Exhibit 2.11A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 22, 1997, by and
among International Wireless Communications Holdings, Inc., a Delaware
corporation ("Parent") and Radio Movil Digital Americas, Inc., a Delaware
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent and the Company
have approved, and deemed it advisable and in the best interests of their
respective stockholders to consummate, the merger of a direct or indirect
wholly owned subsidiary of Parent ("Sub") with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein;
WHEREAS, Parent presently intends promptly to file a registration
statement on Form S-1 relating to an initial public offering (the "IPO") of
Parent Common Shares (as defined in Section 4.02);
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as
follows:
ARTICLE I
THE MERGER
Section 1.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time (as defined in Section 1.03). Following the
Effective Time, the separate corporate existence of Sub shall cease and the
Company shall be the surviving corporation (the "Surviving Corporation").
Section 1.02. CLOSING. Upon the terms and subject to the
conditions of this Agreement, the closing of the Merger (the "Closing") will
take place at 10:00 a.m., New York time, on December 31, 1997 (PROVIDED,
HOWEVER, that if Parent has not obtained $30 million in funding specifically
allocated for purposes of consummating the transactions contemplated hereby
(the "Funding"), the amount set forth in Section 5.13 hereof shall be
increased by $100,000, and January 15, 1998 shall be substituted for December
31, 1997), unless another time or date is agreed to by the parties hereto, at
the offices of Xxxxx Xxxxxxxxxx, 1301 Avenue of the Americas, New York, New
York. The date the Closing occurs is referred to as the "Closing Date." At
the Closing, Parent shall,
and the Company shall cause the Representative (as defined below) to execute
the Escrow Agreement (as defined below).
Section 1.03. EFFECTIVE TIME. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date, the parties shall cause a
Certificate of Merger to be duly filed with the Secretary of State of
Delaware as provided in the DGCL. The Merger shall become effective upon such
filing, or such time as is agreed upon by the parties and specified in the
Certificate of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
Section 1.04. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in the DGCL.
Section 1.05. CHARTER AND BY-LAWS. The Certificate of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the initial Certificate of Incorporation of the Surviving
Corporation. The by-laws of the Company, as in effect immediately prior to
the Effective Time, shall be the initial by-laws of the Surviving
Corporation. Such Certificate and by-laws shall comply with the requirements
of Section 5.14 hereof.
Section 1.06. DIRECTORS AND OFFICERS. The directors of Sub at the
Effective Time shall be the initial directors of the Surviving Corporation.
The officers of Sub at the Effective Time shall be the initial officers of
the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.01. EFFECT ON STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of Sub, the Company or the
holders of any securities of the Company or Sub:
(a) CANCELLATION OF COMPANY-OWNED STOCK AND PARENT-OWNED STOCK.
Each share of the capital stock of the Company that is owned by the Company
or by Parent or any subsidiary of the Company or Parent shall be canceled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) CONVERSION OF COMMON STOCK OF SUB. Each issued and outstanding
share of common stock of Sub shall be converted into one validly issued,
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(c) CONVERSION OF COMPANY STOCK. Subject to the provisions of this
Section 2.01(c), the issued and outstanding shares of (x) common stock, par
value $.005 per share (the "Company Common Shares"), of the Company and (y)
preferred stock, par value $.01 per share (the "Company Preferred Shares"
and, together with the Company Common Shares, the "Company Shares"), of the
Company (other than Company Shares to be cancelled in accordance with Section
2.01(a) and Dissenting Shares, as defined below, if any) shall be converted
into the right to receive Series I Preferred Stock of
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Parent (the "Parent Preferred Shares") having the rights and preferences set
forth on EXHIBIT A hereto (the "Merger Consideration"), in the amounts and
allocated as set forth in EXHIBIT B.
Notwithstanding anything in this Agreement to the contrary (but
subject to the price adjustments explicitly set forth in this Article II),
Parent will not be obligated to issue more than the Conversion Number (as
defined below) of Parent Preferred Shares in respect of the capital stock of
the Company or any options, warrants, rights, convertible securities or other
instruments or obligations entitling the holders thereof to acquire capital
stock of the Company (the "Company Options"), provided that, if there are
Dissenting Shares, the amounts set forth in this paragraph shall be adjusted
by decreasing the Conversion Number by the number of Parent Preferred Shares
to which such Dissenting Shares would otherwise be entitled.
As used herein, "Conversion Number" shall mean $94,534,000 (the
"Stock Value") divided by (i) the price per share of Parent Common Shares
sold to the public in the IPO, if the IPO has closed by the Effective Time,
(ii) if the IPO has not closed by the Effective Time, the mid-point of the
pricing range, or the price, as the case may be, for the Parent Common Shares
indicated in Parent's latest registration statement (including the latest
amendment) relating to the IPO, as filed with the Securities and Exchange
Commission, if such filing includes a price or pricing range, or (iii) if no
filing range or price has been included in such registration statement or no
such registration statement has been filed by Parent prior to the Effective
Time, a price equal to $13.728. As used herein, the term "Offer Price" shall
mean the price specified in clause (i), (ii) or (iii) of the preceding
sentence, as the case may be, subject to adjustment as described below in
this Article II.
Parent shall have the right, in its sole discretion, to substitute
cash in lieu of some or all of the Parent Preferred Shares to be issued at
the Closing (valuing Parent Preferred Shares at the Offer Price) if (i) such
substitution would not prevent the Merger from qualifying as a reorganization
under the provisions of Section 368(a) of the Code or (ii) such amount of
cash is at least $40,000,000 and no more than $50,000,000. Parent may
exercise such rights by issuing a notice to the Company prior to the
Effective Time. Any cash substituted as described in this paragraph shall be
pro rata among the Stockholders (as defined below) and consistent with the
allocations set forth in EXHIBIT B. The parties shall execute such documents
as may be necessary to reflect the changes contemplated by this paragraph.
Any cash substituted shall also be considered "Merger Consideration" and
"Stock Value" for purposes of this Agreement.
Notwithstanding anything in this Agreement to the contrary, if the
IPO has closed prior the Effective Time, Parent Common Shares shall be issued
in the Merger in lieu of Parent Preferred Shares and all references herein to
Parent Preferred Shares shall be deemed references to Parent Common Shares,
unless the context indicates otherwise. In the event of any split,
combination or reclassification of any Parent Common Shares, extraordinary
dividend in respect of Parent Common Shares or any issuance or the
authorization of any issuance of any other securities in exchange or in
substitution for Parent Common Shares at any time during the period from the
date hereof to the
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Effective Time which is not otherwise reflected in the provisions hereof,
including EXHIBIT A hereto, the Merger Consideration shall, subject to
Section 5.16 below, be appropriately adjusted.
As of the Effective Time, all of the Company Shares shall no longer
be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Company
Shares (the "Certificates") shall cease to have any rights with respect
thereto, except the right to receive (i) certificates representing the number
of whole Parent Preferred Shares into which such shares have been converted
("Parent Certificates"), (ii) certain dividends and other distributions in
accordance with Section 2.02(c) and (iii) cash in lieu of fractional Parent
Preferred Shares in accordance with Section 2.02(e), in each case without
interest.
Section 2.02. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As of
the Effective Time, Parent shall enter into an agreement with such bank or
trust company as may be designated by Parent and as shall be reasonably
satisfactory to the Company (the "Exchange Agent"), which shall provide that
Parent shall deposit with the Exchange Agent as of the Effective Time, for
the benefit of the holders of Company Shares, for exchange in accordance with
this Article II, through the Exchange Agent, Parent Certificates representing
the number of whole Parent Preferred Shares issuable pursuant to Section
2.01(c) (such Parent Preferred Shares, together with any dividends or
distributions with respect thereto with a record date after the Effective
Time and any cash payable in lieu of any fractional Parent Preferred Shares
being hereinafter referred to as the "Exchange Fund").
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of
a Certificate whose shares were converted into the Merger Consideration
pursuant to Section 2.01, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify, which form shall include, among other things,
the provisions set forth in Exhibit 5.4 hereof) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor
a Parent Certificate representing that number of whole Parent Preferred
Shares which such holder has the right to receive pursuant to the provisions
of this Article II, certain dividends or other distributions in accordance
with Section 2.02(c) and cash in lieu of any fractional share in accordance
with Section 2.02(e), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of the Company Shares which
is not registered in the transfer records of the Company, a Parent
Certificate representing the proper number of Parent Preferred Shares may be
issued to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the
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person requesting such issuance shall pay any transfer or other nonincome
taxes required by reason of the issuance of Parent Preferred Shares to a
person other than the registered holder of such Certificate or establish to
the satisfactio of Parent that such tax has been paid or is not applicable.
No interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions with respect to Parent Preferred Shares with a record
date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to Parent Preferred Shares represented
thereby, and no cash payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 2.02(e), and all such dividends, other
distributions and cash in lieu of fractional Parent Preferred Shares shall be
paid by Parent to the Exchange Agent and shall be included in the Exchange
Fund, in each case until the surrender of such Certificate in accordance with
this Article II. Subject to the effect of applicable escheat or similar laws,
following surrender of any such Certificate there shall be paid to the holder
of Parent Certificate representing whole Parent Preferred Shares issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole Parent Preferred
Shares and the amount of any cash payable in lieu of a fractional share of
Parent Preferred Shares to which such holder is entitled pursuant to Section
2.02(e) and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable
with respect to such whole Parent Preferred Shares. Parent shall make
available to the Exchange Agent cash for these purposes.
(d) NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY SHARES. All Parent
Preferred Shares issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any cash paid
pursuant to this Article II) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the Company Shares
theretofore represented by such Certificates, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been authorized or made by the Company on such Company Shares which remain
unpaid at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
Company Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by law.
(e) NO FRACTIONAL SHARES. No Parent Certificates or scrip
representing fractional Parent Preferred Shares shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution of Parent
shall relate to such fractional share interests and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Parent. In lieu thereof, each holder who would have
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otherwise received a fractional share shall be entitled to an amount of cash
equal to such fraction multiplied by the Offer Price.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of their claim
for Merger Consideration, any cash in lieu of fractional Parent Preferred
Shares and any dividends or distributions with respect to Parent Preferred
Shares.
(g) NO LIABILITY. None of Parent, the Company, Sub or the Exchange
Agent shall be liable to any person in respect of any Parent Preferred Shares
(or dividends or distributions with respect thereto) or cash from the
Exchange Fund in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to seven years after the Effective Time
(or immediately prior to such earlier date on which any Merger Consideration,
any cash payable to the holder of such Certificate pursuant to this Article
II or any dividends or distributions payable to the holder of such
Certificate would otherwise escheat to or become the property of any
governmental body or authority) any such Merger Consideration or cash,
dividends or distributions in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest
any cash included in the Exchange Fund as directed by Parent on a daily
basis; PROVIDED, that such investment shall be held in the form of
obligations of the United States government or any agency or instrumentality
thereof, investment-grade obligations of United States corporations or
obligations of banks or trust companies whose capital and surplus exceeds
$100,000,000, in each case having remaining maturities of no greater than
three months. Any interest and other income resulting from such investments
shall be paid to Parent.
(i) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond
in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration and, if applicable, any
cash in lieu of fractional shares, and unpaid dividends and distributions on
Parent Preferred Shares deliverable in respect thereof, pursuant to this
Agreement.
(j) RESTRICTIONS ON SHARES. Notwithstanding anything in this
Agreement to the contrary, all Parent Preferred Shares or Parent Common
Shares, as the case may be, that are issued pursuant to this Agreement shall
be subject to the provisions
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of Exhibit 5.4 hereof, including the restrictions set forth in paragraphs 1,
3, 8, 9 and 10 of Exhibit 5.4. If Parent shall, in good faith and after
consultation with outside counsel, believe that the issuance of Parent Shares
to any holder of Company Shares or Company Options would not be in compliance
with applicable law, including federal or state securities laws, due to such
holder not meeting the criteria set forth under Rule 506(b)(2)(ii) under the
Securities Act of 1933 or due to such holder not being an accredited investor
(as defined in Rule 501 under the Securities Act) and the condition set forth
in Rule 506(b)(2)(i) not being satisfied, then Parent shall have the right to
take such steps as it, in good faith and after consultation with outside
counsel, believes is necessary to comply with such Rules, including by
issuing alternative consideration to such holder, so long as such steps would
not prevent the Merger from constituting a reorganization within the meaning
of Section 368(a) of the Code.
Section 2.03. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, Company Shares that are outstanding immediately
prior to the Effective Time that are held by stockholders who comply with all
of the relevant provisions of Section 262 of the DGCL (the "Dissenting
Shares") shall not be converted into the Merger Consideration unless and
until such holders shall have failed to perfect or shall have effectively
withdrawn or lost their rights to appraisal under the DGCL, in which case
such holders Dissenting Shares shall thereupon be converted into the Merger
Consideration in accordance with this Article II, without any interest
thereon.
