AGREEMENT AND PLAN OF MERGER
By and Among
TotalNet Communications Inc.
GST Newco of Texas, Inc.
and
GST Telecommunications, Inc.
Dated: September 27, 1996
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated September 27,
1996, by and among TOTALNET COMMUNICATIONS INC., a Texas corporation (the
"Company"), GST NEWCO OF TEXAS, INC., a Delaware corporation ("Sub"), and GST
TELECOMMUNICATIONS, INC., a federally chartered Canadian corporation ("GST" or
the "Buyer").
Sub and GST are collectively the "GST Companies." Sub is a newly-formed
corporation that is a wholly-owned direct subsidiary of GST. GST is a public
company whose Common Shares, without par value (the "GST Common Shares"), are
traded on the American Stock Exchange (the "AMEX").
PREAMBLE
GST, GST Net, Inc. and certain of the shareholders of the Company are
parties to a letter of intent dated June 27, 1996 (the "Letter of Intent"),
which sets forth the principal terms and conditions involving a proposed
business combination of GST and the Company. The Boards of Directors of the
Company and the GST Companies are of the opinion that the transactions described
herein are the most desirable means of accomplishing such proposed business
combination and are in the best interests of the parties and their respective
shareholders. This Agreement provides for the acquisition of the Company by GST
pursuant to a merger whereby Sub merges with and into the Company. At the
effective time of the Merger (as hereinafter defined), the outstanding shares of
the capital stock of the Company, $1.00 par value per share (the "TotalNet
Stock"), shall be converted into the right to receive GST Common Shares. As a
result, the persons listed on Exhibit A hereto, who are currently all of the
shareholders of the Company (individually, a "Shareholder" and collectively, the
"Shareholders"), shall become shareholders of GST and the Company shall continue
to conduct its business and operations as a wholly- owned subsidiary of GST.
Exhibit A shall be amended to include any persons who become shareholders of the
Company after the date hereof as a result of the exercise of any outstanding
options, warrants, convertible securities or other rights to acquire shares of
the Company's capital stock.
The transactions described in this Agreement have been approved by GST,
the sole shareholder of Sub, and their consummation is subject to the receipt of
certain regulatory approvals and the satisfaction of certain other conditions
described in this Agreement. The Company intends promptly to submit this
Agreement for the approval of the Shareholders.
It is the intention of the parties to this Agreement that the Merger
qualify for federal income tax purposes as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code, as amended (the "Code"), and
that no boot is to payable in connection therewith (other than the payment of
cash in lieu of fractional shares).
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE I
TRANSACTIONS AND TERMS OF THE MERGER
Section 1.1 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereinafter defined), Sub shall be merged
with and into the Company, in accordance with the provisions of the Texas
Business Corporation Act (the "TBCA") and the General Corporation Law of the
State of Delaware (the "DGCL") and with the effect provided in the TBCA and the
DGCL (the "Merger"). The Company shall be the surviving corporation of the
Merger (the "Surviving Corporation"), and it shall be a wholly- owned subsidiary
of GST and shall continue to be governed by the laws of the State of Texas. The
Merger shall be consummated pursuant to the terms of this Agreement, which has
been approved and adopted by the respective Boards of Directors of the Company
and each of the GST Companies.
Section 1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place on the date that the
Effective Time occurs but in no event later than, or at such other time as the
parties, acting through their authorized officers, may mutually agree (the date
on which such closing occurs being hereinafter referred to as the "Closing
Date"). The Closing shall be held at the office of the Company's counsel, Xxxxx,
Xxxxxx & Xxxxx, L.L.P., Two Xxxxx Center, 0000 Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx.
Section 1.3 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Articles of Merger reflecting the Merger (the "Articles of Merger")
shall become effective with the Secretary of State of the State of Texas (the
"Effective Time"). Subject to the terms and conditions hereof, unless otherwise
mutually agreed upon in writing by authorized officers of each party, the
parties shall use their reasonable efforts to cause the Effective Time to occur
on the first business day following the effective date (including expiration of
any applicable waiting period) of the last required consent of any Governmental
Authority (as hereinafter defined) having authority over and approving or
exempting the Merger.
Section 1.4 CHARTER. The Articles of Incorporation of the Company in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until otherwise amended or repealed.
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Section 1.5 BYLAWS. The Bylaws of the Company in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until otherwise amended or repealed.
Section 1.6 DIRECTORS AND OFFICERS. The directors and officers of the
Company in office immediately prior to the Effective Time, together with such
additional persons as may thereafter be elected, shall serve as the respective
directors and officers of the Surviving Corporation from and after the Effective
Time in accordance with the Bylaws of the Surviving Corporation.
Section 1.7 CONVERSION OF SHARES. Subject to the provisions of this
Section 1.7 through Section 1.10, at the Effective Time, by virtue of the Merger
and without any action on the part of the Company, the GST Companies or the
shareholders of any of the foregoing, the shares of the constituent corporations
to the Merger shall be converted as follows:
(a) Each GST Common Share issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
(b) All of the shares of Common Stock, $.01 par value per
share, of Sub issued and outstanding immediately prior to the Effective
Time shall cease to be outstanding and shall be converted into 100
shares of TotalNet Stock.
(c) All of the shares of TotalNet Stock issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding
and shall be converted into GST Common Shares having an aggregate value
(the "Exchange Shares" or the "Consideration") equal to (i) the product
of (a) the average monthly gross revenue of the Company, as recorded in
accordance with U.S. GAAP applied on a consistent basis, for the
Measuring Period multiplied by (b) 9, less (without duplication) (ii)
the sum of (w) the amount of any debt of the Company outstanding to
Southwest Bank of Texas, N.A., under the Company's line of credit with
such bank (the "Line of Credit") other than borrowings incurred to fund
Permitted Payments (x) amounts outstanding under capitalized leases of
the Company, (y) the amount of any Permitted Payments and (z) $35,000.
For purposes hereof, the term "Permitted Payments" shall mean the sum
of any of the following payments made on or before the Closing Date:
(A) the amounts paid by the Company to cancel or buy back any options
or other rights to purchase the capital stock of the Company in
accordance with Section 5.3 and (B) the amount of any payments by the
Company to Xxxxx, Xxxxxx & Xxxxx LLP, counsel to the Company, or Xxxxxx
Xxxxxxx in accordance with the Section 5.4. For the purposes hereof,
the term "Measuring Period" shall mean the two calendar months next
preceding the calendar month that next precedes the calendar month in
which the Closing Date occurs. For example, if the Closing were to
occur on November 6, 1996,
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August and September 1996 would be the two calendar months constituting
the Measuring Period. In the case of each of (w) and (x) above, the
amount thereof shall be determined as of the latest practicable date
prior to the Closing Date. The Consideration shall be payable as
follows: (i) 60% of the Consideration shall be payable on the Closing
Date subject to the limitations set forth below; and (ii) the balance
of the Consideration shall be payable on the first anniversary of the
Closing Date. For purposes of this Section 1.7 and for determining the
number of Exchange Shares issuable in payment of the Consideration on
the Closing Date and on the first anniversary of the Closing Date, the
value of each Exchange Share shall be equal to the average of the
closing sale price of a GST Common Share on the AMEX, or GST's then
principal United States trading market if other than the AMEX, for the
10 consecutive trading days ending three trading days prior to any date
on which a payment is to be made (the "Market Price"); PROVIDED,
HOWEVER, that in the case of such shares issuable on the first
anniversary of the Closing Date, in the event that (A) the average
sales price computed in accordance with this sentence is less than 70%
of the Market Price on the Closing Date, the Market Price shall
nevertheless be fixed at 70% of the Market Price on the Closing Date
and (B) the average sales price computed in accordance with this
sentence is greater than $20 (or appropriately adjusted from $20 in the
event that any anti-dilution event as set forth in Section 1.8 shall
occur after the date of this Agreement) prior to the Market Price shall
nevertheless be fixed at $20 (or appropriately adjusted from $20 in the
event that any anti- dilution event as set forth in Section 1.8 shall
occur after the date of this Agreement). The Consideration shall be
allocated among each of the Shareholders in accordance with each
Shareholder's proportionate share of the total number of shares of
TotalNet Stock, as shown on Exhibit A hereto, as amended for any option
exercises prior to the Closing. The Consideration to be delivered on
the Closing Date to the Exchange Agent (as hereinafter defined)
pursuant to Section 2.1 hereof for distribution to the Shareholders
under Section 2.1 shall be reduced by such number of Exchange Shares as
is equal to 10% of the dollar value of the Consideration as of the
Closing Date (the "Escrowed Shares") in connection with the
indemnification by the Shareholders set forth in Section 9.1 hereof
(such reduction to be allocated among all the Shareholders in
accordance with the percentages set forth opposite each Shareholder's
name in Exhibit A hereto), which shall be deposited with Xxxxxx
Xxxxxxxx Frome & Xxxxxxxxxx LLP, as the Escrow Agent (the "Escrow
Agent"), to be held and applied pursuant to the terms and provisions of
the Escrow Agreement between GST and the Shareholders, a copy of which
is attached as Annex A hereto.
Section 1.8 ANTI-DILUTION PROVISIONS. In the event GST changes the
number of GST Common Shares issued and outstanding
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prior to the Effective Time as a result of a stock split, stock dividend, or
similar recapitalization with respect to such stock and the record date therefor
(in the case of a stock dividend) or the effective date thereof (in the case of
a stock split or similar recapitalization for which a record date is not
established) shall be prior to the Effective Time, if necessary, the anticipated
Effective Time shall be postponed for an appropriate period of time agreed upon
by the parties in order for the trading price of GST Common Shares to reflect
the market effect of such stock split, stock dividend, or similar
recapitalization.
Section 1.9 SHARES HELD IN TREASURY. Each of the shares of TotalNet
Stock held by the Company as treasury stock shall be cancelled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
Section 1.10 FRACTIONAL SHARES. Notwithstanding any other provision of
this Agreement, each holder of shares of TotalNet Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of a GST
Common Share (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of GST Common Share multiplied by the market value
of one GST Common Share at the time such Consideration would be payable in
accordance with Section 1.7(c). The market value of one GST Common Share at the
such time shall be the last sale price of GST Common Shares on the AMEX (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source) on the last trading day preceding the Effective Time. No
such holder will be entitled to dividends, voting rights, or any other rights as
a shareholder in respect of any fractional shares.
ARTICLE II
EXCHANGE OF SHARES
Section 2.1 EXCHANGE PROCEDURES. Promptly after the Merger, Montreal
Trust or another trust company or similar institution acceptable to GST and to
the Company, acting in the capacity of exchange agent (the "Exchange Agent"),
shall mail to the former shareholders of the Company appropriate transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of TotalNet Stock
shall pass, only upon proper delivery of such certificates to the Exchange
Agent). The Exchange Agent may establish reasonable and customary rules and
procedures in connection with its duties. After the Effective Time, each holder
of shares of TotalNet Stock (other than shares to be cancelled pursuant to
Section 1.9 of this Agreement) issued and outstanding at the Effective Time
shall surrender the certificate or certificates representing such shares to the
Exchange Agent and
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shall upon surrender thereof be entitled to receive in exchange therefor at the
times specified in Section 1.7 of this Agreement the Consideration provided in
such Section 1.7(c), together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 2.2 of
this Agreement. To the extent required by Section 1.10 of this Agreement, each
holder of shares of TotalNet Stock issued and outstanding at the Effective Time
also shall receive, upon surrender of the certificate or certificates
representing such shares, cash in lieu of any fractional GST Common Share to
which such holder may be otherwise entitled (without interest) at the time
payment is made under Section 1.7(c) hereof. GST shall not be obligated to
deliver the consideration to which any former holder of TotalNet Stock is
entitled as a result of the Merger until such holder surrenders such holder's
certificate or certificates representing the shares of TotalNet Stock for
exchange as provided in this Section 2.1. The certificate or certificates of
TotalNet Stock so surrendered shall be duly endorsed as the Exchange Agent may
require. Any other provision of this Agreement notwithstanding, neither the GST
Companies nor the Exchange Agent shall be liable to a holder of TotalNet Stock
for any amounts paid or property delivered in good faith to a public official
pursuant to any applicable abandoned property law. Acknowledgment of Articles I
and II of this Agreement by the Shareholders pursuant to the Acknowledgment and
Agreement, a copy of which is attached as Annex B hereto (the "Acknowledgment
and Agreement"), shall constitute ratification of the appointment of the
Exchange Agent.
