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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
LECSTAR COMMUNICATIONS CORPORATION
CORZON, INC.
and
LECSTAR ACQUISITION CORPORATION
January 5, 2001
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TABLE OF CONTENTS
PAGE
ARTICLE I.
THE MERGER; CLOSING; EFFECTIVE TIME; DESIGNATION
1.1 The Merger............................................................1
1.2 Closing...............................................................1
1.3 Effective Time........................................................1
1.4 Certificate of Designation............................................2
ARTICLE II.
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION
2.1 The Certificate of Incorporation......................................2
2.2 The Bylaws............................................................2
ARTICLE III.
OFFICERS, DIRECTORS AND MANAGEMENT
3.1 Directors of Surviving Corporation....................................2
3.2 Officers of Surviving Corporation.....................................2
ARTICLE IV.
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
4.1 Effect on Capital Stock...............................................2
4.2 Exchange of Certificates for Shares...................................3
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.1 Organization, Good Standing and Qualification.........................4
5.2 Capital Structure.....................................................5
5.3 Corporate Authority and Approval......................................6
5.4 Government Filings; No Violations.....................................6
5.5 Financial Statements..................................................7
5.6 Absence of Certain Changes............................................7
5.7 Litigation and Liabilities............................................7
5.8 Employee Benefits.....................................................8
5.9 Compliance with Laws.................................................10
5.10 Environmental Matters................................................10
5.11 Accounting and Tax Matters...........................................11
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TABLE OF CONTENTS
(continued)
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5.12 Taxes................................................................11
5.13 Labor Matters........................................................12
5.14 Brokers and Finders..................................................12
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE MERGER SUB
6.1 Organization, Good Standing and Qualification........................12
6.2 Capital Structure....................................................13
6.3 Corporate Authority and Approval.....................................14
6.4 Government Filings; No Violations....................................14
6.5 Reports; Financial Statements........................................14
6.6 Absence of Certain Changes...........................................15
6.7 Accounting and Tax Matters...........................................15
6.8 Brokers and Finders..................................................15
6.9 Litigation and Liabilities...........................................16
6.10 Employee Benefits....................................................16
6.11 Compliance with Laws.................................................18
6.12 Environmental Matters................................................18
6.13 Taxes................................................................19
6.14 Labor Matters........................................................19
ARTICLE VII.
COVENANTS
7.1 Interim Operations...................................................20
7.2 Acquisition Proposals................................................22
7.3 Post-Closing Shareholder Vote........................................23
7.4 Access; Consultation.................................................23
7.5 Publicity............................................................24
7.6 Benefits.............................................................24
7.7 Expenses.............................................................24
7.8 Indemnification of Officers and Directors............................24
7.9 Post-Merger Indemnification..........................................24
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TABLE OF CONTENTS
(continued)
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ARTICLE VIII.
CONDITIONS
8.1 Conditions to Each Party's Obligation to Effect the Merger...........25
8.2 Condition to Obligations of Parent and Merger Sub....................25
8.3 Conditions to Obligation of the Company..............................27
ARTICLE IX.
TERMINATION
9.1 Termination by Mutual Consent........................................28
9.2 Termination by Either Parent or the Company..........................28
9.3 Termination by the Company...........................................28
9.4 Termination by Parent................................................29
9.5 Effect of Termination and Abandonment................................29
ARTICLE X.
INDEMNIFICATION AND SURVIVAL
10.1 Indemnification of the Company.......................................29
10.2 Xxxxxxx..............................................................29
10.3 Survival.............................................................30
ARTICLE XI.
MISCELLANEOUS AND GENERAL
11.1 Modification or Amendment............................................30
11.2 Waiver...............................................................30
11.3 Counterparts.........................................................30
11.4 Governing Law and Venue; Waiver of Jury Trial........................30
11.5 Notices..............................................................31
11.6 Entire Agreement.....................................................32
11.7 No Third Party Beneficiaries.........................................32
11.8 Obligations of Parent and of the Company.............................32
11.9 Severability.........................................................32
11.10 Interpretation.......................................................33
11.11 Captions.............................................................33
11.12 Assignment...........................................................33
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
January 5, 2001 (the "Agreement Date"), is by and among LecStar Communications
Corporation, a Delaware corporation (the "Company"), Corzon, Inc., a Texas
corporation ("Parent"), and LecStar Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("Merger Sub").
RECITALS
WHEREAS, the respective Boards of Directors of each of Parent, Merger
Sub and the Company have approved this Agreement and the merger of Merger Sub
with and into the Company (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I.
The Merger; Closing; Effective Time; Designation
1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of the state of Delaware, and the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the Delaware General Corporation Law,
as amended (the "DGCL").
1.2 Closing. The closing of the Merger and the other transactions
contemplated hereby (the "Closing") shall take place upon the fulfillment by
each party of their respective obligations hereunder (the "Closing Date"), at
such place as the parties may agree.
1.3 Effective Time. On the Closing Date, the Company and Parent will
cause the Certificate of Merger (the "Certificate of Merger") to be executed,
acknowledged and filed with the Secretary of Sate of Delaware as provided in
Section 251 of the DGCL. The Merger
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shall become effective at the time when the Certificate of Merger has been duly
filed with the Secretary of State of Delaware or such other time as shall be
agreed upon by the parties and set forth in the Certificate of Merger in
accordance with the DGCL (the "Effective Time").
1.4 Certificate of Designation. Prior to the Effective Time, the Board
of Directors of the Parent, in accordance with applicable law, shall have filed
with the Secretary of State of the State of Texas a statement in the form of
Exhibit A attached hereto and incorporate herein, which (i) shall have
designated 100 shares of the preferred stock, par value $1.00 per share, of the
Parent as Series F Convertible Preferred Stock (the "Series F Stock") and (ii)
shall have set forth the terms, designations, powers, preferences and relative
rights, and the qualifications, limitations and restrictions of the Series F
Stock.
ARTICLE II.
Certificate of Incorporation and Bylaws of the Surviving Corporation
2.1 The Certificate of Incorporation. The certificate of incorporation
of the Company as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "Charter"), until
thereafter amended as provided therein or by applicable law.
2.2 The Bylaws. The bylaws of the Company in effect at the Effective
Time shall be the bylaws of the Surviving Corporation (the "Bylaws"), until
thereafter amended as provided therein or by applicable law.
ARTICLE III.
Officers, Directors and Management
3.1 Directors of Surviving Corporation. The directors of the Company at
the Effective Time shall, from and after the Effective Time, be the directors of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and the Bylaws.
3.2 Officers of Surviving Corporation. The officers of the Company at
the Effective Time shall, from and after the Effective Time, be the officers of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and the Bylaws.
ARTICLE IV.
Effect of the Merger on Capital Stock; Exchange of Certificates
4.1 Effect on Capital Stock. At the Effective Time, the Merger shall
have the following effects on the capital stock of the Company and Merger Sub,
without any action on the part of the holder of any capital stock of the Company
or Merger Sub:
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(a) Merger Consideration. All of the shares of common stock,
$0.01 par value per share, of the Company (each a "Company Share" and together
the "Company Shares") issued and outstanding immediately prior to the Effective
Time shall be converted into and become exchangeable for, on an aggregate basis,
(i) 400,000,000 shares of common stock, par value $0.01 per share, of the Parent
(the "Parent Common Stock") and (ii) 10 shares of Series F Convertible Preferred
Stock, par value $1.00 per share, of Parent ("Series F Stock") (collectively,
the Parent Common Stock and the Series F Stock is referred to herein as the
"Merger Consideration").
(b) Cancellation of Shares. Each Company Share issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, no longer be
outstanding, shall be canceled and retired without payment of any consideration
therefore and shall cease to exist. At the Effective Time, each certificate
formerly representing any of such Company Shares (a "Certificate") shall
thereafter represent only the right to a pro rata portion of the Merger
Consideration and any distribution or dividend pursuant to Section 4.2(b)
without interest.
(c) Merger Consideration. At the Effective Time, each share of
common stock, par value $.001 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one Company
Share, and the Surviving Corporation shall be a wholly-owned subsidiary of
Parent.
4.2 Exchange of Certificates for Shares.
(a) Exchange Procedures. Promptly after the Effective Time,
the Surviving Corporation shall cause to be mailed to each holder of record as
of the Effective Time instructions for exchanging the Certificates for
certificates representing the appropriate number of shares of Parent Common
Stock and Series F Stock, in accordance with Section 4.1(a) (collectively,
shares of the Parent Common Stock and Series F Stock are referred to as the
"Parent Merger Shares").
(b) Distributions with Respect to Unexchanged Shares; Voting.
(i) Whenever a dividend or other distribution is
declared by Parent in respect of the Parent Merger Shares, the record date for
which is at or after the Effective Time, that declaration shall include
dividends or other distributions in respect of all Parent Merger Shares issuable
pursuant to this Agreement. No dividends or other distributions in respect of
such Parent Merger Shares shall be paid to any holder of any unsurrendered
Certificate until such Certificate is surrendered for exchange in accordance
with this Article IV. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be issued or paid to the holder
of the Parent Merger Shares, without interest, (A) at the time of such
surrender, the dividends or other distributions with a record date after the
Effective Time and a payment date on or prior to the date of issuance of such
Parent Merger Shares and not previously paid and (B) at the appropriate payment
date, the dividends or other distributions payable with respect to such Parent
Merger Shares with a record date after the Effective Time but with a payment
date subsequent to surrender. For purposes of dividends or other distributions
in respect of Parent Merger Shares, all Parent
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Merger Shares to be issued pursuant to the Merger shall be deemed issued and
outstanding as of the Effective Time.
(ii) Registered holders of unsurrendered Certificates
shall be entitled to vote after the Effective Time at any meeting of Parent
stockholders with a record date at or after the Effective Time the number of
Parent Merger Shares represented by such Certificates, regardless of whether
such holders have exchanged their Certificates.
(c) Transfers. After the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the Company Shares that
were outstanding immediately prior to the Effective Time.
(d) Fractional Shares. Notwithstanding any other provision of
this Agreement, no fractional shares of Parent Common Stock or Series F Stock
will be issued to any holder of Company Shares. Any holder of Company Shares
entitled to receive a fractional share of Parent Common Stock or Series F Stock
but for this Section 4.2(d) shall have the total number of shares of Parent
Common Stock or Series F Stock they are to receive in the Merger rounded to the
nearest whole number of shares.
