AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
by and among
POINTE COMMUNICATIONS CORPORATION,
POINTE ACQUISITION, CORP.,
AND
TELSCAPE INTERNATIONAL, INC.
Dated as of December 31, 1999
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this Agreement) is made
as of December 31, 1999, by and among Pointe Communications Corporation, a
Nevada corporation (PointeCom), Pointe Acquisition, Corp., a Nevada corporation
that is a wholly owned subsidiary of Telscape International, Inc. (Newco), and
Telscape International, Inc., a Texas corporation (the Company).
WHEREAS, the respective Boards of Directors of PointeCom, Newco and the Company
(collectively referred to as the Constituent Corporations) deem it advisable and
in the best interests of the Constituent Corporations and their respective
stockholders that Newco merge with and into PointeCom (the Merger); and
WHEREAS, the Boards of Directors of the Constituent Corporations have approved
and adopted this Agreement as a plan of reorganization within the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended (the Code, and the
Treasury Regulations thereunder);
NOW, THEREFORE, in consideration of the premises and of the mutual agreements,
representations, warranties, provisions and covenants contained herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I. DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement shall have the
following meanings:
Acquisition Proposal means with respect to any Person, a proposal or offer
(including, without limitation, any proposal or offer to stockholders of such
Person) with respect to a merger, acquisition, consolidation, recapitalization,
liquidation, tender offer or exchange offer or similar transaction involving, or
any purchase of 25% or more of the consolidated assets of, or any equity
interest representing 25% or more of the outstanding shares of capital stock in,
such Person.
Affiliate of, or Affiliated with, a specified Person or entity means any entity
directly or indirectly controlling, controlled by or under direct or indirect
common Control with such specified Person and includes, but is not limited to,
(a) any Person who is a director or beneficial owner of at least 5% of such
Persons equity securities, (b) any Person of which such specified Person or any
Affiliate of such specified Person owns at least 10% of such Persons equity
securities or (c) family members of any such Person specified in clause (a) or
(b).
Agreement has the meaning set forth in the first paragraph of this Agreement and
also includes the Schedules and Exhibits hereto.
Balance Sheet Date has the meaning set forth in Section 5.9.
Business Days means Monday through Friday of each calendar week, exclusive of
federal holidays.
Class C Convertible Senior Preferred Stock means the preferred stock to be
issued by the
Company, par value $0.001, upon conversion of the Note, pursuant to the
Certificate of Designation attached hereto as Exhibit A.
Closing has the meaning set forth in Article IV.
Closing Date has the meaning set forth in Article IV.
Code has the meaning set forth in the third paragraph of this Agreement.
Company has the meaning set forth in the first paragraph of this Agreement.
Company Class D Convertible Senior Preferred Stock means the preferred stock
issued by the Company, par value $0.001 having the same rights and preferences
as the PointeCom Class A Preferred Stock.
Company Class E Convertible Senior Preferred Stock means the preferred stock
issued by the Company, par value $0.001 having the same rights and preferences
as the PointeCom Class B Preferred Stock.
Company Common Stock means the common stock of the Company, $0.001 par value,
per share.
Company Permits has the meaning set forth in Section 5.14.
Company Preferred Stock means the Company Class D Convertible Senior Preferred
Stock and the Company Class E Convertible Senior Preferred Stock, collectively.
Company Third Party means any Person (or group of Persons) other than PointeCom
or its respective Affiliates.
Competitive Business means any business that competes with the business of the
Company as conducted at the Effective Time or the businesses of PointeCom and
the Surviving Corporation as conducted or proposed to be conducted at the
Effective Time.
Constituent Corporations has the meaning set forth in the second paragraph of
this Agreement.
Control (including, with its correlative meanings, controlled by and under
common control with) means possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of securities or other ownership interests, by contract or otherwise)
of any Person.
Dissenting Shares has the meaning set forth in Section 3.3.
Effective Time has the meaning set forth in Section 2.2.
Encumbrances means all liens, encumbrances, mortgages, pledges, security
interests, conditional sales agreements, charges, options, preemptive rights,
rights of first refusal, reservations, restrictions or other encumbrances or
defects in title.
Employee benefit plan has the meaning set forth in Section 5.20.
Environmental, Health and Safety Laws means any federal, state or local Law now
or hereafter in effect which are binding on any of the parties hereto,
including, without limitation, any judicial or administrative interpretation
thereof, any judicial or administrative order, consent decree or judgment, or
agreement with any Governmental Authority, relating to (a) pollution, exposure
to oil, pollutants, contaminants, hazardous or toxic materials or waste, (b) the
protection, preservation or restoration of the environment, including laws
relating to exposures to, or emissions, discharges, releases or threatened
releases of oil, pollutants, contaminants, hazardous or toxic materials or
wastes into ambient air, surface water, ground water or land surface or
subsurface strata or (c) the manufacture, processing, labeling, distribution,
use, treatment, storage, transport, handling or disposal of oil, pollutants,
contaminants, hazardous or toxic materials or wastes or relating to the
environment, plant and animal life, natural resources or health, safety or
any Hazardous Substance. Environmental, Health and Safety Laws include, without
limitation, (i) the Federal Comprehensive Environmental Response Compensation
and Liability Act of 1980 (CERCLA), 42 U.S.C. 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. 1251 et seq., the Toxic Substances Control
Act, 15 U.S.C. 2601 et seq., the Clean Air Act, 42 U.S.C. 7401 et seq., the
Safe Drinking Water Act, 42 U.S.C. 300f et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. 5101 et seq., the Atomic Energy Act, 42 U.S.C.
2011 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
136 et seq., and the Occupational Safety and Health Act, 29 U.S.C. 651 et seq.,
in each case as amended from time to time, and any other federal, state or local
Laws now or hereafter relating to any of the foregoing, and (ii) any common
law or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
ERISA has the meaning set forth in Section 5.20.
ERISA Affiliate has the meaning set forth in Section 5.20.
Financial Statements has the meaning set forth in Section 5.9.
GAAP means generally accepted accounting principles as currently applied by the
respective party on a basis consistent with preceding years and throughout the
periods involved.
Governmental Authority means any federal, state, local or foreign government,
political
subdivision or governmental or regulatory authority, agency, board, bureau,
commission, instrumentality or court or quasi-governmental authority.
Hazardous Substances means any substance presently listed, defined, designated
or classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental, Health or Safety Law. The term Hazardous
Substances includes, without limitation, any substance to which exposure is
regulated by any Governmental Authority or any Environmental, Health or Safety
Law including, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste, industrial
substance or petroleum or any derivative or by-product thereof,
radon, radioactive material, asbestos or asbestos containing material, urea
formaldehyde foam insulation, lead or polychlorinated biphenyls.
Interim Balance Sheet has the meaning set forth in Section 5.9.
Interim Financial Statements has the meaning set forth in Section 5.9.
Law or Laws means any and all federal, state, local or foreign statutes, laws,
ordinances,
proclamations, code, regulations, legal doctrine, published requirements,
orders, decrees, judgments, injunctions and rules of any Governmental Authority,
including, without limitation, those covering environmental, Tax, energy,
safety, health, transportation, bribery, recordkeeping, zoning, discrimination,
antitrust and wage and hour matters, in each case as amended and in effect from
time to time.
Loss or Losses means all liabilities, losses, claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, fees, costs and expenses
(including specifically, but without limitation, reasonable attorneys fees and
costs and expenses of investigation), net of income Tax effects with respect
thereto (including, without limitation, income Tax benefits recognized in
connection therewith and income Taxes upon any indemnification recovery
thereof).
Material Adverse Effect means, with respect to any Person, any material adverse
effect on the financial condition, business, assets or results of operations of
such person and its subsidiaries, taken as a whole.
Merger Consideration has the meaning set forth in Section 3.1.
Merger Filing has the meaning set forth in Section 2.2.
Merger has the meaning set forth in the second paragraph of this Agreement.
NASDAQ means a national securities market run by the National Association of
Securities Dealers.
Newco has the meaning set forth in the first paragraph of this Agreement.
Newco Common Stock has the meaning set forth in Section 5.6.
Note means the 12% Convertible Promissory Note issued by the Company in an
original principal amount of $10,000,000 in connection with the PointeCom Loan,
a copy of which is attached hereto as Exhibit B.
NRS means the Nevada Revised Statutes, as amended.
1933 Act means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
1934 Act means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
Organizational Documents shall mean, with respect to a corporation, the
certificate of incorporation or articles of incorporation and bylaws of such
corporation.
Permitted Encumbrances means (a) any Encumbrances reserved against in the
Interim Balance Sheet, (b) Encumbrances for property or ad valorem Taxes not yet
due and payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
Company's books in accordance with GAAP, (c) obligations under operating and
capital leases described in Schedule 5.12, and (d) statutory liens or landlords,
carriers, warehousemans, mechanics, suppliers, materialmens, repairmens or other
like Encumbrances arising in the ordinary
course of business.
Person means any natural person, corporation, partnership, proprietorship, other
business organization, trust, union, association or Governmental Authority,
whether incorporated or unincorporated.
Plan has the meaning set forth in Section 5.20.
PointeCom has the meaning set forth in the first paragraph of this Agreement.
PointeCom Balance Sheet Date has the meaning set forth in Section 6.6.
PointeCom Class A Preferred Stock means the Class A Convertible Senior Preferred
Stock of PointeCom, par value $0.01 per share, issued pursuant to that certain
Certificate of Designations of Pointe Communications Corporation filed with the
Secretary of State of Nevada on May 11, 1999.
PointeCom Class B Preferred Stock means the Class B Convertible Senior Preferred
Stock of PointeCom, par value $0.01 per share, issued pursuant to that certain
Certificate of Designations of Pointe Communications Corporation filed with the
Secretary of State of Nevada on September 7, 1999.
PointeCom Common Stock means PointeCom's common stock, $.00001 par value per
share.
PointeCom ERISA Affiliate has the meaning set forth in Section 6.24.
PointeCom Financial Statements has the meaning set forth in Section 6.6.
PointeCom Interim Balance Sheet has the meaning set forth in Section 6.6.
PointeCom Interim Financial Statements has the meaning set forth in Section 6.6.
PointeCom Loan has the meaning set forth in Section 7.10.
PointeCom Permits has the meaning set forth in Section 6.10.
PointeCom Plan has the meaning set forth in Section 6.24.
PointeCom Preferred Stock means the PointeCom Class A Preferred Stock and the
PointeCom Class B Preferred Stock, collectively.
PointeCom Third Party means any Person (or group of Persons) other than
PointeCom or its respective Affiliates.
PointeCom Year-End Financial Statements has the meaning set forth in Section
6.6.
Qualified Plans has the meaning set forth in Section 5.20.
Qualified PointeCom Plans has the meaning set forth in Section 6.24.
Registration Rights Agreement means that certain Registration Rights Agreement
attached hereto as Exhibit C.
Registration Statement has the meaning set forth in Section 7.10.
Requisite Stockholder Approval means, with respect to the Company, the
affirmative vote of a majority of the holders of the outstanding shares of
Company Common Stock in favor of (a) approval of the issuance of shares of
Company Common Stock and Company Preferred Stock in connection with the Merger
as provided in this Agreement in accordance with the rules of NASDAQ and (b) an
amendment to the Company's certificate of incorporation to increase the
authorized capital stock of the Company (including designation of the rights and
preferences for Company Class D and E Senior Preferred Stock) in accordance with
the Texas Business Corporation Act; or with respect to PointeCom, the
affirmative vote of a majority of the holders of outstanding shares of PointeCom
capital stock in favor of the adoption of this Agreement in accordance with the
NRS.
SEC means the Securities and Exchange Commission.
Subsidiary means, as to a particular parent business entity, any business entity
of which 50% or more of the indicia of equity rights is at the time directly or
indirectly owned by the parent or by one or more Persons controlled by,
controlling or under common control with the parent.
Surviving Corporation has the meaning set forth in Section 2.1.
Surviving Securities means the warrants, options and other rights of PointeCom
as defined in Section 3.4.
Taxes has the meaning set forth in Section 5.22.
Transaction Documents shall refer to this Agreement and any other agreements and
documents to be executed and delivered pursuant to this Agreement by a party
hereto.
Warrant Agreement means that certain Warrant Agreement attached hereto as
Exhibit D.
Warrants shall mean the warrants of the Company to be issued pursuant to the
Warrant Agreement.
Year-End Financial Statements has the meaning set forth in Section 5.9.
Year 2000 Compliant has the meaning set forth in Section 5.28.
1.2. Interpretation. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in Section 1.1 and elsewhere in this Agreement include the
plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the meanings ascribed
to them in accordance with GAAP;
(c) the words herein, hereof, and hereunder and other words of similar import
refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision;
(d) as used herein, the words knowledge or known shall, (i) with respect to the
Company or Newco, mean the actual knowledge of the corporate executive officers
of the Company or Newco, respectively, in each case after such individuals have
made due and diligent inquiry as to the matters which are the subject of the
statements which are known by the Company or Newco, respectively, or made to the
knowledge of the Company or Newco, respectively, and (ii) with respect to
PointeCom, mean the actual knowledge of the corporate executive officers of
PointeCom, in each case after such individuals have made due and diligent
inquiry as to the matters which are the subject of the statements which are
known by PointeCom or made to the knowledge of PointeCom; and
(e) disclosure of any matter in a Schedule shall not be deemed an admission that
such matter is material.
ARTICLE II. THE MERGER AND THE SURVIVING CORPORATION
2.1. The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Newco shall be merged with and into PointeCom
and the separate existence of Newco shall thereupon cease in accordance with the
NRS. PointeCom shall be the surviving corporation in the Merger (hereinafter
sometimes referred to as the Surviving Corporation).
2.2. Effective Time of the Merger. The Merger shall become effective (the
Effective Time) at 1:59 p.m., Nevada time, on June 30, 2000, or such other time
and date mutually agreeable to the parties hereto and stated in a certificate of
merger, in a form mutually acceptable to PointeCom and the Company, filed with
the Secretary of State of the State of Nevada in accordance with the NRS (the
Merger Filing). The Merger Filing shall be made simultaneously with or as soon
as practicable after the Closing. The Surviving Corporation may, at any time
after the Effective Time, take any action (including executing and delivering
any document) in the name and on behalf of the Company, Newco or PointeCom in
order to carry out and effectuate the transactions contemplated by this
Agreement.
2.3. Certificate of Incorporation, Bylaws and Board of Directors of Surviving
Corporation.
As a result of the Merger and at the Effective Time:
(a) The Certificate of Incorporation of PointeCom in effect on the date hereof,
shall become the Certificate of Incorporation of the Surviving Corporation.
After the Effective Time, the Certificate of Incorporation of the Surviving
Corporation may be amended in accordance with its terms and as provided in the
NRS.
(b) The Bylaws of PointeCom in effect on the date hereof, shall become the
Bylaws of the Surviving Corporation, and thereafter may be amended in accordance
with their terms and as provided by the Certificate of Incorporation of the
Surviving Corporation and the NRS.
(c) Upon consummation of the Merger, the Board of Directors of the Surviving
Corporation shall consist of nine members, of which six members shall be named
by PointeCom and three members shall be named by the Company and such
individuals shall serve in such positions until their respective successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporations Certificate
of Incorporation and Bylaws. From and after the Effective Time, the Surviving
Corporation shall possess all rights, powers, privileges and franchises and be
subject to all of the obligations, liabilities, restrictions and disabilities of
PointeCom and Newco, all as provided under the NRS.
ARTICLE III. CONSIDERATION
3.1. Conversion of Shares.
At the Effective Time, by virtue of the Merger, and without any action on the
part of any holder of any capital stock of PointeCom, each share of PointeCom
Common Stock issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive 0.215054 of a share of Company
Common Stock (the Exchange Ratio) and all such shares of PointeCom Common Stock
shall no longer be outstanding, shall be canceled and shall cease to exist, and
each holder of any such shares of PointeCom Common Stock shall thereafter cease
to have any rights with respect to such shares of PointeCom Common Stock except
the right to receive 0.215054 shares of Company Common Stock for each such share
of PointeCom Common Stock and unpaid dividends and distributions, if any, to
which the holder of such shares of PointeCom Common Stock is entitled at the
Effective Time; each share of PointeCom Class A Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive one share of Company Class D Convertible Senior Preferred Stock
and all such shares of PointeCom Class A Preferred Stock shall no longer be
outstanding, shall be canceled and shall cease to exist, and each holder of any
such shares of PointeCom Class A Preferred Stock shall thereafter cease to have
any rights with respect to such shares of PointeCom Class A Preferred Stock
except the right to receive one share of Company Class D Convertible Senior
Preferred Stock for each such share of PointeCom Class A Preferred Stock (the
terms of which shall be in all material respects the same as the PointeCom Class
A Preferred Stock, except that Company Class A Convertible Senior Preferred
Stock shall be convertible into such number of shares of Company Common Stock as
would have been issued to the holders of the PointeCom Class A Preferred Stock
if such holders had converted the PointeCom Class A Preferred Stock into
PointeCom Common Stock prior to the Effective Time) and unpaid dividends and
distributions, if any, to which the holder of such shares of PointeCom Class A
Preferred Stock is entitled at the Effective Time; and each share of PointeCom
Class B Preferred Stock issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive one share of Company
Class E Convertible Senior Preferred Stock and all such shares of PointeCom
Class B Preferred Stock shall no longer be outstanding, shall be canceled and
shall cease to exist, and each holder of any such shares of PointeCom Class B
Preferred Stock shall thereafter cease to have any rights with respect to such
shares of PointeCom Class B Preferred Stock except the right to receive one
share of Company Class E Convertible Senior Preferred Stock for each such share
of PointeCom Class B Preferred Stock (the terms of which shall be in all
material respects the same as the PointeCom Class B Preferred Stock, except that
Company Class E Convertible Senior Preferred Stock shall be convertible into
such number of shares of Company Common Stock as would have been issued to the
holders of the PointeCom Class B Preferred Stock if such holders had converted
the PointeCom Class B Preferred Stock into PointeCom Common Stock prior to the
Effective Time) and unpaid dividends and distributions, if any, to which the
holder of such shares of PointeCom Class B Preferred Stock is entitled at the
Effective Time. The Company capital stock to be issued as described above in
exchange for the PointeCom capital stock shall be referred to herein as the
Merger Consideration. Except with respect to fractional shares (as provided in
Section 3.2, below) and dissenting Shares (as provided in Section 3.3, below),
PointeCom shareholders will receive only voting shares of the Company as
consideration for the Merger.
3.2. Fractional Shares. No scrip or fractional shares of Company Common Stock
shall be issued in the Merger. All fractional shares of Company Common Stock to
which a holder of PointeCom Common Stock immediately prior to the Effective Date
would otherwise be entitled at the Effective Date shall be aggregated. If a
fractional share results from such aggregation, such stockholder shall be
entitled, after the later of (a) the Effective Date or (b) the surrender of such
stockholders certificate representing his PointeCom Common Stock that represent
such shares of PointeCom Common Stock, to receive from the Company an amount in
cash in lieu of such fractional share, based on the average trading price for
Company Common Stock during the twenty trading days that end on the last trading
day prior to the Closing Date. The Company will make available the cash
necessary for the purpose of paying cash for fractional shares.
The payment of cash in lieu of fractional shares of Company Common Stock is
solely for the purpose of avoiding the expense and inconvenience to the Company
of issuing fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the Merger to
the PointeCom stockholders instead of issuing fractional shares of Company
Common Stock will not exceed one percent (1%) of the total consideration that
will be issued in the Merger to the PointeCom stockholders in exchange for their
shares of PointeCom capital stock. The fractional shares interests of each
PointeCom stockholder will be aggregated, and no PointeCom stockholder will
receive cash in an amount greater to or greater than the value of one full share
of Company Common Stock.
