AGREEMENT AND PLAN OF MERGER
By and Among
Call America Business Communications Corporation
Call America Business Communications of Fresno, Inc.
Call America Business Communications of Bakersfield, Inc.
The Selling Shareholders listed in Exhibit A
GST Newco of California, Inc.
and
GST Telecommunications, Inc.
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Dated as of September 26, 1996
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TABLE OF CONTENTS
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ARTICLE I
TRANSACTIONS AND TERMS OF THE MERGER
1.1 Merger............................................................2
1.2 Time and Place of Closing; Escrow.................................2
1.3 Effective Time....................................................2
1.4 Charter...........................................................3
1.5 Bylaws............................................................3
1.6 Directors and Officers............................................3
1.7 Conversion of Shares..............................................3
1.8 Anti-Dilution Provisions..........................................4
1.9 Fractional Shares.................................................4
1.10 Post-Closing Consideration.......................................5
ARTICLE II
EXCHANGE OF SHARES
2.1 Exchange Procedures...............................................5
2.2 Rights of Former Shareholders of each of the Call
America Companies.............................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
CALL AMERICA COMPANIES AND THE SELLERS
3.1 Corporate Organization; Requisite Authority to
Conduct Business; Articles of Incorporation and
By-Laws.......................................................6
3.2 Capitalization and Shareholdings..................................7
3.3 Subsidiaries, Etc.................................................7
3.4 Authority Relative to and Validity of Agreements..................7
3.5 Required Filings and Consents; No Conflict........................8
3.6 Financial Statements and Net Revenues.............................9
3.7 No Undisclosed Liabilities........................................9
3.8 Absence of Certain Changes and Events.............................9
3.9 Taxes and Tax Returns............................................10
3.10 Employee Benefit Plans..........................................12
3.11 Title to Property...............................................12
3.12 Trademarks, Patents and Copyrights..............................13
3.13 Legal Proceedings, Claims, Investigations, etc..................14
3.14 Insurance.......................................................14
3.15 Material Contracts..............................................15
3.16 Certain Transactions............................................15
3.17 Broker..........................................................15
3.18 Environmental Matters...........................................16
3.19 Illegal Payments................................................16
3.20 Statements True and Correct.....................................17
3.21 Accounting, Tax and Regulatory Matters..........................17
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
4.1 Capitalization...................................................17
4.2 Authority Relative to and Validity of Agreements.................18
4.3 Required Filings and Consents; No Conflict.......................18
4.4 Broker...........................................................19
4.5 Investment.......................................................19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
5.1 Corporate Organization; Requisite Authority to
Conduct Business; Articles of Incorporation and
By-Laws......................................................20
5.2 Authority Relative to and Validity of Agreements.................20
5.3 Required Filings; Consents.......................................21
5.4 Capitalization...................................................22
5.5 SEC Reports and Financial Statements.............................22
5.6 No Undisclosed Liabilities.......................................23
5.8 Legal Proceedings, Claims, Investigations, etc...................23
5.9 Vote Required....................................................23
5.10 Statements True and Correct.....................................23
5.11 Accounting, Tax and Regulatory Matters..........................24
Section 5.12 No Prior Activities.....................................24
ARTICLE VI
COVENANTS OF THE CALL AMERICA AND GST COMPANIES
6.1 Covenants of the Call America Companies Regarding
Conduct of Business Operations Pending the
Closing......................................................24
6.2 No Other Negotiations............................................26
6.3 Conduct of Business of GST.......................................26
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Covenants of the Call America Companies, the
Sellers and the GST Companies................................27
7.2 Tax Treatment....................................................28
7.3 Employee Benefits and Contracts..................................29
7.4 Guarantee of Performance.........................................29
7.5 FABRIK Communications, Inc.......................................29
7.6 Stock Exchange Listing...........................................29
7.7 Certain Regulatory Approvals.................................30
7.8 Certain Agreements regarding the Shares......................30
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE CALL AMERICA COMPANIES AND THE SELLERS
8.1 Representations and Warranties True..............................30
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8.2 Performance of Covenants.........................................31
8.3 No Proceedings...................................................31
8.4 Escrow Agreement.................................................31
8.5 Employment Agreements............................................31
8.6 Registration Rights Agreement....................................31
8.7 Consents and Approvals...........................................31
8.8 Opinions of Counsel..............................................31
8.9 Tax Matters......................................................32
8.10 Material Changes.................................................32
8.11 Release of Loan Guarantees.......................................33
8.12 Listing of Shares................................................33
ARTICLE IX
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE GST COMPANIES
9.1 Representation and Warranties True...............................33
9.2 Performance of Covenants.........................................33
9.3 No Proceedings...................................................33
9.4 Consents and Approvals...........................................34
9.5 Escrow Agreement.................................................34
9.6 Employment Agreements............................................34
9.7 Registration Rights Agreement....................................34
9.8 Non-Competition Agreements.......................................34
9.9 Resignation of Officers and Directors............................34
9.10 Opinion of Counsel..............................................34
9.11 Material Changes................................................35
9.12 Waivers.........................................................35
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by the Sellers..................................35
10.2 Indemnification by the Buyer....................................35
10.3 Special Indemnification for Tax Matters.........................36
10.4 Survival........................................................37
10.5 Limitations.....................................................37
10.6 Third Party Claims..............................................38
10.7 Reduction for Insurance.........................................39
10.8 Termination of Indemnification..................................39
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination.....................................................40
11.2 Effect of Termination...........................................41
11.3 Amendment.......................................................41
11.4 Extension; Waiver...............................................41
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ARTICLE XII
MISCELLANEOUS
12.1 Expenses........................................................41
12.2 Notices.........................................................41
12.3 Entire Agreement................................................42
12.4 Binding Effect, Benefits, Assignments...........................42
12.5 Applicable Law..................................................42
12.6 Jurisdiction....................................................43
12.7 Headings........................................................43
12.8 Counterparts....................................................43
12.9 Definitions.....................................................43
EXHIBITS
A List of Sellers
B Escrow Agreement
C Registration Rights Agreement
D Employment Agreement
E Non-Competition
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of September 26, 1996, by and among Call America Business Communications
Corporation, a California corporation ("Call America"), Call America Business
Communications of Fresno, Inc., a California corporation ("CA Fresno"), Call
America Business Communications of Bakersfield, Inc., a California corporation
("CA Bakersfield"), each of the persons listed in Exhibit A hereto
(individually, a "Seller" and collectively, the "Sellers"), GST Newco of
California, Inc., a Delaware corporation ("Sub"), and GST Telecommunications,
Inc., a federally chartered Canadian corporation (the "Buyer" or "GST").
Call America, CA Fresno and CA Bakersfield are individually a "Call America
Company" and collectively the "Call America Companies." The Call America
Companies are affiliated entities which are under the common ownership and
control of the Sellers.
Sub and GST are collectively the "GST Companies". Sub is a newly-formed
corporation which is a wholly-owned subsidiary of GST. GST is a public company
whose shares of Common Stock are traded on the Amex.
PREAMBLE
GST, GST Net, Inc., Call America and the Sellers are parties to a letter of
intent dated July 17, 1996, which sets forth the principal terms and conditions
involving a proposed business combination of GST and Call America. The Boards of
Directors of the Call America Companies and the GST Companies are of the opinion
that the transactions described herein are in the best interests of the parties
and their respective shareholders. This Agreement provides for the acquisition
of the Call America Companies by GST pursuant to a merger whereby CA
Bakersfield, CA Fresno and Sub will merge with and into Call America. At the
effective time of the Merger, the outstanding shares of the capital stock of
each of the Call America Companies shall be converted into the right to receive
shares of the common stock of GST. As a result, the Sellers shall become
shareholders of GST and the Call America Companies shall conduct their business
and operations as a wholly-owned subsidiary of GST.
The transactions described in this Agreement have been approved by the
Sellers, who constitute all of the shareholders of the Call America Companies,
and by GST, the sole shareholder of Sub; and are subject to obtaining certain
regulatory approvals, and the satisfaction of certain other conditions described
in this Agreement.
It is the intention of the parties to this Agreement that the Merger shall
qualify for federal income tax purposes as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 12.9 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE I
TRANSACTIONS AND TERMS OF THE MERGER
Section 1.1 Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3 hereof), CA Fresno, CA
Bakersfield and Sub shall be merged with and into Call America, in accordance
with the provisions of Section 1108 of the CGCL and Section 252 of the DGCL and
with the effect provided in Section 1107 of the CGCL and Sections 259 and 261 of
the DGCL (each a "Merger" and collectively, the "Merger"). Call America shall be
the Surviving Corporation of the Merger, and it shall be a wholly-owned
subsidiary of GST and shall be governed by the Laws of the State of California.
The Merger shall be consummated pursuant to the terms of this Agreement, which
has been approved and adopted by the respective Boards of Directors of each of
the Call America Companies, each of the GST Companies and the Sellers.
Section 1.2 Time and Place of Closing; Escrow.
(a) The closing of the transactions contemplated hereby (the "Closing")
will take place at 9:00 A.M. on the date that the Effective Time (as defined
below) occurs, or at such other time as the parties, acting through their
authorized officers, may mutually agree.
(b) The Closing shall be held at the office of GST's counsel, Xxxxxx
Xxxxxxxx Frome and Xxxxxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx.
Section 1.3 Effective Time. The Merger and other transactions contemplated
by this Agreement shall become effective on the date and at the time the
Agreement of Merger reflecting the Merger, together with officers' certificates
attached thereto and such additional documents as may be required by Section
1103 of the CGCL, are filed with the Secretary of State of the State of
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California, and the documents required by Section 252 of the DGCL are filed with
the Secretary of State of the State of Delaware (the "Effective Time"). Subject
to the terms and satisfaction of all conditions hereof, unless otherwise
mutually agreed upon in writing by authorized officers of each party, the
Effective Time shall occur, and the Merger Documents shall be filed, on the
second business day following the later of (i) the date that all of the
conditions to Closing specified in Articles VIII and IX hereof have been
satisfied or waived and (ii) the effective date (including expiration of any
applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger and which
is listed on Schedule 3.5.
Section 1.4 Charter. The Articles of Incorporation of Call America in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until otherwise amended or repealed.
Section 1.5 Bylaws. The Bylaws of Call America in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
Section 1.6 Directors and Officers. The directors and officers of Call
America in office immediately prior to the Effective Time, together with such
additional persons as may thereafter be elected, shall serve as the respective
directors and officers of the Surviving Corporation from and after the Effective
Time in accordance with the Bylaws of the Surviving Corporation.
Section 1.7 Conversion of Shares. Subject to the provisions of this Section
1.7 through Section 1.9, at the Effective Time, by virtue of the Merger and
without any action on the part of the Call America Companies, the GST Companies
or the shareholders of any of the foregoing, the shares of the constituent
corporations to the Merger shall be converted as follows:
(a) Each share of GST Capital Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time.
(b) Each share of Common Stock of Sub issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding, and
shall be converted into an aggregate of 100 shares of fully paid and non
assessable common stock of the Surviving Corporation from and after the
Effective Time.
(c) All of the shares of Common Stock of the Call America Companies
issued and outstanding at the Effective Time (the "Call American Common
Stock") shall cease to be outstanding and shall be converted into an
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aggregate of 1,307,692 shares of fully paid and nonassessable GST Common
Stock (the "Consideration") plus the Post-Closing Consideration (as defined
in Section 1.10), if any. The Consideration and the Post-Closing
Consideration shall be allocated among the Call America Companies and each
of the Sellers in accordance with the percentage set forth opposite each
Seller's name in Exhibit A hereto. A portion of the Consideration to be
delivered to the Escrow Agent for distribution to the Sellers under Section
2.1 hereof, consisting of 130,000 shares (the "Escrow Shares") of GST
Common Stock (such portion to be allocated among all the Sellers in
accordance with the percentages set forth opposite each Seller's name in
Exhibit A hereto), shall be deposited with the Escrow Agent, to be held as
collateral for the indemnification obligations of the Sellers contained in
Article X hereof, and applied pursuant to the terms and provisions of the
Escrow Agreement in respect of the Sellers' obligations pursuant to Section
10.1 hereof.
Section 1.8 Anti-Dilution Provisions. In the event GST changes the number
of shares of GST Common Stock issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Consideration and Post-Closing Consideration shall be
adjusted to reflect the same ownership percentage in GST as such Consideration
and Post-Closing Consideration would have represented immediately prior to such
stock split, stock dividend or similar recapitalization.
