AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
COVISTA COMMUNICATIONS, INC.,
CCI ACQUISITIONS CORP.
AND
CAPSULE COMMUNICATIONS, INC.
July 17, 2001
TABLE OF CONTENTS
Page
----
RECITALS............................................................ 1
ARTICLE I THE MERGER................................................ 1
1.1. The Merger............................................ 1
1.2. Closing; Effective Time............................... 1
1.3. Certificate of Incorporation; Bylaws.................. 2
1.4. Directors and Officers................................ 2
1.5. Effect on Target Common Stock and Options............. 2
1.6. Exchange Procedures................................... 4
1.7. No Further Ownership Rights in Target Common Stock.... 6
1.8. Lost, Stolen or Destroyed Certificates................ 6
1.9. Tax and Accounting Consequences....................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET................. 7
2.1. Organization, Standing and Power...................... 7
2.2. Capital Structure..................................... 8
2.3. Authority; No Conflict................................ 9
2.4. SEC Documents; Financial Statements...................10
2.5. Absence of Certain Changes............................11
2.6. Disclosure Documents..................................12
2.7. Accounts Receivable...................................12
2.8. Litigation............................................13
2.9. Restrictions on Business Activities...................13
2.10. Title to Property; Absence of Liens...................13
2.11. Intellectual Property.................................14
2.12. Environmental Matters.................................16
2.13. Taxes.................................................17
2.14. Employee Benefit Plans................................18
2.15. Employees and Consultants.............................20
2.16. Certain Agreements Affected by the Merger.............22
2.17. Related-Party Transactions............................22
2.18. Insurance.............................................22
2.19. Compliance with Laws; Governmental Authorizations.....22
2.20. Brokers' and Finders' Fees............................23
2.21. Board Approval; Stockholder Approval..................23
2.22. Customers and Suppliers...............................23
2.23. Material Contracts....................................24
2.24. No Breach of Material Contracts.......................25
2.25. Minute Books..........................................26
2.26. Complete Copies of Materials..........................26
2.27. Year 2000 Compatibility...............................26
2.28. Reorganization........................................26
2.29. Export Control Laws and Foreign Corrupt Practices Act.26
2.30. Registration Rights...................................27
2.31. Functionality of Technology...........................27
2.32. Beneficial Ownership of Acquiror Stock................28
2.33. Immigration Matters...................................28
2.34. Telecommunications Licenses...........................28
2.35. Representations Complete..............................29
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
MERGER SUB..........................................................29
3.1. Organization, Standing and Power......................29
3.2. Capital Structure.....................................30
3.3. Authority; No Conflict................................30
3.4. SEC Documents; Financial Statements...................31
3.5. Absence of Certain Changes............................32
3.6. Disclosure Documents..................................32
3.7. Litigation............................................33
3.8. Restrictions on Business Activities...................33
3.9. Employee Benefit Plans................................33
3.10. Compliance with Laws; Governmental Authorizations.....36
3.11. Brokers' and Finders' Fees............................36
3.12. Board Approval; Stockholder Approval..................36
3.13. Reorganization........................................36
3.14. Beneficial Ownership of Target Stock..................37
3.15. Representations Complete..............................37
3.16. Intentions Regarding Target...........................37
ARTICLE IV COVENANTS OF TARGET......................................37
4.1. Information...........................................37
4.2. Regulatory Approvals..................................38
4.3. Conduct of Business...................................38
4.4. Meeting of Stockholders of Target; Document
Preparation...........................................38
4.5. Consents..............................................39
4.6. Advice of Changes.....................................40
4.7. Taxes.................................................40
4.8. Public Announcements..................................40
4.9. Cooperation and Conditions............................41
4.10. Tax Free Reorganization...............................41
ARTICLE V COVENANTS OF ACQUIROR AND MERGER SUB......................41
5.1. Information...........................................41
5.2. Applications to Governmental Entities.................41
5.3. Conduct of Business...................................42
5.4. Acquiror Common Stock.................................42
5.5. Registration of Shares................................42
5.6. Meeting of Stockholders of Acquiror;
Document Preparation..................................43
5.7. Consents..............................................44
5.8. Advice of Changes.....................................44
5.9. Public Announcements..................................45
5.10. Cooperation and Conditions............................45
5.11. Continuity of Business Enterprise.....................45
5.12. Tax Free Reorganization...............................45
