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EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of February 11, 2000 (this
"Agreement"), by and among World Access, Inc., a Delaware corporation ("WAXS"),
CTI Merger Co., a Delaware corporation and wholly-owned subsidiary of WAXS
("Merger Sub"), and Communication TeleSystems International d/b/a WORLDxCHANGE
Communications, a California corporation ("CTI").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of CTI and WAXS deem it advisable and
in the best interests of each corporation and its respective stockholders that
CTI and WAXS engage in a business combination in order to advance the long-term
strategic business interests of CTI and WAXS;
WHEREAS, the combination of CTI and WAXS shall be effected by the
terms of this Agreement through a merger as outlined below (the "Merger");
WHEREAS, in furtherance thereof, the respective Boards of Directors of
CTI, Merger Sub and WAXS have approved the Merger, upon the terms and subject
to the conditions set forth in this Agreement, pursuant to which each share of
common stock, par value $.01 per share, of CTI ("CTI Common Stock"), each share
of preferred stock, Series A, no par value per share, of CTI (the "CTI Series A
Preferred Stock") and each share of preferred stock, Series B, no par value per
share, of CTI (the "CTI Series B Preferred Stock") (the CTI Series A Preferred
Stock and the CTI Series B Preferred Stock are collectively referred to herein
as the "CTI Preferred Stock" and the CTI Preferred Stock and the CTI Common
Stock are collectively referred to herein as the "CTI Capital Stock") issued
and outstanding immediately prior to the Effective Time (as defined in Section
1.3) will be converted into the right to receive the consideration set forth in
Section 1.7;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, WAXS is entering into an agreement with each of Xxxxx Xxxxxx and
Xxxxxxxx Xxxxxx, Atocha, L.P., Gold & Xxxxx Transfer S.A. and Xxxxxx Xxxxx (the
"Principal Stockholders") pursuant to which each Principal Stockholder will
agree to, among other things, vote in favor of the Merger and certain
restrictions on the transfer of the consideration received in the Merger.
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NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein, and upon and subject to the terms
and the conditions hereinafter set forth, the parties do hereby agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the Delaware General Corporation Law
(the "DGCL") and the California General Corporation Law (the "CGCL"), CTI shall
be merged with and into Merger Sub at the Effective Time (as defined below).
Following the Merger, the separate corporate existence of CTI shall cease and
Merger Sub shall continue as the surviving corporation (the "Surviving
Corporation").
1.2 Closing. Subject to the satisfaction or waiver of the conditions
set forth in Article VII, the closing of the Merger and the transactions
contemplated by this Agreement (the "Closing") will take place on the second
business day following the satisfaction or written waiver of such conditions,
unless another time or date is agreed to in writing by the parties hereto (the
date of the Closing being referred to herein as the "Closing Date"). The
Closing shall be held at the offices of Long Xxxxxxxx & Xxxxxx LLP, 000
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000.
1.3 Effective Time. On the Closing Date the parties shall (i) file a
certificate of merger in such form as is required by, and executed in
accordance with, the relevant provisions of the DGCL (the "Delaware Certificate
of Merger") and an agreement of merger in such form as is required by, and
executed in accordance with, the relevant provisions of the CGCL (the
"California Agreement of Merger") and (ii) make all other filings or recordings
required under the DGCL and the CGCL in connection with the Merger. The Merger
shall become effective at such time as the Delaware Certificate of Merger and
the California Agreement of Merger are duly filed with the Delaware Secretary
of State and the California Secretary of State, respectively, or at such
subsequent time as WAXS and CTI shall agree and as shall be specified in the
Delaware Certificate of Merger and the California Agreement of Merger (the date
and time the Merger becomes effective being the "Effective Time").
1.4 Effects of the Merger. At and after the Effective Time, the Merger
will have the effects set forth in the DGCL and the CGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers, licenses, authorizations and franchises
of Merger Sub and CTI shall be vested in the Surviving Corporation, and all
debts, liabilities and duties of Merger Sub and CTI shall become the debts,
liabilities and duties of the Surviving Corporation.
1.5 Articles of Incorporation/Bylaws. The articles of incorporation
and bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the articles of
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incorporation and bylaws of the Surviving Corporation, until thereafter changed
or amended as provided therein or by applicable law.
1.6 New Directors of WAXS. Immediately following the Effective Time,
WAXS shall cause one (1) designee of CTI to be elected to the Board of
Directors of WAXS. Such CTI designee shall be Xxxx Xxxxxxxx, or such other
person designated by Gold & Xxxxx Transfer S.A. and reasonably acceptable to
WAXS.
1.7 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of WAXS, Merger Sub, CTI or the
holders of any of the following securities:
(a) [INTENTIONALLY OMITTED.]
(b) Each share of CTI Capital Stock issued and outstanding and
directly or indirectly owned or held by CTI or a Subsidiary (as defined in
Section 3.1(b)) thereof at the Effective Time shall, by virtue of the Merger,
cease to be outstanding and shall be canceled and retired and no capital stock
of WAXS or other consideration shall be delivered in exchange therefor.
(c) Subject to Sections 2.4, 2.5 and 2.14 hereof, each share of CTI
Capital Stock issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive 0.6583 (the "Exchange Ratio")
shares of common stock, par value $.01 per share, of WAXS ("WAXS Common Stock").
All shares of CTI Capital Stock, as of the Effective Time, shall no longer be
outstanding and shall automatically be canceled and retired and each holder of a
certificate representing any such shares (a "Certificate") shall cease to have
any rights with respect thereto, except as set forth in this Section 1.7(c),
Section 2.4, Section 2.5 and/or Section 2.14 and as provided under applicable
law. The shares of WAXS Common Stock issuable pursuant to Section 1.7(c) and, if
applicable, the Contingent Shares issuable pursuant to Section 1.7(d), together
with any cash in lieu of fractional shares paid pursuant to Section 2.4, shall
be referred to herein collectively as the "Merger Consideration."
(d) In the event that the average of the closing prices of WAXS
Common Stock as reported on the National Market System of the Nasdaq Stock
Market (the "Nasdaq") for the ten (10) trading-day period ending at the close of
trading on the second (2nd) trading day preceding the Closing (the "Averaging
Period") is less than $20.38, then in addition to the shares of WAXS Common
Stock issued pursuant to Section 1.7(c), each CTI stockholder who receives
shares of WAXS Common Stock pursuant to Section 1.7(c) shall be entitled to
receive, subject to Section 2.5, the amount, if any (the "Contingent Amount"),
by which the Target Price (as defined below) exceeds the greater of (X) the
Current Market Price (as defined below) on the first anniversary of the
Effective Time (the "Maturity Date") and (Y) the Floor Price (as defined below),
multiplied by the number of shares of WAXS Common Stock issued to such holder
pursuant to Section 1.7(c). The maximum number of Contingent Shares that may be
issued to CTI stockholders pursuant to this Section 1.7(d) shall in all events
be less than fifty percent (50%) of the sum of the shares of WAXS Common Stock
issued pursuant to Section 1.7(c) plus
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the number of Contingent Shares issued pursuant to this Section 1.7(d). The
Contingent Amount shall only be paid in shares of WAXS Common Stock (the
"Contingent Shares"), which shares shall be valued for purposes hereof at the
greater of the Current Market Price as of the Maturity Date and the Floor Price
and rounded to the nearest whole share. Notwithstanding anything to the
contrary contained in this Agreement, any and all rights in, or to receive, the
Contingent Amount shall terminate and be of no further force or effect if, at
any time on or prior to the Maturity Date, the Current Market Price is greater
than the Target Price. The parties further acknowledge and agree that if any
shares of WAXS Common Stock constituting part of the Escrow Fund (as defined in
Section 2.5) are released to WAXS in accordance with the Escrow Agreement (as
defined in Section 7.1(e)), then the right to receive the Contingent Amount
with respect to such shares of WAXS Common Stock shall terminate and be of no
further force or effect. Neither the right to receive the Contingent Shares nor
any interest therein shall be transferable or assignable by a holder of CTI
Capital Stock except by operation of law. The terms and conditions relating to
the Contingent Shares have been negotiated by WAXS and CTI so as to satisfy, to
the extent possible, the specific requirements of Section 3.03 of the IRS
Revenue Procedure 77-37, as it has been amplified and superseded, which
established the circumstances under which the Internal Revenue Service (the
"IRS") previously issued advance rulings on contingent stock arrangements in
mergers intended to qualify as "reorganizations" under Section 368(a) of the
Code. Solely for purposes of this Agreement's compliance with such Revenue
Procedure, the maximum number of shares of WAXS Common Stock issuable pursuant
to Sections 1.7(c) and 2.6(b), and as Contingent Shares pursuant to this
Section 1.7(d) is 58,146,739 shares of WAXS Common Stock.
For purposes hereof, (a) the "Target Price" means $20.38 per share of WAXS
Common Stock; provided, however, that if the Nasdaq Composite Index (the
"IXIC") at the close of trading on the Maturity Date is eighty-five percent
(85%), or less, of the IXIC at the close of trading on the date of the
Effective Time (the difference between one hundred percent (100%) and such
percentage being referred to as the "Market Correction Percentage"), then the
Target Price shall be reduced by a percentage equal to that portion of the
Market Correction Percentage in excess of fifteen percent (15%); (b) the
"Current Market Price" means, as of any date specified herein, the average of
the daily closing trading prices of WAXS Common Stock, as reported on the
Nasdaq, for the twenty (20) consecutive trading days (in which such shares are
traded on the Nasdaq) ending at the close of trading on such date; (c) the
"Floor Price" means $11.50 per share of WAXS Common Stock; and (d) references
to the "close of trading" as of or on a particular date shall mean such date,
or if such date is not a trading day or no shares of WAXS Common stock are
traded on the Nasdaq on such date, the last trading day preceding such date on
which shares of WAXS Common Stock were traded on the Nasdaq.
1.8 CTI Stock Options.
(a) At the Effective Time, by virtue of the Merger and without any
further action on the part of CTI, WAXS, Merger Sub or the holder of any
outstanding CTI Stock Option (as defined in Section 3.2), each CTI Stock Option
will be automatically converted into (i) an option to purchase shares of WAXS
Common Stock (a "WAXS Stock Option") in an amount equal to the number of shares
of CTI Common Stock covered under such CTI Stock Option multiplied by
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the Exchange Ratio (rounded to the nearest whole number of shares of WAXS
Common Stock) at a price per share of WAXS Common Stock equal to the per share
option exercise price specified in the CTI Stock Option divided by the Exchange
Ratio (rounded to the nearest whole cent) and (ii) if applicable, the right to
acquire for no additional consideration such number of Contingent Shares as is
equal to the number of Contingent Shares the holder of such CTI Stock Option
would be entitled to receive pursuant to Section 1.7(d) if such CTI Stock
Option had been exercised immediately prior to the Effective Time. Each WAXS
Stock Option shall contain terms and provisions which are substantially similar
to those terms, conditions and provisions governing the original CTI Stock
Option, except that references to CTI in such CTI Stock Option will be deemed
to refer to WAXS and the date of grant of the CTI Stock Option shall be deemed
to be the date of grant of such WAXS Stock Option. At the Effective Time, for
purposes of interpretation of such new WAXS Stock Option, (i) all references in
any stock option plan of CTI (including, without limitation, CTI's 1996 and
1999 Stock Option/Stock Purchase Plans) shall be deemed to refer to WAXS; (ii)
any stock option plan of CTI which governs the CTI Stock Option shall continue
to govern the WAXS Stock Option substituted therefor; and (iii) WAXS shall, as
soon as practicable after the Effective Time, issue to each holder of an
outstanding CTI Stock Option such documentation as appropriately evidences the
foregoing issued and substituted WAXS Stock Option by WAXS. It is the intention
of the parties: (1) that, subject to applicable law, CTI Stock Options assumed
by WAXS qualify, following the Effective Time, as incentive stock options, as
defined in Section 422 of the Code, to the extent that CTI Stock Options
qualified as incentive stock options prior to the Effective Time, (2) that each
holder of a CTI Stock Option shall receive a new WAXS Stock Option which
preserves (but does not increase) the excess of the fair market value of the
shares subject to such CTI Stock Option immediately before the Effective Time
over the aggregate option price of such shares immediately before the Effective
Time, if any such excess then exists, (3) that the terms, conditions,
restrictions and provisions of the WAXS Stock Option be substantially similar
to the terms, conditions, restrictions and provisions of the applicable CTI
Stock Option, including without limitation, the same vesting schedule (other
than to the extent accelerated pursuant to the existing terms of such CTI Stock
Option or plan under which such Stock Option was granted), and (4) any terms
conditions, restrictions or provisions of a CTI Stock Option applicable to a
number of shares rather than a percentage or fraction of shares should be
appropriately adjusted based upon the Exchange Ratio.
(b) With respect to each CTI Stock Option converted into a WAXS
Stock Option pursuant to Section 1.8(a), and with respect to the shares of WAXS
Common Stock and Contingent Shares, if any, in respect of such shares of WAXS
Common Stock underlying such option, WAXS shall file and keep current all
requisite registration statements, on Form S-8 or other appropriate form(s),
and comply in all other material respects with applicable state and federal
requirements for as long as such options remain outstanding.
(c) After the date of this Agreement, CTI agrees that it will not
(x) grant any options, warrants or other rights to acquire any shares of CTI
Capital Stock (except as set forth on SCHEDULE 5.1(c)), including any
restricted stock, stock appreciation rights, limited stock appreciation rights
or any other stock rights, (y) permit cash payments to holders of CTI Stock
Options in lieu of the substitution therefor of WAXS Stock Options, as
described in this Section
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1.8 or (z) modify the vesting rules under any CTI Stock Option outstanding on
the date hereof or take any other action (other than the transactions
contemplated in this Agreement) which in any way would have the effect of
accelerating the vesting of the options granted thereunder.
(d) A holder of a WAXS Stock Option into which a CTI Stock Option
has been converted in accordance with this Section 1.8 may exercise such option
in whole or in part in accordance with its terms by delivering a properly
executed notice of exercise to WAXS, together with the consideration therefor
and the federal withholding tax information, if any, required in accordance
with the related stock option plan.
1.9 Certain Adjustments. If between the date hereof and the Effective
Time, the outstanding WAXS Common Stock or CTI Capital Stock shall have been
changed into a different number of shares or different class by reason of any
reclassification, recapitalization, stock split, split-up, combination or
exchange of shares or a stock dividend or dividend payable in any other
securities shall be declared with a record date within such period, or any
similar event shall have occurred, the Exchange Ratio shall be appropriately
adjusted to provide to the holders of CTI Capital Stock and CTI Stock Options
the same economic effect as contemplated by this Agreement prior to such event.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund. Prior to the Effective Time, WAXS shall appoint a
commercial bank or trust company reasonably acceptable to CTI to act as
exchange agent hereunder (the "Exchange Agent") for the purpose of exchanging
Certificates for the Merger Consideration. At or prior to the Effective Time,
WAXS shall deposit with the Exchange Agent, in trust for the benefit of holders
of shares of CTI Capital Stock, certificates representing the WAXS Common Stock
issuable pursuant to Section 1.7 in exchange for outstanding shares of CTI
Capital Stock. WAXS agrees to make available to the Exchange Agent from time to
time as needed, cash sufficient to pay cash in lieu of fractional shares
pursuant to Section 2.4 and any dividends and other distributions pursuant to
Section 2.3. Any cash, certificates of WAXS Common Stock deposited with the
Exchange Agent shall hereinafter be referred to as the "Exchange Fund".
2.2 Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of a Certificate (i) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent, and which letter shall be in customary form and have such other
provisions as WAXS may reasonably specify and (ii) instructions for effecting
the surrender of such Certificates in exchange for the applicable Merger
Consideration. Upon surrender of a Certificate to the Exchange Agent together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in
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exchange therefor (A) one or more shares of WAXS Common Stock (which shall be
in uncertificated book entry form unless a physical certificate is requested)
representing, in the aggregate, the whole number of shares that such holder has
the right to receive pursuant to Section 1.7 (after taking into account all
shares of CTI Capital Stock then held by such holder), and (B) a check in the
amount equal to the cash that such holder has the right to receive pursuant to
this Article II, including cash in lieu of any additional shares of WAXS Common
Stock pursuant to Section 2.4 and dividends and other distributions pursuant to
Section 2.3. No interest will be paid or will accrue on any cash payable
pursuant to Section 2.3 or Section 2.4. In the event of transfer of ownership
of CTI Capital Stock which is not registered in the transfer records of CTI,
one or more certificates evidencing, in the aggregate, the proper number of
shares of WAXS Common Stock, a check in the proper amount of cash in lieu of
any additional shares of WAXS Common Stock pursuant to Section 2.4, and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.3, may be issued with respect to such CTI Capital Stock to such a
transferee if the Certificate representing such shares of CTI Capital Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
2.3 Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made with respect to shares of WAXS Common
Stock with a record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate with respect to the shares of WAXS Common
Stock that such holder would be entitled to receive upon surrender of such
Certificate and no cash payment in lieu of fractional shares of WAXS Common
Stock shall be paid to any such holder pursuant to Section 2.4 until such
holder shall surrender such Certificate in accordance with Section 2.2. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to such holder of shares of WAXS Common Stock issuable in
exchange therefor, without interest, (a) promptly after the time of such
surrender, the amount of any cash payable in lieu of fractional shares of WAXS
Common Stock to which such holder is entitled pursuant to Section 2.4 and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of WAXS
Common Stock, and (b) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to such surrender payable with
respect to such shares of WAXS Common Stock.
2.4 No Fractional Shares of WAXS Common Stock.
(a) No certificates or scrip or shares of WAXS Common Stock
representing fractional shares of WAXS Common Stock or book-entry credit of the
same shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to
have any rights of a stockholder of WAXS.
