EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
by and among
PRODIGY COMMUNICATIONS CORPORATION,
PUCKNUT CORPORATION
and
FLASHNET COMMUNICATIONS, INC.
Dated as of November 5, 1999
and amended as of March 15, 2000
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER................................................. 1
1.1 Effective Time of the Merger............................... 1
1.2 Closing.................................................... 1
1.3 Effects of the Merger...................................... 2
1.4 Directors and Officers..................................... 2
ARTICLE II CONVERSION OF SECURITIES................................... 2
2.1 Conversion of Capital Stock................................ 2
2.2 Exchange of Certificates................................... 3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 5
3.1 Organization, Standing and Power; Subsidiaries............. 5
3.2 Capitalization............................................. 6
3.3 Authority; No Conflict; Required Filings and Consents...... 7
3.4 SEC Filings; Financial Statements.......................... 8
3.5 No Undisclosed Liabilities................................. 9
3.6 Absence of Certain Changes or Events....................... 9
3.7 Taxes...................................................... 9
3.8 Owned and Leased Real Properties........................... 11
3.9 Intellectual Property...................................... 11
3.10 Agreements, Contracts and Commitments...................... 11
3.11 Litigation................................................. 12
3.12 Environmental Matters...................................... 12
3.13 Employee Benefit Plans..................................... 13
3.14 Compliance With Laws....................................... 14
3.15 Permits.................................................... 14
3.16 Registration Statement; Proxy Statement/Prospectus......... 14
3.17 Labor Matters.............................................. 15
3.18 Insurance.................................................. 15
3.19 Business Activity Restrictions............................. 15
3.20 Year 2000 Compliance....................................... 15
3.21 Assets..................................................... 16
3.22 Subscribers................................................ 17
3.23 Accounts Receivable........................................ 17
3.24 No Existing Discussions.................................... 17
3.25 Opinion of Financial Advisor............................... 17
3.26 Part Thirteen of the TBCA Not Applicable................... 17
3.27 Tax Matters................................................ 17
3.28 Transactions with Affiliate................................ 17
3.29 Brokers; Schedule of Fees and Expenses..................... 17
3.30 Disclosure................................................. 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
TRANSITORY SUBSIDIARY...................................... 18
4.1 Organization, Standing and Power........................... 18
4.2 Capitalization............................................. 18
4.3 Authority; No Conflict; Required Filings and Consents...... 18
4.4 SEC Filings; Financial Statements.......................... 19
4.5 Absence of Certain Changes or Events....................... 19
4.6 Tax Matters................................................ 20
4.7 Litigation................................................. 20
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4.8 Compliance with Laws...................................... 20
4.9 Registration Statement; Proxy Statement/Prospectus........ 20
4.10 Operations of the Transitory Subsidiary................... 20
4.11 Brokers................................................... 20
4.12 Disclosure................................................ 20
ARTICLE V CONDUCT OF BUSINESS....................................... 20
5.1 Covenants of the Company.................................. 20
5.2 Cooperation............................................... 23
5.3 Confidentiality........................................... 23
ARTICLE VI ADDITIONAL AGREEMENTS..................................... 23
6.1 No Solicitation........................................... 23
6.2 Proxy Statement/Prospectus; Registration Statement........ 24
6.3 Nasdaq Quotation.......................................... 25
6.4 Access to Information..................................... 25
6.5 Stockholders Meeting...................................... 25
6.6 Legal Conditions to the Merger............................ 26
6.7 Public Disclosure......................................... 27
6.8 Tax-Free Reorganization................................... 27
6.9 Affiliate Agreements...................................... 27
6.10 Nasdaq National Market Listing............................ 27
6.11 Company Stock Options, Warrants and Plans................. 27
6.12 Stockholder Litigation.................................... 28
6.13 Indemnification........................................... 28
6.14 Notification of Certain Matters........................... 29
ARTICLE VII CONDITIONS TO MERGER...................................... 29
Conditions to Each Party's Obligation To Effect the
7.1 Merger.................................................... 29
7.2 Additional Conditions to Obligations of the Buyer and the
Transitory Subsidiary..................................... 30
7.3 Additional Conditions to Obligations of the Company....... 30
ARTICLE VIII TERMINATION AND AMENDMENT................................. 31
8.1 Termination............................................... 31
8.2 Effect of Termination..................................... 32
8.3 Fees and Expenses......................................... 32
8.4 Amendment................................................. 33
8.5 Extension; Waiver......................................... 33
ARTICLE IX MISCELLANEOUS............................................. 33
9.1 Nonsurvival of Representations and Warranties............. 33
9.2 Notices................................................... 34
9.3 Entire Agreement.......................................... 34
9.4 No Third Party Beneficiaries.............................. 34
9.5 Assignment................................................ 35
9.6 Severability.............................................. 35
9.7 Counterparts and Signature................................ 35
9.8 Interpretation............................................ 35
9.9 Governing Law............................................. 35
9.10 Remedies.................................................. 35
9.11 Waiver of Jury Trial...................................... 36
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EXHIBITS
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C Form of Company Affiliate Agreement
[The exhibits and schedules to this agreement were omitted from the agreement
as filed with the Securities and Exchange Commission by the Registrant. The
Registrant agrees to furnish supplementally a copy of any omitted schedule or
exhibit to the Securities and Exchange Commission upon request.]
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TABLE OF DEFINED TERMS
Cross Reference
Terms in Agreement
----- ---------------
Affiliate....................................................... Section 6.9
Affiliate Agreement............................................. Section 6.9
Agreement....................................................... Preamble
Alternative Transaction......................................... Section 8.3(g)
Antitrust Laws.................................................. Section 6.6(b)
Antitrust Order................................................. Section 6.6(b)
Articles of Merger.............................................. Section 1.1
Buyer........................................................... Preamble
Buyer Balance Sheet............................................. Section 4.4(b)
Buyer Common Stock.............................................. Section 2.1(c)
Buyer Disclosure Schedule....................................... Article IV
Buyer Material Adverse Effect................................... Section 4.1
Buyer Preferred Stock........................................... Section 4.2
Buyer SEC Reports............................................... Section 4.4(a)
Certificates.................................................... Section 2.2(b)
Certificate of Merger........................................... Section 1.1
Closing......................................................... Section 1.2
Closing Date.................................................... Section 1.2
Code............................................................ Preamble
Company......................................................... Preamble
Company Balance Sheet........................................... Section 3.4(b)
Company Common Stock............................................ Section 2.1(b)
Company Disclosure Schedule..................................... Article III
Company Employee Plans.......................................... Section 3.13(a)
Company Intellectual Property Rights............................ Section 3.9(a)
Company Leases.................................................. Section 3.8(b)
Company Material Adverse Effect................................. Section 3.1(a)
Company Material Contracts...................................... Section 3.10
Company Meeting................................................. Section 3.16
Company Permits................................................. Section 3.15
Company Preferred Stock......................................... Section 3.2(a)
Company SEC Reports............................................. Section 3.4(a)
Company Stock Options........................................... Section 3.2(b)
Company Stock Option Agreement.................................. Preamble
Company Stock Plans............................................. Section 3.2(b)
Company Voting Proposal......................................... Section 6.5(a)
Company Warrants................................................ Section 3.2(b)
Confidentiality Agreement....................................... Section 5.3
Constituent Corporations........................................ Section 1.3
DGCL............................................................ Section 1.1
Effective Time.................................................. Section 1.1
Employee Benefit Plan........................................... Section 3.13(a)
Environmental Law............................................... Section 3.12(b)
ERISA Affiliate................................................. Section 3.13(a)
ERISA........................................................... Section 3.13(a)
Exchange Agent.................................................. Section 2.2(a)
Exchange Fund................................................... Section 2.2(a)
Exchange Act.................................................... Section 3.3(c)
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Cross Reference
Terms in Agreement
----- --------------------
Exchange Ratio............................................ Section 2.1(c)
Governmental Entity....................................... Section 3.3(c)
Hazardous Substance....................................... Section 3.12(c)
HSR Act................................................... Section 3.3(c)
Indemnified Parties....................................... Section 6.13
Insurance Policies........................................ Section 3.18
Liens..................................................... Section 3.21
Merger.................................................... Preamble
Outside Date.............................................. Section 8.1(b)
Proxy Statement........................................... Section 3.16
Registration Statement.................................... Section 3.16
Rule 145.................................................. Section 6.9
SEC....................................................... Section 3.3(c)
Securities Act............................................ Section 3.4(a)
Stockholder Agreement..................................... Preamble
Subsidiary................................................ Section 3.1(b)
Superior Proposal......................................... Section 6.1(a)(A)(1)
Surviving Corporation..................................... Section 1.3
Tax Returns............................................... Section 3.7(a)
Taxes..................................................... Section 3.7(a)
TBCA...................................................... Section 1.1
Third Party............................................... Section 8.3(g)
Transitory Subsidiary..................................... Preamble
Year 2000 Compliant....................................... Section 3.20(d)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November 5,
1999 and as amended as of March 15, 2000, is by and among Prodigy
Communications Corporation, a Delaware corporation (the "Buyer"), PUCKnut
Corporation, a Delaware corporation and a wholly owned subsidiary of Buyer (the
"Transitory Subsidiary"), and FlashNet Communications, Inc., a Texas
corporation (the "Company").
WHEREAS, the Boards of Directors of the Buyer and the Company deem it
advisable and in the best interests of each corporation and its respective
stockholders that the Buyer and the Company combine in order to advance the
long-term business interests of the Buyer and the Company;
WHEREAS, the combination of the Buyer and the Company shall be effected by
the terms of this Agreement through a merger of the Transitory Subsidiary into
the Company, as a result of which the stockholders of the Company will become
stockholders of the Buyer (the "Merger");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, the Company has entered into a Stock Option Agreement dated as of
the date of this Agreement and attached hereto as Exhibit A (the "Company Stock
Option Agreement"), pursuant to which the Company granted the Buyer an option
to purchase shares of common stock of the Company under certain circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, the stockholders of the Company specified in Section 6.5(c) of this
Agreement have entered into a Stockholder Agreement dated as of the date of
this Agreement in the form attached as Exhibit B (the "Stockholder Agreement"),
pursuant to which such stockholders agreed to give the Buyer a proxy to vote
all of the shares of capital stock of the Company that such stockholders own;
and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
Buyer, the Transitory Subsidiary and the Company agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, prior to the Closing (as defined in Section 1.2), the Buyer shall
prepare, and on the Closing Date (as defined in Section 1.2) or as soon as
practicable thereafter the Buyer shall cause to be filed (i) with the Secretary
of State of the State of Delaware, a certificate of merger (the "Certificate of
Merger") in such form as is required by, and executed by the Surviving
Corporation (as defined in Section 1.3) in accordance with, the relevant
provisions of the Delaware General Corporation Law ("DGCL"), (ii) with the
Secretary of State of the State of Texas, articles of merger ("Articles of
Merger") in such form as required by, and executed by the Constituent
Corporations (as defined in Section 1.3) in accordance with the relevant
provisions of the Texas Business Corporation Act ("TBCA"), and shall make all
other filings or recordings required under the DGCL and TBCA. The Merger shall
become effective upon the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and the Articles of Merger with the
Secretary of State of the State of Texas or at such later time as is
established by the Buyer and the Company and set forth in the Certificate of
Merger and Articles of Merger (the "Effective Time").
1.2 Closing. The closing of the Merger (the "Closing") shall take place at
10:00 a.m., Boston time, on a date to be specified by the Buyer and the Company
(the "Closing Date"), which shall be no later than the
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second business day after satisfaction or waiver of the conditions set forth in
Article VII (other than delivery of items to be delivered at the Closing), at
the offices of Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx,
unless another date, place or time is agreed to in writing by the Buyer and the
Company.
1.3 Effects of the Merger. At the Effective Time (i) the separate existence
of the Transitory Subsidiary shall cease and the Transitory Subsidiary shall be
merged with and into the Company (the Transitory Subsidiary and the Company are
sometimes referred to below as the "Constituent Corporations" and the Company
following the Merger is sometimes referred to below as the "Surviving
Corporation"), (ii) the Restated Articles of Incorporation of the Company shall
be amended so that the third paragarph of ARTICLE TWO of such Restated Articles
of Incorporation reads in its entirety as follows: "The total number of shares
of all classes of stock which the Corporation shall have authority to issue is
1,000, all of which shall consist of common stock, $.01 par value per share,"
and, as so amended, such Restated Articles of Incorporation shall be the
Restated Articles of Incorporation of the Surviving Corporation, and (iii) the
By-laws of the Company as of the date hereof, with such changes as are
specified by the Buyer prior to the Effective Time, shall be the By-laws of the
Surviving Corporation. The Merger shall have the effects set forth in Section
259 of the DGCL and Article 5.06 of the TBCA.
