AGREEMENT AND PLAN OF MERGER
By and Among
COYOTE NETWORK SYSTEMS, INC.
COYOTE - GLD ACQUISITION, INC.,
and
GROUP LONG DISTANCE, INC.
May 1, 2000
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made this 1st
day of May, 2000, by and among COYOTE NETWORK SYSTEMS, INC., a Delaware
Corporation ("Coyote"), COYOTE - GLD ACQUISITION, INC., a Florida Corporation
("Sub"), and GROUP LONG DISTANCE, INC., a Florida Corporation ("GLD")
(collectively the "Parties").
RECITAL
The respective Boards of Directors of Coyote, Sub and GLD have
determined that it is advisable and in the best interests of the respective
corporations and their shareholders that Sub be merged with and into GLD in
accordance with the Florida Business Corporation Act (the "Florida Law") and the
terms of this Agreement, pursuant to which GLD will be the surviving corporation
and will become a wholly-owned subsidiary of Coyote (the "Merger").
AGREEMENTS
In consideration of the Recital and the mutual agreements herein
contained, the Parties agree as follows:
1. Plan of Merger.
(a) The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Florida Law, at the
Effective Time (as defined in section 1(b) of this Agreement), Sub shall be
merged with and into GLD. As a result of the Merger, the separate corporate
existence of Sub shall cease and GLD shall continue as the surviving corporation
of the Merger (the "Surviving Corporation"). Sub and GLD are sometimes
collectively referred to in this Agreement as the "Constituent Corporations."
(b) Effective Time. As promptly as practicable following
Closing, the Parties shall cause the Merger to be consummated by filing articles
of merger (the "Articles of Merger") with the Florida Department of State in
such form as required by, and executed in accordance with, the relevant
provisions of the Florida Law. The Parties shall take all such further actions
as may be required by law to make the Merger effective upon filing of the
Articles of Merger with the Florida Department of State (the date and time of
such filing, as indicated by the date stamp of the Florida Department of State
on the Articles of Merger, being the "Effective Time").
(c) Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Florida Law.
Without limiting the generality of, and subject to the provisions of the Florida
Law, at the Effective Time, except as otherwise provided in this Agreement, all
the property, interests, assets, rights, privileges, immunities, powers and
franchises of the Constituent Corporations shall vest in the Surviving
Corporation, and all debts, liabilities, duties and obligations of the
Constituent shall become the debts, liabilities, duties and obligations of the
Surviving Corporation.
(d) Articles of Incorporation; By-Laws. At the Effective Time,
the Articles of Incorporation and the By-Laws of the Surviving Corporation shall
be amended to read as did the Articles of Incorporation and the By-Laws of Sub
immediately prior to the Effective Time except with respect to the name of the
Surviving Corporation. The name of the Surviving Corporation shall be "Group
Long Distance, Inc."
(e) Directors and Officers. The directors of Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
(f) Taking Necessary Action; Further Action. Coyote, Sub and
GLD, respectively, shall each use its or their reasonable efforts to take all
such action as may be necessary or appropriate to effectuate the Merger under
the Florida Law at the time specified in section 1(b). If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all properties, interests, assets, rights,
privileges, immunities, powers and franchises of either of the Constituent
Corporations, the officers of the Surviving Corporation are fully authorized in
the name of each Constituent Corporation or otherwise to take, and shall take,
all such lawful and necessary action.
(g) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") will take place at 10:00 a.m. on a date to be
specified by the parties (the "Closing Date") which shall be no later than the
third business day after the satisfaction or waiver of all the conditions
precedent set forth in sections 4 and 5 of this Agreement at the principal
offices of Coyote , or at such other place as the Parties hereto shall mutually
agree, and will be effective at the Effective Time.
2. Consideration. Upon the Parties' execution of this Agreement, Coyote
shall immediately pay $50,000 to GLD as a nonrefundable deposit for the Merger.
At the Effective Time, by virtue of the Merger and without any further action on
the part of Coyote, Sub or GLD, all of the common stock of GLD shall be
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exchanged for 750,000 shares (subject to adjustment as set forth below) of fully
paid and nonassessable common stock of Coyote, $1.00 par value (the "Coyote
Common Stock") payable as follows:
(a) Conversion of GLD Shares. Each share of the common stock,
no par value, of GLD issued and outstanding immediately prior to the Effective
Time ("GLD Common Stock") shall be converted into and exchanged for (subject to
adjustment as set forth below) that number of shares of Coyote Common Stock
equal to the quotient derived by dividing 750,000 by the total number of
outstanding shares of GLD Common Stock immediately prior to the Effective Time
(the "Merger Consideration"). As of the Effective Time, all such shares of GLD
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of GLD Common Stock shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
described in this section 2 and any cash in lieu of fractional shares of Coyote
Common Stock to be issued in exchange thereof upon surrender of such
certificates in accordance with section 3(f).
(b) Adjustment per Five Day Average Trade Price.
(i) In the event that the average closing trade price
for the five trading days immediately prior to the Effective Time (the "Five Day
Average") for the Coyote Common Stock exceeds $7.50 per share, the number of
Coyote Common Stock shares exchanged in the Merger shall be reduced to the
number of shares determined by multiplying 750,000 x ($7.50 / Five Day Average).
For example, if the Five Day Average as of the Effective Time is $10.00 per
share, the number of shares of Coyote Common Stock exchanged shall be 562,500
(750,000 x ($7.50/$10.00)); and
(ii) If the Five Day Average for Coyote Common Stock
is less than $6.50 per share, the number of shares of Coyote Common Stock
exchanged in the Merger shall be increased to the number of shares determined by
multiplying 750,000 x ($6.50 / Five Day Average). For example, if the Five Day
Average is $5.00 per share, the number of shares of Coyote Common Stock in the
exchange shall be 975,000 (750,000 x $6.50/$5.00); provided, however, that if
the closing trade price for Coyote Common Stock should fall below $5.00 per
share for any five consecutive trading days prior to the Effective Time, the
Merger shall be canceled and this Agreement shall be terminated.
(c) Adjustment. In the event Coyote changes (or establishes a
record date for changing) the number of shares of Coyote Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, recapitalization, subdivision, reclassification, combination, exchange
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of shares or similar transaction with respect to the outstanding Coyote Common
Stock and the record date therefor shall be prior to the Effective Time, the
Merger Consideration and the Coyote stock prices for determining any adjustments
thereto and calculations thereof shall be proportionately adjusted to reflect
such stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares or similar transaction.
(d) Conversion of Sub Shares. At the Effective Time and by
virtue of the Merger and without any further action on the part of Coyote, Sub
or GLD, each share of the common stock, no par value, of Sub shall be converted,
into one share of common stock, no par value, of the Surviving Corporation.
3. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Coyote shall
enter into an agreement (the "Exchange Agent Agreement") with a bank or trust
company as may be designated by the Parties (the "Exchange Agent"), which shall
provide that Coyote shall deposit with the Exchange Agent as of the Effective
Time, for the benefit of the holders of shares of GLD Common Stock, for exchange
in accordance with section 2 of this Agreement, through the Exchange Agent,
certificates representing the shares of Coyote Common Stock (such shares of
Coyote Common Stock, together with any dividends or distributions with respect
thereto with a record date after the Effective Time, and any cash payable in
lieu of any fractional shares of Coyote Common Stock being hereinafter referred
to as the "Exchange Fund") issuable or payable pursuant to section 2 of this
Agreement in exchange for outstanding shares of GLD Common Stock.
(b) Exchange Procedure. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of GLD Common Stock (the "Certificates") whose
shares were converted into the right to receive Merger Consideration pursuant to
section 2 (i) a letter of transmittal and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for such Merger Consideration.
