EXHIBIT (d)(i)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
U.S. REALTEL, INC.
CYPRESS MERGER SUB, INC.
AND
CYPRESS COMMUNICATIONS, INC.
DATED AS OF
JANUARY 10, 2002
Table of Contents
Page
----
ARTICLE I THE OFFER AND MERGER............................................................ 2
Section 1.1 The Offer...................................................... 2
Section 1.2 Company Actions................................................ 3
Section 1.3 Directors...................................................... 5
Section 1.4 The Merger..................................................... 6
Section 1.5 Effective Time................................................. 7
Section 1.6 Closing........................................................ 7
Section 1.7 Certificate of Incorporation; By-Laws.......................... 7
Section 1.8 Directors and Officers of the Surviving Corporation............ 7
Section 1.9 Subsequent Actions............................................. 7
Section 1.10 Shareholders' Meeting.......................................... 8
Section 1.11 Merger Without Meeting of Shareholders......................... 9
ARTICLE II CONVERSION OF SECURITIES....................................................... 9
Section 2.1 Conversion of Capital Stock.................................... 9
Section 2.2 Exchange of Certificates Paying Agent.......................... 9
Section 2.3 Dissenting Shares.............................................. 11
Section 2.4 Company Stock Option Plans..................................... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................. 12
Section 3.1 Organization; Qualification.................................... 12
Section 3.2 Subsidiaries and Affiliates.................................... 13
Section 3.3 Capitalization................................................. 13
Section 3.4 Authorization; Validity of Agreement; Company Action........... 15
Section 3.5 Vote Required.................................................. 15
Section 3.6 Consents and Approvals; No Violations.......................... 15
Section 3.7 SEC Reports and Financial Statements........................... 16
Section 3.8 Books and Records.............................................. 16
Section 3.9 No Undisclosed Liabilities..................................... 16
i
Section 3.10 Absence of Certain Changes..................................... 17
Section 3.11 Litigation..................................................... 17
Section 3.12 Employee Benefit Plans......................................... 17
Section 3.13 Tax Matters; Government Benefits............................... 20
Section 3.14 Title to Properties............................................ 21
Section 3.15 Environmental Laws............................................. 22
Section 3.16 Bank Accounts.................................................. 22
Section 3.17 Intellectual Property.......................................... 22
Section 3.18 Employment Matters............................................. 23
Section 3.19 Compliance with Laws; Licenses and Permits..................... 23
Section 3.20 Contracts and Commitments...................................... 24
Section 3.21 Customers...................................................... 24
Section 3.22 Insurance...................................................... 24
Section 3.23 Information Supplied........................................... 25
Section 3.24 Opinion of Financial Advisor................................... 25
Section 3.25 Rights Agreement............................................... 25
Section 3.26 Absence of Questionable Payments............................... 26
Section 3.27 Brokers or Finders............................................. 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER................................................................... 26
Section 4.1 Organization................................................... 26
Section 4.2 Authorization; Validity of Agreement; Necessary Action......... 26
Section 4.3 Consents and Approvals; No Violations.......................... 27
Section 4.4 Information Filed and Supplied................................. 27
Section 4.5 Sufficient Funds; Solvency..................................... 28
Section 4.6 Share Ownership................................................ 28
Section 4.7 Purchaser's Operations......................................... 28
Section 4.8 Brokers or Finders............................................. 28
Section 4.9 Litigation..................................................... 29
ii
ARTICLE V COVENANTS....................................................................... 29
Section 5.1 Interim Operations of the Company.............................. 29
Section 5.2 Access; Confidentiality........................................ 32
Section 5.3 Reasonable Best Efforts........................................ 32
Section 5.4 Employee Benefits.............................................. 33
Section 5.5 No Solicitation of Competing Transaction....................... 34
Section 5.6 Publicity...................................................... 36
Section 5.7 Notification of Certain Matters................................ 36
Section 5.8 Directors' and Officers' Insurance and Indemnification......... 36
Section 5.9 State Takeover Laws............................................ 37
Section 5.10 Purchaser Compliance........................................... 38
Section 5.11 [Intentionally omitted]........................................ 38
Section 5.12 Section 16 Matters............................................. 38
Section 5.13 Other Purchases................................................ 38
Section 5.14 Working Capital Calculation.................................... 38
ARTICLE VI CONDITIONS..................................................................... 38
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger..... 38
ARTICLE VII............................................................................... 39
Section 7.1 Termination.................................................... 39
Section 7.2 Effect of Termination.......................................... 40
Section 7.3 Termination Fees and Expenses.................................. 41
ARTICLE VIII DEFINITIONS AND INTERPRETATION............................................... 42
Section 8.1 Definitions.................................................... 42
Section 8.2 Interpretation................................................. 50
ARTICLE IX MISCELLANEOUS.................................................................. 51
Section 9.1 Amendment and Modification..................................... 51
Section 9.2 Nonsurvival of Representations and Warranties.................. 51
Section 9.3 Notices........................................................ 51
iii
Section 9.4 Counterparts................................................... 53
Section 9.5 Entire Agreement; No Third Party Beneficiaries................. 53
Section 9.6 Severability................................................... 53
Section 9.7 Governing Law.................................................. 54
Section 9.8 Enforcement.................................................... 54
Section 9.9 Time of Essence................................................ 54
Section 9.10 Extension; Waiver.............................................. 54
Section 9.11 Assignment..................................................... 54
iv
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 10,
2002 by and among U.S. REALTEL, INC., a Delaware corporation ("Parent"), CYPRESS
MERGER SUB, INC., a Delaware corporation and a wholly owned subsidiary of Parent
("Purchaser") and CYPRESS COMMUNICATIONS, INC., a Delaware corporation (the
"Company"). As used in this Agreement, capitalized terms have the meanings
ascribed to them in SECTION 8.1.
WHEREAS, the Board of Directors of each of Parent, Purchaser
and the Company has approved, and deems it advisable and in the best interests
of its respective stockholders to consummate, the acquisition of the Company by
Parent upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, it is proposed that Purchaser
make a cash tender offer to acquire all of the issued and outstanding shares of
common stock, $0.001 par value, of the Company, and associated rights to
purchase shares of Series Z Preferred Stock $0.001 par value of the Company, for
$3.50 per Share, net to the seller in cash; and
WHEREAS, also in furtherance of such acquisition, the Board of
Directors of each of Parent, Purchaser and the Company have approved this
Agreement and the Merger following the Offer in accordance with the General
Corporation Law of the State of Delaware and upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the Company Board of Directors has determined that
the consideration to be paid for each Share in the Offer and the Merger is fair
to the holders of such Shares and has resolved to recommend that the holders of
such Shares accept the Offer and approve this Agreement and each of the
Transactions upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Company, Parent and Purchaser desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and Merger;
WHEREAS, as a condition and inducement to Parent's and
Purchaser's entering into this Agreement and incurring the obligations set forth
herein, each of the Major Shareholders, concurrently herewith, is entering into
a Shareholders' Agreement dated as of the date hereof, with Parent and
Purchaser, and pursuant to which the Major Shareholders are agreeing, among
other things, to tender a portion of the Shares held by them in the Offer, to
grant Parent an option to purchase such Shares and to grant Parent a proxy with
respect to the voting of such Shares, all upon the terms and subject to the
conditions set forth in the Shareholders' Agreements.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:
1
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with SECTION 7.1 herein and none of the events
set forth in ANNEX A shall have occurred and be existing, as promptly
as practicable (but in no event later than ten (10) days after the
public announcement of the execution of this Agreement), Purchaser
shall commence (within the meaning of Rule 14d-2 promulgated under the
Exchange Act) a cash tender offer to acquire all of Shares at the Offer
Price. Subject to the Minimum Condition, the conditions set forth in
ARTICLE 6 hereof and subject to the other conditions set forth in ANNEX
A hereto, Purchaser shall consummate the Offer in accordance with its
terms and to accept for payment and promptly pay for Shares tendered
pursuant to the Offer as soon as Purchaser is legally permitted to do
so under applicable law. The Offer shall be made by means of the Offer
to Purchase and shall be subject to the Minimum Condition and the other
conditions set forth in ANNEX A hereto (collectively, the "Offer
Conditions") and shall reflect, as appropriate, the other terms set
forth in this Agreement.
(b) Purchaser expressly reserves the right to modify the
terms and conditions of the Offer, except that, without the written
consent of the Company neither Parent nor Purchaser shall (i) amend or
waive the Minimum Condition, (ii) decrease the Offer Price, (iii)
change the form of consideration, (iv) decrease the number of Shares
sought, or (v) amend or impose any other condition of the Offer in any
manner adverse to the holders of the Shares. Notwithstanding the
foregoing, Purchaser may, without the consent of the Company (x)
increase the amount it offers to pay per Share in the Offer, and, in
connection therewith, extend the period of the Offer to the extent
required by law, (y) extend the Offer for a period not to exceed ten
(10) business days, notwithstanding that all conditions to the Offer
are satisfied as of such expiration date of the Offer, if, immediately
prior to the expiration date of the Offer (as it may be extended), the
Shares tendered and not withdrawn pursuant to the Offer constitute less
than ninety percent (90%) of the outstanding Shares and (z) from time
to time, in its sole discretion, extend the expiration date if on the
initial scheduled expiration date of the Offer, which shall be the date
which is twenty (20) business days after the date the Offer is
commenced, all conditions to the Offer will not have been satisfied or
waived. Purchaser shall extend the Offer from time to time until a date
which is not more than sixty (60) business days after commencement of
the Offer if, and to the extent that, at the initial expiration date of
the Offer, or any extension thereof, the conditions to the Offer set
forth in ANNEX A shall not have been satisfied or waived. Any
extensions of the period of the Offer shall be subject to termination
of this Agreement pursuant to Section 7.1. The Company agrees that no
Shares held by the Company will be tendered pursuant to the Offer.
Except as otherwise required by the Shareholders' Agreement, the
Company's stockholders shall retain their withdrawal rights during any
extension of the Offer or subsequent offering period.
(c) As soon as practicable on the date the Offer is
commenced, Parent and Purchaser shall file with the SEC a Tender Offer
Statement on Schedule TO with respect to the Offer. The Schedule TO
will contain or incorporate by reference the Offer to
2
Purchase and a form of letter of transmittal, summary advertisement and
other ancillary Offer documents. Parent and Purchaser will take all
steps necessary to cause the Offer Documents to be filed with the SEC
and to be disseminated to holders of the Shares, in each case as and to
the extent required by applicable federal securities laws.
Notwithstanding the foregoing, Parent and Purchaser shall, at a
minimum, disseminate the Offer Documents by (i) delivery of the Offer
Documents to the beneficial holders of the Shares in compliance with
Rule 14d-4(a)(3) promulgated under the Exchange Act and (ii) summary
publication appearing in The Wall Street Journal or similar newspaper
with national circulation, in compliance with Rule 14d-4(a)(2)
promulgated under the Exchange Act. Parent and Purchaser, on the one
hand, and the Company, on the other hand, will promptly correct any
information provided by it for use in the Offer Documents if and to the
extent that it shall have become false or misleading in any material
respect, and Purchaser will take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the
extent required by applicable federal securities laws. The Company and
its counsel shall be given the opportunity to review the Schedule TO
before it is filed with the SEC. Parent and Purchaser will provide the
Company and its counsel in writing with any comments or other
communications, whether written or oral, Parent, Purchaser or their
counsel may receive from time to time from the SEC or its staff with
respect to the Offer Documents, promptly after the receipt of such
comments or other communications, and to consult with the Company and
its counsel prior to responding to any such comments or other
communications.
(d) The parties agree that the Offer Conditions are for
the sole benefit of Purchaser and, except as provided in SECTION
1.1(B), may be asserted by Purchaser regardless of the circumstances
giving rise to such Offer Condition or may be waived by Purchaser, in
whole or in part, at any time and from time to time, in its sole
discretion; provided however, that neither Purchaser nor Parent may
assert the nonsatisfaction of any Offer Condition if such
nonsatisfaction is the result of Purchaser or Parent's breach of any
representation, warranty, agreement or covenant contained herein. The
failure by Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall
not be deemed a waiver with respect to other facts or circumstances,
and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
Section 1.2 Company Actions.
(a) The Company hereby approves and consents to the Offer
and represents to Parent and Purchaser that the Board of Directors, at
a meeting duly called and held, has, by the unanimous action of each
director voting at such meeting (i) determined that each of the
Agreement, the Offer and the Merger are fair to and in the best
interests of the stockholders of the Company, (ii) approved and adopted
this Agreement and the Transactions, (iii) resolved to recommend that
the stockholders of the Company accept the Offer, tender their Shares
to Purchaser pursuant to the Offer and approve and adopt this
Agreement, the Merger and the other Transactions, and (v) consented to
the transfer to Purchaser of all such Shares, and none of the aforesaid
actions by the Company Board
3
of Directors has been amended, rescinded or modified. The action taken
by the Company Board of Directors constitutes approval of the Merger
and the other Transactions by the Company Board of Directors under the
provisions of Section 203 of the DGCL such that Section 203 of the DGCL
and the provisions of the Rights Agreement do not apply to this
Agreement or the other Transactions. No other state takeover statute is
applicable to the Merger or the other Transactions.
(b) As soon as practicable on the date the Offer is
commenced, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9, which shall,
subject to the provisions of SECTION 5.5(B), contain the recommendation
referred to in clause (iii) of SECTION 1.2(A). At the time the Offer
Documents are first mailed to the stockholders of the Company, the
Company shall mail or cause to be mailed to the stockholders of the
Company such Schedule 14D-9 together with such Offer Documents. The
Company further agrees to take all steps necessary to cause the
Schedule 14D-9 to be disseminated to holders of the Shares, as and to
the extent required by applicable federal securities laws. Each of the
Company, on the one hand, and Parent and Purchaser, on the other hand,
agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that it shall have become false
and misleading in any material respect and the Company further agrees
to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and its counsel shall be given the
opportunity to review the Schedule 14D-9 before it is filed with the
SEC. In addition, the Company agrees to provide Parent, Purchaser and
their counsel with any comments, whether written or oral, that the
Company or its counsel may receive from time to time from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt
of such comments or other communications, and to consult with Parent
and its counsel prior to responding to any such comments or other
communications.
(c) In connection with the Offer, the Company will
promptly furnish or cause to be furnished to Purchaser mailing labels,
security position listings and any available listing, or computer file
containing the names and addresses of all recordholders of the Shares
as of a recent date, and shall furnish Purchaser with such additional
information (including, but not limited to, lists of holders of the
Shares, updated daily, and their addresses, mailing labels and lists of
security positions) and assistance as Purchaser or its agents may
reasonably request in communicating the Offer to the record and
beneficial holders of the Shares. Except for such steps as are
necessary to disseminate the Offer Documents, Parent and Purchaser
shall hold in confidence the information contained in any of such
labels and lists and the additional information referred to in the
preceding sentence, will use such information only in connection with
the Offer, and, if this Agreement is terminated, will upon request of
the Company promptly deliver or cause to be delivered to the Company
all copies of such information then in its possession or the possession
of its agents or representatives.
4
Section 1.3 Directors.