Section 2.2 RIGHTS OF FORMER SHAREHOLDERS OF THE COMPANY. At the
Effective Time, the stock transfer book of the Company shall be closed as to
holders of TotalNet Stock immediately prior to the Effective Time and no
transfer of TotalNet Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions of
Section 2.1 of this Agreement, each certificate theretofore representing shares
of TotalNet Stock (other than shares to be cancelled pursuant to Section 1.9 of
this Agreement) shall from and after the Effective Time represent for all
purposes only the right to receive the consideration provided in Sections 1.7(c)
and 1.10 of this Agreement in exchange therefor, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time that have been
declared or made by the Company in respect of such shares of TotalNet Stock in
accordance with the terms of this Agreement and that remain unpaid at the
Effective Time. Whenever a dividend or other distribution is declared by GST on
the GST Common Shares, the record date for which is at or after the Effective
Time, the declaration shall include dividends or other distributions on all GST
Common Shares issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of GST Common Shares as of any
time subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of TotalNet Stock issued and
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outstanding at the Effective Time until such holder surrenders such certificate
for exchange as provided in Section 2.1 of this Agreement. However, upon
surrender of such certificate, both the GST Common Share certificate (together
with all such undelivered dividends or other distributions without interest) and
any undelivered dividends and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
certificate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Buyer as follows:
Section 3.1 CORPORATE ORGANIZATION; REQUISITE AUTHORITY TO CONDUCT
BUSINESS; ARTICLES OF INCORPORATION AND BY-LAWS. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas. The Company has provided the Buyer with true and complete copies
of its Articles of Incorporation (certified by the Secretary of State of the
State of Texas) and By-laws (certified by the Secretary of the Company) as in
effect on the date hereof. Prior to the Closing, the minute books of the Company
will be delivered to the Buyer, and will contain true and complete records of
all meetings and consents in lieu of meeting of the Company's Board of Directors
and of the Company's shareholders since the incorporation of the Company, which
accurately reflect in all material respects all transactions referred to in such
minutes and consents in lieu of meeting. The Company has all corporate power and
authority to own, operate and lease its properties and to carry on its business
as the same is now being conducted. Except as disclosed in writing by the
Company to GST prior to the date hereof, the Company is duly qualified or
licensed to do business and is in good standing as a foreign corporation in
every jurisdiction in which the conduct of its business or the ownership or
leasing of its properties requires it to be so qualified or licensed, except
where the failure to be so qualified or licensed would not have a material
adverse effect on the business, properties, assets, liabilities, condition
(financial or otherwise), results of operations or net worth of the Company (a
"Company Material Adverse Effect").
Section 3.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 500,000 shares of TotalNet Stock, 218,213 of which are issued and
outstanding on the date hereof. The capital stock of the Company is duly
authorized and all issued capital stock has been duly and validly issued and is
fully paid and non-assessable and free of preemptive rights. Except as set forth
on Schedule 3.2 hereto, there is not outstanding, and the Company is not bound
by or subject to, any subscription, option, warrant, call, right, contract,
commitment, agreement,
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understanding or arrangement to issue any additional shares of capital stock of
the Company, including any right of conversion or exchange under any outstanding
security or other instrument, and no shares are reserved for issuance for any
purpose. Except as set forth on Schedule 3.2 hereto, there are no voting trusts
or other agreements or understandings of any kind with respect to the Company's
outstanding capital stock.
Section 3.3 SUBSIDIARIES, ETC. The Company does not own (directly or
indirectly) any equity interest in any corporation, partnership, limited
liability company, joint venture, association or other entity.
Section 3.4 AUTHORITY RELATIVE TO AND VALIDITY OF AGREEMENTS. The
Company has the requisite corporate power and authority to execute and deliver
this Agreement and the Employment Agreement with Xxxxxx X. Xxxxxxx which is a
condition precedent to the Closing and shall be entered into as provided in
Section 8.4 (the "Employment Agreement") and to assume and perform all of its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Employment Agreement (collectively, the "Transaction
Documents") by the Company and the performance by the Company of its obligations
thereunder has been duly authorized by its Board of Directors and no further
authorization on the part of the Company is necessary to authorize the execution
and delivery by it of, and the performance of its obligations under the
Transaction Documents. There are no corporate, contractual, statutory or other
restrictions of any kind upon the power and authority of the Company to execute
and deliver the Transaction Documents and to consummate the transactions
contemplated thereunder and, except as set forth on Schedule 3.5 hereto or in a
writing delivered by the Company to GST prior to the date hereof, no action,
waiver or consent by any foreign, federal, state, municipal or other
governmental department, commission or agency (a "Governmental Authority") is
necessary to make each of the Transaction Documents a valid instrument binding
upon the Company in accordance with its terms. This Agreement has been duly
executed and delivered by the Company and constitutes, and the other Transaction
Documents, when executed and delivered by the Company in accordance with their
respective terms will constitute, legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
such enforceability may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and (ii) as such obligations are subject to general principles of
equity.
Section 3.5 REQUIRED FILINGS AND CONSENTS; NO CONFLICT. Except as set
forth on Schedule 3.5 hereto or in a writing delivered by the Company to GST
prior to the date hereof, the Company is not required to submit any notice,
report or other filing to any Governmental Authority in connection with the
execution, delivery or performance of the Transaction Documents.
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The execution, delivery and performance of the Transaction Documents by the
Company and the consummation of the transactions contemplated thereby do not and
will not (a) except as set forth on Schedule 3.5 hereto or in a writing
delivered by the Company to GST prior to the date hereof, conflict with or
violate any law, regulation, judgment, order or decree binding upon the Company,
(b) conflict with or violate any provision of its Articles or By-laws, or (c)
conflict with or result in a breach of any condition or provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any properties or assets of the Company
pursuant to, or cause or permit the acceleration prior to maturity of any
amounts owing under, any indenture, loan agreement, mortgage, deed of trust,
lease, contract, license, franchise or other agreement or instrument to which
the Company is a party or which is or purports to be binding upon the Company or
by which any of its properties are bound, except for conflicts, breaches,
defaults, events, liens, changes, encumbrances or rights of acceleration that
would not have a Company Material Adverse Effect. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation of
the transactions contemplated thereby will not result in the loss of any
license, franchise, legal privilege or permit possessed by the Company or give a
right of termination to any party to any agreement or other instrument to which
the Company is a party or by which any of its properties are bound, except for
losses or rights of termination that would not have a Company Material Adverse
Effect.
Section 3.6 FINANCIAL STATEMENTS; BOOKS OF ACCOUNT; RECORDS. The
Company has heretofore delivered to the Buyer true and complete copies of the
Company's audited balance sheets, income statements and statements of cash flow
for the fiscal years ended December 31, 1994 and 1995, together with the
respective report(s) thereon of Coopers & Xxxxxxx, the independent auditors of
the Company and unaudited statements for the six-month period ended June 30,
1996 and any financial statements available after such date (together with the
related notes, such year-end and interim financial statements are referred to in
this Agreement as the "Financial Statements"). The Financial Statements have
been prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated therein or in the notes thereto) and fairly
present in all material respects the financial position of the Company as of the
respective dates thereof and the results of operations of the Company for the
periods indicated, except that the unaudited interim financial statements are
subject to normal and recurring year end adjustments, which are not expected to
be material in amount.
The general ledgers, books of account and other records of the Company
are complete and correct in all material respects, have been maintained in
accordance with good business practices and
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the matters contained therein are appropriately and accurately reflected in all
material respects in the Financial Statements.
Section 3.7 NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule
3.7 hereto, the Company has no debt, liability or obligation of any nature
(whether liquidated, unliquidated, accrued, absolute, contingent or otherwise
and whether due or to become due) except:
(a) those set forth or reflected in the Financial Statements
and that have not been paid or discharged since the date thereof; and
(b) current liabilities arising in the ordinary and usual
course of business subsequent to June 30, 1996 that are accurately
reflected on its books and records in a manner consistent with past
practice.
Section 3.8 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth
in Schedule 3.8 hereto, since June 30, 1996, there has not been, with respect to
the Company, (i) any Company Material Adverse Effect; (ii) any strike,
picketing, work slowdown or labor disturbance; (iii) any material damage,
destruction or loss (whether or not covered by insurance) with respect to any
assets or properties material to its business or operations; (iv) any redemption
or other acquisition by it of TotalNet Stock or any declaration or payment of
any dividend or other distribution in cash, stock or property with respect
thereto; (v) any entry into any commitment or transaction (including, without
limitation, any borrowing or capital expenditure) other than in the ordinary
course of business or as contemplated by this Agreement; (vi) any transfer of,
or rights granted under, any leases, licenses, agreements, patents, trademarks,
trade names, or copyrights other than those transferred or granted in the
ordinary course of business and consistent with past practice; (vii) any
mortgage, pledge, security interest or imposition of any other encumbrance on
any assets or properties except in the ordinary course of business; (viii) any
payment of any debts, liabilities or obligations of any kind other than those
currently due; (ix) any cancellation of any debts or claims or forgiveness of
amounts owed to the Company; or (x) any change in accounting principles or
methods (except insofar as may have been required by a change in U.S. GAAP).
Since December 31, 1995, the Company has conducted its business only in the
ordinary course and in a manner consistent with past practice and has not made
any material change in the conduct of its business or operations.
Section 3.9 TAXES AND TAX RETURNS. (a) For purposes of this Agreement,
(i) the term "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise,
property, sales, license, payroll and franchise taxes, imposed by the United
States, or any state, local or foreign government or subdivision or agency
thereof
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whether computed on a unitary, combined or any other basis; and such term shall
include any interest and penalties or additions to tax; and (ii) the term "Tax
Return" shall mean any report, return or other information required to be filed
with, supplied to or otherwise made available to a taxing authority in
connection with Taxes.
(b) The Company has (i) duly filed with the appropriate taxing
authorities all Tax Returns required to be filed by or with respect to the
Company, and all such duly filed Tax Returns are true, correct and complete in
all respects, and (ii) paid in full or made adequate provisions for on its
balance sheet (in accordance with U.S. GAAP) all Taxes shown to be due on such
Tax Returns. There are no liens for Taxes upon the assets of the Company, except
for statutory liens for current Taxes not yet due and payable or that may
thereafter be paid without penalty or are being contested in good faith. Except
as set forth on Schedule 3.9 hereto, the Company has not received any notice of
audit, is not undergoing any audit of its Tax Returns, and has not received any
notice of deficiency or assessment from any taxing authority with respect to
liability for Taxes of the Company, which has not been fully paid or finally
settled. There have been no waivers of statutes of limitations by the Company
with respect to any Tax Returns that relate to the Company. The Company has not
filed a request with the Internal Revenue Service for changes in accounting
methods within the last two years, which change would affect the accounting for
tax purposes, directly or indirectly, of the Company.
