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Exhibit 2.4
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
STAR TELECOMMUNICATIONS, INC.
SIERRA ACQUISITION CO., INC.
PT-1 COMMUNICATIONS, INC.
AND
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Dated as of June 9, 1998
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TABLE OF CONTENTS
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ARTICLE I THE MERGER.................................................. 1
1.1 The Merger.................................................. 1
1.2 Filing...................................................... 1
1.3 Effective Time of the Merger................................ 1
1.4 Certificate of Incorporation and Bylaws..................... 2
1.5 Directors and Officers...................................... 2
1.6 Warrants and Options........................................ 2
ARTICLE II CONVERSION OF AND SURRENDER AND PAYMENT FOR COMMON STOCK.... 2
2.1 Conversion.................................................. 2
2.2 Escrow of Shares............................................ 2
ARTICLE III CLOSING; CERTAIN EFFECTS OF MERGER.......................... 3
3.1 Closing Date................................................ 3
3.2 Deliveries of the Company's Stockholders.................... 3
3.3 Deliveries of Acquiror...................................... 3
3.4 Effect of Merger............................................ 3
3.5 Further Assurances.......................................... 3
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR AND NEWCO.... 4
4.1 Organization................................................ 4
4.2 Capital Stock............................................... 4
4.3 Authority Relative to Agreement............................. 4
4.4 Acquiror Shares............................................. 4
4.5 No Violations or Consents................................... 5
4.6 Litigation.................................................. 5
4.7 Financial Statements and Reports............................ 5
4.8 Proxy Statement; Other Information.......................... 5
4.9 Brokers..................................................... 6
4.10 Benefit Plans............................................... 6
4.11 ERISA....................................................... 6
4.12 Environmental Matters....................................... 6
4.13 Absence of Certain Changes.................................. 7
4.14 Government Authorizations................................... 7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.......... 7
5.1 Ownership and Title to the Shares........................... 7
5.2 Authority Relative to Agreement............................. 7
5.3 No Violations or Consents................................... 7
5.4 Rule 501.................................................... 8
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5.5 Restricted Securities....................................... 8
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS................................................ 8
6.1 Corporate Organization; Subsidiaries........................ 8
6.2 Capital Stock............................................... 9
6.3 Options, Warrants or Other Rights........................... 9
6.4 Authority Relative to Agreement............................. 9
6.5 No Violations or Consents................................... 9
6.6 Governmental Authorizations and Regulations................. 10
6.7 Litigation.................................................. 10
6.8 Financial Statements and Reports; Material Liabilities;
Projections................................................. 10
6.9 Absence of Certain Changes.................................. 11
6.10 Benefit Plans............................................... 12
6.11 ERISA....................................................... 12
6.12 Environmental Matters....................................... 13
6.13 Real Estate Leases.......................................... 13
6.14 Title to Properties; Absence of Liens and Encumbrances...... 14
6.15 Tax Matters................................................. 14
6.16 Proprietary Property........................................ 14
6.17 Labor Matters............................................... 15
6.18 Insurance................................................... 15
6.19 Material Contracts.......................................... 15
6.20 Proxy Statement; Other Information.......................... 16
6.21 Brokers..................................................... 16
6.22 Continuity of Interest...................................... 16
6.23 Transactions with Affiliated Parties........................ 16
6.24 Distributors................................................ 17
6.25 Accounts Receivable......................................... 17
6.26 Inventory................................................... 17
ARTICLE VII COVENANTS AND AGREEMENTS.................................... 17
7.1 Proxy Statement; Special Meeting............................ 17
7.2 Conduct of the Business of the Company Prior to the
Effective Time.............................................. 17
7.3 Access to Properties and Record............................. 19
7.4 Acquisition Proposals....................................... 19
7.5 Indemnification by the Stockholders......................... 19
7.6 Confidentiality............................................. 20
7.7 Reasonable Best Efforts..................................... 21
7.8 Withdrawal of Company S-1................................... 21
7.9 Proxy of Principal Stockholders............................. 21
7.10 Certain Events.............................................. 21
7.11 Financial Statements........................................ 21
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7.12 Conduct of the Business of Acquiror Prior to the Effective
Time........................................................ 21
ARTICLE VIII CONDITIONS PRECEDENT........................................ 22
8.1 Conditions to Each Party's Obligation to Effect the
Merger...................................................... 22
8.2 Conditions to the Obligation of the Company and the
Stockholders to Effect the Merger........................... 23
8.3 Conditions to Obligations of the Acquiror and Newco to
Effect the Merger........................................... 23
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER........................... 24
9.1 Termination................................................. 24
9.2 Termination Fee............................................. 25
9.3 Amendment................................................... 25
9.4 Waiver...................................................... 25
ARTICLE X MISCELLANEOUS............................................... 26
10.1 Survival.................................................... 26
10.2 Expenses and Fees........................................... 26
10.3 Notices..................................................... 26
10.4 Headings.................................................... 26
10.5 Publicity................................................... 26
10.6 Entire Agreement; Knowledge................................. 27
10.7 Assignment.................................................. 27
10.8 Counterparts................................................ 27
10.9 Invalidity, Etc............................................. 27
10.10 Specific Performance........................................ 27
10.11 Governing Law............................................... 27
EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Escrow Agreement
Exhibit C Form of Affiliate Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Proxy
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 9, 1998 (this "Agreement"),
by and among STAR Telecommunications, Inc., a Delaware corporation (the
"Acquiror"), Sierra Acquisition Co., Inc., a New York corporation and
wholly-owned subsidiary of the Acquiror ("Newco"), PT-1 Communications, Inc., a
New York corporation (the "Company"), and ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (collectively, the
"Stockholders").
RECITALS:
A. The Boards of Directors of Newco, the Acquiror and the Company deem it
advisable and in the best interests of their respective stockholders to merge
Newco with and into the Company (the "Merger") upon the terms and conditions set
forth herein and in accordance with the New York Business Corporation Law (the
"Business Corporation Law") (the Company and Newco being hereinafter sometimes
referred to as the "Constituent Corporations" and the Company, following the
effectiveness of the Merger, being hereinafter sometimes referred to as the
"Surviving Corporation");
B. The Stockholders beneficially own an aggregate of 92.8% of the issued
and outstanding shares (the "Shares") of the Company's Common Stock, $.01 par
value per share (the "Common Stock"), determined on a fully diluted basis,
taking into account all outstanding warrants, options and other rights or
interests to subscribe for shares of Common Stock; and
C. The Boards of Directors of the Acquiror and Newco have each approved the
transactions contemplated by this Agreement, including without limitation, the
Merger, upon the terms and subject to the conditions set forth herein, including
without limitation, the approval of the stockholders of the Acquiror. The Board
of Directors of the Company and the Company's stockholders have each approved
the transactions contemplated by this Agreement, including without limitation,
the Merger, upon the terms and subject to the conditions set forth herein. Such
approvals comply in all respects with the requirements of Sections 912(b) and
913(c)(2)(A) of the Business Corporation Law.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, the sufficiency of which
is hereby acknowledged by the parties, and in order to set forth the terms and
conditions of the Merger and the mode of carrying the same into effect, the
parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and conditions hereinafter set forth and in
accordance with the Business Corporation Law, at the Effective Time, as defined
below, Newco shall be merged with and into the Company and thereupon the
separate existence of Newco shall cease, and the Company, as the Surviving
Corporation, shall continue to exist under and be governed by the Business
Corporation Law.
1.2 Filing. Upon the satisfaction or waiver of the conditions set forth in
Section 8 hereof (other than the condition set forth in Section 8.1(b) which may
not be waived), Newco and the Company will cause a Certificate of Merger, in
substantially the form of Exhibit A attached hereto (the "Certificate of
Merger"), to be executed and filed with the Department of State of the State of
New York in accordance with the terms of Section 904 of the Business Corporation
Law.
1.3 Effective Time of the Merger. The Merger shall become effective
immediately upon the filing of the Certificate of Merger with the Department of
State of the State of New York in accordance with Section 904. The date and time
of such filing is herein sometimes referred to as the "Effective Time."
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1.4 Certificate of Incorporation and Bylaws. Upon the effectiveness of the
Merger, the Certificate of Incorporation of Newco (as in effect on the date of
the Agreement) shall be the certificate of incorporation of the Surviving
Corporation and the By-Laws of Newco as in effect on the date hereof shall be
the By-Laws of the Surviving Corporation.
1.5 Directors and Officers. The persons who are directors of Newco
immediately prior to the Effective Time and the officers of the Company shall,
after the Effective Time and in accordance with the Certificate of Merger, serve
as the directors and officers, respectively, of the Surviving Corporation, in
each case such directors and officers to serve until their successors have been
duly elected and qualified in accordance with the Certificate of Incorporation
and By-Laws of the Surviving Corporation.
1.6 Warrants and Options. On the Effective Time, the Acquiror shall assume
the duties and obligations of the Company, and the Acquiror shall be vested with
the powers, rights and privileges of the Company, under (a) the warrants of the
Company that remain outstanding at the Effective Time (the "Warrants") and (b)
the options of the Company that remain outstanding at the Effective Time (the
"Options"), as such warrants and options are listed on Schedule 6.3. As of the
Effective Time, the Acquiror shall have reserved for issuance and continue to
maintain sufficient shares of Acquiror Common Stock, as defined below, to issue
the required shares of Acquiror Common Stock pursuant to the exercise of
Warrants and Options after the Effective Time, subject to appropriate adjustment
with respect to the number of shares of Acquiror Common Stock to be acquired
thereunder and the exercise price thereof, based on the Exchange Ratio, as
defined below.
ARTICLE II
CONVERSION OF AND SURRENDER AND
PAYMENT FOR COMMON STOCK
2.1 Conversion. At the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof:
(a) Each of the issued and outstanding shares of Common Stock shall be
automatically converted into the right to receive consideration per share equal
to 0.426875724 of a share (the "Exchange Ratio") of the Acquiror's common stock,
$0.001 per share ("Acquiror Common Stock"). The Exchange Ratio shall be adjusted
as may be necessary and appropriate to reflect any and all stock splits, reverse
stock splits, reclassifications, recapitalizations, dividends payable in shares
of Acquiror Common Stock or in any other securities convertible into or
exchangeable for shares of Acquiror Common Stock and similar capital events that
affect Acquiror Common Stock. The aggregate number of shares of Acquiror Common
Stock to be issued in the Merger at the Effective Time shall be referred to
herein as the "Acquiror Shares."
(b) All shares of Common Stock which are held by the Company as treasury
shares shall be canceled and retired and cease to exist, without any conversion
thereof or payment with respect thereto.
(c) No fraction of a share of Acquiror Common Stock will be issued in
the Merger, but, in lieu thereof, each holder of Common Stock who would
otherwise be entitled to a fraction of a share of Acquiror Common Stock will be
entitled to receive from the Acquiror an amount of cash (rounded to the nearest
whole $0.01) equal to the product of (i) such fraction of a share multiplied by
(ii) the average closing price of Acquiror Common Stock on The Nasdaq National
Market for the five (5) trading days prior to the Effective Time (the "Average
Price").
2.2 Escrow of Shares. A total of ten percent (10%) of the Acquiror Shares
(the "Escrow Shares") shall be deposited at the Closing Date in an escrow
established with Santa ▇▇▇▇▇▇▇ Bank and Trust, a California bank, or such other
Person mutually agreeable to Acquiror and the Stockholders (the "Escrow Agent"),
such escrow to be pursuant to the terms of that certain escrow agreement to be
entered into by and among Acquiror, the Stockholders and the Escrow Agent, such
agreement in substantially the form attached hereto as Exhibit B (the "Escrow
Agreement"). As further set forth in the Escrow Agreement, the Escrow Shares
shall be held in escrow for a period (the "Escrow Period") commencing at the
Closing Date, as
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defined below, and ending on the earlier to occur of (a) the first anniversary
thereof or (b) the completion following the Closing Date of the first audited
consolidated financial statements of Acquiror containing combined operations of
Acquiror and the Company. The Escrow Shares shall be subject to offset pursuant
to the terms of Section 7.5, as further set forth in the Escrow Agreement. Any
such offset against the Escrow Shares shall be calculated as set forth in the
Escrow Agreement.
