AGREEMENT AND PLAN OF MERGER
Dated as of July 16, 1997
Among
TEL-SAVE HOLDINGS, INC.,
TSHCo, INC.
and
SHARED TECHNOLOGIES XXXXXXXXX, INC.
TABLE OF CONTENTS
PAGE
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ARTICLE I
MERGER
1.1. The Merger....................................................... 1
1.2. Filing........................................................... 2
1.3. Effective Time of the Merger..................................... 2
ARTICLE II
CERTIFICATE OF INCORPORATION; BY-LAWS; ETC.
2.1. Certificate of Incorporation and By-Laws of Surviving Corporation 2
2.2. Directors of Surviving Corporation............................... 2
2.3. Board of Directors of Acquiror................................... 2
2.4. Shareholders Agreement........................................... 3
ARTICLE III
MERGER CONSIDERATION; CONVERSION OR CANCELLATION
OF SHARES IN THE MERGER
3.1. Share Consideration; Conversion or Cancellation of
Shares in the Merger........................................... 3
3.2. Payment for Shares in the Merger................................. 8
3.3. Fractional Shares................................................ 11
3.4. Transfer of Shares After the Effective Time...................... 12
ARTICLE IV
CERTAIN EFFECTS OF THE MERGER
4.1. Effect of the Merger............................................. 12
4.2. Further Assurances............................................... 13
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.1. Organization and Qualification.................................... 13
5.2. Capital Stock of Subsidiaries..................................... 13
5.3. Capitalization.................................................... 14
5.4. Authority Relative to This Agreement.............................. 14
5.5. No Violations, etc................................................ 15
5.6. Commission Filings; Financial Statements.......................... 17
5.7. Absence of Changes or Events...................................... 18
5.8. Joint Proxy Statement............................................. 18
5.9. Litigation........................................................ 19
5.10. Title to and Condition of Properties.............................. 19
5.11. Contracts and Commitments......................................... 19
5.12. Labor Matters..................................................... 20
5.13. Compliance with Law............................................... 20
5.14. Board Recommendation.............................................. 21
5.15. Patents and Trademarks............................................ 21
5.16. Taxes............................................................. 21
5.17. Employee Benefit Plans; ERISA..................................... 22
5.18. Environmental Matters............................................. 26
5.19. Disclosure........................................................ 28
5.20. Absence of Undisclosed Liabilities................................ 28
5.21. Finders or Brokers................................................ 28
5.22. State Antitakeover Statutes....................................... 28
5.23. Opinion of Financial Advisor...................................... 29
5.24. Insurance......................................................... 29
5.25. Employment and Labor Contracts.................................... 29
5.26. Pending Transactions.............................................. 29
5.27. Indemnification Agreements........................................ 29
5.28. Indemnified Liabilities........................................... 30
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
6.1. Organization and Qualification.................................. 30
6.2. Capital Stock of Subsidiaries................................... 31
6.3. Capitalization.................................................. 31
6.4. Authority Relative to This Agreement............................ 31
6.5. No Violations, etc.............................................. 32
6.6. Commission Filings; Financial Statements........................ 34
6.7. Absence of Changes or Events.................................... 34
6.8. Joint Proxy Statement........................................... 34
6.9. Board Recommendation............................................ 35
6.10. Disclosure...................................................... 35
6.11. Finders or Brokers.............................................. 35
6.12. Opinion of Financial Advisor.................................... 36
ARTICLE VII
CONDUCT OF BUSINESS OF ACQUIROR AND THE COMPANY PENDING THE MERGER
7.1. Conduct of Business of the Company Pending the Merger........... 36
7.2. Conduct of Business of Acquiror Pending the Merger.............. 39
7.3. Permitted Conduct of the Company................................ 40
ARTICLE VIII
COVENANTS AND AGREEMENTS
8.1. Preparation of the Form S-4 and the Joint Proxy Statement; Stockholders
Meetings.................................................... 40
8.2. Letters of the Company's Accountants............................ 42
8.3. Letters of Acquiror's Accountants............................... 42
8.4. Additional Agreements; Cooperation.............................. 43
8.5. Publicity....................................................... 43
8.6. No Solicitation................................................. 43
8.7. Access to Information........................................... 46
8.8. Notification of Certain Matters................................. 46
8.9. Resignation of Directors........................................ 47
8.10. Indemnification................................................. 47
8.11. Fees and Expenses............................................... 48
8.12. Affiliates...................................................... 48
8.13. NASDAQ Listing.................................................. 49
8.14. Stockholder Litigation.......................................... 49
8.15. Tax Treatment................................................... 49
8.16. Pooling of Interests............................................ 49
8.17. Fairness Opinion................................................ 50
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ARTICLE IX
CONDITIONS TO CLOSING
9.1. Conditions to Each Party's Obligation to Effect the Merger...... 50
9.2. Conditions to Obligations of Acquiror........................... 51
9.3. Conditions to Obligations of the Company........................ 52
ARTICLE X
TERMINATION
10.1. Termination..................................................... 53
10.2. Effect of Termination........................................... 55
ARTICLE XI
MISCELLANEOUS
11.1. Nonsurvival of Representations and Warranties................... 55
11.2. Closing and Waiver.............................................. 56
11.3. Notices......................................................... 56
11.4. Counterparts.................................................... 57
11.5. Interpretation.................................................. 57
11.6. Certain Definitions............................................. 58
11.7. Amendment....................................................... 59
11.8. No Third Party Beneficiaries.................................... 59
11.9. Governing Law................................................... 59
11.10. Entire Agreement................................................ 59
11.11. Validity........................................................ 59
EXHIBIT A - Form of Company Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 16, 1997, by
and among TEL-SAVE HOLDINGS, INC., a Delaware corporation ("Acquiror"), TSHCo,
INC., a Delaware corporation ("Merger Sub"), a Delaware corporation ("Merger
Sub") and a wholly owned subsidiary of Acquiror, and SHARED TECHNOLOGIES
XXXXXXXXX, INC., a Delaware corporation (the "Company" and, together with Merger
Sub, the "Constituent Corporations").
W I T N E S S E T H :
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WHEREAS, the Boards of Directors of Acquiror and the Company
have approved the merger of the Company with and into Merger Sub, with Merger
Sub being the survivor (the "Merger"), upon the terms and subject to the
conditions set forth herein and in accordance with the laws of the State of
Delaware;
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a tax free reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes it is intended that the
Merger shall be accounted for as a pooling-of-interests.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, the parties hereto, intending
to be legally bound, agree as follows:
ARTICLE I
MERGER
1.1. THE MERGER. At the Effective Time (as hereinafter
defined), the Company shall be merged with and into Merger Sub as provided
herein. Thereupon, the corporate existence of Merger Sub, with all its purposes,
powers and objects, shall continue unaffected and unimpaired by the Merger, and
the corporate identity and existence, with all the purposes, powers and objects,
of the Company shall be merged with and into Merger Sub and Merger Sub as the
corporation surviving the Merger (hereinafter sometimes called the "Surviving
Corporation") shall continue its corporate existence under the laws of the State
of Delaware.
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1.2. FILING. As soon as practicable after the fulfillment or
waiver of the conditions set forth in Sections 9.1, 9.2 and 9.3 or on such later
date as may be mutually agreed to between Acquiror and the Company, the parties
hereto will cause to be filed with the office of the Secretary of State of the
State of Delaware, a certificate of merger (the "Certificate of Merger"), in
such form as required by, and executed in accordance with, the relevant
provisions of the Delaware General Corporation Law ("DGCL").
1.3. EFFECTIVE TIME OF THE MERGER. The Merger shall be
effective at the time of the filing of the Certificate of Merger with the office
of the Secretary of State of the State of Delaware, or at such later time
specified in such Certificate of Merger, which time is herein sometimes referred
to as the "Effective Time" and the date thereof is herein sometimes referred to
as the "Effective Date."
ARTICLE II
CERTIFICATE OF INCORPORATION; BY-LAWS; ETC.
2.1. CERTIFICATE OF INCORPORATION AND BY-LAWS OF SURVIVING
CORPORATION. The Certificate of Incorporation and By-Laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation until thereafter amended
as provided by law.
2.2. DIRECTORS OF SURVIVING CORPORATION. The directors of
Merger Sub immediately prior to the Effective Time shall continue as the
directors of the Surviving Corporation, in each case until their successors are
elected and qualified or until their earlier death, resignation or removal.
2.3. BOARD OF DIRECTORS OF ACQUIROR. At or prior to the
Effective Time, Xxxxxxx X. Xxxxxxx, as designee of The Xxxxxxxxx Corporation
("TFC"), and Xxxxxxx X. Xxxxxxxx shall be elected to the Board of Directors of
Acquiror, each to serve for a term of three years or until the earlier death,
resignation or removal of such person, PROVIDED, HOWEVER, that if Xx. Xxxxxxx is
unable to be a director for the full 3-year term due to his death or
incapacitation, then the Board of Directors of the Company shall fill such
vacancy by electing to the Board of Directors such member of Xx. Xxxxxxx'x
immediate family as is designated by TFC; provided that such family member is
reasonably acceptable to Acquiror and provided further that it is expressly
agreed to and accepted that Xxxx Xxxxxxx and Xxxxxxx Xxxxxxx Hercot are
acceptable designees.
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2.4. SHAREHOLDERS AGREEMENT. At the Effective Time, the
Shareholders Agreement dated as of March 13, 1996 by and among RHI Holdings,
Inc. ("RHI"), Xx. Xxxxxxxx and the Company shall be terminated and such
agreement shall be of no further force or effect from and after the Effective
Time. To the extent necessary, each such party shall waive its respective rights
under the Shareholders Agreement in favor of the transactions contemplated by
this Agreement.
ARTICLE III
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
3.1. SHARE CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES
IN THE MERGER. Subject to the provisions of this Article III, at the Effective
Time, by virtue of the Merger and without any action on the part of the holders
thereof, the shares of the Constituent Corporations shall be converted as
follows:
(a) Each share of common stock, par value $.004 per share, of
the Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares owned by the
Company or Acquiror) shall be converted into the right to receive the
number of duly authorized, validly issued, fully paid and nonassessable
shares of common stock, par value $.01 per share (the "Acquiror Common
Stock"), of Acquiror (the "Merger Consideration"), calculated by
dividing (x) $11.25 plus the product of (i) .3 and (ii) the amount by
which the Closing Date Market Price exceeds $20 by (y) the Closing Date
Market Price (as hereinafter defined), rounded to four decimal places
(such fraction being referred to herein as the "Exchange Ratio");
provided, however, that the Exchange Ratio shall in no event be greater
than 1.125. If, prior to the Effective Time, Acquiror should split or
combine the Acquiror Common Stock, or pay a stock dividend or other
stock distribution in shares of Acquiror Common Stock, or otherwise
change the Acquiror Common Stock into any other securities, or make any
other dividend or distribution on the Acquiror Common Stock (other than
normal quarterly dividends as the same may be adjusted from time to
time in the ordinary course), then the Exchange Ratio will be
appropriately adjusted to reflect such split, combination, dividend or
other distribution or change. For purposes of this Agreement, "Closing
Date Market Price" means, with respect to one share of Acquiror Common
Stock, the average closing price for such share as reported on the
National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") for the 15 most recent trading days ending on the
third business day prior to the Closing Date.
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(b) All shares of Company Common Stock to be converted into
shares of Acquiror Common Stock pursuant to this Section 3.1 shall
cease to be outstanding, shall be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares
shall thereafter cease to have any rights with respect to such shares,
except the right to receive for each of such shares, upon the surrender
of such certificate in accordance with Section 3.2, the Merger
Consideration and cash in lieu of fractional shares of Acquiror Common
Stock as contemplated by Section 3.3.
(c) Each share of common stock, par value $1.00 per share, of
Merger Sub issued and outstanding immediately prior to the Effective
Time shall remain outstanding and shall represent one share of common
stock of the Surviving Corporation.
(d) Each share of Series C Preferred Stock, par value $.01 per
share, of the Company (the "Series C Stock") and each share of Series D
Preferred Stock, par value $.01 per share, of the Company (the "Series
D Stock" and together with the Series C Stock, the "Series Preferred
Stock") issued and outstanding immediately prior to the Effective Time
(other than shares owned by Acquiror or the Company and except for
shares held by persons who demand appraisal in compliance with all
provisions of the DGCL concerning the right of such holders to dissent
from the Merger and demand appraisal of their shares ("Dissenting
Holders") but only if holders of such shares are then entitled to so
dissent and demand appraisal rights pursuant to the DGCL) shall, at the
Effective Time, be converted into the right to receive shares of a
series of preferred stock of Acquiror (the "Acquiror Preferred Stock")
having terms substantially identical to the terms of the Series
Preferred Stock, PROVIDED, HOWEVER, that the Acquiror Preferred Stock
shall be convertible into the number of shares of Acquiror Common Stock
equal to the product of the Exchange Ratio and the respective number of
shares of Company Common Stock into which such shares of Series
Preferred Stock were convertible immediately prior to the Effective
Time.
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(e) If holders of shares of Series Preferred Stock are
entitled to dissent from the Merger and demand appraisal of their
shares under the DGCL, any issued and outstanding shares of Series
Preferred Stock held by a Dissenting Holder shall not be converted as
described in Section 3.1(d) but shall from and after the Effective Time
represent only the right to receive such consideration as may be
determined to be due to such Dissenting Holder pursuant to Section 262
of the DGCL; PROVIDED, HOWEVER, that each share of Series Preferred
Stock outstanding immediately prior to the Effective Time and held by a
Dissenting Holder who shall, after the Effective Time, withdraw his or
her demand for appraisal or lose his or her right of appraisal in
either case pursuant to the DGCL, shall be deemed to be converted, as
of the Effective Time, pursuant to Section 3.1(d) hereof.