(b) Except for Contingent Shares, if any, notwithstanding any other
provision of this Agreement, each holder of a Certificate exchanged for Merger
Consideration who would otherwise have been entitled to receive a fraction of a
share of WAXS Common Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash
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(without interest) in an amount equal to the product of (i) such fractional
part of a share of WAXS Common Stock multiplied by (ii) the average closing
price of WAXS Common Stock on the Nasdaq over the Averaging Period. As promptly
as practicable after the determination of the amount of cash, if any, to be
paid to holders of fractional interests, the Exchange Agent shall so notify
WAXS, and WAXS shall cause the Surviving Corporation to deposit such amount
with the Exchange Agent and shall cause the Exchange Agent to forward payments
to such holders of fractional interests subject to and in accordance with the
terms hereof.
2.5 Escrow of Shares.
(a) At the Closing, 2,453,385 of the shares of WAXS Common Stock to
be issued to CTI's stockholders pursuant to Section 1.7(c) (collectively, the
"Escrow Fund") shall be delivered to SunTrust Bank, Atlanta (the "Escrow
Agent"), which Escrow Fund shall serve as the sole and exclusive source of
recovery for any WAXS Protected Party (as defined in Section 8.1) for any
indemnification claims hereunder. The Escrow Fund shall be held in escrow and
released pursuant to the terms and conditions of the Escrow Agreement (as
defined in Section 7.1(e)). The terms and conditions of the Escrow Agreement
have been structured by WAXS and CTI so as to satisfy the specific requirements
of Section 3.06 of IRS Revenue Procedure 77-37, as it has been amplified and
superseded, which established the circumstances under which the IRS previously
issued advance rulings on the escrow of stock in mergers intended to qualify as
"reorganizations" under Section 368(a) of the Code.
(b) If any Contingent Shares are issued at a time that shares of
WAXS Common Stock remain in escrow pursuant to the Escrow Agreement (as defined
in Section 7.1(d)), then any Contingent Shares that are issued with respect to
such shares of WAXS Common Stock shall be delivered to the Escrow Agent and
shall be held and released in accordance with the terms and conditions of
Section 4 of the Escrow Agreement.
2.6 No Further Ownership Rights in CTI Capital Stock.
(a) All shares of WAXS Common Stock issued and cash paid upon
conversion of shares of CTI Capital Stock in accordance with the terms of this
Article II (including any cash paid pursuant to Section 2.4) shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to the
shares of CTI Capital Stock.
(b) Any accrued and unpaid dividends owed upon consummation of the
Merger to any holder of CTI Preferred Stock in connection with the automatic
conversion of such CTI Preferred Stock under the articles of incorporation of
CTI shall be paid, at the Closing, solely in shares of WAXS Common Stock
(valued at $20.38 per share). Any such shares so issued to any holder of CTI
Preferred Stock shall not affect the Exchange Ratio.
2.7 Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates for six months after
the Effective Time shall be delivered to the Surviving Corporation or otherwise
on the instruction of the Surviving Corporation, and any holders of the
Certificates who have not theretofore complied with this
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Article II shall thereafter look only to the Surviving Corporation and WAXS for
the Merger Consideration with respect to the shares of CTI Capital Stock
formerly represented thereby to which such holders are entitled pursuant to
Section 1.7 and Section 2.2, any cash in lieu of fractional shares of WAXS
Common Stock to which such holders are entitled pursuant to Section 2.4 and any
dividends or distributions with respect to shares of WAXS Common Stock to which
such holders are entitled pursuant to Section 2.3. Any such portion of the
Exchange Fund remaining unclaimed by holders of shares of CTI Capital Stock
five years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
Governmental Entity (as defined in Section 3.6) shall, to the extent permitted
by law, become the property of the Surviving Corporation free and clear of any
claims or interest of any person previously entitled thereto.
2.8 No Liability. None of WAXS, Merger Sub, CTI, the Surviving
Corporation or the Exchange Agent shall be liable to any person in respect of
any Merger Consideration from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.9 Investment of the Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund as directed by the Surviving Corporation
on a daily basis. Any interest and other income resulting from such investments
shall promptly be paid to the Surviving Corporation.
2.10 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
CTI Capital Stock formerly represented thereby, any cash in lieu of fractional
shares of WAXS Common Stock, and unpaid dividends and distributions on shares
of WAXS Common Stock deliverable in respect thereof, pursuant to this
Agreement.
2.11 Withholding Rights. Each of the Surviving Corporation and WAXS
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of CTI Capital Stock
such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation or WAXS, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of CTI Capital Stock
in respect of which such deduction and withholding was made by the Surviving
Corporation or WAXS, as the case may be.
2.12 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of CTI or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the
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name and on behalf of CTI or Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
2.13 Stock Transfer Books. The stock transfer books of CTI shall be
closed immediately upon the Effective Time and there shall be no further
registration of transfers of shares of CTI Capital Stock thereafter on the
records of CTI. On or after the Effective Time, any Certificates presented to
the Exchange Agent or WAXS for any reason shall be converted into the Merger
Consideration with respect to the shares of CTI Capital Stock formerly
represented thereby, any cash in lieu of fractional shares of WAXS Common Stock
to which the holders thereof are entitled pursuant to Section 2.4 and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.3.
2.14 Further Holdback. At the Closing, separately from the shares of
WAXS Common Stock comprising the Escrow Fund (which shall be deposited with the
Escrow Agent pursuant to the Escrow Agreement), a total of 49,068 of the shares
of WAXS Common Stock to be issued to CTI's stockholders pursuant to Section
1.7(c) (the "Expense Fund") shall be deemed delivered to each CTI stockholder
and at the deemed direction of each such stockholder delivered to an escrow
agent to be designated in writing by CTI not less than five (5) days prior to
the Closing Date. Any and all escrow provisions with respect to the Expense
Fund shall in all aspects satisfy the specific requirements of Section 3.06 of
IRS Revenue Procedure 77-37, as it has been amplified and superseded by the
IRS. The CTI stockholders as of immediately prior to the Effective Time shall
be the holders of record with full voting rights to all of the shares of WAXS
Common Stock held in the Expense Fund. The CTI stockholders as of immediately
prior to the Effective Time shall be entitled to exercise such voting rights
until such time, if any, as such shares of WAXS Common Stock are sold to pay
Representative's Costs pursuant to this Section 2.14. The escrow agent shall
deliver to the CTI stockholders as of immediately prior to the Effective Time
such proxies or other documents as may be necessary to enable such CTI
stockholders to exercise such voting rights. Further, the CTI stockholders as
of immediately prior to the Effective Time shall be entitled to promptly
receive any dividend distribution with respect to the shares of WAXS Common
Stock held in the Expense Fund. Any such dividends paid with respect to such
shares shall be distributed by the escrow agent to the CTI stockholders as of
immediately prior to the Effective Time as holders of record of such shares.
The Expense Fund shall be available in the good faith discretion of the
Shareholder Representative to pay the costs and expenses, if any, incurred by
the Shareholder Representative in defending (including, without limitation,
assuming the defense of any third party claims pursuant to Section 8.5) or
otherwise responding to, on behalf of the stockholders of CTI, any claims for
indemnification by any WAXS Protected Party pursuant to Article VIII hereof, or
otherwise in the performance of its duties hereunder, including, without
limitation, the reasonable fees, costs and expenses of attorneys, accountants
and other professionals engaged by the Shareholder Representative for such
purpose (collectively, the "Representative Costs"). The Shareholder
Representative shall have the authority to direct the sale from time to time of
such number of shares from the Expense Fund as may be necessary to reimburse
the Shareholder Representative for any Representative's Costs, which shall be
reimbursed to the Shareholder Representative from the Expense Fund
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promptly after the escrow agent's receipt of a request therefor. The
Shareholder Representative shall also be entitled to have any Representative's
Costs advanced to the Shareholder Representative from the Expense Fund upon
request therefor, provided that any such advanced amounts not actually expended
by the Shareholder Representative to pay Representative's Costs shall be
promptly returned to the Expense Fund or returned to the stockholders of CTI as
of immediately prior to the Effective Time on a pro rata basis. All shares of
WAXS Common Stock or any cash amounts returned to the Expense Fund pursuant to
the immediately preceding sentence which are remaining in the Expense Fund at
the later to occur of (i) the expiration of the period for asserting claims
pursuant to Section 8.2(b) or (ii) the first date on which there are no pending
claims from any WAXS Protected Party shall be distributed by the escrow agent
to the stockholders of CTI as of immediately prior to the Effective Time on a
pro rata basis. CTI shall have authority to negotiate, and the Shareholder
Representative shall have authority to enter into an agreement with the escrow
agent designated by CTI, which shall effectuate the foregoing. WAXS agrees
that, notwithstanding any contrary provision of this Agreement, any voting
agreement between WAXS and any Principal Stockholder or any other agreement
entered into in connection herewith or therewith, any shares of WAXS Common
Stock comprising the Expense Fund may be sold from time to time at the
discretion of the Shareholder Representative as contemplated hereby. The
provisions of Section 8.7 shall apply to all actions taken by the Shareholder
Representative as contemplated hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CTI
CTI hereby represents and warrants to WAXS as follows:
3.1 Organization and Authorization.
(a) Each of CTI and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as applicable, and has the
corporate power and authority to carry on and conduct its business as it is now
being conducted and to own or lease its properties and assets, and is duly
qualified and in good standing. Each of CTI and its Subsidiaries is duly
qualified and in good standing in every state of the United States and in such
other jurisdictions (within or outside of the United States) in which the
conduct of its business or the ownership of its properties and assets requires
it to be so qualified except where the failure to be so qualified would not
have a Material Adverse Effect (as defined in Section 3.6) on CTI.
(b) SCHEDULE 3.1(b) sets forth (i) every entity in which CTI owns
fifty percent (50%) or more of the outstanding equity, directly or indirectly
(each a "Subsidiary" and collectively, the "Subsidiaries"), and (ii) the equity
interest in such entity that is owned by CTI. Except as noted on SCHEDULE
3.1(b), all outstanding shares of capital stock of the Subsidiaries (the
"Subsidiary Shares") are owned by CTI, directly or indirectly, free and clear
of all liens, restrictions, claims, equities, charges, options, rights of first
refusal or encumbrances. Except as
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set forth on SCHEDULE 3.1(b), CTI has full power, right and authority to vote
all of the shares of capital stock of each Subsidiary which are owned or held by
CTI. Except as set forth on Schedule 3.1(b), CTI is not a party to or bound by
any agreement prohibiting or restricting its right to transfer or vote the
shares of capital stock of any Subsidiary which are owned or held by CTI.
(c) Subject to the approval of this Agreement, the Merger and the
other transactions contemplated hereby by the stockholders of CTI by the
Required CTI Stockholder Vote, CTI has the corporate power to execute, deliver
and perform this Agreement and to consummate the transactions and perform its
obligations contemplated hereby. The execution, delivery and performance of
this Agreement, and the consummation of the transactions contemplated hereby,
have been duly and validly authorized by all necessary action on the part of
CTI, subject to the approval of this Agreement, the Merger and the other
transactions contemplated hereby by the stockholders of CTI by the Required CTI
Stockholder Vote. This Agreement has been duly and validly executed and
delivered by CTI and constitutes CTI's legal, valid and binding obligation,
enforceable in accordance with its terms, except to the extent such enforcement
may be limited by applicable bankruptcy, reorganization, moratorium or other
such laws affecting the enforcement of creditors' rights generally.
3.2 Authorized and Outstanding Stock. The authorized capital stock of
CTI, the number of issued and outstanding shares thereof and the record holders
of such issued and outstanding shares of CTI's capital stock are set forth on
SCHEDULE 3.2. All of such issued and outstanding shares of capital stock of CTI
are validly issued, fully paid and nonassessable. There are outstanding
options, warrants or other rights, to acquire an aggregate of 4,029,110 shares
of capital stock of CTI (each, a "CTI Stock Option"). SCHEDULE 3.2 lists the
exercise price and vesting schedule for each CTI Stock Option.
3.3 Absence of Other Claims. Except as set forth on SCHEDULE 3.2,
there is not outstanding, nor is CTI bound by, any subscriptions, options,
preemptive rights, warrants, calls, commitments or agreements or rights of any
character requiring CTI to issue or entitling any person or entity to acquire
any additional shares of capital stock or any other equity security of CTI,
including any right of conversion or exchange under any outstanding security or
other instrument, and CTI is not obligated to issue or transfer any shares of
its capital stock for any purpose. There are no outstanding obligations of CTI
to repurchase, redeem or otherwise acquire any outstanding shares of capital
stock of CTI.
3.4 Financial Statements. SCHEDULE 3.4 contains true, correct and
complete copies of (i) the audited consolidated balance sheet of CTI as of
September 30, 1998, and the related audited statement of income, retained
earnings, and cash flows for the year then ended, and the related notes
thereto; (ii) the audited consolidated balance sheet of CTI as of September 30,
1999, and the related audited statement of income, retained earnings, and cash
flows for the year then ended, and the related notes thereto; and (iii) the
unaudited consolidated balance sheet of CTI for the three (3) month period
ending December 31, 1999, and the related unaudited statement of income,
retained earnings, and cash flows for the period then ended (the "Interim
Financial Statements") (collectively, the "Financial Statements"). The
Financial Statements
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present fairly, in all material respects, the consolidated financial position
of CTI, as of the dates thereof, and the related results of its operations for
the periods then ended. Except as set forth on SCHEDULE 3.4, the Financial
Statements have been prepared in accordance with GAAP on a basis consistent
with prior periods subject, in the case of the Interim Financial Statements, to
the absence of any notes thereto and to normal and recurring year-end
adjustments, which adjustments will not, individually or in the aggregate, be
material in amount.
3.5 No Undisclosed Liabilities. Except (i) as and to the extent
reflected and adequately reserved against in the Financial Statements, (ii) for
liabilities and obligations of a type not required under GAAP to be disclosed
in the Financial Statements and which were incurred in the ordinary course of
business, consistent with past practice or (iii) as shown on SCHEDULE 3.5, as
of September 30, 1999, CTI had no liabilities or obligations whatsoever,
whether accrued, absolute, contingent or otherwise. Since September 30, 1999,
CTI has not incurred any liability or obligation whatsoever, except for (i)
liabilities and obligations incurred in the ordinary course of business
consistent with past practice or (ii) as reflected on SCHEDULE 3.5.
3.6 No Violation of Law. Except as set forth on SCHEDULE 3.6, neither
CTI nor any of its Subsidiaries is or has been (by virtue of any past or
present action, omission to act, contract to which it is a party or any
occurrence or state of facts whatsoever) in violation of, or has received any
notices of violation with respect to, any applicable local, state, federal or
international law, ordinance, regulation, order, injunction or decree, or any
other requirement of any supranational, national, state, municipal, local or
foreign government, instrumentality, subdivision, court, administrative agency,
commission or authority thereof, or any quasi-governmental or private body
exercising any supranational, national, state, municipal, local or foreign
regulatory, taxing, importing or other governmental or quasi-governmental
authority (a "Governmental Entity") binding on it, or relating to its assets or
business, except where such violation or loss, liability, penalty or expense by
virtue thereof would not have a Material Adverse Effect on CTI. For purposes of
this Agreement, "Material Adverse Effect" means, with respect to any specified
entity, any change, circumstance or effect or breach of any of the provisions
of this Agreement that, individually or in the aggregate with all other
changes, circumstances and effects or breaches, is or would reasonably be
expected to be materially adverse to (i) the business, financial condition or
results of operations of such entity and its Subsidiaries taken as a whole, or
(ii) the ability of such entity (or the party owning such entity) to consummate
the transactions contemplated by this Agreement.
3.7 Property. Except where it would not have a Material Adverse Effect
on CTI:
(a) Each of CTI and its Subsidiaries (i) has marketable fee simple
title to all of its material real property and has valid title to all personal
and mixed, tangible and intangible properties and assets which it purports to
own, including all such real and personal properties and assets reflected, but
not shown as leased or encumbered, in the Financial Statements (except for
inventory and assets sold in the ordinary course of business consistent with
past practice and supplies consumed in the ordinary course of business
consistent with past practice); and (ii) except for Permitted Liens (as defined
hereafter), owns such real and personal property free and
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clear of objections, liens, restrictions, claims, charges, security interests,
easements or other encumbrances of any nature whatsoever, including any
mortgages, leases, chattel mortgages, conditional sales contracts, collateral
security arrangements and other title or interest retention arrangements.
"Permitted Liens" shall mean (x) the security interests, easements or other
encumbrances described in SCHEDULE 3.7 and (y) liens for Taxes not yet due and
payable. All properties and assets of CTI and its Subsidiaries are in the
possession or control of CTI or its Subsidiaries, as applicable.
(b) Except as would not have a Material Adverse Effect on CTI, the
plants, structures and equipment owned or leased by CTI or any of its
Subsidiaries are structurally sound with no known defects, are in good and safe
operating condition and repair and are adequate for the uses to which they are
being put.
(c) Except as would not have a Material Adverse Effect on CTI, the
rights, properties and other assets presently owned, leased or licensed by CTI
or any of its Subsidiaries include all rights, properties and other assets
necessary to permit CTI and its Subsidiaries to conduct their business in the
same manner as their business has been conducted in prior periods, without any
need for replacement, refurbishment or extraordinary repair.
3.8 [INTENTIONALLY OMITTED.]
3.9 [INTENTIONALLY OMITTED.]