1.4 Directors and Officers. Except as specified in Section 1.4 of the Company
Disclosure Schedule, the directors and officers of the Transitory Subsidiary
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Restated Articles of Incorporation and By-laws of the Surviving
Corporation.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of the
capital stock of the Company or capital stock of the Transitory Subsidiary:
(a) Capital Stock of the Transitory Subsidiary. Each issued and
outstanding share of the capital stock of the Transitory Subsidiary shall
be converted into and become one fully paid and nonassessable share of
common stock, $.01 par value per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All shares of
common stock, no par value, of the Company ("Company Common Stock") that
are owned by the Company as treasury stock or by any wholly owned
Subsidiary (as defined in Section 3.1) of the Company and any shares of
Company Common Stock owned by the Buyer, the Transitory Subsidiary or any
other wholly owned Subsidiary of the Buyer shall be canceled and retired
and shall cease to exist and no stock of the Buyer or other consideration
shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Common Stock. Subject to Section 2.2, each
share of Company Common Stock (other than shares to be canceled in
accordance with Section 2.1(b)) issued and outstanding immediately before
the Effective Time, and all rights in respect thereof, shall be
automatically converted into 0.35 share (the "Exchange Ratio ") of common
stock, $.01 par value per share, of the Buyer ("Buyer Common Stock"). As of
the Effective Time, all such shares of Company Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares of Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive the shares of Buyer Common Stock and
any cash in lieu of fractional shares of Buyer Common Stock to be issued or
paid in consideration therefor upon surrender of such certificate in
accordance with Section 2.2, without interest.
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(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible
into Buyer Common Stock or Company Common Stock), reorganization,
recapitalization or other like change with respect to Buyer Common Stock or
Company Common Stock occurring after the date hereof and prior to the
Effective Time.
(e) Unvested Stock. At the Effective Time, any unvested shares of Company
Common Stock awarded to employees, directors or consultants pursuant to any
of the Company's plans or arrangements and outstanding immediately prior to
the Effective Time shall be converted to unvested shares of Buyer Common
Stock in accordance with the Exchange Ratio and shall remain subject to the
same terms, restrictions and vesting schedule as in effect immediately
prior to the Effective Time, except to the extent by their terms such
unvested shares of Company Common Stock vest at the Effective Time. All
outstanding rights which the Company may hold immediately prior to the
Effective Time to repurchase unvested shares of Company Common Stock shall
be assigned to in the Merger and shall thereafter be exercisable by Buyer
by Buyer upon the same terms and conditions in effect immediately prior to
the Effective Time, except that the shares purchasable pursuant to such
rights and the purchase price payable per share shall be adjusted to
reflect the Exchange Ratio.
(f) Treatment of Company Options and Company Warrants. Outstanding
Company Options and Company Warrants (in each case as defined in Section
3.2(b)) shall be treated following the Effective Time in the manner set
forth in Section 6.11.
2.2 Exchange of Certificates. The procedures for exchanging outstanding
shares of Company Common Stock for Buyer Common Stock pursuant to the Merger
are as follows:
(a) Exchange Agent. As of the Effective Time, the Buyer shall deposit
with a bank or trust company designated by the Buyer (the "Exchange
Agent"), for the benefit of the holders of shares of the Company Common
Stock, for exchange in accordance with this Section 2.2, through the
Exchange Agent, (i) certificates representing the shares of Buyer Common
Stock (such shares of Buyer Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.1 in exchange for
outstanding shares of the Company Common Stock, (ii) cash in an amount
sufficient to make payments required pursuant to Section 2.2(e), and (iii)
any dividends or distributions to which holders of Certificates (as defined
below) may be entitled pursuant to Section 2.2(c)
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of the Company Common Stock (the
"Certificates") whose shares were converted pursuant to Section 2.1 into
the right to receive shares of Buyer Common Stock (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as the Buyer may reasonably specify) and (ii) instructions
for effecting the surrender of the Certificates in exchange for
certificates representing shares of Buyer Common Stock (plus cash in lieu
of fractional shares, if any, of Buyer Common Stock and any dividends or
distributions as provided below). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by the Buyer, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of whole shares
of Buyer Common Stock which such holder has the right to receive pursuant
to the provisions of this Article II plus cash in lieu of fractional shares
pursuant to Section 2.2(e) and any dividends or distributions pursuant to
Section 2.2(c), and the Certificate so surrendered shall immediately be
canceled. In the event of a transfer of ownership of Company Common Stock
which is not registered in
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the transfer records of the Company, a certificate representing the proper
number of shares of Buyer Common Stock plus cash in lieu of fractional
shares pursuant to Section 2.2(e) and any dividends or distributions
pursuant to Section 2.2(c) may be issued and paid to a person other than
the person in whose name the Certificate so surrender is registered, if
such Certificate is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 2.2, each Certificate shall be deemed at
any time after the Effective Time to represent only the right to receive
upon such surrender the certificate representing shares of Buyer Common
Stock plus cash in lieu of fractional shares pursuant to Section 2.2(e) and
any dividends or distributions pursuant to Section 2.2(c) as contemplated
by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Buyer Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Buyer Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to
Section 2.2(e) until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be issued and paid
to the record holder of the Certificate, (i) certificates representing
whole shares of Buyer Common Stock issued in exchange therefor, without
interest, (ii) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Buyer Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and the amount of dividends
or other distributions with a record date after the Effective Time
previously paid with respect to such whole shares of Buyer Common Stock,
and (iii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect
to such whole shares of Buyer Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Buyer Common Stock issued upon the surrender for exchange of Certificates
in accordance with the terms hereof (including any cash or other
distributions paid pursuant to Sections 2.2(c) or 2.2(e)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and from and after the Effective Time there
shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II.
(e) No Fractional Shares. No certificate or scrip representing fractional
shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any other rights of a stockholder
of the Buyer. Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Buyer Common Stock (after taking into account all Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Buyer Common Stock
multiplied by the average of the last reported sales prices of the Buyer
Common Stock on the Nasdaq National Market during the ten (10) consecutive
trading days ending on and including the last trading day prior to the
Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for 180 days
after the Effective Time shall be delivered to the Buyer, upon demand, and
any holder of Company Common Stock who has not previously complied with
this Section 2.2 shall thereafter look only to the Buyer for payment of its
claim for Buyer Common Stock, any cash in lieu of fractional shares of
Buyer Common Stock and any dividends or distributions with respect to Buyer
Common Stock.
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(g) No Liability. To the extent permitted by applicable law, none of the
Buyer, the Transitory Subsidiary, the Company, the Surviving Corporation or
the Exchange Agent shall be liable to any holder of shares of Company
Common Stock or Buyer Common Stock, as the case may be, for such shares (or
dividends or distributions with respect thereto) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law. If any Certificate shall not have been surrendered prior to one year
after the Effective Time (or immediately prior to such earlier date on
which any shares of Buyer Common Stock, and any cash payable to the holder
of such Certificate pursuant to this Article II or any dividends or
distributions payable to the holder of such Certificate would otherwise
escheat to or become the property of any Governmental Entity (as defined in
Section 3.3(c))), any such shares of Buyer Common Stock or cash, dividends
or distributions in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(h) Withholding Rights. Each of the Buyer and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code, or any other
applicable provision of law. To the extent that amounts are so withheld by
the Surviving Corporation or the Buyer, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation
or the Buyer, as the case may be.
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Buyer Common Stock and any
cash in lieu of fractional shares, and unpaid dividends and distributions
on shares of Buyer Common Stock deliverable in respect thereof pursuant to
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Article III are true and
correct, except as set forth herein or in the disclosure schedule delivered by
the Company to the Buyer on or before the date of this Agreement (the "Company
Disclosure Schedule"). The Company Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article III and the disclosure in any paragraph shall qualify other
paragraphs in this Article III only to the extent that it is reasonably
apparent from a reading of such disclosure that it also qualifies or applies to
such other paragraphs.
3.1 Organization, Standing and Power; Subsidiaries.
(a) Each of the Company and its Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has all requisite corporate
power and authority to own, lease and operate its properties and assets and
to carry on its business as now being conducted and as proposed to be
conducted, and is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the failure to be so
qualified, individually or in the aggregate, would be reasonably likely to
have a material adverse effect on the
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business, properties, financial condition, results of operations or
prospects of the Company and its Subsidiaries, taken as a whole, or to have
a material adverse effect on the ability of the Company to consummate the
transactions contemplated by this Agreement or the Company Stock Option
Agreement (a "Company Material Adverse Effect"); provided, however, that
"Company Material Adverse Effect" shall not include any adverse change,
effect or event that (i) is demonstrably shown to have been proximately
caused by the announcement or pendency of the Merger, (ii) is caused by any
breach of any representation, warranty or covenant by the Buyer or the
Transitory Subsidiary, or (iii) applies generally to any entity engaged in
the same business in which the Company is engaged.
(b) Except as set forth in the Company SEC Reports (as defined in Section
3.4) filed prior to the date of this Agreement, neither the Company nor any
of its Subsidiaries directly or indirectly owns any equity, membership,
partnership or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity, membership, partnership or
similar interest in, any corporation, partnership, joint venture, limited
liability company or other business association or entity, whether
incorporated or unincorporated. As used in this Agreement, the word
"Subsidiary" means, with respect to a party, any corporation, partnership,
joint venture, limited liability company or other business association or
entity, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party
and/or one or more of its Subsidiaries do not have a majority of the voting
interest in such partnership), (ii) such party and/or one or more of its
Subsidiaries holds voting power to elect a majority of the board of
directors or other governing body performing similar functions, or (iii)
such party and/or one or more of its Subsidiaries, directly or indirectly,
owns or controls more than 50% of the equity, membership, partnership or
similar interests.
(c) The Company has delivered to the Buyer complete and accurate copies
of the Restated Articles of Incorporation and By-laws of the Company and of
the charter, by-laws or other organization documents of each Subsidiary of
the Company.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of 50,000,000
shares of Company Common Stock and 5,000,000 shares of preferred stock,
$1.00 par value per share ("Company Preferred Stock"). As of the close of
business on the date immediately preceding the date of this Agreement, (i)
14,258,690 shares of Company Common Stock were issued and outstanding, (ii)
no shares of Company Common Stock were held in the treasury of the Company
or by Subsidiaries of the Company, and (iii) no shares of the Company
Preferred Stock were issued and outstanding.
(b) Section 3.2(b) of Company Disclosure Schedule lists the number of
shares of Company Common Stock reserved for future issuance pursuant to
stock options granted and outstanding as of the date of this Agreement and
the plans under which such options were granted (collectively, the "Company
Stock Plans") and sets forth a complete and accurate list of all holders of
outstanding options to purchase shares of Company Common Stock (such
outstanding options, the "Company Stock Options") under the Company Stock
Plans, indicating the number of shares of Company Common Stock subject to
each Company Stock Option, and the exercise price, the date of grant,
vesting schedule and the expiration date thereof. Section 3.2(b) of the
Company Disclosure Schedule shows the number of shares of Company Common
Stock reserved for future issuance pursuant to warrants or other
outstanding rights to purchase shares of Company Common Stock outstanding
as of the date of this Agreement (such outstanding warrants or other
rights, the "Company Warrants") and the agreement or other document under
which such Company Warrants were granted and sets forth a complete and
accurate list of all holders of Company Warrants indicating the number and
type of shares of Company Common Stock subject to each Company Warrant, and
the exercise price, the date of grant and the expiration date thereof.
Except (x) as
6
set forth in this Section 3.2(b) of the Company Disclosure Schedule and (y)
as reserved for future grants under Company Stock Plans, (i) there are no
equity securities of any class of the Company or any of its Subsidiaries,
or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding and (ii) there are
no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound
obligating the Company or any of its Subsidiaries to issue, transfer,
deliver or sell, or cause to be issued, transferred, delivered or sold,
additional shares of capital stock of the Company or any of its
Subsidiaries or any security or rights convertible into or exchangeable or
exercisable for any such shares, or obligating the Company or any of its
Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify
or amend or enter into any such option, warrant, equity security, call,
right, commitment or agreement. Neither the Company nor any of its
Subsidiaries has issued and outstanding any stock appreciation rights,
phantom stock, performance based rights or similar rights or obligations.
To the knowledge of the Company, other than the Stockholders Agreements,
there are no agreements or understandings with respect to the voting
(including voting trusts and proxies) or sale or transfer (including
agreements imposing transfer restrictions) of any shares of capital stock
of the Company or any of its Subsidiaries.
(c) All outstanding shares of Company Common Stock are, and all shares of
Company Common Stock subject to issuance as specified above, upon issuance
on the terms and conditions specified in the instruments pursuant to which
they are issuable, will be, duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the TBCA, the Company's
Restated Articles of Incorporation or By-laws or any agreement to which the
Company is a party or is otherwise bound. There are no obligations,
contingent or otherwise, of Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of the Company Common
Stock or the capital stock of the Company or any of its Subsidiaries or to
provide funds to or make any material investment (in the form of a loan,
capital contribution or otherwise) in the Company or any Subsidiary of the
Company or any other entity, other than guarantees of bank obligations of
Subsidiaries of the Company entered into in the ordinary course of
business.