(f) Each share of Series I 6% Cumulative Convertible Preferred
Stock, par value $100.00 per share, of the Company (the "Convertible
Preferred Stock") issued and outstanding immediately prior to the
Effective Time (other than shares owned by Acquiror or the Company)
shall, at the Effective Time, be converted into the right to receive
the Merger Consideration that would be deliverable in respect of the
shares of the Company Common Stock issuable upon conversion of the
Convertible Preferred Stock in accordance with the certificate of
designation of the Convertible Preferred Stock, which shares of
Acquiror Common Stock into which such Convertible Preferred Stock is
converted shall be subject to the Pledge Agreement, dated March 13,
1996 (the "Pledge Agreement").
(g) Each share of Series J Redeemable Special Preferred Stock,
par value $.01 per share, of the Company (the "Special Preferred
Stock") issued and outstanding immediately prior to the Effective Time
(other than shares owned by Acquiror or the Company) shall, at the
Effective Time, be converted into the right to receive an amount in
cash from Acquiror (the "Special Preferred Consideration"), the amount
of which shall be determined in accordance with Section 5 of the
certificate of designation of the Special Preferred Stock, which amount
shall be pledged collateral under and subject to the Pledge Agreement,
and RHI shall deliver to the pledge agent under the Pledge Agreement
shares of Acquiror Common Stock (valued at the Closing Date Market
Price) equal to the Special Preferred Consideration and in substitution
therefor (it being agreed that such shares are at least equal to the
fair market value of the Special Preferred Consideration for purposes
of the terms of the Pledge Agreement).
(h) All shares of Company Common Stock, Series C Stock, Series
D Stock, Convertible Preferred Stock and Special Preferred Stock which
are owned by Acquiror or the Company in each case shall be canceled and
shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(i) Each option to purchase shares of Company Common Stock
(each an "Option") issued by the Company pursuant to the Company's 1996
Equity Incentive Plan or its 1994 Director Option Plan (collectively,
the "Stock Option Plans"), outstanding and unexercised as of the
Effective Date whether or not vested or exercisable, shall be assumed
by Acquiror, and each such Option shall constitute an option to
acquire, on the same terms and conditions as were applicable under such
assumed Option (giving effect to any accelerated vesting pursuant to an
applicable agreement), the number of shares of Acquiror Common Stock
equal to the product of the Exchange Ratio and the number of shares of
Company Common Stock subject to such Option, at a price per share equal
to the aggregate exercise price for the shares of Company Common Stock
subject to such Option divided by the number of full shares of Acquiror
Common Stock deemed, as provided above, to be purchasable pursuant to
such Option; PROVIDED, HOWEVER, that (i) subject to the provisions of
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clause (ii) below, the number of shares of Acquiror Common Stock that
may be purchased upon exercise of such Option shall not include any
fractional shares and, upon the last such exercise of such Option, a
cash payment shall be made for any fractional share based upon the per
share average of the highest and lowest sale price of shares of
Acquiror Common Stock as reported on NASDAQ on the date of such
exercise and (ii) in the case of any Option to which Section 421 of the
Code applies by reason of its qualification under Section 422 or
Section 423 of the Code ("qualified stock options"), the option price,
the number of shares purchasable pursuant to such Option and the terms
and conditions of exercise of such Option shall be determined in order
to comply with Section 424 of the Code. At the Effective Time, Acquiror
shall deliver to holders of Options appropriate option agreements
representing the right to acquire shares of Acquiror Common Stock on
the terms and conditions set forth above, upon surrender of the
outstanding Options, or Acquiror shall comply with the terms of the
Stock Option Plans as they apply to the Options assumed as set forth
above.
Pursuant to the Shared Technologies Inc. 1987 Stock Option
Plan (the "1987 Option Plan") all options (the "1987 Options")
outstanding under the 1987 Option Plan shall terminate at the Effective
Time and each holder of a 1987 Option shall have the right immediately
prior to the Effective Time to exercise his or her 1987 Options in
whole or in part, notwithstanding that such 1987 Options are not
otherwise exercisable.
The Stock Option Plans and the 1987 Option Plan shall
terminate as of the Effective Time, and the provisions in any other
benefit plan of the Company providing for the issuance, transfer or
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grant of any capital stock of the Company or any interest in respect of
any capital stock of the Company shall be terminated as of the
Effective Time, and the Company shall ensure that following the
Effective Time no holder of an Option or a 1987 Option, and no
participant in any Stock Option Plan, the 1987 Option Plan or other
benefit plan, shall have any right thereunder to acquire any capital
stock of the Company or the Surviving Corporation.
(j) Each Warrant to purchase shares of Company Common Stock
issued by the Company and outstanding and unexercised as of the
Effective Time (each a "Warrant"), whether or not exercisable shall be
assumed by Acquiror, and shall constitute a right to acquire on the
same terms and conditions as were applicable under such assumed
Warrants, the number of shares of Acquiror Common Stock equal to the
product of the Exchange Ratio and the number of shares of Company
Common Stock subject to such Warrant at a price per share equal to the
aggregate exercise price for the shares of Company Common Stock for
which such Warrant is exercisable divided by the number of full shares
of Acquiror Common Stock deemed to be purchasable pursuant to such
Warrant; PROVIDED, HOWEVER, that the number of shares of Acquiror
Common Stock that may be purchased upon exercise of such Warrant shall
not include any fractional shares and, upon the last such exercise of
such Warrant, a cash payment shall be made for any fractional share
based upon the per share average of the highest and lowest sale price
of shares of Acquiror Common Stock as reported on NASDAQ on the date of
such exercise. At the Effective Time, Acquiror shall deliver to holders
of Warrants appropriate warrants representing the right to acquire
shares of Acquiror Common Stock on the same terms and conditions as
contained in the outstanding Warrants (subject to any adjustments
required by the preceding sentence), upon surrender of the outstanding
Warrants.
(k) Acquiror shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of its Common Stock
for delivery upon exercise of the Options and the Warrants assumed in
accordance with this Section 3.1. Acquiror shall file a registration
statement on Form S-8 (or any successor form) or another appropriate
form, effective as of the Effective Time, with respect to Acquiror
Common Stock subject to such Options and shall use all reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the
prospectuses contained therein) for so long as such Options remain
outstanding. With respect to those individuals who subsequent to the
Merger will be subject to the reporting requirements under Section
16(a) of the Exchange Act, Acquiror shall administer the Options of
such persons pursuant to this Section 3.1(d) in a manner that complies
with Rule 16b-3 promulgated under the Exchange Act to the extent the
applicable Stock Option Plan complied with such rule prior to the
Merger.
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3.2. PAYMENT FOR SHARES IN THE MERGER. The manner of making
payment for shares in the Merger shall be as follows:
(a) At the Effective Time, Acquiror shall make available to an
exchange agent selected by Acquiror and reasonably acceptable to the
Company (the "Exchange Agent"), for the benefit of those persons who
immediately prior to the Effective Time were the holders of Company
Common Stock, Series C Stock, Series D Stock, or Convertible Preferred
Stock, a sufficient number of certificates representing Acquiror Common
Stock required to effect the delivery of the aggregate Merger
Consideration required to be issued pursuant to Section 3.1 (the
certificates representing Acquiror Common Stock comprising such
aggregate Merger Consideration being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions from the Acquiror, deliver the Acquiror Common Stock
contemplated to be issued pursuant to Section 3.1 and effect the sales
provided for in Section 3.3 out of the Exchange Fund. The Exchange Fund
shall not be used for any other purpose.
(b) Promptly after the Effective Time, the Exchange Agent
shall mail to each holder of record (other than Acquiror and the
Company) of a certificate or certificates (which immediately prior to
the Effective Time represented outstanding shares of Company Common
Stock, Series C Stock, Series D Stock or Convertible Preferred Stock
(the "Certificates")) (i) a form of letter of transmittal (which shall
specify that delivery shall be effected, and the risk of loss and title
to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates for payment therefor. Upon
surrender of Certificates for cancellation to the Exchange Agent,
together with such letter of transmittal duly executed and any other
required documents, the holder of such Certificates shall be entitled
to receive for each of the shares of Company Common Stock, Series C
Stock, Series D Stock and Convertible Preferred Stock formerly
represented by such Certificates the Merger Consideration and the
Certificates so surrendered shall forthwith be canceled; provided that
for holders of shares of Convertible Preferred Stock, the Merger
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Consideration shall be delivered directly to the pledge agent under the
Pledge Agreement, and provided further that, of the Merger
Consideration deliverable to RHI in respect of shares of Company Common
Stock held by RHI, a certificate for such number of shares of Acquiror
Common Stock as equals the result of the Special Preferred
Consideration divided by the Closing Date Market Price shall be
delivered to RHI by delivery thereof directly to the pledge agent under
the Pledge Agreement in substitution for the Special Preferred
Consideration then held by such pledge agent, and, upon receipt by the
pledge agent of such certificate to be held thereafter as pledged
collateral under the Pledge Agreement, such Special Preferred
Consideration will be released by such pledge agent to RHI. Until so
surrendered, Certificates shall represent solely the right to receive
the Merger Consideration or the Special Preferred Consideration, as the
case may be, and any cash in lieu of fractional Acquiror Common Stock
as contemplated by Section 3.3 with respect to each of the shares
formerly represented thereby. No dividends or other distributions that
are declared after the Effective Time on Acquiror Common Stock and
payable to the holders of record thereof after the Effective Time will
be paid to persons entitled by reason of the Merger to receive Acquiror
Common Stock until such persons surrender their Certificates. Upon such
surrender, there shall be paid to the Person in whose name the shares
of the Acquiror Common Stock are issued any dividends or other
distributions on such Acquiror Common Stock that shall have a record
date after the Effective Time and prior to such surrender and a payment
date after such surrender and such payment shall be made on such
payment date. In no event shall the persons entitled to receive such
dividends or other distributions be entitled to receive interest on
such dividends or other distributions, except to the extent so paid to
all stockholders of Acquiror. If any cash or any certificate
representing Acquiror Common Stock is to be paid to or issued in a name
other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that
the Certificate so surrendered shall be properly endorsed and otherwise
in proper form for transfer and that the Person requesting such
exchange shall pay to the Exchange Agent any transfer or other taxes
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required by reason of the issuance of certificates for such Acquiror
Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a holder of shares of Company Common Stock,
Series C Stock, Series D Stock or Convertible Preferred Stock for any
Acquiror Common Stock or dividends thereon or, in accordance with
Section 3.3, proceeds of the sale of fractional interests, delivered to
a public official pursuant to applicable escheat law. The Exchange
Agent shall not be entitled to vote or exercise any rights of ownership
with respect to Acquiror Common Stock held by it from time to time
hereunder, except that it shall receive and hold all dividends or other
distributions paid or distributed with respect to such Acquiror Common
Stock for the account of the persons entitled thereto.
(c) Certificates surrendered for exchange by any person
constituting an affiliate of the Company for purposes of Rule 145 under
the Securities Act shall not be exchanged for certificates representing
Acquiror Common Stock until Acquiror has received a written agreement
from such person as provided in Section 8.12.
(d) Any portion of the Exchange Fund and the Fractional
Securities Fund (as hereinafter defined) which remains unclaimed by the
former stockholders of the Company for one year after the Effective
Time shall be delivered by the Exchange Agent to Acquiror, upon demand
of Acquiror, and any former stockholders of the Company shall
thereafter look only to Acquiror for payment of their claim for the
Merger Consideration in respect of Company Common Stock or for any cash
in lieu of fractional shares of Acquiror Common Stock.
(e) At the Effective Time, Acquiror shall deliver to RHI, as
the holder of the Special Preferred Stock, by wire transfer to the
pledge agent under the Pledge Agreement, as pledged collateral
thereunder, the Special Preferred Consideration upon surrender of the
certificates evidencing the Special Preferred Stock.
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3.3. FRACTIONAL SHARES. No fraction of Acquiror Common Stock
shall be issued in the Merger. In lieu of any such fractional securities, each
holder of Company Common Stock, Series C Stock, Series D Stock or Convertible
Preferred Stock who would otherwise have been entitled to a fraction of Acquiror
Common Stock upon surrender of Certificates for exchange pursuant to this
Article III will be paid an amount in cash (without interest) equal to such
holder's proportionate interest in the net proceeds from the sale or sales in
the open market by the Exchange Agent on behalf of all such holders, of the
aggregate shares of fractional Acquiror Common Stock issued pursuant to this
Article III. As soon as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (i) the number of full shares of Acquiror
Common Stock delivered to the Exchange Agent by Acquiror over (ii) the aggregate
number of full shares of Acquiror Common Stock to be distributed (such excess
being herein called the "Excess Shares"), and the Exchange Agent, as agent for
the former holders of shares, shall sell the Excess Shares at the prevailing
prices on the NASDAQ. The sale of the Excess Shares by the Exchange Agent shall
be executed on the NASDAQ through one or more member firms of the NASDAQ and
shall be executed in round lots to the extent practicable. Acquiror shall pay
all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of Excess Shares. Until the net proceeds of such sale
have been distributed to the former stockholders of the Company, the Exchange
Agent will hold such proceeds in trust for such former stockholders (the
"Fractional Securities Fund"). As soon as practicable after the determination of
the amount of cash to be paid to former stockholders of the Company in lieu of
any fractional interest, the Exchange Agent shall make available in accordance
with this Agreement such amounts to such former stockholders.
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3.4. TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. No transfers
of Company Common Stock, Series C Stock, Series D Stock, Convertible Preferred
Stock, or Special Preferred Stock shall be made on the stock transfer books of
the Company after the close of business on the day prior to the date of the
Effective Time. If, after the Effective Time, certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged as provided in this
Article II.