3.10 Intellectual Property.
(a) Generally. SCHEDULE 3.10(a) sets forth a complete and accurate
list of (i) all material patents, trademarks, service marks, trademark and
service xxxx registrations, trademark and service xxxx registration
applications, label filings, copyrights, inventions, patents and patent
applications owned by CTI or any of its Subsidiaries and all agreements with
respect thereto, (ii) all material trade names owned by CTI or any of its
Subsidiaries and (iii) all contracts, agreements or understandings pursuant to
which CTI or any of its Subsidiaries has authorized any person to use or any
person has the right to use, in any business or commercial activity, any of the
items listed in clauses (i) and (ii) above that are owned by CTI or any of its
Subsidiaries. Except as would not have a Material Adverse Effect on CTI or as
set forth on SCHEDULE 3.10(a), neither CTI nor any of its Subsidiaries has
heretofore infringed upon, and is not now infringing upon, any patent, service
xxxx, trade name, trademark, copyright, trade secret, or other intellectual
property belonging to any other person. Except as would not have a Material
Adverse Effect on CTI or as set forth on SCHEDULE 3.10(a), CTI does not know of
any person infringing upon any of CTI's or its Subsidiaries' patents, service
marks, trademarks, copyrights, trade secrets, or other intellectual property.
CTI has made available to Buyer true, correct and complete copies of each
trademark and service xxxx registration or application therefor, patent or
patent application or other item listed in SCHEDULE 3.10(a) and each assignment
or license with respect to any thereof.
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(b) Computer Software and Databases. SCHEDULE 3.10(b) accurately
identifies all material proprietary computer software and databases internally
developed or acquired by CTI or any of its Subsidiaries (excluding generally
available "shrink wrap" software and databases). Except as would not have a
Material Adverse Effect on CTI, CTI and its Subsidiaries have all computer
software and databases that are necessary to conduct the business of CTI and
its Subsidiaries as presently conducted and all documentation relating to all
such computer software and databases. Except as would not have a Material
Adverse Effect on CTI, all such computer software and databases perform in
accordance with the documentation related thereto or used in connection
therewith and are free of defects in programming and operation. SCHEDULE
3.10(b) identifies each person to whom CTI or any of its Subsidiaries, in the
last two (2) years, has sold, licensed, leased or otherwise transferred or
granted any interest or rights to any of the computer software and databases
described above and the date of each such sale, license, lease or other
transfer or grant. CTI has made available to WAXS true, correct and complete
copies of all documents relating to each such sale, license, lease or other
transfer or grant.
(c) Year 2000 Compliance. Except as would not have a Material
Adverse Effect on CTI, all computer hardware and software (including all
computer hardware and software contained in imbedded systems) used in the
business of CTI and its Subsidiaries or included in products previously or
currently manufactured by CTI or any of its Subsidiaries (whether such hardware
and software is owned by CTI or any of its Subsidiaries or is licensed from
third parties) (collectively, the "Technology Systems") is designed to be used
during and after the calendar year 2000 and such hardware and software will
continue to operate during each such time period to accurately process date
data (including, but not limited to calculating, comparing and sequencing)
from, into and between the twentieth and twenty-first centuries, including leap
year calculations ("Year 2000 Compliance"). Except as would not have a Material
Adverse Effect on CTI, the occurrence of the calendar year 2000 will not
adversely affect the Technology Systems of CTI or any of its Subsidiaries or of
third parties using products manufactured, or services provided, by CTI or any
of its Subsidiaries. No expenditures in excess of currently budgeted items are
necessary to cause Technology Systems to operate properly during and after the
calendar year 2000. CTI and its Subsidiaries have taken reasonable steps to
determine whether the failure of any third parties with which CTI or any of its
Subsidiaries has a relationship to achieve Year 2000 Compliance could have a
Material Adverse Effect on CTI. Except as would not have a Material Adverse
Effect on CTI, all computer hardware and software embedded in products
manufactured, or services provided, by CTI or any of its Subsidiaries, when
used in combination with, or interfacing with computer hardware and software of
any other person, shall accurately accept, release and exchange date data, and
shall continue to function in the same manner as it performs today and shall
not otherwise impair the accuracy or function ability of such person's computer
hardware or software.
3.11 Litigation. SCHEDULE 3.11 sets forth all litigation, claims,
suits, actions, investigations, indictments or informations, proceedings or
arbitrations, grievances or other procedures (including grand jury
investigations, actions or proceedings, and product liability and workers'
compensation suits, actions or proceedings) pending, or to the knowledge of
CTI, threatened, before any court, commission, arbitration tribunal, or
judicial, governmental or
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administrative department, body, agency, administrator or official, grand jury,
or any other forum for the resolution of grievances, against CTI or any of its
Subsidiaries or involving any of its or their assets or business, except for
such matters as would not have a Material Adverse Effect on CTI. Further,
except as set forth in SCHEDULE 3.11 and for matters which would not have a
Material Adverse Effect on CTI, there are no material judgments, orders, writs,
injunctions, decrees, indictments or informations, grand jury subpoenas or
civil investigative demands, plea agreements, stipulations or awards (whether
rendered by a court, commission, arbitration tribunal, or judicial,
governmental or administrative department, body, agency, administrator or
official, grand jury or any other forum for the resolution of grievances)
against or relating to CTI or any of its Subsidiaries or involving any of its
or their assets or business. CTI has made available to WAXS all information
requested by WAXS with respect to each pending litigation, claim, suit, action,
investigation, indictment or information, proceeding, arbitration, grievance or
other procedure listed in SCHEDULE 3.11, and the judgements and informations,
grand jury subpoenas and civil investigative demands, plea agreements,
stipulations and awards listed in said Schedule.
3.12 Employment Matters and Benefit Plans.
(a) SCHEDULE 3.12(a) sets forth a list of all material agreements,
arrangements, commitments, and policies (1) which relate to employee benefits;
(2) which pertain to present or former employees, officers, retirees, directors
or independent contractors (or their beneficiaries, dependents or spouses) of
CTI or any of its Subsidiaries; and (3) which are currently in effect or
expected to be adopted, maintained by, sponsored by, or contributed to by CTI
or any other employer (a "CTI Affiliate") which, under Section 414 of the Code,
would constitute a single employer with CTI (collectively referred to as "CTI
Employee Benefit Plans", including, but not limited to, all: (A) employee
benefit plans as defined in Section 3(3) of ERISA; and (B) all other deferred
compensation, incentive, profit-sharing, thrift, stock ownership, stock
appreciation rights, bonus, stock option, stock purchase, vacation, or other
benefit plans or arrangements.
(b) CTI and all CTI Affiliates have complied with their respective
substantive obligations with respect to all CTI Employee Benefit Plans
(including, but not limited to, (1) filing or distributing all reports or
notices required by ERISA or the Code and (2) complying with all requirements
of Part 6 of Title I of ERISA and Code Section 4980B) and have maintained the
CTI Employee Benefit Plans in compliance with all applicable laws and
regulations (including, but not limited to, ERISA and the Code), except where
the failure to comply with such obligations would not result in a Material
Adverse Effect on CTI. Each CTI Employee Benefit Plan that is intended to
qualify under Code Section 401(a) has received a favorable determination letter
(or other ruling indicating its tax-qualified status) from the IRS which is
current with respect to all plan provisions required under applicable law for
which such a letter can be obtained under IRS procedures, and the IRS has not
threatened or taken any action to revoke any favorable determination letter
issued with respect to any such CTI Employee Benefit Plan. No statement, either
oral or written, has been made or administrative action has been taken by CTI
or any CTI Affiliate (or any agent of either) to any Person regarding any CTI
Employee Benefit Plans that is not in accordance with the terms of that plan
that would have a Material Adverse Effect on CTI.
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(c) CTI has made available to WAXS true, correct and complete
copies of all of the current documents relating to the CTI Employee Benefit
Plans, including, but not limited to (1) all plan texts (including any
subsequent amendments), trust instruments and other funding arrangements
adopted or entered into in connection with each of the CTI Employee Benefit
Plans; (2) the notices and election forms used to notify employees and their
dependents of their continuation coverage rights under group health plans
(under Code Section 4980B(f) and ERISA Section 606), if applicable; and (3) the
most recent Form 5500 annual reports (including all schedules thereto), summary
plan descriptions and favorable determination letters, if applicable, for
Employee Benefit Plans. Since the date such documents were supplied to WAXS, no
plan amendments have been adopted and no such amendments or changes shall be
adopted or made prior to the Closing Date without WAXS's approval, except as
required by applicable law after the date hereof.
(d) Except as listed in SCHEDULE 3.12(d), neither CTI nor any CTI
Affiliate has any material agreement, arrangement, commitment or understanding
to create any additional CTI Employee Benefit Plans or to continue, modify,
change or terminate any existing CTI Employee Benefit Plans.
(e) None of the CTI Employee Benefit Plans (1) is currently under
investigation, audit or review by the U.S. Department of Labor, the IRS, the
Pension Benefit Guaranty Corporation or any other federal or state agency or
(2) is liable for any federal, state, local or foreign taxes that would have a
Material Adverse Effect on CTI. Except for such liabilities that would not have
a Material Adverse Effect on CTI, there is no transaction in connection with
which CTI or any CTI Affiliate could be subject to either a civil penalty
assessed pursuant to ERISA Section 502, a tax imposed by Code Section 4975 or
liability for a breach of fiduciary responsibility under ERISA.
(f) Other than routine claims for benefits payable to participants
or beneficiaries in accordance with the terms of the CTI Employee Benefit
Plans, or relating to qualified domestic relations orders (as defined in
Section 414(p) of the Code), there are no claims, pending or threatened, by any
participant or beneficiary against any of the CTI Employee Benefit Plans or any
fiduciary of any of the CTI Employee Benefit Plans that would have a Material
Adverse Effect on CTI.
(g) Neither CTI nor any CTI Affiliate has at any time maintained,
sponsored or contributed to any "pension plan", as defined in ERISA Section
3(2), which is subject to Title IV of ERISA or contributed to any pension plan
which is a "multiemployer plan" as defined in ERISA Section 3(37)(A).
(h) SCHEDULE 3.12(h) sets forth a list of all agreements,
arrangements, commitments and CTI Employee Benefit Plans, under which (1) any
benefits will be increased, (2) the vesting or exercisability of benefits will
be accelerated, (3) amounts will become immediately payable, and/or (4) the
immediate funding for any benefits is required, upon the occurrence of the
transactions contemplated by this Agreement. Except with respect to CTI
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Stock Options, SCHEDULE 3.12(h) also sets forth a good faith estimate of the
total value and/or cost of any such change in control benefits and/or funding
and a statement of the time periods in which such payments must be made and/or
funding obligations must be met, including but not limited to the value and/or
costs of any gross up payments for tax purposes.
(i) To the knowledge of CTI, no key employee, or group of
employees of CTI has any plans to terminate employment with CTI or any of
its Subsidiaries other than employees with plans to retire. CTI and its
Subsidiaries have complied with all laws relating to the employment of labor,
including provisions thereof relating to wages, hours and equal opportunity,
and it does not have any labor relations problems (including threatened or
actual strikes or work stoppages or grievances), except for such failures or
problems that would not have a Material Adverse Effect on CTI.
3.13 Collective Bargaining. Except as set forth on SCHEDULE 3.13,
there are no labor contracts, collective bargaining agreements, letters of
understanding or other arrangements, formal or informal, with any union or
labor organization covering any of CTI's or its Subsidiaries' employees and
none of said employees are represented by any union or labor organization. CTI
has made available to Buyer a true, correct, and complete copy of each
agreement listed on SCHEDULE 3.13.
3.14 Labor Disputes. CTI and its Subsidiaries are in compliance with
all federal and state laws respecting employment and employment practices,
terms and conditions of employment, wages and hours, except where the failure
to be in compliance would not have a Material Adverse Effect on CTI. No unfair
labor practice complaint against CTI or any of its Subsidiaries is pending
before the National Labor Relations Board. CTI does not know of any labor
strike or other labor trouble actually pending, being threatened against, or
affecting CTI or any of its Subsidiaries. Relations between management and
labor are amicable and there have not been, nor are there presently, any
attempts to organize non-union employees, nor are there plans for any such
attempts.
3.15 Investments. Except for the Subsidiary Shares and as disclosed on
SCHEDULE 3.15, neither CTI nor any of its Subsidiaries owns any capital stock
or other securities or have any other material investment in any person or
other entity.
3.16 Tax Matters. Except as set forth on SCHEDULE 3.16:
(a) (i) All material Tax Returns required to be filed under
applicable law by CTI and each of its Subsidiaries have been filed, or requests
for extensions have been timely filed and have not expired; (ii) all such Tax
Returns filed by CTI and its Subsidiaries are complete and accurate in all
material respects; (iii) all Taxes shown to be due on such Tax Returns or on
subsequent assessments with respect thereto have been paid or the Financial
Statements reflect that adequate reserves have been established for the payment
of such Taxes, and no other material Taxes are payable by CTI and its
Subsidiaries with respect to items or periods covered by such Tax Returns
(whether or not shown on or reportable on such Tax Returns) or with respect to
any period prior to the date of this Agreement; (iv) CTI and each of its
Subsidiaries
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has disclosed on their federal income Tax Return all positions taken therein
that could give rise to a substantial understatement of income Tax within the
meaning of Section 6662 of the Code; (v) there are no material liens on any of
the assets of CTI or any of its Subsidiaries with respect to Taxes, other than
liens for Taxes not yet due and payable or for Taxes that CTI or any of its
Subsidiaries is contesting in good faith through appropriate proceedings and
for which the Financial Statements reflect that appropriate reserves have been
established; (vi) no power of attorney to deal with Tax matters or waiver or
extension of any statute of limitations with respect to Taxes has been granted
by CTI or any of its Subsidiaries; and (vii) there is no (X) audit,
examination, deficiency or refund litigation or matter in controversy with
respect to any Taxes of CTI and its Subsidiaries nor (Y) has the IRS nor any
other Tax authority asserted any claim for Taxes in writing, or to the
knowledge of CTI, is threatening to assert any claim for Taxes, that might
reasonably be expected to result in a Tax determination which would have a
Material Adverse Effect on CTI.
(b) SCHEDULE 3.16 sets forth the names of the Subsidiaries of CTI
which are or have been a member of an affiliated group of corporations filing a
consolidated federal income Tax Return (or a group of corporations filing a
consolidated, combined or unitary income Tax Return under comparable provisions
of state, local or foreign Tax law) other than a group the common parent of
which was CTI;
(c) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of CTI or any of its Subsidiaries that,
individually or collectively, could give rise to the payment of any amount (or
portion thereof) that would not be deductible pursuant to Section 280G of the
Code.
(d) Neither CTI nor any of its Subsidiaries is a party to (i) a Tax
Sharing Agreement, (ii) transactions which have produced deferred intercompany
gains, losses or other intercompany items or excess loss accounts (within the
meaning of Treas. Reg. ss. 1.1502-13 or 1.1502-19, respectively, or any
predecessor regulations or any comparable items for state, local or non-United
States Tax purposes), or (iii) any joint venture, partnership, limited
liability company or other arrangement or contract that should be treated as a
partnership for federal income Tax purposes or as to which, an election has
been made under Treas. Reg. ss. 301.7701-3 to have the entity disregarded for
federal income Tax purposes as an entity separate from its owner.
(e) None of CTI and its Subsidiaries (i) has or has had operations
or assets outside the United States taxable as a "branch" by the United States
or as a "permanent establishment" by any foreign country, (ii) has received
written notice of any claim made by a Tax authority in a jurisdiction where CTI
or any of its Subsidiaries does not file Tax Returns that it is or may be
subject to Taxes in such jurisdiction, (iii) is a "passive foreign investment
company" within the meaning of the Code, (iv) has participated in or cooperated
with an international boycott or has been requested to do so in connection with
any prior transaction or the transactions contemplated by this Agreement, and
(v) has availed itself of any Tax amnesty, Tax holiday or similar relief in any
jurisdiction.
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(f) CTI has made available to WAXS true copies of (i) all material
Tax Returns that CTI or its Subsidiaries have filed since its fiscal year ended
September 30, 1995, and (ii) all material correspondence, including without
limitation, closing agreements, private letter rulings, advance pricing
agreements and gain recognition agreements and other written submissions to or
communications with any Tax authorities.
(g) (i) There is no plan or intention on the part of holders of CTI
Capital Stock who own five percent (5%) or more of the CTI Capital Stock by
vote or value (the "5% CTI stockholders"), nor have any of such 5% CTI
stockholders entered any agreement, and to the knowledge of CTI, there is no
plan or intention on the part of the remaining holders of CTI Capital Stock to
sell, exchange or otherwise dispose of a number of shares of WAXS Common Stock
received in the Merger (excluding the Contingent Shares, if any) to any person
related to WAXS within the meaning of Treas. Reg. ss. 1.368-1(e)(3) that would
reduce the CTI stockholders' aggregate ownership of such WAXS Common Stock to a
number of shares of WAXS Common Stock having a value, as of the Effective Time
of the Merger, of less than fifty percent (50%) of the value of all of the
formerly outstanding CTI Capital Stock as of the Effective Time. For purposes
of this representation, shares of WAXS Common Stock exchanged for cash or other
property, surrendered by dissenters or exchanged for cash in lieu of fractional
shares of WAXS Common Stock will be treated as outstanding CTI Capital Stock as
of the Effective Time. Any third party who may acquire WAXS Common Stock from
Xxxxx Xxxxxx and Xxxxxxxx Xxxxxx as former CTI stockholders after the Merger as
contemplated in the Voting and Stock Transfer Restriction Agreement dated as of
the date hereof between WAXS and Xxxxx Xxxxxx and Xxxxxxxx Xxxxxx (the "Xxxxxx
Voting and Stock Transfer Restriction Agreement"), will not be a person related
to WAXS within the meaning of Treas. Reg. ss. 1.368-1(e)(3), and there are no
facts and circumstances indicating that the cash to be used by each such third
party to purchase the WAXS Common Stock from such former CTI stockholders
receiving WAXS Common Stock in the Merger will in substance be exchanged by
WAXS or any of its Subsidiaries for CTI Capital Stock.