(e) Lost, Stolen or Destroyed Certificates. In the event 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 the posting by such Person of a bond in the form
customarily required by Parent as indemnity against any claim that may be made
against it with respect to such Certificate, Parent will issue the Parent Merger
Shares, stock, cash, dividends and other distributions in respect thereof
issuable or payable in exchange for such lost, stolen or destroyed Certificate
pursuant to Section 4.1, and Section 4.2(b), in each case, without interest.
For the purposes of this Agreement, the term "Person" means any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.4(a)) or
other entity of any kind or nature.
ARTICLE V.
Representations and Warranties of the Company
The Company hereby represents and warrants to Parent and Merger Sub
that:
5.1 Organization, Good Standing and Qualification. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
has all requisite corporate or similar power and authority to own and operate
its properties and assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the ownership or operation of its properties or
conduct of its business requires such qualification, except where the failure to
be so qualified or in good standing is not, when taken together with all other
such failures, reasonably likely to have a Material Adverse Effect (as defined
below) on it. The Company has made available
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to Parent a complete and correct copy of its certificate of incorporation and
bylaws, each as amended to date. Such certificates of incorporation and bylaws
are in full force and effect.
The term "Subsidiary" means any entity, whether incorporated or
unincorporated, of which at least a majority of the securities or ownership
interests having, by their terms, ordinary voting power to elect at least a
majority of the Board of Directors or other persons performing similar functions
is directly or indirectly owned by such party.
The term "Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the financial condition, assets and liabilities
(taken together), business or prospects of such Person and its Subsidiaries,
taken as a whole; provided, however, that Material Adverse Effect shall exclude
any effect resulting from or related to changes or developments involving (1) a
prospective change arising out of any proposed or adopted legislation, or any
other proposal or enactment by any governmental, regulatory or administrative
authority, (2) general conditions applicable to the global economy, including
changes in interest rates, (3) conditions or effects resulting from the
announcement of the existence or terms of this Agreement or (4) conditions
affecting the global telecommunications industry, in each case taken as a whole.
5.2 Capital Structure. The authorized capital stock of the Company
consists of 100,000,000 Company Shares, of which 21,185,790 Company Shares were
issued and outstanding and no Company Shares were held in treasury as of the
close of business on the Agreement Date, and 5,000,000 shares of Preferred
Stock, par value $0.01 per share (the "Company Preferred Shares"), of which 850
Company Preferred Shares were outstanding as of the close of business on the
Agreement Date. All of the outstanding Company Shares have been duly authorized
and are validly issued, fully paid and nonassessable. Other than (i) Company
Shares subject to issuance as set forth below and (ii) as set forth on Schedule
5.2, the Company has no Company Shares, Company Preferred Shares or other shares
of capital stock reserved for or otherwise subject to issuance, as of the
Agreement Date. As of the Agreement Date, there were not more than 8,100,000
Company Shares that the Company was obligated to issue pursuant to the Company's
stock plans (collectively the "Company Stock Plans") and outstanding stock
purchase warrants. Each of the outstanding shares of capital stock or other
securities of each of the Company's "Significant Subsidiaries" (as defined in
Rule 1-02(w) of Regulation S-X promulgated pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including any Subsidiaries that if
aggregated would together constitute a Significant Subsidiary) is duly
authorized, validly issued, fully paid and nonassessable and owned by the
Company or a direct or indirect wholly-owned Subsidiary of the Company, free and
clear of any lien, pledge, security interest, claim or other encumbrance. Except
as set forth above or as set forth on Schedule 5.2, as of the Agreement Date,
there are no preemptive or other outstanding rights, options, warrants,
conversion rights, stock appreciation rights, redemption rights, repurchase
rights, agreements, arrangements or commitments to issue or sell any shares of
capital stock or other securities of the Company or any of its Significant
Subsidiaries or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person a right to subscribe for or acquire,
any securities of the Company or any of its Significant Subsidiaries, and no
securities or obligations evidencing such rights are authorized, issued or
outstanding. Except as set forth on Schedule 5.2, as of the Agreement Date, the
Company does not have
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outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the shareholders of the Company on any matter. No
Company Shares are held by a Subsidiary of the Company.
5.3 Corporate Authority and Approval. The Company has all requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this Agreement and
the other agreements, instruments, certificates, documents and transactions
contemplated hereby and to consummate the Merger. In taking such corporate
action, the Board of Directors of the Company has complied with all applicable
duties. This Agreement has been duly executed and delivered by the Company and
is a valid and binding agreement of the Company enforceable against the Company
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles (the
"Bankruptcy and Equity Exception"). The Board of Directors of the Company, all
appropriate shareholders and any other parties to the extent required by
applicable law, have approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
5.4 Government Filings; No Violations.
(a) No notices, reports or other filings are required to be
made by the Company with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by the Company from, any
governmental or regulatory authority, court, agency, commission, body or other
governmental entity ("Governmental Entity"), in connection with the execution
and delivery of this Agreement by the Company and the consummation by the
Company of the Merger and the other transactions contemplated by this Agreement,
except those that are set forth on Schedule 5.4 or that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on the Company or prevent, materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement
by the Company do not, and the consummation by the Company of the Merger and the
other transactions contemplated by this Agreement will not, constitute or result
in (A) a breach or violation of, or a default under, the certificate of
incorporation or bylaws of the Company or the comparable governing instruments
of any of its Subsidiaries or any entity in which it has an equity interest of
20% or more (collectively, with Subsidiaries, "Significant Investees"), (B) a
breach or violation of, or a default under, the acceleration of any obligations
or the creation of a lien, pledge, security interest or other encumbrance on the
assets of the Company or the assets of any of its Significant Investees (with or
without notice, lapse of time or both) pursuant to, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") binding upon it or any of its Significant Investees or any Law or
governmental or non-governmental permit or license to which it or any of its
Significant Investees is subject or (C) any change in the rights or obligations
of any party under any Contracts to which the Company or its Significant
Investees are a party, except, in the case of clauses (B) or (C) above, for any
breach, violation, default,
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acceleration, creation or change that are set forth on Schedule 5.4 or that
that, individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect on the Company or prevent, materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement. There are no Contracts of the Company and its
Significant Investees pursuant to which consents or waivers are or may be
required prior to consummation of the transactions contemplated by this
Agreement, other than those where the failure to obtain such consents or waivers
is not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company or prevent or materially impair its ability to
consummate the transactions contemplated by this Agreement.
5.5 Financial Statements. Attached hereto as Schedule 5.5 are true and
correct copies of the following financial statements of Company and its
Significant Investees (the "Company Financial Statements"), all as of November
30, 2000 (the "Financial Statements Date"): (i) a balance sheet, (ii) a
statement of income and (iii) a statement of cash flows. The Company Financial
Statements fairly and accurately represent the consolidated financial position
of the Company and its Subsidiaries as of the Financial Statements Date and the
consolidated results of operations, retained earnings and cash flows, as the
case may be, of the Company and its Significant Investees for the periods set
forth therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with U.S. generally accepted accounting principles
("GAAP") consistently applied during the periods involved, except as may be
noted therein.
5.6 Absence of Certain Changes. Except as set forth in Schedule 5.6,
since the Financial Statements Date, the Company and its Subsidiaries have
conducted their respective businesses only in, and have not engaged in any
material transaction other than according to, the ordinary and usual course of
such businesses and there has not been: (i) any change in the financial
condition, liabilities and assets (taken together), prospects, business or
results of operations of it and its Subsidiaries, except those changes that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it; (ii) any damage, destruction or other casualty loss with
respect to any asset or property owned, leased or otherwise used by it or any of
its Subsidiaries, whether or not covered by insurance, which damage, destruction
or loss is reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on it; (iii) any declaration, setting aside or payment
of any dividend or other distribution in respect of its capital stock; or (iv)
any change by it in accounting principles, practices or methods, except as
required by GAAP. Since the Financial Statements Date, there has not been any
increase in the salary, wage, bonus, grants, awards, benefits or other
compensation payable or that could become payable by the Company or any of its
Subsidiaries to directors, officers or key employees or any amendment of any of
its Compensation and Benefit Plans (as defined in Section 5.8(a)) other than
increases or amendments in the normal and usual course of its business (which
may include normal periodic performance reviews and related compensation and
benefit increases and the provision of new individual compensation and benefits
for promoted or newly hired officers and employees on terms consistent with past
practice).
5.7 Litigation and Liabilities. Except as set forth in Schedule 5.7,
there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings
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pending or, to the actual knowledge of its executive officers, threatened
against the Company or any of its Affiliates (as defined in Rule 12b-2 under the
Exchange Act) or (ii) obligations or liabilities, whether or not accrued,
contingent or otherwise and whether or not required to be disclosed, including
those relating to matters involving any Environmental Law (as defined in Section
5.10), or any other facts or circumstances, in either such case, of which its
executive officers have actual knowledge and that are reasonably likely to
result in any claims against or obligations or liabilities of the Company or any
of its Affiliates, except for those that are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the Company or
prevent, materially delay or materially impair its ability to consummate the
transactions contemplated by this Agreement.
5.8 Employee Benefits.
(a) Except as set forth in Schedule 5.8(a), none of the
Company nor any ERISA Affiliate (as defined below) maintains, is a party to,
participates in or has any liability or contingent liability with respect to any
employee benefit plan (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), or any bonus,
deferred compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock, stock
option, employment, consulting, termination, severance, compensation, medical,
health or fringe benefit plan, or other plan, program, agreement, policy or
arrangement for any agents, consultants, employees, directors, former employees
or former directors of the Company and or any ERISA Affiliate which does not
constitute an employee benefit plan (which employee benefit plans and other
plans, programs, agreements policies and arrangements are collectively referred
to as the "Compensation and Benefit Plans"). A true and correct copy of each
Compensation and Benefit Plan and, to the extent applicable, copies of the most
recent annual report, actuarial report, accountant's opinion of the plan's
financial statements, summary plan description and Internal Revenue Service
determination letter with respect to any Compensation and Benefit Plans and any
trust agreements or insurance contracts forming a part of such Compensation and
Benefit Plans has been made available by the Company to Parent prior to the date
of this Agreement. In the case of any Compensation and Benefit Plan which is not
in written form, the Company has made available to Parent an accurate
description of such Compensation and Benefit Plan as in effect on the date of
this Agreement. For purposes of this Agreement, the term "ERISA Affiliate" means
any corporation or trade or business which, together with the Company, is a
member of a controlled group of Persons or a group of trades or businesses under
common control with the Company within the meaning of Sections 414(b), (c), (m)
or (o) of the Code.