ARTICLE III
CLOSING; CERTAIN EFFECTS OF MERGER
3.1 Closing Date. Subject to the fulfillment of the conditions specified
in Article VIII (any or all of which may be waived in writing by the respective
parties whose performance is conditioned upon satisfaction of such conditions,
except that the condition set forth in Section 8.1(b) may not be waived), the
purchase and sale of the shares of Common Stock shall be consummated at a
closing (the "Closing") to be held at the offices of Acquiror, at ▇▇▇ ▇▇▇▇ ▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ at 11:00 a.m. or at such time as
Acquiror, the Company and the Stockholders shall mutually agree but not later
than December 31, 1998 (such date and time being herein referred to as the
"Closing Date"), providing that if, immediately prior to such date, the
conditions set forth in 8.1(d) have not been satisfied but all other conditions
in Article VIII have been satisfied or waived by the appropriate party thereto,
then the Closing Date may be extended to no later than March 31, 1999.
3.2 Deliveries of the Company's Stockholders. At the Closing, the
stockholders of the Company shall deliver to Acquiror (a) stock certificates
representing all of the outstanding shares of Common Stock, each of which has
been duly endorsed for transfer and with appropriate stock powers, and (b) all
of the agreements, documents and instruments required to be delivered by the
Company and the Stockholders under Section 8.3.
3.3 Deliveries of Acquiror. At the Closing, Acquiror shall deliver to the
stockholders of the Company (a) certificates representing the Acquiror Shares
plus any cash that may be due thereto in payment for any fractional shares, as
calculated pursuant to Section 2.1(c), and (b) all of the agreements, documents
and instruments required to be delivered by the Acquiror under Sections 8.2.
Simultaneously therewith, the Stockholders shall deposit with the Escrow Agent
certificates representing the Escrow Shares pursuant to the terms of the Escrow
Agreement.
3.4 Effect of Merger. On and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises, and
be subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations; and all and singular rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well for stock subscriptions as all other things in
action or belonging to each of the Constituent Corporations, shall be vested in
the Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter the property of
the Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and all debts, liabilities and
duties of the Constituent Corporations shall thenceforth attach to and be the
sole responsibility of the Surviving Corporation and may be enforced against the
Surviving Corporation to the same extent as if said debts, liabilities and
duties had been incurred or contracted by it.
3.5 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary, desirable or
proper to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, the title to any property or right of the Constituent Corporations
acquired or to be acquired by reason of, or as a result of, the Merger, the
Constituent Corporations agree that the Surviving Corporation and its proper
officers and directors shall and will execute and deliver all such deeds,
assignments and assurances in law and do all acts necessary, desirable or proper
to vest, perfect or confirm title to such property or right in the Surviving
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Corporation and otherwise to carry out the purposes of this Agreement, and that
the proper officers and directors of the Constituent Corporations and the proper
officers and directors of the Surviving Corporation are fully authorized in the
name of the Constituent Corporations or otherwise to take any and all such
action.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
ACQUIROR AND NEWCO
The Acquiror and Newco jointly and severally represent and warrant to the
Company as follows:
4.1 Organization. Each of Acquiror and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and each has the requisite corporate power
and authority to own, lease and operate its assets and to conduct its business
in the manner in which it is presently conducted. Acquiror is qualified or
licensed to do business and is in good standing in each jurisdiction in which
the failure to be so qualified or licensed, in the aggregate, would have a
material adverse effect on the financial condition, results of operations,
business or properties of Acquiror (an "Acquiror Material Adverse Effect"). True
and correct copies of the Certificate of Incorporation Bylaws of Acquiror and
Newco have been delivered or made available to the Company.
4.2 Capital Stock. The authorized capital stock of the Acquiror consists
in its entirety of (a) 50,000,000 shares of Acquiror Common Stock, $0.001 par
value, of which, as of May 15, 1998, 41,755,594 were issued and outstanding and
(b) 5,000,000 shares of Preferred Stock, $0.001 par value per share, none of
which is issued and outstanding. All outstanding shares of Acquiror Common Stock
have been duly authorized and validly issued, are fully paid and non-assessable,
are free of preemptive rights and were issued in compliance with all applicable
securities laws and regulations. To the knowledge of Acquiror and except as
otherwise contemplated by this Agreement, there are no voting trusts or other
agreements, arrangements or understandings with respect to the voting of
Acquiror Common Stock. The authorized capital stock of Newco consists in its
entirety of 1,000 shares of common stock, $.01 par value, all of which are
issued and outstanding. All of the outstanding shares of Newco common stock are
owned beneficially and of record by the Acquiror.
4.3 Authority Relative to Agreement. Each of the Acquiror and Newco has
full corporate power and authority to execute and deliver this Agreement and to
consummate the Merger and the other transactions contemplated on its part
hereby. Except with respect to the approval of the stockholders of Acquiror,
which shall be subject to the Special Meeting, as defined below, the execution,
delivery and performance by each of the Acquiror and Newco of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Acquiror and
Newco, including without limitation the affirmative vote of the Board of
Directors as contemplated by Section 203(a)(1) of the Delaware General
Corporation Law (the "DGCL"). This Agreement has been duly executed and
delivered by each of the Acquiror and Newco, and is a legal, valid and binding
obligation of each of the Acquiror and Newco, enforceable against each of the
Acquiror and Newco in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles. Each other agreement to be
executed in connection with this Agreement by the Acquiror and Newco on or prior
to the Closing Date will be duly executed and delivered by each of Acquiror and
Newco, as the case may be, and will constitute a legal, valid and binding
obligation of each of Acquiror and Newco, enforceable against each of Acquiror
and Newco in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
4.4 Acquiror Shares. The Acquiror Shares to be issued in connection with
the Merger have been duly authorized and, when issued as contemplated hereby at
the Effective Time, will be validly issued, fully paid and non-assessable, and
not subject to any preemptive rights or other rights or interests of third
parties.
4.5 No Violations or Consents. The execution, delivery and performance of
this Agreement by each of the Acquiror and Newco and the consummation by each of
them of the transactions contemplated hereby, will
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not (i) violate or conflict with any provision of any charter or bylaws of the
Acquiror or Newco, (ii) require the consent, waiver, approval, license or
authorization of or any filing by the Acquiror or Newco with any public
authority, other than (a) the filing of a pre-merger notification report under
The ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act"), (b) in connection
with or in compliance with the provisions of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Securities Act of 1933, as amended
(the "Securities Act"), the Communications Act of 1934, as amended (the
"Communications Act") and the rules and regulations arising thereunder, the
rules and regulations of The Nasdaq Stock Market, the Business Corporation Law
or the "takeover", "blue sky" or "public utilities" laws of various states and
(c) any other filings and approvals expressly contemplated by this Agreement,
(iii) violate, conflict with or result in a breach of or the acceleration of any
obligation under, or constitute a default (or an event which with notice or the
lapse of time or both would become a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Acquiror
or Newco pursuant to any provision of any indenture, mortgage, lien, lease,
agreement, instrument, order, judgment or decree to which the Acquiror or Newco
is subject or by which the Acquiror or Newco or any of their property or assets
is bound, or (iv) violate or conflict with any law, rule, regulation, permit,
ordinance or decree applicable to the Acquiror or Newco or by which any property
or asset of either of them is bound or affected except, in each of the instances
set forth in items (i) through (iv) above, where failure to give such notice,
make such filings, or obtain such authorizations, consents or approvals, or
where such violations, conflicts, breaches or defaults, in the aggregate, would
not have an Acquiror Material Adverse Effect.
4.6 Litigation. Except as may be disclosed in the Acquiror SEC Filings, as
defined below, there are no actions, proceedings, claims, complaints, grievances
or unfair labor practice complaints pending or, to the best of the Acquiror's
knowledge, threatened or, to the best of the Acquiror's knowledge,
investigations pending or threatened against the Acquiror or with respect to any
of the assets or properties of it before any court or governmental or regulatory
authority or body or arbitrator which, if adversely determined against Acquiror,
would have, individually or in the aggregate, an Acquiror Material Adverse
Effect. There are no such proceedings pending or, to the best knowledge of
Acquiror, threatened against Acquiror or Newco challenging the validity or
propriety of the transactions contemplated by this Agreement.
4.7 Financial Statements and Reports. The Acquiror heretofore has
delivered to the Company true and complete copies of (a) its Registration
Statement on Form S-1 dated April 29, 1998, Registration No. 333-48559, (b) its
Registration Statement on Form S-4 dated May 29, 1998, Registration No.
333-53335, (c) its Annual Report on Form 10-K for the fiscal year ended December
31, 1997 and (d) its Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 (collectively,"Acquiror SEC Filings"). The Acquiror SEC Filings made in
compliance with the Exchange Act were filed in a timely manner pursuant to the
rules and regulations thereof. As of the respective times such documents were
filed or, as applicable, became effective, the Acquiror SEC Filings complied as
to form and content, in all material respects, with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements of
the Acquiror included in the Acquiror SEC Filings were prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis and (except as may be indicated therein or in the notes thereto) present
fairly the consolidated financial position, results of operations and cash flows
of the Acquiror and its consolidated subsidiaries as of the dates and for the
periods indicated subject, in the case of unaudited interim consolidated
financial statements, to normal recurring year-end adjustments.
4.8 Proxy Statement; Other Information. The Proxy Statement, as defined
below, and any other documents to be filed with the Securities and Exchange
Commission (the "SEC") or any regulatory agency in connection with the
transactions contemplated hereby, will not be, at the respective times such
documents are filed with the SEC and, with respect to the Proxy Statement, when
first published, sent or given to the stockholders of Acquiror, false or
misleading with respect to any material fact, or omit to state any material
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fact necessary in order to make the statements therein, in light of the
circumstances under which there are made, not misleading. All documents which
the Acquiror or Newco files or is responsible for filing with the SEC and any
regulatory agency in connection with the Merger (including, without limitation,
the Proxy Statement) will comply as to form and content in all material respects
with the provisions of applicable law and regulations. Notwithstanding the
foregoing, the Acquiror and Newco make no representations or warranties with
respect to any information that has been supplied in writing by the Company or
its auditors, attorneys or financial advisors specifically for use in the Proxy
Statement or in any other documents to be filed by the Acquiror with the SEC or
any other regulatory agency in connection with the transactions contemplated
hereby.
4.9 Brokers. Neither the Acquiror nor Newco has paid or become obligated
to pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with this Agreement, except that the Acquiror has
retained ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ and Credit Suisse First Boston as its financial
advisors in connection with the transactions contemplated by this Agreement.
4.10 Benefit Plans. Except as described in Acquiror's SEC Filings,
Acquiror does not have outstanding any employment agreement with any officer or
employee of Acquiror, any bonus, incentive compensation, deferred compensation,
profit sharing, stock option, stock bonus, stock purchase, savings, severance,
salary continuation, consulting, retirement (including health and life insurance
benefits provided after retirement) or pension plan (including Acquiror Benefit
Plans, as defined in Section 4.11 hereof) or arrangement with or for the benefit
of any officer, employee or other person, or for the benefit of any group of
officers, employees or other persons that provides for payment of more than
$100,000 in annual benefits.