(a) Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, of the Company as is
equal to the product of the total number of directors on such Board
(giving effect to the directors designated by Parent pursuant to this
sentence) multiplied by the Board Fraction. The Directors so designated
by Parent shall take office immediately after (i) the purchase of and
payment for any Shares by Parent or any of its Subsidiaries as a result
of which Parent and its Subsidiaries owns beneficially at least a
majority of then outstanding Shares and (ii) compliance with Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder,
whichever shall occur later. In furtherance thereof, the Company shall,
upon request of the Parent and to the extent permissible pursuant to
the Company's certificate of incorporation and bylaws, use its best
efforts promptly either to increase the size of its Board of Directors
or to secure the resignations of such number of its incumbent
directors, or both, as is necessary to enable such designees of Parent
to be so elected or appointed to the Company's Board, and the Company
shall take all reasonable actions available to the Company to cause
such designees of Parent to be so elected or appointed at such time. In
accordance with the Company's certificate of incorporation, such
designees shall be elected or appointed into such classes as to cause
the number of directors in each class to be as nearly equal as
possible. At such time, the Company shall, if requested by Parent, also
take all action necessary to cause persons designated by Parent to
constitute the same Board Fraction of (i) each committee of the
Company's Board of Directors, (ii) each board of directors (or similar
body) of each Company Subsidiary of the Company and (iii) each
committee (or similar body) of each such board.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-l
promulgated thereunder in order to fulfill its obligations under
SECTION 1.3(A), including mailing to stockholders the information
required by such Section 14(f) and Rule 14f-1 as is necessary to enable
Parent's designees to be elected or appointed to the Company's Board of
Directors immediately after the purchase of and payment for any Shares
by Parent or any of its Subsidiaries as a result of which Parent and
its Subsidiaries owns beneficially at least a majority of then
outstanding Shares. At least 30 days prior to the Appointment Date,
Parent or Purchaser will supply the Company all information with
respect to either of them and their nominees, officers, directors and
Affiliates required to be disclosed by such Section 14(f) and Rule
14f-1 and such other information about such persons as the Company may
reasonably request under the circumstances, including without
limitation a customary director's and officer's questionnaire. The
provisions of this SECTION 1.3 are in addition to and shall not limit
any rights which Purchaser, Parent or any of their Affiliates may have
as a holder or beneficial owner of Shares as a matter of law with
respect to the election of directors or otherwise.
(c) In the event that Parent's designees are elected or
appointed to the Company's Board of Directors, until the Effective
Time, the Company's Board shall have at least two directors who are
Independent Directors, provided that, in such event, if the number of
Independent Directors shall be reduced below two for any reason
whatsoever, any remaining Independent Directors (or Independent
Director, if there be only one
5
remaining) shall be entitled to designate persons to fill such
vacancies who shall be deemed to be Independent Directors for the
purposes of this Agreement or, if no Independent Director then remains,
the other directors shall designate two persons to fill such vacancies
who shall not be stockholders, Affiliates or Associates of Parent or
Purchaser, and such person shall be deemed to be Independent Directors
for purposes of this Agreement. Notwithstanding anything in this
Agreement to the contrary, in the event that Parent's designees
constitute a majority of the directors on the Company Board of
Directors, the affirmative vote of a majority of the Independent
Directors shall be required after the acceptance for payment of Shares
pursuant to the Offer and prior to the Effective Time, to (i) amend or
terminate this Agreement by the Company, (ii) exercise or waive any of
the Company's rights, benefits or remedies hereunder if such exercise
or waiver materially and adversely affects holders of Shares other than
Parent or Purchaser, or (iii) take any other action under or in
connection with this Agreement if such action materially and adversely
affects holders of Shares other than Parent or Purchaser; provided,
that if there shall be no such directors, such actions may be effected
by unanimous vote of the entire Company Board of Directors.
(d) Notwithstanding anything herein to the contrary:
(i) The obligations of the Company under this
SECTION 1.3 are in all cases subject to the faithful and
diligent exercise of the Company Board's fiduciary duties to
the Company's stockholders. Accordingly, the Company is not
obligated to use its best efforts to cause the appointment by
the Company Board of any designee of Parent or Purchaser in
the event that such designee: (A) does not meet the
qualifications for directors under applicable law or the
Company's Bylaws; (B) has been convicted of, pled guilty or
nolo contendere to, or has confessed to any felony or any act
of fraud, misappropriation or embezzlement; (C) has tested
positive for illegal drugs; or (D) has been the subject of any
of the proceedings described in Item 401(f) of Regulation S-K
promulgated under the Exchange Act during at least the past
five years.
(ii) The Company is not obligated to use its best
efforts to cause any Company Board appointments or
resignations that would result in the Company Board failing to
meet the requirements for independent directors or audit
committee membership under NASDAQ listing standards.
Section 1.4 The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time, the Company and Purchaser shall
consummate a merger pursuant to which (a) Purchaser shall be merged with and
into the Company and the separate corporate existence of Purchaser shall
thereupon cease, (b) the Company shall be the successor or surviving corporation
in the Merger and shall continue to be governed by the laws of the State of
Delaware, and (c) the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger, except as set forth in this SECTION 1.4. The Merger shall have
the effects specified in the DGCL. If at any time prior to the Closing Date
Parent notifies the Company that it desires for the Company to be merged with
and into Purchaser (in lieu of Purchaser merging with and into the Company), the
Company, Parent and Purchaser will promptly negotiate in good faith an amendment
to and restatement of this
6
Agreement which provides for such changes to this Agreement as are necessary or
appropriate to effectuate such merger (and upon finalization thereof, the
parties will promptly enter into such amendment and restatement).
Section 1.5 Effective Time Parent, Purchaser and the Company will
cause a Certificate of Merger to be executed and filed on the Closing Date (or
on such other date as Parent and the Company may agree) with the Secretary of
State of Delaware as provided in the DGCL. The Merger shall become effective on
the date on which the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware or such other time as is agreed upon by the
parties and specified in the Certificate of Merger.
Section 1.6 Closing. The closing of the Merger shall take place
at 10:00 a.m. on a date to be agreed upon by the parties, and if such date is
not agreed upon by the parties, the Closing shall occur on the second business
day after satisfaction or waiver of all of the conditions set forth in Article
VI, at the offices of Xxxxx, Xxxxxxxx & Xxxxxxx, LLP, 0000 Xxxxxxxxx Xx., XX,
Xxxxxxx, Xxxxxxx 00000 or at such other time and place as the parties mutually
agree.
Section 1.7 Certificate of Incorporation; By-Laws. Pursuant to
the Merger, (a) the certificate of incorporation of the Company, shall be
amended in its entirety to read as the certificate of incorporation of Purchaser
in effect immediately prior to the Effective Time, except that Article FIRST
thereof shall read as follows:
"FIRST: The name of the corporation is Cypress Communications,
Inc."
and, as so amended, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended as provided by law and such certificate of
incorporation, and (b) the by-laws of Purchaser, as in effect immediately prior
to the Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by law, by such certificate of incorporation or
by such by-laws.
Section 1.8 Directors and Officers of the Surviving Corporation.
The directors and officers of Purchaser at the Effective Time shall, from and
after the Effective Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the certificate of incorporation and the by-laws of the
Surviving Corporation. If, at the Effective Time, a vacancy shall exist on the
Company Board of Directors or in any office of the Surviving Corporation, such
vacancy may thereafter be filled in the manner provided by law.
Section 1.9 Subsequent Actions. If at any time after the
Effective Time the Surviving Corporation will consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Purchaser acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out
7
this Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of either the
Company or Purchaser, all such deeds, bills of sale, instruments of conveyance,
assignments and assurances and to take and do, in the name and on behalf of each
of such corporations or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
Section 1.10 Shareholders' Meeting.
(a) If required by applicable law in order to consummate
the Merger, the Company, acting through its Board of Directors, shall,
in accordance with applicable law:
(i) duly call, give notice of, convene and hold
a special meeting of its stockholders as promptly as
practicable following the acceptance for payment and purchase
of Shares by Purchaser pursuant to the Offer for the purpose
of considering and taking action upon the approval of the
Merger and the adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary
proxy or information statement relating to the Merger and this
Agreement and use commercially reasonable efforts to obtain
and furnish the information required to be included by the SEC
in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, to respond promptly to any comments
made by the SEC with respect to the preliminary proxy or
information statement and cause a definitive proxy or
information statement, including any amendment or supplement
thereto to be mailed to its stockholders, provided that no
amendment or supplement to such Proxy or information statement
will be made by the Company without consultation with Parent
and its counsel;
(iii) include in the Proxy Statement the
recommendation of the Board that stockholders of the Company
vote in favor of the approval of the Merger and the adoption
of this Agreement;
(iv) use commercially reasonable efforts to
solicit from holders of Shares proxies in favor of the Merger
and shall take all other action necessary or, in the
reasonable opinion of Parent, advisable to secure any vote or
consent of stockholders required by Delaware Law to effect the
Merger.
(b) Parent will provide the Company with the information
concerning Parent and Purchaser required to be included in the Proxy
Statement. Parent shall vote, or cause to be voted, all of the Shares
then owned by it, Purchaser or any of its other Subsidiaries or
Affiliates controlled by Parent in favor of the approval of the Merger
and the approval and adoption of this Agreement.
Section 1.11 Merger Without Meeting of Shareholders.
Notwithstanding SECTION 1.10, in the event that Parent, Purchaser and any other
Subsidiaries of Parent shall acquire in the
8
aggregate a number of the outstanding shares of each class of capital stock of
the Company, pursuant to the Offer or otherwise, sufficient to enable Purchaser
or the Company to cause the Merger to become effective without a meeting of
stockholders of the Company, the parties hereto shall, at the request of Parent
and subject to ARTICLE VI, take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any further action on the part of the
holders of any Shares or holders of Purchaser Common Stock:
(a) Purchaser Common Stock. Each issued and outstanding
share of Purchaser Common Stock shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned
Stock. All Shares that are owned by the Company as treasury stock and
any Shares owned by Parent, Purchaser or any other wholly owned
Subsidiary of Parent shall be cancelled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Each issued and outstanding
Share (other than Shares to be cancelled in accordance with SECTION
2.1(B) and other than any Dissenting Shares) shall be converted into
the right to receive the Merger Consideration, payable to the holder
thereof, without interest, upon surrender of the certificate formerly
representing such Share in the manner provided in SECTION 2.2. From and
after the Effective Time, all such converted Shares shall no longer be
outstanding and shall be deemed to be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
Shares shall cease to have any rights with respect to such shares
except the right to receive the Merger Consideration therefor, without
interest, upon the surrender of such certificate in accordance with
SECTION 2.2 or the right, if any, to receive payment from the Surviving
Corporation of the "fair value" of such Shares as determined in
accordance with Section 262 of the DGCL.
Section 2.2 Exchange of Certificates Paying Agent.
(a) Parent shall designate a bank or trust company to act
as agent for the holders of the Shares in connection with the Merger to
receive in trust the funds to which holders of the Shares shall become
entitled pursuant to SECTION 2.1(C). At the Effective Time, Parent or
Purchaser shall deposit, or cause to be deposited, with the Paying
Agent for the benefit of holders of Shares the aggregate consideration
to which such holders shall be entitled at the Effective Time pursuant
to SECTION 2.1(C). Such funds shall be invested as directed by Parent
or the Surviving Corporation pending payment thereof by
9
the Paying Agent to holders of the Shares. Earnings from such
investments shall be the sole and exclusive property of Purchaser and
the Surviving Corporation, and no part of such earnings shall accrue to
the benefit of holders of Shares.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Parent shall cause the Paying
Agent to mail to each holder of record of a Certificate or
Certificates, (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
Paying Agent and shall be in such form and have such other provisions
not inconsistent with this Agreement as Parent may specify) and (ii)
instructions for use in effecting the surrender of Certificates in
exchange for payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent
or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for
each Share formerly represented by such Certificate, and the
Certificate so surrendered shall forthwith be cancelled. If payment of
the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered, it
shall be a condition of payment that the Certificate so surrendered
shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid
any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of
the Certificate surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either has been
paid or is not applicable. Until surrendered as contemplated by this
SECTION 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger
Consideration in cash as contemplated by this SECTION 2.2. All cash
paid upon surrender of Shares in accordance with the terms hereof shall
be deemed to have been paid in full satisfaction of all rights
pertaining to such Shares.
(c) Transfer Books; No Further Ownership Rights in the
Shares. At the Effective Time, the stock transfer books of the Company
shall be closed, and thereafter there shall be no further registration
of transfers of the Shares on the records of the Company. From and
after the Effective Time, the holders of Certificates evidencing
ownership of the Shares outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares, except
as otherwise provided for herein or by applicable law.
(d) Termination of Fund; No Liability. At any time
following three (3) months after the Effective Time, the Surviving
Corporation shall be entitled to require the Paying Agent to deliver to
it any funds (including any earnings received with respect thereto)
which had been made available to the Paying Agent and which have not
been disbursed to holders of Certificates, and thereafter such holders
shall be entitled to look only to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) and only as general
creditors thereof with respect to the Merger Consideration payable upon
due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, neither the Surviving Corporation nor
the
10
Paying Agent shall be liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 2.3 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to
the contrary, Dissenting Shares shall not be converted into or
represent a right to receive cash pursuant to SECTION 2.1, but the
holder thereof shall be entitled to only such rights as are granted by
the DGCL.
(b) Notwithstanding the provisions of SECTION 2.3(A), if
any holder of Shares who demands appraisal of his Shares under the DGCL
effectively withdraws or loses (through failure to perfect or
otherwise) his right to appraisal, then as of the Effective Time or the
occurrence of such event, whichever later occurs, such holder's Shares
shall automatically be converted into and represent only the right to
receive the Merger Consideration as provided in SECTION 2.1(C), without
interest, upon surrender of the certificate or certificates
representing such Shares pursuant to SECTION 2.2.
(c) The Company shall give Parent (i) prompt notice of
any written demands for appraisal or payment of the fair value of any
Shares, withdrawals of such demands, and any other instruments served
on the Company pursuant to the DGCL received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the DGCL. Except with the prior written
consent of Parent, the Company shall not voluntarily make any payment
with respect to any demands for appraisal, settle or offer to settle
any such demands.
Section 2.4 Company Stock Option Plans.
(a) At the Effective Time, each outstanding and
unexercised option to purchase Shares (a "Company Option") pursuant to
those certain Cypress Communications, Inc. 1997 Management Option Plan
(the "1997 Plan") and that certain 2000 Stock Option and Incentive Plan
of the Company (the "2000 Plan", and together with the 1997 Plan,
collectively (the "Company Option Plans") or pursuant to other
compensatory option plans or agreements set forth in the Disclosure
Schedule, whether vested or unvested, shall be converted into an
obligation of the Company to pay, and the right of the holder thereof
to receive, in full satisfaction of each Company Option, the "Cash
Amount" with respect to such Company Option. The "Cash Amount" for any
Company Option shall equal the product of: (1) the excess, if any, of
the Offer Price over the exercise price per Share of such Company
Option and (2) the number of Shares underlying such Company Option. The
Company shall take all reasonable actions necessary to cause the
Company's employees and directors to consent, to the extent required,
to the transactions contemplated by this SECTION 2.4 no later than
immediately prior to the Effective Time. Except as may be otherwise
agreed to by Parent or Purchaser and the Company, as of the Effective
Time, (A) the Company Option Plans shall terminate, (B) the provisions
in any other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the capital stock of the
Company or
11
any of its Subsidiaries shall be deleted and (C) except for Company
Warrants, no holder of Company Options or any participant in the
Company Option Plans or any other plans, programs or arrangements shall
have any rights thereunder to acquire any Equity Interests of the
Company, the Surviving Corporation or any subsidiary thereof. The
Company and Parent agree that the Cash Amounts are the sole payments
that will be made with respect to or in relation to the Company Options
(other than Company Warrants).
(b) All warrants and other Equity Interests of the
Company, other than Company Options (which shall be subject to the
provisions of SECTION 2.4(A) above) and the Company Warrants, shall be
canceled as of the Closing Date at a nominal price or as otherwise
agreed by Purchaser. At or before the Effective Time, the Company shall
use commercially reasonable efforts to take all actions, in a manner
reasonably satisfactory to Parent, necessary or advisable to give
effect to the foregoing provisions of this SECTION 2.4.
(c) As soon as practicable, and in no event greater than
five Business Days following, the Effective Time, Parent shall cause to
be mailed to the holder of each Company Option, the Cash Amount payable
with respect to such Company Option to such holder pursuant to SECTION
2.4(A) hereof.
(d) The Company represents and warrants that all the
Stock Option Plans provide that either (i) the Company can take the
actions described in SECTION 2.4(A) without obtaining the consent of
any holders of Options or (ii) if such consent is required, the Company
will obtain such consents and provide evidence thereof to Parent at
least ten (10) days prior to the initial expiration of the Offer.
(e) Each of the "Restricted Stock Awards" (as defined in
the 2000 Plan) and disclosed pursuant to SECTION 3.3(B) shall vest and
all transfer and other restrictions on such Restricted Stock Awards
shall terminate effective immediately prior to the initial expiration
date of the Offer to permit the holders of such Restricted Stock Awards
to tender the Shares subject to such Restricted Stock Awards in the
Offer.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as set forth in the Company SEC Documents or in the
Disclosure Schedule prepared and signed by the Company and delivered to
Purchaser simultaneously with the execution hereof, the Company represents and
warrants to Parent and Purchaser that all of the statements contained in this
ARTICLE III are true and correct in all material respects as of the date of this
Agreement (or, if made as of a specified date, as of such date), and will be
true and correct as of the Appointment Date as though made on the Appointment
Date.
