EXHIBIT 99.2
AGREEMENT AND PLAN OF MERGER
among
ANSCHUTZ DIGITAL MEDIA, INC.,
PS ACQUISITIONS, INC.
and
PRECISION SYSTEMS, INC.
Dated as of March 15, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER................................................... 1
Section 1.1 The Merger.............................................. 1
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Section 1.2 Closing................................................. 1
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Section 1.3 Effective Time.......................................... 1
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Section 1.4 Effects of the Merger................................... 2
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Section 1.5 Certificate of Incorporation and Bylaws................. 2
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Section 1.6 Directors; Officers..................................... 2
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ARTICLE II EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES.............................. 2
Section 2.1 Conversion of Securities................................ 2
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Section 2.2 Exchange of Certificates................................ 4
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Section 2.3 Stock Transfer Books.................................... 6
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Section 2.4 Appraisal Rights........................................ 6
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 6
Section 3.1 Organization, Qualification, Etc........................ 6
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Section 3.2 Capital Stock........................................... 7
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Section 3.3 Corporate Authority; No Violation....................... 8
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Section 3.4 Reports and Financial Statements....................... 9
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Section 3.5 No Undisclosed Liabilities.............................. 9
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Section 3.6 Compliance with Laws.................................... 9
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Section 3.7 Environmental Laws......................................10
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Section 3.8 Employee Benefit Plans..................................12
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Section 3.9 Absence of Certain Changes or Events....................14
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Section 3.10 Litigation.............................................14
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Section 3.11 Contracts..............................................14
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Section 3.12 Labor Matters..........................................14
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Section 3.13 Tax Matters............................................15
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Section 3.14 Opinion of Financial Advisor...........................16
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Section 3.15 Takeover Laws..........................................16
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Section 3.16 Required Vote of the Company Shareholders..............16
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Section 3.17 Finders or Brokers.....................................17
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Section 3.18 Related Party Transactions.............................17
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Section 3.19 Year 2000..............................................17
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Section 3.20 Telecom Licenses; Operations of Licensed Facilities....17
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Section 3.21 Information Supplied...................................17
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Section 3.22 Property...............................................17
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERSUB......18
Section 4.1 Organization, Qualification, Etc........................18
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Section 4.2 Corporate Authority; No Violation.......................19
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Section 4.3 Finders or Brokers......................................19
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Section 4.4 Financing...............................................20
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ARTICLE V COVENANTS AND AGREEMENTS.....................................20
Section 5.1 Conduct of Business by the Company......................20
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Section 5.2 Investigation...........................................22
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Section 5.3 Stockholder Approval; Filings...........................22
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Section 5.4 Additional Reports......................................23
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Section 5.5 Reasonable Best Efforts.................................23
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Section 5.6 Takeover Statutes.......................................24
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Section 5.7 No Solicitation.........................................24
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Section 5.8 Public Announcements....................................25
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Section 5.9 Indemnification and Insurance...........................26
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Section 5.10 Notification of Certain Matters........................26
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Section 5.11 Employee Plans and Benefit Arrangements................27
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Section 5.12 Xxxxx Financing........................................27
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Section 5.13 Delivery of Final Audited Financials...................28
Section 5.14 Modification of Merger Structure.......................28
ARTICLE VI CONDITIONS TO THE MERGER....................................28
Section 6.1 Conditions to Each Party's Obligation to Effect
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the Merger..............................................28
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Section 6.2 Conditions to Obligations of the Company to Effect
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the Merger..............................................29
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Section 6.3 Conditions to Obligations of Parent to Effect
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the Merger..............................................29
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ARTICLE VII TERMINATION, WAIVER, AMENDMENT AND CLOSING.................30
Section 7.1 Termination or Abandonment..............................30
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Section 7.2 Effect of Termination...................................31
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Section 7.3 Termination Payments....................................31
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ARTICLE VIII MISCELLANEOUS.............................................33
Section 8.1 No Survival of Representations and Warranties...........33
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Section 8.2 Expenses................................................33
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Section 8.3 Counterparts; Effectiveness.............................33
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Section 8.4 Governing Law...........................................34
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Section 8.5 Notices.................................................34
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Section 8.6 Assignment; Binding Effect..............................35
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Section 8.7 Severability............................................35
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Section 8.8 Enforcement of Agreement................................35
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Section 8.9 Miscellaneous...........................................35
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Section 8.10 Headings...............................................36
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Section 8.11 Certain Definitions....................................36
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Section 8.12 Knowledge..............................................36
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 15, 1999 (this
"Agreement"), is among Anschutz Digital Media, Inc., a Colorado corporation
("Parent"), PS Acquisitions, Inc., a Delaware corporation ("MergerSub"), and
Precision Systems, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, MergerSub and the
Company have approved and have declared advisable the merger of the Company with
and into MergerSub (the "Merger"), upon the terms and subject to the conditions
set forth herein, and have determined that the Merger and the other transactions
contemplated hereby are in the best interests of their respective companies and
shareholders; and
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
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set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), the Company shall be merged with and into
MergerSub at the Effective Time (as defined in Section 1.3). Following the
Effective Time, the separate corporate existence of the Company shall cease and
MergerSub shall be the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of the Company in
accordance with the DGCL.
Section 1.2 Closing. The closing of the Merger (the "Closing") will
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take place at 10:00 a.m., local time, at the offices of Xxxxx & Xxxxxxx L.L.P.,
0000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx on a date to be specified
by the parties (the "Closing Date"), which shall be no later than the third
business day after the first date that all of the conditions set forth in
Sections 6.1(a) through (d) have been satisfied or waived, unless another place,
time or date is agreed to by the parties hereto.
Section 1.3 Effective Time. Subject to the provisions of this
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Agreement, as soon as practicable on or after the Closing Date, the parties (i)
shall file with the Secretary of State for the State of Delaware (the "Delaware
Secretary of State") a certificate of merger or other appropriate documents (in
any such case, the "Certificate of Merger") executed in accordance with the
relevant provisions of the DGCL and (ii) shall make all other filings or
recordings required under the DGCL to effect the Merger. The Merger shall
become effective at the time of the filing of the Certificate of Merger with the
Delaware Secretary of State in accordance with the DGCL, or at such subsequent
date or time as Parent and the Company shall agree and specify in the
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Delaware Certificate of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the effects
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set forth in Section 259 of the DGCL.
Section 1.5 Certificate of Incorporation and Bylaws.
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(a) The certificate of incorporation of MergerSub, in the form
attached hereto as Exhibit A, shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended.
(b) The bylaws of MergerSub, as in effect immediately prior to the
Effective Time, which shall contain indemnification provisions no less favorable
to directors and officers of the Company than the corresponding provisions in
the Company's bylaws as of the date hereof, until thereafter changed or amended,
shall be the bylaws of the Surviving Corporation.
Section 1.6 Directors; Officers. The directors and officers of
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MergerSub at the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their respective successors are
duly elected and qualified.
ARTICLE II
EFFECT OF THE MERGER ON THE STOCK
OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue
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of the Merger and without any action on the part of MergerSub, the Company or
the holders of any of the following securities:
(a) Each share of common stock of the Company, par value $0.01 per
share (each a "Common Share"), each share of Series A Preferred Stock of the
Company, par value $0.01 per share (each a "Series A Preferred Share"), and each
share of Series B Preferred Stock of the Company, par value $0.01 per share
(each "Series B Preferred Share" and, together with the Series A Preferred
Shares, the "Preferred Shares"), held in the treasury of the Company and each
such share or any warrant to obtain Common Shares of Company (the "Warrants")
owned by Parent or any direct or indirect wholly owned Subsidiary (as defined in
Section 8.11) of Parent or of the Company immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof and no
payment shall be made with respect thereto.
(b) Each issued and outstanding share of common stock, par value $.01
per share, of MergerSub immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and non-assessable share of common
stock of the Surviving Corporation, and the Surviving Corporation shall be a
wholly owned subsidiary of Parent.
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(c) Each Series A Preferred Share issued and outstanding immediately
prior to the Effective Time (other than those canceled pursuant to Section
2.1(a)) shall be converted into the right to receive $580.00 per share plus all
accumulated but unpaid dividends and any accrued interest on such unpaid
dividends up to (but not beyond) the Effective Time (the "Series A
Consideration"). All such Series A Preferred Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each stock certificate previously evidencing Series A Preferred
Shares ("Series A Stock Certificates") immediately prior to the Effective Time
shall thereafter represent the right to receive the Series A Consideration in
accordance with this Article II. The holders of Series A Stock Certificates
shall cease to have any rights with respect to the Series A Preferred Shares
evidenced thereby except as otherwise provided herein or by Law (as defined in
Section 3.6).
(d) Each Series B Preferred Share issued and outstanding immediately
prior to the Effective Time (other than those canceled pursuant to Section
2.1(a)) shall be converted into the right to receive $1,000.00 per share plus
all accumulated but unpaid dividends and any accrued interest on such unpaid
dividends up to (but not beyond) the Effective Time (the "Series B
Consideration"). All such Series B Preferred Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each stock certificate previously evidencing Series B Preferred
Shares ("Series B Stock Certificates") immediately prior to the Effective Time
shall thereafter represent the right to receive the Series B Consideration in
accordance with this Article II. The holders of Series B Stock Certificates
shall cease to have any rights with respect to Series B Preferred Shares
evidenced thereby except as otherwise provided herein or by Law.
(e) Subject to the other provisions of this Section 2.1, each Common
Share that is issued and outstanding immediately prior to the Effective Time
(excluding any Common Shares canceled pursuant to Section 2.1(a)) shall be
converted into the right to receive $1.00 per share without interest (the "Per
Share Consideration"). All such Common Shares shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each stock certificate previously evidencing Common Shares ("Common Stock
Certificates" and, together with Series A Certificates and Series B
Certificates, "Stock Certificates") immediately prior to the Effective Time
shall thereafter represent the right to receive the Per Share Consideration in
accordance with this Article II. The holders of Common Stock Certificates shall
cease to have any rights with respect to the Common Shares evidenced thereby
except as otherwise provided herein or by Law.