(d) All of the outstanding shares of capital stock of each of the
Company's Subsidiaries are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and all such shares are owned,
of record and beneficially, by the Company or another Subsidiary of the
Company free and clear of all security interests, liens, claims, pledges,
agreements, limitations in the Company's voting rights, charges or other
encumbrances of any nature.
(e) No consent of the holders of Company Stock Options is required in
connection with the conversion of such options contemplated by Section
6.11.
3.3 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and the Company Stock Option Agreement and to
consummate the transactions contemplated by this Agreement and the Company
Stock Option Agreement. The execution and delivery of this Agreement and
the Company Stock Option Agreement and the consummation of the transactions
contemplated by this Agreement and the Company Stock Option Agreement by
the Company have been duly authorized by all necessary corporate action on
the part of the Company, subject only to the approval of the Merger by the
Company's stockholders under the TBCA. This Agreement and the Company Stock
Option Agreement have been duly executed and delivered by the Company and
constitute the valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except as such enforceability may
be limited by principles of public policy and subject to bankruptcy,
insolvency and other laws relating to or affecting creditors' rights
generally and to general equitable principles.
7
(b) The execution and delivery of this Agreement and the Company Stock
Option Agreement by the Company does not, and the consummation of the
transactions contemplated by this Agreement and the Company Stock Option
Agreement will not, (i) conflict with, or result in any violation or breach
of, any provision of the Restated Articles of Incorporation or By-laws of
the Company or the charter, by-laws, or other organizational document of
any Subsidiary of the Company, (ii) conflict with, or result in any
violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material
benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract or other agreement, instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which any of them or
any of their properties or assets may be bound, or (iii) subject to
compliance with the requirements specified in clauses (i), (ii), (iii),
(iv) and (v) of Section 3.3(c), conflict with or violate any permit,
concession, franchise, license, judgment, injunction, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries or any of its or their properties or assets, except
in the case of (ii) and (iii) for any such conflicts, violations, breaches,
defaults, terminations, cancellations or accelerations which, individually
or in the aggregate, are not reasonably likely to have a Company Material
Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of, or,
registration, declaration, notice or filing with, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity") is required by or
with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement and the Company Stock Option
Agreement by the Company or the consummation of the transactions
contemplated by this Agreement or the Company Stock Option Agreement,
except for (i) the filing of a pre-merger notification report under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of the Certificate of Merger with the Secretary of
State of the States of Delaware and the filing of Articles of Merger with
the Secretary of State of the State of Texas, (iii) the filing of the Proxy
Statement (as defined in Section 3.16 below) with the Securities and
Exchange Commission (the "SEC") in accordance with the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (iv) the filing of such
reports or schedules under Section 13 of the Exchange Act as may be
required in connection with this Agreement and the transactions
contemplated hereby and (v) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable state securities laws.
(d) The affirmative vote of the holders of two-thirds of the outstanding
shares of Company Common Stock on the record date for the Company Meeting
(as defined below) is the only vote of the holders of any class or series
of the Company's capital stock or other securities necessary to approve the
Merger. There are no bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders
of the Company may vote.
3.4 SEC Filings; Financial Statements.
(a) The Company has filed and made available to the Buyer all forms,
reports and other documents required to be filed by the Company with the
SEC since December 18, 1998. All such required forms, reports and other
documents (including those that the Company may file after the date hereof
until the Closing) are referred to herein as the "Company SEC Reports." The
Company SEC Reports (i) were or will be filed on a timely basis, (ii) were
or will be prepared in compliance in all material respects with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such Company SEC
Reports, and (iii) did not or will not at the time they were or are filed
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in such Company SEC
8
Reports or necessary in order to make the statements in such Company SEC
Reports, in the light of the circumstances under which they were made, not
misleading. No Subsidiary of the Company is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes and schedules) contained or to be contained in the
Company SEC Reports (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, (ii) were or will be
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case
of unaudited statements, as permitted by the SEC on Form 10-Q under the
Exchange Act) and (iii) fairly presented or will fairly present the
consolidated financial position of Company and its Subsidiaries as of the
dates and the consolidated results of its operations and cash flows for the
periods indicated, consistent with the books and records of the Company and
its Subsidiaries, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were
not or are not expected to be material in amount. The unaudited balance
sheet of the Company as of September 30, 1999 is referred to herein as the
"Company Balance Sheet."
3.5 No Undisclosed Liabilities. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, and except for normal or
recurring liabilities incurred since the date of the Company Balance Sheet in
the ordinary course of business consistent with past practices, the Company and
its Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or
to become due, which, individually or in the aggregate, are reasonably likely
to have a Company Material Adverse Effect.
3.6 Absence of Certain Changes or Events. Except as disclosed in the Company
SEC Reports filed prior to the date of this Agreement, since the date of the
Company Balance Sheet, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course and in a manner consistent
with past practice and, since such date, there has not been (i) any event,
change or development in the business, properties, financial condition, results
of operations or prospects of the Company and its Subsidiaries, taken as a
whole, which, individually or in the aggregate, has had, or is reasonably
likely to have, a Company Material Adverse Effect; (ii) any damage, destruction
or loss (whether or not covered by insurance) with respect to the Company or
any of its Subsidiaries which, individually or in the aggregate, has had, or is
reasonably likely to have, a Company Material Adverse Effect; or (iii) any
other action or event that would have required the consent of the Buyer
pursuant to Section 5.1 of this Agreement had such action or event occurred
after the date of this Agreement.
3.7 Taxes.
(a) The Company and each of its Subsidiaries has filed all Tax Returns
(as defined below) that it was required to file, and all such Tax Returns
were correct and complete except for any errors or omissions which are not,
individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect. The Company and each of its Subsidiaries has paid
on a timely basis all Taxes (as defined below) that are shown to be due on
any such Tax Returns. The unpaid Taxes of the Company and its Subsidiaries
for Tax periods through the date of the Company Balance Sheet do not exceed
in any material respect the accruals and reserves for Taxes set forth on
the Company Balance Sheet exclusive of any accruals and reserves for
"deferred taxes" or similar items that reflect timing differences between
Tax and financial accounting principles. All Taxes that the Company or any
of its Subsidiaries is or was required by law to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Entity. For purposes of this Agreement, (i)
"Taxes" means all taxes, charges, fees, levies or other similar assessments
or liabilities, including income, gross receipts, ad valorem, premium,
9
value-added, excise, real property, personal property, sales, use,
services, transfer, withholding, employment, payroll and franchise taxes
imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the
United States or any such government, and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred
in connection with any tax or any contest or dispute thereof and (ii) "Tax
Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection
with Taxes.
(b) The Company has delivered or otherwise made available to the Buyer
correct and complete copies of all federal income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company or any of its Subsidiaries since inception. The federal income Tax
Returns of the Company and each of its Subsidiaries have not been audited
by the Internal Revenue Service or are closed by the applicable statute of
limitations for all taxable years through the taxable year specified in
Section 3.7(b) of the Company Disclosure Schedule. The Company has made
available to the Buyer correct and complete copies of all other Tax Returns
of the Company and its Subsidiaries together with all related examination
reports and statements of deficiency for all periods from and after January
1, 1996. No examination or audit of any Tax Return of the Company or any of
its Subsidiaries by any Governmental Entity is currently in progress or, to
the knowledge of the Company, threatened or contemplated. Neither the
Company nor any of its Subsidiaries has been informed by any Governmental
Entity that the Governmental Entity believes that the Company or any of its
Subsidiaries was required to file any Tax Return that was not filed.
Neither the Company nor any of its Subsidiaries has waived any statute of
limitations with respect to Taxes or agreed to an extension of time with
respect to a Tax assessment or deficiency.
(c) Neither the Company nor any of its Subsidiaries: (i) is a "consenting
corporation" within the meaning of Section 341(f) of the Code, and none of
the assets of the Company or its Subsidiaries are subject to an election
under Section 341(f) of the Code; (ii) has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(l)(A)(ii) of
the Code; (iii) has made any payments, is obligated to make any payments,
or is a party to any agreement that could obligate it to make any payments
that may be treated as an "excess parachute payment" under Section 280G of
the Code; (iv) has any actual or potential liability for any Taxes of any
person (other than the Company and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of law in any
jurisdiction), or as a transferee or successor, by contract, or otherwise;
or (v) is or has been required to make a basis reduction pursuant to
Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section
1.337(d)-2(b).
(d) None of the assets of the Company or any of its Subsidiaries: (i) is
property that is required to be treated as being owned by any other person
pursuant to the provisions of former Section 168(f)(8) of the Code; (ii) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code;
or (iii) directly or indirectly secures any debt the interest on which is
tax exempt under Section 103(a) of the Code.
(e) Neither the Company nor any of its Subsidiaries has undergone, or
will undergo as a result of the transactions contemplated by the Agreement,
a change in its method of accounting resulting in an adjustment to its
taxable income pursuant to Section 481(h) of the Code.
(f) No state or federal "net operating loss" of the Company determined as
of the Closing Date is subject to limitation on its use pursuant to Section
382 of the Code or comparable provisions of state law as a result of any
"ownership change" within the meaning of Section 382(g) of the Code or
comparable provisions of any state law occurring prior to the Closing Date.
(g) Neither the Company nor any of its Subsidiaries (i) is or has ever
been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax
10
Returns, other than a group of which only the Company and its Subsidiaries
are or were members or (ii) is a party to or bound by any Tax indemnity,
Tax sharing or Tax allocation agreement.
3.8 Owned and Leased Real Properties.
(a) The Company does not and has never owned any real property.
(b) The Company has provided or otherwise made available to the Buyer a
complete and accurate list of all real property leased by the Company or
its Subsidiaries (collectively "Company Leases") and the location of the
premises. The Company is not in default under any of the Company Leases.
Each of the Company Leases is in full force and effect and will not cease
to be in full force and effect as a result of the transactions contemplated
by this Agreement.
3.9 Intellectual Property.
(a) The Company and its Subsidiaries exclusively own, or are licensed or
otherwise possess legally enforceable rights to use on an exclusive basis,
without any obligation to make any fixed or contingent payments, including
any royalty payments, all patents, trademarks, trade names, domain names,
service marks and copyrights, any applications for and registrations of
such patents, trademarks, trade names, domain names, service marks and
copyrights, and all processes, formulae, methods, schematics, technology,
know-how, computer software programs or applications and tangible or
intangible proprietary information or material that are used or necessary
to conduct the business of the Company and its Subsidiaries as currently
conducted (the "Company Intellectual Property Rights").
(b) The execution and delivery of this Agreement and consummation of the
Merger will not result in the breach of, or create on behalf of any third
party the right to terminate or modify, any material license, sublicense or
other agreement relating to the Company Intellectual Property Rights, or
any license, sublicense and other agreement as to which the Company or any
of its Subsidiaries is a party and pursuant to which the Company or any of
its Subsidiaries is authorized to use any third party patents, trademarks,
copyrights or trade secrets (the "Company Third Party Intellectual Property
Rights"), including software that is used in the manufacture of,
incorporated in, or forms a part of any product or service sold by or
expected to be sold by a Company or any of its Subsidiaries.
(c) All patents, registered trademarks, service marks and copyrights
which are held by the Company or any of its Subsidiaries and which are
material to the business of the Company and its Subsidiaries, taken as a
whole, are valid and subsisting. The Company and its Subsidiaries have
taken commercially reasonable measures to protect the proprietary nature of
the Company Intellectual Property Rights that are material to the business
of the Company and its Subsidiaries, taken as a whole, and to maintain in
confidence all trade secrets and confidential information owned or used by
the Company or any of its Subsidiaries and that are material to the
business of the Company and its Subsidiaries, taken as a whole. To the
knowledge of the Company, no other person or entity is infringing,
violating or misappropriating any of the Company Intellectual Property
Rights. None of the activities or business previously or currently
conducted by the Company or any of the Subsidiaries infringes, violates or
constitutes a misappropriation of, any patents, trademarks, trade names,
service marks and copyrights, any applications for and registrations of
such patents, trademarks, trade names, service marks and copyrights, and
all processes, formulae, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material of any other person or entity. Neither
the Company nor any of its Subsidiaries has received any complaint, claim
or notice alleging any such infringement, violation or misappropriation.