Section 3.1 Organization; Qualification. The Company (i) is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation; (ii) has full corporate power and authority to
carry on its business as it is now being conducted and to own the properties and
assets it now owns; and (iii) except as set forth in the Disclosure
12
Schedule, is duly qualified or licensed to do business as a foreign corporation
in good standing in every jurisdiction in which ownership or lease of property
or the conduct of its business requires such qualification, except in any such
case where such failure would not, individually or in the aggregate, have a
Material Adverse Effect.
Section 3.2 Subsidiaries and Affiliates. The Disclosure Schedule
sets forth the name, jurisdiction of incorporation and capitalization of each
Company Subsidiary and the jurisdictions in which each Company Subsidiary is
qualified to do business. Except for the Subsidiaries or as set forth in the
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock or other equity securities of any corporation or have any direct
or indirect equity or ownership interest in any other Person. All the
outstanding capital stock of each Company Subsidiary is owned directly or
indirectly by the Company free and clear of all Liens of any kind and is validly
issued, fully paid and nonassessable, and there are no outstanding Options of
any such Company Subsidiary to any Person except the Company. Each Company
Subsidiary (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation; (ii) has full corporate
power and authority to carry on its business as it is now being conducted and to
own the properties and assets it now owns; and (iii) is duly qualified or
licensed to do business as a foreign corporation in good standing in every
jurisdiction listed opposite the name of such Company Subsidiary in the
Disclosure Schedule which are the only jurisdictions in which ownership or lease
of property or the conduct of its business requires such qualification except
where such failure would not, individually or in the aggregate, have a Material
Adverse Effect. The Company has heretofore delivered to Parent complete and
correct copies of the certificate of incorporation and by-laws of each Company
Subsidiary, as presently in effect.
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company consists
of One Hundred Seventy One Million (171,000,000) shares of capital
stock of which (i) One Hundred Fifty Million (150,000,000) are
designated as common stock, par value $.001 per share (the "Common
Stock") and (ii) One Million (1,000,000) shares are designated as
Series Z Preferred Stock, par value $.001 per share (the "Series Z
Stock") and (iii) Twenty Million (20,000,000) shares designated as
undesignated preferred stock, par value $.001 per share. As of the date
hereof, (a) 4,925,768 shares of Common Stock (including without
limitation all awards of restricted Common Stock) are issued and
outstanding, (b) no shares of Common Stock are issued and held in the
treasury of the Company, (c) 1,000,000 shares of Series Z Stock are
reserved for issuance pursuant to the Rights Agreement ("Company
Rights"), none of which are issued and outstanding, (d) 1,037,395
shares of Common Stock are reserved for issuance upon exercise of
Company Options under the Company Stock Option Plans, and (e) 1,485,000
shares of Common Stock are reserved for issuance upon exercise of
Company Warrants. All the outstanding shares of the Company's capital
stock are, and all Shares which may be issued pursuant to the exercise
of outstanding Company Options and the Company Warrants will be, when
issued in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and non-assessable. There is no
Voting Debt
13
of the Company or any Company Subsidiary issued and outstanding. Except
as set forth above and except for the Transactions, as of the date
hereof, (i) there are no shares of capital stock or Voting Debt of the
Company authorized, issued or outstanding; (ii) there are no existing
Options obligating the Company or any Company Subsidiary to issue,
transfer or sell or cause to be issued, transferred or sold any shares
of capital stock of, or other equity interest in, the Company or any
Company Subsidiary or securities convertible into or exchangeable for
such shares or equity interests, or obligating the Company or any
Company Subsidiary to grant, extend or enter into any such Option and
(iii) there are no outstanding contractual obligations of the Company
or any Company Subsidiary to repurchase, redeem or otherwise acquire
any Shares, or the capital stock of the Company, or any Company
Subsidiary or Affiliate of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise)
in any Company Subsidiary or any other entity. Following the Effective
Time, no holder of Company Options will have any right to receive
shares of common stock of the Surviving Corporation upon exercise of
Company Options.
(b) The Disclosure Schedule sets forth the following
information:
(i) all issued and outstanding shares of Company
Common Stock that constitute restricted stock or that are
otherwise subject to a repurchase or redemption right or right
of first refusal in favor of the Company; the name of the
applicable stockholder, the lapsing schedule for any such
shares, including the extent to which any such repurchase or
redemption right or right of first refusal has lapsed as of
the date of this Agreement, whether (and to what extent) the
lapsing will be accelerated in any way by the transactions
contemplated by this Agreement or by termination of employment
or change in position following consummation of the Merger,
and whether such holder has the sole power to vote and dispose
of such shares;
(ii) a complete and accurate list of all holders
of Company Options outstanding as of December 31, 2001 under
the Company Option Plans, indicating with respect to each such
Stock Option the employment status (e.g., employee or
consultant) of the holder thereof, the number of Shares
subject to each such Stock Option, the exercise price, the
date of grant, the expiration date and the vesting schedule
for any such options, including the extent to which any such
vesting has occurred as of the date of this Agreement, and
whether (and to what extent) the vesting will be accelerated
in any way by the transactions contemplated by this Agreement
or by termination of employment or change in position
following consummation of the Merger; and
(iii) the number of shares of Common Stock
reserved for future issuance pursuant to the warrants
exercisable for Common Stock outstanding as of the date of
this Agreement as set forth in the Disclosure Schedule (such
warrants, the "Company Warrants").
(c) The Company has made available to Parent and
Purchaser true and complete copies of all Company Option Plans and the
forms of all stock option agreements evidencing Company Options granted
under the Company Option Plans or otherwise, all agreements under which
any Company Warrants and Company Rights
14
were issued or are issuable and all agreements governing unvested
shares of Common Stock and the vesting thereof.
Section 3.4 Authorization; Validity of Agreement; Company Action.
The Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions. The execution, delivery and
performance by the Company of this Agreement and the consummation by it of the
Transactions, have been duly authorized by the Company Board of Directors and,
except for obtaining the approval of its stockholders as contemplated by SECTION
1.10, no other corporate action on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement or the
consummation by it of the Transactions. Without limiting the generality of the
preceding sentence, the board of directors of the Company (at a meeting duly
called and held) has by the unanimous vote of the directors voting at such
meeting (i) determined that the Merger is advisable and in the best interests of
the Company and its stockholders, (ii) authorized and approved the execution,
delivery and performance of this Agreement by the Company and approved the
Merger, (iii) recommended (x) the adoption of this Agreement, (y) that the
Company's stockholders accept the Offer and tender their Shares and (z) the
approval of the Merger by the Company's stockholders and directed that this
Agreement be submitted for consideration by the Company's stockholders at a
meeting of the Company's stockholders, and (iv) to the extent necessary, adopted
a resolution having the effect of causing the Merger and the other transactions
contemplated by this Agreement or the Company Voting Agreements not to be
subject to the restrictions set forth in any state takeover law (including
Section 203 of the DGCL) or similar law that might otherwise apply or the Rights
Agreement. This Agreement has been duly executed and delivered by the Company
and, assuming due and valid authorization, execution and delivery thereof by
Parent and Purchaser, this Agreement is a valid and binding obligation of the
Company, subject to general equity principles, enforceable against the Company
in accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally.
Section 3.5 Vote Required. The affirmative vote of the holders of
a majority of the outstanding Shares is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve the Merger.
No vote of any class or series of the Company's capital stock is necessary to
approve any of the Transactions other than the Merger.
Section 3.6 Consents and Approvals; No Violations. Except for the
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR Act,
state securities or blue sky laws, and the DGCL, or as otherwise disclosed in
the Disclosure Schedule, none of the execution, delivery or performance of this
Agreement by the Company, the consummation by the Company of the Transactions or
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the certificate of
incorporation, the by-laws or similar organizational documents of the Company or
any Company Subsidiary, (ii) require any filing with, or permit, authorization,
consent or approval of, any Governmental Entity, (iii) result in a violation or
breach of, or constitute (with or without due notice or the passage of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any Company Agreement, or (iv) violate any
15
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company, any Company Subsidiary or any of their properties or assets, excluding
from the foregoing clauses (ii), (iii) and (iv) such violations, breaches or
defaults which would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 3.7 SEC Reports and Financial Statements. The Company has
filed with the SEC, and has heretofore made available to Parent, true and
complete copies of, the Company SEC Documents. As of their respective dates or,
if amended, as of the date of the last such amendment filed prior to the date
hereof, the Company SEC Documents, including, without limitation, any financial
statements or schedules included therein (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. None of the Company Subsidiaries is
required to file any forms, reports or other documents with the SEC. Except as
set forth in the Disclosure Schedules, each of the Company SEC Documents was
filed on a timely basis. The Financial Statements have been prepared from, and
are in accordance with, the books and records of the Company and its
consolidated Subsidiaries, comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the period involved (except as may be stated in the
notes thereto or, in the case of unaudited interim financial statements, as may
be permitted by the SEC on Form 10-Q under the Exchange Act) and fairly present
the consolidated financial position and the consolidated results of operations
and cash flows (and changes in financial position, if any) of the Company and
its consolidated Subsidiaries as of the times and for the periods referred to
therein, except that the unaudited interim financial statements may not contain
footnotes and were or are subject to normal year-end adjustments.
Section 3.8 Books and Records. The books of account, minute
books, stock record books and other records of the Company are complete and
correct in all material respects and have been maintained in accordance with
sound business practices and the requirements of Section 13(b)(2) of the
Exchange Act. The minute books of the Company contain all minutes of meetings
held of, and accurate and complete records of corporate action taken by, the
stockholders, the Company Board of Directors and committees of the Company Board
of Directors.
Section 3.9 No Undisclosed Liabilities. Except (a) as disclosed
in the Financial Statements and the notes thereto or in the Balance Sheet, (b)
for liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the Balance Sheet Date pursuant to the terms
of this Agreement, (c) the Transaction Liabilities, and (d) liabilities and
obligations that are not required to be set forth in the Financial Statements
under GAAP or the published rules and regulations of the SEC with respect
thereto, neither the Company nor any Company Subsidiary has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
have, or would be reasonably likely to have, a Material Adverse Effect. The
reserves reflected in the Financial Statements are adequate,
16
appropriate and reasonable and have been calculated in a consistent manner. The
Disclosure Schedule contains a good-faith estimate of the Transaction
Liabilities made as of the date of this Agreement.
Section 3.10 Absence of Certain Changes. Since the Balance Sheet
Date, except as described in the Disclosure Schedule or disclosed in the Company
SEC Documents filed prior to the date hereof, (i) the Company and each Company
Subsidiary has conducted its respective business only in the ordinary and usual
course consistent with past practice, (ii) there has not occurred any events or
changes (including the incurrence of any liabilities of any nature, whether or
not accrued, contingent or otherwise) having or reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect, and (iii) the
Company has not taken any action which would have been prohibited under SECTION
5.1 if such section applied to the period between the Balance Sheet Date and the
date of execution of this Agreement.
Section 3.11 Litigation. Except as set forth in the Disclosure
Schedule, there is no action, suit, inquiry, proceeding or investigation by or
before any court or governmental or other regulatory or administrative agency or
commission pending or, to the best knowledge of the Company, threatened against
or involving the Company or any Company Subsidiary, in any such case, which
individually or in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by the Company or any Company
Subsidiary pursuant to this Agreement or in connection with the Transactions;
nor to the Company's knowledge is there any valid basis for any such action,
proceeding or investigation. Neither Company nor any Company Subsidiary is
subject to any judgment, order or decree, which individually of in the
aggregate, has or would be reasonably likely to have a Material Adverse Effect.
Section 3.12 Employee Benefit Plans. Except as set forth in the
Disclosure Schedule:
(a) The Disclosure Schedule contains a true and complete
list of each deferred compensation and each incentive compensation,
stock purchase, stock option and other equity compensation plan,
program, agreement or arrangement; each severance or termination pay,
medical, surgical, hospitalization, life insurance and other "welfare"
plan, fund or program (within the meaning of Section 3(1) of ERISA);
each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each employment
agreement (including prospective severance or termination agreement);
and each other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed
to or required to be contributed to by the Company or by any ERISA
Affiliate, or to which the Company or an ERISA Affiliate is party,
whether written or oral, for the benefit of any employee or former
employee of the Company or any Company Subsidiary. Neither the Company,
any Company Subsidiary nor any ERISA Affiliate has any commitment or
formal plan, whether legally binding or not, to create any material
additional employee benefit plan or materially modify or change any
existing Plan, other than as required by applicable law.
(b) The Company has heretofore made available to
Purchaser true and complete copies of each Plan and any amendments
thereto (or if a Plan is not a written
17
Plan, a description thereof), any related trust or other funding
vehicle, any reports or summaries required under ERISA or the Code for
the past three (3) years, the most recently available Form 5500 annual
report, all material agreements with service providers and the most
recent determination letter received from the Internal Revenue Service
with respect to each Plan intended to qualify under Section 401(a) of
the Code.
(c) No liability under Title IV or Section 302 of ERISA
has been incurred by the Company or any ERISA Affiliate that has not
been satisfied in full, and no condition exists that presents a
material risk to the Company or any ERISA Affiliate of incurring any
such liability, other than liability for premiums due the PBGC (which
premiums have been paid when due) and other than such liability or
condition which, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect. Insofar as the
representation made in this SECTION 3.12(C) applies to Sections 4064,
4069 or 4204 of Title IV of ERISA, it is made with respect to any
employee benefit plan, program, agreement or arrangement subject to
Title IV of ERISA to which the Company or any ERISA Affiliate made, or
was required to make, contributions during the five year period ending
on the last day of the most recent plan year ended prior to the Closing
Date.
(d) The PBGC has not instituted proceedings to terminate
any Title IV Plan and, to the Company's knowledge, no condition exists
that presents a material risk that such proceedings will be instituted.
(e) With respect to each Title IV Plan, the present value
of accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial
report prepared by such plan's actuary with respect to such plan did
not exceed, as of its latest valuation date, then current value of the
assets of such plan allocable to such accrued benefits.
(f) No Title IV Plan or any trust established thereunder
has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each Title
IV Plan ended prior to the Closing Date. All contributions required to
be made with respect to any Title IV Plan on or prior to the Closing
Date have been timely made.
(g) No Title IV Plan is a "multiemployer pension plan or
welfare plan," as defined in Section 3(37) of ERISA, nor is any Title
IV Plan a plan described in Section 4063(a) of ERISA. Neither the
Company nor any ERISA Affiliate has made or suffered a "complete
withdrawal" or a "partial withdrawal," as such terms are respectively
defined in Sections 4203 and 4205 of ERISA (or any liability resulting
therefrom has been satisfied in full).
(h) To the Company's knowledge, neither the Company or
any Company Subsidiary, any Plan, any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in
connection with which the Company or any Company Subsidiary, any Plan,
any such trust, or any trustee or administrator thereof, or any party
dealing with any Plan or any such trust could be subject to either a
civil penalty
18
assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed
pursuant to Section 4975 or 4976 of the Code.
(i) Each Plan and the related trusts subject to ERISA
comply in all material respects and have been administered in
compliance in all material respects with (i) the provisions of ERISA,
(ii) the provisions of the Code applicable to secure the intended tax
consequences, (iii) all applicable state and federal securities laws
and (iv) all other applicable laws, rules, regulations and collective
bargaining agreements, in each case where the failure to be in such
compliance, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect. The Company has not
received any written notice from any governmental agency or
instrumentality questioning or challenging such compliance.
(j) Each Plan that is an "employee benefit pension plan"
within the meaning of Section 3(2) of ERISA which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has
received a current determination letter from the Internal Revenue
Service that such Plan is qualified; or, in the event the Plan is in
the form of a standardized prototype plan, the sponsoring organization
has received a current letter from the Internal Revenue Service
approving the prototype plan as to form; and the Company knows of no
condition or event that could reasonably be expected to adversely
affect the qualified status of the Plan.
