Exhibit 99.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CHOICE ONE COMMUNICATIONS INC.,
BARTER ACQUISITION CORPORATION,
US XCHANGE, INC.
AND
THE STOCKHOLDER OF US XCHANGE, INC.
DATED AS OF MAY 14, 2000
TABLE OF CONTENTS
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ARTICLE I THE MERGER 2
SECTION 1.01. The Merger.................................................2
SECTION 1.02. Effective Time.............................................2
SECTION 1.03. Effect of the Merger.......................................2
SECTION 1.04. Certificate of Incorporation; Bylaws.......................2
SECTION 1.05. Directors and Officers.....................................3
SECTION 1.06. Closing Deliveries by the Company..........................3
SECTION 1.07. Closing Deliveries by Acquiror.............................3
ARTICLE II CONVERSION OF SECURITIES; FRACTIONAL SHARES.......................3
SECTION 2.01. Conversion of Securities...................................3
SECTION 2.02. Fractional Shares..........................................4
SECTION 2.03. Stock Transfer Books.......................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................5
SECTION 3.01. Organization and Standing..................................5
SECTION 3.02. Subsidiaries...............................................5
SECTION 3.03. Certificate of Incorporation and Bylaws....................6
SECTION 3.04. Capitalization.............................................6
SECTION 3.05. Authority; Binding Obligation..............................7
SECTION 3.06. No Conflict; Required Filings and Consents.................7
SECTION 3.07. Licenses; Compliance.......................................8
SECTION 3.08. Financial Statements and Reports..........................10
SECTION 3.09. Absence of Undisclosed Liabilities........................10
SECTION 3.10. Absence of Certain Changes or Events......................11
SECTION 3.11. Litigation; Disputes......................................12
SECTION 3.12. Debt Instruments..........................................12
SECTION 3.13. Real Property Leases......................................13
SECTION 3.14. Other Agreements; No Default..............................13
SECTION 3.15. Labor Relations...........................................15
SECTION 3.16. Pension and Benefit Plans.................................16
SECTION 3.17. Taxes and Tax Matters.....................................19
SECTION 3.18. Customers.................................................20
SECTION 3.19. Certain Business Practices................................21
SECTION 3.20. Insurance.................................................21
SECTION 3.21. Potential Conflicts of Interest...........................21
SECTION 3.22. Receivables...............................................22
SECTION 3.23. Real Property.............................................22
SECTION 3.24. Books and Records.........................................23
SECTION 3.25. Assets....................................................23
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SECTION 3.26. No Infringement or Contest................................24
SECTION 3.27. Board Approval............................................25
SECTION 3.28. Stockholder Approval......................................25
SECTION 3.29. Banks; Attorneys-in-fact..................................25
SECTION 3.30. Brokers...................................................25
SECTION 3.31. Environmental Matters.....................................25
SECTION 3.32. Disclosure................................................27
SECTION 3.33. Directors, Officers and Affiliates........................27
SECTION 3.34. Copies of Documents.......................................27
SECTION 3.35. Condition and Operation of the System.....................27
SECTION 3.36. Reorganization............................................29
SECTION 3.37. State Takeover Statutes; Certain Charter Provisions.......29
SECTION 3.38. Year 2000 Review..........................................29
ARTICLE IIIA REPRESENTATIONS AND WARRANTIES OF COMPANY STOCKHOLDER..........30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB......30
SECTION 4.01. Organization and Qualification; Subsidiaries..............31
SECTION 4.02. Certificate of Incorporation and Bylaws...................31
SECTION 4.03. Authority; Binding Obligation.............................31
SECTION 4.04. No Conflict; Required Filings and Consents................32
SECTION 4.05. No Prior Activities of Acquiror Sub.......................33
SECTION 4.06. Brokers...................................................33
SECTION 4.07. SEC Documents.............................................33
SECTION 4.08. Acquiror Common Stock.....................................33
SECTION 4.09. Capitalization............................................34
SECTION 4.10. Sufficient Funds..........................................34
SECTION 4.11. Reorganization............................................35
SECTION 4.12. Compliance; Litigation....................................35
SECTION 4.13. Absence of Undisclosed Liabilities........................35
SECTION 4.14. Intellectual Property.....................................35
SECTION 4.15. Disclosure................................................36
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS.........................37
SECTION 5.01. Conduct of Business of the Company........................37
SECTION 5.02. Other Actions.............................................39
SECTION 5.03. Certain Tax Matters.......................................40
SECTION 5.04. Access and Information....................................40
SECTION 5.05. No Solicitation...........................................40
SECTION 5.06. Confidentiality...........................................42
ARTICLE VI ADDITIONAL AGREEMENTS............................................43
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SECTION 6.01. Registration Rights.......................................43
SECTION 6.02. Appropriate Action; Consents; Filings.....................54
SECTION 6.03. Senior Notes Tender Offer; Repayment of Indebtedness......55
SECTION 6.04. Update Disclosure.........................................55
SECTION 6.05. Public Announcements......................................56
SECTION 6.06. Employment Agreements; Employee Stock.....................56
SECTION 6.07. Additional Financial Information..........................56
SECTION 6.08. Environmental Matters.....................................57
SECTION 6.09. Post-Signing SEC Documents................................57
SECTION 6.10. Indemnification...........................................58
SECTION 6.11. Procedures; Conditions of Indemnification.................59
SECTION 6.12. Tax Returns...............................................61
SECTION 6.13. Reorganization............................................61
SECTION 6.14. Acquiror's Financing......................................62
SECTION 6.15. Obligations of Acquiror Sub...............................62
SECTION 6.16. Loan Agreement............................................62
SECTION 6.17. Transfer of Fiber Business; IRU and
Maintenance Agreement.....................................62
SECTION 6.18. Noncompetition Covenants..................................63
SECTION 6.19. Representation on Acquiror's Board of Directors...........63
SECTION 6.20. Restriction on Transfer of Acquiror Stock.................64
SECTION 6.21. Trademark License.........................................64
SECTION 6.22. Employee Benefits.........................................64
SECTION 6.23. Directors' and Officers' Indemnification..................65
SECTION 6.24. Adjustment of Common Stock Exchange Ratio.................66
SECTION 6.25. Adjustment of Common Stock Cash Amount....................66
ARTICLE VII CONDITIONS PRECEDENT............................................68
SECTION 7.01. Conditions to Obligations of Each Party Under
This Merger Agreement ....................................68
SECTION 7.02. Additional Conditions to Obligations of
Acquiror and Acquiror Sub ................................69
SECTION 7.03. Additional Conditions to Obligations of the Company.......71
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER..............................72
SECTION 8.01. Termination...............................................72
SECTION 8.02. Effect of Termination.....................................73
SECTION 8.03. Expenses..................................................74
SECTION 8.04. Amendment.................................................74
SECTION 8.05. Extension; Waiver.........................................74
ARTICLE IX GENERAL PROVISIONS...............................................74
SECTION 9.01. Survival of Representations and Warranties................74
SECTION 9.02. Notices...................................................75
SECTION 9.03. Headings..................................................76
SECTION 9.04. Severability..............................................76
SECTION 9.05. Entire Agreement..........................................77
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SECTION 9.06. Assignment................................................77
SECTION 9.07. Parties in Interest.......................................77
SECTION 9.08. Mutual Drafting...........................................77
SECTION 9.09. Specific Performance......................................77
SECTION 9.10. Governing Law.............................................78
SECTION 9.11. Submission to Jurisdiction, Waiver of Jury Trial.......78
SECTION 9.12. Counterparts..............................................78
SECTION 9.13. Disclosure Schedule.......................................78
ARTICLE X DEFINITIONS.......................................................79
EXHIBITS
Exhibit A Form of Promissory Note, Guaranty and Security Agreement
Exhibit B-1 Form of Executive Employment Agreement (two-year employment term)
Exhibit B-2 Form of Executive Employment Agreement (one-year employment term)
Exhibit B-3 Form of Employment Confidentiality and No-Solicitation Agreement
Exhibit C Escrow Agreement
Exhibit D IRU and Maintenance Agreement
Exhibit E Trademark License Agreement
Exhibit F Right of Access Agreement
SCHEDULES
Schedule 1.05 -- Officers of the Surviving Corporation
Schedule 3.02 -- Company Subsidiaries
Schedule 3.04 -- Capitalization of Company
Schedule 3.06 -- Required Consents and Filings of Company
Schedule 3.07 -- Company Licenses
Schedule 3.08 -- Company Financial Statements
Schedule 3.09 -- Undisclosed Liabilities
Schedule 3.10 -- Certain Changes or Events of Company
Schedule 3.11 -- Pending or Threatened Litigation against Company
Schedule 3.12 -- Company Indebtedness
Schedule 3.13 -- Company Real Property Leases
Schedule 3.14 -- Company Contracts
Schedule 3.15 -- Company Labor Matters
Schedule 3.16 -- Company Benefit Plans
Schedule 3.18 -- Company Customers
Schedule 3.20 -- Company Insurance
Schedule 3.21 -- Company Related Party Transactions
Schedule 3.23 -- Company Owned Real Property
Schedule 3.25 -- Assets
Schedule 3.26 -- Company Intellectual Property
Schedule 3.29 -- Company Bank Accounts
Schedule 3.31 -- Company Environmental Liability, Licenses
Schedule 3.33 -- Officers and Directors of Company and Subsidiaries
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Schedule 3.35 -- Description of Company's System, Services Offered,
Customers, Etc.
Schedule 4.04 -- Required Consents and Filings of Acquiror
Schedule 4.09 -- Capitalization of Acquiror
Schedule 5.01 -- Company's Conduct of Business
Schedule 6.06(a) -- Company Employees entering into an Executive Employment
Agreement
Schedule 6.06(b) -- Company Employees entering into a Confidentiality and
No-Solicitation Agreement
Schedule 6.18 -- Fiber Business Employees of the Company
Schedule 6.20 -- Permitted Holders
AGREEMENT AND PLAN OF MERGER, dated as of May 14, 2000 (this "Merger
Agreement"), among Choice One Communications Inc., a Delaware corporation
("Acquiror"), Barter Acquisition Corporation, a Delaware corporation ("Acquiror
Sub") and a direct wholly owned subsidiary of Acquiror, US Xchange, Inc., a
Delaware corporation (the "Company"), and Xxxxxx X. Xxxxxx Pol, the holder of
all of the issued and outstanding capital stock of the Company (the "Company
Stockholder");
WHEREAS, the Company, upon the terms and subject to the conditions of
this Merger Agreement and in accordance with the General Corporation Law of the
State of Delaware ("Delaware Law"), will merge with and into Acquiror Sub (the
"Merger");
WHEREAS, the Board of Directors of the Company has determined that the
Merger is advisable and fair to the Company Stockholder and is in the best
interests of such stockholder and has approved and adopted this Merger Agreement
and the transactions contemplated hereby, and the Company Stockholder has
adopted and approved this Merger Agreement;
WHEREAS, the Board of Directors of Acquiror has determined that the
Merger is advisable and in the best interests of Acquiror and its stockholders
and the Boards of Directors of Acquiror and Acquiror Sub and Acquiror as the
sole stockholder of Acquiror Sub have approved and adopted this Merger Agreement
and the transactions contemplated hereby;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization under the provisions of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, in order to induce Acquiror Sub and Acquiror to enter into
this Agreement, concurrently herewith (i) all of the holders of the outstanding
15% Senior Notes due July 1, 2008 of the Reporting Subsidiary (the "Senior
Notes"), have executed and delivered to Acquiror a letter agreement, in the form
prepared by counsel to Acquiror, pursuant to which such holders have agreed that
the Surviving Corporation (as defined in Section 1.01) may redeem such Senior
Notes on the Closing Date (as defined in Section 1.02) at a redemption price
equal to 109% of the principal amount thereof plus accrued interest, if any, to
the Closing Date, and have agreed to an amendment to the Indenture, to take
effect on the redemption date, providing for the deletion of certain covenants
and other provisions set forth therein, and (ii) the Member of the Reporting
Subsidiary has approved such redemption and amendment; and
WHEREAS, in order to induce the Company to enter into this Agreement,
concurrently herewith Acquiror is agreeing to lend to US Xchange Finance
Company, L.L.C., an indirect wholly-owned subsidiary of the Company ("US Xchange
Finance") up to $25,000,000 from the date hereof until Closing as provided in
Section 6.16 (the "Acquiror Loan");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this Merger
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows:
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ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
Upon the terms and subject to the conditions set forth in Article VII,
and in accordance with Delaware Law, at the Effective Time (as defined in
Section 1.02) the Company shall be merged with and into Acquiror Sub. As a
result of the Merger, the separate corporate existence of the Company shall
cease and Acquiror Sub shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
SECTION 1.02. Effective Time.
As promptly as practicable and in no event later than the third
Business Day following the satisfaction or, if permissible, waiver of the
conditions set forth in Article VII (or such other date as may be agreed upon in
writing by each of the parties hereto), the parties hereto shall cause the
Merger to be consummated by filing this Merger Agreement, articles of merger or
other appropriate documents (in any such case, the "Articles of Merger") with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with, the relevant provisions of, Delaware Law (the
date and time of such filing or such other time as may be agreed upon in writing
by each of the parties hereto and specified in the Articles of Merger being the
"Effective Time"). Immediately prior to the filing of the Articles of Merger, a
closing (the "Closing") will be held at the offices of Xxxxx Peabody LLP, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or such other place as the parties may
agree) to confirm the satisfaction or waiver of the conditions set forth in
Article VII. The day on which the Closing takes place shall hereinafter be
referred to as the "Closing Date."
SECTION 1.03. Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided in
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Acquiror Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Acquiror Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.04. Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Acquiror prior to the Effective
Time, at the Effective Time the certificate of incorporation of Acquiror Sub
shall continue unchanged and shall be the certificate of incorporation of the
Surviving Corporation, until thereafter amended as provided by Law (as defined
in Article X) and such certificate of incorporation, except that Article I of
Acquiror Sub's certificate of incorporation shall be amended at the Effective
Time to read as follows: "The name of the corporation is US Xchange Inc."
(b) Unless otherwise determined by Acquiror prior to the Effective
Time, at the Effective Time the bylaws of Acquiror Sub shall continue unchanged
and shall be the bylaws of
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the Surviving Corporation until thereafter amended as provided by Law, the
certificate of incorporation of the Surviving Corporation and such bylaws.
SECTION 1.05. Directors and Officers.
The directors of Acquiror Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the certificate of incorporation and bylaws of the Surviving
Corporation, and the individuals set forth in Section 1.05 of the Acquiror
Disclosure Schedule shall be the initial officers of the Surviving Corporation,
in each case until their respective successors are duly elected or appointed and
qualified.
SECTION 1.06. Closing Deliveries by the Company.
At the Closing, the Company shall deliver or cause to be delivered to
Acquiror:
(a) a receipt for the Merger Consideration;
(b) the certificates required to be delivered pursuant to Section
7.02; and
(c) any additional document required to be delivered pursuant to
Section 7.02.
SECTION 1.07. Closing Deliveries by Acquiror.
At the Closing, Acquiror shall deliver to the Company or the Company
Stockholder, as the case may be:
(a) the Common Stock Cash Amount by wire transfer in immediately
available funds to an account or accounts designated by the Company Stockholder
in a written notice to Acquiror not less than two Business Days prior to the
Closing Date;
(b) certificates evidencing the Stock Consideration (other than
the Escrow Shares, which shall be delivered to the Escrow Agent pursuant to the
Escrow Agreement) duly endorsed in blank or accompanied by stock powers duly
endorsed in blank in proper form for transfer and with all required stock
transfer stamps, if any, affixed;
(c) the certificates required to be delivered pursuant to Section
7.03; and
(d) any additional document required to be delivered pursuant to
Section 7.03.
ARTICLE II
CONVERSION OF SECURITIES; FRACTIONAL SHARES
SECTION 2.01. Conversion of Securities.
At the Effective Time, as provided in this Merger Agreement, by virtue
of the Merger and without any action on the part of Acquiror Sub, the Company or
the Company Stockholder:
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(a) Conversion.
(i) Company Common Stock. Subject to the provisions of this
Section 2.01, each share of common stock, $.01 par value per share, of the
Company ("Company Common Stock") issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be canceled
pursuant to Section 2.01(b)), shall be converted, subject to Section 2.02, into
the right to receive (A) the Common Stock Cash Amount (as defined in Article X),
and (B) one share of common stock, par value $.01 per share, of Acquiror
("Acquiror Common Stock") multiplied by the Common Stock Exchange Ratio (as
defined in Article X) (the "Stock Consideration" and, together with the Common
Stock Cash Amount, the "Merger Consideration").
At the Effective Time, all such shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each certificate previously representing any such
shares shall thereafter represent the right to receive the Merger Consideration.
No fractional share of Acquiror Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.02 hereof.
(ii) Merger Consideration. If between the date of this Merger
Agreement and the Effective Time the outstanding shares of Acquiror Common Stock
or Company Common Stock shall have been changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Merger Consideration shall be appropriately and correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(b) Cancellation of Treasury Stock. Any shares of capital stock of
the Company held in the treasury of the Company and any shares of capital stock
of the Company owned by Acquiror or any direct or indirect wholly owned
subsidiary of Acquiror or of the Company immediately prior to the Effective Time
shall be canceled and extinguished without any conversion thereof and no payment
or distribution shall be made with respect thereto.
(d) Acquiror Sub Common Stock. Each share of common stock, par
value $.01 per share, of Acquiror Sub issued and outstanding immediately prior
to the Effective Time shall continue to be one issued and outstanding share of
common stock, par value $.01 per share, of the Surviving Corporation, which
shall continue to be held by Acquiror.
SECTION 2.02. Fractional Shares.
No fractional shares of Acquiror Common Stock shall be issued upon
surrender for exchange of the certificate or certificates evidencing Company
Common Stock which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificate"), and any such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Acquiror, but in lieu thereof the Company Stockholder
who would otherwise be entitled to receive a fraction of a share of Acquiror
Common Stock, after aggregating all Certificates delivered by him, and rounding
down to the nearest whole share, shall receive an amount in cash equal to the
Price Per Share multiplied by
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the fraction of a share of Acquiror Common Stock to which such holder would
otherwise be entitled. Such payment in lieu of fractional shares shall be paid
in immediately available funds by the Acquiror on the Closing Date.
SECTION 2.03. Stock Transfer Books.
At the Effective Time, the stock transfer books of the Company shall be
closed and there shall be no further registration of transfers of shares of
capital stock of the Company thereafter on the records of the Company. From and
after the Effective Time, the Company Stockholder shall cease to have any rights
with respect to such shares of capital stock of the Company except as otherwise
provided herein or by Law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in (x) the Disclosure Schedule
delivered by the Company to Acquiror prior to the execution and delivery of this
Merger Agreement (the "Company Disclosure Schedule") (the contents of which
Company Disclosure Schedule may be updated, corrected or otherwise modified by
the Company up to five (5) days prior to the Closing Date in accordance with
Section 6.04 hereof) (with (i) a disclosure with respect to a Section of this
Merger Agreement to require a specific reference in the Company Disclosure
Schedule to the Section of this Merger Agreement to which each such disclosure
applies, (ii) no disclosure to be deemed to apply with respect to any Section to
which it does not expressly refer and (iii) the Company having the right to
cross-reference the sections of the Company Disclosure Schedule as appropriate
with respect to disclosures that are reasonably related) and (y) the Subsidiary
SEC Reports (as defined in Section 3.08) filed prior to the date hereof, the
Company hereby represents and warrants (which representation and warranty shall
be deemed to include the disclosures with respect thereto so specified in the
Company Disclosure Schedule) to, and agrees with, Acquiror and Acquiror Sub as
follows, unless otherwise specifically set forth herein or in the Company
Disclosure Schedule.
SECTION 3.01. Organization and Standing.
The Company is a corporation duly organized, validly existing and in
good standing under Delaware Law, and has the requisite corporate power and
authority to own, operate and lease its Assets (as defined in Article X), to
carry on its business as currently conducted, to execute and deliver this Merger
Agreement and to carry out the transactions contemplated hereby. The Company is
duly qualified to conduct business as a foreign corporation and is in good
standing in Michigan and in each jurisdiction where the nature of its business
or the ownership or leasing of its properties makes such qualification necessary
other than where the failure to be so qualified would not have a Company
Material Adverse Effect.
SECTION 3.02. Subsidiaries.
Except as set forth in Section 3.02 of the Company Disclosure Schedule,
the Company has no Subsidiaries (as defined in Article X) and neither the
Company nor any Subsidiary has
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any equity investment or other interest in, nor has the Company or any
Subsidiary made advances or loans to (other than intra-company transactions
between or among the Company and any Subsidiary and other than for customary
credit extended to customers of the Company in the Ordinary Course of Business
(as defined in Article X) and reflected in the Financial Statements (as defined
in Section 3.08)), any Person. Section 3.02 of the Company Disclosure Schedule
sets forth (a) the authorized capital stock or other equity interests of each
Subsidiary and the percentage of the outstanding capital stock or other equity
interests of each Subsidiary owned by the Company. All of such shares of capital
stock or other equity interests of the Subsidiaries have been duly authorized
and validly issued and are outstanding, fully paid and nonassessable and except
as set forth in Section 3.02 of the Company Disclosure Schedule, are owned by
the Company free and clear of all Encumbrances (as defined in Article X) other
than Encumbrances arising under applicable securities Laws. Each Subsidiary is
duly organized, validly existing and in good standing under the Laws of its
state or jurisdiction of organization (as listed in Section 3.02 of the Company
Disclosure Schedule), and has the requisite corporate or limited liability
company power and authority to own, operate and lease its Assets and to carry on
its business as currently conducted. Each Subsidiary is duly qualified to
conduct business as a foreign Person and is in good standing in each
jurisdiction where the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, other than where the failure to
be so qualified would not have a Company Material Adverse Effect.
SECTION 3.03. Certificate of Incorporation and Bylaws.
The Company has furnished to Acquiror a true and complete copy of (i)
the certificate of incorporation and (ii) the organizational documents of the
Company and each Subsidiary, as in effect on the date hereof, certified as of a
recent date by the Company's corporate secretary, and a true and complete copy
of the Company's bylaws and the bylaws or other governing agreements of each
Subsidiary, as currently in effect, certified by the Company's corporate
secretary.
SECTION 3.04. Capitalization.
The authorized capital stock of the Company consists of 20,000 shares
of Company Common Stock, of which: (i) 1,000 shares are issued and outstanding,
all of which are duly authorized, validly issued, fully paid and nonassessable
and owned of record by the Company Stockholder; and (ii) no shares are held in
the treasury of the Company. Except as described in this Section 3.04 or in
Section 3.04 of the Company Disclosure Schedule, no other shares of capital
stock of the Company have been reserved for any purpose. There are no
outstanding securities convertible into or exchangeable for Company Common
Stock, any other securities of the Company, or any capital stock or other
securities of any of the Subsidiaries and no outstanding options, rights
(preemptive or otherwise), or warrants to purchase or to subscribe for any
shares of such stock or other securities of the Company or any of the
Subsidiaries. Except as set forth in Section 3.04 of the Company Disclosure
Schedule, there are no outstanding Agreements (as defined in Article X)
affecting or relating to the voting, issuance, purchase, redemption,
registration, repurchase or transfer of Company Common Stock, any other
securities of the Company, or any capital stock or other securities of any
Subsidiary, except as contemplated hereunder. Each of the outstanding shares of
Company Common Stock and of capital stock of, or other equity interests in, the
Subsidiaries was issued in compliance with all
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applicable federal and state Laws concerning the issuance of securities. There
are no obligations, contingent or otherwise, of the Company or any Subsidiary to
provide funds to, make any investment (in the form of a loan, capital
contribution or otherwise) in, or provide any guarantee with respect to, any
Person other than the Company or its wholly owned Subsidiaries. There are no
Agreements pursuant to which any Person (other than the Company or its wholly
owned Subsidiaries) is or may be entitled to receive any of the revenues or
earnings, or any payment based thereon or calculated in accordance therewith, of
the Company or any Subsidiary.
SECTION 3.05. Authority; Binding Obligation.
The execution and delivery by the Company of this Merger Agreement, the
execution and delivery by the Company and the Subsidiaries of all other
agreements, documents, certificates or other instruments contemplated hereby,
and the consummation by the Company and the Subsidiaries of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate and shareholder action, and no other corporate or shareholder
proceedings on the part of the Company or the Subsidiaries are necessary to
authorize this Merger Agreement and the other agreements, documents,
certificates or other instruments contemplated hereby, or to consummate the
transactions contemplated hereby and thereby (other than, with respect to the
Merger, the filings and recordation of appropriate merger documents as required
by Delaware Law). This Merger Agreement has been duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
Acquiror, Acquiror Sub and the Company Stockholder, constitutes a legal, valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be subject to the effects of any applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar Laws affecting creditors' rights generally and subject to the effects of
general equitable principles (whether considered in a proceeding in equity or at
law); provided, however, that the Merger will not become effective until
Articles of Merger reflecting the Merger are filed with the office of the
Secretary of State of the State of Delaware.
SECTION 3.06. No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance by the Company of this
Merger Agreement, and the execution, delivery and performance by the Company and
the Subsidiaries of all other agreements, documents, certificates or other
instruments contemplated hereby, the fulfillment of and compliance with the
respective terms and provisions hereof and thereof, and the consummation by the
Company and the Subsidiaries of the transactions contemplated hereby and
thereby, do not and will not: (i) conflict with, or violate any provision of,
the certificate of incorporation or bylaws of the Company or the certificate or
articles of incorporation, bylaws, operating agreement, certificate or articles
of formation of any Subsidiary; (ii) subject to obtaining the consents,
approvals, authorizations and permits of, and making filings with or
notifications to, the applicable Governmental Entity pursuant to the applicable
requirements, if any, of the HSR Act (as defined in Article X), the
Communications Act (as defined in Article X), the applicable state utility Laws,
applicable municipal franchise Laws and the filing and recordation of the
Articles of Merger as required by Delaware Law, conflict with or violate any Law
applicable to the Company or any Subsidiary, or any of their respective Assets;
(iii) subject to obtaining the consents and approvals set forth in Section
3.06(b) of the Company Disclosure Schedule, conflict with, result in any breach
of, or constitute a default (or an event that with
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notice or lapse of time or both would become a default) under any Agreement to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary, or any of their respective Assets, may be bound; or (iv) except as
disclosed in Section 3.06(b) of the Company Disclosure Schedule, result in or
require the creation or imposition of, or result in the acceleration of, any
indebtedness or any Encumbrance of any nature upon, or with respect to, the
Company or any Subsidiary or any of the Assets now owned or hereafter acquired
by the Company or any Subsidiary; except for any such conflict or violation
described in clause (ii), any such conflict, breach or default described in
clause (iii), or any such creation, imposition or acceleration described in
clause (iv) that would not have a Company Material Adverse Effect and that would
not prevent the Company from consummating the Merger on a timely basis.
(b) Except as set forth in Section 3.06(b) of the Company
Disclosure Schedule and for non-material Agreements allowing the installation,
maintenance or operation of the Company's or its Subsidiaries' fiber optic
network on, over, under or across a specific parcel of real property, the
execution, delivery and performance by the Company of this Merger Agreement and
the execution, delivery, performance by the Company and the Subsidiaries of all
other agreements, documents, certificates or other instruments contemplated
hereby, the fulfillment of and compliance with the respective terms and
provisions hereof and thereof, and the consummation by the Company and the
Subsidiaries of the transactions contemplated hereby and thereby, do not and
will not: (i) require any consent, approval, authorization or permit of, or
filing with or notification to, any Person not party to this Merger Agreement,
except (A) pursuant to the applicable requirements, if any, of the HSR Act, the
Communications Act, applicable state utility Laws and applicable municipal
franchise Laws and Laws of other Governmental Entities, (B) the filing and
recordation of the Articles of Merger as required by Delaware Law, (C) as may be
necessary as a result of facts or circumstances related solely to Acquiror or
Acquiror Sub and (D) where the failure to obtain any consent, approval,
authorization or permit or to make any filing or notification otherwise required
to be disclosed hereunder would not have a Company Material Adverse Effect; or
(ii) result in or give rise to any penalty, forfeiture, Agreement termination,
right of termination, amendment or cancellation, or restriction on business
operations of Acquiror, the Company, the Surviving Corporation or any Subsidiary
that would have a Company Material Adverse Effect.
SECTION 3.07. Licenses; Compliance.