3.3. Dissenting Shares. To the extent that appraisal rights are available
under the NRS, shares of PointeCom Common Stock that are issued and outstanding
immediately prior to the Effective Date and that have not been voted for
adoption of the Merger and with respect of which appraisal rights have been
properly demanded in accordance with the applicable provisions of the NRS (the
Dissenting Shares) shall not be converted into the right to receive the Merger
Consideration at or after the Effective Date unless and until the holder of such
shares withdraws his demand for such appraisal (in accordance with the
applicable provisions of the NRS) or becomes ineligible for such appraisal. If
a holder of Dissenting Shares withdraws his demand for such appraisal (in
accordance with the applicable provisions of the NRS) or becomes ineligible for
such appraisal, then, as of the Effective Date or the occurrence of such event,
whichever occurs later, such holders Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right to receive
the Merger Consideration. If any holder of PointeCom Common Stock shall assert
the right to be paid the fair value of such PointeCom Common Stock as described
above, PointeCom shall give the Company notice thereof and the Company shall
have the right to participate in all negotiations and proceedings with respect
to any such demands. PointeCom shall not, except with the prior written consent
of the Company, which shall not be unreasonably withheld, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
payment. After the Effective Date, the Company will cause the Surviving
Corporation to pay its statutory obligations to holders of Dissenting Shares;
provided, however, that PointeCom will be solely responsible for such payments
to the holders of Dissenting Shares and the Company will not contribute funds
nor loan funds to PointeCom in connection with such
payments.
3.4. Other PointeCom Securities. To the extent of any outstanding warrants,
options or other conversion or purchase rights (the Surviving Securities) that
have been issued by PointeCom or its Affiliates prior to the Effective Time to
purchase PointeCom Common Stock, the Company shall reserve shares of Company
Common Stock for future issuance upon exercise of the Surviving Securities. At
the Effective Time, by virtue of the Merger, and without any action on the part
of any holder of a Surviving Security, each Surviving Security (a) may be
exercised only for Company Common Stock notwithstanding any contrary agreement
or document relating to the Surviving Securities or pursuant to which any
Surviving Securities were issued, (b) each such Surviving Security shall at the
Effective Time become a right to acquire a number of shares of Company Common
Stock equal to the product arrived at by multiplying the Exchange Ratio by the
number of shares of PointeCom Common Stock subject to such right immediately
prior to the Effective Time and upon exercise, conversion or purchase of the
Surviving Securities cash shall be paid in lieu of fractional shares of Company
Common Stock in an amount based on the average trading price for Company Common
Stock during the twenty trading days that end on the last trading day prior to
the date of exercise, conversion or purchase thereof less the exercise price
thereof, and (c) the exercise price or purchase price per share of Company
Common Stock for which each such right (as exchanged) is exercisable shall be
the amount (rounded up the next whole cent) arrived at by dividing the exercise
price or purchase price per share of PointeCom Common Stock at which such
Surviving Security is exercisable immediately prior to the Effective Time by the
Exchange Ratio. At the Closing, each holder of a Surviving Security shall
furnish to the Company the certificates or other documents representing his
Surviving Security, duly endorsed in blank (or affidavits of lost certificates
and indemnification in lieu thereof) and the Company shall deliver to each
holder of a Surviving Security a Company warrant, option or right with the same
terms and conditions as such Surviving Security (except that the number of
shares of Company Common Stock issuable upon exercise thereof shall be modified
as set forth in this Section 3.4).
3.5. Newco Shares. At the Effective Time, by virtue of the Merger and
without any action on the part of the Company as the sole holder of the capital
stock of Newco, each issued and outstanding share of common stock, par value
$0.01 per share, of Newco shall be converted in one share of common stock,
$0.00001 par value, of the Surviving Corporation.
3.6. Delivery of Merger Consideration. At the Closing, (a) each stockholder
of the PointeCom shall furnish to the Company the certificates representing his
PointeCom Common Stock and PointeCom Preferred Stock, duly endorsed in blank by
such stockholder or accompanied by duly executed blank stock powers (or
affidavits of lost certificates and indemnification in lieu thereof), and (b)
the Company shall deliver to each such stockholder a copy of an irrevocable
instruction letter to the Company's transfer agent directing that certificates
representing the shares of Company Common Stock and Company Preferred Stock be
delivered to each such stockholder pursuant to Section 3.1, other than as
provided in Sections 3.2 and 3.3 hereof. PointeCom agrees promptly to use
commercially reasonable efforts to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
the PointeCom Common Stock and PointeCom Preferred Stock or with respect to the
stock powers accompanying such stock.
3.7. No Effect on Capital Stock of Company. Each share of the outstanding
capital stock of the Company issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall be unchanged after the Merger.
3.8. Closing of Transfer Records. After the Effective Time, no transfer of
shares of PointeCom Common Stock, or PointeCom Preferred Stock outstanding prior
to the Effective Time shall be made on the stock transfer books of the Surviving
Corporation. If, after the Effective Time, certificates representing such
shares are presented for transfer to the Exchange Agent, they shall be canceled
and exchanged for certificates representing shares of Company Common Stock,
Company Class D Convertible Senior Preferred Stock or Company Class E
Convertible Senior Preferred Stock, as the case may be, cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any, as
provided in Section 3.1.
3.9. Effect on Treasury or Unissued Shares of PointeCom Capital Stock. As of
the Effective Time, by virtue of the Merger and without any action on the part
of the holder of any of the issued and outstanding shares of Company Common
Stock or PointeCom Common Stock, each unissued or treasury share of PointeCom
Common Stock, PointeCom Class A Preferred Stock and PointeCom Class B Preferred
Stock shall automatically be cancelled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
3.10. Rule 16b-3. The Company and PointeCom shall take all steps as may be
required to cause the consummation of the transactions contemplated by this
Article III and any other disposition of PointeCom equity securities (including
derivative securities) or acquisitions of Company equity securities (including
derivative securities) in connection with this Agreement by each individual who
(x) is a director or officer of PointeCom or (y) at the Effective Time, will
become a director or officer of the Company, to be exempt under Rule 16b-3
promulgated under the 1934 Act, such steps to be taken in accordance with the
No-Action Letter dated January 12, 1999, issued by the SEC to Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP.
ARTICLE IV. CLOSING
The consummation of the Merger and delivery of the consideration described in
Section 3.6 hereof and the other transactions contemplated by this Agreement
(the Closing) shall take place at the offices of Gardere & Xxxxx, 0000
Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, not later than the third business
day after the date all conditions in Article VIII have been satisfied or waived
in writing, which Closing shall not be later than June 30, 2000, or at such
other location, time and date as PointeCom and the Company may mutually
agree, which date is herein referred to as the Closing Date.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND NEWCO
A. The Company, on the one hand, and Newco, on the other hand, represent and
warrant to PointeCom as follows:
5.1. Due Organization and Qualification. Each of the Company and Newco is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and the NRS, respectively, and each has all corporate
power required to carry on its business as now conducted. Except as set forth
in Schedule 5.1, each of the Company and Newco is qualified to do business as a
foreign corporation in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not have a Material Adverse Effect on the Company or Newco. Each of the
Company and Newco has the requisite corporate power and corporate authority to
own, lease and operate its assets and properties and to carry on its own
business as such business is currently being conducted. Correct and complete
copies of all stock records and minute books of the Company and Newco have been
made available to PointeCom.
5.2. Authorization; Non-Contravention; Approvals.
(a) Each of the Company and Newco has the corporate power and corporate
authority to enter into each of the Transaction Documents to which each is a
party, and, subject to obtaining the hereinafter described approvals, to
consummate the transactions contemplated hereby, including issuance of the
Merger Consideration. The execution, delivery and performance by the Company
and Newco of each of the Transaction Documents to which it is party is subject
to the Requisite Stockholder Approval of the Company. Other than such
stockholder approval, no additional corporate proceedings on the part of the
Company or Newco are necessary to authorize the execution and delivery of each
of the Transaction Documents to which it is a party and the consummation of the
transactions contemplated hereby. Subject to obtaining the foregoing
approvals, each of the Transaction Documents to which it is a party has been
duly and validly executed and delivered by the Company and Newco and (assuming
the due authorization, execution and delivery by PointeCom, and that each
Transaction Document to which it is a party constitutes a valid and binding
agreement of PointeCom) constitutes valid and binding agreements of the Company
and Newco in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
now or hereafter in effect, affecting the enforcement of creditors rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
(b) Subject to obtaining the foregoing approvals, the execution and delivery by
each of the Company and Newco of each of the Transaction Documents to which it
is a party does not, and the consummation by the Company and Newco of the
transactions contemplated hereby will not (i) violate or result in a breach of
any provision of the Certificate of Incorporation or Bylaws of the Company or
Newco, (ii) assuming compliance with matters referred to in paragraph (c) of
this section, violate or result in a breach of any Laws applicable to the
Company or Newco or the properties or assets of either or (iii) violate or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Encumbrance upon any of the properties or assets of the Company
or Newco under any of the terms, conditions or provisions of, except as set
forth in Schedule 5.2, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, lease or other instrument, obligation or
agreement of any kind to which the Company or Newco is now a party or by which
the Company or Newco or any of the properties or assets of either may be bound
or affected, except in the case of clauses (ii) and (iii), for any such
violation or breach that would not have a Material Adverse Effect on the Company
or Newco.
(c) Except for obtaining the foregoing approvals, the Merger Filing and such
filings as may be required under federal or state securities Laws, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any Governmental Authority or third party is necessary
for the execution and delivery of each of the Transaction Documents to which it
is a party by the Company and Newco or the consummation by the Company and Newco
of the transactions contemplated hereby. Except as set forth in Schedule 5.2,
none of the agreements, licenses or permits to which the Company or Newco is a
party requires notice to, or the consent or approval of any third party for the
execution and delivery of each of the Transaction Documents to which it is a
party by each of the Company and Newco and the consummation of the transactions
contemplated hereby.
5.3. Company Common Stock. The shares of Company Common Stock, and Company
Preferred Stock to be issued to the stockholders of PointeCom pursuant to the
Merger (including upon exercise of the Surviving Securities), when authorized
and issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable and not subject to any preemptive rights.
5.4. Tax-Free Reorganization Representations.
(a) The fair market value of the Company capital stock received by each
PointeCom shareholder pursuant to this Agreement will be approximately equal to
the fair market value of the PointeCom capital stock surrendered in the
exchange.
(b) The Company has no plan or intention to cause PointeCom to issue additional
shares of PointeCom stock that would result in the Company losing control of
PointeCom within the meaning of Section 368 (c) of the Code.
(c) The Company has no plan or intention to liquidate PointeCom; to merge
PointeCom into another corporation (except as contemplated by this Agreement);
to cause PointeCom to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business; or to sell or otherwise
dispose of any of the stock acquired in the transaction, except for transfers
described in Section 368 (a)(2)(C) of the Code.
(d) The Company has no plan or intention to reacquire any of its stock issued in
the Merger.
(e) The Company, PointeCom, and the shareholders of PointeCom will pay their
respective expenses, if any, incurred in connection with the transaction.
(f) The Company will acquire PointeCom capital stock solely in exchange for
Company voting stock. (For purposes of this representation, PointeCom capital
stock redeemed for cash or other property furnished by the Company will be
considered as acquired by the Company.) Further, no liabilities of PointeCom or
the PointeCom shareholders will be assumed by the Company, nor will any of the
PointeCom capital stock that is exchanged pursuant to this Agreement be subject
to any liabilities.
(g) The Company does not own, directly or indirectly, nor has it owned during
the past five years, directly or indirectly, any stock of PointeCom.
(h) Following the Merger, the Company shall cause PointeCom to continue its
historic business or use a significant portion of its historic business assets
in a business.
(i) Neither the Company nor Newco are investment companies as defined in Section
368 (a)(2)(F)(iii) and (iv) of the Code.
(j) The Company shall cause PointeCom to pay any dissenting shareholders the
value of their stock out of PointeCom funds, no funds will be supplied for that
purpose, directly or indirectly, by the Company, nor will the Company directly
or indirectly reimburse PointeCom for any payments to dissenters.
(k) There is no indebtedness between the Company and PointeCom that will be
settled at a discount.
(l) The holders of PointeCom Common Stock and PointeCom Preferred Stock will
receive voting shares of Company Common Stock and voting shares of Company
Preferred Stock having a fair market value equal to at least 50% of the value of
their PointeCom capital stock at the Effective Time. Under the terms of the
Merger, the stockholders of PointeCom will receive solely Company Common Stock
and Company Preferred Stock in exchange for such PointeCom capital stock.
However, redemptions or acquisitions of PointeCom capital stock by the Company
or PointeCom or any related party and extraordinary distributions (i.e.,
distributions with respect to stock other that regular, normal dividends), prior
to and in connection with the Merger will be taken into account for purposes of
this representation. Neither the Company nor a related party has a plan or
intention to reacquire or acquire any of the Company Common Stock or Company
Preferred Stock issued to PointeCom stockholders in the Merger. For purposes of
this representation, a related party includes any corporation (i) that is a
member of any affiliated group of which PointeCom or the Company is a member, as
defined in Section 1504 (determined without regard to Section 1504(b)), or (ii)
a corporation in which the Company owns, directly or indirectly, stock
possessing at least fifty percent (50%) of the total combined voting power of
all classes of stock entitled to vote, or at least fifty percent (50%) of the
total value of shares of all classes of stock (determined by taking into account
the constructive stock ownership rules of Section 318(a) of the Code as modified
by Section 304(c)). For purposes of the foregoing, (i) a corporation will be a
related party if either of the relationships described above exists immediately
before the Merger, immediately after the Merger, or is created in connection
with the Merger, and (ii) a related party will be considered as acquiring its
proportionate share of any Company Common Stock or Company Preferred Stock
acquired by a partnership in which it is a partner.
(m) The payment of cash in lieu of fractional shares of Company Common Stock is
solely for the purpose of avoiding the expense and inconvenience to the Company
of issuing fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the Merger to
the PointeCom stockholders instead of issuing fractional shares of Company
Common Stock will not exceed one percent (1%) of the total consideration that
will be issued in the Merger to the PointeCom stockholders in exchange for their
shares of PointeCom capital stock. The fractional shares interests of each
PointeCom stockholder will be aggregated, and no PointeCom stockholder will
receive cash in an amount greater to or greater than the value of one full share
of Company Common Stock.
(n) None of the compensation received by any shareholder-employee of PointeCom
will be separate consideration for, or allocable to, any of their shares of
PointeCom capital stock; none of the shares of Company Common Stock or Company
Preferred Stock received by any shareholder employee will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any shareholder-employee will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arms length for similar services.
(o) Company is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
5.5. SEC Filings; Disclosure. The Company has filed with the SEC all material
forms, statements, reports and documents required to be filed by it prior to the
date hereof under each of the 1933 Act, the 1934 Act, and the respective rules
and regulations thereunder, (a) all of which, as amended, if applicable,
complied when filed in all material respects with all applicable requirements of
the appropriate Act and the rules and regulations thereunder, and (b) none of
which, as amended, if applicable, contains any untrue statement of material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made and at the time they were made, not misleading. The
financial statements of the Company included in the Company's annual report on
Form 10-KSB for the fiscal year ended December 31, 1998 and Form 10-Q for the
fiscal quarter ended September 30, 1999, comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP, applied on a consistent basis during the period covered and fairly
represent, in all material respects, the financial position of the Company as of
the date thereof and the results of operations and changes in financial position
for the period then ended. The Company is eligible to file a registration
statement on Form S-4 covering the Merger Consideration to be issued pursuant to
this Agreement.
5.6. Interim Operations of Newco. Newco was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged, and
will engage, in no other business activities and has, and will continue to have,
no debt outstanding. The authorized capital stock of Newco consists solely of
10,000 shares of common stock, par value $0.01 per share (Newco Common Stock),
of which 100 shares are issued and outstanding. All of the issued and
outstanding shares of Newco Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable. All of the issued and outstanding
shares of Newco Common Stock are owned by the Company, and the Company has not
entered into any agreements or arrangements to sell or transfer such stock to a
third party.
5.7. Capitalization. The authorized, issued and outstanding capital stock of
the Company is set forth on Schedule 5.7. All of the issued and outstanding
shares of Company Common Stock have been duly authorized and validly issued, are
fully paid and nonassessable, and were offered, issued, sold and delivered by
the Company in compliance with all applicable Laws, including, without
limitation, those Laws concerning the issuance of securities. None of such
shares were issued in violation of the preemptive rights of any past or present
stockholders. Except as set forth in Schedule 5.7, no subscription, option,
warrant, call, convertible or exchangeable security, other conversion right or
commitment of any kind exists which obligates the Company to issue any of its
capital stock.
5.8. Subsidiaries. Except as set forth in Schedule 5.8, the Company owns, of
record or beneficially, or controls, directly or indirectly, no capital stock,
securities convertible into or exchangeable for capital stock or any other
equity interest in any corporation, association or other business entity.
Except as set forth in Schedule 5.8, the Company is not, directly or indirectly,
a participant in any joint venture, limited liability company, partnership or
other noncorporate entity.
5.9. Financial Statements.
(a) The Company has delivered to PointeCom complete copies of the following
financial statements:
(i) the audited balance sheets of the Company as of December 31, 1996, 1997 and
1998 and the related audited statements of income, stockholders equity and cash
flows for the three annual periods ended December 31, 1998, together with the
related notes, schedules and audit report of the Company's independent
accountants (such balance sheets and the related statements of income and the
related notes and schedules are referred to herein as the Year-End Financial
Statements); and;
(ii) the unaudited balance sheet (the Interim Balance Sheet) of the Company as
of September 30, 1999 (the Balance Sheet Date) and the related unaudited
statement of operations for the interim period ended on the Balance Sheet Date,
together with the related notes and schedules (such balance sheets, the related
statements of income and the related notes and schedules are referred to herein
as the Interim Financial Statements). The Year-End Financial Statements and the
Interim Financial Statements (collectively, the Financial Statements) are
attached as Schedule 5.9 to this Agreement.
(b) Except as set forth in Schedule 5.9, the Financial Statements have been or
will be prepared from the books and records of the Company in conformity with
GAAP (except for the absence of notes in the Interim Financial Statements and
that the Interim Financial Statements are subject to year-end audit adjustments,
none of which are expected to be material) and will present fairly in all
material respects the financial position and results of operations of the
Company as of the dates of such statements and for the periods covered thereby.
The books of account of the Company have been kept accurately in all material
respects in the ordinary course of business, the transactions entered therein
represent bona fide transactions, and the revenues, expenses, assets and
liabilities of the Company have been properly recorded therein in all material
respects.
5.10. Liabilities and Obligations. Except as set forth in Schedule 5.10, as of
the Balance Sheet Date the Company did not have, nor has it incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature which would have a Material Adverse Effect on the
Company, except (a) liabilities, obligations or contingencies (i) that are
accrued or reserved against in the Financial Statements or reflected in the
notes thereto or (ii) that were incurred after the Balance Sheet Date and were
incurred in the ordinary course of business, consistent with past practices, and
(b) liabilities and obligations that are of a nature not required to be
reflected in the Financial Statements prepared in accordance with GAAP and that
were incurred in the normal course of business, which material liabilities and
obligations are described in Schedule 5.10 or another Schedule hereto. Schedule
5.10 sets forth the Company's outstanding principal amount of indebtedness for
borrowed money (including overdrafts) as of November 30, 1999.
5.11. Accounts and Notes Receivable. Schedule 5.11 sets forth an accurate list
of the accounts and notes receivable of the Company as of the Balance Sheet
Date. Receivables from and advances to employees are separately identified in
Schedule 5.11. Schedule 5.11 also sets forth an accurate aging of all accounts
and notes receivable as of the Balance Sheet Date, showing amounts due in 30-day
aging categories. The trade and other accounts receivable of the Company,
including without limitation those classified as current assets on the Interim
Balance Sheet, are bona fide receivables, were acquired in the ordinary course
of business, are stated in accordance with GAAP and are collectible in the
amounts shown on Schedule 5.11, net of reserves reflected in the Interim
Financial Statements with respect to the accounts receivable as of the Balance
Sheet Date, and net of reserves reflected in the books and records of the
Company (consistent with the methods used in the Interim Financial Statements)
with respect to receivables of the Company after the Balance Sheet Date.
