EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
by and among
PRODIGY COMMUNICATIONS CORPORATION,
PUCKNUT CORPORATION
and
FLASHNET COMMUNICATIONS, INC.
Dated as of November 5, 1999
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER......................................................3
1.1 Effective Time of the Merger..............................3
1.2 Closing...................................................3
1.3 Effects of the Merger.....................................3
1.4 Directors.................................................4
ARTICLE II CONVERSION OF SECURITIES........................................4
2.1 Conversion of Capital Stock...............................4
2.2 Exchange of Certificates..................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................9
3.1 Organization, Standing and Power; Subsidiaries............9
3.2 Capitalization...........................................10
3.3 Authority; No Conflict; Required Filings and Consents....12
3.4 SEC Filings; Financial Statements........................13
3.5 No Undisclosed Liabilities...............................14
3.6 Absence of Certain Changes or Events.....................15
3.7 Taxes....................................................15
3.8 Owned and Leased Real Properties.........................17
3.9 Intellectual Property....................................17
3.10 Agreements, Contracts and Commitments....................18
3.11 Litigation...............................................19
3.12 Environmental Matters....................................19
3.13 Employee Benefit Plans...................................20
3.14 Compliance With Laws.....................................23
3.15 Permits..................................................23
3.16 Registration Statement; Proxy Statement/Prospectus.......23
3.17 Labor Matters............................................24
3.18 Insurance................................................24
3.19 Business Activity Restrictions...........................24
3.20 Year 2000 Compliance.....................................24
3.21 Assets...................................................26
3.22 Subscribers..............................................26
3.23 Accounts Receivable......................................26
3.24 No Existing Discussions..................................26
3.25 Opinion of Financial Advisor.............................27
3.26 Part Thirteen of the TBCA Not Applicable.................27
3.27 Tax Matters..............................................27
3.28 Transactions with Affiliate..............................27
ii
3.29 Brokers; Schedule of Fees and Expenses...................27
3.30 Disclosure...............................................28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
THE TRANSITORY SUBSIDIARY......................................28
4.1 Organization, Standing and Power.........................28
4.2 Capitalization...........................................28
4.3 Authority; No Conflict; Required Filings and Consents....29
4.4 SEC Filings; Financial Statements........................30
4.5 Absence of Certain Changes or Events.....................31
4.6 Tax Matters..............................................31
4.7 Litigation...............................................31
4.8 Compliance with Laws.....................................31
4.9 Registration Statement; Proxy Statement/Prospectus.......31
4.10 Operations of the Transitory Subsidiary..................32
4.11 Brokers..................................................32
4.12 Disclosure...............................................32
ARTICLE V CONDUCT OF BUSINESS............................................32
5.1 Covenants of the Company.................................32
5.2 Cooperation..............................................36
5.3 Confidentiality..........................................36
ARTICLE VI ADDITIONAL AGREEMENTS..........................................36
6.1 No Solicitation..........................................36
6.2 Proxy Statement/Prospectus; Registration Statement.......38
6.3 Nasdaq Quotation.........................................39
6.4 Access to Information....................................39
6.5 Stockholders Meeting.....................................40
6.6 Legal Conditions to the Merger...........................41
6.7 Public Disclosure........................................42
6.8 Tax-Free Reorganization..................................42
6.9 Affiliate Agreements.....................................42
6.10 Nasdaq National Market Listing...........................43
6.11 Company Stock Options, Warrants and Plans................43
6.12 Stockholder Litigation...................................44
6.13 Indemnification..........................................44
6.14 Notification of Certain Matters..........................45
iii
ARTICLE VII CONDITIONS TO MERGER ..........................................45
7.1 Conditions to Each Party's Obligation To Effect the
Merger...................................................45
iii
7.2 Additional Conditions to Obligations of the Buyer and
the Transitory Subsidiary................................46
7.3 Additional Conditions to Obligations of the Company......47
ARTICLE VIII TERMINATION AND AMENDMENT......................................48
8.1 Termination..............................................48
8.2 Effect of Termination....................................50
8.3 Fees and Expenses........................................50
8.4 Amendment................................................52
8.5 Extension; Waiver........................................52
ARTICLE IX MISCELLANEOUS..................................................52
9.1 Nonsurvival of Representations and Warranties............52
9.2 Notices..................................................52
9.3 Entire Agreement.........................................53
9.4 No Third Party Beneficiaries.............................54
9.5 Assignment...............................................54
9.6 Severability.............................................54
9.7 Counterparts and Signature...............................55
9.8 Interpretation...........................................55
9.9 Governing Law............................................55
9.10 Remedies.................................................55
9.11 Waiver of Jury Trial.....................................55
iv
EXHIBITS
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C Form of Company Affiliate Agreement
v
TABLE OF DEFINED TERMS
Cross Reference
Terms in Agreement
----- ---------------
Affiliate.............................................. Section 6.9
Affiliate Agreement.................................... Section 6.9
Agreement.............................................. Preamble
Alternative Transaction................................ Section 8.3(g)
Antitrust Laws......................................... Section 6.6(b)
Antitrust Order........................................ Section 6.6(b)
Articles of Merger..................................... Section 1.1
Buyer.................................................. Preamble
Buyer Balance Sheet.................................... Section 4.4(b)
Buyer Common Stock..................................... Section 2.1(c)
Buyer Disclosure Schedule.............................. Article IV
Buyer Material Adverse Effect.......................... Section 4.1
Buyer Preferred Stock.................................. Section 4.2
Buyer SEC Reports...................................... Section 4.4(a)
Certificates........................................... Section 2.2(b)
Certificate of Merger.................................. Section 1.1
Closing................................................ Section 1.2
Closing Date........................................... Section 1.2
Code................................................... Preamble
Company................................................ Preamble
Company Balance Sheet ................................. Section 3.4(b)
Company Common Stock .................................. Section 2.1(b)
Company Disclosure Schedule ........................... Article III
Cross Reference
Terms in Agreement
----- ---------------
Company Employee Plans ................................ Section 3.13(a)
Company Intellectual Property Rights................... Section 3.9(a)
Company Leases......................................... Section 3.8(b)
Company Material Adverse Effect ....................... Section 3.1(a)
Company Material Contracts ............................ Section 3.10
Company Meeting ....................................... Section 3.16
Company Permits........................................ Section 3.15
Company Preferred Stock................................ Section 3.2(a)
Company SEC Reports ................................... Section 3.4(a)
Company Stock Options.................................. Section 3.2(b)
Company Stock Option Agreement ........................ Preamble
Company Stock Plans ................................... Section 3.2(b)
Company Voting Proposal ............................... Section 6.5(a)
Company Warrants....................................... Section 3.2(b)
Confidentiality Agreement.............................. Section 5.3
Constituent Corporations............................... Section 1.3
DGCL................................................... Section 1.1
Effective Time......................................... Section 1.1
Employee Benefit Plan.................................. Section 3.13(a)
Environmental Law...................................... Section 3.12(b)
ERISA Affiliate........................................ Section 3.13(a)
ERISA.................................................. Section 3.13(a)
Exchange Agent......................................... Section 2.2(a)
Exchange Fund.......................................... Section 2.2(a)
Exchange Act........................................... Section 3.3(c)
Cross Reference
Terms in Agreement
----- ---------------
Exchange Ratio......................................... Section 2.1(c)
Governmental Entity.................................... Section 3.3(c)
Hazardous Substance.................................... Section 3.12(c)
HSR Act................................................ Section 3.3(c)
Indemnified Parties.................................... Section 6.13
Insurance Policies..................................... Section 3.18
Liens.................................................. Section 3.21
Merger................................................. Preamble
Outside Date........................................... Section 8.1(b)
Proxy Statement........................................ Section 3.16
Registration Statement................................. Section 3.16
Rule 145............................................... Section 6.9
SEC.................................................... Section 3.3(c)
Securities Act......................................... Section 3.4(a)
Stockholder Agreement.................................. Preamble
Subsidiary............................................. Section 3.1(b)
Superior Proposal...................................... Section 6.1(a)(A)(1)
Surviving Corporation.................................. Section 1.3
Tax Returns............................................ Section 3.7(a)
Taxes.................................................. Section 3.7(a)
TBCA................................................... Section 1.1
Third Party............................................ Section 8.3(g)
Transitory Subsidiary.................................. Preamble
Year 2000 Compliant.................................... Section 3.20(d)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November
5, 1999, is by and among Prodigy Communications Corporation, a Delaware
corporation (the "Buyer"), PUCKnut Corporation, a Delaware corporation and a
wholly owned subsidiary of Buyer (the "Transitory Subsidiary"), and FlashNet
Communications, Inc., a Texas corporation (the "Company").
WHEREAS, the Boards of Directors of the Buyer and the Company deem it
advisable and in the best interests of each corporation and its respective
stockholders that the Buyer and the Company combine in order to advance the
long-term business interests of the Buyer and the Company;
WHEREAS, the combination of the Buyer and the Company shall be effected by
the terms of this Agreement through a merger of the Transitory Subsidiary into
the Company, as a result of which the stockholders of the Company will become
stockholders of the Buyer (the "Merger");
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to the Buyer's willingness to enter into this
Agreement, the Company has entered into a Stock Option Agreement dated as of the
date of this Agreement and attached hereto as Exhibit A (the "Company Stock
Option Agreement"), pursuant to which the Company granted the Buyer an option to
purchase shares of common stock of the Company under certain circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to the Buyer's willingness to enter into this
Agreement, the stockholders of the Company specified in Section 6.5(c) of this
Agreement have entered into a Stockholder Agreement dated as of the date of this
Agreement in the form attached as Exhibit B (the "Stockholder Agreement"),
pursuant to which such stockholders agreed to give the Buyer a proxy to vote all
of the shares of capital stock of the Company that such stockholders own; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
Buyer, the Transitory Subsidiary and the Company agree as follows:
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ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, prior to the Closing (as defined in Section 1.2), the Buyer shall
prepare, and on the Closing Date (as defined in Section 1.2) or as soon as
practicable thereafter the Buyer shall cause to be filed (i) with the Secretary
of State of the State of Delaware, a certificate of merger (the "Certificate of
Merger") in such form as is required by, and executed by the Surviving
Corporation (as defined in Section 1.3) in accordance with, the relevant
provisions of the Delaware General Corporation Law ("DGCL"), (ii) with the
Secretary of State of the State of Texas, articles of merger ("Articles of
Merger") in such form as required by, and executed by the Constituent
Corporations (as defined in Section 1.3) in accordance with the relevant
provisions of the Texas Business Corporation Act ("TBCA"), and shall make all
other filings or recordings required under the DGCL and TBCA. The Merger shall
become effective upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware and the Articles of Merger with the Secretary
of State of the State of Texas or at such later time as is established by the
Buyer and the Company and set forth in the Certificate of Merger and Articles of
Merger (the "Effective Time").
1.2 Closing. The closing of the Merger (the "Closing") shall take place at
10:00 a.m., Boston time, on a date to be specified by the Buyer and the Company
(the "Closing Date"), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article VII (other than
delivery of items to be delivered at the Closing), at the offices of Xxxx and
Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, unless another date, place or
time is agreed to in writing by the Buyer and the Company.
1.3 Effects of the Merger. At the Effective Time (i) the separate
existence of the Transitory Subsidiary shall cease and the Transitory Subsidiary
shall be merged with and into the Company (the Transitory Subsidiary and the
Company are sometimes referred to below as the "Constituent Corporations" and
the Company following the Merger is sometimes referred to below as the
"Surviving Corporation"), (ii) the Restated Articles of Incorporation of the
Company shall be amended so that the third paragarph of ARTICLE TWO of such
Restated Articles of Incorporation reads in its entirety as follows: "The total
number of shares of all classes of stock which the Corporation shall have
authority to issue is 1,000, all of which shall consist of common stock, $.01
par value per share," and, as so amended, such Restated Articles of
Incorporation shall be the Restated Articles of Incorporation of the Surviving
Corporation, and (iii) the By-laws of the Company as of the date hereof, with
such changes as are specified by the Buyer prior to the Effective Time, shall be
the By-laws of the Surviving Corporation. The Merger shall have the effects set
forth in Section 259 of the DGCL and Article 5.06 of the TBCA.