Upon surrender of a Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration into
which the shares of GLD Common Stock shall have been converted pursuant to
section 2, cash in lieu of fractional shares of Coyote Common Stock to which
such holder is entitled pursuant to section 3(f) and any dividends or other
distributions to which such holder is entitled pursuant to section 3(c), and the
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Certificate so surrendered shall be canceled. In the event of a transfer of
ownership of GLD Common Stock which is not registered in the transfer of records
of GLD, payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. At any time after Effective Time, each
Certificate shall be deemed to represent only the right to receive upon
surrender the merger consideration into which the shares of GLD Common Stock
shall have been converted pursuant to section 2, cash in lieu of any fractional
shares of Coyote Common Stock as contemplated by section 3(f) and any dividends
or other distributions to which such holder is entitled pursuant to section
3(c), in each case, without interest thereon.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Coyote Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Coyote Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to section 3(f), in each case until the
surrender of such Certificate in accordance with section 3(b). Following
surrender of any such Certificate, there shall be paid to the holder of the
certificate representing whole shares of Coyote Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Coyote Common Stock to which such
holder is entitled pursuant to section 3(f) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Coyote Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Coyote
Common Stock.
(d) No Further Ownership Rights in GLD Common Stock. All
Merger Consideration paid upon the surrender of Certificates in accordance with
the terms of this section 3 (including any cash paid pursuant to section 3(f))
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of GLD Common Stock represented by such Certificates, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of GLD Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this section 3.
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(e) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for eighteen
months after the Effective Time shall be delivered to Coyote, upon demand, and
any holders of the Certificates who have not theretofore complied with this
section 3 shall thereafter look only to Coyote for payment of their claim for
Merger Consideration, any dividends or distributions with respect to Coyote
Common Stock and any cash in lieu of fractional shares of Coyote Common Stock.
(f) No Fractional Shares. No certificates or scrip
representing fractional shares of Coyote Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this section 3, no dividend
or distribution of Coyote shall relate to such fractional share interests and
such fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Coyote. Payment in exchange for fractional shares
shall be made in cash, determined as follows: each former holder of GLD Common
Stock shall be paid an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such former holder (after
taking into account all shares of GLD Common Stock held at the Effective Time by
such holder) would otherwise be entitled by (B) the Five Day Average for Coyote
Common Stock.
(g) GLD Options. GLD shall take all actions necessary to
provide that each outstanding option to purchase shares of GLD Common Stock
under any stock plan, program or agreement to which the GLD or any of its
subsidiaries is a party shall be cancelled immediately prior to the Effective
Time and the holder shall received, in consideration of such cancellation, a
number of shares of GLD Common Stock equal to the product of (a) the excess, if
any, of (x) the Five Day Average over (y) the per share exercise price of such
Option, multiplied by (B) the quotient derived by dividing the number of shares
of GLD Common Stock subject to such Option, by the Five Day Average. The GLD
Common Stock issued as a result of the calculations required by this section
3(g) shall be considered outstanding for all purposes of this Agreement.
4. Conditions Precedent to GLD's Obligations to Close. All obligations
of GLD under this Agreement are subject to the fulfillment, prior to or at the
Closing, of all of the conditions precedent set forth below. If GLD in its
reasonable judgment believes that either Coyote or Sub is not in material
compliance, or is not likely to be in material compliance with any of the
following conditions, GLD shall promptly notify Coyote or Sub in writing and
give the appropriate party fourteen days following receipt of such written
notice to cure such non-compliance.
(a) Satisfaction of GLD's Counsel. All actions, proceedings,
instruments, opinions and all other related legal matters shall, in all material
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respects, be satisfactory in form and substance to GLD's legal counsel in the
exercise of reasonable judgment.
(b) Representations and Warranties. All representations and
warranties of Coyote and Sub contained in this Agreement shall be accurate in
all material respects when made and in addition shall be accurate in all
material respects as of the Closing as though such representations and
warranties were then made in exactly the same language by Coyote or Sub. GLD
shall have received a certificate signed by the appropriate officers of Coyote
and Sub dated the Closing Date in such form as the Parties shall agree.
(c) Performance by Coyote and Sub. Coyote and Sub shall have
performed and complied in all material respects with each and every covenant,
agreement and condition required by this Agreement to be performed or complied
with by them prior to or on the Closing Date. Such compliance shall be evidenced
by a certificate, dated as of the Closing Date and signed by officers of Coyote
and Sub, such as the Parties shall agree.
(d) Certificates of Incorporation. Coyote and Sub shall each
deliver GLD a copy of their respective Certificates of Incorporation, including
all amendments, and Certificates of Good Standing for Coyote and Sub, certified
by the Delaware Secretary of State or the Florida Department of State, as the
case may be, not more than two weeks prior to the Closing Date, and a copy of
Coyote's and Sub's By-Laws, certified by Secretaries of Coyote and Sub,
respectively, as of the Closing Date.
(e) Opinion of Coyote's and Sub's Counsel. Coyote and Sub
shall have delivered to GLD an opinion of counsel to Coyote and Sub, dated the
Closing Date, in such form as the Parties shall agree.
(f) Legal Actions. There shall not have been instituted or
threatened any legal proceeding relating to or seeking to prohibit or otherwise
challenge consummation of transactions contemplated by this Agreement or to
obtain substantial damages with respect thereto.
(g) Other Consents or Information Needed. Except for the
Post-Closing Consents, as defined in Section 9(f) of this Agreement, Coyote and
Sub shall have obtained and provided to GLD, on or prior to the Closing Date,
copies of all of the consents required to be obtained by Coyote and Sub from any
party to any contract, agreement, instrument, lease, license, arrangement, or
understanding to which any of them or any subsidiary is a party or to which any
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of their respective business properties or assets are subject which are
necessary to avoid a material breach of any provision thereof as a result of the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements.
(h) Closing Documents. Coyote and Sub shall have delivered to
GLD at Closing all of the Documents set forth below, as well as any and all
other documents and agreements contemplated by this Agreement:
(i) All documents called for in connection with
subsections (b) - (e), above.
(ii) Such other documents as GLD may reasonably
request in writing at least five business days prior to Closing.
(i) Shareholder Approval. The Shareholders of GLD shall have
approved the merger and such approval shall remain in full force and effect.
(j) Charter Amendment. The Shareholders of Coyote shall have
approved an amendment to Coyote's Certificate of Incorporation increasing the
number of authorized shares of Coyote Common Stock to at least 50 million, such
approval shall remain in full force and effect, and Coyote shall have filed such
amendment with the Secretary of State of the state of Delaware.
(k) Form S-4. The Form S-4, as defined in section 5(i), shall
have become effective under the Securities Act of 1933 (the "Securities Act")
and shall not be the subject of any stop order or proceedings seeking a stop
order, if any.
(l) NASDAQ Exchange. The shares of Coyote Common Stock shall
have been approved for listing on NASDAQ, such approval shall remain in full
force and effect and the shares of Coyote Common Stock shall have been so
listed.
(m) Exchange Agent Agreement. The Exchange Agent Agreement
shall have been executed and delivered by Coyote and the Exchange Agent, and the
Exchange Fund shall have been deposited with the Exchange Agent.
(n) Financial Advisor. GLD shall have received the opinion of
its financial advisor, updated as of the effective time, that the Merger
Consideration to be received by the GLD Shareholders pursuant to this Agreement
is fair to such shareholders from a financial point of view.
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(o) Tax Free Reorganization. GLD shall have received the
opinion of counsel to Coyote that the merger is a tax free reorganization within
the meaning of section 368(a) of the Internal Revenue Code of 1986, as amended.
5. Conditions Precedent to Coyote's and Sub's Obligations to Close. All
obligations of Coyote and Sub under this Agreement are subject to the
fulfillment, prior to or at the Closing, of all of the conditions precedent set
forth below. If Coyote or Sub in their reasonable judgment believe that GLD is
not in material compliance, or is not likely to be in material compliance with
any of the following conditions, Coyote or Sub shall promptly notify GLD in
writing and give GLD 14 days following receipt of such written notice to cure
such material non-compliance.
(a) Satisfaction of Coyote's and Sub's Counsel. All actions,
proceedings, instruments, opinions and all other related legal matters shall, in
all material respects, be satisfactory in form and substance to Coyote's and
Sub's legal counsel in the exercise of reasonable judgment.
(b) Representations and Warranties. All representations and
warranties of GLD contained in this Agreement shall be accurate in all material
respects when made and in addition shall be accurate in all material respects as
of the Closing as though such representations and warranties were then made in
exactly the same language by GLD. Coyote and Sub shall have received a
certificate signed by the President of GLD dated the Closing Date in such form
as the Parties shall agree and shall include further the certification that GLD
has not incurred any liabilities, except the GLD Permitted Liabilities
specifically identified in the Schedules to this Agreement.