Section 1.9 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Call America Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of a
share of GST Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of GST Common Stock multiplied
by the market value of one share of GST Common Stock at the Effective Time. The
market value of one share of GST Common Stock at the Effective Time shall be the
last sale price of GST Common Stock on the Amex (as reported by The Wall Street
Journal or, if not reported thereby, any other authoritative source) on the last
trading day preceding the Effective Time. No such holder will be entitled to
dividends, voting rights, or any other rights as a shareholder in respect of any
fractional shares.
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Section 1.10 Post-Closing Consideration. (a) If the average closing sales
price of GST Common Stock for the Measurement Period (as hereinafter defined) is
less than $12.50 per share, then up to 114,489 shares of GST Common Stock shall
be distributed to the Sellers as promptly as practicable after the end of the
Measurement Period pursuant to Section 1.7(c) as the "Post-Closing
Consideration". The precise number of shares of GST Common Stock which shall
constitute the Post-Closing Consideration shall be equal to: (i) the difference
between (x) $12.50, and (y) the greater of the average closing sales price of
GST Common Stock for the Measurement Period and $11.25, (ii) divided by 1.25,
(iii) times 114,489.
(b) The "Measurement Period" for purposes of Section 1.10 shall mean the 10
consecutive trading day period ending two trading days prior to the date which
is 180 days after the Effective Time. The "average closing sales price" for
purposes of this Section 1.10 shall mean the average last sale price of GST
Common Stock on the Amex (as reported by the Wall Street Journal or, if not
reported thereby, by any other authoritative source) for the 10 trading days
during the Measurement Period.
(c) In the event GST changes the number of shares of GST Common Stock
issued and outstanding after the Effective Time but prior to the end of the
Measurement Period as a result of a stock split, stock dividend, or similar
recapitalization with respect to such stock and the record date therefor (in the
case of a stock dividend) or the effective date thereof (in the case of a stock
split or similar recapitalization for which a record date is not established)
shall be prior to the end of the Measurement Period, the Post-Closing
Consideration shall be adjusted to reflect the same ownership percentage in GST
as such Post-Closing Consideration would have represented immediately prior to
such stock split, stock dividend or similar recapitalization.
ARTICLE II
EXCHANGE OF SHARES
Section 2.1 Exchange Procedures. The conversion of shares of Call America
Common Stock into GST Common Stock as provided for by this Agreement shall occur
automatically at the Effective Time without further action by the holders
thereof. Until surrendered, each certificate that prior to the Effective Time
represented shares of Call America Common Stock will be deemed to evidence the
right to receive the number of shares of GST Common Stock into which such Call
America Common Stock has been converted. At the Closing, each holder of a
certificate or certificates theretofore representing a share or shares of Call
America Common Stock shall be entitled to receive from GST, in exchange for and
upon the surrender of all of such holder's Call America Common Stock
certificates duly endorsed, the number of shares of GST Common Stock to which
the holder of such certificates is entitled pursuant to Section 1.7(c) of this
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Agreement (less the number of shares of GST Common Stock being deposited in
escrow pursuant to this Agreement), together with all undelivered dividends or
distributions in respect of such shares (without interest thereon) pursuant to
Section 2.2 of this Agreement. Stock certificates for fractions of GST Common
Stock shall not be issued in the Merger and such fractional interests shall not
entitle the owners thereof to vote, to receive dividends or to exercise any
other right of a stockholder with respect to such fractional interest.
Section 2.2 Rights of Former Shareholders of each of the Call America
Companies. At the Effective Time, the stock transfer books of each of the Call
America Companies shall be closed as to holders of Common Stock immediately
prior to the Effective Time and no transfer of Common Stock by any such holder
shall thereafter be made or recognized. Whenever a dividend or other
distribution is declared by GST on the GST Common Stock, the record date for
which is at or after the Effective Time, the declaration shall include dividends
or other distributions on all shares of GST Common Stock issuable pursuant to
this Agreement, but no dividend or other distribution payable to the holders of
record of GST Common Stock as of any time subsequent to the Effective Time shall
be delivered to the holder of any certificate representing shares of Common
Stock of any of the Call America Companies issued and outstanding at the
Effective Time until such holder surrenders such certificate for exchange as
provided in Section 2.1 of this Agreement. However, upon surrender of such
certificate, both the GST Common Stock certificate and any undelivered dividends
or other distributions and cash payments payable hereunder (without interest)
shall be delivered and paid with respect to each share represented by such
certificate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
CALL AMERICA COMPANIES AND THE SELLERS
Each of the Call America Companies and each of the Sellers jointly and
severally hereby represent and warrant to the Buyer as follows:
Section 3.1 Corporate Organization; Requisite Authority to Conduct
Business; Articles of Incorporation and By-Laws. Each of the Call America
Companies is a corporation duly organized, validly existing and in good standing
under the laws of the State of California. Call America has provided the Buyer
with true and complete copies of the articles of incorporation of each of the
Call America Companies (certified by the Secretary of State of the State of
California) and By-laws of each of the Call America Companies (certified by the
respective Secretary of each of the Call America Companies) as in effect on the
date hereof. Prior to the Closing, the minute books of each of the Call America
Companies will be delivered to the Buyer, and will contain true and complete
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records of all meetings and consents in lieu of meeting of each of the Call
America Companies' Board of Directors and of each of the Call America Companies'
shareholders since the incorporation of each such entity, which accurately
reflect in all material respects all transactions referred to in such minutes
and consents in lieu of meeting. Each of the Call America Companies has all
corporate power and authority to own, operate and lease its properties and to
carry on its business as the same is now being conducted, except where the
failure to have such power and authority would not have a Material Adverse
Effect on the Call America Companies taken as a whole. Each of the Call America
Companies is duly qualified or licensed to do business and is in good standing
as a foreign corporation in every jurisdiction in which the conduct of its
business or the ownership or leasing of its properties requires it to be so
qualified or licensed, except where the failure to be so qualified or licensed
would not have a Material Adverse Effect on the Call America Companies taken as
a whole. Schedule 3.1 hereto contains a listing of each such foreign
jurisdiction with respect to each of the Companies.
Section 3.2 Capitalization and Shareholdings. The authorized and issued
stock of each of the Call America Companies is listed in Schedule 3.2. The
Sellers own all of the shares of Common Stock of each of the Call America
Companies free and clear of all liens, claims or encumbrances. The Sellers have
full right, power, legal capacity and authority to transfer and deliver the
shares of Common Stock of each of the Call America Companies pursuant to this
Agreement. The capital stock of each of the Call America Companies is duly
authorized and all issued capital stock has been duly and validly issued and is
fully paid and non-assessable. Except as disclosed in Schedule 3.2, none of the
Call America Companies has outstanding, and is not bound by or subject to, any
Rights, and no shares of capital stock of any of the Call America Companies are
reserved for issuance for any purpose.
Section 3.3 Subsidiaries, Etc. None of the Call America Companies owns
(directly or indirectly) any Rights in any corporation, partnership, limited
liability company, joint venture, association or other entity, except as
disclosed in Schedule 3.3.
Section 3.4 Authority Relative to and Validity of Agreements. Each of the
Call America Companies has full corporate power and authority to execute and
deliver this Agreement and to assume and perform all of its obligations
hereunder. The execution and delivery of this Agreement by each of the Call
America Companies and the performance by each of the Call America Companies of
its obligations hereunder has been duly authorized by its respective Board of
Directors and shareholders and no further authorization on the part of any of
the Call America Companies is necessary to authorize the execution and delivery
by it of, and the performance of its obligations under, this Agreement. Except
as disclosed on Schedule 3.4 hereto, there are no corporate, contractual,
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statutory or other restrictions of any kind upon the power and authority of any
of the Call America Companies to execute and deliver this Agreement and to
consummate the transactions contemplated hereunder, and no Consent by any
Regulatory Authority is necessary to make this Agreement a valid instrument
binding upon each of the Call America Companies in accordance with its terms,
except any Consents that may be required by the Canadian federal law and FCC,
state telecommunication and state utility regulations, and Consents and filings
under the CGCL and the DGCL or where any such restriction or the failure to
obtain such Consents would not have a Material Adverse Effect on the Call
America Companies taken as a whole. This Agreement has been duly executed and
delivered by each of the Call America Companies and constitutes a legal, valid
and binding obligation of each of the Call America Companies, enforceable in
accordance with their terms, except (i) as such enforceability may be limited by
or subject to any bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally, (ii) as such obligations are
subject to general principles of equity and (iii) as rights to indemnity may be
limited by federal or state securities laws or by public policy.
Section 3.5 Required Filings and Consents; No Conflict. Except as disclosed
on Schedule 3.5, none of the Call America Companies is required to submit any
notice, report or other filing with any Regulatory Authority in connection with
the execution, delivery or performance of this Agreement, except any filings
that may be required under the CGL, the DGCL and Canadian Federal law and FCC,
state utility and telecommunication regulations, or where failure to so file
would not have a Material Adverse Effect on the Call America Companies taken as
a whole. The execution, delivery and performance of this Agreement by each of
the Call America Companies and the consummation of the transactions contemplated
hereby do not and will not (a) conflict with or violate any law, regulation,
judgment, order or decree binding upon any of the Call America Companies, (b)
conflict with or violate any provision of its respective charter or Bylaws, or
(c) except as disclosed in Schedule 3.5 hereto, conflict with or result in a
breach of any condition or provision of, or constitute a Default under, or
result in the creation or imposition of any Lien upon any properties or assets
of any of the Call America Companies pursuant to, or cause or permit the
acceleration prior to maturity of any amounts owing under, any Contract to which
any of the Call America Companies is a party or which is binding upon any of the
Call America Companies or by which any of its properties are bound, except where
such conflict, violation, breach or default would not have a Material Adverse
Effect on the Call America Companies taken as a whole. The execution, delivery
and performance of this Agreement by each of the Call America Companies and the
consummation of the transactions contemplated hereby will not result in the loss
of any Permit possessed by any of the Call America Companies or give a right of
termination to any party to any agreement or other instrument to which any of
8
the Call America Companies is a party or by which any of its properties are
bound except where such loss or right would not have a Material Adverse Effect
on the Call America Companies taken as a whole.
Section 3.6 Financial Statements and Net Revenues. (a) Call America has
heretofore delivered to Buyer (i) a balance sheet of each of the Call America
Companies at December 31, 1995 and December 31, 1994, and related statements of
income and retained earnings and changes in cash flows for the years then ended,
all of which have been certified by Glenn, Burdette, Xxxxxxxx & Xxxxxx, Call
America's independent auditors, and (ii) a balance sheet of each of the Call
America Companies at June 30, 1996 and related statement of income and retained
earnings and changes in cash flows for the quarter and six months then ended, as
certified by the Controller of Call America (collectively, together with the
notes thereto, the "Call America Financial Statements"). The Call America
Financial Statements have been prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated therein or in
the notes thereto) and fairly present the financial position of the Call America
Companies, taken as a whole, as of the respective dates thereof and the results
of operations of the Call America Companies, taken as whole, for the periods
indicated, except as disclosed on Schedule 3.6 and except that the unaudited
interim financial statements are subject to normal and recurring year end
adjustments which are not expected to be material in amount.
Section 3.7 No Undisclosed Liabilities. None of the Call America Companies
has any Liability except:
(a) as disclosed on Schedule 3.7;
(b) those set forth or reflected in the financial statements delivered
to Buyer in accordance with Section 3.6 and that have not been paid or
discharged since the date thereof;
(c) those arising under agreements or other commitments expressly
identified in any Schedule hereto; and
(d) liabilities arising in the ordinary and usual course of business.
Section 3.8 Absence of Certain Changes and Events. Except as disclosed or
reflected in the Call America Financial Statements or on Schedule 3.8, since
June 30, 1996, through the date hereof there has not been, with respect to any
of the Call America Companies, (i) any Material Adverse Effect; (ii) any
material strike, picketing, work slowdown or labor disturbance; (iii) any
material damage, destruction or loss (whether or not covered by insurance) with
9
respect to any material assets or properties; (iv) any redemption or other
acquisition of Common Stock of any of the Call America Companies or any
declaration or payment of any dividend or other distribution in cash, stock or
property with respect thereto; (v) any entry into any material commitment or
transaction (including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business or as contemplated by
this Agreement; (vi) any transfer of, or rights granted under, any material
leases, licenses, agreements, patents, trademarks, trade names, or copyrights
other than those transferred or granted in the ordinary course of business and
consistent with past practice; (vii) any Lien on any material assets or
properties except in the ordinary course of business; any payment of any
Liabilities other than Liabilities currently due; any cancellation of any debts
or claims or forgiveness of amounts owed to any of the Call America Companies;
or (viii) any change in accounting principles or methods (except insofar as may
have been required by a change in U.S. GAAP). Except as disclosed or reflected
in the Call America Financial Statements or on Schedule 3.8, since June 30,
1996, through the date hereof each of the Call America Companies has conducted
its business only in the ordinary course and in a manner consistent with past
practice and has not made any material change in the conduct of its respective
business or operations. Except as disclosed or reflected in the Call America
Financial Statements or on Schedule 3.8, without limiting the generality of the
foregoing, since June 30, 1996, through the date hereof none of the Call America
Companies has made any payments (except in the ordinary course of business and
in amounts and in a manner consistent with past practice) under any Employee
Benefit Plan (as hereinafter defined) or to any employee, independent contractor
or consultant, entered into any new Employee Benefit Plan or any new consulting
agreement, granted or established any awards under any such Employee Benefit
Plan or agreement, in any such case providing for payments of more than $10,000
or adopted or otherwise amended any of the foregoing.
