS (i) is owned or leased free and clear of all
Liens, other than Permitted Liens, and (ii) is neither subject to any
governmental decree or order to be sold nor is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the best knowledge of NTS, has any such condemnation,
expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit of
NTS to which NTS is a party requiring rental payments in excess of $50,000
during the period of the lease and all amendments and modifications thereto are
in full force and effect and have not been modified or amended, and there exists
no default under any such lease by NTS, nor any event which with the giving of
notice or the lapse of time or both would constitute a default thereunder by
NTS.
4.20 Environmental Matters. (a) Except as set forth on Schedule 4.20,
NTS is in compliance in all material respects with all applicable Environmental
Laws and has been issued and currently maintains all required federal, state and
local permits, licenses, certificates and approvals except to the extent such
non-compliance or the absence of any such permit, license, certificate or
approval would not be, singly or in the aggregate, reasonably expected to have a
Material Adverse Effect. NTS has not been notified of any pending or threatened
action, suit, proceeding or investigation and NTS is not aware of any facts,
which (i) call into question, or would reasonably be expected to call into
question, compliance by NTS with any Environmental Laws, (ii) seeks, or would
reasonably be expected to form the basis of a meritorious proceeding to seek, to
suspend, revoke or terminate any license, permit or approval necessary for the
operation of NTS's business or facilities or for the generation, handling,
storage, treatment or disposal of any Hazardous Substances, or (iii) seeks to
cause, or would reasonably be expected to form the basis of a meritorious
proceeding to cause, any property of NTS to be subject to any restrictions on
ownership, use, occupancy or transferability under any Environmental Law, any of
which would reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 4.20 to the best knowledge of NTS, NTS has not caused or
permitted its business or property (whether real or personal, owned or leased
and whether or not currently owned or occupied by any such entity) to be used to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce, or process Hazardous Substances, except in material
compliance with all applicable Environmental Laws.
(b) Except as set forth on Schedule 4.20, NTS has not received
notice of any violation or notice of regulatory requirements or has been
notified of any threatened or pending action, suit, proceeding or investigation
which suggests that NTS is a potentially responsible party with regard to any
release or threatened release of Hazardous Substances.
(c) Except as set forth on Schedule 4.20, NTS has no liability
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, arising under or relating to any Environmental Law,
which liability would have a Material Adverse Effect.
4.21 The NTS Board. The NTS Board has, as of the date of this Agreement,
determined (i) that the Merger is fair to, and in the best interests of NTS and
its stockholders, and (ii) to recommend that the stockholders of NTS approve and
adopt this Agreement and approve the Merger.
Article V
Covenants And Agreements
------------------------
5.1 Conduct of Business by NTS Pending the Merger. NTS covenants and
agrees that, between the date of this Agreement and the Effective Time, unless
Xxxxxx shall otherwise consent, the business of NTS shall be conducted only in,
and NTS shall not take any action except in the ordinary course of business and
in a manner consistent with past practice; NTS will use its best efforts to
preserve substantially intact the business organization of NTS, to keep
available the services of the present officers, employees and consultants of NTS
and to preserve the present relationships of NTS with customers, suppliers and
other persons with which NTS has significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement, NTS
shall not, between the date of this Agreement and the Effective Time, directly
or indirectly, do any of the following without the prior consent of Xxxxxx:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or propose
the issuance, sale, pledge, disposition, encumbrance or authorization of any
shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
of any other ownership interest, of NTS, other than shares pursuant to options
granted prior to the date hereof or in the ordinary course of business and
exercised in accordance with their terms, as in effect prior to such date; (ii)
amend or propose to amend the Certificate of Incorporation or Bylaws of NTS;
(iii) split, combine or reclassify any outstanding shares of NTS Common Stock,
or declare, set aside or pay any dividend or distribution payable in cash,
stock, property or otherwise with respect to such shares; (iv) redeem, purchase
or otherwise acquire or offer to redeem, purchase or otherwise acquire any
shares of its capital stock, except in the performance of its obligations under
existing employee plans; or (v) authorize or propose or enter into any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 5.1(a);
(b) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof, (ii) sell, pledge, dispose of, or encumber or authorize or
propose the sale, pledge, disposition, encumbrance, or authorization of any