(a) Each of the Company and each Subsidiary is in possession of
all Licenses (as defined in Article X) necessary for the Company or any
Subsidiary to own, lease and operate its Assets or to carry on its business as
it is now being conducted (the "Company Licenses"), except where the failure to
possess, or the suspension or cancellation of, any such Company License would
not have a Company Material Adverse Effect. All Company Licenses that are FCC
(as defined in Article X), or state utilities Licenses or municipal franchises,
and all other Company Licenses the loss of which would have a Company Material
Adverse Effect, are listed in Section 3.07(a) of the Company Disclosure
Schedule. All Company Licenses are valid and in full force and effect through
the respective dates indicated in such Company Licenses, except for any such
invalidity or failure to be in full force and effect that would not have a
Company Material Adverse Effect, and no suspension, cancellation, complaint,
proceeding, order or investigation of or with respect to any Company License (or
operations thereunder) the loss of which would not have a Company Material
Adverse Effect is pending or, to the knowledge of
-9-
the Company or any Subsidiary, threatened. The Company has indicated in Section
3.07 of the Company Disclosure Schedule those Company Licenses which expire by
their terms within 12 months from the date of this Merger Agreement. Neither the
Company nor any Subsidiary is in violation of or default under any Company
License, except for any such violation or default that would not have a Company
Material Adverse Effect. Except as set forth in Section 3.07(a) of the Company
Disclosure Schedule, since March 1, 1999, neither the Company nor any Subsidiary
has received written or, to the knowledge of the Company or any Subsidiary, oral
notice from any Governmental Entity or any other Person of any allegation of any
such violation or default under a Company License that would have a Company
Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in violation of or
default under, nor has it breached, (i) any term or provision of its certificate
or articles of incorporation, bylaws, operating agreement or certificate or
articles of formation or (ii) any Agreement or restriction to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary, or any
of their respective Assets, is bound or affected, except for any such violation,
default or breach described in clause (ii) that would not have a Company
Material Adverse Effect. The Company and the Subsidiaries have complied and are
in full compliance with all Laws, except where the failure to so comply would
not have a Company Material Adverse Effect.
(c) All returns, reports, statements and other documents required
to be filed by the Company or any Subsidiary with any Governmental Entity have
been filed and complied with and are true, correct and complete in all material
respects (and any related fees required to be paid have been paid in full)
except where the failure to so file, comply or to so pay such fees would not
have a Company Material Adverse Effect. Except as would not have a Company
Material Adverse Effect and to the knowledge of the Company and the
Subsidiaries, all records of every type and nature relating to the Company
Licenses or the business, operations or Assets of the Company or any Subsidiary
have been maintained in all respects in accordance with good business practices
and the rules of any Governmental Entity and are maintained at the Company or
the appropriate Subsidiary.
(d) Except as provided in Section 3.07(a) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary has any interest in
any License (including both any Company License and any License held by third
parties in which the Company or any Subsidiary has an interest, if any) the loss
of which would have a Company Material Adverse Effect and that is subject to
restrictions on assignment or transfer based on the circumstances under which
the License was granted (such as eligibility or auction rules), the status of
construction and operation (such as rules restricting resale for a certain
period after construction), or any other restrictions other than an ordinary
course requirement for prior approval of transactions such as the Merger
contemplated herein.
(e) Neither the Company nor any Subsidiary is aware of any fact or
circumstance related to them that would reasonably be expected to cause the
filing of any objection to any application for any Governmental consent required
hereunder, lead to any delay in processing such application, or require any
waiver of any Governmental rule, policy or other applicable Law.
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SECTION 3.08. Financial Statements and Reports.
(a) The Company has delivered to the Acquiror a true and complete
copy of an audited consolidated balance sheet of the Company and the
Subsidiaries as of the end of the fiscal year ended December 31, 1999 (the
"Audited Balance Sheet") and the related audited consolidated statements of
income, shareholders' equity and cash flows of the Company and the Subsidiaries
for such fiscal year (the Audited Balance Sheet and such audited consolidated
statements of income, shareholders' equity and cash flows are hereinafter
referred to collectively as the "Audited Statements"), in each case, audited by
BDO Xxxxxxx, LLP in accordance with GAAP and accompanied by the related report
of BDO Xxxxxxx, LLP. The Company has also prepared unaudited consolidated
balance sheets of the Company and the Subsidiaries as of the last day of each
month ending after January 1, 2000 and prior to the date hereof (the "Unaudited
Balance Sheets") and the unaudited consolidated statements of income and cash
flows of the Company and the Subsidiaries for the one-month periods then ended
(the Unaudited Balance Sheets and such statements of income and cash flows are
hereinafter referred to collectively as the "Unaudited Statements" and, together
with the Audited Statements, as the "Pre-Signing Financial Statements").
(b) The Pre-Signing Financial Statements, including, without
limitation, the notes thereto, (i) are complete and correct in all material
respects, (ii) have been prepared in accordance with the books and records of
the Company and the Subsidiaries, and (iii) present fairly, in all material
respects, the consolidated financial position of the Company and the
consolidated Subsidiaries and their consolidated results of operations and cash
flows as of and for the respective dates and time periods and were prepared in
accordance with GAAP applied on a basis consistent with past practices of the
Company, except as noted thereon and subject to, in the case of the Unaudited
Statements, the absence of footnotes and normal and recurring year-end
adjustments which were not material in amount. All changes in accounting methods
(for financial accounting purposes) made, agreed to, requested or required with
respect to the Company or any of the Subsidiaries since January 1, 2000 and
prior to the date hereof are reflected in the Pre-Signing Financial Statements.
(c) Except as set forth in Section 3.08(c) of the Company
Disclosure Schedule, US Xchange, L.L.C., a Michigan limited liability company
(the "Reporting Subsidiary") has filed with the SEC all forms, reports,
schedules, registration statements, definitive proxy statements, information
statements and other filings (the "Subsidiary SEC Reports") required to be filed
by it with the SEC since March 1, 1998. As of their respective dates, the
Subsidiary SEC Reports complied as to form in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Subsidiary
SEC Reports. As of their respective dates and as of the date any information
from such Subsidiary SEC Reports has been incorporated by reference, the
Subsidiary SEC Reports 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.
SECTION 3.09. Absence of Undisclosed Liabilities.
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Except as set forth in Section 3.09 of the Company Disclosure Schedule,
there are no material liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown) of the Company or any
Subsidiary, including but not limited to liabilities for Taxes (as defined in
Article X), of a nature required by GAAP to be reflected, or reserved against,
in the Financial Statements and that are not so reflected, or reserved against,
in the Financial Statements, except for those that may have been incurred after
January 1, 2000 in the Ordinary Course of Business and that are not material in
amount either individually or collectively.
SECTION 3.10. Absence of Certain Changes or Events.
Other than as set forth in Section 3.10 to the Company Disclosure
Schedule, from December 31, 1999 there has not been a Company Material Adverse
Effect. Except as disclosed pursuant to other provisions of this Merger
Agreement or described in the Company Disclosure Schedule, since January 1,
2000, the Company and the Subsidiaries have conducted their respective
businesses substantially in the manner theretofore conducted and only in the
Ordinary Course of Business, and neither the Company nor any Subsidiary has (a)
incurred any material damage, destruction or loss not covered by insurance with
respect to any Assets of the Company or of any such Subsidiary; (b) issued any
capital stock or other equity securities or granted any options, warrants or
other rights calling for the issuance thereof; (c) issued any bonds or other
long-term debt instruments, granted any options, warrants or other rights
calling for the issuance thereof, or borrowed any funds; (d) discharged or
satisfied any Encumbrance (other than a Permitted Encumbrance) or paid any
material obligation or liability (whether absolute or contingent, matured or
unmatured, known or unknown) other than current liabilities shown in the
Unaudited Balance Sheets and current liabilities incurred since December 31,
1999 in the Ordinary Course of Business; (e) declared or made payment of, or set
aside for payment, any dividends or distributions of any Assets, or purchased,
redeemed or otherwise acquired any of its capital stock, any securities
convertible into capital stock, or any other securities; (f) mortgaged, pledged
or subjected to any Encumbrance (other than a Permitted Encumbrance) any of its
Assets; (g) sold, exchanged, transferred or otherwise disposed of any of its
Assets, or canceled any debts or claims, except in each case in the Ordinary
Course of Business; (h) written down the value of any Assets or written off as
uncollectable any debt, notes or accounts receivable, except to the extent
previously reserved against in the Financial Statements and not material in
amount, and except for write-downs and write-offs in the Ordinary Course of
Business, none of which, individually or in the aggregate, are material; (i)
entered into any transactions material to the Company or its Subsidiaries other
than in the Ordinary Course of Business; (j) increased the rate of compensation
payable, or to become payable, by it to any of its officers, employees, agents
or independent contractors over the rate being paid to them on January 1, 2000,
except for any increase in the rate of compensation payable, or to become
payable in connection with normal employee salary and performance reviews or
otherwise in the Ordinary Course of Business; (k) made or permitted any
amendment or termination of any material Agreement to which it is a party other
than in the Ordinary Course of Business; (l) through negotiation or otherwise
made any commitment or incurred any liability to any labor organization; (m)
made any accrual or arrangement for or payment of bonuses or special
compensation of any kind to any director, officer or employee, except for any
accrual or arrangement for or payment of bonuses or special compensation in
connection with normal employee salary and performance reviews or otherwise in
the Ordinary Course of Business; (n) directly or indirectly paid any severance
or termination pay in excess of two months' salary to any officer or employee
with an annual salary in excess of
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$70,000; (o) made capital expenditures, or entered into commitments therefor,
not provided for in the Company Budget (a copy of which has been furnished by
the Company to Acquiror), except for capital expenditures permitted by Section
5.01; (p) made any change in any method of accounting or accounting practice
except as required by GAAP and except as specified in the Financial Statements;
(q) made any charitable contributions or pledges exceeding $10,000 individually
or $100,000 in the aggregate; or (r) made any Agreement to do any of the
foregoing.
SECTION 3.11. Litigation; Disputes.
(a) Except as disclosed in Section 3.11(a) of the Company
Disclosure Schedule, there are no actions, suits, claims, arbitrations,
proceedings or investigations pending or, to the knowledge of the Company or any
Subsidiary, threatened against, affecting or involving the Company or any
Subsidiary or their respective businesses or Assets, or the transactions
contemplated by this Merger Agreement, at law or in equity, or before or by any
court, arbitrator or Governmental Entity, domestic or foreign which, if resolved
adversely to the Company or any Subsidiary party thereto would have a Company
Material Adverse Effect. Neither the Company nor any Subsidiary is (i) operating
under or subject to any order (except for orders that Persons similarly
situated, engaged in similar businesses and owning similar Assets are operating
under or subject to), award, writ, injunction, decree or judgment of any court,
arbitrator or Governmental Entity, or (ii) in default with respect to any order,
award, writ, injunction, decree or judgment of any court, arbitrator or
Governmental Entity.
(b) Except as set forth in Section 3.11(b) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary is currently
involved in, or to the knowledge of the Company or any Subsidiary, reasonably
anticipates any dispute with, any of its current or former employees, agents,
brokers, distributors, vendors, customers, business consultants, franchisees,
franchisors, representatives or independent contractors (or any current or
former employees of any of the foregoing Persons) affecting the business or
Assets of the Company or any Subsidiary, except for any such disputes that, if
resolved adversely to the Company or any Subsidiary, would not have a Company
Material Adverse Effect.
SECTION 3.12. Debt Instruments.
Section 3.12 of the Company Disclosure Schedule lists all mortgages,
indentures, notes, letters of credit, guarantees and other Agreements for or
relating to borrowed money (including, without limitation, conditional sales
agreements and capital leases) to which the Company or any Subsidiary is a party
or which have been assumed by the Company or any Subsidiary or to which any
Assets of the Company or any Subsidiary are subject that evidences an
indebtedness for borrowed money in excess of $100,000. Except as set forth in
Section 3.12 of the Company Disclosure Schedule, neither the Company nor any
Subsidiary is in default under any of such mortgages, indentures, notes,
guarantees and other Agreements, and there has not occurred any event which
(whether with or without notice, lapse of time or the happening or occurrence of
any other event) would constitute such a default, except for any such default
that would not have a Company Material Adverse Effect.
-13-
SECTION 3.13. Real Property Leases.
Section 3.13 of the Company Disclosure Schedule lists all real property
leases with a term in excess of one (1) year or requiring payments in excess of
$100,000 in the aggregate over its term under which the Company or any
Subsidiary is the lessee or lessor. The Company and the Subsidiaries are the
owners and holders of all the leasehold estates purported to be granted to them
by the leases listed in Section 3.13 of the Company Disclosure Schedule. Each
such lease is in full force and effect and constitutes a legal, valid and
binding obligation of, and to the Company's knowledge, is legally enforceable in
all material respects against, the respective parties thereto and grants the
leasehold estate it purports to grant free and clear of all Encumbrances other
than Permitted Encumbrances. The Company and the Subsidiaries have in all
respects performed all material obligations thereunder required to be performed
by any of them to date. To the knowledge of the Company and the Subsidiaries, no
party is in default in any material respect under any of the foregoing, and
there has not occurred any event which (whether with or without notice, lapse of
time or the happening or occurrence of any other event) would constitute such a
material default.
SECTION 3.14. Other Agreements; No Default.
(a) Except non-material Agreements allowing the installation,
maintenance or operation of the Company's or its Subsidiaries' fiber optic
network on, over, under or across a specific parcel of real property, Sections
3.04, 3.06, 3.07, 3.12, 3.13, 3.14(a) and 3.16 of the Company Disclosure
Schedule list each Agreement (other than Agreements solely between the Company
and its wholly owned Subsidiaries) to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary, or any of their respective
Assets, is bound, and which is:
(i) an Agreement with a term in excess of one (1) year or
requiring payments in excess of $100,000 in any twelve (12) month
period or $100,000 in the aggregate over its term for the employment of
any director, officer, employee, consultant or independent contractor,
or providing for severance payments to any such director, officer,
employee, consultant or independent contractor;
(ii) a license Agreement or distributor, dealer, sales
representative, sales agency, advertising, property management or
brokerage Agreement involving an annual payment in excess of $100,000;
(iii) an Agreement with any labor organization or other
collective bargaining unit;
(iv) an Agreement for the future purchase of materials,
supplies, services, merchandise or equipment involving payments of more
than $100,000 over its remaining term (including, without limitation,
periods covered by any option to renew by any party);
(v) an Agreement for the purchase, sale or lease of any Asset
with a purchase or sale price or aggregate rental payment in excess of
$100,000 and any Agreement for
-14-
the lease of real property at which any equipment with a value in
excess of $50,000 is located;
(vi) a profit-sharing, bonus, incentive compensation, deferred
compensation, stock option, severance pay, stock purchase, employee
benefit, insurance, hospitalization, pension, retirement or other
similar plan or Agreement;
(vii) an Agreement for the sale of any of its Assets or
services or the grant of any preferential rights to purchase any of its
Assets, services or rights, other than in the Ordinary Course of
Business;
(viii) an Agreement that contains any provisions requiring
the Company or any Subsidiary to indemnify any other party;
(ix) a joint venture Agreement or other Agreement
involving the sharing of revenues or profits;
(x) an Agreement with an Affiliate (as defined in Article
X) of the Company or any Subsidiary;
(xi) an Agreement (including, without limitation, an Agreement
not to compete and an exclusivity Agreement) that restricts the ability
of the Company or any Subsidiary, or any of their respective
Affiliates, prior to the Effective Time, or Acquiror or any of its
Affiliates after the Effective Time to conduct the business of the
Company or the Surviving Corporation, as the case may be, or any
Subsidiary thereof in any geographic area;
(xii) an Agreement with any Governmental Entity the loss or
cancellation of which would reasonably be expected to have a Company
Material Adverse Effect;
(xiii) an Agreement with any of the twenty (20) largest
customers of the Company and the Subsidiaries, taken as a whole (based
on amounts billed), for each of (A) the year ended December 31, 1999
and (B) the period from January 1, 2000 through the date of this Merger
Agreement;
(xiv) an Agreement to provide any customer with free service
or service at rates departing from the standard rate schedules of the
System (as defined in Article X) having an aggregate value or discount
in excess of $50,000;
(xv) an Agreement with any incumbent local exchange
carrier involving an aggregate payment in excess of $100,000;
(xvi) an interconnection Agreement with any incumbent local
exchange carrier providing for the transmission of telecommunications
or internet traffic of any type (including, but not limited to, local,
long distance, and data);
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(xvii) an Agreement providing for the setting of rates,
settlement or payment of charges for the exchange or transmission of
telecommunications or internet traffic of any type (including, but not
limited to, local, long distance and data);
(xviii) an Agreement required by any Governmental Entity as a
condition to or settlement of any certification, licensing matter, or
complaint against or on behalf of the Company or any Subsidiary;
(xix) an Agreement for the provision of operator services or
operator assistance associated with calls or the provision of billing,
collection, mailing, and/or fulfillment services of any kind or
description; or
(xx) any other Agreement (A) that is material to the Company
and the Subsidiaries, taken as a whole, or the conduct of their
businesses or operations, or (B) the absence of which would have a
Company Material Adverse Effect,
(the foregoing Agreements referred to herein as the "Company Contracts"). The
Company has furnished Acquiror with access to true and complete copies of each
Company Contract (including any amendments thereto).
(b) Each Company Contract is in full force and effect and
constitutes a legal, valid and binding obligation of, and, to the Company's
knowledge, is legally enforceable in all material respects against the
respective parties thereto. Except as would not have a Company Material Adverse
Effect (i) all necessary approvals of any Governmental Entity with respect
thereto have been obtained, (ii) all material filings or registrations therefor
have been made, (iii) there are no outstanding material disputes thereunder and,
to the knowledge of the Company or any Subsidiary, no threatened cancellation or
termination thereof and (iv) the Company and the Subsidiaries have performed all
material obligations thereunder required to be performed by any of them to date.
To the knowledge of the Company and the Subsidiaries, no party is in default in
any material respect under any of the Company Contracts, and there has not
occurred any event which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a material
default. No Agreement has been canceled or otherwise terminated within the
twelve (12) months prior to the date of this Merger Agreement that would have
been a "Company Contract" had such Agreement not been canceled or terminated and
the cancellation or termination of which has had or is reasonably likely to have
a Company Material Adverse Effect. Except as specifically described in Section
3.14(a) of the Company Disclosure Schedule, there has been no material written
modification or amendment to any Company Contract.
SECTION 3.15. Labor Relations.
There are no collective bargaining or other labor union Agreements to
which the Company or any Subsidiary is a party. There are no strikes, work
stoppages, union organization efforts or other controversies (other than
grievance proceedings) pending, to the Company's knowledge, threatened or
reasonably anticipated between the Company or any Subsidiary and (a) any current
or former employees of the Company or of any Subsidiary (other than disputes
with sales employees not in excess of $3,000 in the aggregate per such employee)
or (b) any
-16-
union or other collective bargaining unit representing such employees. The
Company and the Subsidiaries have complied and are in compliance with all Laws
relating to employment or the workplace, including, without limitation, Laws
relating to wages, hours, collective bargaining, safety and health, work
authorization, equal employment opportunity, immigration, withholding,
unemployment compensation, worker's compensation, employee privacy and right to
know, except where the failure so to comply would have a Company Material
Adverse Effect. Except as set forth in Section 3.15 of the Company Disclosure
Schedule, neither the Company nor any Subsidiary has been notified by any
Governmental Agency or counsel to any claimant of any unresolved material
violation or alleged material violation of any Law relating to equal employment
opportunity, civil or human rights, or employment discrimination generally.
Except as set forth in Section 3.15 to the Company Disclosure Schedule, there
are no employment Agreements between the Company or any Subsidiary and any of
their respective employees, or professional service Agreements not terminable at
will relating to the businesses and Assets of the Company or of any Subsidiary.
Except as set forth in Section 3.15 to the Company Disclosure Schedule, the
consummation of the transactions contemplated hereby will not cause Acquiror,
the Surviving Corporation, the Company or any Subsidiary to incur or suffer any
liability relating to, or obligation to pay, severance, termination or other
payments to any Person or Persons under any Agreement involving in excess of
$100,000 in the aggregate.
SECTION 3.16. Pension and Benefit Plans.
(a) Except as set forth in Section 3.16(a) to the Company
Disclosure Schedule, neither the Company nor any Subsidiary (i) maintains or
during the past six (6) years has maintained any Plan (as defined in Article X)
or Other Arrangement (as defined in Article X), (ii) is or during the past six
(6) years has been a party to or has been obligated to make contributions to any
Plan or Other Arrangement, or (iii) has obligations under any Plan or Other
Arrangement.
(b) The Company has furnished to Acquiror true and complete copies
of each of the following Documents: (i) the Documents setting forth the terms of
each Plan; (ii) all related trust Agreements or annuity Agreements (and any
other funding Document) for each Plan; (iii) for the three (3) most recent plan
years, all annual reports (Form 5500 series) on each Plan that have been filed
with any Governmental Entity; (iv) the current summary plan description and
subsequent summaries of material modifications for each Title I Plan (as defined
in Article X); (v) all DOL (as defined in Article X) opinions on any Plan; (vi)
all correspondence with the PBGC (as defined in Article X) on any Plan exchanged
during the past three (3) years; (vii) all IRS (as defined in Article X)
rulings, opinions or technical advice relating to any Plan and the current IRS
determination letter issued with respect to each Qualified Plan (as defined in
Article X); and (viii) all current Agreements with service providers or
fiduciaries for providing services on behalf of any Plan. For each Other
Arrangement, the Company has furnished to Acquiror true and complete copies of
each policy, Agreement or other Document setting forth or explaining the current
terms of the Other Arrangement, all related trust Agreements or other funding
Documents (including, without limitation, insurance contracts, certificates of
deposit, money market accounts, etc.), all significant employee communications,
all correspondence with or other submissions to any Governmental Entity, and all
current Agreements with service providers or fiduciaries for providing services
on behalf of any Other Arrangement.
-17-
(c) No Plan is a Multiemployer Plan (as defined in Article X).
(d) No Plan is an ESOP (as defined in Article X).
(e) No Plan is a Minimum-Funding Plan (as defined in Article X).
Neither the Company nor the Subsidiaries have any liability under Title IV of
ERISA or Section 302 of ERISA and no fact or event exists that could give rise
to any such liability.
(f) Section 3.16(f) of the Company Disclosure Schedule sets forth
the contributions that (i) the Company or any Subsidiary has promised or is
otherwise obligated to make under the Company's 401(k) Savings and Retirement
Plan and (ii) are unpaid as of the date of this Merger Agreement. Except for the
Company's 401(k) Savings and Retirement Plan, no Plan is a Statutory-Waiver Plan
(as defined in Article X).
(g) The Company and the Subsidiaries have made all contributions
and other payments required by and due under the terms of each Plan and Other
Arrangement or to the extent required under GAAP have accrued such payments and
contributions on the Company's Financial Statements as of December 31, 1999.
Neither the Company nor any of its Subsidiaries has taken any action (other than
actions required by Law) relating to any Plan or Other Arrangement that will
materially increase Acquiror's, the Surviving Corporation's, the Company's or
any Subsidiary's obligation under any Plan or Other Arrangement above the level
of expense incurred for the year ended December 31, 1999.
(h) Section 3.16(h) of the Company Disclosure Schedule sets forth
a list of all Qualified Plans (as defined in Article X). All Qualified Plans and
any related trust Agreements or annuity Agreements (or any other funding
Document) comply and have complied with ERISA, the Code (including, without
limitation, the requirements for Tax qualification described in Section 401
thereof), and all other Laws, except where the failure so to comply would not
have a Company Material Adverse Effect. The trusts established under such Plans
are exempt from federal income taxes under Section 501(a) of the Code. The
Company and the Subsidiaries have received determination letters issued by the
IRS with respect to each Qualified Plan, and the Company has furnished to
Acquiror true and complete copies of all such determination letters and all
correspondence relating to the applications therefor. To the knowledge of the
Company and the Subsidiaries, nothing has occurred that would adversely affect
the tax-qualified status of any Qualified Plan.
(i) To their knowledge, the Company and the Subsidiaries have
complied in all material respects with all applicable provisions of the Code,
ERISA, the National Labor Relations Act, Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act, the Fair Labor Standards Act,
the Securities Act, the Exchange Act, and all other Laws pertaining to the
Plans, including filing and reporting obligations thereunder, Other Arrangements
and other employee or employment related benefits, and all premiums relating to
all Plans or Other Arrangements have been paid in a timely fashion. There are no
investigations by any Governmental Entity, termination proceedings or other
claims (except claims for benefits payable in the normal operation of the Plans
and Other Arrangements), suits or proceedings pending or, to the knowledge of
the Company, threatened or anticipated, against or involving any Plan or Other
Arrangement or asserting any rights or claims to benefits under any Plan or
Other
-18-
Arrangement that would reasonably be expected to give rise to any Company
Material Adverse Effect.
(j) Neither the Company nor any Subsidiary nor any of the Plans
has engaged in a prohibited transaction (within the meaning of Section 406 of
ERISA or Section 4975 of the Code), for which no exemption exists under Section
408 of ERISA or Section 4975(c)(2) or 4975(d) of the Code. The Company has
furnished to Acquiror true and complete copies of each request for a prohibited
transaction exemption and each exemption obtained in response to such request.
All such requests were true and complete when made and continue to be true and
complete.
(k) Except as set forth in Section 3.16(k) of the Company
Disclosure Schedule, no Plan or Other Arrangement, individually or collectively,
provides for any payment by the Company or any Subsidiary to any employee or
independent contractor that is not deductible under Section 162(a)(1) or 404 of
the Code or that is an "excess parachute payment" pursuant to Section 280G of
the Code. Except as set forth in Section 3.16(k) of the Company Disclosure
Schedule, neither the execution and delivery of this Merger Agreement nor the
consummation of the transactions contemplated by this Merger Agreement will (A)
result in any payment (including, without limitation, severance, unemployment
compensation, retention bonus or golden parachute payment) becoming due to any
director, employee or independent contractor of the Company or any Subsidiary,
(B) increase any benefits otherwise payable under any Plan or Other Arrangement
(C) result in the acceleration of the time of payment or vesting of any benefit.
(l) No Plan is a "qualified foreign plan" (as such term is defined
in Section 404A(e) of the Code), and no Plan is subject to the Laws of any
jurisdiction other than the United States of America or one of its political
subdivisions.
(m) No Plan is a funded Welfare Plan (as defined in Article X)
that provides benefits to current or former employees of the Company or any
Subsidiary, or to their beneficiaries.
(n) No Plan provides or promises post-retirement medical, life
insurance or other benefits now or in the future to current, former or retired
employees of the Company or any Subsidiary except as required by applicable
federal and state continuation law.
(o) All Welfare Plans and the related trusts that are subject to
Section 4980B of the Code and Sections 601 through 607 of ERISA comply in all
material respects with and have been administered in material compliance with
the health care continuation-coverage requirements under Section 4980B of the
Code, Sections 601 through 607 of ERISA, and all proposed or final regulations
explaining those requirements.
(p) The Company and the Subsidiaries have (i) filed or caused to
be filed all returns and reports on the Plans that they are required to file,
and (ii) paid or made adequate provision for all fees, interest, penalties,
assessments or deficiencies that have become due pursuant to those returns or
reports or pursuant to any assessment or adjustment that has been made relating
to those returns or reports. All other fees, interest, penalties and assessments
that are due and payable by or for the Company or any Subsidiary with respect to
any Plan have been timely
-19-
reported, fully paid and discharged. There are no unpaid fees, penalties,
interest or assessments due from the Company or any Subsidiary or from any other
Person that are or could become an Encumbrance on any Asset of the Company or
any Subsidiary or could otherwise have a Company Material Adverse Effect. The
Company and the Subsidiaries have collected or withheld all amounts that are
required to be collected or withheld by them to discharge their obligations with
respect to each Plan, and all of those amounts have been paid to the appropriate
Governmental Entity or set aside in appropriate accounts for future payment when
due.
(q) As of the Effective Time, no individuals other than the
Company's or the Subsidiaries' eligible current and former employees, and their
eligible spouses, former spouses, dependents or beneficiaries, shall participate
in any Plan.
SECTION 3.17. Taxes and Tax Matters.
(a) The Company and the Subsidiaries have (or, in the case of
Company Tax Returns (as defined in Article X) required to be filed after the
date hereof and before the Closing Date, will have prior to the Closing Date)
duly filed all Company Tax Returns required to be filed by the Company and the
Subsidiaries at or before the Closing Date with respect to all applicable
material Taxes. No material penalties or other material charges are or will
become due with respect to any such Company Tax Returns as the result of the
late filing thereof. All such Company Tax Returns are (or, in the case of
returns required to be filed after the date hereof and before the Closing Date,
will be) true and complete in all material respects. The Company and the
Subsidiaries: (i) have paid all Taxes due with respect to the periods covered by
any such Company Tax Returns; or (ii) have established (or, in the case of
amounts becoming due after the date hereof, prior to the Closing Date will have
paid or established) in the Financial Statements adequate reserves (in
conformity with GAAP consistently applied) for the payment of such Taxes. The
amounts set up as reserves for Taxes in the Financial Statements are sufficient
for the payment of all unpaid Taxes with respect to periods ending on or prior
to the Closing Date, whether or not such Taxes are disputed or are yet due and
payable, for or with respect to the applicable period, and for which the Company
or any Subsidiary may be liable in its own right (including, without limitation,
by reason of being a member of the same affiliated group) or as a transferee of
the Assets of, or successor to, any Person.