Section 3.9 Taxes and Tax Returns. (a) For purposes of this Agreement, (i)
the term "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise,
property, sales, license, payroll and franchise taxes, imposed by the United
States, or any state, local or foreign government or subdivision or agency
thereof whether computed on a unitary, combined or any other basis; and such
term shall include any interest and penalties or additions to tax; and (ii) the
term "Tax Return" shall mean any report, return or other information required to
be filed with, supplied to or otherwise made available to a taxing authority in
connection with Taxes.
(b) Except as disclosed on Schedule 3.9, each of the Call America Companies
has (i) duly filed with the appropriate taxing authorities all Tax Returns
10
required to be filed by or with respect to its respective business, or are
properly on extension and all such duly filed Tax Returns are true, correct and
complete in all material respects, and (ii) paid in full or made adequate
provisions for on its respective balance sheet (in accordance with U.S. GAAP)
all Taxes shown to be due on such Tax Returns. Except as disclosed on Schedule
3.9, there are no liens for Taxes upon the assets of any of the Call America
Companies except for statutory liens for current Taxes not yet due and payable
or which may thereafter be paid without penalty or are being contested in good
faith. Except as disclosed on Schedule 3.9, none of the Call America Companies
has received any notice of audit, is not undergoing any audit of its Tax
Returns, or has received any notice of deficiency or assessment from any taxing
authority with respect to liability for Taxes of its respective business which
has not been fully paid or finally settled. Except as disclosed on Schedule 3.9,
there have been no waivers of statutes of limitations by any of the Call America
Companies with respect to any Tax Returns. None of the Call America Companies
has filed a request with the Internal Revenue Service for changes in accounting
methods within the last two years which change would effect the accounting for
tax purposes, directly or indirectly, of its respective business.
(c) Except as disclosed on Schedule 3.9, none of the Call America Companies
has executed an extension or waiver of any statute of limitations on the
assessment or collection of any Tax due (excluding such statutes that relate to
years currently under examination by the Internal Revenue Service or other
applicable taxing authorities) that is currently in effect.
(d) Except as disclosed on Schedule 3.9, the provision for Taxes, if any,
due or to become due for any of the Call America Companies for the period or
periods through and including the date of the respective Call America Financial
Statements that has been made and is reflected on such financial statements is
sufficient to cover all such Taxes.
(e) Deferred taxes, if any, of each of the Call America Companies included
in the Call America Financial Statements have been computed in accordance with
GAAP.
(f) None of the Call America Companies is a party to any Tax allocation or
Tax sharing agreement and none of the Call America Companies has been a member
of an affiliated group filing a consolidated federal income Tax Return or has
any Liability for Taxes of any Person under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign Law) as a transferee or
successor or by Contract or otherwise.
(g) None of the Call America Companies has made any payments, is obligated
to make any payments, or is a party to any Contract that could obligate it to
11
make any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
Section 3.10 Employee Benefit Plans. Schedule 3.10 comprises a listing of
each bonus, stock option, stock purchase, benefit, profit sharing, savings,
retirement, liability, insurance, incentive, deferred compensation, and other
similar fringe or employee benefit plans, programs or arrangements for the
benefit of or relating to, any employee of, or independent contractor or
consultant to, and all other compensation practices, policies, terms or
conditions, whether written or unwritten (the "Employee Benefit Plans") which
each of the Call America Companies presently maintains, to which any of the Call
America Companies presently contributes or under which any of the Call America
Companies has any liability and which relate to employees or independent
contractors of any of the Call America Companies. Except as disclosed on
Schedule 3.10, each of the Employee Benefit Plans administered by each of the
Call America Companies have been administered in all material respects in
accordance with all requirements of applicable law and terms of each such plan.
Each Employee Benefit Plan that is required to be qualified under ERISA, or
registered or approved by a Regulatory Authority, has been so qualified,
registered or approved by the appropriate governmental agency or authority and
such qualification, registration or approval has not been revoked. Except as
disclosed on Schedule 3.10, all contributions (including premiums) required by
law or contract to have been made or accrued by each of the Call America
Companies under or with respect to Employee Benefit Plans have been paid or
accrued by each of the Call America Companies or will be paid in the ordinary
course within 90 days. Except as disclosed on Schedule 3.10, without limiting
the foregoing, there are no unfunded liabilities under any Employee Benefit
Plan. Except as disclosed on Schedule 3.10, none of the Call America Companies
has received notice of any investigations, litigation or other enforcement
actions against it with respect to any of the Employee Benefit Plans. To Call
America's Knowledge, there are no pending actions, suits or claims by former or
present employees of any of the Call America Companies (or their beneficiaries)
with respect to Employee Benefit Plans or the assets or fiduciaries thereof
(other than routine claims for benefits).
Section 3.11 Title to Property. Each of the Call America Companies has good
title, or valid leasehold or usage rights (in the case of leased property), to
all real property and all personal property owned or leased by it or used in the
operation of its respective business, free and clear of all encumbrances,
excluding (i) encumbrances disclosed or reflected in the Call America Financial
Statements, (ii) Liens for taxes, fees, levies, imposts, duties or governmental
charges of any kind which are not yet delinquent or are being contested in good
faith by appropriate proceedings which suspend the collection thereof; (iii)
12
Liens for mechanics, materialmen, laborers, employees, suppliers or other which
are not yet delinquent or are being contested in good faith by appropriate
proceedings; (iv) Liens created in the ordinary course of business in connection
with the leasing or financing of office, computer and related equipment and
supplies; (v) the rights of third parties in and to such real and personal
property pursuant to the terms of any lease agreement or other agreement
pursuant to which the Companies are entitled to lease or utilize such property;
(vi) easements and similar encumbrances ordinarily created for xxxxxx
utilization and enjoyment of property; and (vii) Liens or defects in title or
leasehold rights that either individually or in the aggregate do not and will
not have a Material Adverse Effect on the Call America Companies taken as a
whole. All of such owned or leased property with a value in excess of $20,000 is
listed on Schedule 3.11 hereto.
Section 3.12 Trademarks, Patents and Copyrights. (a) Except as disclosed on
Schedule 3.12 hereto, Call America owns or has the right to use all Intellectual
Property used in the conduct of the businesses of the Call America Companies as
being conducted as of the date hereof, except where the failure to own or
possess such right would not have a Material Adverse Effect on the Call America
Companies taken as a whole. Schedule 3.12 hereto lists each patent, patent
right, patent application, tradename registration, trademark registration,
copyright registration, copyright application, source and object code owned by
each of the Call America Companies;
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not constitute a
material breach of any instrument or agreement governing any rights to
Intellectual Property of any of the Call America Companies, will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any Intellectual Property of any of the Call America Companies that is
material to the Call America Companies taken as a whole or materially impair the
right of any of the Call America Companies to use any Intellectual Property
currently being used by the Call America Companies in their business or any
portion thereof;
(c) Neither the manufacture, marketing, license, sale or intended use of
any product currently licensed or sold by any of the Call America Companies or
currently under development by any of the Call America Companies violates any
license or agreement between any of the Call America Companies and any third
party relating to such product or infringes any intellectual property right of
any other party, except where such violation or infringement would have a
Material Adverse Effect on the Call American Companies taken as a whole, and
there is no pending or, to the Knowledge of Call America, threatened claim or
litigation contesting the validity, ownership or right to use, sell, license or
dispose of any Intellectual Property, nor has any of the Call America Companies
13
received any notice asserting that any Intellectual Property or the proposed
use, sale, license or disposition thereof conflicts or will conflict with the
rights of any other party, except to the extent such claim, litigation or
conflict would not have a Material Adverse Effect on the Call America Companies
taken as a whole; and
(d) Except as disclosed in Schedule 3.12 hereto, to the Knowledge of Call
America, no current or prior officers, employees or consultants of any of the
Call America Companies claim an ownership interest in any Intellectual Property
as a result of having been involved in the development of such property while
employed by or consulting to any of the Call America Companies or otherwise.
Section 3.13 Legal Proceedings, Claims, Investigations, etc. Except as
disclosed on Schedule 3.13, there is no litigation pending, or to the Knowledge
of Call America, threatened, against any of the Call America Companies, or to
Knowledge of Call America, any director, officer or employee thereof relating to
their respective business that would have a Material Adverse Effect on the Call
America Companies taken as a whole. Except as disclosed on Schedule 3.13, none
of the Call America Companies has been informed of any violation of or default
under, any laws, ordinances, regulations, judgments, injunctions, orders or
decrees (including without limitation, any immigration laws or regulations) of
any court, governmental department, commission, agency, instrumentality or
arbitrator applicable to the business of each of the Call America Companies.
None of the Companies is currently subject to any Order that would have a
Material Adverse Effect on the Call America Companies taken as a whole.
Section 3.14 Insurance. Schedule 3.14 hereto sets forth a list and brief
description of all existing insurance policies maintained by each of the Call
America Companies pertaining to its business properties, personnel or assets. To
the Knowledge of Call America, none of the Call America Companies is in Default
with respect to any provision contained in any insurance policy that would have
a Material Adverse Effect on the Call America Companies taken as a whole, and
has failed to give any notice or present any claim under any insurance policy in
due and timely fashion that would have a Material Adverse Effect on the Call
America Companies taken as a whole. Prior to the Closing, all such policies
shall have been delivered to the Buyer and shall continue to be in full force
and effect. All payments with respect to such policies are current and none of
the Call America Companies has received any notice threatening a suspension,
revocation, modification or cancellation of any such policy which if
implemented, would have a Material Adverse Effect on the Call America Companies
taken as a whole.
14
Section 3.15 Material Contracts. (a) Except as set forth in Schedule 3.15
hereto, none of the Call America Companies is a party to and is bound by any
Contract which has a term in excess of one year and will result in payments in
excess of $15,000 over any 12 month period other than (i) Contracts entered into
in the ordinary course of business with vendors and customers and (ii) Contracts
cancelable upon not more than 30 days' notice. Each of the Contracts set forth
in Schedule 3.15 hereto to which any of the Call America Companies is a party,
is valid and existing, in full force and effect and there is no Default or claim
of Default against any of the Call America Companies or any notice of
termination with respect thereto, except where such invalidity or default would
not have a Material Adverse Effect on the Call America Companies taken as a
whole. Copies of all the written documents and a synopsis of all oral contracts
and commitments described in Schedule 3.15 hereto have heretofore been made
available to the Buyer and are true and complete and include all amendments and
supplements thereto and modifications thereof to and including the date hereof.
(b) Except as set forth in Schedule 3.15 hereto, none of the Call America
Companies is a party to any (i) Contract with any consultant, executive officer
or other key employee the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of the transactions
contemplated by this Agreement, or (ii) benefit plan, including any stock option
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of the transactions
contemplated by this Agreement.
Section 3.16 Certain Transactions. Except as disclosed on Schedule 3.16,
none of the Call America Companies, nor any officer, director or, to the
Knowledge of Call America, any employee of any of the Call America Companies,
nor any member of any such person's immediate family is presently a party to any
material transaction with any of the Call America Companies relating to its
respective business including without limitation, any Contract or other
arrangement (i) providing for the furnishing of services by, (ii) providing for
the rental of real or personal property from, or (iii) otherwise requiring
payments to (other than for services as officers, directors or employees of any
of the Call America Companies), any such person or any corporation, partnership,
trust or other entity in which any such person has a substantial interest as a
stockholder, officer, director, trustee or partner.
Section 3.17 Broker. Except for the engagement by GST of the Xxxxx Company,
whose fees are to be paid solely by GST, no broker, finder or investment banker
is entitled to any brokerage or finder's fee or other commission in connection
with the transactions contemplated hereby based on the arrangements made by or
on behalf of any of the Call America Companies or the Sellers.