(ii) The fair market value of the WAXS Common Stock (inclusive of
Contingent Shares, if any) and cash in lieu of fractional shares of Parent
Common Stock, if any, together with any cash paid or shares of WAXS Common
Stock issued, as the case may be, in satisfaction of accrued unpaid dividends
on CTI Preferred Stock, received by each holder of CTI Capital Stock in the
Merger will be approximately equal to the fair market value of the shares of
CTI Capital Stock surrendered in the Merger by each CTI stockholder.
(iii) CTI is not a regulated investment company, a real estate
investment trust, or a corporation fifty percent (50%) or more of the value of
whose total assets (excluding cash, cash items, receivables and U.S. government
securities) are stock or securities and eighty percent (80%) or more of the
value of whose total assets are assets held for investment. For purposes of the
fifty percent (50%) and eighty percent (80%) determinations under the preceding
sentence, stock and securities in any subsidiary corporation shall be
disregarded and the parent corporation shall be deemed to own its ratable share
of the subsidiary's assets. A corporation shall be considered a subsidiary for
purposes of this paragraph
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if the parent owns fifty percent (50%) or more of the combined voting power of
all classes of stock entitled to vote, or fifty percent (50%) or more of the
total value of shares of all classes of stock outstanding.
(iv) In the Merger, CTI will transfer to Merger Sub at least
ninety percent (90%) of the fair market value of its net assets, and at least
seventy percent (70%) of the fair market value of its gross assets held
immediately prior to the Merger. For purposes of this representation, amounts
paid by CTI to dissenters or to CTI stockholders who receive cash or other
property, CTI assets used by CTI to pay reorganization expenses, and CTI assets
used for redemptions and distributions (excluding regular, normal dividends)
made by CTI prior to the Effective Time will be included as assets of CTI held
immediately prior to the Merger.
(v) None of the compensation received by any stockholder-employee
of CTI will be separate consideration for, or allocable to, any of the shares
of CTI Capital Stock held by such stockholder-employee; none of the shares of
WAXS Common Stock issued in the Merger and received by any stockholder-employee
of CTI will be separate consideration for, or allocable to, any employment
agreement, agreement not to compete or any other compensation owed or owing to
such stockholder-employee; and the compensation paid to any
stockholder-employee of CTI will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(vi) CTI and each of its stockholders will pay their respective
expenses, if any, incurred in connection with the Merger.
(vii) There is no intercorporate indebtedness existing between
WAXS and CTI or between CTI and the Merger Sub that was issued, acquired, or
will be settled at a discount.
(viii) At the Effective Time of the Merger, the fair market value
of the assets of CTI transferred to Merger Sub will equal or exceed the sum of
its liabilities assumed by Merger Sub, plus (without duplication) the amount of
liabilities, if any, to which the transferred assets of CTI are subject.
(ix) The liabilities of CTI assumed by Merger Sub and the
liabilities of CTI to which the transferred assets of CTI are subject were
incurred by CTI in the ordinary course of its business.
(x) CTI is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(xi) The business carried on by CTI at the Effective Time is its
"historic business" within the meaning of Treas. Reg. ss. 1.368-1(d).
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(xii) Prior to the Effective Time, CTI has not distributed the
stock of any corporation in a distribution qualifying for Tax-free treatment
under Section 355 of the Code.
(xiii) During the five (5) year period ending as of the Effective
Time, neither CTI nor any persons related to CTI within the meaning of Treas.
Reg. ss. 1.368-1(e)(3) (but without regard to Treas. Reg. ss.
1.368-1(e)(3)(i)(A)) will have directly or through any transaction, agreement,
or arrangement with any other person, (A) acquired CTI Capital Stock with
consideration other than shares of WAXS capital stock or CTI Capital Stock or
(B) made any "extraordinary distributions" with respect to CTI Capital Stock
within the meaning of Treas. Reg. ss. 1.368-1T(e)(1)(ii)(A).
(xiv) The principal purposes of CTI for participating in the
Merger are bona fide purposes unrelated to Taxes, and the terms of this
Agreement are the product of arm's-length negotiations.
(xv) CTI and each of its Subsidiaries are not currently, have not
been within the last five (5) years, and do not anticipate becoming a "United
States real property holding corporation" within the meaning of Section 897(c)
of the Code.
(xvi) There is a valid business reason underlying the Section
1.7(d) provisions concerning the possible issuance of Contingent Shares and the
provisions of this Agreement relating to Contingent Shares satisfy the specific
requirements of Section 3.03 of IRS Revenue Procedure 77-37, as it has been
amplified and superseded by the IRS.
(xvii) There is a valid business reason for the escrow of shares
of WAXS Common Stock, including Contingent Shares, if any, pursuant to Section
2.5 of this Agreement and the Escrow Agreement described in Section 7.1(d), and
the escrow provisions of this Agreement and the Escrow Agreement satisfy the
specific requirements of Section 3.06 of IRS Revenue Procedure 77-37, as it has
been amplified and superseded by the IRS.
(xviii) There is a valid business reason for the escrow of shares
of WAXS Common Stock comprising the Expense Fund pursuant to Section 2.14 of
this Agreement, and the escrow provisions of Section 2.14 satisfy the specific
requirements of Section 3.06 of IRS Revenue Procedure 77-37, as it has been
amplified and superseded by the IRS.
(h) For purposes of this Agreement:
(i) "Tax" (and, with correlative meaning, "Taxes" shall mean: (i)
all taxes, charges, fees, levies or other assessments, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state, local
or foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including, but not limited to, federal
income taxes and state income taxes), payroll and employee withholding taxes,
unemployment insurance, social security taxes,
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sales and use taxes, ad valorem taxes, excise taxes, employer tax, estimated,
severance, telecommunications, occupation, goods and services, capital,
profits, value added taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing, which
the Person is required to pay, withhold or collect; and (ii) any liability for
the payment of any amounts described in clause (i) as a result of being a
successor to or transferee of any individual or entity or a member of an
affiliated, consolidated or unitary group for any period (including pursuant to
Treas. Reg. ss. 1.1502-6 or comparable provisions of state, local or foreign
tax law); and (iii) any liability for the payment of amounts described in
clause (i) or clause (ii) as a result of any express or implied obligation to
indemnify any Person or as a result of any obligations under agreements or
arrangements with any Person;
(ii) "Tax Asset" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute which could reduce Taxes (including, without
limitation, credits related to alternative minimum Taxes);
(iii) "Tax Return" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns (including
any attached schedules) or similar statement relating to, or required to be
filed in connection with, any Taxes, including information returns or reports
with respect to backup withholding and other payments to third parties; and
(iv) "Tax Sharing Agreement" shall mean any and all existing
written Tax sharing agreements, or arrangements binding two or more persons
with respect to the payment of Taxes, including any written agreements or
arrangements which afford any other person the right to receive any payment
from one or more other persons in respect to any Taxes or the benefit of any
Tax Asset of one or more other persons or require or permit the transfer or
assignment of any income, revenue, receipts or gains.
3.17 Required Licenses and Permits. Except as would not have a
Material Adverse Effect on CTI, CTI and its Subsidiaries have all licenses,
tariffs, permits, variances, exemptions, orders, approvals and other
authorizations of all Governmental Entities necessary for the operation of the
business of CTI and its Subsidiaries (the "CTI Permits"). CTI and its
Subsidiaries are in compliance with the terms of the CTI Permits, except where
the failure to so be in compliance would have a Material Adverse Effect on CTI.
The businesses of CTI and its Subsidiaries are not being conducted in violation
of, and neither CTI nor any of its Subsidiaries have received any notices of
violations with respect to, any law, ordinance or regulation of any
Governmental Entity, except for possible violations which would not have a
Material Adverse Effect on CTI. CTI has made available to WAXS true, correct,
and complete copies of all CTI Permits.
3.18 Contracts and Commitments. Except as set forth or described in
SCHEDULES 3.12, 3.13 or 3.18:
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(a) Neither CTI nor any of its Subsidiaries is a party to any
agreement or contract, the absence of which would have a Material Adverse
Effect on CTI;
(b) No contracts or commitments of CTI or any of its Subsidiaries
have unexpired terms of more than twelve (12) months from the date hereof or
require payments or the provision of services having a value individually in
excess of $1,000,000 (or, as to any series of related contracts or commitments,
$1,000,000 in the aggregate);
(c) Neither CTI not any of its Subsidiaries have any contract,
written or oral, relating to the employment of any person by CTI or any
Subsidiary thereof, or any consulting or similar kind of contract, that is not
cancelable by CTI as a Subsidiary thereof, on notice of not longer than one
hundred twenty (120) days and without liability of any kind, except liabilities
which arise as a matter of law upon termination of employment, or any agreement
or arrangement providing for the payment of any bonus or commission based on
sales or earnings;
(d) Except for negotiable instruments in the process of collection,
neither CTI nor any of its Subsidiaries has any unexpired power of attorney
outstanding or any contract, commitment or liability (whether absolute,
accrued, contingent or otherwise), as guarantor, surety, co-signer, endorser,
co-maker, indemnitor in respect of the contract or commitment of any other
person, corporation, partnership, joint venture, association, organization or
other entity (other than a Subsidiary of CTI) with respect to an amount
exceeding $2,000,000;
(e) There are no contracts or agreements with any director, officer
or shareholder of CTI or a Subsidiary thereof, or with any person related to
any such person or with any company or other organization in which any
director, officer, or shareholder of CTI or a Subsidiary thereof, or anyone
related to any such person, has a material direct or indirect financial
interest;
(f) Neither CTI nor any of its Subsidiaries is subject to any
contract or agreement containing covenants limiting the freedom of CTI or any
of its Subsidiaries to compete in any line of business in any geographic area
or requiring CTI or any of its Subsidiaries to share any profits;
(g) Neither CTI nor any of its Subsidiaries has any outstanding
contract or agreement for variable cost service (excluding point-to-point
service obtained pursuant to a lease or IRU arrangement) which is of a
"take-or-pay" or similar variety and which requires payments or the provision
of services having a value in excess of $50,000 per year or $1,000,000 over the
term of the contract or agreement; and
(h) CTI has made available to WAXS true, correct and complete
copies of each of the agreements listed on SCHEDULE 3.18 (such agreements,
together with any agreements set forth or described in or required to be set
forth or described in any of SCHEDULES 3.12 or 3.13 being referred to as the
"Material Contracts");
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3.19 No Conflict. Subject to obtaining any required consents or
approvals set forth on SCHEDULE 3.21, the execution and delivery of this
Agreement by CTI, the consummation of the transactions contemplated herein by
CTI, and the performance of the covenants and agreements hereunder of CTI will
not, with or without the giving of notice or the lapse of time, or both, (i)
violate or conflict with any of the provisions of any charter document or bylaw
of CTI or a Subsidiary thereof, (ii) except as set forth in SCHEDULE 3.19,
violate, conflict with or result in a breach or default under or give rise to a
right of termination, amendment, cancellation or acceleration of any term,
condition or obligation under any material mortgage, indenture, contract,
license, permit, instrument, trust document, will, or other agreement, document
or instrument to which CTI or a Subsidiary thereof is a party or by which CTI,
any Subsidiary thereof or its or their assets may be bound, (iii) violate any
provision of law, statute, regulation, court order or ruling of any
governmental authority to which CTI or a Subsidiary thereof is a party or by
which its or their assets may be bound or (iv) result in the creation or
imposition of any lien, claim, charge, restriction, security interest or
encumbrance of any kind whatsoever upon any asset, except, with respect to the
foregoing clauses (ii), (iii) or (iv), where there would arise no Material
Adverse Effect on CTI therefrom.
3.20 Agreements in Full Force and Effect. Except as expressly set
forth in SCHEDULE 3.20, all Material Contracts are valid and binding and in
full force and effect and are enforceable in accordance with their terms,
except to the extent that such enforceability may be limited due to laws
relating to bankruptcy, reorganization, moratorium or other such laws. CTI does
not have knowledge of any pending or threatened bankruptcy, insolvency or
similar proceeding with respect to any party to such agreements. No event has
occurred with respect to any agreement or contract to which CTI or a Subsidiary
thereof is a party which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
thereunder by CTI or a Subsidiary thereof, or to the knowledge of CTI, any
other party thereto, except where such default would not have a Material
Adverse Effect on CTI.
3.21 Required Consents and Approvals. Except as set forth on SCHEDULE
3.21, no consent or approval is required by virtue of the execution hereof by
CTI or the consummation of any of the transactions contemplated herein by CTI
to avoid the violation or breach of, or the default under, or the creation of a
lien on any asset of CTI or a Subsidiary thereof pursuant to the terms of, any
regulation, order, decree or award of any Governmental Entity or any lease,
agreement, contract, mortgage, note, license, permit, tariff, authorization or
any other instrument to which CTI or a Subsidiary thereof is a party or to
which it or any of its property or any of its capital stock is subject, except
where the failure to obtain such consent or approval would not have a Material
Adverse Effect on CTI.
3.22 Absence of Certain Changes and Events. Except as set forth on
SCHEDULE 3.22, since September 30, 1999, each of CTI and its Subsidiaries has
conducted its business only in the ordinary course, and has not:
(a) made any declaration, setting aside or payment of any dividend
or other distribution of assets (whether in cash, stock or property) with
respect to the capital stock of CTI or a Subsidiary thereof, or any direct or
indirect redemption, purchase or other acquisition of
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such stock, or otherwise made any payment of cash or any transfer of other
assets, to any shareholder or affiliate thereof (including, without limitation,
the repayment of or on any indebtedness or other obligation); or transferred
any assets from a Subsidiary to CTI;
(b) suffered any Material Adverse Effect;
(c) except for customary increases based on term of service or
regular promotion of non-officer employees, increased (or announced any
increase in) the compensation payable or to become payable to any employee or
increased (or announced any increase in) any bonus, insurance, pension or other
employee benefit plan, payment or arrangement for such employees, or entered
into or amended any material employment, consulting, severance or similar
agreement;
(d) incurred, assumed or guaranteed any liability or obligation
(absolute, accrued, contingent or otherwise) other than in the ordinary course
of business consistent with past practice;
(e) paid, discharged, satisfied or renewed any material claim,
liability or obligation other than in the ordinary course of business and
consistent with past practice;
(f) permitted any asset to be subjected to any mortgage, lien,
security interest, restriction, charge or other encumbrance of any kind except
for Permitted Liens;
(g) waived any material claims or rights;
(h) sold, transferred or otherwise disposed of any material asset,
except in the ordinary course of business consistent with past practice;
(i) made any single capital expenditure or investment in excess of
$1,000,000;
(j) made any change in any method, practice or principle of
financial or tax accounting;
(k) paid, loaned, advanced, sold, transferred or leased any asset
to any employee, except for normal compensation involving salary and benefits
or expenses reimbursed in the ordinary course of business, consistent with past
practice;
(l) issued or sold any of its capital stock or issued any warrant,
option or other right to purchase shares of its capital stock, or any security
convertible into its capital stock;
(m) entered into any material commitment or transaction, other than
in the ordinary course of business consistent with past practice, affecting the
business of CTI or its Subsidiaries; or
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(n) agreed in writing, or otherwise, to take any action described
in this Section 3.22.
3.23 Brokers and Advisers. Except for Xxxxxx Xxxxxx Xxxxxxxx & Co.,
Inc., no broker, agent or finder has rendered financial services to CTI in
connection with the transactions contemplated by this Agreement.
3.24 Information Supplied. None of the information supplied or to be
supplied by CTI for inclusion or incorporation by reference in the Proxy
Statement/Prospectus and the Registration Statement (each as defined herein)
will, on the date it is first mailed to WAXS's stockholders or at the time of
the WAXS Stockholders Meeting (in the case of the Proxy Statement/Prospectus)
or on the date it is filed or declared effective by the SEC (in the case of the
Registration Statement) contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. None of the information supplied or to be supplied
by CTI to its stockholders in connection with such stockholders' adoption of
this Agreement and approval of the Merger and the other transactions
contemplated hereby will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
3.25 CTI Board Approval. The Board of Directors of CTI, by resolutions
duly adopted by unanimous vote at a meeting duly called and held and not
subsequently rescinded or modified in any way (the "CTI Board Approval"), has
duly (i) determined that this Agreement, the Merger and the other transactions
contemplated hereby are fair to and in the best interests of CTI and its
stockholders, (ii) approved this Agreement, the Merger and the other
transactions contemplated hereby and (iii) declared the advisability of this
Agreement, the Merger and the other transactions contemplated hereby, and,
further, (iv) recommended that the stockholders of CTI approve and adopt this
Agreement, the Merger and the other transactions contemplated hereby and
directed that this Agreement and the transactions contemplated hereby be
submitted for consideration by CTI's stockholders.
3.26 Required CTI Stockholder Vote. The affirmative vote of holders of
shares of CTI Common Stock, CTI Series A Preferred Stock and CTI Series B
Preferred Stock voting as three (3) separate classes, representing a majority
of the outstanding shares of each such class (the "Required CTI Stockholder
Vote"), are the only votes of the holders of any class or series of CTI capital
stock necessary to adopt this Agreement and approve the Merger and the other
transactions contemplated hereby.