1.4 Directors and Officers. Except as specified in Section 1.4 of the
Company Disclosure Schedule, the directors and officers of the Transitory
Subsidiary immediately prior to the Effective Time shall be the initial
directors and officers of the Surviving Corporation, each to
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hold office in accordance with the Restated Articles of Incorporation and
By-laws of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of the
capital stock of the Company or capital stock of the Transitory Subsidiary:
(a) Capital Stock of the Transitory Subsidiary. Each issued and
outstanding share of the capital stock of the Transitory Subsidiary shall be
converted into and become one fully paid and nonassessable share of common
stock, $.01 par value per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All shares
of common stock, no par value, of the Company ("Company Common Stock") that are
owned by the Company as treasury stock or by any wholly owned Subsidiary (as
defined in Section 3.1) of the Company and any shares of Company Common Stock
owned by the Buyer, the Transitory Subsidiary or any other wholly owned
Subsidiary of the Buyer shall be canceled and retired and shall cease to exist
and no stock of the Buyer or other consideration shall be delivered in exchange
therefor.
(c) Exchange Ratio for Company Common Stock. Subject to Section 2.2,
each share of Company Common Stock (other than shares to be canceled in
accordance with Section 2.1(b)) issued and outstanding immediately before the
Effective Time, and all rights in respect thereof, shall be automatically
converted into 0.35 share (the "Exchange Ratio ") of common stock, $.01 par
value per share, of the Buyer ("Buyer Common Stock"). As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive the
shares of Buyer Common Stock and any cash in lieu of fractional shares of Buyer
Common Stock to be issued or paid in consideration therefor upon surrender of
such certificate in accordance with Section 2.2, without interest.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Buyer Common Stock or Company Common Stock), reorganization, recapitalization or
other like change with respect to Buyer Common Stock or Company Common Stock
occurring after the date hereof and prior to the Effective Time.
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(e) Unvested Stock. At the Effective Time, any unvested shares of
Company Common Stock awarded to employees, directors or consultants pursuant to
any of the Company's plans or arrangements and outstanding immediately prior to
the Effective Time shall be converted to unvested shares of Buyer Common Stock
in accordance with the Exchange Ratio and shall remain subject to the same
terms, restrictions and vesting schedule as in effect immediately prior to the
Effective Time, except to the extent by their terms such unvested shares of
Company Common Stock vest at the Effective Time. All outstanding rights which
the Company may hold immediately prior to the Effective Time to repurchase
unvested shares of Company Common Stock shall be assigned to in the Merger and
shall thereafter be exercisable by Buyer by Buyer upon the same terms and
conditions in effect immediately prior to the Effective Time, except that the
shares purchasable pursuant to such rights and the purchase price payable per
share shall be adjusted to reflect the Exchange Ratio.
(f) Treatment of Company Options and Company Warrants. Outstanding
Company Options and Company Warrants (in each case as defined in Section 3.2(b))
shall be treated following the Effective Time in the manner set forth in Section
6.11.
2.2 Exchange of Certificates. The procedures for exchanging outstanding
shares of Company Common Stock for Buyer Common Stock pursuant to the Merger are
as follows:
(a) Exchange Agent. As of the Effective Time, the Buyer shall
deposit with a bank or trust company designated by the Buyer (the "Exchange
Agent"), for the benefit of the holders of shares of the Company Common Stock,
for exchange in accordance with this Section 2.2, through the Exchange Agent,
(i) certificates representing the shares of Buyer Common Stock (such shares of
Buyer Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") issuable pursuant
to Section 2.1 in exchange for outstanding shares of the Company Common Stock,
(ii) cash in an amount sufficient to make payments required pursuant to Section
2.2(e), and (iii) any dividends or distributions to which holders of
Certificates (as defined below) may be entitled pursuant to Section 2.2(c)
(b) Exchange Procedures. As soon as reasonably 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 the Company Common Stock (the "Certificates")
whose shares were converted pursuant to Section 2.1 into the right to receive
shares of Buyer Common Stock (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as the Buyer may reasonably
specify) and (ii) instructions for effecting the surrender of the Certificates
in exchange for certificates representing shares of Buyer Common Stock (plus
cash in lieu of fractional shares, if any, of Buyer Common Stock and any
dividends or distributions as provided below). Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by the Buyer, together
7
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 a certificate representing
that number of whole shares of Buyer Common Stock which such holder has the
right to receive pursuant to the provisions of this Article II plus cash in lieu
of fractional shares pursuant to Section 2.2(e) and any dividends or
distributions pursuant to Section 2.2(c), and the Certificate so surrendered
shall immediately be canceled. In the event of a transfer of ownership of
Company Common Stock which is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Buyer Common
Stock plus cash in lieu of fractional shares pursuant to Section 2.2(e) and any
dividends or distributions pursuant to Section 2.2(c) may be issued and paid to
a person other than the person in whose name the Certificate so surrender is
registered, if such Certificate is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Buyer Common Stock plus cash in
lieu of fractional shares pursuant to Section 2.2(e) and any dividends or
distributions pursuant to Section 2.2(c) as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Buyer 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 Buyer
Common Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.2(e) until the
holder of record of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be issued and paid to the record holder of the Certificate, (i)
certificates representing whole shares of Buyer Common Stock issued in exchange
therefor, without interest, (ii) at the time of such surrender, the amount of
any cash payable in lieu of a fractional share of Buyer Common Stock to which
such holder is entitled pursuant to Section 2.2(e) and the amount of dividends
or other distributions with a record date after the Effective Time previously
paid with respect to such whole shares of Buyer Common Stock, and (iii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Buyer
Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares
of Buyer Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash or other distributions paid
pursuant to Sections 2.2(c) or 2.2(e)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the
8
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article II.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights of a stockholder of the Buyer.
Notwithstanding any other provision of this Agreement, each holder of shares of
Company Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Buyer Common Stock (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 a share of Buyer Common Stock multiplied by the average of the last reported
sales prices of the Buyer Common Stock on the Nasdaq National Market during the
ten (10) consecutive trading days ending on and including the last trading day
prior to the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Common Stock for 180 days
after the Effective Time shall be delivered to the Buyer, upon demand, and any
holder of Company Common Stock who has not previously complied with this Section
2.2 shall thereafter look only to the Buyer for payment of its claim for Buyer
Common Stock, any cash in lieu of fractional shares of Buyer Common Stock and
any dividends or distributions with respect to Buyer Common Stock.
(g) No Liability. To the extent permitted by applicable law, none of
the Buyer, the Transitory Subsidiary, the Company, the Surviving Corporation or
the Exchange Agent shall be liable to any holder of shares of Company Common
Stock or Buyer Common Stock, as the case may be, for such shares (or dividends
or distributions with respect thereto) delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to one year after the Effective Time (or
immediately prior to such earlier date on which any shares of Buyer Common
Stock, and any cash payable to the holder of such Certificate pursuant to this
Article II or any dividends or distributions payable to the holder of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.3(c))), any such shares of Buyer
Common Stock or cash, dividends or distributions in respect of such Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(h) Withholding Rights. Each of the Buyer and the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any other applicable provision
of law. To the extent that amounts are so withheld by the Surviving Corporation
or the Buyer, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common
9
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or the Buyer, as the case may be.
(i) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Buyer Common Stock and any cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of Buyer Common Stock
deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Article III are true and
correct, except as set forth herein or in the disclosure schedule delivered by
the Company to the Buyer on or before the date of this Agreement (the "Company
Disclosure Schedule"). The Company Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article III and the disclosure in any paragraph shall qualify other
paragraphs in this Article III only to the extent that it is reasonably apparent
from a reading of such disclosure that it also qualifies or applies to such
other paragraphs.
3.1 Organization, Standing and Power; Subsidiaries.
(a) Each of the Company and its Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified, individually or in
the aggregate, would be reasonably likely to have a material adverse effect on
the business, properties, financial condition, results of operations or
prospects of the Company and its Subsidiaries, taken as a whole, or to have a
material adverse effect on the ability of the Company to consummate the
transactions contemplated by this Agreement or the Company Stock Option
Agreement (a "Company Material Adverse Effect"); provided, however, that
"Company Material Adverse Effect" shall not include any adverse change, effect
or event that (i) is demonstrably shown to have been proximately caused by the
announcement or pendency of the Merger, (ii) is caused by any breach of any
representation, warranty or covenant by the Buyer or the Transitory Subsidiary,
or (iii) applies generally to any entity engaged in the same business in which
the Company is engaged.
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(b) Except as set forth in the Company SEC Reports (as defined in
Section 3.4) filed prior to the date of this Agreement, neither the Company nor
any of its Subsidiaries directly or indirectly owns any equity, membership,
partnership or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity, membership, partnership or similar
interest in, any corporation, partnership, joint venture, limited liability
company or other business association or entity, whether incorporated or
unincorporated. As used in this Agreement, the word "Subsidiary" means, with
respect to a party, any corporation, partnership, joint venture, limited
liability company or other business association or entity, whether incorporated
or unincorporated, of which (i) such party or any other Subsidiary of such party
is a general partner (excluding partnerships, the general partnership interests
of which held by such party and/or one or more of its Subsidiaries do not have a
majority of the voting interest in such partnership), (ii) such party and/or one
or more of its Subsidiaries holds voting power to elect a majority of the board
of directors or other governing body performing similar functions, or (iii) such
party and/or one or more of its Subsidiaries, directly or indirectly, owns or
controls more than 50% of the equity, membership, partnership or similar
interests.
(c) The Company has delivered to the Buyer complete and accurate
copies of the Restated Articles of Incorporation and By-laws of the Company and
of the charter, by-laws or other organization documents of each Subsidiary of
the Company.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, $1.00 par value per share ("Company Preferred Stock"). As of the close of
business on the date immediately preceding the date of this Agreement, (i)
14,258,690 shares of Company Common Stock were issued and outstanding, (ii) no
shares of Company Common Stock were held in the treasury of the Company or by
Subsidiaries of the Company, and (iii) no shares of the Company Preferred Stock
were issued and outstanding.
(b) Section 3.2(b) of Company Disclosure Schedule lists the number
of shares of Company Common Stock reserved for future issuance pursuant to stock
options granted and outstanding as of the date of this Agreement and the plans
under which such options were granted (collectively, the "Company Stock Plans")
and sets forth a complete and accurate list of all holders of outstanding
options to purchase shares of Company Common Stock (such outstanding options,
the "Company Stock Options") under the Company Stock Plans, indicating the
number of shares of Company Common Stock subject to each Company Stock Option,
and the exercise price, the date of grant, vesting schedule and the expiration
date thereof. Section 3.2(b) of the Company Disclosure Schedule shows the number
of shares of Company Common Stock reserved for future issuance pursuant to
warrants or other outstanding rights to purchase shares of Company Common Stock
outstanding as of the date of this Agreement (such outstanding warrants or other
rights, the "Company Warrants") and the agreement or other document under
11
which such Company Warrants were granted and sets forth a complete and accurate
list of all holders of Company Warrants indicating the number and type of shares
of Company Common Stock subject to each Company Warrant, and the exercise price,
the date of grant and the expiration date thereof. Except (x) as set forth in
this Section 3.2(b) of the Company Disclosure Schedule and (y) as reserved for
future grants under Company Stock Plans, (i) there are no equity securities of
any class of the Company or any of its Subsidiaries, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding and (ii) there are no options, warrants, equity
securities, calls, rights, commitments or agreements of any character to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound obligating the Company or any of its Subsidiaries
to issue, transfer, deliver or sell, or cause to be issued, transferred,
delivered or sold, additional shares of capital stock of the Company or any of
its Subsidiaries or any security or rights convertible into or exchangeable or
exercisable for any such shares, or obligating the Company or any of its
Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify or
amend or enter into any such option, warrant, equity security, call, right,
commitment or agreement. Neither the Company nor any of its Subsidiaries has
issued and outstanding any stock appreciation rights, phantom stock, performance
based rights or similar rights or obligations. To the knowledge of the Company,
other than the Stockholders Agreements, there are no agreements or
understandings with respect to the voting (including voting trusts and proxies)
or sale or transfer (including agreements imposing transfer restrictions) of any
shares of capital stock of the Company or any of its Subsidiaries.