(f) Any outstanding Warrants and any outstanding options to acquire
Common Shares granted to directors or employees of the Company under the Company
Compensation and Benefit Plans (the "Options") shall be canceled prior to the
Effective Time and, in lieu thereof, as soon as reasonably practicable as of or
after the Effective Time, the holders of such Warrants or Options shall receive
a cash payment from Parent equal to the product of (i) the total number of
Common Shares previously subject to such Warrant or Option (ii) the excess of
the Per Share Consideration over the exercise price per Common Share subject to
such Warrants or Options.
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(g) A Letter of Transmittal (as defined in Section 2.2(b)) shall be
included with each copy of the Proxy Statement (as defined in Section 5.3(b))
mailed to shareholders of the Company in connection with the Company Meeting (as
defined in Section 5.3(a)). Parent and the Company shall each use its
reasonable best efforts to mail or otherwise make available a Letter of
Transmittal to all persons who become holders of Common Shares or Preferred
Shares (collectively, the "Shares") during the period between the record date
for the Company Meeting and the Company Meeting.
Section 2.2 Exchange of Certificates.
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(a) At or prior to the Effective Time, Parent shall deposit, or shall
cause to be deposited into an account (the "Exchange Fund") with the Norwest
Bank, N.A., or such other bank or trust company designated by Parent and which
is reasonably satisfactory to the Company (the "Exchange Agent") for the benefit
of the holders of Shares, through the Exchange Agent, cash in an amount equal to
the sum of (i) the number of Common Shares outstanding and not otherwise subject
to cancellation pursuant to Section 2.1(a) multiplied by the Per Share
Consideration, (ii) the number of Series A Preferred Shares outstanding and not
otherwise subject to cancellation pursuant to Section 2.1(a) multiplied by the
Series A Consideration and (iii) the number of Series B Preferred Shares
outstanding and not otherwise subject to cancellation pursuant to Section 2.1(a)
multiplied by the Series B Consideration (collectively, the "Merger
Consideration"). The Exchange Agent shall, pursuant to irrevocable instructions
in accordance with this Article II, deliver the cash contemplated to be
distributed out of the Exchange Fund pursuant to Section 2.1. The Exchange Fund
shall not be used for any other purpose. The Exchange Agent shall invest any
cash in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(b) Parent will instruct the Exchange Agent to mail to each holder of
record of Stock Certificates who has not previously surrendered his or her Stock
Certificates with a validly executed Letter of Transmittal as soon as reasonably
practicable after the Effective Time:
(i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to such holder's Stock
Certificates shall pass, only upon proper delivery of the Stock Certificates to
the Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify); and
(ii) instructions for use in effecting the surrender of the Stock
Certificates in exchange for cash (collectively, the "Letter of Transmittal").
(c) Upon the later of the Effective Time and the surrender of a Stock
Certificate for cancellation (or the affidavits and indemnification regarding
the loss or destruction of such certificates in accordance with Section 2.2(h))
to the Exchange Agent together with the Letter of Transmittal, duly executed,
and such other customary documents as may be required pursuant thereto, the
holder of such Stock Certificate shall be entitled to receive in exchange
therefor, and the Exchange Agent shall deliver in accordance with the Letter of
Transmittal that portion of the Merger Consideration related to such Stock
Certificate that such holder has the
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right to receive in respect of the Shares formerly evidenced by such Stock
Certificate in accordance with Section 2.1.
In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, a certificate evidencing cash
paid in accordance with this Article II to a transferee shall be issued if the
Stock Certificate evidencing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid.
(d) Until surrendered as contemplated by this Section 2.2, each Stock
Certificate shall be deemed at any time after the Effective Time to evidence
only the right to receive upon such surrender that portion of the Merger
Consideration related to such Stock Certificate.
(e) Any portion of the Exchange Fund which remains undistributed to
the holders of the Stock Certificates for six months after the Effective Time
shall be delivered to Parent, upon demand, and any holders of Stock Certificates
who have not theretofore complied with this Article II shall thereafter look
only to Parent for payment of their claim for the Merger Consideration.
(f) None of Parent, the Company, MergerSub or the Exchange Agent shall
be liable to any person in respect of any cash from the Exchange Fund in each
case delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Stock Certificate shall not have been
surrendered prior to seven years after the Effective Time (or immediately prior
to such earlier date on which any cash payable to the holder of such Stock
Certificate would otherwise escheat to or become the property of any
governmental body or authority), any Merger Consideration related to such Stock
Certificate shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(g) Parent and MergerSub shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as Parent or MergerSub is required to deduct and withhold
with respect to the making of such payment under the Code (as defined in Section
3.13) or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by Parent or MergerSub, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Shares in respect of which such deduction and withholding was made by Parent
or MergerSub.
(h) If any Stock Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Stock Certificate to be lost, stolen or destroyed and, if required by the
Parent, the posting by such person of a bond in such reasonable amount as the
Parent may direct as indemnity against any claim that may be made against it
with respect to such Stock Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Stock Certificate the applicable
portion of the Merger Consideration, pursuant to this Article II.
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(i) In the event this Agreement is terminated without the occurrence
of the Effective Time, Parent shall, or shall cause the Exchange Agent to,
return promptly any Stock Certificates theretofore submitted or delivered to
Parent or the Exchange Agent without charge to the person who submitted such
Stock Certificates.
Section 2.3 Stock Transfer Books. There shall be no further
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registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Stock Certificates are presented
to the Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by Law.
Section 2.4 Appraisal Rights. Notwithstanding Section 2.1, Shares which
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are issued and outstanding immediately prior to the Effective Time and which are
held by a holder who has not voted such Shares in favor of the Merger, who shall
have delivered a written demand for relief as a dissenting shareholder in the
manner provided under Section 262 of the DGCL, and who, as of the Effective
Time, shall not have lost such right to relief as a dissenting shareholder shall
not be converted into a right to receive Merger Consideration. The holders
thereof shall be entitled only to such rights as are granted by Section 262 of
the DGCL.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and MergerSub that except as
set forth in the corresponding sections or subsections of the Disclosure
Schedule delivered to Parent by the Company concurrently with entering into this
Agreement (the "Company Disclosure Schedule"):
Section 3.1 Organization, Qualification, Etc.
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(a) The Company is a corporation duly organized, validly existing and
in good standing under the Laws (as defined in Section 3.6) of Delaware and has
the corporate power and authority to own its assets and to carry on its business
as it is now being conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which the ownership of its assets or the
conduct of its business requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good standing does not,
individually or in the aggregate, have a Material Adverse Effect (as defined in
Section 3.1(b)) on the Company.
Copies of the Company's articles of organization and bylaws filed or
incorporated by reference in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 are complete and correct and in full force and
effect on the date hereof.
(b) Each of the Company's Subsidiaries is an entity duly organized,
validly existing and in good standing (where applicable) under the Laws of its
jurisdiction of incorporation or organization, has the corporate power and
authority to own its assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in
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good standing in each jurisdiction in which the ownership of its assets or the
conduct of its business requires such qualification, except where the failure to
be so organized, existing, qualified or in good standing does not, individually
or in the aggregate, have a Material Adverse Effect on the Company. All the
outstanding shares of capital stock of, or other ownership interests in, the
Company's Subsidiaries are validly issued, fully paid and non-assessable and are
owned by the Company, directly or indirectly, free and clear of all liens,
claims, charges or encumbrances ("Encumbrances"), except for Encumbrances which
individually or in the aggregate do not have a Material Adverse Effect on the
Company. There are no existing options, rights of first refusal, conversion
rights, preemptive rights, calls, commitments, arrangements or obligations of
any character ("Share Arrangements") relating to the issued or unissued capital
stock or other securities of, or other ownership interests in, any Subsidiary of
the Company. None of the certificates of incorporation or bylaws or other
organizational documents of any of the Company's Subsidiaries purport to grant
rights to any person other than (1) customary rights given to all shareholders
pro rata in accordance with their holdings and (2) customary rights with respect
to corporate governance (including rights to notices) and rights of
indemnification of directors and officers. The Company has delivered to Parent
complete and correct copies of the certificate of incorporation and bylaws or
other organizational documents of each of the Company's Subsidiaries that is not
wholly owned by the Company and/or another of its wholly owned Subsidiaries.
A complete listing of the Company's Subsidiaries is set forth in
Section 3.1(b) of the Company Disclosure Schedule. Except for the Company's
Subsidiaries listed in Section 3.1(b) of the Company Disclosure Schedule, the
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity.
As used in this Agreement, any reference to any state of facts, event,
change or effect having a "Material Adverse Effect" on or with respect to the
"Company" or "Parent," as the case may be, means such state of facts, event,
change or effect that
(i) has had, or would reasonably be expected to have, a material
adverse effect on the business, results of operations or financial condition of
the Company and its Subsidiaries, taken as a whole, or Parent and its
Subsidiaries, taken as a whole, as the case may be, or
(ii) would reasonably be expected to prevent or substantially delay
consummation of the transactions contemplated by this Agreement.
Section 3.2 Capital Stock. The authorized stock of the Company
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consists of 30,000,000 Common Shares and 50,000 shares of non-redeemable
convertible preferred stock. As of March 15, 1999, 17,807,507 Common Shares
were issued and outstanding, 10,000 Series A Preferred Shares were issued and
outstanding and 4,500 Series B Preferred Shares were issued and outstanding.
All of the outstanding Shares have been validly issued and are fully paid and
non-assessable. Except as set forth in Section 3.2(a) of the Company Disclosure
Schedule,
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as of March 15, 1999 there were no outstanding Share Arrangements to which the
Company is a party relating to the issued or unissued capital stock or other
securities of, or other ownership interests in, the Company, other than Options
or Warrants to purchase 3,024,717 Common Shares granted on or prior to the date
hereof pursuant to the Company's stock option plans, or equity incentive plans
as set forth in Section 3.2(a) of the Company Disclosure Schedule (such plans
being referred to collectively as the "Company Plans").
Section 3.3 Corporate Authority; No Violation.