5.12. Assets.
(a) Schedule 5.12 sets forth an accurate list of all real and personal property
included in property and equipment on the Interim Balance Sheet and all other
tangible assets of the Company with a book value in excess of $10,000 acquired
since the Balance Sheet Date. The Company shall make available to PointeCom
true, complete and correct copies of leases for significant equipment and for
all real property leased by the Company. Schedule 5.12 indicates which assets
used in the operation of the businesses of the Company are currently owned by
Affiliates of the Company. Except as specifically identified in Schedule 5.12,
all of the material tangible assets, vehicles and other significant machinery
and equipment of the Company listed in Schedule 5.12 are in sufficient condition
for the conduct of the Company's business. Except as specifically described in
Schedule 5.12, all material fixed assets used by the Company in its business are
either owned by the Company or leased under agreements identified in Schedule
5.12. All material leases set forth in Schedule 5.12 are in full force and
effect and constitute valid and binding agreements of the Company or Newco as
applicable, and to the knowledge of the Company, the other parties thereto in
accordance with their respective terms. Schedule 5.12 contains true, complete
and correct copies of all title reports and title insurance policies received or
owned by the Company.
(b) The Company has good and marketable title to, or valid leasehold interests
in, the tangible and intangible personal property owned by it and used in its
business, including the properties identified in Schedule 5.12 as owned real
property, free and clear of all Encumbrances other than Permitted Encumbrances
and those set forth in Schedule 5.12.
(c) Except as specifically described in Schedule 5.12, the tangible and
intangible assets owned or leased by the Company include all the material assets
used in the operation of the business of the Company as conducted at the Interim
Balance Sheet Date, except for dispositions of such assets since such date in
the ordinary course of business, consistent with past practices.
5.13. Material Customers and Contracts.
(a) Schedule 5.13 sets forth an accurate list of (i) all customers representing
10% or more of the Company's revenues for the fiscal year ended December 31,
1998 or the interim period ended on the Balance Sheet Date (the Material
Customers), and (ii) all material executory contracts, warranties, commitments
and similar agreements to which the Company is currently a party or by which it
or any of its properties is bound, involving, (A) customer contracts in excess
of $100,000, including, without limitation, consignment contracts, (B) contracts
with any labor organizations, (C) leases providing for annual rental payments in
excess of $100,000, (D) loan agreements, (E) pledge and security agreements, (F)
indemnity or guaranty agreements or obligations , (G) bonds, (H) notes, (I)
mortgages, (J) joint venture or partnership agreements, (K) options to purchase
real or personal property, and (L) agreements relating to the purchase or sale
by the Company of assets (other than oral agreements relating to sales of
inventory or services in the ordinary course of business, consistent with past
practices) or securities for more than $100,000, individually. Prior to the
date hereof, the Company has made available to PointeCom complete and correct
copies of all such agreements.
(b) Except to the extent set forth in Schedule 5.13, since the Balance Sheet
Date, (i) no Material Customer has canceled or substantially reduced or, to the
knowledge of the Company, intends to cancel or substantially reduce its
purchases of the Company's products or services; and (ii) the Company is in
compliance with all material commitments and obligations pertaining to it under
such agreements and is not in material default under any of the agreements
described in subsection (a), no notice of default has been received by the
Company, and to the knowledge of the Company, there is no event which, with
notice or the passage of time or both, would result in a default under any of
the agreements described in subsection (a), in any case where such non
compliance or default would have a Material Adverse Effect on the Company.
(c) Except to the extent set forth in Schedule 5.13, the Company is not a party
to any governmental contracts subject to price redetermination or renegotiation.
Except to the extent set forth in Schedule 5.13, the Company is not required to
provide any bonding or other financial security arrangements in any amount in
connection with any transactions with any of its customers or suppliers, the
failure of which would have a Material Adverse Effect on the Company.
5.14. Permits. Except as set forth on Schedule 5.14, the Company has all
franchises, permits, licenses and any other governmental authority necessary for
the conduct of its business as now being conducted, the lack of which would have
a Material Adverse Effect (the "Company Permits"). The Company Permits are
valid, and the Company has not received any written notice that any Governmental
Authority intends to cancel, terminate or not renew any such Permit. The
Company Permits are all the permits that are required by Law for the operation
of the business of the Company as conducted at the Balance Sheet Date
and the ownership of the assets of the Company, except such Company Permits,
which the failure to possess would not have a Material Adverse Effect on the
Company. The Company has conducted and is conducting its business in substantial
compliance with the Company Permits and is not in violation of any of the
foregoing, except for any violations that individually or in the aggregate do
not have a Material Adverse Effect on the Company. Except as specifically
provided in Schedule 5.14, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to the Company by, any Company Permits except
for breaches or violations that would not have a Material Adverse Effect on the
Company.
5.15. Environmental Matters. Except as set forth in Schedule 5.15 and except
for such matters as would not have a Material Adverse Effect on the Company,
(a) the Company has complied with and is in compliance, in all material
respects, with all Environmental, Health and Safety Laws, including, without
limitation, Environmental, Health and Safety Laws relating to air, water, land
and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Substances; (b) the Company has obtained and complied, in
all material respects, with all necessary permits and other approvals necessary
to treat, transport, store, dispose of and otherwise handle Hazardous Substances
and has reported, to the extent required by all Environmental, Health and Safety
Laws, all past and present sites owned or operated by the Company where
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (c) to the Company's knowledge, there have been no releases or threats
of releases (as defined in any Environmental, Health and Safety Laws) at, from,
in or on any property owned or operated by the Company; (d) to the Company's
knowledge, there is no on-site or off-site location to which the Company has
transported or disposed of Hazardous Substances or arranged for the
transportation or disposal of Hazardous Substances which is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the Surviving Corporation, PointeCom or
Newco for any clean-up cost, remedial work, damage to natural resources or
personal injury, including, but not limited to, any claim under (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (ii) the Resource Conservation and Recovery Act, (iii) the Hazardous
Materials Transportation Act, or (iv) comparable state and local statutes and
regulations; and (e) to the Company's knowledge, the Company has no contingent
liability in connection with any release or disposal of any Hazardous Substance
into the environment. To the Company's knowledge, none of the past or present
sites owned or operated by the Company is currently or has ever been designated
as a treatment, storage and/or disposal facility, nor has any such facility ever
applied for a Permit designating it as a treatment, storage and/or disposal
facility, under any Environmental, Health or Safety Law.
5.16. Labor and Employee Relations. Except as set forth in Schedule 5.16, the
Company is not bound by or subject to any arrangement with any labor union.
Except as set forth in Schedule 5.16, no employees of the Company are
represented by any labor union or covered by any collective bargaining agreement
nor, to the Company's knowledge, is any campaign to establish such
representation in progress. There is no pending or, to the Company's knowledge,
threatened labor dispute involving the Company and any group of its employees
nor has the Company experienced any significant labor interruptions over the
past five years.
5.17. Insurance. Schedule 5.17 sets forth an accurate list as of the Balance
Sheet Date of all insurance policies that are material to the Company. The
policies described in such Schedule 5.17 for the current policy year are
currently in full force and effect and, to the knowledge of the Company, no
defaults exist under any of them.
5.18. Compensation; Employment Agreements. The Company has provided PointeCom
with an accurate written list of all officers, directors and employees of the
Company with annual salaries of $100,000 or more, listing the rate of
compensation (and the portions thereof attributable to salary, bonus, benefits
and other compensation, respectively) of each of such persons as of (a) the
Balance Sheet Date and (b) the date hereof. The Company shall make available to
PointeCom true, complete and correct copies of each employment or consulting
agreement with any employee of the Company. Except as disclosed on Schedule
5.18, the Company is not a party to or bound by, with respect to any officer,
employee or independent contractor of the Company, any (i) employment,
termination or severance agreement, (ii) agreement (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee extending for a period of one year or longer or (C)
providing severance benefits or other benefits after the termination of
employment not comparable to benefits available to employees generally, (iii)
agreement, plan or arrangement under which any person may receive payments that
may be subject to the tax imposed by Section 4999 of the Code or included in the
determination of such persons parachute payment under Section 280G of the Code
and (iv) agreement or plan, including any stock option plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting or other
realization of the benefits of which will be accelerated, by the occurrence of
the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of or otherwise affected by
the transactions contemplated by this Agreement.
5.19. Noncompetition and Nonsolicitation Agreements. Schedule 5.19 sets forth
all agreements containing covenants not to compete or solicit employees to which
the Company is bound or under which the Company has any material rights or
obligations.
5.20. Employee Benefit Plans.
(a) Schedule 5.20 sets forth an accurate schedule of each employee benefit plan,
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (ERISA), and all nonqualified deferred compensation
arrangements, whether formal or informal and whether legally binding or not,
under which the Company or an ERISA Affiliate has any current or future
obligation or liability or under which any present or former employee of the
Company or an ERISA Affiliate, or such present or former employees dependents or
beneficiaries, has any current or future right to benefits (each such plan and
arrangement referred to hereinafter as a Plan), and the Company has provided or
made available to PointeCom true and complete copies of such Plans, any trusts
and other arrangements related thereto, and classifications of employees covered
thereby as of the Balance Sheet Date. Except as set forth in Schedule 5.20,
neither the Company nor any ERISA Affiliate sponsors, maintains or is obligated
to contribute currently, or at any time during the preceding five years, has
sponsored, maintained or was obligated to contribute to, any plan, program, fund
or arrangement that constitutes an employee pension benefit plan as defined in
Section 3(2) of ERISA that is subject to Title IV of ERISA. Each Plan may be
terminated by the Company, or if applicable, by an ERISA Affiliate at any time
without any liability, cost or expense, other than costs and expenses that are
customary in connection with the termination of a Plan. For purposes of this
Agreement, the term ERISA Affiliate means any corporation or trade or business
which is, or ever was, treated as a single employer with the Company under
Section 414(b), (c), (m) or (o) of the Code.
(b) Except as set forth on Schedule 5.20(b), each Plan listed in Schedule 5.20
is in compliance in all material respects with its own terms and the applicable
provisions of ERISA, the Code, and any other applicable Law. Except as set
forth in Schedule 5.20, with respect to each Plan of the Company and each ERISA
Affiliate (other than a multiemployer plan, as defined in Section 4001(a)(3) of
ERISA), all reports and other documents required under ERISA or other applicable
Law to be filed with any Governmental Authority, the failure of which to file
could reasonably be expected to result in a material liability to the Company or
any ERISA Affiliate, including all Forms 5500 or required to be distributed to
participants or beneficiaries, have been duly and timely filed or distributed.
True and complete copies of all such reports and other documents with respect to
the past three years (if applicable) for each Plan have been provided to, or
made available to, PointeCom. No accumulated funding deficiency (as defined in
Section 412(a) of the Code) with respect to any Plan has been incurred (without
regard to any waiver granted under Section 412 of the Code), nor has any funding
waiver from the Internal Revenue Service been received or requested. Except as
set forth in Schedule 5.20, each Plan that is intended to be qualified within
the meaning of Section 401(a) of the Code (a Qualified Plan) is, and has been
during the period from its adoption to the date hereof, so qualified, both as to
form and operation and all necessary approvals of Governmental Authorities have
been timely obtained. Except as set forth in Schedule 5.20, all accrued
contribution obligations, and any other liability to pay benefits, of the
Company with respect to any Plan have either been fulfilled in their entirety or
are fully reflected in the Financial Statements.
(c) Except as set forth in Schedule 5.20(c), no Plan has incurred or is
reasonably likely to incur, and neither the Company nor any ERISA Affiliate has
incurred or is reasonably likely to incur with respect to any Plan, any
liability for excise tax or penalty due to the Internal Revenue Service or any
other governmental authority, and no Plan termination or discontinuance of
contributions to any Plan has resulted in or is reasonably likely to result in
the retroactive disqualification of any Plan qualified under Section 401(a) of
the Code or has resulted in or is reasonably likely to result in any liability
to the Company or any ERISA Affiliate. There have been no terminations, partial
terminations or discontinuances of contributions by the Company or any ERISA
Affiliate to any Qualified Plan during the preceding five years.
(d) Except as set forth in Schedule 5.20(d), neither the Company nor any ERISA
Affiliate has made any promises of retirement or other benefits to employees,
except as set forth in the Plans, and neither the Company nor any ERISA
Affiliate maintains or has established any arrangement for retiree medical
liabilities or any Plan that is a welfare benefit plan within the meaning of
Section 3(1) of ERISA that provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participants
termination of employment, except as may be required by Part 6 of Subtitle B of
Title I of ERISA and Section 4980B of the Code and similar state Law provisions.
Except as set forth in Schedule 5.16(d), neither the Company nor any ERISA
Affiliate maintains, has established or has ever participated in a welfare
benefit fund as defined in Section 419(e) of the Code, a multiple employer
welfare benefit arrangement as described in Section 3(40)(A) of ERISA or a
welfare benefit plan, within said meaning, which provides benefits other than
through insurance policies. Except as set forth in Schedule 5.16, neither the
Company nor any ERISA Affiliate has any current or future obligation or
liability with respect to a Plan pursuant to the provisions of a collective
bargaining agreement.
(e) Except as set forth in Schedule 5.20(e), neither the Company nor any ERISA
Affiliate has incurred any material liability to the Pension Benefit Guaranty
Corporation in connection with any Plan. The assets of each Plan that is
subject to Title IV of ERISA are sufficient to provide the benefits under such
Plan, the payment of which the Pension Benefit Guaranty Corporation would
guarantee in full if such Plan were terminated, and such assets are also
sufficient to provide all other benefits liabilities (as defined in ERISA
Section 4001(a)(16)) due under such Plan upon termination.
(f) Except as set forth in Schedule 5.20(f), no reportable event (as defined in
Section 4043 of ERISA) has occurred and is continuing with respect to any Plan.
There are no pending, or to the Company's knowledge, threatened claims, lawsuits
or actions (other than routine claims for benefits in the ordinary course)
asserted or instituted against, and the Company has no knowledge of any
threatened litigation or claims against, the assets of any Plan or its related
trust or against any fiduciary of a Plan with respect to the operation of such
Plan. To the Company's knowledge, there are no investigations or audits of any
Plan by any Governmental Authority currently pending and there have been no such
investigations or audits that have been concluded that resulted in any liability
to the Company or any ERISA Affiliate that has not been fully discharged.
Neither the Company nor any ERISA Affiliate has participated in any voluntary
compliance or closing agreement programs established with respect to the form or
operation of a Plan.
(g) Neither the Company nor any ERISA Affiliate has engaged in, and no Plan has
otherwise been involved in, any prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, for which exemption was not
available. No fiduciary of any Plan is in violation of any duty imposed by
ERISA. Except as set forth in Schedule 5.20(g), neither the Company nor any
ERISA Affiliate is, or ever has been, a participant in or is obligated to make
any payment to a multiemployer plan, or to a multiple employer plan described in
Section 413(c) of the Code. To the Company's knowledge, no person or entity
that was engaged by the Company or an ERISA Affiliate as an independent
contractor within the last five years reasonably can or will be characterized or
deemed to be an employee of the Company or an ERISA Affiliate under applicable
Laws for any purpose whatsoever, including, without limitation, for purposes of
federal, state and local income taxation, workers compensation and unemployment
insurance and Plan eligibility.
5.21. Litigation and Compliance with Law. Except as set forth in Schedule
5.21, there are no actions, suits or proceedings, pending (of which the Company
has received notice or with respect to which served with process) or, to the
knowledge of the Company threatened against the Company, at law or in equity, or
before or by any Governmental Authority having jurisdiction over the Company.
No written notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received by the Company. Except to the extent set forth in
Schedule 5.21, the Company has conducted and is conducting its business in
compliance with all Laws applicable to the Company, its assets or the operation
of its business, except such non-compliance that would not have a Material
Adverse Effect on the Company.
5.22. Taxes. For purposes of this Agreement, the term Taxes shall mean all
taxes, charges, fees, levies or other assessments including, without limitation,
income, gross receipts, excise, property, sales, withholding, social security,
unemployment, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States or any state, local or foreign government or subdivision or agency
thereof, whether computed on a separate, consolidated, unitary, combined or any
other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. The Each of the Company and its
Subsidiaries has filed all federal, state, local and other Tax returns it was
required to file, and has duly paid in full or made adequate provision in its
books and records for the payment of all Taxes it was required to pay, except to
the extent that such failure to pay or reserve would not have a Material Adverse
Effect on the Company or its Subsidiaries. All such tax returns were correct and
complete in all material respects. Neither the Company nor its Subsidiaries is
currently the beneficiary of any extension of time within which to file any tax
return. Each of the Company and its Subsidiaries has duly withheld and paid or
remitted all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other person or entity that required withholding under any
applicable Law, including, without limitation, any amounts required to be
withheld or collected with respect to social security, unemployment
compensation, sales or use taxes or workers compensation, except where such
failure to withhold or pay would not have a Material Adverse Effect on the
Company or its Subsidiaries. Except as set forth in Schedule 5.22, there are no
examinations in progress or material claims against the Company or its
Subsidiaries relating to Taxes for any period or periods prior to and including
the Balance Sheet Date and no written notice of any claim for Taxes, whether
pending or threatened, has been received which claim has not been finally
settled. Neither the Company nor its Subsidiaries has granted or been requested
to grant any extension of the limitation period not yet closed or agreed to any
extension of time applicable to any claim for Taxes which still is in effect or
assessments with respect to Taxes and has not executed a closing agreement
pursuant to Section 7121 of the Code, or any predecessor provision thereof or
any similar provision of state, local, foreign or other tax law that relates to
the assets or operations of the Company or its Subsidiaries which still is in
effect. Neither the Company nor its Subsidiaries is a party to any Tax
allocation or sharing agreement. The Company has never been (nor has any
liability for Taxes because it once was) a member of an affiliated group filing
a consolidated federal income tax return, other than with respect to the
consolidated federal income tax returns of the Company and its Subsidiaries, has
not incurred any liability for the Taxes of any person under Treasury
Regulations 1.1502-6 (or any similar provision of law) and has never incurred
any liability for the Taxes of any person as a transferee or successor, by
contract or otherwise. The unpaid Taxes of the Company and/or its Subsidiaries
(a) did not, as of the Balance Sheet Date, exceed any material amount the amount
shown as accrual for Taxes on the Interim Balance Sheet and (b) will not exceed
by any material amount that accrual as adjusted for operation and transactions
of the Company or its Subsidiaries through the Closing Date in accordance with
the past custom and practice of the Company in filing its tax returns. True and
complete copies of (a) any tax examinations and statements of deficiencies, (b)
extensions of statutory limitations and (c) the federal, state and local Tax
returns of the Company and its Subsidiaries for the last three fiscal years have
been previously provided to PointeCom. There are no requests for ruling in
respect of any Tax pending between the Company or its Subsidiaries and any
Taxing authority. Except with respect to MSN Communications, Inc., neither
the Company nor its subsidiaries has ever been taxed under the provisions of
Subchapter S of the Code. The Company and its Subsidiaries currently utilize
the accrual method of accounting for income tax purposes; and such method of
accounting has not changed in the past three years. No written notice has been
received from any Tax authority in any jurisdiction in which the Company or its
Subsidiaries does not file tax returns that it is or may be subject to taxation
by that jurisdiction. There are no security interests or liens for Taxes on any
asset of the Company or its Subsidiaries, except for Permitted Encumbrances.
Neither the Company nor its Subsidiaries has filed a consent under section
341(f) of the Code concerning collapsible corporations and neither the Company
nor its Subsidiaries has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code at any time during the
applicable period set forth in Section 897(e)(1)(A)(ii) of the Code. None of the
assets and properties of the Company or its Subsidiaries secures any
indebtedness, the interest on which is tax-exempt under Section 103(a) of the
Code or is an asset or property that the Company or any of its affiliates is or
will be required to treat as being (i) owned by any other person pursuant to
the provisions of section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, as in effect immediately before the enactment of the Tax Reform Act of
1986, or (ii) tax-exempt use property within the meaning of Section 168(h)(1) of
the Code. Neither the Company nor its Subsidiaries has made any payments, is
not obligated to make any payments, and is not a party to any agreement that
under certain circumstances could require it to make any payments, that would
not be deductible by reason of the application of Section 280G of the Code. The
Company has not deferred any taxable income associated with any inter-company
transactions as defined under the Regulations to Section 1502 of the Code.