(c) All outstanding shares of Company Common Stock are, and all
shares of Company Common Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the TBCA, the Company's
Restated Articles of Incorporation or By-laws or any agreement to which the
Company is a party or is otherwise bound. There are no obligations, contingent
or otherwise, of Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of the Company Common Stock or the capital stock of
the Company or any of its Subsidiaries or to provide funds to or make any
material investment (in the form of a loan, capital contribution or otherwise)
in the Company or any Subsidiary of the Company or any other entity, other than
guarantees of bank obligations of Subsidiaries of the Company entered into in
the ordinary course of business.
(d) All of the outstanding shares of capital stock of each of the
Company's Subsidiaries are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and all such shares are owned, of
record and beneficially, by the Company or another Subsidiary of the Company
free and clear of all security interests, liens, claims, pledges, agreements,
limitations in the Company's voting rights, charges or other encumbrances of any
nature.
12
(e) No consent of the holders of Company Stock Options is required
in connection with the conversion of such options contemplated by Section 6.11.
3.3 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and the Company Stock Option Agreement and to
consummate the transactions contemplated by this Agreement and the Company Stock
Option Agreement. The execution and delivery of this Agreement and the Company
Stock Option Agreement and the consummation of the transactions contemplated by
this Agreement and the Company Stock Option Agreement by the Company have been
duly authorized by all necessary corporate action on the part of the Company,
subject only to the approval of the Merger by the Company's stockholders under
the TBCA. This Agreement and the Company Stock Option Agreement have been duly
executed and delivered by the Company and constitute the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as such enforceability may be limited by principles of public
policy and subject to bankruptcy, insolvency and other laws relating to or
affecting creditors' rights generally and to general equitable principles.
(b) The execution and delivery of this Agreement and the Company
Stock Option Agreement by the Company does not, and the consummation of the
transactions contemplated by this Agreement and the Company Stock Option
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Restated Articles of Incorporation or By-laws of the
Company or the charter, by-laws, or other organizational document of any
Subsidiary of the Company, (ii) conflict with, or result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract or other agreement, instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound, or (iii)
subject to compliance with the requirements specified in clauses (i), (ii),
(iii), (iv) and (v) of Section 3.3(c), conflict with or violate any permit,
concession, franchise, license, judgment, injunction, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of its or their properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, breaches, defaults,
terminations, cancellations or accelerations which, individually or in the
aggregate, are not reasonably likely to have a Company Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization
of, or, registration, declaration, notice or filing with, any court,
arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (a "Governmental Entity") is
required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement and the Company
Stock Option Agreement by the Company or the consummation of the transactions
contemplated by this Agreement or the
13
Company Stock Option Agreement, except for (i) the filing of a pre-merger
notification report under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) the filing of the Certificate of Merger
with the Secretary of State of the States of Delaware and the filing of Articles
of Merger with the Secretary of State of the State of Texas, (iii) the filing of
the Proxy Statement (as defined in Section 3.16 below) with the Securities and
Exchange Commission (the "SEC") in accordance with the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (iv) the filing of such reports or
schedules under Section 13 of the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated hereby and (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws.
(d) The affirmative vote of the holders of two-thirds of the
outstanding shares of Company Common Stock on the record date for the Company
Meeting (as defined below) is the only vote of the holders of any class or
series of the Company's capital stock or other securities necessary to approve
the Merger. There are no bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of the
Company may vote.
3.4 SEC Filings; Financial Statements.
(a) The Company has filed and made available to the Buyer all forms,
reports and other documents required to be filed by the Company with the SEC
since December 18, 1998. All such required forms, reports and other documents
(including those that the Company may file after the date hereof until the
Closing) are referred to herein as the "Company SEC Reports." The Company SEC
Reports (i) were or will be filed on a timely basis, (ii) were or will be
prepared in compliance in all material respects with the applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports, and (iii) did not or will not
at the time they were or are filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Company SEC
Reports or necessary in order to make the statements in such Company SEC
Reports, in the light of the circumstances under which they were made, not
misleading. No Subsidiary of the Company is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes and schedules) contained or to be contained in the
Company SEC Reports (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) were or will be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, as
permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly
presented or will fairly present the
14
consolidated financial position of Company and its Subsidiaries as of the dates
and the consolidated results of its operations and cash flows for the periods
indicated, consistent with the books and records of the Company and its
Subsidiaries, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount. The unaudited balance sheet of the Company as
of September 30, 1999 is referred to herein as the "Company Balance Sheet."
3.5 No Undisclosed Liabilities. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, and except for normal or
recurring liabilities incurred since the date of the Company Balance Sheet in
the ordinary course of business consistent with past practices, the Company and
its Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or to
become due, which, individually or in the aggregate, are reasonably likely to
have a Company Material Adverse Effect.
3.6 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement, since the date of
the Company Balance Sheet, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course and in a manner consistent
with past practice and, since such date, there has not been (i) any event,
change or development in the business, properties, financial condition, results
of operations or prospects of the Company and its Subsidiaries, taken as a
whole, which, individually or in the aggregate, has had, or is reasonably likely
to have, a Company Material Adverse Effect; (ii) any damage, destruction or loss
(whether or not covered by insurance) with respect to the Company or any of its
Subsidiaries which, individually or in the aggregate, has had, or is reasonably
likely to have, a Company Material Adverse Effect; or (iii) any other action or
event that would have required the consent of the Buyer pursuant to Section 5.1
of this Agreement had such action or event occurred after the date of this
Agreement.
3.7 Taxes.
(a) The Company and each of its Subsidiaries has filed all Tax
Returns (as defined below) that it was required to file, and all such Tax
Returns were correct and complete except for any errors or omissions which are
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect. The Company and each of its Subsidiaries has paid on a
timely basis all Taxes (as defined below) that are shown to be due on any such
Tax Returns. The unpaid Taxes of the Company and its Subsidiaries for Tax
periods through the date of the Company Balance Sheet do not exceed in any
material respect the accruals and reserves for Taxes set forth on the Company
Balance Sheet exclusive of any accruals and reserves for "deferred taxes" or
similar items that reflect timing differences between Tax and financial
accounting principles. All Taxes that the Company or any of its Subsidiaries is
or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Entity. For purposes of this Agreement, (i) "Taxes" means all taxes, charges,
fees, levies or other similar assessments or liabilities, including income,
gross
15
receipts, ad valorem, premium, value-added, excise, real property, personal
property, sales, use, services, transfer, withholding, employment, payroll and
franchise taxes imposed by the United States of America or any state, local or
foreign government, or any agency thereof, or other political subdivision of the
United States or any such government, and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof and (ii) "Tax Returns"
means all reports, returns, declarations, statements or other information
required to be supplied to a taxing authority in connection with Taxes.
(b) The Company has delivered or otherwise made available to the
Buyer correct and complete copies of all federal income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company or any of its Subsidiaries since inception. The federal income Tax
Returns of the Company and each of its Subsidiaries have not been audited by the
Internal Revenue Service or are closed by the applicable statute of limitations
for all taxable years through the taxable year specified in Section 3.7(b) of
the Company Disclosure Schedule. The Company has made available to the Buyer
correct and complete copies of all other Tax Returns of the Company and its
Subsidiaries together with all related examination reports and statements of
deficiency for all periods from and after January 1, 1996. No examination or
audit of any Tax Return of the Company or any of its Subsidiaries by any
Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. Neither the Company nor any of its
Subsidiaries has been informed by any Governmental Entity that the Governmental
Entity believes that the Company or any of its Subsidiaries was required to file
any Tax Return that was not filed. Neither the Company nor any of its
Subsidiaries has waived any statute of limitations with respect to Taxes or
agreed to an extension of time with respect to a Tax assessment or deficiency.
(c) Neither the Company nor any of its Subsidiaries: (i) is a
"consenting corporation" within the meaning of Section 341(f) of the Code, and
none of the assets of the Company or its Subsidiaries are subject to an election
under Section 341(f) of the Code; (ii) has been a United States real property
holding corpora tion within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (iii)
has made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that may be treated as an
"excess parachute payment" under Section 280G of the Code; (iv) has any actual
or potential liability for any Taxes of any person (other than the Company and
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of law in any jurisdiction), or as a transferee or successor, by
contract, or otherwise; or (v) is or has been required to make a basis reduction
pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation
Section 1.337(d)-2(b).
(d) None of the assets of the Company or any of its Subsidiaries:
(i) is property that is required to be treated as being owned by any other
person pursuant to the provisions of former Section 168(f)(8) of the Code; (ii)
is "tax-exempt use property" within the meaning of
16
Section 168(h) of the Code; or (iii) directly or indirectly secures any debt the
interest on which is tax exempt under Section 103(a) of the Code.
(e) Neither the Company nor any of its Subsidiaries has undergone,
or will undergo as a result of the transactions contemplated by the Agreement, a
change in its method of accounting resulting in an adjustment to its taxable
income pursuant to Section 481(h) of the Code.
(f) No state or federal "net operating loss" of the Company
determined as of the Closing Date is subject to limitation on its use pursuant
to Section 382 of the Code or comparable provisions of state law as a result of
any "ownership change" within the meaning of Section 382(g) of the Code or
comparable provisions of any state law occurring prior to the Closing Date.
(g) Neither the Company nor any of its Subsidiaries (i) is or has
ever been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns, other than a
group of which only the Company and its Subsidiaries are or were members or (ii)
is a party to or bound by any Tax indemnity, Tax sharing or Tax allocation
agreement.
3.8 Owned and Leased Real Properties.
(a) The Company does not and has never owned any real property.
(b) The Company has provided or otherwise made available to the
Buyer a complete and accurate list of all real property leased by the Company or
its Subsidiaries (collectively "Company Leases") and the location of the
premises. The Company is not in default under any of the Company Leases. Each of
the Company Leases is in full force and effect and will not cease to be in full
force and effect as a result of the transactions contemplated by this Agreement.
3.9 Intellectual Property.
(a) The Company and its Subsidiaries exclusively own, or are
licensed or otherwise possess legally enforceable rights to use on an exclusive
basis, without any obligation to make any fixed or contingent payments,
including any royalty payments, all patents, trademarks, trade names, domain
names, service marks and copyrights, any applications for and registrations of
such patents, trademarks, trade names, domain names, service marks and
copyrights, and all processes, formulae, methods, schematics, technology,
know-how, computer software programs or applications and tangible or intangible
proprietary information or material that are used or necessary to conduct the
business of the Company and its Subsidiaries as currently conducted (the
"Company Intellectual Property Rights").
17
(b) The execution and delivery of this Agreement and consummation of
the Merger will not result in the breach of, or create on behalf of any third
party the right to terminate or modify, any material license, sublicense or
other agreement relating to the Company Intellectual Property Rights, or any
license, sublicense and other agreement as to which the Company or any of its
Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries is authorized to use any third party patents, trademarks,
copyrights or trade secrets (the "Company Third Party Intellectual Property
Rights"), including software that is used in the manufacture of, incorporated
in, or forms a part of any product or service sold by or expected to be sold by
a Company or any of its Subsidiaries.
(c) All patents, registered trademarks, service marks and copyrights
which are held by the Company or any of its Subsidiaries and which are material
to the business of the Company and its Subsidiaries, taken as a whole, are valid
and subsisting. The Company and its Subsidiaries have taken commercially
reasonable measures to protect the proprietary nature of the Company
Intellectual Property Rights that are material to the business of the Company
and its Subsidiaries, taken as a whole, and to maintain in confidence all trade
secrets and confidential information owned or used by the Company or any of its
Subsidiaries and that are material to the business of the Company and its
Subsidiaries, taken as a whole. To the knowledge of the Company, no other person
or entity is infringing, violating or misappropriating any of the Company
Intellectual Property Rights. None of the activities or business previously or
currently conducted by the Company or any of the Subsidiaries infringes,
violates or constitutes a misappropriation of, any patents, trademarks, trade
names, service marks and copyrights, any applications for and registrations of
such patents, trademarks, trade names, service marks and copyrights, and all
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material of any other person or entity. Neither the Company nor
any of its Subsidiaries has received any complaint, claim or notice alleging any
such infringement, violation or misappropriation.