material assets of NTS; (iii) incur any material indebtedness for borrowed money
other than in the ordinary course consistent with past practice; (iv) make or
commit to any capital expenditure or make or commit to make aggregate capital
expenditures other than in the ordinary course of the business of NTS or as
contemplated by the planned expansion of the business of NTS without first
notifying Xxxxxx, or (v) enter into or amend any contract, agreement, commitment
or arrangement with respect to any of the matters set forth in this Section
5.1(b);
(c) take any action other than pursuant to existing contracts
(none of which actions shall be unreasonable or unusual) to grant any severance
or termination pay (otherwise than pursuant to policies of NTS in effect on the
date hereof) or to increase benefits payable under its severance or termination
pay policies in effect on the date hereof;
(d) make any payments (except in the ordinary course of business
and in amounts and in a manner consistent with past practice or pursuant to
disclosed contracts) to any employee of, or independent contractor or consultant
to, NTS, increase the compensation payable to NTS's officers or employees,
except for increases in the ordinary course of business, consistent with past
practice, in salaries or wages of employees of NTS who are not officers of NTS,
enter into any new employee plan, any new employment or consulting agreement,
grant or establish any new awards under such plan or agreement, or adopt or
otherwise amend any of the foregoing otherwise than in the ordinary course
consistent with past practice;
(e) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(f) settle or compromise any pending or threatened suit, action
or claim against NTS or any of its directors by any shareholder of NTS relating
to the Merger, the Transactions or this Agreement, or voluntarily cooperate with
any third party which has sought or may hereafter seek to restrain or prohibit
or otherwise oppose the Merger;
(g) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of NTS (other than the Merger); or
(h) take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Section 5.1(a) through
5.1(g) or any action which would make any of the representations or warranties
of NTS contained in this Agreement untrue or incorrect as of the date when made
if such action had then been taken, or would result in any of the conditions set
forth in Article VI not being satisfied.
5.2 Corporate Examinations and Investigations. Prior to the Effective
Time, each party hereto shall be entitled, through its directors, officers,
affiliates, employees, attorneys, accountants, representatives, financiers,
investors, lenders, consultants and other agents (collectively,
"Representatives") to make such investigation of the properties, assets, the
business and operations of the other party, and such examination of the books,
records and financial condition of the other party, as each party hereto
reasonably deems necessary. Any such investigation and examination shall be
conducted at reasonable times, under reasonable circumstances and upon
reasonable notice, and the parties hereto shall cooperate fully therein. In that
connection, each party hereto shall make available to Representatives of the
other party during such period, without however causing any unreasonable
interruption in the operations of such other party, (i) all such information and
copies of such documents and records concerning the affairs of such party as
such Representatives may reasonably request, (ii) shall permit Representatives
of such party access to the assets and all other parts thereof and to such
party's employees, customers, suppliers, contractors and others, and (iii) shall
cause such party's respective Representatives to cooperate fully in connection
with such review and examination. No investigation by any party hereto shall
diminish or obviate any of the representations, warranties, covenants or
agreements of either party contained in this Agreement.
5.3 Joint Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations.
(a) As promptly as practicable after the execution of this
Agreement, NTS and Xxxxxx will prepare, and file with the SEC, a Joint Proxy
Statement-Prospectus and Xxxxxx will prepare and file with the SEC the
registration statement in which the Joint Proxy Statement-Prospectus will be
included as a prospectus (the "Registration Statement"). Each of NTS and Xxxxxx
will cooperate in coordinating a response to any comments of the SEC, will use
its respective reasonable best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing and will cause the Joint Proxy Statement-Prospectus to be mailed to
their respective stockholders at the earliest practicable time. As promptly as
practicable after the date of this Agreement, NTS and Xxxxxx will prepare and
file any other filings required under the Exchange Act, the Securities Act or
any other Federal, foreign or "blue sky" laws relating to the Merger and the
Transactions (the "Other Filings"). Each of NTS and Xxxxxx will notify the other
promptly upon the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff or any other government officials for amendments
or supplements to the Registration Statement, the Joint Proxy
Statement-Prospectus or any Other Filing or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government official, on the other hand, with respect to the Registration
Statement, the Joint Proxy Statement-Prospectus, the Merger or any Other Filing.