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(a) The Company has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the performance by the Company of its obligations
hereunder have been duly and validly authorized by the Board of Directors of the
Company and, except for the approval of its shareholders of this Agreement, no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the transactions contemplated hereby. The Board of
Directors of the Company, at a meeting duly called and held at which a quorum
was present throughout, has unanimously determined that the transactions
contemplated by this Agreement are in the best interest of the Company and its
shareholders and to recommend to such shareholders that they vote in favor of
this Agreement and the Merger (the "Company Board Recommendation"). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes a valid and binding agreement of the other
parties hereto, constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
(b) The execution, delivery and performance of this Agreement by the
Company do not, and the consummation by the Company of the Merger and the other
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of, or a default under, or the creation of any rights in favor of
any party under, the certificate of incorporation or bylaws of the Company or
the comparable governing instruments of any of its Subsidiaries, (ii) a breach
or violation of or a default in any material respect under, or an acceleration
of any obligations under, or the creation of a lien, pledge, security interest
or other encumbrance on the assets of the Company or any of its Subsidiaries
(with or without notice, lapse of time or both) pursuant to, any agreement,
lease, contract, note, mortgage, indenture, arrangement, nongovernmental permit
or license, order, decree, or other obligation ("Contracts") binding upon the
Company or any of its Subsidiaries ("Company Contracts") or (provided, as to
consummation, the filings and notices are made, and approvals are obtained, as
referred to in Section 3.3(c)) any applicable Law or Decree (as defined in
Section 3.6) or governmental permit or license to which the Company or any of
its Subsidiaries is subject, or (iii) any material change in the rights or
obligations of any party under any of the Company Contracts.
(c) Other than in connection with or in compliance with the provisions
of the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), the Securities Exchange Act of
1934, as amended, and the rules and
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regulations promulgated thereunder (the "Exchange Act"), the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), and the securities or blue sky Laws of
the various states and other than the filing of the Certificate of Merger with
the Delaware Secretary of State, no authorization, consent or approval of, or
filing with, any governmental, administrative or regulatory body or authority
("Governmental Entity") is necessary for the consummation by the Company of the
transactions contemplated by this Agreement the failure to obtain which could be
reasonably be expected to have a Material Adverse Effect on the Company.
Section 3.4 Reports and Financial Statements. Since January 1, 1996,
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the Company has timely filed with the SEC all forms, reports, schedules,
statements and other documents required to be filed by it under the Securities
Act or the Exchange Act (such documents, as supplemented or amended since the
time of filing, the "Company SEC Reports"). As of their respective dates, the
Company SEC Reports, including without limitation, any financial statements or
schedules included or incorporated by reference therein, at the time filed (and,
in the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (a) complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, and (b) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited consolidated interim financial statements included or incorporated by
reference in the Company SEC Reports (including any related notes and schedules)
fairly present, in all material respects, the financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and the results of
their operations and their cash flows for the periods set forth therein, in each
case in accordance with past practice and generally accepted accounting
principles in the United States ("GAAP") consistently applied during the periods
involved (except as otherwise disclosed in the notes thereto and subject, where
appropriate, to normal year-end adjustments that would not be material in amount
or effect).
Section 3.5 No Undisclosed Liabilities. Except as disclosed in Section
--------------------------
3.5 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, other than:
(a) liabilities or obligations disclosed in the footnotes to the draft
audited consolidated financial statements of the Company (including the
footnotes thereto) as of and for the fiscal year ended December 31, 1998
submitted to Parent by Company prior to the date hereof (the "Draft Audited
Financials"); and
(b) liabilities or obligations which do not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 3.6. Compliance with Laws. The Company and each of its
--------------------
Subsidiaries each:
9
(a) in the conduct of its businesses, is in compliance in all material
respects with all federal, state, local and foreign statutes and laws, and all
regulations, ordinances and rules promulgated thereunder (collectively, "Laws"),
and all judgments, orders, rulings, injunctions or decrees of Governmental
Entities (collectively, "Decrees"), applicable thereto or to the employees
conducting such businesses;
(b) has all permits, licenses, authorizations, orders and approvals
of, and have made all filings, applications and registrations with, all
Governmental Entities that are required in order to permit it to conduct its
businesses substantially as presently conducted, except where the failure to
have such permit, license, authorization, order or approval, or to make such
filing, application or registration, could not be reasonably expected to have a
Material Adverse Effect on the Company; all such permits, licenses,
authorizations, orders and approvals are in full force and effect and, to the
best of the Company's knowledge, no suspension or cancellation of any of them is
threatened; and
(c) has received, since December 31, 1993, no notification or
communication from any Governmental Entity other than those received in the
ordinary course of business or as disclosed in Section 3.6 of the Company
Disclosure Schedule:
(i) asserting that it is not in compliance with any of the Laws
or Decrees which such Governmental Entity enforces; or
(ii) threatening to revoke any permit, license, authorization,
order or approval.
Section 3.7. Environmental Laws.
------------------
(a) Neither the Company nor any of its Subsidiaries is the subject of
any pending, or to the knowledge of the Company threatened, actions, causes of
action, claims, orders, investigations, or proceedings ("Litigation") (whether
civil, criminal, administrative or arbitral) by any Governmental Entity or other
person alleging liability or damages under or non-compliance with any
Environmental Law (as defined below).
(b) Neither the conduct nor the operation of the Company or its
Subsidiaries violates or has in the past violated in any material respect any
applicable Environmental Law.
(c) Except as set forth in Section 3.7 of the Company Disclosure
Schedule, there is not now on, in or under any property owned, leased or
operated by the Company or any of its Subsidiaries any of the following:
(i) underground improvements, including but not limited to
treatment or storage tanks or underground piping associated with such tanks,
used currently or in the past for the management of Hazardous Substances (as
defined below);
(ii) asbestos-containing materials;
10
(iii) polychlorinated biphenyls;
(iv) other Hazardous Substances, in each case which would
reasonably be expected to form the basis of liability or other obligation of the
Company or any of its Subsidiaries under any applicable Environmental Laws; or
(v) a dump, landfill, filled in land or wetlands.
(d) There has been no written report of any environmental
investigation, study, audit, test, review or other analysis conducted of which
the Company has knowledge and has in its possession or control in relation to
the current or prior business of the Company or any property or facility now or
previously owned, operated, or leased by the Company or any of its Subsidiaries
which has not been made available to Parent at least ten days prior to the date
hereof.
(e) No property currently or formerly owned, operated or leased by the
Company or any of its Subsidiaries, and no property to which Hazardous
Substances originating on or from such properties or the businesses or assets of
the Company or any of its Subsidiaries has been sent for treatment or disposal,
is listed or proposed to be listed on the National Priorities List or CERCLIS or
on any other governmental database or list of properties that may or do require
investigation or cleanup under Environmental Laws.
(f) No Encumbrance in favor of any person relating to or in
connection with any claim under any Environmental Law has been filed or has
attached to the property currently owned, operated or leased by the Company or
any of its Subsidiaries.
(g) No authorization, notification, recording, filing, consent,
waiting period, remediation, investigation, or approval is required under any
Environmental Law in order to consummate the transaction contemplated hereby,
and there are no permits, licenses, certificates or approvals required under
Environmental Laws require consent, notification, or other action to remain in
full force and effect following consummation of the transaction contemplated
hereby.
(h) The Company has supplied Parent with a true and complete list of
all permits, licenses, certificates and approvals required under Environmental
Laws in order for the Company and each Subsidiary to conduct their businesses
substantially as presently conducted.
(i) "Environmental Laws" means any Laws (including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act) and Decrees, including any plans, other criteria, or guidelines
promulgated pursuant to such Laws and Decrees, relating to the generation,
production, installation, use, storage, treatment, transportation, release (as
defined below), threatened release, or disposal of Hazardous Substances, noise
control, or the protection of human health or safety, natural resources, or the
environment.
(j) "Hazardous Substances" means any wastes, substances, radiation, or
materials (whether solids, liquids or gases) (i) which are hazardous, toxic,
infectious, explosive,
11
radioactive, carcinogenic, or mutagenic; (ii) which are or become defined as a
"pollutants," "contaminants," "hazardous materials," "hazardous wastes,"
"hazardous substances," "toxic substances," "radioactive materials," "solid
wastes," or other similar designations in, or otherwise subject to regulation
under, any Environmental Laws; (iii) without limitation, which contain
polychlorinated biphenyls (PCBs), asbestos and asbestos-containing materials,
lead-based paints, urea-formaldehyde foam insulation, and petroleum or petroleum
products (including, without limitation, crude oil or any fraction thereof) or
(iv) which pose a hazard to human health, safety, natural resources, industrial
hygiene, or the environment, or an impediment to working conditions.
Section 3.8. Employee Benefit Plans.
----------------------
(a) Section 3.8 of the Company Disclosure Schedule contains a complete
list of all material written bonus, vacation, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock and stock option plans, employment or
severance contracts, medical, dental, disability, health and life insurance
plans, and other employee benefit and fringe benefit plans or other Contracts
maintained or contributed to by the Company or any of its Subsidiaries for the
benefit of officers, former officers, employees, former employees, directors,
former directors, or the beneficiaries of any of the foregoing, or pursuant to
which the Company or any of its Subsidiaries may have any liability that are
Contracts with, or plans maintained primarily for the benefit of, individuals
employed or rendering services in the United States and are not multiemployer
plans within the meaning of Section 4001(a)(3) of ERISA (as defined in Section
3.8(c)) (collectively (whether or not material), the "Company Compensation and
Benefit Plans").
(b) The Company has delivered to Parent copies of all Company
Compensation and Benefit Plans listed on Section 3.8 of the Company Disclosure
Schedule, including, but not limited to, all amendments thereto, and all of such
copies that have been delivered are true and correct.
(c) Each of the Company Compensation and Benefit Plans has been and is
being administered in accordance with the terms thereof and all applicable Laws.
Each "employee pension benefit plan" within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (each such
plan, a "Pension Plan") included in the Company Compensation and Benefit Plans
(a "Company Pension Plan") which is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service, and the Company is not aware of any circumstances
which could result in the revocation or denial of any such favorable
determination letter. No material "prohibited transaction," within the meaning
of Section 4975 of the Code or Section 406 of ERISA, has occurred with respect
to any Company Compensation and Benefit Plan. There is no pending or, to the
Company's knowledge, threatened Litigation relating to any of the Company
Compensation and Benefit Plans.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by the Company or any of its Subsidiaries or
any entity which is
12
considered one employer with the Company under Section 4001(a)(15) of ERISA or
Section 414 of the Code (any such entity, a "Company ERISA Affiliate"), other
than such liabilities that have previously been satisfied. No notice of a
"reportable event," within the meaning of Section 4043 of ERISA, for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Company Pension Plan or by any Company ERISA Affiliate within the past
12 months.