Section 2.04. PRE CLOSING ADJUSTMENT. (a) Not later than 14 days
prior to the Closing (the "Estimation Date"), the Company shall deliver to
Parent a schedule (the "Estimated Schedule"), containing the Company's
reasonable, good faith estimates of the amounts set forth below. If Parent
shall not dispute any item on the Estimated Schedule within 5 days of
delivery, the Estimated Schedule shall be final and binding for purposes of
this Section 2.04. If Parent shall dispute any item on the Estimated
Schedule, Parent and the Company will endeavor to resolve such dispute
promptly. If Parent and the Company do not resolve such dispute within 10
days of the delivery of the Estimated Schedule to Parent, and the aggregate
amount of the matters with respect to which Parent and the Company are in
dispute exceeds $1,000,000 (that is, that difference between Parent's and the
Company's position exceeds $1,000,000), the matters in dispute shall
thereupon be submitted to KPMG Peat Marwick LLP (the "Reviewing
Accountants"), and such accounting firm shall be instructed to resolve the
matters in dispute as promptly as practicable. In the event that the
aggregate amount of the matters with respect to which Parent and the Company
are in dispute is $1,000,000 or less and, as a result, such dispute is not
submitted to the Reviewing Accountant, such amount of $1,000,000 or less
shall not affect the Estimated Schedule delivered by the Company to Parent,
but shall be resolved in accordance with Section 2.05 upon the determination
of the Balance Sheet Schedule (as defined below). The decision of such
accounting firm shall be final and binding for purposes of the Estimated
Schedule. Parent, on the one hand, and the Company, on the other hand, shall
each pay one-half of the fees and expenses of such accounting firm (the
Company's portion of such fee being considered an "Expense," as defined in
Section 2.05(a) below) and shall cooperate, including by furnishing any
information reasonably requested, with each other and such accounting firm in
the resolution of any disputes. The Merger shall not be consummated until
such dispute is
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resolved. The Stock Value shall be adjusted as follows based on the
Estimated Schedule (as finally determined):
(1) decreased by the amount of any liability or obligation of the
Company or any of its subsidiaries for borrowed money which would be included
in a balance sheet of the Company and its subsidiaries on a consolidated
basis as of the end of the month preceding the Estimation Date as long-term
liabilities, including the current maturities of long-term debt, long-term
vendor debt and subordinated convertible debentures ("Debt"), estimated as of
the end of the month preceding the Estimation Date,
(2) increased by the excess, or decreased by the deficit, of Net
Quick Assets, estimated as of the end of the month preceding the Estimation
Date, compared to $2,701,000 (for purposes hereof "Net Quick Assets" shall
mean the net of (x) cash and cash equivalents, restricted cash, short-term
investments, accounts receivable net of allowance, inventories, prepaid
expenses and other current assets, and expenditures specifically approved by
Parent in writing less (y) short-term vendor debt, accounts payable, accrued
liabilities and customer deposits, in each case of the Company and its
subsidiaries on a consolidated basis),
(3) decreased by the amount of Excess Expenses (as defined below),
estimated as of Closing, and
(4) increased by the difference between the amount paid by Parent
pursuant to Section 5.13 hereof and $4.7 million (or $4.8 million if Parent
has not obtained the Funding on or prior to December 31, 1997), to the extent
that Parent is required to pay less than $4.7 million (or $4.8 million if
Parent has not obtained the Funding on or prior to December 31, 1997)
pursuant to Section 5.13 hereof.
In addition to the foregoing adjustments, the Stock Value shall be
decreased by the greater of (i) any decrease from October 31, 1997 in the
exchange rate (based on the bid price as quoted in The Wall Street Journal on
the date immediately preceding the date of determination) between the
Brazilian Real and the U.S. Dollar in excess of 10% at the rate of $851,318
per 1% decrease that is in excess of 10% (amounts not equaling whole
percentage points shall be prorated) and (ii) (A) if the average of the
closing prices of the Bovespa Stock Index (as reported in Bloomberg) on the
five consecutive trading days immediately preceding December 31, 1997 (the
"Average Closing Price") is 9,000 or less, $10 million, (B) if the Average
Closing Price is between 9,000 and 10,000, $10,000 for every point by which
the Average Closing Price is less than 10,000 and greater than 9,000 or (C)
if the Average Closing Price is 10,000 or greater, then $0 (the "Bovespa/Real
Adjustment").
If the Bovespa/Real Adjustment is less than $10 million, the
difference between $10 million and the Bovespa/Real Adjustment (the
"Bovespa/Real Escrow") shall be placed in escrow and paid to the Stockholders
10 days following the Closing, provided that, to the extent that the Escrow
Fund would be less than $10 million, the Bovespa/Real Escrow will be reduced
(but not below $0) until the Escrow Fund would be $10 million. The Stock
Value paid at Closing shall be decreased by the amount of the
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Bovespa/Real Escrow.
Notwithstanding anything in this Agreement to the contrary, the
Stock Value paid at Closing (not including any amounts delivered into escrow
as provided by Sections 2.04 and 2.06) shall not be less than $50 million
(the "$50 Million Requirement").
Section 2.05. POST CLOSING ADJUSTMENT. (a) Parent shall cause to
be prepared a schedule (the "Balance Sheet Schedule") of the following items
as of the Effective Time. The Balance Sheet Schedule shall be computed using
a balance sheet that has been prepared in accordance with U.S. generally
accepted accounting principles ("GAAP"), applied on a basis consistent with
the Company's June 30, 1997 audited balance sheet.
(1) Debt,
(2) Net Quick Assets,
(3) any expenses of the Company or its subsidiaries in connection
with this Agreement, including the negotiation of this Agreement, the
consummation of the transactions contemplated hereby and any monies owed to
the Representative (as defined below), which were unaccrued and unpaid by the
Company or any subsidiary of the Company, as of the Effective Time (it being
understood that no payables for expenses incurred by the Company and its
subsidiaries in connection with this Agreement and the transactions
contemplated hereby shall be accrued on any balance sheet of the Company or
any of its subsidiaries),
(4) any severance (or similar) obligations of the Company or any of
its subsidiaries unaccrued and unpaid as of the Effective Time owed to any
officer, director or employee of the Company or its subsidiaries as a result
of the consummation of the transactions contemplated by this Agreement,
including as contemplated by Schedule 3.19(a) hereof, plus any amounts paid
in connection with the execution or effectiveness of the Non-Competition
Agreement (such amount, plus the amount in (3), the "Expenses," and the
excess of Expenses over $4.7 million (or $4.8 million if Parent has not
obtained the Funding on or prior to December 31, 1997), the "Excess
Expenses").
(b) Within 90 days of the Closing, Parent shall submit the Balance
Sheet Schedule to Xxxxxx Xxxxxxxx (or if he declines or is unable to do so,
such person as designated by the Board of Directors of the Company, or,
subsequent to the Merger, a majority of the persons who comprise such Board
immediately prior to the Merger), as representative (the "Representative") of
the stockholders of the Company (the "Stockholders"). If the Representative
shall not dispute any item on the Balance Sheet Schedule within 15 days of
delivery, the Balance Sheet Schedule shall be final and binding. If within
such 15-day period, the Representative shall dispute any item on the Balance
Sheet Schedule, Parent and the Representative will endeavor to resolve such
dispute. If Parent and the Representative do not resolve any such dispute
within 15 days of the commencement of such dispute, the matter in dispute
shall thereupon be submitted
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to the Reviewing Accountants, and such accounting firm shall be instructed to
resolve the matters in dispute as promptly as practicable.
(c) Within 95 days of the Closing, Parent shall submit to the
Representative a schedule (the "Active Subscriber Schedule") showing the
number of Active Subscribers (as defined in Section 3.15 hereof) as of
Closing. If the Representative shall not dispute any item on the such
schedule within 15 days of delivery, such schedule shall be final and
binding. If within such 15-day period, the Representative shall dispute any
item on such schedule, Parent and the Representative will endeavor to resolve
such dispute. If Parent and the Representative do not resolve any such
dispute within 15 days of the commencement of such dispute, the matter in
dispute shall thereupon be submitted to the Reviewing Accountants, and such
accounting firm shall be instructed to resolve the matters in dispute as
promptly as practicable. The "Active Subscriber Adjustment" shall equal $600
multiplied by the decrease in the number of Active Subscribers from June 30,
1997 through the Effective Time if and solely to the extent such decrease is
greater than an average of 1.25% per month compared to the number of Active
Subscribers as of June 30, 1997.
(d) Parent shall cause to be prepared one or more "Channel
Schedules." Each Channel Schedule shall (A) set forth a list of (x) Channels
(as defined in Section 3.15(a) hereof) that are set forth on EXHIBIT D which
are not Good and Deliverable on or prior to the one-year anniversary of the
Effective Time (the "First Anniversary") as a result of acts or omissions by
the Company or any of its subsidiaries on or prior to the Effective Time (and
not resulting from acts or omissions by Parent or any other entity following
the Effective Time) and (y) any Channels that are not set forth on EXHIBIT D
which were not Good and Deliverable as of the Effective Time and the
diminution in value (the "Value") resulting from such Channel not being Good
and Deliverable and (B) specify in reasonable detail the basis for Parent's
determination that the Channels are not Good and Deliverable, why (in the
case of clause (A)(x) above) such failure to be Good and Deliverable is the
result of acts or omissions by the Company or any of its subsidiaries on or
prior to the Closing Date and the basis (in the case of clause (A)(y) above)
of the determination of the diminution in value with respect to any such
Channel; PROVIDED, HOWEVER, that nothing in this clause (B) shall act as an
estoppel on Parent's claim that any Channel is not Good and Deliverable or
the reasons therefor or prevent Parent from amending the Channel Schedule.
The term "Good and Deliverable" means that the Channel is capable of being
used in the manner intended in the original grant relating to the License
applicable to such Channel. At any time prior to 15 days prior to the First
Anniversary, Parent may submit a Channel Schedule to the Representative. If
the Representative shall not dispute any item on any Channel Schedule within
15 days of delivery, such Channel Schedules shall be final and binding
(subject to Parent's right to submit a revised Channel Schedule prior to the
First Anniversary; PROVIDED, that Parent may not revise the Value ascribed to
a particular Channel set forth on a Channel Schedule once such Channel
Schedule has become final and binding). If within such 15-day period, the
Representative shall dispute any item on any Channel Schedule, Parent and the
Representative will endeavor to resolve such dispute. If Parent and the
Representative do not resolve any such dispute within 15 days of the
commencement of such dispute, the matter in dispute shall thereupon be
submitted to the
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Reviewing Accountants, and such accounting firm shall be instructed to
resolve the matters in dispute as promptly as practicable.
(e) The decisions of the Reviewing Accountants shall be final and
binding. Parent, on the one hand, and the Representative, on behalf of the
Stockholders, on the other hand, shall each pay one-half of the fees and
expenses of such accounting firm and shall cooperate, including by furnishing
any information reasonably requested, with each other and such accounting
firm in the resolution of any disputes.
Section 2.06. ESCROW FUND. (a) Parent Preferred Shares having a
value of the lesser of (i) $10 million and (ii) the Stock Value minus $50
million (such Parent Preferred Shares being the "Escrow Fund") shall be
withheld from the amounts issued to the Company's stockholders and holders of
Company Options as of the Effective Time, in the amounts and allocated as set
forth on EXHIBIT B, and shall instead be delivered to an escrow agent
pursuant to an escrow agreement substantially in the form of EXHIBIT C hereto
(the "Escrow Agreement").
(b) Notwithstanding Section 2.06(a), Parent Preferred Shares
having a value equal to any amounts in respect of the Bovespa/Real Adjustment
and the estimated Balance Sheet Adjustment which would have been paid to
Parent but for the $50 Million Requirement will be delivered to Parent rather
than being placed in Escrow as part of the Escrow Fund.
(c) If Net Quick Assets on the Balance Sheet Schedule minus Net
Quick Assets on the Estimated Schedule is a negative number, Parent Preferred
Shares having an absolute value of such amount shall be released from the
Escrow Fund to Parent. If Net Quick Assets on the Balance Sheet Schedule
minus Net Quick Assets on the Estimated Schedule is a positive number, Parent
Preferred Shares having an absolute value of such amount shall be issued by
Parent and subject to the last sentence of the clause (c), shall be delivered
to the Representative. Such releases shall occur promptly following the final
determination of the Balance Sheet Schedule. Notwithstanding the foregoing,
shares of Parent Preferred Shares shall be delivered to the Representative
pursuant to this subparagraph only to the extent that Parent Preferred Shares
having a value of $10 million remain in the Escrow Fund.
(d) If Debt plus Excess Expenses on the Balance Sheet Schedule
minus Debt plus Excess Expenses on the Estimated Schedule is a positive
number, Parent Preferred Shares having a value of such amount shall be
released from the Escrow Fund to Parent. If Debt plus Excess Expenses on the
Balance Sheet Schedule minus Debt plus Excess Expenses on the Estimated
Schedule is a negative number, Parent Preferred Shares having an absolute
value of such amount shall be issued by Parent and, subject to the last
sentence of this clause (d), shall be delivered to the Representative. Such
release shall occur promptly following the final determination of the Balance
Sheet Schedule. Notwithstanding the foregoing, shares of Parent Preferred
Shares shall be delivered to the Representative pursuant to this subparagraph
only to the extent that Parent Preferred Shares having a value of $10 million
remain in the Escrow Fund.