(b) Neither the Company nor any Subsidiary, either in its own
right (including, without limitation, by reason of being a member of the same
affiliated group) or as a transferee, has or at the Closing Date will have any
liability for Taxes payable for or with respect to any periods ending on or
prior to the Closing Date in excess of the amounts actually paid on or prior to
the Closing Date or reserved for in the Financial Statements, except for any
Taxes incurred in the Ordinary Course of Business subsequent to the date of the
latest Financial Statement.
(c) There is no action, suit, proceeding, audit, investigation or
claim pending or, to the knowledge of the Company or any Subsidiary, threatened
in writing in respect of any Taxes for which the Company or any Subsidiary is or
may become liable, nor has any deficiency or claim for any such Taxes been
proposed or asserted in writing or, to the knowledge of the Company or any
Subsidiary, threatened in writing. Neither the Company nor any Subsidiary has
consented in writing to any waivers or extensions of any statute of limitations
in respect of Taxes of the Company or any Subsidiary which waiver or extension
is currently in effect. No power of
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attorney granted by the Company or any Subsidiary with respect to any Tax
matters is currently in force.
(d) The Company has made available to Acquiror true and complete
copies of all Company Tax Returns and all material written communications with
any Governmental Entity relating to any such Company Tax Returns or to any
deficiency or claim proposed or asserted, irrespective of the outcome of such
matter, but only to the extent such items relate to Tax years (i) which are
subject to an audit, investigation, examination or other proceeding currently
pending, or (ii) with respect to which the statute of limitations for the
assessment of Tax has not expired.
(e) Neither the Company nor any Subsidiary (i) is or has ever been
a member of an affiliated group of corporations filing consolidated federal
income Tax Returns and has no liability for the Taxes of any Person under Treas.
Reg. ss.1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise; (ii) has executed or filed
with the IRS any consent to have the provisions of Section 341(f) of the Code
apply to it; (iii) is subject to Section 999 of the Code; (iv) is a passive
foreign investment company as defined in Section 1296(a) of the Code; or (v) is
a party to an Agreement relating to the sharing, allocation or payment of, or
indemnity for, Taxes (other than an Agreement the only parties to which are the
Company and the Subsidiaries).
(f) The Company has complied in all material respects with all
rules and regulations relating to the withholding of Taxes.
(g) The Company has had in effect a valid "S" election for federal
and state income tax purposes for a period commencing on the date of its
incorporation and at all times during this period through the Closing has been
taxable as an S corporation for federal income tax purposes and the Company has
also been fully recognized and taxable as an "S" Corporation (or similar entity
entitled to special tax treatment) by each state, locality or other jurisdiction
in which it conducts any business. No written claim has ever been made by a
Governmental Entity in which the Company does not file Company Tax Returns that
the Company may be subject to taxation by that jurisdiction.
(h) The Merger will qualify as a tax-free reorganization within
the meaning of Section 368(a) or Section 368(a)(2)(D) of the Code and, in
reliance on the foregoing, the Acquiror and Acquiror Sub have agreed to report
the transaction as such on their Tax Returns.
SECTION 3.18. Customers.
To the knowledge of the Company and the Subsidiaries, the relationships
of the Company and the Subsidiaries with their customers are generally good
commercial working relationships. Except as set forth in Section 3.18 of the
Company Disclosure Schedule, during the twelve (12) months prior to the date of
this Merger Agreement, no customer of the Company or any Subsidiary which
accounted for in excess of $30,000 of the revenues of the Company and the
Subsidiaries during such twelve (12) months, or $10,000 of such revenues during
any one month within such period, has canceled or otherwise terminated its
relationship with the Company or any Subsidiary.
-21-
SECTION 3.19. Certain Business Practices.
Neither the Company, the Subsidiaries nor any of their officers,
directors or, to the knowledge of the Company or any Subsidiary, any of their
employees or agents (or stockholders, distributors, representatives or other
persons acting on the express, implied or apparent authority of the Company or
of any Subsidiary) have paid, given or received or have offered or promised to
pay, give or receive, any bribe or other unlawful payment of money or other
thing of value, any unlawful discount, or any other unlawful inducement, to or
from any Person or Governmental Entity in the United States or elsewhere in
connection with or in furtherance of the business of the Company or any
Subsidiary (including, without limitation, any offer, payment or promise to pay
money or other thing of value (a) to any foreign official or political party (or
official thereof) for the purposes of influencing any act, decision or omission
in order to assist the Company or any Subsidiary in obtaining business for or
with, or directing business to, any Person, or (b) to any Person, while knowing
that all or a portion of such money or other thing of value will be offered,
given or promised to any such official or party for such purposes). The business
of the Company and the Subsidiaries is not in any manner dependent upon the
making or receipt of such payments, discounts or other inducements.
SECTION 3.20. Insurance.
Section 3.20 of the Company Disclosure Schedule lists all policies of
title, Asset, fire, hazard, casualty, liability, life, worker's compensation and
other forms of insurance of any kind owned or held by the Company or any
Subsidiary. All such policies: (a) are with insurance companies reasonably
believed by the Company to be financially sound and reputable; (b) are in full
force and effect; (c) are valid and outstanding policies enforceable against the
insurer; (d) insure against risks of the kind customarily insured against and in
amounts customarily carried by companies similarly situated and by companies
engaged in similar businesses and owning similar Assets; and (e) provide that
they have the policy expiration dates as set forth in Section 3.20 of the
Company Disclosure Schedule.
SECTION 3.21. Potential Conflicts of Interest.
Except as set forth in Section 3.21 of the Company Disclosure Schedule,
neither any present or, to the knowledge of the Company or any Subsidiary,
former director, officer, employee with an annual salary in excess of $60,000,
or stockholder of the Company or any Subsidiary who beneficially owns more than
5% of the capital stock of the Company or any Subsidiary, nor any Affiliate of
such director, officer, employee or stockholder:
(a) owns, directly or indirectly, any interest in (except for
holdings in securities that are listed on a national securities exchange, quoted
on a national automated quotation system or regularly traded in the
over-the-counter market, where such holdings are not in excess of two percent
(2%) of the outstanding class of such securities and are held solely for
investment purposes), or is a stockholder, partner, other holder of equity
interests, director, officer, employee, consultant or agent of, any Person that
is a lessor, lessee or customer of, or supplier of goods or services to, the
Company or any Subsidiary, except where the value to such individual of any such
arrangement with the Company or any Subsidiary has been less than $60,000 in the
last twelve (12) months;
-22-
(b) owns, directly or indirectly, in whole or in part, any Assets
with a fair market value of $60,000 or more which the Company or any Subsidiary
currently uses in its business;
(c) has any cause of action or other suit, action or claim
whatsoever against, or owes any amount to, the Company or any Subsidiary, except
for claims arising in the Ordinary Course of Business from any such Person's
service to the Company or any Subsidiary as a director, officer or employee;
(d) has sold or leased to, or purchased or leased from, the
Company or any Subsidiary any Assets for consideration in excess of $60,000 in
the aggregate since the inception of the Company;
(e) is a party to any Agreement pursuant to which the Company or
any Subsidiary provides office space to any such Person, or provides services of
any nature to any such Person, other than in the Ordinary Course of Business in
connection with the employment of such Person by the Company or any Subsidiary;
or
(f) has, since the inception of the Company, engaged in any other
material transaction with the Company or any Subsidiary involving in excess of
$60,000, other than (i) in the Ordinary Course of Business in connection with
the employment of such Person by the Company or any Subsidiary, (ii) dividends,
distributions and stock issuances to all common and preferred stockholders (as
applicable) on a pro rata basis and (iii) as set forth in Section 3.04 of the
Company Disclosure Schedule.
SECTION 3.22. Receivables.
The accounts receivable of the Company and the Subsidiaries shown on
the Audited Balance Sheet, the Unaudited Balance Sheets and the Additional
Unaudited Balance Sheets, or thereafter acquired by any of them, have been
collected or are collectible in amounts not less than the amounts thereof
carried on the books of the Company and the Subsidiaries, without right of
recourse, defense, deduction, counterclaim, offset or setoff on the part of the
obligor, and can reasonably be expected to be collected within ninety (90) days
of the date incurred, except to the extent of the allowance for doubtful
accounts shown on such Audited Balance Sheet, Unaudited Balance Sheets and the
Additional Unaudited Balance Sheets.
SECTION 3.23. Real Property.
(a) Section 3.23(a) of the Company Disclosure Schedule lists all
the Real Property (as defined in Article X), specifying the owner of each parcel
thereof, and all such Real Property is suitable and adequate for the uses for
which it is currently being used.
(b) Except as set forth in Section 3.23(b) of the Company
Disclosure Schedule, the Company and the Subsidiaries are the sole owners of
good, valid, and fee simple title to the Real Property respectively owned by
them, including, without limitation, all buildings, structures, fixtures and
improvements thereon and all equipment, machinery and personal property therein,
in each case free and clear of all Encumbrances, except for Permitted
Encumbrances.
-23-
(c) All material buildings, structures, fixtures and other
improvements on the Real Property are in reasonable repair, free of known
defects and are fit for the uses to which they are currently devoted. All such
buildings, structures, fixtures and improvements on the Real Property conform to
all Laws, except for any such non-conformance that would not have a Company
Material Adverse Effect. The buildings, structures, fixtures and improvements on
each parcel of the Real Property lie entirely within the boundaries of such
parcel of the Real Property, and no structures of any kind encroach on the Real
Property, except as may be disclosed on an accurate ALTA Land Title Survey, and
except where the failure of any such buildings, structures, fixtures and
improvements on each parcel of Real Property to lie entirely within the
boundaries of such parcel of the Real Property or the encroachment of any such
structure on the Real Property would not have a Company Material Adverse Effect.
(d) To the knowledge of the Company and the Subsidiaries and
except as would not have a Company Material Adverse Effect, none of the Real
Property is subject to any Agreement or other restriction of any nature
whatsoever (recorded or unrecorded), other than Permitted Encumbrances,
preventing or limiting the Company's or any Subsidiary's right to convey or to
use it.
(e) No portion of the Real Property or any material building,
structure, fixture or improvement thereon is the subject of, or affected by, any
condemnation, eminent domain or inverse condemnation proceeding currently
instituted or pending, and neither the Company nor any Subsidiary has any
knowledge that any of the foregoing are, or will be, the subject of, or affected
by, any such proceeding.
(f) The Real Property has reasonable access to adequate electric,
gas, water, sewer and telephone lines, all of which are adequate for the uses to
which the Real Property is currently devoted.
SECTION 3.24. Books and Records.
The books of account, stock records, minute books and other corporate
and financial records of the Company and each Subsidiary are complete and
correct in all material respects and have been maintained in accordance with
reasonable business practices for companies similar to the Company, and the
matters contained therein are appropriately and accurately reflected in all
material respects in the Financial Statements in accordance with GAAP.
SECTION 3.25. Assets.
Except as set forth in Section 3.25 of the Company Disclosure Schedule,
the Company and the Subsidiaries have good, valid and marketable title to all
material Assets respectively owned by them, including, without limitation, all
material Assets reflected in the Audited Balance Sheet and in the Unaudited
Balance Sheets and all material Assets purchased by the Company or by any
Subsidiary since December 31, 1999 (except for Assets reflected in such Audited
Balance Sheet and Unaudited Balance Sheets or acquired since December 31, 1999
which have been sold or otherwise disposed of in the Ordinary Course of
Business), free and clear of all Encumbrances other than Permitted Encumbrances.
All personal property of the Company and the Subsidiaries is in good operating
condition and repair, normal wear and tear
-24-
excepted, and is suitable and adequate for the uses for which it is intended or
is being used. All Inventory (as defined in Article X) of the Company and the
Subsidiaries (i) consists of items which are good and merchantable and of a
quality and quantity presently usable and salable in the Ordinary Course of
Business and (ii) have been reflected in the Financial Statements at the lower
of cost or market, in accordance with GAAP, and include no obsolete or
discontinued items, except to the extent reserved against in the Financial
Statements.
SECTION 3.26. No Infringement or Contest.
(a) Section 3.26(a) of the Company Disclosure Schedule lists each
item of Intellectual Property (as defined in Article X) (i) owned by the Company
or a Subsidiary, (ii) owned by any third party and used by the Company or any
Subsidiary pursuant to license, sublicense or other Agreement, or (iii)
otherwise used by the Company or any Subsidiary and not otherwise generally used
by Persons similarly situated (including, in each case, specification of whether
each such item is owned, licensed or used by the Company or any Subsidiary) in
the case of each of the foregoing clauses (i), (ii) or (iii), the absence of
which would have a Company Material Adverse Effect.
(b) With respect to each item of Intellectual Property listed in
Section 3.26(a) of the Company Disclosure Schedule that is owned by the Company
or any Subsidiary, such Intellectual Property can be used by the Company and the
Subsidiaries in their respective businesses as presently conducted by them, free
and clear of any material restrictions, Encumbrances (other than Permitted
Encumbrances) and royalties on such use, and the Company and the Subsidiaries
have the right to bring action for infringement of such Intellectual Property.
With respect to the Intellectual Property listed in Section 3.26(a) of the
Company Disclosure Schedule that is used by the Company or a Subsidiary pursuant
to license, sublicense or other Agreement, such Intellectual Property has been
licensed on an arm's-length basis and can be used by the Company and the
Subsidiaries in their respective businesses as currently conducted by them in
accordance with the terms and conditions of such licenses, sublicenses or other
Agreements. With respect to each item of Intellectual Property listed in Section
3.26(a) of the Company Disclosure Schedule that is otherwise used by the Company
or any Subsidiary, such Intellectual Property can be used by the Company and the
Subsidiaries in their respective businesses as presently conducted by them, free
and clear of any material restrictions, Encumbrances (other than Permitted
Encumbrances) and royalties on such use. Each item of Intellectual Property
owned or used by the Company or any Subsidiary immediately prior to the Closing
will be owned or available for use by the Company or such Subsidiary on
identical terms and conditions identified in all material respects immediately
after the Closing.
(c) As used in the businesses of the Company and the Subsidiaries
as conducted in the past and as currently conducted, to the knowledge of the
Company, none of the Intellectual Property listed in Section 3.26(a) of the
Company Disclosure Schedule has at any time infringed or misappropriated or
otherwise violated, or is likely to infringe, misappropriate or violate, any
Intellectual Property of any other Person, nor is the Company or any Subsidiary
otherwise in the conduct of their respective businesses infringing upon, or
alleged to be infringing upon, any Intellectual Property of any other Person.
There are no pending or, to the knowledge of the Company or any Subsidiary,
threatened claims against the Company or any Subsidiary alleging that the
conduct of the Company's or any Subsidiary's business infringes or conflicts
with any
-25-
Intellectual Property rights of others. To the knowledge of the Company or any
Subsidiary, there is no Intellectual Property of another Person which infringes,
misappropriates or violates any of the Intellectual Property listed in Section
3.26(a) of the Company Disclosure Schedule.
(d) The Company and the Subsidiaries own or have the right to use
pursuant to a valid license, sublicense or other Agreement all Intellectual
Property that is material in the operation of the businesses of the Company and
the Subsidiaries as currently conducted and as currently proposed to be
conducted and except as would not have a Company Material Adverse Effect.
SECTION 3.27. Board Approval.
The Board of Directors of the Company has adopted, in compliance with
Delaware Law, a resolution approving and adopting this Merger Agreement and the
transactions contemplated hereby and recommending approval and adoption of this
Merger Agreement and the transactions contemplated hereby by the Company
Stockholder.
SECTION 3.28. Stockholder Approval.
The Company Stockholder has authorized and approved the transactions
contemplated by this Merger Agreement.
SECTION 3.29. Banks; Attorneys-in-fact.
Section 3.29 of the Company Disclosure Schedule sets forth a complete
list showing the name of each bank or other financial institution in which the
Company or any Subsidiary has accounts (including a description of the names of
all Persons authorized to draw thereon or to have access thereto). Such list
also shows the name of each Person holding a power of attorney from the Company
or any Subsidiary and a brief description thereof.
SECTION 3.30. Brokers.
No agent, broker, finder, investment banker, financial advisor or any
other firm is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Merger Agreement based
upon arrangements made by or on behalf of the Company or any Subsidiary or any
of their respective Affiliates, except Xxxxxx Xxxxxxx & Co. Incorporated, whose
fees and expenses will be paid by the Company Stockholder in accordance with the
agreement with such firm.
SECTION 3.31. Environmental Matters.
(a) The Company and each of the Subsidiaries are in compliance
with, and the Real Property and any real property that is leased by the Company
or any Subsidiary and all improvements thereon are in compliance with, all
Environmental Laws (as defined in Article X), except where the failure so to
comply would not have a Company Material Adverse Effect.
(b) Except as would not have a Company Material Adverse Effect,
neither the Company nor any Subsidiary has any asserted or actual liability
under any Environmental Law,
-26-
nor is the Company or any Subsidiary responsible for any asserted or actual
liability of any other Person under any Environmental Law. Except as would not
have a Company Material Adverse Effect, there are no pending or, to the
knowledge of the Company or any Subsidiary, threatened actions, suits, claims,
legal proceedings or other proceedings in each case in writing, against the
Company or any Subsidiary based on, and neither the Company nor any Subsidiary,
has received any formal or informal notice of any complaint, order, directive,
citation, notice of responsibility, notice of potential responsibility, or
information request from any Governmental Entity or any other Person since March
1, 1998 (or prior thereto with respect to any such complaint, order, directive,
citation, notice of responsibility, notice of potential responsibility, or
information request which has not been finally resolved) or knows any fact(s)
which might reasonably be expected to form the basis for any such actions or
notices arising out of or attributable to: (i) the current or past presence at
any part of the Real Property or any real property that is leased by the Company
or any Subsidiary of Hazardous Materials (as defined in Article X) (ii) the
current or past release or threatened release into the environment from the Real
Property or any real property that is leased by the Company or any Subsidiary
(including, without limitation, into any storm drain, sewer, septic system or
publicly owned treatment works) of any Hazardous Materials; (iii) the off-site
disposal of Hazardous Materials originating on or from the Real Property or any
real property that is leased by the Company or any Subsidiary or the businesses
or Assets of the Company or any Subsidiary; (iv) any facility operations,
procedures or designs of the Company or any Subsidiary which do not conform to
requirements of the Environmental Laws; or (v) any violation of Environmental
Laws at any part of the Real Property or any real property that is leased by the
Company or any Subsidiary or otherwise arising from the Company's or any
Subsidiary's activities (or the activities of the Company's or any Subsidiary's
predecessors in title) involving Hazardous Materials.
(c) The Company and the Subsidiaries have been duly issued, and
currently have and will maintain through the Effective Time, all Licenses
required under any Environmental Law for the business of the Company and the
Subsidiaries as currently conducted. A true and complete list of all such
Licenses the absence of which would have a Company Material Adverse Effect is
set out in Section 3.31(c) of the Company Disclosure Schedule. All Licenses
listed in Section 3.31(c) of the Company Disclosure Schedule are valid and in
full force and effect, except as would not have a Company Material Adverse
Effect. Except in accordance with such Licenses, as described in Section 3.31(c)
of the Company Disclosure Schedule or as otherwise permitted by Law or as would
not have a Company Material Adverse Effect, there has been no Hazardous
Discharge (as defined in Article X) caused by the Company or any Subsidiary and
regulated by such Licenses. Except as disclosed in Section 3.31(c) of the
Company Disclosure Schedule or as would not have a Company Material Adverse
Effect, no such Licenses are non-transferable or which require consent,
notification or other action to remain in full force and effect following
consummation of the Merger and the other transactions contemplated hereby.
(d) Except as set forth in Section 3.31(d) of the Company
Disclosure Schedule or as would not have a Company Material Adverse Effect,
neither the Real Property nor any real property that is leased by the Company or
any Subsidiary contains any 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 storage, throughput or other management of
Hazardous Materials, and no portion of the Real Property or any real property
-27-
that is leased by the Company or any Subsidiary is or has been used as a dump or
landfill for Hazardous Materials.
SECTION 3.32. Disclosure.
(a) None of the information supplied by the Company in writing
prior to the Closing with respect to any periods prior to the Closing Date which
is expressly for inclusion (and so included or relied on for information
included) in any Acquiror Post-Signing SEC Documents, at the respective times
that (w) any registration statement is filed with the SEC pursuant to Section
6.01 and the date of any amendments or supplements thereto, (x) any such
registration statement becomes effective, (y) any proxy statement or information
statement is mailed to stockholders of Acquiror and the date of any amendment or
supplements thereto, and (z) any meeting of stockholders of Acquiror (and any
adjournment thereof) is held to consider, or written consents are effective with
respect to approval of, the transactions contemplated by this Merger Agreement,
shall contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(b) No representation or warranty contained in this Merger
Agreement or the Company Disclosure Schedule (giving full effect to the concepts
and qualifications of materiality and knowledge contained therein and not with
the intention or effect of eliminating or limiting such concepts and
qualifications in any way), and no other certificates, furnished or to be
furnished to Acquiror by the Company pursuant to this Merger Agreement, contains
or will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading; provided however, that this representation shall not apply to the
matters specifically covered by any other representation or warranty in this
Merger Agreement, it being the intent of the parties that this sentence not be
applied so as to broaden the scope of those representations and warranties.
SECTION 3.33. Directors, Officers and Affiliates.
Section 3.33 of the Company Disclosure Schedule lists all current
directors and officers of the Company and the Subsidiaries, showing each such
person's name, positions, and annual remuneration, bonuses and fringe benefits
paid by the Company or any Subsidiary for the current fiscal year and the most
recently completed fiscal year.
SECTION 3.34. Copies of Documents.
True and complete copies of all agreements, documents, certificates or
other instruments listed in the Company Disclosure Schedule as of the date
hereof have been made available to Acquiror prior to the execution of this
Merger Agreement.
SECTION 3.35. Condition and Operation of the System.
(a) Section 3.35(a) of the Company Disclosure Schedule contains a
description of the size and capacity of the System (as defined in Article X)
(including, as of December 31, 1999, the percentage of
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the System capacity that was activated and in operation and the percentage of
the System capacity that was unactivated and in reserve). The system coverage
map which constitutes an integral part of the Company Disclosure Schedule has
previously been made available to Acquiror. Except as would not have a Company
Material Adverse Effect, the System and all major component parts (including but
not limited to transmission towers, microwave facilities, fiber optic cables and
switches) are in compliance with all applicable build-out requirements, are in
good operating condition and repair ordinary wear and tear excepted, and are
suitable, adequate and fit for the uses for which they are intended and are
being used, as the case may be. Except as would not have a Company Material
Adverse Effect, since January 1, 1999, there have been no complaints with
respect to the Company's or any Subsidiary's performance under Agreements with
customers that have not been substantially corrected, and there have been no
System outages. Except as would not have a Company Material Adverse Effect, the
System and the Assets of the Company and the Subsidiaries meet the technical
standards, if any, of the FCC and the technical specifications of the Company
Licenses, and do not violate any applicable Laws, engineering standards or
building, fire, zoning, health and safety or other Laws.
(b) Section 3.35(b) of the Company Disclosure Schedule sets forth:
(i) information with respect to System services offered and
rates charged for initiation and provision of System services that is
complete and accurate in all material respects;
(ii) the rate of customer churn for each of (A) the year ended
December 31, 1999 and (B) the period from January 1, 2000 through March
31, 2000;
(iii) the amount of fraud loss for each of (A) the year ended
December 31, 1999 to the extent such amount exceeded $100,000 and (B)
the period from January 1, 2000 through March 31, 2000 to the extent
such amount exceeded $100,000;
(iv) a list of all independent marketing or selling agents for
each month during the period from January 1, 1999 through December 31,
1999, indicating the volume of sales generated by such agents;
(v) any material complaints received by the Company or any
Subsidiary regarding "slamming" or "cramming" (as such term are
understood in the telephone industry) by the Company, any Subsidiary or
any of their respective employees, resellers, agents or
representatives;
(vi) a list and description of all material easements for
the installation, use and repair of fiber optic cable used by the
System;
(vii) a list of all FCC Licenses held by the Company or any
Subsidiary;
(viii) all material filings by the Company or any Subsidiar
with the FCC since January 1, 1998; and
(ix) a list of any proceedings (other than proceedings of
general applicability) before the FCC, a state utility commission, or
other regulatory body that are reasonably
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likely to result in (A) adjustments in and/or refunds of material
amounts in the past charged to or paid to third parties by the Company
or any Subsidiary, or (B) adjustments in amounts otherwise in the
future to be charged to or paid to third parties by the Company or any
Subsidiary, in each case including but not limited to amounts related
to universal service, access charges, reciprocal compensation, service
rates charged to customers, franchise fees, or any other revenues or
expenses subject to regulatory oversight.
(c) To the knowledge of the Company and except as would not have a
Company Material Adverse Effect, the easements required to be disclosed pursuant
to Section 3.35(b)(vi) above (i) are valid, binding, enforceable and sufficient
for the purposes for which they are used as of the date hereof and (ii) will be
valid, binding, enforceable and sufficient for the such purposes immediately
following the Effective Time without the consent or approval of any Person.
SECTION 3.36. Reorganization.
To the knowledge of the Company, neither it nor any of the Subsidiaries
has taken any action or failed to take any action that would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) or Section 368(a)(2)(D) of the Code.
SECTION 3.37. State Takeover Statutes; Certain Charter Provisions.
The Board of Directors of the Company has, to the extent such statutes
are applicable, taken all action (including appropriate approvals of the Board
of Directors of the Company) necessary to exempt the Company, the Subsidiaries
and affiliates, the Merger, this Merger Agreement and the transactions
contemplated hereby and thereby from Section 203 of Delaware Law. To the
knowledge of the Company, no other state takeover statutes or charter or bylaw
provisions are applicable to the Merger or this Merger Agreement and the
transactions contemplated hereby or thereby.
SECTION 3.38. Year 2000 Review.
(a) The Company and the Subsidiaries have not been and will not,
to the Company's knowledge, be materially adversely affected by (i) any failure
of the Company's and the Subsidiaries' computer hardware, software, firmware or
embedded chip technology to be Year 2000 Compliant (as defined in Article X); or
(ii) the cost and/or disruption to normal activities caused by work to be
carried out to ensure such computer hardware, software or embedded chip
technology is Year 2000 Compliant.
(b) All of the information related to the Company Year 2000 Review
disclosed in any of the Company's filings with any Governmental Entity was to
the Company's knowledge accurate and complete in all material respects as of the
date the filing was made with such Governmental Entity.
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ARTICLE IIIA
REPRESENTATIONS AND WARRANTIES OF
COMPANY STOCKHOLDER
To induce Acquiror to enter into this Merger Agreement, the Company
Stockholder represents and warrants to Acquiror as of the date hereof and as of
the Effective Date that:
(a) The Company Stockholder has the legal capacity and all other
necessary power and authority necessary to execute and deliver this Merger
Agreement, to execute and deliver all other agreements, documents, certificates
or other instruments contemplated hereby, and to consummate the transactions
contemplated hereby and thereby.
(b) This Merger Agreement has been duly executed and delivered by
the Company Stockholder and, assuming the due authorization, execution and
delivery by Acquiror, Acquiror Sub and the Company constitutes a legal, valid
and binding obligation of the Company Stockholder, enforceable in accordance
with its terms, except as such enforceability may be subject to the effects of
any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar Laws affecting creditors' rights generally and subject to
the effects of general equitable principles (whether considered in a proceeding
in equity or at law).
(c) The Company Stockholder beneficially owns all of the listed
and outstanding shares of Company Common Stock free and clear of all
Encumbrances other than Encumbrances arising under applicable securities Laws
and other than Encumbrances that will be released at or prior to the Effective
Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND ACQUIROR SUB
Except as specifically set forth in (x) the Disclosure Schedule
delivered by Acquiror and Acquiror Sub to the Company prior to the execution and
delivery of this Merger Agreement (the "Acquiror Disclosure Schedule") (the
contents of which Acquiror Disclosure Schedule may be updated, corrected or
otherwise modified by Acquiror up to five (5) days prior to the Closing Date in
accordance with Section 6.04 hereof) (with (i) a disclosure with respect to a
Section of this Merger Agreement to require a specific reference in the Acquiror
Disclosure Schedule to the Section of this Merger Agreement to which each such
disclosure applies, (ii) no disclosure to be deemed to apply with respect to any
Section to which it does not expressly refer and (iii) Acquiror and Acquiror Sub
having the right to cross-reference the sections of the Acquiror Disclosure
Schedule as appropriate with respect to disclosures that are reasonably related)
and (y) the Acquiror SEC Reports (as defined in Section 4.07) filed prior to the
date hereof, Acquiror and Acquiror Sub hereby jointly and severally represent
and warrant (which representation and warranty shall be deemed to include the
disclosures with respect thereto so specified in the
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Acquiror Disclosure Schedule) to, and agrees with, the Company as follows,
unless otherwise specifically set forth herein or in the Acquiror Disclosure
Schedule.