ARTICLE IV
CERTAIN EFFECTS OF THE MERGER
4.1. EFFECT OF THE MERGER. On and after the Effective Time and
pursuant to the DGCL, the Surviving Corporation shall possess all the rights,
privileges, immunities, powers, and purposes of each of Merger Sub and the
Company; all the property, real and personal, including subscriptions to shares,
causes of action and every other asset (including books and records) of Merger
Sub and the Company, shall vest in the Surviving Corporation without further act
or deed; and the Surviving Corporation shall assume and be liable for all the
liabilities, obligations and penalties of Merger Sub and the Company. No
liability or obligation due or to become due and no claim or demand for any
cause existing against either Merger Sub or the Company, or any stockholder,
officer or director thereof, shall be released or impaired by the Merger, and no
action or proceeding, whether civil or criminal, then pending by or against
Merger Sub or the Company, or any stockholder, officer or director thereof,
shall xxxxx or be discontinued by the Merger, but may be enforced, prosecuted,
settled or compromised as if the Merger had not occurred, and the Surviving
Corporation may be substituted in any such action or proceeding in place of
Merger Sub or the Company.
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4.2. FURTHER ASSURANCES. If at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
either of Merger Sub or the Company, the officers of such corporation are fully
authorized in the name of their corporation or otherwise to take, and shall
take, all such further action.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Acquiror and Merger Sub
as follows:
5.1. ORGANIZATION AND QUALIFICATION. Each of the Company and
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except for failures to be so qualified or in good standing which
would not, individually or in the aggregate, have a material adverse effect on
the general affairs, management, business, operations, condition (financial or
otherwise) or prospects of the Company and its subsidiaries taken as a whole (a
"Company Material Adverse Effect"). Section 5.1 of the Disclosure Statement sets
forth, with respect to the Company and each of its subsidiaries, the
jurisdiction in which they are qualified or otherwise licensed as a foreign
corporation to do business. Neither the Company nor any of its subsidiaries is
in violation of any of the provisions of its Certificate of Incorporation (or
other applicable charter document) or By-Laws. The Company has delivered to
Acquiror accurate and complete copies of the Certificate of Incorporation (or
other applicable charter document) and By-Laws, as currently in effect, of each
of the Company and its subsidiaries.
5.2. CAPITAL STOCK OF SUBSIDIARIES. The only direct or
indirect subsidiaries of the Company are those listed in Section 5.2 of the
Disclosure Statement previously delivered by the Company to Acquiror (the
"Disclosure Statement"). The Company is directly or indirectly the record
(except for directors' qualifying shares) and beneficial owner (including all
qualifying shares owned by directors of such subsidiaries as reflected in
Section 5.2 of the Disclosure Statement) of all of the outstanding shares of
capital stock of each of its subsidiaries, there are no proxies with respect to
such shares, and no equity securities of any of such subsidiaries are or may be
required to be issued by reason of any options, warrants, scrip, rights to
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subscribe for, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any capital
stock of any such subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any such subsidiary is bound to issue
additional shares of its capital stock or securities convertible into or
exchangeable for such shares. Other than as set forth in Section 5.2 of the
Disclosure Statement, all of such shares so owned by the Company are validly
issued, fully paid and nonassessable and are owned by it free and clear of any
claim, lien or encumbrance of any kind with respect thereto. Except as disclosed
in Section 5.2 of the Disclosure Statement, the Company does not directly or
indirectly own any interest in any corporation, partnership, joint venture or
other business association or entity.
5.3. CAPITALIZATION. The authorized capital stock of the
Company consists of 50,000,000 shares of Company Common Stock, par value $.004
per share, and 25,000,000 shares of preferred stock, $.01 par value per share,
of which 5,000,000 shares have been designated Series C Stock, 1,000,000 shares
have been designated Series D Stock, 250,000 shares have been designated Series
I Convertible Preferred Stock and 200,000 shares have been designated Series J
Special Preferred Stock. As of the date hereof, 15,904,146 shares of Company
Common Stock were issued and outstanding and 1,318,950 shares of preferred stock
were issued and outstanding. All of such issued and outstanding shares are
validly issued, fully paid and nonassessable and free of preemptive rights. As
of the date hereof (x) 2,255,920 shares of Company Common Stock were reserved
for issuance upon exercise of outstanding options and 4,619,319 shares of
Company Common Stock were reserved for issuance upon exercise of outstanding
convertible preferred securities and (y) 2,653,381 shares of Company Common
Stock were reserved for issuance upon exercise of the Warrants, all of which
warrants, options and Stock Option Plans are listed and described in Section 5.3
of the Disclosure Statement. Other than the Stock Option Plans and the Warrants,
the Company has no other plan which provides for the grant of options or
warrants to purchase shares of capital stock, stock appreciation or similar
rights or stock awards. Except as set forth above, there are not now, and at the
Effective Time, except for shares of Company Common Stock issued after the date
hereof upon the conversion of convertible securities and the exercise of
Warrants and Options outstanding on the date hereof or pursuant to the Company's
401(k) Plan, there will not be, any shares of capital stock of the Company
issued or outstanding or any subscriptions, options, warrants, calls, claims,
rights (including without limitation any stock appreciation or similar rights),
convertible securities or other agreements or commitments of any character
obligating the Company to issue, transfer or sell any of its securities. The
Company has paid all dividends payable through June 30, 1997 in respect of each
of the Series C Preferred Stock, the Series D Preferred Stock and the
Convertible Preferred Stock.
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5.4. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware. The Company has full corporate power and authority to execute and
deliver each of this Agreement and the STFI Agreement and to consummate the
Merger and other transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the STFI Agreement and the consummation of the
Merger and other transactions contemplated hereby and thereby have been duly and
validly authorized by the Board of Directors of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement and the STFI Agreement or to consummate the Merger or other
transactions contemplated hereby or thereby (other than, with respect to the
Merger, the approval of the Company's stockholders pursuant to Section 251(c) of
the DGCL). Each of this Agreement or the STFI Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Acquiror and Merger Sub and
thereof by Acquiror, constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general equitable or fiduciary principles.
5.5. NO VIOLATIONS, ETC.
(a) Assuming that all filings, permits, authorizations,
consents and approvals or waivers thereof have been duly made or
obtained as contemplated by Section 5.5(b) hereof, except as listed in
Section 5.5 of the Disclosure Statement, neither the execution and
delivery of this Agreement or the STFI Agreement by the Company nor the
consummation of the Merger or other transactions contemplated hereby or
thereby nor compliance by the Company with any of the provisions hereof
will (i) violate, conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination or suspension of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any
of its subsidiaries under, any of the terms, conditions or provisions
of (x) their respective charters or by-laws, (y) except as set forth in
Section 5.5 of the Disclosure Statement, any note, bond, mortgage,
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indenture or deed of trust, or (z) any license, lease, agreement or
other instrument or obligation to which the Company or any such
subsidiary is a party or to which they or any of their respective
properties or assets may be subject, or (ii) subject to compliance with
the statutes and regulations referred to in the next paragraph, violate
any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its subsidiaries or any
of their respective properties or assets, except, in the case of
clauses (i)(z) and (ii) above, for such violations, conflicts,
breaches, defaults, terminations, suspensions, accelerations, rights of
termination or acceleration or creations of liens, security interests,
charges or encumbrances which would not, individually or in the
aggregate, either have a Company Material Adverse Effect or materially
impair the Company's ability to consummate the Merger or other
transactions contemplated hereby.
(b) No filing or registration with, notification to and no
permit, authorization, consent or approval of any governmental entity
(including, without limitation, any federal, state or local regulatory
authority or agency) is required by the Company in connection with the
execution and delivery of this Agreement or the STFI Agreement or the
consummation by the Company of the Merger or other transactions
contemplated hereby or thereby, except (i) in connection with the
applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware, (iii) the approval of the Company's stockholders pursuant to
the DGCL, (iv) filings with applicable state public utility commissions
identified in Section 5.5 of the Disclosure Statement, (v) filings with
the SEC and (vi) such other filings, registrations, notifications,
permits, authorizations, consents or approvals the failure of which to
be obtained, made or given would not, individually or in the aggregate,
either have a Company Material Adverse Effect or materially impair the
Company's ability to consummate the Merger or other transactions
contemplated hereby or thereby.
(c) The Company and its subsidiaries are not in violation of
or default under, except as set forth in Section 5.5 of the Disclosure
Statement, (x) any note, bond, mortgage, indenture or deed of trust, or
(y) any license, lease, agreement or other instrument or obligation to
which the Company or any such subsidiary is a party or to which they or
any of their respective properties or assets may be subject, except, in
the case of clauses (x) and (y) above, for such violations or defaults
which would not, individually or in the aggregate, either have a
Company Material Adverse Effect or materially impair the Company's
ability to consummate the Merger or other transactions contemplated
-17-
hereby. It is understood that the Company has certain covenants in its
bank facilities which the Company from time to time may violate and
that such violations shall not be deemed a breach so long as the
Company promptly seeks, and in a reasonable period of time obtains,
waivers of such violations from the lenders under such facilities
(unless such lenders have accelerated the indebtedness under such
facilities).
5.6. COMMISSION FILINGS; FINANCIAL STATEMENTS. The Company has
filed all forms, reports, schedules, statements and other documents required to
be filed by it since December 31, 1994 (as supplemented and amended since the
time of filing collectively, the "SEC Reports") with the Securities and Exchange
Commission (the "SEC"), each of which complied when filed in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act") and the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"). The audited
consolidated financial statements and unaudited consolidated interim financial
statements of the Company and its subsidiaries included or incorporated by
reference in such SEC Reports have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and present fairly,
in all material respects, the financial position and results of operations and
cash flows of the Company and its subsidiaries on a consolidated basis at the
respective dates and for the respective periods indicated (and in the case of
all such financial statements that are interim financial statements, contain all
adjustments so to present fairly). None of the SEC Reports contained at the time
filed any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
-18-
5.7. ABSENCE OF CHANGES OR EVENTS. Except as set forth in
Section 5.7 of the Disclosure Statement and in the Company's Form 10-K for the
fiscal year ended December 31, 1996, as filed with the SEC, since December 31,
1996, the Company and its subsidiaries have not incurred any material liability,
except in the ordinary course of their businesses consistent with their past
practices, and there has not been any change, or any event involving a
prospective change, in the business, financial condition or results of
operations of the Company or any of its subsidiaries which has had, or is
reasonably likely to have, a Company Material Adverse Effect and the Company and
its subsidiaries have conducted their respective businesses in the ordinary
course consistent with their past practices.
5.8. JOINT PROXY STATEMENT. None of the information supplied
or to be supplied by or on behalf of the Company for inclusion or incorporation
by reference in the registration statement to be filed with the SEC by Acquiror
in connection with the issuance of shares of Acquiror Common Stock in the Merger
(the "Form S-4") will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in the joint
proxy statement, in definitive form, relating to the Company Stockholder Meeting
(as hereinafter defined) and the Acquiror Stockholder Meeting (as hereinafter
defined), or in the related proxy and notice of meeting, or soliciting material
used in connection therewith (referred to herein collectively as the "Joint
Proxy Statement") will, at the dates mailed to stockholders and at the times of
the Company Stockholder Meeting and the Acquiror Stockholder Meeting, 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
therein, in light of the circumstances under which they are made, not
misleading. The Form S-4 and the Joint Proxy Statement (except for information
relating solely to Acquiror and Merger Sub) will comply as to form in all
material respects with the provisions of the Securities Act and the Exchange Act
and the rules and regulations promulgated thereunder.
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5.9. LITIGATION. Except as set forth in Section 5.9 of the
Disclosure Statement, there is no (i) claim, action, suit or proceeding pending
or, to the best knowledge of the Company or any of its subsidiaries, threatened
against or relating to the Company or any of its subsidiaries before any court
or governmental or regulatory authority or body or arbitration tribunal, or (ii)
outstanding judgment, order, writ, injunction or decree, or application, request
or motion therefor, of any court, governmental agency or arbitration tribunal in
a proceeding to which the Company, any subsidiary of the Company or any of their
respective assets was or is a party except, in the case of clauses (i) and (ii)
above, such as would not, individually or in the aggregate, either have a
Company Material Adverse Effect or materially impair the Company's ability to
consummate the Merger.
5.10. TITLE TO AND CONDITION OF PROPERTIES. Except as set
forth in Section 5.10 of the Disclosure Statement, the Company and its
subsidiaries have good title to all of the real property and own outright all of
the personal property (except for leased property or assets) which is reflected
on the Company's and its subsidiaries' December 31, 1996 audited consolidated
balance sheet contained in the Company's Form 10-K for the fiscal year ended
December 31, 1996 filed with the SEC (the "Balance Sheet") except for property
since sold or otherwise disposed of in the ordinary course of business and
consistent with past practice.
5.11. CONTRACTS AND COMMITMENTS. Other than as disclosed in
Section 5.11 of the Disclosure Statement, no existing material contract or
material commitment of the Company or any of its subsidiaries, or as to which
any thereof is a party or their respective assets are bound, contains an
agreement with respect to any change of control that would be triggered by the
Merger. Other than as set forth in Section 5.11 of the Disclosure Statement,
neither this Agreement, the Merger nor the other transactions contemplated
hereby will result in any outstanding loans or borrowings by the Company or any
subsidiary of the Company becoming due, going into default or giving the lenders
or other holders of debt instruments the right to require the Company or any of
its subsidiaries to repay all or a portion of such loans or borrowings; PROVIDED
that it is expressly understood and agreed that the Company is not making any
representations or warranties with respect to the effect of the financial
condition or results of operation of Acquiror and Merger Sub.
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5.12. LABOR MATTERS. Each of the Company and its subsidiaries
is in compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and neither the Company nor any of its subsidiaries is engaged
in any unfair labor practice. There is no labor strike, slowdown or stoppage
pending (or, to the best knowledge of the Company, any labor strike or stoppage
threatened) against or affecting the Company or any of its subsidiaries. No
petition for certification has been filed and is pending before the National
Labor Relations Board with respect to any employees of the Company or any of its
subsidiaries who are not currently organized.
