===============================================================================
AGREEMENT AND PLAN OF MERGER
AND PLAN OF EXCHANGE
among
IWL HOLDINGS CORP.,
IWL COMMUNICATIONS, INCORPORATED,
IWL ACQUISITION CORP.,
CAPROCK COMMUNICATIONS CORP.,
CAPROCK ACQUISITION CORP.
and
CAPROCK FIBER NETWORK, LTD.
February 16, 1998
===============================================================================
TABLE OF CONTENTS
PAGE
----
ARTICLE I - THE MERGERS AND THE INTEREST EXCHANGE. . . . . . . . . . . . . . . . . . 2
1.1 The Mergers and the Interest Exchange . . . . . . . . . . . . . . . . . . 2
1.2 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Mergers and the Interest Exchange . . . . . . . . . . . . . 3
1.4 Articles of Incorporation: Bylaws . . . . . . . . . . . . . . . . . . . . 3
1.5 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Shares to Be Issued in the Mergers and the Interest Exchange;
Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Dissenters' Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.8 No Further Ownership Rights in IWL Common Stock, Company
Common Stock and Partnership Interests. . . . . . . . . . . . . . . . . . 7
1.9 Tax Consequences and Accounting Treatment . . . . . . . . . . . . . . . . 7
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 8
2.1 Organization and Qualification, Subsidiaries . . . . . . . . . . . . . . . 8
2.2 Articles of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . 8
2.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.8 Tax and Other Returns and Reports. . . . . . . . . . . . . . . . . . . . . 11
2.9 Restrictions on Business Activities. . . . . . . . . . . . . . . . . . . . 12
2.10 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Agreements, Contracts and Commitments. . . . . . . . . . . . . . . . . . . 14
2.13 Interested Party Transactions. . . . . . . . . . . . . . . . . . . . . . . 16
2.14 Governmental Authorizations. . . . . . . . . . . . . . . . . . . . . . . . 16
2.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.16 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.17 Minute Books and Stock Records . . . . . . . . . . . . . . . . . . . . . . 16
2.18 Environmental and OSHA . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.19 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . 17
2.20 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.21 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.22 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.23 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.24 Registration Statement; Joint Proxy Statement. . . . . . . . . . . . . . . 19
2.25 Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.26 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.27 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.28 Ownership of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.29 Certain Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . 21
2.30 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . 21
i
ARTICLE IIA - REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. . . . . . . . . . . 21
2A.1 Organization and Qualification, Subsidiaries . . . . . . . . . . . . . . . 22
2A.2 Agreement of Limited Partnership . . . . . . . . . . . . . . . . . . . . . 22
2A.3 Partnership Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2A.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2A.5 Partnership Financial Statements . . . . . . . . . . . . . . . . . . . . . 23
2A.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 23
2A.7 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2A.8 Tax and Other Partnership Returns and Reports. . . . . . . . . . . . . . . 24
2A.9 Restrictions on Business Activities. . . . . . . . . . . . . . . . . . . . 25
2A.10 Title of Properties; Absence of Liens and Encumbrances; Condition of
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2A.11 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2A.12 Agreements, Contracts and Commitments. . . . . . . . . . . . . . . . . . . 27
2A.13 Interested Party Transactions. . . . . . . . . . . . . . . . . . . . . . . 28
2A.14 Governmental Authorizations. . . . . . . . . . . . . . . . . . . . . . . . 28
2A.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2A.16 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2A.17 Environmental and OSHA . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2A.18 Brokers' and Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . 30
2A.19 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2A.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2A.21 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2A.22 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2A.23 Registration Statement; Joint Proxy Statement. . . . . . . . . . . . . . . 31
2A.24 Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2A.25 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2A.26 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2A.27 Ownership of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 33
2A.28 Certain Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . 33
2A.29 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF IWL
AND THE MERGER SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . 34
3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . 34
3.2 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.3 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.4 SEC Documents; IWL Financial Statements. . . . . . . . . . . . . . . . . . 36
3.5 Brokers and Finders' Fees. . . . . . . . . . . . . . . . . . . . . . . . . 36
3.6 Registration Statement; Joint Proxy Statement. . . . . . . . . . . . . . . 36
3.7 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . 36
3.8 Ownership of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.10 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 37
3.11 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.12 Tax and Other Returns and Reports. . . . . . . . . . . . . . . . . . . . . 38
3.13 Restrictions on Business Activities. . . . . . . . . . . . . . . . . . . . 39
3.14 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.15 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.16 Agreements, Contracts and Commitments. . . . . . . . . . . . . . . . . . . 40
ii
3.17 Governmental Authorizations. . . . . . . . . . . . . . . . . . . . . . . . 42
3.18 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.19 Minute Books and Stock Records . . . . . . . . . . . . . . . . . . . . . . 42
3.20 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.21 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.22 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.23 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.24 FIRPTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.25 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.26 Certain Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . 45
3.27 Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.28 Interested Party Transactions. . . . . . . . . . . . . . . . . . . . . . . 45
3.29 Environmental and OSHA . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.30 Representations Complete . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.31 Representations and Warranties with Respect to ICEL. . . . . . . . . . . . 46
ARTICLE IV - CONDUCT PRIOR TO THE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . 47
4.1 Conduct of Business of the Company and the Partnership . . . . . . . . . . 47
4.2 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.3 Conduct of Business of IWL . . . . . . . . . . . . . . . . . . . . . . . . 49
4.4 Control of Other Party's Business; Transition Planning . . . . . . . . . . 51
ARTICLE V - ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.1 Joint Proxy Statement and the Registration Statement.. . . . . . . . . . . 51
5.2 IWL and Company Shareholders' Meetings, Partners' Meeting,
and Consummation of the Mergers and the Interest Exchange. . . . . . . . . 52
5.3 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.6 Public Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.7 Filings; Other Action. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.8 Affiliate Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.9 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.10 Blue Sky Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.11 Best Efforts, Additional Documents and Further Assurances. . . . . . . . . 54
5.12 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.13 Pooling Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.14 Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.15 Post-Merger Board of Directors and Officers of Holdings. . . . . . . . . . 55
5.16 No Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.17 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE VI - CONDITIONS TO THE MERGERS AND THE INTEREST EXCHANGE . . . . . . . . . . 56
6.1 Conditions to Obligations of Each Party to Effect the
Mergers and the Interest Exchange. . . . . . . . . . . . . . . . . . . . . 56
6.2 Additional Conditions to Obligations of the Company and the
Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.3 Additional Conditions to the Obligations of IWL and the Merger
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
iii
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . 59
7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VIII - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . 62
8.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.5 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.7 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.8 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.9 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.11 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
iv
LIST OF EXHIBITS
----------------
Exhibit 1.6(a) Company Merger Consideration and Interest Exchange
Consideration
Exhibit 5.12 Form of Employment Agreement
LIST OF SCHEDULES
-----------------
Company Disclosure Schedule
Partnership Disclosure Schedule
IWL Disclosure Schedule
v
AGREEMENT AND PLAN OF MERGER
AND PLAN OF EXCHANGE
This AGREEMENT AND PLAN OF MERGER AND PLAN OF EXCHANGE (this "Agreement")
is made and entered into as of February 16, 1998, among IWL Communications,
Incorporated, a Texas corporation ("IWL"), IWL Holdings Corp., a Texas
corporation ("Holdings"), IWL Acquisition Corp., a Texas corporation ("I-Sub")
and a wholly owned subsidiary of Holdings, CapRock Communications Corp., a
Texas corporation (the "Company"), CapRock Acquisition Corp., a Texas
corporation ("C-Sub") and a wholly owned subsidiary of Holdings, and CapRock
Fiber Network, Ltd., a Texas limited partnership (the "Partnership").
RECITALS
A. The Boards of Directors of each of Holdings, the Company, IWL, I-Sub,
C-Sub and CapRock Systems, Inc., the general partner of the Partnership (the
"General Partner"), believe it is in the best interests of each company, the
Partnership and their respective shareholders and partners, as the case may be,
that (a) IWL and I-Sub combine into a single company through the statutory
merger of I-Sub with and into IWL (the "IWL Merger"), (b) that the Company and
C-Sub combine into a single company through the statutory merger of C-Sub with
and into the Company (the "Company Merger" and, together with the IWL Merger,
the "Mergers"), and (c) upon consummation of the Mergers, all of the general and
limited partnership interests (collectively, the "Partnership Interests") in the
Partnership be exchanged (the "Interest Exchange") for shares of the common
stock, par value $.01 per share, of Holdings (the "Holdings Common Stock") in
the manner and order as hereinafter set forth, and, in furtherance thereof, have
approved and adopted the Mergers, the Interest Exchange and this Agreement.
B. Pursuant to the Mergers and the Interest Exchange, among other things,
the outstanding shares of IWL Common Stock (as hereinafter defined) and Company
Common Stock (as hereinafter defined) shall be converted into shares of Holdings
Common Stock and the outstanding Partnership Interests shall be exchanged for
shares of Holdings Common Stock, all at the rates determined herein.
C. Holdings, IWL, the Company, the Partnership, I-Sub and C-Sub desire to
make certain representations and warranties and other agreements in connection
with the Mergers and the Interest Exchange.
D. IWL is unwilling to enter into this Agreement (and effect the
transactions contemplated hereby) unless, contemporaneously with the execution
and delivery hereof, (a) certain record and beneficial holders of shares of
Company Common Stock and the Partners (as hereinafter defined) enter into an
agreement (the "Owners Agreement") providing for certain matters with respect to
their shares of Company Common Stock or their Partnership Interests, as the case
may be (including, without limitation, subject to the express provisions and
conditions of that agreement, to vote such shares or Partnership Interests, as
the case may be, in favor of the Company Merger and the Interest Exchange) and
(b) certain members of the Company's management enter into employment agreements
as provided in Section 5.12 hereof.
E. The Company and the Partnership are unwilling to enter into this
Agreement (and effect the transactions contemplated hereby) unless,
contemporaneously with the execution and delivery hereof, (a) certain record and
beneficial holders of shares of IWL Common Stock enter into an agreement (the
"IWL Shareholders Agreement") providing for certain matters with respect to
their shares of IWL Common Stock (including, without limitation, subject to the
express provisions and conditions of that agreement, to vote such shares in
favor of the IWL Merger) and (b) certain members of IWL's management enter into
employment agreements as provided in Section 5.12 hereof.
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
G. The parties intend that the Mergers and the Interest Exchange be
treated as a pooling of interests for accounting purposes.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE MERGERS AND THE INTEREST EXCHANGE
1.1 THE MERGERS AND THE INTEREST EXCHANGE. At the Effective Time (as
defined in Section 1.2) and subject to and upon the terms and conditions of
this Agreement and the applicable laws of Texas, (a) C-Sub shall be merged
with and into the Company in the Company Merger, the separate corporate
existence of C-Sub shall cease, and the Company shall continue as the
surviving corporation in the Company Merger, (b) I-Sub shall be merged with
and into IWL in the IWL Merger, the separate corporate existence of I-Sub
shall cease, and IWL shall continue as the surviving corporation in the IWL
Merger, and (c) all of the outstanding Partnership Interests of the
Partnership shall be contributed to Holdings pursuant to, and in the order
contemplated by, the Interest Exchange. The Company and IWL as the surviving
corporations after the Mergers are hereinafter sometimes collectively referred
to as the "Surviving Corporations" and individually as a "Surviving
Corporation."
1.2 EFFECTIVE TIME.
(a) As promptly as practicable after the satisfaction or waiver of
the conditions set forth in Article VI and the consummation of the Closing
referred to in this Section 1.2, the parties hereto shall cause the Company
Merger and the IWL Merger to be consummated by filing Articles of Merger
("Articles of Merger") with the Secretary of State of Texas in such form as
required by, and executed in accordance with the relevant provisions of, the
laws of the State of Texas (the time of such filings in Texas and the issuance
of a certificate of merger with respect to each of the Company Merger and the
IWL Merger by the Secretary of State of Texas being the "Effective Time").
(b) At the Effective Time, the General Partner shall execute and
deliver to Holdings a contribution agreement substantially in the form agreed
upon by the parties hereto (a "Contribution Agreement") pursuant to which the
General Partner shall contribute its general Partnership Interest in the
Partnership to Holdings. Immediately thereafter, Holdings shall contribute the
general Partnership Interest in the Partnership to the Company. Immediately
following the consummation of the contribution of the general Partnership
Interest to the Company and at the Effective Date, each of the limited
partners in the Partnership (the "Limited Partners" and, collectively with the
General Partner, the "Partners") shall execute and deliver to Holdings a
Contribution Agreement pursuant to which the Limited Partners shall contribute
their respective limited Partnership Interests in the Partnership to Holdings.
The Partnership shall file a certificate of amendment to its certificate of
limited partnership to reflect that the Company has become the new general
partner of the Partnership and that the General Partner is the withdrawing
general partner. The Partnership and the General Partner hereby consent to
(and each Contribution Agreement delivered hereunder by a Limited Partner
shall include such Limited Partner's consent to) the transfers of the
Partnership Interests contemplated by this Agreement and hereby agree (and
each Contribution Agreement delivered hereunder by a Limited Partner shall
include such Limited Partner's agreement) that, effective at the Effective
Time and subject to the consummation of the transactions contemplated hereby,
Holdings shall become a substituted limited partner in the Partnership and the
Company shall become a substituted general partner in the Partnership and the
status of the Partners as partners in the Partnership shall cease. The
Company hereby elects, effective as of the Effective Time and subject to the
consummation of the transactions contemplated hereby, to reconstitute the
Partnership, to continue as the general partner of the Partnership and to
continue the Partnership and its business.
(c) The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Xxxxxx Xxxxx Xxxx Xxxx & Xxxxx,
P.C., 0000 Xxxxxxxx Xxxxx, 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000 at 10:00
a.m., local time, on the date of the Effective Time (the "Closing Date").
2
1.3 EFFECT OF THE MERGERS AND THE INTEREST EXCHANGE.
(a) At the Effective Time, the effect of the Mergers shall be as
provided in the applicable provisions of the laws of the State of Texas.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time (a) all the estate, assets, property, rights, privileges,
powers and franchises of the Company and C-Sub shall vest in the Company as
the Surviving Corporation, and all debts, liabilities and obligations of the
Company and C-Sub shall become the debts, liabilities and obligations of the
Company as the Surviving Corporation and (b) all of the estate, assets,
property, rights, privileges, powers and franchises of IWL and I-Sub shall
vest in IWL as the Surviving Corporation, and all debts, liabilities and
obligations of IWL and I-Sub shall become the debts, liabilities and
obligations of IWL as the Surviving Corporation. After the consummation of
the Mergers, each of the Surviving Corporations shall be a direct, wholly
owned subsidiary of Holdings.
(b) At the Effective Time, the Company shall become the sole
successor general partner of the Partnership and Holdings shall become the
sole successor limited partner of the Partnership.
1.4 ARTICLES OF INCORPORATION: BYLAWS.
(a) The Articles of Merger as to both of the Company Merger and the
IWL Merger shall be in substantially the form agreed upon by the parties
hereto, and shall provide that at the Effective Time as to the Company Merger
and the IWL Merger, as the case may be, the Articles of Incorporation of the
Surviving Corporation shall be amended as therein provided, and may thereafter
be amended as provided by law and such Articles of Incorporation.
(b) The Bylaws of the Company and IWL as in effect immediately
prior to the Effective Time as to the Company Merger and the IWL Merger,
respectively, shall be the Bylaws of the Company and IWL, respectively, each
as a Surviving Corporation, until thereafter amended.
1.5 DIRECTORS AND OFFICERS. The directors of each Surviving Corporation
shall be Xxxxxxxx X. Xxxxxxxx, Xxxx X. Xxxxxxxx, Xx. and Xxx Xxxxxx, each to
hold such position in accordance with the Articles of Incorporation and Bylaws
of such Surviving Corporation, and the officers of each Surviving Corporation
shall be Xxxx X. Xxxxxxxx, Xx., who shall hold the office of Chief Executive
Officer, Xxxxxxxx X. Xxxxxxxx, who shall hold the office of President, and Xxx
Xxxxxx, who shall hold the offices of Vice President, Treasurer and Secretary,
in each case until their respective successors are duly elected or appointed
and qualified.
1.6 SHARES TO BE ISSUED IN THE MERGERS AND THE INTEREST EXCHANGE; EFFECT
ON CAPITAL STOCK. The manner and basis of converting the shares of common
stock of Holdings, the Surviving Corporations and I-Sub and C-Sub
(collectively, the "Merged Corporations" and individually a "Merged
Corporation"), and of exchanging the Partnership Interests, at the Effective
Time by virtue of the Mergers and the Interest Exchange and without any action
on the part of any of the parties hereto or the holder of any of such
securities, shall be as hereinafter set forth in this Section 1.6.
(a) CONVERSION OF SHARES AND EXCHANGE OF PARTNERSHIP INTERESTS.
(i) Each share of the common stock, par value $.01 per share (the
"IWL Common Stock"), of IWL issued and outstanding immediately before the
Effective Time (other than those held in the treasury of IWL) and all rights
in respect thereof shall at the Effective Time, without any action on the part
of any holder thereof, forthwith cease to exist and be converted into and
become exchangeable for one share of Holdings Common Stock (the "IWL Merger
Consideration," and such ratio of IWL Common Stock to Holdings Common Stock
being herein referred to as the "IWL Exchange Ratio").
(ii) Each share of the common stock, par value $.01 per share (the
"Company Common Stock"), of the Company issued and outstanding immediately
before the Effective Time (other than those held in the treasury
3
of the Company and any Dissenters' Shares (as defined and to the extent
provided in Section 1.7(a)) and all rights in respect thereof shall at the
Effective Time, without any action on the part of any holder thereof,
forthwith cease to exist and be converted into and become exchangeable for
that number of shares of Holdings Common Stock set forth in Exhibit 1.6(a)
attached hereto (the "Company Merger Consideration," and such ratio of the
Company Common Stock to Holdings Common Stock being herein referred to as the
"Company Exchange Ratio") (the IWL Exchange Ratio and the Company Exchange
Ratio being referred to herein collectively as the "Exchange Ratios").
(iii) Commencing immediately after the Effective Time, each
certificate which, immediately prior to the Effective Time, represented issued
and outstanding shares of IWL Common Stock or Company Common Stock shall
evidence the right to receive the IWL Merger Consideration or the Company
Merger Consideration, as the case may be, on the basis hereinbefore set forth,
but subject to the limitations set forth in this Section 1.6.
(iv) Each one percent (1%) of the Partnership Interests issued and
outstanding immediately before the Effective Time and all rights in respect
thereof shall at the Effective Time, without any action on the part of the
holder thereof (other than the execution and delivery by the holder thereof of
a Contribution Agreement with respect thereto), forthwith be exchanged for
that number of shares of Holdings Common Stock set forth in Exhibit 1.6(a)
attached hereto (the "Interest Exchange Consideration").
(b) CANCELLATION OF TREASURY SHARES AND OF OUTSTANDING HOLDINGS
COMMON STOCK.
(i) At the Effective Time, each share of IWL Common Stock held in
the treasury of IWL immediately prior to the Effective Time, and each share of
Company Common Stock held in the treasury of the Company immediately prior to
the Effective Time, shall be canceled and retired and no shares of stock or
other securities of Holdings or either of the Surviving Corporations shall be
issuable, and no payment shall be made or other consideration shall be given,
with respect thereto.
(ii) At the Effective Time, the shares of Holdings Common Stock
held by IWL shall be canceled and retired and no shares of stock or other
securities of Holdings or any other corporation shall be issuable, and no
payment or other consideration shall be made, with respect thereto.
(c) CONVERSION OF COMMON STOCK OF THE MERGED CORPORATIONS INTO
COMMON STOCK OF THE SURVIVING CORPORATIONS.
(i) At the Effective Time, each share of the common stock of I-Sub
issued and outstanding immediately prior to the Effective Time and all rights
in respect thereof shall, without any action on the part of Holdings,
forthwith cease to exist and be converted into 1,000 validly issued, fully
paid and nonassessable shares of IWL Common Stock, with IWL being one of the
Surviving Corporations. Immediately after the Effective Time and upon
surrender by Holdings of the certificate representing the shares of the common
stock of I-Sub, IWL as one of the Surviving Corporations shall deliver to
Holdings an appropriate certificate or certificates representing 1,000 shares
of IWL Common Stock created by conversion of the common stock of I-Sub owned
by Holdings as aforesaid.
(ii) At the Effective Time, each share of the common stock of C-Sub
issued and outstanding immediately prior to the Effective Time and all rights
in respect thereof shall, without any action on the part of Holdings,
forthwith cease to exist and be converted into 1,000 validly issued, fully
paid and nonassessable shares of Company Common Stock, with the Company being
one of the Surviving Corporations. Immediately after the Effective Time and
upon surrender by Holdings of the certificate representing the shares of the
common stock of C-Sub, the Company as one of the Surviving Corporations shall
deliver to Holdings an appropriate certificate or certificates representing
1,000 shares of Company Common Stock created by conversion of the common stock
of C-Sub owned by Holdings as aforesaid.
4
(d) EXCHANGE OF SHARES OTHER THAN TREASURY SHARES. Subject to the
terms and conditions hereof, at or prior to the Effective Time, Holdings shall
appoint an exchange agent to effect the exchange of shares of IWL Common Stock
and Company Common Stock (collectively, the "Shares") and the Partnership
Interests for Holdings Common Stock in accordance with the provisions of this
Section 1.6 (the "Exchange Agent"). Upon the Effective Time, Holdings shall
deposit, or cause to be deposited, certificates representing Holdings Common
Stock into which the Shares have been converted in accordance with the
provisions of Section 1.6(a) hereof (such certificates, together with any
dividends or distributions with respect thereto, being herein referred to
collectively as the "Exchange Fund"). Commencing immediately after the
Effective Time and until the appointment of the Exchange Agent shall be
terminated, each holder of a certificate or certificates theretofore
representing Shares may surrender the same to the Exchange Agent, and, after
the appointment of the Exchange Agent shall be terminated, any such holder may
surrender any such certificate to Holdings. Such holder shall be entitled
upon such surrender to receive in exchange therefor a certificate or
certificates representing the number of full shares of Holdings Common Stock
into which the Shares theretofore represented by the certificate or
certificates so surrendered shall have been converted in accordance with the
provisions of Section 1.6(a) hereof. All such shares of Holdings Common Stock
issued in accordance with the immediately preceding sentence shall be deemed
to have been issued at the Effective Time. Until so surrendered and
exchanged, each outstanding certificate which, prior to the Effective Time,
represented issued and outstanding Shares shall be deemed for all corporate
purposes of IWL and the Company, other than the payment of dividends and other
distributions, if any, to represent the right to receive the IWL Merger
Consideration or the Company Merger Consideration, as the case may be. Unless
and until any such certificate theretofore representing Shares is so
surrendered, no dividend or other distribution, if any, payable to the holders
of record of Holdings Common Stock as of any date subsequent to the Effective
Time shall be paid to the holder of such certificate in respect thereof. Upon
the surrender of any such certificate theretofore representing Shares,
however, the record holder of the certificate or certificates representing
shares of Holdings Common Stock issued in exchange therefor shall receive from
the Exchange Agent or from Holdings, as the case may be, payment of the amount
of dividends and other distributions, if any, which as of any date subsequent
to the Effective Time and until such surrender shall have become payable with
respect to such number of shares of Holdings Common Stock ("Pre-Surrender
Dividends"). No interest shall be payable with respect to the payment of
Pre-Surrender Dividends upon the surrender of certificates theretofore
representing Shares. After the appointment of the Exchange Agent shall have
been terminated, such holders of Holdings Common Stock that have not received
payment of Pre-Surrender Dividends shall look only to Holdings for payment
thereof. Notwithstanding the foregoing provisions of this Section 1.6(d)
neither the Exchange Agent nor any party hereto shall be liable to a holder of
Shares for any Holdings Common Stock or dividends or distributions thereon
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law or to a transferee pursuant to Section 1.6(e) hereof.
(e) TRANSFER BOOKS. The stock transfer books of IWL with respect
to the shares of IWL Common Stock and the stock transfer books of the Company
with respect to the shares of Company Common Stock shall each be closed at the
Effective Time and no transfer of any Shares will thereafter be recorded on
any of such stock transfer books. In the event of a transfer of ownership of
Shares that is not registered in the stock transfer records of IWL or the
Company, as the case may be, at the Effective Time, a certificate or
certificates representing the number of full shares of Holdings Common Stock
into which such Shares shall have been converted in accordance with Section
1.6(a) hereof shall be issued to the transferee together with a cash payment
in the amount of Pre-Surrender Dividends, if any, in accordance with Section
1.6(d) hereof, if the certificate or certificates representing such Shares is
or are surrendered as provided in Section 1.6(d) hereof, accompanied by all
documents required to evidence and effect such transfer and by evidence of
payment of any applicable stock transfer tax.
(f) FRACTIONAL SHARES. No fraction of a share of Holdings Common
Stock will be issued, but in lieu thereof each holder of shares of Company
Common Stock and each holder of Partnership Interests who would otherwise be
entitled to a fraction of a share of Holdings Common Stock (after aggregating
all fractional shares of Holdings Common Stock to be received by such holder)
shall be entitled to receive from Holdings a whole share of Holdings Common
Stock.
5
(g) OPTIONS TO PURCHASE COMPANY COMMON STOCK AND IWL COMMON STOCK.
(i) At the Effective Time, each option granted by IWL to purchase
shares of IWL Common Stock, or by the Company to purchase shares of Company
Common Stock, which is outstanding and unexercised immediately prior to the
Effective Time (each, an "Option" and collectively, "Options"), shall be
assumed by Holdings and converted into an option (a "Holdings Option") to
purchase shares of Holdings Common Stock in such amount and at such exercise
price as provided below and otherwise having the same terms and conditions as
are in effect immediately prior to the Effective Time:
(A) the number of shares of Holdings Common Stock to be subject
to the Holdings Option into which an Option is converted shall be equal to the
product of (x) the number of shares of IWL Common Stock or Company Common Stock
subject to the Option that is converted (the "Converted Option") immediately
prior to the Effective Time and (y) the IWL Exchange Ratio (if the Converted
Option related to IWL Common Stock) or the Company Exchange Ratio (if the
Converted Option related to Company Common Stock), respectively, each rounded
down to the nearest whole share; and
(B) the exercise price per share of Holdings Common Stock for
each particular Holdings Option shall be equal to (x) if such Holdings Option
resulted from a Converted Option to acquire IWL Common Stock, the exercise price
per share under the Converted Option, or (y) if such Holdings Option resulted
from a Converted Option to acquire Company Common Stock, (1) the exercise price
per share under the Converted Option divided by (2) the Company Exchange Ratio,
each of which shall be rounded up to the nearest whole cent.
The adjustments provided herein with respect to any Options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be
effected in a manner consistent with Section 424(a) of the Code. No options,
if any, to acquire Partnership Interests shall be assumed by Holdings.