5.23. Absence of Changes. Since the Balance Sheet Date, except as set forth in
Schedule 5.23, the Company has conducted, in all material respects, its
operations in the ordinary course and there has not been:
(a) any material adverse change in the business, operations, properties,
condition (financial or other), assets, liabilities (contingent or otherwise) or
results of operations of the Company, individually or in the aggregate;
(b) any damage, destruction or loss (whether or not covered by insurance)
materially adversely affecting the properties or business of the Company,
individually or in the aggregate;
(c) except as contemplated by this Agreement or the transactions contemplated
hereby, any change in the authorized capital stock of the Company or in its
outstanding securities or any grant of any options, warrants, calls, conversion
rights or commitments;
(d) except as contemplated by this Agreement or the transactions contemplated
hereby, any declaration or payment of any dividend or distribution in respect of
the capital stock or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of the Company;
(e) any increase in the compensation payable or to become payable by the Company
to its stockholders or to any of its officers, directors, employees, consultants
or agents, except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice, which bonuses and salary increases
are set forth in Schedule 5.18;
(f) any material labor disputes, labor grievances or labor claims filed;
(g) except for the Merger and any disposition contemplated by Section 7.1(f),
any sale or transfer, or any agreement to sell or transfer, any material assets,
properties or rights of the Company to any person;
(h) any cancellation, or agreement to cancel, any material indebtedness or other
material obligation owing to the Company;
(i) any increase in the indebtedness of the Company, other than the PointeCom
Loan and accounts payable incurred in the ordinary course of business,
consistent with past practices or incurred in connection with the transactions
contemplated by this Agreement;
(j) any plan, agreement or arrangement granting any preferential rights to
purchase or acquire any interest in any of the assets, property or rights of the
Company or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(k) any purchase or acquisition of, or agreement, plan or arrangement to
purchase or acquire, any property, rights or assets outside of the ordinary
course of the Company's business;
(l) any waiver of any material rights or claims of the Company;
(m) any material breach, amendment or termination of any material contract,
agreement, Permit or other right to which the Company is a party or any of its
property is subject, except that which would not have a Material Adverse Effect
on the Company; or
(n) except for the transactions contemplated by this Agreement, any other
material transaction by the Company outside the ordinary course of business.
5.24. Absence of Certain Business Practices. Neither the Company nor any of
its Affiliates on behalf of the Company has given or offered to give anything of
value to any governmental official, political party or candidate for government
office that was illegal to so offer or give nor has it otherwise taken any
action which would constitute a violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any similar Law.
5.25. Competing Lines of Business; Related-Party Transactions. Except as set
forth in Schedule 5.25, no officer, director or any other Affiliate of the
Company owns, directly or indirectly, any interest (other than up to five
percent (5%) of any class of securities listed on a national securities exchange
or traded publicly in the over-the-counter market) in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is in a Competitive Business or is a competitor, lessor, lessee,
customer or supplier of the Company. Except as set forth in Schedule 5.25, no
officer or director of the Company has any interest in any property, real or
personal, tangible or intangible, used in or pertaining to the business of the
Company.
5.26. Intangible Property. Schedule 5.26 sets forth an accurate list of all
patents, patent applications, trademarks, service marks, technology, licenses,
trade names, copyrights and other intellectual property or proprietary property
rights owned or used by the Company, which are material to the conduct of the
Company's business. The Company owns or possesses sufficient legal rights to
use all of such items, except where failure to own or possess such rights would
not have a Material Adverse Effect on the Company.
5.27. Disclosure. No representation or warranty of the Company or Newco to
PointeCom in this Agreement contains or will contain (at the time such
representation or warranty is repeated) any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
herein, in light of the circumstances under which they were made, not
misleading.
5.28. Year 2000 Compliance. All devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive technology
(jointly and severally its systems) owned by the Company and necessary for the
operation of the Company's business as presently conducted, will be Year 2000
Compliant within a period of time calculated to result in no material disruption
of any of its business operations, and any systems that are not compliant will
not have a Material Adverse Effect on the Company. For purposes hereof, Year
2000 Compliant means that such systems are designed to be used prior to, during
and after the Gregorian calendar year 2000 A.D. and will operate during each
such time period substantially without error relating to date data, specifically
including any error relating to, or the product of, date data which represents
or references different centuries or more than one century.
None of the representations and warranties of the Company and Newco shall
survive the Closing hereunder.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF POINTECOM
PointeCom represents and warrants to the Company and Newco as follows:
6.1. Organization. PointeCom is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Nevada, has all corporate
power required to carry on its business as now conducted and is duly authorized
and qualified under all applicable Laws to carry on its business in the places
and in the manner now conducted. Except as set forth in Schedule 6.1, PointeCom
is qualified to do business as a foreign corporation in each jurisdiction where
the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for jurisdiction where the
failure to qualify would not have a Material Adverse Effect on PointeCom.
PointeCom has the requisite corporate power and corporate authority to own,
lease and operate its assets and properties and to carry on its business as such
business is currently being conducted. Correct and complete copies of all stock
records and minute books of PointeCom have been made available to the Company.
6.2. Authorization; Non-Contravention; Approvals.
(a) PointeCom has the corporate power and corporate authority to enter into each
of the Transaction Documents to which it is a party, and, subject to obtaining
the hereinafter described approvals, to consummate the transactions contemplated
hereby. The execution, delivery and performance of each of the Transaction
Documents to which it is party is subject to the Requisite Stockholder Approval
of PointeCom. Other than such board and shareholder approval, no additional
corporate proceedings on the part of PointeCom is necessary to authorize the
execution and delivery of each of the Transaction Documents to which it is a
party and the consummation of the transactions contemplated hereby. Subject to
obtaining the foregoing approvals, each of the Transaction Documents to which it
is a party has been duly and validly executed and delivered by PointeCom and
(assuming the due authorization, execution and delivery by the Company and
Newco, and each Transaction Document to which it is a party constitutes a valid
and binding agreement of the Company and Newco) constitutes valid and binding
agreements of PointeCom in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws now or hereafter in effect, affecting the enforcement of creditors
rights generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
(b) Subject to obtaining the foregoing approvals, the execution and delivery of
each of the Transaction Documents to which it is a party by PointeCom do not,
and the consummation by PointeCom of the transactions contemplated hereby will
not (i) violate or result in a breach of any provision of the Certificate of
Incorporation or Bylaws of the PointeCom, (ii) assuming compliance with matters
referred to in paragraph (c) of this section, violate or result in a breach of
any Laws applicable to PointeCom or its properties or assets or (iii) violate or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Encumbrance upon any of the properties or assets of PointeCom
under any of the terms, conditions or provisions of, except as set forth in
Schedule 6.2, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, lease or other instrument, obligation or
agreement of any kind to which the PointeCom is now a party or by which any of
its properties or assets may be bound or affected, except in the case of clauses
(ii) and (iii), for any such violation or breach that would not have a Material
Adverse Effect on PointeCom.
(c) Except for obtaining the foregoing approvals, the Merger Filing and such
filings as may be required under federal or state securities Laws, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any Governmental Authority or third party is necessary
for the execution and delivery of each of the Transaction Documents to which it
is a party by PointeCom or the consummation by PointeCom of the transactions
contemplated hereby. Except as set forth in Schedule 6.2, none of the
agreements, licenses or permits to which the PointeCom is a party requires
notice to, or the consent or approval of any third party for the execution and
delivery of each of the Transaction Documents to which it is a party by
PointeCom and the consummation of the transactions contemplated hereby.
6.3. SEC Filings; Disclosure. PointeCom has filed with the SEC all material
forms, statements, reports and documents required to be filed by it prior to the
date hereof under each of the 1933 Act, the 1934 Act, and the respective rules
and regulations thereunder, (a) except as set forth on Schedule 6.3, all of
which, as amended, if applicable, complied when filed in all material respects
with all applicable requirements of the appropriate Act and the rules and
regulations thereunder, and (b) none of which, as amended, if applicable,
contains any untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made and at the
time they were made, not misleading. The financial statements of PointeCom
included in PointeCom's annual report on Form 10-KSB for the fiscal year ended
December 31, 1998 and Form 10-Q for the fiscal quarter ended September 30, 1999,
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP, applied on a consistent
basis during the period covered and fairly represent, in all material respects,
the financial position of PointeCom as of the date thereof and the results of
operations and changes in financial position for the period then ended.
6.4. Capitalization. The authorized, issued and outstanding capital stock of
PointeCom is set forth on Schedule 6.4. All of the issued and outstanding
shares of PointeCom Common Stock have been duly authorized and validly issued
(except as set forth on Annex J to Schedule 6.4), are fully paid and
nonassessable, and were offered, issued, sold and delivered by PointeCom in
compliance with all applicable Laws, including, without limitation, those Laws
concerning the issuance of securities. None of such shares were issued in
violation of the preemptive rights of any past or present stockholders. Except
as set forth in Schedule 6.4, no subscription, option, warrant, call,
convertible or exchangeable security, other conversion right or commitment of
any kind exists which obligates PointeCom to issue any of its capital stock.
6.5. Subsidiaries. Except as set forth in Schedule 6.5, PointeCom owns, of
record or beneficially, or controls, directly or indirectly, no capital stock,
securities convertible into or exchangeable for capital stock or any other
equity interest in any corporation, association or other business entity.
Except as set forth in Schedule 6.5, PointeCom is not, directly or indirectly, a
participant in any joint venture, limited liability company, partnership or
other noncorporate entity.
6.6. Financial Statements.
(a) PointeCom has delivered to the Company complete copies of the following
financial statements:
(i) the audited balance sheets of PointeCom as of December 31, 1996, 1997 and
1998 and the related audited statements of income, stockholders equity and cash
flows for the three-year period ended December 31, 1998, together with the
related notes, schedules and audit report of PointeCom's independent accountants
(such balance sheets and the related statements of income and the related notes
and schedules are referred to herein as the PointeCom Year-End Financial
Statements); and;
(ii) the unaudited balance sheet (the PointeCom Interim Balance Sheet) of
PointeCom as of September 30, 1999 (the PointeCom Balance Sheet Date) and the
related unaudited statement of operations for the interim period ended on the
PointeCom Balance Sheet Date, together with the related notes and schedules
(such balance sheets, the related statements of income and the related notes and
schedules are referred to herein as the PointeCom Interim Financial Statements).
The PointeCom Year-End Financial Statements and the PointeCom Interim Financial
Statements (collectively, the PointeCom Financial Statements) are attached as
Schedule 6.6 to this Agreement.
(b) Except as set forth in Schedule 6.6, the PointeCom Financial Statements have
been prepared from the books and records of PointeCom in conformity with GAAP
(except for the absence of notes in the Interim PointeCom Financial Statements
and that the Interim PointeCom Financial Statements are subject to year-end
audit adjustments, none of which are expected to be material) and will present
fairly in all material respects the financial position and results of operations
of PointeCom as of the dates of such statements and for the periods covered
thereby. The books of account of PointeCom have been kept accurately in all
material respects in the ordinary course of business, the transactions entered
therein represent bona fide transactions, and the revenues, expenses, assets and
liabilities of PointeCom have been properly recorded therein in all material
respects.
6.7. Liabilities and Obligations. Except as set forth in Schedule 6.7, as of
the PointeCom Balance Sheet Date, PointeCom did not have, nor has it incurred
since that date, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature which would have a Material Adverse
Effect on PointeCom, except (a) liabilities, obligations or contingencies (i)
that are accrued or reserved against in the PointeCom Financial Statements or
reflected in the notes thereto or (ii) that were incurred after the PointeCom
Balance Sheet Date and were incurred in the ordinary course of business,
consistent with past practices, and (b) liabilities and obligations that are of
a nature not required to be reflected in the PointeCom Financial Statements
prepared in accordance with GAAP and that were incurred in the normal course of
business, which material liabilities and obligations are described in Schedule
6.7. Schedule 6.7 sets forth PointeCom's outstanding principal amount of
indebtedness for borrowed money (including overdrafts) as of November 30, 1999.
6.8. Assets.
(a) Schedule 6.8 sets forth an accurate list of all real and personal property
included in property and equipment on the PointeCom Interim Balance Sheet and
all other tangible assets of PointeCom with a book value in excess of $10,000
acquired since the PointeCom Balance Sheet Date. PointeCom shall make available
to the Company true, complete and correct copies of leases for significant
equipment and for all real property leased by PointeCom. Schedule 6.8 indicates
which assets used in the operation of the businesses of PointeCom are currently
owned by Affiliates of PointeCom. Except as specifically identified in Schedule
6.8, all of the material tangible assets, vehicles and other significant
machinery and equipment of PointeCom listed in Schedule 6.8 are in sufficient
condition for the conduct of PointeCom's business. Except as specifically
described in Schedule 6.8, all fixed assets used by PointeCom in its business
are either owned by PointeCom or leased under agreements identified in Schedule
6.8. All material leases set forth in Schedule 6.8 are in full force and effect
and constitute valid and binding agreements of PointeCom, and to the knowledge
of PointeCom, the other parties thereto in accordance with their respective
terms. Schedule 6.8 contains true, complete and correct copies of all title
reports and title insurance policies received or owned by PointeCom.
(b) PointeCom has good and marketable title to, or valid leasehold interests in,
the tangible and intangible personal property owned by it and used in its
business, including the properties identified in Schedule 6.8 as owned real
property, free and clear of all Encumbrances other than Permitted Encumbrances
and those set forth in Schedule 6.8. PointeCom does not own any real property.
(c) Except as specifically described in Schedule 6.8, the tangible and
intangible assets owned or leased by PointeCom include all the material assets
used in the operation of the business of PointeCom as conducted at the PointeCom
Balance Sheet Date, except for dispositions of such assets since such date in
the ordinary course of business, consistent with past practices.
6.9. Material Customers and Contracts.
(a) Schedule 6.9 sets forth an accurate list of (i) all customers representing
10% or more of PointeCom's revenues for the fiscal year ended in 1998 or the
interim period ended on the PointeCom Balance Sheet Date, and (ii) all material
executory contracts, warranties, commitments and similar agreements to which
PointeCom is currently a party or by which it or any of its properties is bound,
including, but not limited to, (A) all customer contracts in excess of $100,000,
including, without limitation, consignment contracts, (B) contracts with any
labor organizations, (C) leases providing for annual rental payments in excess
of $100,000, (D) loan agreements, (E) pledge and security agreements, (F)
indemnity or guaranty agreements or obligations , (G) bonds, (H) notes, (I)
mortgages, (J) joint venture or partnership agreements, (K) options to purchase
real or personal property, and (L) agreements relating to the purchase or sale
by PointeCom of assets (other than oral agreements relating to sales of
inventory or services in the ordinary course of business, consistent with past
practices) or securities for more than $100,000, individually. Prior to the
date hereof, PointeCom has made available to the Company complete and correct
copies of all such agreements.
(b) Except to the extent set forth in Schedule 6.9, since the PointeCom Balance
Sheet Date, (i) no material customer has canceled or substantially reduced or,
to the knowledge of PointeCom, intends to cancel or substantially reduce its
purchases of PointeCom's products or services; and (ii) PointeCom is in
compliance with all material commitments and obligations pertaining to it under
such agreements and is not in material default under any of the agreements
described in subsection (a), no notice of default has been received by
PointeCom, and to the knowledge of PointeCom, there is no event which, with
notice or the passage of time or both, would result in a default under any of
the agreements described in subsection (a), where such a default would have a
Material Adverse Effect on PointeCom.
(c) Except to the extent set forth in Schedule 6.9, PointeCom is not a party to
any governmental contracts subject to price redetermination or renegotiation.
Except to the extent set forth in Schedule 6.9, PointeCom is not required to
provide any bonding or other financial security arrangements in any amount in
connection with any transactions with any of its customers or suppliers, the
failure of which would have a Material Adverse Effect on PointeCom
6.10. Permits. Except as set forth on Schedule 6.10, PointeCom has all
franchises, permits, licenses and any other governmental authority necessary for
the conduct of its business as now being conducted, the lack of which would have
a Material Adverse Effect (the "PointeCom Permits"). The PointeCom Permits are
valid, and PointeCom has not received any written notice that any Governmental
Authority intends to cancel, terminate or not renew any such Permit. The
PointeCom Permits are all the permits that are required by Law for the operation
of the business of PointeCom as conducted at the PointeCom Balance Sheet Date
and the ownership of the assets of PointeCom, except such PointeCom Permits,
which the failure to possess would not have a Material Adverse Effect on
PointeCom. PointeCom has conducted and is conducting its business in substantial
compliance with the PointeCom Permits and is not in violation of any of the
foregoing, except for any violations that individually or in the aggregate do
not have a Material Adverse Effect on PointeCom. Except as specifically
provided in Schedule 6.10, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or adversely affect
the rights and benefits afforded to PointeCom by, any PointeCom Permits, except
for breaches or violations that would not have a Material Adverse Effect on
PointeCom.
6.11. Environmental Matters. Except as set forth in Schedule 6.11, and except
for such matters as would not have a Material Adverse Effect on PointeCom, (a)
PointeCom has complied with and is in compliance, in all material respects, with
all Environmental, Health and Safety Laws, including, without limitation,
Environmental, Health and Safety Laws relating to air, water, land and the
generation, storage, use, handling, transportation, treatment or disposal of
Hazardous Substances; (b) PointeCom has obtained and complied, in all material
respects, with all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Substances and has
reported, to the extent required by all Environmental, Health and Safety Laws,
all past and present sites owned or operated by PointeCom where Hazardous
Substances have been treated, stored, disposed of or otherwise handled; (c) to
PointeCom's knowledge, there have been no releases or threats of releases (as
defined in any Environmental, Health and Safety Laws) at, from, in or on any
property owned or operated by PointeCom; (d) to PointeCom's knowledge, there is
no on-site or off-site location to which PointeCom has transported or disposed
of Hazardous Substances or arranged for the transportation or disposal of
Hazardous Substances which is the subject of any federal, state, local or
foreign enforcement action or any other investigation which could lead to any
claim against the Surviving Corporation, PointeCom or Newco for any clean-up
cost, remedial work, damage to natural resources or personal injury, including,
but not limited to, any claim under (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, (ii) the Resource
Conservation and Recovery Act, (iii) the Hazardous Materials Transportation Act,
or (iv) comparable state and local statutes and regulations; and (e) to
PointeCom's knowledge, PointeCom has no contingent liability in connection with
any release or disposal of any Hazardous Substance into the environment. To
PointeCom's knowledge, none of the past or present sites owned or operated by
PointeCom is currently or has ever been designated as a treatment, storage
and/or disposal facility, nor has any such facility ever applied for a Permit
designating it as a treatment, storage and/or disposal facility, under any
Environmental, Health or Safety Law.
6.12. Labor and Employee Relations. Except as set forth in Schedule 6.12,
PointeCom is not bound by or subject to any arrangement with any labor union.
Except as set forth in Schedule 6.12, no employees of PointeCom are represented
by any labor union or covered by any collective bargaining agreement nor, to
PointeCom's knowledge, is any campaign to establish such representation in
progress. There is no pending or, to PointeCom's knowledge, threatened labor
dispute involving PointeCom and any group of its employees nor has PointeCom
experienced any significant labor interruptions over the past five years.
PointeCom has no knowledge of any significant issues or problems in connection
with the relationship of PointeCom with its employees.
6.13. Insurance. Schedule 6.13 sets forth an accurate list as of the PointeCom
Balance Sheet Date of all insurance policies that are material to PointeCom.
The policies described in such Schedule 6.13 for the current policy year are
currently in full force and effect and, to the knowledge of PointeCom, no
defaults exist under any of them.