3.10 Agreements, Contracts and Commitments.
(a) There are no contracts or agreements that are material contracts
(as defined in Item 601(b)(10) of Regulation S-K) with respect to the Company
and its Subsidiaries (the "Company Material Contracts"), other than the Company
Material Contracts identified on the exhibit indices of the Company SEC Reports
filed prior to the date of this Agreement. Each Company Material Contract has
not expired by its terms and is in full force and effect. Neither the Company
nor any of its Subsidiaries is in violation of or in default under (nor does
there exist any condition which, upon the passage of time or the giving of
notice or both, would cause such a violation of or default under) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or other contract, arrangement or understanding to which it
is a party or by which it or any of its properties or assets is bound, except
for violations or defaults which, individually or in the aggregate, have not
resulted in, and are not reasonably likely to result in, a Company Material
Adverse Effect.
18
(b) Section 3.10(b) of the Company Disclosure Schedule sets forth a
complete list of each contract or agreement to which the Company or any of its
Subsidiaries is a party or bound with any Affiliate of the Company (other than
any Subsidiary which is a direct or indirect wholly owned Subsidiary of the
Company).
3.11 Litigation. Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement, there is no action, suit, proceeding,
claim, arbitration or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Company Material Adverse Effect. There are no judgments, orders or decrees
outstanding against the Company.
3.12 Environmental Matters.
(a) Except as disclosed in the Company SEC Reports filed prior to
the date of this Agreement and except for such matters which, individually or in
the aggregate, have not had, and are not reasonably likely to have a Company
Material Adverse Effect: (i) the Company and each of its Subsidiaries has
complied with, and is not in violation of, any applicable Environmental Laws (as
defined in Section 3.12(b)); (ii) the properties currently owned or operated by
the Company and its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances (as defined in Section 3.12(c)); (iii) the properties formerly owned
or operated by the Company or any of its Subsidiaries were not contaminated with
Hazardous Substances prior to or during the period of ownership or operation by
the Company or any of its Subsidiaries; (iv) neither the Company nor its
Subsidiaries are subject to liability for any Hazardous Substance disposal or
contamination on the property of any third party; (v) neither the Company nor
any of its Subsidiaries have released any Hazardous Substance to the
environment; (vi) neither the Company nor any of its Subsidiaries has received
any notice, demand, letter, claim or request for information alleging that the
Company or any of its Subsidiaries may be in violation of, liable under or have
obligations under any Environmental Law; (vii) neither the Company nor any of
its Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving the Company or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
obligations, investigations, costs or restrictions on the ownership, use or
transfer of any property of the Company or any of its Subsidiaries pursuant to
any Environmental Law.
(b) For purposes of this Agreement, "Environmental Law" means any
law, regulation, order, decree, permit, authorization, opinion, common law or
agency requirement of any jurisdiction relating to: (A) the protection,
investigation or restoration of the environment, human health and safety, or
natural resources, (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
19
(c) For purposes of this Agreement, "Hazardous Substance" means any
substance that is: (A) listed, classified, regulated or which falls within the
definition of a "hazardous substance" or "hazardous material" pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is the subject
of regulatory action by any Governmental Entity pursuant to any Environmental
Law.
(d) Section 3.12(d) of the Company Disclosure Schedule sets forth a
complete and accurate list of all documents (whether in hard copy or electronic
form) that contain any environmental reports, investigations and audits relating
to premises currently or previously owned or operated by the Company or any of
its Subsidiaries (whether conducted by or on behalf of the Company or one of its
Subsidiaries or a third party, and whether done at the initiative of the Company
or one of its Subsidiaries or directed by a Governmental Entity or other third
party) which were issued or conducted during the past five years and which the
Company has possession of or access to. A complete and accurate copy of each
such document has been provided to the Buyer.
3.13 Employee Benefit Plans.
(a) Section 3.13(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all Employee Benefit Plans (as defined below)
maintained, or contributed to, by the Company, any Subsidiary of the Company or
any ERISA Affiliate (as defined below) (together, the "Company Employee Plans").
For purposes of this Agreement, the following terms shall have the following
meanings: (i) "Employee Benefit Plan" means any "employee pension benefit plan"
(as defined in Section 3(2) of ERISA), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and any other written or oral plan, agreement
or arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation; (ii)
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended;
and (iii) "ERISA Affiliate" means any entity which is, or at any applicable time
was, a member of (1) a controlled group of corporations (as defined in Section
414(b) of the Code), (2) a group of trades or businesses under common control
(as defined in Section 414(c) of the Code), or (3) an affiliated service group
(as defined under Section 414(m) of the Code or the regulations under Section
414(o) of the Code), any of which includes or included the Company or a
Subsidiary.
(b) With respect to each Company Employee Plan, the Company has
furnished or otherwise made available to the Buyer, a complete and accurate copy
of (i) such Company Employee Plan (or a written summary of any unwritten plan),
(ii) the most recent annual report (Form 5500) filed with the IRS, (iii) each
trust agreement, group annuity contract and summary
20
plan description, if any, relating to such Company Employee Plan and (iv) all
reports regarding the satisfaction of the nondiscrimination requirements of
Sections 410(b), 401(k) and 401(m) of the Code.
(c) Each Company Employee Plan has been administered in all material
respects in accordance with its terms and each of the Company, the Company's
Subsidiaries and their ERISA Affiliates has in all material respects met its
obligations with respect to such Company Employee Plan and has made in all
material respects all required contributions thereto. With respect to the
Company Employee Plans, no event has occurred, and to the knowledge of the
Company, there exists no condition or set of circumstances in connection with
which the Company or any of its Subsidiaries could be subject to any liability
under ERISA, the Code or any other applicable law which, individually or in the
aggregate, is reasonably likely to have a Company Material Adverse Effect.
(d) With respect to the Company Employee Plans, there are no
material funded benefit obligations for which contributions have not been made
or properly accrued and there are no material unfunded benefit obligations which
have not been accounted for by reserves, or otherwise properly footnoted in
accordance with generally accepted accounting principles, on the financial
statements of the Company.
(e) All the Company Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Company Benefit Plans are
qualified and the plans and trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost.
(f) Neither the Company, any Subsidiary of the Company nor any ERISA
Affiliate has (i) ever maintained a Company Employee Plan which was ever subject
to Section 412 of the Code or Title IV of ERISA or (ii) ever been obligated to
contribute to a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA). No Company Benefit Plan is funded by, associated with or related to a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
(g) Each Company Benefit Plan is amendable and terminable
unilaterally by the Company at any time without liability to the Company as a
result thereof and no Company Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Company Benefit Plan.
21
(h) Except as disclosed in the Company SEC Reports filed prior to
the date of this Agreement, neither the Company nor any of its Subsidiaries is a
party to any oral or written (i) agreement with any stockholders, director,
executive officer or other key employee of the Company or any of its
Subsidiaries (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or any of its Subsidiaries of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee or (C) providing severance benefits or other benefits after the
termination of employment of such director, executive officer or key employee;
(ii) agreement, plan or arrangement under which any person may receive payments
from the Company or any of its Subsidiaries that may be subject to the tax
imposed by Section 4999 of the Code or included in the determination of such
person's "parachute payment" under Section 280G of the Code; and (iii) agreement
or plan binding the Company or any of its Subsidiaries, including any stock
option plan, stock appreciation right plan, restricted stock plan, stock
purchase plan or severance benefit plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
3.14 Compliance With Laws. The Company and each of its Subsidiaries has
complied with, is not in violation of, and has not received any notice alleging
any violation with respect to, any applicable provisions of any statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its properties or assets, except for failures to comply or
violations which, individually or in the aggregate, have not had, and are not
reasonably likely to have, a Company Material Adverse Effect.
3.15 Permits. The Company and each of its Subsidiaries have all permits,
licenses and franchises from Governmental Entities required to conduct their
businesses as now being conducted or as presently contemplated to be conducted
(the "Company Permits"), except for such permits, licenses and franchises the
absence of which, individually or in the aggregate, have not resulted in, and
are not reasonably likely to result in, a Company Material Adverse Effect. The
Company and its Subsidiaries are in compliance with the terms of the Company
Permits, except for failures to comply which, individually or in the aggregate,
have not had and are not reasonably likely to have, a Company Material Adverse
Effect.
3.16 Registration Statement; Proxy Statement/Prospectus. The information
to be supplied by the Company for inclusion in the registration statement on
Form S-4 pursuant to which shares of Buyer Common Stock issued in the Merger
will be registered under the Securities Act (the "Registration Statement"),
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information to be
supplied by the Company for inclusion in the proxy statement/prospectus (the
"Proxy Statement") to be sent to the stockholders of the Company in
22
connection with the meeting of the Company's stockholders to consider this
Agreement and the Merger (the "Company Meeting") shall not, on the date the
Proxy Statement is first mailed to stockholders of the Company, at the time of
the Company Meeting and at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Proxy
Statement not false or misleading; or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to the
Company or any of its Affiliates, officers or directors should be discovered by
the Company which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, the Company shall promptly
inform the Buyer.
3.17 Labor Matters. Neither the Company nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
Neither the Company nor any of its Subsidiaries is the subject of any proceeding
asserting that the Company or any of its Subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any labor union or
labor organization, nor is there pending or, to the knowledge of the Company,
threatened, any labor strike, dispute, walkout, work stoppage, slow-down or
lockout involving the Company or any of its Subsidiaries.
3.18 Insurance. Each of the Company and its Subsidiaries maintains
insurance policies (the "Insurance Policies") with reputable insurance carriers
against all risks of a character and in such amounts as are usually insured
against by similarly situated companies in the same or similar businesses. Each
Insurance Policy is in full force and effect and is valid, outstanding and
enforceable, and all premiums due thereon have been paid in full. None of the
Insurance Policies will terminate or lapse (or be affected in any other
materially adverse manner) by reason of the transactions contemplated by this
Agreement. The Company and its Subsidiaries have complied in all material
respects with the provisions of each Insurance Policy under which it is the
insured party. No insurer under any Insurance Policy has canceled or generally
disclaimed liability under any such policy or indicated any intent to do so or
not to renew any such policy. All material claims under the Insurance Policies
have been filed in a timely fashion.
3.19 Business Activity Restrictions. There is no non-competition or other
similar agreement, commitment, judgment, injunction, order to create to which
the Company or any Subsidiary of the Company is a party or subject to that has
or could reasonably be expected to have the effect of prohibiting or impairing
the conduct of the business by the Company in any material respect. The Company
has not entered into any agreement under which it is restricted in any material
respect from selling, licensing or otherwise distributing any of its technology
or products, or providing services to, customers or potential customers or any
class of customers, in any geographic area, during any period of time or any
segment of the market or line of business.
23
3.20 Year 2000 Compliance.
(a) The Company has conducted "year 2000" audits with respect to (i)
all of the internal systems of the Company and each of its Subsidiaries used in
the business or operations of the Company or any of its Subsidiaries, including,
without limitation, computer hardware systems, software applications, firmware,
equipment firmware and other embedded systems, and (ii) the software, hardware,
firmware and other technology which constitute part of the products and services
marketed or sold by the Company or any of its Subsidiaries or licensed by the
Company or any of its Subsidiaries to third parties. The Company has requested
in writing "year 2000" compliance certificates with respect to all material
third-party systems used in connection with the business or operations of the
Company and its Subsidiaries. Communications to date with the Company's major
telecommunications, information systems and software vendors indicate that these
third parties expect, at this time, to be compliant by the year 2000 based on
their progress to date.
(b) All of (i) the material internal systems of the Company and each
of its Subsidiaries used in the business or operations of the Company or any of
its Subsidiaries, as the case may be, including, without limitation, computer
hardware systems, software applications, firmware, equipment containing embedded
microchips and other embedded systems (collectively, the "Company Systems"), and
(ii) the software, hardware, firmware and other technology which constitute part
of the products and services marketed or sold by the Company or any of its
Subsidiaries or licensed by the Company or any of its Subsidiaries to third
parties (collectively, the "Company Products") will be Year 2000 Compliant by
the end of November 1999.
(c) The Company has no knowledge of any failure to be Year 2000
Compliant of any material third-party system used in connection with the
business or operations of the Company and its Subsidiaries.