The Joint Proxy Statement-Prospectus, the Registration Statement and the Other
Filings will comply in all material respects with all applicable requirements of
law and the rules and regulations promulgated thereunder. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Joint Proxy Statement-Prospectus, the Registration Statement or any Other
Filings, NTS or Xxxxxx, as the case may be, will promptly inform the other of
such occurrence and cooperate in the filing with the SEC or its staff or any
other government officials, and/or mailing to stockholders of NTS or of Xxxxxx,
such amendment or supplement.
(b) The Joint Proxy Statement-Prospectus will include the
recommendation of the NTS Board in favor of adoption and approval of this
Agreement and approval of the Merger; except that the NTS Board may withdraw,
modify or refrain from making such recommendation to the extent that the NTS
Board determined to accept an Acquisition Transaction (as defined in Section
5.6) or determined, in good faith, after consultation with outside legal
counsel, that compliance with the Board's fiduciary duties under applicable law
would require it to do so, each pursuant to and in accordance with Section 5.6.
In addition, the Joint Proxy Statement-Prospectus will include the
recommendations of the Xxxxxx Board in favor of: (i) the approval of the
issuance of shares of Xxxxxx Common Stock in connection with the Merger and the
appointment of a new Xxxxxx Board; (ii) the amendment of Nestor's Certificate of
Incorporation to increase its authorized share capital; and (iii) the amendment
to the Xxxxxx Option Plan to increase the number of shares available for
issuance thereunder (collectively, the "Xxxxxx Stockholders' Proposals").
5.4 Meetings of Stockholders. Promptly after the date hereof, NTS will
take all action necessary in accordance with Delaware Law and its Certificate of
Incorporation and Bylaws to convene the NTS Stockholders Meeting to be held as
promptly as practicable, and in any event (to the extent permissible under
applicable law) within 45 days after the declaration of effectiveness of the
Registration Statement, for the purpose of voting upon this Agreement. NTS will
consult with Xxxxxx and use its reasonable best efforts to hold the NTS
Stockholders Meeting on the same day as the Xxxxxx Stockholders Meeting.
Promptly after the date hereof, Xxxxxx will take all action necessary in
accordance with Delaware Law and its Certificate of Incorporation and Bylaws to
convene the Xxxxxx Stockholders Meeting to be held as promptly as practicable,
and in any event (to the extent permissible under applicable law) within 45 days
after the declaration of effectiveness of the Registration Statement. Xxxxxx
will consult with NTS and will use its best efforts to hold the Xxxxxx
Stockholders Meeting on the same day as the NTS Stockholders Meeting. For so
long as the NTS Board continues to make the recommendation set forth in Section
5.3(b), NTS will use its reasonable best efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger and will take all other action necessary or advisable
to secure the vote or consent of its stockholders required by Delaware Law to
obtain such approvals. For so long as the Xxxxxx Board continues to make the
recommendations set forth in Section 5.3, Xxxxxx will use its best efforts to
solicit from its stockholders proxies in favor of each of the Xxxxxx
Stockholders' Proposals.
5.5 Certain Filings and Consents. Upon the terms and subject to the
conditions hereof, each of the parties hereto agrees to cooperate with one
another and to use all reasonable efforts to take or cause to be taken promptly
all action and to do, or cause to be done, promptly all things necessary, proper
or advisable to consummate and make effective, in the most expeditious manner
practicable, the Transactions and shall cooperate with one another and use all
reasonable efforts to obtain in a timely manner all waivers, permits, consents
and approvals and to effect all filings and notices with or to third parties or
governmental or public bodies or authorities that are in the opinion of NTS,
Xxxxxx and Merger Sub necessary or desirable in connection with or with respect
to the Transactions, including, without limitation, filings or submissions to
the extent required under the Exchange Act, and any other filings or approvals
expressly contemplated by this Agreement.