SECTION 4.01. Organization and Qualification; Subsidiaries.
Each of Acquiror, Acquiror Sub and Acquiror's Subsidiaries (as defined
in Article X) is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or
organization, and has the requisite corporate power and authority to own,
operate and lease its Assets, and to carry on its business as currently
conducted. Each of Acquiror, Acquiror Sub and Acquiror's Significant
Subsidiaries is duly qualified to conduct business as a foreign corporation and
is in good standing in the states, countries and territories in which the nature
of the business conducted by it or the character of the Assets owned, leased or
otherwise held by it makes such qualification necessary, except where the
absence of such qualification as a foreign corporation would not have an
Acquiror Material Adverse Effect (as defined in Article X).
SECTION 4.02. Certificate of Incorporation and Bylaws.
Acquiror has furnished to the Company a true and complete copy of the
Amended and Restated Certificate of Incorporation of Acquiror and the
certificate of incorporation of Acquiror Sub, as currently in effect, certified
as of a recent date by the Secretary of State (or comparable Governmental
Entity) of their respective jurisdictions of incorporation, and a true and
complete copy of the Amended and Restated Bylaws of Acquiror and the bylaws of
Acquiror Sub, as currently in effect, certified by their respective corporate
secretaries. Such certified copies are attached as exhibits to, and constitute
an integral part of, the Acquiror Disclosure Schedule.
SECTION 4.03. Authority; Binding Obligation.
Each of Acquiror and Acquiror Sub has the full and unrestricted
corporate power and authority to execute and deliver this Merger Agreement and
to carry out the transactions contemplated hereby. The execution and delivery by
Acquiror and Acquiror Sub of this Merger Agreement and all other agreements,
documents, certificates or other instruments contemplated hereby, and the
consummation by Acquiror and Acquiror Sub of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action,
and no other corporate proceedings on the part of Acquiror or Acquiror Sub are
necessary to authorize this Merger Agreement and the other agreements,
documents, certificates or other instruments contemplated hereby, or to
consummate the transactions contemplated hereby and thereby (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Delaware Law). This Merger Agreement has been duly
executed and delivered by Acquiror and Acquiror Sub and, assuming the due
authorization, execution and delivery by the Company and the Company
Stockholder, constitutes a legal, valid and binding obligation of Acquiror and
Acquiror Sub, enforceable in accordance with its terms, except as such
enforceability may be subject to the effect of any applicable bankruptcy,
insolvency fraudulent conveyance, reorganization, moratorium or similar Laws
affecting creditors' rights generally and subject to the effect of general
equitable principles (whether considered in a proceeding in equity or at law);
provided, however, that the Merger will not become effective until Articles of
Merger reflecting the Merger are filed with the office of the Secretary of State
of Delaware.
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SECTION 4.04. No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance by Acquiror and
Acquiror Sub of this Merger Agreement and all other agreements, documents,
certificates or other instruments contemplated hereby, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by Acquiror and Acquiror Sub of the transactions contemplated
hereby and thereby, do not and will not: (i) conflict with, or violate any
provision of, the Amended and Restated Certificate of Incorporation or the
Amended and Restated Bylaws of Acquiror, or the certificate or articles of
incorporation or bylaws of Acquiror Sub or any of Acquiror's Significant
Subsidiaries; or (ii) subject to obtaining the consents, approvals,
authorizations and permits of, and making filings with or notifications to, the
applicable Governmental Entity pursuant to the applicable requirements, if any,
of the Securities Act, the Exchange Act, Blue Sky Laws, the HSR Act, the
Communications Act, applicable state utility Laws and applicable municipal
franchise Laws, and the filing and recordation of the Articles of Merger as
required by Delaware Law, conflict with or violate any Law applicable to
Acquiror, Acquiror Sub or any of Acquiror's Significant Subsidiaries, or any of
their respective Assets; (iii) conflict with, result in any breach of,
constitute a default (or an event that with notice or lapse of time or both
would become a default) under any Agreement to which Acquiror, Acquiror Sub or
any of Acquiror's Subsidiaries is a party or by which Acquiror, Acquiror Sub or
any of Acquiror's Subsidiaries, or any of their respective Assets, may be bound;
or (iv) result in or require the creation or imposition of, or result in the
acceleration of, any indebtedness or any Encumbrance of any nature upon, or with
respect to, Acquiror, Acquiror Sub or any of Acquiror's Subsidiaries or any of
the Assets of Acquiror, Acquiror Sub or any of Acquiror's Subsidiaries; except
for any such conflict or violation described in clause (ii), any such conflict,
breach or default described in clause (iii), or any such creation, imposition or
acceleration described in clause (iv) that would not have an Acquiror Material
Adverse Effect and that would not prevent Acquiror or Acquiror Sub from
consummating the Merger on a timely basis.
(b) Except as set forth in Section 4.04(b) of the Acquiror
Disclosure Schedule, the execution, delivery and performance by Acquiror and
Acquiror Sub of this Merger Agreement and all other agreements, documents,
certificates or other instruments contemplated hereby, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and the
consummation by Acquiror and Acquiror Sub of the transactions contemplated
hereby and thereby, do not and will not: (i) require any consent, approval,
authorization or permit of, or filing with or notification to, any Person not
party to this Merger Agreement, except (A) pursuant to the applicable
requirements, if any, of the Securities Act, the Exchange Act, Blue Sky Laws,
the HSR Act, the Communications Act, applicable state utility Laws and
applicable municipal franchise Laws and Laws of other Governmental Entities, (B)
the filing and recordation of the Articles of Merger as required by Delaware
Law, (C) as may be necessary as a result of factors or circumstances related
solely to the Company and (D) where the failure to obtain any consent, approval,
authorization or permit or to make any filing or notification otherwise required
to be disclosed hereunder would not have an Acquiror Material Adverse Effect; or
(ii) result in or give rise to any penalty, forfeiture, Agreement termination,
right of termination, amendment or cancellation, or restriction on business
operations of Acquiror, the Surviving Corporation or any of Acquiror's
Significant Subsidiaries that would have an Acquiror Material Adverse Effect.
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SECTION 4.05. No Prior Activities of Acquiror Sub.
Acquiror Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Merger Agreement and has not engaged in any
other business activities and has not conducted and will not conduct its
operations or activities other than those specifically contemplated by this
Agreement or otherwise required for such purpose. Acquiror Sub has no
subsidiaries.
SECTION 4.06. Brokers.
No agent, broker, finder, investment banker, financial advisor or any
other firm (other than Warburg Dillon Read LLC and First Union Securities, Inc.,
the fees of which shall be solely the responsibility of Acquiror) is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Merger Agreement based upon arrangements made
by or on behalf of Acquiror or any of its Affiliates.
SECTION 4.07. SEC Documents.
Acquiror has filed all reports, schedules, forms, registration
statements, definitive proxy statements, information statements and other
filings required to be filed by it with the SEC since February 16, 2000
(including the Acquiror Post-Signing SEC Documents (as defined in Section 6.09),
the "Acquiror SEC Documents"). As of their respective dates, the Acquiror SEC
Documents complied or, in the case of the Acquiror Post-Signing SEC Documents,
will comply as to form in all material respects with the applicable requirements
of the Securities Act or the Exchange Act, as the case may be, and none of the
Acquiror SEC Documents contained or, in the case of the Acquiror Post-Signing
SEC Documents, will contain, any untrue statement of a material fact or omitted
or, in the case of the Acquiror Post-Signing SEC Documents, will omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of Acquiror included in
the Acquiror SEC Documents (the "Acquiror Financial Statements") comply or, in
the case of the Acquiror Post-Signing SEC Documents, will comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been or, in the case
of the Acquiror Post-Signing SEC Documents, will have been prepared in
accordance with GAAP (except, in the case of unaudited statements, for the lack
of normal year-end adjustments, the absence of footnotes and as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the periods subject
thereto (except as may be indicated in the notes thereto) and fairly present, in
all material respects, the consolidated financial position of Acquiror and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end adjustments and the absence of
footnotes). Except as disclosed in the Acquiror SEC Documents, as required by
GAAP or as required by any Governmental Entity, Acquiror has not, since December
31, 1999, made any change in accounting practices or policies applied in the
preparation of financial statements.
SECTION 4.08. Acquiror Common Stock.
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Xxx Xxxxxxxx Xxxxxx Stock to be issued and delivered to the Company
Stockholder pursuant to the Merger has been duly authorized and, when issued in
the Merger in accordance with this Merger Agreement, will be validly issued,
fully paid and nonassessable and will have been approved for listing subject to
official notice of issuance by The Nasdaq Stock Market's National Market System.
SECTION 4.09. Capitalization.
The authorized capital stock of Acquiror consists of (a) 150,000,000
shares of Acquiror Common Stock, of which, as of March 31, 2000: (i) 31,012,181
shares were issued and outstanding, all of which were duly authorized, validly
issued, fully paid and nonassessable; (ii) no shares were held in the treasury
of Acquiror; (iii) 1,063,791 shares were reserved for issuance pursuant to
outstanding options to purchase Acquiror Common Stock granted to employees and
certain other Persons; and (iv) 132,148 shares were reserved for issuance
pursuant to four Convertible Subordinated Promissory Notes each dated February
24, 2000 between Acquiror and each of the former shareholders of EdgeNet, Inc.;
and (b) 5,000,000 shares of serial preferred stock, par value $.01 per share, of
which: (i) no shares are issued and outstanding; and (ii) no shares are held in
the treasury of Acquiror. Except for the options and convertible securities set
forth in clauses (a)(iii) and (a)(iv) above and as set forth in Section 4.09(a)
of the Acquiror Disclosure Schedule, as of March 31, 2000, there were no
outstanding securities convertible into or exchangeable for capital stock or any
other securities of Acquiror, or any capital stock or other securities of any of
Acquiror's Significant Subsidiaries and no outstanding options, rights
(preemptive or otherwise), or warrants to purchase or to subscribe for any
shares of such capital stock or other securities of Acquiror or any of
Acquiror's Significant Subsidiaries. Except as set forth in Section 4.09(b) of
the Acquiror Disclosure Schedule and except for Agreements relating to the
options and convertible securities specified in clauses (a)(iii) and (a)(iv)
above, there are no outstanding Agreements to which Acquiror or any of its
Significant Subsidiaries is a party affecting or relating to the voting,
issuance, purchase, redemption, registration, repurchase or transfer of capital
stock or any other securities of Acquiror, or any capital stock or other
securities of any of Acquiror's Significant Subsidiaries, except as contemplated
hereunder. Each of the outstanding shares of Acquiror Common Stock, and of
capital stock of, or other equity interests in, Acquiror's Significant
Subsidiaries was issued in compliance with all applicable federal and state Laws
concerning the issuance of securities, and, except as set forth in Section
4.09(c) of the Acquiror Disclosure Schedule, such shares or other equity
interests owned by Acquiror or any of its Significant Subsidiaries are owned
free and clear of all Encumbrances. There are no obligations, contingent or
otherwise, of Acquiror or any of its Significant Subsidiaries to provide funds
to, make any investment (in the form of a loan, capital contribution or
otherwise) in, or provide any guarantee with respect to, any of Acquiror's
Significant Subsidiaries or any other Person. Except as set forth in Section
4.09(d) of the Acquiror Disclosure Schedule, there are no Agreements pursuant to
which any Person (other than Acquiror or Acquiror's Significant Subsidiaries) is
or may be entitled to receive any of the revenues or earnings, or any payment
based thereon or calculated in accordance therewith, of Acquiror or any of its
Significant Subsidiaries. Acquiror is the legal and beneficial owner of all of
Acquiror Sub's outstanding capital stock.
SECTION 4.10. Sufficient Funds.
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Acquiror has obtained, on behalf of Acquiror Sub, (i) an executed
commitment letter dated April 27, 2000 from First Union Investors, Inc. and
First Union Securities, Inc. for a $350 million senior credit facility (which
amends an existing credit facility in the amount of $150 million and includes
$200 million of incremental borrowing capacity) and (ii) an executed commitment
letter dated April 27, 2000 from MSCP for a private offering of preferred stock,
which contemplates Acquiror Sub receiving aggregate gross proceeds of not less
than $139 million (such credit facility and private placement, collectively, the
"Buyer Financing" and such commitment letters, collectively, the "Buyer
Financing Letters"). True and complete copies of the Buyer Financing Letters
have been furnished to the Company. Neither Acquiror, Acquiror Sub nor any of
their Affiliates will terminate, amend or modify in any material respect the
Buyer Financing Letters in a manner which will prevent the consummation of such
financing, or materially delay the timing thereof, without prior written consent
of the Company.
SECTION 4.11. Reorganization.
To the knowledge of Acquiror, neither Acquiror, Acquiror Sub nor any of
Acquiror's Significant Subsidiaries has taken any action or failed to take any
action that would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) or Section 368(a)(2)(D) of the Code.
SECTION 4.12. Compliance; Litigation.
Neither Acquiror nor Acquiror Sub is aware of any fact or circumstance
related to them that could reasonably be expected to cause the filing of any
objection to any application for any Governmental consent required hereunder,
lead to any delay in processing such application, or require any waiver of any
Governmental rule, policy or other applicable Law. There are no actions, suits,
claims, arbitrations, proceedings or investigations pending, or the knowledge of
the Acquiror, threatened against, affecting or involving the Acquiror or any
Acquiror Subsidiary or their respective businesses or Assets, or the
transactions contemplated by this Merger Agreement, at law or in equity, or
before or by any court, arbitrator or Governmental Entity, domestic or foreign,
which, if resolved against the Acquiror or any Acquiror Subsidiary party
thereto, would have an Acquiror Material Adverse Effect.
SECTION 4.13. Absence of Undisclosed Liabilities.
There are no material liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown) of the Acquiror or any
Acquiror Subsidiary, including but not limited to liabilities for Taxes, of a
nature required by GAAP to be reflected, or reserved against, in the Acquiror
Financial Statements and that are not so reflected, or reserved against, in the
Acquiror Financial Statements, except for those that may have been incurred
after January 1, 2000 in the Ordinary Course of Business and that are not
material in amount either individually or collectively.
SECTION 4.14. Intellectual Property.
(a) To the knowledge of the Acquiror and except as would not have
an Acquiror Material Adverse Effect, the conduct of the business of Acquiror and
any Acquiror Subsidiary as
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currently conducted does not infringe or misappropriate the Intellectual
Property of any third party.
(b) Except as would have an Acquiror Material Adverse Effect, no
claim has been asserted to Acquiror that the conduct of the business of Acquiror
or any Acquiror Subsidiary as currently conducted infringes or may infringe or
misappropriate the Intellectual Property of any third party.
(c) With respect to each item of Intellectual Property owned by
Acquiror and the Acquiror Subsidiaries and material to the businesses of
Acquiror and the Acquiror Subsidiaries as currently conducted taken as a whole
("Acquiror Owned Intellectual Property"), Acquiror or an Acquiror Subsidiary is
the owner of the entire right, title and interest in and to the Acquiror Owned
Intellectual Property and is entitled to use the Acquiror Owned Intellectual
Property in the continued operation of its respective business.
(d) Except as would have an Acquiror Material Adverse Effect, with
respect to each item of Intellectual Property licensed to Acquiror or an
Acquiror Subsidiary ("Acquiror Licensed Intellectual Property"), Acquiror or an
Acquiror Subsidiary has the right to use such Acquiror Licensed Intellectual
Property in the continued operation of its respective business in accordance
with the terms of the license agreement governing such Acquiror Licensed
Intellectual Property.
(e) To the Knowledge of the Acquiror and except as would not have
an Acquiror Material Adverse Effect, the Acquiror Owned Intellectual Property is
valid and enforceable, and has not been adjudged invalid or unenforceable in
whole or in part.
(f) To the Knowledge of Acquiror and except as would not have an
Acquiror Material Adverse Effect, no Person is engaging in any activity that
infringes the Acquiror Owned Intellectual Property.
(g) Except as would not have an Acquiror Material Adverse Effect,
each license of Acquiror Licensed Intellectual Property is valid and
enforceable, is binding on all parties to such license, is in full force and
effect, and no party thereto is in breach thereof or default thereunder.
SECTION 4.15. Disclosure.
(a) None of the information supplied by Acquiror or Acquiror Sub
which is expressly for inclusion (and so included or relied on for information
included) in any Acquiror Post-Signing SEC Documents, at the respective times
that (w) any registration statement is filed with the SEC and the date of any
amendments or supplements thereto, (x) any such registration statement becomes
effective, (y) any proxy statement or information statement is mailed to
stockholders of Acquiror and the date of any amendment or supplement thereto,
and (z) any meeting of stockholders of Acquiror (and any adjournment thereof) is
held to consider, or written consents are effective with respect to approval of,
the transactions contemplated by this Merger Agreement, shall contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
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(b) No representation or warranty contained in this Merger
Agreement or the Acquiror Disclosure Schedule (giving full effect to the
concepts and qualifications of materiality and knowledge contained therein and
not with the intention or effect of eliminating or limiting such concepts and
qualifications in any way), and no other certificates, furnished or to be
furnished to the Company by Acquiror or Acquiror Sub pursuant to this Merger
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading; provided however, that this representation shall not
apply to the matters specifically covered by any other representation or
warranty in this Merger Agreement, it being the intent of the parties that this
sentence not be applied so as to broaden the scope of those representations and
warranties.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business of the Company.
The Company hereby covenants and agrees that, from the date of this
Merger Agreement until the Effective Time, except as set forth in Section 5.01
of the Company Disclosure Schedule, the Company, unless otherwise expressly
contemplated by this Merger Agreement or consented to in writing by Acquiror,
will, and will cause the Subsidiaries to, carry on their respective businesses
only in the Ordinary Course of Business or as contemplated by the US Xchange 10
Year Plan for General Electric Capital Corporation (the "Company Budget"), a
copy of which was previously furnished to Acquiror, use their respective
reasonable best efforts to preserve intact their business organizations and
Assets, maintain their rights and franchises, retain the services of their
officers and employees and maintain their relationships with customers,
suppliers, licensors, licensees and others having business dealings with them,
and use their respective reasonable best efforts to keep in full force and
effect liability insurance and bonds comparable in amount and scope of coverage
to that currently maintained. Without limiting the generality of the foregoing,
except as otherwise consented to in writing by Acquiror or as otherwise
expressly contemplated by this Merger Agreement or as contemplated by the
Company Budget, from the date of this Merger Agreement until the Effective Time
the Company shall not, and shall not permit any of the Subsidiaries to:
(a)(i) increase in any manner the compensation or fringe benefits of,
or pay any bonus to, any director, officer or employee, except for increases or
bonuses in the Ordinary Course of Business to employees who are not directors or
officers and except pursuant to existing arrangements previously disclosed to
Acquiror; (ii) except as set forth in Section 5.01(a)(i) of the Company
Disclosure Schedule, grant any severance or termination pay (other than pursuant
to the normal severance practices or existing Agreements of the Company or any
Subsidiary in effect on the date of this Merger Agreement as described in
Section 5.01(a)(ii) of the Company Disclosure Schedule) to, or enter into any
severance Agreement with, any director, officer or employee, or enter into any
employment Agreement with any director, officer or employee; (iii) establish,
adopt, enter into or amend any Plan or Other Arrangement, except as may be
required to comply with Section 6.22 or applicable Law; (iv) pay any benefit not
provided for
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under any Plan or Other Arrangement; (v) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or Plan or
Other Arrangement (including the grant of stock options, stock appreciation
rights, stock-based or stock-related awards, performance units or restricted
stock, or the removal of existing restrictions in any Plan or Other Arrangement
or Agreement or awards made thereunder) or (vi) take any action to fund or in
any other way secure the payment of compensation or benefits under any
Agreement, except as required under the Agreements set forth in Section
5.01(a)(ii) of the Company Disclosure Schedule;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock;
(c)(i) redeem, purchase or otherwise acquire any shares of capital
stock of the Company or any Subsidiary or any securities or obligations
convertible into or exchangeable for any shares of capital stock of the Company
or any Subsidiary, or any options, warrants or conversion or other rights to
acquire any shares of capital stock of the Company or any Subsidiary or any such
securities or obligations, or any other securities thereof; (ii) effect any
reorganization or recapitalization; or (iii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock;
(d) issue, deliver, award, grant or sell, or authorize the
issuance, delivery, award, grant or sale (including the grant of any limitations
in voting rights or other Encumbrances) of, any shares of any class of its
capital stock (including shares held in treasury), any securities convertible
into or exercisable or exchangeable for any such shares, or any rights, warrants
or options to acquire, any such shares, or amend or otherwise modify the terms
of any such rights, warrants or options the effect of which shall be to make
such terms more favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with,
by purchasing an equity interest in or a portion of the Assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any Assets of any other Person (other than the purchase of assets from
suppliers or vendors in the Ordinary Course of Business);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
subject to any Encumbrance or dispose of, or agree to sell, lease, exchange,
mortgage, pledge, transfer or otherwise subject to any Encumbrance or dispose
of, any of its Assets, except for sales, dispositions or transfers in the
Ordinary Course of Business;
(g) adopt any amendments to its articles or certificate of
incorporation, bylaws or other comparable charter or organizational documents;
(h) make or rescind any express or deemed election relating to
Taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
-39-
returns for the taxable year ended December 31, 1999, except in either case as
may be required by Law, the IRS or GAAP;
(i) make or agree to make any new capital expenditures which are
not included in the Company Budget, it being understood that the Company shall
provide prior notice to Acquiror of any budgeted expenditures which are
individually in excess of $250,000 and any unbudgeted expenditures which are
individually in excess of $25,000;
(j) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any
Subsidiary, guarantee any debt securities of another Person, enter into any
"keep well" or other Agreement to maintain any financial statement condition of
another Person or enter into any Agreement having the economic effect of any of
the foregoing, except for borrowings pursuant to the Promissory Note, or (ii)
make any loans, advances or capital contributions to, or investments in, any
other Person other than intra-group loans, advances, capital contributions or
investments between or among the Company and any of its wholly owned
Subsidiaries other than in the Ordinary Course of Business;
(k) except for costs incurred by the Company in connection with
the transactions contemplated by this Merger Agreement but only to the extent
such costs are deducted pursuant to the calculation of Merger Consideration in
Article II hereof, pay, discharge, settle or satisfy any claims, liabilities or
obligations (whether absolute or contingent, matured or unmatured, known or
unknown), other than the payment, discharge or satisfaction, in the Ordinary
Course of Business or in accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the most recent Financial Statement
or incurred in the Ordinary Course of Business, or waive any material benefits
of, or agree to modify in any material respect, any confidentiality, standstill
or similar Agreements to which the Company or any Subsidiary is a party;
(l) except in the Ordinary Course of Business, waive, release or
assign any rights or claims, or modify, renew, amend or terminate any Agreement
to which the Company or any Subsidiary is a party;
(m) make any change in any method of accounting or accounting
practice or policy other than those required by GAAP or a Governmental Entity;
(n) take any action or fail to take any action that would have a
Company Material Adverse Effect prior to or after the Effective Time, or that
would adversely affect the ability of the Company or any Subsidiary prior to the
Effective Time, or Acquiror or any of its subsidiaries after the Effective Time,
to obtain consents of third parties or approvals of Governmental Entities
required to consummate the transactions contemplated in this Merger Agreement;
or
(o) authorize, or commit or agree to do any of the foregoing.
SECTION 5.02. Other Actions.
The Company and Acquiror shall not, and shall not permit any of their
respective Affiliates to, take any action that would, or that could reasonably
be expected to, result in (a) any
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of the representations and warranties of such party set forth in this Merger
Agreement becoming untrue, or (b) any of the conditions to the Merger set forth
in Article VII not being satisfied.
SECTION 5.03. Certain Tax Matters.
From the date hereof until the Effective Time, the Company and the
Subsidiaries (a) will prepare and timely file with the relevant Taxing authority
all Company Tax Returns ("Post-Signing Returns"), required to be filed prior to
the Effective Time, which Post-Signing Returns shall be accurate in all material
respects, or permitted extensions with respect thereto, (b) will timely pay all
Taxes shown as due and payable on such Post-Signing Returns, (c) will pay or
otherwise make adequate provision for all Taxes payable by the Company and the
Subsidiaries during such period for which no Post-Signing Return is due prior to
the Effective Time, and (d) will promptly notify Acquiror of any action, suit,
proceeding, claim or audit pending against or with respect to the Company or any
Subsidiary in respect of any Taxes with respect to which the Company or any
Subsidiary has received written notice. In addition, from the date hereof until
the Effective Time, the Company will maintain its status as an S Corporation for
federal and state income tax purposes in all jurisdictions in which the Company
or any Subsidiary conduct any business.
SECTION 5.04. Access and Information.
(a) Except as required pursuant to any confidentiality agreement
or similar agreement or arrangement to which the Company or any Subsidiary is a
party or pursuant to applicable Law, for so long as this Merger Agreement is in
effect, the Company shall, and shall cause each Subsidiary to, (a) afford to
Acquiror and its officers, employees, accountants, consultants, legal counsel
and other representatives reasonable access during normal business hours,
subject to reasonable advance notice, to all of their respective properties,
Agreements, books, records and personnel and (b) make available to Acquiror (i)
a copy of each agreement, document, certificate or other instrument filed with,
or received from any Governmental Entity in connection with this Merger
Agreement and the transactions contemplated hereby and (ii) all other
information concerning their respective businesses, operations, prospects,
conditions (financial or otherwise), Assets, liabilities and personnel as
Acquiror may reasonably request.
(b) Except as required pursuant to any confidentiality agreement
or similar agreement or arrangement to which Acquiror or any Acquiror Subsidiary
is a party or pursuant to applicable Law, for so long as this Merger Agreement
is in effect, Acquiror shall, and shall cause each Acquiror Subsidiary to, (a)
afford to the Company and its officers, employees, accountants, consultants and
legal counsel and other representatives reasonable access during normal business
hours, subject to reasonable advance notice, to all of their respective
properties, Agreements, books, records and personnel and (b) make available to
the Company (i) a copy of each agreement, document, certificate or other
instrument filed with, or received from any Governmental Entity in connection
with the Merger Agreement and the transactions contemplated hereby and (ii) all
other information concerning their respective businesses, operations, prospects,
conditions (financial or otherwise), Assets, liabilities and personnel as the
Company may reasonably request.
SECTION 5.05. No Solicitation.
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(a) The Company shall, and shall cause its directors, officers,
employees, representatives, agents and Subsidiaries and their respective
directors, officers, employees, representatives and agents to, and the Company
Stockholder shall, and shall cause his representatives and agents to,
immediately cease any discussions or negotiations with any Person that may be
ongoing with respect to a Competing Transaction (as defined in this Section
5.05(a)). While this Merger Agreement is in effect, the Company shall not, and
shall cause the Subsidiaries not to, and the Company Stockholder shall not,
initiate, solicit or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into discussions or furnish any information or
negotiate with any Person or otherwise cooperate in any way in furtherance of
such inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize any of the directors, officers, employees,
agents or representatives of the Company or any Subsidiary to take any such
action, and the Company shall, and shall cause the Subsidiaries to, direct and
instruct and use its or their reasonable best efforts to cause the directors,
officers, employees, agents and representatives of the Company and the
Subsidiaries (including, without limitation, any investment banker, financial
advisor, attorney or accountant retained by the Company or any Subsidiary) not
to take any such action, and the Company or the Company Stockholder shall
promptly notify Acquiror if any such inquiries or proposals are received by the
Company, any Subsidiary, or the Company Stockholder or any of its or their
respective directors, officers, employees, agents, investment bankers, financial
advisors, attorneys, accountants or other representatives, and the Company or
the Company Stockholder shall promptly inform Acquiror as to the material terms
of such inquiry or proposal and, if in writing, promptly deliver or cause to be
delivered to Acquiror a copy of such inquiry or proposal, and the Company or the
Company Stockholder shall keep Acquiror informed, on a current basis, of the
nature of any such inquiries and the status and terms of any such proposals. For
purposes of this Merger Agreement, "Competing Transaction" shall mean any of the
following involving the Company or the Subsidiaries (other than the transactions
contemplated by this Merger Agreement): (i) any merger, consolidation, share
exchange, business combination, or other similar transaction; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of ten percent
(10%) or more of the Assets of the Company and the Subsidiaries, taken as a
whole, or issuance of ten percent (10%) or more of the outstanding voting
securities of the Company or any Subsidiary in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for ten percent (10%) or
more of the outstanding shares of capital stock of the Company or any Subsidiary
or the filing of a registration statement under the Securities Act in connection
therewith; (iv) any solicitation of proxies in opposition to approval by the
Company Stockholder of the Merger; (v) any Person shall have acquired beneficial
ownership or the right to acquire beneficial ownership of, or any "group" (as
such term is defined under Section 13(d) of the Exchange Act) shall have been
formed after the date of this Merger Agreement which beneficially owns or has
the right to acquire beneficial ownership of, ten percent (10%) or more of the
then outstanding shares of capital stock of the Company or any Subsidiary; or
(vi) any Agreement to, or public announcement by the Company or any other Person
of a proposal, plan or intention to, do any of the foregoing.