5.13. COMPLIANCE WITH LAW. Except for matters set forth in the
Disclosure Statement, neither the Company nor any of its subsidiaries has
violated or failed to comply with any statute, law, ordinance, regulation, rule
or order of any foreign, federal, state or local government or any other
governmental department or agency, or any judgment, decree or order of any
court, applicable to its business or operations, except where any such violation
or failure to comply would not, individually or in the aggregate, have a Company
Material Adverse Effect; the conduct of the business of the Company and its
subsidiaries is in conformity with all foreign, federal, state and local energy,
public utility and health requirements, and all other foreign, federal, state
and local governmental and regulatory requirements, except where such
nonconformities would not, individually or in the aggregate, have a Company
Material Adverse Effect. The Company and its subsidiaries have all permits,
licenses and franchises from governmental agencies required to conduct their
businesses as now being conducted, except for such permits, licenses and
franchises the absence of which would not, individually or in the aggregate,
have a Company Material Adverse Effect.
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5.14. BOARD RECOMMENDATION. The Board of Directors of the
Company has, by a majority vote at a meeting of such Board duly held on July 16,
1997, approved and adopted this Agreement, the Merger and the other transactions
contemplated hereby, determined that the Merger is fair to the stockholders of
the Company and recommended that the stockholders of the Company approve and
adopt this Agreement, the Merger and the other transactions contemplated hereby.
5.15. PATENTS AND TRADEMARKS. The Company and its subsidiaries
own or have the right to use all patents, patent applications, trademarks,
trademark applications, trade names, inventions, processes, know-how and trade
secrets necessary to the conduct of their respective businesses, except for
those which the failure to own or have the right to use would not, individually
or in the aggregate, have a Company Material Adverse Effect ("Proprietary
Rights").
5.16. TAXES. "Tax" or "Taxes" shall mean all federal, state,
local and foreign taxes, duties, levies, charges and assessments of any nature,
including social security payments and deductibles relating to wages, salaries
and benefits and payments to subcontractors (to the extent required under
applicable Tax law), and also including all interest, penalties and additions
imposed with respect to such amounts. Except as set forth in Section 5.16 of the
Disclosure Statement: (i) the Company and its subsidiaries have prepared and
timely filed or will timely file with the appropriate governmental agencies all
franchise, income and all other material Tax returns and reports required to be
filed for any period ending on or before the Effective Time, taking into account
any extension of time to file granted to or obtained on behalf of the Company
and/or its subsidiaries; (ii) all material Taxes of the Company and its
subsidiaries in respect of the pre-Merger period have been paid in full to the
proper authorities, other than such Taxes as are being contested in good faith
by appropriate proceedings and/or are adequately reserved for in accordance with
generally accepted accounting principles; (iii) all deficiencies resulting from
Tax examinations of federal, state and foreign income, sales and franchise and
all other material Tax returns filed by the Company and its subsidiaries have
either been paid or are being contested in good faith by appropriate
proceedings; (iv) to the best knowledge of the Company, no deficiency has been
asserted or assessed against the Company or any of its subsidiaries, and no
examination of the Company or any of its subsidiaries is pending or threatened
for any material amount of Tax by any taxing authority; (v) no extension of the
period for assessment or collection of any material Tax is currently in effect
and no extension of time within which to file any material Tax return has been
requested, which Tax return has not since been filed; (vi) no material Tax liens
have been filed with respect to any Taxes; (vii) the Company and each of its
subsidiaries will not make any voluntary adjustment by reason of a change in
their accounting methods for any pre-Merger period that would affect the taxable
income or deductions of the Company or any of its subsidiaries for any period
ending after the Effective Date; (viii) the Company and its subsidiaries have
made timely payments of the Taxes required to be deducted and withheld from the
wages paid to their employees; and (ix) the Company and its subsidiaries are not
parties to any tax sharing or tax matters agreement other than the tax sharing
agreement dated March 13, 1996 by and among TFC, RHI and the Company.
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5.17. EMPLOYEE BENEFIT PLANS; ERISA. Except as set forth in
Section 5.17 of the Disclosure Statement:
(a) There are no "employee pension benefit plans" as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), maintained or contributed to by the Company or any of its
subsidiaries, or with respect to which the Company or any of its subsidiaries
contributes or is obligated to make payments thereunder or otherwise may have
any liability ("Pension Benefits Plans").
(b) The Company has furnished Acquiror with a true and
complete schedule of all "welfare benefit plans" (as defined in Section 3(1) of
ERISA), maintained or contributed to by the Company or any of its subsidiaries
or with respect to which the Company or any of its subsidiaries otherwise may
have any liability ("Welfare Plans"), all multiemployer plans as defined in
Section 3(37) of ERISA covering employees employed in the United States to which
the Company or any of its subsidiaries is required to make contributions or
otherwise may have any liability, all stock bonus, stock option, restricted
stock, stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance and vacation or other employee benefit plans, programs
or arrangements that are not Pension Benefit Plans or Welfare Plans maintained
or contributed to by the Company or a subsidiary or with respect to which the
Company or any subsidiary otherwise may have any liability ("Other Plans").
(c) The Company and each of its subsidiaries, and each of the
Pension Benefit Plans, Welfare Plans and Other Plans (collectively, the
"Plans"), are in compliance with the applicable provisions of ERISA, the Code
and other applicable laws except where the failure to comply would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(d) All contributions to, and payments from, the Plans which
are required to have been made in accordance with the Plans and, when
applicable, Section 302 of ERISA or Section 412 of the Code have been timely
made except where the failure to make such contributions or payments on a timely
basis would not, individually or in the aggregate, have a Company Material
Adverse Effect. All contributions required to have been made in accordance with
Section 302 of ERISA or Section 412 of the Code to any employee pension benefit
plan (as defined in Section 3(2) of ERISA) maintained by the Company or any
ERISA Affiliate have been timely made except where the failure to make such
contributions on a timely basis would not individually or in the aggregate have
a Company Material Adverse Effect. For purposes of this Agreement, "ERISA
Affiliate" shall mean any person (as defined in Section 3(9) of ERISA) that is a
member of any group of persons described in Section 414(b), (c), (m) or (o) of
the Code of which the Company or a subsidiary of the Company is a member.
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(e) The Pension Benefit Plans intended to qualify under
Section 401 of the Code are so qualified and have been determined by the
Internal Revenue Service ("IRS") to be so qualified and nothing has occurred
with respect to the operation of such Pension Benefit Plans which would cause
the loss of such qualification or exemption or the imposition of any material
liability, penalty or tax under ERISA or the Code. Such plans have been or will
be, on a timely basis, (i) amended to comply with changes to the Code made by
the Tax Reform Act of 1986, the Unemployment Compensation Amendments of 1992,
the Omnibus Budget Reconciliation Act of 1993, and other applicable legislative,
regulatory or administrative requirements; and (ii) submitted to the Internal
Revenue Service for a determination of their tax qualification, as so amended;
and no such amendment will adversely affect the qualification of such plans.
(f) Each Welfare Plan that is intended to qualify for
exclusion of benefits thereunder from the income of participants or for any
other tax-favored treatment under any provisions of the Code (including, without
limitation, Sections 79, 105, 106, 125 or 129 of the Code) is and has been
maintained in compliance in all material respects with all pertinent provisions
of the Code and Treasury Regulations thereunder.
(g) Except as disclosed in the Company's Form 10-K for the
fiscal year ended December 31, 1996, there are (i) no investigations, audits or
examinations pending, or to the best knowledge of the Company, threatened by any
governmental entity involving any of the Plans, (ii) no termination proceedings
involving the Plans and (iii) no pending or, to the best of the Company's
knowledge, threatened claims (other than routine claims for benefits), suits or
proceedings against any Plan, against the assets of any of the trusts under any
Plan or against any fiduciary of any Plan with respect to the operation of such
plan or asserting any rights or claims to benefits under any Plan or against the
assets of any trust under such plan, which would, in the case of clause (i),
(ii) or (iii) of this paragraph (g), give rise to any liability which would,
individually or in the aggregate, have a Company Material Adverse Effect, nor,
to the best of the Company's knowledge, are there any facts which would give
rise to any liability which would, individually or in the aggregate, have a
Company Material Adverse Effect in the event of any such investigation, audit,
examination, claim, suit or proceeding.
(h) None of the Company, any of its subsidiaries or any
employee of the foregoing, nor any trustee, administrator, other fiduciary or
any other "party in interest" or "disqualified person" with respect to the
Pension Benefit Plans or Welfare Plans, has engaged in a "prohibited
transaction" (within the meaning of Section 4975 of the Code or Section 406 of
ERISA) which presents a material risk of resulting in a tax or penalty on the
Company or any of its subsidiaries under Section 4975 of the Code or Section
502(i) of ERISA which would, individually or in the aggregate, have a Company
Material Adverse Effect.
(i) Neither the Pension Benefit Plans subject to Title IV of
ERISA nor any trust created thereunder has been terminated nor have there been
any "reportable events" (as defined in Section 4043 of ERISA and the regulations
thereunder) with respect to either thereof which would, individually or in the
aggregate, have a Company Material Adverse Effect nor has there been any event
with respect to any Pension Benefit Plan requiring disclosure under Section
4063(a) of ERISA or any event with respect to any Pension Benefit Plan requiring
disclosure under Section 4041(c)(3)(C) of ERISA which would, individually or in
the aggregate, have a Company Material Adverse Effect.
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(j) Neither the Company nor any ERISA Affiliate of the Company
has incurred any currently outstanding liability to the Pension Benefit Guaranty
Corporation (the "PBGC") or to a trustee appointed under Section 4042(b) or (c)
of ERISA other than for the payment of premiums, all of which have been paid
when due. No Pension Benefit Plan has applied for, or received, a waiver of the
minimum funding standards imposed by Section 412 of the Code. The information
supplied to the actuary by the Company or any of its subsidiaries for use in
preparing the most recent actuarial report for Pension Benefit Plans is complete
and accurate in all material respects.
(k) Neither the Company, any of its subsidiaries nor any of
their ERISA Affiliates has any liability (including any contingent liability
under Section 4204 of ERISA) with respect to any multiemployer plan, within the
meaning of Section 3(37) of ERISA (a "Multiemployer Plan"), covering employees
employed in the United States.
(l) With respect to each of the Plans, true, correct and
complete copies of the following documents have been made available to Acquiror:
(i) the current plans and related trust documents, including amendments thereto,
(ii) any current summary plan descriptions, (iii) the most recent Forms 5500 (if
any) filed with respect to each such Plan, (iv) the three recent financial
statements and actuarial reports, if applicable, (v) the most recent IRS
determination letter, if applicable; (vi) if any application for an IRS
determination letter is pending, copies of all such applications for
determination including attachments, exhibits and schedules thereto, (vii) all
material agreements (including settlement agreements or other similar agreements
relating to any Plan); and (viii) all material correspondence between the
Company and any of its subsidiaries and the IRS, PBGC, Department of Labor or
any other governmental entity relating to any of the Plans.
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(m) Neither the Company, any of its subsidiaries, any
organization to which the Company is a successor or parent corporation, within
the meaning of Section 4069(b) of ERISA, nor any of their ERISA Affiliates has
engaged in any transaction described in Section 4069(a) of ERISA, the liability
for which would, individually or in the aggregate, have a Company Material
Adverse Effect.
(n) Except as disclosed in Section 5.17 of the Disclosure
Statement, none of the Welfare Plans maintained by the Company or any of its
subsidiaries are retiree life or retiree health insurance plans which provide
for continuing benefits or coverage for any participant or any beneficiary of a
participant following termination of employment, except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), or except where the full expense of such coverage or benefits is paid
by the participant or the participant's beneficiary. The Company and each of its
subsidiaries which maintain a "group health plan" within the meaning of Section
5000(b)(1) of the Code have complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder except where the failure to comply
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
(o) No liability under any Plan has been funded nor has any
such obligation been satisfied with the purchase of a contract from an insurance
company as to which the Company or any of its subsidiaries has received notice
that such insurance company is in rehabilitation.
(p) The consummation of the transactions contemplated by this
Agreement will not either alone or in connection with an employee's termination
of employment or other event result in an increase in the amount of compensation
or benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable to or in respect of any employee of the Company or any of
its subsidiaries.
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5.18. ENVIRONMENTAL MATTERS. Except as set forth in Section
5.18 of the Disclosure Statement and except for such matters as would not,
individually or in the aggregate, have a Company Material Adverse Effect:
(a) The Company and its subsidiaries have obtained all
Environmental Permits and all licenses and other authorizations and
have made all registrations and given all notifications that are
required under any applicable Environmental Law.
(b) Except as set forth in Section 5.18 of the Disclosure
Statement, there is no Environmental Claim pending against the Company
and its subsidiaries under an Environmental Law.
(c) Except as set forth in Section 5.18 of the Disclosure
Statement, the Company and its subsidiaries are in compliance with all
terms and conditions of their Environmental Permits, and are in
compliance with all applicable Environmental Laws.
(d) Except as set forth in Section 5.18 of the Disclosure
Statement, the Company and its subsidiaries did not generate, treat,
store, transport, discharge, dispose of or release any Hazardous
Materials on or from any property now or previously owned, leased or
used by the Company and its subsidiaries.
(e) For purposes of Section 5.18(a):
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(i) "Environment" shall mean any surface water,
ground water, or drinking water supply, land surface or
subsurface strata, or ambient air and includes, without
limitation, any indoor location;
(ii) "Environmental Claim" means any written notice
or written claim by any person alleging potential liability
(including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental costs, or
harm, injuries or damages to any person, property or natural
resources, and any fines or penalties) arising out of, based
upon, resulting from or relating to (1) the emission,
discharge, disposal or other release or threatened release in
or into the Environment of any Hazardous Materials or (2)
circumstances forming the basis of any violation, or alleged
violation, of any applicable Environmental Law;
(iii) "Environmental Laws" means any federal, state,
and local laws, codes, and regulations as now or previously in
effect relating to pollution, the protection of human health,
the protection of the Environment or the emission, discharge,
disposal or other release or threatened release of Hazardous
Materials in or into the Environment;
(iv) "Environmental Permit" shall mean a permit,
identification number, license or other written authorization
required under any applicable Environmental Law; and
(v) "Hazardous Materials" shall mean all pollutants,
contaminants, or chemical, hazardous or toxic materials,
substances, constituents or wastes, including, without
limitation, asbestos or asbestos-containing materials,
polychlorinated biphenyls and petroleum, oil, or petroleum or
oil derivatives or constituents, including, without
limitation, crude oil or any fraction thereof.