6.14. Compensation; Employment Agreements. Schedule 6.14 sets forth an
accurate list of all officers, directors and employees of PointeCom with annual
salaries of $100,000 or more, listing the rate of compensation (and the portions
thereof attributable to salary, bonus, benefits and other compensation,
respectively) of each of such persons as of (a) the PointeCom Balance Sheet Date
and (b) the date hereof. PointeCom shall make available to the Company true,
complete and correct copies of each employment or consulting agreement with any
employee of PointeCom. Except as disclosed on Schedule 6.14, PointeCom is not a
party to or bound by, with respect to any officer, employee or independent
contractor of PointeCom, any (i) employment, termination or severance agreement,
(ii) agreement (A) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving PointeCom
of the nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee extending for a
period of one year or longer or (C) providing severance benefits or other
benefits after the termination of employment not comparable to benefits
available to employees generally, (iii) agreement, plan or arrangement under
which any person may receive payments that may be subject to the tax imposed by
Section 4999 of the Code or included in the determination of such persons
parachute payment under Section 280G of the Code and (iv) agreement or plan,
including any stock option plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting or other realization of the benefits of
which will be accelerated, by the occurrence of the transactions contemplated by
this Agreement or the value of any of the benefits of which will be calculated
on the basis of the transactions contemplated by this Agreement.
6.15. Noncompetition and Nonsolicitation Agreements. Schedule 6.15 sets forth
all agreements containing covenants not to compete or solicit employees to which
PointeCom is bound or under which PointeCom has any material rights or
obligations.
6.16. Litigation and Compliance with Law. Except as set forth in Schedule
6.16, there are no actions, suits or proceedings, pending (of which the
PointeCom has received notice or with respect to which served with process) or,
to the knowledge of PointeCom, threatened against PointeCom, at law or in
equity, or before or by any Governmental Authority having jurisdiction over
PointeCom. No written notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by PointeCom. Except to the extent set
forth in Schedule 6.16, PointeCom has conducted and is conducting its business
in compliance with all Laws applicable to PointeCom, its assets or the operation
of its business, except such non-compliance that would not have a Material
Adverse Effect on PointeCom.
6.17. Taxes. Each of PointeCom and its Subsidiaries has filed all federal,
state, local and other Tax returns it was required to file, and has duly paid in
full or made adequate provision in the books and records for the payment of all
Taxes it was required to pay, except to the extent that such failure to pay or
to reserve would not have a Material Adverse Effect on PointeCom or its
Subsidiaries. All such Tax returns were correct and complete in all material
respects. Neither PointeCom nor its Subsidiaries is currently the beneficiary
of any extension of time within which to file any tax return. PointeCom and its
Subsidiaries have duly withheld and paid or remitted all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other person or entity that
required withholding under any applicable Law, including, without limitation,
any amounts required to be withheld or collected with respect to social
security, unemployment compensation, sales or use taxes or workers compensation,
except where such failure would not have a Material Adverse Effect on PointeCom
or its Subsidiaries. Except as set forth in Schedule 6.17, there are no
examinations in progress or material claims against PointeCom or its
Subsidiaries relating to Taxes for any period or periods prior to and including
the PointeCom Balance Sheet Date and no written notice of any claim for Taxes,
whether pending or threatened, has been received which claim has not been
finally settled. Neither PointeCom nor its Subsidiaries has granted or been
requested to grant any extension of the limitation period not yet closed or
agreed to any extension of time applicable to any claim for Taxes which is still
in effect or assessments with respect to Taxes and has not executed a closing
agreement pursuant to Section 7121 of the Code, or any predecessor provision
thereof or any similar provision of state, local, foreign or other tax law that
relates to the assets or operations of PointeCom or its Subsidiaries which is
still in effect. Neither PointeCom nor its Subsidiaries is a party to any Tax
allocation or sharing agreement. Neither PointeCom nor its Subsidiaries has
ever been (nor has any liability for Taxes because it once was) a member of an
affiliated group filing a consolidated federal income tax return, other than
with respect to the consolidated federal income tax return of PointeCom and its
Subsidiaries, has not incurred any liability for the Taxes of any person under
Treasury Regulations 1.1502-6 (or any similar provision of law) and has never
incurred any liability for the Taxes of any person as a transferee or successor,
by contract or otherwise. The unpaid Taxes of PointeCom and/or its Subsidiaries
(a) did not, as of the PointeCom Balance Sheet Date, exceed any material amount
the amount shown as accrual for Taxes on the PointeCom Interim Balance Sheet and
(b) will not exceed by any material amount that accrual as adjusted for
operation and transactions of PointeCom or its Subsidiaries through the Closing
Date in accordance with the past custom and practice of PointeCom in filing its
tax returns. True and complete copies of (a) any tax examinations and
statements of deficiencies, (b) extensions of statutory limitations and (c) the
federal, state and local Tax returns of PointeCom and its Subsidiaries for the
last three fiscal years have been previously provided to PointeCom. There are
no requests for ruling in respect of any Tax pending between PointeCom or its
Subsidiaries and any Taxing authority. Neither PointeCom nor its Subsidiaries
has ever been taxed under the provisions of Subchapter S of the Code. PointeCom
and its Subsidiaries currently utilize the accrual method of accounting for
income tax purposes; and such method of accounting has not changed in the past
three years. No written notice has been received from any Tax authority in any
jurisdiction in which PointeCom or its Subsidiaries does not file tax returns
that it is or may be subject to taxation by that jurisdiction. There are no
security interests or liens for Taxes on any asset of PointeCom or its
Subsidiaries, except for Permitted Encumbrances. Neither PointeCom nor its
Subsidiaries has filed a consent under section 341(f) of the Code concerning
collapsible corporations and neither PointeCom nor its Subsidiaries has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code at any time during the applicable period set forth in
Section 897(e)(1)(A)(ii) of the Code. None of the assets and properties of
PointeCom or its Subsidiaries secures any indebtedness, the interest on which is
tax-exempt under Section 103(a) of the Code or is an asset or property that
PointeCom or any of its affiliates is or will be required to treat as being (i)
owned by any other person pursuant to the provisions of section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, as in effect immediately before the
enactment of the Tax Reform Act of 1986, or (ii) tax-exempt use property within
the meaning of Section 168(h)(1) of the Code. Neither PointeCom nor its
Subsidiaries has made any payments, is not obligated to make any payments, and
is not a party to any agreement that under certain circumstances could require
it to make any payments, that would not be deductible by reason of the
application of Section 280G of the Code.
6.18. Absence of Changes. Since the PointeCom Balance Sheet Date, except as
set forth in Schedule 6.18, PointeCom has conducted, in all material respects,
its operations in the ordinary course and there has not been:
(a) any material adverse change in the business, operations, properties,
condition (financial or other), assets, liabilities (contingent or otherwise) or
results of operations of PointeCom, individually or in the aggregate;
(b) any damage, destruction or loss (whether or not covered by insurance)
materially adversely affecting the properties or business of PointeCom,
individually or in the aggregate;
(c) except as contemplated by this Agreement or the transactions contemplated
hereby, any change in the authorized capital stock of PointeCom or in its
outstanding securities or any grant of any options, warrants, calls, conversion
rights or commitments;
(d) except as contemplated by this Agreement or the transactions contemplated
hereby, any declaration or payment of any dividend or distribution in respect of
the capital stock or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of PointeCom;
(e) any increase in the compensation payable or to become payable by PointeCom
to its stockholders or to any of its officers, directors, employees, consultants
or agents, except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice, which bonuses and salary increases
are set forth in Schedule 6.14;
(f) any material labor disputes, labor grievances or labor claims filed;
(g) except for the Merger, any sale or transfer, or any agreement to sell or
transfer, any material assets, properties or rights of PointeCom to any person;
(h) any cancellation, or agreement to cancel, any material indebtedness or other
material obligation owing to PointeCom;
(i) any increase in the indebtedness of PointeCom, other than related to the
Class B Convertible Preferred Stock and accounts payable incurred in the
ordinary course of business, consistent with past practices or incurred in
connection with the transactions contemplated by this Agreement;
(j) any plan, agreement or arrangement granting any preferential rights to
purchase or acquire any interest in any of the assets, property or rights of
PointeCom or requiring consent of any party to the transfer and assignment of
any such assets, property or rights;
(k) any purchase or acquisition of, or agreement, plan or arrangement to
purchase or acquire, any property, rights or assets outside of the ordinary
course of PointeCom's business;
(l) any waiver of any material rights or claims of PointeCom;
(m) any material breach, amendment or termination of any material contract,
agreement, Permit or other right to which PointeCom is a party or any of its
property is subject, except that which would not have a Material Adverse Effect
on PointeCom; or
(n) any other material transaction by PointeCom, other than as contemplated by
this Agreement, outside the ordinary course of business.
6.19. Absence of Certain Business Practices. Neither PointeCom nor any of its
Affiliates has given or offered to give anything of value to any governmental
official, political party or candidate for government office that was illegal to
so offer or give nor has it otherwise taken any action which would constitute a
violation of the Foreign Corrupt Practices Act of 1977, as amended, or any
similar Law.
6.20. Competing Lines of Business; Related-Party Transactions. Except as set
forth in Schedule 6.20, no officer or director or any other Affiliate of
PointeCom owns, directly or indirectly, any interest (other than up to five
percent (5%) of any class of securities listed on a national securities exchange
or traded publicly in the over-the-counter market) in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is in a Competitive Business or is a competitor, lessor, lessee,
customer or supplier of PointeCom. Except as set forth in Schedule 6.20, no
officer or director of PointeCom has any interest in any property, real or
personal, tangible or intangible, used in or pertaining to the business of
PointeCom.
6.21. Intangible Property. Schedule 6.21 sets forth an accurate list of all
patents, patent applications, trademarks, service marks, technology, licenses,
trade names, copyrights and other intellectual property or proprietary
property rights owned or used by PointeCom, which are material to the conduct of
PointeCom's business. PointeCom owns or possesses sufficient legal rights to
use all of such items, except where failure to own or possess such rights would
not have a Material Adverse Effect on PointeCom.
6.22. Disclosure. None of the information so provided nor any representation
or warranty of PointeCom to the Company or Newco in this Agreement contains or
will contain (at the time such representation or warranty is repeated) any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements herein, in light of the circumstances under
which they were made, not misleading.
6.23. Year 2000 Compliance. All devices, systems, machinery, information
technology, computer software and hardware, and other date sensitive technology
(jointly and severally its systems) owned by PointeCom and necessary for the
operation of PointeCom's business as presently conducted will be Year 2000
Compliant within a period of time calculated to result in no material disruption
of any of its business operations, and any systems that are not compliant will
not have a Material Adverse Effect on PointeCom.
6.24. Employee Benefit Plans.
(a) Schedule 6.24 sets forth an accurate schedule of each employee benefit plan,
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (ERISA), and all nonqualified deferred compensation
arrangements, whether formal or informal and whether legally binding or not,
under which PointeCom or an ERISA Affiliate has any current or future obligation
or liability or under which any present or former employee of PointeCom or an
ERISA Affiliate, or such present or former employees dependents or
beneficiaries, has any current or future right to benefits (each such plan and
arrangement referred to hereinafter as a PointeCom Plan), and PointeCom has
provided or made available to the Company true and complete copies of such
PointeCom Plans, any trusts and other arrangements related thereto, and
classifications of employees covered thereby as of the PointeCom Balance Sheet
Date. Except as set forth in Schedule 6.27, neither PointeCom nor any ERISA
Affiliate sponsors, maintains or is obligated to contribute currently, or at any
time during the preceding five years, has sponsored, maintained or was obligated
to contribute to, any plan, program, fund or arrangement that constitutes an
employee pension benefit plan as defined in Section 3(2) of ERISA that is
subject to Title IV of ERISA. Each PointeCom Plan may be terminated by
PointeCom, or if applicable, by an ERISA Affiliate at any time without any
liability, cost or expense, other than costs and expenses that are customary in
connection with the termination of a PointeCom Plan. For purposes of this
Agreement, the term PointeCom ERISA Affiliate means any corporation or trade or
business which is, or ever was, treated as a single employer with PointeCom
under Section 414(b), (c), (m) or (o) of the Code.
(b) Except as set forth on Schedule 6.24(b), each Plan listed in Schedule 6.24
is in compliance in all material respects with its own terms and the applicable
provisions of ERISA, the Code, and any other applicable Law. Except as set
forth in Schedule 6.24, with respect to each Plan of PointeCom and each
PointeCom ERISA Affiliate (other than a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA), all reports and other documents required under
ERISA or other applicable Law to be filed with any Governmental Authority, the
failure of which to file could reasonably be expected to result in a material
liability to PointeCom or any PointeCom ERISA Affiliate, including all Forms
5500 or required to be distributed to participants or beneficiaries, have been
duly and timely filed or distributed. True and complete copies of all such
reports and other documents with respect to the past three years (if applicable)
for each Plan have been provided to, or made available to, the Company. No
accumulated funding deficiency (as defined in Section 412(a) of the Code) with
respect to any Plan has been incurred (without regard to any waiver granted
under Section 412 of the Code), nor has any funding waiver from the Internal
Revenue Service been received or requested. Except as set forth in Schedule
6.24, each Plan that is intended to be qualified within the meaning of Section
401(a) of the Code (a Qualified Plan) is, and has been during the period from
its adoption to the date hereof, so qualified, both as to form and operation and
all necessary approvals of Governmental Authorities have been timely obtained.
Except as set forth in Schedule 6.24, all accrued contribution obligations, and
any other liability to pay benefits, of PointeCom with respect to any Plan have
either been fulfilled in their entirety or are fully reflected in the Financial
Statements.
(c) Except as set forth in Schedule 6.24(c), no Plan has incurred or is
reasonably likely to incur, and neither PointeCom nor any PointeCom ERISA
Affiliate has incurred or is reasonably likely to incur with respect to any
Plan, any liability for excise tax or penalty due to the Internal Revenue
Service or any other governmental authority, and no Plan termination or
discontinuance of contributions to any Plan has resulted in or is reasonably
likely to result in the retroactive disqualification of any Plan qualified under
Section 401(a) of the Code or has resulted in or is reasonably likely to result
in any liability to PointeCom or any ERISA Affiliate. There have been no
terminations, partial terminations or discontinuances of contributions by
PointeCom or any PointeCom ERISA Affiliate to any Qualified Plan during the
preceding five years.
(d) Except as set forth in Schedule 6.24(d), neither PointeCom nor any PointeCom
ERISA Affiliate has made any promises of retirement or other benefits to
employees, except as set forth in the Plans, and neither PointeCom nor any
PointeCom ERISA Affiliate maintains or has established any arrangement for
retiree medical liabilities or any Plan that is a welfare benefit plan within
the meaning of Section 3(1) of ERISA that provides for continuing benefits or
coverage for any participant or any beneficiary of a participant after such
participants termination of employment, except as may be required by Part 6 of
Subtitle B of Title I of ERISA and Section 4980B of the Code and similar state
Law provisions. Except as set forth in Schedule 6.24(d), neither PointeCom nor
any PointeCom ERISA Affiliate maintains, has established or has ever
participated in a welfare benefit fund as defined in Section 419(e) of the Code,
a multiple employer welfare benefit arrangement as described in Section 3(40)(A)
of ERISA or a welfare benefit plan, within said meaning, which provides benefits
other than through insurance policies. Except as set forth in Schedule 6.24,
neither PointeCom nor any PointeCom ERISA Affiliate has any current or future
obligation or liability with respect to a Plan pursuant to the provisions of a
collective bargaining agreement.
(e) Except as set forth in Schedule 6.24(e), neither PointeCom nor any PointeCom
ERISA Affiliate has incurred any material liability to the Pension Benefit
Guaranty Corporation in connection with any Plan. The assets of each Plan that
is subject to Title IV of ERISA are sufficient to provide the benefits under
such Plan, the payment of which the Pension Benefit Guaranty Corporation would
guarantee in full if such Plan were terminated, and such assets are also
sufficient to provide all other benefits liabilities (as defined in ERISA
Section 4001(a)(16)) due under such Plan upon termination.
(f) Except as set forth in Schedule 6.24(f), no reportable event (as defined in
Section 4043 of ERISA) has occurred and is continuing with respect to any Plan.
There are no pending, or to PointeCom's knowledge, threatened claims, lawsuits
or actions (other than routine claims for benefits in the ordinary course)
asserted or instituted against, and PointeCom has no knowledge of any threatened
litigation or claims against, the assets of any Plan or its related trust or
against any fiduciary of a Plan with respect to the operation of such Plan. To
PointeCom's knowledge, there are no investigations or audits of any Plan by any
Governmental Authority currently pending and there have been no such
investigations or audits that have been concluded that resulted in any liability
to PointeCom or any PointeCom ERISA Affiliate that has not been fully
discharged. Neither PointeCom nor any PointeCom ERISA Affiliate has
participated in any voluntary compliance or closing agreement programs
established with respect to the form or operation of a Plan.
(g) Neither PointeCom nor any PointeCom ERISA Affiliate has engaged in, and no
PointeCom Plan has otherwise been involved in, any prohibited transaction,
within the meaning of Section 406 of ERISA or Section 4975 of the Code, for
which exemption was not available. No fiduciary of any PointeCom Plan is in
violation of any duty imposed by ERISA. Except as set forth in Schedule
6.24(g), neither PointeCom nor any PointeCom ERISA Affiliate is, or ever has
been, a participant in or is obligated to make any payment to a multiemployer
plan, or to a multiple employer plan described in Section 413(c) of the Code.
To PointeCom's knowledge, no person or entity that was engaged by PointeCom or
any PointeCom ERISA Affiliate as an independent contractor within the last five
years reasonably can or will be characterized or deemed to be an employee of
PointeCom or any PointeCom ERISA Affiliate under applicable Laws for any
purpose whatsoever, including, without limitation, for purposes of federal,
state and local income taxation, workers compensation and unemployment insurance
and Plan eligibility.
6.25. Tax Free Reorganization.
(a) There is no plan or intention by and to the knowledge of PointeCom, there is
no plan or intention on the part of the shareholders of PointeCom who own five
percent (5%) or more of the PointeCom capital stock, or the remaining
shareholders of PointeCom to sell, exchange or otherwise dispose of a number of
share of the Company Common Stock or Company Preferred Stock received in the
Merger that would reduce the PointeCom shareholders ownership of the Company
capital stock to a number of shares having a value as of the Effective Time, of
less than fifty percent (50%) of the value of all of the formerly outstanding
capital stock of PointeCom as of the same date. For purposes of this
representation, shares of PointeCom capital stock surrendered by dissenters or
exchanged for cash in lieu of fractional shares of Company stock will be treated
as outstanding PointeCom capital stock on the date of the transaction.
Moreover, shares of PointeCom capital stock and shares of Company capital stock
held by PointeCom shareholders and otherwise sold, redeemed or disposed of prior
to or subsequent to the transaction will be considered in making this
representation.
(b) PointeCom has no plan or intention to issue additional shares of its stock
that would result in the Company losing control of PointeCom within the meaning
of Section 368 (c) of the Code.
(c) PointeCom has no plan or intention to liquidate; to merge into another
corporation (except as contemplated by this Agreement); to sell or otherwise
dispose of any of its assets, except for dispositions made in the ordinary
course of business; or to sell or otherwise dispose of any of the stock acquired
in the transaction, except for transfers described in Section 368 (a)(2)(C) of
the Code.
(d) The Company, PointeCom, and the shareholders of PointeCom will pay their
respective expenses, if any, incurred in connection with the transaction.
(e) At the time of the transaction, PointeCom will not have any outstanding
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in PointeCom that, if exercised or
converted, would affect the Company's acquisition or retention of control of
PointeCom, as defined in Section 368 (c) of the Code.
(f) The Company does not own, directly or indirectly, nor has it owned during
the past five years, directly or indirectly, any stock of PointeCom.
(g) Following the Merger, PointeCom will continue its historic business or use a
significant portion of its historic business assets in a business.
(h) PointeCom is not an investment company as defined in Section 368
(a)(2)(F)(iii) and (iv) of the Code.
(i) PointeCom will pay its dissenting shareholders the value of their stock out
of its own funds, no funds will be supplied for that purpose, directly or
indirectly, by the Company, nor will the Company directly or indirectly
reimburse PointeCom for any payments to dissenters.
(j)As of the Effective Time, the fair market value of the assets of PointeCom
will exceed the sum of its liabilities plus the liabilities, if any, to which
the assets are subject.
(k) PointeCom is not a collapsible corporation under Section 341 of the Code.