5.13. Nasdaq Listing........................................45
5.14. Purchases and Offers to Purchase Acquiror Stock.......46
ARTICLE VI CONDITIONS TO ACQUIROR'S AND MERGER SUB'S OBLIGATIONS....46
6.1. Representations, Warranties, and Covenants............46
6.2. No Adverse Changes....................................46
6.3. Stockholder Approval..................................46
6.4. Other Evidence........................................47
6.5. No Adverse Proceedings, Events or Regulatory
Requirements..........................................47
6.6. Consents, Etc.........................................47
6.7. Dissenting Shares.....................................47
6.8. Securities Matters....................................47
6.9. 280G and Control Affiliate Agreements.................47
6.10. Resignation of Directors and Officers.................48
6.11. Target Certificate....................................48
6.12. Termination of Pension Plan...........................48
6.13. Nasdaq Listing........................................48
6.14. Target Receipt of Agreement of Control Affiliate......48
ARTICLE VII CONDITIONS TO TARGET'S OBLIGATIONS......................49
7.1. Representations, Warranties, and Covenants.............49
7.2. No Adverse Changes.....................................49
7.3. Stockholder Approval...................................49
7.4. Other Evidence.........................................49
7.5. No Adverse Proceedings, Events or
Regulatory Requirements................................49
7.6. Consents, Etc..........................................50
7.7. Securities Matters.....................................50
7.8. Nasdaq Listing.........................................50
7.9. Acquiror Certificate...................................50
ARTICLE VIII TERMINATION, EXPENSES, AMENDMENT AND WAIVER............51
8.1. Termination............................................51
8.2. Effect of Termination..................................52
8.3. Expense................................................52
8.4. Extension; Waiver......................................52
ARTICLE IX GENERAL PROVISIONS.......................................53
9.1. Survival of Representations, Warranties, and Covenants.53
9.2. Notices................................................53
9.3. Interpretation.........................................54
9.4. Counterparts...........................................54
9.5. Entire Agreement; Third Party Beneficiaries............55
9.6. Severability...........................................55
9.7. Remedies Cumulative....................................55
9.8. Governing Law..........................................55
9.9. Assignment; Amendment; Binding Effect..................56
9.10. Rules of Construction..................................56
SCHEDULES
---------
Schedule of Control Affiliates
Target Disclosure Schedule
Acquiror Disclosure Schedule
EXHIBITS
--------
Exhibit A Certificate of Merger
Exhibit B Form of Section 280G Agreement
Exhibit C Agreement of Control Affiliate
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of July 17, 2001 by and among Covista Communications, Inc., a
New Jersey corporation ("Acquiror"), CCI Acquisitions Corp., a Delaware
corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"), and
Capsule Communications, Inc., a Delaware corporation ("Target").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub believe
it is in the best interests of their respective companies and the stockholders
of their respective companies that Target and Merger Sub combine into a single
company through the statutory merger of Merger Sub with and into Target with
Target being the surviving corporation in the merger (the "Merger") and, in
furtherance thereof, have approved the Merger.
B. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements and covenants in
connection with the Merger.
C. The parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under Sections 368(a) (1)(A) and 368(a)(2)(E) of the Code.
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1. The Merger
At the Effective Time (as hereinafter defined) and subject to and upon
the terms and conditions of this Agreement, the Certificate of Merger
substantially in the form attached hereto as Exhibit A (the "Certificate of
Merger") and the applicable provisions of the Delaware General Corporation Law
("Delaware Law"), Merger Sub shall be merged with and into Target, in
accordance with Delaware Law, the separate corporate existence of Merger Sub
shall cease and Target shall continue as the surviving corporation. Target as
the surviving corporation after the Merger is hereinafter sometimes referred
to as the "Surviving Corporation."
1.2. Closing; Effective Time
The closing of the transactions contemplated hereby (the "Closing") shall
be held at the offices of the Acquiror, on the fifth business day or sooner
following the satisfaction or waiver of all conditions to the obligations of
the parties to consummate the transactions contemplated hereby, but in no
event later than the close of business on January_31, 2002, time being of the
essence (the date on which the Closing shall occur being the "Closing Date").
On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing the Certificate of Merger with the Secretary of State of
the State of Delaware, in accordance with the relevant provisions of Delaware
Law (the time and date of such filing being the "Effective Time" and the
"Effective Date," respectively).
1.3. Certificate of Incorporation; Bylaws
At the Effective Time, the certificate of incorporation of Target, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended as
provided by Delaware Law and such certificate of incorporation.
At the Effective Time, the bylaws of Target, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by Delaware Law and such bylaws.