(e) All contributions, premiums and payments required to be made under
the terms of any Company Compensation and Benefit Plan have been made, except
where the failure to do so does not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Neither any Company Pension Plan nor
any single-employer plan of a Company ERISA Affiliate has an "accumulated
funding deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA. Neither the Company nor any of its
Subsidiaries has provided, or is required to provide, security to any Company
Pension Plan or to any single-employer plan of a Company ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(f) Under each Company Pension Plan which is a defined benefit plan,
as of the last day of the most recent plan year ended prior to the date hereof,
the actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such Company Pension Plan's most recent
actuarial valuation) did not exceed the then current value of the assets of such
Company Pension Plan, and there has been no adverse change in the financial
condition of such Company Pension Plan (with respect to either assets or
benefits) since the last day of the most recent plan year.
(g) Neither the Company nor any of its Subsidiaries contributes to or
is required to contribute to any multiemployer plan within the meaning of
Section 4001(c)(3) of ERISA ("Multiemployer Plan"). Neither the Company nor any
of its Subsidiaries has incurred any material withdrawal liability (within the
meaning of Section 4201 of ERISA) under any Multiemployer Plan within the past 5
years that has not been satisfied, nor could any such material withdrawal
liability reasonably be expected to be incurred.
(h) Except as set forth in the Company Compensation and Benefit Plans
listed in Section 3.8 of the Company Disclosure Schedule, the execution of, and
performance of the transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events):
(i) constitute an event under any Company Compensation and
Benefit Plan, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any officers and directors of the Company;
(ii) result in any payment or benefit that will or may be made by
the Company, any of its Subsidiaries, Parent or any of their respective
affiliates that will be
13
characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code; or
(iii) provide for any payment to any employee or independent
contractor that is not deductible under Section 162(a)(1) or 404 of the Code.
(i) The contributions of the Company and any of its Subsidiaries to
any trust described in Section 501(c)(9) of the Code have complied with Section
419A of the Code.
(j) Neither the Company nor its Subsidiaries have any obligations for
retiree health and life benefits under any Company Compensation and Benefit
Plan, except as set forth in the Company Disclosure Schedules. The Company or
its Subsidiaries may amend or terminate any such plan under the terms of such
plan at any time without incurring any material liability thereunder.
Section 3.9. Absence of Certain Changes or Events. Except as set
------------------------------------
forth in Section 3.9 of the Company Disclosure Schedule, since December 31,
1998, the businesses of the Company and its Subsidiaries have been conducted in
the ordinary course consistent with past practice, the Company and its
Subsidiaries have not engaged in any transaction or series of related
transactions material to the Company and its Subsidiaries taken as a whole other
than in the ordinary course consistent with past practice, and there has not
been any event, occurrence or development, alone or taken together with all
other existing facts, that, individually or in the aggregate, has a Material
Adverse Effect on the Company.
Section 3.10. Litigation. Except as disclosed in Section 3.10 of the
----------
Company Disclosure Schedule, there is no Litigation pending or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries or any of
their respective properties. The Company is not subject to any Decree that,
individually or in the aggregate, has a Material Adverse Effect on the Company.
Section 3.11. Material Contracts.
------------------
(a) All of the Company Contracts that are required to be described in
the Company SEC Reports or to be filed as exhibits thereto are described in the
Company SEC Reports or filed as exhibits thereto. Neither the Company nor any
of its Subsidiaries nor any other party is in breach of or in default in any
material respect under any Company Contract.
(b) Except as disclosed in Section 3.11 of the Company Disclosure
Schedule, there are no material Company Contracts with any Governmental Entity
that will not continue to be binding and in full force and effect in accordance
with its terms as a result of the consummation of the transactions contemplated
herein.
Section 3.12. Labor Matters. As of the date of this Agreement, the
-------------
Company and its Subsidiaries do not have any collective bargaining agreements
with any persons employed by the Company or any of its Subsidiaries or any
persons otherwise performing services primarily for the Company or any of its
Subsidiaries, nor is the Company or any of its Subsidiaries in the
14
process of negotiating any such agreement. There is no labor strike, dispute or
stoppage pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries. None of the Company or its Subsidiaries is
the subject of a proceeding asserting that it has committed an unfair labor
practice (within the meaning of the National Labor Relations Act) or seeking to
compel it to bargain with any labor organization as to wages and conditions of
employment. As of the date of this Agreement there are, to the knowledge of the
Company, no organizational efforts currently being made involving any of the
employees of the Company or any of its Subsidiaries.
Section 3.13. Tax Matters.
-----------
(a) The Company and each of its Subsidiaries have:
(i) filed all federal, state, local and foreign Tax Returns (as
defined below) required to be filed by them (taking into account extensions);
(ii) paid or accrued all Taxes (as defined below) shown to be due
on such Tax Returns or which are otherwise due and payable; and
(iii) paid or accrued all Taxes for which a notice of assessment
or collection has been received.
For purposes of this Agreement,
"Code" means the Internal Revenue Code of 1986, as amended.
"Taxes" means any and all federal, state, local, foreign or other
taxes of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any taxing
authority, including, without limitation, taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts,
property, sales, use, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth, and taxes or
other charges in the nature of excise, withholding, ad valorem or value added,
and includes, without limitation, any liability for Taxes of another person, as
a transferee or successor, under Treas. Reg. Section 1.1502-6 or analogous
provision of Law or otherwise; and
"Tax Return" means any return, report or similar statement (including
the attached schedules) required to be filed with respect to any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(b) Neither the Internal Revenue Service nor any other taxing
authority has asserted in writing any claim for Taxes, or to the knowledge of
the Company, is threatening to assert any claims for Taxes, against the Company
or any of its Subsidiaries. The Company and each of its Subsidiaries have
withheld or collected and paid over to the appropriate Governmental Entities (or
are properly holding for such payment) all Taxes required by Law to be withheld
or collected. There are no outstanding agreements or waivers extending the
statutory period
15
of limitation applicable to any material Tax Return of the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code. There are no liens for Taxes upon the
assets of the Company or any of its Subsidiaries (other than liens for Taxes
that are not yet due).
(c) Neither the Company nor any of its Subsidiaries:
(i) has any liability under Treasury Regulation Section 1.1502-6
or analogous state, local or foreign law provision, or
(ii) is a party to a Tax sharing or Tax indemnity agreement or any
other agreement of a similar nature with any entity other than the Company or
any of its Subsidiaries that remains in effect and under which the Company or
any such Subsidiary could have any material liability for Taxes.
No claim has been made in writing by a taxing authority in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that the Company or any of its Subsidiaries is or may be subject to
taxation by that jurisdiction. Neither the Company nor any of its Subsidiaries
is the subject of any currently ongoing audit or examination with respect to
Taxes, nor, to the knowledge of the Company, has any such audit been threatened
or proposed, by any taxing authority.
Section 3.14. Opinion of Financial Advisor. The Board of Directors of
----------------------------
the Company has received written opinion of Xxxxxxx Xxxxx & Company ("Xxxxx"),
to the effect that, as of such date, the aggregate Merger Consideration to be
received by the holders of the Common Shares (other than Parent or its
affiliates) in the Merger is fair to such shareholders of the Company from a
financial point of view. A copy of the written opinion of Xxxxx has been
delivered to Parent.
Section 3.15. Takeover Laws. The Company has taken all action
-------------
required to be taken by it in order to exempt Parent, MergerSub and this
Agreement and the transactions contemplated hereby from, and Parent, MergerSub
and this Agreement are exempt from, the requirements of all anti-takeover Laws
and regulations (collectively, "Takeover Laws") of the State of Delaware,
including without limitation Section 203 of the DGCL.
Section 3.16. Required Vote of the Company Shareholders. The
-----------------------------------------
affirmative vote of the holders of a majority of the Shares outstanding and
entitled to vote at the Company Meeting (the "Company Shareholder Approval") is
required to approve this Agreement and the Merger. No other vote of the
shareholders of the Company is required by Law, the certificate of incorporation
or bylaws of the Company or otherwise in order for the Company to consummate the
Merger and the other transactions contemplated hereby.
Section 3.17. Finders or Brokers. Neither the Company nor any of its
------------------
Subsidiaries has employed any investment banker, broker, finder or intermediary
who might be entitled to any fee or any commission in connection with or upon
consummation of the Merger, except for such fees and expenses payable by the
Company to Xxxxx pursuant to those certain letter agreements dated
16
March 13, 1998, August 27, 1998 and February 17, 1999 in an aggregate amount not
to exceed $635,000, of which $325,000 plus certain out-of-pocket expenses had
been paid prior to March 15, 1999.
Section 3.18. Related Party Transactions. Since December 31, 1995,
--------------------------
none of the Company and the Company's Subsidiaries or any officer, director,
affiliate or "associate" (as that term is defined in Rule 12b-2 under the
Exchange Act) of the Company has engaged in any transactions required to be
disclosed by the Company in the Company SEC Reports, except as have been
publicly disclosed by the Company or disclosed herein.
Section 3.19. Year 2000. The Company has no knowledge or reason to
---------
believe that any computer software utilized in and material to the business of
the Company or any of the Subsidiaries has or will develop problems relating to
the proper processing or utilization of dates that span multiple centuries. The
Company and the Subsidiaries have taken reasonable and practicable steps,
including, without limitation, (i) evaluating all computer software utilized in
the business of the Company and (ii) obtaining certifications and other
information concerning the date-handling capabilities of any third party
computer software included in Company's or the Subsidiaries' computer software
products to identify, address, and remediate problems relating to the proper
processing or utilization of dates that span multiple centuries. The Company
has fully disclosed and made available to Parent any and all information and
materials relating to problems with the proper processing or utilization of
dates that span multiple centuries for any computer software utilized in the
business of the Company or any of the Subsidiaries.
Section 3.20. Telecom Licenses; Operations of Licensed Facilities.