(l) The payment of cash in lieu of fractional shares of Company Common Stock is
solely for the purpose of avoiding the expense and inconvenience to the Company
of issuing fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the Merger to
the PointeCom stockholders instead of issuing fractional shares of Company
Common Stock will not exceed one percent (1%) of the total consideration that
will be issued in the Merger to the PointeCom stockholders in exchange for their
shares of PointeCom capital stock. The fractional shares interests of each
PointeCom stockholder will be aggregated, and no PointeCom stockholder will
receive cash in an amount greater to or greater than the value of one full share
of Company Common Stock.
(m) None of the compensation received by any shareholder-employee of PointeCom
will be separate consideration for, or allocable to, any of their shares of
PointeCom capital stock; none of the shares of Company Common Stock or Company
Preferred Stock received by any shareholder-employee will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any shareholder-employee will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arms length for similar services.
(n) The holders of PointeCom Common Stock and PointeCom Preferred Stock will
receive voting shares of Company Common Stock and voting shares of Company
Preferred Stock having a fair market value equal to at least 50% of the value of
their PointeCom capital stock at the Effective Time. Under the terms of the
Merger, the stockholders of PointeCom will receive solely Company Common Stock
and Company Preferred Stock in exchange for such PointeCom capital stock.
However, redemptions or acquisitions of PointeCom capital stock by the Company
or PointeCom or any related party and extraordinary distributions (i.e.,
distributions with respect to stock other that regular, normal dividends), prior
to and in connection with the Merger will be taken into account for purposes of
this representation. Neither the Company nor a related party has a plan or
intention to reacquire or acquire any of the Company Common Stock or Company
Preferred Stock issued to PointeCom stockholders in the Merger. For purposes of
this representation, a related party includes any corporation (i) that is a
member of any affiliated group of which PointeCom or the Company is a member, as
defined in Section 1504 (determined without regard to Section 1504(b)), or (ii)
a corporation in which the Company owns, directly or indirectly, stock
possessing at least fifty percent (50%) of the total combined voting power of
all classes of stock entitled to vote, or at least fifty percent (50%) of the
total value of shares of all classes of stock (determined by taking into account
the constructive stock ownership rules of Section 318(a) of the Code as modified
by Section 304(c)). For purposes of the foregoing, (i) a corporation will be a
related party if either of the relationships described above exists immediately
before the Merger, immediately after the Merger, or is created in connection
with the Merger, and (ii) a related party will be considered as acquiring its
proportionate share of any Company Common Stock or Company Preferred Stock
acquired by a partnership in which it is a partner.
(o) PointeCom is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
(p) There are no non-voting shares of PointeCom capital stock outstanding prior
to the Merger.
6.26. Accounts and Notes Receivable. Schedule 6.26 sets forth an accurate list
of the accounts and notes receivable of PointeCom as of the Balance Sheet Date.
Receivables from and advances to employees are separately identified in Schedule
6.26. Schedule 6.26 also sets forth an accurate aging of all accounts and notes
receivable as of the Balance Sheet Date, showing amounts due in 30-day aging
categories. The trade and other accounts receivable of PointeCom, including
without limitation those classified as current assets on the Interim Balance
Sheet, are bona fide receivables, were acquired in the ordinary course of
business, are stated in accordance with GAAP and are collectible in the amounts
shown on Schedule 6.26, net of reserves reflected in the Interim Financial
Statements with respect to the accounts receivable as of the Balance Sheet Date,
and net of reserves reflected in the books and records of PointeCom (consistent
with the methods used in the Interim Financial Statements) with respect to
receivables of PointeCom after the Balance Sheet Date.
None of the representations and warranties of PointeCom shall survive the
Closing hereunder.
ARTICLE VII. CERTAIN COVENANTS
7.1. Conduct of Business. From the date of this Agreement until the Effective
Time, or earlier termination of this Agreement pursuant to the terms of this
Agreement, each of PointeCom, Newco and Company shall conduct its business only
in the ordinary course and, without limiting the generality of the foregoing,
each of PointeCom, Newco and the Company shall not, except as otherwise
expressly provided in this Agreement or unless the written consent of the other
parties shall have been obtained:
(a) except as expressly provided elsewhere in this Agreement or pursuant to the
terms of any outstanding securities, make or agree to make any change in its
authorized capital stock, other than, in the case of the Company, the amendment
to its Articles of Incorporation to create (x) the Company Class D Convertible
Senior Preferred Stock having in all material respects the same rights and
preferences as the PointeCom Class A Preferred Stock, (y) the Company Class E
Convertible Senior Preferred Stock having in all material respects the same
rights and preferences as the PointeCom Class B Preferred Stock (except that the
Company Preferred Stock shall be convertible into such number of shares of
Company Common Stock as would have been issued to the holders of the PointeCom
Preferred Stock if such holders had converted the PointeCom Preferred Stock into
PointeCom Common Stock prior to the Effective Time), and (z) the Class C
Convertible Senior Preferred Stock and related warrants issuable upon conversion
of the PointeCom Loan;
(b) none of the Company, Newco or PointeCom will grant any option, warrant,
purchase right, subscription right, conversion right, exchange right or other
contract, commitment or security providing for the issuance or sale of any
capital stock, or otherwise causing to become outstanding any capital stock, or
issue, sell, authorize or otherwise dispose of any of its capital stock (Stock
Rights), except (i) upon the conversion or exercise of Stock Rights outstanding
as of the date of this Agreement; (ii) for stock options issued to employees of
the Company and its Subsidiaries or PointeCom and its Subsidiaries in a manner
consistent with past practice which (I) do not provide for the issuance of more
than 200,000 shares of common stock of the Company or PointeCom in any calendar
quarter, (II) are issued at not less than the market price of the Company Stock
on the date of grant, (III) are not issued to any executive officer or director
of the Company or its Subsidiaries, and (IV) do not provide for accelerated
vesting as a result of the Merger.
(c) declare or pay any dividend or distribution, other than as provided in
Section 7.1(f), in respect of its capital stock, or except as expressly provided
elsewhere in this Agreement or pursuant to the terms of any outstanding
securities, directly or indirectly redeem, combine, split, purchase or otherwise
acquire any of its capital stock;
(d) increase the compensation payable or to become payable to any of its
officers, directors, employees, consultants or agents, except in the ordinary
course of business consistent with past practices;
(e) adopt any new or materially amend any existing employee benefit plan or any
employment agreement or severance agreement, except as may be required by law;
(f) sell or transfer, or enter into any agreement to sell or transfer, any
material assets, properties or rights to any person other than sales or
transfers in the ordinary course of business consistent with past practice;
provided, however, that the Company shall have the right and option to dispose
of by sale or otherwise its subsidiary xxxxxxxxxxxxxx.xxx prior to the Closing
Date and PointeCom shall have the right and option to dispose of (or arrange for
the disposition subsequent to the Effective Time) its interest in Telecommute
Solutions, Inc. by distributing such interest to its shareholders, or otherwise,
prior to the Closing Date;
(g) cancel, or agree to cancel, any of its material receivables;
(h) increase indebtedness, other than accounts payable incurred in the ordinary
course of business, consistent with past practices, incurred in connection with
the construction, development, deployment and/or operation of the Company's
telecommunications network in Mexico or incurred in connection with the
transactions contemplated by this Agreement and as contemplated in Section 7.10
below;
(i) encumber any of its property or assets except for Permitted Encumbrances or
except encumbrances incurred in connection with the construction, development,
deployment and/or operation of the Company's telecommunications network in
Mexico;
(j) make any commitments for capital improvements not disclosed on Schedule 7.1;
(k) enter into, or agree to enter into, any plan, agreement or arrangement
granting any preferential rights to purchase or acquire any interest in any of
its assets, property or rights or requiring consent of any party to the transfer
and assignment of any such assets, property or rights except plans, agreements
or arrangements entered into in connection with the construction, development,
deployment and/or operation of the Company's telecommunications network in
Mexico;
(l) purchase or acquire, or enter into any agreement, plan or arrangement to
purchase or acquire, any property, rights or assets outside of the ordinary
course of business except those purchases or acquisitions made in connection
with the construction, development, deployment and/or operation of the Company's
telecommunications network in Mexico;
(m) form or cause to be formed any subsidiary other than in the case of the
Company, Newco;
(n) fail to keep its material properties insured substantially to the same
extent as they are currently insured;
(o) waive any of its material rights or claims; or
(p) materially breach, materially change the terms of, materially amend or
terminate any material contract, agreement, Permit or other right to which it is
a party or any of its property is subject.
In the event either party shall request the other party to consent in writing to
an action otherwise prohibited by this Section 7.1, such other party shall use
reasonable efforts to respond in a prompt and timely fashion (but in no event
later than ten (10) business days following such request), but may otherwise
respond affirmatively or negatively in its sole discretion.
7.2. Reasonable Efforts. Each of the Company and PointeCom shall use all
commercially reasonable efforts to preserve intact its business organization and
to preserve its goodwill as to customers, suppliers and others having business
relations with it.
7.3. Inspection. The Company shall permit representatives of PointeCom, and
PointeCom shall permit representatives of the Company, during normal business
hours, to examine the other party's properties, books, contracts, Tax returns
and other records and shall furnish such representatives with all such
information in its possession or control concerning such affairs as they may
reasonably request.
7.4. Restraint on Solicitation.
(a) Company Exclusivity.
(i) The Company shall, and shall cause its Subsidiaries and Representatives to,
immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any Persons conducted
heretofore by the Company, its Subsidiaries or any of their respective
Affiliates, officers, directors, employees, financial advisors, agents or
representatives (each a Representative) with respect to any proposed, potential
or contemplated Acquisition Proposal.
(ii) From and after the date hereof, without the prior written consent of
PointeCom, the Company will not authorize or permit any of its Subsidiaries to,
and shall cause any and all of its Representatives not to, directly or
indirectly, (A) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, an Acquisition Proposal,
or (B) engage in negotiations or discussions with any Company Third Party
concerning, or provide any non-public information to any person or entity
relating to, an Acquisition Proposal, or (C) enter into any letter of intent,
agreement in principle or any acquisition agreement or other similar agreement
with respect to any Acquisition Proposal; provided, however, that nothing
contained in this Section 7.4(a)(ii) shall prevent the Company or the Company
Board of Directors prior to receipt of the Requisite Stockholder Approval of the
Company stockholders, from furnishing non-public information to, or entering
into discussions or negotiations with, any Company Third Party in connection
with an unsolicited, bona fide written proposal for an Acquisition Proposal by
such Company Third Party, if and only to the extent that (1) such Company Third
Party has made a written proposal to the Company Board of Directors to
consummate an Acquisition Proposal, (2) the Company Board of Directors
determines in good faith, based upon the advice of a financial advisor of
nationally recognized reputation, that such Acquisition Proposal is reasonably
capable of being completed on substantially the terms proposed, and would, if
consummated, result in a transaction that would provide greater value to the
holders of the shares of Company Common Stock than the transaction contemplated
by this Agreement (a Superior Proposal), (3) the failure to take such action
would, in the reasonable good faith judgment of the Company Board of Directors,
based upon a written opinion of the Company's outside legal counsel, be a
violation of its fiduciary duties to the Company's stockholders under applicable
law, and (4) prior to furnishing such non-public information to, or entering
into discussions or negotiations with, such Person, the Company Board of
Directors receives from such Person an executed confidentiality agreement that
provides prior notice of its decision to take such action to PointeCom. The
Company agrees not to release any Company Third Party from, or waive any
provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another Person who has made, or who may
reasonably be considered likely to make, an Acquisition Proposal, unless the
failure to take such action would, in the reasonable good faith judgment of the
Company Board of Directors, based upon the written opinion of the Company's
outside legal counsel, be a violation of its fiduciary duties to the Company
stockholders under applicable law and such action is taken prior to receipt of
the Requisite Stockholder Approval of the Company stockholders. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding sentence by any Representative of the Company or any
of its Subsidiaries shall be deemed to be a breach of this Section 7.4(a) by the
Company.
(iii) The Company shall notify PointeCom promptly after receipt by the Company
or the Company's knowledge of the receipt by any of its Representatives of any
Acquisition Proposal or any request for non-public information in connection
with an Acquisition Proposal or for access to the properties, books or records
of the Company by any Person that informs such party that it is considering
making or has made an Acquisition Proposal. Such notice shall be made orally
and in writing and shall indicate the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact. The Company shall keep
PointeCom informed of the status (including any change to the material terms) of
any such Acquisition Proposal or request for non-public information.
(iv) The Company Board of Directors may not withdraw or modify, or propose to
withdraw or modify, in a manner adverse to PointeCom, the approval or
recommendation by the Company Board of this Agreement or the Merger unless,
following the receipt of a Superior Proposal but prior to receipt of the
Requisite Stockholder Approval of the Company stockholders, in the reasonable
good faith judgment of the Company Board of Directors, based upon the written
opinion of Company's outside legal counsel, the failure to do so would be a
violation of the Company Board of Directors fiduciary duties to the Company's
stockholders under applicable law; provided, however, that, the Company Board of
Directors shall submit this Agreement and the Merger to the Company's
stockholders for adoption and approval, whether or not the Company Board of
Directors at any time subsequent to the date hereof determines that this
Agreement is no longer advisable or recommends that the stockholders of the
Company reject it or otherwise modifies or withdraws its recommendation. Unless
the Company Board of Directors has withdrawn its recommendation of this
Agreement in compliance herewith, the Company shall use its best efforts to
solicit from the Company's stockholders proxies in favor of (a) approval of the
issuance of shares of Company Common Stock in connection with the Merger as
provided in this Agreement in accordance with the rules of NASDAQ and (b) an
amendment to the Company's articles of incorporation to increase the authorized
capital stock of the Company in accordance with the Texas Business Corporation
Act and its articles of incorporation and by-laws.
(v) In the event the Company receives a Superior Proposal, the Company shall
offer to PointeCom the right to equal such Superior Proposal or make a proposal
that is superior to the Company's stockholders than such Superior Proposal. If
PointeCom wishes to exercise such right, it must give the Company written notice
of its decision to do so within five Business Days after the Company gives
written notice to Pointe Com of such Superior Proposal.
(b) PointeCom Exclusivity.
(i) PointeCom shall, and shall cause its Subsidiaries and Representatives to,
immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any Persons conducted
heretofore by PointeCom, its Subsidiaries or any of their Representatives with
respect to any proposed, potential or contemplated Acquisition Proposal.
(ii) From and after the date hereof, without the prior written consent of the
Company, PointeCom will not authorize or permit any of its Subsidiaries to, and
shall cause any and all of its Representatives not to, directly or indirectly,
(A) solicit, initiate, or encourage any inquiries or proposals that constitute,
or could reasonably be expected to lead to, an Acquisition Proposal, or (B)
engage in negotiations or discussions with any PointeCom Third Party concerning,
or provide any non-public information to any person or entity relating to, an
Acquisition Proposal, or (C) enter into any letter of intent, agreement in
principle or any acquisition agreement or other similar agreement with respect
to any Acquisition Proposal; provided, however, that nothing contained in this
Section 7.4(b)(ii) shall prevent PointeCom or the PointeCom Board of Directors
prior to receipt of the Requisite Stockholder Approval of PointeCom
stockholders, from furnishing non-public information to, or entering into
discussions or negotiations with, any PointeCom Third Party in connection with
an unsolicited, bona fide written proposal for an Acquisition Proposal by such
PointeCom Third Party, if and only to the extent that (1) such PointeCom Third
Party has made a written proposal to the PointeCom Board of Directors to
consummate an Acquisition Proposal, (2) the PointeCom Board of Directors
determines in good faith, based upon the advice of a financial advisor of
nationally recognized reputation, that such Acquisition Proposal is reasonably
capable of being completed on substantially the terms proposed, and would, if
consummated, result in a transaction that would provide greater value to the
holders of the shares of PointeCom Common Stock than the transaction
contemplated by this Agreement (a Superior PointeCom Proposal), (3) the failure
to take such action would, in the reasonable good faith judgment of the
PointeCom Board of Directors, based upon a written opinion of PointeCom outside
legal counsel, be a violation of its fiduciary duties to PointeCom's
stockholders under applicable law, and (4) prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such Person,
PointeCom's Board of Directors receives from such Person an executed
confidentiality agreement that provides prior notice of its decision to take
such action to the Company. PointeCom agrees not to release any PointeCom Third
Party from, or waive any provision of, any standstill agreement to which it is a
party or any confidentiality agreement between it and another Person who has
made, or who may reasonably be considered likely to make, an Acquisition
Proposal, unless the failure to take such action would, in the reasonable good
faith judgment of the PointeCom Board of Directors, based upon written opinion
of PointeCom outside legal counsel, be a violation of its fiduciary duties to
PointeCom stockholders under applicable law and such action is taken prior to
receipt of the Requisite Stockholder Approval of PointeCom stockholders.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any Representative of
PointeCom or any of its Subsidiaries shall be deemed to be a breach of this
Section 7.4(b) by PointeCom.
(iii) PointeCom shall notify the Company promptly after receipt by PointeCom or
PointeCom's knowledge of the receipt by any of its Representatives of any
Acquisition Proposal or any request for non-public information in connection
with an Acquisition Proposal or for access to the properties, books or records
of PointeCom by any Person that informs such party that it is considering making
or has made an Acquisition Proposal. Such notice shall be made orally and in
writing and shall indicate the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact. PointeCom shall keep the
Company informed of the status (including any change to the material terms) of
any such Acquisition Proposal or request for nonpublic information.
(iv) The PointeCom Board of Directors may not withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Company, the approval or
recommendation by PointeCom Board of this Agreement or the Merger unless,
following the receipt of a Superior PointeCom Proposal but prior to receipt of
the Requisite Stockholder Approval of PointeCom stockholders, in the reasonable
good faith judgment of PointeCom Board of Directors, based upon the written
opinion of PointeCom's outside legal counsel, the failure to do so would be a
violation of the PointeCom Board of Director's fiduciary duties to PointeCom's
stockholders under applicable law; provided, however, that, the PointeCom Board
of Directors shall submit this Agreement and the Merger to PointeCom's
stockholders for adoption and approval, whether or not PointeCom Board of
Directors at any time subsequent to the date hereof determines that this
Agreement is no longer advisable or recommends that the stockholders of
PointeCom reject it or otherwise modifies or withdraws its recommendation.
Unless the PointeCom Board of Directors has withdrawn its recommendation of this
Agreement in compliance herewith, PointeCom shall use its best efforts to
solicit from PointeCom's stockholders proxies in favor of adoption and approval
of the Merger and this Agreement in accordance with the NRS and its articles of
incorporation and by-laws.
(v) In the event PointeCom receives a Superior PointeCom Proposal, PointeCom
shall offer to the Company the right to equal such Superior PointeCom Proposal
or make a proposal that is superior to PointeCom's stockholders than such
Superior PointeCom Proposal. If the Company wishes to exercise such right, it
must give PointeCom written notice of its decision to do so within five Business
Days after PointeCom gives written notice to the Company of such Superior
PointeCom Proposal.
7.5. Update Information. Not earlier than ten days and not less than five days
before the date scheduled for Closing, each party to this Agreement shall
correct and supplement in writing any information furnished on Schedules that,
to the knowledge of such party, is incorrect or incomplete in any material
respect, and shall promptly furnish such corrected and supplemented information
to the other parties, so that such information shall be correct and complete at
the time such updated information is so provided. Thereafter, to the Closing,
such party shall notify the other parties in writing of any changes or
supplements to the updated information needed, to the knowledge of such party,
to make such information correct and complete at all times to the Closing. If
any corrected or supplemented information or schedules are not objected to in
writing by the receiving party or parties within five Business Days of receipt,
such shall be deemed accepted without objection.
7.6. Future Cooperation; Tax Matters. The Company and PointeCom shall each
deliver or cause to be delivered to the other following the Closing such
additional instruments as the other may reasonably request for the purpose of
fully carrying out this Agreement. The Company and PointeCom will cooperate and
use their commercially reasonable efforts to have the present officers,
directors and employees cooperate with each other at and after the Closing in
furnishing information, evidence, testimony and other assistance in connection
with any actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing. The party
requesting cooperation, information or actions under this Section 7.6 shall
reimburse the other party for all reasonable out-of-pocket costs and expenses
paid or incurred in connection therewith.