11
(e) Parent Preferred Shares having a value equal to the amount of the
Active Subscriber Adjustment shall be released from the Escrow Fund to Parent
promptly following the final determination of the Active Subscriber
Adjustment.
(f) To the extent (x) any Channel set forth in EXHIBIT D is determined
pursuant to a Channel Schedule not to be Good and Deliverable at any time
prior to the First Anniversary as a result of acts or omissions by the
Company or any of its subsidiaries on or prior to the Effective Time (and not
resulting from acts or omissions by Parent or any other entity following the
Effective Time), Parent Preferred Shares having a value equal to the value of
all such Channels, determined using the values set forth on EXHIBIT D, shall
be released from the Escrow Fund to Parent and (y) any other Channel set
forth in Section 3.15(a) of the Company Disclosure Schedule is determined
pursuant to the Channel Schedule not to be Good and Deliverable as of the
Effective Time, Parent Preferred Shares having a value of equal to the value
of all such Channels shall be released from the Escrow Fund to Parent. Such
release shall occur promptly following the final determination of a Channel
Schedule; PROVIDED, that any determination of a Good and Deliverable Channel
under this Section 2.06 and a release from the Escrow Fund in respect
therefor shall supersede any claim for indemnification with respect to such
Channel made for a breach of the representation contained in the second
sentence of Section 3.15(a) hereof or any similar claim regarding the
diminution in value of such Channel.
(g) The balance of the Escrow Fund will be held until the later of the
First Anniversary and the resolution of any claims (i) pending as of the
First Anniversary pursuant to Section 8.01 hereof or (ii) alleging an
adjustment in respect of the matters contemplated by this Section 2.06,
provided that any undisputed amounts shall be released to the Representative
on the First Anniversary.
(h) For purposes of this Section 2.06, Parent Preferred Shares shall be
valued at the Offer Price. To the extent other consideration has been
deposited in the Escrow Fund, references to Parent Preferred Shares shall
include references to such other consideration.
Section 2.07. COMPANY OPTIONS. Each Company Option shall, as of the
Effective Time, become the right solely to acquire Parent Preferred Shares or
cash, as set forth on EXHIBIT B, or shall be cancelled without consideration.
The Company shall use commercially reasonable efforts to take any actions
which are necessary so that, following the Effective Time, no Company Option
or other agreement or instrument shall entitle any person (other than Parent
and its affiliates) to acquire any securities of the Company or Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the disclosure schedule delivered by the Company to
Parent prior to the execution hereof (items disclosed in one section of such
schedule shall apply to all other sections unless the context indicates
otherwise) (the "Company
12
Disclosure Schedule") and except for the execution or performance of a
contract or agreement explicitly permitted under Section 5.01 hereof (which
shall not be deemed to be a breach of the representations and warranties
reasonably related to such action contained in Sections 3.12(c) or (d), 3.18
or 3.19 of this Article III, provided such action is taken in a reasonable
manner), the Company represents and warrants to Parent that, as of the date
hereof and as of the Effective Time (excluding those representations which
speak as of a specific date, which shall speak as of such specific date):
Section 3.01. ORGANIZATION. 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 organization and has all requisite
corporate power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and governmental approvals
would not have a Material Adverse Effect on the Company. As used herein with
respect to an entity, "Material Adverse Effect" shall mean an event, change
or effect which has had, or is reasonably likely to have, a material adverse
effect on the financial condition, assets, results of operations or business
of that entity and its subsidiaries taken as a whole. The Company and each
of its subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
or licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not, in the aggregate, have a Material
Adverse Effect on the Company. The Company has made available to Parent true
and complete copies of its and its subsidiaries certificate of incorporation,
and bylaws, or similar organizational documents.
Section 3.02. CAPITALIZATION. (a) The authorized capital stock of the
Company consists of 35,000,000 Company Common Shares, of which 2,836,941
shares are issued and outstanding as of the date of this Agreement, and
37,528,880 shares of Company Preferred Shares; 5,600,000 shares of which have
been designated "Series A Preferred," all of which are issued and outstanding
as of the date of this Agreement; 4,000,000 shares of which have been
designated "Series B Preferred," of which 3,436,663 are issued and
outstanding as of the date of this Agreement; 5,849,851 shares of which have
been designated "Series C Preferred," of which 5,369,438 are issued and
outstanding as of the date of this Agreement; 9,386,666 shares of which have
been designated Series D Preferred, of which 3,007,312 are issued and
outstanding as of the date of this Agreement; 6,666,666 shares of which have
been designated Series D-1 Preferred, none of which are issued and
outstanding as of the date of this Agreement, 2,772,642 shares of which have
been designated "Series E Preferred", none of which are issued and
outstanding as of the date of this Agreement, and 2,772,642 shares of which
have been designated "Series F Preferred", none of which are issued and
outstanding as of the date of this Agreement. The Company has reserved no
more than (a) 480,413 shares of Series C Preferred for issuance upon exercise
of outstanding warrants to purchase Series C Preferred (the "Series C
Warrants"), (b) 3,727,312 shares of Series D Preferred for issuance upon
exercise of outstanding warrants to purchase Series D Preferred (the "Series
D Warrants"), (c) 2,772,642 shares of Series E Preferred for issuance upon
conversion of convertible subordinated notes issued to BT Foreign
13
Investment Corporation and entities affiliated with Xxxxxx, Read & Co. Inc.,
(d) 2,772,642 shares of Series F Preferred for issuance upon conversion of
the Series E Preferred and (e) 1,750,000 Company Common Shares for issuance
to employees, consultants or directors pursuant to its 1994 Stock Option
Plan, of which options to purchase 1,112,500 Company Common Shares are
currently issued and unexercised. A true and correct list of all Stockholders
as well as a true and correct list of Company Options as of the date of this
Agreement, including the shares issuable pursuant thereto, the exercise or
conversion price and the holder, is set forth in Section 3.2(a) of the
Company Disclosure Schedule. All the outstanding shares of the Company's
capital stock are, and all Company Shares which may be issued pursuant to the
exercise of outstanding Company Options will be, when issued in accordance
with the respective terms thereof, duly authorized, validly issued, fully
paid and non-assessable. Except as set forth above, (i) there are no shares
of capital stock of the Company authorized, issued or outstanding as of the
date of the Agreement and (ii) there are no existing options, warrants,
calls, pre-emptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the issued or
unissued capital stock of the Company or any of its subsidiaries, obligating
the Company or any of its subsidiaries to issue, transfer or sell or cause to
be issued, transferred or sold any shares of capital stock of, or other
equity interest in, the Company or any of its subsidiaries or securities
convertible into or exchangeable for such shares or equity interests, or
obligating the Company or any of its subsidiaries to grant, extend or enter
into any such option, warrant, call, pre-emptive right, subscription or other
right, agreement, arrangement or commitment and (iii) there are no
outstanding obligations of the Company or any of its subsidiaries to vote or
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company, or any subsidiary or affiliate of the Company or to provide funds to
make any investment (in the form of a loan, capital contribution or
otherwise) in any subsidiary or any other entity. Other than Company Shares,
no securities of the Company have the right to vote. The Company has
delivered to Parent true and complete copies of all instruments governing or
defining rights under the Company Shares and the Company Options. Following
the Effective Time, no Company Option or other agreement or instrument
granted by the Company or any subsidiary shall entitle any person (other than
Parent and its affiliates) to acquire any securities of the Company or
Parent, other than Parent Preferred Shares pursuant to the terms of this
Agreement.
(b) All of the outstanding shares of capital stock of each of the
Company's subsidiaries are beneficially owned by the Company, directly or
indirectly, and all such shares have been validly issued and are fully paid
and nonassessable and are owned by either the Company or one of its
subsidiaries free and clear of all liens, security interest, charges, claims
or encumbrances. Except as set forth in Section 3.2 of the Company
Disclosure Schedule, the Company does not, directly or indirectly, have any
equity or ownership interest in any business.
Section 3.03. AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION.
(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery by the Company of this Agreement, and the
consummation by it of the transactions contemplated hereby, have been duly
and validly authorized by all requisite
14
corporate action and, except for obtaining the approval of its stockholders,
no other corporate action on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and, assuming due and
valid authorization, execution and delivery hereof by Parent, is a valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms. The affirmative vote of the holders of not less
than 75% of the outstanding Company Shares, voting together as a single
class, is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
(b) The provisions of Section 203 of the DGCL will not apply to the
transactions contemplated by this Agreement. No other state takeover statute
or similar statute or regulation applies or purports to apply to the Offer,
the Merger or the other transactions contemplated hereby.
Section 3.04. CONSENTS AND APPROVALS; NO VIOLATIONS. (a) Except for the
filings set forth on Section 3.4 the Company Disclosure Schedule and the
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Exchange Act of
1934 (the "Exchange Act"), the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the DGCL, neither the execution,
delivery or performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby nor compliance by the
Company with any of the provisions hereof will (i) conflict with or result in
any breach of any provision of the certificate of incorporation or the
by-laws (or similar organizational instrument) of the Company or of any of
its subsidiaries, (ii) as of the date of this Agreement require any filing
with, or permit, authorization, consent or approval of, any court, tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity") or any other person or entity,
(iii) as of the date of this Agreement result in a violation, conflict with
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration), result in the termination in or a right of
termination or cancellation of, accelerate the performance required by,
result in the triggering of any payment or other material obligation pursuant
to, result in the creation of any lien, security interest, charge, claim or
encumbrance upon any of the material properties of the Company or its
subsidiaries under, or result in being declared void, voidable or without
further binding effect any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, permit, deed of
trust agreement or other instrument or commitment obligation to which the
Company or any of its subsidiaries is a party or by which any of them or any
of their properties or assets may be bound or affected or (iv) as of the date
of this Agreement violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company, any of its subsidiaries or any of
their properties or assets, excluding from the foregoing clauses (ii), (iii)
and (iv) such violations, breaches or defaults which would not, in the
aggregate, have a Material Adverse Effect on the Company.
15
(b) The Company has delivered to Parent true and complete copies of the
BT Note and the OPIC Note (as defined in Section 3.4(b) of the Company
Disclosure Schedule), including all amendments, waivers and other agreements
or understandings with respect thereto. Except as set forth in Section
3.4(b) of the Company Disclosure Schedule, no event has occurred which has or
would result in a breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration), result in the termination in or a
right of termination or cancellation of, accelerate the performance required
by, result in the triggering of any payment or other material obligation
pursuant to, result in the creation of any lien, security interest, charge,
claim or encumbrance upon any of the material properties of the Company or
its subsidiaries under, or result in being declared void, voidable or without
further binding effect any of the terms, conditions or provisions of, the BT
Note or the OPIC Note.
Section 3.05. FINANCIAL STATEMENTS. The Company has delivered to
Parent true and correct copies of its audited consolidated balance sheet as
of June 30, 1997 and related consolidated statements of operations,
stockholder's equity and cash flows for the period ending June 30, 1997 and
its unaudited consolidated balance sheet as of September 30, 1997 and related
consolidated statements of operations, stockholder's equity and cash flows
for the three month period ending September 30, 1997 (the "Company Financial
Statements"). The Company Financial Statements have been prepared from, and
are in accordance with, the books and records of the Company and its
consolidated subsidiaries, comply in all material respects with applicable
accounting requirements, have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated financial position
and the consolidated results of operations and cash flows (and changes in
financial position, if any) of the Company and its consolidated subsidiaries
as of the respective dates thereof, subject, in the case of unaudited
statements, to normal recurring year-end audit adjustments and the absence of
footnotes.
Section 3.06. ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Section 3.6 of the Company Disclosure Schedule, since June 30, 1997, (i) as
of the date of this Agreement, the Company and its subsidiaries have
conducted their respective businesses only in the ordinary and usual course,
consistent with past practice, (ii) as of this date of the Agreement, neither
the Company nor any of its subsidiaries have taken any of the actions
contemplated by Section 5.01 hereof and (iii) as of the date of this
Agreement, there have not occurred any events, changes or effects which have
had or which are reasonably likely to have, in the aggregate, a Material
Adverse Effect on the Company.
Section 3.07. NO UNDISCLOSED LIABILITIES. Except (a) as disclosed in the
Company Financial Statements and (b) for liabilities and obligations (x)
incurred pursuant to the terms of this Agreement or (y) as set forth in Section
3.7 of the Company Disclosure Schedule, since June 30, 1997, neither the Company
nor any of its subsidiaries has through the date of this Agreement incurred any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, whether known or unknown that
16
have a Material Adverse Effect on the Company, or would be required by GAAP
to be reflected on a consolidated balance sheet of the Company and its
subsidiaries (including the notes thereto).
Section 3.08. LITIGATION. Except as disclosed in Section 3.8 of the
Company Disclosure Schedule, (x) there is no suit, claim, action, proceeding
or investigation pending or, to the best knowledge of the Company and its
subsidiaries, threatened against the Company or any of its subsidiaries that
would have a Material Adverse Effect on the Company and (y) neither the
Company nor any of its subsidiaries is subject to any outstanding order,
writ, injunction, judgment or decree that would have a Material Adverse
Effect on the Company.