(d) For purposes of this Agreement, "Year 2000 Compliant" means that
the applicable system or item:
(i) accurately receives, records, stores, provides, recognizes
and processes all date and time data from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years;
(ii) accurately performs all date-dependent calculations and
operations (including, without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years; and
(iii) does not malfunction, cease to function or provide
invalid or incorrect results as a result of (x) the change of years from 1999 to
2000 or from 2000 to 2001, (y) date data, including date data which represents
or references different centuries, different dates during 1999 and 2000, or more
than one century or (z) the occurrence of any particular date;
24
in each case without human intervention, other than original data entry;
provided, in each case, that all applications, hardware and other systems used
in conjunction with such system or item which are not owned or licensed by the
Company or any of its Subsidiaries correctly exchange date data with or provide
data to such system or item.
(e) Neither the Company nor any of its Subsidiaries has provided any
guarantee or warranty for any product sold or licensed, or service provided, by
the Company or any Subsidiary to the effect that such product or service (i)
complies with or accounts for the fact of the arrival of the year 2000, (ii)
will not be adversely affected with respect to functionality, interoperability,
performance or volume capacity (including, without limitation, the processing
and reporting of data) by virtue of the arrival of the year 2000 or (iii) is
otherwise Year 2000 Compliant.
3.21 Assets. Each of the Company and its Subsidiaries owns or leases all
tangible assets necessary for the conduct of its businesses as presently
conducted. All of such tangible assets which are owned, are owned free and clear
of all mortgages, security interest, pledges, liens and encumbrances ("Liens")
except for (i) Liens which are disclosed in the Company SEC Reports filed prior
to the date of this Agreement and (ii) other Liens which, individually and in
the aggregate, do not materially interfere with the ability of the Company and
its Subsidiaries to conduct their business as currently conducted and have not
resulted in, and are not reasonably likely to result in, a Company Material
Adverse Effect. The tangible assets of the Company and its Subsidiaries, taken
as a whole, are free from material defects, have been maintained in accordance
with normal industry practice, are in good operating condition and repair
(subject to normal wear and tear) and are suitable for the purpose for which
they are presently used.
3.22 Subscribers. Section 3.22 of the Company Disclosure Schedule sets
forth the total number of the Company's subscribers as of October 31, 1999 who,
as of such date, had paid at least one monthly xxxx for the Company's services.
3.23 Accounts Receivable. All accounts receivable of the Company reflected
on the Company Balance Sheet are valid receivables, arose from bona fide sales
of goods and services in the ordinary course of business, and are not subject to
any material setoffs or counterclaims.
3.24 No Existing Discussions. As of the date of this Agreement, neither
the Company nor any of its Subsidiaries is engaged, directly or indirectly, in
any discussions or negotiations with any other party with respect to an
Alternative Transaction (as defined in Section 8.3(g)).
3.25 Opinion of Financial Advisor. The financial advisor of the Company,
Xxxxxxx, Sachs & Co., has delivered to the Company an opinion dated the date of
this Agreement to the effect, as of such date, that the Exchange Ratio is fair
to the holders of the Company Common Stock from a financial point of view, a
signed copy of which opinion will be delivered to the Buyer promptly after the
date hereof.
25
3.26 Part Thirteen of the TBCA Not Applicable. The Board of Directors of
the Company has taken all actions necessary so that the restrictions contained
in Part Thirteen of the TBCA applicable to a "business combination" (as defined
therein) will not apply to the execution, delivery or performance of this
Agreement, the Company Stock Option Agreement, the Stockholder Agreements or the
consummation of the Merger or the other transactions contemplated by this
Agreement, the Company Stock Option Agreement or the Stockholder Agreements.
3.27 Tax Matters. To the Company's knowledge, after consulting with its
independent auditors, neither the Company nor any of its Affiliates has taken or
agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
3.28 Transactions with Affiliates. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, neither the Company nor any
of its Subsidiaries has entered into any transaction with any director, officer
or other affiliate of the Company or any of its Subsidiaries or any transaction
that would be subject to proxy statement disclosure pursuant to Item 404 of
Regulation S-K.
3.29 Brokers; Schedule of Fees and Expenses.
(a) No agent, broker, investment banker, financial advisor or other
firm or person is or will be entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with any of the
transactions contemplated by this Agreement, except Xxxxxxx, Xxxxx & Co., whose
fees and expense will be paid by the Company. The Company has delivered to the
Buyer a complete and accurate copy of all agreements pursuant to which Xxxxxxx,
Sachs & Co. is entitled to any fees and expenses in connection with any of the
transactions contemplated by this Agreement.
(b) Section 3.29(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of the estimated fees and expenses incurred and to be
incurred by the Company and any of its Subsidiaries in connection with this
Agreement and the transactions contemplated by this Agreement (including the
fees and expenses of Xxxxxxx, Xxxxx & Co. and of the Company's legal counsel and
accountants).
3.30 Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Company Disclosure Schedule or
any other document, certificate or other instrument delivered to or to be
delivered by or on behalf of the Company pursuant to this Agreement, contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was or will be made, in order to make the statements herein or therein not
misleading.
26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
THE TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary represent and warrant to the
Company that the statements contained in this Article IV are true and correct,
except as set forth herein or in the disclosure schedule delivered by the Buyer
to the Company on or before the date of this Agreement (the "Buyer Disclosure
Schedule"). The Buyer Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV and the disclosure in any paragraph shall qualify other paragraphs in this
Article IV only to the extent that it is reasonably apparent from a reading of
such document that it also qualifies or applies to such other paragraphs.
4.1 Organization, Standing and Power. Each of the Buyer and the Transitory
Subsidiary and the Buyer's other Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the business, properties,
financial condition, results of operations or prospects of the Buyer and its
Subsidiaries, taken as a whole, or to have a material adverse effect on the
ability of the Buyer to consummate the transactions contemplated by this
Agreement (a "Buyer Material Adverse Effect").
4.2 Capitalization. The authorized capital stock of the Buyer consists of
150,000,000 shares of Buyer Common Stock and 10,000,000 shares of preferred
stock, $.01 par value per share (the "Buyer Preferred Stock"). As of the close
of business on the date immediately preceding the date of this Agreement,
64,152,028 shares of Buyer Common Stock were issued and outstanding and no
shares of Buyer Preferred Stock were issued and outstanding. All outstanding
shares of Buyer Common Stock are, and all shares of Buyer Common Stock subject
to issuance as specified above, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be, duly
authorized, validly issued, fully paid and nonassessable. All of the shares of
Buyer Common Stock issuable pursuant to Section 2.1(c) in connection with the
Merger, when issued in accordance with this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable.
27
4.3 Authority; No Conflict; Required Filings and Consents.
(a) Each of the Buyer and the Transitory Subsidiary has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement by the Buyer and the Transitory Subsidiary have been duly
authorized by all necessary corporate action on the part of each of the Buyer
and the Transitory Subsidiary (including the approval of the Merger by the Buyer
as the sole stockholder of the Transitory Subsidiary). This Agreement and has
been duly executed and delivered by each of the Buyer and the Transitory
Subsidiary and constitutes the valid and binding obligation of each of the Buyer
and the Transitory Subsidiary, enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement by each of the
Buyer and the Transitory Subsidiary does not, and the consummation of the
transactions contemplated by this Agreement will not, (i) conflict with, or
result in any violation or breach of, any provision of the Certificate of
Incorporation or By-laws of the Buyer or the Transitory Subsidiary, (ii)
conflict with, or result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract or other agreement, instrument or obligation to which the Buyer or any
of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) subject to compliance with the
requirements specified in clause (i), (ii), (iii), (iv), (v) and (vi) of Section
4.3(c), conflict with or violate any permit, concession, franchise, license,
judgment, injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to the Buyer or any of its Subsidiaries or any of its or their
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, breaches, defaults, terminations, cancellations or
accelerations which, individually or in the aggregate, are not reasonably likely
to have a Buyer Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization
of, or registration, declaration, notice or filing with, any Governmental Entity
is required by or with respect to the Buyer or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by the Buyer or the
Transitory Subsidiary or the consummation of the transactions contemplated by
this Agreement, except for (i) the filing of a pre-merger notification report
under the HSR Act, (ii) the filing of the Certificate of Merger with the
Secretary of State of the States of Delaware and Texas, (iii) the filing of the
Registration Statement with the SEC in accordance with the Securities Act, (iv)
the filings of such reports or schedules under Section 13 of the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and (vi) the filing with the Nasdaq
28
National Market of a Notification Form for Listing of Additional Shares with
respect to the Buyer Common Stock issuable in connection with the Merger.
4.4 SEC Filings; Financial Statements.
(a) The Buyer has filed and made available to the Company all forms,
reports and other documents required to be filed by the Buyer with the SEC since
September 25, 1998. All such required forms, reports and other documents
(including those that the Buyer may file after the date hereof until the
Closing) are referred to herein as the "Buyer SEC Reports." The Buyer SEC
Reports (i) were or will be filed on a timely basis, (ii) were or will be
prepared in compliance in all material respects with the applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such Buyer SEC Reports, and
(iii) did not or will not at the time they were or are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Buyer SEC Reports or necessary in order to make the statements in
such Buyer SEC Reports, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes and schedules) contained or to be contained in the
Buyer SEC Reports (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) were or will be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, as
permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly
presented or will fairly present the consolidated financial position of the
Buyer and its Subsidiaries as of the dates and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of the Buyer and its Subsidiaries, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
unaudited balance sheet of the Buyer as of September 30, 1999 is referred to
herein as the "Buyer Balance Sheet."
4.5 Absence of Certain Changes or Events. Except as disclosed in the Buyer
SEC Reports filed prior to the date of this Agreement, since the date of the
Buyer Balance Sheet, there has not been any event, change or development in the
business, properties, financial condition, results of operations or prospects of
the Buyer and its Subsidiaries, taken as a whole, which has had, or is
reasonably likely to have, a Buyer Material Adverse Effect.
4.6 Tax Matters. To the Buyer's knowledge, after consulting with its
independent auditors, neither the Buyer nor any of its Affiliates has taken or
agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
29
4.7 Litigation. Except as disclosed in the Buyer SEC Reports filed prior
to the date of this Agreement, there is no action, suit, proceeding, claim,
arbitration or investigation pending or, to the knowledge of the Buyer,
threatened against or affecting the Buyer or any of its Subsidiaries which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Buyer Material Adverse Effect. There are no judgments, orders or decrees
outstanding against the Buyer.
4.8 Compliance with Laws. Each of the Buyer and the Transitory Subsidiary
has complied with, is not in violation of, and has not received any notice
alleging any violation with respect to, any applicable provisions of any
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its properties or assets, except for failures to
comply or violations which, individually or in the aggregate, have not had, and
would not have, a Buyer Material Adverse Effect.
4.9 Registration Statement; Proxy Statement/Prospectus. The information in
the Registration Statement (except for information supplied by the Company for
inclusion in the Registration Statement, as to which the Buyer makes no
representation and which shall not constitute part of the Buyer SEC Report for
purposes of this Agreement) shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. If at any time prior to the Effective Time any event relating to the
Buyer or any of its Affiliates, officers or directors should be discovered by
the Buyer which should be set forth in an amendment to the Registration
Statement, the Buyer shall promptly inform the Company.
4.10 Operations of the Transitory Subsidiary. The Transitory Subsidiary
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
4.11 Brokers. The Buyer has not retained or incurred any liability to any
agent, broker, investment banker, financial advisor or similar firm or person in
connection with any of the transactions contemplated by this Agreement, except
Bear, Xxxxxxx & Co. Inc., whose fees and expenses will be paid by the Buyer.