3.10 Agreements, Contracts and Commitments.
(a) There are no contracts or agreements that are material contracts (as
defined in Item 601(b)(10) of Regulation S-K) with respect to the Company
and its Subsidiaries (the "Company Material Contracts"),
11
other than the Company Material Contracts identified on the exhibit indices
of the Company SEC Reports filed prior to the date of this Agreement. Each
Company Material Contract has not expired by its terms and is in full force
and effect. Neither the Company nor any of its Subsidiaries is in violation
of or in default under (nor does there exist any condition which, upon the
passage of time or the giving of notice or both, would cause such a
violation of or default under) any loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or other
contract, arrangement or understanding to which it is a party or by which
it or any of its properties or assets is bound, except for violations or
defaults which, individually or in the aggregate, have not resulted in, and
are not reasonably likely to result in, a Company Material Adverse Effect.
(b) Section 3.10(b) of the Company Disclosure Schedule sets forth a
complete list of each contract or agreement to which the Company or any of
its Subsidiaries is a party or bound with any Affiliate of the Company
(other than any Subsidiary which is a direct or indirect wholly owned
Subsidiary of the Company).
3.11 Litigation. Except as disclosed in the Company SEC Reports filed prior
to the date of this Agreement, there is no action, suit, proceeding, claim,
arbitration or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Company Material Adverse Effect. There are no judgments, orders or decrees
outstanding against the Company.
3.12 Environmental Matters.
(a) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement and except for such matters which, individually or
in the aggregate, have not had, and are not reasonably likely to have a
Company Material Adverse Effect: (i) the Company and each of its
Subsidiaries has complied with, and is not in violation of, any applicable
Environmental Laws (as defined in Section 3.12(b)); (ii) the properties
currently owned or operated by the Company and its Subsidiaries (including
soils, groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances (as defined in Section 3.12(c));
(iii) the properties formerly owned or operated by the Company or any of
its Subsidiaries were not contaminated with Hazardous Substances prior to
or during the period of ownership or operation by the Company or any of its
Subsidiaries; (iv) neither the Company nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on the
property of any third party; (v) neither the Company nor any of its
Subsidiaries have released any Hazardous Substance to the environment; (vi)
neither the Company nor any of its Subsidiaries has received any notice,
demand, letter, claim or request for information alleging that the Company
or any of its Subsidiaries may be in violation of, liable under or have
obligations under any Environmental Law; (vii) neither the Company nor any
of its Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are
no circumstances or conditions involving the Company or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, obligations, investigations, costs or restrictions on the
ownership, use or transfer of any property of the Company or any of its
Subsidiaries pursuant to any Environmental Law.
(b) For purposes of this Agreement, "Environmental Law" means any law,
regulation, order, decree, permit, authorization, opinion, common law or
agency requirement of any jurisdiction relating to: (A) the protection,
investigation or restoration of the environment, human health and safety,
or natural resources, (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
(c) For purposes of this Agreement, "Hazardous Substance" means any
substance that is: (A) listed, classified, regulated or which falls within
the definition of a "hazardous substance" or "hazardous
12
material" pursuant to any Environmental Law; (B) any petroleum product or
by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C)
any other substance which is the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.
(d) Section 3.12(d) of the Company Disclosure Schedule sets forth a
complete and accurate list of all documents (whether in hard copy or
electronic form) that contain any environmental reports, investigations and
audits relating to premises currently or previously owned or operated by
the Company or any of its Subsidiaries (whether conducted by or on behalf
of the Company or one of its Subsidiaries or a third party, and whether
done at the initiative of the Company or one of its Subsidiaries or
directed by a Governmental Entity or other third party) which were issued
or conducted during the past five years and which the Company has
possession of or access to. A complete and accurate copy of each such
document has been provided to the Buyer.
3.13 Employee Benefit Plans.
(a) Section 3.13(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all Employee Benefit Plans (as defined below)
maintained, or contributed to, by the Company, any Subsidiary of the
Company or any ERISA Affiliate (as defined below) (together, the "Company
Employee Plans"). For purposes of this Agreement, the following terms shall
have the following meanings: (i) "Employee Benefit Plan" means any
"employee pension benefit plan" (as defined in Section 3(2) of ERISA), any
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA), and
any other written or oral plan, agreement or arrangement involving direct
or indirect compensation, including insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation; (ii) "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended; and (iii)
"ERISA Affiliate" means any entity which is, or at any applicable time was,
a member of (1) a controlled group of corporations (as defined in Section
414(b) of the Code), (2) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (3) an affiliated
service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or
included the Company or a Subsidiary.
(b) With respect to each Company Employee Plan, the Company has furnished
or otherwise made available to the Buyer, a complete and accurate copy of
(i) such Company Employee Plan (or a written summary of any unwritten
plan), (ii) the most recent annual report (Form 5500) filed with the IRS,
(iii) each trust agreement, group annuity contract and summary plan
description, if any, relating to such Company Employee Plan and (iv) all
reports regarding the satisfaction of the nondiscrimination requirements of
Sections 410(b), 401(k) and 401(m) of the Code.
(c) Each Company Employee Plan has been administered in all material
respects in accordance with its terms and each of the Company, the
Company's Subsidiaries and their ERISA Affiliates has in all material
respects met its obligations with respect to such Company Employee Plan and
has made in all material respects all required contributions thereto. With
respect to the Company Employee Plans, no event has occurred, and to the
knowledge of the Company, there exists no condition or set of circumstances
in connection with which the Company or any of its Subsidiaries could be
subject to any liability under ERISA, the Code or any other applicable law
which, individually or in the aggregate, is reasonably likely to have a
Company Material Adverse Effect.
(d) With respect to the Company Employee Plans, there are no material
funded benefit obligations for which contributions have not been made or
properly accrued and there are no material unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principles, on
the financial statements of the Company.
13
(e) All the Company Benefit Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Company Benefit Plans are
qualified and the plans and trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code,
no such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated
since the date of its most recent determination letter or application
therefor in any respect, and no act or omission has occurred, that would
adversely affect its qualification or materially increase its cost.
(f) Neither the Company, any Subsidiary of the Company nor any ERISA
Affiliate has (i) ever maintained a Company Employee Plan which was ever
subject to Section 412 of the Code or Title IV of ERISA or (ii) ever been
obligated to contribute to a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA). No Company Benefit Plan is funded by, associated with
or related to a "voluntary employee's beneficiary association" within the
meaning of Section 501(c)(9) of the Code.
(g) Each Company Benefit Plan is amendable and terminable unilaterally by
the Company at any time without liability to the Company as a result
thereof and no Company Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed
generally to employees by its terms prohibits the Company from amending or
terminating any such Company Benefit Plan.
(h) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement, neither the Company nor any of its Subsidiaries is
a party to any oral or written (i) agreement with any stockholders,
director, executive officer or other key employee of the Company or any of
its Subsidiaries (A) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction
involving the Company or any of its Subsidiaries of the nature of any of
the transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director,
executive officer or key employee; (ii) agreement, plan or arrangement
under which any person may receive payments from the Company or any of its
Subsidiaries that may be subject to the tax imposed by Section 4999 of the
Code or included in the determination of such person's "parachute payment"
under Section 280G of the Code; and (iii) agreement or plan binding the
Company or any of its Subsidiaries, including any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan or
severance benefit plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of
any of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
3.14 Compliance With Laws. The Company and each of its Subsidiaries has
complied with, is not in violation of, and has not received any notice alleging
any violation with respect to, any applicable provisions of any statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its properties or assets, except for failures to comply or
violations which, individually or in the aggregate, have not had, and are not
reasonably likely to have, a Company Material Adverse Effect.
3.15 Permits. The Company and each of its Subsidiaries have all permits,
licenses and franchises from Governmental Entities required to conduct their
businesses as now being conducted or as presently contemplated to be conducted
(the "Company Permits"), except for such permits, licenses and franchises the
absence of which, individually or in the aggregate, have not resulted in, and
are not reasonably likely to result in, a Company Material Adverse Effect. The
Company and its Subsidiaries are in compliance with the terms of the Company
Permits, except for failures to comply which, individually or in the aggregate,
have not had and are not reasonably likely to have, a Company Material Adverse
Effect.
3.16 Registration Statement; Proxy Statement/Prospectus. The information to
be supplied by the Company for inclusion in the registration statement on Form
S-4 pursuant to which shares of Buyer Common Stock issued in the Merger will be
registered under the Securities Act (the "Registration Statement"), shall not
14
at the time the Registration Statement is declared effective by the SEC contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information to be
supplied by the Company for inclusion in the proxy statement/prospectus (the
"Proxy Statement") to be sent to the stockholders of the Company in connection
with the meeting of the Company's stockholders to consider this Agreement and
the Merger (the "Company Meeting") shall not, on the date the Proxy Statement
is first mailed to stockholders of the Company, at the time of the Company
Meeting and at the Effective Time, contain any statement which, at such time
and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements made in the Proxy Statement not
false or misleading; or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
proxies for the Company Meeting which has become false or misleading. If at any
time prior to the Effective Time any event relating to the Company or any of
its Affiliates, officers or directors should be discovered by the Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, the Company shall promptly inform the Buyer.
3.17 Labor Matters. Neither the Company nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
Neither the Company nor any of its Subsidiaries is the subject of any
proceeding asserting that the Company or any of its Subsidiaries has committed
an unfair labor practice or is seeking to compel it to bargain with any labor
union or labor organization, nor is there pending or, to the knowledge of the
Company, threatened, any labor strike, dispute, walkout, work stoppage, slow-
down or lockout involving the Company or any of its Subsidiaries.
3.18 Insurance. Each of the Company and its Subsidiaries maintains insurance
policies (the "Insurance Policies") with reputable insurance carriers against
all risks of a character and in such amounts as are usually insured against by
similarly situated companies in the same or similar businesses. Each Insurance
Policy is in full force and effect and is valid, outstanding and enforceable,
and all premiums due thereon have been paid in full. None of the Insurance
Policies will terminate or lapse (or be affected in any other materially
adverse manner) by reason of the transactions contemplated by this Agreement.
The Company and its Subsidiaries have complied in all material respects with
the provisions of each Insurance Policy under which it is the insured party. No
insurer under any Insurance Policy has canceled or generally disclaimed
liability under any such policy or indicated any intent to do so or not to
renew any such policy. All material claims under the Insurance Policies have
been filed in a timely fashion.
3.19 Business Activity Restrictions. There is no non-competition or other
similar agreement, commitment, judgment, injunction, order to create to which
the Company or any Subsidiary of the Company is a party or subject to that has
or could reasonably be expected to have the effect of prohibiting or impairing
the conduct of the business by the Company in any material respect. The Company
has not entered into any agreement under which it is restricted in any material
respect from selling, licensing or otherwise distributing any of its technology
or products, or providing services to, customers or potential customers or any
class of customers, in any geographic area, during any period of time or any
segment of the market or line of business.
3.20 Year 2000 Compliance.
(a) The Company has conducted "year 2000" audits with respect to (i) all
of the internal systems of the Company and each of its Subsidiaries used in
the business or operations of the Company or any of its Subsidiaries,
including, without limitation, computer hardware systems, software
applications, firmware, equipment firmware and other embedded systems, and
(ii) the software, hardware, firmware and other technology which constitute
part of the products and services marketed or sold by the Company or any of
its Subsidiaries or licensed by the Company or any of its Subsidiaries to
third parties. The Company has requested in writing "year 2000" compliance
certificates with respect to all material third-party systems used in
connection with the business or operations of the Company and its
Subsidiaries. Communications
15
to date with the Company's major telecommunications, information systems
and software vendors indicate that these third parties expect, at this
time, to be compliant by the year 2000 based on their progress to date.
(b) All of (i) the material internal systems of the Company and each of
its Subsidiaries used in the business or operations of the Company or any
of its Subsidiaries, as the case may be, including, without limitation,
computer hardware systems, software applications, firmware, equipment
containing embedded microchips and other embedded systems (collectively,
the "Company Systems"), and (ii) the software, hardware, firmware and other
technology which constitute part of the products and services marketed or
sold by the Company or any of its Subsidiaries or licensed by the Company
or any of its Subsidiaries to third parties (collectively, the "Company
Products") will be Year 2000 Compliant by the end of November 1999.
(c) The Company has no knowledge of any failure to be Year 2000 Compliant
of any material third-party system used in connection with the business or
operations of the Company and its Subsidiaries.
(d) For purposes of this Agreement, "Year 2000 Compliant" means that the
applicable system or item:
(i) accurately receives, records, stores, provides, recognizes and
processes all date and time data from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all
leap years;
(ii) accurately performs all date-dependent calculations and
operations (including, without limitation, mathematical operations,
sorting, comparing and reporting) from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all
leap years; and
(iii) does not malfunction, cease to function or provide invalid or
incorrect results as a result of (x) the change of years from 1999 to
2000 or from 2000 to 2001, (y) date data, including date data which
represents or references different centuries, different dates during
1999 and 2000, or more than one century or (z) the occurrence of any
particular date;
in each case without human intervention, other than original data entry;
provided, in each case, that all applications, hardware and other systems
used in conjunction with such system or item which are not owned or
licensed by the Company or any of its Subsidiaries correctly exchange date
data with or provide data to such system or item.
