EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LCI INTERNATIONAL, INC.
LCI ACQUISITION CORP.
and
USLD COMMUNICATIONS CORP.
Dated as of September 17, 1997
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.1 The Merger ..................................... 2
SECTION 1.2 Effective Time ................................. 2
SECTION 1.3 Effect of the Merger ........................... 2
SECTION 1.4 Certificate of Incorporation; By-Laws .......... 2
SECTION 1.5 Directors and Officers ......................... 3
SECTION 1.6 Effect on Capital Stock ........................ 3
SECTION 1.7 Exchange of Certificates ....................... 6
SECTION 1.8 Stock Transfer Books ........................... 7
SECTION 1.9 No Further Ownership Rights in Company
Common Stock ................................ 8
SECTION 1.10 Lost, Stolen or Destroyed Certificates ......... 8
SECTION 1.11 Tax and Accounting Consequences ................ 8
SECTION 1.12 Taking of Necessary Action; Further Action ..... 8
SECTION 1.13 Material Adverse Effect ........................ 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 2.1 Corporate Organization ......................... 9
SECTION 2.2 Capitalization ................................. 9
SECTION 2.3 Subsidiaries ................................... 9
SECTION 2.4 No Commitments to Issue Capital Stock ..........10
SECTION 2.5 Authorization; Execution and Delivery ..........10
SECTION 2.6 Governmental Approvals and Filings .............11
SECTION 2.7 No Conflict ....................................11
SECTION 2.8 SEC Filings ....................................12
SECTION 2.9 Financial Statements; Absence of Undisclosed
Liabilities; Receivables ....................12
SECTION 2.10 Certain Other Financial Representations ........13
SECTION 2.11 Absence of Changes .............................13
SECTION 2.12 Tax Matters ....................................14
SECTION 2.13 Relations with Employees and Sales Agents ......16
SECTION 2.14 Benefit Plans ..................................17
SECTION 2.15 Title to Properties ............................19
SECTION 2.16 Compliance with Laws; Legal Proceedings ........19
SECTION 2.17 Brokers ........................................19
SECTION 2.18 Intellectual Property ..........................19
SECTION 2.19 Insurance ......................................20
-i-
Page
SECTION 2.20 Contracts; etc. ................................20
SECTION 2.21 Permits, Authorizations, etc ...................22
SECTION 2.22 Environmental Matters ..........................22
SECTION 2.23 Company Acquisitions ...........................23
SECTION 2.24 Books and Records ..............................23
SECTION 2.25 Interested Party Transactions ..................24
SECTION 2.26 Opinion of Financial Advisor ...................24
SECTION 2.27 Pooling Matters ................................24
SECTION 2.28 Registration Statement; Joint Proxy
Statement/Prospectus ........................24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
SECTION 3.1 Corporate Organization .........................25
SECTION 3.2 Capitalization .................................25
SECTION 3.3 Subsidiaries ...................................25
SECTION 3.4 No Commitments to Issue Capital Stock ..........26
SECTION 3.5 Authorization; Execution and Delivery ..........26
SECTION 3.6 Governmental Approvals and Filings .............27
SECTION 3.7 No Conflict ....................................27
SECTION 3.8 SEC Filings ....................................27
SECTION 3.9 Financial Statements; Absence of Undisclosed
Liabilities; Receivables ....................28
SECTION 3.10 Absence of Changes .............................29
SECTION 3.11 Tax Matters ....................................29
SECTION 3.12 Relations with Employees and Sales Agents ......31
SECTION 3.13 Benefit Plans ..................................31
SECTION 3.14 Title to Properties ............................32
SECTION 3.15 Compliance with Laws; Legal Proceedings ........32
SECTION 3.16 Brokers ........................................32
SECTION 3.17 Intellectual Property ..........................33
SECTION 3.18 Contracts; etc. ................................33
SECTION 3.19 Permits, Authorizations, etc. ..................34
SECTION 3.20 Environmental Matters ..........................34
SECTION 3.21 Books and Records ..............................34
SECTION 3.22 Pooling Matters ................................34
SECTION 3.23 Registration Statement; Joint Proxy
Statement/Prospectus ........................35
SECTION 3.24 Ownership of Merger Sub; No Prior Activities ...35
-ii-
Page
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by the Company Pending
the Merger ..................................36
SECTION 4.2 No Solicitation ................................38
SECTION 4.3 Conduct of Business by Parent Pending
the Merger ..................................40
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Joint Proxy Statement/Prospectus;
Registration Statement ......................41
SECTION 5.2 Company Stockholders Meeting ...................41
SECTION 5.3 Parent Stockholders Meeting ....................41
SECTION 5.4 Access to Information; Confidentiality .........42
SECTION 5.5 Consents; Approvals ............................42
SECTION 5.6 Agreements with Respect to Affiliates ..........42
SECTION 5.7 Indemnification and Insurance ..................42
SECTION 5.8 Notification of Certain Matters ................44
SECTION 5.9 Further Action/Tax Treatment ...................44
SECTION 5.10 Public Announcements; Communications with
Employees ...................................45
SECTION 5.11 Listing of Parent Common Stock .................45
SECTION 5.12 Conveyance Taxes ...............................45
SECTION 5.13 Accountant's Letters ...........................45
SECTION 5.14 Pooling Accounting Treatment ...................45
SECTION 5.15 Rights Agreement ...............................46
SECTION 5.16 Delivery of Certain Reports ....................46
SECTION 5.17 Receipt of Acknowledgments......................46
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Obligation of Each Party
to Effect the Merger ....................... 46
SECTION 6.2 Additional Conditions to Obligations of
Parent and Merger Sub .......................48
SECTION 6.3 Additional Conditions to Obligation of
the Company .................................49
-iii-
Page
ARTICLE VII
TERMINATION
SECTION 7.1 Termination ....................................50
SECTION 7.2 Effect of Termination ..........................52
SECTION 7.3 Fees and Expenses ..............................52
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Effectiveness of Representations,
Warranties and Agreements ...................53
SECTION 8.2 Notices ........................................54
SECTION 8.3 Certain Definitions ............................55
SECTION 8.4 Amendment ......................................55
SECTION 8.5 Waiver .........................................55
SECTION 8.6 Headings; Construction .........................56
SECTION 8.7 Severability ...................................56
SECTION 8.8 Entire Agreement ...............................56
SECTION 8.9 Assignment; Merger Sub. ........................57
SECTION 8.10 Parties in Interest ............................57
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies
Cumulative ..................................57
SECTION 8.12 Governing Law ..................................57
SECTION 8.13 Counterparts ...................................57
SECTION 8.14 WAIVER OF JURY TRIAL ...........................57
-iv-
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of September 17,
1997 (this "Agreement"), among LCI INTERNATIONAL, INC., a Delaware
corporation ("Parent"), LCI ACQUISITION CORP., a Delaware
corporation and a direct, wholly-owned subsidiary of Parent
("Merger Sub"), and USLD COMMUNICATIONS CORP., a Delaware
corporation (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Boards of Directors of Parent, Merger Sub
and the Company have each determined that it is advisable and in
the best interests of their respective stockholders for Parent to
cause Merger Sub to merge with and into the Company upon the terms
and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards
of Directors of Parent, Merger Sub and the Company have each
approved the merger (the "Merger") of Merger Sub with and into the
Company in accordance with the applicable provisions of the
Delaware General Corporation Law (the "DGCL"), and upon the terms
and subject to the conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by
approving resolutions authorizing this Agreement, to adopt this
Agreement as a plan of reorganization within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations promulgated thereunder;
WHEREAS, Parent, Merger Sub and the Company intend that
the Merger be accounted for as a pooling-of-interests for financial
reporting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share
(a "Share") of the Company's Common Stock, par value $0.01 per
share (together with the preferred stock purchase right associated
therewith, the "Company Common Stock"), shall be converted into the
right to receive the Merger Consideration (as defined in Section
1.7(b)), upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to
be legally bound hereby, Parent, Merger Sub and the Company hereby
agree as follows:
-1-
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. (a) EFFECTIVE TIME. At the
Effective Time (as defined in Section 1.2), and subject to and upon
the terms and conditions of this Agreement and the DGCL, Merger Sub
shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue
as the surviving corporation. The Company as the surviving
corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
(b) CLOSING. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 7.1 and subject to the satisfaction
or waiver of the conditions set forth in Article VI, the closing
under this Agreement (the "Closing") will take place on or as
promptly as practicable (and in any event within two Business Days)
after satisfaction or waiver of the conditions set forth in Article
VI at the offices of Kramer, Levin, Naftalis & Xxxxxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, unless another date, time or place is
agreed to in writing by the parties hereto. The day in which the
Closing takes place is called the "Closing Date."
SECTION 1.2 EFFECTIVE TIME. On the Closing Date or as
promptly as practicable thereafter (and in any event within one
Business Day thereafter), the parties hereto shall cause the Merger
to be consummated by filing a certificate of merger as contemplated
by the DGCL (the "Certificate of Merger"), together with any
required related certificates, with the Secretary of State of the
State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (the time of
such filing being the "Effective Time").
SECTION 1.3 EFFECT OF THE MERGER. At the Effective
Time, the effect of the Merger shall be as provided in this
Agreement, the Certificate of Merger and the applicable provisions
of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub
shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.4 CERTIFICATE OF INCORPORATION; BY-LAWS. (a)
CERTIFICATE OF INCORPORATION. Unless otherwise determined by
Parent prior to the Effective Time, at the Effective Time 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 until thereafter
amended as provided by the DGCL and such Certificate of
Incorporation; PROVIDED, HOWEVER, that Section 3 thereof shall be
amended and restated in its entirety to provide that the Surviving
Corporation may engage in any lawful act or activity for which
corporations may be organized under the DGCL.
-2-
(b) BY-LAWS. The By-Laws of the Company, as in effect
immediately prior to the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended as provided by
the DGCL, the Certificate of Incorporation of the Surviving
Corporation and such By-Laws; PROVIDED, HOWEVER, that Article III,
Section 3.01 thereof shall be amended and restated in its entirety
to provide that the Surviving Corporation's Board shall consist of
not less than three members, all of a single class, with the exact
number to be fixed from time to time by resolution of the Board of
Directors.
SECTION 1.5 DIRECTORS AND OFFICERS. The directors of
Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and By-Laws of
the Surviving Corporation, and the officers of the Company
immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
SECTION 1.6 EFFECT ON CAPITAL STOCK. At the Effective
Time, by virtue of the Merger and without any action on the part of
the Parent, Merger Sub, the Company or the holders of any of the
following securities:
(a) CONVERSION OF SECURITIES. Each Share issued and
outstanding immediately prior to the Effective Time (excluding any
Shares to be canceled pursuant to Section 1.6(b)) shall be
cancelled and extinguished and automatically converted, subject to
Section 1.6(f), into the right to receive validly issued, fully
paid and nonassessable shares of Common Stock, par value $0.01, of
Parent (together with the preferred stock purchase rights
associated therewith, the "Parent Common Stock") in the applicable
ratio (the "Exchange Ratio") as follows:
* If the Average Stock Price (as hereinafter defined)
is greater than or equal to $21.60 but less than or
equal to $26.40, the Exchange Ratio shall be equal
to $20.00 divided by the Average Stock Price.
* If the Average Stock Price is more than $26.40, the
Exchange Ratio shall be equal to .7576.
* Except as provided in the following paragraph, if
the Average Stock Price is less than $21.60, the
Exchange Ratio shall be equal to .9259.
* If the Average Stock Price is less than $20.40 and
the Company and Parent deliver their respective
notices specified in Section 7.1(i), the Exchange
Ratio shall be equal to $18.90 divided by the
Average Stock Price (or such higher ratio as
specified in Parent's notice).
Capitalized terms used in this section have the following
meanings:
"Average Stock Price" means the average of the Daily Per
Share Prices for the twenty (20) consecutive trading days
ending on the third trading day prior to the
-3-
Company Stockholders Meeting (as defined in Section 2.28);
PROVIDED, HOWEVER, that, except with respect to Section
7.1(i), if the Closing Date occurs more than three trading
days after the Company Stockholders Meeting, such consecutive
trading days shall end on the second trading day prior to the
Closing Date.
"Daily Per Share Price" for any trading day means the
weighted average of the per share selling prices on the New
York Stock Exchange, Inc. (the "NYSE") of Parent Common Stock
(as reported in the NYSE Composite Transactions) for that day;
PROVIDED, HOWEVER, that if the Parent Common Stock does not
trade on any day in such period, the Daily Per Share Price for
such day means the average of the closing bid and asked prices
of Parent Common Stock on such day.
(b) CANCELLATION. Each Share held in the treasury of
the Company and each Share owned by Parent, Merger Sub or any
direct or indirect wholly owned subsidiary of the Company or Parent
immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof,
cease to be outstanding, be canceled and retired without payment of
any consideration therefor and cease to exist.
(c) ASSUMPTION OF OUTSTANDING STOCK OPTIONS AND
WARRANTS. (i) Each option outstanding at the Effective Time to
purchase shares of Company Common Stock (a "Stock Option") granted
under the USLD Communications Corp. 1990 Employee Stock Option
Plan, as amended, the USLD Communications Corp. 1993 Non-Employee
Director Plan, as amended, or any other stock plan or agreement of
the Company, which by its terms is not extinguished in the Merger
(collectively, the "Company Stock Option Plans"), shall be assumed
by Parent and deemed to constitute an option to acquire, on the
same terms and conditions MUTATIS MUTANDIS as were applicable under
such Stock Option prior to the Effective Time, the number of shares
of Parent Common Stock as the holder of such Stock Option would
have been entitled to receive pursuant to the Merger had such
holder exercised such option in full immediately prior to the
Effective Time (not taking into account whether or not such option
was in fact exercisable) at a price per share equal to (x) the
aggregate exercise price for Company Common Stock otherwise
purchasable pursuant to such Stock Option divided by (y) the number
of shares of Parent Common Stock deemed purchasable pursuant to
such Stock Option; PROVIDED, HOWEVER, that the number of shares of
Parent Common Stock that may be purchased upon exercise of any such
Stock Option shall not include any fractional share and, upon
exercise of the Stock Option, a cash payment shall be made for any
fractional share based upon the Closing Price (as hereinafter
defined) of a share of Parent Common Stock on the trading day
immediately preceding the date of exercise. "Closing Price" shall
mean, on any day, the last reported sale price of one share of
Parent Common Stock on the NYSE. Within three Business Days after
the Effective Time, Parent shall cause to be delivered to each
holder of an outstanding Stock Option an appropriate notice setting
forth such holder's rights pursuant thereto, and such Stock Option
shall continue in effect on the same terms and conditions. Parent
shall comply with the terms of the Company Stock Option Plans
pursuant to which the Stock Options were granted from and after the
Effective Time.
-4-
(ii) At the Effective Time, each warrant to purchase
shares of Company Common Stock (a "Warrant"), shall be assumed by
Parent and deemed to constitute a warrant to acquire, on the same
terms and conditions MUTATIS MUTANDIS as were applicable under such
Warrant prior to the Effective Time, the number of shares of Parent
Common Stock as the holder of such Warrant would have been entitled
to receive pursuant to the Merger had such holder exercised such
Warrant in full immediately prior to the Effective Time (not taking
into account whether or not such Warrant was in fact exercisable)
at a price per share equal to (x) the aggregate exercise price for
Company Common Stock otherwise purchasable pursuant to such Warrant
divided by (y) the number of shares of Parent Common Stock deemed
purchasable pursuant to such Warrant; PROVIDED, HOWEVER, that the
number of shares of Parent Common Stock that may be purchased upon
exercise of any such Warrant shall not include any fractional share
and, upon exercise of such Warrant, a cash payment shall be made
for any fractional share based upon the Closing Price (as
hereinafter defined) of a share of Parent Common Stock on the
trading day immediately preceding the date of exercise.
(iii) Parent shall cause to be taken all corporate
action necessary to reserve for issuance a sufficient number of
shares of Parent Common Stock for delivery upon exercise of Stock
Options and Warrants in accordance with this Section 1.6(c).
Within three Business Days after the Effective Time, Parent shall
cause the Parent Common Stock subject to Stock Options to be
registered under the Securities Act of 1933, as amended and the
rules of the Securities and Exchange Commission (the "SEC")
thereunder (the "Securities Act"), pursuant to a registration
statement on Form S-8 (or any successor or other appropriate
forms), and shall use its best efforts to cause the effectiveness
of such registration statement (and the current status of the
prospectus or prospectuses contained therein) to be maintained for
so long as the Stock Options remain outstanding.
(iv) The Company shall take such action as is necessary
to cause the ending date of the then current offering period under
its Employee Stock Purchase Plan (as such term is defined in
Section 2.14 of the Company Disclosure Schedule) to be prior to the
Effective Time and on such date as is determined in accordance with
the terms of such plan (the "Final Purchase Date"); provided, that,
such change in the offering period shall be conditioned upon the
consummation of the Merger. On the Final Purchase Date, the
Company shall apply the funds credited as of such date under such
Employee Stock Purchase Plan within each participant's payroll
withholding account to the purchase of whole shares of Company
Common Stock in accordance with the terms of such Employee Stock
Purchase Plan.
(v) Employees of the Company as of the Effective Time
shall be permitted to participate in the Parent's Employee Stock
Purchase Plan commencing on the first enrollment date of such plan
following the Effective Time, subject to the eligibility provisions
of such plan (with employees receiving credit, for purposes of such
eligibility provisions, for service with the Company or Parent).
(d) Capital Stock of Merger Sub. The one share of
common stock, $.01 par value, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for 16,590,336 validly issued, fully paid and
nonassessable shares of common stock, $0.01 par value, of the
Surviving Corporation.
-5-
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio
shall be appropriately adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into Parent Common
Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock occurring after the date hereof and
prior to the Effective Time.
(f) FRACTIONAL SHARES. No certificates or scrip
representing less than one share of Parent Common Stock shall be
issued upon the surrender for exchange of a certificate or
certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"). In lieu of
any such fractional share, each holder of Shares who would
otherwise have been entitled to a fraction of a share of Parent
Common Stock upon surrender of Certificates for exchange shall be
paid upon such surrender cash (without interest) in an amount equal
to such fraction multiplied by the Closing Price of Parent Common
Stock on the date of the Effective Time.