1.4. Directors and Officers
At the Effective Time, the directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, to
hold office until such time as such directors resign, are removed or their
respective successors are duly elected or appointed and qualified. At the
Effective Time, the officers of Merger Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, to hold office until
such time as such officers resign, are removed or their respective successors
are duly elected or appointed and qualified.
1.5. Effect on Target Common Stock and Options
By virtue of the Merger and without any action on the part of Acquiror,
Merger Sub, Target or the holders of any of Target's securities:
(a) Conversion of Target Common Stock. On the Effective Date, each
share of the common stock of Target, $0.001 par value per share ("Target
Common Stock") outstanding immediately prior to the Effective Date (other than
shares (the "Dissenting Shares") with respect to which dissenter's rights
shall have been perfected in accordance with Delaware Law), shall, without any
action on the part of the holder thereof, be canceled and converted into the
number of shares of the common stock of Acquiror, $0.05 par value per share
("Acquiror Common Stock") (rounded to the nearest 0.01 share) which results
after multiplication by the Conversion Ratio (as defined below); provided,
however, that each share of Target Common Stock held of record by Xxxxx X.
Xxxxx, III (the "Control Affiliate") shall, without any action on the part of
the holder thereof, be canceled and converted into the number of shares of
Acquiror Common Stock (rounded to the nearest 0.01 share) that results after
multiplication by the Affiliate Conversion Ratio (as defined below). As used
herein, the "Conversion Ratio" means 0.1116 and the "Affiliate Conversion
Ratio" means 0.0838; provided, however, that if the Average Stock Price (as
defined below) is greater than $6.00, then the Conversion Ratio and the
Affiliate Conversion Ratio each shall be reduced by multiplying stated
Conversion Ratio or the Affiliate Conversion Ratio, as the case may be, by the
quotient of $6.00 divided by the Average Stock Price. For example, if the
Average Stock Price is $6.60, then the Conversion Ratio would equal 0.1116
times the quotient of $6.00 divided by $6.60, and the Affiliate Conversion
Ratio would equal 0.0838 times the quotient of $6.00 divided by $6.60. For
purposes of the foregoing, the "Average Stock Price" means the average of the
daily high and low trade prices of Acquiror Common Stock on the Nasdaq
National market for the 15 trading days ending on the trading date that is one
day before the Effective Date, weighted based on the volume of trades during
each of those 15 trading days.
(b) Fractional Shares. No certificates for fractional shares of
Acquiror Common Stock shall be issued. In lieu thereof, each holder otherwise
entitled to a fractional interest shall receive an amount in cash equal to the
product of the fractional share interest held thereby multiplied by the last
sale price for the Acquiror Common Stock on the Nasdaq National Market on the
date hereof as reported in The Wall Street Journal. Each such holder shall
have no other rights with respect to such fractional interest and shall have
no rights as a stockholder of Acquiror.
(c) Conversion of Target Stock Options. At the Effective Time,
each option to purchase Target Common Stock granted by the Target pursuant to
Target Stock Option Plans (as defined in Section 2.2) ("Target Stock Option")
which is outstanding and unexercised immediately prior to the Effective Time
(whether or not vested or exercisable) and which is listed in Section 2.2 of
the Target Disclosure Schedule, will be converted as of the Effective Time
into an equivalent stock option ("Acquiror Stock Option") to purchase Acquiror
Common Stock in an amount and at an exercise price determined as follows:
(x) The number of shares of Acquiror Common Stock to be
subject to each Acquiror Stock Option shall be equal to the number of shares
of Target Common Stock subject to each respective original Target Stock
Option multiplied by the Conversion Ratio, rounded to the nearest whole share;
and
(y) The exercise price per share of Acquiror Common Stock
under each Acquiror Stock Option shall be equal to the exercise price per
share of Target Common Stock under each respective Target Stock Option divided
by the Conversion Ratio, rounded to the nearest xxxxx.
The adjustments provided in this Section 1.5(c) with respect to any
Target Stock Options which are "incentive stock options" (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"))
shall be and are intended to be effected in a manner which is consistent with
Section 424(a) of the Code. The Target Stock Option Plans under which the
Target Stock Options were issued shall be assumed by Acquiror, and the
duration, vesting schedule and other terms of each Acquiror Stock Option shall
be the same as each respective Target Stock Option as described in Section
2.2 of the Target Disclosure Schedule, except (i) as provided above in this
Section 1.5(c), (ii) as set forth in Section 2.2 of the Target Disclosure
Schedule, and (iii) that all references to Target shall be deemed to be
references to Acquiror and the number of shares subject thereto and the
exercise price shall be adjusted in accordance with this Section 1.5(c).