(e) Neither the Company nor any of its Subsidiaries has provided any
guarantee or warranty for any product sold or licensed, or service
provided, by the Company or any Subsidiary to the effect that such product
or service (i) complies with or accounts for the fact of the arrival of the
year 2000, (ii) will not be adversely affected with respect to
functionality, interoperability, performance or volume capacity (including,
without limitation, the processing and reporting of data) by virtue of the
arrival of the year 2000 or (iii) is otherwise Year 2000 Compliant.
3.21 Assets. Each of the Company and its Subsidiaries owns or leases all
tangible assets necessary for the conduct of its businesses as presently
conducted. All of such tangible assets which are owned, are owned free and
clear of all mortgages, security interest, pledges, liens and encumbrances
("Liens") except for (i) Liens which are disclosed in the Company SEC Reports
filed prior to the date of this Agreement and (ii) other Liens which,
individually and in the aggregate, do not materially interfere with the ability
of the Company and its Subsidiaries to conduct their business as currently
conducted and have not resulted in, and are not reasonably likely to result in,
a Company Material Adverse Effect. The tangible assets of the Company and its
Subsidiaries, taken as a whole, are free from material defects, have been
maintained in accordance with normal industry practice, are in good operating
condition and repair (subject to normal wear and tear) and are suitable for the
purpose for which they are presently used.
16
3.22 Subscribers. Section 3.22 of the Company Disclosure Schedule sets forth
the total number of the Company's subscribers as of October 31, 1999 who, as of
such date, had paid at least one monthly xxxx for the Company's services.
3.23 Accounts Receivable. All accounts receivable of the Company reflected on
the Company Balance Sheet are valid receivables, arose from bona fide sales of
goods and services in the ordinary course of business, and are not subject to
any material setoffs or counterclaims.
3.24 No Existing Discussions. As of the date of this Agreement, neither the
Company nor any of its Subsidiaries is engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to an Alternative
Transaction (as defined in Section 8.3(g)).
3.25 Opinion of Financial Advisor. The financial advisor of the Company,
Xxxxxxx, Sachs & Co., has delivered to the Company an opinion dated the date of
this Agreement to the effect, as of such date, that the Exchange Ratio is fair
to the holders of the Company Common Stock from a financial point of view, a
signed copy of which opinion will be delivered to the Buyer promptly after the
date hereof.
3.26 Part Thirteen of the TBCA Not Applicable. The Board of Directors of the
Company has taken all actions necessary so that the restrictions contained in
Part Thirteen of the TBCA applicable to a "business combination" (as defined
therein) will not apply to the execution, delivery or performance of this
Agreement, the Company Stock Option Agreement, the Stockholder Agreements or
the consummation of the Merger or the other transactions contemplated by this
Agreement, the Company Stock Option Agreement or the Stockholder Agreements.
3.27 Tax Matters. To the Company's knowledge, after consulting with its
independent auditors, neither the Company nor any of its Affiliates has taken
or agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
3.28 Transactions with Affiliates. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, neither the Company nor any
of its Subsidiaries has entered into any transaction with any director, officer
or other affiliate of the Company or any of its Subsidiaries or any transaction
that would be subject to proxy statement disclosure pursuant to Item 404 of
Regulation S-K.
3.29 Brokers; Schedule of Fees and Expenses.
(a) No agent, broker, investment banker, financial advisor or other firm
or person is or will be entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with any of the
transactions contemplated by this Agreement, except Xxxxxxx, Xxxxx & Co.,
whose fees and expense will be paid by the Company. The Company has
delivered to the Buyer a complete and accurate copy of all agreements
pursuant to which Xxxxxxx, Sachs & Co. is entitled to any fees and expenses
in connection with any of the transactions contemplated by this Agreement.
(b) Section 3.29(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of the estimated fees and expenses incurred and
to be incurred by the Company and any of its Subsidiaries in connection
with this Agreement and the transactions contemplated by this Agreement
(including the fees and expenses of Xxxxxxx, Xxxxx & Co. and of the
Company's legal counsel and accountants).
3.30 Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Company Disclosure Schedule
or any other document, certificate or other instrument delivered to or to be
delivered by or on behalf of the Company pursuant to this Agreement, contains
or will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary, in light of the circumstances under which
it was or will be made, in order to make the statements herein or therein not
misleading.
17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
THE TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary represent and warrant to the Company
that the statements contained in this Article IV are true and correct, except
as set forth herein or in the disclosure schedule delivered by the Buyer to the
Company on or before the date of this Agreement (the "Buyer Disclosure
Schedule"). The Buyer Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV and the disclosure in any paragraph shall qualify other paragraphs in this
Article IV only to the extent that it is reasonably apparent from a reading of
such document that it also qualifies or applies to such other paragraphs.
4.1 Organization, Standing and Power. Each of the Buyer and the Transitory
Subsidiary and the Buyer's other Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the business,
properties, financial condition, results of operations or prospects of the
Buyer and its Subsidiaries, taken as a whole, or to have a material adverse
effect on the ability of the Buyer to consummate the transactions contemplated
by this Agreement (a "Buyer Material Adverse Effect").
4.2 Capitalization. The authorized capital stock of the Buyer consists of
150,000,000 shares of Buyer Common Stock and 10,000,000 shares of preferred
stock, $.01 par value per share (the "Buyer Preferred Stock"). As of the close
of business on the date immediately preceding the date of this Agreement,
64,152,028 shares of Buyer Common Stock were issued and outstanding and no
shares of Buyer Preferred Stock were issued and outstanding. All outstanding
shares of Buyer Common Stock are, and all shares of Buyer Common Stock subject
to issuance as specified above, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be, duly
authorized, validly issued, fully paid and nonassessable. All of the shares of
Buyer Common Stock issuable pursuant to Section 2.1(c) in connection with the
Merger, when issued in accordance with this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable.
4.3 Authority; No Conflict; Required Filings and Consents.
(a) Each of the Buyer and the Transitory Subsidiary has all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement by the Buyer and the Transitory Subsidiary
have been duly authorized by all necessary corporate action on the part of
each of the Buyer and the Transitory Subsidiary (including the approval of
the Merger by the Buyer as the sole stockholder of the Transitory
Subsidiary). This Agreement and has been duly executed and delivered by
each of the Buyer and the Transitory Subsidiary and constitutes the valid
and binding obligation of each of the Buyer and the Transitory Subsidiary,
enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement by each of the Buyer and
the Transitory Subsidiary does not, and the consummation of the
transactions contemplated by this Agreement will not, (i) conflict with, or
result in any violation or breach of, any provision of the Certificate of
Incorporation or By-laws of the Buyer or the Transitory Subsidiary, (ii)
conflict with, or result in any violation or breach of, or constitute (with
or without notice or lapse of time, or both) a default (or give rise to a
right of termination, cancellation or acceleration of any obligation or
loss of any material benefit) under, or require a consent or
18
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract or other agreement,
instrument or obligation to which the Buyer or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be
bound, or (iii) subject to compliance with the requirements specified in
clause (i), (ii), (iii), (iv), (v) and (vi) of Section 4.3(c), conflict
with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to the Buyer or any of its Subsidiaries or any of its or their
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, breaches, defaults, terminations, cancellations or
accelerations which, individually or in the aggregate, are not reasonably
likely to have a Buyer Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of, or
registration, declaration, notice or filing with, any Governmental Entity
is required by or with respect to the Buyer or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by the Buyer
or the Transitory Subsidiary or the consummation of the transactions
contemplated by this Agreement, except for (i) the filing of a pre-merger
notification report under the HSR Act, (ii) the filing of the Certificate
of Merger with the Secretary of State of the States of Delaware and Texas,
(iii) the filing of the Registration Statement with the SEC in accordance
with the Securities Act, (iv) the filings of such reports or schedules
under Section 13 of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby, (v) such consents,
approvals, orders, authorizations, registrations, declarations and filings
as may be required under applicable state securities laws and (vi) the
filing with the Nasdaq National Market of a Notification Form for Listing
of Additional Shares with respect to the Buyer Common Stock issuable in
connection with the Merger.
4.4 SEC Filings; Financial Statements.
(a) The Buyer has filed and made available to the Company all forms,
reports and other documents required to be filed by the Buyer with the SEC
since September 25, 1998. All such required forms, reports and other
documents (including those that the Buyer may file after the date hereof
until the Closing) are referred to herein as the "Buyer SEC Reports." The
Buyer SEC Reports (i) were or will be filed on a timely basis, (ii) were or
will be prepared in compliance in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
Buyer SEC Reports, and (iii) did not or will not at the time they were or
are filed contain any untrue statement of a material fact or omit to state
a material fact required to be stated in such Buyer SEC Reports or
necessary in order to make the statements in such Buyer SEC Reports, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes and schedules) contained or to be contained in the
Buyer SEC Reports (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, (ii) were or will be
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case
of unaudited statements, as permitted by the SEC on Form 10-Q under the
Exchange Act) and (iii) fairly presented or will fairly present the
consolidated financial position of the Buyer and its Subsidiaries as of the
dates and the consolidated results of its operations and cash flows for the
periods indicated, consistent with the books and records of the Buyer and
its Subsidiaries, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were
not or are not expected to be material in amount. The unaudited balance
sheet of the Buyer as of September 30, 1999 is referred to herein as the
"Buyer Balance Sheet."
4.5 Absence of Certain Changes or Events. Except as disclosed in the Buyer
SEC Reports filed prior to the date of this Agreement, since the date of the
Buyer Balance Sheet, there has not been any event, change or
19
development in the business, properties, financial condition, results of
operations or prospects of the Buyer and its Subsidiaries, taken as a whole,
which has had, or is reasonably likely to have, a Buyer Material Adverse
Effect.
4.6 Tax Matters. To the Buyer's knowledge, after consulting with its
independent auditors, neither the Buyer nor any of its Affiliates has taken or
agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
4.7 Litigation. Except as disclosed in the Buyer SEC Reports filed prior to
the date of this Agreement, there is no action, suit, proceeding, claim,
arbitration or investigation pending or, to the knowledge of the Buyer,
threatened against or affecting the Buyer or any of its Subsidiaries which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Buyer Material Adverse Effect. There are no judgments, orders or decrees
outstanding against the Buyer.
4.8 Compliance with Laws. Each of the Buyer and the Transitory Subsidiary has
complied with, is not in violation of, and has not received any notice alleging
any violation with respect to, any applicable provisions of any statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its properties or assets, except for failures to comply or
violations which, individually or in the aggregate, have not had, and would not
have, a Buyer Material Adverse Effect.
4.9 Registration Statement; Proxy Statement/Prospectus. The information in
the Registration Statement (except for information supplied by the Company for
inclusion in the Registration Statement, as to which the Buyer makes no
representation and which shall not constitute part of the Buyer SEC Report for
purposes of this Agreement) shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact
or omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. If at any time prior to the Effective Time any event relating to
the Buyer or any of its Affiliates, officers or directors should be discovered
by the Buyer which should be set forth in an amendment to the Registration
Statement, the Buyer shall promptly inform the Company.
4.10 Operations of the Transitory Subsidiary. The Transitory Subsidiary was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
4.11 Brokers. The Buyer has not retained or incurred any liability to any
agent, broker, investment banker, financial advisor or similar firm or person
in connection with any of the transactions contemplated by this Agreement,
except Bear, Xxxxxxx & Co. Inc., whose fees and expenses will be paid by the
Buyer.