Section 3.10 EMPLOYEE BENEFIT PLANS. Schedule 3.10 hereto comprises a
listing of each bonus, stock option, stock purchase, benefit, profit sharing,
savings, retirement, liability, insurance, incentive, deferred compensation, and
other similar fringe or employee benefit plans, programs or arrangements for the
benefit of or relating to, any employee of, or independent contractor or
consultant to, and all other compensation practices, policies, terms or
conditions, whether written or unwritten (the "Company Employee Plans") which
the Company presently maintains, to which the Company presently contributes or
under which the Company has any liability and which relate to employees or
independent contractors of the Company. Company Employee Plans administered by
the Company have been administered in all material respects in accordance with
all requirements of applicable law and all terms of each such plan. Each Company
Employee Plan that is required or intended to be qualified under applicable law
or registered or approved by a governmental agency or authority, has been so
qualified, registered or approved by the appropriate governmental agency or
authority and to the Company's knowledge, nothing has occurred since the date of
the last qualification, registration or approval to adversely affect in any
material respect, or cause, the appropriate governmental agency or authority to
revoke such qualification, registration or approval. All contributions
(including premiums) required by law or contract to have been made or approved
by the Company under or with respect to Company
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Employee Plans have been paid or accrued by the Company. Without limiting the
foregoing, there are no unfunded liabilities under any Company Employee Plan.
The Company has not received notice of any investigations, litigation or other
enforcement actions against the Company with respect to any of the Company
Employee Plans. There are no pending actions, suits or claims by former or
present employees of the Company (or their beneficiaries) with respect to the
Company Employee Plans or the assets or fiduciaries thereof (other than routine
claims for benefits).
Section 3.11 TITLE TO PROPERTY. The Company has good and marketable
title, or valid leasehold rights (in the case of leased property), to all real
property and all personal property purported to be owned or leased by it or used
in the operation of its business and necessary to the operation of its business,
free and clear of all Encumbrances, excluding (i) liens for taxes, fees, levies,
imposts, duties or governmental charges of any kind that are not yet delinquent
or are being contested in good faith by appropriate proceedings that suspend the
collection thereof; (ii) liens for mechanics, materialmen, laborers, employees,
suppliers or others that are not yet delinquent or are being contested in good
faith by appropriate proceedings; (iii) liens created in the ordinary course of
business in connection with the leasing or financing of office, computer and
related equipment and supplies or that secure indebtedness to Southwest Bank of
Texas, N.A.; and (iv) easements and similar encumbrances ordinarily created for
xxxxxx utilization and enjoyment of property. All of such owned or leased
property with a value in excess of $5,000 is listed on Schedule 3.11 hereto.
Section 3.12 TRADEMARKS, PATENTS AND COPYRIGHTS. (a) For purposes of
this Agreement, the term "Company Rights" shall mean all worldwide industrial
and intellectual property rights, including, without limitation, each patent,
patent rights, license, patent application, trade name, trademark, trade name
and trademark registration, copyright, copyright registration, copyright
application, service xxxx, brand xxxx and brand name, trade secrets relating to
or arising from any proprietary process, formula, source or object code, owned
or possessed by the Company necessary for the conduct of the Company's business.
The Company owns or has the right to use, sell or license all Company Rights and
such Company Rights are sufficient for the conduct of the Company's businesses
as being conducted as of the date hereof. Schedule 3.12 hereto lists each
patent, patent right, patent application, tradename registration, trademark
registration, copyright registration, copyright application, source and object
code owned or possessed by the Company;
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any Company Rights, will not
cause the forfeiture or termination or give rise to a right of forfeiture or
termination of
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any Company Rights or impair the right of the Company to use, sell or license
any Company Rights or any portion thereof, except for breaches, forfeitures,
terminations, rights of forfeiture or termination, or impairments that would not
have a Company Material Adverse Effect;
(c) Neither the manufacture, marketing, license, sale or intended use
of any product currently licensed or sold by the Company or currently under
development by the Company violates any license or agreement between the Company
and any third party relating to such product or infringes any intellectual
property right of any other party, and there is no pending or, to the best
knowledge of the Company, threatened claim or litigation contesting the
validity, ownership or right to use, sell, license or dispose of any Company
Right nor, to the best knowledge of the Company is there any basis for any such
claim, nor has the Company received any notice asserting that any Company Right
or the proposed use, sale, license or disposition thereof conflicts or will
conflict with the rights of any other party, nor, to the best knowledge of the
Company, is there any basis for any such assertion, except for such violations,
infringements, threatened claims or litigations or conflicts as would not have a
Company Material Adverse Effect; and
(d) No current or prior officers, employees or consultants of the
Company claim an ownership interest in any Company Rights as a result of having
been involved in the development of such property while employed by or
consulting to the Company or otherwise.
Section 3.13 LEGAL PROCEEDINGS, CLAIMS, INVESTIGATIONS, ETC. Except as
set forth on Schedule 3.13 hereto, there is no legal, administrative,
arbitration or other action or proceeding or governmental investigation pending,
or to the knowledge of the Company, threatened, against the Company or any
director, officer or employee thereof relating to the Company's business. The
Company is not currently subject to any judgment, order, injunction or decree of
any court, arbitral authority, administrative agency or other governmental
authority.
Section 3.14 INSURANCE. Schedule 3.14 hereto sets forth a list and
brief description of all existing insurance policies maintained by the Company
pertaining to its business properties, personnel or assets. The Company is not
in default with respect to any provision contained in any insurance policy, and
has not failed to give any notice or present any claim under any insurance
policy in due and timely fashion. All such policies shall have been delivered to
the GST Companies prior to the Closing and at all times prior to the Closing
shall be in full force and effect. All payments with respect to such policies
are current and the Company has not received any notice threatening a
suspension, revocation, modification or cancellation of any such policy.
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Section 3.15 MATERIAL CONTRACTS. (a) Except as set forth in Schedule
3.15 hereto, the Company is not a party to and is not bound by any contract or
has any commitment, whether written or oral, which has a term in excess of one
year and will result in payments in excess of $3,000 or require material
performance on the part of the Company, other than (i) contracts or commitments
entered into in the ordinary course of business with vendors and customers and
(ii) contracts or commitments cancelable upon not more than 30 days' notice.
Each of the contracts and commitments set forth in Schedule 3.15 hereto and each
of the other contracts and commitments to which the Company is a party, is valid
and existing, in full force and effect and enforceable in accordance with its
terms (subject to equitable principles and limitations on indemnity) and there
is no default or claim of default against the Company or any notice of
termination with respect thereto that would have a Company Material Adverse
Effect. The Company has complied in all respects with all requirements of, and
performed all of its obligations under, such contracts and commitments as
necessary to prevent a Company Material Adverse Effect. In addition, no other
party to any such contract or commitment is, to the best of the Company's
knowledge, in default under or in breach of any term or provision thereof, and
there exists no condition or event which, after notice or lapse of time or both,
would constitute a default by any party to any such contract or commitment that
would have a Company Material Adverse Effect. Copies of all the written
documents and a synopsis of all oral contracts and commitments described in
Schedule 3.15 hereto have heretofore been made available to the Buyer and are
true and complete and include all amendments and supplements thereto and
modifications thereof to and including the date hereof.
(b) Except as set forth in Schedule 3.15 hereto, the Company is not a
party to any oral or written (i) agreement with any consultant, executive
officer or other key employee the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of the transactions
contemplated by this Agreement, or (ii) agreement or plan, including any stock
option plan and the like, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of the
transactions contemplated by this Agreement, except that options outstanding on
the date hereof may be exercised prior to the Closing Date.
Section 3.16 CERTAIN TRANSACTIONS. Except as set forth on Schedule 3.16
hereto, no officer, director or any employee of the Company, or any member of
any such person's immediate family is presently a party to any transaction with
the Company relating to the business of the Company, including without
limitation, any contract, agreement or other arrangement (i) providing for the
furnishing of services by, (ii) providing for the rental of real or personal
property from, or (ii) otherwise requiring payments to (other than for services
as officers, directors or employees of the Company), any such person or any
corporation, partnership, trust or
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other entity in which any such person has a substantial interest as a
stockholder, officer, director, trustee or partner.
Except as set forth on Schedule 3.16 hereto, no shareholder or director
and no "affiliate" or "associate" (as such terms are defined in the rules and
regulations promulgated under the Securities Act of 1933, as amended (the
"Securities Act")) thereof holds any position or office with or has any material
financial interest, direct or indirect, in any supplier, customer or account of,
or other outside business that has material transactions with, the Company.
Section 3.17 BROKER. No broker, finder or investment banker is entitled
to any brokerage or finder's fee or other commission in connection with the
transactions contemplated hereby based on any agreements, arrangements or
understandings reached or made by, with or on behalf of the Company or the
Shareholders.
Section 3.18 ENVIRONMENTAL MATTERS. (a) The Company is not the subject
of, or to the Company's knowledge, being threatened to be the subject of (i) any
enforcement proceeding, or (ii) any investigation, brought in either case under
any federal, state or local environmental law, rule, regulation, or ordinance at
any time in effect or (iii) any third party claim relating to environmental
conditions on or off the properties of the Company. The Company has not been
notified that it must obtain any permits and licenses or file documents for the
operation of its business under federal, state and local laws relating to
pollution protection of the environment. To the Company's knowledge, no
conditions exist on or off the properties of the Company that will give rise to
any liabilities, known or unknown, under any federal, state or local
environmental law, rule, regulation or ordinance, or as the result of any claim
of any third party. For the purposes of this Section 3.18, an investigation
shall include, but is not limited to, any written notice received by the Company
that relates to the onsite or offsite disposal, release, discharge or spill of
any waste, waste water, pollutant or contaminants.
(b) There are no toxic wastes or other toxic or hazardous substances or
materials, pollutants or contaminants that the Company (or, to the best of the
Company's knowledge, any previous occupant of the Company's facilities) has
used, stored or otherwise held in or on any of the facilities of the Company,
which, are present at or have migrated from the facilities, whether contained in
ambient air, surface water, groundwater, land surface or subsurface strata. The
facilities have been maintained by the Company in compliance with all
environmental protection, occupational, health and safety or similar laws,
ordinances, restrictions, licenses, and regulations such that there will not be
a Company Material Adverse Effect. The Company has not disposed of or arranged
(by contract, agreement or otherwise) for the disposal of any material or
substance that was generated or used by the Company at any off-site location
that has been or is listed or
-15-
proposed for inclusion on any list promulgated by any Governmental Authority for
the purpose of identifying sites that pose a danger to health and safety. There
have been no environmental studies, reports and analyses made or prepared in the
last five years relating to the facilities of the Company. The Company has not
installed any underground storage tanks in any of its facilities and, to the
Company's knowledge, none of such facilities contain any underground storage
tanks.
Section 3.19 ILLEGAL PAYMENTS. The Company and the Shareholders have
not, directly or indirectly, paid or delivered any fee, commission or other sum
of money or item of property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
that is in any manner related to the business or operations of the Company, that
the Company knows or has reason to believe to have been illegal under any
federal, state or local laws or the laws of any other country having
jurisdiction. The Company and the Shareholders have not participated, directly
or indirectly, in any boycotts affecting any of the Company's actual or
potential customers.