4.12 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in any document, certificate or other
instrument delivered to or to be delivered by or on behalf of the Buyer pursuant
to this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
30
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. Except as expressly provided herein or as
consented to in writing by the Buyer, from and after the date of this Agreement
until the earlier of the termination of this Agreement in accordance with its
terms or the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to, act and carry on its business in the usual, regular and
ordinary course in substantially the same manner as previously conducted, pay
its debts and Taxes and perform its other obligations when due (subject to good
faith disputes over such debts, Taxes or obligations), and use all reasonable
efforts, consistent with past practices, to maintain and preserve its and each
Subsidiary's business organization, assets and properties, keep available the
services of its present officers and employees and preserve its advantageous
business relationships with customers, suppliers, distributors and others having
business dealings with it to the end that its goodwill and ongoing business
shall be unimpaired at the Effective Time. Without limiting the generality of
the foregoing, from and after the date of this Agreement until the earlier of
the termination of this Agreement in accordance with its terms or the Effective
Time, the Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, do any of the following without the prior written
consent of the Buyer:
(a) (A) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, securities or other property) in respect
of, any of its capital stock (other than dividends and distributions by a direct
or indirect wholly owned subsidiary of the company to its parent); (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution of
shares of its capital stock; or (C) purchase, redeem or otherwise acquire any
shares of its capital stock or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(b) issue, deliver, sell, grant, pledge or otherwise dispose of or
encumber any shares of its capital stock, any other voting securities or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible or
exchangeable securities (other than the issuance of shares of Company Common
Stock upon the exercise of Company Options or Company Warrants outstanding on
the date of this Agreement in accordance with their present terms);
(c) amend its Restated Articles of Incorporation, by-laws or other
comparable charter or organizational documents, except as expressly provided by
this Agreement;
(d) except as permitted by Section 6.1, acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets or any
stock of, or by any other manner, any business or any corporation, partnership,
joint venture, limited liability company, association or other business
organization or division thereof or (B) any assets that are
31
material, in the aggregate, to the Company and the Subsidiaries, taken as a
whole, except purchases of inventory in the ordinary course of business
consistent with past practice;
(e) except in the ordinary course of business consistent with past
practice, sell, lease, license, pledge, or otherwise dispose of or encumber any
properties or assets of the Company or of any of its Subsidiaries;
(f) whether or not in the ordinary course of business or consistent
with past practice, sell or dispose of any assets material to the Company and
its Subsidiaries, taken as a whole (including any accounts, leases, contracts or
intellectual property or any assets or the stock of any Subsidiaries, but
excluding the sale of products in the ordinary course of business consistent
with past practice);
(g) adopt or implement any stockholder rights plan;
(h) except as permitted by Section 6.1, enter into an agreement with
respect to any merger, consolidation, liquidation or business combination, or
any acquisition or disposition of all or substantially all of the assets or
securities of the Company or any of its Subsidiaries;
(i) (A) incur or suffer to exist any indebtedness for borrowed money
other than such indebtedness which existed as of September 30, 1999 as reflected
on the Company Balance Sheet or guarantee any such indebtedness of another
person, (B) issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its Subsidiaries, guarantee
any debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
or (C) make any loans, advances (other than routine advances to employees of the
Company in the ordinary course of business consistent with past practice) or
capital contributions to, or investment in, any other person;
(j) make any capital expenditures or expenditures with respect to
property, plant or equipment in excess of $500,000 in the aggregate for the
Company and its Subsidiaries, taken as a whole;
(k) make any changes in accounting methods, principles or practices,
except insofar as may have been required by a change in generally accepted
accounting principles or, except as so required, change any assumption
underlying, or method of calculating, any bad debt, contingency or other
reserve;
(l) (A) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of the
Company included in
32
the Company SEC Reports filed prior to the date of this Agreement (to the extent
so reflected or reserved against) or incurred thereafter in the ordinary course
of business consistent with past practice, or (B) waive any material benefits of
any confidentiality, standstill or similar agreements to which the Company or
any of its Subsidiaries is a party;
(m) modify, amend or terminate any material contract or agreement to
which the Company or any of its Subsidiaries is party, or knowingly waive,
release or assign any material rights or claims (including any write-off or
other compromise of any accounts receivable of the Company of any of its
Subsidiaries);
(n) except in the ordinary course of business consistent with past
practice (A) enter into any material contract or agreement or (B) license any
material intellectual property rights to or from any third party;
(o) except as required to comply with applicable law or agreements,
plans or arrangements existing on the date hereof or as otherwise disclosed in
Section 5.1(o) of the Company Disclosure Schedule, (A) adopt, enter into,
terminate or amend any employment, severance or similar agreement or benefit
plan for the benefit or welfare of any current or former director, officer or
employee or any collective bargaining agreement, (B) increase in any material
respect the compensation or fringe benefits of, or pay any bonus to, any
director, officer or key employee, (C) accelerate the payment, right to payment
or vesting of any compensation or benefits, including any outstanding options or
restricted stock awards, (D) pay any material benefit not provided for as of the
date of this Agreement under any benefit plan, (E) grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement or
benefit plan (including the grant of stock options, stock appreciation rights,
stock based or stock related wards, performance units or restricted stock, or
the removal of existing restrictions in any benefit plans or agreements or
awards made thereunder), or (F) take any action other than in the ordinary
course of business consistent with past practice to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or benefit plan;
(p) make or rescind any Tax election, settle or compromise any Tax
liability or amend any Tax return;
(q) initiate, compromise or settle any material litigation or
arbitration proceeding;
(r) close any facility or office;
(s) invest funds in debt securities or other instruments maturing
more than 90 days after the date of investment;
(t) fail to pay accounts payable and other obligations in the
ordinary course of business consistent with past practice; or
33
(u) authorize any of, or commit or agree, in writing or otherwise,
to take any of, the foregoing actions or any action which would make any
representation or warranty in Article III untrue or incorrect in any material
respect, or would materially impair or prevent the occurrence of any conditions
Article VII hereof.
5.2 Cooperation. Subject to compliance with applicable law, from and after
the date of this Agreement and continuing until the earlier of the termination
of this Agreement in accordance with its terms or the Effective Time, the
Company and each of its Subsidiaries shall make its officers available to confer
on a regular and frequent basis with one or more representatives of the Buyer to
report on the general status of ongoing operations and shall promptly provide
the Buyer or its counsel with copies of all filings made by such party with any
Governmental Entity in connection with this Agreement, the Merger and the
transactions contemplated hereby.
5.3 Confidentiality. The parties acknowledge that the Buyer and the
Company have previously executed a Confidentiality Agreement, dated as of
October 21, 1999 (the "Confidentiality Agreement"), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms,
except as expressly modified herein.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
(a) From and after the date of this Agreement until the earlier of
the termination of this Agreement in accordance with its terms or the Effective
Time, the Company and its Subsidiaries shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative or
agent (i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer for
an Alternative Transaction (as defined Section 8.3(g)), other than the
transactions contemplated by this Agreement, (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity relating to, any Alternative Transaction, or (iii) agree to or recommend
any Alternative Transaction; provided, however, that, if the Company has not
breached this Section 6.1, nothing contained in this Agreement shall prevent the
Company or its Board of Directors, from:
(A) furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity in connection with an
unsolicited bona fide written Alternative Transaction by such person or entity
or recommending an unsolicited bona fide written Alternative Transaction to the
stockholders of the Company, if and only to the extent that
34
(1) the Board of Directors of the Company believes in
good faith (after consultation with its financial advisor) that such Alternative
Transaction is reasonably capable of being completed on the terms proposed and
would, if consummated, result in a transaction more favorable than the
transaction contemplated by this Agreement (any such more favorable Alternative
Transaction being referred to in this Agreement as a "Superior Proposal") and
the Company's Board of Directors determines in good faith after consultation
with outside legal counsel that such action is necessary for such Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law,
(2) prior to furnishing such non-public information to,
or entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality agreement with terms no less favorable to such party than those
contained in the Confidentiality Agreement, and
(3) prior to recommending a Superior Proposal, the
Company shall provide the Buyer with at least five business days' prior notice
of its proposal to do so, during which time the Buyer may make, and in such
event the Company shall consider, a counterproposal to such Superior Proposal,
and the Company shall itself and shall cause its financial and legal advisors to
negotiate in good faith on its behalf with the Buyer with respect to the terms
and conditions of such counterproposal; or
(B) complying with Rule 14d-9 and 14e-2 promulgated under the
Exchange Act with regard to an Alternative Transaction.
(b) The Company will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore of
the nature described in Section 6.1(a) and will use reasonable efforts to obtain
the return of any confidential information furnished to any such parties.
(c) The Company shall notify the Buyer immediately (but in any
event, within 24 hours) after receipt by the Company (or its advisors) of any
Alternative Transaction or any request for nonpublic information in connection
with an Alternative Transaction or for access to the properties, books or
records of the Company by any person or entity that informs the Company that it
is considering making, or has made, an Alternative Transaction. Such notice
shall be made orally and in writing and shall indicate in reasonable detail the
identity of the offer or and the terms and conditions of such proposal, inquiry
or contact. The Company shall continue to keep the Buyer informed, on a current
basis, of the status of any such discussions or negotiations and the terms being
discussed or negotiated.
(d) Nothing in this Section 6.1 shall (i) permit the Company to
terminate this Agreement (except as specifically provided in Section 8.1
hereof), (ii) permit the Company to enter into any agreement with respect to an
Alternative Transaction during the term of this
35
Agreement (it being agreed that during the term of this Agreement, the Company
shall not enter into any agreement with any person that provides for, or in any
way facilitates, an Alternative Transaction (other than a confidentiality
agreement of the type referred to in Section 6.1(a) above)) or (iii) affect any
other obligation of the Company under this Agreement.
6.2 Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practicable after the execution of this
Agreement, the Buyer and the Company shall prepare and the Company shall file
with the SEC the Proxy Statement, and the Buyer shall prepare and file with the
SEC the Registration Statement, in which the Proxy Statement will be included as
a prospectus, provided that the Buyer may delay the filing of the Registration
Statement until approval of the Proxy Statement by the SEC. The Buyer and the
Company shall use reasonable efforts to cause the Registration Statement to
become effective as soon after such filing as practicable. Each of the Buyer and
the Company will respond to any comments of the SEC and will use its respective
reasonable efforts to have the Proxy Statement cleared by the SEC and the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filings and the Company will cause the Proxy Statement
and the prospectus contained within the Registration Statement to be mailed to
its stockholders at the earliest practicable time after both the Proxy Statement
is cleared by the SEC and the Registration Statement is declared effective under
the Securities Act. Each of the Buyer and the Company will notify the other
promptly upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Proxy Statement or any filing pursuant to Section 6.2(b) or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any filing pursuant to Section 6.2(b). Each of the Buyer and the
Company will cause all documents that it is responsible for filing with the SEC
or other regulatory authorities under this Section 6.2 to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement, the Registration
Statement or any filing pursuant to Section 6.2(b), the Buyer or the Company, as
the case may be, will promptly inform the other of such occurrence and cooperate
in filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of the Company, such amendment or supplement.
(b) The Company shall use its best efforts to cause to be delivered
to the Buyer two letters from Deloitte & Touche LLP and/or Ernst & Young LLP, as
appropriate, the Company's former and current independent accountants,
respectively, one letter dated a date within two business days before the date
on which the Registration Statement shall become effective and one letter dated
a date within two business days before the Closing Date, each addressed to the
Buyer, in form and substance reasonably satisfactory to the Buyer and customary
in scope and substance
36
for comfort letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
(c) Each of the Buyer and the Company shall make all filings
required of it with respect to the Merger under the Securities Act, the Exchange
Act, applicable state blue sky laws and the rules and regulations thereunder.
6.3 Nasdaq Quotation. The Company agrees to continue the quotation of the
Company Common Stock on the Nasdaq National Market during the term of this
Agreement.
6.4 Access to Information. The Company shall (and shall cause each of its
Subsidiaries to) afford to the Buyer's officers, employees, accountants, counsel
and other representatives, reasonable access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall (and shall cause each of its Subsidiaries to) furnish promptly to
the Buyer (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of federal or state securities laws and (b) all other information concerning its
business, properties, assets and personnel as the Buyer may reasonably request.
Unless otherwise required by law, the Buyer will hold any such information which
is nonpublic in confidence in accordance with the Confidentiality Agreement. No
information or knowledge obtained in any investigation pursuant to this Section
or otherwise shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
6.5 Stockholders Meeting.
(a) The Company, acting through its Board of Directors, shall,
subject to and according to applicable law and its Restated Articles of
Incorporation and By laws, promptly and duly call, give notice of, convene and
hold as soon as practicable following the date on which the Registration
Statement becomes effective the Company Meeting for the purpose of voting to
approve and adopt this Agreement and the Merger (the "Company Voting Proposal").