4.12 Disclosure. No representation or warranty by the Buyer contained in this
Agreement, and no statement contained in any document, certificate or other
instrument delivered to or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. Except as expressly provided herein or as
consented to in writing by the Buyer, from and after the date of this Agreement
until the earlier of the termination of this Agreement in accordance with its
terms or the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to, act and carry on its business in the usual, regular and
ordinary course in substantially the same manner as
20
previously conducted, pay its debts and Taxes and perform its other obligations
when due (subject to good faith disputes over such debts, Taxes or
obligations), and use all reasonable efforts, consistent with past practices,
to maintain and preserve its and each Subsidiary's business organization,
assets and properties, keep available the services of its present officers and
employees and preserve its advantageous business relationships with customers,
suppliers, distributors and others having business dealings with it to the end
that its goodwill and ongoing business shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, from and after the date
of this Agreement until the earlier of the termination of this Agreement in
accordance with its terms or the Effective Time, the Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, do any of
the following without the prior written consent of the Buyer:
(a) (A) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect
of, any of its capital stock (other than dividends and distributions by a
direct or indirect wholly owned subsidiary of the company to its parent);
(B) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution of shares of its capital stock; or (C) purchase, redeem or
otherwise acquire any shares of its capital stock or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities;
(b) issue, deliver, sell, grant, pledge or otherwise dispose of or
encumber any shares of its capital stock, any other voting securities or
any securities convertible into or exchangeable for, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible or exchangeable securities (other than the issuance of shares
of Company Common Stock upon the exercise of Company Options or Company
Warrants outstanding on the date of this Agreement in accordance with their
present terms);
(c) amend its Restated Articles of Incorporation, by-laws or other
comparable charter or organizational documents, except as expressly
provided by this Agreement;
(d) except as permitted by Section 6.1, acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets or
any stock of, or by any other manner, any business or any corporation,
partnership, joint venture, limited liability company, association or other
business organization or division thereof or (B) any assets that are
material, in the aggregate, to the Company and the Subsidiaries, taken as a
whole, except purchases of inventory in the ordinary course of business
consistent with past practice;
(e) except in the ordinary course of business consistent with past
practice, sell, lease, license, pledge, or otherwise dispose of or encumber
any properties or assets of the Company or of any of its Subsidiaries;
(f) whether or not in the ordinary course of business or consistent with
past practice, sell or dispose of any assets material to the Company and
its Subsidiaries, taken as a whole (including any accounts, leases,
contracts or intellectual property or any assets or the stock of any
Subsidiaries, but excluding the sale of products in the ordinary course of
business consistent with past practice);
(g) adopt or implement any stockholder rights plan;
(h) except as permitted by Section 6.1, enter into an agreement with
respect to any merger, consolidation, liquidation or business combination,
or any acquisition or disposition of all or substantially all of the assets
or securities of the Company or any of its Subsidiaries;
(i) (A) incur or suffer to exist any indebtedness for borrowed money
other than such indebtedness which existed as of September 30, 1999 as
reflected on the Company Balance Sheet or guarantee any such indebtedness
of another person, (B) issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or any of its
Subsidiaries, guarantee any debt securities of another
21
person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, or (C) make
any loans, advances (other than routine advances to employees of the
Company in the ordinary course of business consistent with past practice)
or capital contributions to, or investment in, any other person;
(j) make any capital expenditures or expenditures with respect to
property, plant or equipment in excess of $500,000 in the aggregate for the
Company and its Subsidiaries, taken as a whole;
(k) make any changes in accounting methods, principles or practices,
except insofar as may have been required by a change in generally accepted
accounting principles or, except as so required, change any assumption
underlying, or method of calculating, any bad debt, contingency or other
reserve;
(l) (A) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Company SEC Reports filed
prior to the date of this Agreement (to the extent so reflected or reserved
against) or incurred thereafter in the ordinary course of business
consistent with past practice, or (B) waive any material benefits of any
confidentiality, standstill or similar agreements to which the Company or
any of its Subsidiaries is a party;
(m) modify, amend or terminate any material contract or agreement to
which the Company or any of its Subsidiaries is party, or knowingly waive,
release or assign any material rights or claims (including any write-off or
other compromise of any accounts receivable of the Company of any of its
Subsidiaries);
(n) except in the ordinary course of business consistent with past
practice (A) enter into any material contract or agreement or (B) license
any material intellectual property rights to or from any third party;
(o) except as required to comply with applicable law or agreements, plans
or arrangements existing on the date hereof or as otherwise disclosed in
Section 5.1(o) of the Company Disclosure Schedule, (A) adopt, enter into,
terminate or amend any employment, severance or similar agreement or
benefit plan for the benefit or welfare of any current or former director,
officer or employee or any collective bargaining agreement, (B) increase in
any material respect the compensation or fringe benefits of, or pay any
bonus to, any director, officer or key employee, (C) accelerate the
payment, right to payment or vesting of any compensation or benefits,
including any outstanding options or restricted stock awards, (D) pay any
material benefit not provided for as of the date of this Agreement under
any benefit plan, (E) grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or benefit plan
(including the grant of stock options, stock appreciation rights, stock
based or stock related wards, performance units or restricted stock, or the
removal of existing restrictions in any benefit plans or agreements or
awards made thereunder), or (F) take any action other than in the ordinary
course of business consistent with past practice to fund or in any other
way secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or benefit plan;
(p) make or rescind any Tax election, settle or compromise any Tax
liability or amend any Tax return;
(q) initiate, compromise or settle any material litigation or arbitration
proceeding;
(r) close any facility or office;
(s) invest funds in debt securities or other instruments maturing more
than 90 days after the date of investment;
22
(t) fail to pay accounts payable and other obligations in the ordinary
course of business consistent with past practice; or
(u) authorize any of, or commit or agree, in writing or otherwise, to
take any of, the foregoing actions or any action which would make any
representation or warranty in Artilce III untrue or incorrect in any
material respect, or would materially impair or prevent the occurrence of
any conditions Article VII hereof.
5.2 Cooperation. Subject to compliance with applicable law, from and after
the date of this Agreement and continuing until the earlier of the termination
of this Agreement in accordance with its terms of the Effective Time, the
Company and each of its Subsidiaries shall make its officers available to
confer on a regular and frequent basis with one or more representatives of the
Buyer to report on the general status of ongoing operations and shall promptly
provide the Buyer or its counsel with copies of all filings made by such party
with any Governmental Entity in connection with this Agreement, the Merger and
the transactions contemplated hereby.
5.3 Confidentiality. The parties acknowledge that the Buyer and the Company
have previously executed a Confidentiality Agreement, dated as of October 21,
1999 (the "Confidentiality Agreement"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms, except as
expressly modified herein.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
(a) From and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company and its Subsidiaries shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative
or agent (i) solicit, initiate, or encourage any inquiries or proposals
that constitute, or could reasonably be expected to lead to, a proposal or
offer for an Alternative Transaction (as defined Section 8.3(g)), other
than the transactions contemplated by this Agreement, (ii) engage in
negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Alternative
Transaction, or (iii) agree to or recommend any Alternative Transaction;
provided, however, that, if the Company has not breached this Section 6.1,
nothing contained in this Agreement shall prevent the Company or its Board
of Directors, from:
(A) furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity in connection
with an unsolicited bona fide written Alternative Transaction by such
person or entity or recommending an unsolicited bona fide written
Alternative Transaction to the stockholders of the Company, if and only
to the extent that
(1) the Board of Directors of the Company believes in good faith
(after consultation with its financial advisor) that such
Alternative Transaction is reasonably capable of being completed on
the terms proposed and would, if consummated, result in a
transaction more favorable than the transaction contemplated by this
Agreement (any such more favorable Alternative Transaction being
referred to in this Agreement as a "Superior Proposal") and the
Company's Board of Directors determines in good faith after
consultation with outside legal counsel that such action is
necessary for such Board of Directors to comply with its fiduciary
duties to stockholders under applicable law,
(2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or
entity, such Board of Directors receives from such person or entity
an executed confidentiality agreement with terms no less favorable
to such party than those contained in the Confidentiality Agreement,
and
23
(3) prior to recommending a Superior Proposal, the Company shall
provide the Buyer with at least five business days' prior notice of
its proposal to do so, during which time the Buyer may make, and in
such event the Company shall consider, a counterproposal to such
Superior Proposal, and the Company shall itself and shall cause its
financial and legal advisors to negotiate in good faith on its
behalf with the Buyer with respect to the terms and conditions of
such counterproposal; or
(B) complying with Rule 14d-9 and 14e-2 promulgated under the
Exchange Act with regard to an Alternative Transaction.
(b) The Company will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore of the
nature described in Section 6.1(a) and will use reasonable efforts to
obtain the return of any confidential information furnished to any such
parties.
(c) The Company shall notify the Buyer immediately (but in any event,
within 24 hours) after receipt by the Company (or its advisors) of any
Alternative Transaction or any request for nonpublic information in
connection with an Alternative Transaction or for access to the properties,
books or records of the Company by any person or entity that informs the
Company that it is considering making, or has made, an Alternative
Transaction. Such notice shall be made orally and in writing and shall
indicate in reasonable detail the identity of the offer or and the terms
and conditions of such proposal, inquiry or contact. The Company shall
continue to keep the Buyer informed, on a current basis, of the status of
any such discussions or negotiations and the terms being discussed or
negotiated.
(d) Nothing in this Section 6.1 shall (i) permit the Company to terminate
this Agreement (except as specifically provided in Section 8.1 hereof),
(ii) permit the Company to enter into any agreement with respect to an
Alternative Transaction during the term of this Agreement (it being agreed
that during the term of this Agreement, the Company shall not enter into
any agreement with any person that provides for, or in any way facilitates,
an Alternative Transaction (other than a confidentiality agreement of the
type referred to in Section 6.1(a) above)) or (iii) affect any other
obligation of the Company under this Agreement.
6.2 Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practicable after the execution of this Agreement, the
Buyer and the Company shall prepare and the Company shall file with the SEC
the Proxy Statement, and the Buyer shall prepare and file with the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus, provided that the Buyer may delay the filing of the
Registration Statement until approval of the Proxy Statement by the SEC.
The Buyer and the Company shall use reasonable efforts to cause the
Registration Statement to become effective as soon after such filing as
practicable. Each of the Buyer and the Company will respond to any comments
of the SEC and will use its respective reasonable efforts to have the Proxy
Statement cleared by the SEC and the Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filings and the Company will cause the Proxy Statement and the prospectus
contained within the Registration Statement to be mailed to its
stockholders at the earliest practicable time after both the Proxy
Statement is cleared by the SEC and the Registration Statement is declared
effective under the Securities Act. Each of the Buyer and the Company will
notify the other promptly upon the receipt of any comments from the SEC or
its staff or any other government officials and of any request by the SEC
or its staff or any other government officials for amendments or
supplements to the Registration Statement, the Proxy Statement or any
filing pursuant to Section 6.2(b) 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 officials, on the other hand, with respect to the
Registration Statement, the Proxy Statement, the Merger or any filing
pursuant to Section 6.2(b). Each of the Buyer and the Company will cause
all documents that it is responsible for filing with the SEC or other
regulatory authorities under this Section 6.2 to comply in all
24
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 Proxy
Statement, the Registration Statement or any filing pursuant to Section
6.2(b), the Buyer or the Company, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the SEC or its
staff or any other government officials, and/or mailing to stockholders of
the Company, such amendment or supplement.
(b) The Company shall use its best efforts to cause to be delivered to
the Buyer two letters from Deloitte & Touche LLP and/or Ernst & Young LLP,
as appropriate, the Company's former and current independent accountants,
respectively, one letter dated a date within two business days before the
date on which the Registration Statement shall become effective and one
letter dated a date within two business days before the Closing Date, each
addressed to the Buyer, in form and substance reasonably satisfactory to
the Buyer and customary in scope and substance for comfort letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
(c) Each of the Buyer and the Company shall make all filings required of
it with respect to the Merger under the Securities Act, the Exchange Act,
applicable state blue sky laws and the rules and regulations thereunder.
6.3 Nasdaq Quotation. The Company agrees to continue the quotation of the
Company Common Stock on the Nasdaq National Market during the term of this
Agreement.
6.4 Access to Information. The Company shall (and shall cause each of its
Subsidiaries to) afford to the Buyer's officers, employees, accountants,
counsel and other representatives, reasonable access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments, personnel and records and, during such period,
the Company shall (and shall cause each of its Subsidiaries to) furnish
promptly to the Buyer (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period
pursuant to the requirements of federal or state securities laws and (b) all
other information concerning its business, properties, assets and personnel as
the Buyer may reasonably request. Unless otherwise required by law, the Buyer
will hold any such information which is nonpublic in confidence in accordance
with the Confidentiality Agreement. No information or knowledge obtained in any
investigation pursuant to this Section or otherwise shall affect or be deemed
to modify any representation or warranty contained in this Agreement or the
conditions to the obligations of the parties to consummate the Merger.
6.5 Stockholders Meeting.
(a) The Company, acting through its Board of Directors, shall, subject to
and according to applicable law and its Restated Articles of Incorporation
and Bylaws, promptly and duly call, give notice of, convene and hold as
soon as practicable following the date on which the Registration Statement
becomes effective the Company Meeting for the purpose of voting to approve
and adopt this Agreement and the Merger (the "Company Voting Proposal").
The Board of Directors of the Company shall (i) recommend approval and
adoption of the Company Voting Proposal by the stockholders of the Company
and include in the Proxy Statement such recommendation and (ii) take all
reasonable and lawful action to solicit and obtain such approval; provided,
however, that in response to an Alternative Transaction the Board of
Directors of the Company may withdraw such recommendation if (but only if)
(i) the Board of Directors of the Company has received a Superior Proposal,
(ii) such Board of Directors upon advice of its outside legal counsel
determines that it is required, in order to comply with its fiduciary
duties under applicable law, to recommend such Superior Proposal to the
stockholders of the Company and (iii) the Company has complied with the
provisions of Section 6.1.
(b) The Company shall call and hold the Company Meeting for the purpose
of voting upon the approval of this Agreement and the Merger regardless of
whether its Board of Directors at any time
25
subsequent to the date hereof determines that this Agreement is no longer
advisable or recommends that the Company's stockholders reject it.