SECTION 1.7 EXCHANGE OF CERTIFICATES. (a) EXCHANGE
AGENT. Parent shall cause to be supplied, to or for such bank or
trust company as shall be mutually designated by the Company and
Parent (the "Exchange Agent"), in trust for the benefit of the
holders of Company Common Stock, for exchange in accordance with
this Section 1.7, through the Exchange Agent, certificates
evidencing the shares of Parent Common Stock issuable pursuant to
Section 1.6 in exchange for outstanding Shares and the cash to be
paid in lieu of fractional shares.
(b) EXCHANGE PROCEDURES. As soon as reasonably
practicable after the Effective Time, Parent will instruct the
Exchange Agent to mail to each holder of record of Certificates (i)
a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as
Parent may reasonably specify), and (ii) instructions to effect the
surrender of the Certificates in exchange for the certificates
evidencing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, and such other customary
documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange
therefor (A) certificates evidencing that number of whole shares of
Parent Common Stock which such holder has the right to receive in
accordance with the Exchange Ratio in respect of the Shares
formerly evidenced by such Certificate, (B) any dividends or other
distributions to which such holder is entitled pursuant to Section
1.7(c), and (C) cash in respect of fractional shares as provided in
Section 1.6(f) (the shares of Parent Common Stock and cash being,
collectively, the "Merger Consideration"), and the Certificate so
surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares which is not registered in the
transfer records of the Company as of the Effective Time, shares of
Parent Common Stock, dividends, distributions and cash in respect
of fractional shares may be issued and paid in accordance with this
Article I to a transferee if the Certificate evidencing such Shares
is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer pursuant to this
Section 1.7(b) and by evidence that any applicable stock transfer
taxes have been paid. Until so surrendered, each outstanding
-6-
Certificate that, prior to the Effective Time, represented Shares
will be deemed from and after the Effective Time, for all corporate
purposes, other than the payment of dividends and, subject to
Section 1.6(f), to evidence the ownership of the number of whole
shares of Parent Common Stock, and cash in respect of fractional
shares, into which such Shares shall have been converted pursuant
to the provisions hereof.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.
No dividends or other distributions declared or made after the
Effective Time with respect to shares of Parent Common Stock
payable to stockholders of record as of a date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock they are entitled
to receive pursuant to the provisions hereof until the holder of
such Certificate shall surrender such Certificate pursuant to
Section 1.7(b). Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of
the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions payable
to stockholders of record as of a date after the Effective Time and
theretofore paid with respect to such whole shares of Parent Common
Stock.
(d) TRANSFERS OF OWNERSHIP. If any certificate for
shares of Parent Common Stock is to be issued in a name other than
that in which the Certificate surrendered in exchange therefor is
registered, it will be a condition of the issuance thereof that the
Certificate so surrendered will be properly endorsed and otherwise
in proper form for transfer and that the Person requesting such
exchange will have paid to Parent or any agent designated by it any
transfer or other taxes required by reason of the issuance of a
certificate for shares of Parent Common Stock in any name other
than that of the registered holder of the certificate surrendered,
or established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
(e) NO LIABILITY. Neither Parent, Merger Sub nor the
Company shall be liable to any holder of Company Common Stock for
any Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(f) WITHHOLDING RIGHTS. Parent or the Exchange Agent
shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Exchange Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been
paid to the holder of the Shares in respect of which such deduction
and withholding was made by Parent or the Exchange Agent.
SECTION 1.8 STOCK TRANSFER BOOKS. At the Effective
Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers of the Company
Common Stock thereafter on the records of the Company.
-7-
SECTION 1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY
COMMON STOCK. The Merger Consideration delivered upon the
surrender for exchange of Shares in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of
all rights pertaining to such Shares, and there shall be no further
registration of transfers on the records of the Surviving
Corporation of Shares which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall
be canceled and exchanged as provided in this Article I.
SECTION 1.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In
the event any Certificate shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificate, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent
Common Stock as may be required pursuant to Section 1.6; PROVIDED,
HOWEVER, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificate to deliver a bond in such sum as it
may reasonably direct as indemnity against any claim that may be
made against Parent or the Exchange Agent with respect to the
Certificate alleged to have been lost, stolen or destroyed.
SECTION 1.11 TAX AND ACCOUNTING CONSEQUENCES. It is
intended by the parties hereto that the Merger shall (i) constitute
a reorganization within the meaning of section 368 of the Code, and
(ii) subject to applicable accounting standards, qualify for
accounting treatment as a pooling of interests. The parties hereto
hereby adopt this Agreement as a "plan of reorganization" within
the meaning of sections 1.368-2(g) and 1.368-3(a) of the United
States Treasury Regulations.
SECTION 1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION.
Each of Parent, Merger Sub and the Company will take all such
reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Merger in accordance with this Agreement as
promptly as possible. If, at any time after the Effective Time,
any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger
Sub, the officers and directors of the Company and Merger Sub
immediately prior to the Effective Time are fully authorized in the
name of their respective corporations or otherwise to take, and
will take, all such lawful and necessary action.
SECTION 1.13 MATERIAL ADVERSE EFFECT. When used in
connection with the Company or any of its Subsidiaries or Parent or
any of its Subsidiaries, as the case may be, the term "Material
Adverse Effect" means any change, effect or circumstance that is or
is reasonably likely to be materially adverse to the business,
operations, assets (including intangible assets), condition
(financial or otherwise), liabilities or results of operations of
the Company and its Subsidiaries or Parent and its Subsidiaries, as
the case may be, in each case taken as a whole, other than such
changes, effects or circumstances that affect generally providers
of telecommunications services similar to the Company or Parent, as
the case may be.
-8-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Merger Sub that, except as set forth in the written disclosure
schedule delivered by the Company to Parent (the "Company
Disclosure Schedule"):
SECTION 2.1 CORPORATE ORGANIZATION. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to own, operate and lease its
properties and assets as and where the same are owned, operated or
leased and to conduct its business as it is now being conducted.
The Company is in good standing and duly qualified or licensed as
a foreign corporation to do business in those jurisdictions listed
in Section 2.1 of the Company Disclosure Schedule, such
jurisdictions being the only jurisdictions in which the location of
the property and assets owned, operated or leased by the Company or
the nature of the business conducted by the Company makes such
qualification or licensing necessary, except where the failure to
be so qualified or licensed would not reasonably be expected to
have a Material Adverse Effect. The Company has heretofore
delivered to the Purchaser complete and correct copies of the
Company's Certificate of Incorporation and By-laws, as amended to
and as in effect on the date hereof.
SECTION 2.2 CAPITALIZATION. (a) The authorized capital
stock of the Company consists of 50,000,000 shares of Company
Common Stock and 10,000,000 shares of preferred stock, par value
$0.01 per share ("Company Preferred Stock"). As of the date
hereof, 16,590,336 shares of Company Common Stock and no shares of
Company Preferred Stock are issued and outstanding.
(b) All outstanding shares of Company Common Stock are
validly issued and outstanding, fully paid and nonassessable, and,
except as set forth in the Company's Certificate of Incorporation,
there are no preemptive or similar rights in respect of the Company
Common Stock. All shares of Company Common Stock issuable upon the
exercise of Stock Options and Warrants will, when issued in
accordance therewith, be validly issued, fully paid and
nonassessable. All outstanding shares of Company Common Stock
issued since July 1, 1994 were issued in compliance in all material
respects with all requirements of all applicable federal and state
securities laws.
(c) Section 2.2 of the Company Disclosure Schedule sets
forth a complete and correct list of (i) all Stock Options, and
(ii) all Warrants, indicating as to each holder thereof, the number
of shares of Company Common Stock subject thereto and the
exercisability, exercise price and termination date therefor.
SECTION 2.3 SUBSIDIARIES. (a) Except for the
Subsidiaries listed in Section 2.3(a) of the Company Disclosure
Schedule, there are no entities 20% or more of whose outstanding
-9-
voting securities or other equity interests are owned, directly or
indirectly through one or more intermediaries, by the Company.
Each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation (which jurisdiction is indicated
in Section 2.3(a) of the Company Disclosure Schedule) and has all
requisite corporate power and authority to own, operate and lease
its properties and assets as and where the same are owned, operated
or leased by such Subsidiary and to conduct its business as it is
now being conducted. Each Subsidiary is in good standing and duly
qualified or licensed as a foreign corporation to do business in
each of the jurisdictions in which the location of the property and
assets owned, operated or leased by such Subsidiary or the nature
of the business conducted by such Subsidiary makes such
qualification or licensing necessary, except where the failure to
be so qualified or licensed would not reasonably be expected to
have a Material Adverse Effect. The Company has heretofore deliv
ered to Parent complete and correct copies of each of its
Subsidiaries' certificate of incorporation and by-laws (or similar
organizational document), in each case as amended to and as in
effect on the date hereof.
(b) Section 2.3 of the Company Disclosure Schedule sets
forth the authorized capital stock of each Subsidiary of the
Company, the number of outstanding shares of each class of such
capital stock and the Company's (or, in the case of Subsidiaries
indirectly owned by the Company, a specified Subsidiary's)
ownership of each such class. The Company or such Subsidiary has
good and valid title to all such shares free and clear of all
mortgages, pledges, claims, liens, security interests or other
restrictions or encumbrances of any kind or nature whatsoever
("Encumbrances"). All of the outstanding shares of capital stock
of each Subsidiary of the Company are validly issued, fully paid
and nonassessable, and there are no preemptive or similar rights in
respect of any shares of capital stock of any Subsidiary, other
than preemptive rights held solely by the Company. All of the
outstanding shares of each Subsidiary of the Company were issued in
compliance in all material respects with all requirements of all
applicable federal and state securities laws. Except as set forth
in Section 2.3(b) of the Company Disclosure Schedule, neither the
Company nor any Subsidiary of the Company owns any capital stock of
or other equity interest of any kind or nature in any Person.
SECTION 2.4 NO COMMITMENTS TO ISSUE CAPITAL STOCK.
Except for the Stock Options and the Warrants and as set forth in
Section 2.4 of the Company Disclosure Schedule, there are no out-
standing options, warrants, calls, convertible securities or other
rights, agreements, commitments or other instruments pursuant to
which the Company or any of its Subsidiaries is or may become
obligated to authorize, issue or transfer any shares of its capital
stock or any other equity interest. Except as set forth in Section
2.4 of the Company Disclosure Schedule, there are no agreements or
understandings in effect among any of the stockholders of the
Company or any such Subsidiary or with any other Person and by
which the Company or any such Subsidiary is bound with respect to
the voting, transfer, disposition or registration under the
Securities Act of any shares of capital stock of the Company or any
of its Subsidiaries.
SECTION 2.5 AUTHORIZATION; EXECUTION AND DELIVERY. The
Company has all requisite corporate power and authority to execute
and deliver this Agreement and, subject to
-10-
obtaining any necessary stockholder approval of the Agreement, to
carry out its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of
the Company, except that the Company's stockholders are required to
approve and adopt this Agreement. This Agreement has been duly
executed and delivered by the Company and, subject to such
stockholder approval and, assuming the due authorization, execution
and delivery by the other parties hereto, constitutes the legal,
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy laws and similar
laws affecting creditor's rights generally and (ii) general
principles of equity, regardless of whether asserted in a
proceeding in equity or at law.
SECTION 2.6 GOVERNMENTAL APPROVALS AND FILINGS. No
approval, authorization, consent, license, clearance or order of,
declaration or notification to, or filing or registration with, any
governmental or regulatory authority is required in order (a) to
permit the Company to consummate the Merger or perform its obliga-
tions under this Agreement, or (b) to prevent the termination of,
or materially and adversely affect, any governmental right, privi-
lege, authority, franchise, license, permit or certificate of the
Company or any of its Subsidiaries to provide its services or carry
on its business ("Governmental Licenses"), or to prevent any
material loss or disadvantage to the Company's business, by reason
of the Merger, except for (i) filing and recording of the Certifi-
cate of Merger as required by the DGCL, (ii) filings and other re-
quired submissions under the Xxxx-Xxxxx-Xxxxxx Antitrust Improve-
ments Act of 1976, as amended (the "HSR Act"), (iii) such other
consents, authorizations, filing, approvals and registrations
(other than Governmental Licenses relating to the provision of
telecommunication services) which if not made or obtained would not
reasonably be expected to have a Material Adverse Effect, and (iv)
as set forth in Section 2.6 of the Company Disclosure Schedule.
SECTION 2.7 NO CONFLICT. Subject to compliance with the
Governmental Licenses described in Section 2.6 of the Company
Disclosure Schedule and obtaining the other consents and waivers
that are set forth and described in Section 2.7 of the Company
Disclosure Schedule (the "Private Consents"), neither the
execution, delivery and performance of this Agreement by the
Company, nor the consummation by the Company of the transactions
contemplated hereby, will (i) conflict with, or result in a breach
or violation of, any provision of the certificate of incorporation
(or similar organizational document) or by-laws of the Company or
any of its Subsidiaries; (ii) conflict with, result in a breach or
violation of, give rise to a default, or result in the acceleration
of performance, or permit the acceleration or performance, under
(whether or not after the giving of notice or lapse of time or
both) any Encumbrance, note, bond, indenture, guaranty, lease,
license, agreement or other instrument, writ, injunction, order,
judgment or decree to which the Company or any of its Subsidiaries
or any of their respective properties or assets is subject; (iii)
give rise to a declaration or imposition of any Encumbrance upon
any of the properties or assets of the Company or any of its
Subsidiaries; or (iv) impair the Company's business or adversely
affect any Governmental License necessary to enable the Company and
its Subsidiaries to carry on their business as presently conducted,
except, in the case of clauses (ii), (iii) or (iv), for any
-11-
conflict, breach, violation, default, acceleration, declaration,
imposition or impairment that would not reasonably be expected to
have a Material Adverse Effect.
SECTION 2.8 SEC FILINGS. (a) The Company has filed all
forms, reports and documents required to be filed with the SEC
since October 1, 1993 and has made available to Parent (i) its
Annual Reports on Form 10-K for the fiscal years ended September
30, 1994, 1995 and 1996; (ii) its Quarterly Reports on Form 10-Q
for the quarterly periods ended December 31, 1996, March 31, 1997
and June 30, 1997; (iii) all proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held
since October 1, 1993; (iv) all other reports or registration
statements (other than Reports on Form 10-Q not referred to in
clause (ii) above or on Form 8-K filed before October 1, 1996)
filed by the Company with the SEC since October 1, 1993; and (v)
all amendments, supplements, exhibits and documents incorporated
by reference to all such reports and registration statements filed
by the Company with the SEC (collectively, the "Company SEC
Reports"). Except as disclosed in Section 2.8 of the Company
Disclosure Schedule, the Company SEC Reports (i) were prepared in
accordance, and complied as of their respective dates in all
material respects, with the requirements of the Securities Act or
the Securities Exchange Act of 1934, as amended and the SEC's rules
thereunder (the "Exchange Act"), as the case may be, and (ii) did
not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
Company has filed with the SEC as exhibits to the Company SEC
Reports all agreements, contracts and other documents or
instruments required to be so filed, and such exhibits are correct
and complete copies of such agreements, contracts and other
documents or instruments. None of the Company's Subsidiaries is
required to file any forms, reports or other documents with the
SEC.
SECTION 2.9 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED
LIABILITIES; RECEIVABLES. (a) The Company has heretofore
delivered to Parent complete and correct copies of the following
financial statements (the "Company Financial Statements"), all of
which have been prepared from the books and records of the Company
and its Subsidiaries in accordance with generally accepted
accounting principles ("GAAP") consistently applied and maintained
throughout the periods indicated (except as may be indicated in the
notes thereto and except that the unaudited Company Financial
Statements may not include all notes thereto required by GAAP) and
fairly present in all material respects the financial condition of
the Company and its Subsidiaries at their respective dates and the
results of their operations and cash flows for the periods covered
thereby, except that unaudited interim results were or are subject
to normal and recurring year-end adjustments which were not or are
not expected to be material in amount:
(i) audited consolidated balance sheets at
September 30, 1995 and September 30, 1996 and audited
consolidated statements of income, cash flows and stock-
holders' equity of the Company and its Subsidiaries for
the fiscal years then ended, audited by Xxxxxx Xxxxxxxx
LLP, independent certified public accountants; and
-12-
(ii) unaudited consolidated balance sheet (the
"Company Interim Balance Sheet") of the Company and its
Subsidiaries at June 30, 1997 (the "Company Interim
Balance Sheet Date") and consolidated statements of
income and cash flows for the three and nine months then
ended.
Such statements of income do not contain any material item of
special or nonrecurring revenue or income or any material item of
revenue or income not earned in the ordinary course of business,
except as expressly specified therein.
(b) Except as and to the extent reflected or reserved
against on the Company Interim Balance Sheet, and except for
liabilities which will not have a Material Adverse Effect, neither
the Company nor any of its Subsidiaries had, as of the Company
Interim Balance Sheet Date, any liabilities, debts or obligations
(whether absolute, accrued, contingent or otherwise) of any nature
that would be required as of such date to have been included on a
balance sheet prepared in accordance with GAAP. Since the Company
Interim Balance Sheet Date, neither the Company nor any of its
Subsidiaries has incurred or suffered to exist any liability, debt
or obligation (whether absolute, accrued, contingent or otherwise),
except liabilities, debt and obligations incurred in the ordinary
course of business, consistent with past practice, none of which
will have a Material Adverse Effect.
(c) All receivables of the Company and its Subsidiaries
(including accounts receivable, loans receivable and advances)
which are reflected in the Company Interim Balance Sheet, and all
such receivables which have arisen thereafter and prior to the
Effective Time, have arisen or will have arisen only from bona fide
transactions in the ordinary course of business, the carrying value
of such receivables approximate their fair market values, and
adequate reserves for the Company's receivables have been estab-
lished in accordance with prior practice and GAAP.
SECTION 2.10 CERTAIN OTHER FINANCIAL REPRESENTATIONS.
(a) Except as set forth in Section 2.10(a) of the Company
Disclosure Schedule, the Company has not since October 1, 1996
provided any material special promotions, discounts or other
incentives to its employees, agents, distributors or customers in
connection with the solicitation of new orders for service provided
by the Company or any Subsidiary, nor has any customer pre-paid any
material amount for services to be provided by the Company or any
Subsidiary in the future, except in connection with the purchasing
of debit cards.
(b) To the Company's Knowledge, the Company and its
Subsidiaries have paid or fully provided for all access charges
properly payable to local exchange carriers for access facilities
and have properly reported its percentage of interstate use ("PIU")
to such carriers, except where the failure to do so would not
result in a material liability of the Company or its Subsidiaries.