Within 30 days following the Effective Time, Acquiror shall deliver to former
holders of Target Stock Options appropriate agreements representing the right
to acquire Acquiror Common Stock on the terms and conditions set forth in this
Section 1.5(c).
(d) Capital Stock of Merger Sub. At the Effective Time, each share
of Merger Sub common stock, par value $0.01 per share, issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock,
$0.001 par value, of the Surviving Corporation. Each stock certificate of
Merger Sub evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(e) Adjustments to Conversion Ratio. The Conversion Ratio and the
Affiliate Conversion Ratio shall be adjusted to reflect fully the effect of
any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Acquiror Common Stock or Target
Common Stock, reorganization, recapitalization or other like change with
respect to Acquiror Common Stock or Target Common Stock) occurring after the
date hereof and prior to the Effective Time.
(f) Dissenters' Rights. Any Dissenting Shares, which as of the
Effective Date the holder thereof has not withdrawn or lost any right to such
appraisal, shall not be converted into Acquiror Common Stock or represent the
right to receive shares of Acquiror Common Stock and shall not receive or
represent the right to receive any cash in lieu of fractional shares but
instead shall be converted into the right to receive such consideration as may
be determined to be due with respect to such Dissenting Shares pursuant to
Delaware Law. The Target shall give the Acquiror (i) prompt notice of any
written demands for appraisal of any shares of Target Common Stock,
withdrawals or modifications of such demands, and any other instruments served
pursuant to Delaware Law and received by the Target which relate to any such
demand for appraisal and (ii) the opportunity to participate in all
negotiations and proceedings which take place prior to the Closing. Target
agrees that, except with the prior written consent of Acquiror, it will not
make any payment with respect to, or settle or offer to settle, any claim,
demand or other Liability with respect to any Dissenting Shares. Each holder
of Dissenting Shares (a "Dissenting Stockholder") who, pursuant to the
provisions of Delaware Law, becomes entitled to payment of the fair value for
shares of Target Common Stock, shall receive payment therefor (but only after
the value therefor shall have been agreed upon or finally determined pursuant
to such provisions) and thereupon such Dissenting Shares shall be canceled,
retired and cease to exist. If, after the Effective Time, any Dissenting
Shares shall lose their status as Dissenting Shares (either because the
Dissenting Stockholder withdraws, fails to perfect or otherwise loses the
right to appraisal), Acquiror shall issue and deliver, upon surrender by such
Dissenting Stockholder of a certificate or certificates representing shares of
Target Common Stock, the number of shares of Acquiror Common Stock to which
such Dissenting Stockholder would otherwise be entitled under Section 1.5(a)
and the Certificate of Merger, without interest thereon.
1.6. Exchange Procedures
(a) Exchange Agent. Acquiror's transfer agent, or such other bank
or trust company selected by Acquiror and reasonably acceptable to Target,
shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) Acquiror to Provide Acquiror Common Stock and Cash. At the
Effective Time, Acquiror shall furnish to the Exchange Agent in accordance
with this Article I, through such reasonable procedures as Acquiror may adopt,
(i) the shares of Acquiror Common Stock issuable pursuant to Section 1.5(a) in
exchange for shares of Target Common Stock outstanding immediately prior to
the Effective Time, and (ii) cash in an amount sufficient to permit payment of
cash in lieu of fractional shares pursuant to Section 1.5(b) (together, the
"Merger Consideration").
(c) Exchange Procedures. Promptly after the Effective Time,
Acquiror shall cause the Exchange Agent to mail to each Target stockholder of
record (the "Former Target Stockholders") that holds a certificate or
certificates (the "Certificate(s)") which represented outstanding shares of
Target Common Stock immediately prior to the Effective Time, which shares were
converted into the right to receive shares of Acquiror Common Stock pursuant
to Section 1.5(a), together with (x) a letter of transmittal, in a form to be
mutually agreed upon by Target and Acquiror prior to Closing (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon receipt of the Certificates by the Exchange
Agent, and shall be in such form and have such other provisions as Acquiror
may reasonably specify) and (y) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Acquiror Common Stock (and cash in lieu of fractional shares). Upon
surrender of a Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, the holder of such Certificate shall
be entitled to receive in exchange therefor a certificate representing the
number of whole shares of Acquiror Common Stock and a check representing the
amount of cash in lieu of fractional shares and unpaid dividends and
distributions, if any, to which such holder is entitled, after giving effect
to any required tax withholdings and the Certificate so surrendered shall
forthwith be canceled. If payment is to be made to a person other than the
registered holder of the Certificate surrendered, it shall be a condition of
such payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the Certificate
surrendered or establish to the reasonable satisfaction of Acquiror or the
Exchange Agent that such tax has been paid or is not applicable. Until so
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Target Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of
dividends, to evidence the ownership of the number of full shares of Acquiror
Common Stock into which such shares of Target Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of fractional
shares pursuant to Section 1.5(b).