(ii) Holdings shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Holdings Common Stock for
delivery upon exercise of Holdings Options in accordance with this Section
1.6(g). As soon as practicable (and in no event later than 30 days) after the
Effective Time, Holdings shall file a registration statement on Form S-8 (or
any successor or other appropriate forms) or another appropriate form with
respect to the shares of Holdings Common Stock subject to the Holdings Options
and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as any
of the Holdings Options remain outstanding.
(h) CERTAIN ADJUSTMENTS. Without limiting any other provision of
this Agreement, if, between the date of this Agreement and the Effective Time,
the outstanding shares of IWL Common Stock or of Company Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock of IWL or the Company, as the case may be, shall be declared
thereon with a record date within such period, the Exchange Ratios established
pursuant to the provisions of Section 1.6(a) hereof shall be adjusted
accordingly to provide to the holders of IWL Common Stock and Company Common
Stock the same economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, split-up, combination, exchange or
dividend.
(i) MAXIMUM SHARES ISSUABLE. Notwithstanding anything to the
contrary contained herein, the maximum number of shares of Holdings Common
Stock issuable upon the conversion of shares of Company Common Stock hereunder
and the Interest Exchange and upon the exercise of Holdings Options that are
the result of Converted Options related to Company Common Stock that are
assumed by Holdings hereunder is 10,647,918 shares of Holdings Common Stock.
6
1.7 DISSENTERS' SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of capital stock of the Company ("Dissenters' Shares")
with respect to which the holder thereof ("Dissenter") ultimately receives
payment pursuant to Articles 5.11 through 5.13 of the Texas Business
Corporation Act ("TBCA"), shall not be converted into or represent a right to
receive Holdings Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by the TBCA. Pursuant to
Article 5.11.B of the TBCA, holders of IWL Common Stock shall not have
dissenters' rights.
(b) Notwithstanding the provisions of Section 1.7(a), if after the
Effective Time a Dissenter loses the right to receive payment pursuant to
Articles 5.11 through 5.13 of the TBCA, then upon the occurrence of such
event, such holder's shares shall automatically be converted into and
represent only the right to receive Holdings Common Stock effective as of the
Effective Time, but upon surrender of the certificate representing such
shares, without prejudice to any corporate proceedings which may have been
taken during the interim period between the Effective Time and the occurrence
of such event, and such shareholder shall be entitled to receive any dividends
or other distributions made to shareholders during such interim period.
(c) With respect to any Dissenters' Shares, the Company shall give
Holdings (i) prompt notice of any written demands for appraisal of any shares
of capital stock of the Company, withdrawals of such demands, and any other
instruments served on the Company pursuant to the TBCA and received by the
Company and (ii) the opportunity to participate in all negotiations and
proceedings which take place prior to the Effective Time with respect to
demands for appraisal under the TBCA. The Company shall not, except with the
prior written consent of Holdings, voluntarily make any payment before the
Effective Time with respect to any demands for appraisal of capital stock of
the Company or offer to settle or settle any such demands.
(d) All Dissenters' Shares acquired by the Company shall be
canceled after payment therefor has been made in accordance with the TBCA.
1.8 NO FURTHER OWNERSHIP RIGHTS IN IWL COMMON STOCK, COMPANY COMMON
STOCK AND PARTNERSHIP INTERESTS. All shares of Holdings Common Stock issued
upon the conversion of shares of IWL Common Stock and Company Common Stock and
upon the Interest Exchange in accordance with the terms hereof shall be deemed
to have been issued in full satisfaction of all rights pertaining to such
shares of IWL Common Stock and Company Common Stock and to such Partnership
Interests, respectively.
1.9 TAX CONSEQUENCES AND ACCOUNTING TREATMENT. It is intended by the
parties hereto that the formation of Holdings, I-Sub and C-Sub qualify as
tax-free incorporations pursuant to Section 351 of the Code, that the Interest
Exchange shall qualify as a tax-free exchange pursuant to Section 351 of the
Code, and that the Mergers shall constitute a reorganization within the
meaning of Section 368 of the Code, and that the Mergers and the Interest
Exchange shall be accounted for as a pooling of interests. Holdings, IWL, the
Company, the Partnership, I-Sub and C-Sub each agree that it will not take or
omit to take any action at any time after the date hereof which act or
omission would cause the Mergers not to qualify as a reorganization within the
meaning of Section 368 of the Code or the Interest Exchange not to qualify as
a tax-free exchange pursuant to Section 351 of the Code, including without
limitation:
(a) any sale, exchange, distribution, transfer or other disposition
of the assets of IWL, the Company or the Partnership that would cause the IWL
Merger or the Company Merger, as the case may be, to fail to satisfy the
"continuity of business enterprise" requirement of Section 1.368-1(d) of the
Income Tax Regulations or the "substantially all the properties" requirement
of Section 368(a)(2)(E) of the Code;
(b) any reacquisition of shares of Holdings Common Stock by
Holdings;
7
(c) any issuance of additional shares of IWL Common Stock or
Company Common Stock or sale of IWL Common Stock or Company Common Stock that
would result in Holdings failing to obtain or losing control of IWL or the
Company, as the case may be, within the meaning of Section 368(c) of the Code;
and
(d) any issuance of additional shares of Holdings Common Stock that
would cause the owners of IWL Common Stock, Company Common Stock and
Partnership Interests immediately prior to the consummation of the
transactions contemplated by this Agreement, as a group, to fail to have
control of Holdings, within the meaning of Section 368(c) of the Code,
immediately after the consummation of the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule attached hereto and
incorporated by reference herein (the "Company Disclosure Schedule"), the
Company hereby represents and warrants to Holdings and IWL (and, unless the
context indicates otherwise, all of such representations and warranties shall be
deemed made with respect to the Company, its Subsidiaries and their respective
predecessors, if any) that, as of the date hereof:
2.1 ORGANIZATION AND QUALIFICATION, SUBSIDIARIES. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization. Each of the Company and its Subsidiaries has the requisite
corporate power and authority and any necessary governmental authority,
franchise, license or permit to own, operate or lease the properties that it
purports to own, operate or lease and to carry on its business as it is now
being conducted, and is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, operated or leased or the nature of its activities makes
such qualification necessary, except for such failure which, when taken
together with all other such failures, would not reasonably be expected to
have a Material Adverse Effect on the Company. The Company's Subsidiaries are
listed on Section 2.1 of the Company Disclosure Schedule.
2.2 ARTICLES OF INCORPORATION AND BYLAWS. The Company has heretofore
furnished, or otherwise made available, to IWL a complete and correct copy of
the Articles of Incorporation and the Bylaws (or comparable governing
documents), each as amended to the date hereof, of the Company and each of its
Subsidiaries. Such Articles of Incorporation and Bylaws (or comparable
governing documents) are in full force and effect. Neither the Company nor
any of its Subsidiaries is in violation of any of the provisions of its
respective Articles of Incorporation or Bylaws (or comparable governing
documents).
2.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock, of which as of the date hereof
10,398,954 shares are issued and outstanding and 208,550 shares are issuable
upon the exercise of options outstanding under the Company's stock option
plans listed on Section 2.3 of the Company Disclosure Schedule. Since January
1, 1997, no shares of Company Common Stock have been issued. Except as set
forth in Section 2.3 of the Company Disclosure Schedule, there are no
outstanding Company Equity Rights. For purposes of this Agreement, "Company
Equity Rights" shall mean subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) to purchase or otherwise acquire from the Company or
any of the Company's Subsidiaries at any time, or upon the happening of any
stated event, any shares of the capital stock of the Company.
(b) Section 2.3 of the Company Disclosure Schedule sets forth for
each outstanding Company Equity Right the name of the holder of such Company
Equity Right, the number of shares subject to such Company Equity Right, the
exercise price of such Company Equity Right, the number of shares as to which
such Company Equity Right is exercisable, and, if the exercisability of such
Company Equity Right will be accelerated in any way by the transactions
contemplated by this Agreement, an indication of the extent of such
acceleration. Section 2.3 of the
8
Company Disclosure Schedule also describes any repricing of any Company Equity
Rights which has taken place since January 1, 1993. The Company has made
available to IWL copies of all agreements relating to Company Equity Rights.
(c) Since January 1, 1993, the Company has not repurchased any of
its capital stock, nor has any Person other than the Company shareholders and
the holders of Company Equity Rights listed in Section 2.3 of the Company
Disclosure Schedule owned, or had any right to acquire, any capital stock of
the Company.
(d) There are no outstanding obligations of the Company or any of
the Company's Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company.
(e) All of the issued and outstanding shares of Company Common
Stock were validly issued (free of preemptive rights) and are fully paid and
nonassessable. The Company shareholders and the number of shares of Company
Common Stock owned beneficially and of record by each Company shareholder are
listed in Section 2.3 of the Company Disclosure Schedule. The Company
shareholders are the record and beneficial owners of all of the shares of
Company Common Stock, free and clear of any liens, encumbrances, pledges,
security interests, voting agreements or claims of any nature whatsoever.
(f) All of the outstanding capital stock of each of the Company's
Subsidiaries was duly authorized and validly issued (free of preemptive
rights) and is fully paid and nonassessable, and, except as set forth in
Section 2.3 of the Company Disclosure Schedule, is owned by the Company free
and clear of any liens, security interests, pledges, agreements, claims,
charges or encumbrances. Except as set forth in Section 2.3 of the Company
Disclosure Schedule, there are no existing subscriptions, options, warrants,
calls, commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) to purchase or otherwise acquire from the
Company or any of the Company's Subsidiaries at any time, or upon the
happening of any stated event, any shares of the capital stock of any of the
Company's Subsidiaries, or any securities convertible into or exercisable for
shares of the capital stock of any of the Company's Subsidiaries, whether or
not presently issued or outstanding and there are no outstanding obligations
of the Company or any of the Company's Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of any of the Company's
Subsidiaries. Except for equity interests disclosed in Section 2.3 of the
Company Disclosure Schedule and equity interests in its Subsidiaries, the
Company does not directly or indirectly own any equity interest in any other
Person. Each of the Company's Subsidiaries is a wholly owned Subsidiary.
(g) Except as disclosed in Section 2.3 of the Company Disclosure
Schedule, there are no shareholder agreements, voting trusts or other
agreements or understandings to which the Company or any Subsidiary is a party
or to which it is bound relating to the voting or registration of any shares
of capital stock of the Company or any Subsidiary. The Company has not taken
any action that would result in, nor is the Company a party to any agreement,
arrangement or understanding not disclosed in Section 2.3 of the Company
Disclosure Schedule that would result in any options to purchase Company
Common Stock that are unvested becoming vested in connection with or as a
result of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
2.4 AUTHORITY. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the Company Merger
and the other transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company enforceable in
accordance with its terms. The execution and delivery of this Agreement by
the Company does not, and the consummation of the transactions contemplated
hereby will not result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under (a) any provision of the Articles of Incorporation or Bylaws of the
Company or (b) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with any court,
administrative agency or
9
commission or other governmental authority or instrumentality ("Governmental
Entity"), is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (a) the filing of the Articles of
Merger with the Secretary of State of Texas and (b) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required by the Nasdaq National Market or under applicable state and federal
securities laws.
2.5 COMPANY FINANCIAL STATEMENTS. Section 2.5 of the Company Disclosure
Schedule sets forth the Company's audited financial statements (balance
sheets, income statements and statements of cash flows) as of and for the
fiscal years ended December 31, 1996 and 1995, the Company's compiled
financial statements for the fiscal year ended December 31, 1994, and the
Company's reviewed financial statements for the nine months ended September
30, 1997 (collectively, the "Company Financial Statements"). The Company
Financial Statements are complete and correct in all material respects and,
except as set forth in Section 2.5 of the Company Disclosure Schedule, have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a basis consistent throughout the periods indicated and
consistent with each other (except that the compiled and reviewed Company
Financial Statements do not contain the notes necessary to be in accordance
with GAAP and the reviewed Company Financial Statements are subject to normal
year-end adjustments). The Company Financial Statements present fairly the
financial condition and operating results of the Company and its Subsidiaries
as of the dates and for the periods indicated therein. The reviewed balance
sheet of the Company as of September 30, 1997 is hereinafter referred to as
the "Company Balance Sheet."
2.6 NO UNDISCLOSED LIABILITIES. The Company does not have any
liabilities or obligations, either accrued or contingent, whether or not
required to be reflected in financial statements prepared in accordance with
GAAP, and whether due or to become due, except: (a) liabilities reflected in
the Company Balance Sheet, (b) liabilities specifically described in this
Agreement or in the Company Disclosure Schedule or (c) liabilities not
exceeding $50,000 in the aggregate incurred in the ordinary course of business
since the date of the Company Balance Sheet.
2.7 NO CHANGES. Except as set forth in Section 2.7 of the Company
Disclosure Schedule or as expressly contemplated by this Agreement, since the
date of the Company Balance Sheet there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on that date;
(b) capital expenditure or inventory purchase by the Company
exceeding $25,000 individually or $100,000 in the aggregate, except pursuant
to existing contracts listed in Section 2.12 of the Company Disclosure
Schedule;
(c) destruction, damage to, or loss of any assets (including,
without limitation, intangible assets) of the Company (whether or not covered
by insurance), either individually or in the aggregate, exceeding $25,000;
(d) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(e) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates, any change in policies in
making or reversing accruals, or any change in capitalization of software
development costs) by the Company;
(f) declaration, setting aside, or payment of a dividend or other
distribution in respect of the shares of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of
its shares;
10
(g) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors or employees,
or the declaration, payment, or commitment or obligation of any kind for the
payment by the Company of a bonus or other additional salary or compensation
to any such person except for year-end bonuses paid in the ordinary course of
business consistent with past practice;
(h) acquisition, sale or transfer of any asset of the Company
except in the ordinary course of business;
(i) formation, amendment or termination of any material
distribution agreement or any material contract, agreement or license to
which the Company is a party, other than termination by the Company pursuant
to the terms thereof;
(j) loan by the Company to any Person or guaranty by the Company of
any loan;
(k) waiver or release of any material right or claim of the
Company, including any write-off or other compromise of any account
receivable of the Company except in the ordinary course of business;
(l) the commencement or notice or, to the knowledge of the
Company, threat of commencement of any governmental proceeding against or
investigation of the Company or its affairs;
(m) other event or condition of any character relating to the
Company or the Company's business that has or would be expected to have a
Material Adverse Effect on the Company;
(n) issuance, sale or redemption by the Company of any of its
shares or of any other of its securities, other than pursuant to the exercise
of existing options;
(o) change in pricing or royalties set or charged by the Company
except pursuant to the terms of existing contracts; or
(p) negotiation or agreement by the Company to do any of the
things described in the preceding clauses (a) through (o) (other than
negotiations with IWL and its representatives or any other Person regarding
the transactions contemplated by this Agreement).
2.8 TAX AND OTHER RETURNS AND REPORTS.
(a) TAX RETURNS AND AUDITS. Except as set forth in Section 2.8 of
the Company Disclosure Schedule, each of the Company and its Subsidiaries has
prepared and filed all federal, state, local and foreign returns, estimates,
information statements and reports required to be filed by any of them
relating to any and all Taxes relating or attributable to the Company, its
Subsidiaries, or the assets or operations of the Company or its Subsidiaries
("Company Returns"), and such Company Returns are true and correct in all
material respects and have been completed in accordance with applicable law.
For the purposes of this Agreement, a "Tax" or, collectively, "Taxes," means
any and all federal, state, local and foreign taxes, assessments and other
governmental charges, duties, impositions and liabilities, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and
any obligations under any agreements or arrangements with any other Person
with respect to such amounts. Except as set forth in Section 2.8 of the
Company Disclosure Schedule, each of the Company and its Subsidiaries has
paid all Taxes required to be paid with respect to such Company Returns and
has withheld with respect to its employees all federal and state income
Taxes, FICA, FUTA and other Taxes it is required to withhold. The accruals
for Taxes on the books and records of each of the Company and its
Subsidiaries are sufficient to discharge the Taxes for all periods (or the
portion of any period) ending on or prior to the Closing Date. Neither the
Company nor any of its Subsidiaries is delinquent in the payment
11
of any Tax nor, except as set forth in Section 2.8 of the Company Disclosure
Schedule, to the knowledge of the Company, is there any Tax deficiency
outstanding, proposed or assessed against the Company or any of its Subsidiaries
nor has the Company or any of its Subsidiaries executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax. The audits of each Company Return that has been
audited by the relevant authorities or for which the statute of limitations
has been waived or extended have been closed and neither the Company nor any
of its Subsidiaries has received any written or oral notification that an
audit or other examination of any Company Return is presently in progress.
All such Company Returns that have been audited or for which the statute of
limitations has been waived are listed in Section 2.8 of the Company
Disclosure Schedule. Except as set forth in Section 2.8 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
material liabilities for unpaid Taxes, whether asserted or unasserted, known
or unknown, contingent or otherwise and neither the Company nor any of its
Subsidiaries has any knowledge of any basis for the assertion of any such
liability attributable to the Company, its Subsidiaries or the assets or
operations of the Company or its Subsidiaries. Except as set forth in
Section 2.8 of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries is (nor have they ever been) required to join with any
other entity in the filing of a consolidated tax return for federal tax
purposes or a consolidated or combined return or report for state tax
purposes. Neither the Company nor any of its Subsidiaries is a party to or
bound by any tax indemnity, tax sharing or tax allocation agreement. There
are (and as of immediately following the Closing there will be) no liens on
the assets of the Company or any of its Subsidiaries relating to or
attributable to Taxes, except for liens for Taxes not yet due and payable or
liens for Taxes being contested by appropriate proceedings. Neither the
Company nor any of its Subsidiaries has any knowledge of any basis for the
assertion of any claim which, if adversely determined, would result in liens
on the assets of the Company or its Subsidiaries. There is no contract,
agreement, plan or arrangement, including, but not limited to, the provisions
of this Agreement, covering any employee or former employee of the Company or
any of its Subsidiaries that, individually or collectively, could give rise
to the payment of any amount that would not be deductible pursuant to
Sections 280G, 162 or 404 of the Code.
(b) NO PENALTY. Neither the Company nor any of its Subsidiaries
is subject to any penalty by reason of a violation of any order, rule or
regulation of, or a default with respect to any Company Return, report or
declaration required to be filed with, any Governmental Entity to which it is
subject.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement binding
upon, or judgment, injunction, order or decree entered against, the Company
under which the Company is prohibited from conducting or engaging in any line
of business.
2.10 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION
OF EQUIPMENT.
(a) The Company owns no real property. Section 2.10(a) of the
Company Disclosure Schedule sets forth a true and complete list of all real
property leased by the Company and the aggregate annual rental or other fee
payable under any such lease. All such leases are in good standing, valid
and effective in accordance with their respective terms, and there is not
with respect to the Company and, to the knowledge of the Company, any other
parties to such leases, under any of such leases any existing default or
event of default (or event which with notice or lapse of time, or both, would
constitute a default).
(b) Except as set forth in Section 2.10(b) of the Company Disclosure
Schedule, the Company holds good and valid title to (or, in the case of leased
properties, assets and rights of way, valid leasehold interests in) all of its
tangible properties, assets and rights of way, real, personal and mixed, used in
its business, free and clear of any liens, charges, pledges,security interests
or other encumbrances. The Company has valid and subsisting rights of way to use
all real or personal property in or through which the Company's owned or leased
optic or other fiber lines are currently located or situated.
(c) All items of equipment, including optic or other fiber lines,
whether owned or leased, having an individual value of $5,000 or more (the
"Equipment") used by the Company in the conduct of its business are listed
12
in Section 2.10(c) of the Company Disclosure Schedule, except individual
pieces of equipment owned by the Company with an individual value of less
than $5,000. The Equipment is, taken as a whole, (i) adequate for the
conduct of the business of the Company as presently conducted, (ii) suitable
for the uses to which it is currently employed, (iii) in good operating
condition, (iv) regularly and properly maintained, ordinary wear and tear
excepted, and (v) not obsolete, dangerous or in need of renewal or replacement.
2.11 INTELLECTUAL PROPERTY.
(a) The Company owns, or is licensed to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, schematics, technology, know-how, computer software
programs or applications and tangible or intangible proprietary information
or material (excluding Company Commercial Software Rights (as defined in
Section 2.11(b) below)) that are used or currently proposed by the Company to
be used in the business of the Company as currently conducted or as currently
proposed to be conducted by the Company (the "Company Intellectual Property
Rights"). Section 2.11(a) of the Company Disclosure Schedule (i) sets forth
a complete list of all patents, patent applications, registered trademarks,
material unregistered copyrights, trade names and service marks, and any
applications therefor, included in the Company Intellectual Property Rights;
(ii) specifies the jurisdictions in which each such Company Intellectual
Property Right has been issued or registered or in which an application for
such issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered owners,
together with a list of all of the Company's currently marketed software
products and a list of which, if any, of such software products that have
been registered for copyright protection with the United States Copyright
Office and any foreign offices and by whom such items have been registered
and (iii) as to each such Company Intellectual Property Right, specifies
whether it is owned by the Company or licensed to the Company by another
Person and, in the cases of any license, sets forth the licensor and the term
of such license. Section 2.11(a) of the Company Disclosure Schedule also
sets forth a complete list of all licenses, sublicenses and other agreements
pursuant to which the Company has licensed any other Person to use any
Company Intellectual Property Right or other trade secret material to the
Company, and includes the identity of such licensees, provided, however, that
standard end user licenses (i.e., those licenses granted pursuant to the form
clearly marked as the Company's "standard" form and delivered to IWL by the
Company) to object code versions of the Company's software ("End-User
Licenses") need not be listed. The Company is not, nor will it be as a
result of the execution and delivery of this Agreement or the performance of
its obligations hereunder, in violation of any license, sublicense or
agreement described on such list. The Company is the sole and exclusive
owner of, with all right, title and interest in and to (free and clear of any
liens or encumbrances other than End User Licenses), those Company
Intellectual Property Rights which the Company purports to own, and has sole
and exclusive rights, and is not contractually obligated to pay any
compensation to any third party in respect thereof to the use thereof or the
material covered thereby in connection with the services or products in
respect of which such Company Intellectual Property Rights are being used.
With respect to Company Intellectual Property Rights licensed to the Company,
the Company has sufficient rights under the license agreements relating
thereto to enable the Company to use such Company Intellectual Property
Rights in its business as currently conducted and as proposed to be conducted
without payment of royalties or other compensation to the licensor thereof.
No claims with respect to the Company Intellectual Property Rights have been
asserted or, to the knowledge of the Company, are threatened by any Person
(i) to the effect that the manufacture, sale, licensing or use of any product
as, now used, sold or licensed or proposed for use, sale or license by the
Company infringes on any copyright, patent, trade xxxx, service xxxx or trade
secret, (ii) against the use by the Company of any trademarks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in the Company's business as currently
conducted or as proposed by the Company to be conducted, or (iii) challenging
the ownership, validity or effectiveness of any of the Company Intellectual
Property Rights. Except as set forth in Section 2.11(a) of the Company
Disclosure Schedule, all registered and material unregistered trademarks,
service marks and copyrights held by the Company are valid and subsisting.
To the knowledge of the Company, there is no material unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property
Rights by any third party, including any employee or former employee of the
Company. No Company Intellectual Property Right owned exclusively by the
Company or product of the Company is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any manner the
licensing thereof by the Company. There is no outstanding order, judgment,
decree or
13
stipulation on the Company, and the Company is not party to any agreement,
restricting in any manner the licensing of the Company's products by the
Company. Except for End User Licenses or as otherwise set forth in Section
2.11(a) of the Company Disclosure Schedule, the Company has not entered into
any agreement to indemnify any Person against any charge of infringement of
any Company Intellectual Property Right.
(b) "Company Commercial Software Rights" means packaged
commercially available software programs generally available to the public
through retail dealers in computer software which have been licensed to the
Company pursuant to End-User Licenses and which are used in the Company's
business but are in no way a component of or incorporated in any of the
Company's products and related trademarks, technology and know-how. To the
knowledge of the Company, the Company has not breached or violated the terms
of its license, sublicense or other agreement relating to any Company
Commercial Software Rights and has a valid right to use such Company
Commercial Software Rights under such license and agreements. No claims with
respect to the Company Commercial Software Rights have been asserted or, to
the knowledge of the Company, are threatened by any Person against the
Company. To the knowledge of the Company, there is no material unauthorized
use, infringement or misappropriation of any of the Company Commercial
Software Rights by the Company or any employee or former employee of the
Company during the period of their employment.
2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Other than those listed in
Section 2.12 of the Company Disclosure Schedule, the Company does not have,
is not a party to nor is it bound by:
(a) any collective bargaining agreements,
(b) any agreements that contain any unpaid severance liabilities
or obligations,
(c) any bonus, deferred compensation, incentive compensation,
option, pension, profit-sharing or retirement plans, or any other employee
benefit plans or arrangements,
(d) any employment or consulting agreement, contract or commitment
(other than employment letters) with an employee or individual consultant or
salesperson or consulting or sales agreement, contract or commitment with a
firm or other organization, not terminable by the Company on thirty days
notice without liability,
(e) any stock option plan, stock appreciation right plan or stock
purchase plan,
(f) any insurance policy, fidelity or surety bond or completion
bond not listed in Section 2.21 of the Company Disclosure Schedule,
(g) any lease of personal property having a value individually in
excess of $25,000,
(h) any agreement of indemnification or guaranty not entered into
in the ordinary course of business,
(i) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or
compete with any Person,
(j) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $25,000,
(k) any agreement, contract or commitment relating to the
disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise,
14
(l) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit, including guaranties referred to
in clause (h) hereof,
(m) any purchase order or contract for the purchase of raw
materials or acquisition of assets involving $25,000 or more in any single
instance or $100,000 or more in the aggregate,
(n) any construction contracts involving $25,000 or more in any
single instance or $100,000 or more in the aggregate,
(o) any distribution, joint marketing or development agreement,
(p) any lease for switches or any other machinery, equipment or
other personal property involving payment of aggregate rentals in excess of
$25,000,
(q) any contract pursuant to which the Company has access to the
telephone network of another Person other than the Company's internal
commercial telephone service and any contracts for the resale of any network
capacity of the Company,
(r) any agreement, contract, lease or easement pursuant to which
the Company has the right of way to use any premises or real property to
locate and/or install fiber lines on, under or through such premises or real
property,
(s) any agreement or commitment obligating the Company to deliver
any product or service at a price which does not cover the cost (including
labor, materials and production overhead), plus a reasonable profit margin,
for such product or service,
(t) any joint venture, partnership or other cooperative
arrangement or agreement involving a sharing of profits or losses,
(u) any other agreement, contract or commitment which involves
$25,000 or more and is not cancelable without penalty within thirty (30)
days, or
(v) any agreement which is otherwise material to the Company's
business.