7.7. Expenses. Each party will pay the fees, expenses and disbursements of
such party and its agents, representatives, financial advisors, accountants and
counsel incurred in connection with the execution, delivery and performance of
this Agreement and any amendments hereto and the consummation of the transaction
contemplated hereby. Notwithstanding the immediately preceding sentence, in the
event this Agreement is terminated after the preparation of the Joint Proxy
Statement/Prospectus has begun, the
Company and PointeCom shall each pay 50% of the fees and expenses incurred in
connection with such Joint Proxy Statement/Prospectus; and the Company shall
reimburse PointeCom for all expenses associated with the PointeCom Loan and in
the event the Note is converted into Class C Convertible Senior Preferred Stock,
any expenses of PointeCom associated with the conversion shall be reimbursed.
7.8. Registration Statement and Proxy Statement.
(a) The Company shall promptly prepare and file a registration statement on Form
S-4 (which registration statement, in the form it is declared effective by the
SEC, together with any and all amendments and supplements thereto and all
information incorporated by reference therein, is referred to herein as the
Registration Statement) under and pursuant to the provisions of the 1933 Act for
the purpose of registering the Company Common Stock, the Company Preferred
Stock, and the Surviving Securities to be issued in the Merger, together with
any Company Common Stock issuable upon conversion of the Company Preferred Stock
or upon exercise of the Surviving Securities (the Underlying Securities).
PointeCom shall be allowed to participate in the preparation and review of the
Registration Statement prior to filing with the SEC by the Company. The Company
shall use commercially reasonable efforts to receive and respond to the comments
of the SEC and have the Registration Statement declared effective. The Company
and PointeCom shall promptly mail to their respective stockholders the proxy
statement in its definitive form contained in the Registration Statement. Such
proxy statement shall also serve as the prospectus to be included in the
Registration Statement (such proxy statement, prospectus, and any amendments or
supplements thereto, the Joint Proxy Statement/Prospectus). Each of PointeCom
and the Company agrees to provide as promptly as practical to the other, such
information concerning its business and financial statements and affairs as, in
the reasonable judgment of counsel for the other party, may be required or
appropriate for inclusion in the Registration Statement and the Joint Proxy
Statement/Prospectus and to cause its counsel and auditors to cooperate with the
other counselors and auditors in the preparation of the Registration Statement
and the Joint Proxy Statement/Prospectus. The Company shall use its
commercially reasonable efforts to have the Company Common Stock to be issued in
the Merger, or upon conversion of the Company Preferred Stock and the Surviving
Securities to be listed on NASDAQ, effective with the issuance thereof.
7.9. Company Financings. Upon execution of this Agreement, PointeCom shall
make a loan to the Company in the amount of $10,000,000 (the PointeCom Loan)
upon the terms and conditions set forth on Exhibit B attached hereto. The
outstanding $1,500,000 loan from PointeCom to the Company shall be repaid by the
Company simultaneously with PointeCom's funding of the PointeCom Loan. The net
proceeds of such loan ($8,481,500) will be held in escrow and disbursed pursuant
to the terms of the escrow agreement attached hereto as Exhibit E.
7.10. Voting Agreements. The Company and PointeCom shall use their best
efforts to cause the Voting Agreement in the form attached hereto as Exhibit F
to be executed by (i) the stockholders owning a majority of the voting power of
the outstanding capital stock of PointeCom and (ii) stockholders owning37% of
the voting power of the outstanding capital stock of the Company. The Company,
as the sole stockholder of Newco, hereby consents to the adoption of this
Agreement by Newco and agrees that such consent shall be treated for all
purposes as a vote duly adopted at a meeting of the stockholders of Newco for
this purpose.
7.11. Company Board of Directors and Officers. Upon consummation of the
Merger, the Board of Directors of the Company shall be adjusted in size and
membership so that the total number of directors is nine, of which six of the
initial members shall be named by PointeCom and three of the initial members
shall be named by the Company. In connection with the next two elections of
directors of the Company by the shareholders of the Company that occur
subsequent to election of the initial Board of Directors as provided in the
preceding sentence, the then existing Board of Directors of the Company shall
determine the size of the board and a slate of nominees to be submitted to the
shareholders of the Company. Of these nominees, a majority of the members of
the then existing board who were designated by the Company (or elected to
succeed such designees pursuant the procedure described in this sentence) shall
have the right to designate three members of such slate of nominees. Prior to
Closing, the By-laws (or other appropriate governing instruments) of the Company
shall be appropriately amended to reflect these provisions for determining
nominees for election to the Board of Directors subsequent to consummation of
the Merger.
7.12. Key Managers and Employees. Prior to Closing, and subject to the
approval of the Company and PointeCom, the Boards of Directors of the Company
and PointeCom shall designate certain officers, directors, managers and
employees of the respective companies as the recipients of severance and/or
option agreements to be entered into as of the Effective Time. All accrued
bonuses shall be paid to employees of both companies for calendar year 1999.
7.13. Notices and Consents. Each of the Company, Newco and PointeCom will give
any required notices (and will cause each of their respective Subsidiaries to
give any required notices) to third parties, and will use commercially
reasonable efforts to obtain (and will cause each of their respective
Subsidiaries to use commercially reasonable efforts to obtain) any third-party
consents that may be required to consummate the Merger.
7.14. Indemnification of Directors and Officers of PointeCom.
(a) The Company agrees that, at the Effective Time, all rights to
indemnification existing in favor of the present or former directors and
officers of PointeCom (as such), or present or former officers or directors of
PointeCom serving or who served at PointeCom's request as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise (together with such persons heirs,
executors or administrators, a Company Indemnified Party and collectively, the
Company Indemnified Parties), as provided in the Company's Organizational
Documents and the indemnification agreements with such present and former
directors and officers as in effect as of the date hereof with respect to
matters occurring at or prior to the Effective Time, all of which agreements are
set forth on Schedule 7.14 attached hereto, shall survive the Merger and shall
continue in full force and effect and without modification (other than
modifications which would enlarge the indemnification rights) for a period of
not less than six years and the Surviving Corporation shall comply fully with
its obligations hereunder and thereunder.
(b) Any Company Indemnified Party wishing to claim indemnification under Section
7.14(a), notwithstanding anything to the contrary in the provisions set forth in
the Company's or the Surviving Corporations certificate of incorporation,
by-laws or other agreements respecting indemnification of directors or officers,
upon learning of any such claim, action, suit, proceeding or investigation,
shall promptly notify the Company thereof, but the failure to so notify shall
not relieve the Company of any liability it may have to such Indemnified Party
if such failure does not materially prejudice the Company. In the event of any
such claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (A) the Company or the Surviving Corporation shall
have the right following the Effective Time to assume the defense thereof and
Surviving Corporation shall not be liable to such Company Indemnified Parties
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Company Indemnified Parties in connection with the defense
thereof, except that if the Company or the Surviving Corporation fails to assume
such defense or counsel for the Company Indemnified Party advises that there are
issues which raise conflicts of interest between the Company or the Surviving
Corporation, on the one hand, and the Company Indemnified Parties, on the other
hand, the Company Indemnified Parties may retain counsel satisfactory to them,
and the Company or Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Company Indemnified Parties promptly as
statements therefor are received; provided, however, that Surviving Corporation
and the Company shall be obligated to pay for only one firm of counsel for all
Company Indemnified Parties in any jurisdiction unless the use of one counsel
for such Company Indemnified Parties would present such counsel with a conflict
of interest, in which case Surviving Corporation and the Company need only pay
for separate counsel to the extent necessary to resolve such conflict; (B) the
Company Indemnified Parties will reasonably cooperate in the defense of any such
matter; and (C) Surviving Corporation and the Company shall not be liable for
any settlement effectuated without its express prior written consent, which
consent shall not be unreasonably withheld or delayed. Surviving Corporation
and the Company shall not settle any action or claim identified in this Section
7.14(b) in any manner that would impose any liability or penalty on a Company
Indemnified Party not paid by the Company or the Surviving Corporation without
such Company Indemnified Party's prior written consent, which consent shall not
be unreasonably withheld or delayed.
(c) Notwithstanding anything contained in clause (b) above, Surviving
Corporation and the Company shall not have any obligation hereunder to any
Company Indemnified Party (A) if the indemnification of such Company Indemnified
Party by Surviving Corporation or the Company in the manner contemplated hereby
is prohibited by applicable law, (B) the conduct of the Company Indemnified
Party relating to the matter for which indemnification is sought involved bad
faith, gross negligence or willful misconduct of such Company Indemnified Party,
(C) with respect to actions taken by any such Company Indemnified Party in his
or her individual capacity, including, without limitation, with respect to any
matters relating, directly or indirectly, to the purchase, sale or trading of
securities issued by the Company other than a tender or sale pursuant to a stock
tender agreement or (D) if such Company Indemnified Party shall have breached
its obligation to cooperate with Surviving Corporation or the Company in the
defense of any claim in respect of which indemnification is sought and such
breach (x) materially and adversely affects Surviving Corporations or the
Company's defense of such claim or (y) will materially and adversely affect
Surviving Corporations or the Company's defense of such claim if such breach is
not cured within ten days after notice of such breach is delivered to the
Company Indemnified Party and such breach is not cured during such period.
7.15. Regulatory Matters and Approvals. In addition to the requirements of
Section 7.8, each of the Company, Newco and PointeCom, promptly after the date
hereof, will (and the Company and PointeCom, promptly after the date hereof,
will cooperate to cause each of its Subsidiaries to) give any notices to, make
any filings with and use commercially reasonable efforts to obtain any
authorizations, consents and approvals of Governmental Authorities in connection
with the matters referred to in Section 5.2(c) and Section 6.2(c) above.
Without limiting the generality of the foregoing:
(a) State Corporation Law. The Company will take all action, to the extent
necessary in accordance with applicable law, its certificate of incorporation
and by-laws to convene a special meeting of its stockholders (the Company
Special Meeting), as soon as reasonably practicable in order that its
stockholders may consider and vote upon the adoption of this Agreement and the
approval of the Merger in accordance with the Texas Business Corporation Act,
the issuance of Company Common Stock in connection with the Merger as provided
in this Agreement as required by the rules of NASDAQ and an amendment to the
certificate of incorporation of the Company to increase the number of authorized
shares of Company Common Stock and to approve new stock option plans as required
to effectuate the terms of this transaction. PointeCom will take all action, to
the extent necessary in accordance wit h applicable law, its certificate of
incorporation and by-laws to convene a special meeting of its stockholders (the
PointeCom Special Meeting), as soon as reasonably practicable in order that its
stockholders may consider and vote upon the adoption of this Agreement and the
approval of the Merger in accordance with the NRS. The Company and PointeCom
shall mail the Joint Proxy Statement/Prospectus to their respective stockholders
simultaneously and as soon as reasonably practicable. Subject to Section 7.4,
the Joint Proxy Statement/Prospectus shall contain the affirmative unanimous
recommendations of the Company Board of Directors (i) in favor of the adoption
of this Agreement and the approval of the Merger, (ii) in favor of issuance of
shares of Company Common Stock in connection with the Merger as provided in the
Agreement as required by the rules of NASDAQ and (iii) in favor of the increase
in the number of authorized shares of Company Common Stock in accordance with
the Texas Business Corporation Act; and of the PointeCom Board of Directors in
favor of the adoption of this Agreement and the approval of the Merger.
(b) Periodic Reports. Each of the Parties and its counsel shall be given an
opportunity to review each Form 10-K and Form 10-Q (and any amendments thereto)
to be filed by the other Party under the 1934 Act prior to their being filed
with the SEC and NASDAQ, and shall be provided with final copies thereof
concurrently with their filing with the SEC.
7.16. Continuity of Business Enterprise. The Company, Surviving Corporation or
any other member of the qualified group (as defined in Treasury Regulation
1.368-1(d)) shall, for the foreseeable future, continue at least one significant
historic business line of the Company or use at least a significant portion of
the Company's historic business assets in a business, in each case within the
meaning of Treasury Regulation 1.368-1(d).
ARTICLE VIII. CONDITIONS TO CLOSING
8.1. Conditions to Obligations of PointeCom. Except as may be waived by
PointeCom in writing, the obligations of PointeCom to consummate the
transactions contemplated herein are subject to satisfaction of the following
conditions:
(a) PointeCom shall have received a certificate from the Company and Newco that
(i) the representations and warranties of the Company and Newco contained in
this Agreement are true in all material respects at and as of the Closing, as
though such representations and warranties had been made at and as of the
Closing, except for such representations and warranties that are made as of an
earlier date; (ii) each of the Company and Newco has performed and complied in
all material respects with the covenants or conditions required by this
Agreement or any of the agreements, documents or instruments executed pursuant
hereto or thereto to be performed and complied with by the Company and Newco
prior to the Closing; (iii) all declarations, filings and registrations with,
notices to, and authorizations, consents and approvals of any Governmental
Authority or third party set forth in Schedule 5.2 have been made or obtained;
and (iv) there has been no material adverse change in the business, operations,
or financial condition of the Company or Newco since the date of this Agreement.
(b) PointeCom shall have received the opinion, based on representations of the
Company, Newco and PointeCom, and/or certain assumptions, of its attorneys or
independent accountants that the Merger should qualify as a reorganization under
Section 368 of the Code.
(c) No action, suit or proceeding before any Governmental Authority, to enjoin
the transactions contemplated by this Agreement, will have been instituted on or
before the Closing Date that has not been dismissed as of the Closing Date.
(d) This Agreement and the transactions contemplated hereby shall have been
approved by the Requisite Stockholder Approval of PointeCom.
(e) This Agreement and the transaction contemplated hereby shall have the
Requisite Stockholder Approval of the Company.
(f) At the Effective Time, the officers, managers and employees contemplated in
Section 7.14, shall have resigned from their respective positions and executed
such documents as are mutually acceptable to the Company and PointeCom to
release PointeCom and the Company from any and all claims that any such
individual may have as a result of such employment.
(g) The shares of Merger Consideration to be issued to the PointeCom
shareholders shall have been registered under the 1933 Act.
(h) The Company's Board of Directors shall cause to be taken all necessary
actions required to cause, effective at the Closing (i) the Board of Directors
of the Company to have nine members, of which six shall be named by PointeCom.
(i) The Company shall have obtained the approval of Lucent Technologies, Inc.
and General Electric (NTFC and Newbridge) to the Merger and shall have modified
the existing senior credit facility with Lucent Technologies, Inc.,
substantially in accordance with Exhibit A to the Escrow Agreement.
(j) Any applicable waiting period under the Xxxx Xxxxx Xxxxxx Act shall have (i)
expired without action by the Department of Justice or the Federal Trade
Commission to prevent consummation of the Merger or the complete consummation of
the Merger or (ii) been earlier terminated.
(k) As a condition precedent to the disbursement of funds to the Company
pursuant to the Escrow Agreement, the Company shall cause its legal counsel,
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP, to deliver to PointeCom a legal opinion
with respect to the PointeCom Loan in substantially the form attached hereto
as Exhibit G.
(l) The Company shall cause one of its officers to execute and deliver a
certificate containing the representations set forth in Exhibit H attached
hereto and any other representations which may be reasonably requested in
connection with the rendering of the required federal income tax opinion.
8.2. Conditions to Obligations of the Company and Newco. Except as may be
waived by the Company and Newco in writing, the obligation of the Company and
Newco to consummate the transactions contemplated herein is subject to
satisfaction of the following conditions:
(a) The Company and Newco shall have received a certificate of PointeCom that
(i) the representations and warranties of PointeCom contained in this Agreement
are true in all material respects at and as of the Closing, as though such
representations and warranties had been made at and as of the Closing, (ii)
PointeCom has performed and complied in all material respects with the covenants
or conditions required by this Agreement or any of the agreements, documents or
instruments executed pursuant hereto or thereto to be performed and complied
with by PointeCom prior to the Closing, (iii) all declarations, filings and
registrations with, notices to, and authorizations, consents and approvals of
any Governmental Authority or third party set forth in Schedule 6.2 have been
made or obtained and (iv) there has been no material adverse change in the
business, operations, or financial condition of PointeCom since the date of this
Agreement.
(b) No action, suit or proceeding before any Governmental Authority, to enjoin
the transactions contemplated by this Agreement or to its consummation, will
have been instituted on or before the Closing Date.
(c) The Agreement and the transaction contemplated hereby shall have been
approved by the Requisite Stockholder Approval of the Company.
(d) This Agreement and the transaction contemplated hereby shall have the
Requisite Stockholder Approval of PointeCom.
(e) At the Effective Time, the officers, directors, managers and employees
contemplated in Section 7.12, shall have resigned from their respective
positions and executed such documents as are mutually acceptable to the Company
and PointeCom to release PointeCom and the Company from any and all claims that
any such individual may have as a result of such employment.
(f) The Company shall have obtained the approval of Lucent Technologies, Inc.
and General Electric (NTFC and Newbridge) to the Merger and shall have modified
the existing senior credit facility with Lucent Technologies, Inc.,
substantially in accordance with Exhibit A to the Escrow Agreement.
(g) Any applicable waiting period under the Xxxx Xxxxx Xxxxxx Act shall have (i)
expired without action by the Department of Justice or the Federal Trade
Commission to prevent consummation of the Merger or the complete consummation of
the Merger or (ii) been earlier terminated.
(h) PointeCom shall cause one of its officers to execute and deliver a
certificate containing the representations set forth in Exhibit H attached
hereto and any other representations which may be reasonably requested in
connection with the rendering of the required federal income tax opinion.
(i) PointeCom shall have obtained a written waiver with regard to this
transaction of the rights of PointeCom Class A Preferred stockholders pursuant
to Section 2 of the Certificate of Designations for such PointeCom Class A
Preferred Stock.
(j) The PointeCom Loan shall have been consummated and the proceeds of such loan
disbursed to the Company pursuant to the terms of the Escrow Agreement.
ARTICLE IX. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
9.1. General. Each party hereto will hold, and will use its best efforts to
cause its Affiliates and their respective representatives to hold, in strict
confidence from any Person (other than any such Affiliate or representative),
unless (a) compelled to disclose by judicial or administrative process or by
other requirements of Law or (b) disclosed in an action or proceeding brought by
a party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party hereto or
any of its Affiliates furnished to it by such other party or such other party's
representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (i) previously known by the party receiving such documents
or information, (ii) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (iii) later acquired by the receiving party from another
source if the receiving party is not aware that such source is under an
obligation to another party hereto to keep such documents and information
confidential. In the event of a breach or threatened breach by any party of the
provisions of this Section, all other parties shall be entitled to an injunction
restraining such party from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting any party from
pursuing any other available remedy for such breach or threatened breach,
including, without limitation, the recovery of damages.
9.2. Equitable Relief. Because of the difficulty of measuring economic losses
as a result of the breach of the foregoing covenants, because a breach of such
covenant would diminish the value of the assets and business of the Company or
PointeCom, and because of the immediate and irreparable damage that would be
caused for which the Surviving Corporation and/or PointeCom and/or the Company
would have no other adequate remedy, each party to this Agreement agrees that
the foregoing covenants may be enforced against it by injunctions, restraining
orders and other equitable actions.
ARTICLE X. INTENDED TAX TREATMENT
10.1. Tax-Free Reorganization. PointeCom and the Company are entering into
this Agreement with the intention that the Merger qualify as a tax-free
reorganization for federal income tax purposes and neither PointeCom nor the
Company will take any actions that disqualify the Merger for such treatment.
Neither PointeCom, Newco nor the Company will take or omit to take any action
that would cause the Merger not to be described as a reorganization under
Section 368(a) of the Code (or any comparable provisions of applicable state or
local law) and the parties will characterize the Merger as such a reorganization
for purposes of all tax returns and other filings.
ARTICLE XI. TERMINATION
11.1. Termination. This Agreement may be terminated and the transaction
contemplated hereby abandoned:
(a) By mutual written consent of the parties at any time prior to Closing.
(b) Prior to the Closing, by written notice to the Company and Newco from
PointeCom, if (i) there is material breach of any representation, warranty or
covenant (including the failure of a party to consummate the Closing, if the
other parties are willing, ready and able to consummate the Closing in
accordance with this Agreement) on the part of the Company or Newco, or if a
representation or warranty of the Company or Newco shall be untrue in any
material respect, or (ii) if the conditions specified in Section 8.1 have not
been satisfied, and any such matter described in clauses (i) and (ii) of this
paragraph has not been cured by the Company or Newco within 10 Business Days
after written notice thereof from PointeCom.