As of the date hereof, to the Company's Knowledge, the Company and
its Subsidiaries do not have, and at the Closing the Company and
its Subsidiaries will not have, any material liability on account
of PIU.
SECTION 2.11 ABSENCE OF CHANGES. Except as set forth in
Section 2.11 of the Company Disclosure Schedule or the Company SEC
Reports, since October 1, 1996 the
-13-
Company and its Subsidiaries have conducted their respective
businesses only in the ordinary course and neither the Company nor
any of its Subsidiaries has:
(a) other than certain of the Stock Options and Warrants
as set forth in Section 2.4 or 2.11 of the Company Disclosure
Schedule, issued or sold or authorized for issuance or sale, or
granted any options or made other agreements of the type referred
to in Section 2.4 with respect to, any shares of its capital stock
or any other of its securities, or altered any term of any of its
outstanding securities or made any change in its outstanding shares
of capital stock or other ownership interests or its
capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise or redeemed,
purchased or otherwise acquired any of its or its parent's capital
stock; PROVIDED, HOWEVER, the Company contemplates effecting the
conversions set forth in Section 1.6;
(b) terminated or received any notice of termination of
any material contract, lease, license or other agreement or any
Governmental License, or suffered any damage, destruction or loss
(whether or not covered by insurance) that would reasonably be
expected to have a Material Adverse Effect;
(c) made any change in the rate of compensation,
commission, bonus or other remuneration payable, or paid or agreed
or orally promised to pay, conditionally or otherwise, any bonus,
extra compensation, pension or severance or vacation pay, to any
director or officer, or any material such change to any employee of
the Company or any of its Subsidiaries, except in any case in the
ordinary course of business consistent with prior practice or as
required in accordance with the agreements described in Section
2.13(b), or plans disclosed in Section 2.14(a) of the Company
Disclosure Schedule that were in effect as of October 1, 1996;
(d) made any increase in or commitment to increase any
employee benefits, adopted or made any commitment to adopt any
additional employee benefit plan or made any contribution, other
than regularly scheduled contributions, to any Employee Benefit
Plan, as defined in Section 2.14(a);
(e) changed any accounting practices, policies or
procedures utilized in the preparation of the Company Financial
Statements, except as required by GAAP, the SEC, the Financial
Accounting Standards Board or as otherwise set forth in the Company
SEC Reports;
(f) suffered any change, event or condition that, in any
case or in the aggregate, has had or is reasonably likely to result
in a Material Adverse Effect; or
(g) entered into any agreement or made any commitment to
take any of the types of action described in subparagraphs (a)
through (f) of this Section 2.11.
SECTION 2.12 TAX MATTERS. (a) For purposes of this
Agreement, "Tax" or "Taxes" shall mean taxes, fees, levies, duties,
tariffs, imposts and governmental impositions or charges of any
kind in the nature of (or similar to) taxes, payable to any
federal, state,
-14-
local or foreign taxing authority, including (without limitation)
(i) income, franchise, profits, gross receipts, ad valorem, net
worth, value added, sales, use, service, real or personal property,
special assessments, capital stock, license, payroll, withholding,
employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes,
and (ii) interest, penalties, additional taxes and additions to tax
imposed with respect thereto; and "Tax Returns" shall mean returns,
reports, and information statements with respect to Taxes required
to be filed with the Internal Revenue Service (the "IRS") or any
other taxing authority, domestic or foreign, including, without
limitation, consolidated, combined and unitary tax returns,
including returns required in connection with any Employee Benefit
Plan (as defined in Section 2.14(a)).
(b) The Company on behalf of itself and all of its
Subsidiaries hereby represents that, other than as disclosed in
Section 2.12(b) of the Company Disclosure Schedule or the Company
SEC Reports: The Company and its Subsidiaries have timely filed
all United States federal income Tax Returns and all other material
Tax Returns required to be filed by them. All such Tax Returns are
complete and correct in all material respects (except to the extent
a reserve has been established as reflected in the Company Interim
Balance Sheet). The Company and its Subsidiaries have timely paid
and discharged all Taxes due in connection with or with respect to
the periods or transactions covered by such Tax Returns and have
paid all other Taxes as are due, except such as are being contested
in good faith by appropriate proceedings (to the extent that any
such proceedings are required), and there are no other Taxes that
would be due if asserted by a taxing authority, except with respect
to which the Company is maintaining reserves unless the failure to
do so would not have a Material Adverse Effect. Except as does not
involve or would not result in liability to the Company or any of
its Subsidiaries that would have a Material Adverse Effect,
(i) there are no tax liens on any assets of the Company or any of
its Subsidiaries; (ii) neither the Company nor any of its
Subsidiaries has granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment
of, any Tax; (iii) no unpaid (or unreserved) deficiencies for Taxes
have been claimed, proposed or assessed by any taxing or other
governmental authority with respect to the Company or any of its
Subsidiaries; (iv) there are no pending or, to the Company's
Knowledge, threatened audits, investigations or claims for or
relating to any liability in respect of Taxes of the Company or any
of its Subsidiaries; and (v) neither the Company nor any of its
Subsidiaries has requested any extension of time within which to
file any currently unfiled Tax Returns. The accruals and reserves
for Taxes (including deferred taxes) reflected in the Company
Interim Balance Sheet are in all material respects adequate to
cover all Taxes accruable through the date thereof (including Taxes
being contested) in accordance with GAAP.
(c) The Company on behalf of itself and all its
Subsidiaries hereby represents that, other than as disclosed in
Section 2.12(c) of the Company Disclosure Schedule or the Company
SEC Reports, and other than with respect to items the inaccuracy of
which would not have a Material Adverse Effect: (i) neither the
Company nor any of its Subsidiaries is obligated under any
agreement with respect to industrial development bonds or other
obligations with respect to which the excludability from gross
income of the holder for federal or state income tax purposes could
be affected by the transactions contemplated
-15-
hereunder; (ii) neither the Company nor any of its Subsidiaries is,
or has been, a United States real property holding corporation (as
defined in section 897(c)(2) of the Code) during the applicable
period specified in section 897(c)(1)(A)(ii) of the Code; (iii)
neither the Company nor any of its Subsidiaries has filed or been
included in a combined, consolidated or unitary return (or
substantial equivalent thereof) of any Person other than the
Company and its Subsidiaries; (iv) neither the Company nor any of
its Subsidiaries is liable for Taxes of any Person other than the
Company and its Subsidiaries, or currently under any contractual
obligation to indemnify any Person with respect to Taxes, or a
party to any tax sharing agreement or any other agreement providing
for payments by the Company or any of its Subsidiaries with respect
to Taxes; (v) except entities the beneficial ownership of which is
wholly owned by the Company and/or its Subsidiaries, neither the
Company nor any of its Subsidiaries is a party to any joint
venture, partnership or other arrangement or contract which could
be treated as a partnership for United States federal income tax
purposes; (vi) neither the Company nor any of its Subsidiaries is
a party to any agreement, contract, arrangement or plan that would
result (taking into account the transactions contemplated by this
Agreement), separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of section 280G of
the Code; (vii) the prices for any property or services (or for the
use of property) provided by the Company or any of its Subsidiaries
to any other Subsidiary or to the Company have been arm's length
prices determined using a method permitted by the Treasury
Regulations under section 482 of the Code; (viii) neither the
Company nor any of its Subsidiaries is a "consenting corporation"
under section 341(f) of the Code or any corresponding provision of
state, local or foreign law; (ix) neither the Company nor any of
its Subsidiaries has made an election or is required to treat any
of its assets as owned by another Person for federal income tax
purposes or as tax-exempt bond financed property or tax-exempt use
property within the meaning of section 168 of the Code (or any
corresponding provision of state, local or foreign law); and (x)
the Company is not an investment company within the meaning of
section 368(a)(2)(F)(iii) of the Code.
SECTION 2.13 RELATIONS WITH EMPLOYEES AND SALES AGENTS.
(a) Except as set forth in Section 2.13(a) of the Company
Disclosure Schedule:
(i) No collective bargaining agreement with respect
to the business of the Company or any of its Subsidiaries is
currently in effect or being negotiated. Neither the Company nor
any of its Subsidiaries has any obligation to negotiate any such
collective bargaining agreement.
(ii) There are no strikes or work stoppages pending
or, to the Company's Knowledge, threatened with respect to the
employees of the Company or any of its Subsidiaries, nor has any
such strike or work stoppage occurred or, to the Company's
Knowledge, been threatened since October 1, 1994. There is no
representation claim or petition or complaint pending before the
National Labor Relations Board or any state or local labor agency
and, to the Company's Knowledge, no question concerning
representation has been raised or threatened since October 1, 1994
respecting the employees of the Company or any of its Subsidiaries.
-16-
(iii) To the Company's Knowledge, no charges
with respect to or relating to the business of the Company or any
its Subsidiaries are pending before the Equal Employment
Opportunity Commission, or any state or local agency responsible
for the prevention of unlawful employment practices, which would
reasonably be expected to have a Material Adverse Effect.
(b) Section 2.13(b) of the Company Disclosure Schedule
contains a complete and correct list of all material current
employment, management or other consulting agreements with any
Persons employed or retained by the Company or any of its
Subsidiaries (including independent consultants and commission
agents), complete and correct copies of which have been delivered
to Parent, except that, with respect to agreements with commission
agents, complete and correct copies of all forms of agreements used
by the Company have been delivered to Parent. All of the Company's
agreements with commission agents are substantially similar to such
forms of agreements.
SECTION 2.14 BENEFIT PLANS. (a) Section 2.14(a) of the
Company Disclosure Schedule sets forth with respect to all current
employees a full and complete list of all executive compensation,
deferred compensation, stock ownership, stock purchase, stock
option, restricted stock, performance share, bonus and other
incentive plans, pension, profit sharing, savings, thrift or
retirement plans, employee stock ownership plans, life, health,
dental and disability plans, vacation, severance pay, sick leave,
dependent care, cafeteria and tuition reimbursement plans, and any
other "employee benefit plans" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
currently maintained by the Company or any of its Subsidiaries or
with respect to which the Company or any of its Subsidiaries may
have any liability or obligation (direct, indirect, contingent or
otherwise) to any employee, former employee, director or former
director (or any of their dependents or beneficiaries) of the
Company or any of its Subsidiaries or to any governmental entity
(individually, an "Employee Benefit Plan" and collectively, the
"Employee Benefit Plans"). There have been delivered to Parent or
its counsel complete and correct copies of all written Employee
Benefit Plans.
(b) No Employee Benefit Plan is, a "defined benefit
plan" within the meaning of section 3(35) of ERISA to which ERISA
applies and neither the Company nor any of its Subsidiaries has any
liability with respect to any such plan. Neither the Company nor
any of its Subsidiaries has ever contributed to, or withdrawn in a
complete or partial withdrawal from, any multiemployer plan (within
the meaning of Subtitle E of Title IV of ERISA) or incurred
contingent liability under section 4204 of ERISA. No Employee
Benefit Plan provides for medical or health benefits (through
insurance or otherwise) to individuals other than current employees
of the Company or any of its Subsidiaries (or spouses and
dependents of such employees), except to the extent necessary to
comply with "Applicable Benefits Law" (including section 4980B of
the Code). "Applicable Benefits Law" refers to the legal
requirements imposed upon employee benefit plans by the United
States or any political subdivision thereof (including COBRA and
any requirements enforced by the IRS with respect to employee
benefit plans intended to confer tax benefits on the Company, any
of its Subsidiaries, any of their respective employees, or any
trust maintained in connection with such Employee Benefit Plan).
-17-
(c) Each Employee Benefit Plan (and each related trust,
insurance contract and fund) is in compliance in all material
respects in form and in operation with all applicable requirements
of Applicable Benefits Law (including ERISA and the Code), and is
being administered in all material respects in accordance with all
relevant plan documents to the extent consistent with Applicable
Benefits Law. There has been no prohibited transaction with
respect to any Employee Benefit Plan which would result in the
imposition of any material unpaid excise tax. To the Company's
Knowledge, no Employee Benefit Plan is under investigation or audit
by the Department of Labor or Internal Revenue Service other than
as part of a routine tax audit of the Company. There are no legal
actions or suits pending or, to the Company's Knowledge, threat-
ened against or with respect to any Employee Benefit Plan or the
assets of any such Employee Benefit Plan or against any fiduciary
of any such Employee Benefit Plan and the Company has no Knowledge
of any facts that could give rise to any such actions. There has
been full compliance in all material respects with the notice and
continuation requirements of section 4980B of the Code applicable
to any Employee Benefit Plan.
(d) Except to the extent set forth in Section 2.14(d) of
the Company Disclosure Schedule, no provision of any Employee
Benefit Plan becomes effective in the event of a change in control
of the employer maintaining such Employee Benefit Plan; neither the
Company nor any of its Subsidiaries has agreed to the creation of
any new employee benefit plan or, with respect to any existing
Employee Benefit Plan, any increase in benefits or change in
employee coverage which would materially increase the expense of
maintaining such Employee Benefit Plan; no provision of any
Employee Benefit Plan prohibits the employer maintaining it from
amending or terminating such Employee Benefit Plan at any time and
to the fullest extent that law permits. Except to the extent set
forth in Section 2.14(d) of the Company Disclosure Schedule, the
consummation of the Merger or any other transaction contemplated by
this Agreement, in and of itself, will not result in an increase in
the amount of compensation or benefits or accelerate the vesting or
timing of payment of any benefits or compensation payable under any
Employee Benefit Plan in respect of any employee of the Company or
any of its Subsidiaries; and no employee or former employee of the
Company or any of its Subsidiaries will be entitled to any
severance benefits under the terms of any Employee Benefit Plan
solely by reason of the consummation of the Merger or any other
transaction contemplated by this Agreement.
(e) At no time since the organization of the Company or
any of its Subsidiaries has any entity (other than the Company, any
such Subsidiary or Billing Information Concepts Corp., or any
Subsidiary of Billing Information Concepts Corp.) been an "ERISA
affiliate" of the Company, any such Subsidiary, or both. "ERISA
affiliate" means any trade or business, whether or not
incorporated, which together with the Company or any such
Subsidiary, is or was at any time during such period treated as a
"single employer" within the meaning of section 414(b), (c), (m) or
(o) of the Code or a part of the same "controlled group" as the
Company or any such Subsidiary within the meaning of section 4001
of ERISA. The aggregate number of leased employees (within the
meaning of section 414(n) or (o) of the Code) of the Company and
its Subsidiaries does not exceed 10% of the aggregate number of
employees of the Company and its Subsidiaries.
-18-
(f) All actions required to be taken on behalf of any
Employee Benefit Plan that is a stockholder of the Company, in
order to effectuate the Merger or the other transactions
contemplated by this Agreement, shall have been duly authorized by
the appropriate fiduciaries of such Employee Benefit Plan, and
shall comply with the terms of such Employee Benefit Plan, ERISA
and other applicable laws.
SECTION 2.15 TITLE TO PROPERTIES. Except as set forth
in the Company SEC Reports or Section 2.15 of the Company
Disclosure Schedule, the Company and each of its Subsidiaries have
good and indefeasible title to all of their properties and assets,
free and clear of all Encumbrances, except liens for taxes not yet
due and payable and such Encumbrances or other imperfections of
title, if any, as do not materially detract from the value of or
interfere with the present use of the property affected thereby or
which would not reasonably be expected to have a Material Adverse
Effect, and except for Encumbrances which secure indebtedness
reflected in the Company Interim Balance Sheet.
SECTION 2.16 COMPLIANCE WITH LAWS; LEGAL PROCEEDINGS.
(a) Neither the Company nor any of its Subsidiaries is in
violation of, or in default with respect to, any applicable
statute, regulation, ordinance, writ, injunction, order, judgment,
decree or any Governmental License which violation or default would
reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in the Company SEC Reports or
Section 2.16(b) of the Company Disclosure Schedule, there is no
order, writ, injunction, judgment or decree outstanding and no
legal, administrative, arbitration or other governmental proceeding
or investigation pending or, to the Company's Knowledge,
threatened, and there are no claims (including unasserted claims of
which the Company has Knowledge) against or relating to the Company
or any of its Subsidiaries or any of their respective properties,
assets or businesses that would reasonably be expected to have a
Material Adverse Effect.
SECTION 2.17 BROKERS. Except for ABN AMRO Chicago
Corporation ("AACC"), no broker, finder or investment advisor acted
directly or indirectly as such for the Company, any Subsidiary of
the Company or, to the Company's Knowledge, any stockholder of the
Company in connection with this Agreement or the Merger, and no
broker, finder, investment advisor or other Person is entitled to
any fee or other commission, or other remuneration, in respect
thereof based in any way on any action, agreement, arrangement or
understanding taken or made by or on behalf of the Company, any
Subsidiary of the Company or, to the Company's Knowledge, any
stockholder of the Company. The Company has heretofore furnished
to Parent a complete and correct copy of the agreement between AACC
and the Company pursuant to which such firm would be entitled to
any payment relating to the transactions contemplated hereunder.
SECTION 2.18 INTELLECTUAL PROPERTY. (a) The Company
and/or each of its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software
programs or applications and tangible or intangible proprietary
information or material that are used in the business of the
Company and its
-19-
Subsidiaries as currently conducted, except as would not reasonably
be expected to have a Material Adverse Effect.
(b) Except as disclosed in Section 2.18(b) of the
Company Disclosure Schedule or the Company SEC Reports or as would
not reasonably be expected to have a Material Adverse Effect:
(i) The Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses, sublicenses
and other agreements as to which the Company is a party and
pursuant to which the Company is authorized to use any patents,
trademarks, service marks or copyrights owned by others ("Company
Third-Party Intellectual Property Rights"); (ii) No claims with
respect to the patents, registered and material unregistered
trademarks and service marks, registered copyrights, trade names
and any applications therefor owned by the Company or any of its
Subsidiaries (the "Company Intellectual Property Rights"), any
trade secret material to the Company, or Company Third Party
Intellectual Property Rights to the extent arising out of any use,
reproduction or distribution of Company Third Party Intellectual
Property Rights by or through the Company or any of its
Subsidiaries, are currently pending or, to the Company's
Knowledge, have been threatened by any Person; or (iii) The Company
has no Knowledge of any valid grounds for any bona fide claims (1)
to the effect that the sale, licensing or use of any product or
service as now sold, licensed or used, or proposed for sale,
license or use, by the Company or any of its Subsidiaries infringes
on any copyright, patent, trademark, service xxxx or trade secret;
(2) against the use by the Company or any of its Subsidiaries, of
any trademarks, trade names, trade secrets, copyrights, patents,
technology, know-how or computer software programs and applications
used in the business of the Company or any of its Subsidiaries as
currently conducted or as proposed to be conducted; (3) challenging
the ownership, validity or effectiveness of any of the Company
Intellectual Property Rights or other trade secret material to the
Company; or (4) challenging the license or legally enforceable
right to use of Company Third Party Intellectual Rights by the
Company or any of its Subsidiaries.