(d) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to Acquiror Common Stock with a record
date after the Effective Date shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Acquiror Common Stock represented
thereby until the holder of record of such Certificate surrenders such
Certificate. Subject to applicable Law (as defined in Section 2.19),
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Acquiror Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of any such dividends or other distributions with a record date
after the Effective Date which would have been previously payable (but for the
provisions of this Section 1.6(d)) with respect to such shares of Acquiror
Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Acquiror Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered is
properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Acquiror or the Exchange
Agent any transfer or other Taxes (as defined in Section 2.13) required by
reason of the issuance of a certificate for shares of Acquiror Common Stock in
any name other than that of the registered holder of the Certificate
surrendered, or established to the satisfaction of Acquiror or the Exchange
Agent that such Tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.6, no party hereto or any of their respective agents shall be liable
to any person for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar Law (as defined in
Section 2.19).
(g) Dissenting Shares. The provisions of this Section 1.6 also
shall apply to Dissenting Shares that lose their status as such, except that
the obligations of Acquiror under this Section 1.6 shall commence on the date
of loss of such status and the holder of such shares shall be entitled to
receive in exchange for such shares the number of shares of Acquiror Common
Stock to which such holder is entitled pursuant to Section 1.5.
1.7. No Further Ownership Rights in Target Common Stock
All shares of Acquiror Common Stock issued upon the surrender for
exchange of shares of Target Common Stock in accordance with the terms hereof
shall be deemed (together with cash in lieu of fractional shares) to have been
issued in full satisfaction of all rights pertaining to such shares of Target
Common Stock, and there shall be no further registration of transfers on the
records of the Acquiror of shares of Target Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Acquiror for any reason, they shall be
canceled and exchanged as provided in this Article I.
1.8. Lost, Stolen or Destroyed Certificates
In the event any Certificate shall have been lost, stolen or destroyed,
the Acquiror shall issue or cause to be issued in exchange for such lost,
stolen or destroyed Certificate, upon the making of an affidavit of that fact
by the holder thereof in form reasonably satisfactory to Acquiror, such shares
of Acquiror Common Stock as may be required pursuant to Section 1.5; provided,
however, that Acquiror may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Acquiror, the Surviving
Corporation or any of their agents with respect to the Certificate alleged to
have been lost, stolen or destroyed.
1.9. Tax and Accounting Consequences
The parties hereto intend that the Merger shall constitute a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code. No party shall take any action which would cause the Merger to fail
to so qualify as a reorganization within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(E) of the Code.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity means any material event,
change, condition or effect related to the financial condition, properties,
assets (including intangible assets), liabilities, business, prospects,
operations or results of operations of such entity and its subsidiaries, taken
as a whole. In this Agreement, any reference to a "Material Adverse Effect"
with respect to any entity means any event, change or effect that is
materially adverse to the financial condition, properties, assets (including
intangible assets), Liabilities (as defined in Section 2.5), business,
prospects, operations or results of operations of such entity and its
subsidiaries, taken as a whole; provided, that for purposes of Section 6.1 and
Section 7.1, changes or effects which are primarily and directly caused by the
execution and delivery of this Agreement or the announcement of the
transactions contemplated hereby shall not constitute a Material Adverse
Effect (it being understood that in any controversy concerning the
applicability of this proviso, the party claiming the benefit of this proviso
shall have the burden of proof with respect to the elements of such proviso).
In this Agreement, the words "aware," "knowledge" or similar words,
expressions or phrases with respect to a party means such party's actual
knowledge after reasonable inquiry of the executive officers (as defined in
SEC Rule 405 of the Securities Act of 1933, as amended (the "Securities
Act")), and directors of such party and its subsidiaries.