(c) Applied Telecommunications Technologies, Inc., Xxxxx X. Xxxxxxx, Xx.,
Global Undervalued Securities Fund, L.P., Xxxxxx X. Xxxx, Xxxx X.
Xxxxxxxxxx, Xxxxxxxxxx Capital Partners, Inc., Xxxxxxx Xxxxx Xxxxxx, Xxxxx
X. Xxxxxxxx, Xxxxxx Xxx Thurburn and Xxxxxxx X. Xxxxxxx have each executed
and delivered a Stockholder Agreement to the Buyer concurrently with the
signing of this Agreement.
(d) Xxxxxx X. Xxxx, Xxxxxxx Xxxxx Xxxxxx and Xxxxxxx X. Xxxxxxx have each
executed and delivered to the Buyer a Non-Compete Agreement in a form
agreed upon by the Buyer and the Company.
6.6 Legal Conditions to the Merger.
(a) Subject to the terms hereof, the Company and the Buyer shall each use
its reasonable efforts to (i) take, or cause to be taken, all actions, and
do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated hereby as promptly as practicable,
(ii) obtain from any Governmental Entity or any other third party any
consents, licenses, permits, waivers, approvals, authorizations, or orders
required to be obtained or made by the Company or the Buyer or any of their
Subsidiaries in connection with the authorization, execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby, (iii) as promptly as practicable, make all necessary filings, and
thereafter make any other required submissions, with respect to this
Agreement and the Merger required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities laws,
(B) the HSR Act and any related governmental request thereunder (provided
that the initial filings under the HSR Act shall be made on or after such
date as is designated by the Buyer), and (C) any other applicable law and
(iv) execute or deliver any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of,
this Agreement. The Company and the Buyer shall cooperate with each other
in connection with the making of all such filings, including providing
copies of all such documents to the non-filing party and its advisors prior
to filing and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith. The Company and the Buyer
shall use their respective reasonable efforts to furnish to each other all
information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable law (including all
information required to be included in the Proxy Statement and the
Registration Statement) in connection with the transactions contemplated by
this Agreement.
(b) Subject to the terms hereof, the Buyer and the Company agree, and
shall cause each of their respective Subsidiaries, to cooperate and to use
their respective reasonable efforts to obtain any government clearances or
approvals required for Closing under the HSR Act, the Xxxxxxx Act, as
amended, the Xxxxxxx Act, as amended, the Federal Trade Commission Act, as
amended, and any other federal, state or foreign law or, regulation or
decree designed to prohibit, restrict or regulate actions for the purpose
or effect of monopolization or restraint of trade (collectively "Antitrust
Laws"), to respond to any government requests for information under any
Antitrust Law, and to contest and resist any action, including any
legislative, administrative or judicial action, and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other
order (whether temporary, preliminary or permanent) (an "Antitrust Order")
that restricts, prevents or prohibits the consummation of the Merger or any
other transactions contemplated by this Agreement under any Antitrust Law.
The parties hereto will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to any Antitrust
Law. The Buyer shall be entitled to direct any proceedings or negotiations
with any
26
Governmental Entity relating to any of the foregoing, provided that it
shall afford the Company a reasonable opportunity to participate therein.
Notwithstanding anything to the contrary in this Section, neither the Buyer
nor any of its Subsidiaries shall be required to (i) divest any of their
respective businesses, product lines or assets, or to take or agree to take
any other action or agree to any limitation, that could reasonably be
expected to have a material adverse effect on the Buyer or on the Buyer
combined with the Company after the Effective Time or (ii) take any action
under this Section if the United States Department of Justice or the United
States Federal Trade Commission authorizes its staff to seek a preliminary
injunction or restraining order to enjoin consummation of the Merger.
(c) Each of the Company and the Buyer shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, their reasonable efforts to
obtain any third party consents related to or required in connection with
the Merger that are (A) necessary to consummate the transactions
contemplated hereby, (B) disclosed or required to be disclosed in the
Company Disclosure Schedule or the Buyer Disclosure Schedule, as the case
may be, or (C) required to prevent a Company Material Adverse Effect or a
Buyer Material Adverse Effect from occurring prior to or after the
Effective Time.
6.7 Public Disclosure. The Buyer and the Company shall each use its
reasonable efforts to consult with the other before issuing any press release
or otherwise making any public statement with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement prior to using such efforts, except as may be required by law.
6.8 Tax-Free Reorganization. The Buyer and the Company shall each use its
reasonable efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368(a) of the Code. The parties hereto hereby adopt this
Agreement as a plan of reorganization.
6.9 Affiliate Agreements. Upon the execution of this Agreement, the Company
will provide the Buyer with a list of those persons who are, in the Company's
reasonable judgment, "affiliates" of the Company, within the meaning of Rule
145 (each such person who is an "affiliate" of the Company within the meaning
of Rule 145 is referred to as an "Affiliate") promulgated under the Securities
Act ("Rule 145"). The Company shall provide to the Buyer such information and
documents as the Buyer shall reasonably request for purposes of reviewing such
list and shall notify the Buyer in writing regarding any change in the identity
of its Affiliates prior to the Closing Date. The Company shall use its
reasonable efforts to deliver or cause to be delivered to the Buyer by November
19, 1999 (and in any case prior to the mailing of the Proxy Statement) from
each of its Affiliates, an executed Company Affiliate Agreement, in
substantially the form appended hereto as Exhibit C (the "Affiliate
Agreement"). The Buyer shall be entitled to place appropriate legends on the
certificates evidencing any shares of Buyer Common Stock to be received by Rule
145 Affiliates of the Company pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for the
Buyer Common Stock (provided that such legends or stop transfer instructions
shall be removed, two years after the Effective Date, upon the request of any
stockholder that is not then an Affiliate of the Buyer).
6.10 Nasdaq National Market Listing. The Buyer shall file with the Nasdaq
National Market a Notification Form for Listing of Additional Shares with
respect to the Buyer Common Stock issuable in connection with the Merger.
6.11 Company Stock Options, Warrants and Plans.
(a) At the Effective Time, the Buyer shall assume each outstanding
Company Stock Option under Company Stock Plans, whether vested or unvested,
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under the Company Stock Option immediately
prior to
27
the Effective Time, the same number of shares of Buyer Common Stock as the
holder of the Company Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time (rounded down to the nearest whole
number), at a price per share (rounded up to the nearest whole cent) equal
to (y) the aggregate exercise price for the shares of Company Common Stock
purchasable pursuant to the Company Stock Option immediately prior to the
Effective Time divided by (z) the number of full shares of Buyer Common
Stock deemed purchasable pursuant to the Company Stock Option in accordance
with the foregoing.
(b) As soon as practicable after the Effective Time, the Buyer shall
deliver to the participants in the Company Stock Plans appropriate notice
setting forth such participants' rights pursuant thereto and the grants
pursuant to the Company Stock Plans shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section
after giving effect to the Merger).
(c) The Buyer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Buyer Common Stock for delivery
under the Company Stock Plans assumed in accordance with this Section.
Prior to or as soon as practicable after the Effective Time, and in any
event within 10 business days after the Effective Time, the Buyer shall
file a registration statement on Form S-8 (or any successor form) or
another appropriate form with respect to the shares of Buyer Common Stock
subject to such options and shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements
(and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding.
(d) The Board of Directors of the Company shall, prior to or as of the
Effective Time, take all necessary actions, pursuant to and in accordance
with the terms of Company Stock Plans and the instruments evidencing the
Company Stock Options, to provide for the conversion of the Company Stock
Options into options to acquire Buyer Common Stock in accordance with this
Section, and that no consent of the holders of the Company Stock Options is
required in connection with such conversion.
(e) As of or prior to the Effective Time, the Company shall terminate its
Employee Stock Discount Purchase Plan in accordance with its terms.
(f) As of the Effective Time, the Company shall terminate (with the
consent of the holders of the applicable Company Stock Options, if
necessary) all Company Stock Options with an exercise price equal to or
higher than the last reported sales price of the Company Common Stock on
the Nasdaq National Market on the trading day immediately prior to the
Effective Time.
(g) If requested by the Buyer in writing, the Company shall, immediately
prior to the Effective Time, terminate the Company's 401(k) Plan.
6.12 Stockholder Litigation. Until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time, the Company shall
give the Buyer the opportunity to participate in the defense or settlement of
any stockholder litigation against the Company or its Board of Directors
relating to this Agreement or any of the transactions contemplated by this
Agreement, and shall not settle any such litigation without the Buyer's prior
written consent, which will not be unreasonably withheld or delayed.
6.13 Indemnification. From and after the Effective Time, the Buyer shall, to
the fullest extent permitted by law, cause the Surviving Corporation, for a
period of six years from the Effective Time, to honor all of the Company's
obligations to indemnify and hold harmless, and to advance expenses with
respect to, each present and former director and officer of the Company (the
"Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid
in settlement incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal,
28
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the extent that such
obligations to indemnify and hold harmless exist on the date of this Agreement
under the Company's Restated Articles of Incorporation, By-laws, the TBCA, any
agreement between such person and the Company listed on Section 6.13 of the
Company Disclosure Schedule, or otherwise; provided, further, that in the event
any claim or claims are asserted or made within such six year period, all
rights to indemnification in respect of any such claim or claims shall continue
until the disposition of any and all such claims.
6.14 Notification of Certain Matters. The Buyer will give prompt notice to
the Company, and the Company will give prompt notice to the Buyer, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) (i) any representation or
warranty of such party contained in this Agreement that is qualified as to
materiality to be untrue or inaccurate in any respect or (ii) any other
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect, in each case at any time from and
after the date of this Agreement until the Effective Time, or (b) any material
failure of the Buyer and the Transitory Subsidiary or the Company, as the case
may be, or of any officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement. Notwithstanding the above, the delivery
of any notice pursuant to this Section will not limit or otherwise affect the
remedies available hereunder to the party receiving such notice or the
conditions to such party's obligation to consummate the Merger.
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Company Voting Proposal shall have been
approved and adopted at the Company Meeting, at which a quorum is present,
by the affirmative vote of the holders of two-thirds of the shares of the
Company Common Stock outstanding on the record date for the Company
Meeting.
(b) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) Governmental Approvals. Other than the filings provided for by
Section 1.1, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity, the failure of which to file, obtain or occur is
reasonably likely to have a Buyer Material Adverse Effect or a Company
Material Adverse Effect shall have been filed, been obtained or occurred.
(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order and no similar proceeding in
respect of the Proxy Statement shall have been initiated or threatened by
the SEC.
(e) No Injunctions. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (each an "Order") or
statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the
Merger.
29
7.2 Additional Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligations of the Buyer and the Transitory Subsidiary to
effect the Merger are subject to the satisfaction of each of the following
additional conditions, any of which may be waived in writing exclusively by the
Buyer and the Transitory Subsidiary:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct (i) as of
the date of this Agreement (except to the extent such representations and
warranties are specifically made as of a particular date, in which case
such representations and warranties shall be true and correct as of such
date) and (ii) as of the Closing Date as though made on and as of the
Closing Date (except (x) to the extent such representations and warranties
are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date,
(y) for changes contemplated by this Agreement and (z) where the failures
to be true and correct (without regard to any materiality, Company Material
Adverse Effect or knowledge qualifications contained therein), individually
or in the aggregate, have not had, and are not reasonably likely to have, a
Company Material Adverse Effect); and the Buyer shall have received a
certificate signed on behalf of the Company by the chief executive officer
and the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date; and the Buyer
shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to
such effect.
(c) Tax Opinion. The Buyer shall have received a written opinion from
Xxxx and Xxxx LLP, counsel to the Buyer, to the effect that the Merger will
be treated for federal income tax purposes as a tax-free reorganization
within the meaning of Section 368(a) of the Code; provided that if Xxxx and
Xxxx LLP does not render such opinion, this condition shall nonetheless be
deemed satisfied if Xxxxxxx, Phleger & Xxxxxxxx LLP renders such opinion to
the Buyer (it being agreed that the Buyer and the Company shall each
provide reasonable cooperation, including making reasonable
representations, to Xxxx and Xxxx LLP or Xxxxxxx, Phleger & Xxxxxxxx LLP,
as the case may be, to enable them to render such opinion).
(d) Third Party Consents. The Company shall have obtained (i) all
consents and approvals of third parties referred to in Section 3.3(b) of
the Company Disclosure Schedule and (ii) any other consent or approval of
any third party (other than a Governmental Entity) the failure of which to
obtain, individually or in the aggregate, is reasonably likely to have a
Company Material Adverse Effect.
(e) Resignations. The Buyer shall have received copies of the
resignations, effective as of the Effective Time, of each director and
officer of the Company and its Subsidiaries, except as listed on Section
7.2(e) of the Company Disclosure Schedule.