(c) To the Company's Knowledge, there is no material
unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property Rights by any third party, including
any employee or former employee of the Company or any of its
Subsidiaries.
SECTION 2.19 INSURANCE. The Company has heretofore
provided Parent with true, complete and correct copies of all
material fire and casualty, general liability, business
interruption, product liability and other insurance policies
maintained by the Company and its Subsidiaries. Neither the
Company nor any of its Subsidiaries has, since October 1, 1994,
been denied or had revoked or rescinded any policy of insurance.
SECTION 2.20 CONTRACTS; ETC. (a) Set forth in Section
2.20 of the Company Disclosure Schedule is a complete and correct
list of each of the following agreements, leases and other
instruments to which the Company or any of its Subsidiaries is a
party or by which Company or any of its Subsidiaries or their
respective properties or assets are bound:
-20-
(i) each service or other similar type of agreement
under which services are provided by any other Person to the
Company or any of its Subsidiaries which provides for a
material change in the cost to the Company or its Subsidiaries
of such services or the type thereof as a result of the
transactions contemplated hereunder;
(ii) each operating lease (as lessor, lessee, sublessor
or sublessee) of any real or tangible personal property or
assets that is material to the Company and its Subsidiaries
taken as a whole which provides for a material change in the
payments made or received by the Company or its Subsidiaries,
as the case may be, as a result of the transactions
contemplated hereunder;
(iii) each agreement under which services are
provided by the Company or any of its Subsidiaries to any
material customer which provides for a material decrease in
the fees charged to such customer or a material increase in
the type or kind of services to be provided by the Company or
its Subsidiaries without a corresponding and appropriate
increase in the payments to be received by the Company or its
Subsidiaries, as the case may be, as a result of the
transactions contemplated hereunder;
(iv) any other material agreement, lease and other
instrument to which the Company or any of its Subsidiaries are
a party or by which they are bound, which provides for a
material change in the terms thereof as a result of the
transactions contemplated hereunder;
(v) each agreement (including capital leases) under
which any money has been or may be borrowed or loaned (other
than loans to customers made in the ordinary course of
business consistent with past practice) or any note, bond,
indenture or other evidence of indebtedness (other than trade
payables) has been issued or assumed (other than those under
which there remain no ongoing obligations of the Company or
any of its Subsidiaries), and each guaranty of any evidence of
indebtedness or other obligation, or of the net worth, of any
Person (other than endorsements for the purpose of collection
in the ordinary course of business); and
(vi) any agreement or other undertaking that restricts,
in any material respect, the Company or any of its
Subsidiaries from providing any telecommunications services,
engaging in any telecommunications business in any territory
or hiring any employees.
A complete and correct copy of each written agreement, lease or
other type of document required to be disclosed pursuant to this
Section 2.20(a) has been delivered to Parent.
(b) Each agreement, lease or other type of document
required to be filed as an exhibit to the Company's SEC Reports to
which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries or their respective
properties or
-21-
assets are bound, except for those contracts, the loss of which
would not reasonably be expected to have a Material Adverse Effect
(collectively, the "Company Contracts"), is valid, binding and in
full force and effect and is enforceable by the Company or such
Subsidiary in accordance with its terms. Neither the Company nor
any such Subsidiary is (with or without the lapse of time or the
giving of notice, or both) in breach of or in default under any of
the Company Contracts, and, to the Company's Knowledge, no other
party to any of the Company Contracts is (with or without the lapse
of time or the giving of notice, or both) in breach of or in
default under any of the Company Contracts, where such breach or
default would reasonably be expected to have a Material Adverse
Effect. No existing or completed agreement to which the Company or
any of its Subsidiaries is a party is subject to renegotiation with
any governmental body.
SECTION 2.21 PERMITS, AUTHORIZATIONS, ETC. All
Governmental Licenses and each other material approval, authoriza-
tion, consent, license, certificate of public convenience, order or
other permit of all governmental agencies, whether federal, state,
local or foreign, necessary to enable the Company and its
Subsidiaries to own, operate and lease their properties and assets
as and where such properties and assets are owned, leased or
operated and to provide service and carry on their business as
presently provided and conducted (collectively, the "Company
Permits") or required to permit the continued conduct of such busi-
ness following the Merger in the manner conducted on the date of
this Agreement are valid and in good standing with the issuing
agencies and not subject to any proceedings for suspension,
modification or revocation, except for such Company Permits which
would not reasonably be expected to have a Material Adverse Effect.
SECTION 2.22 ENVIRONMENTAL MATTERS. (a) For purposes
of this Agreement, the capitalized terms defined below shall have
the meanings ascribed to them below.
(i) "Environmental Law(s)" means all federal, state or
local law (including common law), statute, ordinance, rule,
regulation, code, or other requirement relating to the
environment, natural resources, or public or employee health
and safety and includes, but is not limited to the
Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 ET SEQ., the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801
ET SEQ., The Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. Section 6901 ET SEQ., the Clean Water Act, 33 U.S.C.
Section 1251 ET SEQ., the Clean Air Act, 33 U.S.C. Section
2601 ET SEQ., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 ET SEQ., the Oil Pollution Act of 1990, 33 U.S.C.
Section 2701 ET SEQ., and the Occupational Safety and Health
Act, 29 U.S.C. Section 651 ET SEQ., as such laws have been
amended or supplemented, and the regulations promulgated
pursuant thereto, and all analogous state or local statutes
and any applicable transfer statutes.
(ii) "Environmental Permits" means all approvals,
authorizations, consents, permits, licenses, registrations and
certificates required by any applicable Environmental Law.
-22-
(iii) "Hazardous Substance(s)" means, without
limitation, any flammable explosives, radioactive materials,
urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum products (including but not limited to
waste petroleum and petroleum products), methane, hazardous
materials, hazardous wastes, pollutants, contaminants and
hazardous or toxic substances, as defined in or regulated
under any applicable Environmental Laws.
(iv) "Release" means any past or present spilling, leak-
ing, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of a
Hazardous Substance into the Environment.
(b) The Company and each Subsidiary of the Company has
obtained all Environmental Permits that are required for the
lawful operation of its business except for such Environmental
Permits the failure of which to obtain would not reasonably be
expected to have a Material Adverse Effect. The Company and its
Subsidiaries (i) are in compliance with all terms and conditions of
their Environmental Permits and of any applicable Environmental
Law, except for such failure to be in compliance that would not
reasonably be expected to have Material Adverse Effect, and
(ii) have not received written notice of any material violation by
or material claim against the Company or any such Subsidiary under
any Environmental Law.
(c) There have been no Releases, or threatened Releases
of any Hazardous Substances into, on or under any of the properties
owned or operated (or formerly owned or operated) by the Company or
any such Subsidiary, in any case in such a way as to create any
liability (including the costs of investigation and remediation)
under any applicable Environmental Law that would reasonably be
expected to have a Material Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries has
been identified as a potentially responsible party at any federal
or state National Priority List ("Superfund") site.
SECTION 2.23 COMPANY ACQUISITIONS. Section 2.23 of the
Company Disclosure Schedule hereto contains a complete and correct
list of all agreements ("Acquisition Agreements") executed by the
Company or any of its Subsidiaries since October 1, 1996 pursuant
to which the Company or any of its Subsidiaries has acquired or
agreed to acquire all or any part of the stock or assets (including
any customer list) of any Person. A complete and correct copy of
each of the Acquisition Agreements has been delivered to Parent.
Neither the Company nor any such Subsidiary has any further
material obligation or liability under any of the Acquisition
Agreements or as a result of the transactions provided for therein,
except as described in reasonable detail in Section 2.23 of the
Company Disclosure Schedule.
SECTION 2.24 BOOKS AND RECORDS. All accounts, books,
ledgers and official and other records prepared and kept by the
Company and its Subsidiaries have been kept and completed in all
material respects, and there are no material inaccuracies or
discrepancies contained or reflected therein.
-23-
SECTION 2.25 INTERESTED PARTY TRANSACTIONS. Except as
set forth in Section 2.25 of the Company Disclosure Schedule or the
Company SEC Reports, since October 1, 1996 no event has occurred
that would be required to be reported as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
SECTION 2.26 OPINION OF FINANCIAL ADVISOR. The Company
has been advised by its financial advisor, AACC, to the effect that
in its opinion, as of the date hereof, the Exchange Ratio is fair
from a financial point of view to the holders of Shares.
SECTION 2.27 POOLING MATTERS. The Company has provided
to the Company's independent accountants all information concerning
actions taken or agreed to be taken by the Company or any of its
Affiliates on or before the date of this Agreement that could
reasonably be expected to adversely affect the ability of Parent to
account for the business combination to be effected by the Merger
as a pooling of interests. The Company has provided to Parent a
letter from the Company's independent public accountants to the
effect that, after review, such accountants know of no reason
relating to the Company that should prevent the Parent from
accounting for the Merger as a pooling of interests.
SECTION 2.28 REGISTRATION STATEMENT; JOINT PROXY
STATEMENT/PROSPECTUS. The information supplied by the Company with
respect to the Company and its Subsidiaries and their respective
officers, directors, stockholders and other Affiliates
(collectively, the "Company Information") for inclusion in the
Registration Statement (as defined in Section 3.23) shall not at
the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Company Information supplied by the Company for inclusion in the
joint proxy statement/prospectus to be sent to the stockholders of
the Company in connection with the meeting of the stockholders of
the Company to consider the Merger (the "Company Stockholders
Meeting") and, if required, to the stockholders of the Parent in
connection with the meeting of the stockholders of the Parent (the
"Parent Stockholders Meeting" and, together with the Company
Stockholders Meeting, the "Stockholders Meetings") to consider the
Parent Common Stock Issuance (as defined in Section 5.3) (such
joint proxy statement/prospectus as amended or supplemented is
referred to herein as the "Joint Proxy Statement/Prospectus") will
not, on the date the Joint Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto) is first mailed to
stockholders, at the time of the Stockholders Meetings, or at the
Effective Time, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false
or misleading with respect to any material fact, or shall omit to
state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they are
made, not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders
Meetings which has become false or misleading. If at any time
prior to the Effective Time any event relating to the Company or
its Subsidiaries or any of their respective officers, directors,
stockholders or other Affiliates should be discovered by the
Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy
Statement/Prospectus, the Company shall promptly inform
-24-
Parent. The Joint Proxy Statement/Prospectus shall comply in all
material respects with the requirements of the Securities Act and
the Exchange Act. Notwithstanding the foregoing, the Company makes
no representation or warranty with respect to any information
supplied by Parent or Merger Sub which is contained or incorporated
by reference in, or furnished in connection with the preparation
of, the Registration Statement or the Joint Proxy
Statement/Prospectus.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, hereby
represent and warrant to the Company that, except as set forth in
the written disclosure schedule delivered by Parent to the Company
(the "Parent Disclosure Schedule"):
SECTION 3.1 CORPORATE ORGANIZATION. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to own, operate and lease its
properties and assets as and where the same are owned, operated or
leased and to conduct its business as it is now being conducted.
Parent is in good standing and duly qualified or licensed as a
foreign corporation to do business in those jurisdictions in which
the location of the property and assets owned, operated or leased
by Parent or the nature of the business conducted by Parent makes
such qualification or licensing necessary, except where the failure
to be so qualified or licensed would not reasonably be expected to
have a Material Adverse Effect. Parent has heretofore delivered to
the Company complete and correct copies of Parent's Certificate of
Incorporation and By-laws, as amended to and as in effect on the
date hereof.
SECTION 3.2 CAPITALIZATION. (a) The authorized capital
stock of Parent consists of 300,000,000 shares of Parent Common
Stock and 15,000,000 shares of preferred stock, par value $0.01 per
share ("Parent Preferred Stock"). As of the date hereof,
78,554,214 shares of Parent Common Stock and no shares of Parent
Preferred Stock are issued and outstanding.
(b) All outstanding shares of Parent Common Stock are
validly issued and outstanding, fully paid and nonassessable, and,
except as set forth in Parent's Certificate of Incorporation, there
are no preemptive or similar rights in respect of Parent Common
Stock. All outstanding shares of Parent Common Stock issued since
July 1, 1994 were issued in compliance in all material respects
with all requirements of all applicable federal and state securi-
ties laws.
SECTION 3.3 SUBSIDIARIES. (a) The Subsidiaries of
Parent listed in the exhibits to Parent's SEC Reports (as defined
in Section 3.8) constitute the only material Subsidiaries of
Parent. Each Subsidiary of Parent is a corporation duly organized,
validly
-25-
existing and in good standing under the laws of the jurisdiction of
its incorporation and has all requisite corporate power and
authority to own, operate and lease its properties and assets as
and where the same are owned, operated or leased by such Subsidiary
and to conduct its business as it is now being conducted. Each
such Subsidiary is in good standing and duly qualified or licensed
as a foreign corporation to do business in each of the
jurisdictions in which the location of the property and assets
owned, operated or leased by such Subsidiary or the nature of the
business conducted by such Subsidiary makes such qualification or
licensing necessary, except where the failure to be so qualified or
licensed would not reasonably be expected to have a Material
Adverse Effect.
(b) Parent or a Subsidiary of Parent has good and valid
title to all shares of each such Subsidiary owned by Parent or
another Subsidiary of Parent, free and clear of all Encumbrances.
All of the outstanding shares of capital stock of each Subsidiary
of Parent are validly issued, fully paid and nonassessable, and
there are no preemptive or similar rights in respect of any shares
of capital stock of any such Subsidiary. All of the outstanding
shares of each Subsidiary of Parent were issued in compliance with
all requirements of all applicable federal and state securities
laws. Except as set forth in Section 3.3(b) of the Parent
Disclosure Schedule, neither the Parent nor any Subsidiary of the
Parent owns any capital stock of or other equity interest of any
kind or nature in any Person.
SECTION 3.4 NO COMMITMENTS TO ISSUE CAPITAL STOCK.
Other than pursuant to this Agreement and except for the stock
options and warrants set forth in Section 3.4 of the Parent
Disclosure Schedule and in this Agreement, there are no outstanding
options, warrants, calls, convertible securities or other rights,
agreements, commitments or other instruments pursuant to which
Parent or any of its Subsidiaries is or may become obligated to
authorize, issue or transfer any shares of its capital stock or any
other equity interest.
SECTION 3.5 AUTHORIZATION; EXECUTION AND DELIVERY.
Parent and Merger Sub each has all requisite corporate power and
authority to execute and deliver and, subject to obtaining any
necessary stockholder approval with respect to the transactions
contemplated hereunder, perform its obligations under this
Agreement. The execution, delivery and performance of this
Agreement by Parent and Merger Sub and the consummation by Parent
or Merger Sub of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of
Parent and Merger Sub, except that the stockholders' of Parent may
be required to approve the Parent Common Stock Issuance. This
Agreement has been duly executed and delivered by Parent and Merger
Sub and, subject to such stockholder approval and assuming the due
authorization, execution and delivery by the other parties hereto,
constitutes the legal, valid and binding obligation of Parent and
Merger Sub, enforceable against Parent and Merger Sub in accordance
with its terms, except as such enforceability may be limited by (i)
bankruptcy laws and similar laws affecting creditor's rights
generally and (ii) general principles of equity, regardless of
whether asserted in a proceeding in equity or at law. The shares
of Parent Common Stock to be issued as part of the Merger
Consideration and upon the exercise of the Stock Options and
Warrants have been duly reserved and authorized for issuance upon
consummation of the Merger, and when issued pursuant to and in
accordance with this Agreement or such Stock Option or Warrants
-26-
will be duly authorized, validly issued, fully paid and
nonassessable shares of Parent Common Stock.
SECTION 3.6 GOVERNMENTAL APPROVALS AND FILINGS. No
approval, authorization, consent, license, clearance or order of,
declaration or notification to, or filing or registration with, any
governmental or regulatory authority is required in order (a) to
permit Parent or Merger Sub to consummate the Merger or perform its
obligations under this Agreement, or (b) to prevent the termination
of, or materially and adversely affect, any Governmental License of
Parent or any of its Subsidiaries to provide its services or carry
on its business, or to prevent any material loss or disadvantage to
Parent's business, by reason of the Merger, except for (i) filing
and recording of the Certificate of Merger as required by the DGCL,
(ii) filings and other required submissions under the HSR Act,
(iii) such other consents, authorizations, filing, approvals and
registrations which if not made would not reasonably be expected to
have a Material Adverse Effect, and (iv) as set forth in Section
3.6 of the Parent Disclosure Schedule.