4.11 ERISA. All of Acquiror's employee benefit plans, as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), but without regard to whether any such plan is in fact subject to
ERISA, that are sponsored, or being maintained or contributed to, by Acquiror
that provide for payment of more than $25,000 in annual benefits (the "Acquiror
Benefit Plans") are described in Acquiror's SEC Filings. None of the Company
Employee Benefit Plans are "multiemployer plans" as defined in Section 3(37) of
ERISA. No "prohibited transactions" (as such term is defined in Section 4975 of
the Internal Revenue Code (the "IRC"), or in Part 4 of Subtitle B of Title I of
ERISA) have occurred with respect to any Acquiror Benefit Plan that could result
in the imposition of taxes or penalties that, in the aggregate, could have an
Acquiror Material Adverse Effect. Each Acquiror Benefit Plan has been
administered in compliance with the applicable requirements of ERISA and the
IRC, and in compliance with all other applicable provisions of law, except for
such noncompliance, if any, that, in the aggregate, would not have an Acquiror
Material Adverse Effect. With respect to each Acquiror Benefit Plan, Acquiror
has not incurred liabilities which, in the aggregate, could have an Acquiror
Material Adverse Effect as a result of the violation of or the failure to comply
with any applicable provision of ERISA, the IRC, any other applicable provision
of law, or any provision of such plan. There is no pending or, to the best
knowledge of Acquiror, threatened legal action, proceeding or investigation
against or involving any Acquiror Benefit Plan which could result in reduced
liabilities.
4.12 Environmental Matters. "Acquiror Real Properties" shall mean all real
property now or previously owned, operated or leased by Acquiror and located in
the United States. Except as set forth in Acquiror's SEC Filings: (i) Acquiror
and, to the best of Acquiror's knowledge, each of the Acquiror Real Properties
is in compliance with, and has no liability under any or all applicable
Environmental Laws, (ii) neither Acquiror nor any of the Acquiror Real
Properties has been alleged in writing by any governmental agency or third party
to be in violation of, to be liable under, or to be subject to any
administrative or judicial proceeding pursuant to, any Environmental Law and
(iii) there are no facts or circumstances which could reasonably form the basis
for the assertion of any claims against Acquiror relating to environmental
matters, except, in any such case, where the failure to comply or such liability
could not be reasonably expected to have an Acquiror Material Adverse Effect. As
used herein, Environmental Law means any federal, state, or local law, statute,
rule or regulation, or the common law governing or relating to the environment
or to occupational health and safety.
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4.13 Absence of Certain Changes. Since May 29, 1998, except as
contemplated by this Agreement, the Acquiror has conducted its business in the
ordinary course, consistent with past practices, and there has not been any (a)
material adverse change in the financial condition, results of operations,
business or properties of Acquiror, (b) sale, assignment or transfer of a
material portion of the Company's assets, other than in the ordinary course of
business, consistent with past practices, (c) changes in accounting methods,
principles or practices by Acquiror materially affecting Acquiror's assets,
liabilities or results of operations, except as otherwise required by GAAP, (d)
declaration, setting aside or payment of any dividend or other distribution or
payment (whether in cash, stock or property) with respect to any shares of
Acquiror Common Stock or (e) any other event or condition of any character that
in any one case or in the aggregate has had an Acquiror Material Adverse Effect.
4.14 Government Authorizations. Acquiror has all federal and state
governmental licenses, permits and other authorizations, including without
limitation all licenses and authorizations required by the United States Federal
Communications Commission (the "FCC") and by state public utilities commissions
("Acquiror Permits"), necessary to conduct Acquiror's business as presently
conducted, except where the failure to hold any such licenses, permits and other
authorizations would not result in an Acquiror Material Adverse Effect. Such
Acquiror Permits are valid and in full force and effect and Acquiror is not
aware of any threatened suspension, cancellation or invalidation of any such
Acquiror Permit. Except as set forth in Acquiror's SEC Filings, the Acquiror has
not received notice from either the FCC or any state public utilities
commissions of any complaint filed therewith concerning Acquiror, its operations
or services.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Except as set forth in the disclosure schedules attached hereto (the
"Disclosure Schedules"), the Stockholders, severally but not jointly, represent
and warrant to Acquiror as follows:
5.1 Ownership and Title to the Shares. As set forth on Schedule 5.1, such
Stockholder is the record and beneficial owner of that number of shares of
Common Stock and of the Options and Warrants, if any, set forth opposite his
name on such schedule and has good and valid title in and to such securities.
Except as set forth on Schedule 5.1, such shares are, and on the Closing Date
will be, free and clear of any and all liens, security interests, mortgages,
deeds of trust, pledges, claims, rights of first refusal, options, encumbrances,
restrictions, preemptive or subscriptive rights or other rights of third parties
("Encumbrances").
5.2 Authority Relative to Agreement. Such Stockholder has the full power
and authority to execute this Agreement and the other transactions contemplated
on his part hereby. Such Stockholder has taken all steps that may be necessary
to duly authorize the execution and delivery by the Company and by such
Stockholder of this Agreement and the consummation of the transactions
contemplated on his or its part hereby, in accordance with the provisions of
Section 913(c)(2)(A) of the Business Corporation Law, and no other actions on
the part of such Stockholder is necessary to authorize the execution and
delivery of this Agreement by such Stockholder or the consummation of the
transactions contemplated on his or its part hereby. This Agreement has been
duly executed and delivered by such Stockholder, and constitutes a legal, valid
and binding obligation of such Stockholder, enforceable against such Stockholder
in accordance with its terms, except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles. Each other agreement to be executed in connection with this
Agreement by such Stockholder on or prior to the Closing Date will be duly
executed and delivered by the Stockholder and will constitute a legal, valid and
binding obligation of each such Stockholder, enforceable against such
Stockholder in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
5.3 No Violations or Consents. Except as set forth on Schedule 5.3, the
execution, delivery and performance of this Agreement by such Stockholder and
the consummation of the transactions contemplated
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hereby will not (i) violate, conflict with or result in a breach of or the
acceleration of any obligation under, or constitute a default (or an event which
with notice or the lapse of time or both would become a default) under, or give
to others any right of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or other encumbrance on any property or
asset of such Stockholder pursuant to any provision of any contract to which
such Stockholder is bound, lien, order, judgment or decree to which such party
is subject or by which such Stockholder or any of his property or assets is
bound, or (ii) violate or conflict with any law, rule, regulation, permit,
ordinance or regulation applicable to such Stockholder or by which any property
or asset of such Stockholder is bound or affected.
5.4 Rule 501. Such Stockholder is an "accredited investor" within the
meaning of Rule 501 of the Securities Act. In connection with the Merger, each
such Stockholder is acquiring shares of Acquiror Common Stock for investment for
his own account, not as a nominee or agent and not with a view towards the
resale or other distribution of any part thereof, and such Stockholder has no
present intention of selling, granting any participation in, or otherwise
distributing such shares of Acquiror Common Stock.
5.5 Restricted Securities. Such Stockholder understands that the shares of
Acquiror Common Stock he will receive in the Merger will be characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from Acquiror in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act, only in certain limited
circumstances. In this connection, such Stockholder represents that he is
familiar with Rule 145 of the Securities Act, as presently in effect, and
understands the holding period and resale limitations imposed thereby and by the
Securities Act.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
Except as set forth in the Disclosure Schedules, the Company and the
Stockholders jointly and severally represent and warrant to Acquiror as follows:
6.1 Corporate Organization; Subsidiaries.
(a) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York with all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as it is now being conducted, and is qualified or
licensed to do business and is in good standing in each jurisdiction in which
the failure to be so qualified or licensed, in the aggregate, would have a
material adverse effect on the financial condition, results of operations,
business or properties of the Company and its Subsidiaries (as defined below),
taken as a whole (a "Company Material Adverse Effect"). True and correct copies
of the Certificate of Incorporation and the Bylaws of the Company have been
delivered or made available to Acquiror.
(b) Subsidiaries. Schedule 6.1(b) contains a true and complete list of all
direct and indirect domestic and foreign subsidiaries of the Company
(individually, a "Subsidiary" and collectively, the "Subsidiaries"), listing the
name and jurisdiction of incorporation or organization of each such Subsidiary.
Each Subsidiary is a corporation duly organized and validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, has the
corporate power and authority to own, operate or lease the properties and assets
now owned, operated or leased by such Subsidiary and to carry on its business as
now being conducted by such Subsidiary, is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction set
forth on Schedule 6.1(b), which are all of the jurisdictions in which the
failure so to qualify would have a Company Material Adverse Effect. All of the
issued and outstanding capital stock of each Subsidiary is owned by the Company
or one of the Subsidiaries, as the case may be, free and clear of any and all
Encumbrances (as defined below). There are no outstanding rights to purchase or
otherwise receive from any Subsidiary any shares of capital stock or any other
security of such Subsidiary and there are no outstanding securities of any kind
convertible into or exchangeable for such capital stock. The Company does
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not own, directly or indirectly, any stock, partnership interest, joint venture
interest or other security, investment or interest in any other corporation,
organization or entity, other than the Subsidiaries.
6.2 Capital Stock. As of the date hereof, the authorized capital stock of
the Company consists in its entirety of (a) One Hundred Fifty Million
(150,000,000) shares of Common Stock, of which Forty-eight Million Four Hundred
Six Thousand Five Hundred Forty-eight (48,406,548) are issued and outstanding
and (b) Fifteen Million (15,000,000) shares of preferred stock, $.01 par value
per share, none of which are issued and outstanding. All outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid and
non-assessable, are free of preemptive rights and were issued in compliance with
all applicable securities laws and regulations. Except as set forth on Schedule
6.2 or as otherwise contemplated by this Agreement, there are no voting trusts
or other agreements, arrangements or understandings with respect to the voting
of the Shares to which the Company, the Stockholders or any other person is a
party. Except as set forth on Schedule 6.3 or as otherwise contemplated by this
Agreement, there are no preemptive rights, registration rights, subscriptions,
options, warrants, rights, convertible securities or other agreements or
commitments of any character relating to issued or unissued shares of Common
Stock or other securities of the Company and there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire or sell, issue or otherwise transfer any outstanding securities thereof.
6.3 Options, Warrants or Other Rights. Except as set forth on Schedule 6.3
or as contemplated by this Agreement, there is no outstanding right,
subscription, warrant, call, unsatisfied preemptive right, option or other
agreement or arrangement of any kind to purchase or otherwise to receive from
the Company or any Subsidiary any of the outstanding, authorized but unissued,
unauthorized or treasury shares of the capital stock or any other equity
security of the Company or any Subsidiary and there is no outstanding security
of any kind convertible into or exchangeable for such capital stock.
6.4 Authority Relative to Agreement. The Company has full corporate power
and authority to execute and deliver this Agreement and to consummate the Merger
and the other transactions contemplated on its part hereby. The execution and
delivery by the Company of this Agreement and the consummation of the
transactions contemplated on its part hereby have been duly authorized by its
Board of Directors and its stockholders, such authorization being in compliance
with the provisions of Sections 912(b) and 913(c)(2)(A) of the Business
Corporation Law, and no other corporate proceedings on the part of the Company
or the stockholders are necessary to authorize the execution and delivery of
this Agreement by the Company or the consummation of the transactions
contemplated on its part hereby. This Agreement has been duly executed and
delivered by the Company, and constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally or by general equitable principles. Each other
agreement to be executed in connection with this Agreement by the Company on or
prior to the Closing Date will be duly executed and delivered by the Company,
and will constitute a legal, valid and binding obligation of the Company,
enforceable against each of the Company in accordance with its respective terms,
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
other laws affecting the enforcement of creditors' rights generally or by
general equitable principles.