---------------------------------------------------
The Company and its Subsidiaries do not operate any assets or conduct any
businesses for which the Company or any of its Subsidiaries is required to hold
licenses from the FCC or any state communications regulatory authority.
Section 3.21. Information Supplied. None of the information supplied
--------------------
or to be supplied by the Company for inclusion or incorporation by reference
into the Proxy Statement will, at the date the Proxy Statement is first mailed
to the Company's stockholders or at the time of the Company Meeting, 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 are made, not misleading.
Section 3.22. Property.
--------
(a) Section 3.22(a) of the Company Disclosure Schedule sets forth all
of the real property owned or leased by the Company and its Subsidiaries that
are material to the conduct of business of the Company and its Subsidiaries
taken as a whole. Each of the Company and its Subsidiaries owns fee title to
each parcel of real property owned by it free and clear of all Liens, except for
Permitted Liens (as defined in this Section 3.22).
(b) With respect to the tangible properties and assets of the Company
and its Subsidiaries (excluding real property) that are material to the conduct
of the business of the
17
Company and its Subsidiaries, the Company and its Subsidiaries have good title
to, or hold pursuant to valid and enforceable leases, all such properties and
assets, with only such exceptions as, individually or in the aggregate, would
not have a Material Adverse Effect on the Company and subject to the Permitted
Liens. All of the assets of the Company and its Subsidiaries have been
maintained and repaired for their continued operation and are in good operating
condition, reasonable wear and tear excepted, and usable in the ordinary course
of business, except where the failure to be in such repair or condition or so
usable would not individually or in the aggregate have a Material Adverse Effect
on the Company.
(c) Neither the Company nor any of its Subsidiaries has received
notice that any party thereto is in default in any material respect under any
material lease, sublease, license, sublicense or use or occupancy agreement to
which it is a party.
(d) As used in this Agreement, "Permitted Liens" shall mean: (i)
statutory liens securing payments not yet delinquent or the validity of which
are being contested in good faith by appropriate actions; (ii) purchase money
liens arising in the ordinary course; (iii) liens for Taxes not yet due and
payable or delinquent; (iv) liens reflected or reserved against in the balance
sheet of the Company included in the Draft Audited Financials (which have not
been discharged); (v) liens which in the aggregate do not materially detract
from the value of or materially impair the present and continued use of the
properties or assets subject thereto in the usual and normal conduct of the
business of the Company; (vi) liens on leases, subleases, sub-subleases,
easements, licenses, rights of use, rights to access and rights of way arising
from the provisions of such agreements or benefiting or created by any superior
estate, right or interest which is prior in right or prior in lien to that of
the subject lease, sublease, sub-sublease, easement, license, right of use,
right to access or right of way; (vii) any liens set forth in the title
policies, endorsements, title commitments, title certificates and title reports
relating to the Company's interests in real property, copies of which have been
provided to Parent and MergerSub; and (viii) Liens described in the Company SEC
Reports. For the purposes hereof "Company's real property" and "Company's
interests in real property" shall include the real property and interests
therein owned or held respectively by the Company or any of its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERSUB
Parent and MergerSub represent and warrant to the Company that:
Section 4.1 Organization, Qualification, Etc. Parent is an entity
--------------------------------
duly organized, validly existing and in good standing (where applicable) under
the Laws of Colorado and MergerSub is an entity duly organized, validly existing
and in good standing (where applicable) under the Laws of Delaware. Each of
Parent and MergerSub has the corporate power and authority to own its assets and
to carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
of its assets or the conduct of its business requires such qualification. All
the outstanding shares of capital stock of MergerSub are validly issued, fully
paid and non-assessable and are owned by
18
Parent, directly or indirectly, free and clear of all Encumbrances, except for
Encumbrances which individually or in the aggregate do not have a Material
Adverse Effect on Parent.
Section 4.2 Corporate Authority; No Violation.
---------------------------------
(a) Each of Parent and MergerSub has the corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the performance by each of Parent
and MergerSub of its obligations hereunder have been duly and validly authorized
by the Board of Directors of Parent and MergerSub and no other corporate
proceedings on the part of either Parent or MergerSub are necessary to authorize
this Agreement or the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Parent and MergerSub and,
assuming this Agreement constitutes a valid and binding agreement of the other
parties hereto, constitutes a valid and binding agreement of each of Parent and
MergerSub, enforceable against Parent or MergerSub, as the case may be, in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
(b) Except for any breach, violation, default, acceleration, creation
or change that does not, individually or in the aggregate, have a Material
Adverse Effect on Parent or MergerSub, the execution, delivery and performance
of this Agreement by Parent and MergerSub does not, and the consummation by
Parent and MergerSub of the Merger and the other transactions contemplated
hereby will not, constitute or result in (i) a breach or violation of, the
certificate of incorporation or bylaws of Parent or MergerSub, as the case may
be, or (ii) a breach or violation of, or a default under, or an acceleration of
any obligations under, or the creation of a lien, pledge, security interest or
other encumbrance on the assets of either of Parent or MergerSub (with or
without notice, lapse of time or both) pursuant to, any Contract binding upon
Parent or any of its Subsidiaries or MergerSub or (provided, as to consummation,
the filings and notices are made, and approvals are obtained, as referred to in
Section 4.3(c)) any applicable Law or Decree or governmental permit or license
to which Parent or any of its Subsidiaries or MergerSub is subject.
(c) Other than in connection with or in compliance with the provisions
of the Securities Act, the Exchange Act, the HSR Act, and the securities or blue
sky Laws of the various states and other than the filing of the Delaware
Certificate of Merger with the Delaware Secretary of State, no authorization,
consent or approval of, or filing with, any Governmental Entity is necessary for
the consummation by Parent or MergerSub of the transactions contemplated by this
Agreement, except for such authorizations, consents, approvals or filings that,
if not obtained or made, would not, individually or in the aggregate, have a
Material Adverse Effect on either Parent or MergerSub.
Section 4.3 Finders or Brokers. Neither Parent nor MergerSub has
------------------
employed any investment banker, broker, finder or intermediary who might be
entitled to any fee or any commission in connection with or upon consummation of
the Merger.
19
Section 4.4 Financing. Parent has or has available to it cash or cash
---------
equivalents or lines of credit for use in connection with the acquisition of the
Company in an aggregate amount necessary to consummate the Merger.
ARTICLE V
COVENANTS AND AGREEMENTS
Parent, MergerSub and the Company hereby covenant and agree with one
another as follows:
Section 5.1 Conduct of Business by the Company. During the period
----------------------------------
between the date hereof and the Effective Time, except as may otherwise be
consented to in writing by the other parties hereto (which consent shall not be
unreasonably withheld) or as may be expressly permitted pursuant to this
Agreement or as set forth in Section 5.1 of the Company Disclosure Schedule, as
applicable, the Company shall, and shall cause each of its Subsidiaries to,
conduct its operations in the ordinary and usual course of business as
heretofore conducted and preserve intact its business organization and goodwill
in all material respects, keep available the services of its officers and
employees as a group, subject to changes in the ordinary course, and maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it. Without limiting the generality of the
foregoing, unless in each case in receipt of a consent as set forth above the
Company shall not, and shall cause its Subsidiaries not to:
(a) authorize, declare, set aside or pay any dividends on or make any
distribution with respect to its outstanding shares of stock, except that wholly
owned Subsidiaries of the Company may pay dividends on or make distributions of
cash to the Company or another wholly owned Subsidiary of the Company;
(b) except in the ordinary course of business consistent with past
practice, enter into or amend any employment, severance or similar agreements or
arrangements with, or grant any bonus or salary increases or otherwise increase
the compensation or benefits provided to, any of their respective employees;
(c) except as expressly permitted by Section 5.8, authorize or
publicly announce an intention to authorize, or enter into an agreement with
respect to, or take any action to consummate any agreement or arrangement with
respect to:
(i) any merger, consolidation or business combination (other than
the Merger),
(ii) any liquidation, dissolution, restructuring,
recapitalization or other reorganization or
20
(iii) any acquisition or disposition of a material amount of
assets (other than purchases and sales of raw materials, supplies, inventory,
products or services in the ordinary course of business consistent with past
practice) or securities, or any release or relinquishment of any material rights
under any material Contracts;
(d) propose or adopt any amendments to its certificate of
incorporation or bylaws;
(e) issue, sell, pledge or otherwise dispose of or encumber any
capital stock owned by it in any of its Subsidiaries;
(f) except, in the case of the Company, upon exercise of Options
outstanding on the date hereof as set forth in Section 3.2, issue, sell or
otherwise permit to become outstanding any shares of its capital stock, or
effect any stock split or reverse stock split or otherwise change its equity
capitalization as it existed on March 15, 1999, or redeem, repurchase or
otherwise acquire any shares of its capital stock;
(g) grant or award any options (other than in the ordinary course of
business), warrants, conversion rights or other rights to acquire any shares of
capital stock of the Company or its Subsidiaries, or enter into any other Share
Arrangement relating to its capital stock;
(h) except as required by applicable Law or an existing Contract
disclosed to Parent, amend the terms of any Company Compensation or Benefit
Plan, including the Company Plans or adopt any new employee benefit or
compensation plan;
(i) except pursuant to existing credit agreements or other agreements
of the type disclosed in Section 5.1 of the Company Disclosure Schedule and
entered into in the ordinary course consistent with past practice, incur,
create, assume or otherwise become liable for any indebtedness for borrowed
money;
(j) except in the ordinary course of business, consistent with past
practice, transfer, lease, license, mortgage, pledge or encumber any material
asset or material amount of assets;
(k) incur or commit to any capital expenditure in excess of $50,000
individually or $250,000 in the aggregate;
(l) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP or Regulation S-X
promulgated under the Exchange Act;
(m) settle any Litigation to which it is a party or the indemnifying
party or indemnifying any third party with respect to such Litigation; or
(n) agree or commit to do anything prohibited by this Section 5.1.