(b) All Compensation and Benefit Plans are in substantial
compliance with all requirements of applicable law, including the Code and
ERISA, and to the knowledge of the Company, there is no event that has occurred
which will or could cause any such Compensation and Benefit Plan to fail to
comply with such requirements and no notice has been issued by any governmental
authority questioning or challenging such compliance. To the knowledge of the
Company, there have been no acts or omissions by the Company or any ERISA
Affiliate which have given rise to or may give rise to fines, penalties, taxes
or related charges under Section 502 of ERISA or Chapters 43, 47, 68 or 100 of
the Code for which the Company or ERISA Affiliate may be liable. Each of the
Compensation and
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Benefit Plans that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA, other than a multiemployer plan (as defined in Section
3(37) of ERISA (each a "Pension Plan"), and that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service (the "IRS") which covers all changes in law
for which the remedial amendment period (within the meaning of Section 401(b) of
the Code and applicable regulations) has expired and none of the Company nor any
of its ERISA Affiliates is aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no pending or,
to the knowledge of the Company's executive officers, threatened material
litigation relating to its Compensation and Benefit Plans (other than routine
claims for benefits). Neither the Company nor any of the ERISA Affiliates has
engaged in a transaction with respect to any of the Compensation and Benefit
Plans that, assuming the taxable period of such transaction expired as of the
date of this Agreement, would subject it or any of the ERISA Affiliates to a
material tax or penalty imposed by either Section 4975 of the Code or Section
502 of ERISA.
(c) As of the date of this Agreement, no liability under Title
IV of ERISA (other than the payment of prospective premium amounts to the
Pension Benefit Guaranty Corporation in the normal course) has been or is
expected to be incurred by the Company or any ERISA Affiliate with respect to
any Compensation and Benefit Plan. No notice of a "reportable event," within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement has
not been waived, has been required to be filed for any Pension Plans within the
12-month period ending on the date of this Agreement or will be required to be
filed in connection with the transactions contemplated by this Agreement.
(d) All contributions required to be made under the terms of
any of the Compensation and Benefit Plans as of the date of this Agreement have
been timely made or have been reflected on the Company Financial Statements.
None of the Pension Plans has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA. Neither the Company nor any ERISA Affiliate has provided, or is required
to provide, security pursuant to Section 401(a)(29) of the Code, Title IV or
ERISA.
(e) Under each of the Pension Plans as of the last day of the
most recent plan year ended prior to the date of this Agreement, the actuarially
determined present value of all "benefit liabilities," within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in such Pension Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Pension Plan, and
there has been no material change in the financial condition of such Pension
Plan since the last day of the most recent plan year.
(f) None of the Company nor any ERISA Affiliate have any
obligations for post-termination health and life benefits under any of the
Compensation and Benefit Plans, except as set forth in the Company Financial
Statements or as required by applicable law.
(g) Except as set forth in Schedule 5.8(g), the consummation
of the Merger and the other transactions contemplated by this Agreement will not
(x) entitle any
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employees or directors of the Company or any employees of any of the Company's
ERISA Affiliates to severance pay, directly or indirectly, upon termination of
employment or otherwise, (y) accelerate the time of payment or vesting or
trigger any payment of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the
Compensation and Benefit Plans or (z) result in any breach or violation of, or a
default under, any of the Compensation and Benefit Plans.
(h) None of the Compensation and Benefit Plans is a
multiemployer plan and none of the Company or any of the ERISA Affiliates have
contributed or been obligated to contribute to a multiemployer plan at any time
since December 31, 1997.
5.9 Compliance with Laws. Except as set forth in Schedule 5.9, the
businesses of each of Company and its Subsidiaries have not been, and are not
being, conducted in violation of any law, statute, ordinance, regulation,
judgment, order, decree, injunction, arbitration award, license, authorization,
opinion, agency requirement or permit of any Governmental Entity or common law
(collectively, "Laws"), except for violations or possible violations that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company or prevent, materially delay or materially impair
its ability to consummate the transactions contemplated by this Agreement.
Except as set forth in Schedule 5.9, no investigation or review by any
Governmental Entity with respect to it or any of its Subsidiaries is pending or,
to the actual knowledge of its executive officers, threatened, nor has any
Governmental Entity indicated an intention to conduct the same, except for those
the outcome of which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it or prevent, materially delay or
materially impair its ability to consummate the transactions contemplated by
this Agreement. To the actual knowledge of its executive officers, no material
change is required in the Company's, or any of its Subsidiaries', processes,
properties or procedures in connection with any such Laws, and it has not
received any notice or communication of any material noncompliance with any such
Laws that has not been cured as of the date of this Agreement, except for such
changes and noncompliance that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on it or prevent, materially
delay or materially impair its ability to consummate the transactions
contemplated by this Agreement. Each of the Company and its Subsidiaries has all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals (collectively, "Permits"),
necessary to conduct their business as presently conducted, except for those the
absence of which are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on it or prevent, materially delay or materially
impair its ability to consummate the transactions contemplated by this
Agreement.
5.10 Environmental Matters. Except as disclosed in Schedule 5.10, and
except for such matters that, alone or in the aggregate, are not reasonably
likely to have a Material Adverse Effect on the Company: (i) each of it and its
Subsidiaries has complied with all applicable Environmental Laws; (ii) the
properties currently owned or operated by it or any of its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances; (iii) the properties formerly
owned or operated by it or any of its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by it or any of
its Subsidiaries; (iv) neither it nor
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any of its Subsidiaries is subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) neither it nor any
Subsidiary has been associated with any release or threat of release of any
Hazardous Substance; (vi) neither it nor any Subsidiary has received any notice,
demand, letter, claim or request for information alleging that it or any of its
Subsidiaries may be in violation of or liable under any Environmental Law; (vii)
neither it 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 it or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use or transfer of any
of its properties pursuant to any Environmental Law.
The term "Environmental Law" means any Law relating to: (A) the
protection, investigation or restoration of the environment, health, 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 or notifications to government agencies or the public in connection
with any Hazardous Substance.
The term "Hazardous Substance" means any substance that is listed,
classified or regulated pursuant to any Environmental Law, including any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, electromagnetic fields, microwave
transmission, radioactive materials or radon.
5.11 Accounting and Tax Matters. As of the date of this Agreement,
neither the Company nor any of its Subsidiaries has taken or agreed to take any
action, nor do its executive officers have any actual knowledge of any fact or
circumstance, that would prevent the Merger and the other transactions
contemplated by this Agreement from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
5.12 Taxes. The Company and each of its Subsidiaries have prepared in
good faith and duly and timely filed (taking into account any extension of time
within which to file) all material Tax Returns required to be filed by any of
them at or before the Effective Time and all such filed Tax Returns are complete
and accurate in all material respects. The Company and each of its Subsidiaries
as of the Effective Time (x) will have paid all Taxes that they are required to
pay prior to the Effective Time, and (y) will have withheld all federal, state
and local income taxes and other Taxes required to be withheld from amounts
owing to any employee, creditor or third party, except for such amounts that,
alone or in the aggregate, are not reasonably likely to have a Material Adverse
Effect on it. As of the date of this Agreement, there are not pending or
threatened in writing, any audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters. There are not, to the actual
knowledge of its executive officers, any unresolved questions, claims or
outstanding proposed or assessed deficiencies concerning the Company or any of
its Subsidiaries' Tax liability that are reasonably likely to have a Material
Adverse Effect on it. Neither the Company nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes in excess of the
amounts accrued in respect thereof that are reflected in the
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Company Financial Statements, except such excess liabilities as are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on it. Neither the Company nor any of its Subsidiaries has executed any
waiver of any statute of limitations on, or extended the period for the
assessment or collection of, any Tax.
The term "Tax" (including, with correlative meaning, the terms "Taxes,"
and "Taxable") includes all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions. The term "Tax Return"
includes all federal, state, local and foreign returns and reports (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be supplied to a Tax authority relating to Taxes.
5.13 Labor Matters. Neither the Company nor any of its Subsidiaries is
the subject of any material proceeding asserting that it 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 its executive officers, threatened, nor has there been for
the past five years, any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving it or any of its Subsidiaries, except in each
case as is not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it.
5.14 Brokers and Finders. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the Merger or the other transactions contemplated in this Agreement.
ARTICLE VI.
Representations and Warranties of the Parent and the Merger Sub
The Parent, on behalf of itself and Merger Sub, hereby represents and
warrants to the Company that:
6.1 Organization, Good Standing and Qualification. Each of the Parent
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
has all requisite corporate or similar power and authority to own and operate
its properties and assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the ownership or operation of its properties or
conduct of its business requires such qualification, except where the failure to
be so qualified or in good standing is not, when taken together with all other
such failures, reasonably likely to have a Material Adverse Effect on it. The
Parent has made available to the Company a complete and correct copy of its
certificate of incorporation and bylaws, each as amended to date. Such
certificates of incorporation and bylaws are in full force and effect. All of
the
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Subsidiaries of Parent, as of the Agreement Date, are set forth on Schedule 6.1.
As of the Closing Date, the Subsidiaries of Parent shall be as set forth on
Schedule 6.1.
6.2 Capital Structure.
(a) The authorized capital stock of Parent consists of
500,000,000 shares of Parent Common Stock, of which 87,524,410 shares were
issued and outstanding and no shares were held in treasury as of the close of
business on the Agreement Date, and 5,000,000 shares of Preferred Stock, par
value $1.00 per share (the "Parent Preferred Shares"), of which 1,201,478 shares
were outstanding as of the close of business on the Agreement Date. All of the
outstanding shares of Parent Common Stock have been duly authorized and are
validly issued, fully paid and nonassessable. Other than (i) Series F Stock
subject to issuance as set forth below and (ii) as set forth on Schedule 6.2, as
of the date of this Agreement, Parent has no shares of Parent Common Stock or
Parent Preferred Shares reserved for or subject to issuance. Each of the
outstanding shares of capital stock of each of Parent's Significant Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable and owned by
Parent or a direct or indirect wholly-owned subsidiary of Parent, free and clear
of any lien, pledge, security interest, claim or other encumbrance. Except as
set forth above or as set forth on Schedule 6.2, as of the date of this
Agreement there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to sell
any shares of capital stock or other securities of Parent or any of its
Significant Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to subscribe
for or acquire, any securities of Parent or any of its Significant Subsidiaries,
and no securities or obligation evidencing such rights are authorized, issued or
outstanding. Other than as set forth on Schedule 6.2, Parent does not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the stockholders of Parent on any matter.