6.5 No Violations or Consents. Except as set forth on Schedule 6.5, the
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby will not (i) violate or
conflict with any provision of any charter or bylaws of the Company or any
Subsidiary, (ii) require the consent, waiver, approval, license or authorization
of or any filing by the Company or any Subsidiary with any third party or public
authority (other than (a) the filing of a premerger notification report under
the HSR Act, (b) in connection with or in compliance with the provisions of the
Exchange Act, the Securities Act, the Communications Act or the "blue sky" or
"public utility" laws of various states, and (c) any other filings and approvals
expressly contemplated by this Agreement), (iii) violate, conflict with or
result in a breach of or the acceleration of any obligation under, or constitute
a default (or an event which with notice or the lapse of time or both would
become a default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or any Subsidiary pursuant
to any provision of any Material Contract (as
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defined below), lien, order, judgment or decree to which any such party is
subject or by which the Company or any Subsidiary or any of their property or
assets is bound, or (iv) violate or conflict with any law, rule, regulation,
permit, ordinance or regulation applicable to the Company or any Subsidiary or
by which any property or asset of the Company or any Subsidiary is bound or
affected except, in each of the instances set forth in items (i) through (iv)
above, where failure to give such notice, make such filings, or obtain such
authorizations, consents or approvals, or where such violations, conflicts,
breaches or defaults, in the aggregate, would not have a Company Material
Adverse Effect.
6.6 Governmental Authorizations and Regulations. Schedule 6.6 is a true
and complete list of all material governmental licenses, franchises, permits and
other authorizations, including without limitation any and all licenses issued
to the Company or any Subsidiary by the FCC, by state public utilities
commissions and by all applicable foreign telecommunications regulatory entities
(the "Foreign Agencies") ("Company Permits") held by the Company and the
Subsidiaries. Such Company Permits are all governmental licenses, franchises,
permits and other authorizations necessary to the conduct of the business of the
Company and the Subsidiaries. Such Company Permits are valid and in full force
and effect and the Company knows of no threatened suspension, cancellation or
invalidation of any such Company Permit. Except as set forth on Schedule 6.6,
the Company has not received notice from any of the FCC, any state public
utilities commissions or any Foreign Agencies of any complaint filed therewith
concerning the Company, its operations or services and, to the best knowledge of
the Company and the Stockholders, there is not reasonable basis for the filing
of any such complaint. Neither the Company nor any Subsidiary is in conflict
with, or is in default or violation of, any law, rule, regulation, order,
judgment, Company Permit, ordinance, regulation or decree applicable to the
Company or any Subsidiary or by which any property or asset of either of them is
bound or affected, except where such conflicts, defaults or violations, in the
aggregate, would not have a Company Material Adverse Effect.
6.7 Litigation. Except as set forth on Schedule 6.7 hereto, there are no
actions, proceedings, claims, complaints, grievances or unfair labor practice
complaints (collectively, "Actions") pending or, to the best knowledge of the
Company and the Stockholders, threatened, or, to the best knowledge of the
Company and the Stockholders, investigations pending or threatened against the
Company or any of the assets or properties of the Company before any court or
governmental or regulatory authority or body or arbitrator, which, if such
Action were determined adversely to the Company, would have, individually or in
the aggregate, a Company Material Adverse Effect. There are no Actions pending
or, to the best knowledge of the Company and the Stockholders, threatened
against the Company challenging the validity or propriety of the transactions
contemplated by this Agreement. None of the assets, property or other rights of
the Company or any Subsidiaries thereof is subject to any order, judgment,
injunction, writ or decree, which would have, individually or in the aggregate,
a Company Material Adverse Effect.
6.8 Financial Statements and Reports; Material Liabilities; Projections
(a) Financial Statements and Reports. The Company's audited balance
sheets and its audited statements of operations, stockholder's equity and cash
flows as of and for the fiscal years ended March 31, 1995, 1996 and 1997 (the
"Audited Financials"), as well as the June 8, 1998 draft of the Company's
audited balance sheet and audited statements of operations, stockholders' equity
and cash flows as of and for the fiscal year ended March 31, 1998 (collectively
with the Audited Financials, the "Company Financial Statements") were prepared
from and are in accordance with the books and records of the Company and were
prepared in accordance with GAAP applied on a consistent basis and (except as
may be indicated therein or in the notes thereto) present fairly the
consolidated financial position, results of operations and cash flows of the
Company and its consolidated subsidiaries as of the dates and for the periods
indicated.
(b) Material Liabilities. Except as set forth on Schedule 6.8(b), the
Company has no material liabilities or obligations (whether fixed, accrued,
contingent or otherwise) that are not fully reflected or provided for on, or
disclosed in the notes to, the Company Financial Statements, except for (i)
liabilities in the ordinary course of business that could not be reasonably
expected to have a Company Material Adverse Effect or (ii) liabilities incurred
in the ordinary course of business that are not required by GAAP to be reflected
thereon and which, individually and in the aggregate, are not material.
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(c) Projections. The projections dated May 1, 1998 delivered by the
Company to the Acquiror were prepared in good faith in a manner that was
reasonable in the context of the financial information and data set forth
therein, provided that Acquiror and Newco acknowledge that such projections are
forward-looking statements, are subject to the uncertainties inherent thereto
and that the Company's actual results may differ, perhaps materially, from such
projections.
6.9 Absence of Certain Changes. Except as set forth on Schedule 6.9, since
April 1, 1998, the Company has conducted its business in the ordinary course and
there has not been any:
(a) material adverse change in the financial condition, assets,
liabilities, business or results of operations of the Company or any Subsidiary;
(b) addition to or modification of employee benefits plans, arrangements
or practices, other than in the ordinary course of business;
(c) sale, assignment or transfer of any of the material assets of the
Company or any Subsidiary, other than in the ordinary course of business,
consistent with past practice;
(d) cancellation of any indebtedness owed to the Company in an aggregate
amount greater than Seventy-five Thousand Dollars ($75,000), or waiver of any
rights of similar value to the Company relating to any of its business
activities or properties, other than in the ordinary course of business;
(e) amendment, cancellation or termination of any Material Contract,
other than in the ordinary course of business, consistent with past practice;
(f) any breach of, or default under, any Material Contract by the
Company or any Subsidiary;
(g) change in accounting methods, principles or practices by the Company
materially affecting its assets, liabilities or results of operations;
(h) material revaluation by the Company or any Subsidiary of its assets,
including without limitation, any material write-offs, material increases in any
reserves or any material write-up of the value of inventory, property, equipment
or any other asset;
(i) material damage, destruction or loss (if not covered by insurance)
affecting any office or other facility maintained by the Company or any other
material asset of the Company and resulting in a loss in an aggregate amount in
excess of One Hundred Thousand Dollars ($100,000);
(j) Encumbrance with respect to any assets of the Company or any
Subsidiary, except Encumbrances arising in the ordinary course of business;
(k) declaration, setting aside or payment of any dividend or other
distribution or payment (whether in cash, stock or property) with respect to any
shares of Common Stock, or any redemption, purchase or other acquisition of any
of such shares, or any other payment to the stockholders of the Company with
respect to the shares of Common Stock held thereby;
(l) issuance by the Company of, or commitment by it to issue, any shares
of Common Stock or other equity securities or any securities convertible into or
exchangeable or exercisable for shares of the Common Stock or other equity
securities;
(m) indebtedness for borrowed money incurred by the Company or any
Subsidiary or any commitment to incur indebtedness for borrowed money entered
into by the Company or any Subsidiary, or any loans made or agreed to be made by
the Company, including without limitation, any loans made to any of the
Company's executive officers;
(n) incurrence of other liabilities by the Company or any Subsidiary
involving an aggregate amount in excess of One Hundred Fifty Thousand Dollars
($150,000) or more, except in the ordinary course of business, or any material
increase or change in any assumptions underlying, or methods of calculating, any
bad debt, contingency or other reserves;
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(o) payment, discharge or satisfaction of any liabilities other than the
payment, discharge or satisfaction in the ordinary course of business,
consistent with past practice, of liabilities reserved against in the Financial
Statements or of liabilities incurred in the ordinary course of business,
consistent with past practice, since such date or of other liabilities involving
Fifty Thousand Dollars ($50,000) or less individually and One Hundred Fifty
Thousand Dollars ($150,000) or less in the aggregate;
(p) increase in the compensation of officers or employees (including any
such increase pursuant to any bonus, pension, profit sharing or other plan or
commitment) or any increase in the compensation payable or to become payable to
any officer or employee or any severance or termination pay, except for
increases in the ordinary course of business, consistent with past practice or
as required by law or any existing agreement;
(q) granting of any bonus, incentive compensation, service, award or
other like benefit to any officer or employee except in accordance with plans or
arrangements disclosed on Schedule 6.11; or
(r) other event or condition of any character which in any one case or
in the aggregate could be reasonably expected to have a Company Material Adverse
Effect.
6.10 Benefit Plans. Except as disclosed on Schedule 6.10, the Company does
not have outstanding any employment agreement with any officer or employee of
the Company or any Subsidiary any bonus, incentive compensation, deferred
compensation, profit sharing, stock option, stock bonus, stock purchase,
savings, severance, salary continuation, consulting, retirement (including
health and life insurance benefits provided after retirement) or pension plan
(including Company Employee Benefit Plans, as defined in Section 6.11 hereof) or
arrangement with or for the benefit of any officer, employee or other person, or
for the benefit of any group of officers, employees or other persons that
provides for payment of more than $100,000 in annual benefits. Neither the
Company nor any Subsidiary has made, or entered into any agreement to make, any
payment that becomes payable as a result of the consummation of the transactions
contemplated by this Agreement which would be treated as an "excess parachute
payment" as defined in Section 280G of the IRC. There are no such agreements,
plans or other arrangements entered into with or provided for any independent
contractors with whom the Company or any Subsidiary has a business relationship.
6.11 ERISA. Set forth on Schedule 6.11 are all of the employee benefit
plans, as defined in Section 3(3) of ERISA, but without regard to whether any
such plan is in fact subject to ERISA, that is sponsored, or is being maintained
or contributed to, by the Company or any Subsidiary that provides for payment of
more than $25,000 in annual benefits (the "Company Employee Benefit Plans").
None of the Company Employee Benefit Plans are "multiemployer plans" as defined
in Section 3(37) of ERISA. The Company has furnished or made available or will
promptly after the date hereof make available to Newco and the Acquiror (a) a
true and complete copy of the plan document and summary plan description for
each Company Employee Benefit Plan, (b) a true and complete copy of the most
recently filed Form 5500 (including the related schedules) with respect to each
Company Employee Benefit Plan for which such form is required to be filed, (c) a
true and complete copy of any trust agreement, insurance contract or other
agreement or arrangement serving as (a) source of funding any benefits payable
under any Company Employee Benefit Plan, and (d) the most recently issued
financial statement and actuarial report, if any, for each Company Employee
Benefit Plan. No "prohibited transactions" (as such term is defined in Section
4975 of the IRC, or in Part 4 of Subtitle B of Title I of ERISA) have occurred
with respect to any Company Employee Benefit Plan that could result in the
imposition of taxes or penalties that, in the aggregate, could have a Company
Material Adverse Effect. With respect to each of the Company Employee Benefit
Plans that is intended to qualify for favorable income tax treatment under
Section 401(a) of the IRC, (i) the Internal Revenue Service ("IRS") has issued a
favorable determination letter with respect to such plan; (ii) except as set
forth on Schedule 6.10, the Company has furnished Newco and Acquiror with a copy
of the determination letter most recently issued by the IRS with respect to such
plan and the application filed with the IRS for such determination letter; and
(iii) to the best knowledge of the Company, no event has occurred from the date
of each such favorable determination letter that would adversely affect the
tax-qualified status of the plan in question. Each Company Employee Benefit Plan
has been administered in compliance with the applicable requirements of ERISA
and the IRC, and in compliance with all other applicable provisions of law,
except for such noncompliance, if any, that, in the aggregate, would not have a
Company Material Adverse Effect. With
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respect to each Company Employee Benefit Plan, neither the Company nor any
Subsidiary has incurred liabilities which, in the aggregate, could have a
Company Material Adverse Effect as a result of the violation of or the failure
to comply with any applicable provision of ERISA, the IRC, any other applicable
provision of law, or any provision of such plan. None of the Company Employee
Benefit Plans which is an "employee pension benefit plan", as that term is
defined in Section 3(2) of ERISA (a "Company Employee Pension Benefit Plan"),
has incurred an "accumulated funding deficiency," within the meaning of Section
3(2) of ERISA or Section 412 of the IRC. Neither the Company nor any Subsidiary
has failed to make any contribution to, or to make any payment under, any
Company Employee Benefit Plan that it was required to make pursuant to the terms
of the plan or pursuant to applicable law in any amount which, in the aggregate,
could have a Company Material Adverse Effect. To the best knowledge of the
Company, no "reportable events," with respect to which a notice must be filed
with the Pension Benefit Guaranty Corporation ("PBGC"), has occurred with
respect to any Company Employee Pension Benefit Plan subject to Title IV of the
ERISA. No proceedings by the PBGC to terminate any Company Employee Pension
Benefit Plan pursuant to Subtitle of Title IV of ERISA have to the best of the
Company's knowledge, been instituted or threatened. Except for any liabilities
in an amount which, in the aggregate, would not have a Company Material Adverse
Effect, neither the Company nor any Subsidiary (1) has incurred any liability to
the PBGC in connection with any Company Employee Pension Benefit Plan, including
any liability under Section 4069 of ERISA and any penalty imposed under Section
4071 of ERISA, (2) has terminated any Company Employee Pension Benefit Plan, or
ceased operations at any facility or withdrawn from any Company Employee Pension
Benefit Plan, in a manner that could subject it to liability or any liens under
Section 4062, 4063, 4064 or 4068 of ERISA or (3) has any knowledge as to the
existence of any state of facts, or as to the occurrence of any transactions,
that might reasonably be anticipated to result in any liability of the Company
or any Subsidiary to the PBGC under any other provision of Title IV of ERISA.