Section 3.20 COMPLIANCE WITH LAW. Except as disclosed in a writing
delivered by the Company to GST prior to the date hereof, the Company has
complied in all respects with all laws, rules, regulations, arbitral
determinations, orders, writs, decrees and injunctions that are applicable to or
binding upon the Company or its properties such that there will not be a Company
Material Adverse Effect. Schedule 3.20 lists all franchises, licenses, permits,
consents, authorizations, approvals and certificates of any regulatory,
administrative or other governmental agency or body used in conducting the
Company's business. Except as disclosed in such writing, each of such permits is
currently valid and in full force and effect and such permits constitute all
franchises, licenses, permits, consents, authorizations, approvals, and
certificates of any regulatory, administrative or other governmental agency or
body necessary to the conduct of the Company's business. Seller is not in
violation of such permits. There is no pending or threatened proceeding that
could result in the revocation or cancellation of, or inability of the Company
to renew, any such permit.
Section 3.21 RECEIVABLES. Each account receivable reflected on the
balance sheet of the Company for the year ended December 31, 1995 and the
six-month period ended June 30, 1996 constitutes a bona fide receivable
resulting from a bona fide sale to a customer in the ordinary course of
business, the account of which was actually due on the date hereof and has been
or will be collected in the ordinary course of business. The books and records
of the Company state correctly in all material respects the facts with respect
to each account receivable of the Company and the balance due thereon. Each
payment reflected on such books and records as having been made on each such
account receivable was
-16-
made by the respective account debtor and not directly or indirectly by any
director, officer, employee or agent of the Company unless such person is shown
on said books and records as such account debtor. Each document and instrument
evidencing, securing or relating to each account receivable, including, without
limitation, each insurance policy, certificate, xxxx or statement, is correct
and complete in all material respects, is genuine and valid and is enforceable
in accordance with its terms. To the Company's knowledge, there are no defenses,
claims of disabilities, counterclaims, offsets, refusals to pay or other
material rights of set-off against any accounts receivable and there is no
threatened, intended or proposed defense, claim or disability, counterclaim,
offset, refusal to pay or other material right of set-off with respect thereto.
Each account receivable, each document and instrument and each transaction
underlying or relating thereto conforms in all material respects, including,
without limitation, in respect of interest rates charged, notices given and
disclosures made, to the requirements and provisions of each applicable law,
rule or regulation relating to credit or consumer requirements.
Section 3.22 LABOR. The Company is not a party to any representation or
labor contract. The Company has not received any notice from any labor union or
group of employees that such union or group represents or believes or claims it
represents or intends to represent any of the employees of the Company; no
strike or work interruption by any of its employees is planned, under
consideration, threatened or imminent; and neither the Company nor any officer
or director thereof has made any loan or given anything of value, directly or
indirectly, to any officer, official, agent or representative of any labor union
or group of employees. At no time during the past five years has the Company
experienced any threats of strikes, work stoppages or demands for collective
bargaining by any union or labor organization or any other group or other
organization of employees, any grievances, disputes or controversies with any
union or any other group or other organization of employees, or any pending or
threatened court of arbitration proceedings involving an employment grievance,
dispute or controversy. The Company is not delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed by them to the date hereof or amounts
required to be reimbursed to such employees. In the event of termination of the
employment of any said employees, neither the Company nor the GST Companies will
by reason of anything done prior to the Closing be liable to any of said
employees for so-called "severance pay" or any other payments. The Company is in
compliance with all federal, state and local laws and regulations respecting
labor, employment and employment practices, terms and conditions of employment
and wages and hours and there is no unfair labor practice complaint against the
Company pending before the National Labor Relations Board or any comparable
state or local agency such that there will not be a Company Material Adverse
Effect.
-17-
Section 3.23 OFFICERS, EMPLOYEES AND COMPENSATION. Schedule 3.23 hereto
lists and describes as of June 30, 1996, the base salary, fringe benefits and
perquisites of any current employee of the Company whose total current base
salary exceeds or exceeded in the last year $25,000 annually. Except as
disclosed on Schedule 3.23 hereto, there are no other forms of compensation paid
by the Company to any such officer or employee. The provisions for wages and
salaries accrued on the Financial Statements are and will be adequate to reflect
all obligations for wages and salaries and other compensation to the Company's
employees through June 30, 1996 including, without limitation, vacation pay,
sick pay, and all commissions and other fees due and payable to agents, salesmen
and other employees of the Company. The Company is not obligated, directly or
indirectly, to any director or shareholder of the Company or any person related
to such person by blood or marriage, except for current liability for
compensation. None of the Shareholders or the Company has any agreements or
understandings with any officer, employee or representative of Shareholders or
the Company that would influence any such person not to remain associated with
the Company or not to become associated with the GST Companies from and after
the Closing Date or from serving the Company or the GST Companies in a capacity
similar to the capacity currently held. Schedule 3.23 hereto sets forth the
Company's present severance policy and the names, amounts and payment schedules
relating to persons currently receiving severance payments or retiree medical
benefits.
Section 3.24 BANKS; SAFE DEPOSIT BOXES. Schedule 3.24 hereto lists the
names and locations of all banks at which the Company has an account and/or safe
deposit boxes, the numbers of any such accounts and the names of all persons
authorized to draw thereon or to have access thereto.
Section 3.25 CREDIT TERMS. Schedule 3.25 hereto sets forth all the
material terms and conditions of credit greater than "net 30" given to any
customer of the Company and all discounts given by the Company to its customers.
Schedule 3.25 hereto sets forth a copy of the Company's standard warranties and
guarantees and any material departures therefrom.
Section 3.26 CLOSING DATE EFFECT. All of the representations and
warranties of the Shareholders and the Company are true and correct as of the
date hereof and shall be true and correct on and as of the Closing Date with the
same force and effect as if such representations and warranties were made by the
Shareholders and the Company to the Buyer on the Closing Date.
Section 3.27 COMPLETE DISCLOSURE. No representation or warranty made by
the Company or the Shareholders in this Agreement, and no exhibit, schedule,
statement, certificate or other writing furnished to the Buyer by or on behalf
of the Company or any Shareholder pursuant to this Agreement or in connection
with the transactions contemplated hereby, contains or will contain, any
-18-
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein and therein not
misleading.
Section 3.28 REORGANIZATION AND REGULATORY MATTERS. The Company has not
taken any action nor does it have any knowledge of any fact or circumstance that
is reasonably likely to (i) prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code, or (ii)
materially impede or delay receipt of any consents of Governmental Authorities
or result in the imposition of a condition or restriction of the type that would
materially adversely impact the economic or business benefits of the transaction
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE GST COMPANIES
The GST Companies hereby jointly and severally represent and warrant to
the Company as follows:
Section 4.1 CORPORATE ORGANIZATION; REQUISITE AUTHORITY TO CONDUCT
BUSINESS; ARTICLES OF INCORPORATION AND BY-LAWS. Each of the GST Companies is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Each of the GST Companies has each
provided the Company with true and complete copies of its certificate or
articles of incorporation (certified by the Secretary of State of the State of
Delaware and the Deputy Director under the Canada Business Corporations Act,
respectively) and By-laws (certified by the Secretary of each of the GST
Companies, respectively) as in effect on the date hereof. Each of the GST
Companies has the requisite corporate power and authority to enter into this
Agreement, and to perform its obligations hereunder and to consummate the
transactions contemplated hereby; and this Agreement has been duly authorized
and approved by the respective Boards of Directors of the GST Companies and no
further action on their part is necessary to authorize the execution and
delivery by them of, and the performance of their respective obligations under,
this Agreement. There are no corporate, contractual, statutory or other
restrictions of any kind upon the power and authority of the GST Companies to
execute and deliver this Agreement and to consummate the transactions
contemplated hereunder and, except as set forth on Schedule 4.2 hereto, no
action, waiver or consent by any Governmental Authority is necessary to make
this Agreement a valid instrument binding upon the GST Companies in accordance
with its terms. Sub is a wholly-owned, direct subsidiary of GST.
Section 4.2 EXECUTION AND DELIVERY. Except as set forth on Schedule 4.2
hereto, none of the GST Companies is required to submit any notice, report or
other filing to any Governmental Authority in connection with the execution,
delivery or performance
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of this Agreement. This Agreement has been duly executed and delivered by each
of the GST Companies and constitutes a legal, valid and binding obligation of
the GST Companies, enforceable against the GST Companies in accordance with its
terms (to the extent each is a party thereto), except (i) as such enforceability
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and (ii)
as such obligations are subject to general principles of equity.
Section 4.3 NO CONFLICTS; ABSENCE OF DEFAULTS. The execution, delivery
and performance or this Agreement by the GST Companies and the consummation of
the transactions contemplated hereby do not and will not conflict with or
violate (a) any of the GST Companies' Certificates or Articles of Incorporation
or By-laws or (b) any agreement governing the organization, management, business
or affairs of the GST Companies or, in any material respect, any agreement or
instrument to which the GST Companies are bound, or (c) except as set forth on
Schedule 4.2, any material law, administrative regulation or rule or court
order, judgment or decree applicable to the GST Companies; nor will the
execution and delivery of this Agreement or the consummation of the transaction
contemplated hereby constitute a material breach of, or any event of default
under, any material contract or agreement to which the GST Companies may be
bound or affected.
Section 4.4 CAPITALIZATION. The authorized capital stock of GST
consists of (i) an unlimited number of GST Common Shares, 21,170,923 of which
were issued and outstanding at June 30, 1996 and (ii) 10,000,000 Preference
Shares, none of which are issued and outstanding. The Exchange Shares are duly
authorized and when issued in accordance with the terms and conditions of this
Agreement shall be validly issued, fully paid and nonassessable. The Exchange
Shares are not subject to any preemptive rights or other similar restrictions.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. GST has filed with
the Securities and Exchange Commission (the "SEC"), and has heretofore provided
to the Shareholders true and complete copies of all forms, reports, schedules,
statements and other documents required to be filed by it under the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
since September 30, 1995 (as such documents have been amended or supplemented
since the time of their filing, collectively, the "SEC Reports"). As of their
respective dates, the SEC Reports (including without limitation, any financial
statements or schedules included therein) (a) did not contain any untrue
statement of 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, and (b) complied in all material respects with the
applicable requirements of the Securities Act and Exchange Act (as the case may
be) and all applicable rules and regulations of the SEC
-20-
promulgated thereunder. Each of the consolidated financial statements included
in the SEC Reports has been prepared from, and is in accordance with, the books
and records of GST, complies in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, has been prepared in accordance with U.S. GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presents in all material respects the consolidated
results of operations and cash flows (and changes in financial position, if any)
of GST as at the dates thereof or for the periods presented therein.
Section 4.6 NO UNDISCLOSED LIABILITIES. Except as described in the SEC
Reports, GST has no material debts, liabilities or obligations of any kind,
whether accrued, absolute, contingent or other, whether due or to become due,
except current liabilities incurred in the ordinary course of business or that
would not have a material adverse effect on the business, properties, assets,
liabilities, condition (financial or otherwise), results of operations or net
worth of GST (a "GST Material Adverse Effect").
Section 4.7 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since June 30, 1996,
there has not been, with respect to the GST Companies, (i) GST Material Adverse
Effect; (ii) any strike, picketing, work slowdown or labor disturbance; (iii)
any material damage, destruction or loss (whether or not covered by insurance)
with respect to any assets or properties material to their businesses or
operations taken as a whole; (iv) any redemption or other acquisition by it of
GST Common Shares or any declaration or payment of any dividend or other
distribution in cash, stock or property with respect thereto; (v) any entry into
any commitment or transaction (including, without limitation, any borrowing or
capital expenditure) other than in the ordinary course of business or as
contemplated by this Agreement; (vi) any transfer of, or rights granted under,
any leases, licenses, agreements, patents, trademarks, trade names, or
copyrights other than those transferred or granted in the ordinary course of
business and consistent with past practice; (vii) any mortgage, pledge, security
interest or imposition of any other encumbrance on any assets or properties
except in the ordinary course of business; (viii) any payment of any debts,
liabilities or obligations of any kind other than those currently due; (ix) any
cancellation of any debts or claims or forgiveness of amounts owed to the GST
Companies; or (x) any change in accounting principles or methods (except insofar
as may have been required by a change in U.S. GAAP). Since December 31, 1995,
the GST Companies have conducted their business only in the ordinary course and
in a manner consistent with past practice and has not made any material change
in the conduct of its business or operations.