The Company has not breached, or received any claim or threat that it
has breached, any of the terms or conditions of any material agreement,
contract or commitment to which it is bound (including, but not limited to,
those set forth in Section 2.12 or any other section of the Company
Disclosure Schedule) in such manner as would permit any other party to cancel
or terminate the same. Each agreement, contract or commitment to which the
Company is a party and that is required to be set forth in the Company
Disclosure Schedule is in full force and effect and, except as otherwise
disclosed, is not subject to any material default thereunder by any party
thereto. The Company is not bound by any material contract, agreement,
license, lease or other commitment, a copy of which has not been previously
provided or made available to IWL. The Company after making an inquiry of
all of its officers, directors, shareholders and appropriate employees does
not have any reason to expect that any change may occur in the relationships
of the Company with its suppliers or customers as a result of the Mergers or
the Interest Exchange, which change would have a Material Adverse Effect on
the Company. No supplier of or customer of the Company has indicated within
the past year that it will stop, or decrease the rate of supplying or
purchasing materials, products, or services to or from the Company, as a
result of the Mergers or the Interest Exchange. Except as described in
Section 2.4, no consents, waivers or approvals under any of the Company's
material agreements, contracts, licenses or leases are necessary in order to
preserve the benefits thereunder for the Surviving Corporation or otherwise
to avoid any breach, default or right of termination or other right as a
result of the Mergers or the Interest Exchange.
15
2.1 INTERESTED PARTY TRANSACTIONS. Except as set forth in Section 2.13
of the Company Disclosure Schedule, no officer, director or shareholder of
the Company (nor any parent, sibling, descendant or spouse of any of such
persons, or any trust, partnership, corporation or other entity in which any
of such persons has or has had an interest), has or has had, directly or
indirectly, (a) an interest in any entity which furnished or sold, or
furnishes or sells, services or products which the Company furnished or
sells, or proposes to furnish or sell, or (b) any interest in any entity
which purchases from or sells or furnishes to the Company any goods or
services, or (c) a beneficial interest in any contract or agreement required
to be set forth in Section 2.12 of the Company Disclosure Schedule; provided,
that ownership of no more than five percent (5%) of the outstanding voting
stock of a publicly traded corporation shall not be deemed an "interest in
any entity" for purposes of this Section 2.13.
2.14 GOVERNMENTAL AUTHORIZATIONS. Section 2.14 of the Company
Disclosure Schedule accurately lists each federal, state, county, local or
foreign governmental consent, license, permit, grant, or other authorization
issued to the Company (a) pursuant to which the Company currently operates or
holds any interest in any of its properties or (b) which is required for the
operation of its business as currently conducted or the holding of any such
interest as currently held (herein collectively called the "Company
Authorizations"). The Company Authorizations are in full force and effect
and constitute all the authorizations required to permit the Company to
operate or conduct its business as currently conducted or hold any interest
in its properties as currently held.
2.15 LITIGATION. Section 2.15 of the Company Disclosure Schedule
accurately lists all suits, actions and legal, administrative, arbitration or
other proceedings and governmental investigations and all other claims
pending against the Company or, to the knowledge of the Company, threatened
or which the Company expects will ultimately be threatened or commenced
against the Company. None of such suits, actions, proceedings, investigations
or claims seek to prevent the consummation of the Mergers or the Interest
Exchange. There is no judgment, decree or order enjoining the Company in
respect of, or the effect of which is to prohibit, any business practice or
the acquisition of any property or the conduct of business of the Company.
Section 2.15 of the Company Disclosure Schedule also lists all suits and
legal actions initiated by the Company which are still pending or which have
been concluded in the last two years.
2.16 ACCOUNTS RECEIVABLE. All accounts receivable of the Company shown
in the Company Balance Sheet arose in the ordinary course of business and, to
the extent not previously collected, are collectible (except to the extent
reserved against as reflected in the Company Financial Statements) and are
carried at values determined in accordance with GAAP consistently applied.
To the knowledge of the Company, none of the accounts receivable of the
Company outstanding as of the date hereof is subject to any claim of offset,
recoupment, set off or counterclaim and there are no facts or circumstances
(whether asserted or unasserted) that would give rise to any such claim. No
accounts receivable are contingent upon the performance by the Company of any
obligation or contract except for the Company's maintenance obligations under
its maintenance agreements (although no customer has claimed that the Company
has failed to perform its maintenance obligations). No Person has any lien,
charge, pledge, security interest or other encumbrance on any of the
Company's accounts receivable and no agreement for deduction or discount has
been made with respect to any of such accounts receivable, except for liens
granted to Bank One Texas, N.A. under the Company's revolving line of credit.
2.17 MINUTE BOOKS AND STOCK RECORDS. The minute books of the Company
and its Subsidiaries made available to counsel for IWL contain minutes of all
meetings of directors and shareholders (or consents in lieu of such meetings)
accurate in all material respects since the respective times of incorporation
of the Company and its Subsidiaries. The stock records of the Company and
its Subsidiaries made available to counsel for IWL contain an accurate record
of all stock issuances and stock transfers of the Company Common Stock.
2.18 ENVIRONMENTAL AND OSHA.
(a) The Company has complied in all material respects with all
laws (including rules and regulations thereunder) of federal, state and local
Governmental Entities concerning the environment, public health and
16
safety, and employee health and safety, and no charge, complaint, action,
suit, proceeding, hearing, known investigation, claim, demand, or notice has
been filed or commenced against the Company alleging any failure to comply
with any such law or regulation.
(b) The Company has no obligation to take remedial action with
respect to any conditions nor does the Company have any liability, and there
is no basis related to the Company's past or present operations, for any
present charge, complaint, action, suit, proceeding, hearing, known
investigation, claim, or demand giving rise to any liability or obligation to
take any remedial action under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act of 1972, the
Clean Air Act of 1970, the Safe Drinking Water Act of 1974, the Toxic
Substances Control Act of 1976, or the Emergency Planning and Community
Right-to-Know Act of 1986 (each as amended), or any other law (or rule or
regulation thereunder) of any federal, state or local Governmental Entity,
concerning the release or the threatened release of hazardous substances,
public health and safety, pollution or protection of the environment
(collectively, the "Environmental Laws").
(c) The Company has no liability relating to, and it has not
handled or disposed of any substance, arranged for the disposal of any
substance, or owned or operated any property or facility in violation of any
Environmental Law.
(d) The Company has no liability for, and there is no basis for,
any present charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Company giving rise to any
material liability under the Occupational Safety and Health Act, as amended,
or any other law (or rule or regulation thereunder) of any federal, state or
local Governmental Entity concerning employee health and safety
(collectively, "Employee Safety Laws").
(e) The Company has no liability relating to, and, to the
knowledge of the Company, the Company has not exposed any of the Company's
employees to any substances or conditions that could form the basis for, any
present charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand (under the common law or pursuant to statute) against the
Company giving rise to material liability for any illness of or personal
injury to any employee.
(f) The Company has been in compliance with all the terms and
conditions of all permits, licenses, and other authorizations of Governmental
Entities which are required under any Environmental Law or Employee Safety
Law.
(g) All properties and equipment used by the Company are free of
asbestos, PCB's and other Extremely Hazardous Substances (as defined in
Section 302 of the Emergency Planning and Community Right-to-Know Act of
1986, as amended). To the knowledge of the Company, no pollutant,
contaminant, chemical, or industrial, hazardous, or toxic material or waste
has been buried, stored, spilled, leaked, discharged, emitted, or released on
any real property that the Company has ever owned, or that the Company now
leases or has ever leased.
2.19 BROKERS' AND FINDERS' FEES. Except pursuant to an advisory
agreement with Xxxx, Xxxxxxxxx & Xxxxxxxx, Inc. (the arrangements with which
have been disclosed to IWL prior to the date hereof), the Company has not
incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders, fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.20 LABOR MATTERS. The Company is in compliance with all currently
applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment and wages and hours and
employment practices, and is not engaged in any unfair labor practice. The
Company has not received any notice from any Governmental Entity of, and to
the knowledge of the Company there has not been asserted before any Governmental
Entity, any claim, action or proceeding to which the Company is a party or
involving the Company, and there is neither
17
pending nor, to the knowledge of the Company, threatened any investigation or
hearing concerning the Company arising out of or based upon any such laws,
regulations or practices. There are no pending claims against the Company
under any workers compensation plan or policy or for long term disability.
The Company has complied in all material respects with all applicable health
care benefit continuation provisions of Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and has no obligations with respect to
any former employees or qualified beneficiaries thereunder. Section 2.20 of
the Company Disclosure Schedule lists all current employees of the Company
and their current salary and vacation accruals.
2.21 INSURANCE. Section 2.21 of the Company Disclosure Schedule lists
all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, software errors and omissions, employees,
officers and directors of the Company as well as all claims made under any
insurance policy by the Company since January 1, 1993 (other than claims
under the Company's medical and dental insurance plans). There is no claim
by the Company pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds (other than claims made under the Company's medical and
dental insurance plans). The Company has provided or made available to IWL
copies of all such insurance policies and fidelity bonds and all claims made
by the Company under its insurance policies (other than claims under the
Company's medical and dental plans). All premiums payable under all such
policies and bonds have been paid and the Company is otherwise in compliance
in all material respects with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage). Such
policies of insurance and bonds are of the type and in amounts customarily
carried by Persons conducting businesses similar to those of the Company.
The Company does not know of any threatened termination of or proposed
material premium increase with respect to any of such policies. The Company
has never been denied insurance coverage nor has any insurance policy of the
Company ever been canceled for any reason.
2.22 INVENTORY. The inventory appearing on the Company Financial
Statements, or thereafter acquired or produced, conforms in all material
respects with the Company's applicable specifications and warranties and have
been produced in compliance with the Company's quality control procedures and
consist only of items of a quality and quantity useable or saleable by the
Company in the ordinary course of business. All such inventory is
merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is obsolete, damaged or defective in any
amount. Such inventory is owned by the Company and is not subject to any
liens, charges, pledges, security interests or other encumbrances.
2.23 COMPLIANCE WITH LAWS.
(a) The Company has complied in all material respects with, is not
in violation of, and has not received any notices of violation with respect
to any federal, state or local statute, law or regulation with respect to the
conduct of its business or the ownership or operation of its business, assets
or properties. No charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced against
alleging any failure to comply with any such law or regulation.
(b) The Company has not violated in any respect, or received a
notice or charge asserting any violation of the Xxxxxxx Act, the Xxxxxxx Act,
the Xxxxxxxx-Xxxxxx Act, or the Federal Trade Commission Act, each as amended.
(c) The Company has not, and none of the officers, directors,
shareholders or employees of the Company have, on behalf of the Company:
(i) made or agreed to make any contribution, payment or gift of
funds or property to any governmental official, employee, or agent where
either the contribution, payment, or gift or the purpose thereof was illegal
under the laws of any federal, state or local jurisdiction; or
18
(ii) established or maintained any unrecorded fund or asset for
any purpose, or intentionally made any false or inaccurate entries on any of
its books and/or records; or
(iii) made or agreed to make any contribution, or reimbursed any
political gift or contribution made by any other Person, to any candidate for
federal, state or local public office; or
(iv) been involved in the disbursement or receipt of funds
outside of the normal internal control systems of accountability or been
involved in the improper or inaccurate recording of material payments,
disbursements or receipts.
2.24 REGISTRATION STATEMENT; JOINT PROXY STATEMENT. None of the
information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference, and reviewed by the Company prior to
such inclusion or incorporation by reference, in the registration statement
to be filed with the SEC by Holdings in connection with the issuance of
shares of Holdings Common Stock in the Mergers and the Interest Exchange (the
"Registration Statement") will, at the time the Registration Statement
becomes effective under the Securities Act of 1933, as amended (the
"Securities Act"), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by
or on behalf of the Company for inclusion or incorporation by reference, and
reviewed by the Company prior to such inclusion or incorporation by
reference, in the joint proxy statement, in definitive form, relating to the
meetings of the IWL and the Company shareholders to be held in connection
with the Mergers, or in the related proxy and notice of meeting, or
soliciting material used in connection therewith (referred to herein
collectively as the "Joint Proxy Statement") will, at the dates mailed to
shareholders and at the times of the IWL shareholders' meeting and the
Company shareholders' meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Company, its
officers and directors or any of its Subsidiaries should occur which is
required to be described in an amendment of, or a supplement to, the
Registration Statement or the Joint Proxy Statement, the Company shall
promptly so advise IWL and Holdings. The Company will promptly disseminate
any such amendment or supplement to the shareholders of the Company.
2.25 ACCOUNTING MATTERS. Neither the Company nor, to its best
knowledge, any of its affiliates has through the date hereof taken or agreed
to take any action that would prevent the business combination to be effected
by the Mergers and the Interest Exchange from being accounted for as a
"pooling of interests."
2.26 FIRPTA. The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
2.27 EMPLOYEE BENEFIT PLANS.
(a) Section 2.27 of the Company Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements, and any current or former employment or executive
compensation or severance agreements, written or otherwise, for the benefit
of, or relating to, any employee of the Company, any trade or business
(whether or not incorporated) which is a member or which is under common
control with the Company (a "Company ERISA Affiliate") within the meaning of
Section 414 of the Code, or any Subsidiary of the Company (together, the
"Company Employee Plans"), and a copy of each such Company Employee Plan has
been provided or made available to IWL.
(b) (i) None of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person except as
required by applicable law, including, but not limited to, COBRA; (ii)
19
all Company Employee Plans are in compliance in all material respects with
the requirements prescribed by any and all applicable statutes (including
ERISA and the Code), orders, or governmental rules and regulations currently
in effect with respect thereto (including all applicable requirements for
notification to participants or beneficiaries or the Department of Labor,
Internal Revenue Service (the "IRS") or Secretary of the Treasury), and the
Company has performed in all material respects all obligations required to be
performed by it under, is not in default under or violation of, and has no
knowledge of any default or violation by any other party to, any of the
Company Employee Plans; (iii) each Company Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code either has received a favorable determination
letter with respect to each such Company Employee Plan from the IRS or still
has a remaining period of time under applicable Treasury Regulations or IRS
pronouncements in which to apply for such a determination letter and to make
any amendments necessary to obtain a favorable determination; and (iv) no
Company Employee Plan is or within the prior six (6) years has been subject
to, and the Company has not incurred and does not expect to incur any
liability under, Title IV of ERISA or Section 412 of the Code and (v) nothing
in any Company Employee Plan precludes or interferes with Holdings' ability
to cause the Company to terminate (or consolidate, at Holdings' option) any
Company Employee Plan after the Closing, provided that (A) the Company
Employee Plans may be terminated prospectively only, subject to rights
accrued by the Company's employees at the time of such termination and (B)
not more than sixty days notice may be required to terminate certain Company
Employee Plans.
(c) None of the following now exists or has existed within the
six-year period ending on the date hereof with respect to any Company
Employee Plan: (i) any act or omission by the Company constituting a
violation of Section 402 or 403 or, to the knowledge of the Company, Section
404 or 405 of ERISA; (ii) to the knowledge of the Company, any act or
omission by the Company which constitutes a violation of Sections 406 and 407
of ERISA and is not exempted by Section 408 of ERISA or which constitutes a
violation of Section 4975(c) of the Code and is not exempted by Section
4975(d) of the Code; (iii) any act or omission by the Company constituting a
violation of Section 503 or 511 or, to the knowledge of the Company, Section
510 of ERISA; or (iv) any act or omission by the Company which could give
rise to liability under Section 502 of ERISA or under Sections 4979 or 4975
through 4980 of the Code or any other provisions of ERISA or the Code.
(d) Each Company Employee Plan has been maintained in substantial
compliance with its terms, and all contributions, premiums or other payments
due from the Company or any of its Subsidiaries to (or under) any such
Company Employee Plan have been fully paid or adequately provided for on the
Company Financial Statements for the most recently ended fiscal year. All
accruals thereon (including, where appropriate, proportional accruals for
partial periods) have been made in accordance with GAAP consistently applied
on a reasonable basis. There has been no amendment, written interpretation or
announcement (whether or not written) by the Company with respect to, or
change in employee participation or coverage under, any Company Employee Plan
that would increase materially the expense of maintaining such plans or
arrangements, individually or in the aggregate, above the level of expense
incurred with respect thereto for the most recently ended fiscal year.
(e) The Company has made available to IWL complete, accurate and
current copies of all Company Employee Plans and all amendments, documents,
correspondence addressed to the Company and filings relating thereto,
including but not limited to any statements, filings, reports or returns
filed with any governmental agency with respect to the Company Employee Plans
at any time within the three-year period ending on the date hereof.
2.28 OWNERSHIP OF SECURITIES. As of the date hereof, none of the
Company or any of its affiliates or associates (as such terms are defined
under the Exchange Act), (a)(i) beneficially owns, directly or indirectly, or
(ii) is party to any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of, in each case, shares of
capital stock of IWL that in the aggregate represent 10% or more of the
outstanding shares of IWL Common Stock, or (b) is an "affiliated shareholder"
of IWL within the meaning of Article XIII of the TBCA. Neither the Company
nor any of its Subsidiaries owns any shares of IWL Common Stock.
20
2.29 CERTAIN REGULATORY MATTERS.
(a) Except as disclosed in Section 2.29 of the Company Disclosure
Schedule, and except for billing disputes with customers arising in the
ordinary course of business that in the aggregate involve immaterial amounts,
there are no proceedings or, to the Company's knowledge, investigations
pending or threatened before any domestic or foreign court, administrative,
governmental or regulatory body in which any of the following matters are
being considered which could reasonably be expected to have a Material Adverse
Effect on the Company, nor has the Company or any of its Subsidiaries received
written notice or inquiry from any such body, government official, consumer
advocacy or similar organization or any private party indicating that any of
such matters should be considered or may become the object of consideration or
investigation which could reasonably be expected to have a Material Adverse
Effect on the Company: (i) reduction of rates charged to customers; (ii)
reduction of earnings; (iii) refunds of amounts previously charged to
customers; (iv) failure to meet any expense, infrastructure, service quality
or other commitments previously made to or imposed by any administrative,
governmental or regulatory body; or (v) increase in termination or access
charges or other rates paid or payable by the Company to its suppliers.
(b) Except as disclosed in Section 2.29 of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has any outstanding
commitments (and no such obligations have been imposed upon the Company and
remain outstanding) regarding (i) reduction of rates charged to customers;
(ii) reduction of earnings; (iii) refunds of amounts previously charged to
customers; or (iv) expenses, infrastructure expenditures, service quality or
other regulatory requirements to or by any domestic or foreign court,
administrative, governmental or regulatory body, government official, consumer
advocacy or similar organization, in each case which could reasonably be
expected to have a Material Adverse Effect on the Company.
(c) The Company has not transferred, sold any interest in, or
otherwise diluted its control over any federal or state regulatory licenses,
certificates, approvals or other authorizations under which it operates, and
the transfer of such authorizations, subject to regulatory approval, would not
violate the terms of any agreement to which the Company is a party or by which
the Company is bound, or impinge the rights of any third party.
(d) The Company has no current liability (and there is no basis
for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Company giving rise to
any liability) arising out of any injury to persons or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased,
or delivered by the Company. Any such claims would be fully covered to the
extent of the dollar limitations of the Company's product liability insurance.
There are no recalls, threatened or pending, and no federal investigative
reports have been filed or were required to have been filed with respect to
any of the Company's products.
2.30 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Company in this Agreement, nor any statement made in
any Schedule, Exhibit or certificate furnished by the Company pursuant to this
Agreement, when read in their entirety, contains or will contain any untrue
statement of a material fact at the Effective Time, or omits or will omit to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. No warranty or representation shall be deemed to have been made
by the Company except for the warranties and representations set forth in this
Agreement and the Exhibits, Schedules and certificates delivered pursuant
hereto.
ARTICLE IIA
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
Except as set forth in the Partnership Disclosure Schedule attached hereto
and incorporated by reference herein (the "Partnership Disclosure Schedule"),
the Partnership hereby represents and warrants to Holdings and IWL (and,
21
unless the context indicates otherwise, all of such representations and
warranties shall be deemed made with respect to the Partnership and its
predecessor, if any) that, as of the date hereof:
2A.1 ORGANIZATION AND QUALIFICATION, SUBSIDIARIES. The Partnership is a
limited partnership duly formed and validly existing under the laws of the State
of Texas. The Partnership has the requisite partnership power and authority and
any necessary governmental authority, franchise, license or permit to own,
operate or lease the properties that it purports to own, operate or lease and to
carry on its business as it is now being conducted, and is duly qualified as a
foreign partnership to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary, except for such
failure which, when taken together with all other such failures, would not
reasonably be expected to have a Material Adverse Effect on the Partnership.
The Partnership does not have any Subsidiaries.
2A.2 AGREEMENT OF LIMITED PARTNERSHIP. The Partnership has heretofore
furnished, or otherwise made available to IWL, a complete and correct copy of
the Agreement of Limited Partnership (or comparable governing documents), as
amended to the date hereof, of the Partnership and its Certificate of Limited
Partnership. The Agreement of Limited Partnership (or comparable governing
documents) is in full force and effect.
2A.3 PARTNERSHIP INTERESTS.
(a) Section 2A.3 of the Partnership Disclosure Schedule sets forth
all of the outstanding Partnership Interests, all of which were validly issued
in accordance with the terms of the Agreement of Limited Partnership of the
Partnership and are fully paid and nonassessable. Except as set forth in
Section 2A.3 of the Partnership Disclosure Schedule, there are no outstanding
Partnership Equity Rights. For purposes of this Agreement, "Partnership Equity
Rights" shall mean subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire from the Partnership at any time, or
upon the happening of any stated event, any interest in the Partnership.
(b) There are no outstanding obligations of the Partnership to
repurchase, redeem or otherwise acquire any Partnership Interest.
(c) Except as set forth in section 2A.3 of the Partnership
Disclosure Schedule, there are no liens, security interests, pledges,
agreements, claims, charges or encumbrances on any of the Partnership
Interests. Except for equity interests disclosed in Section 2A.3 of the
Partnership Disclosure Schedule, the Partnership does not directly or
indirectly own any equity interest in any other Person.
(d) Except as disclosed in Section 2A.3 of the Partnership
Disclosure Schedule, there are no partner agreements, voting trusts or other
agreements or understandings to which the Partnership is a party or to which
it is bound relating to the voting of any Partnership Interest.
2A.4 AUTHORITY. The Partnership has all requisite partnership power and
authority to enter into this Agreement and to consummate the Interest Exchange
and the other transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the General Partner on behalf of the Partnership. This
Agreement has been duly executed and delivered by the General Partner on behalf
of the Partnership and constitutes the valid and binding obligation of the
Partnership enforceable in accordance with its terms. The execution and
delivery of this Agreement by the Partnership does not and the consummation of
the transactions contemplated hereby will not result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of a material benefit under (a) any provision of the Agreement of Limited
Partnership of the Partnership or (b) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Partnership or its properties or assets. No consent,
approval, order or authorization of, or registration, declaration or filing with
any
22
Governmental Entity is required by or with respect to the Partnership in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (a) the
filing of an amendment to the Partnership's certificate of limited partnership
with the Secretary of State of Texas and (b) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required by
the Nasdaq National Market or under applicable state and federal securities
laws.
2A.5 PARTNERSHIP FINANCIAL STATEMENTS. Section 2A.5 of the Partnership
Disclosure Schedule sets forth the Partnership's audited financial statements
(balance sheets, income statements and statements of cash flows) as of and for
the fiscal years ended December 31, 1996 and 1994 and for the six months ended
June 30, 1995, and the Partnership's reviewed financial statements for the nine
months ended September 30, 1997 (collectively, the "Partnership Financial
Statements"). The Partnership Financial Statements are complete and correct in
all material respects and, except as set forth in Section 2A.5 of the
Partnership Disclosure Schedule, have been prepared in accordance with GAAP
applied on a basis consistent throughout the periods indicated and consistent
with each other (except that the reviewed Partnership Financial Statements do
not contain the notes necessary to be in accordance with GAAP and are subject to
normal year-end adjustments). The Partnership Financial Statements present
fairly the financial condition and operating results of the Partnership and its
Subsidiaries as of the dates and for the periods indicated therein. The
reviewed balance sheet of the Partnership as of September 30, 1997 is
hereinafter referred to as the "Partnership Balance Sheet."
2A.6 NO UNDISCLOSED LIABILITIES. The Partnership does not have any
liabilities or obligations, either accrued or contingent, whether or not
required to be reflected in financial statements prepared in accordance with
GAAP, and whether due or to become due, except: (a) liabilities reflected in the
Partnership Balance Sheet, (b) liabilities specifically described in this
Agreement or in the Partnership Disclosure Schedule or (c) liabilities not
exceeding $50,000 in the aggregate incurred in the ordinary course of business
since the date of the Partnership Balance Sheet.
2A.7 NO CHANGES. Except as set forth in Section 2A.7 of the Partnership
Disclosure Schedule or as contemplated by this Agreement, since the date of the
Partnership Balance Sheet there has not been, occurred or arisen any:
(a) transaction by the Partnership except in the ordinary course of
business as conducted on that date;
(b) capital expenditure or inventory purchase by the Partnership
exceeding $25,000 individually or $100,000 in the aggregate, except pursuant to
existing contracts listed in Section 2A.12 of the Partnership Disclosure
Schedule;
(c) destruction, damage to, or loss of any assets (including without
limitation intangible assets) of the Partnership (whether or not covered by
insurance), either individually or in the aggregate, exceeding $25,000;
(d) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(e) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates, any change in policies in
making or reversing accruals, or any change in capitalization of software
development costs) by the Partnership;
(f) declaration, setting aside, or payment of a distribution in
respect of the Partnership Interests, or any direct or indirect redemption,
purchase or other acquisition by the Partnership of any of its interests;
(g) increase in the salary or other compensation payable or to
become payable by the Partnership to any of its employees, or the declaration,
payment, or commitment or obligation of any kind for the payment by the
23
Partnership of a bonus or other additional salary or compensation to any
person except for year-end distributions and bonuses paid in the ordinary
course of business consistent with past practice;
(h) acquisition, sale or transfer of any asset of the Partnership
except in the ordinary course of business;
(i) formation, amendment or termination of any material distribution
agreement or any material contract, agreement or license to which the
Partnership is a party, other than termination by the Partnership pursuant to
the terms thereof,
(j) loan by the Partnership to any Person or guaranty by the
Partnership of any loan;
(k) waiver or release of any material right or claim of the
Partnership, including any write-off or other compromise of any account
receivable of the Partnership except in the ordinary course of business;
(l) the commencement or notice or, to the knowledge of the
Partnership, threat of commencement of any government proceeding against or
investigation of the Partnership or its affairs;
(m) other event or condition of any character relating to the
Partnership or the Partnership's business that has or would be expected to have
a Material Adverse Effect on the Partnership;
(n) issuance, sale or redemption by the Partnership of any interest
in the Partnership;
(o) change in pricing or royalties set or charged by the Partnership
except pursuant to the terms of existing contracts; or
(p) negotiation or agreement by the Partnership to do any of the
things described in the preceding clauses (a) through (o) (other than
negotiations with parent and its representatives or any other Person regarding
the transactions contemplated by this Agreement).
2A.8 TAX AND OTHER PARTNERSHIP RETURNS AND REPORTS.