(k) No Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or
former employees of the Company or any Company Subsidiary for periods
extending beyond their retirement or other termination of service,
other than (i) coverage mandated by applicable law, (ii) death benefits
under any "pension plan," or (iii) benefits the full cost of which is
borne by the current or former employee (or his beneficiary).
(l) The consummation of the Transactions will not, either
alone or in combination with another event, (i) entitle any current or
former employee or officer of the Company or any ERISA Affiliate to
severance pay, unemployment compensation or any other payment, except
as expressly provided in this Agreement, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee or officer, except for compensation under the Company Option
Plans and restricted stock awards.
(m) There is no pending or, to the knowledge of the
Company, threatened complaint, claim (other than a routine claim for
benefits), proceeding, audit, or investigation of any kind in or before
any court, tribunal, or governmental agency with respect to any Plan in
each case, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
(n) The Company has accrued on its Financial statements
an amount calculated in accordance with GAAP with respect to all
material incurred but unreported claims under any group health Plan.
19
(o) To the Company's knowledge, each group health Plan is
substantially current with respect to the payment of proper and
reported claims.
(p) One or more policies of stop loss insurance are in
effect which insure the Company (or any ERISA Affiliate that sponsors a
group health Plan against claims under a group health Plan that exceed
individual or aggregate claims, copies of which stop loss insurance
policies have been made available to Parent.
(q) The Company's records accurately reflect its
employees' employment histories, including their hours of service and
years of vesting and eligibility service.
(r) All contributions and payments made or accrued with
respect to all Plans are deductible under Sections 404 or 162 of the
Code and, if not made, are properly reflected on the Financial
Statements of the Company or the Balance Sheet.
Section 3.13 Tax Matters; Government Benefits. Except as
otherwise described in the Disclosure Schedule:
(a) The Company and each of its Subsidiaries have duly
and timely filed all Tax Returns that are required to be filed
excluding only such Tax Returns as to which any failure to file does
not have a Material Adverse Effect and have duly paid or caused to be
duly paid in full or made provision in accordance with GAAP (or there
has been paid or provision has been made on their behalf) for the
payment of all material Taxes (as hereinafter defined) for all periods
or portions thereof ending through the date hereof. All such Tax
Returns are correct and complete in all material respects and
accurately reflect all liability for Taxes for the periods covered
thereby. All material Taxes owed and due by the Company and all Company
Subsidiaries relating to operations on or prior to the Balance Sheet
Date (whether or not shown on any Tax Return) have been paid or have
been adequately reflected on the Financial Statements or the Balance
Sheet. Since the Balance Sheet Date, the Company has not incurred
liability for any Taxes other than in the ordinary course of business.
Neither the Company nor any Company Subsidiary has received written
notice of any Claim made by an authority in a jurisdiction where
neither the Company nor any Company Subsidiary file Tax Returns, that
the Company is or may be subject to taxation by that jurisdiction, in
any such case as would be reasonably likely to have a Material Adverse
Effect.
(b) The Internal Revenue Service has not asserted any
material deficiencies that have not been resolved or fully paid with
respect to the federal income Tax Returns of the Company and its
Subsidiaries for any period (or the applicable statutes of limitation
for the assessment of federal income Taxes for such periods have
expired). Neither the Company nor any Company Subsidiary has waived any
statute of limitations in any jurisdiction in respect of Taxes or Tax
Returns or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(c) No federal, state, local or foreign audits,
examinations or other administrative proceedings have been commenced
or, to the Company's knowledge, are pending with regard to any Taxes or
Tax Returns of the Company or of any Company
20
Subsidiary which would be reasonably likely to have a Material Adverse
Effect. No written notification has been received by the Company or by
any Company Subsidiary that such an audit, examination or other
proceeding is pending or threatened with respect to any Taxes due from
or with respect to or attributable to the Company or any Company
Subsidiary or any Tax Return filed by or with respect to the Company or
any Company Subsidiary. There is no dispute or Claim concerning any Tax
liability of the Company, or any Company Subsidiary either claimed or
raised by any taxing authority in writing which would be reasonably
likely to have a Material Adverse Effect.
(d) No amount paid or payable by the Company or any of
its Subsidiaries in connection with the Transactions, including without
limitation accelerated vesting of Options, will constitute an "excess
parachute payment" within the meaning of Section 280G of the Code.
(e) Neither the Company nor any of its Subsidiaries has
filed a consent pursuant to Section 341(f) of the Code (or any
predecessor provision) concerning collapsible corporations, or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a
"subsection (f) asset" (as such term is defined in Section 341(f)(4) of
the Code) owned by the Company or any Company Subsidiary.
(f) No taxing authority is asserting or threatening to
assert a Claim against the Company or any Company Subsidiary under or
as a result of Section 482 of the Code or any similar provision of
state, local or foreign law which would be reasonably likely to have a
Material Adverse Effect.
(g) Neither the Company nor any of its Subsidiaries is a
party to any material tax sharing, tax indemnity or other agreement or
arrangement with any entity not included in the Company's consolidated
financial statements most recently filed by the Company with the SEC.
(h) None of the Company or any Company Subsidiary has
been a member of any affiliated group within the meaning of Section
1504(a) of the Code, or any similar affiliated or consolidated group
for tax purposes under state, local or foreign law (other than a group
the common parent of which is the Company), or to the Company's
knowledge has any liability for Taxes of any person (other than the
Company and its Subsidiaries) under Treasury Regulation Section
1.1502-6 or any similar provision of state, local or foreign law as a
transferee or successor, by contract or otherwise.
Section 3.14 Title to Properties. Except as set forth in the
Disclosure Schedule, each of the Company and the Company Subsidiaries has good
title to all the material properties and assets which it purports to own (real,
personal and mixed, tangible and intangible), including, without limitation, all
the properties and assets reflected in the Balance Sheet (except for personal
property sold since the date of the Balance Sheet in the ordinary course of
business and consistent with past practice), and all the properties and assets
purchased by the Company and the Company Subsidiaries since the date of the
Balance Sheet, free and clear of all liens securing indebtedness for money
borrowed.
21
Section 3.15 Environmental Laws. Except as disclosed in the
Company SEC Documents or as described in the Disclosure Schedule (a) the Company
and each Company Subsidiary are in compliance in all material respects with all
material Environmental Laws, and including, but not limited to, compliance in
such respects with any required permits or other governmental authorizations or
the terms and conditions thereof; (b) neither the Company nor any Company
Subsidiary has received any communication or notice, whether from a governmental
authority or otherwise, alleging any violation of or noncompliance with any
Environmental Laws by the Company any Company Subsidiary or for which the any of
them is known to be responsible, and there is no pending or, to the Company's
knowledge, threatened Environmental Claim, except where such Environmental Claim
would not have a Material Adverse Effect; and (c) to the Company's knowledge,
there are no past or present facts or circumstances that could form the basis of
any Environmental Claim against the Company or any Company Subsidiary or against
any person or entity whose liability for any Environmental Claim the Company or
any Company Subsidiary has retained or assumed either contractually or by
operation of law, except where such Environmental Claim, if made, would not have
a Material Adverse Effect. All permits and other governmental authorizations
currently held by the Company and the Company Subsidiaries pursuant to any
Environmental Laws are identified in the Disclosure Schedule.
Section 3.16 Bank Accounts. The Disclosure Schedule sets forth the
names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which the Company or any Company Subsidiary
maintains safe deposit boxes or accounts of any nature and the names of all
persons authorized to draw thereon, make withdrawals therefrom or have access
thereto.
Section 3.17 Intellectual Property. To the Company's knowledge,
except as otherwise set forth in the Disclosure Schedule, either the Company or
a Company Subsidiary owns, or is licensed or otherwise possesses rights to use
the Company Intellectual Property. To the knowledge of the Company, except as
described in the Disclosure Schedule, there are no oppositions, cancellations,
invalidity proceedings, interferences or re-examination proceedings presently
pending with respect to the Company Intellectual Property. To the Company's
knowledge, except as described in the Disclosure Schedule, the conduct of the
business of the Company and the Company Subsidiaries and the Company
Intellectual Property does not infringe any Intellectual Property rights or any
other proprietary right of any person, and neither the Company nor any Company
Subsidiary has received any written notice from any other Person pertaining to
or challenging the right of the Company or any Company Subsidiary to use any of
the Company Intellectual Property, in each case except for such as would not be
reasonably likely to have a Material Adverse Effect. Neither the Company nor any
Company Subsidiary has made any claim of a violation or infringement by others
of its rights to or in connection with the Company Intellectual Property which
is still pending.
Section 3.18 Employment Matters.
(a) The Disclosure Schedule sets forth a true and
complete list of: the names and current salaries of all directors and
elected and appointed officers of each of the Company and the Company
Subsidiaries, the number of shares of the Company Stock
22
owned beneficially or of record, or both, by each such person and the
family relationships, if any, among such persons; the wage rates for
non-salaried and non-executive salaried employees of each of the
Company and the Company Subsidiaries by classification, and all labor
union contracts; and all group insurance programs in effect for
employees of each of the Company and the Company Subsidiaries. Neither
the Company nor any Company Subsidiary is in default with respect to
any of its obligations referred to in the preceding sentence, except
for such defaults as would not be reasonably likely to have a Material
Adverse Effect.
(b) Neither the Company nor any Company Subsidiary has
experienced any strikes, collective labor grievances, other collective
bargaining disputes or Claims of "unfair labor practices" (as defined
under applicable labor laws) in the last five (5) years. To the
Company's knowledge, there is no organizational effort presently being
made or threatened by or on behalf of any labor union with respect to
employees of the Company and its Subsidiaries.
(c) The Company (i) has been since its date of
organization, and currently is, in compliance with all federal, state
and local laws, rules, regulations and orders affecting employment and
employment practices applicable thereto, including, without limitation,
those regulations promulgated by the Equal Employment Opportunity
Commission and those relating to terms and conditions of employment and
wages and hours, except for such noncompliance as would not be
reasonably likely to have a Material Adverse Effect, and (ii) has not
materially violated, and is not in material violation of, the federal
WARN Act.
Section 3.19 Compliance with Laws; Licenses and Permits.
(a) The Company and its Subsidiaries are in compliance
with all applicable law, rule or regulation of any United States
federal, state, local, or foreign government or agency thereof which
materially affects the business, properties or assets of the Company
and its Subsidiaries, and no notice, charge, Claim, action or assertion
has been received by the Company or any Company Subsidiary or has been
filed, commenced or, to the Company's knowledge, threatened against the
Company or any Company Subsidiary alleging any such violation, except
for any matter otherwise covered by this sentence which does not have
and would not reasonably be expected to have a Material Adverse Effect.
All licenses, permits and approvals required under such laws, rules and
regulations are in full force and effect except where the failure to be
in full force and effect would not have a Material Adverse Effect.
(b) Except where the failure to comply with any of the
following, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect (i) the Company and each
Company Subsidiary is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for the Company and each Company Subsidiary to own, lease and
operate its properties or to carry on its business as it is now being
conducted (the "Company Permits") and (ii) all of the Company Permits
23
are in full force and effect and no violation, suspension or
cancellation of any of the Company Permits is pending or, to the
knowledge of the Company threatened.
Section 3.20 Contracts and Commitments.
(a) The Disclosure Schedule sets forth a list (as of the
date of this Agreement) of all Company Agreements (i) material to the
conduct of the business of the Company and the Company Subsidiaries,
taken as a whole, and having, as to any one such Company Agreement, a
value to the Company in excess of $100,000, or (ii) which represent an
obligation or liability of the Company or any Company Subsidiary for
the payment of an amount in excess of $50,000 per year, other than
those terminable on 30 days' or less notice by the Company or Company
Subsidiary without penalty or other financial obligation or (iii)(A)
under which the Company or any Company Subsidiary has advanced or
loaned any Person (including any employee, officer, director or
Affiliate) an amount in excess of $10,000, (B) under which the Company
or any Company Subsidiary has granted any right of first refusal or
similar right in favor of any third party with respect to any material
portion of the Company's or any Company Subsidiary's properties or
assets, or (C) containing non-compete covenants by the Company or any
Company Subsidiary (collectively, the "Material Company Agreements").
The Company has made available to Parent a correct and complete copy
of each Material Company Agreement listed in the Disclosure Schedule.
(b) Except as set forth in the Disclosure Schedule, (i)
each of the Material Company Agreements are valid, binding and
enforceable in accordance with their terms, subject to general equity
principles, and are in full force and effect, except as the same may be
limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally, (ii) there are no existing
defaults by the Company or any Company Subsidiary thereunder, and (iii)
no event of default has occurred which (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a default by the Company or any Company Subsidiary
thereunder, except, with respect to clauses (ii) and (iii) of this
SECTION 3.20(B), where such default or event of default, individually
or in the aggregate with any other defaults or events of default, does
not constitute and could not reasonably be expected to have a Material
Adverse Effect.
Section 3.21 Customers. There has not been any material adverse
change in the business relationship of the Company or any Company Subsidiary
with any customer who accounted for more than 5% of the Company's sales (on a
consolidated basis) for the twelve-month period ending December 31, 2001.
Section 3.22 Insurance. The Disclosure Schedule contains an
accurate and complete list of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the Company
and each Company Subsidiary and copies of all such policies have been made
available to Purchaser. All such policies are in full force and effect, all
premiums due with respect thereto covering all periods up to and including the
date of the Closing have been paid or reserved, and no notice of cancellation or
termination has been received with respect to any such policy.
24
Section 3.23 Information Supplied.
(a) Schedule 14D-9. The information supplied in writing
by the Company expressly for inclusion in the Offer Documents and the
Schedule 14D-9 will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. The
Schedule 14D-9 will comply in all material respects with the provisions
of applicable federal securities laws and, on the date filed with the
SEC and on the date first published or sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading,
Notwithstanding the foregoing provisions of this SECTION 3.23, no
representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Schedule 14D-9
based on information supplied by Parent or Purchaser expressly for
inclusion or incorporation by reference therein or based on information
which is not made in or incorporated by reference in such documents but
which should have been disclosed pursuant to SECTION 3.23.
(b) Proxy Statement. The Proxy Statement, if any, will
not, at the date mailed to Company stockholders and at the time of the
meeting of Company stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made
therein based on information furnished by Parent or Purchaser for
inclusion in the Proxy Statement. The Proxy Statement will comply in
all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
Section 3.24 Opinion of Financial Advisor. The Company has
received the opinion of Breckenridge Securities Corp. dated the date hereof, to
the effect that, as of such date, the consideration to be received in the Offer
and the Merger by the Company's stockholders is fair to the Company's
stockholders from a financial point of view, and the copy of such opinion
included in the Disclosure Schedule is accurate and complete. The Company has
been authorized by Breckenridge Securities Corp. to permit the inclusion of such
opinion in its entirety in the Offer Documents, the Schedule TO, the Schedule
14D-9 and the Proxy Statement, so long as such inclusion is in form and
substance reasonably satisfactory to Breckenridge Securities Corp. and its
counsel.
Section 3.25 Rights Agreement. The Company has taken all action
which may be necessary under the Rights Agreement, so that the execution of this
Agreement and any amendments thereto by the parties hereto and the consummation
of the Transactions shall not cause (i) the Parent and/or Purchaser to become an
Acquiring Person (as defined in the Rights Agreement) or (ii) a Distribution
Date, a Shares Acquisition Date or a Trigger Event (as such
25
terms are defined in the Rights Agreement) to occur, irrespective of the number
of Shares acquired pursuant to the Offer.
Section 3.26 Absence of Questionable Payments. To the Company's
knowledge, neither the Company nor any Company Subsidiary nor any director,
officer, agent, employee or other person acting on behalf of the Company or any
Company Subsidiary, has used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Securities Exchange Act. To the Company's knowledge, neither
the Company nor any Company Subsidiary nor any current director, officer, agent,
employee or other person acting on behalf of the Company or any Company
Subsidiary, has accepted or received any unlawful contributions, payments,
gifts, or expenditures. The Company and each Company Subsidiary which is
required to file reports pursuant to Section 12 or 15(d) of the Securities
Exchange Act is in compliance with the provisions of Section 13(b) of the
Securities Exchange Act.
Section 3.27 Brokers or Finders. Neither the Company nor any of
its Affiliates has entered into any agreement or arrangement entitling any
agent, broker, investment banker, financial advisor or other firm or person to
any brokers' or finders' fee or any other commission or similar fee in
connection with any of the Transactions except for Breckenridge Securities Corp.