5.6 Negotiations. As long as this Agreement is in effect, neither NTS
nor its directors, officers, employees, agents or other Representatives shall,
directly or indirectly, except to the extent required by the fiduciary duties of
the Board of Directors, participate in any discussions or negotiations
regarding, or provide information concerning NTS or this Agreement to any
corporation, partnership, person, or other entity or group (other than Xxxxxx
and Merger Sub) in connection with, an acquisition of any capital stock, other
securities or assets of NTS, or its affiliates, including pursuant to any
merger, consolidation, liquidation, dissolution, reorganization, tender offer,
exchange offer, business combination, recapitalization or similar transaction
involving NTS (any of the foregoing, an "Acquisition Transaction"). Subject to
the exercise of applicable fiduciary duties as advised by counsel, NTS will
promptly communicate to Xxxxxx and Merger Sub if any discussions or negotiations
are initiated, any inquiry or proposal is made or any information is requested
with respect to an Acquisition Transaction (including the nature and terms of
any of the foregoing).
5.7 Appraisal Rights; Stockholder Claims. NTS shall not, without the
prior written consent of Xxxxxx, make any payment in respect of or settle or
compromise any claim brought by any stockholder of NTS in connection with the
Merger on or prior to the Effective Time (including but not limited to any claim
or demand for appraisal rights under Section 262 of Delaware Law).
5.8 Notification of Certain Matters. NTS shall give prompt notice to
Xxxxxx and Merger Sub, and Xxxxxx and Merger Sub shall give prompt notice to
NTS, of (i) the occurrence, or failure to occur, of any matter or event which
occurrence or failure to occur is likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time, (ii) any material
failure of each of NTS, Xxxxxx or Merger Sub to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, and (iii) any proposal or offer made to, or solicited by, any of
the parties to enter into an Acquisition Transaction (other than the Merger);
provided, however, that no such notification, shall affect the representations
or warranties of the parties or the conditions to the obligations of the parties
hereunder.
5.9 Indemnification.
(a) After the Effective Time, Xxxxxx shall indemnify, defend and
hold harmless the present and former officers and directors of NTS (an
"Indemnified Party") against all losses, expenses, claims, damages or
liabilities (including attorney's fees, fines, judgments and amounts paid in
settlement) arising out of actions or omissions occurring on or prior to the
Effective Time (including without limitation, the Transactions) to the fullest
extent permitted or required under Delaware Law, the Certificate of
Incorporation and the Bylaws of NTS in effect at the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
action or suit. This Section 5.9(a) shall survive beyond the Effective Time and
is intended to benefit the Surviving Corporation and each of the Indemnified
Parties (each of whom shall be entitled, at the expense of the Surviving
Corporation, to enforce this Section 5.9(a) against the Surviving Corporation
and Xxxxxx).
(b) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in each such case, proper provisions shall be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 5.9.
5.10 Increase in Authorized Shares. Subject to the terms hereof, at the
Xxxxxx Stockholders Meeting, Xxxxxx shall propose and recommend that its
Certificate of Incorporation be amended to increase the authorized number of
shares of Xxxxxx Common Stock thereunder from 30,000,000 shares to 100,000,000
shares.
Article VI
Conditions Of Merger
--------------------
6.1 Conditions to the Parties' Obligations.
(a) Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time, of the following conditions;
provided, however, that no party shall refuse to consummate the Merger if a
condition is not satisfied as a result of a breach by such party of any
agreement, representation, warranty or covenant of such party under this
Agreement.