(a) TAX PARTNERSHIP RETURNS AND AUDITS. Except as set forth in
Section 2A.8 of the Partnership Disclosure Schedule, the Partnership has
prepared and filed all federal, state, local and foreign returns, estimates,
information statements and reports required to be filed by any of them relating
to any and all Taxes relating or attributable to the Partnership or the assets
or operations of the Partnership ("Partnership Returns"), and such Partnership
Returns are true and correct in all material respects and have been completed
in accordance with applicable law. Except as set forth in Section 2A.8 of the
Partnership Disclosure Schedule, the Partnership has paid all Taxes required to
be paid by the Partnership with respect to such Partnership Returns and has
withheld with respect to its employees all federal and state income Taxes, FICA,
FUTA and other Taxes it is required to withhold. The accruals for Taxes on the
books and records of the Partnership are sufficient to discharge the Taxes
payable by the Partnership for all periods (or the portion of any period) ending
on or prior to the Closing Date. The Partnership is not delinquent in the
payment of any Tax nor, except as set forth in Section 2A.8 of the Partnership
Disclosure Schedule, is there any Tax deficiency outstanding, to the knowledge
of the Partnership, proposed or assessed against the Partnership nor has the
Partnership executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax. The audits of each
Partnership Return that has been audited by the relevant authorities or for
which the statute of limitations has been waived or extended have been closed
and the Partnership has not received any written or oral notification that an
audit or other examination of any Partnership Return is presently in progress.
All such Partnership Returns that have been audited or for which the statute of
limitations has been waived are listed in Section 2A.8 of the Partnership
Disclosure Schedule. Except as set forth in Section 2A.8 of the Partnership
Disclosure Schedule, the Partnership does not have any material liabilities for
unpaid Taxes, whether asserted or unasserted, known or unknown,
24
contingent or otherwise and the Partnership has no knowledge of any basis for
the assertion of any such liability attributable to the Partnership or the
assets or operations of the Partnership. The Partnership is not (nor has it
ever been) required to join with any other entity in the filing of a
consolidated tax return for federal tax purposes or a consolidated or combined
return or report for state tax purposes. Except as set forth in Section 2A.8
of the Partnership Disclosure Schedule, the Partnership is not a party to or
bound by any tax indemnity, tax sharing or tax allocation agreement. There
are (and as of immediately following the Closing there will be) no liens on
the assets of the Partnership relating to or attributable to Taxes, except for
liens for Taxes not yet due and payable or liens for Taxes being contested by
appropriate proceedings. The Partnership has no knowledge of any basis for
the assertion of any claim which, if adversely determined, would result in
liens on the assets of the Partnership. There is no contract, agreement, plan
or arrangement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Partnership that, individual
or collectively, could give rise to the payment of any amount that would not
be deductible pursuant to Sections 280G, 162A or 404 of the Code.
(b) NO PENALTY. The Partnership is not subject to any penalty by
reason of a violation of any order, rule or regulation of, or a default with
respect to any Partnership Return, report or declaration required to be filed
with any Governmental Entity to which it is subject.
2A.9 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement binding
upon, or judgment, injunction, order or decree entered against, the Partnership
under which the Partnership is prohibited from conducting or engaging in any
line of business.
2A.10 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION
OF EQUIPMENT.
(a) The Partnership owns no real property except as set forth in
Section 2A.10(a) of the Partnership Disclosure Schedule. Section 2A.10(a) of
the Partnership Disclosure Schedule sets forth a true and complete list of all
real property leased by the Partnership and the aggregate annual rental or other
fee payable under any such lease. All such leases are in good standing, valid
and effective in accordance with their respective terms, and there is not with
respect to the Partnership and, to the knowledge of the Partnership, any other
parties to such leases, under any of such leases any existing default or event
of default (or event which with notice or lapse of time, or both, would
constitute a default).
(b) Except as set forth in Section 2A.10(b) of the Partnership
Disclosure Schedule, the Partnership holds good and valid title to (or, in the
case of leased properties, assets and rights of way, valid leasehold interests
in) all of its tangible properties, assets and rights of way, real, personal and
mixed, used in its business, free and clear of any liens, charges, pledges,
security interests or other encumbrances. The Partnership has valid and
subsisting rights of way to use all real or personal property in or through
which the Partnership's owned or leased optic or other fiber lines are currently
located or situated.
(c) The Equipment used by the Partnership in the conduct of its
business is listed in Section 2A.10(c) of the Partnership Disclosure Schedule,
except individual pieces of equipment owned by the Partnership with an
individual value of less than $5,000. The Equipment is, taken as a whole, (i)
adequate for the conduct of the business of the Partnership as currently
conducted, (ii) suitable for the uses to which it is currently employed, (iii)
in good operating condition, (iv) regularly and properly maintained, ordinary
wear and tear excepted, and (v) not obsolete, dangerous or in need of renewal or
replacement.
2A.11 INTELLECTUAL PROPERTY.
(a) The Partnership owns, or is licensed to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, schematics, technology, know-how, computer software
programs or applications and tangible or intangible proprietary information or
material (excluding Partnership Commercial Software Rights (as defined in
Section 2A.11(b) below)) that are used or currently proposed by the
25
Partnership to be used in the business of the Partnership as currently
conducted or as currently proposed to be conducted by the Partnership (the
"Partnership Intellectual Property Rights"). Section 2A.11(a) of the
Partnership Disclosure Schedule (i) sets forth a complete list of all patents,
patent applications, registered trademarks, material unregistered copyrights,
trade names and service marks, and any applications therefor, included in the
Partnership Intellectual Property Rights; (ii) specifies the jurisdictions in
which each such Partnership Intellectual Property Right has been issued or
registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers and
the names of all registered owners, together with a list of all of the
Partnership's currently marketed software products and a list of which, if
any, of such software products that have been registered for copyright
protection with the United States Copyright Office and any foreign offices and
by whom such items have been registered and (iii) as to each such Partnership
Intellectual Property Right, specifies whether it is owned by the Partnership
or licensed to the Partnership by another Person and, in the cases of any
licenses, sets forth the licensor and the term of such license. Section
2A.11(a) of the Partnership Disclosure Schedule also sets forth a complete
list of all licenses, sublicenses and other agreements pursuant to which the
Partnership has licensed any other Person to use any Partnership Intellectual
Property Right or other trade secret material to the Partnership, and includes
the identity of such licensees, provided, however, that End-User Licenses need
not be listed. The Partnership is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any license, sublicense or agreement described on
such list. The Partnership is the sole and exclusive owner of, with all
right, title and interest in and to (free and clear of any liens or
encumbrances other than End-User Licenses), those Partnership Intellectual
Property Rights which the Partnership purports to own, and has sole and
exclusive rights, and is not contractually obligated to pay any compensation
to any third party in respect thereof to the use thereof or the material
covered thereby in connection with the services or products in respect of
which such Partnership Intellectual Property Rights are being used. With
respect to Partnership Intellectual Property Rights licensed to the
Partnership, the Partnership has sufficient rights under the license
agreements relating thereto to enable the Partnership to use such Partnership
Intellectual Property Rights in its business as currently conducted and as
proposed to be conducted without payment of royalties or other compensation to
the licensor thereof. No claims with respect to the Partnership Intellectual
Property Rights have been asserted or, to the knowledge of the Partnership,
are threatened by any Person, (i) to the effect that the manufacture, sale,
licensing or use of any product as now used, sold or licensed or proposed for
use, sale or license by the Partnership infringes on any copyright, patent,
trade xxxx service xxxx or trade secret, (ii) against the use by the
Partnership of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and applications
used in the Partnership's business as currently conducted or as proposed by
the Partnership to be conducted, or (iii) challenging the ownership, validity
or effectiveness of any of the Partnership Intellectual Property Rights.
Except as set forth in Section 2A.11(a) of the Partnership Disclosure
Schedule, all registered and material unregistered trademarks, service marks
and copyrights held by the Partnership are valid and subsisting. To the
knowledge of the Partnership, there is no material unauthorized use,
infringement or misappropriation of any of the Partnership Intellectual
Property Rights by any third party, including any employee or former employee
of the Partnership. No Partnership Intellectual Property Right owned
exclusively by the Partnership or product of the Partnership is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting in
any manner the licensing thereof by the Partnership. There is no outstanding
order, judgment, decree or stipulation on the Partnership, and the Partnership
is not a party to any agreement, restricting in any manner the licensing of
the Partnership's products by the Partnership. Except for End-User Licenses
or as otherwise set forth in Section 2A.11(a) of the Partnership Disclosure
Schedule, the Partnership has not entered into any agreement to indemnify any
Person against any charge of infringement of any Partnership Intellectual
Property Right.
(b) "Partnership Commercial Software Rights" means packaged
commercially available software programs generally available to the public
through retail dealers in computer software which have been licensed to the
Partnership pursuant to End-User Licenses and which are used in the
Partnership's business but are in no way a component of or incorporated in any
of the Partnership's products and related trademarks, technology and know-how.
To the knowledge of the Partnership, the Partnership has not breached or
violated the terms of its license, sublicense or other agreement relating to any
Partnership Commercial Software Rights and has a valid right to use such
Partnership Commercial Software Rights under such license and agreements. No
claims with respect to the Partnership Commercial Software Rights have been
asserted or, to the knowledge of the Partnership, are threatened by any Person
against the
26
Partnership. To the knowledge of the Partnership, there is no material
unauthorized use, infringement or misappropriation of any of the Partnership
Commercial Software Rights by the Partnership or any employee or former
employee of the Partnership during the period of their employment.
2A.12 AGREEMENTS, CONTRACTS AND COMMITMENTS. Other than those listed
in Section 2A.12 of the Partnership Disclosure Schedule, the Partnership does
not have, is not a party to nor is it bound by:
(a) any collective bargaining agreements,
(b) any agreements that contain any unpaid severance liabilities or
obligations,
(c) any bonus, deferred compensation, incentive compensation,
option, pension, profit-sharing or retirement plans, or any other employee
benefit plans or arrangements,
(d) any employment or consulting agreement, contract or commitment
(other than employment letters) with an employee or individual consultant or
salesperson or consulting or sales agreement, contract or commitment with a firm
or other organization, not terminable by the Partnership on thirty days notice
without liability,
(e) any insurance policy, fidelity or surety bond or completion
bond not listed in Section 2A.20 of the Partnership Disclosure Schedule,
(f) any lease of personal property having a value individually in
excess of $25,000,
(g) any agreement of indemnification or guaranty not entered into
in the ordinary course of business,
(h) any agreement, contract or commitment containing any covenant
limiting the freedom of the Partnership to engage in line of business or compete
with any Person,
(i) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $25,000,
(j) any agreement, contract or commitment relating to the
disposition or acquisition of assets not in the ordinary course of business or
any ownership interest in any corporation, partnership, joint venture or other
business enterprise,
(k) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit, including guaranties referred to in clause (g) hereof,
(l) any purchase order or contract for the purchase of raw
materials or acquisition of assets involving $25,000 or more in any single
instance or $100,000 or more in the aggregate,
(m) any construction contracts involving $25,000 or more in any
single instance or $100,000 or more in the aggregate,
(n) any distribution, joint marketing or development agreement,
(o) any lease for switches or any other machinery, equipment or
other personal property involving payment of aggregate rentals in excess of
$25,000,
27
(p) any contract pursuant to which the Partnership has access to
the telephone network of another Person other than the Partnership's internal
commercial telephone service and any contracts for the resale of any network
capacity of the Partnership,
(q) any agreement, contract, lease or easement pursuant to which
the Partnership has the right of way to use any premises or real property to
locate and/or install fiber lines on, under or through such premises or real
property,
(r) any agreement or commitment obligating the Partnership to
deliver any product or service at a price which does not cover the cost
(including labor, materials and production overhead), plus a reasonable profit
margin, for such product or service,
(s) any joint venture, partnership or other cooperative arrangement
or agreement involving a sharing or profits or losses,
(t) any other agreement, contract or commitment which involves
$25,000 or more and is not cancelable without penalty within thirty (30) days,
or
(u) any agreement which is otherwise material to the Partnership's
business.
The Partnership has not breached, or received any claim or threat that it
has breached, any of the terms or conditions of any material agreement, contract
or commitment to which it is bound (including, but not limited to, those set
forth in Section 2A.12 or any other section of the Partnership Disclosure
Schedule) in such manner as would permit any other party to cancel or terminate
the same. Each agreement, contract or commitment to which the Partnership is a
party and that is required to be set forth in the Partnership Disclosure
Schedule is in full force and effect and, except as otherwise disclosed, is not
subject to any material default thereunder by any party thereto. The
Partnership is not bound by any material contract, agreement, license, lease or
other commitment, a copy of which has not been previously provided or made
available to IWL. The Partnership, after making an inquiry of all of its
employees and Partners and their respective officers, directors, shareholders
and appropriate employees, does not have any reason to expect that any change
may occur in the relationships of the Partnership with its suppliers or
customers as a result of the Interest Exchange, which change would have a
Material Adverse Effect on the Partnership. No supplier of or customer of the
Partnership has indicated within the past year that it will stop, or decrease
the rate of supplying or purchasing materials, products, or services to or from
the Partnership, as a result of the Mergers or the Interest Exchange. Except as
described in Section 2A.4, no consents, waivers or approvals under any of the
Partnership's material agreements, contacts, licenses or leases are necessary in
order to preserve the benefits thereunder for the Surviving Corporation or
otherwise to avoid any breach, default or right of termination or other right as
a result of the Mergers or the Interest Exchange.
2A.13 INTERESTED PARTY TRANSACTIONS. Except as set forth in Section
2A.13 of the Partnership Disclosure Schedule, no Partner or any officer,
director or shareholder of such Partner (nor any parent, sibling, descendant or
spouse of any of such persons, or any trust, partnership, corporation or other
entity in which any of such persons has or has had an interest), has or has had,
directly or indirectly, (a) an interest in any entity which furnished or sold,
or furnishes or sells, services or products which the Partnership furnished or
sells, or proposes to furnish or sell, or (b) any interest in any entity which
purchases from or sells or furnishes to the Partnership any goods or services,
or (c) a beneficial interest in any contract or agreement required to be set
forth in Section 2A.12 of the Partnership Disclosure Schedule; provided, that
ownership of no more than five percent (5%) of the outstanding voting stock of a
publicly traded corporation shall not be deemed an "interest of any entity" for
purposes of this Section 2A.13.
2A.14 GOVERNMENTAL AUTHORIZATIONS. Section 2A.14 of the Partnership
Disclosure Schedule accurately lists each federal, state, county, local or
foreign governmental consent, license, permit, grant, or other authorization
issued to the Partnership (a) pursuant to which the Partnership currently
operates or holds any interest in any of its properties or (b) which is required
for the operation of its business as currently conducted or the holding of any
such interest as
28
currently held (herein collectively called the "Partnership Authorizations").
The Partnership Authorizations are in full force and effect and constitute all
the authorizations required to permit the Partnership to operate or conduct
its business as currently conducted or hold any interest in its properties as
currently held.
2A.15 LITIGATION. Section 2A.15 of the Partnership Disclosure Schedule
accurately lists all suits, actions and legal, administrative, arbitration or
other proceedings and governmental investigations and all other claims pending
against the Partnership or, to the knowledge of the Partnership, threatened or
which the partnership expects will ultimately be threatened or commenced against
the Partnership. None of such suits, actions, proceedings, investigations or
claims seek to prevent the consummation of the Mergers or the Interest Exchange.
There is no judgment, degree or order enjoining the Partnership in respect of,
or the effect of which is to prohibit, any business practice or the acquisition
of any property or the conduct of business of the Partnership. Section 2A.15 of
the Partnership Disclosure Schedule also lists all suits and legal actions
initiated by the Partnership which are still pending or which have been
concluded in the last two years.
2A.16 ACCOUNTS RECEIVABLE. All accounts receivable of the Partnership
shown in the Partnership Balance Sheet arose in the ordinary course of business
and, to the extent not previously collected, are collectible (except to the
extent reserved against as reflected in the Partnership's Partnership Financial
Statements) and are carried at values determined in accordance with GAAP
consistently applied. To the knowledge of the Partnership, none of the accounts
receivable of the Partnership outstanding as of the date hereof is subject to
any claim of offset, recoupment, set off or counterclaim, and there are no facts
or circumstances (whether asserted or unasserted) that would give rise to any
such claim. No accounts receivable are contingent upon the performance by the
Partnership of any obligation or contract except for the Partnership's
maintenance obligations under its maintenance agreements (although no customer
has claimed that the Partnership has failed to perform its maintenance
obligations). No Person has any lien, charge, pledge, security interest or
other encumbrance on any of the Partnership's accounts receivable and no
agreement for deduction or discount has been made with respect to any of such
accounts receivable, except for liens granted to Bank One Texas, N.A. under the
Partnership's revolving line of credit.
2A.17 ENVIRONMENTAL AND OSHA.
(a) The Partnership has complied in all material respects with all
Environmental Laws and Employee Safety Laws, and no charge, action, suit,
proceeding, hearing, known investigation, claim, damage, or notice has been
filed or commenced against the Partnership alleging any failure to comply with
any such law or regulation.
(b) The Partnership has no obligation to take remedial action with
respect to any conditions nor does the Partnership have any liability, and there
is no basis related to the Partnership's past or present operations, for any
present charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand giving rise to any liability or obligation to take any remedial
action under any Environmental Law.
(c) Except as set forth in Section 2A.17(c) of the Partnership
Disclosure Schedule, the Partnership has no liability relating to, and it has
not handled or disposed of any substance, arranged for the disposal of any
substance, or owned or operated any property or facility in violation of any
Environmental Law.
(d) The Partnership has no liability for, and there is no basis
for, any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Partnership giving rise
to any material liability under any Employee Safety Laws.
(e) The Partnership has no liability relating to, and to the
knowledge of the Partnership, the Partnership has not exposed any of the
Partnership's employees to any substances or conditions that could form the
basis for, any present charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand (under the common law or pursuant to statute)
against the Partnership giving rise to material liability for any illness of or
personal injury to any employee.
29
(f) The Partnership has been in compliance with all the terms and
conditions of all permits, licenses, and other authorizations of Governmental
Entities which are required under any Environmental Law or Employee Safety Law.
(g) All properties and equipment used by the Partnership are free
of asbestos, PCB's and other Extremely Hazardous Substances (as defined in
Section 302A of the Emergency Planning and Community Right-to-Know Act of
1986, as amended). To the knowledge of the Partnership, no pollutant,
contaminant, chemical, or industrial, hazardous, or toxic material or waste
has been buried, stored, spilled, leaked, discharged, emitted, or released on
any real property that the Partnership has ever owned, or that the Partnership
now leases or has ever leased.
2A.18 BROKERS' AND FINDERS' FEES. The Partnership has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders,
fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
2A.19 LABOR MATTERS. The Partnership is in compliance in all material
respects with all currently applicable laws and regulations respecting
employment, discrimination in employment, terms and conditions of employment and
wages and hours and employment practices, and is not engaged in any unfair labor
practice. The Partnership has not received any notice from any Governmental
Entity of, and to the knowledge of the Partnership there has not been asserted
before any Governmental Entity, any claim of action or proceeding to which the
Partnership is a party or involving the Partnership, and there is neither
pending nor, to the knowledge of the Partnership, threatened any investigation
or hearing concerning the Partnership arising out of or based upon any such
laws, regulations or practices. There are no pending claims against the
Partnership under any workers compensation plan or policy or for long term
disability. The Partnership has complied in all material respects with all
applicable health care benefit continuation provisions of COBRA and has no
obligations with respect to any former employees or qualified beneficiaries
thereunder. Section 2A.19 of the Partnership Disclosure Schedule lists all
current employees of the Partnership and their current salary and vacation
accruals.
2A.20 INSURANCE. Section 2A.20 of the Partnership Disclosure Schedule
lists all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, software errors and omissions, employees,
officers and directors of the Partnership as well as all claims made under any
insurance policy by the Partnership since January 1, 1993 (other than claims
under the Partnership's medical and dental insurance plans). There is no claim
by the Partnership pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds as to which coverage has been questions, denied or disputed by
the underwriters of such policies or bonds (other than claims made under the
Partnership's medical and dental insurance plans). The Partnership has provided
or made available to IWL copies of all such insurance policies and fidelity
bonds and all claims made by the Partnership under its insurance policies (other
than claims under the Partnership's medical and dental plans). All premiums
payable under all such policies and bonds have been paid and the Partnership is
otherwise in compliance in all material respects with the terms of such policies
and bonds (or other policies and bonds providing substantially similar insurance
coverage). Such policies of insurance and bonds are of the type and in amounts
customarily carried by Persons conducting businesses similar to those of the
Partnership. The Partnership does not know of any threatened termination of or
proposed material premium increase with respect to any of such policies. The
Partnership has never been denied insurance coverage nor has any insurance
policy of the Partnership ever been canceled for any reason.
0X.00 XXXXXXXXX. The inventory appearing on the Partnership Financial
Statements, or thereafter acquired or produced, conforms in all material
respects with the Partnership's applicable specifications and warranties and
have been produced in compliance with the Partnership's quality control
procedures and consist only of items of a quality and quantity useable or
saleable by the Partnership in the ordinary course of business. All such
inventory is merchantable and fit for the purpose for which it was procured or
manufactured, and none of which is obsolete, damaged or defective in any amount.
Such inventory is owned by the Partnership and is not subject to any liens,
charges, pledges, security interests or other encumbrances.
30
2A.22 COMPLIANCE WITH LAWS.
(a) The Partnership has complied in all material respects with, is
not in violation of, and has not received any notices of violation with
respect to any federal, state or local statute, law or regulation with
respect to the conduct of its business or the ownership or operations of its
business, assets or properties. No charge, complaint, action, suit,
proceeding, hearing, known investigation, claim, demand, or notice has been
filed or commenced against alleging any failure to comply with any such law
or regulation.
(b) The Partnership has not violated in any respect, or received a
notice or charge asserting any violation of the Xxxxxxx Act, the Xxxxxxx Act,
the Xxxxxxxx-Xxxxxx Act, or the Federal Trade Commission Act, each as amended.
(c) The Partnership has not, and none of the Partners or employees
of the Partnership have, on behalf of the Partnership:
(i) made or agreed to make any contribution, payment or gift
of funds or property to any governmental official, employee, or agent where
either the contribution, payment, or gift or the purpose thereof was illegal
under the laws of any federal, state or local jurisdiction; or
(ii) established or maintained any unrecorded fund or asset
for any purpose, or intentionally made any false or inaccurate entries on any
of its books and/or records; or
(iii) made or agreed to make any contribution, or reimbursed
any political gift or contribution made by any other Person, to any candidate
for federal, state or local public office; or
(iv) been involved in the disbursement or receipt of funds
outside of the normal internal control systems of accountability or been
involved in the improper or inaccurate recording of material payments,
disbursements or receipts.
2A.23 REGISTRATION STATEMENT; JOINT PROXY STATEMENT. None of the
information supplied or to be supplied by or on behalf of the Partnership for
inclusion or incorporation by reference, and reviewed by the Partnership prior
to such inclusion or incorporation by reference, in the Registration Statement
will, at the time the Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by or on
behalf of the Partnership for inclusion or incorporation by reference, and
reviewed by the Partnership prior to such inclusion or incorporation by
reference, in the Joint Proxy Statement will, at the dates mailed to
shareholders and at the times of the IWL shareholders' meeting and the Partners'
meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein a necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect
to the Partnership or its Partners should occur which is required to be
described in an amending of, or a supplement to, the Registration Statement or
the Joint Proxy Statement, the Partnership shall promptly so advise IWL. The
Partnership will promptly disseminate any such amendment or supplement to the
Partners of the Partnership.
2A.24 ACCOUNTING MATTERS. Neither the Partnership nor, to its
knowledge, any of its affiliates has through the date hereof taken or agreed to
take any action that would prevent the business combination to be effected by
the Mergers and the Interest Exchange from being accounted for as a "pooling of
interests."
2A.25 FIRPTA. The Partnership is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2A) of the Code.
31
2A.26 EMPLOYEE BENEFIT PLANS.
(a) Section 2A.26 of the Partnership Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of ERISA) and all bonus,
incentive, deferred compensation, supplemental retirement, severance and
other similar fringe or employee benefit plans, programs or arrangements, and
any current or former employment or executive compensation or severance
agreements, written or otherwise, for the benefit of, or relating to, any
employee of the Partnership (together, the "Partnership Employee Plans"), and
a copy of each such Partnership Employee Plan has been provided or made
available to IWL.
(b) (i) None of the Partnership Employee Plans promises to
provides retiree medical or other retiree welfare benefits to any person
except as required by applicable law, including but not limited to COBRA;
(ii) all Partnership Employee Plans are in compliance in all material
respects with the requirements prescribed by any and all applicable statues
(including ERISA and the Code), orders, or governmental rules and regulations
currently in effect with respect thereto (including all applicable
requirements for the notification to participants or beneficiaries or the
Department of Labor, IRS or Secretary of the Treasury), and the Partnership
has performed in all material respects all obligations required to be
performed by it under, is not in default under or violation of, and has no
knowledge of any default or violation by any other party to, any of the
Partnership Employee Plans; (iii) each Partnership Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code either has received a favorable
determination letter and to make any amendments necessary to obtain a
favorable determination; and (iv) no Partnership Employee Plan is or within
the prior six (6) years has been subject to, and the Partnership has not
incurred and does not expect to incur any liability under, Title IV or ERISA
or Section 412A of the Code and (v) nothing in any Partnership Employee Plan
precludes or interferes with Holdings' ability to cause the Partnership to
terminate (or consolidate, at Holdings' option) any Partnership Employee Plan
after the Closing, provided that (A) the Partnership Employee Plan may be
terminated prospectively only, subject to rights accrued by the Partnership's
employees at the time of such termination and (B) not more than sixty days
notice may be required to terminate certain Partnership Employee Plans.
(c) None of the following now exists or has existed within the
six-year period ending on the date hereof with respect to any Partnership
Employee Plan: (i) any act or omission by the Partnership constituting a
violation of Section 402A or 403 or, to the knowledge of the Partnership,
Section 404 or 405 of ERISA; (ii) to the knowledge of the Partnership, any
act or omission by the Partnership which constitutes a violation of Sections
406 and 407 of ERISA and is not exempted by Section 408 of ERISA or which
constitutes a violation of Section 4975(c) of the Code and is not exempted by
Section 4975(d) of the Code; (iii) any act or omission by the Partnership
constituting a violation of Section 503 or 511, to the knowledge of the
Partnership, Section 510 of ERISA; or (iv) any act or omission by the
Partnership which could give rise to liability under Section 502A of ERISA or
under Sections 4979 or 4975 through 4980 of the Code or any other provisions
of ERISA or the Code.
(d) Each Partnership Employee Plan has been maintained in
substantial compliance with its terms, and all contributions, premiums or
other payments due from the Partnership to (or under) any such Partnership
Employee Plan have been fully paid or adequately provided for on the
Partnership Financial Statements for the most recently ended fiscal year.
All accruals thereon (including, where appropriate proportional accruals for
partial periods have been made in accordance with GAAP consistently applied
on a reasonable basis. There has been no amendment, written interpretation
or announcement (whether or not written) by the Partnership with respect to,
or change in employee participation or coverage under, any Partnership
Employee Plan that would increase materially the expense of maintaining such
plans or arrangements, individually or in the aggregate, above the level of
expense incurred with respect thereto for the most recently ended fiscal year.