True and correct copies of all agreements between the Company and Breckenridge
Securities Corp., including, without limitation, any fee arrangements, are
included in the Disclosure Schedule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company
that:
Section 4.1 Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite corporate or other power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority, and
governmental approvals would not have, individually or in the aggregate, a
material adverse effect on Parent and its Subsidiaries, taken as a whole.
Section 4.2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent and Purchaser has full corporate power and authority to
execute and deliver this Agreement and to consummate the Transactions. The
execution, delivery and performance by Parent and Purchaser of this Agreement
and the consummation of the Merger and the Transactions have been duly
authorized by the Boards of Directors of Parent and Purchaser and by Parent as
the sole stockholder of Purchaser, and no other corporate action on the part of
Parent and Purchaser is necessary to authorize the execution and delivery by
Parent and Purchaser of this Agreement
26
or the consummation of the Transactions. This Agreement has been duly executed
and delivered by Parent and Purchaser, and, assuming due and valid
authorization, execution and delivery hereof by the Company, is a valid and
binding obligation of each of Parent and Purchaser, enforceable against each of
them in accordance with its terms.
Section 4.3 Consents and Approvals; No Violations. Except for the
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR Act,
state securities or blue sky laws and the DGCL, none of the execution, delivery
or performance of this Agreement by Parent or Purchaser, the consummation by
Parent or Purchaser of the Transactions or compliance by Parent or Purchaser
with any of the provisions hereof will (i) conflict with or result in any breach
of any provision of the respective certificate of incorporation or by-laws of
Parent or Purchaser, (ii) require any filing with, or permit, authorization,
consent or approval of, any Governmental Entity, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent, or any of its Subsidiaries or Purchaser is a party or by which
any of them or any of their respective properties or assets may be bound
(including specifically that certain Asset Purchase Agreement, dated as of
October 18, 2000, between Parent and Apex Site Management, Inc.), or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its Subsidiaries or any of their properties or
assets, excluding from the foregoing clauses (ii), (iii) and (iv) such
violations, breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on Parent and its Subsidiaries, taken
as a whole.
Section 4.4 Information Filed and Supplied.
(a) Offer Documents. The information supplied in writing
by Parent and Purchaser expressly for inclusion in the Schedule 14D-9
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The Offer
Documents and the Schedule TO will comply in all material respects with
the provisions of applicable federal securities laws and, on the date
filed with the SEC and on the date first published or sent or given to
the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing provisions of this SECTION
4.4, no representation or warranty is made by Parent or Purchaser with
respect to statements made or incorporated by reference in the Offer
Documents based on information supplied by the Company expressly for
inclusion or incorporation by reference therein or based on information
which is not made in or incorporated by reference in such documents but
which should have been disclosed pursuant to SECTION 4.4.
(b) Proxy Statement. None of the information furnished by
Parent or Purchaser expressly for inclusion in the Proxy Statement
will, at the date mailed to
27
stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
in order to make the statements made therein, in the light of the
circumstances under which they are made, not misleading.
Section 4.5 Sufficient Funds; Solvency. Parent or Purchaser has
sufficient cash, available lines of credit or other sources of immediately
available funds sufficient to enable it to purchase all of the Shares
outstanding on a fully diluted basis at the Offer Price and to pay all fees and
expenses related to, and to consummate, the Transactions. To the extent
Purchaser is relying on financing from third parties to consummate the Offer,
Purchaser has received binding commitments from such third parties to deliver to
Purchaser at the Closing the funds necessary to consummate the purchase of all
of the outstanding Shares in accordance with the Offer and to pay the expenses
of Purchaser in connection with the transactions contemplated hereby. No such
financing or commitments are or will be conditioned upon the pledge, lien,
encumbrance, hypothecation, mortgage or other grant of any security interest or
right in, or security title or deed to, any asset or property of the Company or
its current stockholders, or the deposit of funds by the Company, or subject to
any obligation, arrangement or plan under which the Company shall become
obligated on such financing or commitment. True and correct copies of such
binding commitments have been provided to the Company. Such third parties have
the financial wherewithal to provide the funding to which they are committed.
Both before and after giving effect to the closing of any such financings, the
acceptance and payment of all Shares tendered in the Offer, the Merger, and the
consummation of the other transactions contemplated hereunder and the payment
and accrual of all transaction costs in connection with the foregoing, Parent,
Purchaser, the Company and the Surviving Corporation is and will be Solvent.
Section 4.6 Share Ownership. None of Parent, Purchaser or any of
their respective Affiliates or Associates beneficially owns any Shares, and none
of them have any rights to acquire beneficial ownership of any Shares, other
than as set forth in this Agreement.
Section 4.7 Purchaser's Operations. Purchaser was formed solely
for the purpose of engaging in the Transactions and has not engaged in any
business activities or conducted any operations other than in connection with
the Transactions.
Section 4.8 Brokers or Finders. Neither Parent nor any of its
Subsidiaries or its Affiliates has entered into any agreement or arrangement
entitling any agent, broker, investment banker, financial advisor or other firm
or person to any brokers' or finders' fee or any other commission or similar fee
in connection with any of the Transactions.
Section 4.9 Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission pending or, to the best
knowledge of the Parent or Purchaser, threatened against or involving the Parent
or Purchaser, or which questions or challenges the validity of this Agreement or
any action taken or to be taken by the Parent or Purchaser pursuant to this
Agreement or in connection with the Transactions; nor to Parent's knowledge is
there any valid basis for any such action, proceeding or investigation.
28
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company
covenants and agrees that prior to the Effective Date, except (i) as expressly
contemplated by this Agreement, (ii) as set forth in the Interim Business Plan,
or (iii) as agreed in writing by Parent, after the date hereof:
(a) the business of the Company and the Company
Subsidiaries shall be conducted only in the usual, regular and ordinary
course and substantially in the same manner as heretofore conducted,
and except as otherwise required or prohibited by this SECTION 5.1 or
the Interim Business Plan, each of the Company and Company Subsidiaries
shall use commercially reasonable efforts to preserve its business
organization intact, and maintain its existing relations with
franchisees, customers, suppliers, creditors, business partners and
others having business dealings with it, to the end that the goodwill
and ongoing business of each of them shall be materially unimpaired at
the Effective Time, and the Company will comply with its obligations
and covenants in the Interim Business Plan;
(b) neither the Company nor any Company Subsidiary shall:
(i) amend its certificate of incorporation or by-laws or similar
organizational documents, (ii) issue, sell, transfer, pledge, dispose
of or encumber any shares of any class or series of its capital stock
or Voting Debt, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire,
any shares of any class or series of its capital stock or any Voting
Debt, other than Shares reserved for issuance on the date hereof
pursuant to the exercise of Company Options or Company Warrants
outstanding on the date hereof, (iii) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with
respect to any shares of any class or series of its capital stock; (iv)
split, combine or reclassify any shares of any class or series of its
stock; or (v) redeem, purchase or otherwise acquire directly or
indirectly any shares of any class or series of its capital stock, or
any instrument or security which consists of or includes a right to
acquire such shares;
(c) neither the Company nor any of Company Subsidiaries
shall (i) incur or modify any indebtedness or other liability, other
than in the ordinary and usual course of business and consistent with
past practice; or (ii) modify, amend or terminate any of its material
contracts or waive, release or assign any material rights or Claims,
except in the ordinary course of business and consistent with past
practice;
(d) neither the Company nor any of Company Subsidiaries
shall: (i) incur or assume any long-term debt, or except in the
ordinary course of business, incur or assume any short-term
indebtedness in amounts not consistent with past practice; (ii) modify
the terms of any indebtedness or other liability; (iii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person, except as described in the Disclosure Schedule as being in the
ordinary course of business and consistent with past practice; (iv)
make any loans, advances or capital contributions to, or investments
in, any other person (other than to or
29
in wholly owned Subsidiaries of the Company); or (v) enter into any
material commitment or transaction (including, but not limited to, any
material capital expenditure or purchase, sale or lease of assets or
real estate);
(e) neither the Company nor any Company Subsidiary shall
transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber any material assets other than in the ordinary and usual
course of business and consistent with past practice;
(f) except as otherwise specifically provided in this
Agreement or as otherwise described in the Disclosure Schedule, make
any change in the compensation payable or to become payable to any of
its officers, directors, employees, agents or consultants (other than
normal recurring increases in wages to employees who are not officers
or directors or Affiliates in the ordinary course of business
consistent with past practice) or to Persons providing management
services, or enter into or amend any employment, severance, consulting,
termination or other agreement or employee benefit plan (including,
without limitation any Company health Plan) or make any loans to any of
its officers, directors, employees, Affiliates, agents or consultants
or make any change in its existing borrowing or lending arrangements
for or on behalf of any of such Persons pursuant to an employee benefit
plan or otherwise;
(g) except as otherwise specifically contemplated by this
Agreement or as otherwise described in the Disclosure Schedule, pay or
make any accrual or arrangement for payment of any pension, retirement
allowance or other employee benefit pursuant to any existing plan,
agreement or arrangement (including, without limitation any Company
health Plan) to any officer, director, employee or Affiliate or pay or
agree to pay or make any accrual or arrangement for payment to any
officers, directors, employees or Affiliates of the Company of any
amount relating to unused vacation days, except payments and accruals
made in the ordinary course of business consistent with past practice;
adopt or pay, grant, issue, accelerate or accrue salary or other
payments or benefits pursuant to any pension, profit-sharing, bonus,
extra compensation, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan (including, without
limitation any Company health Plan), agreement or arrangement, or any
employment or consulting agreement with or for the benefit of any
director, officer, employee, agent or consultant, whether past or
present; or amend in any material respect any such existing plan,
agreement or arrangement in a manner inconsistent with the foregoing;
(h) the Company and the Company Subsidiaries shall use
commercially reasonable efforts to prevent any insurance policy naming
it or them as a beneficiary or a loss payable payee to lapse or to be
cancelled or terminated without notice to Parent, unless comparable
substitute insurance is obtained;
(i) neither the Company nor any of Company Subsidiaries
shall enter into any contract or transaction relating to the purchase
of assets other than in the ordinary course of business consistent with
prior practices;
30
(j) neither the Company nor any Company Subsidiary shall
pay, repurchase, discharge or satisfy any of its Claims or other
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with
past practice;
(k) neither the Company nor any of Company Subsidiaries
will adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any Company Subsidiary (other than the
Merger);
(l) neither the Company nor any Company Subsidiary will
(i) change any of the accounting methods used by it unless required by
GAAP or (ii) make any material election relating to Taxes, change any
material election relating to Taxes already made, adopt any material
accounting method relating to Taxes, change any material accounting
method relating to Taxes unless required by GAAP, enter into any
closing agreement relating to Taxes, settle any Claim or assessment
relating to Taxes or consent to any such claim or assessment relating
to Taxes or any waiver of the statute of limitations for any such claim
or assessment;
(m) except for this Agreement and the transactions
expressly contemplated hereby, take any action or fail to take any
action that could limit the utilization of any of the net operating
losses, built-in losses, tax credits or other similar items of the
Company and its Subsidiaries under Section 382, 383, 384 or 1502 of the
Code and the Treasury Regulations thereunder;
(n) accelerate the collection of receivables or defer the
payment of payables, or modify the payment terms of any receivables or
payables, other than immaterial changes in a manner consistent with
prudent and past business practice;
(o) neither the Company nor any of Company Subsidiaries
will take, or agree to commit to take, any action that would or is
reasonably likely to result in any of the conditions to the Offer set
forth in ANNEX A or any of the conditions to the Merger set forth in
ARTICLE VI not being satisfied, or would make any representation or
warranty of the Company contained herein inaccurate in any material
respect at, or as of any time prior to, the Effective Time, or that
would materially impair the ability of the Company, Parent, Purchaser
or the holders of Shares to consummate the Offer or the Merger in
accordance with the terms hereof or materially delay such consummation;
and
(p) neither the Company nor any of Company Subsidiaries
will enter into an agreement, contract, binding commitment or binding
arrangement to do any of the foregoing, or to authorize, recommend,
propose or announce an intention to do any of the foregoing.
Section 5.2 Access; Confidentiality. The Company shall (and shall
cause each of Company Subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other representatives of Parent,
reasonable access during normal business hours during the period prior to the
Appointment Date, to all its properties, books, contracts,
31
commitments and records and, during such period, the Company shall (and shall
cause each of the Company Subsidiaries to) furnish or make available promptly to
the Parent (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 securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request, provided
that in all cases such access shall be conducted in a manner so as to not
interfere with the normal operation of the Company's business. Access shall
include (i) provision, at no cost or expense to Purchaser, of reasonable office
space at the Company's headquarters together with reasonable access to
telephones and copiers, and (ii) reasonable access to personnel of the Company.
Until the Effective Time, unless otherwise required by law or in order to comply
with disclosure requirements applicable to the Offer Documents or the Proxy
Statement, Parent and Purchaser will hold any such information which is
nonpublic in confidence, and shall cause its officers, employees, accountants,
counsel, financing sources and other representatives to hold such information in
confidence, in accordance with the provisions of the Confidentiality Agreement.
Parent and Purchaser covenant and agree to be bound by the terms and conditions
of the Confidentiality Agreement to same extent as Resurgence Communications,
LLC.
Section 5.3 Reasonable Best Efforts.
(a) Prior to the Closing, upon the terms and subject to
the conditions of this Agreement, Parent, Purchaser and the Company
agree to use their respective reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable (subject to any applicable laws) to
consummate and make effective the Merger and the other Transactions as
promptly as practicable including, but not limited to (i) the
preparation and filing of all forms, registrations and notices required
to be filed to consummate the Merger and the other Transactions and the
taking of such actions as are necessary to obtain any requisite
approvals, consents, orders, exemptions or waivers by any third party
or Governmental Entity, (ii) the preparation of any disclosure
documents reasonably requested by Parent in order to facilitate
financing of any of the Transactions and (iii) the satisfaction of the
other parties' conditions to Closing. In addition, no party hereto
shall take any action after the date hereof that would reasonably be
expected to materially delay the obtaining of, or result in not
obtaining, any permission, approval or consent from any Governmental
Entity necessary to be obtained prior to Closing. Notwithstanding the
foregoing, or any other covenant herein contained, in connection with
the receipt of any necessary approvals under the HSR Act, neither the
Company nor any of the Company Subsidiaries shall be entitled to divest
or hold separate or otherwise take or commit to take any action that
limits Parent's or Purchaser's freedom of action with respect of, or
their ability to retain, the Company or any of the Company Subsidiaries
or any material portions thereof or any of the businesses, product
lines, properties or assets of the Company or any of the Company
Subsidiaries, without Parent's prior written consent.
(b) Prior to the Closing, each party shall promptly
consult with the other parties hereto with respect to, provide any
necessary information with respect to, and provide the other parties
(or their respective counsel) with copies of, all filings made by such
party with any Governmental Entity or any other information supplied by
such party to a Governmental Entity in connection with this Agreement,
the Merger and the other
32
Transactions. Each party hereto shall promptly inform the other of any
communication from any Governmental Entity regarding any of the
Transactions. If any party hereto or Affiliate thereof receives a
request for additional information or documentary material from any
such Governmental Entity with respect to any of the Transactions, then
such party shall endeavor in good faith to make, or cause to be made,
as soon as reasonably practicable and after consultation with the other
parties, an appropriate response in compliance with such request. To
the extent that transfers, amendments or modifications of permits
(including environmental permits) are required as a result of the
execution of this Agreement or consummation of any of the Transactions,
the Company shall use commercially reasonable efforts to effect the
transfer, amendment or modification of such permits as requested by
Parent.
(c) If required, the Company and Parent shall file as
soon as practicable notifications under the HSR Act and respond as
promptly as practicable to any inquiries received from the Federal
Trade Commission and the Antitrust Division of the Department of
Justice for additional information or documentation and respond as
promptly as practicable to all inquiries and requests received from any
State Attorney General or other Governmental Entity in connection with
antitrust matters. Concurrently with the filing of notifications under
the HSR Act or as soon thereafter as practicable, the Company and
Parent shall each request early termination of the HSR Act waiting
period.