15
Section 3.18 Environmental Matters. (a) None of the Call America Companies
is the subject of, or being threatened to be the subject of (i) any enforcement
proceeding, or (ii) to Call America's Knowledge any investigation, brought in
either case under any Environmental Law, at any time in effect or (iii) to Call
America's Knowledge any third party claim for liability relating to
environmental conditions on properties of any of the Call America Companies.
None of the Call America Companies has been notified that it must obtain any
permits and licenses or file documents for the operation of its business under
federal, state and local laws relating to pollution protection of the
environment. None of the Call America Companies has been notified of any
conditions on its respective properties which will give rise to any Liabilities,
under any Environmental Law, or as the result of any claim of any third party
with respect to any Environmental Law. For the purposes of this Section 3.18, an
investigation shall include, but is not limited to, any written notice received
by any of the Call America Companies which relates to the onsite or offsite
disposal, release, discharge or spill of any waste, waste water, pollutant or
contaminants.
(b) Except as disclosed on Schedule 3.18, there are no toxic wastes or
other toxic or hazardous substances or materials, pollutants or contaminants
which any of the Call America Companies (or, to the Knowledge of Call America,
any previous occupant of any of the Call America Companies' facilities) has
used, stored or otherwise held in or on any of the facilities of any of the Call
America Companies which, are present at or have migrated from the facilities,
whether contained in ambient air, surface water, groundwater, land surface or
subsurface strata in any such case that would have a Material Adverse Effect on
the Call America Companies taken as a whole. None of the Call America Companies
has disposed of or arranged (by Contract or otherwise) for the disposal of any
material or substance that was generated or used by any of the Call America
Companies at any off-site location that has been or is listed or proposed for
inclusion on any list promulgated by any Regulatory Authority for the purpose of
identifying sites which pose a danger to health and safety. Except as disclosed
on Schedule 3.18, there have been no environmental studies, reports and analyses
made or prepared in the last five years relating to the facilities of any of the
Call America Companies. None of the Call America Companies has installed any
underground storage tanks in any of its facilities and, to the Knowledge of Call
America, none of such facilities contain any underground storage tanks.
Section 3.19 Illegal Payments. None of the Call America Companies has,
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item of property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
which is in any manner related to their respective businesses or operations,
which any of the Call America Companies knows or has reason to believe to have
16
been illegal under any Laws or the laws of any other country having
jurisdiction. None of the Call America Companies has participated, directly or
indirectly, in any boycotts affecting any of its actual or potential customers.
Section 3.20 Statements True and Correct. Except as disclosed on Schedule
3.20, no statement, certificate, instrument, or other writing furnished or to be
furnished by any of the Call America Companies, any Seller or any Affiliate
thereof to any of the GST Companies pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by any of the Call America Companies or any Affiliate thereof for
inclusion in any documents to be filed by a Call America Company or any
Affiliate thereof with any Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. All documents that
any of the Call America Companies or Affiliate thereof is responsible for filing
with any Regulatory Authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable Law.
Section 3.21 Accounting, Tax and Regulatory Matters. None of the Call
America Companies, or, to the Knowledge of Call America, any Affiliate thereof
has taken any action that is reasonably likely to (i) prevent any of the Mergers
from qualifying as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities or result in the imposition of a condition or
restriction which could materially adversely impact the economic or business
benefits of the transaction contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller hereby severally represents and warrants to the Buyer as
follows:
Section 4.1 Capitalization. Except for restrictions contained in the
Shareholders' Agreement (the "Shareholders' Agreement") dated May 28, 1996 by
and among Xxxxx Xxxxxxxxx ("Xxxxxxxxx"), Xxxxxxx Xxxxxxxxxx and F. Xxxxx Xxxxxx,
such Seller owns the shares of Common Stock of each of the Call America
Companies set forth opposite his name in Exhibit A, free and clear of all Liens.
17
Such Seller has full right, power, legal capacity and authority to transfer and
deliver such shares pursuant to this Agreement.
Section 4.2 Authority Relative to and Validity of Agreements. Such Seller
has full power and authority to execute and deliver this Agreement, the Escrow
Agreement, the Registration Rights Agreement in the form attached hereto as
Exhibit C (the "Registration Rights Agreement"), the Employment Agreement in the
form attached hereto as Exhibit D (the "Employment Agreement") to which such
Seller is a party and the Non-Competition Agreement to which such Seller is a
party in the form attached hereto as Exhibit E (the "Non-Competition
Agreements"), and to assume and perform all of his obligations hereunder and
thereunder. There are no contractual, statutory or other restrictions of any
kind upon the power and authority of such Seller to execute and deliver this
Agreement, the Escrow Agreement, the Registration Rights Agreement, the
Employment Agreement to which such Seller is a party and the Non-Competition
Agreement to which such Seller is a party and to consummate the transactions
contemplated hereunder and thereunder and except Consents that may be required
by Canadian federal law, FCC and state telecommunications and state utility
regulations and filings that may be required by the CGCL and the DCGL, no
action, waiver or consent by any Regulatory Authority is necessary to make this
Agreement, the Escrow Agreement, the Registration Rights Agreement, the
Employment Agreement to which such Seller is a party and the Non-Competition
Agreements to which such Seller is a party, a valid instrument binding upon such
Seller in accordance with its terms, except where such failure to obtain such
Consent or where such restriction would not have a Material Adverse Effect on
the Call America Companies taken as a whole. This Agreement has been duly
executed and delivered by such Seller and constitutes, and the Escrow Agreement,
the Registration Rights Agreement, the Employment Agreement to which such Seller
is a party and the Non-Competition Agreement to which such Seller is a party,
when executed and delivered by such Seller in accordance with their terms will
constitute, legal, valid and binding obligations of such Seller, enforceable in
accordance with their terms, except (i) as such enforceability may be limited by
or subject to any bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally, (ii) as such obligations are
subject to general principles of equity and (iii) as rights to indemnity may be
limited by federal or state securities laws or by public policy.
Section 4.3 Required Filings and Consents; No Conflict. Except as disclosed
on Schedule 4.3, such Seller is not required to submit any notice, report or
other filing with any Regulatory Authority in connection with the execution,
delivery or performance of this Agreement, the Escrow Agreement, the
Registration Rights Agreement, the Employment Agreement to which such Seller is
a party and the Non-Competition Agreements to which such Seller is a party,
except under the CGCL, the DGCL, FCC, Canadian federal law and state
18
telecommunication and state utility regulations where the failure to so submit
would not have a Material Adverse Effect on the Call America Companies taken as
a whole. The execution, delivery and performance of this Agreement, the Escrow
Agreement, the Registration Rights Agreement, the Employment Agreement to which
such Seller is a party and the Non-Competition Agreement to which such Seller is
a party by such Seller and the consummation of the transactions contemplated
hereby and thereby do not and will not (a) conflict with or violate any Law, or
(b) except as disclosed on Schedule 4.3, conflict with or result in a material
breach of any condition or provision of, or constitute a material Default under,
or result in the creation or imposition of any Lien upon any properties or
assets of such Seller pursuant to, or cause or permit the acceleration prior to
maturity of any amounts owing under, any Contract to which such Seller is a
party or which is binding upon such Seller or by which any of his properties are
bound, except where such conflict, violation, breach or default would not have a
Material Adverse Effect on the Call America Companies taken as a whole. The
execution, delivery and performance of this Agreement, the Escrow Agreement, the
Registration Rights Agreement, the Employment Agreement to which such Seller is
a party and the Non-Competition Agreement to which such Seller is a party by
such Seller and the consummation of the transactions contemplated hereby and
thereby will not result in the loss of any Permit possessed by such Seller or
give a right of termination to any party to any agreement or other instrument to
which such Seller is a party or by which any of his properties are bound, except
where such loss or right would not have a Material Adverse Effect on the Call
America Companies taken as a whole.
Section 4.4 Broker. Except for the engagement of the Xxxxx Company by GST,
whose fees are to be paid solely by GST, no broker, finder or investment banker
is entitled to any brokerage or finder's fee or other commission in connection
with the transactions contemplated hereby based on the arrangements made by or
on behalf of such Seller.
Section 4.5 Investment. Such Seller is acquiring the consideration solely
for his own account as an investment and not with a view to any distribution or
resale thereof within the meanings of such terms under the Securities Act of
1933, as amended (the "Securities Act"). Such Seller is an "accredited investor"
as defined in Rule 501(a) promulgated under the Securities Act. Such Seller has
been advised by the Buyer that the Consideration to be acquired by such Seller
has not been registered under the Securities Act, or applicable state securities
laws, that such Consideration will be acquired by such Seller pursuant to
exemptions from the registration requirements of these laws and that the
reliance by the Buyer on these exemptions is predicated in part on such Seller's
representations contained in this Agreement. Such Seller has been advised by
Buyer that the certificate or certificates representing Consideration to be
acquired by such Seller under this Agreement shall contain a legend stating that
19
the shares represented thereby have not been registered under the Securities Act
and referring to applicable restrictions on transferability.
Section 4.6. Certain Sellers. Xxxxxxx X. Xxxxxx and Xxxxxxxx X. Xxxxxx are
not employees of any of the Call America Companies.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to each of the Call America
Companies and the Sellers as follows:
Section 5.1 Corporate Organization; Requisite Authority to Conduct
Business; Articles of Incorporation and By-Laws. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; GST is a corporation duly organized, validly existing and in good
standing under the federal laws of Canada. The Buyer has provided the Sellers
with true and complete copies of the certificate of incorporation (certified by
the Secretary of State of the State of Delaware in the case of Sub and the
Director appointed under the Canada Business Corporation Act in the case of GST)
and By-laws of each of the GST Companies (certified by the respective Secretary
of each of the GST Companies) as in effect on the date hereof. Each of the GST
Companies has all corporate power and authority to own, operate and lease its
properties and to carry on its business as the same is now being conducted,
except where the failure to have such power and authority would not have a
Material Adverse Effect on any of the GST Companies. Each of the GST Companies
is duly qualified or licensed to do business and is in good standing as a
foreign corporation in every jurisdiction in which the conduct of its business
or the ownership or leasing of its properties requires it to be so qualified or
licensed, except where the failure to be so qualified or licensed would not have
a Material Adverse Effect on the GST Companies.
Section 5.2 Authority Relative to and Validity of Agreements. Each of the
GST Companies has full corporate power and authority to execute and deliver this
Agreement, the Escrow Agreement and the Registration Rights Agreement, as the
case may be, to assume and perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of each of this Agreement, the Escrow Agreement and the
Registration Rights Agreement and the performance by each of the GST Companies
of its obligations hereunder and thereunder has been duly authorized and
approved by its respective Board of Directors, as the case may be, and no
further action on the part of any of the GST Companies is necessary to authorize
the execution and delivery by it of, and the performance of its obligations
20
under, this Agreement, the Escrow Agreement and the Registration Rights
Agreement. There are no corporate, contractual, statutory or other restrictions
of any kind upon the power and authority of any of the GST Companies to execute
and deliver this Agreement, the Escrow Agreement and the Registration Rights
Agreement and to consummate the transactions contemplated hereunder and
thereunder and no Consent by any Regulatory Authority is necessary to make this
Agreement, the Escrow Agreement and the Registration Rights Agreement a valid
instrument binding upon each of the GST Companies in accordance with its terms,
except any Consents that may be required by FCC and state telecommunications and
state utilities regulations and Consents and filings that may be required by
Canadian federal law, the CGCL or the DGCL, or where any such restrictions or
the failure to obtain such Consents would not have a Material Adverse Effect on
the GST Companies. This Agreement has been duly executed and delivered by each
of the GST Companies and constitutes, and the Escrow Agreement and the
Registration Rights Agreement will, when executed and delivered by each of the
Call America Companies and the Sellers in accordance with their terms will
constitute, legal, valid and binding obligations of each of the GST Companies,
enforceable against them in accordance with its terms, except (i) as such
enforceability may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, (ii) as such obligations are subject to general principles of equity
and (iii) as rights to indemnity may be limited by federal or state securities
laws or by public policy.