(b) The authorized capital stock of Merger Sub consists of 100
shares of Common Stock, par value $.001 per share, all of which are validly
issued and outstanding. All of the issued and outstanding capital stock of
Merger Sub is, and at the Effective Time will be, owned by Parent, and there are
(i) no other shares of capital stock or other voting securities of Merger Sub,
(ii) no securities of Merger Sub convertible into or exchangeable for shares of
capital stock or other voting securities of Merger Sub and (iii) no options or
other rights to acquire from Merger Sub, and no obligations of Merger Sub to
issue, any capital stock, other voting securities or securities convertible into
or exchangeable for capital stock or other voting securities of Merger Sub.
Merger Sub has not conducted any business prior to the date of this Agreement
and has no, and prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its formation and
pursuant to this Agreement and the Merger and the other transactions
contemplated by this Agreement. Except as set forth in Schedule 6.2, the Parent
has not issued registration rights to any third party. There are no penalties
currently owed by the Parent for its failure to register any of its outstanding
securities.
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6.3 Corporate Authority and Approval. Parent and Merger Sub each has
all requisite corporate power and authority and each has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement and the other agreements, instruments, certificates, documents
and transactions contemplated hereby and to consummate the Merger. In taking
such corporate action, the Board of Directors of Parent and Merger Sub have
complied with all applicable duties. This Agreement has been duly executed and
delivered by Parent and Merger Sub and is a valid and binding agreement of
Parent and Merger Sub, enforceable against each of Parent any Merger Sub in
accordance with its terms, subject to the Bankruptcy and Equity Exception. The
Parent Merger Shares, when issued pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.
6.4 Government Filings; No Violations.
(a) No notices, reports or other filings are required to be
made by the Parent with, nor are any consents, registrations, approvals, permits
or authorizations required to be obtained by the Parent from, any Governmental
Entity, in connection with the execution and delivery of this Agreement by it
and the consummation by it of the Merger and the other transactions contemplated
by this Agreement, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on the Parent or prevent, materially delay or materially impair its
ability to consummate the transactions contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement
by the Parent do not, and the consummation by it of the Merger and the other
transactions contemplated by this Agreement will not, constitute or result in
(A) a breach or violation of, or a default under, its certificate of
incorporation or bylaws or the comparable governing instruments of any of its
Significant Investees, (B) a breach or violation of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on its assets or the assets of any of its
Significant Investees (with or without notice, lapse of time or both) pursuant
to, any Contract binding upon it or any of its Significant Investees or any Law
or governmental or non-governmental permit or license to which it or any of its
Significant Investees is subject or (C) any change in the rights or obligations
of any party under any Contracts to which it or its Significant Investees are a
party, except, in the case of clauses (B) or (C) above, for any breach,
violation, default, acceleration, creation or change that, individually or in
the aggregate, is not reasonably likely to have a Material Adverse Effect on it
or prevent, materially delay or materially impair its ability to consummate the
transactions contemplated by this Agreement. Schedule 6.4 sets forth a correct
and complete list of Contracts of the Parent and its Significant Investees
pursuant to which consents or waivers are or may be required prior to
consummation of the transactions contemplated by this Agreement other than those
where the failure to obtain such consents or waivers is not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on the Parent
or prevent or materially impair its ability to consummate the transactions
contemplated by this Agreement.
6.5 Reports; Financial Statements. The Parent has made available to the
Company, through electronic filings or otherwise, each registration statement,
report, proxy statement or information statement prepared by it since December
31, 1997, including its
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Annual Report on Form 10-K for the years ended December 31, 1997, December 31,
1998 and December 31, 1999 in the form (including exhibits, annexes and any
amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (collectively, including any such registration statements, reports, proxy
statements or information statements filed subsequent to the date of this
Agreement, its "Reports"). Since December 31, 1997, the Parent has made all
filings required to be made by the Securities Act of 1933, as amended, and the
Exchange Act. As of their respective dates, the Reports complied as to form with
all applicable requirements and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. Each of the consolidated balance sheets
included in or incorporated by reference into the Reports (including the related
notes and schedules) fairly presents the consolidated financial position of the
Parent and its Subsidiaries as of its date and each of the consolidated
statements of income and of cash flows included in or incorporated by reference
into the Reports (including any related notes and schedules) fairly presents the
consolidated results of operations, retained earnings and cash flows, as the
case may be, of the Parent and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein.
6.6 Absence of Certain Changes. Except as disclosed in its Reports
filed prior to the date of this Agreement or as expressly contemplated by this
Agreement, since December 31, 1999, the Parent and its Subsidiaries have
conducted their respective businesses only in, and have not engaged in any
material transaction other than according to, the ordinary and usual course of
such businesses and there has not been: (i) any change in the financial
condition, liabilities and assets (taken together), prospects, business or
results of operations of the Parent and its Subsidiaries, except those changes
that are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it; (ii) any damage, destruction or other casualty
loss with respect to any asset or property owned, leased or otherwise used by
the Parent or any of its Subsidiaries, whether or not covered by insurance,
which damage, destruction or loss is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it; (iii) any declaration,
setting aside or payment of any dividend or other distribution in respect of its
capital stock, except publicly announced regular quarterly cash dividends on its
common stock and dividends in capital stock of Parent; or (iv) any change by it
in accounting principles, practices or methods, except as required by GAAP.
6.7 Accounting and Tax Matters. As of the date of this Agreement,
neither the Parent nor any of its Subsidiaries has taken or agreed to take any
action, nor do its executive officers have any actual knowledge of any fact or
circumstance, that would prevent the Merger and the other transactions
contemplated by this Agreement from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
6.8 Brokers and Finders. Neither the Parent nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the Merger or the other transactions
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contemplated in this Agreement, except for certain advisor fees due from the
Parent to Greenfield Capital Partners, L.L.C., as set forth on Schedule 6.8.
6.9 Litigation and Liabilities. Except as set forth in the Parent's
Reports, there are no (i) civil, criminal or administrative actions, suits,
claims, hearings, investigations or proceedings pending or, to the actual
knowledge of its executive officers, threatened against the Company or any of
its Affiliates (as defined in Rule 12b-2 under the Exchange Act) or (ii)
obligations or liabilities, whether or not accrued, contingent or otherwise and
whether or not required to be disclosed, including those relating to matters
involving any Environmental Law, or any other facts or circumstances, in either
such case, of which its executive officers have actual knowledge and that are
reasonably likely to result in any claims against or obligations or liabilities
of the Parent or any of its Subsidiaries, except for those that are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on the Parent or prevent, materially delay or materially impair its
ability to consummate the transactions contemplated by this Agreement.
6.10 Employee Benefits.
(a) Except as set forth in the Parent's Reports and to the
knowledge of Parent, none of the Parent nor any ERISA Affiliate (as defined
below) maintains, is a party to, participates in or has any liability or
contingent liability with respect to any employee benefit plan (within the
meaning of Section 3(3) of ERISA), or any Compensation and Benefit Plan. A true
and correct copy of each Compensation and Benefit Plan and, to the extent
applicable, copies of the most recent annual report, actuarial report,
accountant's opinion of the plan's financial statements, summary plan
description and Internal Revenue Service determination letter with respect to
any Compensation and Benefit Plans and any trust agreements or insurance
contracts forming a part of such Compensation and Benefit Plans has been made
available by the Parent to the Company prior to the date of this Agreement. In
the case of any Compensation and Benefit Plan which is not in written form, the
Parent has made available to Company an accurate description of such
Compensation and Benefit Plan as in effect on the date of this Agreement.
(b) All Compensation and Benefit Plans are in substantial
compliance with all requirements of applicable law, including the Code and
ERISA, and to the knowledge of the Parent, there is no event that has occurred
which will or could cause any such Compensation and Benefit Plan to fail to
comply with such requirements and no notice has been issued by any governmental
authority questioning or challenging such compliance. To the knowledge of the
Parent, there have been no acts or omissions by the Parent or any ERISA
Affiliate which have given rise to or may give rise to fines, penalties, taxes
or related charges under Section 502 of ERISA or Chapters 43, 47, 68 or 100 of
the Code for which the Parent or ERISA Affiliate may be liable. Each of the
Compensation and Benefit Plans that is a Pension Plan and that is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS which covers all changes in law for which the
remedial amendment period (within the meaning of Section 401(b) of the Code and
applicable regulations) has expired and none of the Parent nor any of its ERISA
Affiliates is aware of any circumstances likely to result in revocation of any
such favorable determination letter. There is no pending or, to the knowledge of
the Parent's executive
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officers, threatened material litigation relating to its Compensation and
Benefit Plans (other than routine claims for benefits). Neither the Parent nor
any of the ERISA Affiliates has engaged in a transaction with respect to any of
the Compensation and Benefit Plans that, assuming the taxable period of such
transaction expired as of the date of this Agreement, would subject it or any of
the ERISA Affiliates to a material tax or penalty imposed by either Section 4975
of the Code or Section 502 of ERISA.
(c) Except as set forth in the Parent's Reports, as of the
date of this Agreement, no liability under Title IV of ERISA (other than the
payment of prospective premium amounts to the Pension Benefit Guaranty
Corporation in the normal course) has been or is expected to be incurred by the
Parent or any ERISA Affiliate with respect to any Compensation and Benefit Plan.
No notice of a "reportable event," within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plans within the 12-month period ending on
the date of this Agreement or will be required to be filed in connection with
the transactions contemplated by this Agreement.
(d) Except as set forth in the Parent's Reports and to the
knowledge of the Parent, all contributions required to be made under the terms
of any of the Compensation and Benefit Plans as of the date of this Agreement
have been timely made. None of the Pension Plans has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA. Neither the Parent nor any ERISA Affiliate has
provided, or is required to provide, security pursuant to Section 401(a)(29) of
the Code, Title IV or ERISA.
(e) Except as set forth in the Parent's Reports, under each of
the Pension Plans as of the last day of the most recent plan year ended prior to
the date of this Agreement, the actuarially determined present value of all
"benefit liabilities," within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in such Pension
Plan's most recent actuarial valuation), did not exceed the then current value
of the assets of such Pension Plan, and there has been no material change in the
financial condition of such Pension Plan since the last day of the most recent
plan year.