(c) Performance by GLD. GLD shall have performed and complied
with, in all material respects, each and every covenant, agreement and condition
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date. Such compliance shall be evidenced by a certificate, delivered
to Coyote or Sub, dated as of the Closing Date and signed by officers of GLD, in
such form as the Parties shall agree, and shall include further the
certification that no payments, including the distribution of moneys, assets or
the forgiveness of debt shall have been made by GLD, except as specifically
disclosed and permitted by this Agreement.
(d) Articles of Incorporation and By-Laws. GLD shall have
delivered to Coyote a copy of GLD's Articles of Incorporation, including all
amendments, and a Certificate of Status for GLD , certified by the Florida
Department of State not more than one week prior to the Closing Date, and a copy
of GLD's By-Laws, certified by the Secretary of GLD as of the Closing Date.
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(e) Opinion of GLD's Counsel. GLD shall have delivered to
Coyote and Sub an opinion of counsel to GLD, dated the Closing Date, in such
form as the Parties shall agree.
(f) Legal Actions. There shall not have been instituted or
threatened any legal proceeding relating to or seeking to prohibit or otherwise
challenge consummation of transactions contemplated by this Agreement or to
obtain substantial damages with respect thereto.
(g) Other Consents or Information Needed. Except for the
Post-Closing Consents, as defined in section 9(f) of this Agreement, GLD shall
have obtained and provided to Coyote and Sub, at or prior to the Closing Date,
copies of all the consents required to be obtained by GLD from any party to any
contract, agreement, instrument, lease, license, arrangement, or understanding
to which any of them is a party or to which any of GLD's business properties or
assets are subject which are necessary to avoid a breach of any provision
thereof as a result of the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements.
(h) Closing Documents. GLD shall have delivered to Coyote at
Closing all of the Documents set forth below:
(i) all documents called for in connection with
subsections (b) - (e), above.
(ii) such other documents as Coyote or Sub may
reasonably request in writing at least five business days prior to Closing.
(i) Proxy Information. Coyote shall have received for
inclusion in the proxy statement to be distributed to GLD's shareholders in
connection with the Merger and the transactions contemplated by this Agreement,
(the "Proxy Statement") all information (the "Proxy Information") with respect
to GLD and its subsidiaries required for the preparation and filing of the Proxy
Statement and the registration statement on form S-4 (the "S-4") in which the
Proxy Statement will be included in accordance with the applicable rules and
regulations of the SEC, including, without limitation, all financial statements
and financial information, audited where required, of GLD and its subsidiaries,
and all audit reports and consents of independent public accountants with
respect to such financial statements, and the financial condition, results of
operations and other matters disclosed with respect to GLD and its subsidiaries
in the Proxy Information shall be reasonably satisfactory in form and substance
to Coyote.
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(j) Charter Amendment. Coyote shall have amended its
Certificate of Incorporation (the "Charter Amendment") to authorize the issuance
of additional shares of common stock in a number not less than the maximum
number of shares of Coyote Common Stock to be exchanged pursuant to section 2
above.
(k) No Material Adverse Change. Except as otherwise provided
by this Agreement or as noted on Schedule 5(k), there shall not have occurred
after the date hereof, in the reasonable judgment of Coyote, a material adverse
change in the financial or business condition of GLD.
6. Representations and Warranties of GLD. GLD represents and warrants
to Coyote and Sub as follows:
(a) Corporate Organization; Authorization. GLD is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Florida. GLD has full corporate power and corporate
authority to carry on its business as it is now being conducted and to own and
lease the properties and assets it now owns and leases. GLD has full corporate
power and corporate authority to enter into this Agreement and the Ancillary
Agreements, and to consummate the transactions contemplated hereby and thereby.
GLD is not required to be qualified or licensed to do business as a foreign
corporation in any other jurisdiction where the failure to be so qualified or
licensed could have a material adverse effect on GLD, whether financial or
otherwise. True, correct and complete copies of GLD's Articles of Incorporation
and By-Laws are attached hereto as Schedule 6(a).
(i) GLD's Board of Directors (at a meeting duly
called and held) has unanimously (i) approved this Agreement and the ancillary
agreements contemplated by this Agreement (the "Ancillary Agreements") and (ii)
resolved to recommend that the shareholders of GLD approve and adopt the Merger
and this Agreement. The resolutions of GLD's Board of Directors taking the
actions described in the preceding sentence have not been rescinded, withdrawn,
amended or otherwise modified, remain in full force and effect, and constitute
the only action of GLD's Board of Directors with respect to the Merger or the
other transactions contemplated by this Agreement.
(ii) The affirmative vote of the holders of a
majority of the outstanding shares of the GLD Common Stock is the only vote of
the holders of any class or series of GLD's capital stock necessary to approve
and adopt this Agreement.
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(b) Capitalization. The issued and outstanding GLD Common
Stock consists of 3,500,402 shares of common stock, no par value, and options to
purchase 667,000 shares of GLD Common Stock. The GLD Common Stock and the
options set forth above represent all of the issued and outstanding equity of
GLD. The GLD Common Stock is duly authorized, validly issued and outstanding,
fully paid and nonassessable. Except as noted above or on Schedule 6(b), there
are no options, warrants, conversion privileges or any other rights or
agreements with respect to any of the GLD Common Stock as to which GLD is a
party. Except as set forth on Schedule 6(b) there are no outstanding contractual
obligations or other commitments or arrangements of GLD to (1) repurchase,
redeem or otherwise acquire any shares of GLD Common Stock (or any interest
therein) or (2) to provide funds or make any investment (in the form of a loan,
capital contribution or otherwise) in any subsidiary or other entity or (3)
issue or distribute to any person any capital stock of GLD or any subsidiary or
(4) issue or distribute to holders of any of the capital stock of GLD or its
subsidiaries any evidence of indebtedness or assets of GLD or its subsidiary.
(c) Binding Obligation. Neither the execution and delivery of
this Agreement and the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby or thereby will:
(i) onflict with or violate any provision of the
Articles of Incorporation or the By-Laws of GLD, any law, or any order of any
court or administrative agency;
(ii) result in any breach of or default under any
mortgage, contract, agreement, indenture, trust or other instrument, which is
either binding upon or enforceable against GLD or the assets and properties of
GLD, where such breach or default could reasonably be expected to have a
material adverse effect on GLD, whether financial or otherwise; or
(iii) invalidate or terminate any material GLD
License (as defined below) or prevent any use by Sub following the Closing.
(d) Subsidiaries of GLD. Except as listed on Schedule 6(d),
GLD has no equity interest or no other right or obligation to acquire any equity
interest in any other person or entity.
(e) Consents and Approvals. Except for the Post Closing
Consents, as defined in section 9(f) of this Agreement, and as set forth on
Schedule 6(e), no consent of any entity, agency or person is required in
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connection with the execution and delivery by GLD of this Agreement and the
Ancillary Agreements to which they are a party, or the consummation of the
transactions contemplated hereby or thereby, including, without limitation,
consents from parties to loans, contracts, leases or other agreements to which
GLD is a party and consents from any governmental authority providing any
license or right to carry on or conduct GLD's business as now conducted.
(f) Financial Statements. GLD has delivered to Coyote copies
of the following financial statements prepared by GLD, and, if indicated below,
audited by Xxxxx Xxxxxxxx, LLC or other independent certified public accountants
acceptable to Coyote, all of which are complete, correct and accurate in all
material respects as of their respective dates, and have been prepared from the
internal books and records of GLD in accordance with generally accepted
accounting principles ("GAAP") consistently applied and maintained throughout
the periods indicated:
(i) an audited balance sheet, income statements and
cash flows for the fiscal years ended April 30, 1997, April 30, 1998 and April
30, 1999 (the "GLD Year-End Statements") and statements of income, changes in
shareholders' equity and cash flow of GLD, in a fashion that fairly and
accurately represents the performance of the business of GLD , for each of the
years then ended; and
(ii) an unaudited balance sheet of GLD, in a fashion
that fairly and accurately represents the performance of the business of GLD ,
for the six-month period ended October 31, 1999 and the related statements of
income, changes in shareholders' equity and cash flow for that period (the "GLD
Interim Financials").