Section 5.3 Required Filings; Consents. Except for an Amex listing
application with respect to the Consideration, none of the GST Companies is
required to submit any notice, report or other filing with any Regulatory
Authority in connection with the execution, delivery or performance of this
Agreement, the Escrow Agreement and the Registration Rights Agreement, except
any filings that may be required under the CGCL, the DGCL, Canadian federal law,
the FCC and state telecommunications and state utilities regulations or where
failure to so file would not have a Material Adverse Effect on the GST Companies
taken as a whole. The execution, delivery and performance or this Agreement, the
Escrow Agreement and the Registration Rights Agreement by each of the GST
Companies party thereto and the consummation of the transactions contemplated
hereby and thereby does not and will not (a) conflict with or violate any law,
regulation, judgment, order or decree binding upon any of the GST Companies, (b)
conflict with or violate any provision of its respective charter or Bylaws, or
(c) conflict with or result in a breach of any condition or provision of, or
constitute a Default under, or result in the creation or imposition of any Lien
upon any properties or assets of any of the GST Companies pursuant to, or cause
or permit the acceleration prior to maturity of any amounts owing under, any
Contract to which any of the GST Companies is a party or which is binding upon
any of the GST Companies or by which any of its properties are bound, except
21
where such conflict, violation, breach on default would not have a Material
Adverse Effect on the GST Companies. The execution, delivery and performance of
this Agreement by each of the GST Companies party thereto and the consummation
of the transactions contemplated hereby will not result in the loss of any
Permit possessed by any of the GST Companies or give a right of termination to
any party to any agreement or other instrument to which any of the GST Companies
is a party or by which any of its properties are bound except where such loss or
right would not have a Material Adverse Effect on the GST Companies taken as a
whole.
Section 5.4 Capitalization. (a) The authorized capital stock of GST
consists of (i) an unlimited number of GST Common Shares, 21,170,923 of which
are issued and outstanding as of June 30, 1996, and (ii) 10,000,000 Preference
Shares, none of which are issued and outstanding. The capital stock of GST is
duly authorized and all issued capital stock has been duly and validly issued
and is fully paid and nonassessable and free of preemptive rights. The
Consideration is duly authorized and when issued in accordance with the terms
and conditions of this Agreement shall be validly issued, fully paid and
nonassessable. The Consideration is not subject to any preemptive rights or
other similar restrictions. Except as set forth in the SEC Reports (as
hereinafter defined), as of May 31, 1996 none of the GST Companies had
outstanding, or was bound by or subject to, any Rights, and no shares of capital
stock of any of the GST Companies were reserved for issuance for any purpose.
(b) The authorized capital stock of Sub consists of 1,000 shares of common
stock, 100 of which are issued and outstanding as of the date hereof. All of
such issued shares are owned beneficially and of record by GST.
Section 5.5 SEC Reports and Financial Statements. GST has filed with the
Securities and Exchange Commission (the "SEC"), and has heretofore made
available to the Sellers true and complete copies of all forms, reports,
schedules, statements and other documents required to be filed by it since
January 1, 1995 under the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act") (as such documents have been amended or
supplemented since the time of their filing, collectively, the "SEC Reports").
As of their respective dates, the SEC Reports (including without limitation, any
financial statements or schedules included therein) (a) did not contain any
untrue statement of a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (b) complied in all material respects
with the applicable requirements of the Securities Act and Exchange Act (as the
case may be) and all applicable rules and regulations of the SEC promulgated
thereunder. Each of the consolidated financial statements included in the SEC
22
Reports have been prepared from, and are in accordance with the books and
records of GST, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with U.S. GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of GST and its consolidated subsidiaries as of the date
thereof and their consolidated results of operations and cash flows (and changes
in financial position, if any) for the periods presented therein.
Section 5.6 No Undisclosed Liabilities. Except as described in the SEC
Reports, GST has no Liabilities, except as incurred in the ordinary course of
business, that would have a Material Adverse Effect on GST.
Section 5.7 Broker. Except for the engagement by GST of the Xxxxx Company,
whose fees are to be paid solely by GST, no broker, finder or investment banker
is entitled to any brokerage or finder's fee or other commission in connection
with the transactions contemplated hereby based upon the arrangements made by or
on behalf of any of the GST Companies.
Section 5.8 Legal Proceedings, Claims, Investigations, etc. There is no
litigation pending, or to the Knowledge of GST, threatened, against any of the
GST Companies, or to Knowledge of GST, any director, officer or employee thereof
relating to their respective business that would have a Material Adverse Effect
on the GST Companies. None of the GST Companies has been informed of any
violation of or default under, any laws, ordinances, regulations, judgments,
injunctions, orders or decrees (including without limitation, any immigration
laws or regulations) of any court, governmental department, commission, agency,
instrumentality or arbitrator applicable to the business of each of the GST
Companies. None of the GST Companies is currently subject to any Order that
would have a Material Adverse Effect on the GST Companies.
Section 5.9 Vote Required. The vote of the holders of GST's capital stock
is not required to approve the issuance of the GST Common Stock in the Merger;
nor is it required to approve the Merger.
Section 5.10 Statements True and Correct. No statement, certificate,
instrument, or other writing furnished or to be furnished by any of the GST
Companies to any of the Call America Companies or the Sellers pursuant to this
Agreement or any other document, agreement, or instrument referred to herein
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
23
information supplied or to be supplied by any of the GST Companies for inclusion
in any documents to be filed by a GST Company with any Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that any of the GST Companies is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
Section 5.11 Accounting, Tax and Regulatory Matters. None of the GST
Companies, or, to the Knowledge of GST, any Affiliate thereof has taken any
action that is reasonably likely to (i) prevent any of the Mergers from
qualifying a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, or (ii) materially impede or delay receipt of any Consents of
Regulatory Authorities or result in the imposition of a condition or restriction
which could materially adversely impact the economic or business benefits of the
transaction contemplated by this Agreement.
Section 5.12 No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby, Sub has
neither incurred any obligation or liability nor engaged in any business or
activity of any type or kind whatsoever or entered into any agreement or
arrangement with any person.
ARTICLE VI
COVENANTS OF THE CALL AMERICA AND GST COMPANIES
Section 6.1 Covenants of the Call America Companies Regarding Conduct of
Business Operations Pending the Closing. Except as disclosed on Schedule 6.1,
each of the Call America Companies covenants and agrees that between the date of
this Agreement and the Closing Date, each of the Call America Companies will
carry on its business in the ordinary course and consistent with past practice,
will use its best efforts to (i) preserve its respective business organization
intact, (ii) retain the services of its respective present employees, and (iii)
preserve the good will of its respective suppliers and customers, and will not,
except in the ordinary course of business, purchase, sell, lease or dispose of
any property or assets or incur any liability or enter into any other
extraordinary transaction. Except as disclosed on Schedule 6.1, by way of
amplification and not limitation, none of the Call America Companies shall,
between the date of this Agreement and the Closing Date, directly or indirectly,
do any of the following without the prior written consent of the Buyer:
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(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or propose
the issuance, sale, pledge, disposition, encumbrance or authorization of any
shares of its capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of its capital
stock, or any other ownership interest; (ii) amend or propose to amend its
Articles of Incorporation; (iii) split, combine or reclassify any of its
outstanding shares, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise with respect thereto;
or (iv) redeem, purchase or otherwise acquire any shares of its capital stock;
(b) (i) make any acquisition (by merger, consolidation, or acquisition of
stock or assets) of any corporation, partnership or other business organization
or division thereof; (ii) except in the ordinary course of business and in a
manner consistent with past practice, sell, pledge, dispose of, or encumber or
authorize or propose the sale, pledge, disposition or encumbrance of any of its
assets; (iii) other than under any existing credit facility, incur any
indebtedness for borrowed money, assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, partnership, firm or
corporation, or make any loans or advances to any individual, partnership, firm,
or corporation, or enter into any contract or agreement to do so, except in the
ordinary course of business and consistent with past practice; (iv) authorize
any single capital expenditure or series of related capital expenditures each of
which is in excess of $50,000; or (v) release or assign any indebtedness owed to
it or any claims held by it, except in the ordinary course of business and
consistent with past practice;
(c) take any action other than in the ordinary course of business and in a
manner consistent with past practice with respect to the grant of any severance
or termination pay (otherwise than pursuant to its policies in effect on the
date hereof) or with respect to any increase of benefits payable under its
severance or termination pay policies in effect on the date hereof;
(d) make any payments (except in the ordinary course of business and in
amounts and in a manner consistent with past practice) under any Employee
Benefit Plan to any employee, independent contractor or consultant, enter into
any new Employee Benefit Plan or any new consulting agreement, grant or
establish any awards under such Employee Benefit Plan or agreement, in any such
case providing for payments or awards having a fair market value of more than,
$10,000, or adopt or otherwise amend any of the foregoing;
(e) change any accounting policies or procedures (including without
limitation its procedures with respect to the payment of accounts payable),
25
other than such changes deemed necessary to comply with U.S. GAAP or required as
a result of a change in law;
(f) enter into or terminate any material contract or agreement or make any
material change in any of its material contracts or agreements, other than (i)
Contracts entered into, and amendments thereof, in the ordinary course of
business, (ii) relating to indebtedness incurred in clause (b)(iii) above or
(iii) agreements, if any, relating to the transactions contemplated hereby;
(g) enter into any contract or commitment for network capacity services,
switching equipment or services in excess of $50,000; or
(h) take, or agree in writing or otherwise to take, any of the foregoing
actions or any action which would make any of its representations or warranties
contained in this Agreement untrue or incorrect in any material respect as of
the date when made or, except for the representations and warranties contained
in Section 3.8 hereof, as of a future date.
Section 6.2 No Other Negotiations. Each of the Call America Companies and
the Sellers agrees that until the termination of this Agreement pursuant to the
provisions of Article XI hereof (the "Termination Date"), neither the Call
America Companies nor the Sellers will, nor will it permit any of its affiliates
(including any officers, directors, employees, financial advisors, brokers,
stockholders or any other person acting on their behalf) to, (i) enter into any
agreement with a third party with respect to the acquisition, directly or
indirectly, of shares or other securities of any of the Call America Companies
or a material part of their respective assets, (ii) enter into discussions or
negotiations with a third party regarding such an agreement, or (iii) provide a
third party with general access to their books, records or employees for the
purpose of enabling such third party to conduct a due diligence investigation of
the legal, financial or business condition of them.
Section 6.3 Conduct of Business of GST. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, GST will,
and will cause each of its subsidiaries to, conduct their operations with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that goodwill and ongoing businesses shall be unimpaired at the
Closing Date. Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement, prior to the Closing Date,
26
neither GST nor any of its subsidiaries will, without the prior written consent
of Call America:
(a) knowingly take any action that would result in a failure to
maintain the trading of the GST Common Stock on the Amex;
(b) adopt or propose to adopt any amendment to its charter documents,
which would have an adverse impact on the consummation of the transactions
contemplated by this Agreement or the value of the Consideration;
(c) take, or agree in writing or otherwise to take, any of the actions
described in Sections 6.3(a) through 6.3(b) hereof or any action which
would make any of the representations or warranties of GST contained in
this Agreement untrue or incorrect.
ARTICLE VII
ADDITIONAL COVENANTS
Section 7.1 Covenants of the Call America Companies, the Sellers and the
GST Companies. Each of the Call America Companies, the Sellers and the GST
Companies covenants and agrees:
(a) Reasonable Efforts. To proceed diligently and use its reasonable
efforts to take or cause to be taken all actions and to do or cause to be done
all things necessary, proper and advisable to consummate the transactions
contemplated by this Agreement, including the execution and delivery of the
Escrow Agreement, the Registration Rights Agreement, the Non-Competition
Agreements and the Employment Agreement and satisfaction of all conditions to
the Merger; provided, however, that no party shall be required to pay money to
any third party for the purpose of obtaining any Consent to the transaction.
(b) Compliance. Subject to Section 7.7 hereof, to comply in all material
respects with all applicable rules and regulations of any Regulatory Authority
in connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby; to use all reasonable efforts to obtain in
a timely manner all necessary waivers, consents and approvals and to take, or
cause to be taken, all other actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement;
provided, however, that no party shall be required to pay money to any third
party for the purpose of obtaining any Consent to the transaction.
(c) Notice. To give prompt notice to the other party of (i) the occurrence,
or failure to occur, of any event whose occurrence or failure to occur, would be
likely to cause any representation or warranty contained in this Agreement to be
27
untrue or incorrect in any material respect as of the date hereof or as of the
Closing Date, and (ii) any material failure on its part, or on the part of any
of its officers, directors, employees or agents, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any such notice shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
(d) Access. To cause its affiliates, officers, directors, employees,
auditors and agents to afford the officers, employees and agents of the other
party hereto complete access at all reasonable times and upon reasonable notice
to its properties, offices and other facilities and to all books and records,
and shall furnish such other party with all financial, operating and other data
and information as the other party through its officers, employees or agents,
may reasonably request, provided that the party providing such access and
furnishing such data and information to the other party incurs no cost in doing
so.
(e) Confidentiality. All access and information obtained or furnished in
connection with the transactions contemplated by this Agreement shall be subject
to the terms and conditions of those certain Confidentiality Agreements (the
"Confidentiality Agreements") dated July 17, 1996, by and between GST and Call
America.