SECTION 3.7 NO CONFLICT. Subject to compliance with any
Governmental Licenses described in Section 3.6 of the Parent
Disclosure Schedule and obtaining the consents and waivers that are
set forth and described in Section 3.7 of the Parent Disclosure
Schedule (the "Private Consents"), neither the execution, delivery
and performance of this Agreement by Parent or Merger Sub, nor the
consummation by Parent or Merger Sub of the transactions
contemplated hereby, will (i) conflict with, or result in a breach
or violation of, any provision of the certificate of incorporation
(or similar organizational document) or by-laws of Parent or any of
its Subsidiaries; (ii) conflict with, result in a breach or
violation of, give rise to a default, or result in the acceleration
of performance, or permit the acceleration or performance, under
(whether or not after the giving of notice or lapse of time or
both) any Encumbrance, note, bond, indenture, guaranty, lease,
license, agreement or other instrument, writ, injunction, order,
judgment or decree to which Parent or any of its Subsidiaries or
any of their respective properties or assets is subject; (iii) give
rise to a declaration or imposition of any Encumbrance upon any of
the properties or assets of Parent or any of its Subsidiaries; or
(iv) impair Parent's business or adversely affect any Governmental
License necessary to enable Parent and its Subsidiaries to carry on
their business as presently conducted, except, in the cases of
clauses (ii), (iii) or (iv), for any conflict, breach, violation,
default, acceleration, declaration, imposition or impairment that
would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.8 SEC FILINGS. (a) The Parent has filed all
forms, reports and documents required to be filed with the SEC
since January 1, 1994 and has made available to the Company (i) its
Annual Reports on Form 10-K for the fiscal years ended December 31,
1994, 1995 and 1996; (ii) its Quarterly Reports on Form 10-Q for
the quarterly periods ended March 31, 1997 and June 30, 1997; (iii)
all proxy statements relating to Parent's meetings of stockholders
(whether annual or special) held since January 1, 1994; (iv) all
other reports or registration statements (other than Reports on
Form 10-Q not referred to in clause (ii) above or on Form 8-K filed
before January 1, 1997) filed by Parent with the SEC since January
1, 1994; and (v) all amendments, supplements, exhibits and
documents incorporated therein by reference to all such reports and
registration statements filed by Parent with the
-27-
SEC (collectively, the "Parent SEC Reports"). Except as disclosed
in Section 3.8 of the Parent Disclosure Schedule, the Parent SEC
Reports (i) were prepared in accordance, and complied as of their
respective dates in all material respects, with the requirements of
the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Parent has filed with the SEC as exhibits to the Parent SEC Reports
all agreements, contracts and other documents or instruments
required to be so filed, and such exhibits are correct and complete
copies of such agreements, contracts and other documents or
instruments. None of Parent's Subsidiaries is required to file any
forms, reports or other documents with the SEC.
SECTION 3.9 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED
LIABILITIES; RECEIVABLES. (a) Parent has heretofore delivered to
the Company complete and correct copies of the following financial
statements (collectively, the "Parent Financial Statements"), all
of which have been prepared from the books and records of Parent
and its Subsidiaries in accordance with GAAP consistently applied
and maintained throughout the periods indicated (except as may be
indicated in the notes thereto and except that the unaudited Parent
Financial Statements may not include all notes thereto required by
GAAP) and fairly present in all material respects the financial
condition of Parent and its Subsidiaries as at their respective
dates and the results of their operations and cash flows for the
periods covered thereby, except that unaudited interim results were
or are subject to normal and recurring year-end adjustments which
were not or are not expected to be material in amount:
(i) audited consolidated balance sheets at
December 31, 1995 and December 31, 1996 and audited
consolidated statements of income, cash flows and
stockholders' equity of Parent and its Subsidiaries for
the fiscal years then ended, audited by Xxxxxx Xxxxxxxx
LLP, independent certified public accountants; and
(ii) unaudited consolidated balance sheet (the
"Parent Interim Balance Sheet") of Parent and its
Subsidiaries as at June 30, 1997 (the "Parent Interim
Balance Sheet Date") and consolidated statements of
income and cash flows for the three and six months then
ended.
Such statements of income do not contain any material item of
special or nonrecurring revenue or income or any material item of
revenue or income not earned in the ordinary course of business,
except as expressly specified therein.
(b) Except as and to the extent reflected or reserved
against on the Parent Interim Balance Sheet, and except for
liabilities which will not have a Material Adverse Effect, neither
Parent nor any of its Subsidiaries had, as of the Parent Interim
Balance Sheet Date, any liabilities, debts or obligations (whether
absolute, accrued, contingent or otherwise) of any nature that
would be required as of such date to have been included on a
balance sheet prepared in accordance with GAAP. Since the Parent
Interim Balance Sheet Date, neither
-28-
Parent nor any of its Subsidiaries has incurred or suffered to
exist any liability, debt or obligation (whether absolute, accrued,
contingent or otherwise), except liabilities, debt and obligations
incurred in the ordinary course of business, consistent with past
practice, none of which will have a Material Adverse Effect.
(c) Except as set forth in Section 3.9 of the Parent
Disclosure Schedule, all receivables of the Parent and its Subsid-
iaries (including accounts receivable, loans receivable and advanc-
es) which are reflected in the Parent Interim Balance Sheet, and
all such receivables which have arisen thereafter and prior to the
Effective Time, have arisen or will have arisen only from bona fide
transactions in the ordinary course of business, the carrying value
of such receivables approximate their fair market values and
adequate reserves for Parent's receivables have been established in
accordance with prior practice and GAAP.
SECTION 3.10 ABSENCE OF CHANGES. Except as set forth in
Section 3.10 of the Parent Disclosure Schedule or the Parent SEC
Reports, since January 1, 1997, Parent and its Subsidiaries have
conducted their respective businesses only in the ordinary course,
and neither Parent nor any of its Subsidiaries has:
(a) terminated or received any notice of termination of
any material contract, lease, license or other agreement or any
Governmental License, or suffered any damage, destruction or loss
(whether or not covered by insurance) that would reasonably be
expected to have a Material Adverse Effect;
(b) changed any accounting practices, policies or
procedures utilized in the preparation of the Parent Financial
Statements, except as required by GAAP, the SEC, the Financial
Accounting Standards Board or as otherwise set forth in the Parent
SEC Reports;
(c) suffered any change, event or condition that, in any
case or in the aggregate, has had or is reasonably likely to result
in a Material Adverse Effect; or
(d) entered into any agreement or made any commitment to
take any of the types of action described in subparagraphs (a)
through (c) of this Section 3.10.
SECTION 3.11 TAX MATTERS. (a) Parent on behalf of
itself and all of its Subsidiaries hereby represents that, other
than as disclosed in Section 3.11(a) of the Parent Disclosure
Schedule or the Parent SEC Reports, Parent and its Subsidiaries
have timely filed all United States federal income Tax Returns and
all other material Tax Returns required to be filed by them. All
such Tax Returns are complete and correct in all material respects
(except to the extent a reserve has been established as reflected
in the Parent Interim Balance Sheet). Parent and its Subsidiaries
have timely paid and discharged all Taxes due in connection with or
with respect to the periods or transactions covered by such Tax
Returns and have paid all other Taxes as are due, except such as
are being contested in good faith by appropriate proceedings (to
the extent that any such proceedings are required), and there are
no other Taxes that would be due if asserted by a taxing authority,
except with respect to which Parent is maintaining reserves unless
the failure to do so would not have a Material Adverse Effect.
Except as does not involve or would not result in liability to
Parent or any
-29-
of its Subsidiaries that would have a Material Adverse Effect,
(i) there are no tax liens on any assets of Parent or any of its
Subsidiaries; (ii) neither Parent nor any of its Subsidiaries has
granted any waiver of any statute of limitations with respect to,
or any extension of a period for the assessment of, any Tax; (iii)
no unpaid (or unreserved) deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental authority
with respect to Parent or any of its Subsidiaries; (iv) there are
no pending or, the Parent's Knowledge, threatened audits,
investigations or claims for or relating to any liability in
respect of Taxes of Parent or any of its Subsidiaries; and (v)
neither Parent nor any of its Subsidiaries has requested any
extension of time within which to file any currently unfiled Tax
Returns. The accruals and reserves for Taxes (including deferred
taxes) reflected in the Parent Interim Balance Sheet are in all
material respects adequate to cover all Taxes accruable through the
date thereof (including Taxes being contested) in accordance with
GAAP.
(b) Parent on behalf of itself and all its Subsidiaries
hereby represents that, other than as disclosed in Section 3.11(b)
of the Parent Disclosure Schedule or the Parent SEC Reports, and
other than with respect to items the inaccuracy of which would not
have a Material Adverse Effect: (i) neither Parent nor any of its
Subsidiaries is obligated under any agreement with respect to
industrial development bonds or other obligations with respect to
which the excludability from gross income of the holder for federal
or state income tax purposes could be affected by the transactions
contemplated hereunder; (ii) neither Parent nor any of its
Subsidiaries is, or has been, a United States real property holding
corporation (as defined in section 897(c)(2) of the Code) during
the applicable period specified in section 897(c)(1)(A)(ii) of the
Code; (iii) neither Parent nor any of its Subsidiaries has filed or
been included in a combined, consolidated or unitary return (or
substantial equivalent thereof) of any Person other than Parent and
its Subsidiaries; (iv) neither Parent nor any of its Subsidiaries
is liable for Taxes of any Person other than Parent and its
Subsidiaries, or currently under any contractual obligation to
indemnify any Person with respect to Taxes, or a party to any tax
sharing agreement or any other agreement providing for payments by
Parent or any of its Subsidiaries with respect to Taxes; (v) except
entities the beneficial ownership of which is wholly owned by
Parent and/or its Subsidiaries, neither Parent nor any of its
Subsidiaries is a party to any joint venture, partnership or other
arrangement or contract which could be treated as a partnership for
United States federal income tax purposes; (vi) neither Parent nor
any of its Subsidiaries is a party to any agreement, contract,
arrangement or plan that would result (taking into account the
transactions contemplated by this Agreement), separately or in the
aggregate, in the payment of any "excess parachute payments" within
the meaning of section 280G of the Code; (vii) the prices for any
property or services (or for the use of property) provided by
Parent or any of its Subsidiaries to any other Subsidiary or to the
Parent have been arm's length prices determined using a method
permitted by the Treasury Regulations under section 482 of the
Code; (viii) neither Parent nor any of its Subsidiaries is a
"consenting corporation" under section 341(f) of the Code or any
corresponding provision of state, local or foreign law; (ix)
neither Parent nor any of its Subsidiaries has made an election or
is required to treat any of its assets as owned by another Person
for federal income tax purposes or as tax-exempt bond financed
property or tax-exempt use property within the meaning of section
168 of the Code (or any corresponding provision of state, local or
foreign law); and (x) Parent is not an investment company within
the meaning of section 368(a)(2)(F)(iii) of the Code.
-30-
SECTION 3.12 RELATIONS WITH EMPLOYEES AND SALES AGENTS.
(a) Except as set forth in Section 3.12 of the Parent Disclosure
Schedule:
(a) No collective bargaining agreement with respect to
the business of Parent or any of its Subsidiaries is currently in
effect or being negotiated. Neither Parent nor any of its Subsid-
iaries has any obligation to negotiate any such collective bargain-
ing agreement.
(b) There are no strikes or work stoppages pending or,
to Parent's Knowledge, threatened with respect to the employees of
Parent or any of its Subsidiaries, nor has any such strike or work
stoppage occurred or, to Parent's Knowledge, been threatened since
January 1, 1995. There is no representation claim or petition or
complaint pending before the National Labor Relations Board or any
state or local labor agency and, to Parent's Knowledge, no
question concerning representation has been raised or threatened
since January 1, 1995 respecting the employees of Parent or any of
its Subsidiaries.
(c) To Parent's Knowledge, no charges with respect to or
relating to the business of Parent or any its Subsidiaries are
pending before the Equal Employment Opportunity Commission, or any
state or local agency responsible for the prevention of unlawful
employment practices, which would reasonably be expected to have a
Material Adverse Effect.
SECTION 3.13 BENEFIT PLANS. (a) Complete and correct
copies of all material written Employee Benefit Plans of Parent and
its Subsidiaries have been filed as exhibits to the Parent's SEC
Reports.
(b) No Employee Benefit Plan of Parent or any of its
Subsidiaries is, and no material employee benefit plan formerly
maintained by Parent and/or any of its Subsidiaries was, a "defined
benefit plan" within the meaning of section 3(35) of ERISA to which
ERISA applies. Neither the Parent nor any of its Subsidiaries has
ever contributed to, or withdrawn in a complete or partial
withdrawal from, any multiemployer plan (within the meaning of
Subtitle E of Title IV of ERISA) or incurred contingent liability
under section 4204 of ERISA.
(c) Each Employee Benefit Plan of Parent and its
Subsidiaries (and each related trust, insurance contract and fund)
is in compliance in all material respects in form and in operation
with all applicable requirements of Applicable Benefits Law
(including ERISA and the Code), and is being administered in all
material respects in accordance with all relevant plan documents to
the extent consistent with Applicable Benefits Law. There has been
no prohibited transaction with respect to any Employee Benefit Plan
of Parent or any of its Subsidiaries which would result in the
imposition of any material unpaid excise tax. No Employee Benefit
Plan of Parent or any of its Subsidiaries is under investigation or
audit by the Department of Labor or Internal Revenue Service other
than as part of a routine tax audit of Parent. There are no legal
actions or suits pending or, to Parent's Knowledge, threatened
against any Employee Benefit Plan of Parent or any of its
Subsidiaries or the assets of any such Employee Benefit Plan or
against any fiduciary of any such Employee Benefit Plan and
-31-
Parent has no Knowledge of any facts that could give rise to any
such actions. There has been full compliance in all material
respects with the notice and continuation requirements of section
4980B of the Code applicable to any Employee Benefit Plan of Parent
and its Subsidiaries.
(d) The consummation of the Merger or any other
transaction contemplated by this Agreement, in and of itself, will
not result in a material increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any
benefits or compensation payable under any Employee Benefit Plan in
respect of any employee of Parent or any of its Subsidiaries.
(e) At no time since the organization of Parent or any
of its Subsidiaries has any entity (other than Parent or any such
Subsidiary) been an "ERISA affiliate" of Parent, any such Subsid-
iary, or both.
SECTION 3.14 TITLE TO PROPERTIES. Except as set forth
in the Parent SEC Reports or Section 3.14 of the Parent Disclosure
Schedule, Parent and each of its Subsidiaries have good and
indefeasible title to all of their properties and assets, free and
clear of all Encumbrances, except liens for taxes not yet due and
payable and such Encumbrances or other imperfections of title, if
any, as do not materially detract from the value of or interfere
with the present use of the property affected thereby or which
would not reasonably be expected to have a Material Adverse Effect,
and except for Encumbrances which secure indebtedness reflected in
the Parent Interim Balance Sheet.
SECTION 3.15 COMPLIANCE WITH LAWS; LEGAL PROCEEDINGS.
(a) Neither Parent nor any of its Subsidiaries is in violation
of, or in default with respect to, any applicable statute,
regulation, ordinance, writ, injunction, order, judgment, decree or
any Governmental License which violation or default would
reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth in the Parent SEC Reports or
Section 3.15(b) of the Parent Disclosure Schedule, there is no
order, writ, injunction, judgment or decree outstanding and no
legal, administrative, arbitration or other governmental proceeding
or investigation pending or, to Parent's Knowledge, threatened,
and there are no claims (including unasserted claims of which
Parent has Knowledge) against or relating to Parent or any of its
Subsidiaries or any of their respective properties, assets or
businesses that would reasonably be expected to have a Material
Adverse Effect.
SECTION 3.16 BROKERS. Except for Xxxxxx Brothers, no
broker, finder or investment advisor acted directly or indirectly
as such for Parent, any Subsidiary of Parent or, to Parent's
Knowledge, any stockholder of Parent in connection with this
Agreement or the Merger, and no broker, finder, investment advisor
or other Person is entitled to any fee or other commission, or
other remuneration, in respect thereof based in any way on any
action, agreement, arrangement or understanding taken or made by or
on behalf of Parent, any Subsidiary of Parent or, to Parent's
Knowledge, any stockholder of the Parent.
-32-
SECTION 3.17 INTELLECTUAL PROPERTY. (a) Parent and/or
each of its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software
programs or applications and tangible or intangible proprietary
information or material that are used in the business of Parent and
its Subsidiaries as currently conducted, except as would not
reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in Section 3.17(b) of the Parent
Disclosure Schedule or the Parent SEC Reports or as would not
reasonably be expected to have a Material Adverse Effect:
(i) Parent is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other
agreements as to which Parent is a party and pursuant to which
Parent is authorized to use any patents, trademarks, service marks
or copyrights owned by others ("Parent Third-Party Intellectual
Property Rights"); (ii) No claims with respect to the patents,
registered and material unregistered trademarks and service marks,
registered copyrights, trade names and any applications therefor
owned by Parent or any of its Subsidiaries ("Parent Intellectual
Property Rights"), any trade secret material to Parent, or Parent
Third Party Intellectual Property Rights to the extent arising out
of any use, reproduction or distribution of Parent Third Party
Intellectual Property Rights by or through Parent or any of its
Subsidiaries, are currently pending or, to Parent's Knowledge,
have been threatened by any Person; or (iii) Parent has no
Knowledge of any valid grounds for any bona fide claims (1) to the
effect that the sale, licensing or use of any product or service as
now sold, licensed or used, or proposed for sale, license or use,
by Parent or any of its Subsidiaries infringes on any copyright,
patent, trademark, service xxxx or trade secret; (2) against the
use by Parent or any of its Subsidiaries of any trademarks, trade
names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in the business of
Parent or any of its Subsidiaries as currently conducted or as
proposed to be conducted; (3) challenging the ownership, validity
or effectiveness of any of Parent Intellectual Property Rights or
other trade secret material to Parent; or (4) challenging the
license or legally enforceable right to use of Parent Third Party
Intellectual Rights by Parent or any of its Subsidiaries.
(c) To Parent's Knowledge, there is no material
unauthorized use, infringement or misappropriation of any of Parent
Intellectual Property Rights by any third party, including any
employee or former employee of the Parent or any of its
Subsidiaries.
SECTION 3.18 CONTRACTS; ETC. (a) Each agreement, lease
or other type of document required to be filed as an exhibit to the
Parent's SEC Reports to which Parent or any of its Subsidiaries is
a party or by which Parent or any of its Subsidiaries or their
respective properties or assets are bound, except for those
contracts, the loss of which would not reasonably be expected to
have a Material Adverse Effect (collectively, the "Parent
Contracts"), is valid, binding and in full force and effect and is
enforceable by Parent or such Subsidiary in accordance with its
terms. Neither Parent nor any such Subsidiary is (with or without
the lapse of time or the giving of notice, or both) in breach of or
in default under any of the Parent Contracts, and, to Parent's
Knowledge, no other party to any of the Parent
-33-
Contracts is (with or without the lapse of time or the giving of
notice, or both) in breach of or in default under any of the Parent
Contracts, where such breach or default would reasonably be
expected to have a Material Adverse Effect. No existing or
completed agreement to which Parent or any of its Subsidiaries is
a party is subject to renegotiation with any governmental body.