(i) Stockholder Approval. This Agreement and the Merger
shall have been approved and adopted by the requisite vote of the stockholders
of NTS in accordance with Delaware Law and the Certificate of Incorporation of
NTS and by the requisite vote of the sole stockholder of Merger Sub in
accordance with Delaware Law and the Certificate of Incorporation of Merger Sub;
and each of the Xxxxxx Stockholders' Proposals shall have been approved and
adopted by the requisite vote of the stockholders of Xxxxxx in accordance with
Delaware Law and the Certificate of Incorporation of Xxxxxx; and
(ii) The Registration Statement and Joint Proxy
Statement-Prospectus. The Registration Statement of which the Joint Proxy
Statement-Prospectus is a part filed by Xxxxxx with respect to the Xxxxxx Common
Stock to be issued in the Merger shall have been declared effective by the SEC;
and no stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose, and
no similar proceeding in respect of the Joint Proxy Statement-Prospectus, shall
have been initiated or threatened by the SEC; and
(iii) No Material Adverse Effect. There shall have been no
event or events which have occurred which, individually or in the aggregate,
shall have had a Material Adverse Effect on NTS, Xxxxxx or Merger Sub
respectively; and
(iv) No Orders or Injunctions. No (A) order issued by any
United States federal or state or foreign governmental or regulatory authority
or body and no statute, rule, regulation or executive order promulgated or
enacted by any United States' federal or state or foreign government or
governmental authority shall be in effect which, or (B) action, suit, or
proceeding shall be pending before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction, or charge which,
would (x) prevent consummation of any of the Transactions or (y) cause any of
the Transactions to be rescinded following consummation (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect).
(v) Fairness Opinion. The Xxxxxx Board shall have received
a satisfactory opinion addressed to Xxxxxx as to the fairness of the terms of
the Merger from a financial point of view and a copy of such opinion shall have
been delivered to NTS in accordance with Section 3.22 hereof.
(vi) Investment of NTS Investors, LLC. NTS Investors, LLC
shall have increased its investment in NTS, including the principal amount of
the Secured Note Agreement dated as of January 9, 2001, all accrued interest
thereon and additional cash in the aggregate amount of at least $7,500,000 or up
to $8,000,000.
(vii) Stockholders Agreement. Each of Xxxxxx, NTS
Investors, LLC and the holders of at least 15.8% of the outstanding Xxxxxx
Common Stock after giving effect to the Merger shall have executed and delivered
to Xxxxxx a Stockholders Agreement substantially in the form annexed hereto as
Exhibit 1.
(b) Conditions to Nestor's and Merger Sub's Obligations to
Effect the Merger. The obligations of Xxxxxx and Merger Sub to effect the Merger
shall also be subject to the fulfillment at or prior to the Effective Time of
the following additional conditions, unless waived by Xxxxxx:
(i) The representations and warranties of NTS contained in
this Agreement shall have been true and correct in all material respects as of
the date of this Agreement. In addition, the representations and warranties of
NTS contained in this Agreement shall be true and correct in all material
respects on and as of the Effective Time except for changes contemplated by this
Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time.
(ii) NTS shall have complied in all material respects with
each covenant, agreement and condition required by this Agreement to be
performed or complied with by it on or before the Effective Time.
(iii) NTS shall not have received appraisal demands
pursuant to Section 262 of the Delaware Law in respect of 5% or more of the
outstanding NTS Common Stock.
(iv) NTS Investors, LLC shall have delivered all such
documentation as may be reasonably requested by Xxxxxx to evidence the
termination of the Secured Note Agreement dated as of January 9, 2001 and the
cancellation of all notes issued in connection therewith.
(c) Conditions to NTS's Obligation to Effect the Merger. The
obligations of NTS to effect the Merger also shall be subject to the fulfillment
of the following additional conditions, unless waived by Xxxxxx:
(i) The representations and warranties of Xxxxxx and
Merger Sub contained in this Agreement shall have been true and correct in all
material respects as of the date of this Agreement. In addition, the
representations and warranties of Xxxxxx and Merger Sub contained in this
Agreement shall be true and correct in all material respects on and as of the
Effective Time except for changes contemplated by this Agreement and except for
those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time.