(d) Notwithstanding the foregoing, nothing in this
Agreement shall be deemed to require Parent or Purchaser to commence
any litigation against any entity in order to facilitate the
consummation of any of the Transactions or to defend against any
litigation brought by any Governmental Entity seeking to prevent the
consummation of any of the Transactions.
Section 5.4 Employee Benefits.
(a) From and after the Effective Time, the Surviving
Corporation and its Subsidiaries will honor in accordance with their
terms (i) all written employment, severance, consulting and salary
continuation agreements between any Person and the Company or any of
its Subsidiaries existing, and in their respective forms of agreement,
as of December 31, 2001, subject to any written modifications thereto
agreed to by any such officers or directors with the Surviving
Corporation and done after the Effective Time, and (ii) all written
"Separation, Confidentiality and Nonsolicitation Agreements and
Covenants Not to Xxx" entered into by the Company with those persons
identified, and on the terms and conditions set forth, in the "Critical
Employee Severance Agreements" section of SCHEDULE 3.18 of the
Disclosure Schedule.
(b) To the extent permitted under applicable law, each
employee of the Company or its Subsidiaries shall be given credit for
all service with the Company or its Subsidiaries under all employee
benefit plans, programs, policies and arrangements maintained by Parent
or the Surviving Corporation following the Effective Date.
Section 5.5 No Solicitation of Competing Transaction.
33
(a) From the date hereof until the Effective Time or
earlier termination of this Agreement, neither the Company nor any
Company Subsidiary or Affiliate of the Company shall (and the Company
shall cause the officers, directors, employees, representatives and
agents of the Company, each Company Subsidiary and each Affiliate of
the Company, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly, (i)
knowingly encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any Person or "group"
(as defined in Section 13(d) of the Exchange Act) other than Parent and
its affiliates, representatives and agents concerning any Acquisition
Proposal, except that nothing contained in this SECTION 5.5 or any
other provision hereof shall prohibit the Company or the Company's
Board from (i) taking and disclosing to the Company's stockholders a
position with respect to a tender or exchange offer by a third party
pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act,
or (ii) making such disclosure to the Company's stockholders as, in the
good faith judgment of the Board, after receiving advice from outside
counsel, is required under applicable law, provided that the Company
may not, except as permitted by SECTION 5.5(B), withdraw or modify, or
propose to withdraw or modify, its position with respect to the Offer
or the Merger or approve or recommend, or propose to approve or
recommend any Acquisition Proposal, or enter into any agreement (other
than a confidentiality agreement as permitted by the last sentence of
this paragraph) with respect to any Acquisition Proposal. Upon
execution of this Agreement, the Company will immediately cease any
existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing and hereby
represents and warrants to Parent and Purchaser that no such
arrangements require the Company to make any payment (whether by way of
reimbursement or otherwise) with regard to any such activities.
Notwithstanding the foregoing, prior to the time of acceptance of
Shares for payment pursuant to the Offer, the Company may furnish
information concerning its business, properties or assets to any
corporation, partnership, person or other entity or group pursuant to
appropriate confidentiality agreements that it may enter into (provided
that such confidentiality agreement need not contain terms which
restrict the ability of the Third Party to make a proposal to the
Company Board of Directors) and may negotiate and participate in
discussions and negotiations with such entity or group concerning an
Acquisition Proposal if such entity or group has on an unsolicited
basis submitted a bona fide written proposal to the Company Board of
Directors relating to an Acquisition Proposal which the Board (after
consultation with its financial advisor) determines in good faith,
represents a Superior Proposal.
The Company shall promptly (but in no event later than twenty-four (24)
hours following receipt) notify Parent if any proposal, offer, inquiry
or other contact is received by, any information is requested from, or
any discussions or negotiations are sought to be initiated with the
Company in respect of an Acquisition Proposal, and shall, in any such
notice to Parent, and to the extent such disclosure is not a breach of
the fiduciary duties of the Board or in violation of any existing
contractual obligations of the Company, indicate the identity of the
party making such proposal or inquiry or engaging in such discussion or
negotiation and the terms and conditions of any proposals or offers or
the nature of any inquiries or contacts, and thereafter shall keep
Parent informed, on a prompt basis, of all material developments
affecting the status and terms of any such proposals or offers or
34
the status of any such discussions or negotiations. As of the date
hereof, the Company shall cease, and shall cause the Subsidiaries and
the officers, directors, employees, representatives and other agents of
the Company and the Subsidiaries, to cease, all discussions,
negotiations and communications with all such parties.
(b) Except as set forth below in this subsection (b),
neither the Company Board of Directors nor any committee thereof shall
(i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or Purchaser, the approval or recommendation by such
Board of Directors or any such committee of the Offer, this Agreement
or the Merger, (ii) approve or recommend or propose to approve or
recommend, any Acquisition Proposal, (iii) enter into any agreement
with respect to any Acquisition Proposal (other than a confidentiality
agreement as permitted by the last sentence of the first paragraph of
SECTION 5.5(A)), or (iv) (A) amend or grant any waiver or release under
any standstill or similar agreement with respect to any Company Stock,
(B) amend or grant any waiver or release or approve any transaction or
redeem Rights under the Rights Agreement (except as provided in SECTION
3.25), or (C) approve any transaction under Section 203 of the DGCL or
Article X of the Company's Certificate of Incorporation.
Notwithstanding the foregoing, prior to the time of acceptance for
payment of Shares pursuant to the Offer, the Company Board of Directors
may withdraw or modify its approval or recommendation of the Offer,
this Agreement or the Merger, approve or recommend a Superior Proposal,
or enter into an agreement with respect to a Superior Proposal, in each
case at any time after the fourth (4th) business day following Parent's
receipt of written notice from the Company advising Parent that the
Board of Directors has received a Superior Proposal which it intends to
accept, specifying the material terms and conditions of such Superior
Proposal, identifying the Person making such Superior Proposal, but
only if the Company shall cause its financial and legal advisors to
negotiate with Parent during such four business days to make such
adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with the transactions contemplated herein
on such adjusted terms.
(c) Nothing in this Section 5.5 shall (i) permit the
Company to terminate this Agreement (except as specifically provided in
SECTION 7.1 hereof), (ii) permit the Company to enter into any
agreement with respect to an Acquisition Proposal during the term of
this Agreement (it being agreed by the Company 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 Acquisition
Proposal (other than a confidentiality agreement as permitted by the
last sentence of the first paragraph of SECTION 5.5(A)) or (iii) affect
any other obligation of the Company under this Agreement.
(d) Notwithstanding the foregoing provisions of this
Section 5.5, if the conditions of subparagraphs (a) and (b) of Section
5.5 have been satisfied and the Company then has the right to terminate
this Agreement pursuant to SECTION 7.1(C)(II), then the Company, in
connection with the termination by it of this Agreement pursuant to
SECTION 7.1(C)(II), may take any of the actions described in SECTION
5.5(B) contemporaneously with the termination of this Agreement
pursuant to SECTION 7.1(C)(II) and the payment to Parent of the fee
described in SECTION 7.3.
35
Section 5.6 Publicity. The initial press release with respect to
the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company; such initial press release shall be issued
contemporaneously with the execution of this Agreement and shall describe the
material terms of this Agreement, including without limitation, the Offer Price,
the Shareholders' Agreement and the termination thereof, and the operation of
SECTION 5.5 and ARTICLE VII hereof. Thereafter, until the Appointment Date, or
the date the Transactions are terminated or abandoned pursuant to ARTICLE VII,
neither the Company, Parent nor any of their respective Affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other Transactions without prior
consultation with the other party, except as may be required by law or by any
listing agreement with a national securities exchange or trading market.
Section 5.7 Notification of Certain Matters. Each party hereto
shall give prompt notice to the other parties orally and in writing of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would cause any representation or warranty of such party contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time and (ii) any material failure of such party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
such party hereunder; provided, however, that the delivery of any notice
pursuant to this SECTION 5.7 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 5.8 Directors' and Officers' Insurance and
Indemnification.
(a) After the Effective Time, Parent will cause the
Surviving Corporation to indemnify and hold harmless each person who is
now, or has been prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of the Company or any of its
Subsidiaries (the "Indemnified Persons") against (i) all losses,
claims, damages, costs, expenses (including without limitation counsel
fees and expenses), settlement, payments or liabilities arising out of
or in connection with any claim, demand, action suit, proceeding or
investigation based in whole or in part on, or arising in whole or in
part out of, the fact that such person is or was an officer or director
of the Company or any of its Subsidiaries, whether or not pertaining to
any matter existing or occurring at or prior to the Effective Time and
whether or not asserted or claimed prior to or at or after the
Effective Time (the "Indemnified Liabilities") and (ii) all Indemnified
Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to, this Agreement or the transactions
contemplated hereby, in each case to the fullest extent required or
permitted under applicable law (including with respect to the
advancement of expenses). Each Indemnified Person is intended to be a
third party beneficiary of this SECTION 5.8 and may specifically
enforce its terms. This SECTION 5.8 shall not limit or otherwise
adversely affect any rights any Indemnified Person may have under any
agreement with the Company or under the Company's Certificate of
Incorporation or By-Laws.
(b) Parent will cause the Surviving Corporation to
provide, until the sixth anniversary of the Closing Date, the directors
and officers of the Company who are currently covered by the Company's
existing insurance and indemnification policy an insurance and
indemnification policy, or a "tail coverage policy", that provides
coverage for events occurring prior to the Effective Time (the "D&O
Insurance") that is no less
36
favorable than the Company's existing policy or, if substantially
equivalent coverage is unavailable, the best available coverage;
provided, that Parent shall not be required to pay an annual premium
for the D&O Insurance in excess of 150% of the last annual premium paid
by the Company prior to the date hereof, but in such case shall
purchase as much coverage as possible for such amount; provided
however, that notwithstanding the foregoing, the Surviving Corporation
may satisfy its obligations under this SECTION 5.8(B) by purchasing a
"tail" policy under the Company's existing directors' and officers'
insurance policy that (i) has an effective term of six (6) years from
the Effective Time, (ii) covers those Persons who are currently covered
and also those who will be covered on or prior to the Effective Time,
by the Company's directors' and officers' insurance policy in effect on
the date hereof for actions and omissions occurring on or prior to the
Effective Time and (iii) contains terms and conditions (including
without limitation coverage amounts) that are at least as favorable in
the aggregate as the terms and conditions of the Company's directors'
and officers' insurance policy in effect on the date hereof.
(c) The obligations of Parent or the Surviving
Corporation under this SECTION 5.8 are subject to the conditions that
each Indemnified Party shall comply with the reasonable requests of the
Surviving Corporation or Parent in defending or settling any action
hereunder and that any Indemnified Party shall approve any proposed
settlement of any such action if (i) such settlement involves no
finding or admission of any liability by any Indemnified Party, and
(ii) the sole relief provided in connection with such settlement is
monetary damages that are paid in full by the Surviving Corporation or
Parent. (d) This SECTION 5.8 shall survive the consummation of the
transactions contemplated hereunder, is intended to benefit the
Indemnified Parties, and shall be binding on the successors and assigns
of Parent and the Surviving Corporation.
Section 5.9 State Takeover Laws. Notwithstanding any other
provision in this Agreement, in no event shall the Section 203 Approval be
withdrawn, revoked or modified by the Board of Directors of the Company. If any
state takeover statute other than Section 203 of the DGCL becomes or is deemed
to become applicable to the Agreement, the Offer, the acquisition of Shares
pursuant to the Offer or the Merger or the other Transactions, the Company shall
take all action necessary to render such statute inapplicable to all of the
foregoing.
Section 5.10 Purchaser Compliance. Parent shall cause Purchaser to
comply with all of its obligations under or related to this Agreement.
Section 5.11 [Intentionally omitted]
Section 5.12 Section 16 Matters. Prior to the Appointment Date,
the Company shall take all such steps as may reasonably be required (and, to the
extent required, Parent and Purchaser shall reasonably cooperate in the taking
of any such actions) to cause any dispositions of Shares (including derivative
securities with respect to the Shares) resulting from the transactions
contemplated by this Agreement by each individual who is subject to the
reporting requirements of Section 16(a) of the Exchange Act with respect to the
Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
37
Section 5.13 Other Purchases. Parent and Purchaser shall not, and
shall cause its Associates and Affiliates to not, purchase any Shares from the
period beginning on the date hereof until the Effective Time, regardless of
whether such purchases are permitted by Rule 14e-5 promulgated under the
Exchange Act, except pursuant to the Offer.
Section 5.14 Working Capital Calculation. On or before the later
of (i) February 10, 2002 and (ii) the day that is three (3) business days before
the initial scheduled expiration date of the Offer, the Company will deliver to
Parent its calculation of Net Working Capital as of January 31, 2002, together
with such reasonable detail as may indicate the manner in which such calculation
was made and the extent to which such calculation was done in accordance with
the requirements of the definition of "Net Working Capital" hereunder, and the
Company shall thereafter make available to the Purchaser or Parent, promptly
after a request by Purchaser or Parent, such additional information or other
materials as Purchaser or Parent may reasonably request to assist Purchaser or
Parent in determining the extent to which such Net Working Capital calculation
was made in accordance with the requirements hereof.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or Purchaser, as the case may be, to the extent permitted by
applicable law:
(a) Shareholder Approval. This Agreement shall have been
approved and adopted by the requisite vote of the holders of the
Shares, if required by applicable law, in order to consummate the
Merger;
(b) Statutes; Court Orders. No statute, rule or
regulation shall have been enacted or promulgated by any Governmental
Entity which prohibits the consummation of the Merger; and there shall
be no order or injunction of a court of competent jurisdiction in
effect precluding consummation of the Merger; and
(c) Purchase of Shares in Offer. Parent, Purchaser or
their Affiliates shall have accepted for payment and purchased Shares
pursuant to the Offer; provided that Parent and Purchaser may not
assert this condition if the failure to accept Shares for payment
resulted from a breach of this Agreement by Parent or Purchaser.
ARTICLE VII
TERMINATION
Section 7.1 Termination. The Transactions may be terminated or
abandoned at any time prior to the Effective Time, whether before or after
stockholder approval thereof:
38
(a) Subject to SECTION 1.3(C), by the mutual written
consent of Parent and the Company;
(b) By either of the Company or Parent:
(i) if Purchaser shall not have accepted for
payment any Shares pursuant to the Offer by February 28, 2002;
provided, however, that the right to terminate this Agreement
under this SECTION 7.1(B)(I) shall not be available to any
party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure
of Purchaser to purchase the Shares pursuant to the Offer on
or prior to such date; or
(ii) if any Governmental Entity shall have issued
an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties hereto shall
use their reasonable efforts to lift), which permanently
restrains, enjoins or otherwise prohibits the acceptance for
payment of, or payment for, Shares pursuant to the Offer or
the Merger and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) By the Company:
(i) if Purchaser shall have failed to commence
the Offer on or prior to ten (10) days following the date of
the initial public announcement of the Offer; provided, that
the Company may not terminate this Agreement pursuant to this
SECTION 7.1(C)(I) if the Company is at such time in material
breach of its obligations under this Agreement;
(ii) prior to acceptance of Shares pursuant to
the Offer, in connection with entering into a definitive
agreement as permitted by SECTION 5.5(B) or the Company Board
shall have recommended to the Company Stockholders a Superior
Proposal or, in either case, the Company has resolved by
Company Board action to do so, provided the Company has
complied with all provisions thereof, including the notice
provisions therein, and that the Company makes simultaneous
payment to Parent of funds as required by SECTION 7.3(B);
(iii) if Parent or Purchaser shall have breached
in any material respect any of their respective
representations, warranties, covenants or other agreements
contained in this Agreement, which breach cannot be or has not
been cured within ten (10) days after the giving of written
notice by the Company to Parent or Purchaser, as applicable.