SECTION 3.19 PERMITS, AUTHORIZATIONS, ETC. All
Governmental Licenses and each other material approval, authoriza-
tion, consent, license, certificate of public convenience, order or
other permit of all governmental agencies, whether federal, state,
local or foreign, necessary to enable Parent and its Subsidiaries
to own, operate and lease their properties and assets as and where
such properties and assets are owned, leased or operated and to
provide service and carry on their business as presently provided
and conducted or required to permit the continued conduct of such
business following the Merger in the manner conducted on the date
of this Agreement (collectively, the "Parent Permits") are valid
and in good standing with the issuing agencies and not subject to
any proceedings for suspension, modification or revocation, except
for such Parent Permits which would not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.20 ENVIRONMENTAL MATTERS. (a) Parent and
each Subsidiary of Parent has obtained all Environmental Permits
that are required for the lawful operation of its business except
for such Environmental Permits the failure of which to obtain would
not reasonably be expected to have a Material Adverse Effect.
Parent and its Subsidiaries (i) are in compliance with all terms
and conditions of their Environmental Permits and are in compliance
with and not in default under any applicable Environmental Law,
except for such failure to be in compliance that would not
reasonably be expected to have Material Adverse Effect, and
(ii) have not received written notice of any material violation by
or material claim against Parent or any such Subsidiary under any
Environmental Law.
(b) There have been no Releases or threatened Releases
of any Hazardous Substances (i) into, on or under any of the
properties owned or operated (or formerly owned or operated) by
Parent or any such Subsidiary in such a way as to create any
liability (including the costs of investigation or remediation)
under any applicable Environmental Law that would reasonably be
expected to have a Material Adverse Effect.
(c) Neither the Parent or its Subsidiaries have been
identified as a potentially responsible party at any federal or
stated National Priority List ("superfund") site.
SECTION 3.21 BOOKS AND RECORDS. All accounts, books,
ledgers and official and other records prepared and kept by Parent
and its Subsidiaries have been kept and completed in all material
respects, and there are no material inaccuracies or discrepancies
contained or reflected therein.
SECTION 3.22 POOLING MATTERS. Parent has provided to
Parent's independent accountants all information concerning actions
taken or agreed to be taken by Parent or any of its Affiliates on
or before the date of this Agreement that could reasonably be
expected to adversely affect the ability of Parent to account for
the business combination to be effected by
-34-
the Merger as a pooling of interests. Parent has provided Company
a letter from Parent's independent public accountants to the effect
that, after review, such accountants know of no reason relating to
the Parent that should prevent the Parent from accounting for the
Merger as a pooling of interests.
SECTION 3.23 REGISTRATION STATEMENT; JOINT PROXY
STATEMENT/PROSPECTUS. Subject to the accuracy of the
representations of the Company in Section 2.28, the registration
statement (the "Registration Statement") pursuant to which the
Parent Common Stock to be issued in the Merger will be registered
with the SEC shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. The information supplied by Parent in
writing specifically for inclusion in the Joint Proxy
Statement/Prospectus will not, on the date the Joint Proxy
Statement/Prospectus (or any amendment thereof or supplement
thereto) is first mailed to stockholders, at the time of the
Stockholders Meetings, or at the Effective Time, contain any
statement which, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders Meetings which has
become false or misleading. If at any time prior to the Effective
Time any event relating to Parent or any of its Subsidiaries or any
of their respective officers, directors, stockholders or Affiliates
should be discovered by Parent which should be set forth in an
amendment to the Registration Statement or a supplement to the
Joint Proxy Statement/Prospectus, Parent shall promptly inform the
Company. The Joint Proxy Statement/Prospectus shall comply in all
material respects with the requirements of the Securities Act and
the Exchange Act. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any Company Information
which is contained or incorporated by reference in, or furnished in
connection with the preparation of, the Registration Statement or
the Joint Proxy Statement/Prospectus.
SECTION 3.24 OWNERSHIP OF MERGER SUB; NO PRIOR
ACTIVITIES. (a) Merger Sub is a direct, wholly-owned subsidiary
of Parent and was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
(b) As of the date hereof and the Effective Time, expect
for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by
this Agreement and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Merger
Sub has not and will not have incurred, directly or indirectly,
through any subsidiary or affiliate, any obligations or liabilities
or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any
Person.
-35-
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING
THE MERGER. During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement
or the Effective Time, the Company covenants and agrees that,
unless Parent shall otherwise agree in writing, the Company shall
conduct its business and shall cause the businesses of its
Subsidiaries to be conducted only in, and the Company and its
Subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice,
other than actions taken by the Company or its Subsidiaries in
order to facilitate the negotiation and execution of this Agreement
and the consummation of the transactions contemplated hereunder
which actions would not breach any of the Company's
representations, warranties, covenants or agreements herein; and
the Company shall use reasonable commercial efforts to preserve
substantially intact the business organization of the Company and
its Subsidiaries, to keep available the services of the present
officers, employees, agents, distributors and consultants of the
Company and its Subsidiaries and to preserve the present
relationships of the Company and its Subsidiaries with customers,
suppliers and other Persons with which the Company or any of its
Subsidiaries has significant business relations. By way of
amplification and not limitation, except as contemplated by this
Agreement, neither the Company nor any of its Subsidiaries shall,
during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do, or propose to do, any of
the following without the prior written consent of Parent:
(a) amend or otherwise change the Company's Certificate
of Incorporation or By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or
authorize the issuance, sale, pledge, disposition or
encumbrance of, any shares of capital stock of any class, or
any options, warrants, convertible securities or other rights
of any kind to acquire any shares of capital stock, or any
other ownership interest (including, without limitation, any
phantom interest) in the Company or any of its Subsidiaries or
Affiliates (except for the issuance of shares of Company
Common Stock issuable upon the exercise of the Warrants or
Stock Options, which Warrants and Stock Options are
outstanding on the date hereof or pursuant to the Company's
Employee Stock Purchase Plan);
(c) sell, pledge, dispose of or encumber any assets of
the Company or any of its Subsidiaries (except for sales,
pledges, dispositions and encumbrances of assets in the
ordinary course of business);
(d) (i) declare, set aside, make or pay any dividend or
other distribution (whether in cash, stock or property or any
combination thereof) in respect of any of its capital stock,
except that a wholly owned Subsidiary of the Company may
declare and pay a dividend to its parent, (ii) split, combine
or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect
-36-
of, in lieu of or in substitution for shares of its capital
stock, or (iii) amend the terms or change the period of
exercisability of, purchase, repurchase, redeem or otherwise
acquire, or permit any Subsidiary to purchase, repurchase,
redeem or otherwise acquire, any of its securities or any
securities of its Subsidiaries, including, without limitation,
shares of Company Common Stock or any option, warrant or
right, directly or indirectly, to acquire shares of Company
Common Stock;
(e) (i) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership
or other business organization or division thereof; (ii) incur
any material indebtedness for borrowed money, except for
borrowings and reborrowing under the Company's existing credit
facilities or issue any debt securities or assume, guarantee
(other than guarantees of bank debt of the Company's
Subsidiaries under existing credit facilities entered into in
the ordinary course of business); (iii) endorse or otherwise
as an accommodation become responsible for, the obligations of
any Person, or make any material loans or advances, except for
endorsements, accommodations, loans or advancements in the
ordinary course of business consistent with prior practice;
(iv) authorize any capital expenditures or purchases of fixed
assets other than in the ordinary course of business
consistent with prior practice and in the aggregate less than
$10,000,000 prior to December 31, 1997 and $18,000,000 prior
to March 31, 1998; or (v) enter into or amend any contract,
agreement, commitment or arrangement to effect any of the
matters prohibited by this Section 4.1(e);
(f) make any change in the rate of compensation,
commission, bonus or other remuneration payable, or pay or
agree or promise to pay, conditionally or otherwise, any
bonus, extra compensation, pension or severance or vacation
pay, to any director, officer, employee, salesman, distributor
or agent of the Company or any of its Subsidiaries except in
the ordinary course of business consistent with prior practice
or as currently scheduled for various officers of the Company
beginning October 1, 1997 as required by such officers'
employment agreements, correct and complete copies of which
agreements have heretofore been delivered by the Company to
Parent, or make any increase in or commitment to increase any
employee benefits, adopt or make any commitment to adopt any
additional employee benefit plan or make any contribution,
other than regularly scheduled contributions, to any Employee
Benefit Plan;
(g) take any action to change accounting practices,
policies or procedures (including, without limitation,
procedures with respect to revenue recognition, payments of
accounts payable or collection of accounts receivable) except
as required by the SEC, the Financial Accounting Standards
Board or GAAP;
(h) make any material tax election inconsistent with
past practice or settle or compromise any material federal,
state, local or foreign Tax liability or agree to an extension
of a statute of limitations, except to the extent the amount
of any such settlement has been reserved for in the financial
statements contained in the Company
-37-
SEC Reports filed with the SEC prior to the date of this
Agreement and except as described in Section 4.1(h) of the
Company Disclosure Schedule;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) that
are individually or in the aggregate material to the Company
and its Subsidiaries, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent
with past practice of liabilities reflected or reserved
against in the Company Financial Statements or incurred
thereafter in the ordinary course of business and consistent
with past practice;
(j) take any action to delist a security of the Company
from any securities exchange;
(k) recommend or take any action to adopt a plan of
dissolution or liquidation with respect to the Company or any
of its Subsidiaries; or
(l) take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(a) through (k) above,
or any action which would make any of the representations or
warranties of the Company contained in this Agreement untrue
or incorrect in any material respect or prevent the Company
from performing or cause the Company not to perform in all
material respects its covenants herein.
SECTION 4.2 NO SOLICITATION. (a) Upon execution of
this Agreement, the Company does not have, or shall immediately
terminate any discussions with, any third party concerning an
Alternative Acquisition (as defined below). From and after the
date of this Agreement until the earlier of the Effective Time or
the termination of this Agreement in accordance with its terms, the
Company shall not, and shall not permit any officer, director,
employee, investment banker or other agent of the Company or any
Subsidiary of the Company to, directly or indirectly, (i) solicit,
engage in discussions or negotiate with any Person (whether such
discussions or negotiations are initiated by the Company or
otherwise) or take any other action intended or designed to
facilitate the efforts of any Person, other than Parent, relating
to the possible acquisition of the Company or any of its
Subsidiaries (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its or
their capital stock or assets (with any such efforts by any such
Person, including a firm proposal to make such an acquisition, to
be referred to as an "Alternative Acquisition"), (ii) provide
information with respect to the Company or any of its Subsidiaries
to any Person, other than Parent, relating to a possible
Alternative Acquisition by any Person, other than Parent, (iii)
enter into an agreement with any person, other than Parent,
providing for a possible Alternative Acquisition, or (iv) make or
authorize any statement, recommendation or solicitation in support
of any possible Alternative Acquisition by any Person, other than
by Parent.
(b) Notwithstanding the foregoing, the restrictions set
forth in Section 4.2(a) shall not prevent the Board of Directors of
the Company (or its agents pursuant to its instructions) from
taking any of the following actions: (i) furnishing information
concerning the Company and its business, properties and assets to
any third party or (ii) engaging in
-38-
discussions or negotiating with such third party concerning an
Alternative Acquisition, in either such case provided that all of
the following events shall have occurred: (1) such third party is
not an Affiliate of the Company and has made a written, bona fide
proposal to the Board of Directors of the Company to acquire the
Company (which proposal may be conditional) through an Alternative
Acquisition which proposal identifies a price or range of values to
be paid for all of the outstanding securities (including Stock
Options and Warrants) or substantially all of the assets of the
Company, and if consummated, based on the advice of the Company's
investment bankers, the Board of Directors of the Company has
determined, in good faith, is more favorable to the stockholders of
the Company, from a financial point of view, than the terms of the
Merger (a "Superior Proposal"); (2) the Company's Board of
Directors has determined, based on the advice of its investment
bankers, that such third party is financially capable of
consummating such Superior Proposal; (3) the Board of Directors of
the Company shall have determined, after consultation with its
outside legal counsel, that, the fiduciary duties of the Board of
Directors of the Company require the Company to furnish information
to and negotiate with such third party; and (4) Parent shall have
been notified in writing of such Alternative Acquisition, including
all of its terms and conditions, and shall have been given copies
of such proposal. Furthermore, nothing contained in this Agreement
shall prevent the Company from taking any position with respect to
an Alternative Acquisition pursuant to Rules 14d-9 and 14e-2 under
the Exchange Act which is consistent with the advice of counsel
concerning the fiduciary duties of the Board of Directors of the
Company under applicable law with respect to a tender offer
commenced by a third party other than an Affiliate of the Company.
(c) Notwithstanding the foregoing, the Company shall not
provide any non-public information to such third party unless (i)
it has prior to or contemporaneously therewith provided such
information to Parent or Parent's representatives; and (ii) the
Company provides such non-public information pursuant to a
nondisclosure agreement with terms which are at least as
restrictive as the nondisclosure agreement heretofore entered into
between Parent and the Company.
(d) In addition to the foregoing, the Company shall not
accept or enter into any agreement concerning an Alternative
Acquisition for a period of not less than 48 hours after Parent's
receipt of a notice of the material terms of such proposal of an
Alternative Acquisition. Upon compliance with all of the foregoing
provisions of this Section 4.2, the Company shall be entitled to
(i) change its recommendation concerning the Merger, and (ii) enter
into an agreement with such third party concerning an Alternative
Acquisition provided that the Company shall immediately make
payment in full to Parent of the Fee as defined in Section 7.3
below.
(e) the Company shall ensure that the officers and
directors of the Company and its Subsidiaries and any investment
banker or other financial advisor or representative retained by the
Company or any Subsidiary of the Company are aware of the
restrictions described in this Section 4.2.
(f) the Company shall be entitled to provide copies of
this Section 4.2 to third parties who on an entirely unsolicited
basis after the date hereof, contact the Company
-39-
concerning an Alternative Acquisition; provided that Parent shall
concurrently be notified of such contact and the delivery of such
copy.
SECTION 4.3 CONDUCT OF BUSINESS BY PARENT PENDING THE
MERGER. During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement
or the Effective Time, Parent covenants and agrees that, unless the
Company shall otherwise agree in writing, Parent shall conduct its
business, and cause the businesses of its Subsidiaries to be
conducted only in, and Parent and its Subsidiaries shall not take
any action except in, the ordinary course of business and
consistent with past practice, except for actions taken by Parent
or its Subsidiaries in order to facilitate the negotiation and
execution of this Agreement and the consummation of the
transactions contemplated hereunder which actions would not breach
any of Parent's or Merger Sub's representations, warranties,
covenants and agreements herein, and shall not directly or
indirectly do, or propose to do, any of the following without the
prior written consent of the Company:
(a) amend or otherwise change Parent's Certificate of
Incorporation or By-Laws;
(b) declare, set aside, make or pay any cash dividend or
other distribution in respect of any of its capital stock,
except that a wholly owned Subsidiary of Parent may declare
and pay a dividend to its parent;
(c) take any action to delist a security of Parent from
any securities exchange;
(d) recommend or take any action to adopt a plan of
dissolution or liquidation with respect to Parent or any of
its Subsidiaries; or
(e) take or agree in writing or otherwise to take any
action described in Sections 4.3(a) through (d) above or any
action which would make any of the representations or
warranties of Parent or Merger Sub contained in this Agreement
untrue or incorrect or prevent Parent or Merger Sub from
performing or cause Parent or Merger Sub not to perform its
covenants herein.
Nothing in this Section 4.3 or any other provision of this
Agreement shall prevent Parent from engaging in any discussions or
entering into or consummating any agreements or other arrangements
with respect to (i) the sale of all or substantially all of the
Parent's capital stock or assets, (ii) any material strategic
alliance or (iii) the material acquisition (by merger,
consolidation or acquisition of stock or assets or otherwise) of
any corporation, partnership or other business organization or
division thereof ((i), (ii) and (iii) each a "Material Parent
Transaction") and no such actions by Parent or any of its
Subsidiaries with respect to a Material Parent Transaction shall
constitute a breach of any representation, warranty, covenant or
agreement of Parent or Merger Sub herein; PROVIDED, HOWEVER, that
after the Joint Proxy Statement/Prospectus has been mailed to the
stockholders of the Company and prior to the then scheduled date of
the Company Stockholders Meeting, Parent will not initiate any
discussions with respect to any Material Parent Transaction, it
being understood
-40-
and agreed that nothing in this proviso shall in any way affect
Parent's right to respond to any such discussions initiated by any
third party who is not an Affiliate of the Company.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 JOINT PROXY STATEMENT/PROSPECTUS;
REGISTRATION STATEMENT. As promptly as practicable after the
execution of this Agreement, and after the furnishing by the
Company and Parent of all information required to be contained
therein, which respective information each of Parent and Company
covenant to use their best efforts as promptly as possible
following the date hereof to so furnish, the Company and Parent
shall file with the SEC a Registration Statement on Form S-4 (or on
such other form as shall be appropriate), which shall include the
Joint Proxy Statement/Prospectus relating to the adoption of this
Agreement and, consistent with Section 4.2, approval of the
transactions contemplated hereby by the stockholders of the Company
and Parent pursuant to this Agreement, and shall use all reasonable
efforts to cause the Registration Statement to become effective as
soon thereafter as practicable. The Joint Proxy
Statement/Prospectus shall include the recommendation of the Boards
of Directors of the Company in favor of the Merger and of Parent in
favor of the Parent Common Stock Issuance, and such recommendations
shall not be withdrawn modified or changed in a manner adverse to
Parent or Merger Sub or the Company, respectively, subject to the
last sentence of Section 5.2.
SECTION 5.2 COMPANY STOCKHOLDERS MEETING. The Company
shall call the Company Stockholders Meeting as promptly as
practicable for the purpose of voting upon the approval of the
Merger, and the Company shall use its reasonable best efforts to
hold the Company Stockholders Meeting as soon as practicable after
the date on which the Registration Statement becomes effective.
Unless otherwise required under the applicable fiduciary duties of
the directors of the Company, as determined in accordance with
Section 4.2, the Company shall solicit from its stockholders
proxies in favor of approval of the Merger and this Agreement,
shall take all other reasonable action necessary or advisable to
secure the vote or consent of stockholders in favor of such
approval and shall not take any action that could reasonably be
expected to prevent the vote or consent of stockholders in favor of
such approval.