(e) The Partnership has made available to IWL complete, accurate
and current copies of all Partnership Employee Plans and all amendments,
documents, correspondence addressed to the Partnership and filings relating
thereto, including but not limited to any statements, filings, reports or
returns filed with any governmental
32
agency with respect to the Partnership Employee Plans at any time within the
three-year period ending on the date hereof.
2A.27 OWNERSHIP OF SECURITIES. As of the date hereof, none of the
Partnership or any of its affiliates or associates (as such terms are defined
under the Exchange Act), (a)(i) beneficially owns, directly or indirectly, or
(ii) is party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of capital
stock of IWL that in the aggregate represent 10% or more of the outstanding
shares of IWL Common Stock, or (b) is an "affiliated shareholder" of IWL within
the meaning of Article XIII of the TBCA. Neither the Partnership nor any of its
Partners own any shares of IWL Common Stock.
2A.28 CERTAIN REGULATORY MATTERS.
(a) Except as disclosed in Section 2A.28 of the Partnership
Disclosure Schedule and except for billing disputes with customers arising in
the ordinary course of business that in the aggregate involve immaterial
amounts, there are no proceedings or, to the Partnership's knowledge,
investigations pending or threatened before any domestic or foreign court,
administrative, governmental or regulatory body in which any of the following
matters are being considered which could reasonably be expected to have a
Material Adverse Effect on the Partnership, nor has the Partnership received
written notice or inquiry from any such body, government official, advocacy
or similar organization or any private party indicating that any of such
matters should be considered or may become the object of consideration or
investigation which could reasonably be expected to have a Material Adverse
Effect on the Partnership: (i) reduction of rates charged to customers; (ii)
reduction of earnings; (iii) refunds of amounts previously charged to
customers; (iv) failure to meet any expense, infrastructure, service quality
or other commitments previously made to or imposed by any administrative,
governmental or regulatory body; or (v) increase in termination or access
charges or other rates paid or payable by the Partnership to its suppliers.
(b) Except as disclosed in Section 2A.28 of the Partnership
Disclosure Schedule, the Partnership has no outstanding commitments (and no such
obligations have been imposed upon the Partnership and remain outstanding)
regarding (i) reduction of rates charged to customers; (ii) reduction of
earnings; (iii) refunds of amounts previously charged to customers; or (iv)
expenses, infrastructure expenditures, service quality or other regulatory
requirements to or by any domestic or foreign court, administrative,
governmental or regulatory body, government official, consumer advocacy or
similar organization, in each case which could reasonably be expected to have a
Material Adverse Effect on the Partnership.
(c) The Partnership has not transferred, sold any interest in, or
otherwise diluted its control over any federal or state regulatory licenses,
certificates, approvals or other authorizations under which it operates, and the
transfer of such authorizations, subject to regulatory approval, would not
violate the terms of any agreement to which the Partnership is a party or by
which the Partnership is bound, or impinge the rights of any third party.
(d) The Partnership has no current liability (and there is no basis
for any present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Partnership giving rise to any
liability) arising out of any injury to persons or property as a result of the
ownership, possession, or use of any product manufactured, sold, leased, or
delivered by the Partnership. Any such claims would be fully covered to the
extent of the dollar limitations of the Partnership's product liability
insurance. There are no recalls, threatened or pending, and no federal
investigative reports have been filed or were required to have been filed with
respect to any of the Partnership's products.
2A.29 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by the Partnership in this Agreement, nor any statement made
in any Schedule, Exhibit or certificate furnished by the Partnership pursuant
to this Agreement, when read in their entirety, contains or will contain any
untrue statement of a material fact at the Effective Time, or omits or will
omit to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which
made, not misleading. No warranty or representation shall be
33
deemed to have been made by the Partnership except for the warranties and
representations set forth in this Agreement and the Exhibits, Schedules and
certificates delivered pursuant hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IWL AND THE MERGER SUBSIDIARIES
Except as set forth in the IWL Disclosure Schedule attached hereto and
incorporated by reference herein (the "IWL Disclosure Schedule"), and subject to
Section 3.31, IWL and I-Sub and C-Sub (collectively, the "Merger Subsidiaries")
hereby jointly and severally represent and warrant to the Company and the
Partnership (and, unless the context indicates otherwise, all of such
representations and warranties shall be deemed made with respect to IWL and the
Merger Subsidiaries, their respective Subsidiaries (other than as set forth in
Section 3.31) and their respective predecessors, if any) that, as of the date
hereof:
3.1 ORGANIZATION, STANDING AND POWER. Each of IWL and its Subsidiaries
(including each Merger Subsidiary) is a corporation duly organized, validly
existing and in good standing under the laws of its state or other
jurisdiction of incorporation. Each of IWL and its Subsidiaries has the
corporate power to own its properties and to carry on its business as now
being conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect on IWL and its
Subsidiaries taken as a whole. IWL has made available a true and correct
copy of the Articles of Incorporation and Bylaws of each of IWL and its
Subsidiaries, as amended to date, to counsel for the Company and the
Partnership.
3.2 CAPITAL STRUCTURE.
(a) The authorized stock of IWL consists of 100,000,000 shares of
common stock, par value $0.01 per share, of which 3,754,230 shares were
issued and outstanding as of December 31, 1997, and 10,000,000 shares of
preferred stock, par value $.01 per share, of which no shares are issued or
outstanding as of the date hereof. The authorized capital stock of Holdings
consists of 100,000,000 shares of common stock, par value $.01 per share, and
10,000,000 shares of preferred stock, par value $.01 per share. The
authorized capital stock of each Merger Subsidiary consists of 1,000 shares
of common stock, par value $0.01 per share. Holdings has 1,000 shares of
common stock issued and outstanding as of the date hereof, which are held by
IWL, and I-Sub and C-Sub each have 1,000 shares of common stock issued and
outstanding as of the date hereof, which are held by Holdings. All such
shares have been duly authorized, and all such issued and outstanding shares
have been validly issued (free of preemptive rights), are fully paid and
nonassessable and are free of any liens or encumbrances other than any liens
or encumbrances created by or imposed upon the holders thereof. IWL has also
reserved (i) 146,695 shares of IWL Common Stock for issuance to employees and
consultants pursuant to IWL's Employee Incentive Stock Option Plan, (ii)
300,000 shares of IWL Common Stock for issuance to employees and consultants
pursuant to IWL's 1997 Stock Option Plan, and (iii) 100,000 shares of Common
Stock for issuance to outside directors of IWL under IWL's 1997 Director
Stock Option Plan. Except as set forth in the preceding sentence and except
as set forth in Section 3.2 of the IWL Disclosure Schedule, IWL has not
reserved any shares of its capital stock for future issuance.
(b) Except as set forth in Section 3.2 of the IWL Disclosure
Schedule, there are no outstanding IWL Equity Rights. For purposes of this
Agreement, "IWL Equity Rights" shall mean subscriptions, options, warrants,
calls, commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) to purchase or otherwise acquire from IWL
or any of IWL's Subsidiaries at any time, or upon the happening or any stated
event, any shares of the capital stock of IWL.
(c) Section 3.2 of the IWL Disclosure Schedule sets forth for each
outstanding IWL Equity Right the name of the holder of such IWL Equity Right,
the number of shares subject to such IWL Equity Right, the exercise price of
such IWL Equity Right and the number of shares as to which such IWL Equity
Right is exercisable, and, if the exercisabilty of such IWL Equity Right will
be accelerated in any way by the transactions contemplated by this
34
Agreement, an indication of the extent of such acceleration. Section 3.2 of
the IWL Disclosure Schedule also describes any repricing of any IWL Equity
Rights which has taken place since January 1, 1993. IWL has made available
to the Company and the Partnership copies of all agreements relating to IWL
Equity Rights.
(d) Since January 1, 1993, IWL has not repurchased any of its
capital stock.
(e) There are no outstanding obligations of IWL or any of IWL's
Subsidiaries or of ICEL to repurchase, redeem or otherwise acquire any shares
of capital stock of IWL.
(f) All of the outstanding capital stock of each of IWL's
Subsidiaries was duly authorized and validly issued (free of preemptive
rights) and is fully paid and nonassessable, and, except as set forth in
Section 3.2 of the IWL Disclosure Schedule or in Section 3.2(a), is owned by
IWL free and clear of any liens, security interests, pledges, agreements,
claims, charges or encumbrances. IWL owns all of the issued and outstanding
shares of capital stock of ICEL. Except as set forth in Section 3.2 of the
IWL Disclosure Schedule, there are no existing subscriptions, options, warrants,
calls, commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) to purchase or otherwise acquire from
IWL, any of IWL's Subsidiaries or ICEL at any time, or upon the happening of
any stated event, any shares of the capital stock of any IWL's Subsidiaries
or of ICEL, or any securities convertible into or exercisable for shares of
capital stock of any of IWL's Subsidiaries or of ICEL, whether or not
presently issued or outstanding and there are no outstanding obligations of
IWL or of any of IWL's Subsidiaries or of ICEL to repurchase, redeem or
otherwise acquire any shares of capital stock of any of IWL's Subsidiaries or
of ICEL. Except for equity interests disclosed in Section 3.2 of the IWL
Disclosure Schedule and equity interests in its Subsidiaries, IWL does not
directly or indirectly own any equity interest in any other Person. Each of
IWL's Subsidiaries is a wholly owned Subsidiary.
(g) Except as disclosed in Section 3.2 of the IWL Disclosure
Schedule, there are no shareholder agreements, voting trusts or other
agreements or understandings to which IWL, any Subsidiary or ICEL is a party
or to which it is bound relating to the voting or registration of any shares
of capital stock of IWL or any Subsidiary. IWL has not taken any action that
would result in, nor is IWL a party to any agreement, arrangement or
understanding not disclosed in Section 3.2 of the IWL Disclosure Schedule
that would result in, any options to purchase IWL Common Stock that are
unvested becoming vested in connection with or as a result of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(h) The shares of Holdings Common Stock to be issued pursuant to
the Mergers and in the Interest Exchange will be duly authorized, validly
issued, fully paid, and nonassessable.
3.3 AUTHORITY. IWL and the Merger Subsidiaries have all requisite
corporate power and authority to enter into this Agreement and to consummate
the Mergers and the Interest Exchange and the other transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of IWL and the Merger Subsidiaries.
This Agreement has been duly executed and delivered by IWL and the Merger
Subsidiaries and constitutes the valid and binding obligations of IWL and the
Merger Subsidiaries enforceable in accordance with its terms. The execution
and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, result in any violation of, or
default under (with or without notice or lapse of time, or both), or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under (a) any provision of the
Articles of Incorporation or Bylaws of IWL and the Merger Subsidiaries or (b)
any mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to IWL or its properties or
assets, other than any such violations, defaults, terminations, cancellations
or accelerations which individually or in the aggregate would not have a
Material Adverse Effect on the ability of IWL to consummate the transactions
contemplated hereby (or which have been consented to or waived on or prior to
the Closing Date). Except as set forth in Section 3.3 of the IWL Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
35
respect to IWL and the Merger Subsidiaries in connection with the execution
and delivery of this Agreement by IWL and the Merger Subsidiaries or the
consummation by IWL and the Merger Subsidiaries of the transactions
contemplated hereby, except for (a) the filing of the Articles of Merger with
the Secretary of State of Texas, (b) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required by
the Nasdaq National Market or under applicable state and federal securities
laws, (c) any consents or approvals required by the Federal Communications
Commission ("FCC") or any state public utility commissions, and (d) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not have a Material Adverse Effect on the ability of IWL
and the Merger Subsidiaries to consummate the transactions contemplated hereby.
3.4 SEC DOCUMENTS; IWL FINANCIAL STATEMENTS. IWL has furnished or made
available to the Company and the Partnership a true and complete copy of its
Form 10-K for the fiscal year ended June 30, 1997, and its Form 10-Q for the
quarter ended September 30, 1997 (collectively, the "SEC Documents"), which
IWL filed under the Exchange Act with the SEC. As of their respective filing
dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading, except to the extent corrected by a subsequently filed document
with the SEC. The financial statements of IWL, including the notes thereto,
included in the SEC Documents (the "IWL Financial Statements") comply as to
form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP consistently applied (except as
may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present the
consolidated financial position of IWL at the dates thereof and of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring audit adjustments).
3.5 BROKERS AND FINDERS' FEES. Except for Cruttenden Xxxx Incorporated
(the arrangements with which have been disclosed to the Company prior to the
date hereof), IWL has not incurred, and will not incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions, advisory
fees or any similar charges in connection with this Agreement, the Mergers, the
Interest Exchange or any other transaction contemplated hereby.
3.6 REGISTRATION STATEMENT; JOINT PROXY STATEMENT. None of the
information supplied or to be supplied by or on behalf of IWL for inclusion
or incorporation by reference, and reviewed by IWL prior to such inclusion or
incorporation by reference, in the Registration Statement will, at the time
the Registration Statement becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied or to be supplied by or on
behalf of IWL for inclusion or incorporated by reference, and reviewed by IWL
prior to such inclusion or incorporation by reference, in the Joint Proxy
Statement will, at the dates mailed to shareholders and at the times of the
IWL shareholders' meeting and the Company shareholders' meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time, any event with
respect to IWL, its officers and directors or any of its Subsidiaries should
occur which is required to be described in an amendment of, or a supplement
to, the Registration Statement or the Joint Proxy Statement, IWL shall
promptly so advise the Company. IWL will promptly disseminate any such
amendment or supplement (which the Company shall have a reasonable
opportunity to review) to the shareholders of IWL.
3.7 OPINION OF FINANCIAL ADVISOR. IWL has received the oral opinion of
Cruttenden Xxxx Incorporated on the date hereof, to the effect that, as of
the date hereof, the IWL Exchange Ratio is fair from a financial point of
view to the shareholders of IWL and that the Company Merger Consideration is
fair from a financial point of view to IWL, and will, within two business
days of the date hereof, have received the written opinion of Cruttenden Xxxx
Incorporated to such effect.
36
3.8 OWNERSHIP OF SECURITIES. As of the date hereof, neither IWL nor,
to IWL's knowledge, any of its affiliates or associates (as such terms are
defined under the Exchange Act), (a)(i) beneficially owns, directly or
indirectly, or (ii) is party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case,
shares of capital stock of the Company that in the aggregate represent 10% or
more of the outstanding shares of Company Common Stock, nor (b) is an
"affiliated shareholder" of the Company within the meaning of Article XIII of
the TBCA. Neither IWL nor any of the Merger Subsidiaries owns any shares of
Company Common Stock.
3.9 LITIGATION. Except as set forth in the SEC Documents or in Section
3.9 of the IWL Disclosure Schedule, there are no suits, actions or legal,
administrative, arbitration or other proceedings or governmental
investigations against IWL or any of the Merger Subsidiaries pending or, to
IWL's knowledge, threatened which (a) if determined adversely to IWL, could
be expected to result in a Material Adverse Effect on IWL, or (b) seek to
prevent the consummation of the Mergers or the Interest Exchange.
3.10 NO UNDISCLOSED LIABILITIES. IWL does not have any liabilities or
obligations, either accrued or contingent, whether or not required to be
reflected in financial statements prepared in accordance with GAAP, and
whether due or to become due, except: (a) liabilities reflected in the SEC
Documents, (b) liabilities specifically described in this Agreement or in the
IWL Disclosure Schedule or (c) liabilities not exceeding $50,000 in the
aggregate incurred in the ordinary course of business since September 30,
1997.
3.11 NO CHANGES. Except as set forth in Section 3.11 of the IWL
Disclosure Schedule or as contemplated by this Agreement, since September 30,
1997 there has not been, occurred or arisen any:
(a) transaction by IWL except in the ordinary course of business as
conducted on that date;
(b) capital expenditure or inventory purchase by IWL exceeding
$25,000 individually or $100,000 in the aggregate, except pursuant to existing
contracts listed in Section 3.16 of the IWL Disclosure Schedule;
(c) destruction, damage to, or loss of any assets (including without
limitation intangible assets) of IWL (whether or not covered by insurance),
either individually or in the aggregate, exceeding $25,000;
(d) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(e) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates, any change in policies in
making or reversing accruals, or any change in capitalization of software
development costs) by IWL;
(f) declaration, setting aside, or payment of a dividend or other
distribution in respect of the shares of IWL, or any direct or indirect
redemption, purchase or other acquisition by IWL of any of its shares;
(g) increase in the salary or other compensation payable or to become
payable by IWL to any of its officers, directors or employees, or the
declaration, payment, or commitment or obligation of any kind for the payment by
IWL of a bonus or other additional salary or compensation to any such person
except for year-end bonuses paid in the ordinary course of business consistent
with past practice;
(h) acquisition, sale or transfer or any asset of IWL except in the
ordinary course of business;
(i) formation, amendment or termination of any material distribution
agreement or any material contract, agreement or license to which IWL is a
party, other than termination by IWL pursuant to the terms thereof;
(j) loan by IWL to any Person or guaranty by IWL of any loan;
37
(k) waiver or release of any material right or claim of IWL,
including any write-off or other compromise of any account receivable of IWL
except in the ordinary course of business;
(l) the commencement or notice or, to the knowledge of IWL, threat of
commencement of any governmental proceeding against or investigation of IWL or
its affairs;
(m) other event or condition of any character relating to IWL or
IWL's business that has or would be expected to have a Material Adverse Effect
on IWL;
(n) issuance, sale or redemption by IWL of any of its shares or of
any other of its securities, other than pursuant to the exercise of existing
options;
(o) change in pricing or royalties set or charged by IWL except
pursuant to the terms of existing contracts; or
(p) negotiation or agreement by IWL to do any of the things described
in the preceding clauses (a) through (o) (other than negotiations with IWL and
its representatives or any other Person regarding the transactions contemplated
by this Agreement).
3.12 TAX AND OTHER RETURNS AND REPORTS.
(a) TAX RETURNS AND AUDITS. Except as set forth in Section 3.12 of
the IWL Disclosure Schedule, each of IWL and its Subsidiaries has prepared and
filed all federal, state, local and foreign returns, estimates, information
statements and reports required to be filed by any of them relating to any and
all Taxes relating or attributable to IWL, its Subsidiaries, or the assets or
operations of IWL or its Subsidiaries ("IWL Returns"), and such IWL Returns are
true and correct in all material respects and have been completed in accordance
with applicable law. Except as set forth in Section 3.12 of the IWL Disclosure
Schedule, each of IWL and its Subsidiaries has paid all Taxes required to be
paid with respect to such IWL Returns and has withheld with respect to its
employees all federal and state income Taxes, FICA, FUTA and other Taxes it is
required to withhold. The accruals for Taxes on the books and records of each
of IWL and its Subsidiaries are sufficient to discharge the Taxes for all
periods (or the portion of any period) ending on or prior to the Closing Date.
Neither IWL nor any of its Subsidiaries is delinquent in the payment of any Tax
nor, except as set forth in Section 3.12 of the IWL Disclosure Schedule, to the
knowledge of IWL is there any Tax deficiency outstanding, proposed or assessed
against IWL or any of its Subsidiaries nor has IWL or any of its Subsidiaries
executed any waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax. The audits of each IWL Return that has
been audited by the relevant authorities or for which the statute of limitations
has been waived or extended have been closed, and neither IWL nor any of its
Subsidiaries has received any written or oral notification that an audit or
other examination of any Return of IWL or any of its Subsidiaries is presently
in progress. All such IWL Returns that have been audited or for which the
statute of limitations has been waived are listed in Section 3.12 of the IWL
Disclosure Schedule. Except as set forth in Section 3.12 of the IWL Disclosure
Schedule, neither IWL nor any of its Subsidiaries has any material liabilities
for unpaid Taxes, whether asserted or unasserted, known or unknown, contingent
or otherwise and neither IWL nor any of its Subsidiaries has any knowledge of
any basis for the assertion of any such liability attributable to IWL, its
Subsidiaries or the assets or operations of IWL or its Subsidiaries. Neither
IWL nor any of its Subsidiaries is (nor have they ever been) required to join
with any other entity in the filing of a consolidated tax return for federal tax
purposes or a consolidated or combined return or report for state tax purposes.
Except as set forth in Section 3.12 of the IWL Disclosure Schedule, neither IWL
nor any of its Subsidiaries is a party to or bound by any tax indemnity, tax
sharing or tax allocation agreement. There are (and as of immediately following
the Closing there will be) no liens on the assets of IWL or any of its
Subsidiaries relating to or attributable to Taxes, except for liens for Taxes
not yet due and payable or liens for Taxes being contested by appropriate
proceedings. Neither IWL nor any of its Subsidiaries has any knowledge of any
basis for the assertion of any claim which, if adversely determined, would
result in liens on the assets of IWL or Subsidiaries. There is no contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any
38
employee or former employee of IWL or any of its Subsidiaries that, individually
or collectively, could give rise to the payment of any amount that would not
be deductible pursuant to Sections 280G, 162 or 404 of the Code.
(b) NO PENALTY. Neither IWL nor any of its Subsidiaries is subject
to any penalty by reason of a violation of any order, rule or regulation of, or
a default with respect to any IWL Return, report or declaration required to be
filed with, any Governmental Entity to which it is subject.
3.13 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement binding
upon, or judgment, injunction, order or decree entered against, IWL under
which IWL is prohibited from conducting or engaging in any line of business.
3.14 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION
OF EQUIPMENT.
(a) IWL owns no real property other than as set forth in Section
3.14(a) of the IWL Disclosure Schedule. Section 3.14(a) of the IWL Disclosure
Schedule also sets forth a true and complete list of all real property leased by
IWL and the aggregate annual rental or other fee payable under any such lease.
All such leases are in good standing, valid and effective in accordance with
their respective terms, and there is not with respect to IWL and, to the
knowledge of IWL, any other parties to such leases, under any of such leases any
existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default).
(b) Except as set forth in Section 3.14(b) of the IWL Disclosure
Schedule, IWL holds good and valid title to (or, in the case of leased
properties, assets and rights of way, valid leasehold interests in) all of its
tangible properties, assets and rights of way, real, personal and mixed, used in
its business, free and clear of any liens, charges, pledges, security interests
or other encumbrances.
(c) The Equipment used by IWL in the conduct of its business is
listed in Section 3.14(c) of the IWL Disclosure Schedule, except individual
pieces of equipment owned by IWL with an individual value of less than $5,000.
The Equipment is, taken as a whole, (i) adequate for the conduct of the business
of IWL as presently conducted, (ii) suitable for the uses to which it is
currently employed, (iii) in good operating condition, (iv) regularly and
properly maintained, ordinary wear and tear excepted, and (v) not obsolete,
dangerous or in need of renewal or replacement.
3.15 INTELLECTUAL PROPERTY.
(a) IWL owns, or is licensed to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, maskwork,
schematics, technology, know-how, computer software programs or applications and
tangible or intangible proprietary information or material (excluding IWL
Commercial Software Rights (as defined in Section 3.15(b) below)) that are used
or currently proposed by IWL to be used in the business of IWL as currently
conducted or as currently proposed to be conducted by IWL (the "IWL Intellectual
Property Rights"). Section 3.15(a) of the IWL Disclosure Schedule (i) sets
forth a complete list of all patents, patent applications, registered
trademarks, material unregistered copyrights, trade names and service marks, and
any applications therefor, included in IWL Intellectual Property Rights; (ii)
specifies the jurisdictions in which each such IWL Intellectual Property Right
has been issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners, together with a list
of all of IWL's currently marketed software products and list of names of all
registered owners, if any, of such software products that have been registered
for copyright protection with the United States Copyright Office and any foreign
offices and by whom such items have been registered and (iii) as to each such
IWL Intellectual Property Right, specifies whether it is owned by IWL or
licensed to IWL by another Person and, in the cases of any license, sets forth
the licensor and the term of such license. Section 3.15(a) of the IWL
Disclosure Schedule also sets forth a complete list of all licenses, sublicenses
and other agreements pursuant to which IWL has licensed any other Person to use
any IWL Intellectual Property Right or other trade secret material to IWL, and
includes the identity of such licenses; provided, however, that IWL's End-User
Licenses need not be listed. IWL is not, nor will it be as a result of the
execution and delivery of this
39
Agreement or the performance of its obligations hereunder, in violation of
any license, sublicense or agreement described on such list. IWL is the sole
and exclusive owner of, with all right, title and interest in and to (free
and clear of any liens or encumbrances), those IWL Intellectual Property
Rights which IWL purports to own, and has sole and exclusive rights, and is
not contractually obligated to pay any compensation to any third party in
respect thereof to the use thereof or the material covered thereby in
connection with the services or products in respect of which such IWL
Intellectual Property Rights are being used. With respect to IWL
Intellectual Property Rights licensed to IWL, IWL has sufficient rights under
the license agreements relating thereto to enable IWL to use such IWL
Intellectual Property Rights in its business as currently conducted and as
proposed to be conducted without payment of royalties or other compensation
to the licensor thereof. No claims with respect to IWL Intellectual Property
Rights have been asserted or, to the knowledge of IWL, are threatened by any
Person, (i) to the effect that the manufacture, sale, licensing or use of any
product as, now used, sold or licensed or proposed for use, sale or license
by IWL infringes on any copyright, patent, trade xxxx service xxxx or trade
secret, (ii) against the use by IWL of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in IWL's business as currently conducted or as
proposed by IWL to be conducted, or (iii) challenging the ownership, validity
or effectiveness of any IWL Intellectual Property Rights. Except as set
forth in Section 3.15(a) of the IWL Disclosure Schedule, all registered and
material unregistered trademarks, service marks and copyrights held by IWL
are valid and subsisting. To the knowledge of IWL, there is no material
unauthorized use, infringement or misappropriation of any of IWL Intellectual
Property Rights by any third party, including any employee or former employee
of IWL. No IWL Intellectual Property Right owned exclusively by IWL or
product of IWL is subject to any outstanding order, judgment, decree,
stipulation or agreement restricting in any manner the licensing thereof by
IWL. There is no outstanding order, judgment, decree or stipulation on IWL,
and IWL is not party to any agreement, restricting in any manner the
licensing of IWL's products by IWL. Except for End User Licenses or as
otherwise set forth in Section 3.15(a) of the IWL Disclosure Schedule, IWL
has not entered into any agreement to indemnify any Person against any charge
of infringement of any IWL Intellectual Property Rights.
(b) "IWL Commercial Software Rights" means packaged commercially
available software programs generally available to the public through retail
dealers in computer software which have been licensed to IWL pursuant to
End-User Licenses and which are used in IWL's business but are in no way a
component of or incorporated in any of IWL's products and related trade
markets, technology and know-how. To the knowledge of IWL, IWL has not
breached or violated the terms of its license, sublicense or other agreement
relating to any IWL Commercial Software Rights and has a valid right to use
such IWL Commercial Software Rights under such license and agreements. No
claims with respect to the IWL Commercial Software Rights have been asserted
or, to the knowledge of IWL, are threatened by any Person against IWL. To
the knowledge of IWL, there is no material unauthorized use, infringement or
misappropriation of any of the IWL Commercial Software Rights by IWL or any
employee or former employee of IWL during the period of their employment.