21
Section 5.2 Investigation. During the period between the date hereof
-------------
and the Effective Time, the Company shall afford Parent and Parent's officers,
employees, accountants, counsel and other authorized representatives reasonable
access, during normal business hours, to its and its Subsidiaries':
(a) properties, contracts, books and records (including but not
limited to (i) tax returns, (ii) audits, assessments, reports, studies,
monitoring results and any other information or documents relevant to the
environment or occupational health and safety and (iii) accountants work
papers);
(b) any report, schedule or other document filed or received by it
pursuant to the requirements of federal or state securities Laws;
(c) any other information concerning its business, properties and
personnel as the other may reasonably request; and
(d) to (i) conduct tests of the soil, surface or subsurface waters,
and air quality at, in, on, beneath or about any of its properties, in a manner
consistent with good engineering practice; (ii) inspect all records, reports,
permits, applications, monitoring results, studies, correspondence, data and any
other information or documents relevant to Hazardous Substances or other
environmental conditions, and (iii) to inspect all buildings and equipment at
any of its properties for asbestos-containing materials or other Hazardous
Substances; provided, however, that no investigation pursuant to this Section
5.2 shall affect or be deemed to modify any representation or warranty made by
the Company, Parent or MergerSub.
Parent, MergerSub and the Company hereby agree that each of them will
treat any such information in accordance with the Confidential Disclosure
Agreement dated February 25, 1999 between the Company and Parent (the
"Confidentiality Agreement"). Notwithstanding any provision of this Agreement
to the contrary, no party shall be obligated to make any disclosure in violation
of applicable Laws or if disclosure would cause a forfeiture of attorney-client
privilege. The Company and Parent will make appropriate substitute disclosure
arrangements if the circumstances of the preceding sentence apply.
Section 5.3 Stockholder Approval; Filings.
-----------------------------
(a) Subject to the terms and conditions contained herein, the Company
shall submit this Agreement and the Merger for approval to the holders of Shares
at a meeting to be duly held for this purpose by the Company (the "Company
Meeting"). The Company shall take all action in accordance with the federal
securities Laws, the DGCL and its articles of organization, certificate of
incorporation, and bylaws necessary to duly convene the Company Meeting. In the
absence of a Company Competing Transaction (as defined in Section 5.7(a)) or a
Company Business Combination (as defined in Section 7.3(d)) that the Board of
Directors of the Company believes to be a Superior Transaction (as defined in
Section 5.7(d)), the Board of Directors of the Company shall recommend that the
Company's stockholders approve such matters, which recommendation shall be
contained in the Proxy Statement (as defined below),
22
and use its reasonable best efforts to take all lawful action to solicit such
approval by such stockholders.
(b) Each of the Company and Parent agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in the proxy statement to be filed with
the SEC in connection with the Merger (the "Proxy Statement") and any amendment
or supplement thereto will, at the date of mailing to stockholders and at the
time of the Company Meeting, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which such statements are made, not
misleading. Each of the Company and Parent further agrees that if it shall
become aware prior to the time of the Company Meeting of any information that
would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary in order to make the statements made therein not false or
misleading, to promptly inform the other party thereof and to take the necessary
steps to correct the Proxy Statement.
Section 5.4 Additional Reports. The Company shall furnish copies of any
------------------
Company SEC Reports that it files with the SEC on or after the date hereof, and
the Company represents and warrants that as of the respective dates thereof,
such reports will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Any unaudited consolidated interim financial statements included
in such reports (including any related notes and schedules) will fairly present,
in all material respects, the financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the results of operations
and changes in financial position or other information included therein for the
periods or as of the dates then ended, in each case in accordance with past
practice and GAAP consistently applied during the periods involved (except as
otherwise disclosed in the notes thereto and subject, where appropriate, to
normal year-end adjustments).
Section 5.5 Reasonable Best Efforts. Each of the parties shall use its
-----------------------
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including (a) the obtaining of (and
cooperating with the other parties to obtain) waivers, consents, exemptions,
licenses, permits, authorizations, orders and approvals from, and the making of
all other necessary registrations and filings with, Governmental Entities
(including, without limitation, filings required to be made pursuant to the HSR
Act), (b) the obtaining of (and cooperating with the other parties to obtain)
all waivers, consents, exemptions, licenses, authorizations and approvals from
third parties which may be necessary or desirable to be obtained by reason of
the Merger or in order to consummate the transactions contemplated by, and to
fully carry out the purposes of and realize the benefits of, this Agreement, and
(c) the execution and delivery of any additional instruments necessary to
consummate the transaction contemplated by, and to fully carry out the purposes
of and realize the benefits of, this Agreement.
23
Section 5.6 Takeover Statutes. None of the parties shall take any action
-----------------
that would cause the transactions contemplated by this Agreement to be subject
to the requirements of any Takeover Law. If any Takeover Law shall become
applicable to the transactions contemplated by this Agreement, each of the
Company and Parent and the members of their respective Boards of Directors shall
grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby, and otherwise act to eliminate or minimize the
effects of such Takeover Law on the transactions contemplated hereby.
Section 5.7 No Solicitation.
---------------
(a) During the term of this Agreement, the Company shall not, and
shall not authorize or permit any of its Subsidiaries or any of its or its
Subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit or initiate, or furnish or disclose non-
public information in furtherance of, any inquiries or the making of any
proposal with respect to any recapitalization, merger, consolidation or other
business combination involving the Company, or the acquisition of 10% or more of
the outstanding capital stock of the Company (other than upon exercise of
Options and Warrants which are outstanding as of the date hereof) or any
Subsidiary of the Company or, the acquisition of 10% or more of the assets of
the Company and its Subsidiaries, taken as a whole, in a single transaction or a
series of related transactions, or any combination of the foregoing (a "Company
Competing Transaction"), or negotiate or otherwise engage in discussions with
any person (other than Parent, MergerSub or their respective directors,
officers, employees, agents or representatives) with respect to any Company
Competing Transaction or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement, and will immediately cease all
existing activities, discussions and negotiations with any parties conducted
heretofore with respect to any proposal for a Company Competing Transaction;
provided that, at any time prior to the approval of the Merger by the
shareholders of the Company, the Company may furnish information to, and
negotiate or otherwise engage in discussions with, any party (a "Company Third
Party") who (x) delivers a bona fide written proposal for a Company Competing
Transaction which was not solicited or initiated by the Company, directly or
indirectly, after the date of this Agreement and (y) enters into an appropriate
confidentiality agreement with the Company (which agreement shall be no less
favorable to the Company than the Confidentiality Agreement, and a copy of which
will be delivered to Parent promptly after the execution thereof), if, but only
if, the Board of Directors of the Company determines in good faith by a majority
vote after consultation with the Company's independent financial advisors, that
such proposal could reasonably be expected to lead to a Superior Transaction;
provided further, that nothing in this Agreement shall prevent the Company from
complying with the provisions of Rule 14e-2 promulgated under the Exchange Act
with respect to a Company Competing Transaction.
(b) From and after the execution of this Agreement, the Company shall
promptly advise Parent in writing of the receipt, directly or indirectly, of any
inquiries or proposals relating to a Company Competing Transaction (including
the specific terms thereof and the identity of the third party), shall keep
Parent reasonably informed of the status of any
24
such inquiries or proposals, of the furnishing of information to the Company
Third Party, and of any negotiations or discussions relating thereto (including
any changes or adjustments to the material terms of such Company Competing
Transaction as a result of negotiations or otherwise).
(c) If, prior to the approval of the Merger by the shareholders of the
Company, the Board of Directors of the Company determines in good faith by a
majority vote, with respect to any written proposal from a Company Third Party
for a Company Competing Transaction received after the date hereof that was not
solicited or initiated by the Company, directly or indirectly, after the date of
this Agreement, that such Company Competing Transaction is a Superior
Transaction and is in the best interest of the Company and its shareholders, and
the Board of Directors of the Company has received a written opinion (a copy of
which shall have been delivered to Parent) from the Company's independent
financial advisors that the Company Competing Transaction is a Superior
Transaction, then the Company may terminate this Agreement and enter into an
acquisition agreement for the Superior Transaction; provided that, prior to any
such termination, and in order for such termination to be effective, (i) the
Company shall provide Parent two business days' written notice that it intends
to terminate this Agreement pursuant to this Section 5.7(c), identifying the
Superior Transaction and the parties thereto and delivering an accurate
description of all material terms of the Superior Transaction to be entered into
and (ii) on the date of termination (provided that the opinion from the
Company's financial advisor referred to above shall continue in effect without
revocation, revision or modification), the Company shall deliver to Parent (A) a
written notice of termination of this Agreement pursuant to this Section 5.7(c),
(B) a wire transfer of immediately available funds in the amount of the Company
Termination Fee and the Commitment Expenses (each as defined in Section 7.3),
and (C) a written acknowledgment from the Company and each other party to the
Superior Transaction that it will not contest the payment of the Company
Termination Fee and Commitment Expenses, and Parent shall deliver to Company a
full release.
(d) "Superior Transaction" shall mean a Company Competing Transaction
which the Board of Directors of the Company reasonably determines is more
favorable to the Company and its shareholders than the Merger and which is not
subject to any financing condition. Reference in the foregoing definition to
the "Merger" shall include any proposed alteration of the terms of this
Agreement committed to in writing by Parent in response to such Company
Competing Transaction.
Section 5.8 Public Announcements. Each of the parties agrees that it
--------------------
shall not, nor shall any of their respective affiliates, issue or cause the
publication of any press release or other public announcement with respect to
the Merger, this Agreement or the transactions contemplated hereby without the
prior approval of the other party, except such disclosure as may be required by
Law, any listing agreement with a national securities exchange or any of the
rules of the NASDAQ Stock Market; provided, if such disclosure is required by
Law, any such listing agreement or any such rules, such disclosure shall not be
made without prior consultation of the other parties.
25
Section 5.9 Indemnification and Insurance.
-----------------------------
(a) Parent and MergerSub agree that all rights to exculpation and
indemnification for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers of the
Company or any of its Subsidiaries (the "Indemnified Parties") as provided in
its articles of organization or bylaws or in any agreement (collectively, the
"Company Indemnity Provisions") shall survive the Merger and shall continue in
full force and effect in accordance with their terms.