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5.19. DISCLOSURE. All of the facts and circumstances not
required to be disclosed as exceptions under or to any of the foregoing
representations and warranties made by the Company, in this Article V by reason
of any minimum disclosure requirement in any such representation and warranty
would not, in the aggregate, have a Company Material Adverse Effect.
5.20. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth
in Section 5.20 of the Disclosure Statement, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature, whether absolute,
accrued, unmatured, contingent or otherwise, or any unsatisfied judgments or any
leases of personalty or realty or unusual or extraordinary commitments, except
the liabilities recorded on the Company's consolidated balance sheet at December
31, 1996 included in the financial statements referred in Section 5.6 and the
notes thereto, and except for liabilities or obligations incurred in the
ordinary course of business and consistent with past practice since December 31,
1996 that would not individually or in the aggregate have a Company Material
Adverse Effect.
5.21. FINDERS OR BROKERS. Except as set forth in Section 5.21
of the Disclosure Statement, none of the Company, the subsidiaries of the
Company, the Board of Directors or any member of the Board of Directors has
employed any investment banker, broker, finder or intermediary in connection
with the transactions contemplated hereby who might be entitled to a fee or any
commission in connection with the Merger, and Section 5.21 of the Disclosure
Statement sets forth the maximum consideration (present and future) agreed to be
paid to each such party.
5.22. STATE ANTITAKEOVER STATUTES. The Company has granted all
approvals and taken all other steps necessary to exempt the Merger and the other
transactions contemplated hereby from the requirements and provisions of Section
203 of the DGCL and any other applicable state antitakeover statute or
regulation such that none of the provisions of such Section 203 or any other
"business combination," "moratorium," "control share" or other state
antitakeover statute or regulation (x) prohibits or restricts the Company's
ability to perform its obligations under this Agreement or its ability to
consummate the Merger and the other transactions contemplated hereby, (y) would
have the effect of invalidating or voiding this Agreement any provision hereof,
or (z) would subject Acquiror to any material impediment or condition in
connection with the exercise of any of its rights under this Agreement.
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5.23. OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of Deutsche Xxxxxx Xxxxxxxx Inc. dated the date of this Agreement,
to the effect that, as of such date, the Exchange Ratio is fair from a financial
point of view to the holders of shares of Company Common Stock and to holders of
shares of any series of Preferred Stock of the Company.
5.24. INSURANCE. Section 5.24 of the Disclosure Statement
lists all insurance policies in force on the date hereof covering the
businesses, properties and assets of the Company and its subsidiaries, and all
such policies are currently in effect.
5.25. EMPLOYMENT AND LABOR CONTRACTS. Neither the Company nor
any of its subsidiaries is a party to any employment contract or other similar
contract or any other contract for the provision of management or consulting
services to the Company or any of its subsidiaries with any past or present
officer, director, employee or, to the best of the Company's knowledge, any
entity affiliated with any past or present officer, director or employee other
than those set forth in Section 5.25 of the Disclosure Statement and other than
the agreements executed by employees generally, the forms of which have been
delivered to Acquiror.
5.26. PENDING TRANSACTIONS. Section 5.26 of the Disclosure
Statement lists the status of the Pending Transactions.
5.27. INDEMNIFICATION AGREEMENTS. Each of the RHI
Indemnification Agreement, the FHC Indemnification Agreement and the Pledge
Agreement is a valid and binding agreement of the Company and, to the knowledge
of the Company, each of such agreements is enforceable against RHI and TFC, FHC,
and RHI, respectively, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable or fiduciary principles. Each of the RHI Indemnification
Agreement, the FHC Indemnification Agreement and the Pledge Agreement shall
inure to the benefit of the Surviving Corporation and shall be enforceable by
the Surviving Corporation except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable or fiduciary principles. As of the date hereof, the Company
has no knowledge of any liabilities or claims for which the Company is
indemnified under the RHI Indemnification Agreement and FHI Indemnification
Agreement (other than the (i) contingent liabilities related to a dispute with
the United States Government under government contract accounts rules concerning
potential liability arising out of the use of and accounting for approximately
$50.0 million in excess pension funds relating to certain government contracts
in the discontinued aerospace business of FII; (ii) all non-telecommunications
environmental liabilities of FII; and (iii) approximately $50.0 million (at June
30, 1995 of costs associated with post-retirement healthcare benefits of FII) as
such items are described in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996) that would (were the indemnification under the RHI
Indemnification Agreement and FHI Indemnification Agreement not available),
individually or in the aggregate, have a Company Material Adverse Effect.
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5.28. INDEMNIFIED LIABILITIES. Notwithstanding all of the
representations and warranties contained in this Article V (except for Section
5.27), it is hereby agreed that the Company need not disclose as exceptions to
any of the foregoing representations and warranties any losses, liabilities and
damages or actions or claims for which the Company is indemnified under each of
the FHI Indemnification Agreement and the RHI Indemnification Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Each of Acquiror and Merger Sub jointly and severally
represents and warrants to the Company that:
6.1. ORGANIZATION AND QUALIFICATION. Each of Acquiror, Merger
Sub and Acquiror's subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Each of Acquiror, Merger Sub and Acquiror's subsidiaries is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification necessary, except for failures to be
so qualified or in good standing which would not, individually or in the
aggregate, have a material adverse effect on the general affairs, management,
business, operations, condition (financial or otherwise) or prospects of
Acquiror and its subsidiaries taken as a whole (an "Acquiror Material Adverse
Effect"). Except as set forth in Section 6.1 of the Disclosure Statement,
neither Acquiror, Merger Sub nor any of Acquiror's subsidiaries is in violation
of any of the provisions of its Certificate of Incorporation (or other
applicable charter document) or By-Laws. Acquiror has delivered to the Company
accurate and complete copies of the Certificate of Incorporation (or other
applicable charter document) and By-Laws, as currently in effect, of each of
Acquiror and its subsidiaries.
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6.2. CAPITAL STOCK OF SUBSIDIARIES. The only direct or
indirect subsidiaries of Acquiror as of the date hereof are those listed in
Section 6.2 of the Disclosure Statement previously delivered by Acquiror to the
Company. As of the date hereof, Acquiror is directly or indirectly the record
(except for directors' qualifying shares) and beneficial owner (including all
qualifying shares owned by directors of such subsidiaries as reflected in
Section 6.2 of the Disclosure Statement) of all of the outstanding shares of
capital stock of each of its subsidiaries. All of the capital stock of Merger
Sub will at all times be owned directly by Acquiror, free and clear of any
liens, claims or encumbrances.
6.3. CAPITALIZATION. The authorized capital stock of Acquiror
consists of 100,000,000 shares of Acquiror Common Stock, par value $.01 per
share, and 5,000,000 shares of Preferred Stock, par value $.01 per share. As of
July 15, 1997, 64,353,823 shares of Common Stock are issued and outstanding and
no shares of preferred stock are issued and outstanding. All of such issued and
outstanding shares are validly issued, fully paid and nonassessable and free of
preemptive rights. Except as set forth above and except as disclosed in Section
6.3 of the Disclosure Schedule, there are not as of the date hereof any shares
of capital stock of Acquiror issued or outstanding or any subscriptions,
options, warrants, calls, claims, rights (including without limitation any stock
appreciation or similar rights), convertible securities or other agreements or
commitments of any character obligating Acquiror to issue, transfer or sell any
of its securities.
6.4. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Acquiror
and Merger Sub has full corporate power and authority to execute and deliver
this Agreement and to consummate the Merger and other transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
Merger and other transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Acquiror and Merger Sub and no other
corporate proceedings on the part of Acquiror and Merger Sub are necessary to
authorize this Agreement or to consummate the Merger or other transactions
contemplated hereby (other than the approval of Acquiror's stockholders with
respect to the issuance of the Acquiror Common Stock in connection with the
Merger as required by the rules of the National Association of Securities
Dealers, Inc. and the amendment of Acquiror's certificate of incorporation to
increase the number of authorized Shares of Acquiror Common Stock). This
Agreement has been duly and validly executed and delivered by Acquiror and,
assuming the due authorization, execution and delivery hereof by the Company,
constitutes a valid and binding agreement of Acquiror, enforceable against
Acquiror in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable or fiduciary principles.
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6.5. NO VIOLATIONS, ETC.
(a) Assuming that all filings, permits, authorizations,
consents and approvals or waivers thereof have been duly made or obtained as
contemplated by Section 6.5(b) hereof, neither the execution and delivery of
this Agreement by Acquiror and Merger Sub nor the consummation of the Merger or
other transactions contemplated hereby nor compliance by Acquiror and Merger Sub
with any of the provisions hereof will (i) violate, conflict with, or result in
a breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or suspension of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Acquiror and Merger Sub or any of Acquiror's
subsidiaries under, any of the terms, conditions or provisions of (x) their
respective charters or by-laws, (y) except as set forth in Section 6.5 of the
Disclosure Statement, any note, bond, mortgage, indenture or deed of trust, or
(z) any license, lease, agreement or other instrument or obligation, to which
Acquiror, Merger Sub or any such subsidiary is a party or to which they or any
of their respective properties or assets may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in the next paragraph,
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Acquiror, Merger Sub or any of Acquiror's subsidiaries
or any of their respective properties or assets, except, in the case of clauses
(i)(z) and (ii) above, for such violations, conflicts, breaches, defaults,
terminations, suspensions, accelerations, rights of termination or acceleration
or creations of liens, security interests, charges or encumbrances which would
not, individually or in the aggregate, either have an Acquiror Material Adverse
Effect or materially impair Merger Sub's ability to consummate the Merger or
other transactions contemplated hereby.
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(b) No filing or registration with, notification to and no
permit, authorization, consent or approval of any governmental entity is
required by Acquiror, Merger Sub or any of Acquiror's subsidiaries in connection
with the execution and delivery of this Agreement or the consummation by
Acquiror of the Merger or other transactions contemplated hereby, except (i) in
connection with the applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing of the
Certificate of Merger and the certificate of amendment of Acquiror's certificate
of incorporation with the Secretary of State of the State of Delaware, (iii)
filings with the Federal Communications Commission or any applicable state
public utility commissions or applicable state or local regulatory agency or
authority, (iv) filings with NASDAQ, (v) filings with the SEC and state
securities administrators, (vi) the approval of Acquiror's stockholders as
required by NASDAQ rules, and (vii) such other filings, registrations,
notifications, permits, authorizations, consents or approvals the failure of
which to be obtained, made or given would not, individually or in the aggregate,
either have an Acquiror Material Adverse Effect or materially impair Merger
Sub's ability to consummate the Merger or other transactions contemplated
hereby.
(c) As of the date hereof except as set forth in Sections 6.5
of the Disclosure Statement (x) Acquiror, Merger Sub and Acquiror's subsidiaries
are not in violation of or default under any note, bond, mortgage, indenture or
deed of trust, or (y) any license, lease, agreement or other instrument or
obligation to which Acquiror or any such subsidiary is a party or to which they
or any of their respective properties or assets may be subject, except, in the
case of clauses (x) and (y) above, for such violations or defaults which would
not, individually or in the aggregate, either have an Acquiror Material Adverse
Effect or materially impair Merger Sub's ability to consummate the Merger or
other transactions contemplated hereby.
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6.6. COMMISSION FILINGS; FINANCIAL STATEMENTS. Except as set
forth in Section 6.6 of the Disclosure Schedule: (a) Acquiror has filed all
required forms, reports, schedules, statements and other documents required to
be filed by it since December 31, 1994 to the date hereof (as supplemented and
amended since the time of filing, collectively, the "Acquiror SEC Reports") with
the SEC, all of which complied when filed in all material respects with all
applicable requirements of the Securities Act and the Exchange Act; (b) the
audited consolidated financial statements and unaudited consolidated interim
financial statements of Acquiror and its subsidiaries included or incorporated
by reference in such Acquiror SEC Reports were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto) and
present fairly, in all material respects, the financial position and results of
operations and cash flows of the Acquiror and its subsidiaries on a consolidated
basis at the respective dates and for the respective periods indicated (and in
the case of all such financial statements that are interim financial statements,
contain all adjustments so to present fairly); and (c) none of the Acquiror SEC
Reports contained at the time filed any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
6.7. ABSENCE OF CHANGES OR EVENTS. Except as set forth in
Acquiror's Form 10-K for the fiscal year ended December 31, 1996, as filed with
the SEC, or except as set forth in Section 6.6 of the Disclosure Schedule, since
December 31, 1996 to the date hereof, Acquiror and its subsidiaries have not
incurred any material liability, except in the ordinary course of their
businesses consistent with their past practices, and there has not been any
change, or any event involving a prospective change, in the business, financial
condition or results of operations of Acquiror or any of its subsidiaries which
has had, or is reasonably likely to have, an Acquiror Material Adverse Effect
and Acquiror and its subsidiaries have conducted their respective business in
the ordinary course consistent with their past practices.
6.8. JOINT PROXY STATEMENT. None of the information supplied
or to be supplied by or on behalf of Acquiror and Merger Sub for inclusion or
incorporation by reference in the Form S-4 will, at the time the Form S-4
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by or on behalf of Acquiror and Merger Sub for inclusion or
incorporation by reference in the Joint Proxy Statement will, at the dates
mailed to stockholders and at the times of the Company Stockholder Meeting and
the Acquiror Stockholder Meeting, 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 therein, in light of the circumstances
under which they are made, not misleading. The Form S-4 and the Joint Proxy
Statement (except for information relating solely to the Company) will comply as
to form in all material respects with the provisions of the Securities Act and
the Exchange Act and the rules and regulations promulgated thereunder.