(f) Except as set forth in the Parent's Reports, none of the
Parent nor any ERISA Affiliate have any obligations for post-termination health
and life benefits under any of the Compensation and Benefit Plans, except as
required by applicable law.
(g) Except as set forth in Schedule 6.10(g), the consummation
of the Merger and the other transactions contemplated by this Agreement will not
(x) entitle any employees or directors of the Parent or any employees of any of
the Parent's ERISA Affiliates to severance pay, directly or indirectly, upon
termination of employment or otherwise, (y) accelerate the time of payment or
vesting or trigger any payment of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any of the
Compensation and Benefit Plans or (z) result in any breach or violation of, or a
default under, any of the Compensation and Benefit Plans.
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(h) Except as set forth in the Parent's Reports, none of the
Compensation and Benefit Plans is a multiemployer plan and none of the Parent or
any of the ERISA Affiliates have contributed or been obligated to contribute to
a multiemployer plan at any time since December 31, 1997.
6.11 Compliance with Laws. Except as set forth in the Parent's Reports,
the businesses of the Parent and its Subsidiaries have not been, and are not
being, conducted in violation of any Laws, except for violations or possible
violations that are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on the Parent or prevent, materially delay or
materially impair its ability to consummate the transactions contemplated by
this Agreement. Except as set forth in the Parent's Reports, no investigation or
review by any Governmental Entity with respect to the Parent or any of its
Subsidiaries is pending or, to the actual knowledge of its executive officers,
threatened, nor has any Governmental Entity indicated an intention to conduct
the same, except for those the outcome of which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or prevent,
materially delay or materially impair its ability to consummate the transactions
contemplated by this Agreement. To the actual knowledge of its executive
officers, no material change is required in the Parent's, or any of its
Subsidiaries', processes, properties or procedures in connection with any such
Laws, and it has not received any notice or communication of any material
noncompliance with any such Laws that has not been cured as of the date of this
Agreement, except for such changes and noncompliance that are not, individually
or in the aggregate, reasonably likely to have a Material Adverse Effect on it
or prevent, materially delay or materially impair its ability to consummate the
transactions contemplated by this Agreement. Each of the Parent and its
Subsidiaries has all Permits necessary to conduct their business as presently
conducted, except for those the absence of which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or prevent,
materially delay or materially impair its ability to consummate the transactions
contemplated by this Agreement.
6.12 Environmental Matters. Except as set forth in the Parent's
Reports, and except for such matters that, alone or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on the Parent: (i) each of
it and its Subsidiaries has complied with all applicable Environmental Laws;
(ii) the properties currently owned or operated by it or any of its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances; (iii) the properties formerly
owned or operated by it or any of its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by it or any of
its Subsidiaries; (iv) neither it nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither it nor any Subsidiary has been associated with any
release or threat of release of any Hazardous Substance; (vi) neither it nor any
Subsidiary has received any notice, demand, letter, claim or request for
information alleging that it or any of its Subsidiaries may be in violation of
or liable under any Environmental Law; (vii) neither it 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 it or any of its Subsidiaries that could
reasonably be
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expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use or transfer of any of its properties pursuant
to any Environmental Law.
The term "Environmental Law" means any Law relating to: (A) the
protection, investigation or restoration of the environment, health, 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 or notifications to government agencies or the public in connection
with any Hazardous Substance.
The term "Hazardous Substance" means any substance that is listed,
classified or regulated pursuant to any Environmental Law, including any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, electromagnetic fields, microwave
transmission, radioactive materials or radon.
6.13 Taxes. Except as set forth in the Parent's Reports and to the
knowledge of the Parent, the Parent and each of its Subsidiaries have prepared
in good faith and duly and timely filed (taking into account any extension of
time within which to file) all material Tax Returns required to be filed by any
of them at or before the Effective Time and all such filed Tax Returns are
complete and accurate in all material respects. Except as set forth in the
Parent's Reports, the Parent and each of its Subsidiaries as of the Effective
Time (x) will have paid all Taxes that they are required to pay prior to the
Effective Time, and (y) will have withheld all federal, state and local income
taxes and other Taxes required to be withheld from amounts owing to any
employee, creditor or third party, except for such amounts that, alone or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on it.
Except as set forth in the Parent's Reports, as of the date of this Agreement,
there are not pending or threatened in writing, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters. Except
as set forth in the Parent's Reports, there are not, to the actual knowledge of
its executive officers, any unresolved questions, claims or outstanding proposed
or assessed deficiencies concerning the Parent or any of its Subsidiaries' Tax
liability that are reasonably likely to have a Material Adverse Effect on it.
Except as set forth in the Parent's Reports, neither the Parent nor any of its
Subsidiaries has any liability with respect to income, franchise or similar
Taxes in excess of the amounts accrued in respect thereof that are reflected in
the Parent's Reports, except such excess liabilities as are not, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect on it.
Except as set forth in the Parent's Reports, neither the Parent nor any of its
Subsidiaries has executed any waiver of any statute of limitations on, or
extended the period for the assessment or collection of, any Tax. Except as set
forth in the Parent's Reports, no payments to be made to any of the officers and
employees of it or its Subsidiaries will, as a result of consummation of the
Merger, be subject to the deduction limitations under Section 280G of the Code.
6.14 Labor Matters. Except as set forth in the Parent's Reports,
neither the Parent nor any of its Subsidiaries is the subject of any material
proceeding asserting that it 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 its executive
officers, threatened, nor has there been for the past five years, any labor
strike,
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dispute, walkout, work stoppage, slow-down or lockout involving it or any of its
Subsidiaries, except in each case as is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on it.
ARTICLE VII.
Covenants
7.1 Interim Operations.
(a) Except as set forth in this Agreement or on Schedule 7.1,
each of the Parent and the Company covenants and agrees as to itself and its
Subsidiaries that, after the date of this Agreement and prior to the Effective
Time (unless the other party shall otherwise approve in writing and except as
otherwise expressly contemplated by this Agreement, disclosed in the Schedules
attached hereto or required by applicable Law):
(i) The business of it and its Subsidiaries shall be
conducted in the ordinary and usual course and, to the extent consistent
therewith, it and its Subsidiaries shall use their reasonable efforts to
preserve its business organization intact and maintain its existing relations
and goodwill with customers, suppliers, regulators, distributors, creditors,
lessors, employees and business associates;
(ii) It shall not: (A) amend its certificate of
incorporation or bylaws; (B) split, combine, subdivide or reclassify its
outstanding shares of capital stock; (C) declare, set aside or pay any dividend
payable in cash, stock or property in respect of any capital stock; or (D)
repurchase, redeem or otherwise acquire, except in connection with existing
commitments under the Parent or Company Stock Plans but subject to the
obligations under subparagraph (iii) below, or permit any of its Subsidiaries to
purchase or otherwise acquire, any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its capital
stock;
(iii) Neither it nor any of its Subsidiaries shall
take any action that would prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code or that would
cause any of its representations and warranties in this Agreement to become
untrue in any material respect;
(iv) Neither it nor any of its ERISA Affiliates
shall: (A) accelerate, amend or change the period of exercisability of or
terminate, establish, adopt, enter into, make any new grants or awards of
stock-based compensation or other benefits under any Compensation and Benefit
Plans; (B) amend or otherwise modify any Compensation and Benefit Plans; or (C)
increase the salary, wage, bonus or other compensation of any directors,
officers or key employees, in the case of (A), (B) and (C), except (x) for
grants or awards to directors, officers and employees of it or its Subsidiaries
under existing Compensation and Benefit Plans in such amounts and on such terms
as are consistent with past practice, (y) in the normal and usual course of its
business (which may include normal periodic performance reviews and related
compensation and benefit increases and the provision of individual Compensation
and Benefit Plans consistent with past practice for promoted or newly hired
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officers and employees on terms consistent with past practice); provided, that
it shall not take such action unless it shall have provided the other party with
prior reasonable notice, or (z) for actions necessary to satisfy existing
contractual obligations under Compensation and Benefit Plans existing as of the
date of this Agreement;
(v) Neither it nor any of its Subsidiaries shall
incur, repay or retire prior to maturity or refinance any indebtedness for
borrowed money or guarantee any such indebtedness or issue, sell, repurchase or
redeem prior to maturity any debt securities or warrants or rights to acquire
any debt securities or guarantee any debt securities of others, in all such
cases in excess of, in the aggregate, $25,000;
(vi) Neither it nor any of its Subsidiaries shall
issue, deliver, sell, pledge or encumber shares of any class of its capital
stock or any securities convertible or exchangeable into, or any rights,
warrants or options to acquire, any such shares except Parent Common Stock or
Company Shares issued pursuant to options and other awards outstanding on the
date of this Agreement under the Parent or Company Stock Plans, awards of
options and other awards granted hereafter under the Parent or Company Stock
Plans in accordance with this Agreement and Parent Common Stock or Company
Shares issuable pursuant to such awards;
(vii) Neither it nor any of its Subsidiaries shall
authorize, propose or announce an intention to authorize or propose, or enter
into an agreement with respect to, any merger, consolidation or business
combination (other than the Merger), or any purchase, sale, lease, license or
other acquisition or disposition of any business or of a material amount of
assets or securities except for transactions entered into in the normal and
usual course of its business;
(viii) Neither the Parent nor the Company shall make
any material change in its accounting policies or procedures, other than any
such change that is required by GAAP;
(ix) Neither the Parent nor the Company shall
release, assign, settle or compromise any material claims or litigation or make
any material tax election or settle or compromise any material federal, state,
local or foreign tax liability; and
(x) Neither it nor any of its Subsidiaries shall
authorize or enter into any agreement to do any of the foregoing.
(b) Parent and the Company agree that any written approval
obtained under this Section 7.1 must be signed by the Chief Executive Officer or
Chief Financial Officer of the respective party.
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7.2 Acquisition Proposals.