Section 3.09. NO DEFAULT; COMPLIANCE WITH APPLICABLE LAWS. Except as
disclosed in Section 3.9 of the Company Disclosure Schedule, the business of
the Company and each of its subsidiaries is not being conducted in default or
violation of any term, condition or provision of (i) its respective
certificate of incorporation or by-laws (or similar organizational
instrument), (ii) any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which the Company or
any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iii) any federal, state, local or
foreign statute, law, ordinance, rule, regulation, judgment, decree, order,
concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to the Company or any of its
subsidiaries, excluding from the foregoing clauses (ii) and (iii), defaults
or violations which would not, in the aggregate, have a Material Adverse
Effect on the Company.
Section 3.10. INTELLECTUAL PROPERTY. The Company and its subsidiaries
own, or are licensed or otherwise have the rights to use all patents,
trademarks, trade names, service marks, copyrights, technology, trade
secrets, licenses, know-how, processes and other intellectual property rights
(collectively, "Intellectual Property Rights") material to or necessary for
the conduct of their businesses as presently conducted. All such
Intellectual Property Rights are set forth in Section 3.10 of the Company
Disclosure Schedule, including all related licenses and registrations and
applications, as well as summary descriptions thereof. To the Company's and
its subsidiaries' best knowledge, the use by the Company or any of its
subsidiaries of all Intellectual Property Rights does not infringe on the
rights of any person. To the Company's and its subsidiaries' best knowledge,
no third person is infringing on the Intellectual Property Rights of the
Company or any of its subsidiaries.
Section 3.11. TAXES. (a) For purposes of this Agreement: "Taxes"
means all taxes, charges, fees, social contributions, levies or other
assessments, including, without limitation, income, gross receipts,
employment, excise, withholding, property, sales, use, transfer, license,
payroll and franchise taxes, and social security payments, together with any
interest and any penalties, additions to tax or additional amounts with
respect thereto, imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof. "Taxable Period" means any
taxable year or any other period that is treated as a taxable year with
respect to such other period, (e.g., a quarter) with respect to which any Tax
may be imposed under any applicable statute, rule or
17
regulation. "Tax Return" means any report, return, election, notice or other
information required to be supplied to a taxing authority in connection with
Taxes.
(b) Except as set forth in Section 3.11 of the Company Disclosure
Schedule, all Tax Returns required to be filed with respect to the Company
and each of its subsidiaries for all Taxable Periods ending on or before the
date hereof have been timely filed. All such Tax Returns (i) were prepared
in the manner required by applicable law, (ii) are true, correct and complete
in all material respects and (iii) reflect the liability for Taxes of the
Company and each of its subsidiaries. All Taxes shown to be payable on such
Tax Returns, and all assessments of Tax made against the Company and each of
its subsidiaries relating to any such Tax Return, have been paid when due.
No adjustment relating to any such Tax Return has been proposed or threatened
formally or informally by any taxing authority and no basis exists for any
such adjustment. The Company and each of its subsidiaries have made (or there
has been made on their behalf) all required current estimated Tax payments
sufficient to avoid any underpayment penalties. The Company and each of its
subsidiaries have (i) timely paid or caused to be paid all Taxes that are or
were due on or prior to the date hereof, whether or not shown (or required to
be shown) on a Tax Return, and (ii) provided a sufficient reserve for the
payment of all Taxes not yet due and payable, on the Company Financial
Statements for the period ended June 30, 1997. The Company and each of its
subsidiaries have complied (and until the Closing Date will comply) in all
material respects with the provisions of the Code relating to the withholding
and payment of Taxes, including, without limitation, the withholding and
reporting requirements under Code sections 1441 through 1464, 3401 through
3406, and 6041 through 6049, as well as similar provisions under any other
laws, and have, within the time and in the manner prescribed by law, withheld
from employee wages and paid over to the proper governmental authorities all
amounts required. No material claim has ever been made by any taxing
authority with espect to the Company or any of its subsidiaries in a
jurisdiction where the Company and/or any such subsidiary, as the case may
be, does not file Tax Returns that the Company or any of its subsidiaries is
or may be subject to taxation by that jurisdiction. Except for liens for
real and personal property Taxes that are not yet due and payable, there are
no liens for any Tax upon any asset of the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries has agreed or
is required to include in income or make any material adjustment under either
Code section 481(a) or Code section 482 (or an analogous provision of state,
local or foreign law) by reason of a change in accounting or otherwise.
Except as disclosed in Section 3.11 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to any agreement
(other than this Agreement) to share Taxes with respect to any Taxable
Period. There is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, could give rise to the payment of
any amount that would not be deductible by the Company or any subsidiary
thereof by reason of Code section 280G. No indebtedness of the Company or
any of its subsidiaries constitutes "corporate acquisition indebtedness"
within the meaning of Code section 279.
18
Section 3.12. EMPLOYEE BENEFIT PLANS.
(a) Section 3.12(a) of the Company Disclosure Schedule contains a true
and complete list of all employee profit-sharing, incentive, deferred
compensation, welfare, pension, retirement, group insurance, bonus,
severance, stock option, stock purchase, and other employee benefit plans,
programs or arrangements (oral or written), including, without limitation,
any such plan or arrangement that is an "employee benefit plan", as such term
is defined in section 3(3) of the Employee Retirement Income Security Act of
1974 (a "Company Plan"), as amended ("ERISA"), maintained or contributed to
by the Company or by any trade or business (an "ERISA Affiliate") that
together with the Company would be deemed a "single employer" within the
meaning of section 4001(a)(14) of ERISA. With respect to each Company Plan,
the Company has heretofore delivered to Parent true and complete copies of
(i) the Company Plan (including all amendments thereto), (ii) the annual
reports and actuarial reports for the last two years and (iii) any trust or
other funding agreement relating thereto (including all amendments to any
such document) and the latest financial statements thereof.
(b) No liability under Title IV of ERISA has been incurred by the
Company or any ERISA Affiliate and no condition exists that presents a
material risk of incurring any such liability. No prohibited transaction, as
described in section 406 of ERISA, has occurred with respect to any Company
Plan and no tax has been imposed pursuant to section 4975 or 4976 of the
Code. Full payment has been made of all amounts which the Company or any
ERISA Affiliate is required to pay each Company Plan and no Company Plan has
incurred any "accumulated funding deficiency" (as defined in section 412 of
the Code), whether or not waived. Each Company Plan has been operated and
administered in accordance with its terms and applicable law, there are no
pending, or to the knowledge of the Company and its subsidiaries, threatened
or anticipated claims with respect to any Company Plan (other than routine
claims for benefits) and no Company Plan is "qualified" under section 401(a)
of the Code. No Company Plan provides benefits with respect to current or
former employees of the Company or any ERISA Affiliate beyond their
retirement or other termination of service.
(c) Section 3.12(c) of the Company Disclosure Schedule contains an
accurate and complete list of all employment, compensation, consulting,
benefit and severance plans, agreements, arrangements or understandings
between the Company or any of its subsidiaries, on the one hand, and any
directors or officers of the Company or of any of its subsidiaries, on the
other hand.
(d) Except as disclosed in Section 3.12(d) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
(either alone or together with any other event) will not (i) entitle any
current or former director, officer or employee of the Company or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such director, officer or employee or (iii) increase the
benefits or other rights of any such director, officer or employee under any
Company Plan, or create a funding obligation under any Company Plan.
19
(e) The Company and its subsidiaries do not have any obligation to
provide healthcare coverage to any of their employees following termination
of employment.
Section 3.13. ENVIRONMENTAL MATTERS. Except as would not, in the
aggregate, have a Material Adverse Effect on the Company, (i) the Company and
its subsidiaries comply, and the Company, its subsidiaries, and their
respective predecessors at all times during their existence have complied
with all applicable Environmental Laws; (ii) as of the date of this
Agreement, none of the Company, any of its subsidiaries, or any of their
respective predecessors has received any notice, demand, letter, claim or
request for information alleging that the Company, any of its subsidiaries,
or any of their respective predecessors may be in violation of or liable
under any Environmental Law, and none of the Company, any of its
subsidiaries, or any of their respective predecessors is subject to any
agreement, order or decree involving liability under any Environmental Law;
(iii) to the knowledge of the Company and its subsidiaries, there are no
Hazardous Substances located on the properties currently or formerly owned or
operated by the Company, any of its subsidiaries, or any of their respective
predecessors (including soil, groundwater and surface features and buildings
and structures thereon) (the "Company Properties") the existence of which
would give rise to liability under Environmental Law, and none of the Company
Properties contain, or has contained, any underground improvements,
including, but not limited to, treatment or storage tanks, pumps, gas or oil
xxxxx, or associated piping; (iv) to the knowledge of the Company and its
subsidiaries, no Hazardous Substance has been disposed of or released at, to
or from any of the Company Properties; (v) to the knowledge of the Company
and its subsidiaries, neither the Company nor any of its subsidiaries is
subject to liability for off-site disposal of or contamination by any
Hazardous Substance; (vi) to the knowledge of the Company and its
subsidiaries, there are no circumstances or conditions involving the Company,
any of its subsidiaries, or any of their respective predecessors that would
reasonably be expected to result in any claims, liability, investigations,
costs or losses, or any restrictions on the ownership, use or transfer of any
Company Property pursuant to any Environmental Law.
As used herein, "Environmental Law" means and federal, state, local or
foreign law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to pollution, contamination,
wastes, hazardous materials or the protection of the environment, human
health or safety; and "Hazardous Substance" means any substance that is
listed, classified under or regulated by any governmental authority pursuant
to any Environmental Law, including, without limitation, any petroleum
product or by product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive material or radon.
Section 3.14. TAX FREE REORGANIZATION. As of the date of this
Agreement, neither the Company nor any of its subsidiaries has taken any
action or failed to take any action, or has knowledge of any fact or
circumstance, which would prevent the Merger constituting as a reorganization
within the meaning of Section 368(a) of the Code.
Section 3.15. REGULATORY MATTERS; PERMITS AND LICENSES. (a) Set forth
in Section 3.15(a) of the Company Disclosure Schedule is a true and complete
list, as of the date of this Agreement, of all (i) Specialized Mobile Radio
and telecommunications
20
licenses, permits, franchises and authorizations and all consents,
certificates of compliance and approvals applicable thereto ("Licenses")
assigned and reserved by the Company and its subsidiaries and (ii) authorized
Specialized Mobile Radio Channels ("Channels"). All Licenses and Channels
are as of the date hereof, and as of the Closing will be Good and Deliverable.
(b) Except as set forth in Section 3.15 of the Company Disclosure
Schedule, (i) the Company and its subsidiaries are in compliance with all
material requirements of all Governmental Entities concerning all Licenses,
including build-out and loading requirements, and (ii) none of the Licenses
is subject to any right of first refusal, option or other such right or
obligation with respect to the acquisition or disposition of such Licenses
(or interests therein), including, without limitation, entitlement to acquire
additional ownership interests, which may affect the ownership interests of
the Company or any of its subsidiaries other than immaterial liens arising by
operation of law.
(c) Set forth in Section 3.15(c) of the Company Disclosure Schedule is a
list, as of the date of this Agreement, of all Channels held directly or
indirectly by the Company or its subsidiaries and, with respect to each such
Channel (1) its location, (2) its number, (3) the dates of grant and
expiration of the relevant License, (4) any extension or renewal periods or
requests therefor for the relevant License, and the status thereof, (5) any
required loading dates, and the status thereof, and (6) the nature of any
frequency interference with the use of such Channel. Section 3.15(c) of the
Company Disclosure Schedule includes a list of the number of active
subscribers whose payments owed to the Company or its subsidiaries are not
more than ninety days past due (such subscribers, the "Active Subscribers"),
using Channels as of June 30, 1997 and as of the date of the close of the
most recent accounting cycle. Except as listed in Section 3.15(c) of the
Company Disclosure Schedule, the Company and its subsidiaries have no other
interests, direct or indirect, contingent or pending, in frequencies capable
of being used for SMR service.
(d) The Company and its subsidiaries have paid all material franchise,
license and other fees and charges imposed by any Governmental Entity which
have become due and payable in respect of the business of the Company and its
subsidiaries and has made appropriate provision in the Company Financial
Statements as is required by GAAP for any such fees and charges which were
accrued and unpaid on the date of such Company Financial Statements. Neither
the Company nor any of its subsidiaries is in arrears for any payments due
and owing to any Governmental Entities or other persons with respect to its
Licenses, whether payment is being made pursuant to an installment payment
plan or otherwise. There are no outstanding material orders issued by any
Governmental Entities with respect to any of the Company's or its
subsidiaries' Licenses.
(e) The Company and its subsidiaries have all required regulatory
approval for all current tariffs. None of the Company's or any of its
subsidiaries' current tariffs are subject to an accounting order or, to the
knowledge of the Company and its subsidiaries, subject to investigation by
any Governmental Entity. There are no complaints or proposed tariff
modifications regarding the Company's or its subsidiaries' current tariffs
pending at any Governmental Entity.