The financial statements present fairly the financial position
of GLD at each of the dates stated therein and the results of operations for
each of the periods covered, subject in the case of the GLD interim financials
to normal year-end adjustments.
(g) Permitted Liabilities. GLD has no material liabilities or
obligations, direct or indirect, absolute, accrued, contingent, or otherwise, or
any outstanding indebtedness accrued or otherwise to any party, except the
following ("GLD Permitted Liabilities"):
13
(i) as properly reflected or as specifically reserved
against on the GLD Year-End Statements and the GLD Interim Financials;
(ii) liabilities incurred in the ordinary course of
business after October 31, 1999; or
(iii) as otherwise set forth in Schedule 6(g).
(h) Systems and Software. GLD owns or has the right to use
pursuant to lease, license, sublicense, agreement or permission all computer
hardware, software and information systems necessary for the operation of the
business as presently conducted (collectively "GLD Systems"). Each GLD System
owned or used by GLD immediately prior to the Effective Time will be owned or
available for use by Sub on identical terms and conditions immediately
subsequent to the Effective Time. GLD's use and Sub's continued use of such GLD
Systems has not and will not interfere with, infringe upon, misappropriate or
otherwise come into conflict with, any intellectual property rights of third
parties as a result of the continued operation of the business.
(i) Property. Schedule 6(i) sets forth a true and complete
list and description of all material tangible personal property utilized in
connection with GLD's business. Except as specifically set forth on Schedule
6(i), GLD has good title to all personal property which is used in the business,
free and clear of all third-party rights of any type or nature, except for such
defects in title, encumbrances and impediments that, in the aggregate, do not
and could not reasonably be expected to have a material adverse effect on GLD.
All of GLD's personal property is in good condition and working order
(reasonable wear and tear excepted) and, to the knowledge of GLD, adequate in
quality and quantity for the operation of GLD 's business.
(j) Contracts and Commitments. GLD has disclosed all of its
material contracts and agreements (the "GLD Contracts") in its reports to the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934. Since October 31, 1999, GLD has not entered into any contracts or
commitments outside the ordinary course of business, except as set forth on
Schedule 6(j).
Except as set forth on Schedule 6(j), and except for such
defects that individually or in the aggregate could not reasonably be expected
to have a material adverse effect on GLD, (1) all of the GLD Contracts are
legally valid and binding and in full force and effect; (2) GLD is not, and none
of the other parties to any such GLD Contracts are, in material breach or
default thereof; (3) none of the material rights of GLD, under the GLD Contracts
14
will be impaired by the consummation of the transactions contemplated by this
Agreement; and (4) all of the material rights of GLD, will be enforceable
following the Effective Time without the consent or agreement of any other
party. Copies of all the GLD Contracts have been delivered or made available by
GLD to Coyote, and are true, correct and complete and include all amendments,
supplements and modifications to the GLD Contracts.
(k) Litigation and Proceedings. Except as set forth on
Schedule 6(k), and except for such matters that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on GLD, there
are no suits, actions or legal or administrative investigations or proceedings
(collectively, "GLD Proceedings") pending or, to the knowledge of GLD,
threatened against GLD or affecting any of its assets or properties. To the
knowledge of GLD, no set of facts or circumstances exist or have existed since
December 31, 1999 which could constitute a basis for any GLD Proceeding. There
are no outstanding orders, decrees or stipulations issued by any local, state,
federal or foreign judicial authority in any proceeding to which GLD was a
party.
(l) Government Licenses and Regulation. Except for the
Post-Closing Consents, as defined in section 9(f) of this Agreement, GLD has all
domestic and foreign governmental licenses and permits necessary to conduct its
business as presently conducted and to own and use its assets and such licenses
and permits are in full force and effect and are not subject to any GLD
Proceeding except for the absence of licenses or permits, or defaults
thereunder, that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on GLD. Schedule 6(l) sets forth a
list of all such licenses and permits.
(m) Restrictions on Personnel. The officers, directors,
employees or consultants of GLD have not entered into any agreement which is now
in effect with any individual or entity (i) requiring such person to assign any
interest in any invention or trade secret related to GLD's business or to keep
confidential any such invention or trade secret, or (ii) containing any
prohibition or restriction on competition or solicitation of customers.
(n) Employee Benefit Plans. Schedule 6(n) sets forth a true
and complete list of all employee benefit plans (as defined in section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
15
all bonus, stock, option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other fringe or employee benefit plans,
programs or arrangements and any current or former employment or executive
compensation or severance agreements written or otherwise maintained or
contributed to for the benefit of or relating to any employee of GLD, any trade
or business (whether or not incorporated) which is a member of a controlled
group including GLD or which is under common control with GLD within the meaning
of Section 414 of the Code (an "ERISA Affiliate"), as well as each plan with
respect to which GLD or an ERISA Affiliate could incur liability under Section
4069 (if such plan has been or were terminated) or Section 4212(c) of ERISA
(together the "Employee Plans"), excluding former agreements under which the
Company has no remaining obligations and any of the foregoing that are required
to be maintained by GLD under the laws of any foreign jurisdiction. GLD has
delivered to Coyote a copy of: (i) the most recent annual report on Form 5500
filed with the Internal Revenue Service (the "IRS") for each Employee Plan where
such report is required and (ii) the documents and instruments governing each
such Employee Plan (other than those referred to in Section 4(b)(4) of ERISA).
No event has occurred and, to the knowledge of GLD, there currently exists no
condition or set of circumstances in connection with which GLD or any of its
subsidiaries could be subject to any material liability under the terms of any
Employee Plans, ERISA, the Code or any other applicable law.
Except as further disclosed on Schedule 6(n), there will be no
payment, accrual of additional benefits, acceleration of payments or vesting in
any benefit under any Employee Plan or any agreement or arrangement disclosed
under this section 6(n) solely by reason of entering into or in connection with
the transactions contemplated by this Agreement.
(o) Labor Matters.
(i) GLD is not a party to or bound by any union
collective bargaining agreements or other collective labor contracts, and GLD is
not aware of any attempts to organize a collective bargaining unit at any of its
locations or facilities, except as set forth on Schedule 6(o).
(ii) GLD is not bound by any court, administrative
agency, tribunal, commission or board decree, judgment, decision, arbitration
agreement or settlement relating to collective bargaining agreements, conditions
of employment, employment discrimination or attempts to organize a collective
bargaining unit which in any case may materially and adversely affect GLD or
Sub. There is no employment discrimination, safety or unfair labor practice or
other employment-related investigation, claim or allegation against either GLD
or any set of facts constituting a basis for such an action.
16
(iii) GLD has provided Coyote with all of GLD's
employment policies presently in effect.
(iv) GLD has made all required payments to the
appropriate governmental authorities with respect to applicable unemployment
compensation reserve accounts for GLD 's employees.
(p) Employee Compensation Contracts. Schedule 6(p) lists: (i)
the names, job descriptions and total compensation of each director, employee or
consultant of GLD; (ii) the fringe benefits currently furnished to such persons;
and (iii) all loans, leases and other financial arrangements to or from GLD with
any employee, officer, director or consultant.
(q) Intellectual Property.
(i) The term "Technology" shall include processes,
formulae, manufacturing techniques, machines, devices, compositions of matter,
computer software and programs, data and information (whether in human or
machine readable form), designs, drawings, inventions (whether or not
patentable), works of authorship, printed circuits, mass works, know-how and
products. "Intellectual Property" shall include trade secrets and confidential
business information, know-how, proprietary processes, patent and patent
applications, copyright, copyright registrations and applications therefor,
trademarks, service marks, brand names and trade names, and goodwill associated
with all of the above, and registrations and applications for all of the above,
and licenses of all of the foregoing. Schedule 6(q) sets forth all Intellectual
Property, other than trade secrets and confidential business information, owned
by GLD or licensed by GLD, or otherwise used by GLD in its business. Other than
the Intellectual Property, there is no intellectual property owned by GLD or
used in its business or licensed by GLD, or otherwise used in the business of
GLD. Expiration dates, if applicable, are also set forth on Schedule 6(q). GLD's
Intellectual Property is free and clear of any and all third-party rights. All
patents and trademarks, copyrights and mask work registrations comprising GLD's
Intellectual Property have been maintained and are in force. GLD has not granted
any licenses or sublicenses of its Intellectual Property. To GLD's knowledge,
there are no others infringing any Intellectual Property rights of GLD.