3.27 Disclosure. No representations or warranties by CTI in this
Agreement (as qualified by the corresponding Schedules delivered by CTI
pursuant hereto) contain any untrue statement of material fact, or omit to
state any fact necessary, in light of the circumstances under which it was
made, in order to make the statements herein or therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WAXS AND MERGER SUB
WAXS and Merger Sub hereby represent and warrant to CTI as follows:
4.1 Organization. WAXS and Merger Sub are corporations duly
organized, validly existing and in good standing under the laws of the state of
their incorporation and have all requisite corporate power and authority to
effect the transactions and perform their obligations as contemplated hereunder.
Except as set forth on SCHEDULE 4.1, Exhibit 21.1 to WAXS's Annual Report on
Form 10-K for the year ended December 31, 1998 includes all the Subsidiaries of
WAXS which as of the date of this Agreement are Significant Subsidiaries (as
defined in Rule 1-02 of Regulation S-X of the Securities and Exchange Commission
(the "SEC")). Except as disclosed on SCHEDULE 4.1 or in the WAXS SEC Reports (as
defined herein), all the outstanding shares of capital stock of, or other equity
interest in, each such Significant Subsidiary owned or held by WAXS have been
validly issued and are fully paid and nonassessable and are owned directly or
indirectly by WAXS, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever and free of
any other restriction (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests), except
for such matters as would not have a Material Adverse Effect on WAXS. Neither
WAXS nor any of its Subsidiaries directly or indirectly owns any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity (other than the
Subsidiaries of WAXS) that is or would reasonably be expected to be material to
WAXS and its Subsidiaries taken as a whole.
4.2 Authorization. Subject to the approval of this Agreement, the
Merger and the other transactions contemplated hereby by the stockholders of
WAXS by the Required WAXS Vote, WAXS has the right, power and authority to
execute, deliver and perform this Agreement and the Escrow Agreement and to
consummate the transactions contemplated hereby and thereby, including the
issuance of the WAXS Common Stock as contemplated hereunder. The execution,
delivery and performance of this Agreement and the Escrow Agreement, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action on the part of WAXS,
subject to the approval of this Agreement, the Merger and the other transactions
contemplated hereby by the stockholders of WAXS by the Required WAXS Vote. This
Agreement and the Escrow Agreement have been duly and validly executed and
delivered by WAXS and constitute a legal, valid and binding obligation of WAXS,
enforceable in accordance with their terms, except to the extent such
enforceability may be limited by applicable bankruptcy, reorganization,
moratorium or other such laws affecting the rights of creditors generally.
Merger Sub has the right, power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereunder. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of the Merger Sub. This Agreement has
been duly and
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validly executed and delivered by Merger Sub and constitutes a legal, valid and
binding obligation of Merger Sub, enforceable in accordance with its terms,
except to the extent such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium or other such laws affecting the rights
of creditors generally.
4.3 No Conflict. The execution and delivery of this Agreement and
the Escrow Agreement by WAXS, the execution and delivery of this Agreement by
Merger Sub, the consummation of the transactions contemplated herein and therein
by WAXS and Merger Sub, as applicable, and the performance of the covenants and
agreements of WAXS and Merger Sub will not, with or without the giving of notice
or the lapse of time, or both, (i) violate or conflict with any of the
provisions of any charter document or bylaw of WAXS or Merger Sub, (ii) except
as set forth in SCHEDULE 4.3, violate, conflict with or result in a breach or
default under or give rise to a right of termination, amendment, cancellation or
acceleration of any term, condition or obligation under any material mortgage,
indenture, contract, license, permit, instrument, trust document, or other
agreement, document or instrument to which WAXS or Merger Sub is a party or by
which WAXS or Merger Sub or any of its or their properties may be bound, (iii)
violate any provision of law, statute, rule, regulation, court order, judgment
or decree, or ruling of any Governmental Entity, to which WAXS or Merger Sub is
a party or by which WAXS or Merger Sub or any of its or their properties may be
bound or (iv) result in the creation or imposition of any lien, claim, charge,
restriction, security interest or encumbrance of any kind whatsoever upon any
asset of WAXS or Merger Sub, except, with respect to the foregoing clauses (ii),
(iii) or (iv), where there would arise no Material Adverse Effect on WAXS or
Merger Sub therefrom.
4.4 Validity of Issuance. The shares of WAXS Common Stock, when
issued in accordance with Section 1.7 hereof, will be duly authorized, validly
issued, fully paid and nonassessable.
4.5 Capital Structure. As of February 11, 2000:
(a) The authorized capital stock of WAXS consists of (A)
150,000,000 shares of WAXS Common Stock, of which 53,787,805 shares are
outstanding and no shares are held in treasury of WAXS and (B) 10,000,000 shares
of Preferred Stock, par value $.01 per share, of which 50,000 shares designated
as 4.25% Cumulative Senior Perpetual Convertible Preferred Stock, Series A, par
value $.01 per share (the "Series A Preferred Stock"), and 350,259.875 shares
designated as Convertible Preferred Stock, Series C (the "Series C Preferred
Stock"), are outstanding. WAXS has reserved or has available 4,347,827 shares of
WAXS Common Stock for issuance upon conversion of the Series A Preferred Stock
and 18,027,478 shares of WAXS Common Stock for issuance upon conversion of the
Series C Preferred Stock. All issued and outstanding shares of the capital stock
of WAXS are duly authorized, validly issued, fully paid and nonassessable, and
no class of capital stock is entitled to preemptive rights. In addition to the
option described in Item 1 of SCHEDULE 4.5, there are outstanding options,
warrants or other rights (a "WAXS Stock Option") to acquire 13,133,837 shares of
capital stock from WAXS.
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(b) No bonds, debentures, notes or other indebtedness of
WAXS having the right to vote on any matters on which holders of capital stock
of WAXS may vote are issued or outstanding.
(c) Except as otherwise set forth in this Section 4.5,
the WAXS SEC Reports (as defined below) or SCHEDULE 4.5 and as contemplated by
Section 1.5 and Section 1.6, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which WAXS or any of its Subsidiaries is a party or by which any of them is
bound obligating WAXS or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of WAXS or any of its Subsidiaries or obligating WAXS or
any of its Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call right, commitment, agreement, arrangement or undertaking.
Except as set forth on SCHEDULE 4.5 or the WAXS SEC Reports, there are no
outstanding obligations of WAXS or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of WAXS or any of its
Subsidiaries.
4.6 Reports and Financial Statements.
(a) WAXS has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents required
to be filed by it under the federal securities laws with the SEC since January
1, 1998 (collectively, including all exhibits thereto, the "WAXS SEC Reports").
No Subsidiary of WAXS is required to file any form, report, registration
statement, prospectus or other document with the SEC not otherwise filed with a
WAXS SEC Report. None of the WAXS SEC Reports, as of their respective dates (or,
if amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing), contained or will contain any untrue statement of a
material fact or omitted or will omit to state a 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 WAXS SEC Reports,
taken as a whole, do not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances existing as of the time of
filing of such reports, not misleading. Each of the financial statements
(including the related notes) included in the WAXS SEC Reports (or, if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of WAXS
and its Subsidiaries as of the respective dates or for the respective periods
set forth therein all in conformity with GAAP consistently applied during the
periods involved except as otherwise noted therein, and subject, in the case of
the unaudited interim financial statements, to normal and recurring year-end
adjustments that have not been and will not be material in amount. All of such
WAXS SEC Reports, as of their respective dates (or as of the date of any
amendment to the respective WAXS SEC Report filed prior to the date of this
Agreement), complied as to form in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations promulgated thereunder.
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(b) Except as disclosed on SCHEDULE 4.6 or in the WAXS
SEC Reports, since December 31, 1999, WAXS and its Subsidiaries have not
incurred any liabilities that are of a nature that would be required to be
disclosed on a balance sheet of WAXS and its Subsidiaries or the footnotes
thereto prepared in conformity with GAAP, other than (A) liabilities incurred in
the ordinary course of business or (B) liabilities that would not have a
Material Adverse Effect on WAXS.
4.7 Brokers and Advisers. Except for Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation, no broker, agent or finder has rendered financial
services to WAXS in connection with the transactions contemplated by this
Agreement.
4.8 Information Supplied. None of the information supplied or to
be supplied by WAXS for inclusion or incorporation by reference in the Proxy
Statement/Prospectus (as defined herein) will, on the date it is first mailed to
WAXS's stockholders, or at the time of the WAXS Stockholders Meeting contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The Proxy
Statement/Prospectus will, on the date it is first mailed to WAXS's stockholders
and at the time of the WAXS Stockholders Meeting, comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
4.9 WAXS Board Approval. The Board of Directors of WAXS, by
resolutions duly adopted by unanimous vote at a meeting duly called and held and
not subsequently rescinded or modified in any way (the "WAXS Board Approval"),
has duly (i) determined that this Agreement, the Merger and the other
transactions contemplated hereby are fair to and in the best interests of WAXS
and its stockholders, (ii) approved this Agreement, the Merger and the other
transactions contemplated hereby and (iii) declared the advisability of this
Agreement, the Merger and the other transactions contemplated hereby, and,
further, (iv) recommended that the stockholders of WAXS approve and adopt this
Agreement, the Merger and the other transactions contemplated hereby and
directed that this Agreement and the transactions contemplated hereby by
submitted for consideration by WAXS's stockholders at the WAXS Stockholders
Meeting.
4.10 Required WAXS Stockholder Vote. Except as set forth on
SCHEDULE 4.10, the affirmative vote of holders of shares of WAXS Common Stock,
Series A Preferred Stock and Series C Preferred Stock, voting together as a
single class, representing a majority of the outstanding shares of WAXS Common
Stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock (the "Required WAXS Vote"), is the only vote of the holders of any class
or series of WAXS capital stock necessary to adopt this Agreement and approve
the Merger and the other transactions contemplated hereby.
4.11 Required Merger Sub Board Approval. The Board of Directors of
Merger Sub, by resolutions duly adopted by a unanimous written consent and not
subsequently rescinded or modified in any way, has duly (i) determined that this
Agreement, the Merger and the other transactions
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contemplated hereby are fair to and in the best interests of Merger Sub and its
sole stockholder, WAXS, (ii) approved this Agreement, the Merger and the other
transactions contemplated hereby and (iii) declared the advisability of this
Agreement, the Merger and the other transactions contemplated hereby, and,
further, (iv) recommended that WAXS adopt this Agreement and approve the Merger
and the other transactions contemplated hereby.
4.12 Required Merger Sub Stockholder Vote. The affirmative vote of
WAXS, as sole stockholder of Merger Sub, is the only vote of the holders of any
class or series of Merger Sub capital stock necessary to adopt this Agreement
and approve the Merger and the other transactions contemplated hereby. WAXS, in
its capacity as sole stockholder of Merger Sub, has, by resolutions duly adopted
by written consent (the "Merger Sub Stockholder Resolutions") adopted this
Agreement and approved the Merger and the other transactions contemplated
hereby.
4.13 Litigation; Compliance with Laws.
(a) Except as disclosed on SCHEDULE 4.13 or in the WAXS
SEC Report, there is no suit, investigation, action or proceeding pending or, to
the knowledge of WAXS, threatened, against or affecting WAXS or any Subsidiary
of WAXS having, or which would have a Material Adverse Effect on WAXS, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against WAXS or any Subsidiary of WAXS having, or
which would have a Material Adverse Effect on WAXS.
(b) Except as would not have a Material Adverse Effect on
WAXS, WAXS and its Subsidiaries hold all permits, licenses, variances,
authorizations, exemptions, orders and approvals of all Governmental Entities
which are necessary for the operation of the businesses of WAXS and its
Subsidiaries (the "WAXS Permits"). WAXS and its Subsidiaries are in compliance
with the terms of the WAXS Permits, except as disclosed in the WAXS SEC Reports
or where the failure to be valid and in full force and effect or to so comply
would not have a Material Adverse Effect on WAXS. The businesses of WAXS and its
Subsidiaries are not being conducted in violation of, and WAXS has not received
any notices of violations with respect to, any law, ordinance or regulation of
any Governmental Entity, except as disclosed in the WAXS SEC Reports or for
violations which would not have a Material Adverse Effect on WAXS.
4.14 Absence of Certain Changes or Events. Except as disclosed on
SCHEDULE 4.14 or in the WAXS SEC Reports and except for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, since
December 31, 1998 through and including the date hereof, (i) WAXS and its
Subsidiaries have conducted, in all material respects, their business only in
the ordinary course and (ii) there has not been any change, circumstance or
event which has had, or would reasonably be expected to have, a Material Adverse
Effect on WAXS, other than any change, circumstance or effect relating (A) to
the economy or financial markets in general, or (B) in general to the industries
in which WAXS and its Subsidiaries operate and not specifically relating to WAXS
and its Subsidiaries.
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4.15 Tax Matters. Except as set forth on SCHEDULE 4.15:
(a) (i) All material Tax Returns required to be filed
under applicable law by WAXS and each of its Subsidiaries have been filed, or
requests for extensions have been timely filed and have not expired; (ii) all
such Tax Returns filed by WAXS and its Subsidiaries are complete and accurate in
all material respects; (iii) all Taxes shown to be due on such Tax Returns or on
subsequent assessments with respect thereto have been paid or the WAXS SEC
Reports reflect that adequate reserves have been established for the payment of
such Taxes, and no other material Taxes are payable by WAXS or any of its
Subsidiaries with respect to items or periods covered by such Tax Returns
(whether or not shown on or reportable on such Tax Returns) or with respect to
any period prior to the date of this Agreement; (iv) there are no material liens
on any of the assets of WAXS or any of its Subsidiaries with respect to Taxes,
other than liens for Taxes not yet due and payable or for Taxes that WAXS and
its Subsidiaries is contesting in good faith through appropriate proceedings and
for which the WAXS SEC Reports reflect that appropriate reserves have been
established; and (v) there is no audit, examination, deficiency or refund
litigation or matter in controversy with respect to any Taxes of WAXS and its
Subsidiaries that might reasonably be expected to result in a Tax determination
which would have a Material Adverse Effect on WAXS.
(b) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of WAXS or any of its Subsidiaries
that, individually or collectively, could give rise to the payment of any amount
(or portion thereof) that would not be deductible pursuant to Section 280G of
the Code.
(c) Neither WAXS nor any of its Subsidiaries is a party
to a Tax Sharing Agreement.
(d) (i) During the five (5) year period beginning as of
the Effective Time, neither WAXS nor any person "related" to WAXS within the
meaning of Treas. Reg. ss. 1.368-1(e)(3) will (A) be under any obligation and
will have entered into any agreement to redeem or repurchase any of the WAXS
Common Stock issued in the Merger or to make any "extraordinary distributions"
within the meaning of Treas. Reg. ss. 1.368-1T(e)(1)(ii)(A) in respect of the
WAXS Common Stock and (B) have a plan or intention to reacquire any of the WAXS
Common Stock issued in the Merger either directly or through any transaction,
agreement or arrangement with any other person, except (X) for escrowed shares
of WAXS Common Stock, if any, which may be returned to WAXS pursuant to the
Escrow Agreement and (Y) that WAXS may repurchase shares of WAXS Common Stock on
the open market through a broker for the prevailing market price pursuant to an
open-market repurchase program as described in Rev. Rul. 99-58, 1999-52 I.R.B.
701. To the knowledge of WAXS, any third party who may acquire WAXS Common Stock
from Xxxxx Xxxxxx and Xxxxxxxx Xxxxxx as former CTI stockholders after the
Merger as contemplated by the Xxxxxx Voting and Stock Transfer Restriction
Agreement will not be a person related to WAXS within the meaning of Treas. Reg.
ss. 1.368-1(e)(3) and to the knowledge of WAXS, there are no facts and
circumstances indicating
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that the cash to be used by any such third party to purchase the WAXS Common
Stock from such former CTI stockholders receiving such WAXS Common Stock in the
Merger will in substance be exchanged by WAXS or any of its Subsidiaries for CTI
Capital Stock.
(ii) As of the Effective Time, neither WAXS nor
any person related to WAXS within the meaning of Treas. Reg. ss. 1.368-1(e)(3)
will own beneficially or of record, nor will have owned during the past five (5)
years, any CTI Capital Stock or securities of CTI or options or instruments
giving the holder thereof the right to acquire CTI Capital Stock or securities
of CTI.
(iii) Prior to or in the Merger, neither WAXS nor
any person related to WAXS within the meaning of Treas. Reg. ss. 1.368-1(e)(3)
will have acquired directly or through any transaction, agreement or arrangement
with any other person, any capital stock of CTI with consideration other than
shares of WAXS Common Stock.
(iv) The fair market value of the WAXS Common
Stock (inclusive of Contingent Shares, if any) and cash in lieu of fractional
shares of WAXS Common Stock, if any, together with any cash paid or shares of
WAXS Common Stock issued, as the case may be, in satisfaction of accrued unpaid
dividends on CTI Preferred Stock, received by each holder of CTI Capital Stock
in the Merger will be approximately equal to the fair market value of the shares
of CTI Capital Stock surrendered in the Merger by each CTI stockholder.
(v) Following the Merger, WAXS will cause Merger
Sub to continue CTI's "historic business" within the meaning of Treas. Reg. ss.
1.368-1(d) or use a significant portion of CTI's historic business assets in a
business. For purposes of this representation, Merger Sub will be treated as
conducting CTI's historic business or using a significant portion of CTI's
historic business assets in a business if (a) the members of the WAXS "qualified
group" (as defined below in this Section 4.15(d)(viii)), in the aggregate,
continue the historic business of CTI or use a significant portion of CTI's
historic business assets in a business, or (b) the foregoing activities are
undertaken by a partnership in which (1) the members of the WAXS qualified
group, in the aggregate, own at least a thirty-three and one third percent
(33 1/3%) interest in the partnership, or (ii) one or more members of the
qualified group has active and substantial management functions as a partner
with respect to the partnership business and the members of the qualified
group, in the aggregate, own at least a twenty percent (20%) interest in the
partnership.