21
(f) The consummation of the transactions contemplated hereby will not
require the consent of any Governmental Entity or to the knowledge of the
Company and its subsidiaries result in the loss or modification of, or the
imposition of any restriction on any License.
(g) The Company has taken all of the actions set forth in the column
entitled "RMD Proposed Action" of EXHIBIT D.
Section 3.16. TRANSACTIONS WITH AFFILIATES. Except as set forth in
Section 3.16 of the Company Disclosure Schedule, no present or former
officer, director, stockholder or other affiliate of the Company or any of
its subsidiaries has (i) any material interest in the assets, properties or
rights used in the business of the Company or its subsidiaries (other than
solely through the ownership of Company Shares or Company Options), (ii) any
material contract, arrangement, agreement or understanding with the Company
or its subsidiaries or (iii) engaged in any material transactions with the
Company since June 30, 1997.
Section 3.17. ASSETS NECESSARY TO THE BUSINESS. As of the date of this
Agreement, other than with respect to Channels, the assets, properties and
rights of the Company and its subsidiaries include all assets, properties and
rights used in, or necessary for, the business of the Company and its
subsidiaries, all such assets and properties are in good condition and
repair, ordinary wear and tear excepted, and, except as set forth in Section
3.17 of the Company Disclosure Schedule, are held by the Company or its
subsidiaries free and clear of any liens, security interests, charges claims
or encumbrances.
Section 3.18. MATERIAL CONTRACTS. Section 3.18 of the Company
Disclosure Schedule sets forth a list, as of the date of this Agreement, of
each contract, instrument or other agreement which is material to the Company
and its subsidiaries. All material contracts, instruments and agreements to
which the Company or any of its subsidiaries is a party are valid and binding
obligations of the parties thereto, enforceable in accordance with their
terms, the Company or its subsidiary is not in default thereunder and, to the
best knowledge of the Company, as of the date of this Agreement, the other
party or parties thereto are not in default thereunder. The Company has made
available to Parent true and complete copies of each such contract,
instrument or agreement.
Section 3.19. LABOR MATTERS. There are no material disputes, employee
grievances, disciplinary actions or legal actions pending or threatened between
the Company or any of its subsidiaries and any of their respective employees or
independent contractors and no claims under U.S. federal, state, local or any
foreign law. Each of the Company and its subsidiaries has complied in all
material respects with all provisions of all U.S. federal, state, local or any
foreign law relating to the employment of labor and have no liability for any
arrears of wages, social security payments or taxes or penalties for failure to
comply with any such laws, including but not limited to in connection with work
performed by independent contractors. To the Company's and its subsidiaries'
knowledge, there are no organizational efforts presently being made or
threatened by or
22
on behalf of any labor union with respect to any of the employees of the
Company and its subsidiaries.
Except as specifically set forth in Section 3.19 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a
party to any:
(a) management, employment or other contract providing for the
employment or rendition of executive services;
(b) employment contract that is not terminable without penalty by the
Company or any of its subsidiaries on 30 days notice;
(c) bonus, incentive, deferred compensation, severance pay, pension,
profit-sharing, retirement, stock purchase, stock option, employee
benefit or similar plan, agreement or arrangement;
(d) collective bargaining agreement or other agreement with any labor
union or other employee organization (and no such agreement is
currently being requested by, or is under discussion by management
with, any group of employees or others); or
(e) other employment contract or other compensation agreement or
arrangement, oral or written, affecting or relating to current or
former employees of the Company or any of its subsidiaries.
All such contracts and other agreements and arrangements set forth in
Section 3.19 of the Company Disclosure Schedule are valid and in full force
and effect, each of the Company and each of its subsidiaries has performed
all material obligations imposed upon it thereunder, and there are, under any
of such contracts, agreements or arrangements, no defaults or events of
default by the Company or any of its subsidiaries or, to the knowledge of the
Company and its subsidiaries, any other party thereto that would have a
Material Adverse Effect on the Company and its subsidiaries or would
materially and adversely affect the relationship of the Company or any
subsidiary of the Company with any employee of the Company or any subsidiary
of the Company.
Section 3.19(a) of the Company Disclosure Schedule lists all agreements,
arrangements and understandings relating to employment, severance,
termination pay or similar matters with any employee, officer, director,
consultant or agent of the Company or any subsidiary which would be affected,
including by the acceleration of payments, by the transactions contemplated
hereby.
Section 3.20. NO BROKERS. Neither the Company nor any of its
subsidiaries has entered into any contract, arrangement or understanding with
any person or firm which may result in the obligation of the Company or any
of its subsidiaries to pay any finder's fees, advisors, brokerage or agent's
commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions
contemplated hereby, except that Company has retained Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities Corporation as its financial advisor, the arrangements
with which
23
have been disclosed in writing to Parent prior to the date hereof. Other than
the foregoing arrangements, the Company is not aware of any claim for payment
of any finder's fees, brokerage or agent's commissions or other like payments
in connection with the negotiations leading to this Agreement or the
consummation of the transaction contemplated hereby.
Section 3.21. OPINION OF FINANCIAL ADVISOR. The Company has received
the written opinion of Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation,
dated the date hereof, to the effect that, the Merger Consideration in the
aggregate is fair, from a financial point of view, to the Stockholders.
Section 3.22. REPRESENTATIONS. The representations and warranties of
the Company set forth herein are true and correct in all material respects
and do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated herein or necessary to make the
representations and warranties set forth herein, in light of the
circumstances under which they are made, not misleading.
Section 3.23. INFORMATION DELIVERED TO STOCKHOLDERS. As of the date of
delivery, the information delivered to the Stockholders for purposes of
obtaining their approval of the Merger, this Agreement and the transactions
contemplated hereby, other than information supplied by Parent in writing for
inclusion therein, including a draft of Parent's registration statement on
Form S-1 relating to the IPO (the "Draft S-1"), does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated herein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth on the disclosure schedule delivered by Parent to
the Company prior to the execution hereof (items disclosed in one section of
such schedule shall apply to all other sections unless the context indicates
otherwise) (the "Parent Disclosure Schedule"), Parent represents and warrants
to the Company that, as of the date hereof and as of the Effective Time
(excluding those representations which speak as of a specific date, which
shall speak as of such specific date):
Section 4.01. ORGANIZATION. Parent is, and at the Effective Time Sub
will be, a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and Parent has, and at
the Effective Time Sub will have, all requisite corporate power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power, authority and governmental approvals would not, have a Material
Adverse Effect on Parent. Parent is, and at the Effective Time Sub will be,
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the
24
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing would
not, in the aggregate, have a Material Adverse Effect on Parent. Parent has
made available to the Company true and complete copies of its certificate of
incorporation and bylaws.
Section 4.02. CAPITALIZATION. (a) The authorized capital stock of the
Parent consists, or will prior to the Effective Time consist, of (i)
50,000,000 shares of Preferred Stock, par value $0.01 per share, 1,200,000 of
which shares have been designated Series A Preferred Stock, 933,200 of which
are issued and outstanding; 1,229,240 of which shares have been designated
Series B Preferred Stock, all of which are issued and outstanding; 2,460,000
of which shares have been designated Series C Preferred Stock, 1,762,280 of
which are issued and outstanding; 5,800,000 of which shares have been
designated Series D Preferred Stock, 3,661,636 of which are issued and
outstanding; 3,972,240 of which shares have been designated Series E
Preferred Stock, all of which are issued and outstanding; 7,000,000 of which
shares have been designated Series F-1 Preferred Stock, 4,508,480 of which
are issued and outstanding; 1,080,000 of which shares have been designated
Series F-2 Preferred Stock, 848,000 of which are issued and outstanding;
1,928,000 of which shares have been designated Series G-1 Preferred Stock,
none of which are issued or outstanding; 1,292,000 of which shares have been
designated Series G-2 Preferred Stock, none of which are issued or
outstanding; 5,072,000 of which shares have been designated Series H-1
Preferred Stock, none of which are issued or outstanding; 3,398,000 of which
shares have been designated Series H-2 Preferred Stock, none of which are
issued or outstanding; and 8,000,000 of which shares have been designated
Series I Preferred Stock, some or all of which may be issued pursuant to the
Merger and (ii) 70,000,000 shares of Class A Common Stock, par value $0.01
per share (the "Class A Common Stock"), 1,310,230 of which are issued and
outstanding; and 6,000,000 shares of Class B Common Stock, par value $0.01
per share (the "Class B Common Stock;" together with the Class A Common
Stock, the "Parent Common Shares"), none of which are issued and outstanding.
All the outstanding shares of Parent's capital stock are, and all Parent
Common Shares which may be issued pursuant to the exercise of outstanding
options will be, when issued in accordance with the respective terms thereof,
duly authorized, validly issued, fully paid and non-assessable. Except for
(i) the conversion privileges of the Preferred Stock, (ii) the rights of
first refusal as set forth in Section 2.3 and 2.5 of the Sixth Amended and
Restated Investors' Rights Agreement dated as of August 18, 1997 among Parent
and the investors named therein, (iii) outstanding warrants to purchase
339,840 shares of Preferred Stock (iv) the Initial Warrants and Liquidity
Warrants (as such terms are defined in the Exchange Agreement dated as of
August 18, 1997 among Parent and the lenders named therein), (v) Warrants to
purchase the number of shares of Class A Common Stock set forth in Section
4.02(v) of the Parent Disclosure Schedule, (vi) 3,064,262 Parent Common
Shares issuable upon exercise of stock options granted to employees,
consultants, officers, or directors of Parent, its subsidiairies or its
affiliates, and (v) Preferred Shares issuable upon exchange of the Notes and
the PWH Notes (as such terms are defined in the Loan Agreement dated August
18, 1997 among Parent and the Lenders named therein) to Parent's knowledge,
as of the date of this Agreement, (i) there are no shares of capital stock of
Parent authorized, issued or outstanding and (ii) there are no
25
existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character, relating to
the issued or unissued capital stock of Parent or Sub, obligating Parent or
Sub to issue, transfer or sell or cause to be issued, transferred or sold any
shares of capital stock of, or other equity interest in, Parent or Sub or
securities convertible into or exchangeable for such shares or equity
interests, or obligating Parent or Sub to grant, extend or enter into any
such option, warrant, call, pre-emptive right, subscription or other right,
agreement, arrangement or commitment and (iii) there are no outstanding
obligations of Parent or Sub to vote or to repurchase, redeem or otherwise
acquire any shares of capital stock of Parent or Sub or to provide funds to
make any investment (in the form of a loan, capital contribution or
otherwise) in any subsidiary or any other entity. Other than capital stock,
no securities of Parent have the right to vote.
(b) At the Effective Time, the Parent Preferred Shares to be issued in
the Merger will be duly authorized and, upon issuance in accordance with this
Agreement, will be validly issued, fully paid and non-assessable and free of
preemptive rights, and, assuming the accuracy of the information set forth in
Exhibit 5.4 with respect to each person who is to receive Parent Preferred
Shares pursuant to this Agreement or the transactions contemplated hereby,
issued in compliance with all applicable federal and state securities laws.
The Parent Preferred Shares shall have the rights and preferences set forth
in Exhibit A hereto. The memo attached hereto as EXHIBIT 4.02, as of the
date of this Agreement, is true and correct in all material respects.
Section 4.03. AUTHORIZATION; VALIDITY OF AGREEMENT; PARENT ACTION.
Parent has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery by Parent of this Agreement, and the consummation by
it of the transactions contemplated hereby, have been duly and validly
authorized by all requisite corporate action and, except for obtaining the
approval of its stockholders and except as contemplated by Section 5.10
hereof, no other corporate action on the part of Parent is necessary to
authorize the execution and delivery by Parent of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Parent and, assuming due and valid
authorization, execution and delivery hereof by the Company, is a valid and
binding obligation of Parent enforceable against Parent in accordance with
its terms. No stockholder has any preemptive rights or rights of first
refusal by reason of the issuance of the Parent Preferred Shares. The Parent
Common Shares issuable upon conversion of the Parent Preferred Shares have
been duly and validly reserved and are not subject to any preemptive rights
or rights of first refusal and when issued, will be validly issued, fully
paid and non-assessable.