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6.9. BOARD RECOMMENDATION. The Board of Directors of Acquiror
has, by a majority vote at a meeting of such Board duly held on July 15, 1997,
approved and adopted this Agreement, the Merger and the other transactions
contemplated hereby (including, without limitation, the issuance of Acquiror
Common Stock as a result of the Merger), and recommended that the holders of
shares of Acquiror Common Stock approve and adopt this Agreement, the Merger,
the issuance of Acquiror Common Stock as a result of the Merger as required by
NASDAQ and the other transactions contemplated hereby.
6.10. DISCLOSURE. All of the facts and circumstances not
required to be disclosed as exceptions under or to any of the foregoing
representations and warranties made by Acquiror by reason of any minimum
disclosure requirement in any such representation and warranty would not, in the
aggregate, have an Acquiror Material Adverse Effect.
6.11. FINDERS OR BROKERS. Except as set forth in Section 6.11
of the Disclosure Statement, none of Acquiror, the subsidiaries of Acquiror, the
Board of Directors of Acquiror or any member of the Board of Directors of
Acquiror has employed any investment banker, broker, finder or intermediary in
connection with the transactions contemplated hereby who might be entitled to a
fee or any commission in connection with of the Merger, and Section 6.12 of the
Disclosure Statement sets forth the maximum consideration (present and future)
agreed to be paid to each such party.
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6.12. OPINION OF FINANCIAL ADVISOR. Acquiror has received the
opinion (the "Fairness Opinion") of Salomon Brothers Inc dated the date of this
Agreement, to the effect that as of such date, the Exchange Ratio is fair from a
financial point of view to Acquiror.
ARTICLE VII
CONDUCT OF BUSINESS OF ACQUIROR AND
THE COMPANY PENDING THE MERGER
7.1. CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER.
Except as contemplated by this Agreement or as expressly agreed to in writing by
Acquiror, during the period from the date of this Agreement to the Effective
Time, each of the Company and its subsidiaries will conduct their respective
operations according to its ordinary course of business consistent with past
practice, and will use all commercially reasonable efforts to preserve intact
its business organization, to keep available the services of its officers and
employees and to maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with it and
will take no action which would materially adversely affect the ability of the
parties to consummate the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, prior to the Effective Time, the Company will not
nor will it permit any of its subsidiaries to, without the prior written consent
of Acquiror, which consent shall not be unreasonably withheld:
(a) amend its certificate of incorporation or by-laws;
(b) authorize for issuance, issue, sell, deliver, grant any
options for, or otherwise agree or commit to issue, sell or deliver any
shares of any class of its capital stock or any securities convertible
into shares of any class of its capital stock, except (i) pursuant to
and in accordance with the terms of currently outstanding convertible
securities, warrants and options, and (ii) shares granted to employees
as matching contributions pursuant to the Company's 401(k) Plan in an
aggregate amount not to exceed 40,000 shares;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend (other than a dividend of
stock of Shared Technologies Cellular, Inc. owned by the Company) or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock or purchase,
redeem or otherwise acquire any shares of its own capital stock or of
any of its subsidiaries, except as otherwise expressly provided in this
Agreement;
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(d) (i) create, incur, assume, maintain or permit to exist any
debt for borrowed money other than under existing lines of credit in
the ordinary course of business consistent with past practice; (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of
any other person except for (a) its wholly owned subsidiaries, and (b)
STF Canada, Inc. in the ordinary course of business and consistent with
past practices; or (iii) make any loans, advances or capital
contributions to, or investments in, any other person except for STF
Canada, Inc. in an aggregate amount not to exceed $1,000,000;
(e) (i) increase in any manner the compensation of (x) any
employee except in the ordinary course of business consistent with past
practice or (y) any of its directors or officers; (ii) pay or agree to
pay any pension, retirement allowance or other employee benefit not
required, or enter into or agree to enter into any agreement or
arrangement with such director or officer or employee, whether past or
present, relating to any such pension, retirement allowance or other
employee benefit, except as required under currently existing
agreements, plans or arrangements; (iii) grant any severance or
termination pay to, or enter into any employment or severance agreement
with, (x) any employee except in the ordinary course of business
consistent with past practice or (y) any of its directors or officers
except for honorarium payments to outside directors of the Company in
an amount not to exceed $300,000 in the aggregate; or (iv) except as
may be required to comply with applicable law, become obligated (other
than pursuant to any new or renewed collective bargaining agreement)
under any new pension plan, welfare plan, multiemployer plan, employee
benefit plan, benefit arrangement, or similar plan or arrangement,
which was not in existence on the date hereof, including any bonus,
incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other
benefit plan, agreement or arrangement, or employment or consulting
agreement with or for the benefit of any person, or amend any of such
plans or any of such agreements in existence on the date hereof;
PROVIDED, HOWEVER, that this clause (iv) shall not prohibit the Company
from renewing any such plan, agreement or arrangement already in
existence on terms no more favorable to the parties to such plan,
agreement or arrangement;
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(f) except as otherwise expressly contemplated by this
Agreement, enter into any other agreements, commitments or contracts,
except agreements, commitments or contracts for the purchase, sale or
lease of goods or services involving payments or receipts by the
Company or its subsidiaries in excess of $50,000, other than (i)
customer agreements, (ii) leases for rental space in an amount not to
exceed $250,000 for any lease or (iii) developer agreements in an
amount not to exceed $250,000 for any agreement; PROVIDED, HOWEVER,
that the Company will not enter into agreements with any local exchange
carriers, competitive local exchange carriers or incumbent local
exchange companies which require a financial commitment by the Company
or any of its subsidiaries or which limit the ability of the Company or
any of its subsidiaries to conduct their respective business;
(g) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in
principle or an agreement with respect to, any plan of liquidation or
dissolution, any acquisition of a material amount of assets or
securities, any sale, transfer, lease, license, pledge, mortgage, or
other disposition or encumbrance of a material amount of assets or
securities or any material change in its capitalization, or any entry
into a material contract or any amendment or modification of any
material contract or any release or relinquishment of any material
contract rights;
(h) authorize or commit to make capital expenditures in excess
of $200,000 for any one order in the Company's service business (other
than purchases by the Company's systems business in the ordinary course
of business consistent with past practice);
(i) make any change in the accounting methods or accounting
practices followed by the Company;
(j) settle any action, suit, claim, investigation or
proceeding (legal, administrative or arbitrative) in excess of $50,000
without the consent of the Acquiror; PROVIDED, HOWEVER, that the
Company may settle the matter set forth in item 2 of Section 5.9 of the
Disclosure Statement as previously discussed with Acquiror;
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(k) make any election under the Code which would have a
Company Material Adverse Effect;
(l) amend, change or alter in any respect any of the RHI
Indemnification Agreement, the FHC Indemnification Agreement or the
Pledge Agreement (except as specifically contemplated by this
Agreement);
(m) take or cause to be taken, whether before or after the
Effective Time, any action that would disqualify the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code; or
(n) agree to do any of the foregoing.
7.2. CONDUCT OF BUSINESS OF ACQUIROR PENDING THE MERGER.
Except as contemplated by this Agreement or as expressly agreed to in writing by
the Company, during the period from the date of this Agreement to the Effective
Time, each of Acquiror and its subsidiaries will use all commercially reasonable
efforts to keep substantially intact its business, properties and business
relationships and will take no action which would materially adversely affect
the ability of the parties to consummate the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective Time,
Acquiror will not nor will it permit any of its subsidiaries to, without the
prior written consent of the Company, which consent shall not be unreasonably
withheld:
(a) amend its certificate of incorporation or by-laws except
as set forth in this Agreement;
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(b) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock or purchase, redeem or otherwise acquire
any shares of its own capital stock or of any of its subsidiaries,
except as otherwise expressly provided in this Agreement;
(c) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in
principle or an agreement with respect to, any plan of liquidation or
dissolution;
(d) take or cause to be taken, whether before or after the
Effective Time, any action that would disqualify the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code; or
(e) agree to do any of the foregoing.
7.3. PERMITTED CONDUCT OF THE COMPANY. Notwithstanding
anything contained in Section 7.1, this Agreement shall not restrict the
Company's ability to (i) consummate the Pending Transactions or take any action
in furtherance thereof or (ii) sell, assign or transfer its interest in Shared
Technologies Cellular, Inc.
ARTICLE VIII
COVENANTS AND AGREEMENTS
8.1. PREPARATION OF THE FORM S-4 AND THE JOINT PROXY
STATEMENT; STOCKHOLDERS MEETINGS.
(a) As soon as practicable following the date of this
Agreement, the Company and Acquiror shall prepare and file with the SEC the
Joint Proxy Statement and Acquiror thereafter shall prepare and file with the
SEC the Form S-4, in which the Joint Proxy Statement will be included as a
prospectus. Each of the Company and Acquiror shall use their respective best
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. The Company will use all best efforts
to cause the Joint Proxy Statement to be mailed to the Company's stockholders,
and Acquiror will use all best efforts to cause the Joint Proxy Statement to be
mailed to Acquiror's stockholders in each case as promptly as practicable after
the Form S-4 is declared effective under the Securities Act. Acquiror shall also
take any action required to be taken under any applicable state securities laws
in connection with the issuance of Acquiror Common Stock in the Merger. No
filing of, or amendment or supplement to, the Form S-4 or the Joint Proxy
Statement will be made by Acquiror without providing the Company the opportunity
to review and comment thereon. Acquiror will advise the Company, promptly after
it receives notice thereof, of the time when the Form S-4 has become effective
or any supplement or amendment has been filed, the issuance of any stop order,
the suspension of the qualification of the Acquiror Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Joint Proxy Statement or the Form S-4 or
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comments thereon and responses thereto or requests by the SEC for additional
information. If at any time prior to the Effective Time any information relating
to the Company or Acquiror, or any of their respective affiliates, officers or
directors, should be discovered by the Company or Acquiror which should be set
forth in an amendment or supplement to any of the Form S-4 or the Joint Proxy
Statement, so that any of such documents would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall promptly notify
the other parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the extent
required by law, disseminated to the stockholders of the Company and Acquiror.
(b) The Company shall, as soon as practicable following the
date of this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Company Stockholder Meeting") for the purpose of
obtaining the approval (the "Company Stockholder Approval") of a majority of the
stockholders of the Company of this Agreement and shall, through its Board of
Directors, recommend to its stockholders the approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby, and shall
use all commercially reasonable efforts to solicit from its stockholders proxies
in favor of approval and adoption of this Agreement; PROVIDED, HOWEVER, that
such recommendation is subject to any action required by the fiduciary duties of
the Board of Directors.
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(c) Acquiror shall, as soon as practicable following the date
of this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Acquiror Stockholder Meeting") for the purpose of obtaining
the approval (the "Acquiror Stockholder Approval") of a majority of the
stockholders of Acquiror of an increase in the authorized common stock of
Acquiror, the issuance of the Acquiror Common Stock in connection with the
Merger (the "Issuance") and shall, through its Board of Directors, recommend to
its stockholders the approval and adoption of this Agreement, the Merger, the
Issuance and the other transactions contemplated hereby, and shall use all
commercially reasonable efforts to solicit from its stockholders proxies in
favor of approval and adoption of this Agreement.
(d) Acquiror and the Company will use best efforts to hold the
Company Stockholder Meeting and the Acquiror Stockholder Meeting on the same
date and as soon as practicable after the date hereof.
8.2. LETTERS OF THE COMPANY'S ACCOUNTANTS.
(a) The Company shall use its best efforts to cause to be
delivered to Acquiror two letters from the Company's independent accountants,
one dated the date of effectiveness of Form S-4 and one dated the Closing Date,
each addressed to Acquiror, in form and substance reasonably satisfactory to
Acquiror and customary in scope and substance for comfort letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4.
(b) The Company shall use its best efforts to cause to be
delivered to Acquiror a letter from the Company's independent accountants
addressed to the Company and Acquiror, dated as of the Closing Date, stating
that the Merger will qualify as a pooling of interests transaction under Opinion
16 of the Accounting Principles Board and applicable SEC rules and regulations.
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8.3. LETTERS OF ACQUIROR'S ACCOUNTANTS.
(a) Acquiror shall use its best efforts to cause to be
delivered to the Company two letters from Acquiror's independent accountants,
one dated the date of effectiveness of Form S-4 and one dated the Closing Date,
each addressed to the Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for comfort letters delivered
by independent public accountants in connection with registration statements
similar to the Form S-4.
(b) Acquiror shall use its best efforts to cause to be
delivered to the Company a letter from Acquiror's independent accountants,
addressed to the Company and Acquiror, dated as of the Closing Date, stating
that the Merger will qualify as a pooling of interests transaction under Opinion
16 of the Accounting Principles Board and applicable SEC rules and regulations.
8.4. ADDITIONAL AGREEMENTS; COOPERATION.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, and to cooperate with each other in
connection with the foregoing, including using its best efforts (i) to obtain
all necessary waivers, consents and approvals from other parties to loan
agreements, material leases and other material contracts that are specified on
Schedule 8.4 to the Disclosure Statement, (ii) to obtain all necessary consents,
approvals and authorizations as are required to be obtained under any federal,
state or foreign law or regulations, (iii) to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, (iv) to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (v) to effect all necessary registrations and
filings, including, but not limited to, filings under the HSR Act and
submissions of information requested by governmental authorities, (vi) provide
all necessary information for the Joint Proxy Statement and the Form S-4 and
(vii) to fulfill all conditions to this Agreement.