(b) Neither the Board of Directors of the Company nor any
committee thereof nor the Company Stockholder shall (i) approve or recommend,
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or propose to approve or recommend, any Competing Transaction or (ii) enter into
any Agreement with respect to any Competing Transaction.
SECTION 5.06. Confidentiality.
Each of the parties hereto has disclosed and delivered and will
disclose and deliver to the other party certain information about its
properties, employees, finances, businesses and operations (such party when
disclosing such information being the "Disclosing Party" and such party when
receiving such information being the "Receiving Party"). All such information
furnished by the Disclosing Party or its Representatives (as defined below),
whether furnished before or after the date hereof, whether oral or written, and
regardless of the manner in which it is furnished, is referred to in this
Agreement as "Proprietary Information." Proprietary Information does not
include, however, information which (a) is or becomes generally available to the
public other than as a result of a disclosure by the Receiving Party or its
Representatives, (b) was available to the Receiving Party on a nonconfidential
basis prior to its disclosure by the Disclosing Party or its Representatives,
(c) becomes available to the Receiving Party on a nonconfidential basis from a
Person other than the Disclosing Party or its Representatives who is not
otherwise bound by a confidentiality agreement with the Disclosing Party or any
of its Representatives, or is otherwise not under an obligation to the
Disclosing Party or any of its Representatives not to transmit the information
to the Receiving Party or (d) which is disclosed in accordance with Section
6.05. As used in this Agreement, the term "Representative" means, as to any
Person, such Person's Affiliates and its and their directors, officers,
employees, agents, advisors (including, without limitation, financial advisors,
counsel and accountants) and controlling Persons.
(i) Subject to clause (ii) below, unless otherwise agreed to
in writing by the Disclosing Party, the Receiving Party agrees (a) except as
required by Law, to keep all Proprietary Information confidential and not to
disclose or reveal any Proprietary Information to any Person other than its
Representatives who are actively and directly participating in the consummation
of the transactions contemplated hereby or who otherwise need to know the
Proprietary Information in connection with the transactions contemplated hereby
and to cause those Persons to observe the terms of this Merger Agreement and (b)
not to use Proprietary Information for any purpose other than in connection with
the transactions contemplated hereby. The Receiving Party will be responsible
for any breach of the terms of this Section 5.06 by the Receiving Party or any
of its Representatives when acting in such capacity.
(ii) In the event that the Receiving Party is requested
pursuant to, or required by, Law or stock exchange rule or by legal process to
disclose any Proprietary Information or any other information concerning the
Disclosing Party, the Receiving Party agrees that it will provide the Disclosing
Party with prompt notice of such request or requirement in order to enable the
Disclosing Party to seek an appropriate protective order or other remedy, to
consult with the Receiving Party with respect to the Disclosing Party taking
steps to resist or narrow the scope of such request or legal process, or to
waive compliance, in whole or in part, with the terms of this Section 5.06. In
the event that no such protective order or other remedy is obtained or that the
Disclosing Party waives compliance with the terms of this Section 5.06 the
Receiving Party will furnish only that portion of any Proprietary Information
which the Receiving Party is
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advised by counsel is legally required and will exercise all reasonable efforts
to obtain reliable assurance that confidential treatment will be accorded any
Proprietary Information.
(iii) If this Merger Agreement is terminated, each party will
promptly return to the other party all copies of Proprietary Information in its
possession or in the possession of any of its Representatives and will not
retain any copies or other reproductions in whole or in part of such material.
All other documents, memoranda, notes, summaries, analyses, extracts,
compilations, studies or other material whatsoever prepared by it or any of its
Representatives based on the Proprietary Information will be destroyed, and such
destruction will be certified in writing to the other party by an authorized
officer supervising such destruction. Any oral Proprietary Information will
continue to be the subject of this Section 5.06.
(iii) Without prejudice to the rights and remedies otherwise
available to each of the parties hereto, each such party shall be entitled to
equitable relief by way of injunction or otherwise if the other party or any of
its Representatives breaches or threatens to breach any of the provisions of
this Section 5.06.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Rights.
(a) If on any occasion after the Exercise Date one or more of the
Holders of Registrable Securities having an aggregate proposed market price of
not less than $25,000,000 shall notify Acquiror in writing that he or they
intend to offer or cause to be offered for public sale all or any portion of his
or their Registrable Securities, Acquiror will notify all of the Holders of
Registrable Securities of its receipt of such notification from such Holder or
Holders. Upon the written request of any such Holder delivered to Acquiror
within 15 days after receipt from the Company of such notification, Acquiror
will use its best efforts to cause such of the Registrable Securities as may be
requested by any Holders (including the Holder or Holders giving the initial
notice of intent to register hereunder) to be registered under the Securities
Act within 90 days of the notification by the Holders, in accordance with the
terms of this Section 6.01(a); provided, however that unless such registration
becomes effective, the Holders of the Registrable Securities shall be entitled
to require an additional registration pursuant to this Section 6.01(a). All
expenses of such registration and offerings incurred by Acquiror (which shall in
no event include underwriting discounts or commissions attributable to the sale
of Registrable Securities), and the reasonable fees and expenses of one
independent counsel for the Holders shall be borne by Acquiror, provided,
however, that Acquiror shall have no liability for such expenses if such
registration does not become effective due solely to the action or failure to
act of any Holder requiring such registration. Notwithstanding any other
provision of this Section 6.01, with respect to any registration statement
filed, or to be filed, pursuant to this Section 6.01(a), if Acquiror shall
furnish to the Holders of Registrable Securities that have made such request a
certified resolution of Acquiror's Board of Directors stating that in the
Board's good faith judgment it would (because of the existence of, or in
anticipation of, any acquisition or other material event or transaction the
public disclosure of which at the time would be
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materially prejudicial to Acquiror) be significantly disadvantageous (a
"Disadvantageous Condition") to Acquiror for such a registration statement to be
maintained effective, or to be filed and become effective, or for sales of
Registrable Securities under such registration statement to be permitted, or for
the disclosure thereunder to remain current, and setting forth in reasonable
detail the general reasons for such judgment, Acquiror shall be entitled to
cause such registration statement to be withdrawn and the effectiveness of such
registration statement terminated or such sales under such registration
statement to be prohibited, or, in the event no registration statement has yet
been filed, shall be entitled not to file any such registration statement, until
such Disadvantageous Condition no longer exists (written notice of which
Acquiror shall promptly deliver to such Holders) (any such time period during
which such registration statement is withdrawn, the effectiveness of such
registration statement is terminated, the filing of such registration statement
is delayed or any sales under such registration statement are prohibited is
referred to herein as the "Blackout Period"). Upon receipt of any such
certification of a Disadvantageous Condition, such Holders shall forthwith
discontinue use of the prospectus contained in such registration statement and,
if so directed by Acquiror, each such Holder will deliver to Acquiror all
copies, other than permanent file copies then in such Holder's possession, of
the prospectus then covering such Registrable Securities current at the time of
receipt of such notice; provided that, notwithstanding anything else contained
in this Agreement, (i) neither the filing nor the effectiveness of any such
registration statement may be delayed nor sales thereunder be prohibited for a
period in excess of 90 days due to the occurrence of any particular
Disadvantageous Condition and (ii) in connection with any registration request
under Section 6.01(a) or in any 12-month period, Acquiror may only exercise its
right to impose a Blackout Period for any purpose under this Section 6.01(a) on
one (1) occasion for not more than 90 days and on one (1) additional occasion
for not more than 30 days (but, with respect to such additional occasion, only
to prohibit sales of Registrable Securities under a Shelf Registration
Statement). If so requested by the requesting Holder(s), Acquiror shall, if any
registration statement shall have been withdrawn, at such time as it is possible
or, if earlier, at the end of the 90-day period following such withdrawal, file
a new registration statement covering the Registrable Securities that were
covered by such withdrawn registration and maintain the effectiveness thereof
for such time as is required under this Agreement. The Holders may collectively
exercise their rights under this Section 6.01(a) on not more than two occasions
with respect to registration statements on Form S-1 and on not more than three
occasions with respect to registration statements on Form S-3; provided,
however, if the Holders do not exercise their rights under this Section 6.01(a)
with respect to the registration statements on Form S-1, the Holders may
exercise their rights under this Section 6.01(a) on not more than five (5)
occasions with respect to registration statements on Form S-3. At Acquiror's
option, Acquiror may elect to include in such registration on Form S-3,
securities to be issued by Acquiror and, if required in order to effect the
registration of such securities, cause the registration to be made pursuant to a
registration statement on Form S-1 or S-2, which shall count as one of the three
registration statements on Form S-3 to be filed pursuant to this Section
6.01(a). Holders of Registrable Securities will not be permitted to require
Acquiror to file a registration statement on Form S-1 or Form S-2 pursuant to
this Section 6.01(a) more frequently than once every 12 months. The registration
rights provided by this Section 6.01(a) shall expire upon the earlier to occur
of (i) such time when the Holders in the aggregate beneficially own Registrable
Securities representing less than 25% of the number of shares of Acquiror Common
Stock held by such Holders immediately following the Effective Time or
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(ii) five (5) years after the Exercise Date. If so requested by any Holder
in connection with a registration under this Section 6.01(a), Acquiror shall
take such steps as are required to register such Holder's Registrable Securities
for sale on a delayed or continuous basis under Rule 415, and also take such
steps as are required to keep any registration effective until the earlier to
occur of such time when (i) all of such Holder's Registrable Securities
registered thereunder are sold or (ii) 90 days after the effective date of the
registration statement; provided that such period shall be extended by an
additional 90-day period if, during the initial 90-day period, as a result of
materially adverse market conditions during such initial 90-day period, such
Holder has sold not more than the lesser of (x) 15% of the aggregate amount of
the Registrable Securities and (y) 50% of the Registrable Securities registered
by such Holder pursuant to the registration statement used during the initial
90-day period; provided, further, if any Blackout Period is imposed by the
Acquiror pursuant to this Section 6.01(a), such 180 day period or 90 day period,
as the case may be, relating to such registration statement shall be extended
for a period equal to such Blackout Period. Notwithstanding the foregoing, a
registration requested by a Holder of Registrable Securities pursuant to this
Section 6.01(a) shall not be deemed to have been effected (and, therefore, not
requested (and rights of a Holder shall be deemed not to have been exercised)
for purposes of this Section 6.01(a)), (i) unless it has become effective, (ii)
if after it has become effective such registration is interfered with by any
stop order, injunction or other order or requirement of the SEC or any
Governmental Entity other than a misrepresentation or an omission by such
Holder, and as a result thereof, the Registrable Securities requested to be
registered cannot be completely distributed in accordance with the plan of
distribution set forth in the related registration statement or (iii) if the
conditions to closing specified in the underwriting agreement entered into in
connection with such registration are not satisfied or waived other than solely
by reason of some act or omission by such Holder of Registrable Securities. In
the event that any registration pursuant to this Section 6.01(a) shall involve,
in whole or in part, an underwritten offering, the Holders will have the right
to select Acquiror's lead underwriter of such underwritten offering; provided,
however, that if Acquiror is required to select MSCP or an Affiliate thereof as
the lead underwriter for any underwritten offering by Acquiror pursuant to that
certain Registration Rights Agreement dated as of July 8, 1998, by and among
Acquiror, MSCP and certain other parties thereto (the "MSCP Agreement"), a copy
of which was provided to the Holders on the date hereof, the Holders shall
choose MSCP or such Affiliate thereof as the lead underwriter for any
underwritten offering pursuant to this Section 6.01(a) during the term of the
MSCP Agreement. The Holders of Registrable Securities shall not have the right
to exercise any registration rights under this Section 6.01(a) until after the
earlier to occur of (x) the completion of a sale of Acquiror Common Stock
pursuant to at least one (1) demand registration by the holders of Founder
Securities pursuant to Section 2.01 of the MSCP Agreement, or (y) two (2) years
after the Closing (the date when the Holders may exercise any registration
rights under this Section 6.01(a) being referred to herein as the "Exercise
Date") Notwithstanding anything else contained herein, any registration under
this Section 6.01 may not be used by the Holders for any transaction or
structure (whether or not including a trust or other intermediary) involving a
derivative, forward sale, short selling or similar transactions (except for
transactions (a) involving solely private sales in the over-the-counter market
and (b) which do not in any way involve the registration of any security other
than Acquiror Common Stock (such exception, the "Permitted Derivative
Transactions")) and may only be used by the Holders to effect direct transfers,
underwritten sales or the Permitted Derivative Transactions.
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(b) If on any occasion at least 180 days after Closing, Acquiror
proposes to register any of its common stock, any other of its equity securities
or securities convertible into or exchangeable for its equity securities
(collectively, including common stock, "Other Securities") under the Securities
Act, whether or not for sale for its own account, in a manner that would permit
registration of Registrable Securities for sale for cash to the public under the
Securities Act, it shall prior to such time as all Holders in the aggregate
beneficially own less than 15% of the number of shares of Acquiror Common Stock
held by such Holders immediately following the Effective Time, give prompt
written notice to each Holder of Registrable Securities of its intention to do
so and of the rights of such Holder under this paragraph. Subject to the terms
and conditions hereof, such notice shall offer each such Holder the opportunity
to include in such registration statement such number of Registrable Securities
as such Holder may request. Upon the written request of any such Holder made
within 15 days after the receipt of Acquiror's notice (which request shall
specify the number of Registrable Securities intended to be disposed of and the
intended method of disposition thereof), Acquiror shall use its best efforts to
effect, in connection with the registration of the Other Securities, the
registration under the Securities Act of all Registrable Securities which
Acquiror has been so requested to register, to the extent required to permit the
disposition (in accordance with such intended methods thereof) of the
Registrable Securities so requested to be registered; provided, that:
(i) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective
date of the registration statement filed in connection with such
registration, Acquiror shall determine for any reason not to register
the Other Securities, Acquiror may, at its election, give written
notice of such determination to such Holders and thereupon Acquiror
shall be relieved of its obligation to register such Registrable
Securities in connection with the registration of such Other
Securities, without prejudice, however, to the rights of the Holders of
Registrable Securities immediately to request that such registration be
effected as a registration under Section 6.01(a) to the extent
permitted thereunder;
(ii) if the registration referred to in the first sentence of
this paragraph is to be an underwritten registration on behalf of
Acquiror, and a nationally recognized investment banking firm selected
by Acquiror advises Acquiror in writing that, in such firm's good faith
view, the inclusion of all or a part of such Registrable Securities in
such registration would be likely to have an adverse effect upon the
price, timing or distribution of the offering and sale of the Other
Securities then contemplated, Acquiror shall include in such
registration: (A) first, all Other Securities Acquiror proposes to sell
for its own account ("Acquiror Securities"), (B) second, up to the full
number of Acquiror securities held by any Persons holding registration
rights pursuant to MSCP Agreement that have requested to be included in
such registration ("Founder Securities"), (C) third, up to the full
number of Registerable Securities held by Holders of Registerable
Securities that are requested to be included in such registration in
excess of the number of Acquiror Securities and Founder Securities to
be sold in such offering which, in the good faith view of such
investment banking firm, can be so sold without so adversely affecting
such offering (and (x) if such number is less than the full number of
such Registrable Securities, such number shall be allocated pro rata
among such Holders on the basis of the relative number of Registrable
Securities then held by each such Holder (provided that any number in
excess of a Holder's request may be reallocated among the requesting
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Holders in a like manner) and (y) in the event that such investment
banking firm advises Acquiror in writing pursuant to this subclause
(ii) that less than all of such Registrable Securities should be
included in such offering, such Holders may withdraw their request for
registration of their Registrable Securities under this Section 6.01(b)
and request that 90 days subsequent to the effective date of the
registration statement for the registration of such Other Securities
such registration of Registrable Securities be effected as a
registration under Section 6.01(a) to the extent permitted thereunder),
and (D) fourth, up to the full number of the Other Securities (other
than Acquiror Securities), if any, in excess of the number of Acquiror
Securities, Founder Securities and Registrable Securities to be sold in
such offering which, in the good faith view of such investment banking
firm, can be so sold without so adversely affecting such offering (and,
if such number is less than the full number of such Other Securities,
such number shall be allocated pro rata among the holders of such Other
Securities (other than Acquiror Securities) on the basis of the number
of securities requested to be included therein by each such holder);
(iii) Acquiror shall not be required to effect any
registration of Registrable Securities under this Section 6.01(b)
incidental to the registration of any of its securities in connection
with mergers, acquisitions, exchange offers, subscription offers,
dividend reinvestment plans or stock option or other executive or
employee benefit or compensation plans; and
(iv) no registration of Registrable Securities effected under
this Section 6.01(b) shall relieve Acquiror of its obligation to effect
a registration of Registrable Securities pursuant to Section 6.01(a).
(c) For the purposes of this Section 6.01, the term "Registrable
Securities" shall mean any shares of common stock of Acquiror acquired hereunder
and any securities issued directly or indirectly with respect to such common
stock by way of a split, dividend, or other division of securities, or in
connection with a combination of securities, recapitalization, merger,
consolidation, or other reorganization. As to any particular Registrable
Securities, such Registrable Securities shall cease to be Registrable Securities
when they (i) have been effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them or (ii)
repurchased by Acquiror or otherwise have ceased to be outstanding.
(d) Whenever under the preceding paragraphs of this Section 6.01
Acquiror is required hereunder to register any Registrable Securities, it agrees
that it shall as promptly as practicable also do the following:
(i) Prepare, file and use its reasonable best efforts to cause
to become effective a registration statement under the Securities Act
relating to the Registrable Securities to be offered in accordance with
the intended method of disposition thereof;
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities until
such
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time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition set forth in such
registration statement; provided that the Acquiror will, at least five
(5) business days prior to filing a registration statement or
prospectus or any amendment or supplement thereto, furnish to each
selling Holder copies of such registration statement or prospectus (or
amendment or supplement) as proposed to be filed (including, upon the
request of such Holder, documents to be incorporated by reference
therein) which documents will be subject to the reasonable review and
comments of such Holder (and its attorneys) during such 5-business-day
period and the Acquiror will not file any registration statement, any
prospectus or any amendment or supplement thereto (or any such
documents incorporated by reference) containing any statements with
respect to such Holder to which such Holder shall reasonably object in
writing;
(iii) Furnish to the Holders of Registrable Securities and to
any underwriter of such Registrable Securities such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number
of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus,
and such other documents, as the selling Holders or such underwriter
may reasonably request, and a copy of any and all transmittal letters
or other correspondence to or received from, the SEC or any other
governmental agency or self-regulatory body or other body having
jurisdiction (including any domestic or foreign securities exchange)
relating to such offering;
(iv) After the filing of the registration statement, promptly
notify each selling Holder in writing of the effectiveness thereof and
of any stop order issued or threatened by the SEC and take all
reasonable actions required to prevent the entry of such stop order or
to promptly remove it if entered and promptly notify such selling
Holder of such lifting or withdrawal of such order;
(v) Use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the selling Holders to consummate the
disposition of such Registrable Securities;
(vi) Enter into any reasonable underwriting agreement
required by the proposed underwriter for the selling Holders, if any;
(vii) Use its reasonable best efforts to register or qualify
all Registrable Securities covered by said registration statement under
the securities or "blue-sky" laws of such jurisdictions as any selling
Holder or any underwriter may request and use its reasonable best
efforts to obtain all appropriate registrations, permits and consents
in connection therewith, and do any and all other acts and things which
may be necessary or advisable to enable the Holders of Registrable
Securities or any such underwriter to consummate the disposition in
such jurisdictions of its Registrable Securities covered by such
registration statement; provided that Acquiror shall not be required to
register or
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qualify the securities in any jurisdictions which require it to qualify
to do business or subject itself to taxation or general service of
process therein;
(viii) Immediately notify each selling Holder in writing, (i)
at any time when a prospectus relating to his, her or its Registrable
Securities is required to be delivered under the Securities Act, of the
happening of any event as a result of which such prospectus contains an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (ii) of any request by the SEC or any other
regulatory body having jurisdiction for any amendment or supplement to
any registration statement or other document relating to such offering,
and in either such case, at the request of any such selling Holder,
prepare and furnish a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not 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 not misleading;
(ix) Use its reasonable best efforts to cause all such
Registrable Securities to be listed on or included in each securities
exchange or quotation system on which similar securities issued by
Acquiror are then listed;
(x) Otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC and make generally
available to its security holders, in each case as soon as practicable,
but not later than 30 days after the close of the period covered
thereby an earnings statement of Acquiror which will satisfy the
provisions of Section 11(a) of the Securities Act;
(xi) (A) Use its reasonable best efforts to furnish to each
selling Holder and to any underwriter of such Registrable Securities an
opinion of counsel for the Acquiror addressed to each selling Holder
and dated the date of the closing under the underwriting agreement (if
any) (or if such offering is not underwritten, dated the effective date
of the registration statement), and (B) use its reasonable best efforts
to furnish to each selling Holder a "cold comfort" letter addressed to
each selling Holder and signed by the independent public accountants
who have audited the financial statements of the Acquiror included in
such registration statement, in each such case covering substantially
the same matters with respect to such registration statement (and the
prospectus included therein) as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters
in connection with the consummation of underwritten public offerings of
securities and such other matters as the selling Holders may reasonably
request and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements;
(xii) Send appropriate officers of the Acquiror to attend any
"road shows" and rating agency, analyst and investor presentations
scheduled in connection with any such registration and use its
reasonable best efforts to cooperate as reasonably requested by the
Holders in the marketing of the Registrable Securities, and all
reasonable out-of-pocket
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costs and expenses incurred by the Acquiror or such officers in
connection with such attendance or co-operation shall be paid by the
Acquiror; and
(xiii) Furnish for delivery in connection with the closing of
any offering of Registrable Securities pursuant to a registration
effected pursuant to Section 6.01(a) or (b) unlegended certificates
representing ownership of the Registrable Securities being sold in such
denominations as shall be requested by the selling Holders or the
underwriters.
(xiv) Choose the auditors, Acquiror legal counsel and
financial printer to be engaged by Acquiror in any such registration.
(e) Incident to any registration statement referred to in this
Section 6.01, and subject to applicable law, Acquiror will indemnify and hold
harmless each underwriter, each Holder of Registrable Securities (including its
respective partners, directors, officers, employees and agents) so registered,
and each person who controls any of them within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, expenses and liabilities, joint or several (including
any investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities arise out of or are based on (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement
(including any related preliminary or definitive prospectus, or any amendment or
supplement to such registration statement or prospectus), (ii) any omission or
alleged omission to state in such document a material fact required to be stated
in it or necessary to make the statements in it not misleading, or (iii) any
violation by Acquiror of the Securities Act, any state securities or "blue sky"
laws or any rule or regulation thereunder in connection with such registration,
provided that Acquiror will not be liable to the extent that such loss, claim,
damage, expense or liability (x) arises from and is based on an untrue statement
or omission or alleged untrue statement or omission made in reliance on and in
conformity with information furnished in writing to Acquiror by such
underwriter, Holder or controlling person expressly for use in such registration
statement or (y) arises from the failure of any Holder or underwriter to comply
with such prospectus delivery requirements as are applicable to it. With respect
to such untrue statement or omission or alleged untrue statement or omission in
the information furnished in writing to Acquiror by such Holder expressly for
use in such registration statement or such failure to comply with such
prospectus delivery requirements, such Holder will indemnify and hold harmless
each underwriter, Acquiror (including its directors, officers, employees and
agents), each other Holder of Registrable Securities (including its respective
partners directors, officers, employees and agents) so registered, and each
person who controls any of them within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, expenses and liabilities, joint or several, to which
they, or any of them, may become subject under the Securities Act, the Exchange
Act or other federal or state statutory law or regulation, at common law or
otherwise to the same extent provided in the immediately preceding sentence. In
no event, however, shall the liability of a Holder for indemnification under
this paragraph exceed the net proceeds received by such Holder from its sale of
Registrable Securities under such registration statement. Each
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Holder's obligation to indemnify pursuant to this Section is several in the
proportion that the net proceeds of the offering received by such holder bear to
the total proceeds of the offerings received by all Holders and not joint.
(f) Each party indemnified under Section 6.01(e) above shall,
promptly after receipt of notice of a claim or action against such indemnified
party in respect of which indemnity may be sought hereunder, notify the
indemnifying party in writing of the claim or action and the indemnifying party
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party, and shall assume the payment of all fees
and expenses; provided that the failure of any indemnified party so to notify
the indemnifying party shall not relieve the indemnifying party of its
obligations hereunder except to the extent that the indemnifying party is
materially prejudiced by such failure to notify. In any such action, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the sole expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) in the reasonable
judgment of such indemnified party representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, in which case the fees and expenses of such counsel shall be at
the sole expense of the indemnifying party. It is understood that the
indemnifying party shall not, in connection with any claim or action or related
proceeding in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such indemnified parties, and that all such fees
and expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Holders as indemnified parties, such firm shall be
designated in writing by the indemnified party that had the largest number of
Registrable Securities included in such registration. The indemnifying party
shall not be liable for any settlement of any claim or action effected without
its written consent, which consent shall not be unreasonably withheld or
delayed, but if settled with such consent, or if there be a final judgment for
the plaintiff, the indemnifying party shall indemnify and hold harmless such
indemnified parties from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened claim or action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising out
of such proceeding.
(g) If the indemnification provided for in this Section 6.01 shall
for any reason be unavailable (other than in accordance with its terms) to an
indemnified party in respect of any loss, liability, cost, claim or damage
referred to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, cost, claim or damage (A)
as between the Acquiror and the underwriters, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Acquiror on the one
hand and the underwriters on the other hand from the offering of the Registrable
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in
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connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations, and (B) as between (x) the Acquiror and the selling Holders, or
(y) the selling Holders and the underwriters, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or parties
on the one hand and of the indemnified party or parties on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Acquiror on the one hand
and the underwriters on the other hand in connection with the offering of the
Registrable Securities shall be deemed to be in the same respective proportions
as the net proceeds from the offering of the Registrable Securities (before
deducting expenses) (as if, for purposes of this Section 6.01(g), the Acquiror
had received the proceeds of any secondary offering) and the total underwriting
discounts and commissions received by the underwriters, in each case as set
forth in the table on the cover of a prospectus, bear to the aggregate public
offering price of the Registrable Securities. The relative fault of the
Acquiror, the selling Holders and the underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Acquiror, by a selling Holder or by the
underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by an indemnified party as a result of the loss, cost, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 6.01(g) shall be deemed to include, for purposes of this Section
6.01(g), any legal or other costs, fees and expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. The Acquiror and the selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 6.01 were determined by
pro rata allocation (even if the underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in this Section 6.01(g).
Notwithstanding any other provision of this Section 6.01, no selling Holder
shall be required to contribute any amount in excess of the amount by which the
net proceeds of the offering received by such selling Holder exceed the amount
of any damages which such selling Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. Each selling Holder's obligations to contribute pursuant to this
Section are several in the proportion that the net proceeds of the offering
received by such selling Holder bears to the total net proceeds of the offering
received by all the selling Holders and not joint. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(h) Indemnification and contribution similar to that specified in
the preceding subsections of this Section 6.01 (with appropriate modifications)
shall be given by the Acquiror, the selling Holders and the underwriters with
respect to any required registration or other qualification of securities under
any state law or regulation or governmental authority.
(i) With a view to making available the benefits of certain rules
and regulations of the SEC which may permit the sale of the Registrable
Securities to the public without registration, Acquiror agrees to: (i) make and
keep public information available as those terms are understood and defined in
Rule 144 under the Securities Act (and any successor rule to Rule 144); (ii)
file with the SEC in a timely manner all reports and other documents required of
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Acquiror under the Securities Act and the Exchange Act; (iii) furnish to each
Holder as promptly as possible upon its request a written statement by Acquiror
confirming its compliance with the reporting requirements of Rule 144 (at any
time from and after May 16, 2000), and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of Acquiror, and any
other reports and documents so filed as a holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a holder to sell
any such securities without registration; and (iv) promptly upon request of any
Holder, use its reasonable best efforts to comply, in connection with any
resales by the Investors, pursuant to Rule 144A, with the informational
requirements of Rule 144A(d)(4) (and any successor rule to Rule 144A(d)(4)).