Section 4.04. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for the
filings set forth in Section 4.4 of the disclosure schedule delivered to the
Company (the "Parent Disclosure Schedule") and the filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the HSR Act, and the DGCL,
neither the execution, delivery or performance of this Agreement by Parent
nor the consummation by Parent of the transactions contemplated hereby nor
compliance by Parent with any of the provisions hereof will (i) conflict with
26
or result in any breach of any provision of the certificate of incorporation
or the by-laws of Parent, (ii) as of the date of this Agreement, require any
filing with, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) as of the date of this Agreement, result in a
violation, conflict with or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) result in the
termination in or a right of termination or cancellation of, accelerate the
performance required by, result in the triggering of any payment or other
material obligation pursuant to, result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties of Parent
under, or result in being declared void, voidable or without further binding
effect any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument
or obligation to which Parent is a party or by which Parent or any of its
properties or assets may be bound or (iv) as of the date of this Agreement,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent or any of Parent's properties or assets, excluding from
the foregoing clauses (ii), (iii) and (iv) such violations, breaches or
defaults which would not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
Section 4.05. SEC FILINGS; FINANCIAL STATEMENTS. (a) Since September
30, 1996, Parent has filed with the SEC all forms, reports and other
documents (the "SEC Reports") required to be filed by it under the Securities
Act of 1933 (the "Securities Act") and the Exchange Act and the rules and
regulations thereunder. As of their respective dates or, if amended, the date
of latest amendment, the SEC Reports (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (b) complied in
all material respects with the Exchange Act and the Securities Act, as the
case may be, and the rules and regulations thereunder. The financial
statements included in the SEC Reports have been prepared from, and are in
accordance with, the books and records of Parent and its consolidated
subsidiaries, comply in all material respects with applicable accounting
requirements, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position and
the consolidated results of operations and cash flows (and changes in
financial position, if any) of Parent and its consolidated subsidiaries as of
the respective dates thereof, subject, in the case of unaudited statements,
to normal recurring year-end adjustments and the absence of footnotes.
(b) Except with respect to information relating to the Company and its
subsidiaries or the transactions contemplated hereby, the Draft S-1 (a) does
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complies in all material respects with the Securities
Act and the rules and regulations thereunder. It is understood that such
Draft S-1 may be changed as a result of, among other things, comments from
the SEC, market and other conditions, the passage of time and the occurrence
of events, and that the fact of such change shall not, in itself, suggest
that the Draft S-1 did not meet the standards set forth in the immediately
preceding sentence.
27
Section 4.06. ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Section 4.6 of the Parent Disclosure Schedule or in the Draft S-1, since
December 31, 1996, (i) as of the date of this Agreement, Parent has conducted
it businesses only in the ordinary and usual course, consistent with past
practice, (ii) as of the date of this Agreement, Parent has not taken any of
the actions contemplated by Section 5.2 hereof and (iii) as of the date of
this Agreement, there have not occurred any events, changes or effects which
have had or which are reasonably likely to have, in the aggregate, a Material
Adverse Effect on Parent.
Section 4.07. NO UNDISCLOSED LIABILITIES. Except for liabilities and
obligations (x) incurred pursuant to the terms of this Agreement or (y) as
set forth in Section 4.7 of the Parent Disclosure Schedule or in the Draft
S-1, since December 31, 1996, Parent has not through the date of this
Agreement incurred any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, whether known or unknown that have a
Material Adverse Effect on Parent, or would be required by GAAP to be
reflected on a consolidated balance sheet of the Parent and its subsidiaries
(including the notes thereto).
Section 4.08. LITIGATION. Except as disclosed in Section 4.8 of the
Parent Disclosure Schedule, (x) there is no suit, claim, action, proceeding
or investigation pending or, to the best knowledge of Parent, threatened
against Parent that would have a Material Adverse Effect on Parent and (y)
Parent is not subject to any outstanding order, writ, injunction, judgment or
decree that could have a Material Adverse Effect on Parent.
Section 4.09. NO DEFAULT; COMPLIANCE WITH APPLICABLE LAWS. Except as
disclosed in Section 4.9 of the Parent Disclosure Schedule, the business of
Parent is not being conducted in default or violation of any term, condition
or provision of (i) its certificate of incorporation or by-laws, (ii) any of
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Parent is a party or by which Parent
or any of its properties or assets may be bound or (iii) any federal, state,
local or foreign statute, law, ordinance, rule, regulation, judgment, decree,
order, concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to Parent, excluding from the foregoing
clauses (ii) and (iii), defaults or violations which would not, in the
aggregate, have a Material Adverse Effect on Parent.
Section 4.10. INTELLECTUAL PROPERTY. Parent and its subsidiaries and
affiliates own or are licensed or otherwise have the rights to use all
patents, trademarks, trade names, service marks copyrights, technology, trade
secrets, licenses know-how, processes and other intellectual property rights
material to or necessary for the conduct of its businesses as presently
conducted (collectively, "Intellectual Property Rights") set forth in Section
4.10 of Parent Disclosure Schedule, including all related licenses and
registrations and applications, as well as summary descriptions thereof. To
Parent's best knowledge, the use by Parent, any of its subsidiaries or
affiliates of all Intellectual Property Rights does not infringe on the
rights of any person. To Parent's best knowledge, no third person is
infringing on the Intellectual Property Rights of Parent.
28
Section 4.11. TAXES. Except as set forth in Section 4.11 of the Parent
Disclosure Schedule, all Tax Returns required to be filed with respect to
Parent for all Taxable Periods ending on or before the date hereof have been
timely filed. All such Tax Returns (i) were prepared in the manner required
by applicable law, (ii) are true, correct and complete in all material
respects and (iii) reflect the liability for Taxes of Parent. All Taxes
shown to be payable on such Tax Returns, and all assessments of Tax made
against Parent with respect to such Tax Returns, have been paid when due. No
adjustment relating to any such Tax Return has been proposed or threatened
formally or informally by any taxing authority and no basis exists for any
such adjustment. Parent has made (or there has been made on its behalf) all
required current estimated Tax payments sufficient to avoid any underpayment
penalties. Parent has (i) timely paid or caused to be paid all Taxes that
are or were due on or prior to the date hereof, whether or not shown (or
required to be shown) on a Tax Return, and (ii) provided a sufficient reserve
for the payment of all Taxes not yet due and payable in the financial
statements included in the SEC Reports. Parent has complied (and until the
Closing Date will comply) in all material respects with the provisions of the
Code relating to the withholding and payment of Taxes, including, without
limitation, the withholding and reporting requirements under Code sections
1441 through 1464, 3401 through 3406, and 6041 through 6049, as well as
similar provisions under any other laws, and have, within the time and in the
manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required. No material claim has
ever been made by any taxing authority with respect to Parent in a
jurisdiction where Parent does not file Tax Returns that Parent is or may be
subject to taxation by that jurisdiction. Except for liens for real and
personal property Taxes that are not yet due and ayable, there are no liens
for any Tax upon any asset of Parent. Parent has not agreed or is required
to include in income or make any material adjustment under either Code
section 481(a) or Code section 482 (or an analogous provision of state, local
or foreign law) by reason of a change in accounting or otherwise. Except as
disclosed in Section 4.11 of the Parent Disclosure Schedule, Parent is not a
party to any agreement (other than this Agreement) to share Taxes with
respect to any Taxable Period. There is no contract, agreement, plan or
arrangement covering any person that, individually or collectively, could
give rise to the payment of any amount that would not be deductible by the
Parent thereof by reason of Code section 280G. No indebtedness of Parent
constitutes "corporate acquisition indebtedness" within the meaning of Code
section 279.
Section 4.12. EMPLOYEE BENEFIT PLANS. (a) Section 4.12(a) of the
Parent Disclosure Schedule contains a true and complete list of all employee
profit-sharing, incentive, deferred compensation, welfare, pension,
retirement, group insurance, bonus, severance, stock option, stock purchase,
and other employee benefit plans, programs or arrangements (oral or written),
including, without limitation, any such plan or arrangement that is an
"employee benefit plan", as such term is defined in section 3(3) of the
Employee Retirement Income Security Act of 1974 (a "Parent Plan"), as amended
("ERISA"), maintained or contributed to by Parent or by any trade or business
(an "ERISA Affiliate") that together with Parent would be deemed a "single
employer" within the meaning of section 4001(a)(14) of ERISA. With respect
to each Parent Plan, Parent has heretofore delivered to the Company true and
complete copies of (i) the Parent Plan (including all amendments thereto),
(ii) the annual reports and actuarial reports for
29
the last two years and (iii) any trust or other funding agreement relating
thereto (including all amendments to any such document) and the latest
financial statements thereof.
(b) No liability under Title IV of ERISA has been incurred by Parent or
any ERISA Affiliate and no condition exists that presents a material risk of
incurring any such liability. No prohibited transaction, as described in
section 406 of ERISA, has occurred with respect to any Parent Plan and no
tax has been imposed pursuant to section 4975 or 4976 of the Code. Full
payment has been made of all amounts which Parent or any ERISA Affiliate is
required to pay each Parent Plan and no Company Plan has incurred any
"accumulated funding deficiency" (as defined in section 412 of the Code),
whether or not waived. Each Parent Plan has been operated and administered in
accordance with its terms and applicable law, there are no pending or, to the
knowledge of Parent, threatened or anticipated claims with respect to any
Parent Plan (other than routine claims for benefits) and each Parent Plan
which is intended to be "qualified" under section 401(a) of the Code is so
qualified. No Parent Plan provides benefits with respect to current or
former employees of Parent or any ERISA Affiliate beyond their retirement or
other termination of service.
(c) Section 4.12(c) of the Parent Disclosure Schedule contains an
accurate and complete list of all employment, compensation, consulting,
benefit and severance plans, agreements, arrangements or understandings
between Parent, on the one hand, and any directors or officers of Parent, on
the other hand.
(d) Except as disclosed in Section 4.12(d) of the Parent Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
(either alone or together with any other event) will not (i) entitle any
current or former director, officer or employee of Parent or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such director, officer or employee or (iii) increase the
benefits or other rights of any such director, officer or employee under any
Company Plan, or create a funding obligation under any Parent Plan.
Section 4.13. ENVIRONMENTAL MATTERS. Except as would not, in the
aggregate, have a Material Adverse Effect on Parent, (i) Parent complies, and
Parent and its predecessors at all times during their existence have complied
with all applicable Environmental Laws; (ii) as of the date of this
Agreement, none of Parent or any of its predecessors has received any notice,
demand, letter, claim or request for information alleging that Parent, or any
of its predecessors may be in violation of or liable under any Environmental
Law, and none of Parent or any of its predecessors is subject to any
agreement, order or decree involving liability under any Environmental Law;
(iii) to the knowledge of Parent, there are no Hazardous Substances located
on the properties currently or formerly owned or operated by Parent or any of
its predecessors (including soil, groundwater and surface features and
buildings and structures thereon) (the "Parent Properties") the existence of
which would give rise to liability under Environmental Law, and none of the
Parent Properties contain, or has contained, any underground improvements,
including, but not limited to, treatment or storage tanks, pumps, gas or oil
xxxxx, or associated piping; (iv) to the knowledge of Parent, no Hazardous
Substance has
30
been disposed of or released at, to or from any of the Parent Properties; (v)
to the knowledge of Parent, Parent is not subject to liability for off-site
disposal of or contamination by any Hazardous Substance; (vi) to the
knowledge of Parent, there are no circumstances or conditions involving
Parent or any of its predecessors that would reasonably be expected to result
in any claims, liability, investigations, costs or losses, or any
restrictions on the ownership, use or transfer of any Parent Property
pursuant to any Environmental Law.
Section 4.14. TAX FREE REORGANIZATION. As of the date of this
Agreement, neither Parent nor any of its subsidiaries has taken any action or
failed to take any action, or has knowledge of any fact or circumstance,
which would prevent the Merger constituting as a reorganization within the
meaning of Section 368(a) of the Code.
Section 4.15. NO BROKERS. Parent has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Parent to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions
contemplated hereby, except that Parent has retained TD Securities (USA) Inc.