(vi) On and prior to the Effective Time, WAXS
will be in "control" of Merger Sub within the meaning of Section 368(c) of the
Code, which is a newly-formed corporation that was organized for the sole
purpose of facilitating the Merger.
(vii) WAXS has no plan or intention, and WAXS has
no plan or intention to cause the Merger Sub, to issue additional shares of its
capital stock following the Merger, or take any other action, that would result
in WAXS losing "control" of the Merger Sub within the meaning of Section 368(c)
of the Code.
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(viii) WAXS has no plan or intention following the
Merger to liquidate the Merger Sub; to merge the Merger Sub with and into
another corporation; to sell or otherwise dispose of the stock of the Merger
Sub; or to cause the Merger Sub to sell or otherwise dispose of any of the
assets acquired from CTI, except for dispositions made in the ordinary course of
business or for transfers or successive transfers of all or part of the assets
acquired from CTI to a member(s) of the WAXS qualified group or to a partnership
that has a member(s) of the qualified group as a partner who own, in the
aggregate, at least a thirty-three and one third percent (33 1/3%) interest in
the partnership, or (ii) one or more members of the qualified group has active
and substantial management functions as a partner with respect to the
partnership business and the members of the qualified group, in the aggregate,
own at least a twenty percent (20%) interest in the partnership. For purposes of
this Section 4.15(d) and as set forth under Treas. Reg. ss. 1.368-1(d)(4)(ii),
the term "qualified group" shall mean one or more chains of corporations
connected through stock ownership with WAXS, but only if WAXS owns directly
stock meeting the requirements of Section 368(c) of the Code in at least one
other corporation, and stock meeting the requirements of Section 368(c) of the
Code in each of the corporations (except WAXS) is owned directly by one of the
other corporations.
(ix) WAXS and Merger Sub will pay their
respective expenses, if any, incurred in connection with the Merger.
(x) There is no intercorporate indebtedness
existing between WAXS and CTI or between the Merger Sub and CTI that was issued,
acquired, or will be settled at a discount.
(xi) Neither WAXS nor Merger Sub is a regulated
investment company, a real estate investment trust, or a corporation fifty
percent (50%) or more of the value of whose total assets (excluding cash, cash
items, receivables and U.S. government securities) are stock or securities and
eighty percent (80%) or more of the value of whose total assets are assets held
for investment. For purposes of the fifty percent (50%) and eighty percent (80%)
determinations under the preceding sentence, stock and securities in any
subsidiary corporation shall be disregarded and the parent corporation shall be
deemed to own its ratable share of the subsidiary's assets. A corporation shall
be considered a subsidiary for purposes of this paragraph if the parent owns
fifty percent (50%) or more of the combined voting power of all classes of stock
entitled to vote, or fifty percent (50%) or more of the total value of shares of
all classes of stock outstanding.
(xii) No stock of the Merger Sub will be issued in
the Merger.
(xiii) Neither WAXS nor the Merger Sub is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(xiv) In the Merger, to the knowledge of WAXS, the
Merger Sub will acquire at least ninety percent (90%) of the fair market value
of CTI's net assets, and at least seventy percent (70%) of the fair market value
of CTI's gross assets held immediately prior to the Merger. For purposes of this
representation, amounts paid by CTI to dissenters or to CTI
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stockholders who receive cash or other property, CTI assets used by CTI to pay
reorganization expenses, and CTI assets used for redemptions and distributions
(excluding regular, normal dividends) made by CTI prior to the Effective Time
will be included as assets of CTI held immediately prior to the Merger.
(xv) None of the compensation received by any
stockholder-employee of CTI will be separate consideration for, or allocable to,
any of the shares of CTI Capital Stock held by such stockholder-employee; none
of the shares of WAXS Common Stock issued in the Merger and received by any
stockholder-employee of CTI will be separate consideration for, or allocable to,
any employment agreement, agreement not to compete or any other compensation
owed or owing to such stockholder-employee; and the compensation paid to any
stockholder-employee of CTI will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(xvi) The payment of cash in lieu of fractional
shares of WAXS Common Stock is solely for the purpose of avoiding the expense
and inconvenience to WAXS of issuing fractional shares and does not represent
separately bargained-for consideration. The total cash consideration that will
be paid in the Merger to CTI stockholders instead of issuing fractional shares
of WAXS Common Stock will not exceed one percent (1%) of the total Merger
Consideration that will be issued in the Merger.
(xvii) Prior to the Effective Time, neither WAXS
nor any Subsidiary of WAXS has distributed the stock of any corporation in a
distribution of stock qualifying for Tax-free treatment under Section 355 of the
Code.
(xviii) The principal purposes of WAXS for
participating in the Merger are bona fide purposes unrelated to Taxes, and the
terms of this Agreement are the product of arm's-length negotiations.
(xix) To the extent of the shares of WAXS Common
Stock, including Contingent Shares, if any, that are placed in escrow under the
Escrow Agreement for possible return to WAXS under the conditions specified in
such Escrow Agreement and this Agreement: (1) there is a valid business reason
for establishing the escrow arrangement; (2) the shares of WAXS Common Stock
subject to the Escrow Agreement at the Effective Date, including the Contingent
Shares, if any, which are issued pursuant to Section 1.7(d) hereunder and
subsequently become subject to the Escrow Agreement, will each appear as issued
and outstanding on the balance sheet of WAXS and such shares will be legally
outstanding under applicable state law; (3) all dividends paid on such stock by
WAXS will be distributed to the former CTI stockholders; (4) all voting rights
of such stock held under the Escrow Agreement will be exercisable by the former
CTI stockholders or on their behalf by the Shareholder Representative; (5) such
stock will not be subject to restrictions requiring its return to WAXS because
of the death, failure to continue employment or similar restrictions; (6) all
such stock will be released from the Escrow Agreement within five (5) years
after the Effective Time (except where there is a bona fide dispute as to whom
such stock should be released); (7) the return of such stock to WAXS will not be
triggered by an event the occurrence or nonoccurrence
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of which is within the control of the CTI stockholders; (8) the return of such
stock to WAXS will not be triggered by the payment of additional Tax or
reduction in Taxes paid as a result of an IRS audit of the CTI stockholders,
Merger Sub or WAXS either (x) with respect to the Merger or (y) when the Merger
involves a related person within the meaning of Section 267(c)(4) of the Code;
(9) the mechanism for the calculation of the number of shares of WAXS Common
Stock to be returned to WAXS from the Escrow Fund is objective and readily
ascertainable; and (10) at least fifty percent (50%) of the number of shares of
WAXS Common Stock issued as of Effective Time to the CTI stockholders will not
be subject to the Escrow Agreement or the Expense Fund.
(xx) As to the Contingent Shares, if any, which
may be issued by WAXS pursuant to Section 1.7(d) hereunder: (1) all the
Contingent Shares will be issued by WAXS pursuant to Section 1.7(d) of this
Agreement within five (5) years from the Effective Time and as to any Contingent
Shares which are placed in escrow under the Escrow Agreement, such Contingent
Shares will be released from the Escrow Agreement within five (5) years after
the Effective Time (except where there is a bona fide dispute as to whom such
stock should be released); (2) there is a valid business reason for the
provisions in Section 1.7(d) concerning the possible issuance of Contingent
Shares; (3) the maximum number of Contingent Shares that may be issued is stated
hereunder; (4) at least fifty percent (50%) of the maximum number of shares of
WAXS Common Stock (inclusive of the Contingent Shares) will be issued as of the
Effective Time pursuant to Section 1.7(c) hereunder; (5) the Section 1.7(d)
provisions concerning the possible right to receive Contingent Shares after the
Effective Time prohibit assignment of such rights except by operation of law;
(6) the Section 1.7(d) provisions can give rise only to the receipt of
additional WAXS Common Stock; (7) such stock issuance will not be triggered by
an event the occurrence or nonoccurrence of which is within the control of the
CTI stockholders; (8) such stock issuance will not be triggered by the payment
of additional Tax or reduction in Taxes paid as a result of an IRS audit of the
CTI shareholders or WAXS either (x) with respect to the Merger or (y) when the
Merger involves related persons within the meaning of Section 267(c)(4) of the
Code; and (9) the mechanism in Section 1.7(d) hereunder for the calculation of
Contingent Shares to be issued is objective and readily ascertainable.
(xxi) To the knowledge of WAXS, there is a valid
business reason for the escrow of shares of WAXS Common Stock comprising the
Expense Fund pursuant to Section 2.14 of this Agreement, and to the knowledge of
WAXS, the escrow provisions of Section 2.14 satisfy the specific requirements of
Section 3.06 of IRS Revenue Procedure 77-37, as it has been amplified and
superseded by the IRS.
ARTICLE V
COVENANTS RELATED TO CONDUCT OF BUSINESS
5.1 Covenants of CTI. During the period from the date of this
Agreement and continuing until the Effective Time, CTI agrees as to itself and
its Subsidiaries that:
(a) Ordinary Course. Except with respect to any of the
matters described on
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any of the Schedules to Sections 5(b), (c), (e), (f), (g), (h) or (j), CTI and
its Subsidiaries shall carry on their respective businesses in the usual,
regular and ordinary course, substantially in accordance with past practice, in
all material respects.
(b) Dividends; Changes in Share Capital. Except as set
forth on SCHEDULE 5.1(b), CTI shall not, and shall not permit any of its
Subsidiaries to, and shall not propose to, (i) declare or pay any dividends on
or make other distributions in respect of any of its capital stock, except for
dividends by wholly-owned Subsidiaries of CTI (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, except for any such action by a wholly-owned Subsidiary of CTI
which remains a wholly owned Subsidiary after consummation of such transaction,
or (iii) repurchase, redeem or otherwise acquire any shares of capital stock of
CTI or any of its Subsidiaries or any securities convertible into or exercisable
for any shares of such capital stock except for the purchase from time to time
by CTI of CTI Common Stock in the ordinary course of business consistent with
past practice in connection with the CTI Employee Benefit Plans.
(c) Issuance of Securities. Except as set forth on
SCHEDULE 5.1(c), CTI shall not, and shall not permit any of its Subsidiaries to,
issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock of any class, or any securities convertible
into or exercisable for, or any rights, warrants or options to acquire, any such
shares, or enter into any agreement with respect to any of the foregoing, other
than (i) the issuance of CTI Common Stock upon the exercise of CTI Stock Options
or in connection with other stock-based benefits plans outstanding on the date
hereof, in each case in accordance with their present terms or (ii) issuances by
a wholly-owned Subsidiary of CTI of capital stock to such Subsidiary's parent or
another wholly-owned subsidiary of CTI.
(d) Governing Documents. Neither CTI nor any of its
Subsidiaries shall amend or propose to amend their respective certificates of
incorporation, bylaws or other governing documents.
(e) Acquisitions. Except as set forth on SCHEDULE 5.1(e),
CTI shall not, and shall not permit any of its Subsidiaries to acquire or agree
to acquire by merging or consolidating with, or by purchasing a substantial
equity interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets (other than the acquisition of assets used in the operations
of the business of CTI and its Subsidiaries in the ordinary course).
(f) Sales. Except as set forth on SCHEDULE 5.1(f), CTI
shall not, and shall not permit any of its Subsidiaries to, sell or agree to
sell by merging or consolidating with, or by selling a substantial equity
interest in or a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise sell or agree to sell any assets
(other than the sale of assets used in the operations of the business of CTI and
its Subsidiaries in the ordinary course).
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(g) Investments; Indebtedness. Except as set forth on
Schedule 5.1(g), CTI shall not, and shall not permit any of its Subsidiaries to
make any capital expenditures or capital investments or make any loans, advances
or capital commitments to, or investments in, any other person, in excess of
$5,000,000 in the aggregate other than (x) by CTI or a Subsidiary of CTI to or
in CTI or in any Subsidiary of CTI or (y) pursuant to any contract or other
legal obligation of CTI or any of its Subsidiaries existing at the date hereof.
Except as set forth on SCHEDULE 5.1(g), CTI shall not, and shall not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any
indebtedness, issuances of debt guarantees, loans or advances not in existence
as of the date hereof except pursuant to credit facilities, indentures and other
arrangements in existence on the date hereof (as such credit facilities,
indentures and other arrangements may be amended, extended, modified, refunded,
renewed or refinanced after the date hereof) or in the ordinary course of
business consistent with past practice.
(h) Compensation. Other than as contemplated by SCHEDULE
5.1(h) or SCHEDULE 5.1(c), CTI shall not (i) increase the amount of compensation
of any director or executive officer except in the ordinary course of business
consistent with past practice or as required by an existing agreement, (ii) make
any increase in or commitment to increase any employee benefits, except in the
ordinary course of business, consistent with past practice or as required by an
agreement existing on the date hereof, (iii) issue any options, warrants or
other rights to acquire any shares of CTI Capital Stock or adopt or make any
commitment to adopt any agreement, arrangement, commitment or policy which, if
in affect as of the date hereof, would constitute a CTI Employee Benefit Plan
under Section 3.12(a) hereof or (iv) make any contribution, other than regularly
scheduled contributions, to any CTI Employee Benefit Plan.
(i) Accounting Methods; Income Tax Matters. CTI shall not
change its methods of accounting in effect on December 31, 1999, except as
required by changes in GAAP as concurred in by CTI's independent auditors. CTI
shall not (i) change its fiscal year, (ii) make any material tax election, (iii)
adopt or change any Tax accounting method, (iv) enter into any closing
agreement, settle or compromise a Tax liability with a Tax authority, (v)
surrender any right to claim a refund of Taxes, or (vi) take (or permit any
Subsidiary of CTI to take) any other action which would have the effect of
materially increasing the Tax liability or materially decreasing any Tax asset
of CTI or any of its Subsidiaries, other than in the ordinary course of business
consistent with past practice.
(j) Certain Agreements. Except as set forth on SCHEDULE
5.1(j) and except for extensions or renewals of agreements in existence on the
date hereof, CTI shall not, and shall not permit any of its Subsidiaries to,
without the prior consent of WAXS (which consent shall not be unreasonably
withheld or delayed), enter into any agreement or arrangement which, if it had
been entered into prior to the execution of this Agreement, would have been a
Material Contract.
(k) Litigation. CTI shall not and shall not permit any of
its Subsidiaries to settle or, compromise any litigation, except where the
amount paid or payable, in each case, does not exceed $1,000,000.
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5.2 Control of CTI's Business. Nothing contained in this Agreement
shall give WAXS, directly or indirectly, the right to control CTI's operations
prior to the Effective Time. Prior to the Effective Time, CTI shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision over its operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Proxy Statement: Stockholders Meetings.
(a) As promptly as reasonably practicable following the
date hereof, WAXS shall prepare and file with the Securities and Exchange
Commission (the "SEC") materials which shall constitute its proxy statement and
prospectus in connection with the WAXS Stockholders Meeting (such proxy
statement and prospectus, and any amendments or supplements thereto, the "Proxy
Statement/Prospectus") and WAXS shall prepare and file a registration statement
on Form S-4 with respect to the issuance of all WAXS Common Stock in the Merger,
including, without limitation, the Contingent Shares and the shares of WAXS
Common Stock issuable to the holders of CTI Preferred Stock as contemplated by
Section 2.6(b) (the "Registration Statement"). The Proxy Statement/Prospectus
will be included in and will constitute a part of the Registration Statement as
WAXS's prospectus. The Registration Statement and the Proxy Statement/Prospectus
shall comply as to form in all material respects with the applicable provisions
of the Securities Act and the Exchange Act and the rules and regulations
thereunder. WAXS shall use reasonable efforts to have the Registration Statement
declared effective by the SEC as promptly as reasonably practicable after filing
with the SEC and to keep the Registration Statement effective as long as is
necessary to consummate the Merger and the actions contemplated thereby. CTI
shall use its reasonable best efforts to cooperate with and assist WAXS in
connection with the preparation and amendment of the Proxy Statement/Prospectus
and the Registration Statement. WAXS will provide CTI with a reasonable
opportunity to review and comment on any amendment or supplement to the
Registration Statement prior to filing such with the SEC, and will provide CTI
with a copy of all such filings made with the SEC. WAXS will use reasonable
efforts to cause the Joint Proxy Statements/Prospectus to be mailed to WAXS's
stockholders as promptly as practicable after the Registration Statement is
declared effective under the Securities Act. WAXS shall also take any action
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified or to file a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
of WAXS Common Stock and CTI shall furnish all information concerning CTI and
the holders of CTI Capital Stock as may be reasonably requested in connection
with any such action. WAXS will advise CTI promptly after it receives notice
thereof, of the time when the Registration Statement has become effective, the
issuance of any stop order or the suspension of the qualification of the WAXS
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction or any request by the SEC for amendment of the Registration
Statement. If at any time prior to the Effective Time any information relating
to WAXS or CTI, or any of their respective affiliates, officers or directors,
should be discovered by WAXS or CTI
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which should be set forth in an amendment or supplement to the Registration
Statement or the Proxy Statement/Prospectus so that any of such documents would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other party hereto and, to the extent
required by law, rules or regulations, an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and
disseminated to the stockholders of WAXS and CTI.