(j) If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a registration requested under this
Section 6.01, the Acquiror shall enter into an underwriting agreement with such
underwriters for such offering, which agreement will contain such
representations and warranties and covenants by the Acquiror and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnification and contribution provisions substantially to the effect and to
the extent provided in Section 6.01, and agreements as to the provision of
opinions of counsel and accountants' letters to the effect and to the extent
provided in Section 6.01(d)(xi). The selling Holders on whose behalf the
Registrable Securities are to be distributed by such underwriters shall be
parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Acquiror to and for
the benefit of such underwriters, shall also be made to and for the benefit of
such selling Holders. Such underwriting agreement shall also contain such
representations and warranties by such selling Holders and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions on the part of selling shareholders, including,
without limitation, indemnification and contribution provisions substantially to
the effect and to the extent provided in Section 6.01.
(k) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act pursuant to this Section 6.01, the Acquiror shall give the Holders of such
Registrable Securities and the underwriters, if any, and their respective
counsel and accountants, such reasonable and customary access to its books,
records and properties and such opportunities to discuss the business and
affairs of the Acquiror with its officers and the independent public accountants
who have certified the financial statements of the Acquiror as shall be
necessary, in the opinion of such Holders and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act; provided, that such Holders and the underwriters and their
respective counsel and accountants shall use their reasonable best efforts to
coordinate any such investigation of the books, records and properties of the
Acquiror and any such discussions with the Acquiror's officers and accountants
so that all such investigations occur at the same time and all such discussions
occur at the same time.
(l) The rights described in this Section 6.01 shall be
transferable only to Affiliates of the Company Stockholder or members of his
immediate family, spouses, lineal descendants and members of the Company
Stockholder's immediate family or trusts for their benefit or upon the Company
Stockholder's death, his executor, administrator, testamentary trustee,
legatees, heirs or beneficiaries (collectively, the "Permitted Transferees" and
each, a "Permitted Transferee").
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Only the Company Stockholder and his Permitted Transferees shall be deemed to be
to be a "Holder" for purposes of this Section 6.01.
(m) Notwithstanding anything to the contrary, for purposes of
Sections 6.01(e), (f), (g) and (h), the term "underwriter" shall also include,
without limitation, "statutory underwriters."
SECTION 6.02. Appropriate Action; Consents; Filings.
(a) Upon the terms and subject to the conditions set forth in this
Merger Agreement, the Company and Acquiror shall use their reasonable best
efforts to take, or cause to be taken, all appropriate action, and do, or cause
to be done, and to assist and cooperate with the other parties in doing all
things necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the transactions contemplated by this Merger
Agreement as promptly as practicable, including (i) executing and delivering any
additional instruments necessary, proper or advisable to consummate the
transactions contemplated by, and to carry out fully the purposes of, this
Merger Agreement, (ii) obtaining from any Governmental Entities any material
Licenses required to be obtained or made by Acquiror or the Company or any of
their subsidiaries in connection with the authorization, execution and delivery
of this Merger Agreement and the consummation of the transactions contemplated
herein, including, without limitation, the Merger, and (iii) making all
necessary filings, and thereafter making any other required submissions, with
respect to this Merger Agreement and the Merger required under (A) the
Securities Act, the Exchange Act and any other applicable federal or state
securities Laws, (B) the HSR Act and (C) any other applicable Law; provided that
Acquiror and the Company shall cooperate with each other in connection with the
making of all such filings, including providing copies of all such documents to
the non-filing party and its advisors prior to filing and discussing all
reasonable additions, deletions or changes suggested in connection therewith.
The Company and Acquiror shall furnish to each other all information required
for any application or other filing to be made pursuant to the rules and
regulations of any applicable Law in connection with the transactions
contemplated by this Merger Agreement.
(b)(i) The Company and Acquiror shall give (or shall cause their
respective subsidiaries to give) any notices to third parties, and use, and
cause their respective subsidiaries to use, their reasonable best efforts to
obtain any third party consents, approvals or waivers (A) necessary, proper or
advisable to consummate the transactions contemplated in this Merger Agreement,
(B) disclosed or required to be disclosed in the Company Disclosure Schedule or
the Acquiror Disclosure Schedule, as the case may be, or (C) required to prevent
a Company Material Adverse Effect from occurring prior to or after the Effective
Time or an Acquiror Material Adverse Effect from occurring prior to or after the
Effective Time.
(ii) In the event that either the Company or Acquiror shall fail to
obtain any third party consent, approval or waiver described in subsection
(b)(i) above, such party shall use its reasonable best efforts, and shall take
any such actions reasonably requested by the other parties hereto, to minimize
any adverse effect upon the Company and Acquiror, their respective subsidiaries,
and their respective businesses resulting, or which could reasonably be expected
to result after the Effective Time, from the failure to obtain such consent,
approval or waiver.
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(c) From the date of this Merger Agreement until the Effective
Time, the Company and Acquiror shall promptly notify each other in writing of
any pending or, to the knowledge of the Company or Acquiror (or their respective
subsidiaries), threatened action, proceeding or investigation by any
Governmental Entity or any other Person (i) challenging or seeking damages in
connection with the Merger or the conversion of the Company Common Stock into
the Merger Consideration pursuant to the Merger or (ii) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the right of Acquiror
or its subsidiaries to own or operate all or any portion of the businesses or
Assets of the Company or any Subsidiary. The Company and Acquiror shall
cooperate with each other in defending any such action, proceeding or
investigation, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed.
SECTION 6.03. Senior Notes Tender Offer; Repayment of Indebtedness.
(a) After the execution of this Merger Agreement, the Company
shall cause its Reporting Subsidiary to use its reasonable best efforts to
purchase all of the Senior Notes effective as of the Closing Date at a purchase
price equal to 109% of the principal amount of the Senior Notes, plus accrued
interest, if any.
(b) Concurrently with the Closing, and subject to receipt of the
Buyer Financing, Acquiror shall infuse the Company with a sufficient amount of
cash necessary and otherwise cause the Company and the Subsidiaries to pay and
satisfy in full in cash by wire transfer of immediately available funds all of
the Company's and the Subsidiaries' indebtedness for borrowed money to (i)
General Electric Capital Corporation, (ii) Xxxxxx X. XxxxxxXxx, (iii) Comerica
Bank and (iv) and The Bank of New York as Trustee for the holders of Senior
Notes, provided that Acquiror shall not be obligated to pay more than 101% of
the outstanding principal amount of the Senior Notes together with any accrued
but unpaid interest thereon to the Closing Date (the "Senior Note Redemption
Price"). The Company agrees to cooperate with Acquiror and its lenders in
securing the Buyer Financing, (including, without limitation, requesting
estoppel certificates, landlord's waivers and similar documents from third
parties).
SECTION 6.04. Update Disclosure.
From and after the date of this Merger Agreement until the Effective
Time, each party hereto shall promptly notify the other parties hereto by
written update to its Disclosure Schedule of (i) any representation or warranty
made by it in connection with this Merger Agreement becoming untrue or
inaccurate, (ii) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any condition to the
obligations of any party to effect the Merger and the other transactions
contemplated by this Merger Agreement not to be satisfied, or (iii) the failure
of the Company, Acquiror or Acquiror Sub, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it pursuant to this Merger Agreement which would be likely to result in any
condition to the obligations of any party to effect the Merger and the other
transactions contemplated by this Merger Agreement not to be satisfied;
provided, however, that the delivery of any notice pursuant to this Section 6.04
shall not cure any breach of any representation or warranty requiring disclosure
of such matter prior to the date of this Merger
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Agreement or otherwise limit or affect the rights and remedies available
hereunder prior to or following the Closing to the party receiving such notice.
SECTION 6.05. Public Announcements.
Acquiror, Acquiror Sub and the Company shall consult with each other
before issuing or making, and shall give each other the opportunity to review
and comment upon, any press release or other public statement with respect to
the Merger and the other transactions contemplated in this Merger Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by Law or any listing agreement
with the NASD (as defined in Article X).
SECTION 6.06. Employment Agreements; Employee Stock.
(a) The Company shall use its reasonable best efforts to cause the
persons listed on Section 6.06(a) of the Company Disclosure Schedule (the
"Company Executives") to execute and deliver to Acquiror Sub at or prior to the
Closing, without further consideration, an employment agreement in substantially
the form attached hereto as Exhibit B-1 (for Company Executives receiving a
two-year employment term) or Exhibit B-2 (for Company Executives receiving a
one-year employment term) (the "Executive Employment Agreements"), as
appropriate, pursuant to which Acquiror will grant to such persons, in the
aggregate, up to the number of shares of restricted common stock of Acquiror set
forth in Section 6.06(a) of the Company Disclosure Schedule and in such amount,
individually, as set forth opposite such person's name on Section 6.06(a) of the
Company Disclosure Schedule and vesting over a two year period, and the Company
Executives will agree to non-compete, non-solicitation and assignment of
inventions provisions for the benefit of the Surviving Corporation.
(b) The Company and its Subsidiaries shall use their reasonable
best efforts to cause the persons listed on Section 6.06(b) of the Company
Disclosure Schedule to execute and deliver an employment agreement in
substantially the form attached hereto as Exhibit B-3, pursuant to which
Acquiror will grant to such persons, in the aggregate, up to the number of
shares of restricted common stock of Acquiror set forth in Section 6.06(a) of
the Company Disclosure Schedule and in such amount, individually, as set forth
opposite such person's name on Section 6.06(b) of the Company Disclosure
Schedule and vesting over a two year period, and the employees will agree to
non-compete, non-solicitation and assignment of inventions provisions for the
benefit of the Surviving Corporation.
SECTION 6.07. Additional Financial Information.
(a) The Company will cause to be prepared and will furnish to
Acquiror as promptly as possible an unaudited consolidated balance sheet of the
Company and the Subsidiaries as of the last day of each month ending after the
date hereof (the "Additional Unaudited Balance Sheets") and the related
unaudited consolidated statements of income and cash flows of the Company and
the Subsidiaries for the one-month period then ended (the "Additional Unaudited
Balance Sheets and such statements of income and cash flows are being
hereinafter referred to collectively, as the "Additional Unaudited Statements").
The Company represents and warrants to Acquiror and Acquiror Subsidiary that as
of the date of delivery thereof, that such Additional
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Unaudited Statements are complete and correct in all material respects, have
been prepared in accordance with the books and records of the Company and the
Subsidiaries, and present fairly, in all material respects, the consolidated
financial position of the Company and the consolidated Subsidiaries and their
consolidated results of operations and cash flows as of and for the respective
dates and time periods in accordance with GAAP applied on a basis consistent
with past practices of the Company, except as noted thereon and subject to the
absence of footnotes and normal and recurring year-end adjustments which are not
expected to be material in amount. All changes in accounting methods (for
financial accounting purposes) made, agreed to, requested or required with
respect to the Company or any of the Subsidiaries since the date hereof and
prior to the date of each Additional Unaudited Statements will be reflected in
such Additional Unaudited Statements.
(b) The Company will cause to be prepared, at Acquiror's cost and
expense, and will furnish to Acquiror as promptly as possible an audited
consolidated balance sheet of the Company and the Subsidiaries as of March 31,
2000 and the related audited consolidated statements of income and cash flows of
the Company and the Subsidiaries for the three-month period then ended
(collectively, the "First Quarter Audited Financial Statements"), in each case,
audited by BDO Xxxxxxx, LLP or other auditor selected by Acquiror in accordance
with GAAP and accompanied by the related report of such auditor. The Company
will record any proposed adjustments arising from such audit on its books and
records. The Company will ensure that the First Quarter Audited Financial
Statements are complete and correct in all material respects, have been prepared
in accordance with the books and records of the Company and the Subsidiaries,
and present fairly, in all material respects, the consolidated financial
position of the Company and the consolidated Subsidiaries and their consolidated
results of operations and cash flows as of and for the respective dates and time
periods in accordance with GAAP applied on a basis consistent with past
practices of the Company, except as noted thereon.
SECTION 6.08. Environmental Matters.
Provided that Acquiror enters into the Right of Access Agreement set
forth herein as Exhibit F, the Company will permit Acquiror, in Acquiror's
reasonable discretion and at Acquiror's expense, to cause to be prepared a Phase
I environmental report on each parcel of the Real Property or any real property
leased by the Company or any Subsidiary (to the extent the Company or a
Subsidiary has the right to allow Acquiror to do the same) designated by
Acquiror and, if recommended under the Phase I environmental report and so
requested by Acquiror, a Phase II environmental report, in each case prepared by
an environmental consultant designated by Acquiror such consultant and the scope
of such work subject to the consent of the Company, which consent shall not be
unreasonably withheld (the "Environmental Reports"). The Company shall cooperate
with, and provide such information or other assistance as may be reasonably
requested by, Acquiror or the environmental consultant designated by Acquiror in
connection with the preparation and completion of such Environmental Reports.
Acquiror shall cause all Environmental Reports (including drafts thereof) to be
provided to the Company promptly after their receipt by Acquiror.
SECTION 6.09. Post-Signing SEC Documents.
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(a) Acquiror will file with the SEC all reports, schedules, forms,
statements and other documents required to be filed by it after the date of this
Merger Agreement but before the Effective Time, and any registration statement,
together with all amendments and supplements thereto, required to be filed after
the Effective Time pursuant to Section 6.01 (the "Acquiror Post-Signing SEC
Documents"). The Company and the Company Stockholder will cooperate in the
preparation of any Acquiror Post-Signing SEC Documents, and shall cooperate in
responding to any comments with respect thereto received from the SEC. The
Company will furnish Acquiror with such information concerning the Company and
the Subsidiaries as is necessary in order to cause any Acquiror Post-Signing SEC
Document, insofar as it relates to the Company and the Subsidiaries, to comply
with applicable Laws. The Company agrees promptly to advise Acquiror if any
information provided by it in the Acquiror Post-Signing SEC Documents is or
becomes incorrect or incomplete in any material respect and to provide Acquiror
with the information needed to correct such inaccuracy or omission.
(b) Prior to the Closing, at their cost and expense, (i) the
Company shall reasonably cooperate with and assist Acquiror and Xxxxxx Xxxxxxxx
LLP, its independent public accountants ("AA"), in the compilation and
preparation of such financial statements, financial statement schedules and
other financial information relating to the Company's business which Acquiror
may be required to include in any registration statement, report or other
document which Acquiror may file with the SEC, NASD or any applicable state
securities commission, (ii) the Company shall direct BDO Xxxxxxx, LLP, the
Company's independent public accountants prior to the Closing ("BDO"), to
cooperate with AA and use its commercially reasonable best efforts to obtain
promptly for AA, upon its request, any consent, report, opinion or letter of BDO
required to be filed by Acquiror under applicable regulations of the SEC or any
applicable state securities commission in connection therewith. Without
limitation of the foregoing, the Company shall use its reasonable best efforts
to cause to be delivered to Acquiror "comfort" letters of BDO dated and
delivered the date on which any registration statement relating to the Buyer
Financing or any registration pursuant to Section 6.01 shall be filed and as of
the date any such registration statement shall become effective, and addressed
to Acquiror, in form and substance reasonably satisfactory to Acquiror and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Merger Agreement.
SECTION 6.10. Indemnification.
(a) After the Effective Time, subject to the terms and conditions
set forth in Sections 6.10 and 6.11, the Company Stockholder shall indemnify and
hold harmless Acquiror, the Surviving Corporation and their respective officers
and directors, and each Person, if any, who controls or may control Acquiror or
the Surviving Corporation within the meaning of the Securities Act (all such
persons hereinafter are referred to individually as an "Indemnified Person" and
collectively as "Indemnified Persons," but in no event shall any stockholder of
the Company be such an Indemnified Person), from and against any and all losses,
costs, damages, liabilities and expenses, including reasonable attorneys' fees
and expenses ("Damages") actually suffered by them and arising out of the breach
of the representations, warranties, covenants and agreements given or made by
the Company in this Merger Agreement, in the Articles of Merger or in the
Exhibits or Schedules hereto or in any certificate delivered by or on behalf of
the Company pursuant hereto; provided however, that the Company Stockholder
shall have no
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liability under this Section 6.10(a) to the extent claims for Damages hereunder
do not exceed an aggregate of $500,000 and that if such Damages exceed an
aggregate of $500,000 then the indemnification provided for hereunder shall
apply only to Damages to the extent exceeding $500,000. Notwithstanding anything
to the contrary contained in this Merger Agreement, the maximum amount of
indemnifiable Damages which may be recovered from the Company Stockholder
arising out of or resulting from the causes enumerated in this Section 6.10(a)
and Section 6.10(b) shall be $125 million; provided, however, that such
limitation on the indemnification obligations of the Company Stockholder shall
not apply to any claim or claims for indemnification to the extent such claim or
claims are based on common law fraud. It shall be a condition of the right of
each Indemnified Person to indemnification pursuant to this Section 6.10(a) that
such Indemnified Person shall deliver to the Company Stockholder a written claim
for such indemnification, setting forth in reasonable detail the basis therefor
and setting forth the amount of damages sought, on or prior to the date that the
particular representation, warranty, covenant or agreement for the breach of
which the indemnification is being sought, expires under the terms of this
Merger Agreement.
(b) In addition to the indemnification provided by the Company
Stockholder as set forth in Section 6.10(a), the Company Stockholder shall
indemnify and hold harmless the Indemnified Persons for Damages actually
suffered by them and arising out of the breach of the representations,
warranties, covenants and agreements given or made by the Company Stockholder in
this Merger Agreement or in its Exhibits or Schedules thereto or in any
certificate delivered by or on behalf of the Company Stockholder pursuant
hereto.
(c) Any payment to be made to an Indemnified Person by the Company
Stockholder under this Section 6.10 may be made in cash or, in whole or in part,
in Acquiror Common Stock having a value per share equal to the Price Per Share.
The Company Stockholder and Acquiror agree that any payment required to be made
by the Company Stockholder shall first be made pursuant to the terms of and from
the escrow established under the Escrow Agreement attached as Exhibit C.
(d) After the Effective Time, indemnification pursuant to this
Section 6.10 shall be the sole and exclusive remedy of Acquiror and the
Surviving Corporation under or in connection with this Merger Agreement or any
of the transactions contemplated herein, except that Acquiror and the Surviving
Corporation shall be entitled to obtain specific performance or injunctive
relief in connection with the enforcement of any of the covenants set forth
herein which by their terms continue after the Effective Time.
SECTION 6.11. Procedures; Conditions of Indemnification.
With respect to any indemnification provided pursuant to this Merger
Agreement, the Indemnified Person agrees to give prompt written notice to the
Company Stockholder of any claim or other assertion of liability by third
parties (hereinafter called collectively "Claims"), it being understood that the
failure to give such notice shall not affect the Indemnified Person's right to
indemnification and the indemnifying party's obligation to indemnify as set
forth in this Merger Agreement, unless the Company Stockholder's rights with
respect to such Claim are thereby materially prejudiced.
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The obligations and liabilities of the parties hereto with respect to
any indemnification by the Company Stockholder pursuant to this Merger Agreement
resulting from any Claim shall be subject to the following terms and conditions:
(a) The Company Stockholder shall have the right to undertake, by
counsel or other representatives of his own choosing, the defense of such Claim.
(b) In the event that the Company Stockholder shall elect not to
undertake such defense, or within a reasonable time after notice of any such
Claim from the Indemnified Person shall fail to defend, the Indemnified Person
(upon further written notice to the Company Stockholder) shall have the right to
undertake the defense, compromise or settlement of such Claim, by counsel or
other representatives of its own choosing, on behalf of and for the account and
risk of the Company Stockholder (subject to the right of the Company
Stockholder, to assume defense of such Claim at any time prior to settlement,
compromise or final determination thereof); provided however, that no settlement
or compromise of such Claim shall be made without the written consent of the
Company Stockholder which consent shall not be unreasonably withheld.
(c) Anything in this Section 6.11 to the contrary notwithstanding,
(i) if the Indemnified Person notifies the Company Stockholder that the
Indemnified Person has concluded that a Claim may materially and adversely
affect the Indemnified Person other than as a result of money damages or other
money payments, the Indemnified Person shall have the right, at its own cost and
expense, to participate in the defense, compromise or settlement of the Claim;
provided, however, that the Indemnified Person shall not have the right to
participate with respect to a Claim relating to Taxes if the Claim relates to
Taxes of the Company or any Subsidiary for taxable years or taxable periods
ending on or prior to the Closing Date, (ii) the Company Stockholder shall not,
without the Indemnified Person's written consent, settle or compromise any Claim
or consent to entry of any judgment that does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Person of a release from all liability in respect of such Claim, and (iii) in
the event that the Company Stockholder undertakes defense of any Claim, the
Indemnified Person, by counsel or other representative of its own choosing and
at its sole cost and expense, shall have the right to consult with the Company
Stockholder and his counsel or other representatives concerning such Claim and
the Company Stockholder and the Indemnified Person and their respective counsel
or other representatives shall cooperate with respect to such Claim.
(d) Notwithstanding any other provision of this Section 6.11 and
with the exception of any Claim relating to Taxes as provided above, the
Indemnified Person may at any time assume full control over the responsibility
for any Claim (other than a Claim against the Company Stockholder, by written
notice to the Company Stockholder releasing the Company Stockholder from any
further indemnity obligation pursuant to this Merger Agreement with respect to
said Claim.
(e) Each of (A) Company Stockholder and (B) Acquiror, for itself
and on behalf of its Affiliates, agrees that, with respect to each
indemnification obligation contained in this Merger Agreement, (i) each such
obligation shall be calculated after reduction for any actual Tax benefit to the
Indemnified Person (including the Company, the Subsidiaries or any Affiliate of
the
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Indemnified Person) that arises in connection with the payment of the Damage or
otherwise with respect to the underlying claims giving rise to such Damage and
which is utilized by the Indemnified Person in the taxable year in which the
Claim is paid; (ii) all Damages shall be net of (x) any third-party insurance
proceeds actually received by the Indemnified Person from its own or its
Affiliates' insurance policies in connection with the facts giving rise to the
right of indemnification and (y) all premiums paid by Acquiror or its Affiliates
under such policies; and (iii) all Damages paid pursuant to Section 6.10 shall
be calculated so as to take into account all increases in actual Tax liability
payable by the Indemnified Person with respect to the taxable year in which the
Damages are paid as a result of the receipt of such payment; provided, however,
that each of (x) the Company Stockholder and (y) the Acquiror, for itself and on
behalf of its Affiliates, agrees to report each payment of Damages hereunder as
an adjustment to the Merger Consideration for federal income tax purposes unless
the Indemnified Person determines in good faith that such reporting position
cannot be supported on a more likely than not basis (it being understood that if
any such reporting position is later disallowed in any administrative or court
proceeding, Company Stockholder shall indemnify the Indemnified Person for the
effects of such disallowance). If a payment is made by the Company Stockholder
in accordance with Section 6.10 and Section 6.11, and if in a subsequent taxable
year a Tax benefit described in the previous sentence is utilized by Acquiror,
then Acquiror promptly shall pay to the Company Stockholder, at the time of such
utilization, the amount of such Tax benefit to the extent that such amount would
have resulted in a reduction in the indemnification obligations of the Company
Stockholder under Section 6.10 and Section 6.11 if the Tax benefit had been
utilized by Acquiror in the taxable year that the Company Stockholder made such
indemnification payment.
(f) Acquiror and the Company Stockholder acknowledge and agree
that anything herein to the contrary notwithstanding, no breach of any
representation, warranty, covenant or agreement contained herein shall give rise
to any right on the part of Acquiror or the Company Stockholder, after the
consummation of the Merger contemplated by this Agreement, to rescind this
Agreement or any of the transactions contemplated hereby.
SECTION 6.12. Tax Returns.
To the extent permitted under applicable Tax Laws, the Merger shall be
reported as a "reorganization" within the meaning of Section 368(a) and Section
368(a)(2)(D) of the Code in all federal, state and local Tax Returns filed after
the Effective Time. To the extent permitted under applicable Tax Laws, no party
to this Merger Agreement shall take any position inconsistent with the foregoing
on any Tax Return, in any audits or proceeding or otherwise. Notwithstanding any
other provision of this Merger Agreement, the obligations set forth in this
Section 6.12(a) shall survive the Effective Time without limitation as to time
or in any other respect.
SECTION 6.13. Reorganization.
During the period from the date of this Merger Agreement through the
Effective Time, unless Acquiror and the Company shall otherwise agree in
writing, Acquiror and the Company shall not, and shall cause their respective
subsidiaries not to, and the Company Stockholder shall
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not, knowingly take or fail to take any action which action or failure would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 6.14. Acquiror's Financing.
Acquiror shall use its reasonable best efforts to cause the Buyer
Financing to be obtained substantially on the terms set forth in the Buyer
Financing Letters or to obtain alternative financing on terms not materially
less favorable to Acquiror than the terms of the Buyer Financing Letters. The
Company agrees to provide, and will cause the Company, the Subsidiaries and its
and their respective officers, managers, employees and advisors to provide,
reasonable cooperation in connection with the arrangement of the Buyer
Financing; provided that the terms and conditions of such financing may not
require, prior to the Effective Time, the payment of any commitment or similar
fees by the Company, or the incurrence of any liabilities by the Company.
SECTION 6.15. Obligations of Acquiror Sub.
Acquiror shall take all action necessary to cause Acquiror Sub to
perform its obligations under this Merger Agreement and to consummate the Merger
on the terms and conditions set forth in this Merger Agreement and hereby
unconditionally guarantees to the Company that Acquiror Sub will perform all of
its obligations under this Merger Agreement.
SECTION 6.16. Loan Agreement.
Concurrently with the execution of this Merger Agreement, US Xchange
Finance shall execute a Promissory Note in the form attached hereto as Exhibit A
(the "Promissory Note"), pursuant to which the Acquiror shall make available to
US Xchange Finance a loan (the "Credit Facility") on the terms and subject to
the conditions set forth therein. Acquiror's obligation to execute the
Promissory Note is subject to and conditioned upon Acquiror's receipt of (i) a
security agreement executed by US Xchange Finance and its Subsidiaries, pursuant
to which such Persons will grant to Acquiror a security interest in Assets to
secure US Xchange Finance's obligations under the Credit Facility, in
substantially the form of Exhibit A to the Promissory Note; and (ii) a personal
guarantee of Xxxxxx X. XxxxxxXxx, in substantially the form attached as Exhibit
B to the Promissory Note.
SECTION 6.17. Transfer of Fiber Business; IRU and Maintenance
Agreement.
(a) Prior to the Closing, the Company will transfer all of its
fiber business (the "Fiber Business") to a company wholly-owned by the Company
Stockholder ("Barter Fiber") pursuant to an asset transfer agreement in form and
substance reasonably satisfactory to Acquiror, provided, however, that such
agreement shall provide: (i) that with respect to any employee engaged in the
conduct of both the Fiber Business and any other business of the Company and the
Subsidiaries, the Acquiror shall have the right to retain such employee upon the
Closing and (ii) that with respect to any asset which is used in both the Fiber
Business and any other business of the Company and the Subsidiaries, the
Acquiror shall have the right to retain ownership of such asset upon the Closing
but shall make such asset available to Barter Fiber at cost plus allocable
overhead to the extent that such asset is used in the Fiber Business; provided,
however, that with respect to any asset which is at least 66% used in the Fiber
Business, such asset will be
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assigned to Barter Fiber and Barter Fiber shall make such asset available to
Acquiror at cost plus allocable overhead to the extent such asset is used in any
other business of the Company and the Subsidiaries, and (iii) that the Acquiror
shall provide access to Barter Fiber to the central offices where fiber is
located. Barter Fiber shall solely be liable for and hold the Company, Acquiror
and Acquiror Sub harmless against the real property transfer or gains, sales,
use, transfer, value-added, excise, stock transfer, stamp, recording,
registration and any similar taxes that become payable in connection with the
transfer of such business pursuant to this Section 6.17 (a).
(b) Acquiror Sub shall execute and deliver at Closing, and the
Company Stockholder agrees to cause Barter Fiber to execute and deliver at
Closing, the IRU and Maintenance Agreement in substantially the form attached
hereto as Exhibit D (the "IRU and Maintenance Agreement").
SECTION 6.18. Noncompetition Covenants.