3.16 AGREEMENTS, CONTRACTS AND COMMITMENTS. Other than those listed in
Section 3.16 of the IWL Disclosure Schedule, IWL does not have, is not a
party to nor is it bound by:
(a) any collective bargaining agreement;
(b) any agreements that contain any unpaid severance liabilities or
obligations;
(c) any bonus, deferred compensation, incentive compensation, option,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements;
(d) any employment or consulting agreement, contract or commitment
(other than employment letters) with an employee or individual consultant or
salesperson or consulting or sales agreement, contract or commitment with a firm
or other organization, not terminable by IWL on thirty days notice without
liability;
(e) any stock option plan, stock appreciation right plan or stock
purchase plan;
40
(f) any insurance policy, fidelity or surety bond or completion bond
not listed in Section 3.21 of the IWL Disclosure Schedule;
(g) any lease of personal property having a value individually in
excess of $25,000;
(h) any agreement of indemnification or guaranty not entered into in
the ordinary course of business;
(i) any agreement, contract or commitment containing any covenant
limiting the freedom of IWL to engage in any line of business or compete with
any Person;
(j) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $25,000;
(k) any agreement, contract or commitment relating to the disposition
or acquisition of assets not in the ordinary course of business or any ownership
interest in any corporation, partnership, joint venture or other business
enterprise;
(l) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit, including guaranties referred to the clause (h) hereof;
(m) any purchase order or contract for the purchase of raw materials
or acquisition of assets involving $25,000 or more in any single instance or
$100,000 or more in the aggregate;
(n) any construction contracts involving $25,000 or more in any
single instance or $100,000 or more in the aggregate;
(o) any distribution, joint marketing or development agreements;
(p) any lease for switches or any other machinery, equipment or other
personal property involving payment of aggregate rentals in excess of $25,000;
(q) any contract pursuant to which IWL has access to the telephone
network of another Person other than IWL's internal commercial telephone service
and any contracts for the resale of any network capacity of IWL;
(r) any agreement, contract, lease or easement pursuant to which IWL
has the right of way to use any premises or real property to locate and/or
install fiber lines on, under or through such premises or real property;
(s) any agreement or commitment obligating IWL to deliver any product
or service at a price which does not cover the cost of (including labor,
materials and production overhead), plus a reasonable profit margin, for such
product or service;
(t) any joint venture, partnership or other cooperative arrangement
or agreement involving a sharing of profits or losses;
(u) any other agreement contract or commitment which involves $25,000
or more and is not cancelable without penalty within thirty (30) days; or
(v) any agreement which is otherwise material to IWL's business.
41
IWL has not breached, or received any claim or threat that it has breached,
any of the terms or conditions of any material agreement, contract or commitment
to which it is bound (including, but not limited to, those set forth in Section
3.16 or any other section of the IWL Disclosure Schedule) in such manner as
would permit any other party to cancel or terminate the same. Each agreement,
contract or commitment to which IWL is party and that is required to be set
forth in the IWL Disclosure Schedule is in full force and effect and, except as
otherwise disclosed, is not subject to any material default thereunder by any
party thereto. IWL is not bound by any material contract, agreement, license,
lease or other commitment, a copy of which has not been previously provided or
made available to the Company and the Partnership. IWL after making an inquiry
of all of its officers, directors, shareholders and appropriate employees does
not have any reason to expect that any change may occur in the relationships of
IWL with its suppliers or customers as a result of the Mergers or the Interest
Exchange, which change would be a Material Adverse Effect on IWL. No supplier
of or customer of IWL has indicated within the past year that it will stop, or
decrease the rate of supplying or purchasing materials, products, or services to
or from IWL, as a result of the Mergers or the Interest Exchange. Except as
described in Section 3.3, no consents, waivers or approvals under any of IWL's
material agreements, contracts, licenses or leases are necessary in order to
preserve the benefits thereunder for the Surviving Corporation or otherwise to
avoid any breach, default or right of termination or other right as a result of
the Mergers or the Interest Exchange.
3.17 GOVERNMENTAL AUTHORIZATIONS. Section 3.17 of the IWL Disclosure
Schedule accurately lists each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization issued
to IWL or statute, regulation, private treaty or agreement adopted or made
for the benefit for IWL or to which IWL is a party (a) pursuant to which IWL
currently operates or holds any interest in any of its properties or (b)
which is required for the operation of its business as currently conducted or
the holding of any such interest as currently held (herein collectively
called the "IWL Authorizations"). The IWL Authorizations are in full force
and effect and constitute all the authorizations required to permit IWL to
operate or conduct its business as currently conducted or hold any interest
in its properties as currently held.
3.18 ACCOUNTS RECEIVABLE. All accounts receivable shown in the IWL
Financial Statements arose in the ordinary course of business and, to the
extent not previously collected, are collectible (except to the extent
reserved against as reflected in the IWL Financial Statements) and are
carried at values determined in accordance with GAAP consistently applied.
To the knowledge of IWL, none of the accounts receivable of IWL outstanding
as of the date hereof is subject to any claim of offset, recoupment, set off
or counterclaim and there are no facts or circumstances (whether asserted or
unasserted) that would give rise to any such claim. No accounts receivable
are contingent upon the performance by IWL of any obligation or contract
except for IWL's maintenance obligations under its maintenance agreements
(although no customer has claimed that IWL has failed to perform its
maintenance obligations). No Person has any lien, charge, pledge, security
interest or other encumbrance on any of IWL's accounts receivable and no
agreement for deduction or discount has been made with respect to any of such
accounts receivable, except for liens granted to Bank One Texas, N.A. under
IWL's line of credit.
3.19 MINUTE BOOKS AND STOCK RECORDS. The minute books of IWL and its
Subsidiaries made available to counsel for the Company and the Partnership
contain minutes of all meetings of directors and shareholders (or consents in
lieu of such meetings) accurate in all material respects since the respective
times of incorporation of IWL and its Subsidiaries.
3.20 LABOR MATTERS. IWL is in compliance with all currently applicable
laws and regulations respecting employment, discrimination in employment,
terms and conditions of employment and wages and hours and employment
practices, and is not engaged in any unfair labor practice. IWL has not
received any notice from any Governmental Entity of, and to the knowledge of
IWL there has not been asserted before any Governmental Entity, any claim,
action or proceeding to which IWL is a party or involving IWL, and there is
neither pending nor, to the knowledge of IWL, threatened any investigation or
hearing concerning IWL arising out of or based upon any such laws,
regulations or practices. There are no pending claims against IWL under any
workers compensation plan or policy or for long term disability. IWL has
complied in all material respects with all applicable health care benefit
continuation provisions of
42
COBRA and has no obligations with respect to any former employees or
qualified beneficiaries thereunder. Section 3.20 of the IWL Disclosure
Schedule lists all current employees of IWL and their current salary and
vacation accruals.
3.21 INSURANCE. Section 3.21 of the IWL Disclosure Schedule lists all
insurance policies and fidelity bonds covering the assets, equipment,
properties, operations, software errors and omissions, employees, officers
and directors of IWL as well as all claims made under any insurance policy
by IWL since January 1, 1993 (other than claims under IWL's medical and
dental insurance plans and claims made with respect to insured losses which
did not, in the aggregate, have a Material Adverse Effect on IWL). There is
no claim by IWL pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds (other than claims made under IWL's medical and dental
insurance plans). IWL has provided or made available to the Company and the
Partnership copies of all such insurance policies and fidelity bonds and all
claims made by IWL under its insurance policies (other than claims under
IWL's medical and dental plans). All premiums payable under all such
policies and bonds have been paid and IWL is otherwise in compliance in all
material respects with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage). Such
policies of insurance and bonds are of the type and in amounts customarily
carried by Persons conducting businesses similar to those of IWL. IWL does
not know of any threatened termination of or proposed material premium
increase with respect to any of such policies. IWL has never been denied
insurance coverage nor has any insurance policy of IWL ever been canceled for
any reason.
3.22 INVENTORY. The inventory appearing on the IWL Financial
Statements, or thereafter acquired or produced, conforms in all material
respects with IWL's applicable specifications and warranties and have been
produced in compliance with IWL's quality control procedures and consist only
of items of a quality and quantity useable or saleable by IWL in the ordinary
course of business. All such inventory is merchantable and fit for the
purpose for which it was procured or manufactured, and none of which is
obsolete, damaged or defective in any amount. Such inventory is owned by IWL
and is not subject to any liens, charges, pledges, security interests or
other encumbrances.
3.23 COMPLIANCE WITH LAWS.
(a) IWL has complied in all material respects with, is not in
violation of, and has not received any notices of violation with respect to any
federal, state or local state, law or regulation with respect to the conduct of
business or the ownership or operation of its business, assets or properties.
No charge, complaint, action, suit, proceeding, hearing, known investigation,
claim, demand, or notice has been filed or commenced against IWL alleging any
failure to comply with any such law or regulation.
(b) IWL has not violated in any respect, or received a notice or
charge asserting any violation of the Xxxxxxx Act, the Xxxxxxx Act, the
Xxxxxxxx-Xxxxxx Act, or the Federal Trade Commission Act, each as amended.
(c) IWL has not, and none of the officers, directors, shareholders or
employees of IWL have, on behalf of IWL:
(i) made or agreed to make any contribution, payment or gift
funds or property to any governmental official, employee, or agent where either
the contribution, payment, or gift or the purpose thereof was illegal under the
laws of any federal, state or local jurisdiction; or
(ii) established or maintained any unrecorded fund or asset for
any purpose, or intentionally made any false or inaccurate entries on any of its
books and/or records; or
(iii) made or agreed to make any contribution, or reimbursed
any political gift or contribution made by any other Person, to any candidate
for federal, state or local public office; or
43
(iv) been involved in the disbursement or receipt of funds
outside of the normal internal control systems of accountability or been
involved in the improper or inaccurate recording of material payments,
disbursements or receipts.
3.24 FIRPTA. IWL is not, and has not been at any time, a "United States
real property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
3.25 EMPLOYEE BENEFIT PLANS.
(a) Section 3.25 of the IWL Disclosure Schedule lists all employee
benefit plans (as defined in Section 3(3) of ERISA) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar fringe or employee benefit plans, programs or
arrangements, and any current or former employment or executive compensation or
severance agreements, written or otherwise, for the benefit of, or relating to,
any employee of IWL, any trade or business (whether or not incorporated) which
is a member or which is under common control with IWL (an "IWL ERISA Affiliate")
within the meaning of Section 414 of the Code, or any Subsidiary of IWL
(together, the "IWL Employee Plans"), and a copy of each such IWL Employee Plan
has been provided or made available to the Company and the Partnership.
(b) (i) None of the IWL Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person except as required by
applicable law, including but not limited to COBRA; (ii) all IWL Employee Plans
are in compliance in all material respects with the requirements prescribed by
any and all applicable statutes (including ERISA and the Code), orders, or
governmental rules and regulations currently in effect with respect thereto
(including all applicable requirements for notification to participants or
beneficiaries or the Department of Labor, IRS or Secretary of the Treasury), and
IWL has performed in all material respects all obligations required to be
performed by it under, is not in default under or violation of, and has no
knowledge of any default or violation by any other party to, any of the IWL
Employee Plans; (iii) each IWL Employee Plan intended to qualify under Section
401(a) of the Code and each trust intended to qualify under Section 501(a) of
the Code either has received a favorable determination letter with respect to
each such IWL Employee Plan from the IRS or still has a remaining period of time
under applicable Treasury Regulations or IRS pronouncements in which to apply
for such a determination letter and to make any amendments necessary to obtain a
favorable determination; and (iv) no IWL Employee Plan is or within the prior
six (6) years has been subject to, and IWL has not incurred and does not expect
to incur any liability under, Title IV of ERISA or Section 412 of the Code.
(c) None of the following now exists or has existed within the
six-year period ending on the date hereof with respect to any IWL Employee
Plan: (i) any act or omission by IWL constituting a violation of Section 402
or 403 or, to the knowledge of IWL, Section 404 or 405 of ERISA; (ii) to the
knowledge of IWL, any act or omission by IWL which constitutes a violation of
Sections 406 and 407 of ERISA and is not exempted by Section 408 of ERISA or
which constitutes a violation of Section 4975(c) of the Code and is not
exempted by Section 4975(d) of the Code; (iii) any act or omission by IWL
constituting a violation of Section 503 or 511 or, to the knowledge of IWL,
Section 510 of ERISA; or (iv) any act or omission by IWL which could give
rise to liability under Section 502 of ERISA or under Sections 4979 or 4975
through 4980 of the Code or any other provisions of ERISA or the Code.
(d) Each IWL Employee Plan has been maintained in substantial
compliance with its terms, and all contributions, premiums or other payments due
from IWL or any of its Subsidiaries to (or under) any such IWL Employee Plan
have been fully paid or adequately provided for on IWL Financial Statements for
the most recently ended fiscal year. All accruals thereon (including, where
appropriate proportional accruals for partial periods) have been made in
accordance with GAAP consistently applied on a reasonable basis. There has been
no amendment, written interpretation or announcement (whether or not written) by
IWL with respect to, or change in employee participation or coverage under, any
IWL Employee Plan that would increase materially the expense of maintaining such
plans or arrangements, individually or in the aggregate, above the level of
expense incurred with respect thereto for the most recently ended fiscal year.
44
(e) IWL has made available to the Company and the Partnership
complete, accurate and current copies of all IWL Employee Plans and all
amendments, documents, correspondence addressed to IWL and filings relating
thereto, including but not limited to any statements, filings, reports or
returns filed with any governmental agency with respect to the IWL Employee
Plans at any time within the three-year period ending on the date hereof.
3.26 CERTAIN REGULATORY MATTERS.
(a) Except as disclosed in Section 3.26 of the IWL Disclosure
Schedule and except for billing disputes with customers arising in the ordinary
course of business that in the aggregate involve immaterial amounts, there are
no proceedings or, to IWL's knowledge, investigations pending or, to IWL's
knowledge, threatened before any domestic or foreign court, administrative,
governmental or regulatory body in which any of the following matters are being
considered which could reasonably be expected to have a Material Adverse Effect
on IWL, nor has IWL or any of its Subsidiaries received written notice or
inquiry from any such body, government official, advocacy or similar
organization or any private party indicating that any of such matters should be
considered or may become the object of consideration or investigation which
could reasonably be expected to have a Material Adverse Effect on IWL: (i)
reduction of rates charged to customers; (ii) reduction of earnings; (iii)
refunds of amounts previously charged to customers; (iv) failure to meet any
expense, infrastructure, service quality or other commitments previously made to
or imposed by any administrative, governmental or regulatory body; or (v)
increase in termination or access charges or other rates paid or payable by IWL
to its suppliers.
(b) Except as disclosed in Section 3.26 of the IWL Disclosure
Schedule, neither IWL nor any of its Subsidiaries has any outstanding
commitments (and no such obligations have been imposed upon IWL and remain
outstanding) regarding (i) reduction of rates charged to customers; (ii)
reduction of earnings; (iii) refunds of amounts previously charged to customers;
or (iv) expenses, infrastructure expenditures, service quality or other
regulatory requirements to or by any domestic or foreign court, administrative,
governmental or regulatory body, government official, consumer advocacy or
similar organization, in each case which could reasonably be expected to have a
Material Adverse Effect on IWL.
(c) IWL has not transferred, sold any interest in, or otherwise
diluted its control over any federal or state regulatory licenses, certificates,
approvals or other authorizations under which it operates, and the transfer of
such authorizations, subject to regulatory approval, would not violate the terms
of any agreement to which IWL is a party or by which is bound, or impinge the
rights of any third party.
(d) IWL has no current liability (and there is no basis for any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against IWL giving rise to any liability)
arising out of any injury to persons or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
IWL. Any such claims would be fully covered to the extent of the dollar
limitations of IWL's product liability insurance. There are no recalls,
threatened or pending, and no federal investigative reports have been filed or
were required to have been filed with respect to any of IWL's products.
3.27 ACCOUNTING MATTERS. Neither IWL nor, to its knowledge, any of its
affiliates has through the date hereof taken or agreed to take any action
that would prevent the business combination to be effected by the Mergers and
the Interest Exchange from being accounted for as a "pooling of interests."
3.28 INTERESTED PARTY TRANSACTIONS. Except as set forth in Section 3.28
of the IWL Disclosure Schedule, since June 30, 1994, no executive officer or
director of IWL (nor any parent, sibling, descendant or spouse of any of such
persons, or any trust, partnership, corporation or other entity in which any
of such persons has or has had an interest), has or has had, directly or
indirectly, (a) an interest in any entity which furnished or sold, or furnishes
or sells, services or products which IWL furnished or sells, or proposes to
furnish or sell, or (b) any interest in any entity which purchases from or
sells or furnishes to IWL any goods or services, or (c) a beneficial interest
in any contract or agreement required to be set forth in Section 3.16 of the IWL
Disclosure Schedule; provided, that ownership of no more
45
than five percent (5%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "interest in any entity" for purposes of
this Section 3.28.
3.29 ENVIRONMENTAL AND OSHA.
(a) IWL has complied in all material respects with all Environmental
Laws and Employee Safety Laws, and no charge, action, suit, proceeding, hearing,
known investigation, claim, damage, or notice has been filed or commenced
against IWL alleging any failure to comply with any such law or regulation.
(b) IWL has no obligation to take remedial action with respect to any
conditions nor does IWL have any liability, and there is no basis related to
IWL's past or present operations, for any present charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand giving rise to any
liability or obligation to take any remedial action under any Environmental Law.
(c) IWL has no liability relating to, and it has not handled or
disposed of any substance, arranged for the disposal of any substance, or owned
or operated any property or facility in violation of any Environmental Law.
(d) IWL has no liability for, and there is no basis for, any present
or future charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against IWL giving rise to any material liability under any
Employee Safety Laws.
(e) IWL has no liability relating to, and to the knowledge of IWL,
IWL has not exposed any of IWL's employees to any substances or conditions that
could form the basis for, any present charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand (under the common law or
pursuant to statute) against IWL giving rise to material liability for any
illness of or personal injury to any employee.
(f) IWL has been in compliance with all the terms and conditions of
all permits, licenses, and other authorizations of Governmental Entities which
are required under any Environmental Law or Employee Safety Law.
(g) All properties and equipment used by IWL are free of asbestos,
PCB's and other Extremely Hazardous Substances (as defined in Section 302A of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended). To
the knowledge of IWL, no pollutant, contaminant, chemical, or industrial,
hazardous, or toxic material or waste has been buried, stored, spilled, leaked,
discharged, emitted, or released on any real property that IWL has ever owned,
or that IWL now leases or has ever leased.
3.30 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by IWL in this Agreement, nor any statement made in any
Schedule, Exhibit or certificate furnished by IWL pursuant to this Agreement,
when read in their entirety, contains or will contain any untrue statement of
a material fact at the Effective Time, or omits or will omit to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
No warranty or representation shall be deemed to have been made by IWL except
for the warranties and representations set forth in this Agreement and the
Exhibits, Schedules and certificates delivered pursuant hereto.
3.31 REPRESENTATIONS AND WARRANTIES WITH RESPECT TO ICEL. IWL hereby
makes for the benefit of the Company and the Partnership all of the
representations and warranties made by NERA Limited, Xxxxxx Xxxxxx Xxxxx and
Xxxxxxx Xxxxx Xxxxx to IWL under the ICEL Stock Purchase Agreement (as
defined below), which relates to the acquisition by IWL of all of the stock
of Integrated Communications and Engineering Limited, a limited company
incorporated in Scotland ("ICEL"), including without limitation those set
forth in Schedule 2 and Section 5 of the ICEL Stock Purchase Agreement, but
subject to the same limitations (including limitations on liability),
exclusions and exceptions as set forth in the ICEL Stock Purchase Agreement;
and IWL further represents and warrants that each of
46
such representations and warranties, as subject to such limitations, are
true, complete and correct in all material respects as of the date hereof.
Notwithstanding anything to the contrary contained in this Agreement, the
representations and warranties set forth in this Section 3.31 shall be
subject to the provisions relating to survivability of representations and
warranties set forth in Section 8.1 hereof. Notwithstanding anything to the
contrary contained herein, except for those instances in which express
reference is made to ICEL, none of the representations and warranties
contained in Sections 3.1 through 3.30 shall be deemed made with respect to
ICEL, and no warranty or representation shall be deemed to have been made by
IWL or the Merger Subsidiaries herein with respect to ICEL except for the
warranties and representations set forth in this Section 3.31.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE COMPANY AND THE PARTNERSHIP. During the
period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, each of the Company
and the Partnership agrees (except to the extent that IWL shall otherwise
consent in writing), to carry on its business in the usual regular and
ordinary course in substantially the same manner as heretofore conducted and,
to the extent consistent with such business, use all commercially reasonable
efforts consistent with past practice and policies to preserve intact the
Company's and the Partnership's respective present business organizations,
keep available the services of its present officers and respective key
employees, and preserve their respective relationships with customers,
suppliers, distributors, licensors, licensees and others having business
dealings with it. The Company and the Partnership shall promptly notify IWL
of any event or occurrence not in the ordinary course of business of the
Company and the Partnership which could have a Material Adverse Effect on the
Company and the Partnership, respectively. Except as expressly contemplated
by this Agreement or as set forth in Section 4.1 of the Company and
Partnership Disclosure Schedule, the Company and the Partnership shall not,
without the prior written consent of IWL (which consent shall not require the
approval of the Board of Directors of IWL):
(a) Enter into any commitment or transaction involving more than
$500,000 of products and services of the Company and the Partnership;
(b) Grant any severance or termination pay in excess of $10,000
(i) to any director or (ii) to any employees, except payments made pursuant
to written agreements outstanding on the date hereof;
(c) Except for End-User Licenses, transfer to any Person any
rights to the Company Intellectual Property Rights or the Partnership
Intellectual Property Rights;
(d) Enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or other rights of any type or scope
with respect to any products of the Company or the Partnership, or the
Company or the Partnership terminates or assigns any such agreement;
(e) Violate, amend or otherwise modify the terms of any of the
contracts or agreements required to be set forth in the Company or the
Partnership Disclosure Schedule except in the ordinary course of business;
(f) Commence any litigation except for normal collection actions;
(g) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of the
Company's capital stock, or split, combine or reclassify any of the Company's
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of the
Company, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock;
(h) Issue, deliver, sell, grant (whether or not there are shares
available for grant under any stock option plans) or authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase of, any
shares
47
of the Company's capital stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities, except for the issuance of shares pursuant to the exercise of
employee stock options granted prior to the date hereof;
(i) Except as provided in the Articles of Merger, cause or permit
any amendments to the Company's Articles of Incorporation or Bylaws or the
Partnership's Agreement of Limited Partnership;
(j) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to
the business of the Company or the Partnership;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets which are material individually or in the aggregate, to
the business of the Company or the Partnership, except in the ordinary course
of business;
(l) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of the Company or the
Partnership or guarantee any debt securities of others in excess of $10,000,
except pursuant to existing bank credit facilities or lines of credit;
(m) Adopt or amend any employee benefit or option plan, grant any
additional options to acquire shares of capital stock of the Company or any
Subsidiary under any employee benefit or option plans (whether or not the
issuance of such options is authorized by such plans), or enter into any
employment contract, pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates of its employees
other than raises in compensation payable to employees that are granted on
their respective anniversary dates and are consistent with the Company's or
the Partnership's, as the case may be, past practice;
(n) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
(o) Pay, discharge or satisfy in an amount in excess of $25,000 in
any one case (or $100,000 in the aggregate) any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against the Company
Financial Statements or the Partnership Financial Statements;
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(q) Take any action which the Company or the Partnership, as the
case may be, knows or should know would jeopardize the ability of the parties
hereto to account for the Mergers and the Interest Exchange as a pooling of
interests; or
(r) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (q) above, or any action which
would make any of the representations or warranties or covenants of the
Company or the Partnership contained in this Agreement materially untrue or
incorrect.
4.2 NO SOLICITATION. Prior to the Effective Time, the Company and the
Partnership will not (and will not permit any of the Company's officers,
directors, shareholders affiliated with any officer or director or the
Company's agents, representatives or affiliates to) directly or indirectly,
take any of the following actions with any party other than IWL and its
designees:
48
(a) Solicit, encourage, initiate, accept or participate in any
negotiations or discussions with respect to, any offer or proposal to acquire
all or substantially all of the Company's or the Partnership's business and
properties, or capital stock or Partnership Interests, as the case may be,
whether by merger, purchase of assets, tender offer or otherwise, or agree to
any such offer or proposal,
(b) Except for disclosures made to financial institutions and
others in the ordinary course of business, disclose any information not
customarily disclosed to any Person other than its attorneys or financial
advisors concerning the Company's or the Partnership's business and
properties or afford to any Person or entity access to its properties, books
or records, or
(c) Assist or cooperate with any Person to make any proposal to
purchase all or any part of the Company's capital stock or assets or agree to
any such proposal, other than selling its products and licensing of software
in the ordinary course of business.
4.3 CONDUCT OF BUSINESS OF IWL. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, IWL agrees (except to the extent that the
Company and the Partnership shall otherwise consent in writing), to carry on
its business in the usual regular and ordinary course in substantially the
same manner as heretofore conducted and, to the extent consistent with such
business, use all commercially reasonable efforts consistent with past
practice and policies to preserve intact IWL's present business
organizations, keep available the services of its present officers and key
employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees and others having business dealings with
it. IWL shall promptly notify the Company and the Partnership of any event
or occurrence not in the ordinary course of business of IWL which could have
a Material Adverse Effect on IWL. Except as expressly contemplated by this
Agreement or as set forth in Section 4.3 of the IWL Disclosure Schedule, IWL
shall not, without the prior written consent of the Company and the
Partnership (which consent shall not require the approval of the Board of
Directors of the Company or the General Partner):
(a) Enter into any commitment or transaction involving more than
$500,000 of products and services of IWL;
(b) Grant any severance or termination pay in excess of $10,000
(i) to any director or (ii) to any employee, except payments made pursuant to
written agreements outstanding on the date hereof;
(c) Except for End-User Licenses, transfer to any Person any
rights to the IWL Intellectual Property Rights;
(d) Enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or other rights of any type or scope
with respect to any products of IWL, or IWL terminates or assigns any such
agreement;
(e) Violate, amend or otherwise modify the terms of any of the
contracts or agreements required to be set forth in the IWL Disclosure
Schedule except in the ordinary course of business;
(f) Commence any litigation except for normal collection actions,
other than litigation with IEX Corporation or CLG, Inc. arising out of or
resulting from the dispute described in Section 3.9 of the IWL Disclosure
Schedule;
(g) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize
49
the issuance of any other securities in respect of, in lieu or in substitution
for shares of capital stock of IWL, or repurchase or otherwise acquire,
directly or indirectly, any shares of its capital stock.