Target represents and warrants to Acquiror and Merger Sub that the
statements contained in this Article II are true and correct, including
disclosures set forth in the disclosure schedule delivered by Target to
Acquiror immediately prior to the execution and delivery of this Agreement
(the "Target Disclosure Schedule"), but in each case subject to the exceptions
set forth in the Target Disclosure Schedule. The Target Disclosure Schedule
shall be arranged in paragraphs corresponding to the numbered Sections
contained in this Article II, and the disclosure in any Section shall qualify
only the corresponding Section in this Article II. Any reference in this
Article II to an agreement being "enforceable" shall be deemed to be qualified
to the extent such enforceability is subject to (i) laws of general
application relating to bankruptcy, insolvency, moratorium, fraudulent
conveyance and the relief of debtors and (ii) the availability of specific
performance, injunctive relief and other equitable remedies. In this Article
II, "Target" will be deemed to include Target and its predecessors, unless the
context otherwise requires.
2.1. Organization, Standing and Power
(a) Section 2.1 of the Target Disclosure Schedule sets forth a list
of each subsidiary of Target and each joint venture and partnership in which
Target has an interest (collectively, the "Target Subsidiaries"). Except for
the interests of Target set forth in Section 2.1 of the Target Disclosure
Schedule, neither Target nor any of the Target Subsidiaries owns, directly or
indirectly, 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. Except as set forth in Section 2.1 of the Target Disclosure Schedule,
Target and each of the Target Subsidiaries are corporations duly organized,
validly existing and in good standing under the Laws of their respective
jurisdiction of incorporation and has full corporate power and authority to
conduct its business as presently conducted. Target has full corporate power
and authority to enter into this Agreement and to carry out the transactions
contemplated by this Agreement.
(b) Except as set forth in Section 2.1 of the Target Disclosure
Schedule, Target and each of the Target Subsidiaries is duly qualified and in
good standing to do business as a foreign corporation in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except where the failure to be
so qualified would not have a Material Adverse Effect on Target. Target and
each of the Target Subsidiaries have furnished to Acquiror true and complete
copies of their respective certificates or articles of incorporation and
bylaws, each as amended to date and currently in effect, and said copies are
true, correct and complete, and contain all amendments through the date
hereof. Target and each of the Target Subsidiaries are not in violation of
any of the provisions of its certificate or articles of incorporation or
bylaws. Target is the sole owner of all outstanding shares of capital stock
of each of the Target Subsidiaries and all such shares are duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any character
relating to the issued or unissued capital stock or other securities of the
Target Subsidiaries, or otherwise obligating Target or any of the Target
Subsidiaries to issue, transfer, sell, purchase, redeem or otherwise acquire
any such securities of any of the Target Subsidiaries.
(c) All of the outstanding shares of capital stock of each of the
Target Subsidiaries are owned by Target free and clear of any "Liens" (as
defined below) other than (i) mechanic's, materialmen's and similar Liens,
Liens for taxes not yet due and payable and (ii) those Liens shown on Section
2.1(c) of the Target Disclosure Schedule ((i) and (ii) collectively, the
"Permitted Liens of Target"). "Liens" means any mortgage, lien (including
mechanics, warehousemen, laborers and landlords liens), claim, pledge, charge,
security interest, preemptive right, right of first refusal, option, judgment,
title defect or encumbrance of any kind.
2.2. Capital Structure
The authorized capital stock of Target consists of 100,000,000 shares of
Target Common Stock, of which 22,667,444 shares are issued and outstanding as
of June 30, 2001, and 2,000,000 shares of preferred stock, par value $0.01
per share ("Target Preferred Stock"), of which no shares are issued and
outstanding. All of the issued and outstanding shares of Target Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Section 2.2 of the Target Disclosure
Schedule, (a) no subscription, warrant, option, agreement, convertible
security or other right (contingent or otherwise) to purchase or acquire from
Target any shares of capital stock of Target is authorized, reserved or
outstanding (and Section 2.2 of the Target Disclosure Schedule sets forth the
names of the holders of each outstanding Target Stock Option, the expiration
date and exercise price therefor, the number of shares underlying such option
and the related vesting schedule and circumstances under which such vesting,
if any, may be accelerated), (b) Target has no obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible security or
other such right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of Target, (c) Target
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof and (d) no other
shares of capital stock of the Target are issued and outstanding. True and
complete copies of all agreements and instruments relating to or issued under
Target's 2001 Stock Option Plan, Target's 1999 Stock Option Plan and Target's
1996 Stock Option Plan (collectively, the "Target Stock Option Plans") have
been made available to Acquiror, and such agreements and instruments have not
been amended, modified or supplemented, and there are no agreements to amend,
modify or supplement such agreements or instruments from the forms made
available to Acquiror. Target has reserved 6,907,000 shares of Target Common
Stock for issuance pursuant to the Target Stock Option Plans and as of the
date hereof, the maximum number of shares reserved to be issued under the
Target's 2001 Stock Option Plan are 500,000, the maximum number of shares
reserved to be issued under the Target's 1999 Stock Option Plan are 3,000,000
and the maximum number of options to be issued under the Target's 1996 Stock
Option Plan are 3,407,900. All of the issued and outstanding securities of
Target, including those offered pursuant to the Target Stock Option Plans,
have been offered, issued and sold by Target in compliance in all material
respects with applicable federal and state securities Laws.