For a period of three (3) years commencing on the Closing Date, the
Company Stockholder will not:
(i) Directly or indirectly, engage in, own, control, or make a
significant non-controlling investment in, any business that competes directly
with the integrated communications provider business of Acquiror and/or the
Surviving Corporation (including any of the Subsidiaries) within the "Restricted
Area", provided that nothing in this Section 6.18 shall prohibit the Company
Stockholder or any of his Affiliates from (A) selling Dark Fiber or rights to
use Dark Fiber to any Person, (B) selling fiber, other than Dark Fiber, or
rights to use such fiber to wholesale carriers (which term, "wholesale
carriers," shall not include retail customers or other end users of such fiber),
or (C) conducting the directory business conducted by US Xchange Directory LLC.
For purposes of this Section 6.18, the term "Restricted Area" will mean the
States of Maine, Vermont, New Hampshire, Massachusetts, Rhode Island,
Connecticut, New York, New Jersey, Pennsylvania, Michigan, Ohio, Wisconsin,
Indiana, Illinois, Virginia and Maryland and the District of Columbia;
(ii) Accept employment with any person or entity that competes
directly with the business of Acquiror and/or the Surviving Corporation
(including any of the Subsidiaries) within the Restricted Area as of the date
hereof;
(iii) Directly or indirectly solicit or employ any person who at
such time provides services for or is otherwise employed by Acquiror and/or the
Surviving Corporation (including any of the Subsidiaries), or encourage or
induce any employee of Acquiror and/or the Surviving Corporation (including any
of the Subsidiaries) to leave such employment, other than the Fiber Business
Employees set forth on Section 6.18 of the Company Disclosure Schedule; or
(iv) Directly or indirectly, divert or attempt to divert from the
Acquiror and/or the Surviving Corporation (including any of the Subsidiaries),
the business conducted in the Restricted Area of any customer, supplier or
client of Acquiror and/or the Surviving Corporation (including any of the
Subsidiaries).
SECTION 6.19. Representation on Acquiror's Board of Directors.
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Acquiror agrees to cause its Transaction Agreement, dated as of July 8,
1998, as amended, among Acquiror and certain of its institutional shareholders
and management shareholders, to be amended (the "Transaction Agreement
Amendment") to provide that the parties to such Transaction Agreement Amendment
will vote their shares of Acquiror which are subject to the terms thereof in
favor of the election of Xxxxxxx Xxxxxx (or other designee of the Company
Stockholder approved by the Board of Directors, which approval shall not be
unreasonably withheld) to the Board of Directors of Acquiror so long as the
Company Stockholder owns at least 4,500,000 shares of Acquiror Common Stock.
SECTION 6.20. Restriction on Transfer of Acquiror Stock.
The Company Stockholder shall not, during the period commencing on the
Closing Date and ending 180 days after the Closing Date, offer, sell, contract
to sell, grant any option, right or warrant to purchase, or otherwise gift,
assign, convey, transfer or dispose of, directly or indirectly, any shares of
Acquiror Stock; provided that the foregoing shall not apply to any transfer or
disposition of Acquiror Stock to a Permitted Holder (as hereinafter defined)
who, as a condition to any proposed transfer or disposition, shall agree in
writing with Acquiror to be bound by all of the provisions of this Section 6.20
to the same extent as if such transferee were a Company Stockholder. A
"Permitted Holder" shall mean: (i) any Permitted Transferee or any charitable
organization designated by any Permitted Transferee; (ii) any organization
described in Section 501(c)(3) of the Code; (iii) Barter Fiber; or (iv) any of
the Persons listed on Section 6.20 of the Company Disclosure Schedule. The stock
certificates issued by Acquiror pursuant to this Agreement shall be stamped or
imprinted with a legend in substantially the following form (in addition to any
legend required under applicable Federal or state securities laws): "Until
[insert date 180 days after the Closing Date], the securities represented by
this certificate may not be transferred, sold or assigned without obtaining the
prior written consent of the Corporation."
SECTION 6.21. Trademark License.
The Acquiror Sub shall grant to US Xchange Directory LLC the right to
use the name "US Xchange" either alone or in connection with other words, for
its directory business, pursuant to the Trademark License Agreement in
substantially the form attached hereto as Exhibit E.
SECTION 6.22. Employee Benefits.
(a) For a period of at least two years following the Effective
Time, Acquiror shall provide or shall cause the Surviving Corporation and each
Subsidiary to provide benefits to any employee of the Surviving Corporation and
each Subsidiary which are not less favorable in the aggregate than the benefits
provided to similarly situated employees of the Acquiror and Acquiror
Subsidiaries or the benefits provided to similarly situated employees of the
Company of the Company's Subsidiaries immediately prior to the Effective Time.
From and after the Effective Time, solely for purposes of determining an
employee's vesting and eligibility rights under an employee benefit plan and not
for purposes of benefit accruals, Acquiror shall grant all employees of the
Surviving Corporation and any Subsidiaries credit for all service (to the same
extent as service with Acquiror or any Acquiror Subsidiary is taken into account
with respect to similarly situated employees of Acquiror and Acquiror
Subsidiaries) with the Company and any
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Subsidiary and their respective predecessors prior to the Effective Time (but
only to the extent that the Company and its Subsidiaries granted credit for such
service) as if such service with the Company or any Subsidiary was service with
Acquiror or any Acquiror Subsidiary. Following the Effective Time, all employees
of the Surviving Corporation and any Subsidiaries shall be eligible to
participate in the Acquiror Stock Option Plan, and, in the discretion of the
Acquiror's Board of Directors, to receive grants of stock options under the
Acquiror Stock Option Plan. With respect to any new medical or dental benefit
plan established as of the Effective Time (if any), Acquiror shall waive any
pre-existing condition exclusions and actively at work requirements (provided,
however, that no such waiver shall apply to a pre-existing condition of any
employee of the Surviving Corporation or any Subsidiary who was, as of the
Effective Time, excluded from participation in a Plan by virtue of such
pre-existing condition or actively at work requirement) and provide that any
covered expenses incurred on or before the Effective Time by an employee or an
employee's covered dependent shall be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions of any new medical or dental benefit plan established as of the
Effective Time (if any).
(b) The Company shall amend the Plans and take such necessary
actions prior to the Closing Date, consistent with applicable Laws, so that only
the Company's and the Subsidiaries' eligible current and former employees, and
their eligible spouses, former spouses, dependents or beneficiaries, shall
participate in the Plans as of the Effective Time. Such actions shall include,
but not be limited to, spinning off the assets and liabilities of that portion
of the Company's 401(k) Savings and Retirement Plan and its Flexible Benefit
Plan that are attributable to current or former employees of entities other than
the Company or the Subsidiaries to new plans established by the Company
Stockholder or an entity controlled by the Company Stockholder. Such spin-off
shall comply with all applicable Laws, including but not limited to Section
414(l) of the Code.
SECTION 6.23. Directors' and Officers' Indemnification.
(a) Acquiror and Acquiror Sub agree that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any claim, action, suit, proceeding or investigation (a "D&O
Claim") existing in favor of the D&O Indemnified Parties as provided in the
Company's Certificate of Incorporation or By-laws, as in effect as of April 11,
2000, with respect to matters occurring through the Effective Time, shall
survive the Merger and shall continue in full force and effect for a period six
(6) years from the Effective Time; provided, however, that all rights to
indemnification in respect of any D&O Claim asserted or made within such period
shall continue until the disposition of such D&O Claim.
(b) Without limiting the foregoing, in the event any D&O Claim is
brought against any D&O Indemnified Party after the Effective Time arising our
of or pertaining to any action, omission or alleged action or omission occurring
on or prior to the Effective Time in his or her capacity as director or officer
(i) the Acquiror shall retain counsel reasonably satisfactory to D&O Indemnified
Parties and (ii) Acquiror and the Surviving Corporation will use all reasonable
efforts to assist in the vigorous defense of any such matter, provided that
neither Acquiror nor the Surviving Corporation shall be liable for any
settlement of any D&O Claim effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any D&O Indemnified Party wishing
to claim indemnification under this Section 6.23, upon learning of
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any such D&O Claim, shall notify Acquiror (but the failure so to notify Acquiror
shall not relieve Acquiror from any liability that Acquiror may have under this
Section 6.23 except to the extent such failure materially prejudices Acquiror),
and shall deliver to Acquiror the undertaking contemplated by Section 145(e) of
the Delaware Law. The D&O Indemnified Parties as a group may retain only one law
firm to represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more D&O Indemnified Parties.
SECTION 6.24. Adjustment of Common Stock Exchange Ratio.
The Common Stock Exchange Ratio shall be subject to adjustment on the
Closing Date as specified in this Section 6.24:
(a) At least five Business Days prior to the scheduled Closing
Date, the Company will deliver to Acquiror an unaudited pro forma consolidated
balance sheet, as of the Closing Date (the "Pro Forma Balance Sheet"), prepared
in conformity with GAAP applied on a basis consistent with the preparation of
the Reference Balance Sheet. At the Closing, a Common Stock Exchange Ratio
adjustment shall be made as set forth in the definition of Common Stock Exchange
Ratio. In the event that the Net Receivables Position reflected on the Reference
Balance Sheet exceeds the Net Receivables Position reflected on the Pro Forma
Balance Sheet by at least the Designated Amount, then the amount equal to the
full amount of such change without taking into account the Designated Amount is
defined as the "Deficiency." In the event that the Net Receivables Position
reflected on the Pro Forma Balance Sheet exceeds the Net Receivables Position
reflected on the Reference Balance Sheet by at least the Designated Amount, then
the amount of such change without taking into account the Designated Amount is
defined as the "Surplus."
SECTION 6.25. Adjustment of Common Stock Cash Amount.
The Common Stock Cash Amount shall be subject to adjustment after the
Closing as specified in this Section 6.25:
(a) As promptly as practicable, but in any event within sixty
calendar days following the Closing Date, the Company Stockholder shall deliver
to Acquiror the Closing Balance Sheet, together with an unqualified report
thereon of the Company Stockholder's Accountants stating that the Closing
Balance Sheet fairly presents in all material respects the consolidated
financial position of the Company at the Closing Date in conformity with GAAP
applied on a basis consistent with the preparation of the Reference Balance
Sheet. During the preparation of the Closing Balance Sheet by the Company
Stockholder and the periods of any dispute provided for in Section 6.25(b),
Acquiror shall provide the Company Stockholder and the Company Stockholder's
Accountants reasonable access to the books, records, facilities and employees of
the Company, and Acquiror shall cooperate reasonably with the Company
Stockholder's Accountants, in each case to the extent required by the Company
Stockholder and the Company Stockholder's Accountants in order to prepare the
Closing Balance Sheet and to investigate the basis for any such dispute.
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(b) (i) Subject to clause (ii) of this Section 6.25(b), the Closing
Balance Sheet delivered by the Company Stockholder to Acquiror shall be deemed
to be and shall be final, binding and conclusive on the parties hereto.
(ii) Acquiror may dispute any amounts reflected on the Closing
Balance Sheet to the extent the net effect of such disputed amounts in the
aggregate would affect the Net Receivables Position reflected on the
Closing Balance Sheet by more than the Designated Amount, but only on the
basis that the amounts reflected on the Closing Balance Sheet were not
arrived at in accordance with GAAP applied on a basis consistent with the
preparation of the Reference Balance Sheet; provided, however, that
Acquiror shall have notified the Company Stockholder and the Company
Stockholder's Accountants in writing of each disputed item, specifying the
amount thereof in dispute and setting forth, in reasonable detail, the
basis for such dispute, within 20 Business Days of the Company
Stockholder's delivery of the Closing Balance Sheet to Acquiror. In the
event of such a dispute, Acquiror's Accountants and the Company
Stockholder's Accountants shall attempt to reconcile their differences, and
any written resolution by them as to any disputed amounts shall be final,
binding and conclusive on the parties hereto. If any such resolution by
Acquiror's Accountants and the Company Stockholder's Accountants leaves in
dispute amounts the net effect of which in the aggregate would not affect
the Net Receivables Position reflected on the Closing Balance Sheet by more
than the Designated Amount, all such amounts remaining in dispute shall
then be deemed to have been resolved in favor of the Closing Balance Sheet
delivered by the Company Stockholder to Acquiror. If the Company
Stockholder's Accountants and Acquiror's Accountants are unable to reach a
resolution with such effect within 20 Business Days after receipt by the
Company Stockholder and the Company Stockholder's Accountants of Acquiror's
written notice of dispute and the items remaining in dispute are such that
the Common Stock Cash Amount would be adjusted by at least the Designated
Amount, the Company Stockholder's Accountants and Acquiror's Accountants
shall submit the items remaining in dispute for resolution to an
independent accounting firm of international reputation mutually acceptable
to the Company Stockholder and Acquiror ( such accounting firm being
referred to herein as the "Independent Accounting Firm"), which shall,
within thirty Business Days after such submission, determine and report to
the Company Stockholder and Acquiror upon such remaining disputed items,
and such written report shall be final, binding and conclusive on the
Company Stockholder and Acquiror. The fees and disbursements of the
Independent Accounting Firm shall be allocated between the Company
Stockholder and Acquiror in the same proportion that the aggregate amount
of such remaining disputed items so submitted to the Independent Accounting
Firm that is unsuccessfully disputed by each such party (as finally
determined by the Independent Accounting Firm) bears to the total amount of
such remaining disputed items so submitted.
(iii) In acting under this Agreement, the Company
Stockholder's Accountants, Acquiror's Accountants and the Independent
Accounting Firm shall be entitled to the privileges and immunities of
arbitrators.
(iv) No adjustment to the Common Stock Cash Amount pursuant to
Section 6.25(c) shall be made with respect to amounts disputed by Acquiror
pursuant to this Section 6.25(b), unless the net effect of the amounts
successfully disputed by Acquiror in the aggregate is to decrease the Net
Receivables Position reflected on the Closing Balance Sheet
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by at least the Designated Amount, in which case such adjustment shall be
made in an amount equal to the full amount successfully disputed.
(c) The Closing Balance Sheet shall be deemed final for the purposes of
this Section 6.25 upon the earliest of (A) the failure of Acquiror to notify the
Company Stockholder of a dispute within 20 Business Days of the Company
Stockholder's delivery of the Closing Balance Sheet to Acquiror, (B) the written
resolution of all disputes, pursuant to Section 6.25(b)(ii), by the Company
Stockholder's Accountants and Acquiror's Accountants and (C) the written
resolution of all disputes, pursuant to Section 6.25(b)(ii), by the Independent
Accounting Firm. Subject to the limitation set forth in Section 6.25(b)(iv),
within three Business Days of the Closing Balance Sheet being deemed final, a
Common Stock Cash Amount adjustment shall be made as follows:
(i) in the event that the Net Receivables Position reflected
on the Pro Forma Balance Sheet exceeds the Net Receivables Position
reflected on the Closing Balance Sheet by at least the Designated Amount,
then the Common Stock Cash Amount shall be adjusted downward in an amount
equal to the full amount of such change without taking into account the
Designated Amount, and the Company Stockholder shall, within three Business
Days of such determination, pay such amount to Acquiror by wire transfer in
immediately available funds; and
(ii) in the event that the Net Receivables Position reflected
on the Closing Balance Sheet exceeds the Net Receivables Position reflected
on the Pro Forma Balance Sheet by at least the Designated Amount, then the
Common Stock Cash Amount shall be adjusted upward in an amount equal to the
full amount of such change without taking into account the Designated
Amount and Acquiror shall, within three Business Days of such
determination, pay the amount of such excess to the Company Stockholder by
wire transfer in immediately available funds.
(d) Any payments required to be made by the Company Stockholder or
Acquiror pursuant to Section 6.25(c) shall bear interest from the Closing Date
through the date of payment at the rate of interest publicly announced by
Citibank, N.A. or any successor thereto in New York, New York from time to time
as its prime rate from the Closing Date to the date of such payment.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Obligations of Each Party Under
This Merger Agreement.
The respective obligations of each party to effect the Merger and the
other transactions contemplated herein shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions, any or all of which
may be waived by agreement of Acquiror and the Company, in whole or in part, to
the extent permitted by applicable Law:
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(a) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in any
case which is in effect and which prevents or prohibits consummation of the
Merger; provided, however, that each of the parties shall use its reasonable
best efforts to cause any such decree, judgment, injunction or other order to be
vacated or lifted and provided further, that the failure to obtain a required
consent or approval of a Governmental Entity (other than those specified in
Section 7.01(b) and Section 7.01(c)) shall not form the basis for an assertion
that this condition is not satisfied.
(b) HSR Act. The applicable waiting period with respect to the Merger
and the other transactions contemplated hereby, together with any extensions
thereof, under the HSR Act shall have expired or been terminated.
(c) Certain Governmental Approvals. All consents, waivers, approvals
and authorizations required to be obtained, and all filings or notices required
to be made, by Acquiror or the Company prior to consummation of the transactions
contemplated in this Merger Agreement (other than the filing of the Articles of
Merger in accordance with Delaware Law) shall have been obtained from and made
with the FCC and each of the public utility commissions of the states of
Indiana, Illinois, Wisconsin and Michigan.
(d) Company Securities. Other than 1,000 shares of Company Common
Stock, there shall be no other securities of the Company outstanding that are
securities convertible into or exchangeable for Company Common Stock or any
other equity securities of the Company and no outstanding options, rights
(preemptive or otherwise), or warrants to purchase or to subscribe for any
shares of such stock or other equity securities of the Company.
(e) Acquiror's Financing. Acquiror shall have received the Buyer
Financing substantially on the terms contemplated by the Buyer Financing Letters
or alternative financing on terms not materially less favorable to Acquiror than
those set forth in the Buyer Financing Letters.
SECTION 7.02. Additional Conditions to Obligations of Acquiror and
Acquiror Sub.
The obligations of Acquiror and Acquiror Sub to effect the Merger and
the other transactions contemplated herein are also subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived by Acquiror, in whole or in part, to the extent permitted by
applicable Law:
(a) Representations and Warranties. Each and all of the representations
and warranties of the Company and the Company Stockholder contained in this
Merger Agreement shall be true and correct in all material respects as of the
Closing Date as though made as of the Closing Date, except where the failure to
be so true and correct would not have a Company Material Adverse Effect,
considered in the aggregate, except that those representations and warranties
which address matters only as of a particular date shall be true and correct in
all material respects as of such date, except where the failure to be so true
and correct would not have a Company Material Adverse Effect, considered in the
aggregate, and except, in each case,
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for changes permitted by or consistent with this Merger Agreement; provided,
however, that if any portion of any representation or warranty is already
qualified by the words Company Material Adverse Effect, for purposes of
determining whether this Section 7.02(a) has been satisfied with respect to such
portion of such representation or warranty, such portion of such representation
or warranty as so qualified must be true and correct in all respects. Acquiror
shall have received a certificate of the chief executive officer or chief
financial officer of the Company, on behalf of the Company, to that effect.
(b) Updated Company Disclosure Schedule. The revised versions of the
Company Disclosure Schedules delivered to Acquiror pursuant to Section 6.04
shall not disclose any Company Material Adverse Effect as compared to such
Sections of the Company Disclosure Schedule as of the date of this Merger
Agreement.
(c) Agreements and Covenants. The Company and the Company Stockholder
shall have performed or complied in all respects with all agreements and
covenants required by this Merger Agreement to be performed or complied with by
them on or prior to the Effective Time except for such noncompliance that does
not have a Company Material Adverse Effect. Acquiror shall have received a
certificate of the Company Stockholder and the chief executive officer or chief
financial officer of the Company (as to the Company and on its behalf) to that
effect.
(d) At least 80% of the outstanding principal amount of the Senior
Notes shall have been acquired by the Company or the Reporting Subsidiary, and
the holders of such Senior Notes and the Trustee shall have properly authorized
and approved an amendment to the Indenture, to take effect on the redemption
date, providing for the deletion of certain covenants and other provisions
thereof specified, in writing, by the Acquiror.
(e) No Challenge. There shall not be pending any enforcement action or
similar proceeding by any Government Entity that is likely to place limitations
on the ownership of shares of Company Common Stock (or shares of common stock of
the Surviving Corporation) by Acquiror or Acquiror Sub such that consummation of
the Merger would violate any provisions of Acquiror's indentures relating to its
outstanding public indebtedness. There shall not be pending any enforcement
action or similar proceeding by any state or federal Governmental Entity that is
likely to have a Company Material Adverse Effect or, if such action arises in
connection with the transactions contemplated hereby, an Acquiror Material
Adverse Effect.
(f) Company Material Adverse Effect. Since December 31, 1999, there
shall not have occurred a Company Material Adverse Effect (or any development
that, insofar as reasonably can be foreseen, is reasonably likely to result in
any Company Material Adverse Effect) not disclosed in the Company Disclosure
Schedule.
(g) Ancillary Agreements. Acquiror shall have received, after the date
of this Merger Agreement and on or prior to the Closing Date, (i) an executed
Executive Employment Agreement from at least 80% of the Company Executives; and
(ii) an executed IRU and Maintenance Agreement from Barter Fiber.
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(h) Escrow Agreement. Pursuant to the escrow agreement in the form of
Exhibit C (the "Escrow Agreement"), the Company Stockholder shall have agreed to
deposit with the Escrow Agent, such number of shares of Acquiror Common Stock
equal to $25 million divided by the Price Per Share, to be received by him
pursuant to this Agreement, such shares to be held and disposed of as therein
provided.
(i) Accountants Consent. BDO Xxxxxxx, LLP shall have furnished to
Acquiror an undertaking to consent to the use and inclusion of financial
statements relating to the Company and the Subsidiaries audited by it in filings
made by Acquiror subsequent to the Effective Time with the SEC, NASD and state
securities authorities.
(j) Amendment or Termination of Agreements. The following agreements
shall have been amended or terminated, as appropriate: (i) the Expense Sharing
Agreement dated February 1, 1997 between the Reporting Subsidiary and RVP
Development shall be terminated without liability; (ii) the Corporate Aircraft
Lease between the Reporting Subsidiary and RVP Leasing Company, Inc. shall be
terminated without liability; (iii) the Lease dated January 29, 1999 between 56
Grandville, L.L.C., and the Reporting Subsidiary shall be modified in the
following manner: (y) to delete the provisions of Section 4(a) of such Lease
which provide for adjustment of the Base Rent (as defined therein) upon a change
of control with respect to the Reporting Subsidiary and (z) to amend Section 22
of such Lease to provide the Tenant (as defined therein) the right to sublease
all or any part of the Leased Premises (as defined therein) after a change of
control with the permission of the Landlord (as defined therein) which
permission shall not be unreasonably withheld or delayed; (iv) the Equipment
Lease dated October 1, 1999, by and between the Reporting Subsidiary and RVP
Development Corporation shall be modified in the following manner: (y) to amend
such Equipment Lease to provide for an attachment consisting of an itemized list
of all of the Leased Equipment (as defined therein), and (z) to amend Section 11
of such Equipment Lease to include a dollar amount that the Company reasonably
determines will represent the fair market value of the Leased Equipment at the
expiration of the term of such Equipment Lease; and (v) RVP Development, Inc.
shall assign to Acquiror its entire right, title and interest in each Memorandum
of Agreement with Engineering Protection Systems, Inc. referenced in Section
3.14 of the Company Disclosure Schedules or, at the election of Acquiror, each
such Memorandum of Agreement shall be terminated without liability and
Engineering Protection Systems, Inc. shall agree to enter into a new Agreement
with Acquiror Sub on the same terms.
(k) Consent to Assignment. Acquiror shall have received consents from
Metasolv Software, Inc. to the assignment of the agreements between the
Reporting Subsidiary and Metasolv Software, Inc. referenced in the Company
Disclosure Schedule.
SECTION 7.03. Additional Conditions to Obligations of the Company.
The obligations of the Company to effect the Merger and the other
transactions contemplated herein are also subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived by the Company, in whole or in part, to the extent permitted by
applicable Law:
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(a) Representations and Warranties. Each and all of the representations
and warranties of Acquiror and Acquiror Sub contained in this Merger Agreement
shall be true and correct as of the date of this Merger Agreement and shall be
true and correct in all material respects as of the Closing Date as though made
as of the Closing Date, except where the failure to be so true and correct would
not have an Acquiror Material Adverse Effect, considered in the aggregate,
except that those representations and warranties which address matters only as
of a particular date shall be true and correct as of such date, except where the
failure to be so true and correct would not have an Acquiror Material Adverse
Effect, considered in the aggregate, and except, in each case, for changes
permitted by or consistent with this Merger Agreement; provided, however, that
if any portion of any representation or warranty is already qualified by the
words Acquiror Material Adverse Effect, for purposes of determining whether this
Section 7.03(a) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty as
so qualified must be true and correct in all respects. The Company shall have
received a certificate of the chief executive officer or chief financial officer
of Acquiror, on behalf of Acquiror, to that effect.
(b) Agreements and Covenants. Acquiror and Acquiror Sub shall have
performed or complied in all respects with all agreements and covenants required
by this Merger Agreement to be performed or complied with by them on or prior to
the Effective Time except for such noncompliance that does not have an Acquiror
Material Adverse Effect. The Company shall have received a certificate of the
chief executive officer or chief financial officer of Acquiror and Acquiror Sub,
on behalf of Acquiror and Acquiror Sub, to that effect.
(c) Acquiror Material Adverse Effect. Since December 31, 1999, there
shall not have occurred an Acquiror Material Adverse Effect (or any development
that, insofar as reasonably can be foreseen, is reasonably likely to result in
any Acquiror Material Adverse Effect) not disclosed in the Acquiror Disclosure
Schedule.
(d) No Challenge. There shall not be pending any enforcement action or
similar proceeding by any Government Entity that is likely to place limitations
on the ownership of shares of Company Common Stock (or shares of common stock of
the Surviving Corporation) by Acquiror or Acquiror Sub such that consummation of
the Merger would violate any provisions of Acquiror's indentures relating to its
outstanding public indebtedness. There shall not be pending any enforcement
action or similar proceeding by any state or federal Governmental Entity that is
likely to have an Acquiror Material Adverse Effect or, if such action arises in
connection with the transactions contemplated hereby, a Company Material Adverse
Effect.
(e) Ancillary Agreements. The Company Stockholder shall have received,
on or prior to the Closing Date, copies of (i) an executed IRU and Maintenance
Agreement and (ii) an executed Trademark License Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.
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This Merger Agreement may be terminated at any time (except where
otherwise indicated) prior to the Effective Time:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Acquiror and the Company;
(b)(i) by Acquiror, if there has been a breach by the Company of any of
its representations, warranties, covenants or agreements contained in this
Merger Agreement, or any such representation and warranty shall have become
untrue, in any such case such that Section 7.02(a), Section 7.02(b) or Section
7.02(c) will not be satisfied and such breach or condition has not been cured
such that Section 7.02(a), Section 7.02(b), or Section 7.02(c), as the case may
be, will be satisfied within twenty (20) business days following receipt by the
Company of written notice of such breach describing the extent and nature
thereof in reasonable detail;
(ii) by the Company, if there has been a breach by Acquiror or Acquiror
Sub of any of its representations, warranties, covenants or agreements contained
in this Merger Agreement, or any such representation and warranty shall have
become untrue, in any such case such that Section 7.03(a) or Section 7.03(b)
will not be satisfied and such breach or condition has not been cured such that
Section 7.03(a) or Section 7.03(b), as the case may be, will be satisfied within
twenty (20) business days following receipt by Acquiror of written notice of
such breach describing the extent and nature thereof in reasonable detail;
(c) subject to it having complied with Section 6.02, by either Acquiror
or the Company if any decree, permanent injunction, judgment, order or other
action by any court of competent jurisdiction or any other federal or state (but
not county or municipal) Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and non-appealable;
(d) by either Acquiror or the Company if the Effective Time shall not
have occurred on or before November 14, 2000; provided however, that the right
to terminate this Merger Agreement under this Section 8.01(d) shall not be
available to (i) Acquiror, where Acquiror's willful failure to fulfill any
obligation under this Merger Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before such date, or (ii) the
Company, where the Company's willful failure to fulfill any obligation under
this Merger Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date; or
(e) by Acquiror, if the Merger shall not have been consummated by
August 12, 2000 and Acquiror, in its sole discretion, elects not to fund any
further operating losses of the Company and the Subsidiaries; provided that
Acquiror may not exercise its rights under this clause (e) if the Company
notifies Acquiror in writing prior to August 12, 2000 that the Company
Stockholder will fund any such operating losses of the Company between August
12, 2000 and the earlier of the Closing Date or the termination of this Merger
Agreement in accordance with this Section 8.01.
SECTION 8.02. Effect of Termination.
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In the event of termination of this Merger Agreement by either Acquiror
or the Company as provided in Section 8.01, this Merger Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Acquiror, Acquiror Sub or the Company or any of their respective directors or
officers except (i) nothing herein shall relieve any party from liability for
any willful breach hereof, (ii) each party shall be entitled to any remedies at
law or in equity for such breach and (iii) Sections 5.04(c) and 6.05, Section
8.02, Section 8.03 and Article IX shall remain in full force and effect and
survive any termination of this Merger Agreement.