There is no pending or, to the best knowledge of the Company, threatened legal
action, proceeding or investigation against or involving any Company Employee
Benefit Plan which could result in liabilities to the Plan, the Company or any
Subsidiary. Except as disclosed on Schedule 6.10, the present value of accrued
benefits of each Company Employee Benefit Plan that is a defined benefit plan as
defined in Section 3(35) of ERISA does not exceed the value of the assets of
such plan available to pay such benefits by an amount that, in the aggregate for
all such plans, could have a Company Material Adverse Effect. All
representations made by the Company in this Section 6.11 are likewise true with
respect to each Subsidiary.
6.12 Environmental Matters. "Company Real Properties" shall mean all real
property now or previously owned, operated or leased by the Company, any
Subsidiary or any predecessor-in-interest. Except as set forth on Schedule 6.12:
(i) the Company, each of the Subsidiaries, and to the best of the Company's
knowledge, each of the Company Real Properties is in compliance with, and has no
liability under any or all applicable Environmental Laws, (ii) none of the
Company, any Subsidiary or any of the Company Real Properties has been alleged
in writing by any governmental agency or third party to be in violation of, to
be liable under, or to be subject to any administrative or judicial proceeding
pursuant to, any Environmental Law and (iii) there are no facts or circumstances
which could reasonably form the basis for the assertion of any claims against
the Company or any Subsidiary relating to environmental matters, except, in any
such case, where the failure to comply or such liability could not be reasonably
expected to have a Company Material Adverse Effect. As used herein,
Environmental Law means any federal, state, or local law, statute, rule or
regulation, or the common law governing or relating to the environment or to
occupational health and safety.
6.13 Real Estate Leases. Schedule 6.13 sets forth a complete and accurate
list, copies of which have been delivered to the Acquiror, of (i) all leases and
subleases under which the Company or any Subsidiary is lessor or lessee of any
real property, together with all amendments, supplements, nondisturbance
agreements and other agreements pertaining thereto; (ii) all material options
held by the Company or any Subsidiary or contractual obligations on the part of
the Company or any Subsidiary to purchase or acquire any interest in real
property; and (iii) all options granted by the Company or any Subsidiary or
contractual obligations on the part of the Company or any Subsidiary to sell or
dispose of any material interest in real property in each such instance in items
(i) through (iii) above, which provides for a payment of more than $25,000. Such
leases, subleases and other agreements are in full force and constitute binding
obligations of the Company and, to the best of its knowledge, the other parties
thereto, and (i) there are no defaults thereunder by the Company or
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any Subsidiary or, to the best of Company's knowledge, by any other party
thereto and (ii) no event has occurred which (with notice, lapse of time or both
or occurrence of any other event) would constitute a default by the Company or
any Subsidiary or, to the best of the Company's knowledge, by any other party
thereto, except, in either such instance, for defaults or events that could not
be reasonably expected to have a Company Material Adverse Effect. The Company or
a Subsidiary has good, valid and insurable leasehold title to all such leased
property, free and clear of all encumbrances, liens, charges or other
restrictions of any kind or character, except for Permitted Liens, as defined
below.
6.14 Title to Properties; Absence of Liens and Encumbrances. The Company
does not own any real property. Except for leased assets, the Company and the
Subsidiaries have good and insurable title to all of their material tangible
personal property used in their businesses, including, without limitation, those
reflected in the balance sheet of the Company as of March 31, 1998 (the "Company
Balance Sheet") (other than assets disposed of in the ordinary course of
business since March 31, 1998), free and clear of all Encumbrances, except liens
for taxes not yet due and payable and such liens or other imperfections of
title, if any, as would not, in the aggregate, have a Company Material Adverse
Effect on the operation of the business of the Company or any Subsidiary, and
except as reflected or disclosed in the Company Balance Sheet, or on Schedule
6.14.
6.15 Tax Matters. Except as set forth on Schedule 6.15, the Company has
paid, or the Company Balance Sheet contains adequate provision for, all federal,
state, local, foreign or other governmental income, excise, franchise, payroll,
F.I.C.A., unemployment, withholding, real property, personal property, sales,
payroll, disability and all other taxes imposed on the Company or any Subsidiary
or with respect to any of their respective properties, or otherwise payable by
them, including interest and penalties, if any, in respect thereof
(collectively, "Company Taxes"), for the Company taxable period ended on the
date of the Company Balance Sheet and all fiscal periods of the Company prior
thereto. Company Taxes paid and/or incurred from the date of the Company Balance
Sheet until the Effective Time will include only Company Taxes incurred in the
ordinary course of business determined in the same manner as in the taxable
period ending on the date of the Company Balance Sheet. Except as disclosed on
Schedule 6.15, the Company and its Subsidiary have timely filed all income tax,
excise tax, sales tax, use tax, gross receipts tax, franchise tax, employment
and payroll related tax, property tax, and all other tax returns which the
Company and/or each Subsidiary (as the case may be) are required to file ("Tax
Returns"), and have paid or provided for all the amounts shown to be due
thereon. Except as set forth on Schedule 6.15, (i) neither the Company nor any
Subsidiary has filed or entered into, or is otherwise bound by, any election,
consent or extension agreement that extends any applicable statute of
limitations with respect to taxable periods of the Company, (ii) the Company is
not a party to any contractual obligation requiring the indemnification or
reimbursement of any person with respect to the payment of any Tax, (iii) no
claim has ever been made or threatened by an authority in a jurisdiction where
the Company or any Subsidiary do not file Tax Returns that they are or may be
subject to Taxes by that jurisdiction, (iv) no issues have been raised by the
relevant taxing authorities on audit that are of a recurring nature and that
would have an effect upon the Taxes of the Company or any Subsidiary. Except as
set forth on Schedule 6.15, to the best of the Company's and each Subsidiary's
knowledge, no action or proceeding is pending or threatened by any governmental
authority for any audit, examination, deficiency, assessment or collection from
the Company or any Subsidiary of any Company Taxes, no unresolved claim for any
deficiency, assessment or collection of any Company Taxes has been asserted
against the Company or any Subsidiary, and all resolved assessments of Company
Taxes have been paid or are reflected in the Company Balance Sheet.
6.16 Proprietary Property. Schedule 6.16 contains a complete and accurate
list of all material trade names, trademarks, service marks, copyrights, trade
names, brand names, software and proprietary and other technical information
(collectively "Proprietary Property"), including all contracts, agreements and
licenses relating thereto, owned by the Company or the Subsidiaries or in which
any of them has any rights to any such Proprietary Property. To the Company's
knowledge, none of the Company or the Subsidiaries has infringed or is now
infringing on any Proprietary Property belonging to any other person, firm or
corporation. The Company and the Subsidiaries own or hold adequate licenses or
other rights to use all Proprietary Property necessary for them to conduct their
respective businesses as they are being conducted, including without
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limitation, all such rights relating to all software and related Proprietary
Property used in and necessary for the operation of the Company's debit card
platform and the Company's billing system relating to its 10XXX program, except
where the failure to hold such rights could not be reasonably expected to result
in a Company Material Adverse Effect. Except as disclosed on Schedule 6.16, none
of the Company or the Subsidiaries has granted any licenses with respect to any
of their respective Proprietary Property. None of the Company or the
Subsidiaries has received any notice of, nor does the Company have any knowledge
with respect to, any claim of infringement or other conflict or claimed conflict
with respect to the rights of others to the use of the corporate name of the
Company or any Subsidiary or any of their Proprietary Property, except such
conflicts or claimed conflicts which, in the aggregate, would not result in a
Company Material Adverse Effect. No Proprietary Property is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by the Company or any Subsidiary or restricting the licensing
thereof by the Company or any Subsidiary to any Person. Except as set forth on
Schedule 6.16, neither the Company nor any Subsidiary has entered into any
agreement to indemnity any other party against any charge of infringement of any
patent, trademark, service ▇▇▇▇ or copyright.
6.17 Labor Matters. Neither the Company nor any Subsidiary is a party to
any collective bargaining agreement with respect to any of their employees. None
of the employees of the Company or any Subsidiary are represented by any labor
union and, as of the date hereof, neither the Company nor any Subsidiary has any
knowledge of any union organizational efforts involving the Company's employees
during the past five years. Except as set forth on Schedule 6.17, neither the
Company nor any Subsidiary has received written notice of any claim, or has
knowledge of any facts which are likely to give rise to any claim, that they
have not complied in any material respect with any laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, the payment of social security
and similar taxes, equal employment opportunity, employment discrimination or
employment safety.
6.18 Insurance. Schedule 6.18 lists, as of the date of this Agreement, all
material policies of fire, products liability, general liability, vehicle,
worker's compensation, directors' and officers' liability, title and other
insurance owned or held by or covering the Company or any Subsidiary or any of
their property or assets which are material to the business of the Company and
any Subsidiary, taken as a whole. As of the date hereof, all of such policies
are in full force and effect, except as to matters or defaults which, in the
aggregate, would not have a Company Material Adverse Effect, and no written
notice of cancellation or termination has been received with respect to any such
policy which has not been replaced or cannot be replaced on substantially
similar terms prior to the date of such cancellation or termination.