(ii) No proceedings have been instituted or are
pending or, to GLD's knowledge, threatened which challenge GLD 's rights in
Intellectual Property or the validity thereof. GLD has not received notice of
any interference or opposition proceeding with
17
respect to the Intellectual Property. To the knowledge of GLD, GLD is not
infringing or otherwise violating intellectual property rights of others.
(iii) Except as disclosed in Schedule 6(q), GLD has
the right to use all of its Technology and Intellectual Property and owns and
possesses all Intellectual Property Rights with respect to or is expressly
licensed to use all such Technology and Intellectual Property. GLD's rights in
such Technology and Intellectual Property are adequate for the conduct of its
business.
(iv) No director, officer or employee of GLD owns,
directly or indirectly, in whole or in part, any Intellectual Property rights
which GLD has used where such continued use is necessary for GLD's business as
now conducted, or which relate to the Technology which GLD has used when the use
of such Technology is necessary GLD's business as now conducted.
(v) Except as disclosed in Schedule 6(q), there are
no agreements relating to or affecting GLD's Intellectual Property or the use or
ownership of Technology or Intellectual Property by GLD, including, for example,
confidential and nondisclosure agreements, assignments or agreements to assign,
development agreements, settlement agreements and the like.
(r) Insurance. GLD maintains adequate and appropriate
insurance coverage with respect to its business. All such insurance coverage is
set forth on Schedule 6(r). GLD has maintained insurance in amounts and
coverages that are prudent for GLD's business.
(s) Absence of Changes. Except as set forth on Schedule 6(s),
since October 31, 1999 there have not been (a) any material adverse change other
than in as is normal in the ordinary course of business in the condition
(financial or otherwise), assets, liabilities, business, prospects, results of
operations or cash flows of GLD (including, without limitation, any adverse
change resulting from damage, destruction or other casualty loss, whether or not
covered by insurance), (b) any waivers by GLD of any material right, or
cancellation of any debt or claim of substantial value, (c) declaration set
aside or payments of any dividend or other distributions or payments in respect
of the capital stock of GLD, or (d) any material changes in the accounting
principles or methods which are utilized by GLD.
(t) Disclosure. There exists no material fact, condition or,
to GLD's knowledge, threatened development of any nature not otherwise disclosed
in this Agreement or on the schedules to this Agreement that would be materially
18
adverse to the operation of GLD's business. No warranty or representation by GLD
contained in this Agreement or in any writing to be furnished pursuant hereto or
previously furnished to Coyote contains or will contain any untrue statement of
material fact or omits or will omit to state any material fact required to make
the statements therein contained not misleading.
Except as set forth on Schedule 6(t), GLD has filed with the
SEC all reports, registrations and other documents, together with any and all
amendments thereto, required to be filed under the Securities Act and the
Exchange Act (all such reports, registrations and documents filed with the SEC
are collectively referred to as "GLD's SEC Reports"). As of their respective
dates, GLD's SEC Reports comply in all material respects with all rules and
regulations promulgated by the SEC and do not contain any untrue statement of a
material fact or omit a statement of material fact required to be stated
therein, or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. GLD has provided to
Coyote a true and complete copy of all of GLD's SEC Reports filed on or prior to
the date hereof.
Except as disclosed in GLD's SEC Reports, there has not been
any event or circumstance that has had or could reasonably be expected to have a
material adverse effect on GLD.
(u) No Violation of Law. GLD is not engaging in any activity
or omitting to take any action as a result of which it is in material violation
of any law, rule, regulation, zoning or other ordinance, statute, order,
injunction or decree, or any other requirement of any court or governmental or
administrative body or agency, applicable to GLD, any of the Assets, including,
but not limited to those relating to occupational safety and health matters,
issues of environmental and ecological protection, business practices and
operations, labor practices, employee benefits, and zoning and other land use
laws and regulations. To the knowledge of GLD, all notices from governmental
authorities regarding any such material violations have been remedied.
(v) Information Supplied. None of the information supplied or
to be supplied by GLD for inclusion or incorporation by reference to the S-4 or
the Proxy Statement will, in the case of the S-4, at the time the S-4 is filed
with the SEC, at the time it becomes effective under the Securities Act, at the
time of the filing of any post-effective amendments thereto and at the Effective
Time, and, in the case of the Proxy Statement, at the time of the mailing of the
Proxy Statement or any amendments or supplements thereto, and at the respective
19
times of the meetings of GLD and Coyote to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading provided, however, that GLD makes no representation or
warranty concerning information supplied or to be supplied by Coyote for
inclusion or incorporation by reference to the S-4.
7. Representations and Warranties of Coyote and Sub. Coyote and Sub
hereby jointly and severally represent and warrant to GLD as follows:
(a) Corporate Organization; Authority. Coyote is a corporation
duly organized and validly existing under the laws of the State of Delaware and
has the corporate power corporate and authority to own its property and carry on
its business as now conducted. Sub is a corporation duly organized and validly
existing under the laws of the State of Florida and has the corporate power and
corporate authority to own its property and carry on its business as now
conducted. Coyote and Sub have all necessary corporate power and corporate
authority to execute and deliver this Agreement and the Ancillary Agreements and
to consummate the transactions contemplated hereby and thereby. This Agreement
and the Ancillary Agreements, are and will, when so executed, be valid and
binding obligations of Coyote and Sub, enforceable in accordance with their
terms. Neither Coyote nor Sub is required to be qualified or licensed to do
business as a foreign corporation in any other jurisdiction where the failure to
be so qualified or licensed could have a material adverse effect on Coyote or
Sub, as the case may be, whether financial or otherwise.
(i) Coyote's Board of Directors (at a meeting duly
called and held) has unanimously (i) approved an increase in Coyote's number of
authorized shares of Common Stock to at least 50 million shares and (ii)
resolved to recommend that the shareholders of Coyote approve an amendment to
Coyote's Certificate of Incorporation implementing such increase. The
resolutions of Coyote's Board of Directors taking the actions described in the
preceding sentence have not been rescinded, withdrawn, amended or otherwise
modified and remain in full force and effect.
(ii) The affirmative vote of the holders of a
majority of the outstanding shares of Coyote Common Stock is the only vote of
the holders of any class or series of Coyote's Capital Stock necessary to
approve and implement an increase in the number of authorized shares of Coyote
Common Stock.
20
(b) Capitalization. As of the execution date of this
Agreement, the current authorized Capital Stock of Coyote consists of 30,000,000
shares of Coyote Common Stock and 5,000,000 shares of Preferred. 17,418,001
shares of Coyote Common Stock are issued and outstanding. There are 124 shares
of Preferred A Shares outstanding, convertible into 206,666 shares of Coyote
Common Stock, and 3,157,895 shares of Preferred B Convertible into 3,157,895
shares of Coyote Common Stock. There are 5,010,135 shares of Coyote Common Stock
reserved for issuance on the exercise of outstanding Common Stock purchase
warrants of Coyote, and 4,235,000 shares of Coyote Common Stock reserved for
issuance on the exercise of outstanding options and options or restricted stock,
which may be granted under certain stock incentive plans of Coyote. Except for
warrants and options and other rights granted under such plans and certain
commitments which are contingent upon the Charter Amendment and could amount to
up to 3,150,000 additional options under the plans as amended by Coyote's
preliminary proxy, there are not, as of the date of this Agreement, any existing
options, warrants, calls, subscriptions or other rights or agreements or
commitments obligating Coyote to issue or transfer shares of its capital stock
or any other securities convertible into or evidencing the right to subscribe
for any such shares. All issued and outstanding shares of Coyote Common Stock
are, and all shares of Coyote Common Stock to be issued at the Effective Time
shall be, when issued, duly authorized and validly issued, fully paid Common
Stock, nonassessable and free of pre-emptive rights with respect thereto.