SECTION 8.03. Expenses.
Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Merger Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense, except
that Acquiror shall pay for all HSR filing fees.
SECTION 8.04. Amendment.
Subject to applicable Law, this Merger Agreement may be amended by the
parties hereto at any time prior to the Effective Time. This Merger Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
SECTION 8.05. Extension; Waiver.
At any time prior to the Effective Time, the parties hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any agreements, documents, certificates or
other instruments delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby. The failure of any party to assert any of its
rights under this Merger Agreement or otherwise shall not constitute a waiver of
such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Survival of Representations and Warranties.
The representations and warranties of the Company and the Company
Stockholder contained in this Merger Agreement shall survive the Effective Time
for a period of twelve (12) months; provided, however, that the representations
and warranties of the Company contained in Section 3.17 (Taxes and Tax Matters),
shall survive until the expiration of the applicable statute of limitations, it
being understood that after the Effective Time any claim for Damages resulting
from a breach of any representation and warranty of the Company shall be subject
to the limitations contained in Section 6.10 and Section 6.11. The
representations and warranties of Acquiror contained in the Merger Agreement
shall survive the Effective Time for a period of twelve (12) months.
Notwithstanding anything herein to the contrary, any representation, warranty,
covenant or Agreement which is the subject of a claim which is asserted in
writing in
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compliance with Section 6.10(a) or Section 6.10(b) prior to the expiration of
the applicable period set forth above shall survive with respect to such claim
or dispute until the final resolution thereof.
WITHOUT LIMITING THE REPRESENTATIONS AND WARRANTIES CONTAINED IN
ARTICLE III, EXCEPT AS SET FORTH IN ARTICLE III, THE COMPANY MAKES NO OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT
OF THE COMPANY, ITS SUBSIDIARIES, ANY OF THEIR RESPECTIVE ASSETS, LIABILITIES OR
OPERATIONS, OR THE BUSINESS, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH OTHER
REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
(b) In connection with Acquiror's investigation of the Company and the
Subsidiaries of the Company, Acquiror has received certain estimates,
projections and other forecasts for the Company and its Subsidiaries, prepared
by management of the Company and its Subsidiaries, and certain plan and budget
information. Except as specifically set forth in this Merger Agreement, no
representation or warranty is made with respect to any such estimates,
projections, forecasts, plans or budgets. Acquiror acknowledges and agrees (and,
upon the occurrence of the Closing, shall be deemed to have acknowledged and
agreed as of the Closing Date) that there are uncertainties inherent in
attempting to make such estimates, projections, forecasts, plans and budgets,
that Acquiror is familiar with such uncertainties, that Acquiror is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all
estimates, projections, forecasts, plans and budgets so furnished to it, and
that Acquiror will not assert any claim against any of the Company's directors,
officers, employees, agents, stockholder, affiliates, consultants, investment
bankers or representatives, or hold any such persons liable with respect
thereto.
SECTION 9.02. Notices.
All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered, mailed or transmitted if delivered personally, mailed by
registered or certified mail (postage prepaid, return receipt requested) or sent
by overnight courier (providing proof of delivery) to the parties at the
following addresses or sent by electronic transmission to the following
telecopier numbers (or at such other address or telecopy number for a party as
shall be specified by like notice):
(a) If to Acquiror or Acquiror Sub:
Choice One Communications Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx Xxxxxx
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With a copy (which shall not constitute notice) to:
Xxxxx Xxxxxxx LLP
Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, Xxx Xxxx 00000-0000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
(b) If to the Company:
US Xchange, Inc.
00 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
With a copy (which shall not constitute notice) to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxx X'Xxxxx, Esq.
(c) If to the Company Stockholder:
c/o US Xchange, Inc.
00 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxx 00000
Telecopier No.: 000-000-0000
Attention: Xxxxxxx Xxxxxx
SECTION 9.03. Headings.
The headings contained in this Merger Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Merger Agreement.
SECTION 9.04. Severability.
If any term or other provision of this Merger Agreement is invalid,
illegal or incapable of being enforced by any rule of Law or public policy, all
other conditions and provisions of this Merger Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this
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Merger Agreement so as to effect the original intent of the parties as closely
as possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
SECTION 9.05. Entire Agreement.
This Merger Agreement (together with the Exhibits, Schedules, the
Company Disclosure Schedule and the Acquiror Disclosure Schedule and the other
documents delivered pursuant hereto) constitute the entire agreement of the
parties and supersede all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly set forth in Section 9.07, are not
intended to confer upon any other Person any rights or remedies hereunder.
SECTION 9.06. Assignment.
Neither this Merger 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.
SECTION 9.07. Parties in Interest.
Subject to Section 9.06, this Merger Agreement shall be binding upon
and inure solely to the benefit of each party hereto and their respective
successors and assigns, and nothing in this Merger Agreement, express or
implied, other than the provisions set forth in Section 6.23 (the "Third Party
provisions"), is intended to or shall confer upon any other Person other than
the parties hereto or their respective successors and assigns any right, benefit
or remedy of any nature whatsoever under or by reason of this Merger Agreement.
The Third Party Provisions may be enforced by the beneficiaries thereof.
SECTION 9.08. Mutual Drafting.
Each party hereto has participated in the drafting of this Merger
Agreement, which each party acknowledges is the result of extensive negotiations
between the parties.
SECTION 9.09. Specific Performance.
In addition to any other remedies which any party may have at law or in
equity, (a) the Company hereby acknowledges that the Company Common Stock and
the Company and the Subsidiaries are unique, and that the harm to Acquiror
resulting from breaches by the Company of its obligations cannot be adequately
compensated by damages and (b) Acquiror and Acquiror Sub hereby acknowledge that
the Acquiror Common Stock and Acquiror and Acquiror Sub are unique, and that the
harm to the Company resulting from breaches by the Acquiror or Acquiror Sub of
their respective obligations cannot be adequately compensated by damages.
Accordingly, (i) the Company agrees that Acquiror and Acquiror Sub shall have
the right to have all obligations, undertakings, agreements, covenants and other
provisions of this Merger Agreement specifically performed by the Company and
that Acquiror and Acquiror Sub shall have the right to obtain an order or decree
of such specific performance in any of the courts of the United States of
America or of any state or other political subdivision thereof and (ii) Acquiror
and Acquiror
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Sub agree that the Company shall have the right to have all obligations,
undertakings, agreements, covenants and other provisions of this Merger
Agreement specifically performed by Acquiror and Acquiror Sub and that the
Company shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States of America or of any state
or other political subdivision thereof.
SECTION 9.10. Governing Law.
This Merger Agreement shall be governed by, and construed in accordance
with, the Laws of the State of Delaware, regardless of the Laws that might
otherwise govern under applicable principles of conflicts of law.
SECTION 9.11. Submission to Jurisdiction, Waiver of Jury Trial.
(a) The parties hereby submit to the jurisdiction of any federal or
state court located in Wilmington, Delaware for purposes of all legal
proceedings which may arise hereunder or under any of the other agreements
entered into in connection herewith. The parties irrevocably waive, to the
fullest extent permitted by Law, any objection which it may have or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. The parties hereby consent to the process being served
in any such proceeding by the mailing of a copy hereof by registered or
certified mail, postage prepaid, to their respective addresses specified in
Section 9.02 or in any other manner permitted by Law.
(b) THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OF ANY PARTY.
SECTION 9.12. Counterparts.
This Merger Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement. Delivery of
an executed counterpart of a signature page to this Merger Agreement by
telecopier shall be effective as delivery of a manual executed counterpart of
this Agreement.
SECTION 9.13. Disclosure Schedule
The parties hereto acknowledge that certain matters set forth in the
Company Disclosure Schedule or the Acquiror Disclosure Schedule, as the case may
be, are included for informational purposes only, notwithstanding the fact that,
because they do not rise above applicable materiality thresholds or otherwise,
they would not be required to be set forth therein by the terms of this Merger
Agreement and that disclosure of such matters shall not be taken as an
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admission by the Company or the Acquiror, as the case may be, that such
disclosure is required to be made under the terms of any provision of this
Merger Agreement and in no event shall the disclosure of such matters be deemed
or interpreted to broaden or otherwise amplify the representations and
warranties contained in this Agreement.
ARTICLE X
DEFINITIONS
For purposes of this Merger Agreement, the following terms, and the
singular and plural thereof, shall have the meanings set forth below:
"Acquiror" is defined in the Preamble to this Merger Agreement.
"Acquiror Common Stock" is defined in Section 2.01.
"Acquiror Disclosure Schedule" is defined in Article IV.
"Acquiror Financial Statements" is defined in Section 4.07.
"Acquiror Licensed Intellectual Property" is defined in Section
4.14(d).
"Acquiror Material Adverse Effect" means any event, change or effect
that, individually or when taken together with any and all other events, changes
or effects, is or is reasonably likely to be materially adverse to the business,
operations, condition (financial or otherwise), Assets or liabilities of
Acquiror and its subsidiaries, taken as a whole.
"Acquiror Owned Intellectual Property" is defined in Section 4.14(c).
"Acquiror Post-Signing SEC Documents" is defined in Section 6.08.
"Acquiror SEC Documents" is defined in Section 4.07.
"Acquiror Stock Option Plan" means the Acquiror's 1998 Employee Stock
Option Plan dated August 12, 1998, as amended from time to time.
"Acquiror Sub" is defined in the Preamble to this Merger Agreement.
"Acquiror Subsidiary" means a corporation, partnership, joint venture
or other entity of which Acquiror owns, directly or indirectly, at least 50% of
the outstanding securities or other interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body or otherwise exercise Control of such entity.
"Acquiror's Accountants" means Xxxxxx Xxxxxxxx LLP.
"Additional Unaudited Balance Sheets" is defined in Section 6.07(a).
"Additional Unaudited Statements" is defined in Section 6.07(a).
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"Affiliate" means: (a) with respect to an individual, any member of
such individual's family; (b) with respect to an entity, any officer, director,
stockholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a Person, any Person which directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with such person or entity.
"Agreement" means any agreement between two or more Persons with
respect to their relative rights and/or obligations or with respect to a thing
done or to be done, including, without limitation, agreements denominated as
contracts, leases, promissory notes, covenants, easements, rights of way,
covenants, commitments, arrangements and understandings.
"Articles of Merger" is defined in Section 1.02.
"Assets" means assets of every kind and everything that is or may be
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"Audited Balance Sheet" is defined in Section 3.08(a).
"Audited Statements" is defined in Section 3.08(a).
"Barter Fiber" is defined in Section 6.17(a).
"Beneficial owner" with respect to any shares of capital stock means a
Person who shall be deemed to be the beneficial owner of such shares (i) which
such Person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such Person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
Agreement or upon the exercise of conversion rights, exchange rights, warrants
or options, or otherwise, or (B) the right to vote pursuant to any Agreement,
(iii) which are beneficially owned, directly or indirectly, by any other Persons
with whom such Person or any of its affiliates or associates has any Agreement
for the purpose of acquiring, holding, voting or disposing of any such shares,
or (iv) pursuant to Section 13(d) of the Exchange Act and any rules or
regulations promulgated thereunder.
"Blackout Period" is defined in Section 6.01(a).
"Blue Sky Laws" means state securities or blue sky laws and the rules
and regulations thereunder.
"Buyer Financing Letters" is defined in Section 4.10.
"Business Day" means a day other than a Saturday, a Sunday or any other
day on which commercial banks in the State of New York and Michigan are
authorized or obligated to be closed.
"Certificates" is defined in Section 2.02.
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"Claims" is defined in Section 6.10.
"Closing" is defined in Section 1.02.
"Closing Date" is defined in Section 1.02.
"Code" is defined in the Preamble to this Merger Agreement.
"Common Control Entity" means any trade or business under common
control (as such term is defined in Section 414(b) or 414(c) of the Code) with
the Company or any Subsidiary.
"Common Stock Cash Amount" means the result of:
(A) the total of $339 million minus (1)(x) the principal
amount of indebtedness under the Senior Notes, together with any
premium in excess of 101% of the principal amount thereof which is
payable in connection with the redemption of the Senior Notes, any
interest accrued thereon (whether or not paid) during the period
beginning on the date hereof and ending 90 days from the date hereof
and (y) the amount of principal owed by the Company or any Subsidiary
to each of General Electric Capital Corporation, Comerica Bank and
Xxxxxx X. XxxxxxXxx referenced in Section 6.03; minus (2) costs
incurred by the Company or any Subsidiary in connection with the
transactions contemplated by this Merger Agreement (other than HSR
filing fees) and plus (3) in the event that the Company Stockholder
agrees to fund operating losses of the Company between August 12, 2000
and the earlier of the Closing Date or the termination of this Merger
Agreement in accordance with Section 8.01 (the "Post 90-day Period"),
any amount spent during the Post 90-day Period to fund capital
expenditures of the Company or any Subsidiary in accordance with
Section 5.01(i);
(B) divided by the number of shares of Company Common Stock
validly issued and outstanding and fully paid and nonassessable at the
close of business on the business day before the Closing Date.
"Common Stock Exchange Ratio" means the ratio with:
(A) the numerator being the result of (1) the total of $224
million minus (a) the number of shares of common stock of Acquiror set
forth on Sections 6.06(a) and 6.06(b) to the Company Disclosure
Schedules multiplied by the Price Per Share, minus (b) the principal
amount of all loans made by Acquiror to the Company and any interest
accrued thereon (whether or not paid)
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to fund operating losses incurred by the Company and its Subsidiaries
from the date hereof through August 12, 2000 pursuant to the Promissory
Note, provided, that such operating losses shall include the interest
payments made or accrued by the Company or any Subsidiary in connection
with the debt owed by the Company or any Subsidiary to General Electric
Capital Corporation, Comerica Bank and Xxxxxx X. XxxxxxXxx; provided,
further, that such operating losses shall exclude any amount spent
towards capital expenditures of the Company or any Subsidiary and
interest thereon, minus (c) the Deficiency, if any, minus (d) the
principal amount of all loans made by Acquiror to the Company and any
interest accrued thereon (whether or not paid) to fund capital
expenditures for the Fiber Business, if any, and plus (e) the Surplus,
if any; divided by (2) the Price Per Share; and,
(B) the denominator being the number of shares of Company
Common Stock validly issued and outstanding and fully paid and
nonassessable at the close of business on the business day before the
Closing Date.
"Communications Act" means the Communications Act of 1934, as amended,
and all Laws promulgated pursuant thereto or in connection therewith.
"Company" is defined in the Preamble to this Merger Agreement.
"Company Budget" is defined in Section 5.01.
"Company Common Stock" is defined in Section 2.01(a).
"Company Contracts" is defined in Section 3.14(a).
"Company Disclosure Schedule" is defined in Article III.
"Company Executives" is defined in Section 6.06(a).
"Company Licenses" is defined in Section 3.07(a).
"Company Material Adverse Effect" means any event, change or effect
that, individually or when taken together with any and all other events, changes
or effects, is or is reasonably likely to be materially adverse to the business,
operations, condition (financial or otherwise), Assets or liabilities of the
Company and the Subsidiaries, taken as a whole.
"Company Stockholder" is defined in the Preamble to this Merger
Agreement.
"Company Stockholder's Accountants" means BDO Xxxxxxx LLP.
"Company Tax Returns" means all Tax Returns required to be filed by the
Company or any of the Subsidiaries.
"Competing Transaction" is defined in Section 5.05(a).
"Control" (including the terms "Controlled by" and "under common
Control with") means, as used with respect to any Person, possession, directly
or indirectly or as a trustee or executor, of power to direct or cause the
direction of management or policies of such Person (whether through ownership of
voting securities, as trustee or executor, by Agreement or otherwise).
"D&O Claim" is defined in Section 6.23(a).
"D&O Indemnified Parties" means each present and former director or
officer of the Company and each Subsidiary, but in no event shall the Company
Stockholder be such a D&O
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Indemnified Party with respect to any D&O Claim for which the Company
Stockholder would be required to indemnify any Indemnified Person pursuant to
Section 6.10 hereof.
"Damages" is defined in Section 6.10.
"Dark Fiber" means fiber between two specified locations that has no
optronics or electronics attached to it.
"Deficiency" is defined in Section 6.24.
"Defined Benefit Plan" means a Plan that is or was a "defined benefit
plan" as such term is defined in Section 3(35) of ERISA.
"Delaware Law" is defined in the Preamble to this Merger Agreement.
"Designated Amount" means $500,000.
"Disadvantageous Condition" is defined in Section 6.01(a).
"Disclosing Party" is defined in Section 5.06.
"DOL" means the United States Department of Labor and its successors.
"Effective Time" is defined in Section 1.02.
"Encumbrance" means any mortgage, lien, pledge, encumbrance, security
interest, deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Agreement, claim or equity of any
kind.
"Environmental Laws" means any Laws (including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act), in
effect as of the Closing Date relating to Hazardous Materials generation,
production, use, storage, treatment, transportation or disposal, or noise
control, or the protection of human health or the environment.
"Environmental Reports" is defined in Section 6.08(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"Escrow Agent" is defined in the Escrow Agreement.
"Escrow Shares" is defined in the Escrow Agreement.
"ESOP" means an "employee stock ownership plan" as such term is defined
in Section 407(d)(6) of ERISA or Section 4975(e)(7) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all Laws promulgated pursuant thereto or in connection therewith.
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"Exercise Date" is defined in Section 6.01(a).
"FCC" means the United States Federal Communications Commission and its
successors.
"Fiber Business" is defined in Section 6.17(a).
"Fiber Business Employees" means those employees of the Company or any
Subsidiary that the parties agree are Fiber Business Employees pursuant to
Section 6.17(a).
"Financial Statements" means, collectively, the Pre-Signing Financial
Statements, the Additional Unaudited Financial Statements and the First Quarter
Audited Financial Statement.
"First Quarter Audited Financial Statements" is defined in Section
6.07(b).
"Founders Securities" is defined in Section 6.01(b)(ii).
"GAAP" means United States generally accepted accounting principles, in
effect from time to time.
"Governmental Entities" (including the term "Governmental") means any
governmental, quasi-governmental or regulatory authority, whether domestic or
foreign.
"Hazardous Discharge" means any emission, spill, release or discharge
(whether on Real Property, on property adjacent to the Real Property, or at any
other location or disposal site) into or upon the air, soil or improvements,
surface water or groundwater, or the sewer, septic system, or waste treatment,
storage or disposal systems servicing the Real Property, in each case of
Hazardous Materials used, stored, generated, treated or disposed of at the Real
Property.
"Hazardous Materials" means any wastes, substances, radiation or
materials (whether solids, liquids or gases) that are regulated by a
Governmental Entity pursuant to Environmental Law or defined or listed by a
Governmental Entity pursuant to Environmental Law as hazardous, toxic,
pollutants or contaminants, including, without limitation, substances defined as
"hazardous wastes," "hazardous substances," "toxic substances," "radioactive
materials," or other similar designations in, or otherwise subject to regulation
under, any Environmental Laws. "Hazardous Materials" includes polychlorinated
biphenyls (PCBs), asbestos, lead-based paints, and petroleum and petroleum
products (including, without limitation, crude oil or any fraction thereof).
"Holder" is defined in Section 6.01(g).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and all Laws promulgated pursuant thereto or in connection
therewith.
"Indemnified Persons" is defined in Section 6.09.
"Indenture" means that certain Indenture by and between the Reporting
Subsidiary and The Bank of New York, as trustee, dated as of June 25, 1998.
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"Individual Account Plan" means a Plan that is or was an "individual
account plan" as such term is defined in Section 3(34) of ERISA.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, all rights to database
information, and all applications, registrations, and renewals in connection
therewith, (d) all mask works and all applications, registrations, and renewals
in connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium) existing in any part of the world.
"Inventory" means all new materials, work in progress and finished
goods and inventorable supplies.
"IRS" means the United States Internal Revenue Service and its
successors.
"Knowledge" will be deemed to be present with respect to the Company
and the Subsidiaries when the matter in question (i) is actually known to Xxxxxx
Xxxxxx Pol, Xxxxxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxx Xxxxxxxxxx, Xxx Xxxxx, Xxxx
Xxxxxx, Xxxxxx Xxxxxxxx, X. Xxxxxxx, Xxxx Xxxxx, Xxx Buick, Xxxxx Over, Xxxxxx
Xxxxx or any other person listed in Section 6.06(a) of the Company Disclosure
Schedule or (ii) was brought to the attention of or, if due diligence had been
exercised by the persons named in clause (i), would have been brought to the
attention of any such person; "knowledge" will be deemed to be present with
respect to Acquiror when the matter in question (i) is actually known to Xxxxx
X. Xxxxxx, Xxxx Xxxxxxxxx, Xxxxx X. Xxxxxxx, Xxx Xxxxxx Xxxxxxx, Xxxx X. Xxxxxx,
Xxx X. Xxxxxx-Xxx, Xxxxxx X. Xxxxxx or Xxxxxx X. Xxxxxxx or (ii) was brought to
the attention of or, if due diligence had been exercised by the persons named in
this clause (ii), would have been brought to the attention of, any such person.
"Laws" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, tariffs, determinations,
writs, injunctions, awards (including, without limitation, awards of any
arbitrator), judgments and decrees applicable to the specified Person and to the
businesses and Assets thereof (including, without limitation, Laws relating to
securities registration and regulation; the sale, leasing, ownership or
management of real property; employment practices, terms and conditions, and
wages and hours; building standards, land use and zoning; safety, health and
fire prevention; and environmental protection, including Environmental Laws).
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"License" means any franchise, grant, authorization, license, tariff,
permit, easement, variance, exemption, consent, certificate, approval or order
of any Governmental Entity, except non-material Agreements allowing the
installation, maintenance or operation of the Company's or the Subsidiaries'
fiber optic network on, over, under or across a specific parcel of real
property.
"Merger" is defined in the Preamble to this Merger Agreement.
"Merger Agreement" is defined in the Preamble to this Merger Agreement.
"Merger Consideration" is defined in Section 2.01(a)(1).
"Minimum-Funding Plan" means a Pension Plan that is subject to Title I,
Subtitle B, Part 3, of ERISA (concerning "funding").
"MSCP" means any of Xxxxxx Xxxxxxx Capital Partners III, L.P., Xxxxxx
Xxxxxxx Capital Investors, L.P., or MSCP III 892 Investors, L.P.
"MSCP Agreement" is defined in Section 6.01(a).
"Multiemployer Plan" means a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA.
"NASD" means the National Association of Securities Dealers, Inc.
"Net Receivables Position" means the excess of accounts receivable over
all accounts payable and all accrued expenses (excluding accrued interest) of
the Company and the Subsidiaries shown on any specified consolidated balance
sheet of the Company and the Subsidiaries.
"Ordinary Course of Business" means ordinary course of business
consistent with past practices and reasonable business operations.
"Other Arrangement" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not a Plan.
"Other Securities" is defined in Section 6.01(b).
"PBGC" means the Pension Benefit Guaranty Corporation or its
successors.
"Pension Plan" means an "employee pension benefit plan" as such term is
defined in Section 3(2) of ERISA.
"Permitted Derivative Transactions" is defined in Section 6.01(a).
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"Permitted Encumbrance" means (i) easements, rights of way, minor
irregularities of title, and liens for taxes not yet due and payable, (ii)
landlord, xxxxxxx, repairman, carrier, warehouse and materialmen's liens and
(iii) other Encumbrances similar to clauses (i) and (ii); provided, however,
that any or all of the foregoing do not materially affect the utility or value
of the Assets or other matters to which they relate.
"Permitted Holder" is defined in Section 6.20.
"Permitted Transferee" is defined in Section 6.01(g).
"Person" means an individual, corporation, partnership, limited
partnership, limited liability company, joint venture, trust, unincorporated
organization or other entity, or a Governmental Entity.
"Plan" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by the Company
or any Subsidiary; (b) to which the Company or any Subsidiary contributed or was
obligated to contribute or to fund or provide benefits; or (c) which provides or
promises benefits to any person who performs or who has performed services for
the Company or any Subsidiary and because of those services is or has been (i) a
participant therein or (ii) entitled to benefits thereunder.
"Post-Signing Returns" is defined in Section 5.03.
"Price Per Share" means $32.00.
"Promissory Note" is defined in Section 6.15.
"Proprietary Information" is defined in Section 5.06.
"Qualified Plan" means a Pension Plan that satisfies, or is intended by
the Company to satisfy, the requirements for Tax qualification described in
Section 401 of the Code.
"Real Property" means the real property owned in fee by the Company or
any of the Subsidiaries as of December 31, 1999, and any additional real
property owned since that date, and, for purposes of Section 3.23, any real
property formerly owned by the Company or any of the Subsidiaries, except
non-material Agreements allowing the installation, maintenance or operation of
the Company's or the Subsidiaries' fiber optic network on, over, under or across
a specific parcel of real property.
"Receiving Party" is defined in Section 5.06.
"Reference Balance Sheet" means the audited consolidated balance sheet
of the Company dated as of March 31, 2000, as adjusted by the accountants of the
Company in consultation with the Acquiror's Accountants to reflect any impact
associated with transfer of the Fiber Business.
"Registrable Securities" is defined in Section 6.01(c).
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"Reporting Subsidiary" is defined in Section 3.08(c).
"Representative" is defined in Section 5.06.
"SEC" means the United States Securities and Exchange Commission and
its successors.
"Securities Act" means the Securities Act of 1933, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"Senior Notes" is defined in the Recitals to this Merger Agreement.
"Shelf Registration Statement" means a registration statement filed at
the request of a Holder pursuant to Section 6.01(a) which permits sales of
Registrable Securities on a delayed or continuous basis under Rule 415
promulgated under the Securities Act.
"Significant Subsidiary" means any subsidiary of Acquiror disclosed in
its most recent Annual Report on Form 10-K, and any other subsidiary that would
constitute a "Significant Subsidiary" of Acquiror within the meaning of Rule
1-02 of Regulation S-X of the SEC.
"Statutory-Waiver Plan" means a Pension Plan that is not subject to
Title I, Subtitle B, Part 3, of ERISA (concerning "funding").
"Stock Consideration" is defined in Section 2.01(a).
"Subsidiary" means a corporation, partnership, joint venture or other
entity of which the Company owns, directly or indirectly, at least 50% of the
outstanding securities or other interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body or otherwise exercise Control of such entity.
"Subsidiary SEC Reports" is defined in Section 3.08(c).
"Surplus" is defined in Section 6.24.
"Survey" means a current, as-built survey of each parcel of the Real
Property.
"Surviving Corporation" is defined in Section 1.01.
"System" means the fiber optic system and assets generally described in
Sections 3.35(a)-1 and 3.35(a)-2 of the Company Disclosure Schedule.
"Taxes" (including the terms "Tax" and "Taxing") means all federal,
state, local and foreign taxes (including, without limitation, income, profit,
franchise, sales, use, real property, personal property, ad valorem, excise,
employment, social security and wage withholding taxes) and installments of
estimated taxes, assessments, deficiencies, levies, imports, duties, license
fees, registration fees, withholdings, or other similar charges of every kind,
character or description imposed by any Governmental Entity, and any interest,
penalties or additions to tax imposed thereon or in connection therewith but
does not include municipal or county franchise fees or similar payments due or
payable in connection with the construction of the System.
-89-
"Tax Returns" means all federal, state, local, foreign and other
applicable returns, declarations, reports and information statements with
respect to Taxes required to be filed with the IRS or any other Governmental
Entity or Tax authority or agency, including, without limitation, consolidated,
combined and unitary tax returns.
"Third Party provisions" is defined in Section 9.07.
"Title I Plan" means a Plan that is subject to Title I of ERISA.
"Unaudited Balance Sheets" is defined in Section 3.08(a).
"Unaudited Financial Statements" is defined in Section 3.08(a).
"US Xchange Finance" is defined in the Recitals to this Merger
Agreement.
"Welfare Plan" means an "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA.
"Year 2000 Compliant" means that all computer, hardware, software
systems and equipment (the "Company Systems") material to the business of the
Company or any Subsidiary will provide uninterrupted millennium functionality in
that the Company Systems will record, store process and present calendar dates
falling on or after January 1, 2000 in the same manner and with the same
functionality as the Company Systems record, store and process calendar dates
falling on or before December 31, 1999.
IN WITNESS WHEREOF, Choice One Communications Inc., Barter Acquisition
Corporation, the Company and the Company Stockholder have executed and delivered
or have caused this Merger Agreement to be duly executed and delivered as of the
date first written above.
Choice One Communications Inc.
By:
--------------------------------
Name:
Title:
Barter Acquisition Corporation
By:
--------------------------------
Name:
Title:
US Xchange, Inc.
By:
--------------------------------
Name:
Title:
Stockholder
By:
--------------------------------
Name: Xxxxxx X. Xxxxxx Pol