The Board of Directors of the Company shall (i) recommend approval and adoption
of the Company Voting Proposal by the stockholders of the Company and include in
the Proxy Statement such recommendation and (ii) take all reasonable and lawful
action to solicit and obtain such approval; provided, however, that in response
to an Alternative Transaction the Board of Directors of the Company may withdraw
such recommendation if (but only if) (i) the Board of Directors of the Company
has received a Superior Proposal, (ii) such Board of Directors upon advice of
its outside legal counsel determines that it is required, in order to comply
with its fiduciary duties under applicable law, to recommend such Superior
Proposal to the stockholders of the Company and (iii) the Company has complied
with the provisions of Section 6.1.
(b) The Company shall call and hold the Company Meeting for the
purpose of voting upon the approval of this Agreement and the Merger regardless
of whether its Board of
37
Directors at any time subsequent to the date hereof determines that this
Agreement is no longer advisable or recommends that the Company's stockholders
reject it.
(c) Applied Telecommunications Technologies, Inc., Xxxxx X. Xxxxxxx,
Xx., Global Undervalued Securities Fund, L.P., Xxxxxx X. Xxxx, Xxxx X.
Xxxxxxxxxx, Xxxxxxxxxx Capital Partners, Inc., Xxxxxxx Xxxxx Xxxxxx, Xxxxx X.
Xxxxxxxx, Xxxxxx Xxx Thurburn and Xxxxxxx X. Xxxxxxx have each executed and
delivered a Stockholder Agreement to the Buyer concurrently with the signing of
this Agreement.
(d) Xxxxxx X. Xxxx, Xxxxxxx Xxxxx Xxxxxx and Xxxxxxx X. Xxxxxxx have
each executed and delivered to the Buyer a Non-Compete Agreement in a form
agreed upon by the Buyer and the Company.
6.6 Legal Conditions to the Merger.
(a) Subject to the terms hereof, the Company and the Buyer shall
each use its reasonable efforts to (i) take, or cause to be taken, all actions,
and do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated hereby as promptly as practicable, (ii)
obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by the Company or the Buyer or any of their Subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, (iii) as promptly as
practicable, make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
the Securities Act and the Exchange Act, and any other applicable federal or
state securities laws, (B) the HSR Act and any related governmental request
thereunder (provided that the initial filings under the HSR Act shall be made on
or after such date as is designated by the Buyer), and (C) any other applicable
law and (iv) execute or deliver any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement. The Company and the Buyer shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing and,
if requested, to accept all reasonable additions, deletions or changes suggested
in connection therewith. The Company and the Buyer shall use their respective
reasonable efforts to furnish to each other all information required for any
application or other filing to be made pursuant to the rules and regulations of
any applicable law (including all information required to be included in the
Proxy Statement and the Registration Statement) in connection with the
transactions contemplated by this Agreement.
(b) Subject to the terms hereof, the Buyer and the Company agree,
and shall cause each of their respective Subsidiaries, to cooperate and to use
their respective reasonable efforts to obtain any government clearances or
approvals required for Closing under the HSR Act, the Xxxxxxx Act, as amended,
the Xxxxxxx Act, as amended, the Federal Trade Commission Act,
38
as amended, and any other federal, state or foreign law or, regulation or decree
designed to prohibit, restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade (collectively "Antitrust Laws"), to respond
to any government requests for information under any Antitrust Law, and to
contest and resist any action, including any legislative, administrative or
judicial action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Antitrust Order") that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement under any Antitrust Law. The parties hereto will consult and cooperate
with one another, and consider in good faith the views of one another, in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to any Antitrust Law.
The Buyer shall be entitled to direct any proceedings or negotiations with any
Governmental Entity relating to any of the foregoing, provided that it shall
afford the Company a reasonable opportunity to participate therein.
Notwithstanding anything to the contrary in this Section, neither the Buyer nor
any of its Subsidiaries shall be required to (i) divest any of their respective
businesses, product lines or assets, or to take or agree to take any other
action or agree to any limitation, that could reasonably be expected to have a
material adverse effect on the Buyer or on the Buyer combined with the Company
after the Effective Time or (ii) take any action under this Section if the
United States Department of Justice or the United States Federal Trade
Commission authorizes its staff to seek a preliminary injunction or restraining
order to enjoin consummation of the Merger.
(c) Each of the Company and the Buyer shall give (or shall cause
their respective Subsidiaries to give) any notices to third parties, and use,
and cause their respective Subsidiaries to use, their reasonable efforts to
obtain any third party consents related to or required in connection with the
Merger that are (A) necessary to consummate the transactions contemplated
hereby, (B) disclosed or required to be disclosed in the Company Disclosure
Schedule or the Buyer Disclosure Schedule, as the case may be, or (C) required
to prevent a Company Material Adverse Effect or a Buyer Material Adverse Effect
from occurring prior to or after the Effective Time.
6.7 Public Disclosure. The Buyer and the Company shall each use its
reasonable efforts to consult with the other before issuing any press release or
otherwise making any public statement with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement prior to using such efforts, except as may be required by law.
6.8 Tax-Free Reorganization. The Buyer and the Company shall each use its
reasonable efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368(a) of the Code. The parties hereto hereby adopt this
Agreement as a plan of reorganization.
6.9 Affiliate Agreements. Upon the execution of this Agreement, the
Company will provide the Buyer with a list of those persons who are, in the
Company's reasonable judgment, "affiliates" of the Company, within the meaning
of Rule 145 (each such person who is an
39
"affiliate" of the Company within the meaning of Rule 145 is referred to as an
"Affiliate") promulgated under the Securities Act ("Rule 145"). The Company
shall provide to the Buyer such information and documents as the Buyer shall
reasonably request for purposes of reviewing such list and shall notify the
Buyer in writing regarding any change in the identity of its Affiliates prior to
the Closing Date. The Company shall use its reasonable efforts to deliver or
cause to be delivered to the Buyer by November 19, 1999 (and in any case prior
to the mailing of the Proxy Statement) from each of its Affiliates, an executed
Company Affiliate Agreement, in substantially the form appended hereto as
Exhibit C (the "Affiliate Agreement"). The Buyer shall be entitled to place
appropriate legends on the certificates evidencing any shares of Buyer Common
Stock to be received by Rule 145 Affiliates of the Company pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Buyer Common Stock (provided that such legends or stop
transfer instructions shall be removed, two years after the Effective Date, upon
the request of any stockholder that is not then an Affiliate of the Buyer).
6.10 Nasdaq National Market Listing. The Buyer shall file with the Nasdaq
National Market a Notification Form for Listing of Additional Shares with
respect to the Buyer Common Stock issuable in connection with the Merger.
6.11 Company Stock Options, Warrants and Plans.
(a) At the Effective Time, the Buyer shall assume each outstanding
Company Stock Option under Company Stock Plans, whether vested or unvested,
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under the Company Stock Option immediately prior
to the Effective Time, the same number of shares of Buyer Common Stock as the
holder of the Company Stock Option would have been entitled to receive pursuant
to the Merger had such holder exercised such option in full immediately prior to
the Effective Time (rounded down to the nearest whole number), at a price per
share (rounded up to the nearest whole cent) equal to (y) the aggregate exercise
price for the shares of Company Common Stock purchasable pursuant to the Company
Stock Option immediately prior to the Effective Time divided by (z) the number
of full shares of Buyer Common Stock deemed purchasable pursuant to the Company
Stock Option in accordance with the foregoing.
(b) As soon as practicable after the Effective Time, the Buyer shall
deliver to the participants in the Company Stock Plans appropriate notice
setting forth such participants' rights pursuant thereto and the grants pursuant
to the Company Stock Plans shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section after giving
effect to the Merger).
(c) The Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Stock for delivery
under the Company Stock Plans assumed in accordance with this Section. Prior to
or as soon as practicable after the Effective Time, and in any event within 10
business days after the Effective Time, the Buyer shall file a registration
statement on Form S-8 (or any successor form) or another appropriate form
40
with respect to the shares of Buyer Common Stock subject to such options and
shall use its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options remain
outstanding.
(d) The Board of Directors of the Company shall, prior to or as of
the Effective Time, take all necessary actions, pursuant to and in accordance
with the terms of Company Stock Plans and the instruments evidencing the Company
Stock Options, to provide for the conversion of the Company Stock Options into
options to acquire Buyer Common Stock in accordance with this Section, and that
no consent of the holders of the Company Stock Options is required in connection
with such conversion.
(e) As of or prior to the Effective Time, the Company shall
terminate its Employee Stock Discount Purchase Plan in accordance with its
terms.
(f) As of the Effective Time, the Company shall terminate (with the
consent of the holders of the applicable Company Stock Options, if necessary)
all Company Stock Options with an exercise price equal to or higher than the
last reported sales price of the Company Common Stock on the Nasdaq National
Market on the trading day immediately prior to the Effective Time.
(g) If requested by the Buyer in writing, the Company shall,
immediately prior to the Effective Time, terminate the Company's 401(k) Plan.
6.12 Stockholder Litigation. Until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time, the Company shall
give the Buyer the opportunity to participate in the defense or settlement of
any stockholder litigation against the Company or its Board of Directors
relating to this Agreement or any of the transactions contemplated by this
Agreement, and shall not settle any such litigation without the Buyer's prior
written consent, which will not be unreasonably withheld or delayed.
6.13 Indemnification. From and after the Effective Time, the Buyer shall,
to the fullest extent permitted by law, cause the Surviving Corporation, for a
period of six years from the Effective Time, to honor all of the Company's
obligations to indemnify and hold harmless, and to advance expenses with respect
to, each present and former director and officer of the Company (the
"Indemnified Parties"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the extent that such obligations to indemnify and hold harmless exist
on the date of this Agreement under the Company's Restated Articles of
Incorporation, By-laws, the TBCA, any agreement between such person and the
Company listed on Section 6.13 of the Company Disclosure Schedule, or
41
otherwise; provided, further, that in the event any claim or claims are asserted
or made within such six year period, all rights to indemnification in respect of
any such claim or claims shall continue until the disposition of any and all
such claims.
6.14 Notification of Certain Matters. The Buyer will give prompt notice to
the Company, and the Company will give prompt notice to the Buyer, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) (i) any representation or warranty
of such party contained in this Agreement that is qualified as to materiality to
be untrue or inaccurate in any respect or (ii) any other representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect, in each case at any time from and after the date of this
Agreement until the Effective Time, or (b) any material failure of the Buyer and
the Transitory Subsidiary or the Company, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the above, the delivery of any notice pursuant to
this Section will not limit or otherwise affect the remedies available hereunder
to the party receiving such notice or the conditions to such party's obligation
to consummate the Merger.
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Company Voting Proposal shall have
been approved and adopted at the Company Meeting, at which a quorum is present,
by the affirmative vote of the holders of two-thirds of the shares of the
Company Common Stock outstanding on the record date for the Company Meeting.
(b) HSR Act. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
(c) Governmental Approvals. Other than the filings provided for by
Section 1.1, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity, the failure of which to file, obtain or occur is reasonably
likely to have a Buyer Material Adverse Effect or a Company Material Adverse
Effect shall have been filed, been obtained or occurred.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings
42
seeking a stop order and no similar proceeding in respect of the Proxy Statement
shall have been initiated or threatened by the SEC.
(e) No Injunctions. No Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (each an "Order") or
statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
7.2 Additional Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligations of the Buyer and the Transitory Subsidiary to effect
the Merger are subject to the satisfaction of each of the following additional
conditions, any of which may be waived in writing exclusively by the Buyer and
the Transitory Subsidiary:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
(i) as of the date of this Agreement (except to the extent such representations
and warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date) and
(ii) as of the Closing Date as though made on and as of the Closing Date (except
(x) to the extent such representations and warranties are specifically made as
of a particular date, in which case such representations and warranties shall be
true and correct as of such date, (y) for changes contemplated by this Agreement
and (z) where the failures to be true and correct (without regard to any
materiality, Company Material Adverse Effect or knowledge qualifications
contained therein), individually or in the aggregate, have not had, and are not
reasonably likely to have, a Company Material Adverse Effect); and the Buyer
shall have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date; and the Buyer shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(c) Tax Opinion. The Buyer shall have received a written opinion
from Xxxx and Xxxx LLP, counsel to the Buyer, to the effect that the Merger will
be treated for federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Code; provided that if Xxxx and Xxxx LLP
does not render such opinion, this condition shall nonetheless be deemed
satisfied if Xxxxxxx, Phleger & Xxxxxxxx LLP renders such opinion to the Buyer
(it being agreed that the Buyer and the Company shall each provide reasonable
cooperation, including making reasonable representations, to Xxxx and Xxxx LLP
or Xxxxxxx, Phleger & Xxxxxxxx LLP, as the case may be, to enable them to render
such opinion).