(a) The Company agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall direct and use its reasonable efforts to cause its and
its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) (the Company, its Subsidiaries and their officers, directors,
employees, agents and representatives being the "Company Representatives") not
to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving it,
or any purchase or sale of the consolidated assets (including without limitation
stock of Subsidiaries) of it or any of its Subsidiaries, taken as a whole,
having an aggregate value equal to 10% or more of its market capitalization, or
any purchase or sale of, or tender or exchange offer for, 10% or more of its or
any of its Subsidiaries' equity securities (any such proposal or offer being
referred to as an "Acquisition Proposal"). The Company further agrees that
neither it nor any of its Subsidiaries nor any of the officers and directors of
it or its Subsidiaries shall, and that it shall direct and use its reasonable
efforts to cause the Company Representatives not to, directly or indirectly,
have any discussion with or provide any confidential information or data to any
Person relating to or in contemplation of an Acquisition Proposal or engage in
any negotiations concerning an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal; provided,
however, that nothing contained in this Agreement shall prevent either the
Company or its Board of Directors from: (A) engaging in any discussions or
negotiations with or providing any information to, any Person in response to an
unsolicited bona fide written Acquisition Proposal by any such Person; or (B)
recommending such an unsolicited bona fide written Acquisition Proposal to the
shareholders of the Company if and only to the extent that, with respect to the
actions referred to in clause (A): (i) the Board of Directors of the Company
concludes in good faith (after consultation with its outside legal counsel and
its financial advisor) that such Acquisition Proposal is reasonably capable of
being completed, taking into account all legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal, and would, if
consummated, result in a transaction more favorable to the Company's
shareholders from a financial point of view than the transaction contemplated by
this Agreement (any such more favorable Acquisition Proposal being referred to
as a "Superior Proposal"), (ii) the Board of Directors of the Company determines
in good faith after consultation with outside legal counsel that such action is
necessary for the Board of Directors to comply with its fiduciary duty to the
Company's shareholders under applicable law and (iii) prior to providing any
information or data to any Person in connection with an Acquisition Proposal by
any such Person, the Board of Directors of the Company shall receive from such
Person an executed confidentiality agreement; provided, that such
confidentiality agreement shall contain terms that allow the Company to comply
with its obligations under this Section 7.2.
(b) The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. The
Company agrees that it will take the necessary steps to promptly inform each
Company Representative of the obligations
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undertaken in Section 7.2(a). The Company agrees that it will notify Parent
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any Company Representative indicating,
in connection with such notice, the name of such Person making such inquiry,
proposal, offer or request and the substance of any such inquiries, proposals or
offers. The Company thereafter shall keep Parent informed, on a current basis,
of the status and terms of any such inquiries, proposals or offers and the
status of any such discussions or negotiations. The Company also agrees that it
will promptly request each Person that has heretofore executed a confidentiality
agreement in connection with its consideration of any Acquisition Proposal to
return all confidential information heretofore furnished to such Person by or on
behalf of the Company or any of its Subsidiaries.
7.3 Post-Closing Shareholder Vote. As soon as practicable after the
Closing Date, the Parent will take, in accordance with applicable Law and its
certificate of incorporation and bylaws, all action that the Board of Directors
of the Parent deems reasonably necessary to effectuate (i) a reverse split of
the outstanding Parent Common Stock and (ii) any amendments that are necessary
or advisable to the Parent's Compensation and Benefit Plans, on terms agreeable
to the holders of a majority of the Parent Common Stock at such time.
7.4 Access; Consultation.
(a) Upon reasonable notice, and except as may be prohibited by
applicable Law, the Company and Parent each shall (and shall cause its
Subsidiaries to) afford to the other and its Subsidiaries, and the employees,
agents and representatives (including any investment banker, attorney or
accountant retained by either party) of either party or its Subsidiaries, as the
case may be, reasonable access, during normal business hours throughout the
period prior to the Effective Time, to its properties, books, Contracts and
records and, during such period, each shall (and shall cause its Subsidiaries
to) furnish promptly to the other all information concerning its business,
properties and personnel as may reasonably be requested, provided that no
investigation pursuant to this Section shall affect or be deemed to modify any
representation or warranty made by the Company, Parent or Merger Sub under this
Agreement, and provided, further, that the foregoing shall not require the
Company or Parent to permit any inspection, or to disclose any information, that
in the reasonable judgment of the Company or Parent, as the case may be, would
result in the disclosure of any trade secrets of third parties or violate any of
its obligations with respect to confidentiality if the Company or Parent, as the
case may be, shall have used all reasonable efforts to obtain the consent of
such third party to such inspection or disclosure. All requests for information
made pursuant to this Section shall be directed to an executive officer of the
Company or Parent, as the case may be, or such Person as may be designated by
any such executive officer, as the case may be.
(b) Subject to applicable Laws relating to the exchange of
information, from the date of this Agreement to the Effective Time, Parent and
the Company agree to consult with each other on a regular basis on a schedule to
be agreed with regard to their respective operations.
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7.5 Publicity. The initial press release with respect to the Merger
shall be a joint, mutually agreed press release. Thereafter, the Company and
Parent shall consult with each other prior to issuing any press releases or
otherwise making public announcements with respect to the Merger and the other
transactions contemplated by this Agreement and prior to making any filings with
any third party and/or any Governmental Entity (including any securities
exchange) with respect thereto, except as may be required by law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange.
7.6 Benefits.
(a) Stock Options.
(i) At the Effective Time, each outstanding option or
warrant to purchase Company Shares (a "Company Option") under the Company Stock
Plans, whether vested or unvested, shall be converted to an option or warrant (a
"Substitute Option") to acquire, on the same terms and conditions as were
applicable under such Company Option, a number of shares of Parent Common Stock
as set forth on Schedule 7.6(a).
(ii) As promptly as practicable after the Effective
Time, the Company shall deliver to the participants in the Company Stock Plans
appropriate notices setting forth such participants' rights pursuant to the
Substitute Options.
(b) Benefit Obligations. Subject to Section 7.6(a)(i), Parent
shall, and shall cause the Surviving Corporation to honor, pursuant to their
terms, all employee benefit obligations existing at the Closing Date to current
and former employees under the Company Compensation and Benefit Plans.
7.7 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such expense.
7.8 Indemnification of Officers and Directors. Parent and Merger Sub
agree that all rights to indemnification existing in favor of any of the present
or former officers or directors of the Company (the "Managers") as provided in
the Company's Certificate of Incorporation or Bylaws as in effect as of the date
hereof, and in any agreement between the Company and any Manager with respect to
matters occurring prior to the Effective Time, shall survive the Merger and all
obligations arising therefrom shall be assumed by Parent on behalf of the
Company. Parent further covenants not to amend or repeal any provisions of the
Certificate of Incorporation or Bylaws of the Company in any manner which would
adversely affect the indemnification or exculpatory provisions contained
therein. The provisions of this Section 7.8 are intended to be for the benefit
of, and shall be enforceable by, each indemnified party and his or her heirs and
representatives.
7.9 Post-Merger Indemnification. For a period of two years from the
Effective Time, the Parent shall either (x) maintain in effect the Company's
current directors' and officers' liability insurance covering those Managers who
are currently covered on the Agreement Date by the Company's directors' and
officers' liability insurance policy (a copy of which has been heretofore
delivered to Parent); provided, however, that the Surviving Corporation may
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substitute for such policies, policies with at least the same coverage
containing terms and conditions which are no less advantageous to the Managers
and provided that said substitution does not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time or (y) to
the extent applicable, cause Parent's directors' and officers' liability
insurance, if any, then in effect to cover those persons who are covered on the
date of this Agreement by the Company's directors' and officers' liability
insurance policy with respect to those matters covered by the Company's
directors' and officers' liability insurance policy. The provisions of this
Section 7.9 are intended to be for the benefit of, and shall be enforceable by,
each Manager and his or her heirs and representatives.
ARTICLE VIII.
Conditions
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver, if applicable, at or prior to the Effective Time, of
each of the following conditions:
(a) Shareholder Approval. This Agreement shall have been duly
adopted by holders of the required number of Company Shares, and, if applicable,
Company Preferred Shares, under applicable Law;
(b) Laws and Orders. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement (collectively, an "Order"),
and no Governmental Entity shall have instituted any proceeding or threatened to
institute any proceeding seeking any such Order;
(c) Blue Sky Approvals. Parent shall have received all state
securities and "blue sky" permits and approvals necessary to consummate the
transactions contemplated by this Agreement;
(d) Tax-Free Reorganization. The Merger shall qualify as a
tax-free reorganization within the meaning of Section 368(a) of the Code; and
(e) Board Composition. The Board of Directors of Parent shall
consist of five members, two of whom shall be satisfactory to the Parent and
three of whom shall be satisfactory to the Company.
8.2 Condition to Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to effect the Merger are also subject to the
satisfaction or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (i) to the extent
qualified by Material Adverse Effect shall be true and correct and (ii) to the
extent not qualified by Material Adverse Effect shall be true and correct
(except that this clause (ii) shall be deemed satisfied so long as any
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failures of such representations and warranties to be true and correct, taken
together, would not reasonably be expected to have a Material Adverse Effect on
the Company and would not reasonably be expected to have a material adverse
effect on the expected benefits of the Merger to Parent), in the case of each of
(i) and (ii), as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date;
(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;
(c) Officer's Certificate. The Company shall have delivered to
the Parent a certificate signed on behalf of the Company by an executive officer
of the Company certifying to the matters set forth in (a) and (b) above;
(d) Consents Under Agreements. The Company shall have obtained
the consent or approval of each Person whose consent or approval shall be
required in order to consummate the transactions contemplated by this Agreement
under any Contract to which the Company or any of its Subsidiaries is a party,
except those for which the failure to obtain such consent or approval,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect on the Company or a material adverse effect on the expected
benefits of the Merger to Parent;
(e) Equity Line. Parent and a third party indicated thereon
shall have executed and delivered an Equity Line Financing Agreement in a form
mutually agreeable to the parties thereto and the Company (the "Equity Line");
(f) Revolver. Parent and a third party indicated thereon shall
have executed and delivered a Revolving Credit Facility in a form mutually
agreeable to the parties thereto and the Company (the "Revolver");
(g) Security Agreement. Parent, Company and any other party
indicated thereon shall have executed and delivered a Security Agreement in a
form mutually agreeable to the parties thereto (the "Security Agreement");
(h) Guaranty. Parent, Company and any other party indicated
thereon shall have executed and delivered a Guaranty in a form mutually
agreeable to the parties thereto (the "Guaranty");
(i) Debenture. Parent and Xxxxxxx LLC ("Xxxxxxx"), shall have
executed and delivered an Amended and Restated Debenture in a form mutually
agreeable to the parties thereto (the "Debenture");
(j) Appraisal Rights. No holder of Company Shares shall have
demanded appraisal pursuant to Section 262 of the DGCL;
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(k) Employment Agreements. The Parent shall have executed and
delivered an employment agreement with each of Xxxxx Xxxxxxxx and Xxxxxxxx
Postelnk (collectively the "Employment Agreements"); and
(l) Conversion of all Outstanding Securities. There shall not
be any securities outstanding that are convertible into either common or
preferred stock of the Company.