(b) Each of the parties hereto agrees to furnish to the other
party hereto such necessary information and reasonable assistance as such other
party may request in connection with its preparation of necessary filings or
submissions to any regulatory or governmental agency or authority, including,
without limitation, any filing necessary under the provisions of the HSR Act or
any other applicable Federal or state statute. At any time upon the written
request of Acquiror, the Company shall advise Acquiror of the number of shares
of Company Common Stock outstanding on such date.
8.5. PUBLICITY. The Company, Acquiror and Merger Sub agree to
consult with each other in issuing any press release and with respect to the
general content of other public statements with respect to the transactions
contemplated hereby, and shall not issue any such press release prior to such
consultation, except as may be required by law.
8.6. NO SOLICITATION. (a) The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly, (i) solicit any Company Takeover
Proposal (as hereinafter defined) or (ii) participate in any discussions or
negotiations regarding any Company Takeover Proposal; PROVIDED, HOWEVER, that
if, at any time prior to Company Stockholders Meeting, the Board of Directors of
the Company determines in good faith, after consultation with outside counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
the Company's stockholders under applicable law, the Company may, in response to
a Company Takeover Proposal that was not solicited, and subject to compliance
with Section 8.6(c), (x) furnish information with respect to the Company to any
person pursuant to a customary confidentiality agreement (as determined by the
Company after consultation with its outside counsel) and (y) participate in
negotiations regarding such Company Takeover Proposal. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any director or executive officer of the Company or
any of its subsidiaries, whether or not such person is purporting to act on
behalf of the Company or any of its subsidiaries or otherwise, shall be deemed
to be a breach of this Section 8.6(a) by the Company. For purposes of this
Agreement, "Company Takeover Proposal" means any inquiry, proposal or offer from
any person relating to any direct or indirect acquisition or purchase of 20% or
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more of the assets of the Company or its subsidiaries or 20% or more of any
class of equity securities of the Company or any of its subsidiaries, any tender
offer or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of the Company
or any of its subsidiaries, any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries, other than the transactions contemplated by
this Agreement, or any other transaction the consummation of which would
reasonably be expected to impede, interfere with, prevent or materially delay
the Merger or which would reasonably be expected to dilute materially the
benefits to Acquiror of the transactions contemplated by this Agreement.
(b) Except as set forth in this Section 8.6, neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Acquiror, the approval or recommendation by such Board of Directors or such
committee of the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Company Takeover Proposal or (iii) cause
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, a "Company Acquisition
Agreement") related to any Company Takeover Proposal. Notwithstanding the
foregoing, in the event that prior to the Company Stockholders Meeting the Board
of Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Board
of Directors of the Company may (subject to this and the following sentences)
(x) withdraw or modify its approval or recommendation of the Merger and this
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Agreement or (y) approve or recommend a Company Superior Proposal (as defined
below) or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause the Company to enter into any Company
Acquisition Agreement with respect to any Company Superior Proposal), but in
each of the cases set forth in this clause (y), no action shall be taken by the
Company pursuant to clause (y) until a time that is after the fifth business day
following Acquiror's receipt of written notice advising Acquiror that the Board
of Directors of the Company has received a Company Superior Proposal, specifying
the material terms and conditions of such Company Superior Proposal and
identifying the person making such Company Superior Proposal, to the extent such
identification of the person making such proposal does not breach the fiduciary
duties of the Board of Directors as advised by outside legal counsel. For
purposes of this Agreement, a "Company Superior Proposal" means any bona fide
proposal made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Company Common Stock and Company
Preferred Stock then outstanding or all or substantially all the assets of the
Company and otherwise on terms that the Board of Directors of the Company
determines in its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation) to be more favorable to the
Company's stockholders than the Merger.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 8.6, the Company shall immediately advise
Acquiror orally and in writing of any request for information or of any Company
Takeover Proposal, the material terms and conditions of such request or Company
Takeover Proposal, and to the extent such disclosure is not a breach of the
fiduciary duties of the Board of Directors as advised by outside legal counsel,
the identity of the person making such request or Company Takeover Proposal.
(d) Nothing contained in this Section 8.6 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act, or from making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Board of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with its fiduciary duties to the
Company's stockholders under applicable law; provided, however, neither the
Company nor its Board of Directors nor any committee thereof shall, except as
permitted by Section 8.6(b), withdraw or modify, or propose publicly to withdraw
or modify, its position with respect to this Agreement or the Merger or approve
or recommend, or propose publicly to approve or recommend, a Company Takeover
Proposal.
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8.7. ACCESS TO INFORMATION.
(a) From the date of this Agreement until the Effective Time,
each of the Company and Acquiror will give the other party and its authorized
representatives (including counsel, environmental and other consultants,
accountants and auditors) full access during normal business hours to all
facilities, personnel and operations and to all books and records of it and its
subsidiaries, will permit the other party to make such inspections as it may
reasonably require and will cause its officers and those of its subsidiaries to
furnish the other party with such financial and operating data and other
information with respect to its business and properties as such party may from
time to time reasonably request.
(b) Each of the parties hereto will hold and will cause its
consultants and advisors to hold in strict confidence on the terms and
conditions set forth in the Confidentiality Agreement dated July 11, 1997
between Acquiror and the Company (the "Confidentiality Agreement") all documents
and information furnished to the other in connection with the transactions
contemplated by this Agreement as if each of the parties hereto and such
consultant or advisor was a party thereto, and this provision shall survive any
termination of this Agreement.
8.8. NOTIFICATION OF CERTAIN MATTERS. The Company or Acquiror,
as the case may be, shall promptly notify the other of (i) its obtaining of
actual knowledge as to the matters set forth in clauses (x) and (y) below, or
(ii) the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be likely to cause (x) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time, or (y) any material
failure of the Company or Acquiror, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; PROVIDED, HOWEVER, that no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
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8.9. RESIGNATION OF DIRECTORS. At or prior to the Effective
Time, the Company shall take all commercially reasonable efforts to deliver to
Acquiror the resignations of such directors of its Subsidiaries as Acquiror
shall specify, effective at the Effective Time.
8.10. INDEMNIFICATION.
(a) As of the date of this Agreement and for a period of six
years following the Effective Time of the Merger, the Surviving Corporation will
indemnify and hold harmless any persons who were directors or officers of the
Company or a subsidiary of the Company prior to the Effective Time of the Merger
(the "Indemnified Persons") to the fullest extent such person could have been
indemnified under the DGCL or under the Certificate of Incorporation or By-Laws
of the Company or the certificate of incorporation or by-laws of any subsidiary
of the Company in effect immediately prior to the Effective Time of the Merger,
with respect to any act or failure to act by any such Indemnified Person prior
to the Effective Time of the Merger.
(b) Any determination required to be made with respect to
whether an Indemnified Person's conduct complies with the standards set forth
under the DGCL or other applicable corporate law shall be made by independent
counsel selected by the Indemnified Persons and reasonably acceptable to the
Surviving Corporation. The Surviving Corporation shall pay such counsel's fees
and expenses (it being agreed that neither the Indemnified Persons, Acquiror nor
the Surviving Corporation shall challenge any such determination by such
independent counsel).
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(c) The provisions of this Section 8.10 are for the benefit of
the Indemnified Persons, any of whom shall have all rights at law and in equity
to enforce the rights hereunder.
(d) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person, the
Surviving Corporation or such successor or assign is not the continuing or
surviving corporation or entity of such consolidation or merger, or (ii)
transfers all or substantially all of its properties and assets to any person,
then, and in each case, proper provision shall be made so that such person or
the continuing or surviving corporation assumes the obligations set forth in
this Section 8.10.
(e) Acquiror shall cause the Surviving Corporation to maintain
in effect for not less than five years from the Effective Time the current
polices of directors' and officers' liability insurance maintained by the
Company and its subsidiaries (provided that Acquiror may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous to the Indemnified Parties in all material respects so long
as no lapse in coverage occurs as a result of such substitution) with respect to
all matters, including the transactions contemplated hereby, occurring prior to,
and including the Effective Time, provided that, in the event that any Claim is
asserted or made within such five year period, such insurance shall be continued
in respect of any such Claim until final disposition of any and all such Claims,
provided, further, that Acquiror shall not be obligated to make annual premium
payments for such insurance to the extent such premiums exceed 200% of the
premiums paid as of the date hereof by the Company for such insurance.
8.11. FEES AND EXPENSES. Whether or not the Merger is
consummated, the Company and Acquiror shall bear their respective expenses
incurred in connection with the Merger, including, without limitation, the
preparation, execution and performance of this Agreement and the transactions
contemplated hereby, and all fees and expenses of investment bankers, finders,
brokers, agents, representatives, counsel and accountants, except that each of
Acquiror and the Company shall bear and pay one-half of the costs and expenses
incurred in connection with (1) the filing, printing and mailing of the Form S-4
and the Joint Proxy Statement (including SEC filing fees) and (2) the filings of
the premerger notification and report forms under the HSR Act (including filing
fees).
8.12. AFFILIATES. As soon as practicable after the date
hereof, the Company shall deliver to Acquiror a letter identifying all persons
who are, at the time this Agreement is submitted for adoption by the
stockholders of the Company, "affiliates" of the Company for purposes of Rule
145 under the Securities Act or for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations. The Company shall use
its reasonable efforts to cause each such person to deliver to Acquiror as of
the Closing Date, a written agreement substantially in the form attached as
Exhibit A hereto. Acquiror shall use its reasonable efforts to cause all persons
who are "affiliates" of Acquiror for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations to comply with the
fourth paragraph of Exhibit A hereto.
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8.13. NASDAQ LISTING. Acquiror shall use its reasonable best
efforts to cause the Acquiror Common Stock to be issued in connection with the
Merger to be approved for listing on NASDAQ, subject to official notice of
issuance, as promptly as practicable after the date hereof, and in any event
prior to the Closing Date.
8.14. STOCKHOLDER LITIGATION. Each of the Company and Acquiror
shall give the other the reasonable opportunity to participate in the defense of
any stockholder litigation against or in the name of the Company or Acquiror, as
applicable, and/or their respective directors relating to the transactions
contemplated by this Agreement.
8.15. TAX TREATMENT. Each of Acquiror and the Company shall
use its respective best efforts (including, without limitation, providing
information and providing for itself and obtaining from its affiliates
reasonable and necessary representations and covenants in connection with the
tax opinions required by Article IX) and Acquiror shall cause the Surviving
Corporation to use its best efforts to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code and shall
treat the Merger as a tax free reorganization on its tax returns.
8.16. POOLING OF INTERESTS. Each of the Company and Acquiror
shall use its respective best efforts to cause the transactions contemplated by
this Agreement to be accounted for as a pooling of interests under Opinion 16 of
the Accounting Principles Board and applicable SEC rules and regulations, and
such accounting treatment to be accepted by each of the Company's and Acquiror's
independent certified public accountants, respectively, and each of the Company
and Acquiror agrees that it shall voluntarily take no action (including, without
limitation, any action by the Company with respect to Shared Technologies
Cellular, Inc.) that would cause such accounting treatment not to be obtained.
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8.17. FAIRNESS OPINION. Each of the Acquiror and the Company
shall use their respective best efforts to cause to be delivered to each of
their respective stockholders a fairness opinion dated the date of the Joint
Proxy Statement.
ARTICLE IX
CONDITIONS TO CLOSING
9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVALS. Each of the Company Stockholder
Approval and the Acquiror Stockholder Approval shall have been
obtained.
(b) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(c) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, decree,
statute, law, ordinance, rule or regulation entered, enacted,
promulgated, enforced or issued by any court or other governmental
entity of competent jurisdiction or other legal restraint or
prohibition (collectively, "Restraints") shall be in effect preventing
the consummation of the Merger.
(d) GOVERNMENTAL ACTION. No action or proceeding shall be
instituted by any governmental authority seeking to prevent
consummation of the Merger or seeking material damages in connection
with the transactions contemplated hereby which continues to be
outstanding.
(e) FORM S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order and no stop order or similar
restraining order shall be threatened or entered by the SEC or any
state securities administration preventing the Merger.
(f) NASDAQ LISTING. The shares of Acquiror Common Stock
issuable to the Company's stockholders as contemplated by this
Agreement shall have been approved for listing on NASDAQ, subject to
official notice of issuance.
(g) POOLING LETTERS. The Company and Acquiror shall have
received a letter from the Acquiror's independent accountants, dated as
of the Closing Date, addressed to the Company and Acquiror, stating in
substance that the Merger will qualify as a pooling of interests
transaction under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations.
(h) BANK CREDIT FACILITY. The lenders under the existing
credit facility of the Company shall have delivered their written
consent to the Merger and the transactions contemplated hereby or a new
credit facility shall have been entered into and the existing facility
terminated.
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9.2. CONDITIONS TO OBLIGATIONS OF ACQUIROR. The obligation of
Acquiror to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth herein shall be true and correct
both when made and at and as of the Closing Date, as if made at and as
of such time (except to the extent expressly made as of an earlier
date, in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) does not have, and is not likely to
have, individually or in the aggregate, a Company Material Adverse
Effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing
Date.
(c) NO MATERIAL ADVERSE CHANGE. At any time after December 31,
1996, there shall not have occurred any material adverse change in the
general affairs, management, business, operations, assets, condition
(financial or otherwise) or prospects of the Company and its
subsidiaries, taken as a whole.
(d) AFFILIATE LETTERS. Acquiror shall have received a written
agreement substantially in the form attached as Exhibit A hereto from
each of the persons specified pursuant to Section 8.12.
(e) GOVERNMENTAL CONSENTS. All necessary consents and
approvals of any federal, state or local governmental authority or any
other third party required for the consummation of the transactions
contemplated by this Agreement shall have been obtained except for such
consents and approvals the failure to obtain which individually or in
the aggregate would not have a material adverse effect on the Surviving
Corporation.
(f) TAX OPINION. Acquiror shall have received an opinion of
Xxxxxx & Xxxxxx, in form and substance reasonably satisfactory to it,
to the effect that the Merger will qualify as a reorganization within
the meaning of Section 368(a) of the Code. In rendering such opinion,
such counsel may receive and rely on representations of fact contained
in certificates provided by Acquiror and the Company.