as its financial advisor.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.01. INTERIM OPERATIONS OF THE COMPANY. The Company covenants
and agrees that, except (i) as expressly contemplated by this Agreement, (ii)
as set forth in Section 5.1 of the Company Disclosure Schedule or (iii) as
agreed in writing by Parent (such consent in the case of clauses (a) - (c),
(e) - (i), (k), (m) and (n) not to be unreasonably withheld, and provided
that any debt, obligation or liability contemplated by clause (g) is
immediately prepayable without cost), the business of the Company and its
subsidiaries shall be conducted only in the ordinary and usual course,
consistent with past practice, and, to the extent consistent therewith, each
of the Company and its subsidiaries shall use commercially reasonable efforts
to preserve its business organization intact and maintain its existing
relations with customers, suppliers, employees, creditors and business
partners and neither the Company nor any of its subsidiaries shall:
(a) amend its certificate of incorporation or by-laws or similar
organizational documents;
(b) (i) declare, set aside or pay any dividend or other distribution
with respect to its capital stock, (ii) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock other than existing Company
Options; (iii) issue, sell, pledge, dispose of or encumber any securities (or
any rights to acquire such securities), other than Company Common Shares
issued upon the exercise of Company Options outstanding on the date hereof in
accordance with the terms of such Company Options as in effect on the date
hereof or (iv) split, combine or reclassify its outstanding capital stock;
31
(c) acquire or agree to acquire, any material assets or securities
either by purchase, merger or otherwise;
(d) transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber any material assets or securities other than in the ordinary and
usual course of business and consistent with past practice; or authorize,
propose or announce an intention to authorize or propose, or enter into an
agreement with respect to, any merger, consolidation or business combination
(other than the Merger);
(e) (i) grant any increase in the compensation payable or to become
payable to any of its executive officers or key employees, (ii)(A) adopt any
new, or (B) amend or otherwise increase, or, except as required pursuant to
agreements existing on the date hereof, accelerate the payment or vesting of
the amounts payable or to become payable under any existing, bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock purchase, insurance, pension, retirement or other employee benefit plan
agreement or arrangement, (iii) enter into any employment or severance
agreement with or, except in accordance with the existing written agreements,
grant any severance or termination pay to any officer, director or employee
other than if paid at Closing and deemed to be Expenses for purposes hereof
or (iv) except in the ordinary course of business, consistent with past
practice, increase the compensation or benefits of any employee;
(f) modify, amend or terminate or enter into any material contract or
waive, release or assign any material rights or claims, except in the
ordinary course of business and consistent with past practice;
(g) (i) incur or assume any long-term debt, or except in the ordinary
course of business, incur or assume any short-term indebtedness in amounts
not consistent with past practice; (ii) incur or modify any material
indebtedness or other liability; (iii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business and consistent with past practice; or (iv) make any loans,
advances or capital contributions to, or investments in, any other person
(other than to wholly owned subsidiaries of the Company or customary loans or
advances to employees in accordance with past practice); PROVIDED, that the
Company may take action in the case of either subclause of this clause (g)(i)
or (ii) without the consent of Parent so long as such items are prepayable at
no cost to Parent;
(h) change any of the accounting methods used by it unless required by
GAAP;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction of any such claims, liabilities
or obligations, in the ordinary course of business and consistent with past
practice, of claims, liabilities or obligations reflected or reserved against
in, or contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its consolidated subsidiaries and other than
32
payments made in connection with this Agreement and the transactions
contemplated hereby;
(j) transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber, directly or indirectly, any Channel or any interest in any SMR
Channel listed in Section 3.15(c) of the Company Disclosure Schedule;
(k) except as expressly contemplated by this Agreement, engage in any
transactions with any stockholders or other affiliates of the Company or
enter into any agreements with such stockholders or affiliates;
(l) fail to take any required actions (consistent with applicable law)
in order to maintain its Licenses, including, but not limited to, any
build-out and loading requirements, filings or any requirements that payments
be made. For purposes of this clause (l), "required" shall mean reasonably
required in order to maintain such licenses, including as a result of any
changes in law or regulation, industry practices, enforcement practices,
notices from relevant Governmental Entities or otherwise;
(m) make any material election with respect to Taxes;
(n) engage in any other material transaction, except as otherwise
permitted under clause (f) of this Section 5.01; or
(o) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize any of the foregoing.
Section 5.02. INTERIM OPERATIONS OF PARENT. Parent covenants and
agrees that, except (i) as expressly contemplated by this Agreement, (ii) as
set forth in Section 5.2 of the Parent Disclosure Schedule or (iii) as agreed
in writing by the Company, the business of Parent shall be conducted only in
the ordinary and usual course, consistent with past practice, and, to the
extent consistent therewith, Parent shall use commercially reasonable efforts
to preserve its business organization intact and maintain its existing
relations with customers, suppliers, employees, creditors and business
partners and Parent shall not:
(a) amend its certificate of incorporation or by-laws or similar
organizational documents;
(b) (i) declare, set aside or pay any dividend or other distribution
with respect its capital stock, (ii) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock or (iii) split, combine or
reclassify its outstanding capital stock;
(c) not take any action that would affect the rights of the Stockholders
in a manner that is more adverse than the effect of such action on holders of
Series B Preferred through Series E Preferred;
33
(d) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
Notwithstanding the foregoing, subject to Section 5.05(c), Parent and its
subsidiaries may engage in any transactions they consider appropriate if such
transactions are arm's length transactions with third parties or transactions
in compliance with Parent's Indenture with Marine Midland, as trustee, as in
effect on the date hereof.
Section 5.03. INVESTIGATION. Each of the Company and Parent shall
afford to one another and to one another's officers, employees, accountants,
counsel and other authorized representatives full and complete access during
normal business hours, throughout the period prior to the earlier of the
Effective Time or the date of termination of this Agreement, to its and its
subsidiaries' plants, properties, contracts, commitments, books, and records
and any report, schedule or other document filed or received by it pursuant
to the requirements of federal or state securities laws, shall use their
reasonable best efforts to cause their respective representatives to furnish
promptly to one another such additional financial and operating data and
other information as to its and its subsidiaries' respective businesses and
properties as the other or its duly authorized representatives may from time
to time reasonably request and shall cooperate with one another to (i)
produce all financial statements and other information necessary for Parent
to comply with its reporting obligations under the Exchange Act or required
by Parent to be included in any registration statement filed or to be filed
by Parent with the SEC, the cost and expense of such production to be borne
by the Company to the extent performed in accordance with past practice of
the Company or required pursuant to agreements of the Company other than this
Agreement (otherwise such cost and expense shall be borne by Parent), (ii)
conduct an audit of the Company and its subsidiaries for the year ended
December 31, 1997 (PROVIDED, that nothing contained herein shall obligate the
Company to complete such audit prior to the Effective Time). The parties
hereby agree that each of them will treat any such information in accordance
with the Joint Non-Disclosure Agreement, dated as of February 7, 1997,
between the Company and Parent (the "Confidentiality Agreement").
Section 5.04. STOCKHOLDER AGREEMENTS; CONSULTING/NON-COMPETITION
AGREEMENT. (a) The Company shall, prior to the Effective Time, deliver to
Parent a list setting forth the names and addresses of all Stockholders. The
Company shall furnish such information and documents as Parent may reasonably
request for the purpose of reviewing such list. The Company shall use its
reasonable efforts to cause each Stockholder to execute a written agreement
on or prior to the Effective Time, in substantially the form of EXHIBIT 5.4
hereto.
(b) The Company shall cause the Chief Executive Officer to enter into a
Consultant Agreement (the "Consultant Agreement") and a Non-Competition
Agreement (the "Non-Competition Agreement") with Parent substantially in the
forms of EXHIBITS E and F hereto.
34
Section 5.05. FILINGS; OTHER ACTION. The Company and Parent shall
each (a) promptly make the required filings and thereafter make any other
required submissions under the HSR Act and any other filings with any
Governmental Entity in connection with the Company's Licenses, (b) use
reasonable best efforts to cooperate with one another in (i) determining
whether any other filings are required to be made with, or consents, permits,
authorizations or approvals are required to be obtained from, any third party
or any Governmental Entity in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
and thereby, (ii) timely making all such filings and timely seeking all such
consents, permits, authorizations or approvals, including obtaining the
agreement of the holders of the OPIC Note to extend the period during which
no default or event of default shall have occurred under such note until a
date no earlier than 30 days after the Closing, and (iii) negotiating and
executing employment agreements with certain key employees currently employed
by the Company's subsidiaries as reasonably requested by Parent, (c) perform
its covenants set forth herein and otherwise use reasonable best efforts to
take, or cause to be taken, all other actions and do, or cause to be done,
all other things necessary, proper or advisable to consummate and make
effective the transactions contemplated hereby as promptly as practicable,
and (d) not take any action which would adversely affect its ability to
consummate the transactions contemplated hereby.
Section 5.06. FURTHER ASSURANCES. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers of the Company and Parent
shall take all such necessary action.
Section 5.07. NO SOLICITATION. From and after the date hereof,
the Company will not, and shall use its reasonable best efforts not to permit
any of its officers, directors, employees, attorneys, financial advisors,
agents or other representatives or those of any of its subsidiaries to,
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing confidential or non-public information) any Takeover Proposal from
any person, or engage in or continue discussions or negotiations relating
thereto. The Company will promptly (but in no case later than 48 hours)
notify Parent of the receipt of any Takeover Proposal, including the material
terms and conditions thereof (and shall inform Parent within such time period
of any material amendments to any such Takeover Proposal) and the identity of
the person or group making such Takeover Proposal. As used in this
Agreement, "Takeover Proposal" shall mean any bona fide proposal or offer
(other than a proposal or offer by Parent or any of its subsidiaries) for a
merger, consolidation or other business combination involving, or any
purchase of at least 25% of the assets or voting securities of, the Company,
or any similar transaction.
Section 5.08. PUBLIC ANNOUNCEMENTS. The Company and Parent will
consult with each other before issuing any press release relating to this
Agreement or the transactions contemplated hereby and shall not issue any
such press release prior to such consultation, except as may be required by
law or by obligations pursuant to any listing agreement with any national
securities exchange.
35
Section 5.09. CERTIFICATE OF DESIGNATION. No later than
immediately prior to the Effective Time, Parent shall file an Amended and
Restated Certificate of Incorporation authorizing the issuance of the Parent
Preferred Shares with the Delaware Secretary of State.
Section 5.10. STOCKHOLDER APPROVAL. Parent shall promptly use its
reasonable best efforts to take all action necessary to cause the holders of
its stock to approve and adopt the merger, this agreement and the other
transactions contemplated hereby within 21 days after the date hereof.
Section 5.11. TAX COVENANTS. Notwithstanding any other provision
of this Agreement, all transfer, documentary, sales, use, registration and
other such Taxes (including, without limitation, all applicable real estate
transfer or gains taxes and stock transfer Taxes), any penalties, interest
and additions to Tax and fees incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Stockholders. Each
party to this Agreement shall cooperate in the timely making of all filings,
returns, reports and forms as may be required in connection therewith. After
the Closing, the parties hereto shall (i) provide, and shall cause each of
their affiliates to provide, to the other party and its affiliates (at the
expense of the requesting party) such information relating to Company and its
subsidiaries as such party may reasonably request with respect to Tax matters
and (ii) cooperate with each other in the conduct of any audit or other
proceeding with respect to any Tax involving Company and its subsidiaries and
shall retain or cause to be retained all books and records pertinent to
Company and its subsidiaries for each Taxable Period or portion thereof
ending on or prior to the date of Closing until the expiration of the
applicable statute of limitations (giving effect to any and all extensions
and waivers). At the Closing, the Company shall deliver to Parent, a
properly executed statement conforming to the requirements of Treasury
Regulation Sections 1.897-2(h)(1)(I) and 1.445-2(c)(3) and the Company
further agrees to provide notification to the Internal Revenue Service
required pursuant to Treasury Regulation Section 1.897-2(h)(2).
Section 5.12. INTERIM FINANCIAL STATEMENTS. Within 30 days after
the end of each calendar month after the date of this Agreement but prior to
Closing, the Company will deliver to Parent unaudited balance sheets with
respect to the Company and its subsidiaries for such calendar month and for
year-to-date. All such financial statements shall fairly present the
financial position, results of operations and changes in financial position
of the Company as at the dates or for the periods indicated and in accordance
with GAAP. All unaudited financial statements delivered pursuant to this
Section shall be prepared on a basis consistent with the Company Financial
Statements.
Section 5.13. FUNDING. (a) Parent shall use commercially
reasonable efforts to obtain the Funding.
(b) Provided that such amounts are Expenses, simultaneously with
the Effective Time, Parent shall pay $4.7 million (or $4.8 million if Parent
has not obtained the Funding on or prior to December 31, 1997) in cash
directly to those persons and in
36
the amounts as set forth in Section 5.13 of the Company Disclosure Schedule
(as it may be updated by the Company from time to time).
Section 5.14. INDEMNIFICATION. (a) For a period of six years
from and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects, to the extent consistent
with law, the obligations of the Company pursuant to (i) each indemnification
agreement currently in effect between the Company and each person who is or
was a director or officer of the Company at or prior to the Effective Time
and (ii) any indemnification provision under the Company's Restated
Certificate of Incorporation or by-laws as each is in effect on the date
hereof. The Certificate of Incorporation and by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's Restated Certificate of
Incorporation and by-laws on the date of this Agreement, which provisions
shall not be amended, repealed or otherwise modified for a period of six
years after the Effective Time in any manner that would adversely affect the
rights of any person entitled to be indemnified thereunder.
(b) This Section shall survive the consummation of the Merger and shall
be binding on all successors and assigns of Parent and the Surviving
Corporation.
Section 5.15. NOTIFICATION. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (i) any
representation or warranty made by it or contained in this Agreement becoming
untrue or inaccurate in any material respect and (ii) the failure by it to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement. For
purposes of this Section 5.15, any references in the representations and
warranties to "as of the date of this Agreement" or "as of the date hereof"
or the like shall be ignored. No notification pursuant to this Section 5.15
shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
Section 5.16 LIQUIDATION OF PARENT. Prior to the Closing or the
termination of this Agreement, Parent shall not enter into an agreement with
a third party regarding a Corporate Transaction (as defined in Article
V.B.1.(e)(i) the Amended and Restated Certificate of Incorporation of
Parent); PROVIDED, HOWEVER, that if Parent wishes to enter into such
agreement, it shall so notify the Company and all references to December 31,
1997 (or January 15, 1998 if Parent has not obtained the Funding on or prior
to December 31, 1997) in this Agreement shall thereupon be changed to the
earlier of (A) December 31, 1997 (or January 15, 1998 if Parent has not
obtained the Funding on or prior to December 31, 1997) and (B) the date
immediately prior to the entering into of such agreement. Accordingly,
depending on whether, on the one hand, all conditions to the obligations of
the parties to effect the Merger are satisfied or waived by such time, or, on
the other hand, they are not, the Merger shall be effected or this Agreement
shall be terminated, in each case prior to the entering into of such
agreement regarding a Corporation Transaction. If the Merger is to be
consummated, the notice provisions set forth in Section 1.02 shall not be
obviated by the foregoing.