(b) For two years from the Effective Time, Parent shall indemnify,
defend and hold harmless each of the Indemnified Parties for acts or omissions
occurring at or prior to the Effective Time (including any such act or omission
as to which Parent or the Surviving Corporation has received a claim during such
two year period but as to which no final judicial determination or settlement
has been made) for which the Indemnified Parties would have been entitled to
indemnification under the Company Indemnity Provisions to the fullest extent
permitted by applicable Law, including with respect to taking all actions
necessary to advance expenses to the extent permitted by applicable Law and, in
any such case, to the extent contemplated by the Company Indemnity Provisions.
(c) Parent shall use its reasonable best efforts to obtain and
maintain in effect, or cause the Surviving Corporation to obtain and maintain in
effect, for three years from the Effective Time, the Company's current
directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy (a copy of which has been heretofore delivered to Parent); provided,
however, that in no event shall Parent or the Surviving Corporation be required
to expend in any year an amount in excess of 150% of the annual premiums
currently paid by the Company for such insurance, and, provided, further, that
if the annual premiums of such insurance coverage exceed such amount, Parent
shall or shall cause the Surviving Corporation to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(d) The provisions of this Section 5.9 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives and may not be amended or altered so as to materially
and adversely affect the rights of any Indemnified Party described in this
Section 5.9 without the written consent of such affected Indemnified Party.
Section 5.10 Notification of Certain Matters. Each of the Company and
-------------------------------
Parent shall give prompt notice to the other of any fact, event or circumstance
known to it that (i) is reasonably likely, individually or taken together with
all other existing facts, events and circumstances known to it, to result in any
Material Adverse Effect with respect to it, or (ii) would cause or constitute a
material breach of any of its representations, warranties, covenants or
agreements contained herein.
26
Section 5.11 Employee Plans and Benefit Arrangements.
---------------------------------------
(a) From and after the Effective Time, subject to applicable Law,
Parent shall cause the Surviving Corporation and its Subsidiaries to honor the
obligations of the Company and its Subsidiaries under all existing Company
Compensation and Benefit Plans.
(b) Parent agrees that, for at least one year from the Effective Time,
subject to applicable Law, the Surviving Corporation and its Subsidiaries shall
provide benefits to the individuals who, as of the Effective Time, were
employees of the Company or any of its Subsidiaries which will, in the
aggregate, be on the same terms and conditions as similarly situated employees
of Parent. Nothing herein shall be construed to prevent the termination of
employment of any employee or any amendment or termination of any Company
Compensation and Benefit Plan to the extent permitted by the terms and
conditions thereof as in effect on the date hereof.
(c) After the Effective Time, Parent shall grant (if applicable), and
shall cause the Surviving Corporation and its Subsidiaries to grant, to all
individuals who are, as of the Effective Time, employees of the Company or any
of its Subsidiaries credit for all service with the Company, any of its present
and former Subsidiaries, any other affiliate of the Company and their respective
predecessors (collectively, the "Company Affiliated Group") prior to the
Effective Time for purposes of eligibility and vesting (but not benefit accrual)
to the extent that prior service with Parent or its Subsidiaries is recognized
in respect of employees other than the employees of the Company Affiliated Group
and to the extent such service was recognized under the corresponding plan of
the Company and its Subsidiaries prior to the Effective Time. Any employee
benefit plan which provides medical, dental or life insurance benefits after the
Effective Time to any individual who is a current or former employee of the
Company Affiliated Group as of the Effective Time or a dependent thereof shall,
with respect to such individuals, waive any waiting periods and any pre-existing
conditions and actively-at-work exclusions to the extent so waived under present
policy of the Company Affiliated Group and shall provide that any expenses
incurred on or before the Effective Time by such individuals shall be taken into
account under such plans for purposes of satisfying applicable deductible or
coinsurance provisions to the extent taken into account under present policy of
the Company Affiliated Group.
(d) The Company shall amend all trusts and other funding arrangements
to the extent necessary to provide that no event which occurs in connection with
the transactions contemplated by this Agreement shall require the Company, the
Surviving Corporation, or any of their affiliates to make any payment of cash or
other property to any such trust or funding arrangement.
Section 5.12 Xxxxx Financing. Upon the closing of the transactions
---------------
contemplated under that certain Asset Purchase Agreement dated as of February
16, 1999 by and among Parent, Xxxxx Communications Holdings Limited Partnership,
a Nevada limited partnership, Xxxxx Virtual Media Limited Partnership, a Nevada
limited partnership, Xxxxx World Wide Digital Limited Partnership, a Nevada
limited partnership, Xxxxx Productions Limited Partnership, a
27
Nevada limited partnership, Professional Video Services Corporation, a Delaware
corporation, and Enhanced Services of Nevada, Inc., a Nevada corporation, RMS
Limited Partnership, a Nevada limited partnership, and Xxx X. Xxxxx, Parent
shall assume the promissory notes and loan agreements in effect between Xxxxx
Communications Holdings Limited Partnership and the Company in an aggregate
amount not to exceed $5,000,000 of which $3,750,000 has been loaned to the
Company as of the date hereof (the "Line of Credit"). In the event such closing
occurs, none of Parent, MergerSub nor any affiliate shall accelerate or demand
the payment under the Line of Credit so assumed of any amounts outstanding
thereunder prior to the termination of this Agreement in accordance with its
terms, and Parent agrees to extend additional credit under the Line of Credit in
accordance with and subject to the terms and provisions thereof.
Section 5.13 Delivery of Final Audited Financials. Not later than the
------------------------------------
earlier of (a) ten days from the date hereof and (b) two business days prior to
the filing of the Proxy Statement with the SEC, the Company shall deliver to
Parent final audited consolidated financial statements of the Company as of and
for the fiscal year ended December 31, 1998 (the "Final Audited Financials").
Section 5.14 Modification of Merger Structure. The parties hereto
--------------------------------
acknowledge that Parent has had limited opportunity to examine the financial and
tax condition of the Company. Accordingly, the Company agrees that Parent shall
have the right, within 10 business days from the date hereof, to alter the
structure of the Merger to provide that the Company be the surviving corporation
in the Merger and in the event Parent elects to make such alteration the Company
agrees to enter into an amendment to this Agreement to effect such election
accordingly; provided, however, that the Company shall have no obligation and
Parent shall have no right to cause any other change to the terms or conditions
of this Agreement.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date (or waiver by the
party for whose benefit the applicable condition exists) of the following
conditions:
(a) The holders of the issued and outstanding Shares shall have duly
approved this Agreement and the Merger all in accordance with applicable Law,
the certificate of incorporation and bylaws of the Company, and the rules of the
NASDAQ Stock Market Smallcap Market.
(b) All regulatory approvals required to consummate the transactions
contemplated hereby shall have been obtained and shall be in full force and
effect and all statutory waiting periods in respect thereof shall have expired
or been terminated, other than any such regulatory approvals the failure to
obtain which is not reasonably likely, individually, in the aggregate or
together with all other existing facts, events and circumstances, to result in
any
28
Material Adverse Effect on the Company (in the case of Parent's obligation to
close) or on Parent (in the case of the Company's obligation to close).
(c) No Law or Decree shall have been enacted, entered, promulgated, or
enforced by any court or other tribunal or Governmental Entity which prohibits
or makes illegal the consummation of any of the transactions contemplated
hereby. In the event any such Decree shall have been issued, each party shall
use its reasonable efforts to remove any such Decree.
(d) Prior to April 1, 1999, the Company shall have received from each
of Xx. Xxxxxx Primat (the beneficial owner of the Shares held by Alta
Investissements SA) and Vulcan Ventures Incorporated ("Vulcan") or their
respective successors extensions for payment of those certain loans each of
which is up to $2,000,000 (the "Preferred Shareholder Loans") in aggregate
principal amount from Mr. Primat and Vulcan to the Company from April 1, 1999 to
August 1, 1999.
Section 6.2 Conditions to Obligations of the Company to Effect the Merger.
-------------------------------------------------------------
The obligation of the Company to effect the Merger is further subject to the
conditions that:
(a) The representations and warranties of Parent and MergerSub
contained herein (which for purposes of this clause (a) shall be read as though
none of them contained any Material Adverse Effect or materiality qualification)
shall be true and correct in all respects as of the Closing Date with the same
effect as though made as of the Closing Date (provided that any representations
and warranties made as of a specified date shall be required only to continue on
the Closing Date to be true and correct as of such specified date) except (i)
for changes specifically permitted by the terms of this Agreement and (ii) where
the failure of the representations and warranties to be true and correct in all
respects would not in the aggregate have a Material Adverse Effect on either
Parent or MergerSub.
(b) Each of Parent and MergerSub shall have in all material respects
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
(c) Each of Parent and MergerSub shall have delivered to the Company a
certificate, dated the Closing Date and signed by its President or a Vice
President, certifying the satisfaction of the conditions set forth in the
foregoing clauses (a) and (b).
(d) Parent shall have undertaken to cause the Surviving Corporation to
pay off the Preferred Shareholder Loans no later than one business day
subsequent to the Closing Date.
Section 6.3 Conditions to Obligations of Parent to Effect the Merger.
--------------------------------------------------------
The obligation of Parent to effect the Merger is further subject to the
conditions that:
(a) The representations and warranties of the Company contained herein
(which for purposes of this clause (a) shall be read as though none of them
contained any Material Adverse Effect or materiality qualification) shall be
true and correct in all respects as of the Closing Date with the same effect as
though made as of the Closing Date (provided that any
29
representations and warranties made as of a specified date shall be required
only to continue on the Closing Date to be true and correct as of such specified
date) except (i) for changes specifically permitted by the terms of this
Agreement and (ii) where the failure of the representations and warranties to be
true and correct in all respects would not in the aggregate have a Material
Adverse Effect on the Company.
(b) The Company shall have in all material respects performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it at or prior to the Closing Date.
(c) The Company shall have delivered to Parent a certificate, dated
the Closing Date and signed by its President or a Vice President, certifying the
satisfaction of the conditions set forth in the foregoing clauses (a) and (b).