(h) Issue, deliver, sell, grant (whether or not there are shares
available for grant under any stock option plans) or authorize or propose the
issuance, delivery or sale of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities, except for the issuance of shares pursuant to the exercise of
employee stock options granted prior to the date hereof;
(i) Except as provided in the Articles of Merger, cause or permit
any amendments to its Articles of Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to
the business of IWL;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets which are material individually or in the aggregate, to
the business of IWL, except in the ordinary course of business;
(l) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of IWL or guarantee
any debt securities of others in excess of $10,000, except pursuant to
existing bank credit facilities, existing lines of credit or other existing
agreements referred to in Section 3.16 of the IWL Disclosure Schedule;
(m) Adopt or amend any employee benefit or option plan, grant any
additional options to acquire shares of capital stock of IWL or any
Subsidiary under any employee benefit or option plans (whether or not the
issuance of such options is authorized by such plans), or enter into any
employment contract, pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates of its employees
other than raises in compensation payable to employees that are granted on
their respective anniversary dates and are consistent with IWL's past
practice;
(n) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business;
(o) Pay, discharge or satisfy in an amount in excess of $25,000 in
any one case (or $100,000 in the aggregate) any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in the IWL
Financial Statements;
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(q) Take any action which IWL knows or should know would
jeopardize the ability of the parties hereto to account for the Mergers or
the Interest Exchange as a pooling of interests; or
(r) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.3(a) through (q) above, or any action which
would make any of the representations or warranties or covenants of IWL
contained in this Agreement materially untrue or incorrect.
50
4.4 CONTROL OF OTHER PARTY'S BUSINESS; TRANSITION PLANNING. Nothing
contained in this Agreement shall give IWL, directly or indirectly, the right
to control or direct the Company's or the Partnership's operations prior to
the Effective Time. Nothing contained in this Agreement shall give the
Company or the Partnership, directly or indirectly, the right to control or
direct IWL's operations prior to the Effective Time. Prior to the Effective
Time, each of the Company, the Partnership, and IWL shall exercise,
consistent with the terms and conditions of this Agreement, complete control
and supervision over its respective operations. Subject to the foregoing,
Xxxxxxxx X. Xxxxxxxx, as Chief Executive Officer of IWL, and Xxxx X.
Xxxxxxxx, Xx., as President of the Company, jointly shall be responsible for
coordinating all aspects of transition planning and implementation relating
to the Mergers and the Interest Exchange and the other transactions
contemplated hereby. If either such person ceases to be chief executive
officer of his company for any reason, such person's successor shall assume
his predecessor's responsibilities under this Section 4.4. During the period
between the date of this Agreement and the Effective Time, Messrs. Leonards
and Xxxxxxxx jointly shall (i) examine various alternatives regarding the
manner in which to best organize and manage the businesses of IWL, the
Partnership and the Company after the Effective Time and (ii) coordinate
policies and strategies with respect to regulatory authorities and bodies, in
all cases subject to applicable and regulation.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. JOINT PROXY STATEMENT AND THE REGISTRATION STATEMENT.
(a) Holdings shall register the issuance of the shares of
Holdings Common Stock to be issued in the Mergers and the Interest Exchange
under the Securities Act and any blue sky law under which registration or a
qualification is required. In connection therewith, as promptly as
practicable after the execution and delivery of this Agreement, the parties
hereto shall prepare and file with the SEC the Registration Statement, which
(i) shall be a Registration Statement on Form S-4, (ii) shall register the
issuance of the shares of Holdings Common Stock to be issued in the Mergers
and the Interest Exchange, and (iii) shall contain a joint proxy
statement/prospectus for IWL, the Company and the Partnership. The parties
shall use commercially reasonable efforts to have the Registration Statement
declared effective by the SEC. Upon the SEC declaring the Registration
Statement effective, IWL, the Company and the Partnership shall mail to the
holders of record of shares of IWL Common Stock, Company Common Stock and
Partnership Interests, the Joint Proxy Statement/Prospectus, provided,
however, that IWL, the Partnership and the Company shall not mail or
otherwise furnish the Joint Proxy Statement/Prospectus to their respective
shareholders or to the Partners unless and until:
(i) IWL shall have received (and included as an exhibit or
appendix to the Joint Proxy Statement/Prospectus) a letter from Cruttenden
Xxxx Incorporated, dated as of, or within two business days preceding, the
date of the first mailing of the Joint Proxy Statement, to the effect set
forth in Section 3.7 hereof;
(ii) IWL shall have received a letter of KPMG Peat Marwick, LLP,
dated a date within two business days prior to the date of the first mailing
of the Joint Proxy Statement, and addressed to IWL, in form and substance
reasonably satisfactory to IWL and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in connection
with registration statements on Form S-4 with respect to the financial
statements of the Company and the Partnership included in the Joint Proxy
Statement and the Registration Statement;
(iii) the Company and the Partnership shall have received a letter
of KPMG Peat Marwick, LLP, dated a date within two business days prior to the
date of the first mailing of the Joint Proxy Statement, and addressed to the
Company and the Partnership, in form and substance reasonably satisfactory to
the Company and the Partnership and customary in scope and substance for
"cold comfort" letters delivered by independent public accountants in
connection with registration statements on Form S-4 with respect to the
financial statements of IWL included in the Joint Proxy Statement and the
Registration Statement;
51
(iv) each of the IWL Shareholders Agreement and the Owners
Agreement shall have been fully executed and delivered by all signatories
thereto;
(v) each of Xxxxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxx, Xxxx X.
Xxxxxxxx, Xx., Xxxx X. Xxxxxxxx, Xx., Xxxx Xxxxxxxx, Xxx Xxxxxx, Xxx Xxxxxxx
and Xxxxx Xxxxxxx shall have executed and delivered to Holdings a lock-up
agreement in form and substance reasonably satisfactory to Holdings (provided
that the lock-up period shall expire on or prior to the date that Holdings
publicly announces financial results covering at least 30 days of combined
operations of IWL, the Partnership and the Company); and
(vi) such Joint Proxy Statement/Prospectus shall include audited
financial statements (balance sheets, income statements and statements of
cash flows) for the Company and the Partnership as of and for the fiscal
years ended December 31, 1997, 1996 and 1995 (which shall have been audited
by KPMG Peat Marwick, LLP).
(b) The parties hereto will use their respective best efforts to
cause the letters referred to in clauses (ii) and (iii) above to be delivered
and will cooperate in the preparation of the Joint Proxy Statement and the
Registration Statement and in having the Registration Statement declared
effective as soon as practicable.
5.2 IWL AND COMPANY SHAREHOLDERS' MEETINGS, PARTNERS' MEETING, AND
CONSUMMATION OF THE MERGERS AND THE INTEREST EXCHANGE.
(a) At the earliest reasonably practicable time following the
execution and delivery of this Agreement, each of IWL and the Company shall
promptly take all action necessary in accordance with the TBCA and its
Articles of Incorporation and Bylaws to convene a meeting of their respective
shareholders (each, a "Shareholders Meeting"). Each of IWL and the Company
shall use all commercially reasonable efforts to solicit from its respective
shareholders proxies to be voted at its Shareholders Meeting in favor of this
Agreement pursuant to the Joint Proxy Statement and each of IWL and the
Company shall include in the Joint Proxy Statement the recommendation of its
Board of Directors in favor of this Agreement and the Mergers. Each of the
parties hereto shall take all other action necessary or, in the opinion of
the other parties, reasonably advisable to promptly and expeditiously secure
any vote or consent of shareholders required by the TBCA and such party's
Articles of Incorporation and Bylaws to effect the Mergers. At the earliest
reasonably practicable time following the execution and delivery of this
Agreement, the Partnership shall promptly take all action necessary in
accordance with the Texas Revised Limited Partnership Act ("TRLPA") and its
Agreement of Limited Partnership to convene a meeting of the Partners. The
Partnership shall use all commercially reasonable efforts to solicit from its
Partners proxies to be voted at such meeting in favor of this Agreement and
the Interest Exchange pursuant to the Joint Proxy Statement.
(b) Upon the terms and subject to the conditions hereof and as
soon as practicable after the conditions set forth in Article VI hereof have
been fulfilled or waived, each of the parties shall execute in the manner
required by the TBCA and TRLPA and deliver to and file with the Secretary of
State of the State of Texas, such instruments and agreements as may be
required by the TBCA and TRLPA, and the parties shall take all such other and
further actions as may be required by law to make the Mergers and the
Interest Exchange effective.
5.3 ACCESS TO INFORMATION. Each of the parties hereto shall afford the
other parties and their respective accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (a) all of its properties, books,
contracts, commitments and records, and (b) all other information concerning
the business, properties and personnel of such party as may be reasonably
requested. IWL, the Partnership and the Company agree to provide to the
other parties' respective accountants, counsel and other representatives
copies of internal financial statements promptly upon reasonable request. No
information or knowledge obtained in any investigation pursuant to this
Section 5.3 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties
to consummate the Mergers and the Interest Exchange.
52
5.4 CONFIDENTIALITY. From the date hereof to and including the
Effective Time, the parties hereto shall maintain, and cause their directors,
officers, employees, agents and advisors to maintain, in confidence and not
disclose or use for any purpose, except the evaluation of the transactions
contemplated hereby and the accuracy of the respective representations and
warranties of the parties hereto contained herein, information concerning the
other parties hereto and obtained directly or indirectly from such parties,
or their directors, officers, employees, agents or advisors, except such
information as is or becomes (a) available to the non-disclosing party from
third parties not subject to an undertaking of confidentiality or secrecy;
(b) generally available to the public other than as a result of a breach by
the non-disclosing party hereunder; or (c) required to be disclosed under
applicable law; and except such information as was in the possession of such
party prior to obtaining such information from such other party as to which
the fact of prior possession such possessing party shall have the burden of
proof. Each of IWL, the Company and the Partnership agrees that all
information so received from the other party shall be deemed received
pursuant to the confidentiality agreement, dated December 2, 1997, heretofore
executed and delivered by IWL and the Company (the "Confidentiality
Agreement") and such party shall, and shall cause its Subsidiaries and each
of its and their respective officers, directors, employees, financial
advisors and agents, to comply with the provisions of the Confidentiality
Agreement with respect to such information and the provisions of the
Confidentiality Agreement are hereby incorporated herein by reference with
the same effect as if fully set forth herein. In the event that the
transactions contemplated hereby shall not be consummated, all such
information which shall be in writing shall be returned to the party
furnishing the same, including to the extent reasonably practicable, copies
or reproductions thereof which may have been prepared.
5.5 EXPENSES. Subject to Section 5.12, whether or not the Mergers and
the Interest Exchange are consummated, all expenses incurred in connection
with this Agreement shall be the obligation of the party incurring such
expenses, except that expenses incurred in connection with the printing of
the Joint Proxy Statement and the Registration Statement shall be shared
equally by IWL and the Company.
5.6 PUBLIC DISCLOSURE. Unless otherwise required by law or the
requirements of the Nasdaq National Market, prior to the Effective Time, no
disclosure (whether or not in response to an inquiry) of the subject matter
of this Agreement shall be made by any party hereto unless approved by IWL,
the Company and the Partnership prior to release, provided that such approval
shall not be unreasonably withheld. Notwithstanding the above, the IWL may
make such public disclosures without the consent of the Company to the extent
reasonably necessary to comply with IWL's securities laws disclosure
requirements, as determined by IWL.
5.7 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, as promptly as practicable after the date hereof, IWL, the Company
and the Partnership shall (a) use all commercially reasonable efforts to
cooperate with each other in (i) determining which filings are required to be
made prior to the Closing Date with, and which material consents, approvals,
permits, or authorizations are required to be obtained prior to the Closing
Date from, governmental or regulatory authorities of the United States, the
several states or the District of Columbia, the Commonwealth of Puerto Rico,
and foreign jurisdictions in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
and (ii) timely making all such filings and timely seeking all such consents,
approvals, permits, or authorizations, including without limitation all
applicable state regulatory approvals, and (b) use all commercially
reasonable efforts to take, or cause to be taken, all other actions and do,
or cause to be done, all other things necessary or appropriate to consummate
the transactions contemplated by this Agreement, as soon as practicable. The
parties acknowledge that certain actions may be necessary with respect to the
foregoing in making notifications and obtaining clearances, consents,
approvals, waivers, or similar third party actions that are material to the
consummation of the transactions contemplated hereby, and each party agrees
to take all commercially reasonable actions as are necessary to complete such
notifications and obtain such clearances, approvals, waivers, or third party
actions except where such consequence, event, or occurrence would not have a
Material Adverse Effect on IWL, the Company or the Partnership, as the case
may be.
5.8 AFFILIATE AGREEMENT. Each of the Company and IWL shareholders and
each of the Partners designated by Holdings as an "Affiliated Shareholder"
(the "Affiliated Shareholders") agrees to execute, on or prior to the
Effective Time, an Affiliate Agreement with respect to Rule 145 under the
Securities Act in the form agreed upon by the parties
53
hereto. Holdings shall be entitled to place on the certificates evidencing
any Holdings Common Stock to be received by any Affiliated Shareholder
pursuant to the terms of this Agreement the legends set forth in the
Affiliate Agreement, and to issue appropriate stop transfer instructions to
the transfer agent for Holdings Common Stock, consistent with the terms of
such Affiliate Agreement.
5.9 COMPLIANCE.
(a) In consummating the Mergers, the Interest Exchange and the
other transactions contemplated hereby, the Company and the Partnership shall
comply in all material respects with the provisions of the Exchange Act and
the Securities Act and shall comply, and/or cause its Subsidiaries to comply
or to be in compliance, in all material respects, with all other applicable
laws.
(b) In consummating the Mergers, the Interest Exchange and the
other transactions contemplated hereby, IWL shall comply in all material
respects with the provisions of the Exchange Act and the Securities Act and
shall comply, and/or cause its Subsidiaries (including the Merger
Subsidiaries) to comply or to be in compliance, in all material respects,
with all other applicable laws.
5.10 BLUE SKY LAWS. Holdings shall take such steps as may be necessary
to comply with the federal securities laws and with the securities and blue
sky laws of all other jurisdictions which are applicable to the issuance of
Holdings Common Stock pursuant hereto (such determination shall be made based
on the shareholder and optionee addresses furnished to Holdings by IWL and
the Company). IWL, the Company and the Partnership shall use commercially
reasonable efforts to assist Holdings as may be necessary to comply with the
federal securities laws and with the securities and blue sky laws of all
other jurisdictions which are applicable in connection with the issuance of
Holdings Common Stock pursuant hereto.
5.11 BEST EFFORTS, ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each
of the parties to this Agreement shall use commercially reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to
be fulfilled the conditions to closing under this Agreement. Each party
hereto, at the request of another party hereto, shall execute and deliver
such other instruments and do and perform such other acts and things as may
be reasonably necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
5.12 EMPLOYMENT AGREEMENTS. On or prior to the date hereof, each of
Xxxxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxx, Xxxxx Xxxxxxx, Xxxxxxx X. Xxxxxxxx and
Xxxxx Xxxxxxx, who are currently IWL employees, and Xxxx X. Xxxxxxxx, Xx.,
Xxxxx Xxxxxxx, Xxx Xxxxxx and Xxx Xxxxxxx, who are currently Company
employees, shall enter into an employment agreement (which shall include
covenants not to compete) in substantially the form attached hereto as
Exhibit 5.12 with Holdings (the "Employment Agreements"). None of such
employees shall have any right, remedy or cause of action under this Section
5.12, nor shall they be third party beneficiaries of this Section 5.12.
Prior to the Effective Time, the Company shall bear and be responsible for
the performance of all of Holdings' obligations under the Employment
Agreements with the Company employees and IWL shall bear and be responsible
for the performance of all of Holdings' obligations under the Employment
Agreements with the IWL employees, in each case including without limitation
obligations to pay base compensation and bonus (if any), tax withholding and
payment obligations (including with respect to FICA, Medicare and all other
similar taxes) and employee expense reimbursement obligations. Prior to the
Effective Time, each of IWL and the Company shall reimburse the other for any
expenses incurred by the other that were the responsibility hereunder of IWL
or the Company, as the case may be.
5.13 POOLING ACCOUNTING. IWL, the Partnership and the Company shall
each use commercially reasonable efforts to cause the business combination to
be effected by the Mergers and the Interest Exchange to be accounted for as a
pooling of interests. Each of IWL, the Partnership and the Company shall use
commercially reasonable efforts to cause its "affiliates" (within the meaning
of Rule 145 promulgated under the Securities Act) not to take any action that
would adversely affect the ability of the parties hereto to account for the
business combination to be effected by the
54
Mergers and the Interest Exchange as a pooling of interests. The Affiliate
Agreements to be entered into by the Affiliated Shareholders shall require
the Affiliated Shareholders not to sell, exchange, transfer, pledge, dispose
of, offer for sale or grant an option to purchase any shares of the Holdings
Common Stock during the period which begins on the date hereof and ends on
the third day after Holdings publicly announces financial results covering at
least 30 days of combined operations of IWL, the Partnership and the Company.
5.14 NASDAQ LISTING. Holdings agrees to use its best efforts to
authorize for listing on the Nasdaq National Market the shares of Holdings
Common Stock issuable, and those required to be reserved for issuance, in
connection with the Mergers and the Interest Exchange, upon official notice
of issuance.
5.15 POST-MERGER BOARD OF DIRECTORS AND OFFICERS OF HOLDINGS.
Following the Effective Time, Holdings shall use commercially reasonable
efforts to (a) cause the Board of Directors of Holdings to consist of
Xxxxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxx, Xxxx X. Xxxxxxxx, Xx., Xxxx Xxxxxxxx,
Xxx Xxxxxx, one outside director designated by IWL and one outside director
designated by the Company (provided that IWL and the Company shall each have
the right to veto the other's designee) and (b) cause the officers of
Holdings to consist of Xxxx X. Xxxxxxxx, Xx., Chief Executive Officer,
Xxxxxxxx X. Xxxxxxxx, President, Xxxxx X. Xxxxx, Executive Vice President,
and Xxxxxxx X. Xxxxxxxx, Controller, Treasurer and Secretary. Holdings shall
take all action necessary to amend its Articles of Incorporation as of the
Effective Time to change its name to "CapRock Communications Corp." or such
other name as may be agreed upon by the parties.
5.16 NO REGISTRATION RIGHTS. Holdings shall not be required to amend
or maintain the effectiveness of the Registration Statement for any purposes,
including without limitation for the purpose of permitting resale of the
shares of Holdings Common Stock received pursuant hereto by the Persons who
may be deemed to be "affiliates" of Holdings, IWL, the Company or the
Partnership within the meaning of Rule 145 promulgated under the Securities
Act.
5.17 NOTIFICATION OF CERTAIN MATTERS. Each of IWL, the Partnership and
the Company shall give prompt notice to the other of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence
or nonoccurrence would be likely to cause either (i) any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate
in any material respect at any time from the date hereof to the Effective
Time, or (ii) directly or indirectly, any Material Adverse Effect with
respect to such party;
(b) any material failure of such party, or any officer, director,
employee or agent of any thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
(c) any facts relating to such party which would make it
necessary or advisable to amend the Joint Proxy Statement or the Registration
Statement in order to make the statements therein not misleading or to comply
with applicable law;
(d) any notice of, or other communication relating to, a default
or event which, with notice or lapse of time or both, would become a default,
received by it or any of its Subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, under any contract or agreement
material to the financial condition, properties, businesses or results of
operations of it and its Subsidiaries taken as a whole to which it or any of
its Subsidiaries is a party or is subject; and
(e) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement; provided,
however, that the delivery of any notice pursuant to this Section 5.17 shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
55
ARTICLE VI
CONDITIONS TO THE MERGERS AND THE INTEREST EXCHANGE
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGERS AND
THE INTEREST EXCHANGE. The respective obligations of each party to this
Agreement to effect the Mergers and the Interest Exchange shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(a) SHAREHOLDER APPROVAL. The Mergers and the Interest Exchange
and this Agreement shall have been approved and adopted by the requisite vote
of the shareholders of each of IWL and the Company in accordance with the
TBCA and of the Partners in accordance with TRLPA and/or the Agreement of
Limited Partnership of the Partnership;
(b) LEGALITY. No federal, state or foreign statute, rule,
regulation, executive order, decree or injunction shall have been enacted,
entered, promulgated or enforced by any court or governmental authority which
is in effect and has the effect of making the Mergers and the Interest
Exchange illegal or otherwise prohibiting the consummation of the Mergers and
the Interest Exchange;
(c) REGULATORY MATTERS. All authorizations, consents, orders or
approvals of, or declarations or filings with, and all expirations of waiting
periods imposed by, any governmental body, agency or official (all of the
foregoing, "Consents") which are necessary for the consummation of the
transactions contemplated hereby (including any consents or approvals
required by the FCC or any state public utility commissions), other than
immaterial Consents the failure to obtain which would have no material
adverse effect on the consummation of the transactions contemplated hereby
and no Material Adverse Effect on Holdings or the Surviving Corporations,
shall have been filed, have occurred or have been obtained (all such permits,
approvals, filings and consents and the lapse of all such waiting periods
being referred to as the "Requisite Regulatory Approvals") and all such
Requisite Regulatory Approvals shall be in full force and effect, provided,
however, that a Requisite Regulatory Approval shall not be deemed to have
been obtained if in connection with the grant thereof there shall have been
an imposition by any state or federal governmental body, agency or official
of any condition, requirement, restriction or change of regulation, or any
other action directly or indirectly related to such grant taken by such
governmental body, which would reasonably be expected to either (i) have a
Material Adverse Effect on Holdings or the Surviving Corporations, or (ii)
prevent the parties hereto from realizing in all material respects the
economic benefits of the transactions contemplated by this Agreement that
such parties currently anticipate receiving therefrom; provided further,
however, that until such time as the Requisite Regulatory Approvals have been
obtained, there shall be no change in the ownership or management of IWL, the
Company or the Partnership and no transfer of control whatsoever over the
governmental authorizations held by IWL, the Company or the Partnership
except insofar as such change in ownership or management or transfer of
control may be completed without obtaining regulatory approval in order to
comply with applicable federal, state and local laws, rules, regulations and
policies;
(d) REGISTRATION STATEMENT EFFECTIVE. The Registration Statement
shall have become effective prior to the mailing by IWL, the Company and the
Partnership of the Joint Proxy Statement to their respective shareholders and
Partners, as applicable, no stop order suspending the effectiveness of the
Registration Statement shall then be in effect, and no proceedings for that
purpose shall then be threatened by the SEC or shall have been initiated by
the SEC and not concluded or withdrawn;
(e) BLUE SKY. All state securities or blue sky permits or
approvals required to carry out the transactions contemplated hereby shall
have been received;
(f) NASDAQ LISTING. The shares of Holdings Common Stock into
which the shares of IWL Common Stock, Company Common Stock and Partnership
Interests will be converted pursuant to Article II hereof and the shares of
Holdings Common Stock issuable upon the exercise of Holdings Options pursuant
to Section 1.6 hereof shall have been duly approved for listing on the Nasdaq
National Market, subject to official notice of issuance; and
56
(g) LOCK-UP AGREEMENTS. All of the lock-up agreements required
to be executed pursuant to Section 5.1(a) shall have been executed and
delivered to Holdings.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
PARTNERSHIP. The obligations of the Company and the Partnership to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing,
exclusively by the Company and the Partnership:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of IWL and the Merger Subsidiaries in this
Agreement shall be true and correct in all material respects on and as of the
Effective Time as though such representations and warranties were made on and
as of such time and IWL and the Merger Subsidiaries shall have performed and
complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by
them as of the Effective Time.
(b) CERTIFICATE OF IWL. Each of the Company and the Partnership
shall have been provided with a certificate executed on behalf of IWL by its
Chief Executive Officer or its Chief Financial Officer to the effect that, as
of the Effective Time:
(i) all representations and warranties made by IWL and the
Merger Subsidiaries under this Agreement are true and complete in all material
respects; and
(ii) all covenants, obligations and conditions of this Agreement
to be performed by IWL and the Merger Subsidiaries on or before such date have
been so performed in all material respects.
(c) LEGAL OPINIONS. (i) The Company and the Partnership shall
have received a legal opinion from Xxxxxx Xxxxx Xxxx Xxxx & Xxxxx, P.C. and
from IWL's regulatory counsel as to corporate and regulatory matters, each
dated as of the Closing Date and each in form and substance reasonably
satisfactory to the Company and the Partnership; (ii) the Company and the
Partnership shall have received an opinion from Xxxxxx & Xxxx, L.L.P.,
counsel to the Company and the Partnership, dated as of the Closing Date, in
form and substance reasonably satisfactory to the Company and the
Partnership, substantially to the effect that, on the basis of the facts,
representations and assumptions set forth in such opinion: (A) no gain or
loss will be recognized for federal income tax purposes by Holdings, the
Company or C-Sub as a result of the formation of Holdings and C-Sub and the
Merger of C-Sub with and into the Company; (B) no gain or loss will be
recognized for federal income tax purposes by the shareholders of the Company
upon their exchange of Company Common Stock for the Company Merger
Consideration pursuant to such Company Merger; and (C) no gain or loss will
be recognized for federal income tax purposes by the Partners upon their
exchange of Partnership Interests for shares of Holdings Common Stock
pursuant to the Interest Exchange; and (iii) IWL shall have received the
opinion described in Section 6.3(e)(ii) hereof, in form and substance
reasonably satisfactory to the Company.
(d) NO MATERIAL ADVERSE CHANGES. There shall not have occurred
any event, fact or condition that has had or reasonably would be expected to
have a Material Adverse Effect on IWL.
(e) SATISFACTORY FORM OF LEGAL AND ACCOUNTING MATTERS. The form,
scope and substance of all legal, tax and accounting matters contemplated
hereby and all closing documents and other papers delivered hereunder shall
be reasonably acceptable to the Company's and the Partnership's counsel and
accountants.
(f) AFFILIATE AGREEMENTS. The Company and the Partnership shall
have received from each IWL Affiliated Shareholder an executed Affiliate
Agreement, which shall be in full force and effect.
57
(g) EMPLOYMENT AGREEMENTS. The Employment Agreements shall have
been duly executed and delivered and shall be in full force and effect.
(h) IWL SHAREHOLDERS AGREEMENT. The IWL Shareholders Agreement
shall have been executed and delivered to the Company and the Partnership on
or prior to the date hereof.
(i) POOLING OF INTERESTS LETTER. Each of the Company and the
Partnership shall have received a letter from KPMG Peat Marwick, LLP to the
effect that the Mergers and the Interest Exchange qualify for "pooling of
interests" accounting treatment under Accounting Principles Board Opinion
No. 16 if consummated in accordance with this Agreement.
(j) RELEASE OF GUARANTIES. The guaranties made by Xx. Xxxx X.
Xxxxxxxx, Xx. and Xx. Xxxx Xxxxxxxx of the indebtedness of the Partnership to
Bank One Texas, N.A. shall have been released and terminated.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF IWL AND THE MERGER
SUBSIDIARIES. The obligations of IWL and the Merger Subsidiaries to
consummate and effect this Agreement and the transactions contemplated hereby
shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing,
exclusively by IWL:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the Company and the Partnership in this
Agreement shall be true and correct in all material respects on and as of the
Effective Time as though such representations and warranties were made on and
as of such time, and the Company and the Partnership shall have performed and
complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it
as of the Effective Time.