(f) Announcements. That all announcements, reports, statements and press
releases to the public, the trade or the press or any other third party
concerning the transactions contemplated by this Agreement (including any
disclosure by GST of the transaction or any information or financial data
relating to the Call America Companies in any filing with the Securities and
Exchange Commission) shall be mutually agreed to by Call America and the Buyer
before the issuance or the making thereof and, subject to the advice of counsel,
no party shall issue any such announcement, report, statement or press releases
or make any such public statement prior to such mutual agreement, except as may
be required by law. Copies of any such announcement, report, statements or press
release, including any announcement or disclosure required by law or by any
Governmental Authority, shall be delivered to each of the parties hereto prior
to release.
Section 7.2 Tax Treatment. Each of the parties hereto undertakes and agrees
to use its reasonable efforts to cause the Merger, and to take no action which
would cause any of the Mergers not, to qualify for treatment as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes. On or before the Closing Date, GST and Sub
shall execute and deliver to Call America a tax certificate in a form mutually
agreed upon by the parties hereto (the "GST Tax Certificate"), which GST and Sub
28
acknowledge is a condition to the ability of Call America's counsel to render
the tax opinion contemplated by Section 8.9.
Section 7.3 Employee Benefits and Contracts. Following the Effective Time,
GST shall provide all employees of the Call America Companies (including
officers of the Call America Companies who become employees of the Surviving
Corporation) employee benefits under employee benefit and welfare plans (other
than stock option or other plans involving the potential issuance of GST Common
Stock), on terms and conditions which when taken as a whole are substantially
similar to those currently provided by GST to its similarly situated employees.
For purposes of participation, vesting and (except in the case of GST retirement
plans) benefit accrual under GST's employee benefit plans, the service of the
employees of the GST Companies prior to the Effective Time shall be treated as
service with GST. GST also shall cause the Surviving Corporation to honor in
accordance with their terms all employment, severance, consulting and other
compensation Contracts disclosed in Schedule 3.15 between any of the Call
America Companies and any current or former director, officer, or employee
thereof, and all provisions for vested benefits or other vested amounts earned
or accrued through the Effective Time under the Employee Benefit Plans.
Section 7.4 Guarantee of Performance. GST hereby guarantees the performance
by Sub of its obligations under this Agreement.
Section 7.5 FABRIK Communications, Inc. Following the Effective Time, the
Surviving Corporation shall, and GST and Xxxxxxx Xxxxxxxxxx (for as long as he
is employed by the Surviving Corporation) agree to use their best efforts to
cause the Surviving Corporation to, (i) comply with the terms and conditions of
that certain Services Agreement between FABRIK and Call America dated October
21, 1994, (ii) not take any act, or omit to take any action, which would result
in a Default thereunder or which would give rise to or constitute a Termination
Event (as such term is defined in the Stock Purchase Agreement between FABRIK
and Call America (the "FABRIK Agreement")) or otherwise cause the Purchase
Option (as defined in the FABRIK Agreement) to become exercisable, (iii) not
sell, assign, or transfer the shares of common stock of FABRIK (the "FABRIK
Shares") owned by the Surviving Corporation, or grant any rights to acquire such
shares to any person and (iv) not take any act, or omit to take any action,
which would create any lien, charge or encumbrance on the FABRIK Shares.
Section 7.6 Stock Exchange Listing. GST shall use all reasonable efforts to
cause the shares of GST Common Stock to be issued in the Merger to be approved
for listing on the Amex, subject to official notice of issuance, prior to the
Closing Date.
29
Section 7.7 Certain Regulatory Approvals. GST and GST Sub covenant and
agree to proceed diligently and use their reasonable efforts to obtain in a
timely manner all necessary waivers, consents and approvals with respect of the
FCC and state telecommunications and utilities regulations in order to
consummate and make effective the transactions contemplated by this Agreement.
Section 7.8 Certain Agreements regarding the Shares (a) Each of the Sellers
shall waive any all pre-emptive rights to purchase the Shares of the other
Sellers under all agreements and arrangements, including, without limitation,
the Buy/Sell Agreement by and among certain of the Sellers and Call America
dated April 18, 1989 and the Shareholders' Agreement, and the Sellers who are
parties to the Shareholders' Agreement shall cause the Shareholders' Agreement
to be terminated and null and void before the Closing Date.
(b) The Sellers and the Call America Companies shall obtain from Xxxx
Xxxxxx, without any cost to the Call America Companies, the waiver of any and
all rights, including, without limitation pursuant to the acceleration
paragraphs of the Promissory Notes dated May 1, 1995 from Private Exchange
Network, CA Fresno and CA Bakersfield to Xxxx Xxxxxx, to (i) acquire shares of
GST Common Stock in connection with the transactions contemplated by this
Agreement or (ii) participate in the transactions contemplated by this
Agreement, except for the payment in cash of the unpaid principal and accrued
and unpaid interest on such Notes to the extent that such amounts become due
thereunder.
Section 7.9 Certain Insurance Policies. Call America will use its best
efforts to transfer on or before the Closing Date, at no cost to Call America,
the life insurance policies for the benefit of the Sellers set forth on Schedule
3.14(1), provided however, that each Seller to whom such a policy is transferred
shall be responsible for the payment of premiums and all other costs and
expenses relating to such insurance policy after the Closing Date.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE CALL AMERICA COMPANIES AND THE SELLERS
The obligations of the Call America Companies and Sellers under this
Agreement are subject to the satisfaction, on or prior to the Closing Date,
unless waived in writing, of each of the following conditions:
Section 8.1 Representations and Warranties True. The representations and
warranties of each of the GST Companies contained in this Agreement shall be
true and correct in all material respects as of the date when made and at and as
of the Closing Date, except as and to the extent that the facts and conditions
upon which such representations and warranties are based are expressly required
30
or permitted to be changed by the terms hereof, with the same force and effect
as if made on and as of the Closing Date, and Call America shall have received a
certificate to that effect and as to the matters set forth in Section 8.2
hereof, dated the Closing Date, from the President or Chief Executive Officer of
GST.
Section 8.2 Performance of Covenants. Each of the GST Companies shall have
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by it
on or before the Closing Date.
Section 8.3 No Proceedings. No statute, rule or regulation shall have been
enacted and no preliminary or permanent injunction or other order (including a
temporary restraining order) of any state, federal or local court or other
governmental agency or of any foreign jurisdiction shall have been issued or
entered and remain in effect which prohibits the consummation of the
transactions which are the subject of this Agreement or prohibits the Merger or
operation of the business of any of the GST Companies.
Section 8.4 Escrow Agreement. The Escrow Agreement shall have been executed
by the parties thereto.
Section 8.5 Employment Agreements. The Employment Agreement shall have been
executed by the parties thereto.
Section 8.6 Registration Rights Agreement. The Registration Rights
Agreement shall have been executed by the parties thereto.
Section 8.7 Consents and Approvals. All filings and registrations with, and
notifications to, all federal, state, local and foreign authorities required for
consummation of the transactions contemplated by this Agreement shall have been
made, and all consents, approvals and authorizations of all federal, state,
local and foreign authorities and parties to material contracts, licenses,
agreements or instruments required for consummation of the transactions
contemplated by this Agreement the absence of which would have a Material
Adverse Effect on the Call America Companies taken as a whole, shall have been
received and shall be in full force and effect.
Section 8.8 Opinions of Counsel. Call America and the Sellers shall have
received the opinion, dated the Closing Date in form reasonably satisfactory to
Call America, of (i) X'Xxxxx and Company, Canadian counsel to the Buyer,
substantially to the effect that the Consideration has been duly authorized and
validly issued and is fully-paid and nonassessable and (ii) Xxxxxx Xxxxxxxx
Frome & Xxxxxxxxxx LLP, counsel to the Buyer (which opinion shall be limited to
the United States federal law, DGCL and the laws of the State of New York and to
31
the extent that the laws of any other state or jurisdiction or the commercial
laws of Delaware are applicable, such counsel is entitled to assume that such
laws are the same as the laws of the State of New York) substantially to the
effect that: (a) each of the GST Companies is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation; (b) each of the GST Companies has the corporate power to enter
into this Agreement, the Escrow Agreement, the Employment Agreement and the
Registration Rights Agreement, as the case may be, and to consummate the
transactions contemplated hereby and thereby; (c) the execution and delivery of
this Agreement, the Escrow Agreement, the Employment Agreement and the
Registration Rights Agreement, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of each of the GST Companies as the case may be;
(d) each of this Agreement, the Escrow Agreement, the Employment Agreement and
the Registration Rights Agreement, has been duly executed and delivered by each
of the GST Companies, as the case may be, and (assuming that each is a valid and
binding obligation of the other parties thereto) is a valid and binding
obligation of each of the GST Companies enforceable against each of them in
accordance with its terms, subject to customary exceptions; and (e) none of the
execution, delivery or performance of this Agreement, the Escrow Agreement, the
Employment Agreement and the Registration Rights Agreement by each of the GST
Companies, as the case may be, and the consummation by each of the GST Companies
of the transactions herein and therein contemplated, conflict with or result in
a breach of, or default under, their respective certificates of incorporation or
bylaws or, to such counsel's knowledge, any material indenture, mortgage, deed
of trust, voting trust agreement, stockholders agreement, note agreement or
other material agreement or other material instrument to which any of them is a
party or by which any of them is bound or to which any of their property is
subject.
Section 8.9 Tax Matters. The Sellers shall have received an opinion or
other advice of counsel and/or accountants, in form reasonably satisfactory to
the Sellers (the "Tax Opinion"), to the effect that, for U.S. federal income tax
purposes, the exchange in the Merger of Common Stock of the Call America
Companies for GST Common Stock will not give rise to gain or loss to the
shareholders of any of the Call America Companies with respect to such exchange
(except to the extent of any cash received).
Section 8.10 Material Changes. Since April 1, 1996, there shall not have
been any Material Adverse Change in the business, operations, financial
condition, assets, liabilities, prospects or regulatory status of GST and its
subsidiaries, taken as a whole; provided, however, that the incurrence by GST
32
and its subsidiaries of losses from operations shall not, taken alone,
constitute any such Material Adverse Change.
Section 8.11 Release of Loan Guarantees. As of the Closing Date, GST shall
have obtained the release of the Sellers listed on Schedule 8.11 hereto as
guarantors of the loans described therein, and there shall be delivered to those
Sellers documentation to that effect which is satisfactory to them in form and
substance.
Section 8.12 Listing of Shares. The shares of GST Common Stock issuable to
the Sellers pursuant to this Agreement shall have been authorized for listing on
the Amex, subject to official notice of issuance.
ARTICLE IX
CONDITIONS PRECEDENT TO
OBLIGATIONS OF THE GST COMPANIES
The obligations of the GST Companies under this Agreement are subject to
the satisfaction, on or prior to the Closing Date, unless waived in writing, of
each of the following conditions:
Section 9.1 Representation and Warranties True. The representations and
warranties of each of the Call America Companies and the Sellers contained in
this Agreement shall be true and correct in all material respects as of the date
when made and at and as of the Closing Date (except for the representations and
warranties contained in Section 3.8 hereof, which need only to be true and
correct as of the date hereof), except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof with the same
force and effect as if made on and as of the Closing Date, and the Buyer shall
have received a certificate to that effect and as to the matters set forth in
Section 9.2 hereof, dated the Closing Date, from the President or Chief
Executive Officer of Call America and from each of the Sellers.
Section 9.2 Performance of Covenants. Each of the Call America Companies
and the Sellers shall have performed or complied in all material respects with
all agreements, conditions and covenants required by this Agreement to be
performed or complied with by them on or before the Closing Date.
Section 9.3 No Proceedings. No statute, rule or regulation shall have been
enacted and no preliminary or permanent injunction or other order (including a
temporary restraining order) of any state, federal or local court or other
governmental agency or of any foreign jurisdiction shall have been issued or
entered and remain in effect which prohibits the consummation of the
transactions which are the subject of this Agreement or prohibits the Merger or
33
operation of the business of any of the Call America Companies.
Section 9.4 Consents and Approvals. All filings and registrations with, and
notifications to, all federal, state, local and foreign authorities required for
consummation of the transactions contemplated by this Agreement shall have been
made, and all consents, approvals and authorizations of all federal, state,
local and foreign authorities and parties to material contracts, licenses,
agreements or instruments required for consummation of the transactions
contemplated by this Agreement, the absence of which would have a Material
Adverse Effect on the GST Companies shall have been received and shall be in
full force and effect.