6.19 Material Contracts. Schedule 6.19 lists, as of the date of this
Agreement, the following contracts or agreements to which the Company or a
Subsidiary is a party or is bound (collectively, the "Material Contracts"), (i)
all contracts or other agreements, whether or not made in the ordinary course of
business, which are material to the business of the Company and the Subsidiaries
taken as a whole; (ii) all contracts in the nature of mortgages, indentures,
promissory notes, loan or credit agreements or similar instruments under which
the Company and the Subsidiaries have borrowed or may borrow at least
$1,000,000; (iii) any personal property lease providing for annual rentals of
$500,000 or more; (iv) any agreement with a term of at least one year for the
purchase of materials, supplies, goods, services, equipment or other assets
providing for either annual payments by the Company and the Subsidiaries of
$500,000 or more or aggregate payments by the Company and the Subsidiaries of
$1,000,000 or more; (v) any sales, distribution or other similar agreement with
a term of at least six months, providing for the sale by the Company or any
Subsidiary of materials, supplies, goods, services, equipment or other assets
that provides for (A) annual payments to the Company and the Subsidiaries of
$200,000 or more and (B) does not by its terms permit the Company or any
Subsidiary to pass any increase in the costs of such materials, supplies, goods,
services, equipment or other assets on to the counterpart thereto; (vi) any
material partnership, joint venture or other similar agreement or arrangement;
(vii) any material agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise) entered
into since April 1, 1997; (viii) any and all carrier services agreements,
operating agreements and agreements with vendors; (ix) any material option,
license, franchise or similar agreement; (x) any material agency, dealer, sales
representative, marketing or other similar agreement; (xi) any agreement that
limits the freedom of the Company or any Subsidiary to compete
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in any line of business or with any Person or in any area or which would so
limit the freedom of the Company or any Subsidiary after the Effective Date;
(xii) all agreements with qualified independent distributors; (xiii) any
agreement with any person directly or indirectly owning, controlling or holding
with power to vote, 5% or more of the outstanding voting securities of the
Company. Except as set forth on Schedule 6.19, each of the Material Contracts is
valid and binding and in full force and effect, enforceable by the Company in
accordance with its terms, except to the extent that such enforceability may be
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
other laws affecting the enforcement of creditors' rights generally or by
general equitable principles. None of the Company or the Subsidiaries or, to the
knowledge of the Company, any other party thereto, is in default in any respect,
and no event has occurred which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would constitute a default of
the Company or any Subsidiary or, to the knowledge of the Company, any third
party, under any of the Material Contracts, except such defaults which, in the
aggregate, would not result in a Company Material Adverse Effect. True and
complete copies of each of the Material Contracts have been delivered or made
available to the Acquiror.
6.20 Proxy Statement; Other Information. The information supplied or to be
supplied in writing by the Company specifically for inclusion in the Proxy
Statement and any other documents to be filed with the SEC or any other
regulatory agency in connection with the transactions contemplated hereby will,
at the respective times such documents are filed, or, as applicable, declared
effective, and on the Effective Time, and, with respect to the Proxy Statement,
when first published, sent or given to stockholders of the Acquiror, not be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting.
If, at any time prior to the Effective Time, any event relating to the Company
or any of its affiliates, officers or directors is discovered by the Company
that should be set forth in a supplement to the Proxy Statement, the Company
will promptly inform the Acquiror.
6.21 Brokers. Except as set forth in Schedule 6.21, neither the Company
nor any Subsidiary has paid or become obligated to pay any fee or commission to
any broker, finder, investment banker or other intermediary in connection with
this Agreement. The Company has delivered to the Acquiror copies of all current
engagement letters that the Company has entered with BT Alex. ▇▇▇▇▇
Incorporated.
6.22 Continuity of Interest. The Company has caused each person who is an
affiliate, as defined in Rule 12b-2 under the Exchange Act (an "Affiliate"), to
deliver to the Acquiror and each Affiliate has, concurrently with the signing of
this Agreement, signed an affiliate agreement in the form attached hereto as
Exhibit C (an "Affiliate Agreement") providing, among other things, that such
person has no plan or intention and will not sell, pledge, transfer or otherwise
dispose of shares of Acquiror Common Stock or in any way reduce their risk
relative to any such shares, until such time as financial results covering at
least 30 days of combined operations of the Acquiror and the Company have been
published within the meaning of Section 201.01 of the Codification of Financial
Reporting Policies of the SEC and except in compliance with the applicable
provisions of the Securities Act, and the rules and regulations thereunder.
6.23 Transactions with Affiliated Parties. Schedule 6.23 sets forth a true
and complete list and description of all transactions engaged in since April 1,
1996 between the Company and any director, officer, employee, stockholder,
partner or agent of the Company, or any of their respective spouses or children,
any trust of which any such person is the grantor, trustee or beneficiary, any
corporation of which any such person or party is a stockholder, employee,
officer or director, or any partnership or other person in which any such person
or party owns an interest (all such persons, trusts, corporations and
partnerships being herein referred to collectively as "Affiliated Parties" and
individually as an "Affiliated Party"). No Affiliated Party is a party to any
agreement, contract or commitment with the Company except as set forth in
Schedule 6.23.
6.24 Distributors. Schedule 6.24 hereto sets forth the Company's five (5)
largest distributors for the fiscal year ended March 31, 1998 (the "Large
Distributors").
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6.25 Accounts Receivable. The accounts receivable of the Company set forth
on the Company Balance Sheet or which have arisen since April 1, 1998 have
arisen only from bona fide transactions in the ordinary course of business. The
services sold and delivered that gave rise to such accounts were sold and
delivered in conformity in all material respects with applicable Material
Contracts and, except as set forth on Schedule 6.25, as of March 31, 1998 there
were no refunds, rebates, discounts or other adjustments payable with respect to
any such accounts receivable.
6.26 Inventory. As of the date of the Company Balance Sheet, inventories
set forth on the Company Balance Sheet consisted in all material respects of
items of a quantity and quality saleable in the ordinary course of business net
of applicable reserves. All such inventories are valued on the Company Balance
Sheet in accordance with GAAP applied on a basis consistent with past practices.
ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 Proxy Statement; Special Meeting. As promptly as practicable following
the execution of this Agreement, Acquiror agrees that this Agreement shall be
submitted at a special meeting of its stockholders duly called and held pursuant
to Section 251(c) of the DGCL (the "Special Meeting") to consider and vote upon
the approval of the Merger, and the Acquiror shall promptly prepare and file
with the SEC the Proxy Statement and all other filings relating to the Special
Meeting as required by the Exchange Act and the rules and regulations of the SEC
promulgated thereunder. Acquiror shall use all commercially reasonable efforts
to solicit from its stockholders proxies to be voted at the Special Meeting in
favor of this Agreement and the transactions contemplated hereby, including
without limitation, the Merger, which solicitation shall include the
recommendations of the Company's Board of Directors in favor of this Agreement,
the Merger and such other transactions. Acquiror will provide the Company and
its advisors drafts of the Proxy Statement and will provide the Company and its
advisors a reasonable opportunity to participate in such drafting process. The
Acquiror will notify the Company promptly of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff for amendments
or supplements to the Proxy Statement or for additional information, and will
supply the Company and its legal counsel with copies of all correspondence
between the Acquiror or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement. The term
"Proxy Statement" shall mean such proxy statement at the time it initially is
mailed to the stockholders of Acquiror and all duly filed amendments or
revisions made thereto, if any, similarly mailed.
7.2 Conduct of the Business of the Company Prior to the Effective
Time. The Company and the Stockholders agree that prior to the Effective Time,
except as set forth on Schedule 7.2, otherwise consented to or approved in
writing by the Acquiror or expressly permitted by this Agreement:
(a) the business of the Company and the Subsidiaries shall be conducted
only in the ordinary course and consistent with past practice;
(b) each of the Company and each Subsidiary shall not (i) amend its
Certificate of Incorporation or Bylaws, (ii) change the number of authorized,
issued or outstanding shares of its capital stock, except upon the exercise of
stock options or warrants outstanding on the date hereof, (iii) declare, set
aside or pay any dividend or other distribution or payment in cash, stock or
property in respect of shares of its capital stock, (iv) make any direct or
indirect redemption, retirement, purchase or other acquisition of any of its
capital stock or (v) split, combine or reclassify its outstanding shares of
capital stock;
(c) neither the Company nor any Subsidiary shall, directly or
indirectly, (i) issue, grant, sell or pledge or agree or propose to issue,
grant, sell or pledge any shares of, or rights of any kind to acquire any shares
of the capital stock of the Company or any Subsidiary, except that the Company
may issue shares of Common Stock upon the exercise of stock options or warrants
outstanding on the date hereof, (ii) incur any material indebtedness for
borrowed money, except material indebtedness for borrowed money incurred under
credit facilities existing as of the date hereof, (iii) waive, release, grant or
transfer any rights of material value
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or (iv) transfer, lease, license, sell, mortgage, pledge, dispose of or encumber
any material assets of the Company or any Subsidiary other than in the ordinary
course of business and consistent with past practice;
(d) the Company and the Subsidiaries shall preserve intact the business
organization of the Company and the Subsidiaries, use their respective best
efforts to keep available the services of its operating personnel and use their
respective best efforts to preserve the goodwill of those having business
relationships with each of them, including, without limitation, the Large
Distributors;
(e) neither the Company nor any Subsidiary will, directly or indirectly,
(i) increase the compensation payable or to become payable by it to any of its
employees, officers or directors, except in accordance with employment
agreements, welfare and benefit plans set forth on Schedule 6.10, (ii) adopt
additional, or make any payment or provision, other than as required by existing
plans or agreements, including provisions and actions under existing stock
option plans in connection with the Merger, in the ordinary course of business
and consistent with prior practice, with respect to any stock option, bonus,
profit sharing, pension, retirement, deferred compensation, employment or other
payment or employee compensation plan, agreement or arrangement for the benefit
of employees of the Company or any Subsidiary, (iii) grant any stock options or
stock appreciation rights or issue any warrants, (iv) enter into or amend any
employment or severance agreement or arrangement or (v) make any loan or advance
to, or enter into any written contract, lease or commitment with, any officer or
director of the Company or its Subsidiary or any Stockholder;
(f) neither the Company nor any Subsidiary shall, directly or
indirectly, assume, guarantee, endorse or otherwise become responsible for the
obligations of any other individual, firm or corporation other than a Subsidiary
or make any loans or advances to any individual, firm or corporation except in
the ordinary course of its business and consistent with past practices;
(g) neither the Company nor any Subsidiary shall make any investment of
a capital nature either by purchase of stock or securities, contributions to
capital, property transfers, acquisition or financing of equipment or any other
assets or otherwise by the purchase of any property or assets of any other
individual, firm or corporation, except with respect to capital expenditures
incurred in the ordinary course of business under Material Contracts in place on
the date of this Agreement;
(h) neither the Company nor any Subsidiary shall enter into, modify or
amend in any material respect or take any action to terminate their respective
Material Contracts, except in the ordinary course of business;
(i) neither the Company nor any Subsidiary shall take any action, other
than reasonable and usual actions in the ordinary course of business and
consistent with past practice, with respect to accounting policies or
procedures, except for changes required by GAAP;
(j) neither the Company nor any Subsidiary shall settle or compromise
any material federal, state, local or foreign income or excise tax proceeding or
audit;
(k) the Company and the Subsidiaries will promptly advise the Acquiror
in writing of any Company Material Adverse Effect or any breach of the Company's
representations or warranties, or any material breach of a covenant contained
herein of which the Company or any Subsidiary has knowledge; and
(l) neither the Company nor any Subsidiary shall enter into any
agreement, commitment or arrangement to do any of the things described in
clauses (a) through (k).
From time to time, at the request of Acquiror, representatives of the Company
shall be available to meet with the chief executive officer or chief financial
officer of the Acquiror to discuss the Company and all ongoing operational
issues and matters and to provide such periodic financial information and data
as may be requested by the Acquiror. Following the execution of this Agreement,
the Company and Acquiror shall commence negotiations with respect to the terms
and conditions of a route management agreement to be entered into between such
parties prior to the Closing Date.
7.3 Access to Properties and Record. Each party to this Agreement shall
afford to the other parties hereto and their respective accountants, financial
advisors, counsel and representatives, reasonable access
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during normal business hours throughout the period prior to the Effective Time
to all of their properties, books, contracts, commitments and written records,
including without limitation, all regulatory filings with the FCC, state public
utilities commissions and Foreign Agencies from the last four years and all tax
returns for the preceding six years), and shall make reasonably available their
officers and employees to answer fully and promptly questions put to them
thereby; provided that no investigation pursuant to this Section 7.3 shall alter
any representation or warranties of any party hereto or conditions to the
obligation of the parties hereto; provided, further, that such access shall not
unreasonably interfere with the normal business operations of any of the parties
hereto.