8.3 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement (i) to the
extent qualified by Material Adverse Effect shall be true and correct, and (ii)
to the extent not qualified by Material Adverse Effect shall be true and correct
(except that this clause (ii) shall be deemed satisfied so long as any failures
of such representations and warranties to be true and correct, taken together,
would not reasonably be expected to have a Material Adverse Effect on Parent),
in the case of each of (i) and (ii), as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date;
(b) Performance of Obligations of Parent and Merger Sub. Each
of Parent and Merger Sub 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;
(c) Officer's Certificate. The Parent shall have delivered to
the Company a certificate signed on behalf of the Parent by an executive officer
of the Parent certifying to the matters set forth in (a) and (b) above;
(d) Consents Under Agreements. Each of Parent and Merger Sub
shall have obtained the consent or approval of each Person whose consent or
approval shall be required in order to consummate the transactions contemplated
by this Agreement under any Contract to which the Parent or Merger Sub is a
party, except those for which the failure to obtain such consent or approval,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect on the Parent or Merger Sub or a material adverse effect on the
expected benefits of the Merger to Company;
(e) Equity Line. Parent and a third party shall have executed
and delivered the Equity Line;
(f) Revolver. Parent and a third party shall have executed and
delivered the Revolver;
(g) Security Agreement. Parent, Company and any other party
indicated thereon shall have executed and delivered the Security Agreement;
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(h) Guaranty. Parent, Company and any other party indicated
thereon shall have executed and delivered the Guaranty;
(i) Debenture. Parent and Xxxxxxx shall have executed and
delivered the Debenture; and
(j) Employment Agreements. Parent and the parties thereto
shall have executed and delivered the Employment Agreements.
ARTICLE IX.
Termination
9.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by shareholders of the Company referred to in
Section 8.1(a), by mutual written consent of the Company and Parent, through
action of their respective Boards of Directors.
9.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if (i)
the Merger shall not have been consummated by January 31, 2001 (the "Termination
Date"), (ii) the adoption of this Agreement by the Company's shareholders
required by Section 8.1(a) shall not have occurred at a meeting duly convened
therefore or at any adjournment or postponement thereof, or (iii) any Order
permanently restraining, enjoining or otherwise prohibiting consummation of the
Merger shall become final and non-appealable (whether before or after the
adoption or approval by the shareholders of the Company); provided, that the
right to terminate this Agreement pursuant to clause (i) above shall not be
available to any party that has breached in any material respect its obligations
under this Agreement in any manner that shall have approximately contributed to
the failure of the Merger to be consummated.
9.3 Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the adoption of this Agreement by the shareholders of the
Company referred to in Section 8.1(a), by action of the Board of Directors of
the Company:
(a) If (i) the Company shall not have breached any of the
terms of this Agreement in a manner resulting in failure of a condition set
forth in Section 8.2(a) or 8.2(b), (ii) the Board of Directors of the Company
determines in good faith after consultation with outside legal counsel that, in
order for the Board of Directors to comply with its fiduciary duty to the
Company's stockholders under applicable Law, the Company must accept a Superior
Proposal unless Parent matches that Superior Proposal, (iii) the Board of
Directors of the Company approves entering into a binding written agreement
concerning a transaction that constitutes a Superior Proposal and the Company
notifies Parent in writing that the Company wishes to enter into such agreement,
(iv) Parent does not make, within ten (10) business days after receipt of the
Company's written notification of its desire to enter into a binding agreement
for a Superior Proposal, an offer that the Board of Directors of the
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Company believes, in good faith after consultation with its financial advisors,
is at least as favorable, from a financial point of view, to the shareholders of
the Company as the Superior Proposal and (v) the Company enters into a binding
written agreement for a Superior Proposal at the same time that it terminates
this Agreement. The Company agrees to notify Parent promptly if its desire to
enter into a written agreement referred to in its notification shall change at
any time after giving such notification; or
(b) If there has been a material breach by Parent or Merger
Sub of any representation, warranty, covenant or agreement contained in this
Agreement which (x) would result in a failure of a condition set forth in
Section 8.3(a) or 8.3(b) and (y) cannot be or is not cured prior to the
Termination Date.
9.4 Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the shareholders of the Company referred to in Section 8.1(a),
by action of the Board of Directors of Parent if:
(a) the Board of Directors of the Company shall have withdrawn
or adversely modified its approval or recommendation of this Agreement, or
failed to reconfirm its recommendation of this Agreement to the Company's
shareholders within 15 business days after a written request by Parent to do so;
or
(b) there has been a material breach by the Company of any
representation, warranty, covenant or agreement contained in this Agreement
which (i) would result in a failure of a condition set forth in Section 8.2(a)
or 8.2(b) and (ii) cannot be or is not cured prior to the Termination Date.
9.5 Effect of Termination and Abandonment. In the event of termination
of this Agreement and the abandonment of the Merger in accordance with the
provisions of this Article IX, this Agreement shall become void and of no effect
with no liability on the part of any party to this Agreement or of any of its
directors, officers, employees, agents, legal or financial advisors or other
representatives.
ARTICLE X.
Indemnification and Survival
10.1 Indemnification of the Company. In the event that the Parent or
Merger Sub has (a) committed any breach of a representation or warranty in this
Agreement or (b) materially breached any agreement or covenant under this
Agreement, from and after the Closing Date, Xxxxxxx LLC, shall indemnify and
hold the Company harmless from and against any and all damages (including
exemplary damages and penalties), losses, deficiencies, costs, expenses,
obligations, fines, expenditures, claims and liabilities, including reasonable
counsel fees and reasonable expenses of investigation, defending and prosecuting
litigation.
10.2 Xxxxxxx. Xxxxxxx recognizes that immediately following the Closing
Date, the current stockholders of the Company will own a substantial interest in
the Parent.
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Further, Xxxxxxx acknowledges that it will derive significant benefit from this
transaction. Therefore, Xxxxxxx has agreed to the provisions set forth in
Section 10.1, except that Xxxxxxx'x liability is hereby limited to, and shall in
no event exceed, $500,000. The only recourse of the Company (or any other Person
claiming indemnity under this Article 10) for such indemnification shall be the
right to offset against amounts outstanding under the Debenture.
10.3 Survival. The liability of Xxxxxxx shall be limited to claims for
which the Company delivers written notice to Xxxxxxx on or before the third
anniversary date of the Closing Date.
ARTICLE XI.
Miscellaneous and General
11.1 Modification or Amendment. Subject to the provisions of the
applicable law, the parties to this Agreement may modify or amend this
Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties.
11.2 Waiver. No failure or delay by any party in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. Except
as otherwise provided in this Agreement, the rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by Law.
11.3 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
11.4 Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in all
respects shall be interpreted, construed and governed by and in accordance with
Delaware law without regard to the conflict of law principles thereof. The
parties hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States of America located in Wilmington, Delaware (the "Delaware Courts") for
any litigation arising out of or relating to this Agreement and the transactions
contemplated by this Agreement (and agree not to commence any litigation
relating thereto except in such Delaware Courts), waive any objection to the
laying of venue of any such litigation in the Delaware Courts and agree not to
plead or claim in any Delaware Court that such litigation brought therein has
been brought in an inconvenient forum.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY
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LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.5.
11.5 Notices. Notices, requests, instructions or other documents to be
given under this Agreement shall be in writing and shall be deemed given, (i)
three business days following sending by registered or certified mail, postage
prepaid, (ii) when sent if sent by facsimile, provided that receipt of the fax
is promptly confirmed by telephone, (iii) when delivered, if delivered
personally to the intended recipient, and (iv) one business day later, if sent
by overnight delivery via a national courier service, and in each case,
addressed to a party at the following address for such party:
If to Parent or Merger Sub:
Corzon, Inc.
0000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Chief Executive Officer and General Counsel
Fax: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xx. Xxxx X. Xxxx
Fax: (000) 000-0000
If to the Company:
LecStar Communications Corporation
0000 Xxxxxx 00 Xxxxxxx, Xxxxx X-0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: President
Fax: (000) 000-0000
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with a copy (which shall not constitute notice) to:
Xxxxxx, Golden & Xxxxxxx, LLP
2800 One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxxx
Fax: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
11.6 Entire Agreement. This Agreement (including any schedules to this
Agreement) constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties both written and
oral, among the parties, with respect to the subject matter of this Agreement.
EACH PARTY TO THIS AGREEMENT AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER PARENT AND MERGER SUB NOR THE
COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS
ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR
OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
11.7 No Third Party Beneficiaries. Except as provided in Section 7.6
(Benefits), Section 7.8 (Indemnification of Officers and Directors) and Section
7.9 (Post-Merger Indemnification), this Agreement is not intended to confer upon
any Person other than the parties to this Agreement any rights or remedies under
this Agreement.
11.8 Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
11.9 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions of this Agreement.
If any provision of this Agreement, or the application thereof to any Person or
any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefore in order to carry out, so far as
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may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
11.10 Interpretation. The table of contents and headings in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement. Where a reference in this Agreement is made to a
schedule, such reference shall be to a schedule to this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
11.11 Captions. The Article, Section and paragraph captions in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement.
11.12 Assignment. This Agreement shall not be assignable by operation
of law or otherwise. Any assignment in contravention of the preceding sentence
shall be null and void.
* * * * *
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IN WITNESS WHEREOF, this Agreement and Plan of Merger has been duly
executed and delivered by the duly authorized officers of the parties to this
Agreement and Plan of Merger as of the date first written above.
LECSTAR COMMUNICATIONS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
CORZON, INC.
By: /s/ Xxxxx Xxxxxxxx
------------------------------
Name: Xxxxx Xxxxxxxx
Title: President
LECSTAR ACQUISITION CORPORATION
By: /s/ Xxxx X. Xxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxx
Title: President and Secretary
XXXXXXX LLC
By: /s/ Xxxxxx xx Xxxxxx
------------------------------
Name: Navigator Management Ltd.