ARTICLE VII
TERMINATION, WAIVER, AMENDMENT AND CLOSING
Section 7.1 Termination or Abandonment. This Agreement may be
--------------------------
terminated and the Merger may be abandoned at any time prior to the Effective
Time (notwithstanding any approval of this Agreement by the shareholders of the
Company):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated before July 15, 1999; 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 perform any covenant or obligation under this Agreement has
been the cause of or resulted in the failure of the Merger to occur on or before
such date;
(c) by Parent if (i) the Board of Directors of the Company shall or
shall resolve to (A) withdraw the Company Board Recommendation, (B) modify such
recommendation in a manner adverse to Parent or MergerSub or refuse to affirm
the Company Board Recommendation as promptly as practicable (but in any case
within 10 business days) after receipt of any written request from Parent which
request was made on a reasonable basis, or (C) approve or recommend any proposed
Company Business Combination (as defined in Section 7.3(d)), or (ii) the Company
has failed to call the Company Meeting or to mail the Proxy Statement to its
shareholders on or before June 7, 1999, or has failed to include in such
statement mailed by the Company the Company Board Recommendation;
(d) by Parent or the Company if at the Company Meeting (including any
adjournment or postponement thereof) the requisite vote of the shareholders of
the Company to approve this Agreement and the Merger shall not have been
obtained;
(e) by either the Company or Parent, if there shall be any Law or
Decree that prohibits or makes illegal consummation of the Merger or if any
Decree enjoining Parent or the
30
Company from consummating the Merger is entered and such Decree shall become
final and nonappealable;
(f) by Parent or the Company if there shall have been a material
breach by the other of any of its representations, warranties, covenants or
agreements contained in this Agreement, which breach would result in the failure
to satisfy one or more of the conditions set forth in Section 6.2 (in the case
of a breach by the Company) or Section 6.3 (in the case of a breach by Parent),
and such breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within 30 days after written notice thereof shall have
been received by the party alleged to be in breach;
(g) by Parent if (i) the Company has filed a petition in bankruptcy,
is insolvent or has sought relief under any law related to the Company's
financial condition or its ability to meet its payment obligations or (ii) any
involuntary petition in bankruptcy has been filed against Company, or any relief
under any such law has been sought by any creditor(s) of Company, unless such
involuntary petition is dismissed, or such relief is denied, within 30 days
after it has been filed or sought; or
(h) by Parent if (i) either (x) the aggregate liabilities of the
Company and its Subsidiaries taken as a whole or (y) the consolidated net
working capital of the Company and its Subsidiaries, each as set forth on the
Final Audited Financials, is subject to an adverse change in excess of 3% of
such aggregate liabilities or consolidated net working capital, respectively, as
set forth in the Draft Audited Financials or (ii) the Company fails to deliver
the Final Audited Financials in accordance with the time parameters set forth in
Section 5.13.
Section 7.2 Effect of Termination. In the event of the termination of
---------------------
this Agreement pursuant to Section 7.1, this Agreement, except for the
provisions of this Section 7.2 and Sections 7.3, 8.2 and 8.4 shall become void
and have no effect, without any liability on the part of any party or any of its
affiliates. Notwithstanding the foregoing, nothing in this Section 7.2 shall
relieve any party to this Agreement of liability for any willful breach of any
provision of this Agreement.
Section 7.3 Termination Payments.
--------------------
(a) Upon the happening of a Company Triggering Event (as defined
below), the Company shall pay to Parent (or to any Subsidiary of Parent
designated in writing by Parent to the Company) the amount of $750,000 (the
"Company Termination Fee") (plus any Expense Fee that may be payable in the same
circumstances), by wire transfer of immediately available funds
(i) on the second business day after such termination in the case
of clause (a) of the definition of Company Triggering Event,
(ii) on or prior to the date of such termination, in the case of
clause (c) of the definition of Company Triggering Event, or
31
(iii) on the earlier of the date an agreement is entered into with
respect to a Company Business Combination (as defined in Section 7.3(d)) or a
Company Business Combination is consummated, in the case of clauses (b) or (d)
of the definition of Company Triggering Event. In no event shall more than one
Company Termination Fee be payable under this Agreement.
"Company Triggering Event" means any one of the following:
a) a termination of this Agreement by Parent pursuant to
Section 7.1(c);
b) a termination of this Agreement by Parent or the
Company pursuant to Section 7.1(d), if (1) any Company
Business Combination is publicly proposed or announced
on or after the date hereof and prior to the Company
Meeting and (2) any Company Business Combination is
entered into, agreed to or consummated by the Company
or any of its subsidiaries with the other party or
parties to such publicly proposed or announced Company
Business Combination within 12 months of such
termination of this Agreement;
c) a termination of this Agreement by Parent pursuant to
Section 7.1(f) (but only if the breach of warranty,
representation, covenant or agreement that gives rise
to such termination arises out of bad faith or willful
misconduct of the Company), if any Company Business
Combination is entered into, agreed to or consummated
by the Company within 6 months of such termination of
this Agreement with a party with which the Company had
contact prior to such termination.
(b) Notwithstanding Section 8.2, if this Agreement is terminated by
Parent or the Company pursuant to Sections 7.1(d) or 7.1(h), then the Company
shall pay to Parent, on the second business day after such termination, by wire
transfer of immediately available funds, a cash amount necessary to compensate
the Parent for all reasonable fees and expenses incurred at any time prior to
such termination by it or on its behalf in connection with the Merger, the
preparation of this Agreement and the transactions contemplated by this
Agreement; provided that Parent shall provide reasonable records relating to
such fees and expenses upon request, and further providing that such fees and
expenses shall not exceed $250,000 in the aggregate.
(c) The parties acknowledge that the agreements contained in
paragraphs (a) through (c) of this Section 7.3 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement; accordingly, if the Company fails to
pay promptly any fee payable by it pursuant to this Section 7.3, then the
Company shall pay to the Parent its costs and expenses (including attorneys'
fees) in connection with such suit, together with interest on the amount of the
fee at the prime or base
32
rate of Norwest Bank, N.A. from the date such payment was due under this
Agreement until the date of payment.
(d) "Company Business Combination" shall mean:
(i) any merger, consolidation or other business combination as a
result of which the shareholders of the Company would hold less than 50% of the
voting securities outstanding following that transaction;
(ii) the acquisition of 50% or more of the outstanding capital
stock of the Company; or
(iii) the acquisition of 50% or more of the assets of the Company
and its Subsidiaries taken as a whole (including capital stock of any
Subsidiary);
provided that solely for purposes of clause (b)(1) of the definition of Company
Triggering Event, the percentage in clause (i) of this definition shall be
deemed to be 75% and the percentage in clauses (ii) and (iii) of this definition
shall be deemed to be 25%.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Survival of Representations and Warranties. None of the
---------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, except
for the agreements set forth in Article II, the provisions of Section 5.9,
Section 5.11 and this Section 8.1.
Section 8.2 Expenses. Subject to the provisions of Section 7.3, (a)
--------
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby and
thereby shall be paid by the party incurring such expenses, except that the
expenses incurred in connection with (i) the preparation, filing, printing and
mailing the Proxy Statement (including registration and filing fees relating
thereto) shall be paid by the Company and (ii) the fee related to the filing of
a premerger notification notice to be submitted in accordance with the
requirements of the HSR Act shall be paid 50% by Parent and 50% by the Company
and (b) if the Merger is consummated, all transfer taxes shall be paid by the
Company.
Section 8.3 Counterparts; Effectiveness. This Agreement may be
---------------------------
executed in two or more consecutive counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered (by telecopy or otherwise)
to the other parties.
33
Section 8.4 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the Laws of the State of Delaware, without regard
to the principles of conflicts of Laws thereof.
Section 8.5 Notices. All notices and other communications hereunder
-------
shall be in writing (including telecopy or similar writing) and shall be
effective (a) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 8.5 and the appropriate telecopy
confirmation is received or (b) if given by any other means, when delivered at
the address specified in this Section 8.5 (or at such other address as may be
provided in accordance with this section):
To the Company:
Precision Systems, Inc.
00000 00xx Xxxxx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
copy to:
Xxxxx & Lardner
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxx III, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Parent or MergerSub:
Anschutz Digital Media, Inc.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Telephone: (000) 000-0000
34
Facsimile: (000) 000-0000
copy to:
Xxxxx & Xxxxxxx L.L.P.
One Xxxxx Center, Suite 1500
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 8.6 Assignment; Binding Effect . Neither this Agreement nor any
--------------------------
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of Law or otherwise) without the prior
written consent of the other parties; provided however, that MergerSub may
assign all of its rights and obligations under this Agreement and the
transactions contemplated hereby to any other Subsidiary of Parent. Subject to
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Section 8.7 Severability. Any term or provision of this Agreement which
------------
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
Section 8.8 Enforcement of Agreement. The parties hereto agree that
------------------------
money damages or other remedy at Law would not be sufficient or adequate remedy
for any breach or violation of, or a default under, this Agreement by them and
that in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by Law to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance, without bond or other security being required.
Section 8.9 Miscellaneous. This Agreement:
-------------
(a) along with the Confidentiality Agreement, Exhibits and Disclosure
Schedules hereto, constitutes the entire agreement, and supersedes all other
prior agreements and understandings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof and thereof; and
(b) except for the provisions of Section 5.9, is not intended to and
shall not confer upon any person other than the parties hereto any rights or
remedies hereunder.
35
Section 8.10 Headings. Headings of the Articles and Sections of this
--------
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 8.11 Certain Definitions. References in this Agreement to
-------------------
"Subsidiaries" of the Company or Parent shall mean any corporation or other form
of legal entity of which more than 50% of the outstanding voting securities are
on the date hereof directly or indirectly owned by the Company or Parent, as the
case may be. References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership of other ownership interests, by contract
or otherwise. References in the Agreement to "person" shall mean an individual,
a corporation, a partnership, an association, a trust or any other entity or
organization, including, without limitation, a governmental body or authority.
Section 8.12 Knowledge. Reference to the "knowledge" of any person that
---------
is not an individual shall be to the knowledge of the executive officers of such
person and, with respect to representations and warranties made or deemed to be
made as of the Closing Date, unless expressly limited to a specified date of
this Agreement, shall include knowledge obtained at any time after the date
hereof and prior to the Closing Date.
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
ANSCHUTZ DIGITAL MEDIA, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
--------------------------------
Title: Vice President
-------------------------------
PS ACQUISITIONS, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
--------------------------------
Title: Vice President
-------------------------------
PRECISION SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
--------------------------------
Title: Chief Financial Officer
-------------------------------
37