Section 4.8 TAXES AND TAX RETURNS. The GST Companies have (i) duly
filed with the appropriate taxing authorities all Tax
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Returns required to be filed by or with respect to the GST Companies, and all
such duly filed Tax Returns are true, correct and complete in all respects, and
(ii) paid in full or made adequate provisions for on its balance sheet (in
accordance with U.S. GAAP) all Taxes shown to be due on such Tax Returns. There
are no liens for Taxes upon the assets of the GST Companies, except for
statutory liens for current Taxes not yet due and payable or that may thereafter
be paid without penalty or are being contested in good faith. The GST Companies
have not received any notice of audit, is not undergoing any audit of their Tax
Returns, and has not received any notice of deficiency or assessment from any
taxing authority with respect to liability for Taxes of the GST Companies, which
has not been fully paid or finally settled. There have been no waivers of
statutes of limitations by the GST Companies with respect to any Tax Returns
that relate to the GST Companies. The GST Companies have not filed a request
with the Internal Revenue Service for changes in accounting methods within the
last two years, which change would affect the accounting for tax purposes,
directly or indirectly, of the GST Companies.
Section 4.9 BROKER. No broker, finder or investment banker is entitled
to any brokerage or finder's fee or other commission in connection with the
transactions contemplated hereby based on any agreements, arrangements or
understandings reached or made by, with or on behalf of the GST Companies,
except for the investment banking fee payable in Exchange Shares to Summit
Capital, Inc.
Section 4.10 LEGAL PROCEEDINGS, CLAIMS, ETC. There is no legal,
administrative, arbitration or other action or proceeding or governmental
investigation pending, or to the knowledge of the GST Companies, threatened,
against the GST Companies, or any director, officer or employee thereof relating
to this Agreement or the transactions contemplated hereunder. None of the GST
Companies is in violation of, or default under, any laws, ordinances,
regulations, judgements, injunctions, orders or decrees of any Governmental
Authority. Except as set forth in the SEC Reports, none of the GST Companies is
subject to any judgment, order, injunction or decree of any court, arbitral
authority or Governmental Authority that would have a GST Material Adverse
Effect.
Section 4.11 ENVIRONMENTAL MATTERS. (a) The GST Companies are not the
subject of, or to their knowledge, being threatened to be the subject of (i) any
enforcement proceeding, or (ii) any investigation, brought in either case under
any federal, state or local environmental law, rule, regulation, or ordinance at
any time in effect or (iii) any third party claim relating to environmental
conditions on or off the properties of the GST Companies. The GST Companies have
not been notified that they must obtain any permits and licenses or file
documents for the operation of their business under federal, state and local
laws relating to pollution protection of the environment. To the GST Companies'
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knowledge, no conditions exist on or off the properties of the GST Companies
that will give rise to any liabilities, known or unknown, under any federal,
state or local environmental law, rule, regulation or ordinance, or as the
result of any claim of any third party. For the purposes of this Section 4.11,
an investigation shall include, but is not limited to, any written notice
received by the GST Companies that relates to the onsite or offsite disposal,
release, discharge or spill of any waste, waste water, pollutant or
contaminants.
(b) There are no toxic wastes or other toxic or hazardous substances or
materials, pollutants or contaminants that the GST Companies (or, to the best of
the their knowledge, any previous occupant of the GST Companies' facilities) has
used, stored or otherwise held in or on any of the facilities of the GST
Companies, which, are present at or have migrated from the facilities, whether
contained in ambient air, surface water, groundwater, land surface or subsurface
strata. The facilities have been maintained by the GST Companies in compliance
with all environmental protection, occupational, health and safety or similar
laws, ordinances, restrictions, licenses, and regulations such that there will
not be a GST Material Adverse Effect. The GST Companies have not disposed of or
arranged (by contract, agreement or otherwise) for the disposal of any material
or substance that was generated or used by the GST Companies at any off-site
location that has been or is listed or proposed for inclusion on any list
promulgated by any Governmental Authority for the purpose of identifying sites
that pose a danger to health and safety. There have been no environmental
studies, reports and analyses made or prepared in the last five years relating
to the facilities of the GST Companies. The GST Companies have not installed any
underground storage tanks in any of its facilities and, to the their knowledge,
none of such facilities contain any underground storage tanks.
Section 4.12 COMPLIANCE WITH LAW. The GST Companies have complied in
all respects with all laws, rules, regulations, arbitral determinations, orders,
writs, decrees and injunctions that are applicable to or binding upon the GST
Companies or their properties such that there will not be a GST Material Adverse
Effect.
Section 4.13 CLOSING DATE EFFECT. All of the representations and
warranties of the GST Companies are true and correct as of the date hereof and
shall be true and correct on and as of the Closing Date with the same force and
effect as if such representations and warranties were made by the GST Companies
to the Company on the Closing Date.
Section 4.14 COMPLETE DISCLOSURE. No representation or warranty made by
the Companies in this Agreement, and no exhibit, schedule, statement,
certificate or other writing furnished to the Company by or on behalf of the GST
Companies pursuant to this
-23-
Agreement or in connection with the transactions contemplated hereby, contains
or will contain, any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained herein and
therein not misleading.
Section 4.15 REORGANIZATION MATTERS. None of the GST Companies has
taken any action, nor do they have any knowledge of any fact or circumstance
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 COVENANTS OF THE COMPANY REGARDING CONDUCT OF BUSINESS
OPERATIONS PENDING THE CLOSING. The Company covenants and agrees that between
the date of this Agreement and the Closing Date, the Company will carry on its
business in the ordinary course consistent with past practice, will use its best
efforts to (i) preserve its business organization intact, (ii) retain the
services of its present employees, and (iii) preserve the good will of its
suppliers and customers, and will not, except in the ordinary course of
business, purchase, sell, lease or dispose of any property or assets or incur
any liability or enter into any other extraordinary transaction. By way of
amplification and not limitation, the Company shall not, between the date of
this Agreement and the Closing Date, directly or indirectly, do any of the
following without the prior written consent of the Buyer:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or authorization of
any shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock,
or any other ownership interest, of the Company, except pursuant to the exercise
of one or more stock options listed on Schedule 3.2 hereto; (ii) amend or
propose to amend its Articles of Incorporation; (iii) split, combine or
reclassify any of its outstanding shares, or declare, set aside, pay or make any
dividend or other distribution payable in cash, stock, property or otherwise
with respect thereto; or (iv) redeem, purchase or otherwise acquire any shares
of its capital stock;
(b) (i) make any acquisition (by merger, consolidation, or acquisition
of stock or assets) of any corporation, partnership or other business
organization or division thereof; (ii) except in the ordinary course of business
and in a manner consistent with past practice, sell, pledge, dispose of, or
encumber or authorize or propose the sale, pledge, disposition or encumbrance of
any of its assets, except for assets that individually or in the aggregate
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have a value of less than $5,000; (iii) incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise become responsible for the
obligations of any other individual, partnership, firm or corporation, or make
any loans or advances to any individual, partnership, firm, or corporation, or
enter into any contract or agreement to do so, except in the ordinary course of
business and consistent with past practice; (iv) authorize any single capital
expenditure or series of related capital expenditures each of which is in excess
of $5,000; or (v) release or assign any indebtedness owed to it or any claims
held by it, except in the ordinary course of business and consistent with past
practice;
(c) take any action other than in the ordinary course of business and
in a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to the grant of any severance or
termination pay (otherwise than pursuant to its policies in effect on the date
hereof) or with respect to any increase of benefits payable under its severance
or termination pay policies in effect on the date hereof;
(d) make any payments (except in the ordinary course of business and in
amounts and in a manner consistent with past practice) under any Company
Employee Plan to any employee, independent contractor or consultant, enter into
any new Company Employee Plan or any new consulting agreement, grant or
establish any awards under such Company Employee Plan or agreement, in any such
case providing for payments of more than $5,000, or adopt or otherwise amend any
of the foregoing; PROVIDED, HOWEVER, that the Company may make payments to
Xxxxxx Xxxxxxx in an amount not to exceed (i) the amount of proceeds received by
the Company after the date hereof from the exercise of any options to acquire
shares of TotalNet Stock held by Xxxxxx Xxxxxxx as of the date hereof (the
"Option Payment") and (ii) amounts paid to Xxxxxx Xxxxxxx permitted under
Section 5.4. Any amounts paid by the Company under this Section other than the
Option Payment shall be considered "Permitted Payments" for purposes of Section
1.7(c);
(e) take any action except in the ordinary course of business and in a
manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to accounting policies or procedures,
other than such actions deemed necessary to comply with U.S. GAAP (including
without limitation its procedures with respect to the payment of accounts
payable);
(f) enter into or terminate any material contract or agreement or make
any material change in any of its material contracts or agreements, other than
(i) in the ordinary course of business, (ii) relating to indebtedness incurred
in clause (b)(iii) above and (iii) agreements, if any, relating to the
transactions contemplated hereby;
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(g) enter into any material contract or commitment for network capacity
services, switching equipment or services;
(h) waive any rights of material value or cancel any material debts or
claims;
(i) make any significant organizational or executive personnel changes,
including but not limited to the entry into employment agreements, the material
modification of existing employment agreements, or any general or executive
officer compensation increases not in accordance with past practices; or
(j) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action which would make any of its representations or
warranties contained in this Agreement untrue or incorrect in any material
respect as of the date when made or as of a future date.
Section 5.2 NO OTHER NEGOTIATIONS. The Company agrees that, between the
date of this Agreement and the Effective Time, the Company will not, nor will it
permit any of its affiliates (including any officers, directors, employees,
financial advisors, brokers, stockholders or any other person acting on their
behalf) to, (i) enter into any agreement with a third party with respect to the
acquisition, directly or indirectly, of shares or other securities of the
Company or a material part of its assets or any merger, business combination,
consolidation or reorganization, (ii) enter into discussions or negotiations
with a third party regarding such an agreement, or (iii) provide a third party
with general access to their books, records or employees for the purpose of
enabling such third party to conduct a purchase investigation of the legal,
financial or business condition of them PROVIDED, HOWEVER, that nothing
contained in this Agreement shall prohibit the Board of Directors of the Company
from furnishing information to, or entering into discussions or negotiations
with, any person or entity in connection with a proposal in writing by such
person or entity to acquire the Company pursuant to a merger, consolidation,
share exchange, business combination or other similar transaction or to acquire
all or substantially all of the assets of the Company if the Board of Directors
of the Company, after consultation with independent legal counsel (which may
include its regularly engaged independent legal counsel), determines in good
faith that such action is required for the Board of Directors of the Company to
comply with its fiduciary duties to shareholders imposed by Texas law.
Section 5.3 OUTSTANDING OPTIONS, ETC. The Company will take such action
as may be necessary to cause any outstanding options, warrants, convertible
securities or other rights of any kind to acquire any shares of the capital
stock of the Company to be exercised, cancelled or bought by the Company on or
prior to the Closing Date. It is understood that any amounts expended by the
Company in connection with the satisfaction of its obligations
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under this Section 5.3 shall be treated as "Permitted Payments" for purposes of
Section 1.7(c).