7.4 Acquisition Proposals. Following the execution of this Agreement, none
of the Company, any Subsidiary, the Stockholders nor any of the Company's or any
Subsidiary's directors, partners, officers, employees or other representatives
or agents shall, directly or indirectly, communicate, solicit, initiate,
encourage or participate in discussions or negotiations with or the submission
of any offer or proposal by or provide any information or access to, any
corporation, partnership, person, or other entity or group (other than Newco or
Acquiror or an officer or other authorized representative of Newco or Acquiror)
concerning any Acquisition Proposal. The Company will promptly, and in no event
later than 24 hours after receipt of the relevant Acquisition Proposal, notify
(which notice shall be provided orally and in writing) the Acquiror after (i)
the Company has received any Acquisition Proposal, (ii) the Company has actual
knowledge that any person is considering making an Acquisition Proposal, or
(iii) the Company has received any request for information relating to the
Company or any Subsidiary, or for access to the properties, books or records of
the Company or any Subsidiary, by any person that the Company has actual
knowledge is considering making, or has made, an Acquisition Proposal. Such
notice shall contain, among other things, the identity of the person making or
considering an Acquisition Proposal and the terms and conditions of such
Acquisition Proposal, including without limitation the consideration offered or
to be offered in connection therewith. The Company will keep the Acquiror fully
informed of the status and details of any such Acquisition Proposal or request.
The Company and the Stockholders shall, and shall cause the Company's and each
Subsidiary's directors, officers, employees, financial advisors and other agents
or representatives to, cease immediately and cause to be terminated all
activities, discussions or negotiations, if any, with any persons heretofore
conducted with respect to any Acquisition Proposal. For purposes of this
Agreement, "Acquisition Proposal" means any offer or proposal for a merger or
other business combination involving the Company or any Subsidiary or the
acquisition of any equity interest in, or a substantial portion of the assets
of, the Company or any Subsidiary, other than the transactions contemplated by
this Agreement.
7.5 Indemnification by the Stockholders.
(a) Following the Effective Time, the Stockholders agree, (i) with
respect to the representations and warranties set forth in Article V, severally
but not jointly, and (ii) with respect to the representations and warranties set
forth in Article VI, jointly and severally, to indemnify Acquiror, and each of
Acquiror's respective officers, directors, employees, agents and representatives
(collectively, the "Acquiror Indemnitees"), against, and hold such Acquiror
Indemnitees harmless from any and all claims, obligations, losses, damages,
costs, expenses (including without limitation, reasonable attorneys' fees and
expenses) and other liabilities of Acquiror (collectively, the "Losses") arising
out of the breach of any representation, warranty, covenant or agreement of the
Company or the Stockholders herein, whether or not such Losses arise as a result
of third party claims asserted against the Company. Notwithstanding the
foregoing, the Stockholders shall not be liable to the Acquiror Indemnitees
under this Section 7.5(a) until the aggregate of all such Losses exceeds One
Million Dollars ($1,000,000) (the "Stockholders's Threshold Amount"), in which
case the Stockholders shall be required to indemnify the Acquiror Indemnitees
for the full amount of such Losses, including the Stockholders's Threshold
Amount. Notwithstanding the foregoing, no claim for indemnification under this
Section 7.5(a) may be made after the Escrow Period.
(b) Each of the Acquiror Indemnitees agrees to give the Stockholders
prompt written notice of any claim, assertion, event or proceeding by or in
respect of a third party of which it has knowledge concerning any Loss as to
which it may request indemnification hereunder with respect to any such third
party claim. The Stockholders shall have the right to direct, through counsel of
their own choosing, the defense or settlement of any such third party claim or
proceeding (provided that the Stockholders shall have first acknowledged its
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indemnification obligations hereunder specifically in respect of such claim or
proceeding) at its own expense, which counsel shall be reasonably satisfactory
to the Acquiror Indemnitees. If the Stockholders elect to assume the defense of
any such claim or proceeding, the Acquiror Indemnitees may participate in such
defense, but in such case the expenses of the Acquiror Indemnitees incurred in
connection with such participation shall be paid by the Acquiror Indemnitees.
The Acquiror Indemnitees shall reasonably cooperate with the Stockholders in the
defense or settlement of any such claim, assertion, event or proceeding. If the
Stockholders elect to direct the defense of any such claim or proceeding, the
Acquiror Indemnitees shall not pay, or permit to be paid, any part of any claim
or demand arising from such asserted Loss, unless the Stockholders consent in
writing to such payment or unless the Stockholders withdraws from the defense of
such asserted Loss, or unless a final judgment from which no appeal may be taken
by or on behalf of the Stockholders is entered against any Acquiror Indemnitee
for such Loss. The Stockholders will not settle or compromise any claim subject
to this Section 7.5(b) without the prior consent of the affected Acquiror
Indemnitees, such consent not to be unreasonably withheld, provided that such
consent shall not be necessary if such settlement or compromise includes (i) the
payment of monetary damages by the Stockholders on behalf of such Acquiror
Indemnitees and (ii) the full release of such Persons. If the Stockholders shall
fail to defend, or if, after commencing or undertaking any such defense, the
Stockholders fail to prosecute or withdraws from such defense, the Acquiror
Indemnitees shall have the right to undertake the defense or settlement thereof
at the Stockholders's expense.
(c) Any Loss subject to indemnification pursuant to this Section 7.5
shall be offset against any appropriate number of Escrow Shares pursuant to the
terms and conditions of the Escrow Agreement.
(d) Notwithstanding any other provision herein to the contrary, (i)
following the Effective Time, the indemnification of Acquiror by the
Stockholders in this Section 7.5 shall be the exclusive remedy for any breach of
any representation, warranty, covenant or agreement of the Company or the
Stockholders in this Agreement or the Escrow Agreement, (ii) recourse for any
Loss shall be limited exclusively to the right to receive Escrow Shares in
accordance with the terms of this Agreement and the Escrow Agreement and (iii)
in determining the number of Escrow Shares required to satisfy any Loss, the
Escrow Shares shall be valued at the average closing price of Acquiror Common
Stock on The Nasdaq Stock Market for the five (5) trading days prior to the date
on which such Escrow Shares are delivered in satisfaction of a claim in respect
of such Loss.
7.6 Confidentiality.
(a) Subject to applicable law and to subpoena, the Acquiror and Newco
will hold, and will cause each of their affiliates, employees, officers,
directors and other representatives to hold, in strict confidence, and to not
use to the detriment of the Company or the Subsidiaries, any information or data
concerning the Company or the Subsidiaries furnished to them in connection with
the transactions contemplated by this Agreement, except for information or data
generally known or available to the public; and if the transactions contemplated
by this Agreement are not consummated, such confidence shall be maintained and
the Acquiror and Newco will return to the Company or the Subsidiaries all such
information and data as the Company or the Subsidiaries may request.
(b) Subject to applicable law and to subpoena, each of the Company, its
Subsidiaries and the Stockholders will hold, and will cause each of the
Company's and each Subsidiary's employees, officers, directors and other
representatives to hold, in strict confidence, and to not use to the detriment
of the Acquiror or Newco, any information or data concerning the Acquiror or
Newco furnished to them in connection with the transactions contemplated by this
Agreement, except for information or data generally known or available to the
public; and if the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained and the Company and the
Subsidiaries will return to the Acquiror or Newco all such information and data
as the Acquiror or Newco may request.
7.7 Reasonable Best Efforts. Subject to the terms and conditions hereof,
each of the parties hereto agrees to use their reasonable best efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary to satisfy the conditions set forth herein as soon as practicable,
including, without limitation, reasonable best efforts necessary to have removed
or rescinded any temporary, preliminary or
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permanent injunction, including the injunctions or other orders described in
Section 8.1(b). The Acquiror and the Company each agree to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary or
required by (a) the United States Federal Trade Commission or the United States
Department of Justice in connection with the expiration or termination of the
waiting period under the HSR Act and (b) the FCC and applicable state regulatory
agencies and public utilities commissions in connection with the transfer of any
licenses required hereunder, including without limitation, any license held by
the Company under Section 214 of the Communications Act, provided that neither
party will be required to take any action or to do anything in connection with
the foregoing which would materially impair the Acquiror's or the Surviving
Corporation's ownership or operation of all or a material portion of the
business and assets of the Company and its Subsidiary taken as a whole, or
compel the Acquiror to dispose of all or a material portion of the business or
assets of the Acquiror and its subsidiaries, taken as a whole. No party hereto
will take any action for the purpose of delaying, impairing or impeding the
receipt of any required consent, authorization, order or approval or the making
of any required filing or registration.
7.8 Withdrawal of Company S-1. Promptly following the execution of this
Agreement, the Company shall file all necessary documents with the SEC and take
all other necessary steps to terminate the registration process with respect to
the registration of the shares of the Company's Common Stock under the
Securities Act.
7.9 Proxy of Principal Stockholders. On or prior to its execution of this
Agreement, Acquiror shall receive from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ proxies, substantially in the form of Exhibit D hereto (the "Proxies"),
which Proxies shall include, among other things, the agreement of such parties
to vote in favor of this Agreement and the transactions contemplated hereby,
including without limitation, the Merger.
7.10 Certain Events. Acquiror will promptly advise the Company and the
Stockholders in writing of any event or condition that would have a material
adverse effect on the ability of Acquiror to consummate the transactions
contemplated hereby, including without limitation, the Merger, or of any
material breach of Acquiror's representations or warranties or any material
breach of a covenant contained herein of which Acquiror has knowledge.
7.11 Financial Statements. On or prior to June 15, 1998, the Company shall
deliver to Acquiror an audited balance sheet and audited statements of
operations, stockholders' equity and cash flows as of and for the Company's
fiscal year ended March 31, 1998, which financial statements have been audited
by KPMG Peat Marwick LLP. Such audited financial statements shall not vary
materially from the Company Financial Statements. As promptly as practical but
no later than forty five days following the end of each of the Company's fiscal
quarters, the Company shall deliver to Acquiror the Company's balance sheet and
its statements of operations, stockholders' equity and cash flows for such
fiscal quarter, which financial statements shall be accompanied by the
certification of the Company's chief financial officer that such financial
statements have been prepared in accordance with GAAP, consistently applied,
subject only to normal year-end adjustments.
7.12 Conduct of the Business of Acquiror Prior to the Effective
Time. Acquiror agrees that prior to the Effective Time, except as expressly
permitted by this Agreement or as otherwise consented to by the Company, which
consent shall not apply to Section 7.12(e), Acquiror:
(a) shall preserve intact its business organization and shall use all
reasonable efforts to keep available the services of its key operating personnel
and to preserve the goodwill of those parties having a material business
relationship with Acquiror;
(b) shall not change in any material respect Acquiror's accounting
methods, principles or practices, except for actions taken in the ordinary
course of business and actions consistent with or required by GAAP;
(c) shall not enter into a plan of dissolution or liquidation or
otherwise commence the winding down of Acquiror's operations;
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(d) shall not, except with respect to options granted and/or exercised
in the ordinary course of business, issue a material number of shares of
Acquiror Common Stock at a price that is more than 10% below the last closing
sales price of Acquiror Common Stock, as quoted on The Nasdaq Stock Market on
the trading day immediately prior to the date of issuance; and
(e) shall not enter into any transaction or series of relating
transactions with an aggregate purchase price of more than $100 million without
notifying the Company prior thereto.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) This Agreement and the Merger contemplated hereby shall have been
approved and adopted by the requisite vote of the holders of the outstanding
shares of Acquiror Common Stock entitled to vote thereon at the Special Meeting.