7.3 Additional Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is subject to the satisfaction of each of the
following additional conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and warranties of
the Buyer and the Transitory Subsidiary set forth in this Agreement shall
be true and correct (i) as of the date of this Agreement (except to the
extent such representations are specifically made as of a particular date,
in which case such representations and warranties shall be true and correct
as of such date) and (ii) as of the Closing Date as though made on and as
of the Closing Date (except (x) to the extent such representations and
warranties are specifically made as of a particular date, in which case
such representations and
30
warranties shall be true and correct as of such date, (y) for changes
contemplated by this Agreement and (z) where the failures to be true and
correct (without regard to any materiality, Buyer Material Adverse Effect
or knowledge qualifications contained therein), individually or in the
aggregate, have not had, and are not reasonably likely to have, a Buyer
Material Adverse Effect); and the Company shall have received a certificate
signed on behalf of the Buyer by the chief executive officer or the chief
financial officer of the Buyer to such effect.
(b) Performance of Obligations of the Buyer and the Transitory
Subsidiary. The Buyer and Sub shall have performed in all material respects
all obligations required to be performed by them under this Agreement at or
prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of the Buyer by the chief executive officer or
the chief financial officer of the Buyer to such effect.
(c) Tax Opinion. The Company shall have received the opinion of Xxxxxxx,
Phleger & Xxxxxxxx LLP, counsel to the Company, to the effect that the
Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code; provided
that if Xxxxxxx, Phleger & Xxxxxxxx LLP does not render such opinion, this
condition shall nonetheless be deemed satisfied if Xxxx and Xxxx LLP
renders such opinion to the Company (it being agreed that the Buyer and the
Company shall each provide reasonable cooperation, including making
reasonable representations, to Xxxxxxx, Phleger & Xxxxxxxx LLP or Xxxx and
Xxxx LLP, as the case may be, to enable them to render such opinion).
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time (with respect to Sections 8.1(b) through 8.1(f), by written
notice by the terminating party to the other party), whether before or after
approval of the Merger by the stockholders of the Company:
(a) by mutual written consent of the Buyer and the Company; or
(b) by either the Buyer or the Company if the Merger shall not have been
consummated by May 31, 2000 (the "Outside Date") (provided that the right
to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been a principal cause of or resulted in the failure of the
Merger to occur on or before such date); or
(c) by either the Buyer or the Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger; or
(d) by either the Buyer or the Company if at the Company Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of the Company in favor of the Company Voting Proposal shall
not have been obtained (provided that the right to terminate this Agreement
under this Section 8.1(d) shall not be available to any party seeking
termination who at the time is in breach of or has failed to fulfill its
obligations under this Agreement); or
(e) by the Buyer, if: (i) the Board of Directors of the Company shall
have failed to recommend approval of the Company Voting Proposal in the
Proxy Statement or shall have withdrawn or modified its recommendation of
the Company Voting Proposal; (ii) the Board of Directors of the Company
fails to reconfirm its recommendation of this Agreement or the Merger
within five business days after the Buyer requests in writing that the
Board of Directors of the Company do so; (iii) the Board of Directors of
the Company shall have approved or recommended to the stockholders of the
Company an Alternative Transaction (as defined in Section 8.3(g)); or (iv)
a tender offer or exchange offer for outstanding shares of
31
the Company Common Stock is commenced (other than by the Buyer or an
Affiliate of the Buyer) and the Board of Directors of the Company
recommends that the stockholders of the Company tender their shares in such
tender or exchange offer or, within 10 days after such tender or exchange
offer, fails to recommend against acceptance of such offer or takes no
position with respect to the acceptance thereof; or (v) for any reason the
Company fails to call and hold the Company Meeting by the date which is one
business day prior to the Outside Date; or
(f) by either the Buyer or the Company, if there has been a breach of, or
material inaccuracy or omission with respect to, any representation,
warranty, covenant or agreement on the part of the other party set forth in
this Agreement, which breach, inaccuracy or omission (i) causes the
conditions set forth in Section 7.2(a) or 7.2(b) (in the case of
termination by the Buyer) or Section 7.3(a) or 7.3(b) (in the case of
termination by the Company) not to be satisfied, and (ii) shall not have
been cured within 10 days following receipt by the breaching party of
written notice of such breach from the other party.
8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall immediately become void and there
shall be no liability or obligation on the part of the Buyer, the Company, the
Transitory Subsidiary or their respective officers, directors, stockholders or
Affiliates, except as set forth in Sections 3.29, 5.3, 8.3 and Article IX;
provided that any such termination shall not relieve any party from liability
for any willful breach of this Agreement (which includes without limitation the
making of any representation or warranty by a party in this Agreement that the
party knew was not true and accurate when made) and the provisions of the
Company Stock Option Agreement, Sections 3.29, 5.3, 8.3 and Article IX of this
Agreement and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees and
expenses, whether or not the Merger is consummated; provided however, that
the Company and the Buyer shall share equally all fees and expenses, other
than attorneys' fees, incurred with respect to the printing and filing of
the Proxy Statement (including any related preliminary materials) and the
Registration Statement and any amendments or supplements thereto.
(b) The Company shall pay the Buyer up to $500,000 as reimbursement for
expenses of the Buyer actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not
limited to, fees and expenses of the Buyer's counsel, accountants and
financial advisors, but excluding any discretionary fees paid to such
financial advisors), upon the termination of this Agreement by the Buyer
pursuant to (i) Section 8.1(b) as a result of the failure to satisfy the
condition set forth in Section 7.2(a); (ii) Section 8.1(e); or (iii)
Section 8.1(f) or by the Buyer or the Company pursuant to Section 8.1(d).
(c) The Company shall pay the Buyer a termination fee of $5,000,000 upon
the earliest to occur of the following events:
(i) the termination of this Agreement by the Buyer pursuant to
Section 8.1(e); or
(ii) the termination of this Agreement by the Buyer pursuant to
Section 8.1(f) after a breach by the Company of this Agreement; or
(iii) the termination of the Agreement by the Buyer or the Company
pursuant to Section 8.1(d) as a result of the failure to receive the
requisite vote for approval of the Company Voting Proposal by the
stockholders of the Company at the Company Meeting.
(d) The Buyer shall pay the Company up to $500,000 as reimbursement for
expenses of the Company actually incurred relating to the transactions
contemplated by this Agreement prior to
32
termination (including, but not limited to, but excluding any discretionary
fees paid to such financial advisors), upon the termination of this
Agreement by the Company pursuant to (i) Section 8.1(b) as a result of the
failure to satisfy the condition set forth in Section 7.3(a) or (ii)
Section 8.1(f).
(e) The Buyer shall pay the Company a termination fee of $5,000,000 upon
the termination of this Agreement by the Company pursuant to Section 8.1(f)
after a breach by the Buyer of this Agreement.
(f) The expenses and fees, if applicable, payable pursuant to Section
8.3(b), 8.3(c), 8.3(d) and 8.3(e) shall be paid within one business day
after demand therefor following the first to occur of the events giving
rise to the payment obligation described in Section 8.3(b), 8.3(c)(i), (ii)
or (iii), 8.3(d) or 8.3(e). If one party fails to promptly pay to the other
any expense reimbursement or fee due hereunder, the defaulting party shall
pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other
legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of Bank of
New York plus five percent per annum, compounded quarterly, from the date
such expense reimbursement or fee was required to be paid.
(g) As used in this Agreement, "Alternative Transaction" means either (i)
a transaction pursuant to which any person (or group of persons) other than
the Buyer or its affiliates (a "Third Party"), acquires more than 20% of
the outstanding shares of the Company Common Stock pursuant to a tender
offer or exchange offer or otherwise, (ii) a merger or other business
combination involving the Company pursuant to which any Third Party
acquires more than 20% of the outstanding shares of Company Common Stock or
of the entity surviving such merger or business combination, (iii) any
other transaction pursuant to which any Third Party acquires control of
assets (including for this purpose the outstanding equity securities of
Subsidiaries of the Company, and the entity surviving any merger or
business combination including any of them) of the Company having a fair
market value equal to more than 20% of the fair market value of all the
assets of the Company immediately prior to such transaction, or (iv) any
public announcement by a Third Party of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
8.4 Amendment. This Agreement may be amended by the parties hereto, by action
taken or authorized by their respective Boards of Directors, at any time before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company, but, after any such approval, no amendment shall
be made which by law requires further approval by such stockholders without
such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (iii) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations and Warranties. The respective
representations and warranties of the Company, the Buyer and the Transitory
Subsidiary contained in this Agreement or in any instrument delivered pursuant
to this Agreement shall expire with, and be terminated and extinguished upon,
the Effective Time. No party hereto makes any representation or warranty to the
other party other than those expressly set forth herein.
33
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly delivered (i) four business days after being
sent by registered or certified mail, return receipt requested, postage
prepaid, or (ii) one business day after being sent for next business day
delivery, fees prepaid, via a reputable nationwide overnight courier service,
in each case to the intended recipient as set forth below:
(a) if to the Buyer or Transitory Subsidiary, to
Prodigy Communications Corporation
00 Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Attn: General Counsel
Telecopy: (000) 000-0000
with a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxxx, Esq.
Telecopy: (000) 000-0000
(b) if to the Company, to
FlashNet Communications, Inc.
0000 Xxxxx Xxxxxx Xxxx Xxxx.
Xxxx Xxxxx, Xxxxx 00000
Attn: President
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: S. Xxxxxxx Xxxx, Esq.
Telecopy: (000) 000-0000
Any party may give any notice or other communication hereunder using any
other means (including personal delivery, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice or other communication
shall be deemed to have been duly given unless and until it actually is
received by the party for whom it is intended. Any party may change the address
to which notices and other communications hereunder are to be delivered by
giving the other parties notice in the manner herein set forth.
9.3 Entire Agreement. This Agreement (including the Schedules and Exhibits
hereto and the documents and instruments referred to herein that are to be
delivered at the Closing) constitutes the entire agreement among the parties
hereto and supersedes any prior understandings, agreements or representations
by or among the parties hereto, or any of them, written or oral, with respect
to the subject matter hereof; provided that the Confidentiality Agreement shall
remain in effect in accordance with its terms.
9.4 No Third Party Beneficiaries. Except as provided in Section 6.13, this
Agreement is not intended, and shall not be deemed, to confer any rights or
remedies upon any person other than the parties hereto and their respective
successors and permitted assigns, to create any agreement of employment with
any person or to otherwise create any third-party beneficiary hereto.
34
9.5 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, and any such assignment without
such prior written consent shall be null and void, except that the Buyer and/or
the Transitory Subsidiary may assign this Agreement to any direct or indirect
wholly owned Subsidiary of the Buyer without consent of the Company, provided
that the Buyer and/or the Transitory Subsidiary, as the case may be, shall
remain liable for all of its obligations under this Agreement. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties hereto and their respective successors
and permitted assigns.
9.6 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree hereto that the court making such
determination shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified. In the event
such court does not exercise the power granted to it in the prior sentence, the
parties hereto agree to replace such invalid or unenforceable term or provision
with a valid and enforceable term or provision that will achieve, to the extent
possible, the economic, business and other purposes of such invalid or
unenforceable term.
9.7 Counterparts and Signature. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed and delivered by
facsimile transmission.
9.8 Interpretation. When reference is made in this Agreement to an Article or
a Section, such reference shall be to an Article or Section of this Agreement,
unless otherwise indicated. The table of contents, table of defined terms and
headings contained in this Agreement are for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Agreement.
The language used in this Agreement shall be deemed to be the language chosen
by the parties hereto to express their mutual intent, and no rule of strict
construction shall be applied against any party. Whenever the context may
require, any pronouns used in this Agreement shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns and
pronouns shall include the plural, and vice versa. Any reference to any
federal, state, local or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation".
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of laws
of any jurisdictions other than those of the State of New York.
9.10 Remedies. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
35
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof this being in addition to any
other remedy to which they are entitled at law or in equity.
9.11 Waiver of Jury Trial. EACH OF THE BUYER, THE TRANSITORY SUBSIDIARY AND
THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF THE BUYER, THE TRANSITORY SUBSIDIARY OR
THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF
THIS AGREEMENT.
[Signature Page to follow]
36
IN WITNESS WHEREOF, the Buyer, the Transitory Subsidiary and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
PRODIGY COMMUNICATIONS CORPORATION
/s/ Xxxxxx X. Xxxxxx
By: _________________________________
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
and General Counsel
PUCKNUT CORPORATION
/s/ Xxxxxx X. Xxxxxx
By: _________________________________
Name: Xxxxxx X. Xxxxxx
Title: Vice President, General
Counsel and Secretary
FLASHNET COMMUNICATIONS, INC.
/s/ Xxxxxxx Xxxxx Xxxxxx
By: _________________________________
Name: Xxxxxxx Xxxxx Xxxxxx
Title: Chief Executive Officer
and President
37