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9.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to effect the Merger is further subject to satisfaction or waiver
of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Acquiror and Merger Sub set forth herein shall be true
and correct both when made and at and as of the Closing Date, as if
made at and as of such time (except to the extent expressly made as of
an earlier date, in which case as of such date), except where the
failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein) does not have, and is not
likely to have, individually or in the aggregate, an Acquiror Material
Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS OF ACQUIROR AND MERGER SUB.
Acquiror and Merger Sub shall have performed in all material respects
all obligations required to be performed by them under this Agreement
at or prior to the Closing Date.
(c) SENIOR SUBORDINATED NOTES. Acquiror shall have obtained a
standby underwriting commitment to enable it to make an offer to
purchase the 12 1/4% Senior Subordinated Notes due 2006 of Shared
Technologies Xxxxxxxxx Communications Corp. pursuant to the indenture
governing such notes.
(d) TAX OPINION. The Company shall have received an opinion of
Xxxxxx Xxxxxx & Xxxxxxx, in form and substance reasonably satisfactory
to it, to the effect that the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. In rendering such
opinion, such counsel may receive and rely on representations of fact
contained in certificates provided by Acquiror and the Company.
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ARTICLE X
TERMINATION
10.1. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after and approval of this
Agreement by either the Company's stockholders or the Acquiror's stockholders:
(a) by mutual written consent of the Company and Acquiror;
(b) by either the Company or Acquiror;
(i) if the Merger shall not have been consummated by
December 15, 1997 unless the Merger has not occurred by such
time solely by reason of the failure by the SEC to give timely
approval to the Joint Proxy Statement or the Form S-4 or by
reason of the conditions set forth in Section 9.1(b) or 9.2(e)
having not yet been satisfied, in which case January 15, 1997
if consented to by the Company (such consent not to be
unreasonably withheld); PROVIDED, HOWEVER, that the right to
terminate this Agreement pursuant to this Section 10.1(b)(i)
shall not be available to any party whose failure to perform
any of its obligations under this Agreement results in the
failure of the Merger to be consummated by such time;
(ii) if the Acquiror Stockholder Approval shall not
have been obtained at an Acquiror Stockholder Meeting duly
convened therefor or at any adjournment or postponement
thereof;
(iii) if the Company Stockholder Approval shall not
have been obtained at a Company Stockholder Meeting duly
convened therefor or at any adjournment or postponement
thereof; or
(iv) if any Restraint having any of the effects set
forth in Section 9.1(c) shall be in effect and shall have
become final and nonappealable;
(c) by the Company, if Acquiror shall have breached or failed
to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this Agreement;
(d) by the Company if the Closing Date Market Price is less
than $10.00;
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(e) by the Company if the Form S-4 is not declared effective
by November 20, 1997 (it being understood that the Acquiror may request
the Company to consent to the extension of such date to December 20,
1997 (such consent not to be unreasonably withheld));
(f) by Acquiror, if the Company shall have breached or failed
to perform in any material respect any of its representations,
warranties, covenants or other agreements (other than Section 8.6)
contained in this Agreement;
(g) by the Company if the average closing price for shares of
Acquiror Common Stock as reported on the NASDAQ for any period of 20
consecutive trading days after the date hereof is less than $10 per
share;
(h) by Acquiror, if Section 8.6 shall be breached by the
Company or any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative of the Company, in any material respect and the Company
shall have failed promptly to terminate the activity giving rise to
such breach and use best efforts to cure such breach upon notice
thereof from Acquiror, or the Company shall breach Section 8.6 by
failing to promptly notify Acquiror as required thereunder;
(i) by Acquiror if (i) the Board of Directors of the Company
or any committee thereof shall have withdrawn or modified in a manner
adverse to Acquiror its approval or recommendation of the Merger or
this Agreement, or failed to reconfirm its recommendation within
fifteen business days after a written request to do so, or approved or
recommended any Company Takeover Proposal or (ii) the Board of
Directors of the Company or any committee thereof shall have resolved
to take any of the foregoing actions; or
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(j) by the Company if it elects to terminate this Agreement in
accordance with Section 8.6(b); PROVIDED that it has complied with all
provisions thereof, including the notice provisions therein, and that
it complies with applicable requirements relating to the payment
(including the timing of any payment) of the termination fee required
by Section 10.2(b).
10.2. EFFECT OF TERMINATION.
(a) The termination of this Agreement shall become effective
upon delivery to the other party of written notice thereof. In the event of the
termination of this Agreement pursuant to the foregoing provisions of this
Article X, this Agreement shall become void and have no effect, with no
liability on the part of any party (except as provided in paragraph (b) below)
or its stockholders or directors or officers in respect thereof except for
agreements which survive the termination of this Agreement and except for
liability that Acquiror or the Company might have arising from a breach of this
Agreement.
(b) In the event of a termination of this Agreement by the
Company pursuant to Section 10.1(j), then the Company shall within two business
days of such termination pay Acquiror by wire transfer of immediately available
funds to an account specified by Acquiror a termination fee of $15.0 million,
which includes reimbursement for expenses.
ARTICLE XI
MISCELLANEOUS
11.1. 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 11.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
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11.2. CLOSING AND WAIVER.
(a) Unless this Agreement shall have been terminated in
accordance with the provisions of Section 10.1 hereof, a closing (the "Closing"
and the date and time thereof being the "Closing Date") will be held as soon as
practicable after the conditions set forth in Sections 9.1, 9.2 and 9.3 shall
have been satisfied or waived. The Closing will be held at the offices of Xxxxxx
Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx or at such other places as
the parties may agree. Simultaneously therewith, the Certificate of Merger will
be filed.
(b) At any time prior to the Effective Date, any party hereto
may (i) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
duly authorized by and signed on behalf of such party.
11.3. NOTICES.
(a) Any notice or communication to any party hereto shall be
duly given if in writing and delivered in person or mailed by first class mail
(registered or certified, return receipt requested), facsimile or overnight air
courier guaranteeing next day delivery, to such other party's address.
If to Acquiror or Merger Sub:
0000 Xxxxx 000
Xxx Xxxx, Xxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxxxx
and
Xxxxxxxx X. Lawn, IV, Esq.
General Counsel
Tel-Sav Holdings, Inc.
0000 Xxxxx 000
Xxx Xxxx, Xxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
-57-
If to the Company:
000 Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
with a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
and
Xxxxxx X. Xxxxxx, Esq.
The Xxxxxxxxx Corporation
000 Xxxx Xxxxxxx Xxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
(b) All notices and communications will be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, if mailed; when sent, if sent
by facsimile; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
11.4. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.5. INTERPRETATION. The headings of articles and sections
herein are for convenience of reference, do not constitute a part of this
Agreement, and shall not be deemed to limit or affect any of the provisions
hereof. As used in this Agreement, "person" means any individual, corporation,
limited or general partnership, joint venture, association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof; "subsidiary" of any person means (i) a corporation more
than 50% of the outstanding voting stock of which is owned, directly or
indirectly, by such person or by one or more other subsidiaries of such person
or by such person and one or more subsidiaries thereof or (ii) any other person
(other than a corporation) in which such person, or one or more other
subsidiaries of such person or such person and one or more other subsidiaries
thereof, directly or indirectly, have at least a majority ownership and voting
power relating to the policies, management and affairs thereof; and "voting
stock" of any person means capital stock of such person which ordinarily has
voting power for the election of directors (or persons performing similar
functions) of such person, whether at all times or only so long as no senior
class of securities has such voting power by reason of any contingency.
Notwithstanding anything contained herein, in no event will Shared Technologies
Cellular, Inc. be considered a subsidiary of the Company for any purpose.
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11.6. CERTAIN DEFINITIONS.
--------------------
"FII" means Xxxxxxxxx Industries, Inc., the non-surviving
constituent corporation in the merger of March 13, 1996 with Shared
Technologies, Inc.
"FHC Indemnification Agreement" means the Indemnification
Agreement, between Xxxxxxxxx Holding Corp. and the Company dated March 13, 1996.
"RHI Indemnification Agreement" means the Indemnification
Agreement dated March 13, 1996 by and among TFC, RHI and the Company.
"Pending Transactions" means the pending transactions
regarding ICS Communications, Inc. and GE Capital-Rescom, L.L.P.
"Pledge Agreement" means the Pledge Agreement dated as of
March 13, 1996 by RHI in favor of Xxxxxx & Hannah as pledge agent.
"STFI Agreement" means the Agreement dated the date hereof
between the Company and Acquiror.
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11.7. AMENDMENT. This Agreement may be amended by the parties
at any time before or after any required approval of matters presented in
connection with the Merger by each of the stockholders of the Company and
Acquiror; provided, however, that after any such approval, there shall not be
made any amendment that by law requires further approval by such stockholders
without the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
11.8. NO THIRD PARTY BENEFICIARIES. Except for the provisions
of Section 8.10 (which is intended to be for the benefit of the persons referred
to therein, and may be enforced by such persons) nothing in this Agreement shall
confer any rights upon any person or entity which is not a party or permitted
assignee of a party to this Agreement.
11.9. GOVERNING LAW. Except as the laws of the State of
Delaware are by their terms applicable, this Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.
11.10. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
11.11. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be executed by their duly authorized officers all as of the day and
year first above written.
TEL SAVE HOLDINGS, INC.
By:/s/ Xxxxxx Xxxxxxxxx
-----------------------
Name: Xxxxxx Xxxxxxxxx
Title: Executive Vice President
TSHCo, INC.
By:/s/ Xxxxxx Xxxxxxxxx
---------------------
Name: Xxxxxx Xxxxxxxxx
Title: Executive Vice President
SHARED TECHNOLOGIES XXXXXXXXX, INC.
By:/s/ Xxxxxxx Xxxxxxxx
---------------------
Name: Xxxxxxx Xxxxxxxx
Title: Chairman and Chief Executive
Officer
EXHIBIT A
---------
FORM OF COMPANY AFFILIATE LETTER
--------------------------------
[ADDRESS]
Ladies and Gentlemen:
The undersigned, a holder of shares of common stock, par value
$.004 per share ("Company Common Stock"), of Shared Technologies Xxxxxxxxx Inc.,
a Delaware corporation (the "Company"), is entitled to receive in connection
with the merger (the "Merger") between the Company and a direct wholly owned
subsidiary of Tel-Save Holdings, Inc. ("Acquiror") shares of common stock, par
value $.01 per share, ("Acquiror Common Stock") of Acquiror. The undersigned
acknowledges that the undersigned may be deemed an "affiliate" of the Company
within the meaning of Rule 145 ("Rule 145") promulgated under the Securities Act
of 1933, as amended (the "Act"), although nothing contained herein should be
construed as an admission of such fact.
If in fact the undersigned is an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Shares received by the
undersigned pursuant to the Merger may be restricted unless such transaction is
registered under the Act or an exemption from such registration is available.
The undersigned understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of such securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with
Acquiror that the undersigned will not sell, assign or transfer any of the
Acquiror Common Stock received by the undersigned pursuant to the Merger except
(i) pursuant to an effective registration statement under the Act, (ii) in
conformity with the limitations specified by Rules 144 and Rule 145(d) or (iii)
in a transaction that, in the opinion of counsel reasonably satisfactory to
Acquiror or as described in a "no-action" or interpretive letter from the Staff
of the Securities and Exchange Commission (the "SEC"), is not required to be
registered under the Act.
-2-
It is understood that the undersigned has no present intention
to sell the Acquiror Common Stock acquired by the undersigned pursuant to the
Merger. The undersigned agrees that the undersigned will not sell, transfer or
otherwise dispose of any Company Common Stock for 30 days prior to the effective
date of the Merger or any Acquiror Common Stock received by the undersigned in
the Merger until after such time as results covering at least 30 days of
combined operations of the Company and Acquiror have been published by Acquiror,
in the form of a quarterly earnings report, a report to the SEC on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes such
combined results of operations.
In the event of a sale or other disposition by the undersigned
of Acquiror Common Stock pursuant to Rule 145(d)(1), the undersigned will supply
Acquiror with evidence of compliance with such Rule, in the form of a letter in
the form of Annex I hereto. The undersigned understands that Acquiror may
instruct its transfer agent to withhold the transfer of any Acquiror Common
Stock disposed of by the undersigned, but that upon receipt of such evidence of
compliance the transfer agent shall effectuate the transfer of the Shares sold
as indicated in the letter.
The undersigned acknowledges and agrees that appropriate
legends will be placed on certificates representing the Acquiror Common Stock
received by the undersigned pursuant to the Merger or held by a transferee
thereof, which legends will be removed by delivery of substitute certificates
upon receipt of an opinion in form and substance reasonably satisfactory to
Acquiror from independent counsel reasonably satisfactory to Acquiror to the
effect that such legends are no longer required for the purposes of the Act or
the fourth paragraph of this letter.
The undersigned acknowledges that (i) the undersigned has
carefully read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other disposition
of the Acquiror Common Stock and (ii) the receipt by Acquiror of this letter is
an inducement and a condition to Acquiror's obligations to consummate the
Merger.
Very truly yours,
ANNEX I
TO EXHIBIT A
------------
[Date]
[Name]
On _____________ the undersigned sold _____________ shares of
common stock, par value $.01 per share, of Tel-Save Holdings, Inc. ("Acquiror").
The shares were received by the undersigned in connection with the merger of
Shared Technologies Xxxxxxxxx Inc. with and into a direct wholly owned
subsidiary of Acquiror.
Based upon the most recent report or statement filed by
Acquiror with the Securities and Exchange Commission, the shares sold by the
undersigned were within the prescribed limitations set forth in paragraph (e) of
Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the shares were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the shares, and that the undersigned has not made
any payment in connection with the offer or sale of the shares to any person
other than to the broker who executed the order in respect of such sale.
Very truly yours,