Section 5.4 BANK LINE OF CREDIT. The Company shall not make any
borrowings under its Line of Credit except for borrowings (a) not to exceed
$100,000 in the aggregate to pay for amounts to be paid (i) as compensation to
Xxxxxx Xxxxxxx in excess of the amounts paid to Xxxxxx Xxxxxxx by the Company in
accordance with Section 5.1(d), (ii) for legal fees and disbursements of Xxxxx,
Xxxxxx & Xxxxx, LLP counsel to the Company, for services provided on behalf of
the Company in connection with the Merger, (b) in the ordinary course of
business to fund routine business operations, (c) to fund bonuses to employees
in amounts required in order for such employees to exercise any options or
rights to provide capital stock of the Company provided such borrowings are
repaid upon exercise of such options and (d) not to exceed $25,000 to cancel or
buy back any options or rights to purchase the capital stock of the Company in
accordance with Section 5.3.
Section 5.5 APPROVAL BY SHAREHOLDERS. The Company will use its best
efforts to ensure that, at the Effective Time, the Merger shall have been duly
authorized, and this Agreement shall have been duly adopted, by the Shareholders
in accordance with the TBCA.
ARTICLE VI
ADDITIONAL COVENANTS
Each of the Company and the GST Companies covenants and agrees:
(a) BEST EFFORTS. To proceed diligently and use its best efforts to
take or cause to be taken all actions and to do or cause to be done all things
necessary, proper and advisable to consummate the transactions contemplated by
this Agreement, including the execution and delivery of the Employment Agreement
and the Escrow Agreement.
(b) COMPLIANCE. To comply in all material respects with all applicable
rules and regulations of any Governmental Authority in connection with the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby; to use all reasonable efforts to obtain in a timely manner
all necessary waivers, consents and approvals and to take, or cause to be taken,
all other actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement.
(c) NOTICE. To give prompt notice to the other party of (i) the
occurrence, or failure to occur, of any event whose
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occurrence or failure to occur, would be likely to cause any representation or
warranty contained in this Agreement to be untrue or incorrect in any material
respect at any time from the date hereof to the Closing Date and (ii) any
material failure on its part, or on the part of any of its officers, directors,
employees or agents, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any such notice shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
(d) ACCESS. Subject to the confidentiality arrangement provided in (e)
below, to cause its affiliates, officers, directors, employees, auditors and
agents to afford the officers, employees and agents of the other party hereto
complete access at all reasonable times and upon reasonable notice to its
properties, offices and other facilities and to all books and records, and shall
furnish such other party with all financial, operating and other data and
information as the other party through its officers, employees or agents, may
reasonably request, provided that the party providing such access and furnishing
such data and information to the other party incurs no cost in doing so.
(e) CONFIDENTIALITY. To hold in strict confidence all data and
information obtained from any other party hereto or any subsidiary, division,
associate, representative, agent or affiliate of any such party (unless such
information is or becomes publicly available without the fault of any
representative of such party, or public disclosure of such information is
required by law in the opinion of counsel to such party) that is confidential
and shall insure that such representatives do not disclose information to others
without the prior written consent of the other party hereto, and in the event of
the termination of this Agreement, to cause its representatives to return
promptly every document furnished by the other party hereto or any subsidiary,
division, associate, representative, agent or affiliate of any such party in
connection with the transactions contemplated hereby and any copies thereof
which may have been made, other than documents which are publicly available.
(f) ANNOUNCEMENTS. That all announcements, reports, statements and
press releases to the public, the trade or the press or any other third party
concerning the transactions contemplated by this Agreement shall be mutually
agreed to by the Company and the Buyer before the issuance or the making thereof
and, subject to the advice of counsel, no party shall issue any such press
releases or make any such public statement prior to such mutual agreement,
except as may be required by law. Copies of any such announcement, report,
statements or press release, including any announcement or disclosure required
by law or by any Governmental Authority, shall be delivered to each of the
parties hereto prior to release.
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(g) REORGANIZATION TREATMENT. To use its reasonable efforts to cause
the Merger to qualify, and to take no action that would cause the Merger not to
qualify, for treatment as a "reorganization" within the meaning of Section
368(a) of the Code for federal income tax purposes, and in such connection, to
maintain the separate corporate existence of the Company as the operator of the
business operated by it on the date hereof and as a direct subsidiary of GST for
a period of not less than one year after the Closing Date.
(h) DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE. From the date
hereof through the fifth anniversary of the Closing Date and for so long as any
claim asserted prior to such date has not been fully adjudicated by a court of
competent jurisdiction, to at all times maintain liability insurance coverage
with respect to the Company's directors and officers immediately prior to the
Effective Time insuring each such individual against liability for their actions
in such capacities taken in connection with the Merger occurring on or before
the Closing Date and in scope of coverage and in amounts and having deductibles
at least equivalent to that provided to officers of GST's subsidiaries;
PROVIDED, HOWEVER, that such insurance coverage can be obtained at commercially
reasonable rates, which in no event may exceed 150% of the rates presently paid
by GST.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement are subject to the
satisfaction, on or prior to the Closing Date, unless waived in writing, of each
of the following conditions:
Section 7.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the GST Companies contained in this Agreement shall be true
and correct in all material respects as of the date when made and at and as of
the Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, with the same force and effect as
if made on and as of the Closing Date, and the Company shall have received a
certificate to that effect and as to the matters set forth in Section 7.2
hereof, dated the Closing Date, from the President or Chief Executive Officer of
each of the GST Companies.
Section 7.2 PERFORMANCE OF COVENANTS. The GST Companies shall have
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by
them on or before the Closing Date.
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Section 7.3 NO PROCEEDINGS. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any federal, state or
local court or other governmental agency or of any foreign jurisdiction that
prohibits the consummation of the transactions which are the subject of this
Agreement shall have been issued or entered and remain in effect.
Section 7.4 AGREEMENTS. Each of (i) the Employment Agreement, (ii)
indemnification agreements in the form of Annex D hereto (the "Indemnification
Agreements") between the Company and each of the officers and directors of the
Company in office immediately prior to the Effective Time, and (iii) the
registration rights agreement in the form of Annex E hereto (the "Registration
Rights Agreement") shall have been executed and delivered by the Company.
Section 7.5 CONSENTS AND APPROVALS. All filings and registrations with,
and notifications to, all Governmental Authorities required for consummation of
the transactions contemplated by this Agreement shall have been made, and all
consents, approvals and authorizations of all Governmental Authorities and
parties to material contracts, licenses, agreements or instruments required for
consummation of the transactions contemplated by this Agreement shall have been
received and shall be in full force and effect.
Section 7.6 OPINION OF COUNSEL TO THE GST COMPANIES. The Shareholders
shall have received the opinion of Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP,
counsel to the GST Companies (who may rely, as to matters not governed by the
laws of New York, United States federal law or the DGCL, on opinions of other
counsel reasonably acceptable to the Company), dated the Closing Date, in form
reasonably satisfactory to the Company, substantially to the effect that: (i)
the GST Companies are corporations duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of incorporation; (ii)
the GST Companies have the corporate power to enter into this Agreement and to
consummate the transactions contemplated hereby; (iii) the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate action
on the part of the GST Companies; (iv) this Agreement has been duly executed and
delivered by the GST Companies and (assuming that it is a valid and binding
obligation of the other parties hereto) is a valid and binding obligation of the
GST Companies enforceable against the GST Companies in accordance with its
terms, except (a) as enforceability may be limited by any bankruptcy, insolvency
and other laws affecting the enforcement of creditors' rights generally, and (b)
as such enforceability is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
provided that the opinion in (iv) shall not be interpreted as constituting an
opinion that any of the provisions of the said agreements do not contravene a
provision of
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law, have the legal effect that they purport to have or are specifically
enforceable; (v) the Exchange Shares are duly authorized, and when issued will
be validly issued, fully-paid and nonassessable; and (vi) none of the execution,
delivery or performance of this Agreement by the GST Companies and the
consummation by the GST Companies of the transactions herein contemplated, to
the best of such counsel's knowledge, conflict with or result in a breach of, or
default under, the GST Companies' certificates of incorporation or By-laws or
any material indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note agreement or other material agreement or other
material instrument to which the GST Companies are a party or by which the GST
Companies are bound or to which any of the property of the GST Companies are
subject.
Section 7.7 MATERIAL CHANGES. Since the date hereof, there shall not
have been any material adverse change in the business, operations, financial
condition, assets, liabilities, prospects or regulatory status of the GST
Companies; provided that the incurrence by the GST Companies of losses from
operations during such period shall not in and of itself constitute such
material adverse change.
Section 7.8 TAX MATTERS. The Company shall have received a written
opinion of counsel from Xxxxx, Xxxxxx & Xxxxx, L.L.P., in form reasonably
satisfactory to its Board of Directors (the "Tax Opinion"), to the effect that
(i) the Merger will constitute a reorganization within the meaning of Section
368(a) of the Code, and (ii) the exchange in the Merger of TotalNet Stock for
Exchange Shares will not give rise to gain or loss to the Shareholders with
respect to such exchange (except to the extent of any cash received).
Section 7.9 GUARANTEE OF INDEBTEDNESS. The Buyer shall cause any
indebtedness of the Company that is the subject of a guarantee by one or more of
the Shareholders to be extinguished at or before the Closing Date, or in the
alternative, the Buyer may procure the termination or release of any such
guarantee.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE GST COMPANIES
The obligations of the GST Companies under this Agreement are subject
to the satisfaction, on or prior to the Closing Date, unless waived in writing,
of each of the following conditions:
Section 8.1 REPRESENTATION AND WARRANTIES TRUE. The representations and
warranties of the Company shall be true and correct in all material respects as
of the date when made and at and as of the Closing Date, except as and to the
extent that the facts and conditions upon which such representations and
warranties
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are based are expressly required or permitted to be changed by the terms hereof
with the same force and effect as if made on and as of the Closing Date, and the
Buyer shall have received a certificate to that effect and as to the matters set
forth in Section 8.2 hereof, dated the Closing Date, from the President or Chief
Executive Officer of the Company.
Section 8.2 PERFORMANCE OF COVENANTS. The Company shall have performed
or complied in all material respects with all agreements, conditions and
covenants required by this Agreement to be performed or complied with by it on
or before the Closing Date.
Section 8.3 NO PROCEEDINGS. No preliminary or permanent injunction or
other order (including a temporary restraining order) of any federal, state or
local court or other governmental agency or of any foreign jurisdiction that
prohibits the consummation of the transactions which are the subject of this
Agreement or prohibits the Merger or operation of the Company's business shall
have been issued or entered and remain in effect.
Section 8.4 AGREEMENTS. An Employment Agreement in form acceptable to
the GST Companies shall have been executed by the Company and Xxxxxx Xxxxxxx.
The Indemnification Agreements and the Registration Rights Agreement shall have
been executed by the Shareholders and the Company.
Section 8.5 CONSENTS AND APPROVALS. All filings and registrations with,
and notifications to, all Governmental Authorities required for consummation of
the transactions contemplated by this Agreement shall have been made, and all
consents, approvals and authorizations of all Governmental Authorities and
parties to material contracts, licenses, agreements or instruments required for
consummation of the transactions contemplated by this Agreement shall have been
received and shall be in full force and effect.