SECTION 5.3 PARENT STOCKHOLDERS MEETING. Parent shall
call the Parent Stockholders Meeting as promptly as practicable for
the purpose of authorizing and approving the issuance by Parent of
the Parent Common Stock in the Merger, as contemplated by this
Agreement (the "Parent Common Stock Issuance") as required by the
NYSE, and if so required by the NYSE, Parent shall use its
reasonable best efforts to hold the Parent Stockholders Meeting as
soon as practicable after the date on which the Registration
Statement becomes effective. Parent shall solicit from its
stockholders proxies in favor of approval of the Parent Common
Stock Issuance, shall take all other reasonable action necessary or
advisable to secure the vote or consent of stockholders in favor of
such
-41-
approval, if required, and shall not take any action that could
reasonably be expected to prevent such vote or consent of
stockholders in favor of such approval.
SECTION 5.4 ACCESS TO INFORMATION; CONFIDENTIALITY.
Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject (from
which such party shall use reasonable efforts to be released), the
Company and Parent shall each (and shall cause each of their
Subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of the other reasonable access,
during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during
such period, the Company and Parent each shall (and shall cause
each of their Subsidiaries to) furnish promptly to the other all
information concerning its business, properties and personnel as
such other party may reasonably request, and each shall make
available to the other the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of
the other's business, properties and personnel as either Parent or
the Company may reasonably request. Each party shall keep such
information confidential in accordance with the terms of the
confidentiality letter (the "Confidentiality Letter") between
Parent and the Company.
SECTION 5.5 CONSENTS; APPROVALS. The Company and Parent
shall each in good faith use their reasonable best efforts to
obtain all consents, waivers, approvals, authorizations or orders
(including, without limitation, all United States and foreign
governmental and regulatory rulings and approvals), and the Company
and Parent shall make all filings (including, without limitation,
all filings with United States and foreign governmental or
regulatory agencies) required in connection with the authorization,
execution and delivery of this Agreement by the Company and Parent
and the consummation by them of the transactions contemplated
hereby. The Company and Parent shall furnish all information
required to be included in the Joint Proxy Statement/Prospectus and
the Registration Statement or for any application or other filing
to be made pursuant to the rules and regulations of any United
States or foreign governmental body in connection with the
transactions contemplated by this Agreement.
SECTION 5.6 AGREEMENTS WITH RESPECT TO AFFILIATES. The
Company shall deliver to Parent, prior to the date the Registration
Statement becomes effective under the Securities Act, a letter (the
"Affiliate Letter") identifying all Persons who are, at the time of
the Company Stockholders Meeting, anticipated to be "Affiliates" of
the Company for purposes of Rule 145 under the Securities Act
("Rule 145"), or the rules and regulations of the SEC relating to
pooling of interests accounting treatment for merger transactions
(the "Pooling Rules"). The Company shall use its reasonable best
efforts to cause each Person who is identified as an "affiliate" in
the Affiliate Letter to deliver to Parent, no less than 30 days
prior to the date of the Company Stockholders Meeting, a written
agreement (an "Affiliate Agreement") in connection with
restrictions on Affiliates under Rule 145 and pooling of interests
accounting treatment, in form mutually agreeable to the Company and
Parent.
SECTION 5.7 INDEMNIFICATION AND INSURANCE. (a) The By-
Laws and Certificate of Incorporation of the Surviving Corporation
shall contain the provisions with
-42-
respect to indemnification set forth in the By-Laws and Certificate
of Incorporation of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would adversely affect
the rights thereunder as of the Effective Time of individuals who
at the Effective Time were directors, officers, employees or agents
of the Company or its Subsidiaries, unless such modification is
required after the Effective Time by law.
(b) The Surviving Corporation shall, to the fullest
extent permitted under applicable law or under the Surviving
Corporation's Certificate of Incorporation or By-Laws, indemnify
and hold harmless each present and former director, officer,
employee or agent of the Company or any of its subsidiaries
(collectively, the "Indemnified Parties") against any costs or
expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement
in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative (collectively, "Actions"), (x) arising out of or
pertaining to the transactions contemplated by this Agreement, or
(y) otherwise with respect to any acts or omissions occurring at or
prior to the Effective Time, in each case to the same extent
(including any provision for the advancement of expenses) as
provided in the Company's Certificate of Incorporation or By-Laws
or any applicable contract or agreement as in effect on the date
hereof, in each case for a period of six years after the Effective
Time; PROVIDED, HOWEVER, that, in the event that any claim or
claims for indemnification are asserted or made within such six-
year period, all rights to indemnification in respect of any such
claim or claims shall continue until the disposition of any and all
such claims. In the event of any such Action (whether arising
before or after the Effective Time), the Indemnified Parties shall
promptly notify the Surviving Corporation in writing, but the
failure to so notify shall not relieve the Surviving Corporation of
its obligations under this Section 5.7(b) except to the extent it
is materially prejudiced by such failure, and the Surviving
Corporation shall have the right to assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
Indemnified Parties. The Indemnified Parties shall have the right
to employ separate counsel in any such Action and to participate in
(but not control) the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Parties
unless (a) the Surviving Corporation has agreed to pay such fees
and expenses, (b) the Surviving Corporation shall have failed to
assume the defense of such Action or (c) the named parties to any
such Action (including any impleaded parties) include both the
Surviving Corporation and the Indemnified Parties and such
Indemnified Parties shall have been reasonably advised by counsel
that there may be one or more legal defenses available to the
Indemnified Parties which are in conflict with those available to
the Surviving Corporation. In the event such Indemnified Parties
employ separate counsel at the expense of the Surviving Corporation
pursuant to clauses (b) or (c) of the previous sentence, (i) any
counsel retained by the Indemnified Parties for any period after
the Effective Time shall be reasonably satisfactory to the
Surviving Corporation; (ii) the Indemnified Parties as a group may
retain only one law firm to represent them in each applicable
jurisdiction with respect to any single Action unless there is,
under applicable standards of professional conduct, a conflict on
any significant issue between the positions of any two or more
Indemnified Parties, in which case each Indemnified Person with
respect to whom such a conflict exists (or group of such
Indemnified Persons who among them have no such conflict) may
retain one separate law firm in each
-43-
applicable jurisdiction; (iii) after the Effective Time, the
Surviving Corporation shall pay the reasonable fees and expenses of
such counsel, promptly after statements therefor are received; and
(iv) the Surviving Corporation will cooperate in the defense of any
such Action. The Surviving Corporation shall not be liable for any
settlement of any such Action effected without its written consent.
(c) The Surviving Corporation shall honor and fulfill in
all respects the obligations of the Company pursuant to
indemnification agreements and employment agreements (the employee
parties under such agreements being referred to as the "Officer
Employees") with the Company's directors and officers existing on
the date hereof.
(d) For a period of six years after the Effective Time,
Parent shall cause the Surviving Corporation to maintain in effect,
if available, directors' and officers' liability insurance covering
those Persons who are currently covered by the Company's directors'
and officers' liability insurance policy (a correct and complete
copy of which has been made available to Parent) on terms
comparable to those now applicable to directors and officers of the
Company; PROVIDED, HOWEVER, that in no event shall the Surviving
Corporation be required to expend in excess of 300% of the annual
premium currently paid by the Company for such coverage; and
PROVIDED FURTHER, that if the premium for such coverage exceeds
such amount, Parent or the Surviving Corporation shall purchase a
policy with the greatest coverage available for such 300% of such
annual premium.
(e) The provisions of this Section 5.7 shall survive the
consummation of the Merger at the Effective Time, is intended to
benefit the Company, the Surviving Corporation, the Indemnified
Parties and the Officer Employees, shall be binding on all
successors and assigns of the Surviving Corporation and shall be
enforceable by the Indemnified Parties and the Officer Employees.
SECTION 5.8 NOTIFICATION OF CERTAIN MATTERS. The
Company shall give prompt notice to Parent, and Parent shall give
prompt notice to the Company, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which
would be likely to cause any representation or warranty contained
in this Agreement to be materially untrue or inaccurate, or (ii)
any failure of the Company, Parent or Merger Sub, as the case may
be, materially to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 5.8 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and
PROVIDED FURTHER that failure to give such notice shall not be
treated as a breach of covenant for the purposes of Sections 6.2(b)
or 6.3(b) unless the failure to give such notice results in
material prejudice to the other party.
SECTION 5.9 FURTHER ACTION/TAX TREATMENT. Upon the
terms and subject to the conditions hereof, each of the parties
hereto shall use all commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all
other things reasonably necessary, proper or advisable to
consummate and make effective as promptly as practicable the trans-
actions contemplated by this Agreement, to obtain in a timely
manner all necessary waivers, consents and approvals and to effect
all necessary registrations and filings,
-44-
and otherwise to satisfy or cause to be satisfied all conditions
precedent to its obligations under this Agreement. The foregoing
covenant shall not include any obligation by Parent to agree to
divest, abandon, license or take similar action with respect to any
assets (tangible or intangible) of Parent or the Company. Each of
Parent, Merger Sub and the Company shall use its commercially
reasonable efforts to cause the Merger to qualify, and will not
(both before and after consummation of the Merger) take any actions
which to its Knowledge could reasonably be expected to prevent the
Merger from qualifying, as a reorganization under the provisions of
section 368 of the Code.
SECTION 5.10 PUBLIC ANNOUNCEMENTS; COMMUNICATIONS WITH
EMPLOYEES. Parent and the Company shall consult with each other
before issuing any press release with respect to the Merger or this
Agreement and shall not issue any such press release or make any
such public statement without the prior consent of the other party,
which shall not be unreasonably withheld; PROVIDED, HOWEVER, that
a party may, without the prior consent of the other party, issue
such press release or make such public statement as may upon the
advice of counsel be required by law or the rules and regulations
of the NYSE or the Nasdaq National Market, as the case may be, if
it has used all reasonable efforts to consult with the other party.
Parent and the Company shall cooperate with each other with respect
to, and endeavor in good faith to agree in advance upon the method
and content of, all written communications to employees of the
Company and its Subsidiaries, and all oral communications to groups
of employees, prior to the Effective Time.
SECTION 5.11 LISTING OF PARENT COMMON STOCK. Parent
shall use its best efforts to cause the shares of Parent Common
Stock to be issued in the Merger and upon the exercise of the Stock
Options and Warrants to be listed, upon official notice of
issuance, on the NYSE prior to the Effective Time.
SECTION 5.12 CONVEYANCE TAXES. Parent and the Company
shall cooperate in the preparation, execution and filing of all
returns, questionnaires, applications or other documents regarding
any real property transfer or gains, sales, use, transfer, value
added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby
that are required or permitted to be filed on or before the
Effective Time and the Surviving Corporation shall be responsible
for the payment of all such taxes and fees.
SECTION 5.13 ACCOUNTANT'S LETTERS. Upon reasonable
notice from the other, the Company shall use its best efforts to
cause Xxxxxx Xxxxxxxx LLP to deliver to Parent, and Parent shall
use its best efforts to cause Xxxxxx Xxxxxxxx LLP to deliver to the
Company, a letter covering such matters as are requested by Parent
or the Company, as the case may be, and as are customarily
addressed in accountant's "comfort" letters.
SECTION 5.14 POOLING ACCOUNTING TREATMENT. Parent and
the Company each agrees not to take any action that would
reasonably be expected to adversely affect the ability of Parent to
account for the business combination to be effected by the Merger
as a pooling of interests, and Parent and the Company each agrees
to use its commercially reasonable efforts to take such action as
may be reasonably required to negate the impact of any past
-45-
actions by Parent, the Company or their respective Affiliates which
would reasonably be expected to adversely impact the ability of
Parent to treat the Merger as a pooling of interests. The taking
by Parent or the Company of any action prohibited by the previous
sentence, or the failure of Parent or the Company to use its
commercially reasonable efforts to take any action required by the
previous sentence, if the Merger is not able to be accounted for as
a pooling of interests because of such action or failure to take
action, shall constitute a breach of this Agreement by such party
for the purposes of Section 7.1(h).
SECTION 5.15 RIGHTS AGREEMENT. Prior to the Effective
Time, the Company shall take all necessary action to (i) render
rights issued pursuant to the Rights Agreement dated April 12, 1996
by and between the Company and U.S. Trust Company of Texas, N.A.,
as Rights Agent (as amended, the "Company Rights Agreement"),
inapplicable to the Merger, and (ii) ensure that (x) neither Parent
nor any of its Affiliates (as defined in the Company Rights
Agreement) is an Acquiring Person (as defined in the Company Rights
Agreement) and (y) no Distribution Date, Triggering Event or Stock
Acquisition Date (each as defined in the Company Rights Agreement)
shall occur by reason of the approval, execution or delivery of
this Agreement, or the announcement or consummation of the Merger.
SECTION 5.16 DELIVERY OF CERTAIN REPORTS. Within 30
days after the date of this Agreement, the Company shall deliver to
Parent or its counsel complete and correct copies of all trust
agreements related to any Employee Benefit Plan, insurance and
other contracts and other funding arrangements, the current summary
plan descriptions and current summaries of material modifications
relating to each Employee Benefit Plan, the most recent Form 5500's
which have been filed with any appropriate government agency with
respect to each Employee Benefit Plan, the most recent favorable
determination letter issued for each Employee Benefit Plan and
related trust that is intended to satisfy the qualification
requirements of sections 401(a) and 501(a) of the Code (and the
latest IRS form 5300 or 5307, whichever is applicable, filed with
the IRS for each such Employee Benefit Plan).
SECTION 5.17 RECEIPT OF ACKNOWLEDGMENTS. The Company
shall use its best efforts to obtain prior to the Effective Time an
acknowledgment in form and substance reasonably satisfactory to
Parent from all holders of Stock Options, and shall obtain such
acknowledgment from all holders of Stock Options who are officers
or directors of the Company, that such Stock Options from and after
the Effective Time are exercisable for shares of Parent Common
Stock as provided in Section 1.6(c) of this Agreement.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO
EFFECT THE MERGER. The respective obligations of each party to
effect the Merger shall be subject to the satisfaction at or prior
to the Effective Time of the following conditions:
-46-
(a) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The
Registration Statement shall have been declared effective by
the SEC under the Securities Act. No stop order suspending
the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose and
no similar proceeding in respect of the Joint Proxy
Statement/Prospectus shall have been initiated or threatened
by the SEC;
(b) STOCKHOLDER APPROVAL. The Merger and this Agreement
shall have been approved by the requisite vote of the
stockholders of the Company, and the Parent Common Stock
Issuance shall have been approved by the requisite vote of the
stockholders of Parent, if required;
(c) LISTING. The shares of Parent Common Stock issuable
in the Merger shall have been authorized for listing on the
NYSE upon official notice of issuance;
(d) HSR ACT. All waiting periods applicable to the
consummation of the Merger under the HSR Act shall have
expired or been terminated;
(e) GOVERNMENTAL ACTIONS. There shall not have been
instituted, pending or threatened any action or proceeding (or
any investigation or other inquiry that might result in such
an action or proceeding) by any governmental authority or
administrative agency before any governmental authority,
administrative agency or court of competent jurisdiction,
domestic or foreign, nor shall there be in effect any
judgment, decree or order of any governmental authority,
administrative agency or court of competent jurisdiction, or
any other legal restraint (i) preventing or seeking to prevent
consummation of the Merger, (ii) prohibiting or seeking to
prohibit or limiting or seeking to limit Parent from
exercising all material rights and privileges pertaining to
its ownership of the Surviving Corporation or the ownership or
operation by Parent or any of its Subsidiaries of all or a
material portion of the business or assets of Parent or any of
its Subsidiaries (including the Surviving Corporation or any
of its Subsidiaries), or (iii) compelling or seeking to compel
Parent or any of its Subsidiaries to dispose of or hold
separate all or any material portion of the business or assets
of Parent or any of its Subsidiaries (including the Surviving
Corporation and its Subsidiaries), as a result of the Merger
or the transactions contemplated by this Agreement;
(f) ILLEGALITY. No statute, rule, regulation or order
shall be enacted, entered, enforced or deemed applicable to
the Merger which makes the consummation of the Merger illegal;
(g) OPINIONS OF COUNSEL. The Company shall have
received the written opinion of Kramer, Levin, Naftalis &
Xxxxxxx, in form reasonably satisfactory to the Company, as to
certain customary corporate and legal matters relating to
Parent, Merger Sub, the Merger, this Agreement and the
transactions contemplated hereby. Parent and Merger Sub shall
have received the written opinion of Xxxxx & Xxxxxx, in form
reasonably satisfactory to Parent, as to certain customary
corporate and legal
-47-
matters relating to the Company, the Merger, this Agreement
and the transactions contemplated hereby; and
(h) TAX OPINIONS. The Company shall have received a
written opinion of Xxxxx & Xxxxxx, and Parent shall have
received a written opinion of Kramer, Levin, Naftalis &
Xxxxxxx, in form and substance reasonably satisfactory to each
of them to the effect that the Merger will constitute a
reorganization within the meaning of section 368 of the Code.
Each party agrees to make all reasonable representations and
covenants in connection with the rendering of such opinions.
(i) POOLING. The Merger shall be accounted for as a
pooling of interests.
SECTION 6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF
PARENT AND MERGER SUB. The obligations of Parent and Merger Sub to
effect the Merger are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company contained in this Agreement
shall be true and correct in all respects on and as of the
Effective Time with the same force and effect as if made on
and as of the Effective Time, except for (i) changes
contemplated by this Agreement, (ii) those representations and
warranties which address matters only as of a particular date
(which shall have been true and correct as of such date,
subject to clause (iii)), or (iii) where the failure to be
true and correct would not reasonably be expected to have a
Material Adverse Effect, and Parent and Merger Sub shall have
received a certificate to such effect signed by the Chief
Executive Officer and Chief Financial Officer of the Company;
(b) AGREEMENTS AND COVENANTS. The Company shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective
Time, and Parent and Merger Sub shall have received a
certificate dated as of the Effective Time to such effect
signed by the Chief Executive Officer and Chief Financial
Officer of the Company;
(c) CONSENTS OBTAINED. All material consents, waivers,
approvals, authorizations or orders required to be obtained,
and all material filings required to be made, by the Company
for the authorization, execution and delivery of this
Agreement, the consummation by it of the transactions
contemplated hereby and the continuation in full force and
effect of any and all material rights, documents, agreements
or instruments of the Company shall have been obtained and
made by the Company, except where the failure to receive such
consents, waivers, approvals, authorizations or orders or make
such filings would not reasonably be expected to have a
Material Adverse Effect on the Surviving Corporation or
Parent;
(d) OPINION OF ACCOUNTANT. Parent shall have received
an opinion of Xxxxxx Xxxxxxxx LLP, independent certified
public accountants, regarding the
-48-
qualification of the Merger as a pooling of interests for
accounting purposes, and Company shall have received an
opinion of Xxxxxx Xxxxxxxx LLP, independent certified public
accountants, regarding the qualification of the Merger as a
pooling of interests for accounting purposes. Such opinions
shall be in form and substance reasonably satisfactory to
Parent; and
(e) AFFILIATE AGREEMENTS. Parent shall have received
from each Person who is identified in the Affiliate Letter as
an "affiliate" of the Company, an Affiliate Agreement, and
such Affiliate Agreement shall be in full force and effect.