(c) Binding Obligation. Neither the execution and delivery of
this Agreement and the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby or thereby will:
(i) conflict with or violate any provision of the
Certificates of Incorporation or the By-Laws of Coyote or Sub, any law, or any
court or other order;
(ii) result in any breach of or default under any
mortgage, contract, agreement, indenture, trust or other instrument, which is
either binding upon or enforceable against Coyote or Sub, or the assets and
properties of Coyote or Sub, where such breach or default could have a material
adverse effect on Coyote, whether financial or otherwise;
(iii) violate any legally protected right of any
individual or entity or give any individual or entity the right to claim against
Coyote or Sub or the assets or properties of Coyote or Sub; or
21
(iv) invalidate or terminate any governmental permit
or license of Coyote.
(d) Consents and Approvals. Except as set forth on Schedule
7(d), no consent of any entity, agency or person is required in connection with
the execution and delivery by Coyote or Sub of this Agreement and the Ancillary
Agreements to which they are a party, or consummation of the transactions
contemplated hereby or thereby, including, without limitation, consents from
parties to loans, contracts, leases or other agreements to which Coyote or Sub
is a party.
(e) Financial Statements. Coyote has delivered to GLD copies
of the following financial statements prepared by Coyote, and, if indicated
below, audited by Xxxxxx Xxxxxxxx or other independent certified public
accountants acceptable to GLD , all of which are complete, correct and accurate
in all respects as of their respective dates, and have been prepared from the
internal books and records of Coyote in accordance with GAAP consistently
applied and maintained throughout the periods indicated:
(i) an audited balance sheet, income statements and
cash flows for the fiscal years ended March 31, 1997, March 31, 1998 and March
31, 1999 (the "Coyote Year-End Statements") and statements of income, changes in
shareholders' equity and cash flow of Coyote, in a fashion that fairly and
accurately represents the performance of the business Coyote now conducts, for
each of the years then ended; and
(ii) an unaudited balance sheet of Coyote, in a
fashion that fairly and accurately represents the performance of the business
Coyote now conducts, for the nine-month period ended December 31, 1999 and the
related statements of income, changes in shareholders' equity and cash flow for
that period (the "Coyote Interim Financials").
The financial statements present fairly the financial
position of Coyote at each of the dates stated therein and the results of
operations for each of the periods covered, subject in the case of the Coyote
interim financials to normal year-end adjustments.
(f) Litigation and Proceedings. Except as set forth on
Schedule 7(f), and except for such matters that individually or in the aggregate
could not reasonably be expected to have a material adverse effect on Coyote,
there are no suits, actions or legal or administrative investigations or
proceedings (collectively, "Coyote Proceedings") pending or, to the knowledge of
22
Coyote, threatened against Coyote or affecting any of its assets or properties.
To the knowledge of Coyote, no set of facts or circumstances exist or have
existed since December 31, 1999 which could constitute a basis for any Coyote
Proceeding. There are no outstanding orders, decrees or stipulations issued by
any local, state, federal or foreign judicial authority in any proceeding to
which Coyote was a party.
(g) Government License and Regulation. Coyote has all domestic
and foreign governmental licenses and permits necessary to conduct its business
as presently conducted and to own and use its assets and such licenses and
permits are in full force and effect and are not subject to any Coyote
Proceeding except for the absence of licenses or permits, or defaults
thereunder, that individually or in the aggregate could not reasonably be
expected to have a material adverse effect on Coyote.
(h) Disclosure. There exists no material fact, condition or,
to Coyote's knowledge, threatened development of any nature not otherwise
disclosed in this Agreement or on the schedules to this Agreement that would be
materially adverse to the operation of Coyote's business. No warranty or
representation by Coyote contained in this Agreement or in any writing to be
furnished pursuant hereto or previously furnished to GLD contains or will
contain any untrue statement of material fact or omits or will omit to state any
material fact required to make the statements therein contained not misleading.
Except as set forth on Schedule 7(h), Coyote has filed with
the SEC all reports, registrations and other documents, together with any and
all amendments thereto, required to be filed under the Securities Act and the
Exchange Act (all such reports, registrations and documents filed with the SEC
are collectively referred to as "Coyote's SEC Reports"). As of their respective
dates, Coyote's SEC Reports comply in all material respects with all rules and
regulations promulgated by the SEC and do not contain any untrue statement of a
material fact or omit a statement of material fact required to be stated
therein, or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. Coyote has provided to
GLD a true and complete copy of all of Coyote's SEC Reports filed on or prior to
the date hereof.
Except as disclosed in Coyote's SEC Reports, there has not
been any event or circumstance that has had or could reasonably be expected to
have a material adverse effect on Coyote.
23
(i) No Violation of Law. Coyote is not engaging in any
activity or omitting to take any action as a result of which it is in material
violation of any law, rule, regulation, zoning or other ordinance, statute,
order, injunction or decree, or any other requirement of any court or
governmental or administrative body or agency, applicable to Coyote or any of
its assets, including, but not limited to those relating to occupational safety
and health matters, issues of environmental and ecological protection, business
practices and operations, labor practices, employee benefits, and zoning and
other land use laws and regulations. To the knowledge of Coyote, all notices
from governmental authorities regarding any such material violations have been
remedied.
(j) Information Supplied. Neither the S-4 or any
post-effective amendment thereto nor any of the information supplied or to be
supplied by Coyote for inclusion or incorporation by reference in the Proxy
Statement will, in the case of the S-4, at the time the S-4 is filed with the
SEC, at the time it becomes effective under the Securities Act, at the time of
the filing of any post-effective amendments thereto and at the Effective Time,
and, in the case of the Proxy Statement, at the time of the mailing of the Proxy
Statement or any amendments or supplements thereto, and at the respective times
of the meetings of GLD and Coyote to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading provided, however, that Coyote makes no representation or
warranty concerning information supplied or to be supplied by GLD for inclusion
or incorporation by reference to the S-4.
8. Covenants and Agreements of GLD Pending Closing. GLD hereby
covenants and agrees with Coyote and Sub that:
(a) Access to Records. From and after the date of this
Agreement through the Closing Date, the officers, independent accountants,
attorneys and other authorized representatives of Coyote and Sub shall have free
and full access at reasonable times, upon reasonable notice, upon the premises
of GLD, to:
(i) the properties, books, records and all documents
of or relating to GLD;
(ii) the audit work papers and other records of GLD
of the independent accountants of GLD that are in GLD's possession;
24
(iii) such additional financial and operating data
and other information concerning the business and properties of GLD as Coyote
and Sub shall from time to time reasonably request in writing;
(iv) shall provide adequate copying facilities; all
in order that Coyote and Sub may have full opportunity to make such
investigation as they shall reasonably desire of the condition and affairs of
GLD; and
(v) at Coyote's request, GLD shall direct its
independent accountants to provide full access to the audit work papers and
other written records of such independent accountants with respect to their
audits and reviews of GLD's financial condition
(b) Compliance with Agreements; Preservation of Business.
Through the Closing Date, GLD shall:
(i) comply, in all material respects, with all
applicable provisions and conditions of this Agreement;
(ii) maintain and preserve the properties and
business of GLD with its customers, employees, suppliers and others having
business relationships with GLD;
(iii) refrain from adding to the GLD Permitted
Liabilities any amounts, outside the debts incurred in the ordinary course of
business; and
(iv) conduct the business of GLD diligently and only
in the ordinary course, except for the purchase of a tail insurance policy, with
a premium not to exceed $75,000.
(c) Conduct of Business. GLD will use its best efforts to
conduct its affairs so that at Closing no representation or warranty of GLD will
be inaccurate in any material respect.
(d) Execution of Documents. GLD will execute and deliver such
additional or further transfers, assignment, endorsements and other instruments
as Coyote or Sub may reasonably request in writing for the purpose of carrying
out this Agreement.
25
(e) Insurance. Through the Closing Date, GLD will continue to
carry its existing insurance, subject to variations in amount required by the
ordinary operation of its business.
(f) Consents and Approvals. Immediately upon the execution of
this Agreement, GLD shall make any and all appropriate filings and shall use
their reasonable best efforts to obtain or make at the earliest practicable date
and in any event before Closing, all consents, governmental approvals and
filings necessary to the consummation of the transactions contemplated hereby
which are necessary to be obtained or made by GLD or which are reasonably
requested by Coyote.