Section 8.6 OPINION OF THE COMPANY'S COUNSEL. The Buyer shall have
received the opinion of Xxxxx, Xxxxxx & Xxxxx LLP, counsel to the Company (who
may rely as to matters not governed by the laws of the State of Texas or United
States federal law, on opinions of other counsel reasonably acceptable to the
Buyer), dated the Closing Date, in form reasonably satisfactory to the Buyer,
substantially to the effect that: (i) the Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas; (ii) the Company has the corporate power to enter into the Transaction
Documents and to consummate the transactions contemplated thereby; (iii) the
execution and delivery of the Transaction Documents and the consummation of the
transactions contemplated thereby have been duly authorized by requisite
corporate action taken on the part of the Company; (iv) each of the Transaction
Documents has been executed and delivered by the Company and (assuming that it
is a valid and binding obligation of the other parties thereto) is a
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valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (a) as enforceability may be limited by any
bankruptcy, insolvency and other laws affecting the enforcement of creditors'
rights generally, and (b) as such enforceability is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law); (v) the TotalNet Stock is duly authorized,
validly issued, fully paid and nonassessable, (vi) the execution, delivery or
performance of the Transaction Documents by the Company and the consummation by
the Company of the transactions therein contemplated, to the best of such
counsel's knowledge, will not conflict with or result in a breach of, or default
under, the Company's Articles of Incorporation or By-laws or any indenture,
mortgage, deed of trust, voting trust agreement, stockholders' agreement, note
agreement or other agreement or other instrument to which the Company is a party
or by which the Company is bound or to which any of the property of the Company
is subject and (vii) there is no action, suit or proceeding pending, or
threatened, against or affecting the Company before any court or arbitrator or
governmental body, agency or official (or any basis thereof known to us) in
which there is a reasonable possibility of an adverse decision which may result
in a Company Material Adverse Effect, which could adversely affect the present
or prospective ability of the Company to perform its obligations under the
Transaction Documents or which in any manner draws into question the validity or
enforceability of the Transaction Documents.
Section 8.7 MATERIAL CHANGES. Since the date hereof, there shall not
have been any material adverse change in the business, operations, financial
condition, assets, liabilities, prospects or regulatory status of the Company.
Section 8.8 APPROVAL BY SHAREHOLDERS. This Agreement shall have been
approved and adopted by the requisite affirmative vote of the Shareholders in
accordance with the TBCA.
Section 8.9 APPRAISAL RIGHTS. The holders of TotalNet Stock who shall
have properly exercised, and who shall not have failed to take any steps
theretofore necessary to perfect or who shall not have otherwise subsequently
withdrawn or lost, their appraisal rights with respect to such shares, shall
hold TotalNet Stock representing not more than 2% of the aggregate of
outstanding shares of TotalNet Stock.
ARTICLE IX
INDEMNIFICATION
Section 9.1 INDEMNIFICATION BY THE SHAREHOLDERS. Subject to the limits
set forth in this Article IX, each Shareholder severally, and solely to the
extent of his allocable portion of the Escrowed Shares whatever their Market
Price, shall
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indemnify, defend and hold harmless the GST Companies and the Company and each
of their directors and officers from and against any and all loss, liability,
damage, costs and expenses (including interest, penalties and attorneys' fees)
(collectively, "Losses") that the GST Companies, the Company or any of their
affiliates may incur or become subject to arising out of or due to the following
(individually, an "Indemnifiable Claim" and collectively, "Indemnifiable Claims"
when used in the context of the Company, the GST Companies or the Shareholders
as the Indemnified Party (as defined below): (i) the claims of any broker or
finder engaged by the Shareholders or by the Company prior to the Closing Date,
(ii) any inaccuracy of any representation or the breach of any warranty of the
Company contained in Article III of this Agreement and (iii) any breach or
failure of observance of any covenant, agreement or commitment made by the
Company in this Agreement and required to be performed or fulfilled at or prior
to the Closing Date. Each Shareholder severally, and solely to the extent of his
allocable portion of the Escrowed Shares whatever their Market Price, shall
reimburse the GST Companies and each controlling person for any reasonable and
documented legal or any other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, liability, action or
proceeding subject to the limitation set forth in Section 9.2. The provisions of
Article IX, including this Section 9.1, shall be acknowledged and agreed to by
the Shareholders in the Acknowledgment and Agreement.
Section 9.2 DISPOSITION OF ESCROWED SHARES. The obligation of the
Shareholders pursuant to Section 9.1 shall be satisfied only out of the Escrowed
Shares, based on their Market Price computed in accordance with Section 1.7(c)
hereof as of any date on which payment is to be made pursuant to this Article
IX. No later than the first anniversary of this Agreement, the parties to the
Escrow Agreement shall instruct the Escrow Agent to pay over to the Shareholders
the Escrowed Shares then being held pursuant to the Escrow Agreement; unless at
such time there is pending against the Shareholders or the GST Companies, or any
of them, one or more Indemnifiable Claims, in which case the Escrowed Shares
shall be applied to satisfy all such Indemnifiable Claims based on their stated
value. In the event the Shareholders believe that the ultimate value of an
Indemnifiable Claim is less than its stated value, the Shareholders shall have
the option of not having the Escrowed Shares be applied to satisfy any or all
Indemnifiable Claims; PROVIDED, HOWEVER, that the Shareholders must first assume
such Indemnifiable Claims pursuant to an agreement containing, among other
things, such security provisions, as is satisfactory to the Buyer. If and to the
extent that from time to time pursuant to the provisions of this Agreement, it
is determined in accordance with this Article IX that the GST Companies are
entitled to indemnification with respect to Indemnifiable Claims, the parties to
the Escrow Agreement shall instruct the Escrow Agent to pay over to the GST
Companies the Escrowed Shares, or portion thereof, necessary to satisfy in full
such Indemnifiable Claims.
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Section 9.3 INDEMNIFICATION BY THE GST COMPANIES. Subject to the limits
on indemnification set forth in this Article IX, including without limitation,
those contained in the first sentence of Section 9.1, the GST Companies agree to
indemnify, defend and hold the Shareholders harmless from and against any and
all Losses that the Shareholders may incur or become subject to arising out of
or due to (i) the claims of any broker or finder engaged by the GST Companies;
(ii) any inaccuracy of any representation or the breach of any warranty of the
GST Companies contained in Article IV of this Agreement and (iii) any breach or
failure of observance of any covenant, agreement or commitment made by the GST
Companies in this Agreement. The GST Companies shall reimburse the Company for
any reasonable and documented legal or other expenses reasonably incurred by it
in connection with investigating or defending any such loss, claim, liability,
action or proceeding.
Section 9.4 SURVIVAL. The obligation of indemnity provided herein shall
terminate on the first anniversary of this Agreement.
Section 9.5 LIMITATIONS. The rights of indemnity provided herein are
limited as follows: (a) No party shall assert any claim against the other for
indemnification hereunder with respect to any inaccuracy or breach of such
warranties, representations, covenants or agreements unless and until the amount
of all such claims shall exceed $200,000 and then, only to the extent that such
claims exceed $200,000.
(b) The aggregate amount of claims subject to indemnification hereunder
by the Shareholders shall not exceed the value of the Escrowed Shares. Upon the
release of all remaining Escrowed Shares to the Shareholders, the Escrowed
Shares shall no longer be subject to offset pursuant to these indemnity
provisions and the obligation of indemnity provided herein shall terminate. The
aggregate amount of claims subject to indemnification hereunder by the GST
Companies shall not exceed an amount equal to the Market Price of the Escrowed
Shares.
(c) In case any event shall occur which would otherwise entitle either
party to assert a claim for indemnification hereunder, no loss, damage or
expense shall be deemed to have been sustained by such party to the extent of
any tax savings realized by such party with respect thereto.
Section 9.6 THIRD PARTY CLAIMS. In order for a party (the "Indemnified
Party") to be entitled to any indemnification provided for under this Agreement
in respect of, arising out of, or involving a claim or demand or written notice
made by any third party against the Indemnified Party (a "Third Party Claim")
after the Closing Date, such Indemnified Party must notify the indemnifying
party (the "Indemnifying Party") in writing of the Third Party Claim within 30
business days after receipt by such
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indemnified party of written notice of the Third Party Claim; provided that the
failure of any Indemnified Party to give timely notice shall not affect his
right of indemnification hereunder except to the extent the Indemnifying Party
has actually been prejudiced or damaged thereby. If a Third Party Claim is made
against an Indemnified Party, the Indemnifying Party shall be entitled, if it so
chooses, to assume the defense thereof with counsel selected by the Indemnifying
Party (which counsel shall be reasonably satisfactory to the Indemnified Party).
The Indemnifying Party may, in its discretion, effect any settlement of any
pending or threatened suit or proceeding which it controls; PROVIDED, HOWEVER,
that the Indemnifying Party shall not effect any settlement of any such pending
or threatened suit or proceeding (A) without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld) or (B)
unless such settlement includes (i) an unconditional release of such Indemnified
Party from all liability on claims that are the subject matter of such suit or
proceeding, (ii) no admission or acknowledgment of culpability or wrongdoing by
such Indemnified Party and (iii) no provision for any nonmonetary relief to any
person to be performed by such Indemnified Party. If any Indemnifying Party
shall not have assumed the defense of such pending or threatened suit or
proceeding as provided hereunder, such Indemnified Party may effect any
settlement of such pending or threatened suit or proceeding only with the
Indemnifying Party's prior consent (which consent shall not be unreasonably
withheld). If the Indemnifying Party assumes the defense of a Third Party Claim,
the Indemnified Party will cooperate in all reasonable respects with the
Indemnifying Party in connection with such defense, and shall have the right to
participate in such defense with counsel selected by it. The fees and
disbursements of such counsel, however, shall be at the expense of the
indemnified party; PROVIDED, HOWEVER, that, in the case of any Third Party Claim
of which the Indemnifying Party has not employed counsel to assume the defense,
the fees and disbursements of such counsel shall be at the expense of the
Indemnifying Party.
Section 9.7 REDUCTION FOR INSURANCE. The gross amount which an
Indemnifying Party is liable to, for, or on behalf of the Indemnified Party
pursuant to this Article IX (the "Indemnifiable Loss") shall be reduced
(including, without limitation, retroactively) by any insurance proceeds
actually recovered by or on behalf of such Indemnified Party related to the
Indemnifiable Loss. If an Indemnified Party shall have received or shall have
had paid on its behalf an indemnity payment in respect of an Indemnifiable Loss
and shall subsequently receive directly or indirectly insurance proceeds in
respect of such Indemnifiable Loss, then such indemnified party shall pay to
such Indemnifying Party the net amount of such insurance proceeds or, if less,
the amount of such indemnity payment.
Section 9.8 NOTICE OF CLAIM; DISPUTE. In order for an Indemnified Party
to be entitled to any indemnification provided
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for under this Agreement, and as a prerequisite to any recovery pursuant to any
such indemnification, the Indemnified Party shall, upon obtaining knowledge
thereof, promptly notify the indemnifying party in writing of any damage, claim,
loss, liability or expense which the indemnified party has determined has given
or could give rise to a claim for indemnity pursuant to this Article IX (such
written notice being hereinafter referred to as "Notice of Claim." A Notice of
Claim shall specify, in reasonable detail, the nature of any such claim which
gives rise to a right of indemnification. Upon receipt of a Notice of Claim, the
Indemnifying Party shall have 20 days to, at Indemnifying Party's sole
discretion, either (i) accept the claim giving rise to a right of
indemnification and undertake proper remedial actions, or (ii) dispute such
claim by providing written notice to the Indemnified Party which specified, in
reasonable detail, why such claim does not give rise to a right of
indemnification (such written notice being hereinafter referred to as a "Dispute
Notice"). In the event a Dispute Notice is issued, the parties shall exercise
their best efforts to reach a mutually acceptable resolution of such dispute
within 30 days after the issuance of such Dispute Notice. In the event the
parties are unable to resolve such dispute within the requisite period, such
dispute shall be settled by final and binding arbitration in Denver, Colorado in
accordance with the commercial rules and regulations of the American Arbitration
Association, in effect as of the date of this Agreement.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated by this Agreement abandoned at any time prior to the
Closing:
(a) By mutual written consent of the Buyer and the Company;
(b) By either the Buyer or the Company if the transactions contemplated
by this Agreement shall not have been consummated on or before November 22,
1996;
(c) By the Company if any condition specified in Article VII hereto has
not been met or waived by the Company at such time as such condition can no
longer be satisfied; or
(d) By the Buyer if any condition specified in Article VIII hereto has
not been met or waived by the Buyer at such time as such condition can no longer
be satisfied; or
(e) By either the Buyer or the Company if a court of competent
jurisdiction or Governmental Authority shall have issued a final, non-appealable
order, decree or ruling or taken any other
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action (which order, decree or ruling the parties hereto shall use their best
efforts to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement.