(b) No United States or state governmental authority or other agency or
commission or United States or state court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and has the effect of making the acquisition of Common Stock by Newco
illegal or otherwise prohibiting consummation of the transactions contemplated
by this Agreement.
(c) Any waiting period applicable to the Merger under the HSR Act shall
have expired or been terminated.
(d) All material filings with the FCC required under the Communications
Act, with state agencies under state public utility statutes and with Foreign
Agencies under applicable foreign statutes shall have been made, and all
approvals with respect to such material filings shall have been received.
(e) The shares of Acquiror Common Stock issuable in the Merger or
thereafter shall have been authorized for listing on the Nasdaq National Market,
upon official notice of issuance.
(f) There shall not have been instituted or pending any action or
proceeding by or before any court or governmental authority or other regulatory
or administrative agency or commission, domestic or foreign, by any government
or governmental authority, nor shall there be any determination by any
government, governmental authority, regulatory or administrative agency or
commission which, in either case, would require either party to take any action
or do anything in connection with the foregoing which would result in a material
adverse effect to their respective businesses or materially impair Acquiror's or
the Surviving Corporation's ownership or operation of all or a material portion
of the business or assets of the Company and the Subsidiary, taken as a whole,
or compel Acquiror to dispose of all or a material portion of the business or
assets of Acquiror and the Subsidiaries, taken as a whole.
(g) The Acquiror shall have received letters (i) from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP approving the accounting treatment of the Merger as a "pooling of interests"
and (ii) from KPMG Peat Marwick LLP that the Company has taken no action in the
past two years that would prevent the application of a "pooling of interests"
accounting treatment to the Merger, and the SEC shall not have objected to such
accounting treatment.
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8.2 Conditions to the Obligation of the Company and the Stockholders to
Effect the Merger. The obligation of the Company to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) Each of the Acquiror and Newco shall have performed in all material
respects its obligations under this Agreement required to be performed by it on
or prior to the Effective Time pursuant to the terms hereof.
(b) All representations or warranties of the Acquiror and Newco in this
Agreement which are qualified with respect to an Acquiror Material Adverse
Effect or materiality shall be true and correct, and all such representations or
warranties that are not so qualified shall be true and correct in all material
respects, in each case as if such representation or warranty was made as of the
Effective Time, except to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty shall
have been true and correct as of such specified date.
(c) Since the date of this Agreement, there shall not have been any
material adverse change in the financial condition, results of operations,
properties or business of the Acquiror and its Subsidiaries, taken as a whole,
excluding any such change caused by a general change in the economy or in the
telecommunications industry served by the Acquiror and its Subsidiaries.
(d) Each of the Acquiror and Newco shall have delivered a certificate of
its President or Vice President to the effect set forth in paragraphs (a), (b)
and (c) of this Section 7.2.
(e) Acquiror and each Stockholder shall have entered into a registration
rights agreement in the form of Exhibit E hereto.
(f) The Company shall have received from ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to
the Acquiror and Newco, an opinion dated the Effective Time and covering such
matters as may be reasonably requested by the Company and the Stockholders.
(g) The Acquiror shall have taken all necessary steps such that ST will
become a member of the Board of Directors of the Acquiror immediately following
the Effective Time.
(h) The Company shall have received reasonably satisfactory evidence
that, following the Effective Date, the shares of Acquiror Common Stock issuable
on exercise of the Options and Warrants will be subject to an effective
Registration Statement on Form S-8 filed by Acquiror pursuant to the Securities
Act.
8.3 Conditions to Obligations of the Acquiror and Newco to Effect the
Merger. The obligations of Acquiror and Newco to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) Each of the Company and its Subsidiaries shall have performed in all
material respects each of its obligations under this Agreement required to be
performed by it on or prior to the Effective Time pursuant to the terms hereof.
(b) All representations or warranties of the Company in this Agreement
which are qualified with respect to a Company Material Adverse Effect or
materiality shall be true and correct, and all such representations or
warranties that are not so qualified shall be true and correct in all material
respects, in each case as if such representation or warranty were made as of the
Effective Time except to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty shall
have been true and correct as of such specified date.
(c) Since the date of this Agreement, there shall not have been any
material adverse change in the financial condition, results of operations,
properties or business of the Company and its Subsidiaries, taken as a whole,
excluding any such change caused by a general change in the economy or in the
telecommunications industry served by the Company and its Subsidiaries and other
than any such change approved by the Acquiror.
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(d) The Company shall have delivered a certificate of its President or
Vice President to the effect set forth in paragraphs (a), (b) and (c) to this
Section 8.3.
(e) Newco shall have received letters of resignation addressed to the
Company from those members of the Company's board of directors as listed on
Schedule 8.3(e), which resignations shall be effective as of the Effective Time.
(f) The Acquiror shall have received from ▇▇▇▇▇▇▇ & Berlin, Chartered,
and Rakisons, domestic and foreign counsel to the Company, respectively,
opinions dated the Effective Time and covering such matters as may be reasonably
requested by Acquiror, such matters to include, among other things, opinions
relating to all federal, state and foreign regulatory approvals.
(g) Newco shall have received executed Affiliate Agreements from
designated Affiliates.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time and
before approval by the stockholders of Acquiror:
(a) by the mutual consent of Acquiror and the Company, acting through
their respective Boards of Directors;
(b) by Acquiror if (i) there has occurred a material adverse change in
the financial condition, results of operations, business or properties of the
Company and its Subsidiaries, taken as a whole, except for any change caused by
a general change in the economy of the United States or in the
telecommunications industry served by the Company, and except as otherwise
approved in writing by Acquiror, (ii) there is a breach of any of the
representations and warranties of the Company which are qualified with respect
to a Company Material Adverse Effect or materiality or if the Company shall have
breached in any material respect any of such representations or warranties which
are not so qualified, or (iii) the Company or the Stockholders fail to comply in
any material respect with any of the covenants or agreements contained herein
applicable thereto or otherwise wilfully breach or fail to perform pursuant to
the terms hereof, which breaches or failures, as the case may be, are, in the
aggregate, material in the context of the transactions contemplated by this
Agreement;
(c) by the Company (i) if there has occurred a material adverse change
in the financial condition, results of operations, business or properties of the
Acquiror, except for any change caused by a general change in the economy of the
United States or in the telecommunications industry served by Acquiror, and
except as otherwise approved in writing by the Company, (ii) there is a breach
of any of the representations and warranties of the Acquiror or Newco which are
qualified with respect to an Acquiror Material Adverse Effect or materiality or
if the Acquiror or Newco shall have breached in any material respect any of such
representations or warranties which are not so qualified or (iii) the Acquiror
or Newco fails to comply in any material respect with any of its covenants or
agreements contained herein or otherwise wilfully breaches or fails to perform
pursuant to the terms hereof, which breaches or failures, as the case may be,
are, in the aggregate, material in the context of the transactions contemplated
by this Agreement; and
(d) by either Newco or the Company, if on or before December 31, 1998
the Merger shall not have been consummated, except as otherwise set forth in
that last clause of Section 3.1 and provided that neither party may terminate
under this Section 9.1(d) if such failure has been caused by that party's
material breach of this Agreement; provided further that if any condition to
this Agreement shall fail to be satisfied by reason of the existence of an
injunction or order of any court or governmental or regulatory body resulting
from an action or proceeding commenced by any party which is not a government or
governmental authority, then at the request of either party the deadline date
referred to above shall be extended for a reasonable period of time, not in
excess of 120 days, to permit the parties to have such injunction vacated or
order reversed.
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In the event of such termination and abandonment, no party hereto (or any
of its directors or officers) shall have any liability or further obligation to
any other party to this Agreement except as provided in Section 9.2, and except
that nothing herein will relieve any party from liability for any willful breach
of this Agreement prior to such termination or abandonment.
9.2 Termination Fee. If (a) this Agreement is terminated by Acquiror
pursuant to Section 9.1(b)(iii), (b) within six (6) months following such
termination, the Company and/or the Stockholders enter into an agreement or
series of related agreements contemplating the acquisition, by means of a tender
or exchange offer, merger, consolidation, business combination or otherwise, all
or a substantial portion of the outstanding shares of Common Stock or of the
assets of the Company and the Subsidiaries and (c) the value of the
consideration to be received by the stockholders of the Company with respect to
such transaction or transactions equals or exceeds $500 million (determined on
the execution of the agreement or agreements relating to such transaction or
transactions), then the Company shall, simultaneously with consummation of such
transaction or transactions, pay to Acquiror $20 million by wire transfer in
immediately available funds.
9.3 Amendment. Subject to the applicable provisions of the Business
Corporation Law, this Agreement may be amended by the parties hereto solely by
action taken by their respective Boards of Directors. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto,
by action taken by their respective Boards of Directors, may (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any documents delivered pursuant hereto, and
(iii) waive compliance by the other party with any of the agreements or
conditions herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE X
MISCELLANEOUS
10.1 Survival. All representations, warranties and agreements contained in
this Agreement or in any instrument delivered pursuant to this Agreement shall
terminate and be extinguished at the end of the Escrow Period.
10.2 Expenses and Fees. Each party to this Agreement shall bear his or its
own fees and expenses incurred in the connection with the transactions
contemplated hereby, provided that, in the context of the enforcement of the
terms and conditions of this Agreement, the prevailing party shall be entitled
to the payment of its reasonable legal fees and expenses incurred in connection
with the enforcement of such rights.
10.3 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been given or made if in
writing and delivered personally or sent by registered or certified mail
(postage prepaid, return receipt requested) or by telecopier to the parties at
the following addresses and facsimile numbers:
(a) if to Newco or the Acquiror to:
STAR Telecommunications, Inc.
▇▇▇ ▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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with copies to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company or the Stockholders, to:
PT-1 Communications, Inc.
▇▇-▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇ & Berlin, Chartered
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made as
of the date so delivered or mailed or confirmation of transmission.
10.4 Headings. The headings contained in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
10.5 Publicity. The parties hereto shall not, and shall cause their
affiliates not to, issue or cause the publication of any press release or other
announcement with respect to the Merger or this Agreement without delivering a
draft of any such press release to such parties.
10.6 Entire Agreement; Knowledge. This Agreement constitutes the entire
agreement among the parties and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. For purposes of this Agreement,
"knowledge" of any party shall mean the actual knowledge of such party or, in
the case of Acquiror or the Company, the actual knowledge of the executive
officers thereof.
10.7 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefits of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations shall be assigned by any of the parties
hereto without the prior written consent of the other. This Agreement is not
intended to confer upon any other person any rights or remedies hereunder.
10.8 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
10.9 Invalidity, Etc. In the event that any provision of this Agreement
shall be deemed contrary to law or invalid or unenforceable in any respect by a
court of competent jurisdiction, the remaining provisions shall remain in full
force and effect to the extent that such provisions can still reasonably be
given effect in accordance with the intentions of the parties, and the invalid
and unenforceable provisions shall be deemed, without further action on the part
of the parties, modified, amended and limited solely to the extent necessary to
render the same valid and enforceable.
10.10 Specific Performance. Each of the parties hereto acknowledges and
agrees that the other parties hereto would be irreparably damaged in the event
any of the provisions of this Agreement were not performed
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in accordance with their specific terms or were otherwise breached. Accordingly,
each of the parties hereto agrees that they each shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
conditions hereof in any action instituted in any court of the United States or
any state having competent jurisdiction, in addition to any other remedy to
which such party may be entitled, at law or in equity.
10.11 Governing Law. The validity and interpretation of this Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without reference to the conflict of laws principles thereof.
[The remainder of this page is left blank intentionally]
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IN WITNESS WHEREOF, Acquiror, Newco, the Company and the Stockholders have
caused this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
ACQUIROR: STAR Telecommunications, Inc.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
NEWCO: Sierra Acquisition Co., Inc.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
COMPANY: PT-1 Communications, Inc.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
THE STOCKHOLDERS: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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