(b) CTI shall, as promptly as reasonably practicable
following the execution of this Agreement, (i) duly take all lawful action to
call, give notice of, convene and hold a meeting of its stockholders (which
meeting the parties intend to be held no later than 30 days following the date
on which the Registration Statement has been declared effective by the SEC) for
the purpose of obtaining or (ii) duly take all lawful action to obtain by
written consent pursuant to the CGCL, the required vote of its stockholders with
respect to the actions contemplated by this Agreement and shall take all lawful
action to solicit the adoption of this Agreement by the stockholders of CTI by
written consent or otherwise. The Board of Directors of CTI shall recommend
adoption of this Agreement by the stockholders of CTI and shall not withdraw,
modify or materially qualify in any manner adverse to WAXS such recommendation
or take any action or make any statement materially inconsistent with such
recommendation (collectively, an "Adverse Change in the CTI Recommendation");
provided, however, that the foregoing shall not prohibit accurate disclosure of
factual information regarding the business, financial condition or results of
operations of WAXS or CTI or the fact that an Acquisition Proposal (as defined
in Section 6.4) has been made, the identity of the party making such proposal or
the material terms of such proposal (provided, that the Board of Directors of
CTI does not withdraw, modify or materially qualify in any manner adverse to
WAXS its recommendation) in the Registration Statement or the Proxy
Statement/Prospectus, to the extent such information, facts, identity or terms
is required to be disclosed therein under applicable law.
(c) WAXS shall, as promptly as reasonably practicable
following the execution of this Agreement, duly take all lawful action to call,
give notice of, convene and hold a meeting of its stockholders (the "WAXS
Stockholders Meeting") (which meeting the parties intend to be held no later
than 30 days following the date on which the Registration Statement has been
declared effective by the SEC) for the purpose of obtaining the required vote of
its stockholders with respect to the transactions contemplated by this Agreement
and shall take all lawful action to solicit the approval of the transactions
contemplated hereby by the stockholders of WAXS. The Board of Directors of WAXS
shall recommend approval of the transactions contemplated hereby by the
stockholders of WAXS and shall not withdraw, modify or materially qualify in any
manner adverse to CTI such recommendation or take any action or make any
statement in connection with the WAXS Stockholders Meeting materially
inconsistent with such recommendation; provided, however, that the foregoing
shall not prohibit accurate disclosure of factual information regarding the
business, financial condition or operations of WAXS or CTI.
6.2 Access to Information. Upon reasonable notice, each of CTI and
WAXS shall (and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel,
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financial advisors and other representatives of the other parties hereto
reasonable access during normal business hours, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments, records,
officers and employees and, during such period, each of CTI and WAXS shall (and
shall cause its Subsidiaries to) furnish promptly to the other parties hereto
(a) a copy of each report, schedule, registration statement and other document
filed, published, announced or received by it during such period pursuant to the
requirements of federal or state securities laws, as applicable (other than
documents which such party is not permitted to disclose under applicable law),
and (b) consistent with its legal obligations, all other information concerning
it and its business, properties and personnel as such other party may reasonably
request; provided, however, that either CTI or WAXS may restrict the foregoing
access to the extent that any law, treaty, rule or regulation of any
governmental entity applicable to such party requires such party or its
Subsidiaries to restrict access to any properties or information. The parties
will hold any such information which is non-public in confidence to the extent
required by, and in accordance with, the provisions of the Confidentiality
Agreement, dated January 6, 2000, between CTI and WAXS (the "Confidentiality
Agreement"). Any investigation by WAXS or CTI shall not affect the
representations and warranties made herein of CTI or WAXS, as the case may be.
6.3 Reasonable Efforts.
(a) Subject to the terms and conditions of this
Agreement, each party will use reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the Merger and the
other transactions contemplated by this Agreement as soon as practicable after
the date hereof, including (i) preparing and filing as promptly as practicable
all documentation to effect all necessary applications, notices, petitions,
filings, and other documents and to obtain as promptly as practicable all
consents, waivers, licenses, orders, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party and/or
any governmental entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement and (ii) taking all reasonable steps
as may be necessary to obtain all such material consents, waivers, licenses,
registrations, permits, authorizations, tax rulings, orders and approvals. The
parties each shall keep the other apprised of the status of matters relating to
completion of the transactions contemplated hereby, including promptly
furnishing the other with copies of notices or other communications received by
it or any of its Subsidiaries or affiliates from any governmental entity or
third party with respect to the Merger or any of the other transactions
contemplated by this Agreement, in each case, to the extent permitted by law or
regulation or any applicable confidentiality agreements existing on the date
hereof.
(b) The parties shall promptly prepare and file any
required notifications with the United States Department of Justice (the "DOJ")
and the Federal Trade Commission (the "FTC") as required by the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The parties shall cooperate with each other in connection with the
preparation of such notifications and related matters, including sharing
information concerning sales and ownership and such other information as may be
needed to complete such notification, and
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providing a copy of such notifications to the other prior to filing; provided,
that WAXS and CTI shall have the right to redact any dollar revenue information
from the copies of such notifications provided to the other parties. The parties
shall keep all information about the other obtained in connection with the
preparation of such notification confidential pursuant to the terms of the
Confidentiality Agreement. Each party shall pay the filing fee required under
the regulations promulgated pursuant to the HSR Act with respect for the
notification for which such party is the "Acquiring Person" (as defined in the
regulations promulgated to the HSR Act).
6.4 Acquisition Proposals. Without the prior written consent of
WAXS, pending the Closing, CTI agrees that neither it nor any of its
Subsidiaries shall, and that it shall cause its employees, officers, directors,
affiliates, agents and representatives (including any investment banker,
financial advisor, attorney or accountant retained by any of them) not to,
directly or indirectly, initiate, solicit, encourage or knowingly facilitate
(including by way of furnishing information or engaging in discussions or
negotiations) any inquiries or the making of any proposal or offer with respect
to a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar action
involving CTI, or any purchase or sale of a material portion of the assets of
(including stock of Subsidiaries) of CTI, taken as a whole, or any purchase or
sale of, or tender or exchange offer for, a material portion of the equity
securities of CTI (any such proposal or offer being referred to herein as an
"Acquisition Proposal"). CTI further agrees that neither it nor any of its
Subsidiaries shall, and that it shall cause it and its Subsidiaries' officers,
directors, affiliates, employees, agents and representatives (including any
investment banker, financial advisor, attorney or accountant retained by it or
any of its Subsidiaries) not to, directly or indirectly, have any discussion
with or provide any confidential information or data to any Person relating to
an Acquisition Proposal, or engage in any negotiations concerning an Acquisition
Proposal, or knowingly facilitate any effort or attempt to make or implement an
Acquisition Proposal or accept an Acquisition Proposal. CTI agrees that it and
its Subsidiaries will, and will cause its officers, directors, affiliates,
employees, agents and representatives to, immediately cease and cause to be
terminated any activities, discussions or negotiations existing as of the date
of this Agreement with any parties conducted heretofore with respect to any
Acquisition Proposal. CTI agrees that it will promptly inform its directors,
officers, affiliates, key employees, agents and representatives of the
obligations undertaken in this Section 6.4.
6.5 Fees and Expenses. All Expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such Expenses. As used in this Agreement, "Expenses" includes
all out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a parry hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby.
6.6 Public Announcements. Neither WAXS nor CTI shall, without the
prior consent of the other party, issue a press release or any other public
statement with respect to this Agreement or the transactions contemplated hereby
except pursuant to a joint communications plan, unless otherwise required by
applicable law or by obligations pursuant to any listing
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agreement with or rules of any securities exchange, in which case the parties
shall use reasonable efforts to consult with each other before issuing any press
release or otherwise making any public statement with respect to this Agreement
or the transactions contemplated hereby.
6.7 Listing. So long as WAXS Common Stock is quoted on the Nasdaq
or listed on any national securities exchange, WAXS, if permitted by the rules
of such system or exchange, will quote or list and keep quoted or listed on such
system or exchange, all WAXS Common Stock issuable pursuant to Article I hereof.
WAXS shall not voluntarily cause or take any steps to voluntarily cause WAXS
Common Stock to fail to be quoted on the Nasdaq or a national securities
exchange.
6.8 Termination of Tax Sharing Agreements. As of the Effective
Time, CTI shall cause all Tax Sharing Agreements to which CTI or any of its
Subsidiaries is a party to be terminated and of no further force and effect
after the Effective Time, thereby extinguishing any rights or obligations of any
party thereunder.
6.9 Bridge Financing. WAXS agrees to make funds available to
Borrower (as defined in that certain Participation Agreement, of even date
herewith, between Foothill Capital Corporation and WAXS (the "Participation
Agreement")) on and subject to the terms and conditions set forth in the
Participation Agreement.
6.10 Tax Treatment; Plan of Reorganization. This Agreement is
intended to constitute a "plan of reorganization" within the meaning of Treas.
Reg. ss.1.368-2(g). During the period from the date of this Agreement through
the Effective Time, unless the parties shall otherwise agree in writing, none of
WAXS, CTI or any of their respective Subsidiaries shall knowingly take or fail
to take any action which action or failure to act which could reasonably be
expected to cause the Merger to fail to qualify as a "reorganization" within the
meaning of Section 368(a) of the Code. After the Merger and pursuant to the plan
of reorganization set forth in this Agreement, WAXS expects to transfer some or
all of the assets of the Surviving Corporation in a manner permitted under
Section 368(a)(2)(C) of the Code and Treas. Reg. ss.1.368-2(k). WAXS and CTI
agree to treat the Merger as a reorganization within the meaning of Section
368(a) of the Code. To this end, none of WAXS, CTI nor Merger Sub, nor, after
the Merger, the Surviving Corporation will take any position on any federal,
state or local income or franchise Tax Return, or take any other Tax reporting
position that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code, unless otherwise required by a "determination" (as defined in Section
1313(a)(1) of the Code) or by applicable state or local income or franchise Tax
law.
6.11 Directors' and Officers' Indemnification and Insurance.
(a) From the Effective Time through the sixth (6th)
anniversary of the date on which the Effective Time occurs, WAXS shall indemnify
and hold harmless each present (as of the Effective Time) or former officer or
director of CTI and its Subsidiaries (the "Indemnified Parties"), against all
claims, losses, liabilities, damages, judgments, fines and reasonable fees,
costs and expenses, including attorneys' fees and disbursements (collectively,
"Costs"), incurred
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in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to (i) the fact that the Indemnified Party is or was an officer or director of
CTI or any of its Subsidiaries or (ii) matters existing or occurring at or prior
to the Effective Time (including those related to this Agreement and the
transactions and actions contemplated hereby), whether asserted or claimed prior
to, at or after the Effective Time, to the fullest extent permitted under
applicable law; provided that no Indemnified Party may settle any such claim
without the prior approval of WAXS (which approval shall not be unreasonably
withheld or delayed). Each Indemnified Party will be entitled to advancement of
expenses incurred in the defense of any claim, action, suit, proceeding or
investigation from WAXS within ten (10) business days of receipt by WAXS from
the Indemnified Party of a request therefor; provided that any person to whom
expenses are advanced provides an undertaking, to the extent required by the
CGCL, to repay such advances if it is ultimately determined that such person is
not entitled to indemnification.
(b) WAXS shall maintain, at no expense to the
beneficiaries, in effect for six years from the Effective Time the current
policies of the directors' and officers' liability insurance maintained by CTI
with respect to matters existing or occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement); provided that WAXS
may substitute therefor policies of at least the same coverage containing terms
and conditions which are not materially less advantageous to any beneficiary
thereof; and provided, further, that in no event shall WAXS be required to pay
annual premiums for such insurance in excess of 125% of the annual premiums
currently paid by CTI for such insurance. Notwithstanding the foregoing, if the
insurance policies that WAXS would be required to maintain pursuant to this
Section 6.11(b) would require the payment of aggregate annual premiums in excess
of 125% of the aggregate annual premiums in effect under such policies of CTI as
of the date hereof (the "CTI Policies"), then WAXS shall be obligated to use
commercially reasonable efforts to obtain and maintain such substitute policies
of insurance as are the best available as to amount and other coverage terms and
conditions for annual premiums equal to 125% of the aggregate annual premiums in
respect of the CTI Policies.
(c) Notwithstanding anything herein to the contrary, if
any claim, action, suit, proceeding or investigation (whether arising before, at
or after the Effective Time) is made against any Indemnified Party, on or prior
to the sixth (6th) anniversary of the Effective Time, the provisions of this
Section 6.11 shall continue in effect until the final disposition of such claim,
action, suit, proceeding or investigation.
(d) The covenants contained in this Section 6.11 are
intended to be for the benefit of, and shall be enforceable by, each of the
Indemnified Parties and their respective heirs and legal representatives and
shall not be deemed exclusive of any other rights to which an Indemnified Party
is entitled, whether pursuant to law, contract or otherwise.
(e) In the event that WAXS or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, proper provision shall be
made
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so that the successors or assigns of WAXS or the purchaser of such properties
and assets shall succeed to the obligations set forth in this Section 6.11.
6.12 Merger Sub Stockholder Resolutions. Pending the Closing, WAXS
shall not rescind or modify in any material respect the Merger Sub Stockholder
Resolutions.
6.13 Compliance with Dissenters' Rights Statute. CTI shall comply
with all procedures and requirements applicable to CTI under Chapter 13 of the
CGCL.
6.14 Good Faith. The parties shall perform and exercise their
respective obligations and rights provided for hereunder in good faith.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of CTI, Merger Sub and WAXS to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) HSR Act. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(b) Stockholder Approval. The stockholders of WAXS shall
have approved this Agreement and the Merger by the Required WAXS Vote and the
stockholders of CTI shall have approved this Agreement and the Merger by the
Required CTI Vote.
(c) Registration Statement. The Registration Statement
shall have been declared effective by the SEC under the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose shall have been initiated
or, to the knowledge of WAXS or CTI, threatened by the SEC.
(d) Escrow Agreement. WAXS, CTI and the Escrow Agent
shall have executed and delivered an escrow agreement in the form attached
hereto as Exhibit A (the "Escrow Agreement").
7.2 Additional Conditions to Obligations of WAXS. The obligations
of WAXS to effect the Merger are subject to the satisfaction of, or waiver by
WAXS, on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of CTI set forth in this Agreement shall be true
and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date (except to
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the extent that such representations and warranties speak as of another date, in
which case any such representations and warranties shall be true and correct as
of such date), except where any failures to be true and correct would not have a
Material Adverse Effect on WAXS or the Surviving Corporation, and WAXS shall
have received a certificate of the chief executive officer and the chief
financial officer of CTI to such effect.
(b) Performance of Obligations of CTI. CTI shall have
performed or complied in all material respects with all material agreements and
covenants required to be performed by it under this Agreement at or prior to the
Closing Date, and WAXS shall have received a certificate of the chief executive
officer and the chief financial officer of CTI to such effect.
(c) Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any governmental entity required to
consummate the Merger and the other transactions contemplated hereby, or of any
other third party required of CTI or any of its Subsidiaries to consummate the
Merger and the other transactions contemplated hereby shall have been obtained,
except where the failure to obtain any such consent or approval would not have a
Material Adverse Effect on WAXS or the Surviving Corporation; provided, however,
that the provisions of this Section 7.2(c) shall not be available to WAXS if
WAXS's failure to fulfill its obligations pursuant to Section 6.3 shall have
been the cause of, or shall have resulted in, the failure to obtain any such
consent or approval.
(d) No Material Change. CTI and its Subsidiaries, taken
as a whole, shall not have suffered, since the date hereof, a Material Adverse
Effect, other than any change, circumstance or effect relating (i) to the
economy or financial markets in general, or (ii) in general to the industries in
which CTI operates and not specifically relating to CTI.
(e) Opinion of Counsel to CTI. WAXS shall have received
from O'Melveny & Xxxxx LLP an opinion, dated the Closing Date, in the form
attached hereto as Exhibit B.
(f) No Injunctions or Restraints; Illegality. No laws
shall have been adopted or promulgated, and no temporary restraining order,
preliminary or permanent injunction or other order issued by a court or other
governmental entity of competent jurisdiction shall be in effect (i) having the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger or (ii) which otherwise would have a Material Adverse Effect on WAXS or
the Surviving Corporation; provided, however, that the provisions of this
Section 7.2(f) shall not be available to WAXS if its failure to fulfill its
obligations pursuant to Section 6.3 shall have been the cause of, or shall have
resulted in any such order or injunction.
(g) Trading Price. The average of the closing prices of
WAXS Common Stock as reported on the Nasdaq for the ten (10) consecutive trading
days ending at the close of trading on the second (2nd) trading day preceding
the Closing shall not be below $15.00.
(h) Dissenters' Rights. CTI shall have complied with all
procedures and requirements applicable to it under Chapter 13 of the CGCL, the
period for exercising dissenters'
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rights pursuant to the CGCL in connection with the Merger shall have expired and
holders of less than one percent (1%) of the shares of CTI Capital Stock issued
and outstanding immediately prior to the Closing shall have exercised such
dissenters' rights, and WAXS shall have received a certificate from an officer
of CTI to all such effects.
(i) Approval of CTI Preferred Stock. All of the shares of
outstanding CTI Preferred Stock shall have been voted in favor of this
Agreement, the Merger and the other transactions contemplated hereby (which vote
shall not have been rescinded or modified in any way) and such shares have been
converted into not more than 8,282,829 shares of CTI Common Stock pursuant to
the terms and conditions of the Certificate of Determination of Preferences of
the CTI Series A Preferred Stock and the CTI Series B Preferred Stock, as
applicable.
7.3 Additional Conditions to Obligations of CTI. The obligations
of CTI to effect the Merger are subject to the satisfaction of, or waiver by
CTI, on or prior to the Closing Date of the following additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties of WAXS set forth in this Agreement shall be true
and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date (except to the extent that such
representations and warranties speak as of another date, in which case any such
representations and warranties shall be true and correct as of such date),
except where any failures to be true and correct would not have a Material
Adverse Effect on WAXS, and CTI shall have received a certificate of the chief
executive officer and the chief financial officer of WAXS to such effect.