2.3. Authority; No Conflict
The execution, delivery and performance by Target of this Agreement and
the consummation by Target of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action on the part of Target,
subject only to the approval of this Agreement and the Merger by the
affirmative vote of the holders of a majority of the outstanding shares of
Target Common Stock. This Agreement has been duly executed and delivered by
Target and constitutes a valid and binding obligation of Target enforceable
against Target in accordance with its terms.
Except as set forth in Section 2.3 of the Target Disclosure Schedule, the
execution, delivery and performance of this Agreement by Target does not, and
the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or breach of or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under, or require a waiver or consent under (x) the certificate of
incorporation or bylaws (each as amended to date) of Target or any of the
Target Subsidiaries, (y) any mortgage, indenture, material lease, material
contract or other material agreement or material instrument binding upon the
Target or any of the Target Subsidiaries, or (z) any permit, concession,
franchise, material license, judgment, order, decree, Law, judgment, or
injunction or other similar authorization held by Target or any of the Target
Subsidiaries or applicable to Target, any of the Target Subsidiaries or any of
their properties or assets.
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Entity is required to be obtained by Target or any of the Target Subsidiaries
in connection with the execution and delivery of this Agreement or the
consummation of the other transactions contemplated by this Agreement, except
for (i) the filing of the Certificate of Merger, (ii) compliance with any
applicable requirements of the Securities Act and the rules and regulations
promulgated thereunder, (iii) such other filings or registrations with, or
authorizations, consents or approvals of, Governmental Entities, the failure
of which to make or obtain would not reasonably be expected to have a Material
Adverse Effect on Target, and (iv) the Required Telecommunications Consents
(as defined in Section 2.34).
The terms of the Target Stock Option Plans permit the assumption thereof
by Acquiror or the substitution of options to purchase Acquiror Common Stock
as provided in this Agreement, without the consent or approval of the holders
of such options, the Target stockholders or otherwise and without any
acceleration of the exercise schedule or vesting provisions in effect for such
options; provided, that the Board of Target or a committee appointed by the
Board of Target to administer the Target Stock Option Plans is entitled to
accelerate the exercise schedule; and provided, further, that except as set
forth in Sections 2.2 and 2.3 of the Target Disclosure Schedule, no exercise
schedule will be accelerated as of or after the date of this Agreement and
none has been accelerated prior to the date hereof as a result of the
transactions contemplated hereby.
2.4. SEC Documents; Financial Statements
As of their respective filing dates and, except to the extent that
subsequent Exchange Act (as defined below) statements, reports and filings
supplement earlier Exchange Act statements, reports and filings, as of the
date hereof, each statement, report, filing, registration statement (with the
prospectus in the form filed pursuant to Rule 424(b) of the Securities Act),
definitive proxy statement and other document filed with the Securities and
Exchange Commission (the "SEC") by Target since December 31, 2000
(collectively, the "Target SEC Documents") complied and do comply in all
material respects with the applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the Securities Act, and none
of the Target SEC Documents contained any untrue statement of a material fact
or omitted a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they were
made, not misleading, except to the extent supplemented by a subsequently
filed Target SEC Document.
Target has filed with the SEC an Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 (the "Target 10-K") and a Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2001 (the "Target 10-Q").