(d) By Parent:
(i) if, due to an occurrence, not involving a
breach by Parent or Purchaser of their obligations hereunder,
which makes it impossible to satisfy one or more of the
conditions set forth in ANNEX A hereto, Parent or Purchaser
shall have failed to commence the Offer on or prior to the
tenth (10th) day following the date of the initial public
announcement of the Offer;
39
(ii) if, prior to the acceptance of Shares by
Purchaser pursuant to the Offer, the Company Board of
Directors shall have (x) withdrawn, modified or changed
(including by amendment of any Schedule 14D-9) in a manner
adverse to Parent or Purchaser its approval or recommendation
of the Offer, this Agreement or the Merger or the Company
Board shall have resolved to do so, (y) recommended an
Acquisition Proposal or shall have executed an agreement in
principle or definitive agreement relating to an Acquisition
Proposal with a person or entity other than Parent or
Purchaser or shall have resolved to do so, or (z) failed to
reaffirm publicly and unconditionally its recommendation to
the Company Stockholders that they tender their Shares in the
Offer, which public reaffirmation must be made within three
(3) business days after Parent's written requests to do so; or
(iii) if prior to the purchase of Shares pursuant
to the Offer, the Company shall have breached any
representation, warranty, covenant or other agreement
contained in this Agreement which would give rise to the
failure of a condition set forth in paragraph (c) (vi) or
(viii) of ANNEX A hereto.
Section 7.2 Effect of Termination. In the event of the
termination or abandonment of the Transactions by any party hereto pursuant to
the terms of this Agreement, written notice thereof shall forthwith be given to
the other party or parties specifying the provision hereof pursuant to which
such termination or abandonment of the Transactions is made, and (a) this
Agreement and the Transactions shall be thereupon terminated, and (b) there
shall be no liability on the part of the Parent or the Company except (A) for
fraud or for breach of this Agreement prior to such termination or abandonment
of the Transactions and (B) as set forth in SECTION 5.2 and SECTION 7.3.
Section 7.3 Termination Fees and Expenses.
(a) All costs and expenses incurred in connection with
this Agreement and the consummation of the Transactions shall be paid
by the party incurring such expenses. Without limitation, the expenses
of preparing, duplicating and disseminating the Offer Documents shall
be borne by the Purchaser, and the expenses of preparing, duplicating
and disseminating the Schedule 14D-9 shall be borne by the Company,
irrespective of which party disseminates such materials to the
Company's stockholders. It is understood that all fees and other
charges of Xxxxxxxxxx Xxxxxxxx LLP are being incurred for the benefit
of the Company.
(b) Notwithstanding anything to the contrary herein,
including, without limitation SECTION 7.3(A) herein, if (i) the Company
shall enter into an agreement which accepts or implements a Superior
Proposal; (ii) the Company shall terminate or abandon the Transactions
pursuant to SECTION 7.1(C)(II); or (iii) Parent shall terminate or
abandon the Transactions pursuant to SECTION 7.1(D)(II) (other than for
reason of the failure of the condition set forth in paragraph (c)(iv)
or (c)(ix) of ANNEX A hereto); then the Company shall pay to Parent an
amount equal to the Termination Fee plus an amount equal to Parent's
actual and reasonably documented out-of-pocket fees and expenses
(excluding
40
any contingent fees and expenses of financial advisors or brokers)
incurred by Parent and Purchaser in connection with the Offer, the
Merger, this Agreement and the consummation of the Transactions in an
amount not to exceed $600,000. The Termination Fee and Parent's good
faith estimate of its expenses shall be paid in same day funds
concurrently with the execution of an agreement referred to in
subsection (i) above or any termination or abandonment referred to in
subsections (ii) or (iii) above, whichever shall first occur, together
with delivery of a written acknowledgment by the Company of its
obligation to reimburse Parent for its actual expenses in excess of
such estimated expense payment. As promptly as practicable after
receipt thereof, Parent shall deliver to the Company copies of all
final invoices and bills related to Parent's and Purchaser's actual
reasonable out-of-pocket fees and expenses incurred by them in
connection with the Offer, the Merger, and this Agreement. If such fees
and expenses as documented in reasonable detail exceed the good faith
estimate of fees and expenses paid by the Company prior to receipt of
such invoices and bills, then the Company shall reimburse Parent for
its actual fees and expenses in excess of such estimated expense
payment in accordance with its written acknowledgement of such
obligation. If such fees and expenses as documented in reasonable
detail are less than the estimate of fees and expenses paid by the
Company prior to receipt of the final invoices and bills, then Parent
shall reimburse the Company for such excess payment. All payments
required to be made hereunder shall be made by wire transfer of
immediately available funds within two (2) days of the event giving
rise to the payment of such amounts. Each of Parent and the Company
acknowledges that the agreements contained in this SECTION 7.3 are an
integral part of the transactions contemplated herein and that, without
said agreements, neither Parent nor the Company would have entered into
this Agreement; accordingly, if Company fails promptly to pay the
amounts due pursuant to this SECTION 7.3, and, in order to obtain such
payment, Parent commences an action that results in a judgment against
the Company for failure to make such payments, the Company will pay
Parent's reasonable expenses (including attorneys' fees and expenses)
in connection with such action, together with interest on the amounts
due hereunder at the prime rate of Bank of America in effect on the
date the payment was due determined by the court rendering such
judgment.
ARTICLE VIII
DEFINITIONS AND INTERPRETATION
Section 8.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context clearly requires
otherwise:
"Acquisition Proposal" shall mean any bona fide, unsolicited
written proposal or offer to acquire not less than forty percent (40%) of the
combined voting power of shares of Company Stock then outstanding or forty
percent (40%) by value of the consolidated assets of the Company and its
Subsidiaries (as determined by the Board of Directors of the Company, acting in
good faith), whether by merger, tender offer, exchange offer, sale of assets or
similar transactions involving the Company or any Subsidiary, division or
operating or principal business unit of the Company.
41
"Affiliate" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act.
"Agreement" or "this Agreement" shall mean this Agreement and
Plan of Merger, together with the Exhibits, Annexes and Appendices hereto and
the Disclosure Schedule.
"Appointment Date" shall mean the time the persons designated
by Purchaser have been elected to, and shall constitute a majority of, the
Company Board of Directors pursuant to SECTION 1.3.
"Associate" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act.
"Balance Sheet" shall mean the balance sheet of the Company
and its consolidated subsidiaries as of November 30, 2001.
"Balance Sheet Date" shall mean November 30, 2001.
"Board Fraction" shall mean a fraction, the numerator of which
shall be the number of Shares which Parent and its subsidiaries beneficially own
at the time of calculation of the Board Fraction, and the denominator of which
shall be the total number of Shares then outstanding.
"Cash Amount" shall mean an amount of cash calculated in
accordance with SECTION 2.4(A).
"Certificate" shall mean a certificate which immediately prior
to the Effective Time represented Shares which were converted pursuant to
SECTION 2.1 into the right to receive the Merger Consideration.
"Change Order" shall mean a writing signed by representatives
of both the Company and Purchaser after the date hereof and on or before January
31, 2002 which identifies one or more actions or omissions which the Company
wishes to take or refrain from taking or is willing to take at the request of
the Purchaser, which action(s) the Company believes will or may result in the
creation of additional current liabilities of the Company or a decrease in
current assets of the Company, thereby causing a corresponding reduction in the
amount of the Net Working Capital of the Company which would otherwise be on
hand at January 31, 2002. A Change Order may contain an amount, or two or more
specified amounts, which the Company and Purchaser agree, as set forth in such
writing, will constitute a reduction by such amount(s) of the required amount of
Net Working Capital of the Company as of January 31, 2002 pursuant to ANNEX A
hereto. If the Change Order does not contain such an amount or amounts, the
"amount" of the Change Order for purposes of calculating the reduction in the
required amount of Net Working Capital shall be the actual amount of the
additional current liabilities or decrease in current assets resulting from the
action or omission covered by the Change Order, calculated using the
methodology, if any, agreed to by the parties and specified in such Change
Order.
42
"Claim" means any action, claim, obligation, liability,
damage, loss, deficiency, cost, expense, commitment, lawsuit, demand, suit,
inquiry, hearing, investigation, notice of a violation, litigation, proceeding,
arbitration, or other dispute, whether civil, criminal, administrative or
otherwise, whether pursuant to contractual obligations or otherwise.
"Closing" shall mean the closing referred to in SECTION 1.6.
"Closing Date" shall mean the date on which the Closing
occurs.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company" shall have the meaning set forth in the introduction
to this Agreement.
"Company Agreement" shall mean any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any Company Subsidiary is a party or by which any of
them or any of their properties or assets may be bound.
"Company Board of Directors" shall mean the board of directors
of the Company.
"Company Intellectual Property" shall mean all Intellectual
Property that is currently used in the business of the Company or any Company
Subsidiary or that is necessary to conduct the business of the Company and the
Company Subsidiaries as presently conducted or as currently proposed to be
conducted.
"Company Option" shall mean an Option to purchase Shares which
has been granted by the Company and which is outstanding at the Effective Time,
other than the Company Warrants.
"Company SEC Documents" shall mean each form, report,
schedule, statement and other document (including all exhibits thereto) required
to be filed by the Company since December 3, 1999 under the Exchange Act or the
Securities Act, including any amendment to such document, whether or not such
amendment is required to be so filed.
"Company Subsidiary" shall mean each Person which is a
Subsidiary of the Company.
"Company Warrant" shall mean the warrants referred to in
SECTION 3.3(B)(III).
"Company's knowledge" or "best knowledge of the Company" shall
mean the knowledge of W. Xxxxx Xxxxxx, R. Xxxxxxx Xxxxx, Xxxxxxx X. Xxxxx, Xxxxx
X. Xxxxxx, Xxxxxxxx Xxxxx or Xxx X. Xxxxx.
43
Confidentiality Agreement" means that certain Nondisclosure
Agreement dated as of November 19, 2001 with respect to confidential information
entered into by and between the Company and Resurgence Communications, LLC, a
representative of Parent.
"Copyrights" shall mean U.S. and foreign registered and
unregistered copyrights (including, but not limited to, those in computer
software and databases), rights of publicity and all registrations and
applications to register the same.
"DGCL" shall mean the General Corporation Law of the State of
Delaware, as now or hereafter amended.
"Disclosure Schedule" shall mean the disclosure schedule of
even date herewith prepared and signed by the Company and delivered to Purchaser
simultaneously with the execution hereof.
"Dissenting Shares" shall mean any Shares as to which the
holder thereof has demanded appraisal with respect to the Merger in accordance
with Section 262 of the DGCL and as of the Effective Time has neither
effectively withdrawn nor lost his right to such appraisal.
"Effective Time" shall mean the date on which the Certificate
of Merger is duly filed with the Secretary of State of the State of Delaware or
such other time as is agreed upon by the parties and specified in the
Certificate of Merger.
"Environmental Claim" shall mean any claim, action,
investigation or notice by any person or entity alleging potential liability for
investigatory, cleanup or governmental response costs, or natural resources or
property damages, or personal injuries, attorney's fees or penalties relating to
(i) the presence, or release into the environment, of any Materials of
Environmental Concern at any location owned or operated by the Company or any
Company Subsidiary, now or in the past, or (ii) any violation, or alleged
violation, of any Environmental Law.
"Environmental Law" shall mean each federal, state, local and
foreign law and regulation relating to pollution, protection or preservation of
human health or the environment, including, without limitation, each law and
regulation relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the generation,
storage, containment (whether above ground or underground), disposal, transport
or handling of Materials of Environmental Concern, or the preservation of the
environment or mitigation of adverse effects thereon and each law and regulation
with regard to record keeping, notification, disclosure and reporting
requirements respecting Materials of Environmental Concern.
"Equity Interests" shall mean (a) with respect to a
corporation, any and all shares of capital stock, (b) with respect to a
partnership, limited liability company, trust or similar Person, any and all
units, interests or other partnership/limited liability company interests, and
(c) with respect to any other Person, any direct equity ownership or
participation in a Person.
44
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean any trade or business, whether or
not incorporated, that together with the Company would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Financial Statements" shall mean the financial statements of
the Company included in the Company SEC Documents.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Entity" shall mean a court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" shall mean each present and former officer
and director of the Company and the Company Subsidiaries.
"Independent Directors" shall mean P. Xxxx Xxxxx and Xxxx X.
Xxxxxxx.
"Intellectual Property" shall mean all of the following:
Trademarks, Patents, Copyrights, Trade Secrets and Licenses.
"Interim Business Plan" shall mean that certain business plan
regarding the operations of the Company and its Subsidiaries during the period
between the date hereof and the Closing Date attached hereto as SCHEDULE 5.1(A).
"Licenses" shall mean all licenses and agreements pursuant to
which the Company has acquired rights in or to any Trademarks, Patents, or
Copyrights, or licenses and agreements pursuant to which the Company has
licensed or transferred the right to use any of the foregoing.
"Lien" shall mean any security interest, lien, mortgage,
pledge, hypothecation, encumbrance, claim, easement, restriction, option,
assessment, levy, voting trust or agreement, proxy, marital or community
property interest or other claim, charge or interest of another Person of any
nature whatsoever.
"Major Shareholder" shall mean any of Centennial Fund V, L.P.,
Centennial Entrepreneurs Fund V, L.P., Centennial Holdings I, LLC, W. Xxxxx
Xxxxxx, R. Xxxxxxx Xxxxx, Xxxx Communications VI, L.P. and Nassau Capital
Partners III L.P.
45
"Material Adverse Effect" shall mean a circumstance or event
which has a material adverse effect on (x) the business, assets, financial
condition or results of operations of the Company and the Company Subsidiaries,
taken as a whole, or (y) the Company's ability to perform its obligations
hereunder or under any other agreement entered into by the Company in connection
with the Transactions; provided, that no circumstance or event (i) resulting
from a matter disclosed in the Disclosure Schedule, (ii) in the nature of the
future prospects of the Company's and its Subsidiaries' business, (iii) in the
nature of any change in the trading prices of the Company's capital stock, (iv)
resulting from any failure to obtain any approval, consent, assignment, waiver,
franchise, license, permit, order, certificate of convenience or public
necessity or other authorization from any government or other person with
respect to periods after the Appointment Date, (v) substantially caused by the
execution and delivery of this Agreement or the announcement of the
Transactions, (vi) substantially caused by any act or omission that the Company
or any Company Subsidiary is required to take or refrain from taking to comply
with any of their respective obligations pursuant to SECTION 5.1 hereof or the
Interim Business Plan, (vii) changes in the regulatory regime, affecting the
industry in which the Company operates or in the economy in the United States in
general, or (viii) as a result of the September 11, 2001 terrorist attacks or
their aftermath, shall constitute a Material Adverse Effect.
"Materials of Environmental Concern" shall mean toxic or
hazardous substances, materials or wastes, petroleum and petroleum products,
asbestos or asbestos-containing materials, polychlorinated biphenyls, radon or
lead or lead-based paints or materials.
"Merger" shall mean the merger of Purchaser into the Company
referred to in SECTION 1.4.
"Merger Consideration" shall mean an amount of cash equal to
the Offer Price, which amount shall not include interest, regardless of when
paid.
"Minimum Condition" shall mean the condition that, pursuant to
the Offer, there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer, not less than that number of Shares which constitutes
at least ninety percent (90%) of the Shares outstanding on a Fully Diluted
Basis. For purposes hereof, "Fully Diluted Basis" means after giving effect to
the conversion or exercise of all outstanding options, warrants and other rights
and securities exercisable or convertible into Shares at an exercise price of
$3.50 or less per Share, whether or not exercised or converted at the time of
determination.
"Offer" shall mean the cash tender offer to be made by
Purchaser pursuant to SECTION 1.1 to acquire all of the issued and outstanding
shares of common stock, $0.001 par value, of the Company and the associated
right to purchase shares of Series Z Preferred Stock, par value $0.001 per share
of the Company at the Offer Price.
"Offer Documents" shall mean the Offer to Purchase and a form
of letter of transmittal, summary advertisement and other ancillary Offer
documents filed as exhibits to the Schedule TO, together with any amendments and
supplements thereto.
46
"Offer Price" shall mean $3.50 per Share net to the seller in
cash, or such increased amount, if any, as Purchaser may offer to pay as
contemplated by SECTION 1.1(B).
"Offer to Purchase" shall mean the offer to purchase included
in the Schedule TO filed with the SEC pursuant to SECTION 1.1(C).
"Option" shall mean, with respect to any Person, any option,
warrant, call, pre-emptive right, subscription or other similar right,
agreement, arrangement or commitment of any kind or nature whatsoever, relating
to the issued or unissued capital stock of such Person.
"Parent" shall have the meaning set forth in the introduction
to this Agreement.