(b) Performance of Obligations of WAXS. WAXS shall have
performed or complied in all material respects with all agreements and covenants
required to be performed by it under this Agreement at or prior to the Closing
Date, and CTI shall have received a certificate of the chief executive officer
and the chief financial officer of WAXS to such effect.
(c) Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any governmental entity required to
consummate the Merger and the other transactions contemplated hereby, or of any
other third party required of WAXS or any of its Subsidiaries to consummate the
Merger and the transactions contemplated hereby shall have been obtained, except
where the failure to obtain any such consent or approval would not have a
Material Adverse Effect on WAXS or the Surviving Corporation; provided, however,
that the provisions of this Section 7.3(c) shall not be available to CTI if its
failure to fulfill any of its obligations pursuant to Section 6.3 shall have
been the cause of, or shall have resulted in, the failure to obtain any such
consent or approval.
(d) Opinion of Counsel to WAXS. CTI shall have received
from Long Xxxxxxxx & Xxxxxx LLP an opinion, dated the Closing Date, in the form
attached hereto as Exhibit C.
(e) [INTENTIONALLY OMITTED.]
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(f) No Injunctions or Restraints; Illegality. No laws
shall have been adopted or promulgated, and no temporary restraining order,
preliminary or permanent injunction or other order issued by a court or other
governmental entity of competent jurisdiction shall be in effect (i) having the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger or (ii) which otherwise would have a material adverse effect on the
business, financial condition or operations of WAXS and its Subsidiaries taken
as a whole; provided, however, that the provisions of this Section 7.3(g) shall
not be available to CTI if its failure to fulfill its obligations pursuant to
Section 6.3 shall have been the cause of, or shall have resulted in any such
order or injunction.
ARTICLE VIII
POST-CLOSING INDEMNIFICATION; SHAREHOLDER REPRESENTATIVE
8.1 Remedies. Subject to the terms of this Article VIII, from and
after the Effective Time, WAXS shall be indemnified and held harmless from and
against any and all claims, losses, liabilities, damages, costs (including court
costs) and expenses (including reasonable attorneys' and accountants' fees)
suffered or incurred by WAXS, its successors or assigns, and their respective
officers, employees, consultants and agents (the "WAXS Protected Parties")
(hereinafter "Loss" or "Losses"), as a result of, or with respect to, (i) except
as otherwise provided in Section 8.2, any breach or inaccuracy of any
representation or warranty of CTI set forth in this Agreement (without regard to
any Material Adverse Effect qualification contained in any such representation
or warranty, except such qualification contained in the representation and
warranty in Section 3.18(a)), whether such breach or inaccuracy exists or is
made on the date of this Agreement or as of the Closing Date; (ii) any breach or
inaccuracy of any representation or warranty of CTI set forth in the
certificates to be provided to WAXS pursuant to Sections 7.2(a) and (b), without
regard to the Material Adverse Effect qualification contained in such
certificate or the underlying representations or warranties referenced therein
(except such qualification contained in the representation and warranty in
Section 3.18(a)); (iii) any breach of or noncompliance by CTI prior to the
Effective Time with any covenant or agreement of CTI contained in this
Agreement; and (iv) any imposition of the suspended $17.6 million fine, or other
monetary penalty, imposed in connection with or related to the matter described
in item 1 of SCHEDULE 3.6, but only to the extent that such imposition arises
out of wrongful acts or omissions of CTI which occur after the effective date of
the order referred to in item 1 of SCHEDULE 3.6 and prior to the Closing Date.
8.2 Indemnity Claims.
(a) Survival. The representations and warranties of CTI
contained herein or in any certificate or other document delivered pursuant
hereto or in connection herewith shall not be extinguished by the Closing but
shall survive the Closing, subject to the limitations set forth in Section
8.2(b) hereof with respect to the time periods within which claims for indemnity
must be asserted, and the covenants and agreements of the parties contained
herein shall survive
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without limitation as to time except as may be otherwise specified herein.
Notwithstanding the foregoing, none of the representations and warranties of CTI
contained in Section 3.16(g) hereof or in the CTI certificate required pursuant
to Section 7.2(a) with respect to Section 3.16(g) hereof shall survive the
Closing and no WAXS Protected Party shall be entitled to indemnification
pursuant to this Article VIII for any breach or alleged breach by CTI of such
representations and warranties. No investigation or other examination of CTI by
WAXS shall affect the term of survival of any representation or warranty
contained herein or in any certificate or other document delivered pursuant
hereto or in connection herewith.
(b) Time to Assert Claims. All claims for indemnification
hereunder shall be asserted no later than one (1) year after the Effective Time
provided; however, that if a notice of claim which conforms, in all material
respects, as to form and substance with the requirements set forth in Section
8.4 is given pursuant to Section 8.4 prior to such one-year anniversary of the
Effective Time, such representation or warranty shall continue indefinitely with
respect to the claims in such notice until such claims are resolved pursuant to
this Article VIII. Nothing herein shall be deemed to prevent a WAXS Protected
Party from making a claim for a Loss hereunder for potential or contingent
claims or demands provided the notice of Loss sets forth the specific basis for
any such potential or contingent claim or demand to the extent then feasible and
the party making the claim has reasonable grounds to believe that such a claim
or demand may become actual.
8.3 Deductible. Notwithstanding any other provision hereof, the
WAXS Protected Parties shall make no claim against CTI for indemnification
hereunder (except pursuant to Section 8.1(a)(iv)) unless and until the amount of
each individual Loss in excess of $150,000 (the "Subdeductible Amount") exceeds
$3,000,000 in the aggregate (the "Deductible Amount"), in which event the WAXS
Protected Parties may claim indemnification for the amount of such Losses (in
each case net of the Subdeductible Amount) in excess of the Deductible Amount.
8.4 Notice of Claim. A WAXS Protected Party shall notify the
Shareholder Representative (as defined in Section 8.7), in writing, of any claim
for indemnification, specifying in reasonable detail the nature of the Loss,
and, if known, the amount, or an estimate of the amount, of the liability
arising therefrom. The WAXS Protected Party shall provide to the Shareholder
Representative as promptly as practicable thereafter such information and
documentation as may be reasonably requested to support and verify the claim
asserted, so long as such disclosure would not violate the attorney-client
privilege of the WAXS Protected Party.
8.5 Defense. If the facts pertaining to a Loss arise out of the
claim of any third party, or if there is any claim against a third party
available by virtue of the circumstances of the Loss, the Shareholder
Representative may assume the defense or the prosecution thereof by prompt
written notice to the WAXS Protected Party, including the employment of counsel
or accountants, at its cost and expense. The WAXS Protected Party shall have the
right to employ counsel separate from counsel employed by the Shareholder
Representative in any such action and to participate therein, but the fees and
expenses of such counsel employed by the WAXS Protected Party shall be at its
expense. The Shareholder Representative shall not be liable for any settlement
of any such claim effected without its prior written consent, which shall not be
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unreasonably withheld or delayed. The Shareholder Representative shall not agree
to a settlement of any claim which provides for any relief, other than the
payment of monetary damages, which would have a material precedential impact or
effect on the business or financial condition of any WAXS Protected Party
without the WAXS Protected Party's prior written consent. Whether or not the
Shareholder Representative chooses to so defend or prosecute such claim, the
parties hereto shall reasonably cooperate in the defense or prosecution thereof
and shall furnish such records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith. The Shareholder Representative
shall be subrogated to all rights and remedies of any WAXS Protected Party.
8.6 Satisfaction of Obligations. Notwithstanding anything else
herein or otherwise to the contrary (except as set forth in Section 10.1), (i)
the sole remedy of any WAXS Protected Party for any breach by CTI of a
representation or warranty of CTI hereunder shall be the right to receive
indemnification from CTI pursuant to this Article VIII and (ii) the Escrow Fund
shall constitute the WAXS Protected Parties' sole source of recovery for claims
for indemnification arising under this Article VIII, and none of CTI, its
Subsidiaries or any of their respective officers, directors, employees or
shareholders shall have any personal liability whatsoever with respect thereto.
8.7 Shareholder Representative.
(a) Upon approval by the stockholders of CTI of the
Merger, this Agreement and the other transactions contemplated hereby, the
stockholders of CTI will be deemed to have appointed, as of the Effective Time,
Xxxxxx X. Xxxxx (the "Shareholder Representative") as their representative under
this Agreement and the Escrow Agreement, including for purposes of the
indemnification obligations set forth in this Article VIII, and as
attorney-in-fact and agent for and on behalf of such CTI stockholders with
authority to take any and all actions and make any and all decisions required or
permitted to be taken or made by them under this Agreement and the Escrow
Agreement (including the settling of claims for indemnity). The Shareholder
Representative shall have full power and authority as agent of the CTI
stockholders to represent the CTI stockholders, and their successors, heirs,
representatives, and assigns with respect to all matters arising under this
Agreement and the Escrow Agreement and any other matters concerning the
transactions contemplated by this Agreement and the Escrow Agreement after the
Closing, and all action taken by the Shareholder Representative shall be binding
upon the CTI stockholders and their successors, heirs, representatives and
assigns as if expressly confirmed and ratified by each of them.
(b) The Shareholder Representative shall act in good
faith in undertaking his duties set forth herein. The Shareholder
Representative, acting in such capacity, shall not incur any liability with
respect to any action or inaction taken by him except those involving his own
willful misconduct or gross negligence. The Shareholder Representative may, in
all questions arising under this Agreement, rely on the advice of counsel and
for anything done, omitted or suffered in good faith by the Shareholder
Representative based on such advice, the Shareholder Representative shall not be
liable to anyone, except to the extent such action or inaction involves
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the Shareholder Representative's own willful misconduct or gross negligence.
Nothing set forth in this Section 8.7(b) shall in any way relieve the
Shareholder Representative in his capacity as a CTI Stockholder of his
obligations under this Article VIII.
(c) In the event of the death or permanent disability of
the Shareholder Representative or his resignation as the Shareholder
Representative, a successor Shareholder Representative shall be appointed by
Xxxxx Xxxxxx. Prompt notice of such appointment shall be delivered in writing by
Xxxxx Xxxxxx to WAXS and the Escrow Agent.
ARTICLE IX
TERMINATION PRIOR TO CLOSING
9.1 Termination of Agreement. This Agreement may be terminated at
any time prior to the Closing:
(a) By mutual written consent of WAXS and CTI;
(b) By either WAXS or CTI, if the other party shall have
failed to comply in any material respect with any of its material covenants or
agreements contained in this Agreement, which failure to so comply has not been
cured within thirty (30) days following receipt by such other party of written
notice of such failure to comply; provided, however, that if any such breach is
curable by the breaching party through the exercise of the breaching party's
reasonable efforts and for so long as the breaching party shall be so using its
reasonable efforts to cure such breach, the non-breaching party may not
terminate this Agreement pursuant to this paragraph; and provided, further, that
no party shall have the right to terminate this Agreement pursuant to this
Section 9.1(b) if such party is then failing to comply in any material respect
with any of its covenants or agreements contained in this Agreement;
(c) By either WAXS or CTI, if there has been a breach by
the other party of any representations or warranties, which breach has not been
cured within thirty (30) days following receipt by such other party of written
notice of such failure to comply; provided, however, that if any such breach is
curable by the breaching party through the exercise of the breaching party's
reasonable efforts and for so long as the breaching party shall be so using
reasonable efforts to cure such breach, the non-breaching party may not
terminate this Agreement pursuant to this paragraph; and provided further, that
this provision shall only apply to such breaches which would have a Material
Adverse Effect on (i) WAXS (after giving effect to the Merger), (ii) the
Surviving Corporation or (iii) WAXS (after giving effect to the Merger) and the
Surviving Corporation;
(d) By either CTI or WAXS, if the Effective Time shall
not have occurred on or before October 31, 2000 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this Section
9.1(d) shall not be available to any party whose action or failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
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in, the failure of the Effective Time to occur on or before the Termination Date
and any such action or failure constitutes a breach of this Agreement;
(e) By either CTI or WAXS if any governmental entity (i)
shall have issued an order, decree or ruling or taken any other action (which
the parties shall have used their reasonable efforts to resist, resolve or lift,
as applicable, in accordance with Section 6.3) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling, or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree or
ruling or to take any other action (which order, decree, ruling or other action
the parties shall have used their reasonable efforts to obtain, in accordance
with Section 6.3), which, in the case of each of (i) and (ii) is necessary to
fulfill the conditions set forth in Section 7.2(f) with respect to WAXS or
Section 7.3(g) with respect to CTI, and such denial of a request to issue such
order, decree, ruling or take such other action shall have become final and
nonappealable; provided, however, that the right to terminate this Agreement
under this Section 9.1(e) shall not be available to any party whose action or
failure to fulfill any obligation under this Agreement has been the cause of
such action or inaction and any such action or failure constitutes a breach of
this Agreement; or
(f) By WAXS or CTI if the adoption of this Agreement by
the stockholders of WAXS or the stockholders of CTI shall not have been obtained
by reason of the failure to obtain the required vote of the WAXS or CTI
stockholders, in each case, upon the taking of such vote.
9.2 Effect of Termination. In the event of any termination of this
Agreement by either CTI or WAXS, as provided in Section 9.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of WAXS or CTI or their respective officers or directors except with
respect to Sections 6.2, 6.5, 6.6, this Section 9.2 and Section 10.7, which
provisions shall survive such termination and except that, notwithstanding
anything to the contrary contained in this Agreement, neither WAXS nor CTI shall
be relieved or released from any liabilities or damages arising out of its
breach of this Agreement.
9.3 Amendment. This Agreement may be amended by CTI and WAXS, by
action taken or authorized by their respective Boards of Directors or
representatives or authorized officers, at any time before or after approval of
the matters presented in connection with the Merger by the stockholders of CTI
and WAXS, but, after any such approval, no amendment shall be made which by law
or in accordance with the rules of any relevant stock exchange or automatic
quotations system requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of CTI and WAXS.
9.4 Extension, Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, representatives or authorized officers, may, to the extent legally
allowed, (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 contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any
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agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties and Covenants;
Fraud/Misrepresentation. Except as otherwise provided herein, no representation
or warranty of any party made in this Agreement or in any certificate delivered
by such party pursuant hereto shall survive the Closing. Except as otherwise
provided in Section 9.2, all covenants and agreements of the parties hereto
shall survive the Closing. Notwithstanding anything in this Agreement to the
contrary, nothing contained in Article VIII or in any other provision hereof
shall limit, modify or otherwise affect the rights or remedies of WAXS or CTI,
at law or in equity, arising prior to the Effective Time or against any person
or entity for fraud or intentional misrepresentation.
10.2 Entire Agreement. This Agreement (including the Schedules and
Exhibits), the Escrow Agreement and the Confidentiality Agreement constitute the
sole understanding of the parties with respect to the subject matter hereof;
provided, however, that this provision is not intended to abrogate any other
written agreement between the parties executed with or after this Agreement.
10.3 Parties Bound by Agreement; Successors and Assigns. The terms,
conditions and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof. Without the prior written consent of WAXS, CTI may not assign its
rights, duties or obligations hereunder or any part thereof to any other person
or entity. WAXS may assign its rights and duties hereunder in whole or in part
(before or after the Effective Time) to one or more affiliates but if it does
so, it shall remain liable for all WAXS' obligations hereunder.
10.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
10.5 Headings. The headings of the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
10.6 Modification and Waiver. Any of the terms or conditions of
this Agreement may be waived in writing at any time by the party which is
entitled to the benefits thereof. No waiver
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of any of the provisions of this Agreement shall be deemed to or shall
constitute a waiver of any other provision hereof (whether or not similar).
10.7 Notices. Any notice, request, instruction or other document to
be given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally (including by overnight courier or express mail
service) or sent by registered or certified mail, postage or fees prepaid,
if to CTI to:
WORLDxCHANGE Communications
0000 Xxxxxx Xxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
if to WAXS to:
World Access, Inc.
000 X. Xxxxx Xxxxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: W. Xxx Xxxxx
with a copy to:
Long Xxxxxxxx & Xxxxxx LLP
Suite 5300
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: H. Xxxxxxxx Xxxxxx, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or the office of such party. Any notice which is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been duly given to the party to which it is addressed at the close of business,
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local time of the recipient, on the fourth business day after the day it is so
placed in the mail or, if earlier, the time of actual receipt.
10.8 Governing Law. This Agreement is executed by Buyer in, and
shall be construed in accordance with and governed by the laws of the State of
Delaware without giving effect to the principles of conflicts of law thereof.
10.9 No Third-Party Beneficiaries. With the exception of the
parties to this Agreement and the WAXS Protected Parties and the Seller
Protected Parties, there shall exist no right of any person to claim a
beneficial interest in this Agreement or any rights occurring by virtue of this
Agreement.
10.10 "Including." Words of inclusion shall not be construed as
terms of limitation herein, so that references to "included" matters shall be
regarded as non-exclusive, non-characterizing illustrations.
10.11 Schedules and Exhibits. Each of the Schedules and Exhibits
referred to in this Agreement are and shall be incorporated herein and made a
part hereof.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date indicated on the
first page hereof.
WAXS:
World Access, Inc.
By: /s/ W. Xxx Xxxxx
------------------------------------------
Name: W. Xxx Xxxxx
-------------------------------------
Title: Executive Vice President
------------------------------------
MERGER SUB:
CTI Merger Co.
By: /s/ W. Xxx Xxxxx
------------------------------------------
Name: W. Xxx Xxxxx
-------------------------------------
Title: President
------------------------------------
CTI:
Communication TeleSystems International d/b/a
WORLDxCHANGE Communications
By: /s/ Xxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxx
-------------------------------------
Title: Executive Vice President
------------------------------------