(ii) Each of Xxxxxx and Merger Sub shall have complied in all material respects
with each covenant, agreement and condition required by this Agreement to be
performed or complied with by it hereunder on or before the Effective Time.
Article VII
Termination, Amendment And Waiver
---------------------------------
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of the Xxxxxx Board and the NTS
Board;
(b) by Xxxxxx or NTS if: (i) NTS's stockholders fail to approve
this Agreement; (ii) Nestor's stockholders fail to approve any of the Xxxxxx
Stockholders' Proposals; or (iii) the Merger shall not have been consummated on
or before December 31, 2001 by reason of the failure of any condition precedent
under Section 6.1; provided, however, that no party may terminate this Agreement
pursuant to this Section 7.1(b) if such failure results primarily from that
party's breach of this Agreement;
(c) by Xxxxxx or NTS if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the Transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable;
(d) by NTS, by giving written notice to Xxxxxx and Merger Sub,
in the event of a material breach by Xxxxxx and Merger Sub of any
representation, warranty or agreement of Xxxxxx and Merger Sub contained in this
Agreement, in each case which has not been cured or is not curable by the
earlier of the satisfaction of the conditions to the Merger set forth in Article
VI of this Agreement or the fifteenth day after notice of such breach was given
by NTS;
(e) by NTS if the Xxxxxx Board (a) withdraws, modifies or
changes its recommendation of this Agreement or the Merger in a manner adverse
to NTS, (b) recommends to the holders of shares of Xxxxxx Common Stock any
proposal with respect to a tender offer, merger, consolidation, share exchange
or similar transaction involving Xxxxxx or any of its Subsidiaries, in lieu of
the Merger and the Transactions contemplated by this Agreement, or (c) resolves
to do any of the foregoing;
(f) by Xxxxxx, by giving written notice to NTS, in the event of
a material breach by NTS of any representation, warranty or agreement of NTS
contained in this Agreement which has not been cured or is not curable by the
earlier of the satisfaction of the conditions to the Merger set forth in Article
VI of this Agreement or the fifteenth day after notice of such breach was given
by Xxxxxx; and
(g) by Xxxxxx if the NTS Board (a) withdraws, modifies or
changes its recommendation of this Agreement or the Merger in a manner adverse
to Xxxxxx, (b) recommends to the holders of shares of NTS Common Stock any
proposal with respect to a tender offer, merger, consolidation, share exchange
or similar transaction involving NTS, other than the Merger and the
Transactions, or (c) resolves to do any of the foregoing.
7.2 Effect of Termination. Except as set forth in Section 8.2 below and
as otherwise expressly set forth in this Agreement, in the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability on the part of NTS, Xxxxxx
or Merger Sub or their respective officers, directors, stockholders or
affiliates, and this Section 7.2 shall remain in full force and effect and
survive any termination of this Agreement.
7.3 Amendment; Waiver. By action taken by their respective Boards of
Directors or a duly authorized committee thereof (including after such time as
the stockholders of NTS, Xxxxxx and Merger Sub approve the Merger) this
Agreement may be amended by an instrument in writing signed on behalf of each of
the parties hereto. At any time prior to the Effective Time, the parties hereto,
by action taken by their respective Boards of Directors or duly authorized
committees thereof, may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements of the other parties hereto or conditions
to its own obligations herein; provided, however, that any such waiver of or
failure to insist on strict compliance with any such representation, warranty,
agreement or condition shall not (x) operate as a waiver of, or estoppel with
respect to, any subsequent or other failure, or (y) be deemed, or constitute, a
waiver of any other provision, whether or not similar. Any agreement on the part
of a party hereto to any such amendment, extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of all the parties. No
course of dealing between or among the parties will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any party under or by reason of this Agreement.
Article VIII
Miscellaneous
-------------
8.1 Survival of Representations and Warranties. All representations and
warranties contained in this Agreement shall not survive beyond the Effective
Time.