Section 9.5 Escrow Agreement. The Escrow Agreement shall have been executed
by the parties thereto.
Section 9.6 Employment Agreements. The Employment Agreement shall have been
executed by the parties thereto.
Section 9.7 Registration Rights Agreement. The Registration Rights
Agreement shall have been executed by the parties hereto.
Section 9.8 Non-Competition Agreements. Each of the Sellers other than
Xxxxxxx Xxxxxxxxxx, Xxxxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxx shall have executed
a non-competition agreement substantially in the form of Annex D hereto.
Section 9.9 Resignation of Officers and Directors. GST shall have received
the resignation of each of the officers and directors of Call America as
required by GST.
Section 9.10 Opinion of Counsel. The Buyer shall have received the opinion
of Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel to the Call America Companies (which
opinion shall be limited to the United States federal law, DGCL and the laws of
the State of California and to the extent that the laws of any other state or
jurisdiction or the commercial laws of Delaware are applicable, such counsel is
entitled to assume that such laws are the same as the laws of the State of
California), dated the Closing Date, in form reasonably satisfactory to the
Buyer, substantially to the effect that: (i) each of the Call America Companies
is a corporation duly organized, validly existing and in good standing under the
laws of the State of California; (ii) each of the Call America Companies has the
corporate power to enter into this Agreement and to consummate the transactions
contemplated hereby; (iii) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby has been duly authorized by
all requisite corporate action taken on the part of each of the Call America
Companies party thereto; (iv) this Agreement has been duly executed and
34
delivered by each of the Call America Companies and (assuming that it is a valid
and binding obligation of the other parties thereto) is a valid and binding
obligation of each of the Call America Companies enforceable against each of
them in accordance with its terms, subject to customary exceptions; (v) the
shares of Common Stock of each of the Call America Companies are duly
authorized, validly issued, fully paid and nonassessable, and (vi) none of the
execution, delivery or performance of this Agreement by each of the Call America
Companies of the transactions herein and therein contemplated, to the best of
such counsel's knowledge, conflict with or result in a breach of, or default
under, their respective Certificates of Incorporation or Bylaws or any Contracts
identified with an asterisk on Schedule 3.15 hereto.
Section 9.11 Material Changes. Except as disclosed on Schedule 9.11, since
May 1, 1996, there shall not have been any Material Adverse Change in the
business, operations, financial condition, assets, liabilities, prospects or
regulatory status of the Call America Companies, taken as a whole.
Section 9.12 Waivers. The Sellers and the Call America Companies shall have
obtained the waivers contemplated by Section 7.8 (b) and there shall be
delivered to GST documentation to that effect which is satisfactory to GST in
form and substance.
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnification by the Sellers. Subject to the limits set
forth in this Article X, the Sellers agree, jointly and severally, to indemnify,
defend and hold the Buyer and each of its directors and officers harmless from
and against any and all loss, liability, damage, costs and expenses (including
interest, penalties and attorneys' fees) (collectively, "Losses") that the Buyer
or any of its affiliates may incur or become subject to arising out of or due to
(i) the claims of any broker or finder engaged by the Sellers (other than those
of the Xxxxx Company which shall borne entirely by GST) and (ii) any breach of
any representation or the breach of any warranty of any of the Call America
Companies or any Seller contained in Article III or Article IV of this
Agreement. The Sellers will reimburse the Buyer and each controlling person for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding.
Section 10.2 Indemnification by the Buyer. Subject to the limits set forth
in this Article X, the Buyer agrees to indemnify, defend and hold each Seller
harmless from and against any and all Losses that the Seller or its affiliates
may incur or become subject to arising out of or due to (i) the claims of any
broker or finder engaged by any of the GST Companies; (ii) any breach of any
35
representation or the breach of any warranty of any of the GST Companies
contained in Article V of this Agreement; (iii) any tax liability of the Sellers
incurred in connection with the Merger; (iv) any personal injury, death or
property damage attributable to products manufactured, processed or sold by any
of the Call America Companies and which are sold to any third party after the
Closing Date and (v) any breach of the covenant of the GST Companies contained
in Section 7.5 of this Agreement unless such breach is caused by Xxxxxxx
Xxxxxxxxxx. The Buyer will reimburse the Sellers for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding.
Section 10.3 Special Indemnification for Tax Matters.
(a) The GST Companies understand and acknowledge that the Sellers are
entering into the transactions contemplated hereby on the understanding that the
conditions set forth in Treasury Regulation xx.xx. 1.367(a)-3T(c)(l)(i), (ii),
(iii) and (iv)(A) will be satisfied with respect to each merger comprising the
Merger and with respect to each Seller, as applicable, that following the
Closing, Buyer will cause Call America, as successor to each Call America
Company, to comply with the reporting requirements of Treasury Regulation ss.
1.367(a)-3T(c)(4), and that following the Closing the GST Companies will comply
with such other requirements as may be necessary in order to ensure that each
merger constitutes a "reorganization" within the meaning of Section 368(a) of
the Internal Revenue Code. The GST Companies hereby agree to indemnify and hold
harmless each Seller from and against any cost, expense, liability and other
damages, including, but not limited to, attorneys and accountants fees, taxes,
interest and penalties, arising from or as a result of any of the Mergers of
Sub, CA Bakersfield and CA Fresno into Call America and the Merger not
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code by reason of (a) the failure to satisfy the requirements of Treasury
Regulation ss. 1.367(a)-3T(c)(l)(i), (ii) or (iii), (b) the treatment of any
Seller as a "five-percent transferee shareholder," as defined in Treasury
Regulation ss. 1.367(a)-3T(c)(6)(ii), (c) the failure of Call America on behalf
of each Call America Company, to file on a timely basis and in a correct manner
the statement described in Treasury Regulation ss. 1.367(a)-3T(c)(4), (d) the
failure by the GST Companies, on behalf of each Seller, to file with the
Internal Revenue Service in a timely and correct manner the information required
by Treasury Regulation ss. 1.6038B-1T, or (e) the failure of any such merger to
satisfy the requirements for a "reorganization" as defined in Section 368(a) of
the Internal Revenue Code by virtue of any action or inaction of any GST Company
and, following the Effective Time, Call America.
(b) The indemnification provided under this Section 10.3 shall not be
reduced by any tax benefit arising from an increase in the tax basis of a Seller
36
in such Seller's shares of GST Common Stock received in the Merger by virtue of
a merger not constituting a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code unless and until such benefit is realized in
the form of a refund or a reduction in taxes otherwise actually payable.
Section 10.4 Survival. The representations and warranties of each of the
Call America Companies and the Sellers set forth in Articles III and IV of this
Agreement shall survive the Closing until the first anniversary of the Closing
Date. The representations and warranties of the GST Companies set forth in
Article V of this Agreement shall survive the closing until the first
anniversary of the Closing Date. The covenants and agreements of the parties
shall not survive the Closing Date, except for the covenants and agreements set
forth under this Article X and Sections 7.3 and 7.5.
Section 10.5 Limitations. (a) No party shall assert, and no party shall be
liable for, any claim against the other for indemnification hereunder with
respect to any inaccuracy or breach of such warranties, representations,
covenants or agreements unless and until the amount of all such claims shall
exceed on a cumulative basis $75,000, and then only to the extent such claim for
indemnification exceeds that amount; provided, however, that a claim for
indemnification hereunder with respect to any breach of the covenants contained
in Section 7.5 shall not be subject to any threshold.
(b) All representations and warranties made by the parties herein shall be
deemed to have been relied upon notwithstanding any investigation. The
liability, including expenses, of the Sellers pursuant to Section 10.1 shall be
limited to the return to GST of the Escrow Shares. No Seller shall be directly
liable to GST or any other indemnified party for any indemnification under
Section 10.1 and GST acknowledges that the indemnified parties' sole recourse
for any Losses for which they are entitled to indemnification under Section 10.1
shall be the return of the Escrow Shares. For purposes of this Article X, the
fair market value of one share of GST Common Stock shall be the closing sales
price of a share of GST Common Stock on the AMEX (as reported by The Wall Street
Journal or, if not reported thereby, by any other authoritative source) on the
date of the Effective Time (the "Effective Date"). In the event GST or another
party to be indemnified pursuant to Section 10.1 suffers any Losses for which it
is entitled to indemnification, the Escrow Agent shall, subject to the
procedures set forth in the Escrow Agreement, deliver to the party to be
indemnified out of escrow the lesser of: (a) the number of the Escrow Shares (in
whole shares) that has an aggregate market value (determined as provided above)
most nearly equal to the amount of the Losses thus to be satisfied, or (b) all
of the Escrow Shares. If any distribution referred to in this Section 10.5(b)
37
involves fewer than all of the Escrow Shares, it shall be allocated pro rata
against the Escrow Shares therein based on the Escrow Shares beneficially owned
by each Seller. The liability, including expenses, of the GST Companies pursuant
to Sections 10.2 and 10.3 shall not exceed the fair market value of the Escrow
Shares on the Effective Date and shall be payable in cash.
(c) Buyer acknowledges and agrees that, from and after the Closing, its
sole and exclusive remedy with respect to any and all claims relating to the
subject matter of this Agreement shall be pursuant to the indemnification
provisions set forth in this Article X. In furtherance of and subject to the
foregoing, Buyer hereby waives, from and after the Closing Date, to the fullest
extent permitted under applicable law, any and all rights, claims and causes of
action (other than claims of, or causes of action arising from, fraud) it, the
GST Companies, or any of their subsidiaries may have against the Sellers
relating to the subject matter of this Agreement arising under or based on any
Federal, state or local statute, law, ordinance, rule or regulation or
otherwise.
Section 10.6 Third Party Claims. In order for a party (the "indemnified
party") to be entitled to any indemnification provided for under this Agreement
in respect of, arising out of, or involving a claim or demand or written notice
made by any third party against the indemnified party (a "Third Party Claim")
after the Closing Date, such indemnified party must notify the indemnifying
party (the "indemnifying party") in writing and in reasonable detail of the
Third Party Claim within 30 business days after receipt by such indemnified
party of written notice of the Third Party Claim; provided that the failure of
any indemnified party to give timely notice shall not affect his right of
indemnification hereunder except to the extent the indemnifying party has
actually been prejudiced or damaged thereby (except that the indemnifying party
shall not be liable for any expenses during the period in which the indemnified
party failed to give notice). If a Third Party Claim is made against an
indemnified party, the indemnifying party shall be entitled, if it so chooses,
to assume the defense thereof with counsel selected by the indemnifying party
(which counsel shall be reasonably satisfactory to the indemnified party). If
the indemnifying party assumes the defense of a Third Party Claim, the
indemnified party will cooperate in all reasonable respects with the
indemnifying party in connection with such defense, and shall have the right to
participate in such defense with counsel selected by it. The fees and
disbursements of such counsel, however, shall be at the expense of the
indemnified party; provided, however, that, in the case of any Third Party Claim
of which the indemnifying party has not employed counsel to assume the defense,
the fees and disbursements of such counsel shall be at the expense of the
indemnifying party.
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The indemnified party shall deliver to the indemnifying party, within five
business days after the indemnified party's receipt thereof, copies of all
notices and documents (including court papers) received by the indemnified party
relating to the Third Party Claim. If the indemnifying party chooses to defend
or prosecute any Third Party Claim, all the parties hereto shall cooperate in
the defense or prosecution thereof. Such cooperation shall include the retention
and (upon the indemnifying party's request) the provision to the indemnifying
party of records and information which are reasonably relevant to such Third
Party Claim, and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Whether or not the indemnifying party shall have assumed the defense
of a Third Party Claim, the indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the indemnifying party's prior written consent (which consent shall not be
unreasonably withheld).
In the event GST or any of the persons entitled to indemnification pursuant
to Section 10.1 is an "indemnified party" with respect to a third party claim,
no Escrow Shares shall be released by the Escrow Agent in settlement of any
indemnification obligation unless and until a final, non-appealable settlement
or judgment is reached with respect to such claim.
Section 10.7 Reduction for Insurance. The gross amount which an
indemnifying party is liable to, for, or on behalf of the indemnified party
pursuant to this Article X (the "Indemnifiable Loss") shall be reduced
(including, without limitation, retroactively) by any insurance proceeds
actually recovered by or on behalf of such indemnified party related to the
Indemnifiable Loss. If an indemnified party shall have received or shall have
had paid on its behalf an indemnity payment in respect of an Indemnifiable Loss
and shall subsequently receive directly or indirectly insurance proceeds in
respect of such Indemnifiable Loss, then such indemnified party shall pay to
such indemnifying party the net amount of such insurance proceeds or, if less,
the amount of such indemnity payment.