(g) Advice of Changes. Until Closing or the earlier rightful
termination of this Agreement, GLD will immediately provide Coyote and Sub
detailed written notice of any fact or occurrence or any pending or threatened
occurrence of which it obtains knowledge, where such occurrence or pending or
threatened occurrence: (i) would have been required to be set forth or disclosed
in or pursuant to this Agreement or any Schedule hereto; (ii) would make the
performance by any party of a covenant contained in this Agreement impossible or
make such performance materially more difficult than in the absence of such fact
or occurrence; or (iii) would cause a condition to any party's obligations under
this Agreement not to be fully satisfied; provided, however that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(h) Best Efforts. Between the date hereof and the Closing
Date, GLD shall use its reasonable best efforts:
(i) to fulfill the conditions set forth in section 5
hereof; and
(ii) to cause the representations and warranties set
forth in section 6 hereof to remain true and correct.
Notwithstanding the foregoing, GLD shareholders'
obligation to close hereunder shall not arise unless and until Coyote and Sub
shall have fulfilled completely the conditions and obligations of Coyote and Sub
contained in section 5 and the subsections thereof.
(i) Shareholders Meetings. GLD shall take all action necessary
in accordance with the Florida Law and its Articles of Incorporation
26
and By-Laws to duly call, give notice of, convene and hold the a meeting of
GLD's shareholders as soon as practicable after the S-4 has been declared
effective under the Securities Act to consider and vote upon the adoption and
approval of this Agreement and the transactions contemplated herein. The
shareholder votes required for the adoption and approval of the transactions
contemplated by this Agreement shall be the vote required by Florida law and
GLD's Articles of Incorporation and By-Laws. GLD will, through its Board of
Directors, recommend to its shareholders approval of such matters.
(j) Preparation of S-4 and the Proxy Statement. GLD shall
assist Coyote in promptly preparing and filing with the SEC the Proxy Statement
and Coyote shall promptly prepare and file with the SEC the S-4 in which the
Proxy Statement will be included. GLD shall use its reasonable best efforts to
cooperate with Coyote to have the S-4 declared effective under the Securities
Act as promptly as practicable after such filing. GLD shall furnish Coyote with
all information concerning GLD and its shareholders as may be reasonably
requested in connection with the preparation of the S-4 and the Proxy Statement.
9. Covenants and Agreements of Coyote and Sub Pending Closing. Coyote
and Sub jointly and severally hereby covenant and agree with GLD that:
(a) Access to Records. From and after the date of this
Agreement through the Closing Date, the officers, independent accountants,
attorneys and other accredited representatives of GLD shall have free and full
access at reasonable times, upon reasonable notice, upon the premises of Coyote,
to:
(i) the properties, books, records and all documents
of or relating to Coyote and Sub;
(ii) the audit work papers and other records of
Coyote of the independent accountants of Coyote; and
(iii) such additional financial and operating data
and other information concerning the business and properties of Coyote as GLD
shall from time to time reasonably request in writing;
(iv) shall provide adequate copying facilities; all
in order that GLD may have full opportunity to make such investigation as they
shall reasonably desire of the condition and affairs of Coyote; and
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(v) at GLD's request, Coyote shall direct its
independent accountants to provide full access to the audit work papers and
other written records of such independent accountants with respect to their
audits and reviews of Coyote's financial condition.
(b) Compliance with Agreements; Preservation of Business.
Through the Closing Date, Coyote and Sub shall:
(i) comply in all material respects, with all
applicable provisions and conditions of this Agreement;
(ii) maintain and preserve the properties and
business of Coyote with its customers, employees, suppliers and others having
business relationships with Coyote;
(iii) conduct the business of Coyote diligently and
only in the ordinary course except as previously disclosed to GLD.
(c) Conduct of Business. Coyote and Sub will use reasonable
efforts to conduct their affairs so that at Closing no representation or
warranty of Coyote or Sub will be inaccurate in any material respect. No
covenant or agreement of Coyote or Sub will be breached and no condition in this
Agreement will remain unfulfilled by reason of the actions or omissions of
Coyote or Sub.
(d) Execution of Documents. Coyote and Sub will execute and
deliver such additional or further transfers, assignment, endorsements and other
instruments as GLD may reasonably request in writing for the purpose of carrying
out this Agreement.
(e) Consents and Approvals. Immediately upon the execution of
this Agreement, Coyote and Sub shall make any and all appropriate filings and
shall use their reasonable best efforts to obtain or make at the earliest
practicable date and in any event before Closing, all consents, governmental
approvals and filings except the Post-Closing consents, as defined in section
9(f), necessary to the consummation of the transactions contemplated hereby
which are necessary to be obtained or made by Coyote and/or Sub or which are
reasonably requested by GLD.
(f) Post-Closing Consents. The Parties acknowledge and agree
that certain consents and approvals necessary for the consummation of the
transactions contemplated hereby may, if mutually agreed to by the Parties, need
to be obtained following the Closing Date (the "Post-Closing Consents"). Coyote
and Sub shall make any and all
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appropriate filings and use their reasonable best efforts to obtain at the
earliest practicable date, the Post-Closing Consents. GLD shall use all
reasonable best efforts to assist Coyote and Sub with respect to obtaining such
Post-Closing Consents.
(g) Advice of Changes. Until Closing or the earlier rightful
termination of this Agreement, Coyote and Sub will immediately provide GLD
detailed written notice of any fact or occurrence or any pending or threatened
occurrence of which any of them obtains knowledge, where such occurrence or
pending or threatened occurrence: (i) would have been required to be set forth
or disclosed in or pursuant to this Agreement or any Schedule hereto; (ii) would
make the performance by any party of a covenant contained in this Agreement
impossible or make such performance materially more difficult than in the
absence of such fact or occurrence or; (iii) would cause a condition to any
party's obligations under this Agreement not to be fully satisfied; provided,
however that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(h) Best Efforts. Between the date hereof and the Closing
Date, Coyote and Sub shall use their reasonable best efforts:
(i) to fulfill the conditions set forth in section 4
hereof; and
(ii) to cause the representations and warranties set
forth in section 7 hereof to remain true and correct.
Notwithstanding the foregoing, Coyote's obligation to close
hereunder shall not arise unless and until GLD shall have fulfilled completely
the conditions and obligations of GLD contained in section 5 and the subsections
thereof.
(i) Preparation of S-4 and Proxy Statement. Coyote, with GLD's
assistance, shall promptly prepare and file with the SEC the Proxy Statement and
Coyote shall promptly prepare and file with the SEC the S-4 in which the Proxy
Statement will be included. Coyote shall use its reasonable best efforts to have
the S-4 declared effective under the Securities Act as promptly as practicable
after such filing. Coyote shall also take any action (other than qualifying to
do business in any jurisdiction in which it is now not so qualified) required to
be taken
29
under any applicable state securities laws in connection with the issuance of
Coyote Common Stock in the Merger
(j) Corporate Action. Coyote shall take all action necessary
in accordance with the Delaware General Corporation Law (the "Delaware Law") and
its Certificate of Incorporation and By-Laws to duly call, give notice of,
convene and hold the a meeting of the Coyote shareholders as soon as practicable
to consider and vote upon the adoption and approval of the Charter Amendment The
shareholder votes required for the adoption and approval of the Charter
Amendment contemplated by this Agreement shall be the vote required by the
Delaware Law, the Coyote's Certificate of Incorporation and By-Laws. Coyote
will, through its Board of Directors, recommend to its shareholders approval of
all such matters requiring shareholder approval. The Charter Amendment shall be
effective not later than July 31, 2000.
(k) NASDAQ Listing. Coyote shall cause the shares of Coyote
Common Stock to be issued in the Merger to be approved for listing on the NASDAQ
National Market, subject to official notice of issuance, as promptly as
practicable after the date hereof and in any event prior to the Effective Time.
10. Termination.
(a) Termination Events. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of GLD):
(i) by mutual written consent of GLD and Coyote;
(ii) by either GLD or Coyote, if the Merger has not
been consummated by December 31, 2000 (provided that the party seeking to
terminate this Agreement shall not have breached its obligations under this
Agreement in any material respect); or
(iii) by either GLD or Coyote, if any judgement,
injunction, order or decree enjoining Coyote or GLD from consummating the Merger
is entered and such judgement, injunction, order or decree shall become final
and nonappealable.