8.2 Remedies, Expenses and Fees.
(a) Each of the parties hereto shall have and shall retain all
other rights and remedies existing in its favor at law or equity for breaches of
this Agreement.
(b) If the Merger is consummated, all fees and expenses incurred
in connection with the Merger and the Transactions will be paid by the Surviving
Corporation, including, without limitation, the reasonable attorneys' fees and
expenses of counsel to NTS Investors, LLC up to a maximum of $25,000, which
amount shall be paid promptly after the Effective Time. If the Merger is not
consummated, each party hereto shall bear its respective fees and expenses.
8.3 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed given if delivered personally, by
commercial carrier, or registered or certified mail (postage prepaid, return
receipt requested) or transmitted by facsimile (with confirmation of receipt) to
the parties at the following addresses and numbers:
(a) If to Xxxxxx or Merger Sub, c/o:
Xxxxxx, Inc.
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
(b) If to NTS, to:
Xxxxxx Traffic Systems, Inc.
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Mr. Xxxxx Xxx
Facsimile No.: (000) 000-0000
with a copy to:
X.X. Xxxx Prof. Corp.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: X.X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
(c) in each case, with copies to:
Xxxx Marks & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
or at such other addresses or facsimile numbers as shall be furnished by the
parties by like notice.
8.4 Headings. The headings contained in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
8.5 Publicity. So long as this Agreement is in effect and except as
otherwise agreed to by the parties hereto, all press releases and other public
announcements relating to the Transactions will be made by NTS, Xxxxxx or Merger
Sub as required by law and only after consultation with and review thereof by
the other parties hereto.
8.6 Entire Agreement. This Agreement (including all Schedules hereto)
and the other agreements specifically referred to herein or delivered pursuant
hereto, constitute the entire agreement among the parties and supersede all
other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
8.7 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties.
8.8 Counterparts; Facsimile Signatures. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original. Delivery of an executed
counterpart of this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart thereof.
8.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Delaware, or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Delaware.
8.10 Severability. In the event that any provision, or any part of any
provision, of this Agreement, or the application thereof, becomes or is declared
by a court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of such provision and of this Agreement will continue in full force
and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
8.11 No Strict Construction. The parties hereto jointly participated in
the negotiation and drafting of this Agreement and the other agreements
contemplated hereby. The language used in this Agreement will be deemed to be
the language chosen by the parties hereto to express their collective mutual
intent, this Agreement shall be construed as if drafted jointly by the parties
hereto, and no rule of strict construction will be applied against any person.
The term, "including" as used herein shall be by way of example, and shall not
be deemed to constitute a limitation of any term or provision contained herein.
8.12 No Third Party Contract Rights. This Agreement is intended solely
for the benefit of the parties hereto and, in respect of the matters described
in Section 5.9(a) hereof, the Indemnified Parties. Nothing herein shall be
construed or deemed to create any rights or benefits to any other third parties
or third party beneficiaries.
8.13 Further Assurances. If at any time after the Effective Date, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary, desirable or
proper (a) to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, the title to any property or right of NTS or to be acquired by
reason or as a result of the Merger, or (b) otherwise to carry out the purposes
of this Agreement, the parties agree that the Surviving Corporation and its
proper officers and directors shall and will execute and deliver all such
property, deeds, assignments and assurances in law and do all acts necessary,
desirable or proper to vest, perfect or confirm title to such property or right
in the Surviving Corporation and otherwise to carry out the purposes of this
Agreement, and that the proper officers and directors of NTS and the proper
officers and directors of the Surviving Corporation are fully authorized in the
name of the parties or otherwise to take any and all such action.
IN WITNESS WHEREOF, Xxxxxx, Merger Sub and NTS have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
XXXXXX, INC.
By: ______________________-
Name:
Title:
XXXXXX MERGER SUB CORP.
By: ______________________-
Name:
Title:
XXXXXX TRAFFIC SYSTEMS, INC.
By: ______________________-
Name:
Title:
[Note Schedules and Exhibits are not included.]