(c) Prior to the Closing, by written notice to PointeCom from the Company and
Newco (i) if there is material breach of any representation, warranty or
covenant (including the failure of a party to consummate the Closing, if the
other parties are willing, ready and able to consummate the Closing in
accordance with this Agreement) on the part of PointeCom or if a representation
or warranty of PointeCom shall be untrue in any material respect, or (ii) if the
conditions specified in Section 8.2 have not been satisfied, and any such matter
described in clauses (i) and (ii) of this paragraph has not been cured by
PointeCom within 10 Business Days after written notice thereof from the Company.
(d) By action of the Board of Directors of either PointeCom or the Company,
before or after the approval by the Company stockholders or the PointeCom
stockholders, (A) if the Effective Time shall not have occurred by June 30, 2000
(the Outside Date) (unless the failure to consummate the Merger by such date is
due to the action or failure to act of the party seeking to terminate); or (B)
if any condition to the obligation of the terminating party to consummate the
Merger shall have become incapable of being satisfied prior to the Outside Date
as a result of a court order, stipulation or injunction that is final and
non-appealable.
(e) By PointeCom if the Company Board of Directors (i) enters into or publicly
announces its intention to enter into an agreement or agreement in principle
with respect to an Acquisition Proposal, (ii) withdraws its recommendation to
the Company stockholders of this Agreement or the Merger, or (iii) after the
receipt of an Acquisition Proposal, fails to confirm publicly, within ten
Business Days after the request of PointeCom, its recommendation to the Company
stockholders that the Company stockholders adopt and approve this Agreement and
the Merger.
(f) By the Company if the PointeCom Board of Directors (i) enters into or
publicly announces its intention to enter into an agreement or agreement in
principle with respect to an Acquisition Proposal, (ii) withdraws its
recommendation to the PointeCom stockholders of this Agreement or the Merger or
(iii) after the receipt of an Acquisition Proposal, fails to confirm publicly,
within ten Business Days after the request of the Company, its recommendation to
the PointeCom stockholders that the PointeCom stockholders adopt and approve
this Agreement and the Merger.
(g) In the event any party becomes aware, and notifies the other party (the
Notified Party) in writing, of any matter, fact or circumstance which would be
required to be disclosed by any party as of the date hereof or at the Closing,
and such matter, fact or circumstance is such that the Notified Party would not
be obligated hereunder to consummate the Closing, then the Notified Party shall
have the right to terminate this Agreement within 10 Business Days after having
received such notice, such period being subject to an extension at the written
request of the Notified Party of up to five additional Business Days as
reasonably required to allow the Notified Party to evaluate the matter, fact or
circumstance of which it has been notified, or if the Notified Party does not so
terminate this Agreement, then (i) such notice shall be deemed to amend the
schedule or appropriate disclosure hereunder as of the date hereof; (ii) any
breach of any representation, warranty or covenant hereunder that could have
existed as a result of the occurrence or existence of such fact, matter or
circumstance shall be deemed cured and performed; and (iii) any condition to
such Notified Party's obligation to consummate the Closing which would otherwise
not be fulfilled as a result of the occurrence or existence of such fact, matter
or circumstance shall be deemed waived.
11.2. Effect. Any termination of this Agreement shall not release either
PointeCom on the one hand or the Company and Newco on the other from any
liability (for damages or otherwise) or other consequences arising from any
breach or violation by such party of the terms of this Agreement prior to the
effective time of such termination, nor shall any such termination release any
party from its obligations or duties under this Agreement, which, by their terms
and/or expressed intent, may require performance subsequent to any such
termination, and all provisions of this Agreement that set forth such
obligations or duties (including, without limitation Sections 7.7, and 11.3) and
such other general or procedural provisions that maybe relevant to any attempt
to enforce such obligations or duties, shall survive any such termination of
this Agreement until such obligations or duties shall have been performed or
discharged in full. Notwithstanding the foregoing, if Section 11.3 is
applicable to a termination and a party satisfies all of its obligations as set
forth in Section 11.3, no further liability or obligation shall extend to such
party, other than as set forth in Section 11.3.
11.3. Special Remedies.
(a) For purposes of the remedies available under this Section 11.3, the parties
acknowledge that it would be extremely impractical and difficult to ascertain
the actual damages that would be suffered by the parties if any party or parties
fails to consummate the transactions contemplated herein (for any reason other
than a party's failure, refusal or inability to perform any of its covenants and
agreements hereunder or the failure of any other of the conditions to the
party's obligation to consummate the transactions herein) and this Agreement is
terminated as hereinafter provided in this Section 11.3. The parties have
considered carefully the loss to each non-breaching or non-defaulting party that
would result from the failure of the transactions to be consummated as a result
of such a breach or default hereunder by a party or parties; and other damages
that the non-breaching or non-defaulting party or parties will sustain but which
the parties cannot calculate with absolute certainty. Accordingly, to the
extent set forth in this Section 11.3, the parties damages under the
circumstances hereinafter described would reasonably be expected to amount to
the sum of $5,000,000 (in the aggregate), which shall be paid as full and
complete liquidated damages (the Termination Fee).
(b) In the event of any termination of this Agreement pursuant to Section
11.1(e), then the Company shall, at the option of PointeCom, promptly, but in no
event later than thirty Business Days after demand by PointeCom, pay to
PointeCom the Termination Fee, plus all amounts due (by acceleration or
otherwise) under the PointeCom Loan. Alternatively, PointeCom may, at its sole
option, convert the PointeCom Loan and the amount owed as the Termination Fee
into Class C Convertible Senior Preferred Stock (100,000 shares and 50,000
shares, respectively), which preferred stock shall automatically convert into
Company Common Stock at a conversion price of $8.20 per share as therein
provided, and Warrants. If the Company defaults in the payment of the
Termination Fee, PointeCom may, at its option, convert the Termination Fee into
50,000 shares of Class C Convertible Senior Preferred Stock (which is
convertible, at the option of PointeCom, into Company Common Stock at $8.20 per
share with regard to the Termination Fee); if the Company defaults in the
repayment of the PointeCom Loan, PointeCom may, at its option, convert the
PointeCom Loan into 100,000 shares (plus shares equal to accrued interest) of
Class C Convertible Senior Preferred Stock (which is convertible, at the option
of PointeCom, into Company Common Stock at $5.00 per share with regard to the
PointeCom Loan) and Warrants.
(c) In the event of any termination of this Agreement pursuant to Section
11.1(f), then PointeCom shall promptly, but in no event later than thirty
Business Days after written request by the Company, pay to the Company the
Termination Fee.
(d) In the event of termination of this Agreement pursuant to Section
11.1(b)(i), then the Termination Fee shall not be payable, PointeCom may pursue
its remedies at law or in equity and the Company shall, at the option of
PointeCom, promptly, but in no event later than thirty Business Days after
demand by PointeCom, pay to PointeCom all amounts due (by acceleration or
otherwise) under the PointeCom Loan. If the Company defaults in the repayment
of the PointeCom Loan, then PointeCom may, at its option, convert the PointeCom
Loan into Class C Convertible Senior Preferred Stock (which is convertible into
Company Common Stock at $5.00 per share with regard to the PointeCom Loan) and
Warrants as provided under the terms of the PointeCom Loan.
(e) In the event of termination of this Agreement pursuant to Section
11.1(c)(i), then the Termination Fee shall not be payable and the Company may
pursue its remedies at law or in equity.
(f) In the event of termination of this Agreement because the conditions
specified in Sections 8.1(g), (j) or (k) have not been satisfied, then the
Termination Fee shall not be payable and the PointeCom Loan shall not be
accelerated. If the Company defaults in the repayment of the PointeCom Loan
when said loan shall become due, then PointeCom may, at its option, convert the
PointeCom Loan into Class C Convertible Senior Preferred Stock (which are
convertible into Company Common Stock at $8.20 per share) and Warrants of the
Company as provided under the terms of the PointeCom Loan.
(g) In the event of termination of this Agreement because the condition
specified in Section 8.1(e)(ii) has not been satisfied (under circumstances that
are not encompassed by paragraph 11.3(b) above), then the Termination Fee shall
not be payable and the Company shall promptly, but in no event later than thirty
Business Days after demand by PointeCom, pay to PointeCom all amounts due (by
acceleration or otherwise) under the PointeCom Loan. If the Company defaults in
the repayment of the PointeCom Loan, then PointeCom may, at its sole option,
convert the PointeCom Loan into Class C Convertible Senior Preferred Stock
(which is convertible into Company Common Stock at $8.20 per share) and Warrants
of the Company as provided under the terms of the PointeCom Loan.
(h) In the event of termination of this Agreement because the condition
specified in Section 8.2(d)(ii) has not been satisfied, then this Agreement
shall terminate, the Termination Fee shall not be payable and the PointeCom
Loan shall not be accelerated, and PointeCom may, at its sole option, convert
the PointeCom Loan into Class C Convertible Senior Preferred Stock (which is
convertible into Company Common Stock at $8.20 per share) and Warrants as
provided under the terms of the PointeCom Loan.
(i) In order for PointeCom to convert the Termination Fee into 50,000 shares of
Class C Convertible Senior Preferred Stock, PointeCom shall give the Company
written notice that PointeCom elects to convert such fee. The date of receipt
of such notice by the Company shall be the Conversion Date. The Company shall,
as soon as practicable after receipt of such notice and no later than 10 days
thereafter, issue and deliver to PointeCom a certificate for 50,000 shares of
Class C Convertible Senior Preferred Stock, together with a duly executed
Registration Rights Agreement. Such conversion shall be deemed to have been
made immediately prior to the close of business on the Conversion Date, and
PointeCom shall be regarded for all corporate purposes as the holder of the
number of shares of Class C Convertible Senior Preferred Stock to which it is
entitled upon the Conversion Date.
ARTICLE XII. MISCELLANEOUS
12.1. Successors and Assigns. This Agreement and the rights, interests and
obligations of the parties hereunder may not be assigned or delegated (by
operation of Law or otherwise) and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of PointeCom, Newco, and the
Company.
12.2. Entire Agreement. This Agreement (including the Schedules, exhibits and
annexes attached hereto) and the documents delivered pursuant hereto constitute
the entire agreement and understanding among the Company, Newco and PointeCom
and supersede any prior agreement and understanding relating to the subject
matter of this Agreement, including the term sheet dated November 23, 1999.
This Agreement may be modified or amended only by a written instrument executed
by the parties hereto, acting through their respective officers, duly authorized
by their respective Boards of Directors.
12.3. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. Facsimile
transmission of any signed original document and/or retransmission of any signed
facsimile transmission will be deemed the same as delivery of an original. At
the request of any party, the parties will confirm facsimile transmission by
signing a duplicate original document.
12.4. Brokers and Agents. Each party hereto represents and warrants that it
employed no broker or agent in connection with the transactions contemplated by
this Agreement. Each party agrees to indemnify each other party against all
loss, cost, damages or expense arising out of claims for fees or commissions of
brokers employed or alleged to have been employed by such indemnifying party in
connection with the transactions contemplated by this Agreement.
12.5. Notices. All notices and communications required or permitted hereunder
shall be in writing and may be given by facsimile or by depositing the same in
the United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party, as follows:
(a) If to PointeCom, addressed to them at:
Pointe Communications Corporation
0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
FAX: (000) 000-0000
with a copy (which shall not constitute notice) to:
W. Xxxxxx Xxxx, Jr.
Xxxxxxx & Xxxxx, L.L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
FAX: (000) 000-0000
(b) If to the Company or Newco, addressed as follows:
Telscape International, Inc.
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
FAX: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxx X.Xxxxxxxxx
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
0000 X Xx., XX, Xxxxx 000
Xxxxxxxxxx, XX 00000
FAX: (000) 000-0000
or such other address as any party hereto shall specify pursuant to this Section
12.5 from time to time.
12.6. Exercise of Rights and Remedies. Except as otherwise provided herein, no
delay of or omission in the exercise of any right, power or remedy accruing to
any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
12.7. Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable, but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case, the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
12.8. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Texas (except for its principles governing conflicts of
laws).
12.9. No Third-Party Beneficiaries. This Agreement shall not confer any rights
or remedies upon any Person other than the parties hereto and their respective
successors and permitted assigns; provided, however, that (i) the provisions in
Article III above (A) concerning payment of the Merger Consideration are
intended for the benefit of PointeCom stockholders and (B) concerning the
conversion of the stock options are intended for the benefit of the holders of
such stock options, (ii) the provisions in Section 7.14 above concerning
indemnification are intended for the benefit of the individuals specified
therein and their respective legal representatives and (iii) the provisions of
Sections 7.4, and 10.1 are intended for the benefit of the Company stockholders
and the PointeCom stockholders.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
POINTE COMMUNICATIONS CORPORATION
By:
Name:
Title:
POINTE ACQUISITION, CORP.
By:
Name:
Title:
TELSCAPE INTERNATIONAL, INC.
By:
Name:
Title:
Exhibit A
Certificate of Designation
Exhibit B
Form of Promissory Note
Exhibit C
Registration Rights Agreement
Exhibit D
Warrant Agreement
Exhibit E
Escrow Agreement
Exhibit F
Voting Agreement
Exhibit G
Form of Legal Opinion
Exhibit H
Officer's Representations
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1. Definitions1
1.2. Interpretation7
ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION
2.1. The Merger7
2.2. Effective Time of the Merger7
2.3. Certificate of Incorporation, Bylaws and Board of Directors of Surviving
Corporation8
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of Shares8
3.2. Fractional Shares9
3.3. Dissenting Shares10
3.4. Company Options10
3.5. Newco Shares10
3.6. Delivery of Merger Consideration11
3.7. No Effect on Capital Stock of Company11
3.8. Closing of Transfer Records11
3.9. Effect on Treasury of Unissued Shares of PointeCom Capital Stock11
3.10. Rule 166-310
ARTICLE IV
CLOSING 12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND NEWCO
5.1. Due Organization and Qualification12
5.2. Authorization; Non-Contravention; Approvals12
5.3. Company Common Stock13
5.4. Tax Free Reorganization13
5.5. SEC Filings; Disclosure15
5.6. Interim Operations of Newco16
5.7. Capitalization.16
5.8. Subsidiaries16
5.9. Financial Statements16
5.10. Liabilities and Obligations17
5.11. Accounts and Notes Receivable.17
5.12. Assets17
5.13. Material Customers and Contracts18
5.14. Permits19
5.15. Environmental Matters19
5.16. Labor and Employee Relations20
5.17. Insurance20
5.18. Compensation; Employment Agreements20
5.19. Noncompetition and Nonsolicitation Agreements20
5.20. Employee Benefit Plans20
5.21. Litigation and Compliance with Law22
5.22. Taxes23
5.23. Absence of Changes24
5.24. Absence of Certain Business Practices25
5.25. Competing Lines of Business; Related-Party Transactions25
5.26. Intangible Property25
5.27. Disclosure26
5.28. Year 2000 Compliance26
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF POINTECOM AND NEWCO
6.1. Organization26
6.2. Authorization; Non-Contravention; Approvals26
6.3. SEC Filings; Disclosure27
6.4. Capitalization28
6.5. Subsidiaries28
6.6. Financial Statements28
6.7. Liabilities and Obligations29
6.8. Assets29
6.9. Material Customers and Contracts30
6.10. Permits30
6.11. Environmental Matters31
6.12. Labor and Employee Relations31
6.13. Insurance31
6.14. Compensation; Employment Agreements31
6.15. Noncompetition and Nonsolicitation Agreements32
6.16. Litigation and Compliance with Law32
6.17. Taxes32
6.18. Absence of Changes33
6.19. Absence of Certain Business Practices34
6.20. Competing Lines of Business; Related-Party Transactions35
6.21. Intangible Property35
6.22. Disclosure35
6.23. Year 2000 Compliance35
6.24. Employee Benefit Plans35
6.25. Tax Free Reorganization37
6.26. Accounts and Notes Receivable39
ARTICLE VII
CERTAIN COVENANTS
7.1. Conduct of Business40
7.2. Reasonable Efforts42
7.3. Inspection42
7.4. Restraint on Solicitation.42
7.5. Update Information45
7.6. Future Cooperation; Tax Matters45
7.7. Expenses46
7.8. Registration Statement and Proxy Statement46
7.9. Company Financings46
7.10. Voting Agreements47
7.11. Company Board of Directors and Officers47
7.12. Key Managers and Employees47
7.13. Notices and Consents47
7.14. Indemnification of Officers and Directors of PointeCom47
7.15. Regulatory Matters and Approvals49
7.16. Continuity of Business Enterprise49
ARTICLE VIII
CONDITIONS TO CLOSING
8.1. Conditions to Obligations of PointeCom50
8.2. Conditions to Obligations the Company and Newco51
ARTICLE IX
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
9.1. General52
9.2. Equitable Relief52
ARTICLE X
INTENDED TAX TREATMENT
10.1. Tax-Free Reorganization53
ARTICLE XI
TERMINATION
11.1. Termination53
11.2. Effect54
11.3. Special Remedies55
ARTICLE XII
MISCELLANEOUS
12.1. Successors and Assigns56
12.2. Entire Agreement57
12.3. Counterparts57
12.4. Brokers and Agents57
12.5. Notices57
12.6. Exercise of Rights and Remedies58
12.7. Reformation and Severability58
12.8. Governing Law58
12.9. No Third-Party Beneficiaries58
Schedules
Schedule 5.1 Company Organization and Qualification
Schedule 5.2 Company Authority
Schedule 5.7 Company Capitalization
Schedule 5.8 Company Subsidiaries
Schedule 5.9 Company Financial Statements
Schedule 5.10 Company Liabilities and Obligations
Schedule 5.11 Company Accounts and Notes Receivable
Schedule 5.12 Company Assets
Schedule 5.13 Company Material Customers and Contracts
Schedule 5.14 Company Permits
Schedule 5.15 Company Environmental Matters
Schedule 5.16 Company labor and Employee Relations
Schedule 5.17 Company Insurance
Schedule 5.18 Company Compensation; Employment Agreements
Schedule 5.19 Company Noncompetition, Confidentiality and Non-Solicitation
Agreements
Schedule 5.20 Company Employee Benefit Plans
Schedule 5.21 Company Litigation and Compliance with Laws
Schedule 5.22 Company Taxes
Schedule 5.23 Company Absence of Changes
Schedule 5.25 Company Competing Lines of Business; Related Party Transactions
Schedule 5.26 Company Intangible Property
Schedule 6.1 PointeCom Organization
Schedule 6.2 PointeCom Authorization
Schedule 6.3 PointeCom SEC Filings; Disclosure
Schedule 6.4 PointeCom Capitalization
Schedule 6.5 PointeCom Subsidiaries
Schedule 6.6 PointeCom Financial Statements
Schedule 6.7 PointeCom Liabilities and Obligations
Schedule 6.8 PointeCom Assets
Schedule 6.9 PointeCom Material Customers and Contracts
Schedule 6.10 PointeCom Permits
Schedule 6.11 PointeCom Environmental Matters
Schedule 6.12 PointeCom labor and Employee Relations
Schedule 6.13 PointeCom Insurance
Schedule 6.14 PointeCom Compensation; Employment Agreements
Schedule 6.15 PointeCom Noncompetition, Confidentiality and Non-Solicitation
Agreements
Schedule 6.16 PointeCom Litigation and Compliance with Laws
Schedule 6.17 PointeCom Taxes
Schedule 6.18 PointeCom Absence of Changes
Schedule 6.20 PointeCom Competing Lines of Business; Related Party Transactions
Schedule 6.21 PointeCom Intangible Property
Schedule 6.24 PointeCom Employee Benefit Plans
Schedule 6.26 PointeCom Accounts and Notes Receivable
Exhibits
Exhibit A - Certificate of Designation
Exhibit B - Form of Promissory Note
Exhibit C - Registration Rights Agreement
Exhibit D - Warrant Agreement
Exhibit E - Escrow Agreement
Exhibit F - Voting Agreement
Exhibit G - Form of Legal Opinion
Exhibit H - Officers Representations