(iv) Coyote may terminate this Agreement by giving
written notice to GLD at any time prior to Closing in the event GLD has breached
any material representation, warranty, covenant or agreement contained in this
Agreement in any material respect, Coyote has notified GLD of the breach, and
the breach has continued without cure for a period of fifteen days after the
notice of breach; and
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(v) GLD may terminate this Agreement by giving
written notice to Coyote at any time prior to closing in the event Coyote has
breached any material representation, warranty, covenant or agreement contained
in this Agreement in any material respect, GLD has notified Coyote of the
breach, and the breach has continued without cure for a period of fifteen days
after the notice of breach; and
(b) Effect of Termination. Except for any willful and material
breach of this Agreement by any party hereto (which breach and liability
therefor shall not be affected by the termination of this Agreement), if this
Agreement is terminated by either Coyote or GLD as provided in this section 10,
this Agreement shall become void and have no further effect, without any
liability or obligation on the part of Coyote, Sub or GLD, other than the
provisions of section 10(b), 13(d), 13(e), 13(f), 13(j) and 13(l).
11. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This section 11
shall not limit any covenant or agreement of the parties which by it terms
contemplates performance after the Effective Time.
12. Brokers. The Parties represent and warrant to each other that,
except for Xxxxxx X. Xxxxxxxxx, Xx., P.A. neither party has retained any broker
or finder with respect to this transaction.
13. Miscellaneous.
(a) Further Assurances, Amendment and Waiver. Upon reasonable
request, from time to time, the Parties shall (or, with respect to either GLD or
Coyote, shall direct its respective subsidiaries, directors, shareholders and
officers to, if appropriate) execute and deliver all documents which may be
necessary or desirable to effectuate the provisions of this Agreement. This
Agreement may only be amended in writing by GLD and Coyote. The failure of GLD
or Coyote to insist, in any one or more instances, upon performance of any of
the terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or the future performance of any
such term, covenant or condition. All rights and remedies granted in this
Agreement shall be cumulative and nonexclusive of all other rights and remedies.
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(b) Notices. Any notice to be given hereunder shall be deemed
given and sufficient if in writing and delivered or mailed by registered or
certified mail,
in the case of GLD to: Group Long Distance, Inc.
0000 X. Xxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
Attn: President
with a copy to: Xxxx X. Xxxxxx, Esq. Xxxxxx & Xxxxxx, P.A.
0000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 0000
Xxxxx, XX 00000
and, in the case of Coyote or Sub, to: Coyote Network Systems, Inc.
0000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attn: President
with a copy to: Xxxxxxx X. Xxxxxxxx, Esq.
Reinhart, Boerner, Van Deuren,
Xxxxxx & Rieselbach, P.C.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
or to such other address as GLD , Coyote or Sub may designate by notice in
writing to the other.
(c) Benefit. This Agreement shall be binding upon and inure to
the benefit and burden of and shall be enforceable by and against Coyote and
Sub, their successors and assigns; and GLD, its successors and assigns. This
Agreement may not be assigned by any party without the written consent of the
others.
(d) Expenses. All expenses incurred by GLD, Sub or Coyote in
connection with the transactions contemplated hereby, including, without
limitation, legal and accounting fees, shall be the responsibility of and for
the account of the party who ordered the particular service or incurred the
particular expense.
(e) Entire Agreement. This Agreement and the schedules and
other documents to be delivered pursuant hereto constitute the entire agreement
among the Parties hereto and there are no agreements, representations or
warranties which are not set forth herein. All prior
32
negotiations, agreements and understandings are superseded hereby, including,
without limitation, a certain letter of intent dated March 28, 2000 between
Coyote and GLD.
(f) Choice of Law. This Agreement shall be governed by the
laws of the State of Florida, without regard to such State's conflict of laws
principles.
(g) Severability. If any provision of this Agreement is held
for any reason to be unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall, nevertheless, remain in full force and
effect.
(h) Headings. Headings are intended solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
(i) Counterparts. This Agreement may be executed in any number
of counterparts and delivered via facsimile, each of which shall be deemed to be
an original, and all of which together shall be deemed to be one and the same
instrument.
(j) Arbitration. Any and all disputes concerning the
interpretation, construction or application of this Agreement shall be
determined by binding arbitration pursuant to the Rules of the American
Arbitration Association. The location of any and all arbitration proceedings
shall be the city and state in which the Defendant's corporate headquarters are
located. At present, Coyote's corporate headquarters are located in Los Angeles,
California and those of GLD are located in Fort Lauderdale, Florida. The Party
seeking arbitration shall give the other party written notice of its intention
to arbitrate a dispute between the parties with respect to this Agreement. Any
dispute shall be determined by an arbitrator selected by mutual agreement of the
parties. If the parties are not able to expeditiously agree upon the arbitrator,
an arbitrator shall be determined by striking names from a list of potential
arbitrators provided by the American Arbitration Association. Any and all
arbitrators selected shall be independent of the parties to this Agreement.
Arbitration shall be conducted expeditiously as time shall be deemed to be the
essence in determining any matters subject to arbitration.
(k) Confidential Information.
(i) Each Party acknowledges that it has and will
continue to receive "Confidential Information" (as defined below) from the other
Party. Each Party shall use reasonable efforts to prevent the disclosure to any
other person, firm or other corporation of any
33
Confidential Information which it receives from the other. Each Party shall also
use the same degree of care to avoid disclosure of such information as it
employs with respect to its own proprietary and confidential information of like
importance and shall limit disclosure of the Confidential Information to those
of its personnel and personnel of its affiliated companies and its outside
professional firm who have an actual need to know and have an obligation to
protect the confidentiality of such information consistent with the requirements
of this Agreement. Each Party also agrees not to use the Confidential
Information for any purpose other than for evaluating the other Party in
connection with the Merger.
(ii) Notwithstanding the foregoing, information shall
not be deemed Confidential Information and a Party shall have no obligation with
respect to any such information that
[a] Is already known to it, and such prior knowledge can be
demonstrated through physical evidence that pre-dates this Agreement, or
[b] Is or becomes publicly known through publication or
otherwise and through no wrongful act of the Party receiving such information;
or
[c] Is received from a third party who is not under a
confidentiality restriction, who provides the information without requiring
confidentiality thereof, and without a breach of this or any other
confidentiality agreement; or
[d] Is approved for release by written authorization of the
Party disclosing the information (so long as such release complies with any
requirements of the authorization), or
[e] Is disclosed pursuant to the lawfully imposed requirement
of a governmental agency or disclosure is required by operation of law.
(iii) Each of the Parties acknowledges that
irreparable harm, for which there would be no adequate remedy at law, would
arise from a violation of this section 13 (k). Therefore, each party
acknowledges that a breach of this section 13 (k) would give rise to a right to
an injunction in favor of the non-breaching party.
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(iv) All Confidential Information that is in any
reproducible form (including without limitation, written or electronic form)
delivered by one Party hereto to the other Party shall be and remain the
property of the delivering Party, and all such data, and any copies thereof,
shall be promptly returned to the delivering Party upon written request, or
destroyed at the delivering Party's option.
(v) For the purposes of this Agreement, "Confidential
Information" shall mean any information that is disclosed to a Party by the
other Party, that has been created, developed, discovered, discerned, acquired,
licensed or purchased by such other Party, and constitutes information relating
to any product, process, financial information, financial projections, research
work, business line, business strategy or intellectual property of any kind, and
shall include, without limitation, customer lists, trade secrets, ideas,
processes, know-how, methods, proprietary data, products, future products, any
and therein or any improvements thereof.
(l) Public Announcements. Coyote and Sub, on the one hand, and
GLD, on the other hand, will consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any press release or
other public statements with respect to the transactions contemplated by this
Agreement, including the Merger, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with NASDAQ. The Parties agree that the initial press release
to be issued with respect to the transactions contemplated by this Agreement
will be in the form previously agreed to by the Parties.
35
COYOTE NETWORK SYSTEMS, INC.
BY /s/ Xxx Xxxxxxxx
-------------------
Its General Counsel
COYOTE-GLD ACQUISITION, INC.
BY /s/ Xxx Xxxxxxxx
--------------------
Its Secretary
GROUP LONG DISTANCE, INC.
BY /s/ Xxxxx Xxxxx
-------------------
Its President
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