43
(d) Third Party Consents. The Company shall have obtained (i) all
consents and approvals of third parties referred to in Section 3.3(b) of the
Company Disclosure Schedule and (ii) any other consent or approval of any third
party (other than a Governmental Entity) the failure of which to obtain,
individually or in the aggregate, is reasonably likely to have a Company
Material Adverse Effect.
(e) Resignations. The Buyer shall have received copies of the
resignations, effective as of the Effective Time, of each director and officer
of the Company and its Subsidiaries, except as listed on Section 7.2(e) of the
Company Disclosure Schedule.
7.3 Additional Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is subject to the satisfaction of each of the
following additional conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of the Buyer and the Transitory Subsidiary set forth in this
Agreement shall be true and correct (i) as of the date of this Agreement (except
to the extent such representations are specifically made as of a particular
date, in which case such representations and warranties shall be true and
correct as of such date) and (ii) as of the Closing Date as though made on and
as of the Closing Date (except (x) to the extent such representations and
warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date, (y)
for changes contemplated by this Agreement and (z) where the failures to be true
and correct (without regard to any materiality, Buyer Material Adverse Effect or
knowledge qualifications contained therein), individually or in the aggregate,
have not had, and are not reasonably likely to have, a Buyer Material Adverse
Effect); and the Company shall have received a certificate signed on behalf of
the Buyer by the chief executive officer or the chief financial officer of the
Buyer to such effect.
(b) Performance of Obligations of the Buyer and the Transitory
Subsidiary. The Buyer and Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of the Buyer by the chief executive officer or the chief financial
officer of the Buyer to such effect.
(c) Tax Opinion. The Company shall have received the opinion of
Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel to the Company, to the effect that the
Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code; provided that
if Xxxxxxx, Phleger & Xxxxxxxx LLP does not render such opinion, this condition
shall nonetheless be deemed satisfied if Xxxx and Xxxx LLP renders such opinion
to the Company (it being agreed that the Buyer and the Company shall each
provide reasonable cooperation, including making reasonable representations, to
Xxxxxxx, Phleger & Xxxxxxxx LLP or Xxxx and Xxxx LLP, as the case may be, to
enable them to render such opinion).
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time (with respect to Sections 8.1(b) through 8.1(f), by written
notice by the terminating party to the other party), whether before or after
approval of the Merger by the stockholders of the Company:
(a) by mutual written consent of the Buyer and the Company; or
(b) by either the Buyer or the Company if the Merger shall not have
been consummated by April 30, 2000 (the "Outside Date") (provided that the right
to terminate this Agreement under this Section 8.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
a principal cause of or resulted in the failure of the Merger to occur on or
before such date); or
(c) by either the Buyer or the Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by either the Buyer or the Company if at the Company Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of the Company in favor of the Company Voting Proposal shall not
have been obtained (provided that the right to terminate this Agreement under
this Section 8.1(d) shall not be available to any party seeking termination who
at the time is in breach of or has failed to fulfill its obligations under this
Agreement); or
(e) by the Buyer, if: (i) the Board of Directors of the Company
shall have failed to recommend approval of the Company Voting Proposal in the
Proxy Statement or shall have withdrawn or modified its recommendation of the
Company Voting Proposal; (ii) the Board of Directors of the Company fails to
reconfirm its recommendation of this Agreement or the Merger within five
business days after the Buyer requests in writing that the Board of Directors of
the Company do so; (iii) the Board of Directors of the Company shall have
approved or recommended to the stockholders of the Company an Alternative
Transaction (as defined in Section 8.3(g)); or (iv) a tender offer or exchange
offer for outstanding shares of the Company Common Stock is commenced (other
than by the Buyer or an Affiliate of the Buyer) and the Board of Directors of
the Company recommends that the stockholders of the Company tender their shares
in such tender or exchange offer or, within 10 days after such tender or
exchange offer, fails to recommend against acceptance of such offer or takes no
position with respect to the acceptance thereof; or (v) for any reason the
Company fails to call and hold the Company Meeting by the date which is one
business day prior to the Outside Date; or
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(f) by either the Buyer or the Company, if there has been a breach
of, or material inaccuracy or omission with respect to, any representation,
warranty, covenant or agreement on the part of the other party set forth in this
Agreement, which breach, inaccuracy or omission (i) causes the conditions set
forth in Section 7.2(a) or 7.2(b) (in the case of termination by the Buyer) or
Section 7.3(a) or 7.3(b) (in the case of termination by the Company) not to be
satisfied, and (ii) shall not have been cured within 10 days following receipt
by the breaching party of written notice of such breach from the other party.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall immediately become void and
there shall be no liability or obligation on the part of the Buyer, the Company,
the Transitory Subsidiary or their respective officers, directors, stockholders
or Affiliates, except as set forth in Sections 3.29, 5.3, 8.3 and Article IX;
provided that any such termination shall not relieve any party from liability
for any willful breach of this Agreement (which includes without limitation the
making of any representation or warranty by a party in this Agreement that the
party knew was not true and accurate when made) and the provisions of the
Company Stock Option Agreement, Sections 3.29, 5.3, 8.3 and Article IX of this
Agreement and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees and expenses, whether or
not the Merger is consummated; provided however, that the Company and the Buyer
shall share equally all fees and expenses, other than attorneys' fees, incurred
with respect to the printing and filing of the Proxy Statement (including any
related preliminary materials) and the Registration Statement and any amendments
or supplements thereto.
(b) The Company shall pay the Buyer up to $500,000 as reimbursement
for expenses of the Buyer actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, fees and expenses of the Buyer's counsel, accountants and financial
advisors, but excluding any discretionary fees paid to such financial advisors),
upon the termination of this Agreement by the Buyer pursuant to (i) Section
8.1(b) as a result of the failure to satisfy the condition set forth in Section
7.2(a); (ii) Section 8.1(e); or (iii) Section 8.1(f) or by the Buyer or the
Company pursuant to Section 8.1(d).
(c) The Company shall pay the Buyer a termination fee of $5,000,000
upon the earliest to occur of the following events:
(i) the termination of this Agreement by the Buyer pursuant to
Section 8.1(e); or
46
(ii) the termination of this Agreement by the Buyer pursuant
to Section 8.1(f) after a breach by the Company of this Agreement; or
(iii) the termination of the Agreement by the Buyer or the
Company pursuant to Section 8.1(d) as a result of the failure to receive the
requisite vote for approval of the Company Voting Proposal by the stockholders
of the Company at the Company Meeting.
(d) The Buyer shall pay the Company up to $500,000 as reimbursement
for expenses of the Company actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, but excluding any discretionary fees paid to such financial advisors), upon
the termination of this Agreement by the Company pursuant to (i) Section 8.1(b)
as a result of the failure to satisfy the condition set forth in Section 7.3(a)
or (ii) Section 8.1(f).
(e) The Buyer shall pay the Company a termination fee of $5,000,000
upon the termination of this Agreement by the Company pursuant to Section 8.1(f)
after a breach by the Buyer of this Agreement.
(f) The expenses and fees, if applicable, payable pursuant to
Section 8.3(b), 8.3(c), 8.3(d) and 8.3(e) shall be paid within one business day
after demand therefor following the first to occur of the events giving rise to
the payment obligation described in Section 8.3(b), 8.3(c)(i), (ii) or (iii),
8.3(d) or 8.3(e). If one party fails to promptly pay to the other any expense
reimbursement or fee due hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Bank of New York plus five percent per annum, compounded
quarterly, from the date such expense reimbursement or fee was required to be
paid.
(g) As used in this Agreement, "Alternative Transaction" means
either (i) a transaction pursuant to which any person (or group of persons)
other than the Buyer or its affiliates (a "Third Party"), acquires more than 20%
of the outstanding shares of the Company Common Stock pursuant to a tender offer
or exchange offer or otherwise, (ii) a merger or other business combination
involving the Company pursuant to which any Third Party acquires more than 20%
of the outstanding shares of Company Common Stock or of the entity surviving
such merger or business combination, (iii) any other transaction pursuant to
which any Third Party acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of the Company, and the entity
surviving any merger or business combination including any of them) of the
Company having a fair market value equal to more than 20% of the fair market
value of all the assets of the Company immediately prior to such transaction, or
(iv) any public announcement by a Third Party of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the foregoing.
47
8.4 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company, but, after any such approval, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations and Warranties. The respective
representations and warranties of the Company, the Buyer and the Transitory
Subsidiary contained in this Agreement or in any instrument delivered pursuant
to this Agreement shall expire with, and be terminated and extinguished upon,
the Effective Time. No party hereto makes any representation or warranty to the
other party other than those expressly set forth herein.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly delivered (i) four business days after being
sent by registered or certified mail, return receipt requested, postage prepaid,
or (ii) one business day after being sent for next business day delivery, fees
prepaid, via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
(a) if to the Buyer or Transitory Subsidiary, to
Prodigy Communications Corporation
00 Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Attn: General Counsel
Telecopy: (000) 000-0000
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with a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxxx, Esq.
Telecopy: (000) 000-0000
(b) if to the Company, to
FlashNet Communications, Inc.
0000 Xxxxx Xxxxxx Xxxx Xxxx.
Xxxx Xxxxx, Xxxxx 00000
Attn: President
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: S. Xxxxxxx Xxxx, Esq.
Telecopy: (000) 000-0000
Any party may give any notice or other communication hereunder using any other
means (including personal delivery, messenger service, telecopy, telex, ordinary
mail or electronic mail), but no such notice or other communication shall be
deemed to have been duly given unless and until it actually is received by the
party for whom it is intended. Any party may change the address to which notices
and other communications hereunder are to be delivered by giving the other
parties notice in the manner herein set forth.
9.3 Entire Agreement. This Agreement (including the Schedules and Exhibits
hereto and the documents and instruments referred to herein that are to be
delivered at the Closing) constitutes the entire agreement among the parties
hereto and supersedes any prior understandings, agreements or representations by
or among the parties hereto, or any of them, written or oral, with respect to
the subject matter hereof; provided that the Confidentiality Agreement shall
remain in effect in accordance with its terms.
9.4 No Third Party Beneficiaries. Except as provided in Section 6.13, this
Agreement is not intended, and shall not be deemed, to confer any rights or
remedies upon any person other than the parties hereto and their respective
successors and permitted assigns, to create any agreement of employment with any
person or to otherwise create any third-party beneficiary hereto.
49
9.5 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, and any such assignment without such
prior written consent shall be null and void, except that the Buyer and/or the
Transitory Subsidiary may assign this Agreement to any direct or indirect wholly
owned Subsidiary of the Buyer without consent of the Company, provided that the
Buyer and/or the Transitory Subsidiary, as the case may be, shall remain liable
for all of its obligations under this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
9.6 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforce ability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree hereto that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
9.7 Counterparts and Signature. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed and delivered by
facsimile transmission.
9.8 Interpretation. When reference is made in this Agreement to an Article
or a Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party. Whenever the
context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations
50
promulgated thereunder, unless the context requires otherwise. Whenever the
words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation".
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of laws of any
jurisdictions other than those of the State of New York.
9.10 Remedies. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof this being in addition to any other remedy to
which they are entitled at law or in equity.
9.11 Waiver of Jury Trial. EACH OF THE BUYER, THE TRANSITORY SUBSIDIARY
AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF THE BUYER, THE TRANSITORY SUBSIDIARY OR
THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF
THIS AGREEMENT.
[Signature Page to follow]
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IN WITNESS WHEREOF, the Buyer, the Transitory Subsidiary and the Company
have caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
PRODIGY COMMUNICATIONS CORPORATION
By:
-----------------------------------------
Name. Xxxxxx X. Xxxxxx
Title: Executive Vice President and
General Counsel
PUCKNUT CORPORATION
By:
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President, General Counsel and
Secretary
FLASHNET COMMUNICATIONS, INC.
By:
-----------------------------------------
Name: Xxxxxxx Xxxxx Xxxxxx
Title: Chief Executive Officer and President
52