Section 10.8 Termination of Indemnification. The obligations to indemnify
and hold harmless a party hereto (i) pursuant to Sections 10.1 and 10.2 hereof
shall terminate one year after the Closing Date and (ii) pursuant to Section
10.3 hereof shall terminate at the time the applicable statutes of limitations
with respect to the Tax liabilities in question expire (giving effect to any
extension thereof); provided, however, that such obligations to indemnify and
hold harmless shall not terminate with respect to any item as to which the
person to be indemnified or the related party hereto shall have, before the
expiration of the applicable period, previously made a claim by delivering a
39
notice (stating in reasonable detail the basis of such claim) to the
indemnifying party.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
Section 11.1 Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement abandoned at any time prior to the
Closing:
(a) By mutual written consent of GST and Call America;
(b) By either GST or Call America if the transactions contemplated by
this Agreement shall not have been consummated on or before January 31,
1997.
(c) by Call America if (i) there shall have been a breach of any
representation or warranty on the part of GST or Sub set forth in this
Agreement, or if any representation or warranty of GST or Sub shall have
become untrue, in either case such that the conditions set forth in Section
8.1 would be incapable of being satisfied by January 31, 1997 (or as
otherwise extended) or (ii) there shall have been a breach by GST or Sub of
any of their respective covenants or agreements hereunder having a Material
Adverse Effect on GST or materially adversely affecting (or materially
delaying) the consummation of the Merger, and GST or Sub, as the case may
be, has not cured such breach within 20 business days after notice by Call
America thereof, provided that Call America has not materially breached any
of its obligations hereunder.
(d) by GST if (i) there shall have been a breach of any representation
or warranty on the part of the Call America Companies set forth in this
Agreement, or if any representation or warranty of the Call America
Companies shall have become untrue, in either case such that the conditions
set forth in Section 9.1 hereof would be incapable of being satisfied by
January 31, 1997 (or as otherwise extended), or (ii) there shall have been
a breach by the Call America Companies of their covenants or agreements
hereunder having a Material Adverse Effect on the Call America Companies
taken as a whole or materially adversely affecting (or materially delaying)
the consummation of the Merger, and the Call America Companies have not
cured such breach within 20 business days after notice by GST or Sub
thereof, provided that neither GST nor Sub has materially breached any of
their respective obligations hereunder.
(e) By either GST or Call America if a court of competent jurisdiction
or Regulatory Authority shall have issued a final, non-appealable order,
decree or ruling or taken any other action (which order, decree or ruling
the parties hereto shall use their best efforts to lift), in each case
40
permanently restraining, enjoining or otherwise prohibiting any of the
transactions contemplated by this Agreement.
Section 11.2 Effect of Termination. The termination of this Agreement in
accordance with Section 11.1 hereof shall have no effect on whatever rights and
remedies the parties hereto may have against one another as a result of any
breach of this Agreement.
Section 11.3 Amendment. This Agreement may be amended by the written
agreement of the parties hereto.
Section 11.4 Extension; Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in writing signed on behalf of such
party. The failure of a party hereto to assert any of its rights hereunder shall
not constitute a waiver of such rights.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses (except that Call America shall also
bear the costs and expenses of the Sellers, if any), regardless of the
termination of this Agreement or the failure to consummate the transactions
contemplated hereby .
Section 12.2 Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered personally
or by facsimile transmission, in either case with receipt acknowledged, or three
days after being sent by registered or certified mail, return receipt requested,
postage prepaid:
(a) If to any of the GST Companies to:
GST Telecommunications, Inc.
0000 X.X. Xxxxxxxx Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxx
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with a copy to:
Xxxxxx Xxxxxxxx Frome & Xxxxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
(b) If to the Sellers or any of the Call America Companies to:
Call America Business Communications, Inc.
0000 Xxxxx Xxxxxxx
Xxxxx 000
Xxx Xxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
or to such other address as any party shall have specified by notice in writing
to the other in compliance with this Section 12.2.
Section 12.3 Entire Agreement. This Agreement (including the Schedules,
letter agreements and other documents delivered as of the date hereof)
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof and supersedes all prior agreements,
representations and understandings among the parties hereto including the letter
of intent dated July 17, 1996 among the parties hereto except as provided in
Section 7.1(e) with respect to the Confidentiality Agreements.
Section 12.4 Binding Effect, Benefits, Assignments. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns; nothing in this Agreement, expressed or
implied, is intended to confer on any other person, other than the parties
hereto or their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement. This Agreement
may not be assigned without the prior written consent of the other parties
hereto, except that GST may assign this Agreement to any of its direct
wholly-owned subsidiaries.
Section 12.5 Applicable Law. This Agreement and the legal relations between
the parties hereto shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to principles of conflicts of law.
42
Section 12.6 Jurisdiction. (a) Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in Denver, Colorado, administered by the American Arbitration
Association in accordance with its applicable rules, and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be conducted before a panel of three neutral
arbitrators, all of whom shall be members of the Colorado state bar actively
engaged in the practice of law or retired members of the state or federal
judiciary. Call America and GST shall bear equally the cost of such arbitration.
(b) Notwithstanding the provisions of Section 12.6(a), the parties hereto
shall have the right to seek and obtain from a court of competent jurisdiction a
temporary restraining order, injunction, specific performance or other equitable
relief to enforce the provisions of this Agreement.
Section 12.7 Headings. The headings and captions in this Agreement are
included for purposes of convenience only and shall not affect the construction
or interpretation of any of its provisions.
Section 12.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 12.9 Definitions.
(a) Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits, schedules, letter agreements and other documents delivered as of the
date hereof, delivered pursuant hereto and incorporated herein by reference.
"Agreement of Merger" shall mean the Merger Agreement in a form not
inconsistent with the terms of this Agreement and to be mutually agreed upon by
the parties hereto and to be filed with the Secretary of State of the State of
California relating to the Merger as contemplated by Section 1.1 of this
Agreement and/or the Certificate of Merger in a form not inconsistent with the
terms of this Agreement and to be mutually agreed upon by the parties hereto and
43
to be filed with the Secretary of State of the State of Delaware relating to the
Merger as contemplated by Section 1.1 of this Agreement.
"Amex" shall mean the American Stock Exchange, or such other securities
exchange or market system where the GST Common Stock may be primarily traded.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or contingent,
or otherwise relating to or utilized in such Person's business, directly or
indirectly, in whole or in part, whether or not carried on the books and records
of such Person, and whether or not owned in the name of such Person or any
Affiliate of such Person and wherever located.
"CGCL" shall mean the California General Corporation Law.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, franchise agreement, indenture, instrument,
lease, license, obligation, plan, practice, restriction, understanding or
undertaking of any kind or character, or other document to which any Person is a
party or that is binding on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of or default under any
Contract, Order or Permit, (ii) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (iii) any giving
of notice giving rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"DGCL" shall mean the Delaware General Corporation Law.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata) and which are
administered, interpreted or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
44
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" shall mean
"Escrow Agreement" shall mean the Escrow Agreement by and among the
Sellers, GST, and the Escrow Agent, substantially in the form of Exhibit B.
"FABRIK" shall mean FABRIK Communications, Inc.
"FCC" shall mean Chapter 5 of Title 47 of the United States Code and the
rules and regulations promulgated thereunder.
"GST Capital Stock" shall mean, collectively, the GST Common Stock and any
other class or series of capital stock of GST.
"GST Common Stock" shall mean the no par value common stock of GST.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"Intellectual Property" shall mean all worldwide industrial and
intellectual copyrights, patents, trademarks, service marks, service names,
trade names, technology rights and licenses, computer software (including any
source or object codes therefor or documentation relating thereto), trade
secrets, franchises, know-how, inventions, and other intellectual property
rights used in the business of the Call America Companies or the GST Companies,
as the case may be.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
45
"Knowledge" as used with respect to a Person (including references to such
Person being aware of a particular matter) shall mean those facts that are known
by the Chairman, President and Chief Financial Officer of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including those promulgated, interpreted or enforced by
any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge,or claim
of any nature whatsoever of,on, or with respect to any property or property
interest, other than (i) Liens for current property Taxes not yet due and
payable, and (iii) Liens which do not materially impair the use of or title to
the Assets subject to such Lien.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution or demand letter, or notice (written or oral) by
any Person of governmental or other examination or investigation, hearing,
inquiry, administrative or other proceeding alleging potential Liability, or any
Regulatory Authority or other federal, state or local governmental agency or
department requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement.
"Material Adverse Effect" on a party shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial condition,
business, or results of operations of such party and its Subsidiaries, taken as
a whole, or (ii) the ability of such party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement, provided that "material adverse impact" shall not be deemed to
include the impact of (a) changes in Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes in
generally accepted accounting principles or regulatory accounting principles,
(c) actions and omissions of a party (or any of its subsidiaries) taken with the
46
prior informed written Consent of the other party in contemplation of the
transactions contemplated hereby, and (z) the Merger on the operating
performance of the Parties, including expenses incurred by the parties in
consummating the transactions contemplated by this Agreement.
"Merger Documents" shall mean the documents to be filed with the
Secretaries of State of the States of California and Delaware pursuant to
Section 1.1 and the first sentence of Section 1.3 hereof.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, Assets or
business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"Regulatory Authorities" shall mean, collectively, the Amex, the SEC, the
Federal Trade Commission, the United States Department of Justice, the Federal
Communications Commission, and all other federal, state, county, local or other
foreign or domestic governmental or regulatory agencies, authorities,
instrumentalities, commissions, boards or bodies having jurisdiction over the
Parties and their respective Subsidiaries.
"Rights" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants, or other
binding obligations of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Rights.
"Subsidiaries" shall mean all those corporations, associations, or other
business entities of which the entity in question either (i) owns or controls
50% or more of the outstanding equity securities either directly or through an
unbroken chain of entities as to each of which 50% or more of the outstanding
equity securities is owned directly or indirectly by its parent (provided, there
shall not be included any such entity the equity securities of which are owned
47
or controlled in a fiduciary capacity), or (ii) in the case of partnerships,
serves as a general partner.
"Surviving Corporation" shall mean Call America as the surviving
corporation resulting from the Merger.
"Tax Return" shall mean any report, return, information return, or other
information required to be supplied to a taxing authority in connection with
Taxes, including any return of an affiliated or combined or unitary group that
includes a Party or its Subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, county, local, or foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise, occupancy, and other taxes, assessments, charges,
fares, or impositions, including interest, penalties, and additions imposed
thereon or with respect thereto.
(b) The terms set forth below shall have the meanings ascribed thereto in
the referenced sections:
Call America Financial Statements Section 3.6
Call America Common Stock Section 1.7(c)
Closing Section 1.2
Confidentiality Agreements Section 7.1(e)
Consideration Section 1.7(c)
Effective Date Section 10.5(b)
Effective Time Section 1.3
Employee Benefit Plans Section 3.10
Employment Agreement Section 4.2
Escrow Shares Section 1.7(c)
FABRIK Agreement Section 7.5
GST Surviving Conditions Precedent Section 1.2(b)
GST Tax Certificate Section 7.2
Indemnifiable Loss Section 10.7
indemnified party Section 10.6
indemnifying party Section 10.6
Merger Section 1.1
Non-Competition Agreements Section 4.2
Post-Closing Consideration Section 1.10(a)
Registration Rights Agreement Section 4.2
Representative Section 1.2(a)
SEC Section 5.5
SEC Reports Section 5.5
Seller Surviving Conditions Precedent Section 1.2(b)
Shareholders' Agreement Section 4.1
Tax Opinion Section 8.9
Termination Date Section 6.2
Third Party Claim Section 10.6
U.S. GAAP Section 3.6(a)
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
48
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
49
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year hereinabove first set forth.
GST TELECOMMUNICATIONS, INC.
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Name: Xxxxxxx Xxxxx
Title: Secretary
CALL AMERICA BUSINESS
COMMUNICATIONS CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President
GST NEWCO OF CALIFORNIA, INC.
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Name: Xxxxxxx Xxxxx
Title: President
CALL AMERICA BUSINESS COMMUNICATIONS
OF FRESNO, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President
CALL AMERICA BUSINESS COMMUNICATIONS
OF BAKERSFIELD, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President
50
SELLERS:
/s/ Xxxxxxx X. Xxxxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
/s/ F. Xxxxx Xxxxxx
----------------------------------------
Name: F. Xxxxx Xxxxxx
Trustee U/A dated 2/14/84
/s/ Xxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
/s/ Xxxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxxx X. Xxxxxx
CONSENTED AND AGREED:
/s/ Xxxx X. Xxxxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Xxxxxx X. Xxxxxxxxx
100609.10
51