(b) CERTIFICATE OF THE COMPANY AND THE PARTNERSHIP. IWL and the
Merger Subsidiaries shall have been provided with certificates executed on
behalf of the Company by its President and the Partnership by its General
Partner to the effect that, as of the Effective Time:
(i) all representations and warranties made by the Company and
the Partnership under this Agreement are true and complete in all material
respects; and
(ii) all covenants, obligations and conditions of this Agreement
to be performed by the Company or the Partnership, as the case may be, on or
before such date have been so performed in all material respects.
(c) THIRD PARTY CONSENTS. The Company and the Partnership shall
have obtained the consents listed in Section 6.3(c) of the Company and
Partnership Disclosure Schedule, as well as the consent or approval of each
other Person whose consent or approval shall be required under any agreement
or instrument in order to permit the consummation of the transactions
contemplated hereby except those which the failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on Holdings
or the Surviving Corporations.
(d) SATISFACTORY FORM OF LEGAL AND ACCOUNTING MATTERS. The form,
scope and substance of all legal, tax and accounting matters contemplated
hereby and all closing documents and other papers delivered hereunder shall
be reasonably acceptable to IWL's counsel and accountants.
(e) LEGAL OPINIONS. (i) IWL and the Merger Subsidiaries shall
have received a legal opinion from Xxxxxx & Xxxx, L.L.P. and from regulatory
counsel to the Company and the Partnership as to corporate and regulatory
matters, each dated as of the Closing Date and each in form and substance
reasonably satisfactory to IWL; (ii) IWL shall have received an opinion from
Xxxxxx Xxxxx Xxxx Xxxx & Xxxxx, P.C., dated as of the Closing Date in form
and substance reasonably satisfactory to the Company and the Partnership,
substantially to the effect that, on the basis of the facts, representations
and assumptions set forth in such opinion: (A) no gain or loss will be
recognized for
58
federal income tax purposes by Holdings, IWL or I-Sub as a result of the
formation of Holdings and I-Sub and the Merger of I-Sub with and into IWL;
and (B) no gain or loss will be recognized for federal income tax purposes by
the shareholders of IWL upon their exchange of IWL Common Stock solely for
Holdings Common Stock pursuant to such IWL Merger; and (iii) the Company and
the Partnership shall have received the opinion described in Section
6.2(c)(ii) hereof, in form and substance reasonably satisfactory to IWL.
(f) NO MATERIAL ADVERSE CHANGES. There shall not have occurred
any event, fact or condition which has had or reasonably would be expected to
have a Material Adverse Effect on Holdings, the Company, the Partnership or
the Surviving Corporations since the date hereof.
(g) AFFILIATE AGREEMENTS. IWL shall have received from each
Company and Partnership Affiliated Shareholder an executed Affiliate
Agreement, which shall be in full force and effect.
(h) EMPLOYMENT AGREEMENTS. The Employment Agreements shall have
been duly executed and delivered and shall be in full force and effect.
(i) OWNERS AGREEMENT. The Owners Agreement shall have been
executed and delivered to IWL on or prior to the date hereof.
(j) CONTRIBUTION AGREEMENTS. Each Partner shall have executed
and delivered to IWL a Contribution Agreement in respect of such Partner's
Partnership Interest, shall have consented to the transfers of Partnership
Interests contemplated by the Interest Exchange and shall have consented to
the substitution of the Company as the new General Partner of the Partnership
and of Holdings as the new limited partner of the Partnership.
(k) POOLING ACCOUNTING. IWL shall have received a letter from
KPMG Peat Marwick, LLP to the effect that the Mergers and the Interest
Exchange qualify for "pooling of interests" accounting treatment under
Accounting Principles Board Opinion No. 16 if consummated in accordance with
this Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time before
the Effective Time, in each case as authorized by the respective Board of
Directors of IWL or the Company or by the General Partner:
(a) By mutual written consent of each of IWL, the Company and the
General Partner;
(b) By either IWL, on the one hand, or the Company and the
Partnership, on the other hand, if the Mergers and the Interest Exchange
shall not have been consummated on or before December 31, 1998 (the
"Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before the
Termination Date; and provided, further, that if on the Termination Date the
conditions to the Closing set forth in Section 6.1(c) shall not have been
fulfilled, but all other conditions to the Closing shall be fulfilled or
shall be capable of being fulfilled, then the Termination Date shall be
extended to a date that is one year from the date hereof;
(c) By either IWL, the Company or the Partnership if a court of
competent jurisdiction or governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties hereto shall use their
commercially reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement, and such order, decree, ruling or other action shall have
become final and nonappealable;
59
(d) By either IWL, on the one hand, or the Company and the
Partnership, on the other hand, if another party shall have breached, or
failed to comply with, in any material respect any of its obligations under
this Agreement or any representation or warranty made by such party shall
have been incorrect in any material respect when made or shall have since
ceased to be true and correct in any material respect, and such breach,
failure or misrepresentation is not cured within 30 days after notice thereof
and such breaches, failures or misrepresentations, individually or in the
aggregate and without regard to materiality qualifiers contained therein,
results or would reasonably be expected to result in a Material Adverse
Effect on IWL, on the one hand, or the Company or the Partnership, on the
other hand, as the case may be;
(e) By either IWL, on the one hand, or the Company and the
Partnership, on the other hand, upon the occurrence of a Material Adverse
Effect on another party or an event which could reasonably be expected to
result in a Material Adverse Effect on the other;
(f) (i) by IWL (A) if the Board of Directors or any committee
of the Board of Directors of the Company or the General Partner (w) shall
withdraw or modify in any adverse manner its approval or recommendation of
this Agreement or the Mergers or the Interest Exchange, (x) shall fail to
reaffirm such approval or recommendation upon IWL's request, (y) shall
approve or recommend any acquisition of the Company or the Partnership or a
material portion of their respective assets or any tender offer for shares of
their capital stock or partnership interests, in each case, other than by a
party hereto or an affiliate thereof, or (z) shall resolve to take any of the
foregoing specified actions or (B) if the Board of Directors or any committee
of the Board of Directors of IWL (x) shall withdraw or modify in any adverse
manner its approval or recommendation of this Agreement or the Mergers or the
Interest Exchange, (y) shall approve or recommend any acquisition of IWL or a
material portion of its assets or any tender offer for shares of its capital
stock, in each case, other than by a party hereto or an affiliate thereof, or
(z) shall resolve to take any of the foregoing specified actions; or (ii) by
the Company and the Partnership (A) if the Board of Directors or any
committee of the Board of Directors of IWL (w) shall withdraw or modify in
any adverse manner its approval or recommendation of this Agreement or the
Mergers or the Interest Exchange, (x) shall fail to reaffirm such approval or
recommendation upon the request of the Company or the Partnership, (y) shall
approve or recommend any acquisition of IWL or a material portion of its
assets or any tender offer for shares of its capital stock, in each case,
other than by a party hereto or an affiliate thereof, or (z) shall resolve to
take any of the foregoing specified actions or (B) if the Board of Directors
or any committee of the Board of Directors of the Company or the General
Partner (x) shall withdraw or modify in any adverse manner its approval or
recommendation of this Agreement or the Mergers or the Interest Exchange, (y)
shall approve or recommend any acquisition of the Company or the Partnership
or a material portion of their respective assets or any tender offer for
shares of their capital stock or partnership interests, in each case, other
than by a party hereto or an affiliate thereof, or (z) shall resolve to take
any of the foregoing specified actions;
(g) By either (i) IWL (A) if any of the required approvals of the
shareholders or Partners, as the case may be, of the Company and the
Partnership, as the case may be, shall fail to have been obtained at a duly
held shareholders or Partners' meeting, as the case may be, of the Company or
the Partnership, including any adjournments thereof, or (B) if the required
approval of the shareholders of IWL shall fail to have been obtained at a
duly held shareholders meeting of IWL, including any adjournments thereof; or
(ii) the Company and the Partnership (A) if any of the required approvals of
the shareholders or Partners, as the case may be, of the Company and the
Partnership, as the case may be, shall fail to have been obtained at a duly
held shareholders or Partners' meeting, as the case may be, of the Company or
the Partnership, including any adjournments thereof, or (B) if the required
approval of the shareholders of IWL shall fail to have been obtained at a
duly held shareholders meeting of IWL, including any adjournments thereof;
(h) By the Company or the Partnership, prior to the approval of
this Agreement by the shareholders of the Company or the Partners, as the
case may be, upon two business days' prior notice to IWL, if, as a result of
an Acquisition Proposal received by the Company or the Partnership from a
Person other than a party to this Agreement or any of its affiliates, the
Board of Directors of the Company or the General Partner, as the case may be,
determines in good faith, on the basis of oral or written advice of outside
counsel, that their fiduciary obligations under
60
applicable law require that such Acquisition Proposal be accepted; provided,
however, that (i) the Board of Directors of the Company or the General Partner
shall have concluded in good faith, after considering applicable provisions of
law, on the basis of oral or written advice of outside counsel, that such
action is necessary for the Board of Directors or the General Partner to act
in a manner consistent with its fiduciary duties under applicable law and (ii)
prior to any such termination, the Company or the Partnership shall, and shall
cause its respective financial and legal advisors to, negotiate with IWL to
adjust the terms and conditions of this Agreement to provide the opportunity
for the Company or the Partnership to proceed with the transactions
contemplated hereby; or
(i) By IWL, prior to the approval of this Agreement by the
shareholders of the IWL upon two business days' prior notice to the Company
and the Partnership, if, as a result of an Acquisition Proposal received by
IWL from a Person other than a party to this Agreement or any of its
affiliates, the Board of Directors of IWL determines in good faith, on the
basis of oral or written advice of outside counsel that their fiduciary
obligations under applicable law require that such Acquisition Proposal be
accepted; provided however, that (i) the Board of Directors of IWL shall have
concluded in good faith, after considering applicable provisions of law, on
the basis of oral or written advice of outside counsel, that such action is
necessary for the Board of Directors to act in a manner consistent with its
fiduciary duties under applicable law and (ii) prior to any such termination,
IWL shall, and shall cause its respective financial and legal advisors to,
negotiate with the Company and the Partnership to adjust the terms and
conditions of this Agreement to provide the opportunity for IWL to proceed
with the transactions contemplated hereby;
provided further, however, that no termination shall be effective pursuant to
Sections 7.1(f), (g), (h) or (i) under circumstances in which a termination fee
is payable by IWL, on the one hand, or the Company and the Partnership, on the
other hand, under Section 7.2(b) or (c) unless concurrently with such
termination, such termination fee is paid in full by IWL, on the one hand, or
the Company and the Partnership, on the other hand, in accordance with the
provisions of Sections 7.2(b) or (c), as applicable.
7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement as provided in
Section 7.1 hereof, and subject to the provisions of Section 8.1 hereof, this
Agreement shall forthwith become void and there shall be no liability on the
part of any of the parties hereto, except (i) as set forth in this Section 7.2
and in Sections 2.19, 2.24, 2A.18, 2A.23, 3.5, 3.6 and 8.10 hereof, and (ii)
nothing herein shall relieve any party hereto from liability for any willful
breach hereof.
(b) If (i) this Agreement (A) is terminated by IWL pursuant to
Section 7.1(f)(i)(A) or Section 7.1(g)(i)(A) or by the Company or the
Partnership pursuant to Section 7.1(f)(ii)(B), Section 7.1(g)(ii)(A) or
Section 7.1(h) hereof, or (B) is terminated as a result of the Company's or
the Partnership's material breach of Section 5.2 hereof which is not cured
within 30 days after notice thereof to the Company or the Partnership, as
appropriate, and (ii) at the time of such termination or prior to the meeting
of the Company's shareholders or the Partners there shall have been an
Acquisition Proposal involving the Company or any of its Subsidiaries or the
Partnership (whether or not such offer shall have been rejected or shall have
been withdrawn prior to the time of such termination or of the meeting), the
Company or the Partnership, as the case may be, shall pay to IWL a termination
fee of $2.5 million, which shall be payable in cash at the date of termination.
(c) If (i) this Agreement (A) is terminated by the Company or the
Partnership pursuant to Section 7.1(f)(ii)(A) or Section 7.1(g)(ii)(B) or by
IWL pursuant to Section 7.1(f)(i)(B), Section 7.1(g)(i)(B) or Section 7.1(i),
or (B) is terminated as a result of IWL's material breach of Section 5.2
hereof which is not cured within 30 days after notice thereof to IWL, and (ii)
at the time of such termination or prior to the meeting of IWL's shareholders
there shall have been an Acquisition Proposal involving IWL or any of its
Subsidiaries (whether or not such offer shall have been rejected or shall have
been withdrawn prior to the time of such termination or of the meeting), IWL
shall pay to the Company and the Partnership an aggregate termination fee of
$2.5 million, which shall be payable in cash at the date of termination.
61
(d) The Company, the Partnership, and IWL agree that the
agreements contained in Section 7.2(b) and Section 7.2(c) above are an
integral part of the transactions contemplated by this Agreement and
constitute liquidated damages and not a penalty. If any party fails to
promptly pay any fee due under Section 7.2(b) or Section 7.2(c), then such
party shall pay the costs and expenses (including reasonable legal fees and
expenses) in connection with any action, including the filing of any lawsuit
or other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of Bank One
Texas, N.A. from the date such fee was required to be paid.
7.3 AMENDMENT. This Agreement may be amended by the parties hereto
pursuant to a writing adopted by action taken by all of the parties at any
time before the Effective Time; provided, however, that, after approval of the
Mergers and the Interest Exchange by the shareholders of IWL or the Company or
the Partners, whichever shall occur first, no amendment may be made which
would (a) alter or change the amount or kinds of consideration to be received
by the holders of shares of IWL Common Stock or Company Common Stock and the
Partnership Interests upon consummation of the Mergers and the Interest
Exchange, (b) alter or change any term of the Articles of Incorporation of the
Surviving Corporations, or (c) alter or change any of the terms and conditions
of this Agreement if such alteration or change would adversely affect the
holders of any class or series of securities of Holdings, IWL, the Company or
the Partnership. This Agreement may not be amended except by an instrument in
writing signed by the parties.
7.4 WAIVER. At any time before the Effective Time, any party may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party to any such extension or waiver
shall be valid only as against such party and only if set forth in an
instrument in writing signed by such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants to be
performed prior to the Effective Time, and all representations and warranties
in this Agreement or in any instrument delivered pursuant to this Agreement
(including the Affiliate Agreements) shall survive the Mergers and the
Interest Exchange and continue until the earlier of (i) the date one year
following the Effective Time or (ii) the date Holdings publicly announces
financial results covering at least 30 days of combined operations of IWL, the
Partnership and the Company, provided that any representation or warranty
relating or pertaining to Company Taxes shall terminate upon the expiration of
all applicable statutes of limitations relevant to Company Taxes or Tax
matters. All covenants to be performed after the Effective Time shall
continue indefinitely.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given and received if delivered personally or by
commercial delivery service, or three business days after being mailed by
registered or certified mail (return receipt requested) or sent via telecopy
to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to IWL or any Merger Subsidiary, to:
IWL Communications, Inc.
00000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Chief Executive Officer
Facsimile No.: (000) 000-0000
62
with a copy to:
Xxxxxx Xxxxx Xxxx Xxxx & Xxxxx, P.C.
0000 Xxxxxxxx Xxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attn: A. Xxxxxxx Xxxxxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
CapRock Communications Corp.
Two Galleria Tower, Suite 1925
00000 Xxxx Xxxx
Xxxxxx, Xxxxx 00000-0000
Attn: Xxxx X. Xxxxxxxx, Xx.
Facsimile No.: (000) 000-0000
or if to the Partnership, to:
CapRock Fiber Network, Ltd.
Two Galleria Tower, Suite 1925
00000 Xxxx Xxxx
Xxxxxx, Xxxxx 00000-0000
Attn: Xxxx X. Xxxxxxxx, Xx.
Facsimile No.: (000) 000-0000
each with a copy to:
Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
8.3 INTERPRETATION. When a reference is made in this Agreement to
Schedules or Exhibits, such reference shall be to a Schedule or Exhibit to
this Agreement unless otherwise indicated. The words "include," "includes"
and "including" when used herein shall be deemed in each case to be followed
by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. The
Disclosure Schedules and Exhibits to this Agreement are hereby incorporated by
reference into and made a part of this Agreement for all purposes.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 MISCELLANEOUS. This Agreement and the documents and instruments and
other agreements among the parties hereto (including the Confidentiality
Agreement) (a) constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral among the parties with respect to the
subject matter hereof, including the parties' letter of intent with respect to
this transaction,
63
but excluding the Confidentiality Agreement; (b) are not intended to confer
upon any other Person any rights or remedies hereunder; and (c) shall not be
assigned by operation of law or otherwise except as otherwise specifically
provided.
8.6 GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Texas. All parties hereto agree to submit to the jurisdiction of the federal
and state courts of the State of Texas, and further agree that service of
documents commencing any suit therein may be made as provided in Section 8.2.
8.7 ATTORNEYS' FEES. If any party to this Agreement brings an action
against another party to this Agreement to enforce its rights under this
Agreement, the prevailing party shall be entitled to recover its reasonable
costs and expenses, including reasonable attorneys' fees and costs, incurred
in connection with such action, including any appeal of such action.
8.8 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof, shall be settled by arbitration in
Dallas, Texas, in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
8.10 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party hereto. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties hereto as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the maximum extent possible.
8.11 DEFINITIONS. Terms used herein with initial capital letters shall
have the respective meanings set forth below:
"Acquisition Proposal" shall mean a proposal or offer for a tender or
exchange offer, merger, consolidation or other business combination involving
the Company or the Partnership or any proposal to acquire in any manner a
substantial equity interest in, or all or substantially all of the assets of the
Company or the Partnership.
"Affiliated Shareholders" has the meaning set forth in Section 5.8.
"Agreement" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"Articles of Merger" shall have the meaning set forth in Section 1.2(a).
"Closing" shall have the meaning set forth in Section 1.2(c).
"Closing Date" shall have the meaning set forth in Section 1.2(c).
"COBRA" shall have the meaning set forth in Section 2.20.
64
"Code" shall have the meaning set forth in Recital F to this Agreement.
"Company" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"Company Authorizations" shall have the meaning set forth in Section 2.14.
"Company Balance Sheet" shall have the meaning set forth in Section 2.5.
"Company Commercial Software Rights" shall have the meaning set forth in
Section 2.11(b).
"Company Common Stock" shall have the meaning set forth in Section 1.6(a).
"Company Disclosure Schedule" shall have the meaning set forth in the
introductory paragraph of Article II.
"Company Employee Plans" shall have the meaning set forth in Section
2.27(a).
"Company Equity Rights" shall have the meaning set forth in Section 2.3(a).
"Company ERISA Affiliates" shall have the meaning set forth in Section
2.27(a).
"Company Exchange Ratio" shall have the meaning set forth in Section
1.6(a).
"Company Financial Statements" shall have the meaning set forth in Section
2.5.
"Company Intellectual Property Rights" shall have the meaning set forth in
Section 2.11(a).
"Company Merger" shall have the meaning set forth in Recital A to this
Agreement.
"Company Merger Consideration" shall have the meaning set forth in Section
1.6(a).
"Company Returns" shall have the meaning set forth in Section 2.8(a).
"Confidentiality Agreement" shall have the meaning set forth in Section
5.4.
"Consents" shall have the meaning set forth in Section 6.1(c).
"Contribution Agreement" shall have the meaning set forth in Section
1.2(b).
"Converted Option" shall have the meaning set forth in Section 1.6(g).
"C-Sub" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"Dissenter" shall have the meaning set forth in Section 1.7(a).
"Dissenters' Shares" shall have the meaning set forth in Section 1.7(a).
"Effective Time" shall have the meaning set forth in Section 1.2(a).
"Employee Safety Laws" shall have the meaning set forth in Section 2.18(d).
"Employment Agreement" shall have the meaning set forth in Section 5.12.
65
"End-User Licenses" shall have the meaning set forth in Section 2.11(a).
"Environmental Law" shall have the meaning set forth in Section 2.18(b).
"Equipment" shall have the meaning set forth in Section 2.10(c).
"ERISA" shall have the meaning set forth in Section 2.27(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall have the meaning set forth in Section 1.6(d).
"Exchange Fund" shall have the meaning set forth in Section 1.6(d).
"Exchange Ratios" shall have the meaning set forth in Section 1.6(a).
"FCC" shall have the meaning set forth in Section 3.3.
"GAAP" shall have the meaning set forth in Section 2.5.
"General Partner" shall have the meaning set forth in Recital A to this
Agreement.
"Governmental Entity" shall have the meaning set forth in Section 2.4.
"Holdings" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"Holdings Common Stock" shall have the meaning set forth in Recital A to
this Agreement.
"Holdings Option" shall have the meaning set forth in Section 1.6(g).
"ICEL" shall have the meaning set forth in Section 3.31.
"ICEL Stock Purchase Agreement" shall mean that certain Agreement dated
January 21, 1998, among IWL, NERA Limited, and Xxxxxx Xxxxxx Xxxxx and Xxxxxxx
Xxxxx Xxxxx for the sale and purchase of the whole of the issued share capital
of ICEL, including all schedules and exhibits attached thereto.
"Interest Exchange" shall have the meaning set forth in Recital A to this
Agreement.
"Interest Exchange Consideration" shall have the meaning set forth in
Section 1.6(a).
"IRS" shall have the meaning set forth in Section 2.27(b).
"I-Sub" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"IWL" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"IWL Authorizations" shall have the meaning set forth in Section 3.17.
"IWL Commercial Software Rights" shall have the meaning set forth in
Section 3.15(b).
"IWL Common Stock" shall have the meaning set forth in Section 1.6(a).
66
"IWL Disclosure Schedule" shall have the meaning set forth in the
introductory paragraph of Article III.
"IWL Employee Plans" shall have the meaning set forth in Section 3.25(a).
"IWL Equity Rights" shall have the meaning set forth in Section 3.2(b).
"IWL ERISA Affiliate" shall have the meaning set forth in Section 3.25(a).
"IWL Exchange Ratio" shall have the meaning set forth in Section 1.6(a).
"IWL Financial Statements" shall have the meaning set forth in Section 3.4.
"IWL Intellectual Property Rights" shall have the meaning set forth in
Section 3.15(a).
"IWL Merger" shall have the meaning set forth in Recital A to this
Agreement.
"IWL Merger Consideration" shall have the meaning set forth in Section
1.6(a).
"IWL Returns" has the meaning set forth in Section 3.12(a).
"IWL Shareholders Agreement" shall have the meaning set forth in Recital E
to this Agreement.
"Joint Proxy Statement" shall have the meaning set forth in Section 2.24.
"Limited Partners" shall have the meaning set forth in Section 1.2(b).
"Material Adverse Effect" shall mean any change in or effect on the
business of the referenced corporation or partnership or any of its Subsidiaries
that is or will be materially adverse to the business, operations (including the
income statement), properties (including intangible properties), condition
(financial or otherwise), assets, liabilities or regulatory status of such
referenced corporation and its Subsidiaries taken as a whole, but shall not
include the effects of changes that are generally applicable in (a) the United
States economy or (b) the United States securities markets if, in any of (a) or
(b), the effect on IWL, the Company or the Partnership (as the case may be) and
its respective Subsidiaries, taken as a whole, is not disproportionate relative
to the effect on the other and its Subsidiaries, taken as a whole.
"Merged Corporation" shall have the meaning set forth in Section 1.6.
"Merger Subsidiary" shall have the meaning set forth in the introductory
paragraph of Article III.
"Mergers" shall have the meaning set forth in Recital A to this Agreement.
"Options" shall have the meaning set forth in Section 1.6(g).
"Owners Agreement" shall have the meaning set forth in Recital D to this
Agreement.
"Partners" shall have the meaning set forth in Section 1.2(b).
"Partnership" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Partnership Authorizations" shall have the meaning set forth in Section
2A.14.
67
"Partnership Balance Sheet" shall have the meaning set forth in Section
2A.5.
"Partnership Commercial Software Rights" shall have the meaning set forth
in Section 2A.11(b).
"Partnership Disclosure Schedule" shall have the meaning set forth in the
introductory paragraph of Article IIA.
"Partnership Employee Plans" shall have the meaning set forth in Section
2A.26(a).
"Partnership Equity Rights" shall have the meaning set forth in Section
2A.3(a).
"Partnership Financial Statements" shall have the meaning set forth in
Section 2A.5.
"Partnership Intellectual Property Rights" shall have the meaning set forth
in Section 2A.11(a).
"Partnership Interests" shall have the meaning set forth in Recital A to
this Agreement.
"Partnership Returns" shall have the meaning set forth in Section 2A.8(a).
"Person" means an individual, corporation, partnership, limited liability
company, association, trust, unincorporated organization, entity or group (as
defined in the Exchange Act).
"Pre-Surrender Dividends" shall have the meaning set forth in Section
1.6(d).
"Registration Statement" shall have the meaning set forth in Section 2.24.
"Requisite Regulatory Approvals" shall have the meaning set forth in
Section 6.1(c).
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section 3.4.
"Securities Act" shall have the meaning set forth in Section 2.24.
"Shareholders' Meeting" shall have the meaning set forth in Section 5.2(a).
"Shares" shall have the meaning set forth in Section 1.6(d).
"Subsidiary" means any corporation or other legal entity of which IWL, the
Company or the Partnership, as the case may be (either alone or through or
together with any other Subsidiary or Subsidiaries), owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity, except that
in the case of IWL, ICEL shall not, for any purposes of this Agreement, be
considered a Subsidiary of IWL.
"Surviving Corporation" shall have the meaning set forth in Section 1.1.
"Tax" or "Taxes" shall have the meaning set forth in Section 2.8(a).
"TBCA" shall have the meaning set forth in Section 1.7(a).
"Termination Date" shall have the meaning set forth in Section 7.1(b).
"TRLPA" shall have the meaning set forth in Section 5.2(a).
68
IN WITNESS WHEREOF, Holdings, IWL, the Merger Subsidiaries, the Company and
the Partnership have caused this Agreement to be signed by themselves or their
duly authorized respective officers or general partners, all as of the date
first written above.
IWL HOLDINGS CORP.
By: /s/ Xxxx X. Xxxxxxxx, Xx.
-------------------------------
Its: Chief Executive Officer
-------------------------------
IWL COMMUNICATIONS, INCORPORATED
By: /s/ Xxxxxxxx X. Xxxxxxxx
-------------------------------
Its: Chief Executive Officer
-------------------------------
IWL ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxxxx, Xx.
-------------------------------
Its: Chief Executive Officer
-------------------------------
CAPROCK COMMUNICATIONS CORP.
By: /s/ Xxxx X. Xxxxxxxx, Xx.
-------------------------------
Its: Chief Executive Officer
-------------------------------
CAPROCK ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxxxx, Xx.
-------------------------------
Its: Chief Executive Officer
-------------------------------
CAPROCK FIBER NETWORK, LTD.
By: CapRock Systems, Inc.
Its: General Partner
By: /s/ Xxxx X. Xxxxxxxx, Xx.
--------------------------
Its: President
--------------------------
69