Section 10.2 EFFECT OF TERMINATION. The termination of this Agreement
in accordance with Section 10.1 hereof shall have no effect on whatever rights
and remedies the parties hereto may have against one another by reason of such
termination.
Section 10.3 AMENDMENT. This Agreement may be amended by the written
agreement of the parties hereto.
ARTICLE XI
MISCELLANEOUS
Section 11.1 EXPENSES. Except as otherwise provided herein, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and expenses
regardless of the termination of this Agreement or the failure to consummate the
transactions contemplated hereby; provided, that payments to Xxxxx, Xxxxxx &
Xxxxx, LLP, counsel to the Company, of legal fees and disbursements shall not
exceed the limitations set forth in Section 5.4.
Section 11.2 NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered personally
or by facsimile transmission, in either case with receipt acknowledged, or five
days after being sent by registered or certified mail, return receipt requested,
postage prepaid:
(a) If to the GST Companies to:
GST Telecommunications, Inc.
0000 X.X. Xxxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
(b) If to the Company to:
TotalNet Communications Inc.
000 Xxxx Xxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
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with a copy to:
Xxxxx, Xxxxxx & Xxxxx, LLP
Two Xxxxx Center
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
or to such other address as any party shall have specified by notice in writing
to the other in compliance with this Section 11.2.
Section 11.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, representations and understandings among the
parties hereto including the Letter of Intent.
Section 11.4 BINDING EFFECT, BENEFITS, ASSIGNMENTS. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns; except for the Shareholders, who are
expressly acknowledged as third-party beneficiaries under this Agreement with
full power to seek enforcement or damages arising from a breach of its terms,
nothing in this Agreement, expressed or implied, is intended to confer on any
other person, other than the parties hereto or their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement. This Agreement may not be assigned without the prior written
consent of the other parties hereto.
Section 11.5 APPLICABLE LAW. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to principles of conflicts of
laws.
Section 11.6 JURISDICTION. The parties hereto agree to submit to the
jurisdiction of any federal or state court located in the State of Washington
for the purpose of resolving any action or claim arising out of the performance
of the provisions of this Agreement.
Section 11.7 HEADINGS. The headings and captions in this Agreement are
included for purposes of convenience only and shall not affect the construction
or interpretation of any of its provisions.
Section 11.8 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which
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shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first set forth.
TOTALNET COMMUNICATIONS INC.
By:/s/ Xxxxxx X. Xxxxx
------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chairman
GST NEWCO OF TEXAS, INC.
By:/s/ Xxxxxxx Xxxxx
------------------------------
Name: Xxxxxxx Xxxxx
Title: Secretary
GST TELECOMMUNICATIONS, INC.
By:/s/ Xxxxxxx Xxxxx
------------------------------
Name: Xxxxxxx Xxxxx
Title: Secretary
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TABLE OF CONTENTS
PAGE
ARTICLE I
TRANSACTIONS AND TERMS OF THE MERGER......................................2
1.1 MERGER ....................................................2
1.2 TIME AND PLACE OF CLOSING...................................2
1.3 EFFECTIVE TIME..............................................2
1.4 CHARTER ....................................................2
1.5 BYLAWS ....................................................3
1.6 DIRECTORS AND OFFICERS......................................3
1.7 CONVERSION OF SHARES........................................3
1.8 ANTI-DILUTION PROVISIONS....................................4
1.9 SHARES HELD IN TREASURY.....................................5
1.10 FRACTIONAL SHARES..........................................5
ARTICLE II
EXCHANGE OF SHARES........................................................5
2.1 EXCHANGE PROCEDURES.........................................5
2.2 RIGHTS OF FORMER SHAREHOLDERS OF THE COMPANY................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................7
3.1 CORPORATE ORGANIZATION; REQUISITE AUTHORITY TO
CONDUCT BUSINESS; ARTICLES OF INCORPORATION AND
BY-LAWS.............................................7
3.2 CAPITALIZATION..............................................7
3.3 SUBSIDIARIES, ETC...........................................7
3.4 AUTHORITY RELATIVE TO AND VALIDITY OF AGREEMENTS............8
3.5 REQUIRED FILINGS AND CONSENTS; NO CONFLICT..................8
3.6 FINANCIAL STATEMENTS; BOOKS OF ACCOUNT; RECORDS.............9
3.7 NO UNDISCLOSED LIABILITIES..................................9
3.8 ABSENCE OF CERTAIN CHANGES AND EVENTS......................10
3.9 TAXES AND TAX RETURNS......................................10
3.10 EMPLOYEE BENEFIT PLANS.....................................11
3.11 TITLE TO PROPERTY..........................................12
3.12 TRADEMARKS, PATENTS AND COPYRIGHTS.........................12
3.13 LEGAL PROCEEDINGS, CLAIMS, INVESTIGATIONS, ETC.............13
3.14 INSURANCE..................................................13
3.15 MATERIAL CONTRACTS.........................................13
3.16 CERTAIN TRANSACTIONS.......................................14
3.17 BROKER ....................................................15
3.18 ENVIRONMENTAL MATTERS......................................15
3.19 ILLEGAL PAYMENTS...........................................15
3.20 COMPLIANCE WITH LAW........................................16
3.21 RECEIVABLES................................................16
3.22 LABOR .....................................................17
3.23 OFFICERS, EMPLOYEES AND COMPENSATION.......................17
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PAGE
3.24 BANKS; SAFE DEPOSIT BOXES.................................18
3.25 CREDIT TERMS..............................................18
3.26 CLOSING DATE EFFECT.......................................18
3.27 COMPLETE DISCLOSURE.......................................18
3.28 REORGANIZATION AND REGULATORY MATTERS.....................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE GST COMPANIES......................19
4.1 CORPORATE ORGANIZATION; REQUISITE AUTHORITY TO
CONDUCT BUSINESS.........................................19
4.2 EXECUTION AND DELIVERY.....................................19
4.3 NO CONFLICTS; ABSENCE OF DEFAULTS..........................20
4.4 CAPITALIZATION.............................................20
4.5 SEC REPORTS AND FINANCIAL STATEMENTS.......................20
4.6 NO UNDISCLOSED LIABILITIES.................................21
4.7 ABSENCE OF CERTAIN CHANGES AND EVENTS......................21
4.8 TAXES AND TAX RETURNS......................................21
4.9 BROKER ...................................................22
4.10 LEGAL PROCEEDINGS, CLAIMS, ETC.............................22
4.11 ENVIRONMENTAL MATTERS......................................22
4.12 COMPLIANCE WITH LAW........................................23
4.13 CLOSING DATE EFFECT........................................23
4.14 COMPLETE DISCLOSURE........................................23
4.15 REORGANIZATION MATTERS....................................23
ARTICLE V
COVENANTS OF THE COMPANY.................................................24
5.1 COVENANTS OF THE COMPANY REGARDING CONDUCT OF
BUSINESS OPERATIONS PENDING THE CLOSING..................24
5.2 NO OTHER NEGOTIATIONS......................................26
5.3 OUTSTANDING OPTIONS, ETC...................................26
5.4 BANK LINE OF CREDIT........................................26
5.5 APPROVAL BY SHAREHOLDERS...................................27
ARTICLE VI
ADDITIONAL COVENANTS.....................................................27
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY.......................29
7.1 REPRESENTATIONS AND WARRANTIES TRUE........................29
7.2 PERFORMANCE OF COVENANTS...................................29
7.3 NO PROCEEDINGS.............................................29
7.4 AGREEMENTS.................................................29
7.5 CONSENTS AND APPROVALS.....................................29
7.6 OPINION OF COUNSEL TO THE GST COMPANIES....................30
7.7 MATERIAL CHANGES...........................................30
7.8 TAX MATTERS................................................31
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7.9 GUARANTEE OF INDEBTEDNESS..................................31
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE GST COMPANIES.................31
8.1 REPRESENTATION AND WARRANTIES TRUE.........................31
8.2 PERFORMANCE OF COVENANTS...................................31
8.3 NO PROCEEDINGS.............................................31
8.4 AGREEMENTS.................................................32
8.5 CONSENTS AND APPROVALS.....................................32
8.6 OPINION OF THE COMPANY'S COUNSEL...........................32
8.7 MATERIAL CHANGES...........................................33
8.8 APPROVAL BY SHAREHOLDERS...................................33
8.9 APPRAISAL RIGHTS...........................................33
ARTICLE IX
INDEMNIFICATION..........................................................33
9.1 INDEMNIFICATION BY THE SHAREHOLDER.........................33
9.2 DISPOSITION OF ESCROWED SHARES.............................34
9.3 INDEMNIFICATION BY THE GST COMPANIES.......................34
9.4 SURVIVAL...................................................34
9.5 LIMITATIONS................................................35
9.6 THIRD PARTY CLAIMS.........................................35
9.7 REDUCTION FOR INSURANCE....................................36
9.8 NOTICE OF CLAIM; DISPUTE...................................36
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER........................................37
10.1 TERMINATION...............................................37
10.2 EFFECT OF TERMINATION.....................................37
10.3 AMENDMENT.................................................37
ARTICLE XI
MISCELLANEOUS............................................................37
11.1 EXPENSES..................................................37
11.2 NOTICES...................................................38
11.3 ENTIRE AGREEMENT..........................................38
11.4 BINDING EFFECT, BENEFITS, ASSIGNMENTS.....................39
11.5 APPLICABLE LAW............................................39
11.6 JURISDICTION..............................................39
11.7 HEADINGS..................................................39
11.8 COUNTERPARTS..............................................39
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EXHIBITS
Exhibit A List of TotalNet Shareholders
ANNEXES
Annex A Form of Escrow Agreement
Annex B Acknowledgment and Agreement
Annex C [Intentionally Omitted]
Annex D Form of Indemnification Agreement
Annex E Form of Registration Rights Agreement
SCHEDULES
Schedule 3.2 Capitalization
Schedule 3.5 Required Filings and Consents; No Conflict
Schedule 3.7 No Undisclosed Liabilities
Schedule 3.8 Absence of Certain Changes and Events
Schedule 3.9 Taxes and Tax Returns
Schedule 3.10 Employee Benefit Plans
Schedule 3.11 Title to Property
Schedule 3.12 Trademarks, Patents and Copyrights
Schedule 3.13 Legal Proceedings, Claims, Investigations, etc.
Schedule 3.14 Insurance
Schedule 3.15 Material Contracts
Schedule 3.16 Certain Transactions
Schedule 3.20 Compliance with Law
Schedule 3.23 Officers, Employees and Compensation
Schedule 3.24 Banks; Safe Deposit Boxes
Schedule 3.25 Credit Terms
Schedule 4.2 Execution and Delivery
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