(f) AGREEMENTS WITH WARRANT HOLDERS. Parent shall have
received from each Warrant holder and from the holders of
Stock Options to purchase at least 2.5 million shares of
Company Common Stock an acknowledgement in form and substance
reasonably satisfactory to Parent that such Warrant and Stock
Options from and after the Effective Time are exercisable for
shares of Parent Common Stock as provided in section 1.6(c) of
this Agreement.
SECTION 6.3 ADDITIONAL CONDITIONS TO OBLIGATION OF THE
COMPANY. The obligation of the Company to effect the Merger is
also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct in all respects on and as
of the Effective Time with the same force and effect as if
made on and as of the Effective Time, except for (i) changes
contemplated by this Agreement, (ii) those representations
and warranties which address matters only as of a particular
date (which shall have been true and correct as of such date,
subject to clause (iii)), or (iii) where the failure to be
true and correct would not reasonably be expected to have a
Material Adverse Effect, and the Company shall have received
a certificate to such effect signed by the Chief Financial
Officer of Parent;
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub
shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a
certificate dated as of the Effective Time to such effect
signed by the President and Chief Financial Officer of Parent;
and
(c) CONSENTS OBTAINED. All material consents, waivers,
approvals, authorizations or orders required to be obtained,
and all material filings required to be made, by Parent or
Merger Sub for the authorization, execution and delivery of
this Agreement, the consummation by them of the transactions
contemplated hereby and the continuation in full force and
effect of any and all material rights, documents, agreements
or instruments of Parent shall have been obtained and made by
Parent and Merger Sub, except where the failure to receive
such consents, waivers, approvals, authorizations or orders or
make such filings would not be reasonably be expected to have
a Material Adverse Effect on the Surviving Corporation or
Parent, and except
-49-
where Parent has requested the Company to take such reasonable
actions, including the transfer of assets and the execution of
management agreements or similar arrangements with Affiliates
of the Company, where, as a result of the consummation of such
actions, the failure to receive such consents, waivers,
approvals, authorizations or orders would not have a Material
Adverse Effect on the Surviving Corporation or Parent.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be
terminated at any time prior to the Effective Time, notwithstanding
approval thereof by the stockholders of the Company or Parent:
(a) by mutual written consent duly authorized by the
Boards of Directors of Parent and the Company; or
(b) by either Parent or the Company if the Merger shall
not have been consummated by February 28, 1998 (provided that
the right to terminate this Agreement under this Section
7.1(b) shall not be available (i) to any party whose failure
to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on
or before such date or (ii) to Parent in the event that a
Material Parent Transaction has been the cause of or resulted
in the failure of the Merger to occur on or before such date);
or
(c) by either Parent or the Company if a court of
competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued a
nonappealable final order, decree or ruling or taken any other
action having the effect of permanently restraining, enjoining
or otherwise prohibiting the Merger (provided that the right
to terminate this Agreement under this Section 7.1(c) shall
not be available to any party who has not complied with its
obligations under Section 5.9 and such noncompliance
materially contributed to the issuance of any such order,
decree or ruling or the taking of such action); or
(d) by either Parent or the Company if :
(i) subject to clause (iii) below, (x) the requisite
vote of the stockholders of the Company shall not have
been obtained by February 28, 1998, or (y) if required,
the requisite vote of the stockholders of Parent shall
not have been obtained by February 28, 1998 ;
(ii) (x) the stockholders of the Company shall not have
approved the Merger and this Agreement at the Company
Stockholders Meeting or (y) if required,
-50-
the stockholders of Parent shall not have approved the
Parent Common Stock Issuance at the Parent Stockholders
Meeting;
(iii) in the event that a Material Parent Transaction
prevents holding the Company Stockholders Meeting or the
Parent Stockholders Meeting, as the case may be, by
February 28, 1998, (x) the requisite vote of the
stockholders of the Company shall not have been obtained
by the earlier of (1) the 45th consecutive day that the
Registration Statement is effective and (2) December 31,
1998 or (y) if required, the requisite vote of the
stockholders of Parent shall not have been obtained by
the earlier of (1) the 45th consecutive day that the
Registration Statement is effective and (2) December 31,
1998; or
(e) by the Company or Parent, if the Board of Directors
of the Company shall withdraw, modify or change its approval
of this Agreement or the Merger in a manner adverse to Parent
or Merger Sub or shall have resolved to do so, in each case in
compliance with the provisions of Section 4.2; or
(f) by Parent or the Company if any representation or
warranty of the Company, or Parent and Merger Sub,
respectively, set forth in this Agreement shall be untrue when
made, such that the conditions set forth in Sections 6.2(a) or
6.3(a), as the case may be, would not be satisfied (a
"Terminating Misrepresentation"); PROVIDED, HOWEVER, that, if
such Terminating Misrepresentation is curable prior to the
Closing Date by the Company or Parent, as the case may be,
through the exercise of its commercially reasonable efforts
and for so long as the Company or Parent, as the case may be,
continues to exercise such commercially reasonable efforts,
neither Parent nor the Company, respectively, may terminate
this Agreement under this Section 7.1(f); or
(g) by Parent if any representation or warranty of the
Company shall have become untrue such that the condition set
forth in Section 6.2(a) would not be satisfied (a "Company
Terminating Change"), or by the Company if any representation
or warranty of Parent and Merger Sub shall have become untrue
such that the condition set forth in Section 6.3(a) would not
be satisfied (a "Parent Terminating Change" and together with
a Company Terminating Change, a "Terminating Change"), in
either case other than by reason of a Terminating Breach (as
hereinafter defined); PROVIDED, HOWEVER, that if any such
Terminating Change is curable prior to Closing Date by the
Company or Parent, as the case may be, through the exercise of
its commercially reasonable efforts, and for so long as the
Company or Parent, as the case may be, continues to exercise
such commercially reasonable efforts, neither Parent nor the
Company, respectively, may terminate this Agreement under this
Section 7.1(g); or
(h) by Parent or the Company upon a breach of any
covenant or agreement on the part of the Company or Parent,
respectively, set forth in this Agreement, such that the
conditions set forth in Sections 6.2(b) or 6.3(b), as the case
may be, would not be satisfied (a "Terminating Breach");
PROVIDED, HOWEVER, that, if such Terminating Breach is curable
prior to the Closing Date by the Company or Parent, as
-51-
the case may be, through the exercise of its commercially
reasonable efforts and for so long as the Company or Parent,
as the case may be, continues to exercise such commercially
reasonable efforts, neither Parent nor the Company,
respectively, may terminate this Agreement under this Section
7.1(h); or
(i) by the Company, if (x) the Average Stock Price for
the twenty (20) consecutive trading days ending on the third
trading day prior to the Company Stockholders Meeting is less
than $20.40, (y) on or before the second trading day prior to
the date of the Company Stockholders Meeting, the Company
delivers to Parent written notice of its intention, subject to
the following clause (z), to terminate this Agreement, and (z)
Parent has not agreed by notice to the Company in writing on
or before one trading day prior to the date of the Company
Stockholders Meeting to an Exchange Ratio at least equal to
$18.90 divided by the Average Stock Price. In the event
Parent delivers its notice specified in clause (z) of this
Section 7.1(i), the Company shall not have the right to
terminate this Agreement pursuant to this Section 7.1(i); or
(j) by Parent, if the Average Stock Price is less than
$20.40.
SECTION 7.2 EFFECT OF TERMINATION. In the event of the
termination of this Agreement pursuant to Section 7.1, this
Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto or of any of its
Affiliates, directors, officers or stockholders except (i) as set
forth in Section 7.3 and Section 8.1, and (ii) nothing herein shall
relieve any party from liability for any breach hereof.
SECTION 7.3 Fees and Expenses. (a) Except as set forth
in this Section 7.3, all fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses, whether or not the
Merger is consummated; PROVIDED, HOWEVER, that Parent and the
Company shall share equally all SEC filing fees and printing
expenses incurred in connection with the printing and filing of the
Joint Proxy Statement/Prospectus (including any preliminary
materials related thereto) and the Registration Statement
(including financial statements and exhibits) and any amendments or
supplements thereto.
(b) The Company shall pay Parent a fee of $11,000,000
upon (i) the termination of this Agreement pursuant to Section
7.1(d)(i)(x) or Section 7.1(d)(iii)(x)(1), PROVIDED that in either
such case, such failure to obtain the requisite vote is the result
of a Terminating Misrepresentation by the Company or a Terminating
Breach by the Company, (ii) the termination of this Agreement
pursuant to Section 7.1(d)(ii)(x), PROVIDED, the average of the
closing prices (or the average of the closing bid and asked prices
for any day on which the Parent Common Stock does not trade) of the
Parent Common Stock on the NYSE for the three trading days
immediately prior to the Company Stockholders Meeting is not below
$20.40, (iii) the termination of this Agreement pursuant to Section
7.1(e) or (iv) the termination of this Agreement for any reason
other than a Terminating Breach by Parent, a Terminating
Misrepresentation by Parent, a Terminating Change or pursuant to
Section 7.1(a), Section 7.1(c), Section 7.1(d)(i)(y), (ii)(y) or
(iii)(y)(1), Section 7.1(i) or Section
-52-
7.1(j), and the Company enters into an agreement with a third party
within six months of the date of the termination of this Agreement
relating to the possible acquisition of the Company or any of its
Subsidiaries (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its or
their capital stock or assets.
(c) Parent shall pay the Company a fee of $11,000,000
upon (i) the termination of this Agreement pursuant to Section
7.1(d)(i)(y) or Section 7.1(d)(iii)(y)(1), PROVIDED that in either
such case, such failure to obtain the requisite vote is the result
of a Terminating Misrepresentation by Parent or a Terminating
Breach by Parent or (ii) the termination of this Agreement pursuant
to Section 7.1(d)(ii)(y).
(d) Upon termination of this Agreement by either Parent
or the Company, the respective parties hereto may seek any and all
remedies available to it under applicable law.
(e) The fee payable pursuant to Section 7.3(b) or 7.3(c)
shall be paid within one Business Day after a demand for payment
following the occurrence of any of the events described in Section
7.3(b) or Section 7.3(c); PROVIDED, HOWEVER, that, in no event
shall the Company or Parent, as the case may be, be required to pay
such fee to the other party, if, immediately prior to the
termination of this Agreement, the party entitled to receive such
fee was in material breach of its obligations under this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS. (a) Except as otherwise provided in this Section
8.1, the representations, warranties, covenants and agreements of
each party hereto shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any
other party hereto, any Person controlling any such party or any of
their officers, directors or representatives, whether prior to or
after the execution of this Agreement. The representations,
warranties and agreements in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant
to Section 7.1, as the case may be, except that the covenants and
agreements set forth in Article I and Section 5.7 or 7.2 shall
survive the Effective Time and those set forth in Section 7.3 shall
survive such termination. The Confidentiality Letter shall survive
termination of this Agreement as provided therein.
(b) Any disclosure made with reference to one or more
Sections of the Company Disclosure Schedule or the Parent
Disclosure Schedule shall be deemed disclosed with respect to each
other section therein as to which such disclosure is relevant
provided that such relevance is reasonably apparent. Disclosure of
any matter in the Company Disclosure Schedule or the Parent
Disclosure Schedule shall not be deemed an admission that such
matter is material.
-53-
SECTION 8.2 NOTICES. All notices and other
communications given or made pursuant hereto shall be in writing
and shall be deemed to have been duly given or made if and when
delivered personally or by overnight courier to the parties at the
following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or
at such other address or telecopy number (or to such other Person's
attention) for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
LCI International, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
XxXxxx, XX 00000
Telecopier No.: (000)000-0000
Telephone No.: (000) 000-0000
Attention: Xxx X. Xxxxxx, Esq.
Vice President and General Counsel
With a copy to:
Kramer, Levin, Naftalis & Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
(b) If to the Company:
USLD Communications Corp.
0000 Xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: W. Xxxxx Xxxx, Esq.
General Counsel
With a copy to:
Xxxxx & Xxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
-54-
SECTION 8.3 CERTAIN DEFINITIONS. For purposes of this
Agreement, the term:
(a) "Affiliates" means a Person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first
mentioned Person;
(b) "Business Day" means any day other than a day on
which banks in New York are required or authorized to be
closed;
(c) "control" (including the terms "controlled by" and
"under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct
or cause the direction of the management or policies of a
Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "Knowledge" means the actual knowledge of the
directors and executive officers of such Person and its
significant Subsidiaries who are listed in Section 8.3 of the
Company Disclosure Schedule, with respect to the Company and
its Subsidiaries, and Section 8.3 of the Parent Disclosure
Schedule, with respect to Parent and its Subsidiaries.
(e) "Person" means an individual, corporation,
partnership, limited liability company, association, trust,
unincorporated organization other entity or group (as defined
in Section 13(d)(3) of the Exchange Act); and
(f) "Subsidiary" or "Subsidiaries" of the Company, the
Surviving Corporation, Parent or any other Person means any
significant corporation, partnership, limited liability
company, or other legal entity of which the Company, the
Surviving Corporation, Parent or such other Person, as the
case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, more than 50%
of the stock or other equity interests the holders of which
are generally entitled to vote for the election of the board
of directors or other governing body of such corporation or
other legal entity.
SECTION 8.4 AMENDMENT. This Agreement may be amended by
the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective
Time; PROVIDED, HOWEVER, that, after approval of the Merger and
this Agreement by the stockholders of the Company, no amendment may
be made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 8.5 WAIVER. At any time prior to the Effective
Time, any party hereto may with respect to any other party hereto
(a) extend the time for the performance of any of the obligations
or other acts, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto, or (c) waive
-55-
compliance with any of the agreements or conditions contained
herein. Any such extension or waiver shall be valid if set forth
in an instrument in writing signed by the party or parties to be
bound thereby.
SECTION 8.6 HEADINGS; CONSTRUCTION. The headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. In this Agreement (a) words denoting the singular
include the plural and vice versa, (b) "it" or "its" or words
denoting any gender include all genders, (c) the word "including"
shall mean "including without limitation," whether or not
expressed, (d) any reference to a statute shall mean the statute
and any regulations thereunder in force as of the date of this
Agreement or the Effective Time, as applicable, unless otherwise
expressly provided, (e) any reference herein to a Section, Article
or Schedule refers to a Section or Article of or a Schedule to this
Agreement, unless otherwise stated, (f) when calculating the period
of time within or following which any act is to be done or steps
taken, the date which is the reference day in calculating such
period shall be excluded and if the last day of such period is not
a Business Day, then the period shall end on the next day which is
a Business Day, and (g) any reference to a party's "best efforts"
or "commercially reasonable efforts" or like or similar phrases
shall not include any obligation of such party to pay, or guarantee
the payment of, money or other consideration to any third party or
to agree to the imposition on such party or its Affiliates of any
condition reasonably considered by such party to be materially
burdensome to such party or its Affiliates.
SECTION 8.7 SEVERABILITY. (a) If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent
reasonably possible.
(b) The Company and Parent agree that the fees provided
in Sections 7.3(b) and 7.3(c) are fair and reasonable in the
circumstances. If a court of competent jurisdiction shall
nonetheless, by a final, non-appealable judgment, determine that
the amount of any such fee exceeds the maximum amount permitted by
law, then the amount of such fee shall be reduced to the maximum
amount permitted by law in the circumstances, as determined by such
court of competent jurisdiction.
SECTION 8.8 ENTIRE AGREEMENT. This Agreement, together
with any written agreements relating to the transactions
contemplated hereby entered into contemporaneously with this
Agreement, constitutes the entire agreement and supersedes all
prior agreements and undertakings (other than the Confidentiality
Letter), both written and oral, among the parties, or any of them,
with respect to the subject matter hereof, except as otherwise
expressly provided herein.
-56-
SECTION 8.9 ASSIGNMENT; MERGER SUB. This Agreement
shall not be assigned by operation of law or otherwise, except that
all or any of the rights of Merger Sub hereunder may be assigned to
any direct, wholly-owned Subsidiary of Parent provided that no such
assignment shall relieve the assigning party of its obligations
hereunder. Parent guarantees the full and punctual performance by
Merger Sub of all the obligations hereunder of Merger Sub or any
such assignees.
SECTION 8.10 PARTIES IN INTEREST. This Agreement shall
be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of
this Agreement, including, without limitation, by way of
subrogation, other than Section 5.7 (which is intended to be for
the benefit of the Indemnified Parties and Officer Employees and
may be enforced by such Indemnified Parties and Officer Employees).
SECTION 8.11 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES
CUMULATIVE. No failure or delay on the part of any party hereto in
the exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty, covenant or agreement herein, nor shall
any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 8.12 GOVERNING LAW. This Agreement shall be
governed by, and construed in accordance with, the internal laws of
the State of Delaware applicable to contracts executed and fully
performed within the State of Delaware.
SECTION 8.13 COUNTERPARTS. This Agreement may be
executed in one or more counterparts, and by the different parties
hereto in separate counterparts, each of which when executed shall
be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 8.14 WAIVER OF JURY TRIAL. EACH OF PARENT,
MERGER SUB AND THE COMPANY, AND EACH INDEMNIFIED PARTY AND OFFICER
EMPLOYEE, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY.
[This space intentionally left blank.]
-57-
IN WITNESS WHEREOF, Parent, Merger Sub and the Company
have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly
authorized.
LCI INTERNATIONAL, INC.
By /s/ H. XXXXX XXXXXXXX
--------------------------
H. Xxxxx Xxxxxxxx
Chairman of the Board and
Chief Executive Officer
LCI ACQUISITION CORP.
By /s/ H. XXXXX XXXXXXXX
-------------------------
H. Xxxxx Xxxxxxxx
Chairman of the Board and
Chief Executive Officer
USLD COMMUNICATIONS CORP.
By /s/ XXXXX X. XXXXX
-------------------------
Xxxxx X. Xxxxx
Chairman of the Board,
Chief Executive Officer
and President
-58-