Title: Director
Xxxxxxx LLC is executing this Agreement
and Plan of Merger for the sole purpose
of acknowledging its obligations under
Article 10 hereof.
39
EXHIBIT A
FORM OF STATEMENT OF RESOLUTION
40
STATEMENT OF RESOLUTION
ESTABLISHING SERIES OF SHARES
OF PREFERRED STOCK
OF CORZON, INC.
Pursuant to the provisions of Article 2.13 of the Texas Business
Corporation Act, the undersigned, Corzon, Inc., a Texas corporation (the
"Company"), submits the following statement for the purpose of establishing and
designating a series of shares and fixing and determining the preferences,
limitations, and relative rights thereof:
1. The name of the Company is Corzon, Inc.
2. Attached hereto as Annex A is a copy of a resolution establishing
and designating, and fixing and determining the preferences, limitations, and
relative rights of, a series of preferred stock designated as the Company's
Series F Convertible Preferred Stock.
3. The date of adoption of such resolution was January 3, 2001.
4. Such resolution was duly adopted by all necessary action on the part
of the Company.
CORZON, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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ANNEX A
RESOLUTION ESTABLISHING AND DESIGNATING
SERIES F CONVERTIBLE PREFERRED STOCK
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Company (the "Board") in accordance with the
provisions of the Articles of Incorporation of the Company, as amended, and
Article 2.13 of the Texas Business Corporation Act, the Board hereby establishes
a series of the Company's preferred stock, par value $1.00 per share (the
"Preferred Stock"), and hereby fixes and determines the number and the
designations, preferences, limitations and relative rights thereof as follows:
1. Designation and Amount. The shares of such series of the Company's
Preferred Stock shall be designated as "Series F Convertible Preferred Stock"
(the "Series F Stock") and the number of shares constituting the Series F Stock
shall be One Hundred (100). Such number of shares may be increased or decreased
by resolution of the Board, subject to Section 2; provided, that no decrease
shall reduce the number of shares of Series F Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion, exercise or exchange of any outstanding securities issued by the
Company convertible, exercisable or exchangeable into Series F Stock.
2. Voting.
(a) General. Except as otherwise set forth in this Section 2,
each holder of Series F Stock will have the right to one vote for each share of
Series F Stock held by such holder. The holders of Series F Stock shall be
entitled to notice of any shareholders' meeting and to vote upon any matter
submitted to the Company's shareholders for a vote, as though the Common Stock
and the Series F Stock, and any other class or series of stock with pari passu
voting rights constituted a single class of stock.
(b) Class Vote. Notwithstanding Section 2(a) above, the
affirmative consent of the holders of at least two-thirds (2/3) of the shares of
Series F Stock outstanding, voting together as a single voting group, shall be
necessary for authorizing, effecting or validating any of the following:
(i) any amendment to the terms of the Series F Stock
that materially adversely alters the rights, preferences and
privileges of the Series F Stock; and
(ii) all matters required by law to be approved by
the holders of Series F Stock voting together as a separate
voting group.
(c) Board Vote. Notwithstanding Section 2(a) above, the vote
or affirmative consent of the entire Board shall be necessary for authorizing,
effecting or validating the issuance of any new shares of capital stock of the
Company that are senior to the Series F Stock with respect to rights of
distribution, liquidation, winding up or dissolution.
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3. Dividends. The holders of the Series F Stock shall be entitled to
receive dividends when, as and if declared by the Board, out of funds legally
available therefore, on each outstanding share, in an amount equal to the
dividends paid on such number of shares of Common Stock into which such share of
Series F Stock, on the record date for such dividend payment, is convertible.
The right to such dividends on the Series F Stock shall not be cumulative. No
such dividend shall be paid with respect to the Common Stock during any fiscal
year unless and until such dividend is declared and paid with respect to all
outstanding shares of Series F Stock in an amount equal to the dividends paid on
such number of shares of Common Stock into which such share of Series F Stock,
on the record date for such dividend payment, is convertible.
4. Liquidation Preference. In the event of any liquidation,
dissolution, or winding up of the Company, either voluntary or involuntary:
(a) The holders of the Series F Stock shall be entitled to
receive, upon any distribution of any of the assets of the Company to the
holders of Common Stock by reason of their ownership in such stock, an amount
per share of Series F Stock equal to the distribution paid on such number of
shares of Common Stock into which such share of Series F Stock, on the record
date for such distribution, is convertible (the "Liquidation Amount").
(b) For purposes of this Section 4, the sale by the Company of
all or substantially all of its assets or a merger or consolidation of the
Company with or into any other entity or entities in which the shareholders of
the Company immediately prior to the sale, merger or consolidation do not own
more than fifty percent (50%) of the outstanding voting power (assuming
conversion of all convertible securities and the exercise of all outstanding
options and warrants) of the surviving company (any such transaction being a
"Change of Control Event"), shall, at the election of the holders of a majority
of the Series F Stock, be treated as liquidation, dissolution or winding up of
the Company.
5. Conversion.
(a) Optional Conversion. Upon a vote of the holders of
two-thirds of the shares of Series F Stock outstanding, the holders shall have
the right at any time, and without the payment of any additional consideration
therefor, to convert all of the outstanding shares of Series F Stock into
Twenty-Five Million Three Hundred Thirty-Three Thousand Three Hundred
Thirty-Three (25,333,333) shares of Common Stock (the "Conversion Shares"). The
number of Conversion Shares set forth in the preceding sentence has been
determined upon the assumption that after the effective time of the Merger and
prior to the conversion of the Series F Stock, the aggregate number of
outstanding shares of Common Stock has been reduced to one (1) share for each
sixty (60) shares outstanding. If, at the time of conversion of the Series F
Stock, the number of outstanding shares has not been reduced, or has been
reduced by a ratio of other than 1-for-60, then the number of Conversion Shares
shall be increased or decreased proportionately. Each share of Series F Stock
shall be convertible into the number of Conversion Shares equal to the ratio
that the aggregate number of shares of Series F Stock issued bears to the
aggregate number of shares of Conversion Shares issuable upon the conversion of
the Series F Stock.
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(b) Automatic Conversion. Immediately after the effective date
of a reverse split of the outstanding common stock of the Company, without any
further action required on the part of the Company or the holders of the then
outstanding Series F Stock, the Series F Stock shall be automatically converted
into Twenty-Five Million Three Hundred Thirty-Three Thousand Three Hundred
Thirty-Three (25,333,333) Conversion Shares. The number of Conversion Shares set
forth in the preceding sentence has been determined upon the assumption that
after the effective time of the Merger and prior to the conversion of the Series
F Stock, the aggregate number of outstanding shares of Common Stock has been
reduced to one (1) share for each sixty (60) shares outstanding. If, at the time
of conversion of the Series F Stock, the number of outstanding shares has not
been reduced, or has been reduced by a ratio of other than 1-for-60, then the
number of Conversion Shares shall be increased or decreased proportionately.
Each share of Series F Stock shall be convertible into the number of Conversion
Shares equal to the ratio that the aggregate number of shares of Series F Stock
issued bears to the aggregate number of shares of Conversion Shares issuable
upon the conversion of the Series F Stock.
(c) Mechanics of Conversion. Before any holder of Series F
Stock converts any such shares into shares of Common Stock pursuant to Section
5(a) herein, such holder shall surrender any certificate or certificates
evidencing the shares to be converted at that time, duly endorsed, at the
principal office of the Company and shall give written notice to the Company at
such office of the election to convert such shares into shares of Common Stock.
The notice shall state the total number of shares of Series F Stock to be
converted and the name of the holder or the name(s) of the nominee(s) of such
holder in which any certificates for shares of Common Stock are to be issued.
The Company shall, as soon as practicable thereafter, issue and deliver at such
office to such holder or such nominee(s), a certificate or certificates for the
number of full shares of Common Stock to which such holder or such nominee(s) is
entitled. Any conversion shall be deemed to occur immediately prior to the close
of business on the date of surrender of the shares to be converted or, in the
case of automatic conversion, on the date specified in Section 5(b) above, and
the Person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(d) No Fractional Units. No fractional units or scrip
representing fractional units shall be issued upon conversion of any shares of
Series F Stock. If, upon conversion of any shares of Series F Stock, the holder
would, except for the provisions of this Section 5(d), be entitled to a receive
a fractional share of Common Stock, then the number of shares of Common Stock to
be so issued shall be rounded to the nearest whole number.
(e) Shares Free and Clear. All shares of Common Stock issued
in connection with the conversion provisions set forth herein shall be, upon
issuance by the Company, validly issued, fully paid and nonassessable and free
from all taxes, liens or charges with respect thereto created or imposed by the
Company.
(f) Other Adjustments. The Company will not, by amendment of
its Articles of Incorporation, Bylaws or through any reorganization, transfer of
assets, reclassification, merger, dissolution, issue or sale of securities or
otherwise, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by the Company hereunder but will at all times
in good faith assist in the carrying out of all the provisions hereof and in the
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taking of all such actions as may be necessary or appropriate in order to
protect the rights of the holders of Series F Stock against impairment.
(g) Common Stock Reserved. The Company shall use its best
efforts to reserve and keep available out of its authorized but unissued shares
of Common Stock such number of shares of Common Stock as shall from time to time
be sufficient to effect conversion of the shares of Series F Stock.
6. Reacquired Shares. Any shares of Series F Stock purchased or
otherwise acquired by the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall, upon
their cancellation, become authorized but unissued shares of Series F Stock and
may be reissued as part of the current or a new series of preferred stock
subject to the conditions and restrictions on issuance set forth herein, in the
Articles of Incorporation of the Company, or in any other resolution creating a
series of Preferred Stock or any similar stock or as otherwise required by law.
7. Definitions. The following terms shall have the meanings indicated:
"Common Stock" means Common Stock (as defined in the Company's Articles
of Incorporation) and any capital stock of any class of the Company hereafter
authorized which is not limited to a fixed sum or percentage of stated value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"LecStar" means LecStar Communications Corporation, a Delaware
corporation.
"Merger" means the merger of Merger Sub with and into LecStar, as filed
with the Secretary of State of Delaware.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
January 5, 2001, the Company, LecStar and Merger Sub.
"Merger Sub" means LecStar Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Company.
"Person" means an individual, a partnership, a corporation, a limited
liability company, a trust, a joint venture, an unincorporated organization or
any department or agency thereof.
5