37
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger is
subject to the conditions that:
(a) This Agreement shall have been duly adopted by the requisite vote of
holders of Company Shares.
(b) The transactions contemplated hereby, including the amendment of
Parent's Amended and Restated Certificate of Incorporation, shall
have been duly approved by the requisite vote of holders of Parent
Shares.
(c) No statute, rule, regulation, executive order, writ, decree, ruling
or injunction shall have been enacted, entered, promulgated or enforced
by any court or other tribunal or governmental body or authority which
prohibits the consummation of the Merger and no litigation or
proceeding shall have been commenced by a Governmental Entity which
would prohibit such consummation. In the event any order, decree or
injunction shall have been issued, each party shall use its reasonable
efforts to remove any such order, decree or injunction.
(d) Any applicable waiting period under the HSR Act shall have expired
or been terminated, any filing with, or permit, authorization, consent
or approval of any Governmental Entity or any third party shall have
been made or obtained, except where the failure to obtain such other
approvals would not, in the aggregate, have a Material Adverse Effect
on the Company or Parent, as the case may be.
Section 6.02. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger is further subject
to the conditions that:
(a) The representations and warranties of Parent contained herein shall
be true and correct (without giving effect to the materiality
qualifiers contained in such representations and warranties) as of the
date hereof and as of the Effective Time (excluding those
representations which are made as of a specific date which shall be
true and correct as of such date) with the same effect as though made
as of the Effective Time unless the failure to be so true and correct
would not in the aggregate have a Material Adverse Effect on Parent.
(b) Parent shall have performed in all material respects all obligations
and complied with all covenants required by this Agreement to be
performed or complied with by it prior to the Effective Time.
38
(c) Parent shall have delivered to the Company an opinion dated the
Closing Date, of Parent's legal counsel, substantially in the form of
Exhibit H hereto. Parent shall have delivered to the Company a
certificate, dated the Effective Time and signed by its Chairman of the
Board and Chief Executive Officer or a Senior Vice President,
certifying to both such effects, and such other evidence as the Company
shall reasonably request as to the satisfaction of the conditions
hereto.
(d) Parent shall not have suffered a Material Adverse Effect from the
date of this Agreement to the Closing Date (or, if Parent shall have
suffered such effect, it shall have been cured).
(e) The Investor Rights Agreement in the form of Exhibit I shall be in full
force and effect as of the Closing.
Section 6.03. CONDITIONS TO OBLIGATIONS OF PARENT TO EFFECT THE
MERGER. The obligation of Parent to effect the Merger is further subject to
the conditions that:
(a) The representations and warranties of the Company contained
herein shall be true and correct (without giving affect to the
materiality qualifiers contained in such representations and
warranties) as of the date hereof and as of the Effective Time
(excluding those representations which are made as of a specific
date which shall be true and correct as of such date) with the same
effect as though made as of the Effective Time unless the failure to
be so true and correct would not in the aggregate have a Material
Adverse Effect on the Company.
(b) The Company shall have performed in all material respects all
obligations and complied with all covenants required by this Agreement
to be performed or complied with by it prior to the Effective Time.
(c) The Company shall not have suffered a Material Adverse Effect
from the date of this Agreement to the Closing Date (or, if the Company
shall have suffered such effect, it shall have been cured).
(d) No federal, state, local or foreign statute, law, ordinance,
rule, regulation, decree or order, applicable to the Company or any of
its subsidiaries, including without limitation, the Licenses and
Channels of the Company and its subsidiaries, shall have been adopted
or officially proposed by an applicable Governmental Entity, which
would, in the aggregate, have a Material Adverse Effect on the Company.
(e) Fewer than 7.5% of the outstanding Company Shares shall be
Dissenting Shares.
(f) The Company shall have delivered to Parent opinions, dated the
Closing Date, of the Company's and its subsidiaries' legal counsel,
substantially in the form of EXHIBIT G hereto. The Company shall have
delivered to Parent a certificate,
39
dated the Effective Time and signed by its Chief Executive Officer
and President or a Senior Vice President, certifying to the effects set
forth in (a)-(e), and such other evidence as Parent shall reasonably
request as to the satisfaction of the conditions hereto.
(g) Parent shall be reasonably satisfied that the transactions
contemplated hereby do not require registration under the Securities
Act (PROVIDED, that to the extent registration under the Securities Act
is required as a result of actions taken by Parent (other than the
actions set forth herein), then this clause (g) shall not be a
condition to Parent's obligation to consummate the transactions
contemplated hereby).
Section 6.04. FRUSTRATION OF CLOSING CONDITIONS. None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section
6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was
directly caused by such party's failure to use commercially reasonable
efforts to consummate the Merger and the other transactions contemplated by
this Agreement, as required by and subject to Section 5.05.
ARTICLE VII
TERMINATION, WAIVER, AMENDMENT
Section 7.01. TERMINATION OR ABANDONMENT. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Effective Time:
(a) by the mutual written consent of the Company and Parent;
(b) by either the Company or Parent if the Effective Time shall
not have occurred on or before December 31, 1997 (or January 15, 1998
if Parent has not obtained the Funding on or prior to December 31,
1997); PROVIDED, that the party seeking to terminate this Agreement
pursuant to this clause 7.01(b) shall not have breached in any material
respect its obligations under this Agreement in any manner that shall
have proximately contributed to the failure to consummate the Merger on
or before such date;
(c) by either the Company or Parent if (i) a statute, rule,
regulation or executive order shall have been enacted, entered or
promulgated prohibiting the consummation of the Merger substantially on
the terms contemplated hereby or (ii) an order, decree, ruling or
injunction shall have been entered permanently restraining, enjoining
or otherwise prohibiting the consummation of the Merger and such order,
decree, ruling or injunction shall have become final and
non-appealable; provided, that the party seeking to terminate this
Agreement pursuant to this clause 7.01(c)(ii) shall have used its
reasonable best efforts to remove such injunction, ruling, order or
decree;
(d) by the Company or Parent if there shall have been a breach by
the other of any of its representations, warranties, covenants or
agreements contained in this Agreement which would have a Material
Adverse Effect and such breach shall
40
not have been cured within 30 days after notice thereof shall have
been received by the party alleged to be in breach;
(e) by the Company if the requisite vote of its stockholders as
contemplated by Section 5.10, or the other approvals or waivers set
forth in Section 4.3, and the first sentence of Section 4.4 (excluding
any Blue Sky filings or approvals), of the Parent Disclosure Schedule,
have not been obtained on or prior to the date which is 21 days from
the date hereof; PROVIDED, that the Company has given Parent at least 7
days notice of such proposed termination and; PROVIDED, FURTHER, that
the Company may not terminate this Agreement pursuant to this Section
7.01(e) if such vote (or such other approvals or consents) shall be
obtained prior to such termination; or
(f) By Parent if the requisite vote of the holders of the Company
Shares has not been obtained on or prior to December 1, 1997.
In the event of termination of this Agreement pursuant to this Section
7.01, this Agreement shall terminate (except for the confidentiality
agreement referred to in the last sentence of Section 5.03 and Section 8.02),
and there shall be no other liability on the part of the Company or Parent to
the other except liability arising out of a willful breach of this Agreement.
Section 7.02. AMENDMENT OR SUPPLEMENT. At any time prior to the
Effective Time, whether before or after the approval of this Agreement by the
stockholders of Parent or the Company this Agreement may be amended or
supplemented in writing by the Company and Parent with respect to any of the
terms contained in this Agreement (PROVIDED, that no amendment shall be made
subsequent to receipt of stockholder approval that by law requires a further
approval of such stockholders without obtaining such approval).
Section 7.03. EXTENSION OF TIME, WAIVER, ETC. At any time prior to the
Effective Time, the Company and Parent may: (a) extend the time for the
performance of any of the obligations or acts of the other party, (b) waive
any inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other party
contained herein. Notwithstanding the foregoing no failure or delay by the
Company or Parent in exercising any right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any other right hereunder. 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 signed on behalf of
such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall survive for a period of
one year
41
following the Closing, provided that if any claim is made by Parent prior to
the expiration of such one year period, such claim shall survive until it is
finally determined. The Stockholders shall indemnify and hold Parent
harmless for damages (including as a result of any diminution of value as a
result of such breach or compared to the value if there had been no such
breach) resulting from any breach of the representations, warranties,
covenants and agreements of the Company contained in this Agreement;
PROVIDED, that the Stockholders will not have any liability under this
Section 8.01 in respect of any claim for a breach of a representation or
warranty of the Company contained in this Agreement until the aggregate
amount of all damages to Parent (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' and accountants' fees and
expenses in connection with any action, suit or proceeding) ("Losses") with
respect to breaches of representations and warranties equals or exceeds
$100,000, at which time all Losses shall be recoverable. Other than as set
forth above, no representation or warranty shall survive the Effective Time.
Following the Effective Time, the sole and exclusive remedy for any claim
arising under this Agreement (other than claims arising out of fraud) and
adjustments set forth in Article II hereof shall be the Escrow Fund.
Section 8.02. EXPENSES. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expenses, except as otherwise contemplated hereby; PROVIDED,
HOWEVER, that one-half of the expenses incurred in connection with the audit
by KPMG of the Company's June 30, 1997 financial statements shall be
considered Expenses and one half shall be borne by Parent, unless the Merger
is not consummated, in which case such expenses shall be paid by Parent.
Section 8.03. COUNTERPARTS; EFFECTIVENESS. This Agreement may be
executed in two or more consecutive counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
Section 8.04. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
regard to the principles of conflicts of laws thereof.
Section 8.05. NOTICES. All notices and other communications hereunder
shall be in writing (including telecopy or similar writing) and shall be
effective upon receipt by the following:
to the Company:
RMD
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Fax: 000-000-0000
42
Attention: Xxxxxx Xxxxxx
with a copy to:
the Representative, at such address as he may designate in writing
and to:
Xxxx Xxxx
Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
to Parent:
International Wireless Communications Holdings, Inc.
000 Xxxxx Xx Xxxxxx Xxxx
Xxxxx 0000
Xxx Xxxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxx X. Xxxxxxx, Xx.
with a copy to:
Xxxxxxx X. Xxxxx
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
and a copy to:
Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Fax: 000-000-0000
or to such other address as may be specified by such notice.
Section 8.06. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties, provided that Sub may assign
its rights and obligations hereunder to any wholly owned subsidiary of
Parent, and the parties shall execute such documents as may
43
be necessary to reflect such assignment. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
Section 8.07. SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable, such
provision shall be interpreted to be only so broad as is enforceable.
Section 8.08. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
money damages or other remedy at law would not be sufficient or adequate
remedy for any breach or violation of, or a default under, this Agreement by
them and that in addition to all other remedies available to them, each of
them shall be entitled to the fullest extent permitted by law to an
injunction restraining such breach, violation or default or threatened
breach, violation or default and to any other equitable relief, including,
without limitation, specific performance, without bond or other security
being required.
Section 8.09. MISCELLANEOUS. This Agreement: (a) along with the
Confidentiality Agreement, the Amended and Restated Certificate of
Incorporation of Parent, the Seventh Amended and Restated Investor Rights
Agreement attached hereto as EXHIBIT H and the Escrow Agreement constitutes
the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, between the parties, or any of them,
with respect to the subject matter hereof and thereof; and (b) except as
contemplated by Section 5.14 hereof, is not intended to and shall not confer
upon any Person other than the parties hereto any rights or remedies
hereunder.
Section 8.10. HEADINGS. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.11. SUBSIDIARIES; AFFILIATES. References in this Agreement
to "subsidiaries" of the Company or Parent shall mean any corporation or
other form of legal entity of which 50% or more of the outstanding voting
securities having general voting powers, general partnership interests or
equity interests are directly or indirectly owned by the Company or Parent,
as the case may be. References in this Agreement to "affiliates" shall mean,
as to any person, any other person which, directly or indirectly, controls,
or is controlled by, or is under common control with, such person. As used in
this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of
management or policies of a Person, whether through the ownership of
securities or partnership of other ownership interests, by contract or
otherwise. References in the Agreement to "person" shall mean an individual,
a corporation, a partnership, an association, a trust or any other entity or
organization, including, without limitation, a governmental body or authority.
44
Section 8.12. CONSENT TO JURISDICTION. The parties hereto agree that the
federal and state courts of the State of Delaware shall be the exclusive forum
for the resolution of disputes arising under this Agreement or in connection
with the transactions contemplated hereby, consent to such jurisdiction, waive
any objection to venue or forum therein and agree not to bring any actions in
any other jurisdiction (other than to enforce final judgements of such courts).
The parties acknowledge that service of process by any means specified in
Section 8.05 hereof shall be deemed valid service of process for all purposes in
connection herewith.
45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
INTERNATIONAL WIRELESS
COMMUNICATIONS HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
RADIO MOVIL DIGITAL AMERICAS, INC.
By:
--------------------------------
Name:
Title:
46