"Patents" shall mean issued U.S. and foreign patents and
pending patent applications, patent disclosures, and any and all divisions,
continuations, continuations-in-part, reissues, reexaminations, and extension
thereof, any counterparts claiming priority therefrom, utility models, patents
of importation/confirmation, certificates of invention and like statutory
rights.
"Paying Agent" shall mean the bank or trust company designated
by Parent to act as agent for the holders of the Shares pursuant to SECTION
2.2(A).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean a natural person, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Entity or other
entity or organization.
"Plan" shall mean a plan, program, agreement, arrangement or
program required to be included in the Disclosure Schedule pursuant to SECTION
3.12(A).
"Purchaser Common Stock" shall mean common stock, par value
$0.001 per share, of Purchaser.
"Proxy Statement" shall mean the proxy statement to be filed
by the Company with the SEC pursuant to SECTION 1.10(A)(II), together with all
amendments and supplements thereto and including the exhibits thereto.
"Purchaser" shall have the meaning set forth in the
introduction to this Agreement.
"Rights Agreement" shall mean that certain Shareholder Rights
Agreement, dated as of February 9, 2000, by and between the Company and State
Street Bank and Trust Company as Rights Agent, as amended, including by that
certain amendment dated as of the date hereof.
47
"Schedule TO" shall mean the Schedule TO filed by Purchaser
with the SEC pursuant to SECTION 1.1(C), together with all amendments and
supplements thereto and including the exhibits thereto.
"Schedule 14D-9" shall mean the Solicitation/Recommendation
Statement on Schedule 14D-9 filed by the Company with the SEC pursuant to
SECTION 1.2(B), together with all amendments and supplements thereto and
including the exhibits thereto.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Section 203 Approval" shall mean the action taken by the
Company Board of Directors referred to in SECTION 1.2(A) causing Section 203 of
the DGCL not to apply to this Agreement or the other Transactions.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shares" shall mean shares of common stock, par value $0.001,
issued by the Company together with the associated right to purchase shares of
Series Z Preferred Stock of the Company.
"Shareholders' Agreement" shall mean each agreement, dated as
of the date hereof, among a Major Shareholder, Parent and Purchaser, pursuant to
which each Major Shareholder has agreed, among other things, to tender certain
Shares held by such Major Shareholder in the Offer and to grant Parent an option
to purchase such Shares and a proxy with respect to the voting of such Shares
upon the terms and subject to the conditions set forth therein.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including contingent liabilities,
of such Person; (b) the present fair salable value of the assets of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts as they become absolute and matured; (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (d) such Person is not engaged in a business or transaction, and is
not about to engage in a business or transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities (such as litigation, guaranties and pension plan
liabilities) at any time shall be computed as the amount that, in light of all
the facts and circumstances existing at the time, represents the amount that can
be reasonably be expected to become an actual or matured liability.
"Subsidiary" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (a) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries or (b) such party or any other Subsidiary of such party is a
general partner (excluding any such partnership where
48
such party or any Subsidiary of such party does not have a majority of the
voting interest in such partnership).
"Superior Proposal" shall mean an Acquisition Proposal which
the Company Board of Directors determines in good faith after consultation with
the Company's financial advisors (x) that the proposed transaction (together
with one or more other proposed transactions otherwise constituting a Superior
Proposal) would be more favorable to its shareholders than the Offer and the
Merger and the transactions contemplated hereby taking into account at the time
of determination any changes to the terms of this Agreement that as of that time
had been proposed by Parent, and (y) that the person or entity making such
Superior Proposal is capable of timely consummating such Acquisition Proposal
(based upon, among other things, the availability of financing and the degree of
certainty of obtaining financing, the expectation of obtaining required
regulatory approvals and the identity and background of such person).
"Surviving Corporation" shall mean the successor or surviving
corporation in the Merger.
"Tax" or "Taxes" shall mean all taxes, charges, fees, duties,
levies, penalties or other assessments imposed by any federal, state, local or
foreign governmental authority, including, but not limited to, income, gross
receipts, excise, property, sales, gain, use, license, custom duty,
unemployment, capital stock, transfer, franchise, payroll, withholding, social
security, minimum estimated, and other taxes, and shall include interest,
penalties or additions attributable thereto; and
"Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Termination Fee" shall mean the sum of $500,000 in U.S.
currency.
"Title IV Plan" shall mean a Plan that is subject to Section
302 or Title IV of ERISA or Section 412 of the Code.
"Trademarks" shall mean U.S. and foreign registered and
unregistered trademarks, trade dress, service marks, logos, trade names,
corporate names and all registrations and applications to register the same.
"Trade Secrets" shall mean all categories of trade secrets as
defined in the Uniform Trade Secrets Act including, but not limited to, business
information.
"Transaction Liabilities" shall mean the liabilities of the
Company incurred or to be incurred in connection with the Transactions in the
respective amounts set forth on the Disclosure Schedule.
"Transactions" shall mean the transactions provided for or
contemplated by this Agreement and the Shareholders' Agreements, including but
not limited to the Offer and the Merger.
49
"Voting Debt" shall mean any bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities having such
rights).
Section 8.2 Interpretation.
(a) When a reference is made in this Agreement to a
section or article, such reference shall be to a section or article of
this Agreement unless otherwise clearly indicated to the contrary.
(b) Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation."
(c) The words "hereof", "herein" and "herewith" and words
of similar import shall, unless otherwise stated, be construed to refer
to this Agreement as a whole and not to any particular provision of
this Agreement, and article, section, paragraph, exhibit and schedule
references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified.
(d) The plural of any defined term shall have a meaning
correlative to such defined term, and words denoting any gender shall
include all genders. Where a word or phrase is defined herein, each of
its other grammatical forms shall have a corresponding meaning.
(e) A reference to any party to this Agreement or any
other agreement or document shall include such party's successors and
permitted assigns.
(f) A reference to any legislation or to any provision of
any legislation shall include any modification or re-enactment thereof,
any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.
(g) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue
of the authorship of any provisions of this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification. Subject to applicable law
and SECTION 1.3, this Agreement may be amended, modified and supplemented in any
and all respects, whether before or after any vote of the stockholders of the
Company contemplated hereby, by written agreement of the parties hereto, by
action taken by their respective Boards of Directors (which in the case of the
Company shall include approvals as contemplated in SECTION 1.3(C)), at any time
50
prior to the Closing Date with respect to any of the terms contained herein;
provided, however, that (i) after the purchase of Shares pursuant to the Offer,
no amendment shall be made which decreases the amount or changes the form of the
Merger Consideration and (ii) after the approval of this Agreement by the
stockholders of the Company, no such amendment, modification or supplement shall
be made which by law requires further approval by such stockholders without
obtaining such further approval.
Section 9.2 Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
SECTION 9.2 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
Section 9.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent, to:
U.S. Realtel, Inc.
Xxx Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxx, CEO, and
Mr. Xxxx Xxxxx, President
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Xx., Esq.
Xxxx X. Xxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) if to Purchaser, to:
Cypress Merger Sub, Inc.
0000 Xxxxxxxxx Xxxxxx XX
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xx. Xxxxxxx X. XxXxxxx, President, and
Xxxxx X. Xxxxxxxx, Xx., Esq.
Telecopy No.: (000) 000-000-0000
with a copy to:
51
Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Xx., Esq.
Xxxx X. Xxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
and
Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Xx., Esq.
Xxxx X. Xxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
and
if to the Company, to:
Cypress Communications, Inc.
00 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000.
Xxxxxxx, Xxxxxxx 00000-0000
Attention: W. Xxxxxxx Xxxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
Section 9.4 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 9.5 Entire Agreement; No Third Party Beneficiaries. This
Agreement, the Shareholders' Agreement, and the Confidentiality Agreement
(including the documents and the instruments referred to herein and therein):
(a) constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof, and (b) except as provided in SECTION 2.4 and
SECTION 5.8 are
52
not intended to confer upon any person other than the parties hereto and thereto
any rights or remedies hereunder.
Section 9.6 Severability. Any term or provision of this Agreement
that is held by a court of competent jurisdiction or other authority to be
invalid, void 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 or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void 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.
Section 9.7 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
Section 9.8 Enforcement. The parties 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
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 of this Agreement in any court of the
United States located in the State of Delaware or in Delaware state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any Federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the Transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the Transactions
contemplated by this Agreement in any court other than a Federal or state court
sitting in the State of Delaware.
Section 9.9 Time of Essence. Each of the parties hereto hereby
agrees that, with regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.
Section 9.10 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of SECTION 9.1, waive compliance by the other parties with any of
the agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on
53
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
Section 9.11 Assignment. Neither this Agreement not any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written content of the other parties, except that Purchaser may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to Parent or to any direct or indirect wholly owned Subsidiary of Parent.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
54
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
U.S. REALTEL, INC.
By: /s/ Xxxxx X. Xxxx
---------------------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer
CYPRESS MERGER SUB, INC.
By: /s/ Xxxxxxx X. XxXxxxx
---------------------------------------
Name: Xxxxxxx X. XxXxxxx
Title: President
CYPRESS COMMUNICATIONS, INC.
By: /s/ W. Xxxxx Xxxxxx
---------------------------------------
Name: W. Xxxxx Xxxxxx
Title: Chairman & CEO
55
ANNEX A
Certain Conditions of the Offer. Notwithstanding any other
provisions of the Offer, and in addition to (and not in limitation of)
Purchaser's rights to extend and amend the Offer at any time in its sole
discretion (subject to the provisions of the Agreement), Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate or amend the Offer as to any Shares
not then paid for, if
(a) [intentionally omitted]
(b) the Minimum Condition has not been satisfied, or
(c) at any time on or after the date of the Agreement and before
the time of payment for any such Shares, any of the following events shall occur
which in the reasonable good faith judgment of Parent or Purchaser, in any such
case, and regardless of the circumstances (including any action or inaction by
Parent or Purchaser) giving rise to such condition makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares:
(i) there shall be pending any suit, action or proceeding
by any Governmental Entity (A) seeking to prohibit or impose any material
limitations on Parent's or Purchaser's ownership or operation (or that of any of
their respective Subsidiaries or Affiliates) of all or a material portion of the
Company's businesses or assets, or to compel Parent or Purchaser or their
respective Subsidiaries and Affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or the Company's
Subsidiaries, in each case taken as a whole, (B) challenging the acquisition by
Parent or Purchaser of any Shares under the Offer or pursuant to the
Shareholders' Agreement, seeking to restrain or prohibit the making or
consummation of the Offer or the Merger or the performance of any of the other
transactions contemplated by this Agreement or the Shareholders' Agreement or
seeking to obtain from the Company, Parent or Purchaser any damages that are
material in relation to the Company and the Company Subsidiaries taken as a
whole, (C) seeking to impose material limitations on the ability of Purchaser,
or rendering Purchaser unable, to accept for payment, pay for or purchase some
or all of the Shares pursuant to the Offer and the Merger, (D) seeking to impose
material limitations on the ability of Purchaser or Parent effectively to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote the Shares purchased by it on all matters properly presented
to the Company's stockholders, or (E) which otherwise is reasonably likely to
have a Material Adverse Effect; or
(ii) there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result,
56
directly or indirectly, in any of the consequences referred to in clauses (A)
through (E) of paragraph (i) above; or
(iii) there shall have occurred (A) any general suspension
of trading in, or limitation on prices for, securities on the New York Stock
Exchange or in the NASDAQ National Market System, for a period in excess of one
trading day (excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market conditions),
(B) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (C) any
limitation (whether or not mandatory) by any United States governmental
authority on the extension of credit by banks or other financial institutions,
or (D) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof; or
(iv) irrespective of whether the same would be the basis
for any action pursuant to clauses (vi) or (vii) below, there shall have
occurred after the date hereof any material adverse change in the assets,
businesses, operations or prospects of the Company and the Company Subsidiaries,
taken as a whole, in an amount that would require the Company in accordance with
GAAP consistently applied to record an extraordinary non-recurring charge
against earnings in an amount in excess of $2,000,000.00; provided the
determination of any such charge shall exclude any changes resulting from (A)
any action of the Company taken or omitted to be taken to comply with the
Company's obligations pursuant to, or specifically permitted by, SECTION 5.1 or
the Interim Business Plan, (B) the termination of any carrier or circuit
agreements with telecommunications providers, (C) any revaluation in accordance
with GAAP, consistently applied, of noncurrent assets of the Company and its
Subsidiaries, or (D) the execution and delivery of this Agreement or the
consummation of the Transactions; or
(v) the Company Board of Directors or any committee
thereof shall have (A) withdrawn, modified or changed in a manner adverse to
Parent or Purchaser its approval or recommendation of the Offer, this Agreement
or the Merger, (B) shall have recommended the approval or acceptance of an
Acquisition Proposal from, or similar business combination with, a person or
entity other than Parent, Purchaser or their Affiliates, or (C) shall have
executed an agreement in principle or definitive agreement relating to an
Acquisition Proposal from, or similar business combination with, a person or
entity other than Parent, Purchaser or their Affiliates; or
(vi) any of the representations and warranties of the
Company set forth in this Agreement (A) that are qualified by reference to a
"Material Adverse Effect" shall not be true and correct as of the date of this
Agreement and such breach of representation or warranty cannot be or is not
cured within ten (10) business days after the giving of written notice to the
Company or (B) any of the representations and warranties of the Company set
forth in this Agreement that are not qualified by reference to a "Material
Adverse Effect" shall not be true and correct as of the date of this Agreement
in any material respect, and such breach of representation or warranty cannot be
or has not been cured within ten (10) business days after the giving of written
notice to the Company, unless any of such breaches referred to in this clause
(vi), individually or in the aggregate, have not had and cannot reasonably be
expected to have a Material Adverse Effect; or
57
(vii) [Reserved.]
(viii) the Company shall have failed to perform in any
material respect any material obligation or to comply in any material respect
with any material agreement or covenant of the Company to be performed or
complied with by it under this Agreement or the Interim Business Plan, which
failure cannot be or has not been cured within ten (10) business days after the
giving of written notice to the Company, unless such breaches, individually or
in the aggregate, have not had and cannot reasonably be expected to have a
Material Adverse Effect; or
(ix) this Agreement shall have been terminated in
accordance with its terms; or
(x) Company shall have Net Working Capital as of January
31, 2002 in an amount less than (i) Fourteen Million Dollars ($14,000,000) minus
(ii) the aggregate amount, if any, of any and all Change Orders. "Net Working
Capital" means, as of any date, an amount equal to: (a) the Company's
consolidated current assets as of such date and calculated in accordance with
GAAP, minus (b) the sum of (i) the Company's consolidated current liabilities as
of such date calculated in accordance with GAAP plus, without duplication, (ii)
the aggregate amount of the unpaid Transaction Liabilities as of such date,
treating the unpaid balance of the Transaction Liabilities as of such date, to
the extent not otherwise included within the Company's consolidated current
liabilities as of such date, as additional consolidated current liabilities of
the Company as of such date. As used in this SUBSECTION (X), "calculated in
accordance with GAAP" means calculated in accordance with GAAP applied in a
manner consistent with the calculation of consolidated current assets and
consolidated current liabilities for purposes of the Financial Statements.
(d) the following conditions have not been satisfied as
determined by Parent its sole discretion:
(i) Lockup. Affiliates of the Company shall have executed
and performed their respective material obligations under the Shareholders'
Agreements with Parent with respect to an aggregate amount of Company Shares
equal to at least eleven percent (11%) of the total number of Shares issued and
outstanding; provided, however, that in the event of nonperformance by any of
the Major Shareholders under the Shareholders' Agreement, performance may be
tendered by any other Major Shareholder of the Company so long as, in the
aggregate, all material obligations of the Major Shareholders (taken as a group
and not individually) are satisfied; and
(ii) Board of Directors Approval. The Company Board of
Directors shall have publicly approved and recommended for approval to the
stockholders of the Company, by the unanimous vote of those voting at the
meetings where such actions was taken, the Offer and the Transactions.
The foregoing conditions are for the sole benefit of Parent
and Purchaser, and except as provided in SECTION 1.1(B) of the Agreement, may be
waived by Parent or Purchaser,
58
in whole or in part, at any time and from time to time in the sole discretion of
Parent or Purchaser. The failure by Parent or Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
59