The financial statements included in the Target 10-K and the Target 10-Q
(collectively, the "Target Financial Statements") are complete and correct in
all material respects as of their respective dates, and were prepared in
accordance with generally accepted accounting principles ("GAAP") (except that
the unaudited financial statements do not have complete notes thereto and are
subject to normal year-end adjustments) applied on a consistent basis
throughout the periods indicated and with each other (except as may be
indicated in the notes thereto). The Target Financial Statements fairly
present in all material respects the consolidated financial condition and
operating results of Target as of the dates, and for the periods, indicated
therein, subject in the case of the Target Financial Statements set forth in
the Target 10-Q to normal year-end audit adjustments. Target maintains and
will continue to maintain through the Closing Date a standard system of
accounting established and administered in accordance with GAAP. The Target
Financial Statements complied as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto as of their respective dates. The
balance sheet of Target, dated as of December 31, 2000, included in the Target
10-K is herein referred to as the "Target Balance Sheet."
2.5. Absence of Certain Changes
Since December_31, 2000 (the "Target Balance Sheet Date"), and except in
connection with this Agreement and the transactions contemplated hereby,
Target and the Target Subsidiaries have conducted their business in the
ordinary course consistent with past practice and, except as set forth in
Section 2.5 of the Target Disclosure Schedule, there has not occurred: (a)
any change, event, condition or development (whether or not covered by
insurance) that has resulted in, or would reasonably be expected to result in,
a Material Adverse Effect on Target, provided, however, that losses shown on
Target's financial statements for the quarter ended March 31, 2001 shall not
be deemed to be a condition or development that would result in a Material
Adverse Effect on Target; (b) any acquisition, sale or transfer of any
material asset of Target or any of the Target Subsidiaries other than in the
ordinary course of business and consistent with past practice (including
transfers or licenses of Target Intellectual Property (as defined in Section
2.11) on a non-exclusive basis to Target's or any of the Target Subsidiaries'
customers, distributors or other licensees in the ordinary course of business
and consistent with past practice); (c) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Target or any of the Target Subsidiaries or any revaluation by
Target or any of the Target Subsidiaries of any of its assets; (d) any
declaration, setting aside, or payment of a dividend or other distribution
with respect to the capital stock of Target; (e) any reduction greater than
$10,000 in the amounts of coverage provided by existing casualty and liability
insurance policies with respect to the business or properties of Target or any
of the Target Subsidiaries; (f) any repurchase, redemption or other
acquisition by Target of any outstanding shares of capital stock or other
securities of or other ownership interests in the Target; (g) any Material
Contract (as defined in Section 2.23) entered into by Target or any of the
Target Subsidiaries; (h) any amendment or termination of, or default under,
any contract or agreement to which Target or any of the Target Subsidiaries is
a party or by which it is bound which would reasonably be expected to have a
Material Adverse Effect on Target; (i) any amendment or change to the
certificate or articles of incorporation or bylaws of Target or any of the
Target Subsidiaries or any proposal by the Board of Directors or stockholders
of Target or any of the Target Subsidiaries relating thereto; (j) any grant of
any severance or termination pay to any director, officer, or employee of
Target or any of the Target Subsidiaries in an amount in excess of $10,000
individually or $50,000 in the aggregate; (k) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of Target or any of
the Target Subsidiaries in an amount in excess of $10,000 individually or
$50,000 in the aggregate; (l) increase in or modification of the compensation
or benefits payable by Target or any of the Target Subsidiaries under any of
its existing severance or termination pay policies or employment agreements to
any of its consultants, independent contractors, directors or employees; (m)
entering into any contracts, agreement, extension of credit, business
arrangement or other relationship of any kind with any of the following
persons: (i) any officer or director of Target or any of the Target
Subsidiaries; (ii) any stockholder owning five percent or more of the
outstanding Common Stock of Target; or (iii) any "affiliate" or "associate"
(as such terms are defined in SEC Rule 405 of the Securities Act (an
"Affiliate(s)") of the foregoing persons or any business in which any of the
foregoing persons is an officer, director, employee, or five percent or
greater equity owner; or (l) any obligation, agreement or ongoing negotiation
by Target or any of the Target Subsidiaries to do any of the things described
in the preceding clauses (a) through (m) (other than negotiations with
Acquiror and its representatives regarding the transactions contemplated by
this Agreement).
Target and each of the Target Subsidiaries have no Liabilities (as
defined below) of any nature (matured or unmatured, fixed or contingent) other
than (a) those set forth or adequately reserved for in the Target Balance
Sheet, (b) those not required to be set forth or adequately reserved for in
the Target Balance Sheet under GAAP, (c) those incurred in the ordinary course
of business since December 31, 2000 which are consistent with past practice,
and (d) those incurred in connection with the execution of this Agreement.
"Liabilities" or "Liability" mean any direct or indirect indebtedness,
liability, assessment, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, xxxxxx or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, actual or potential,
contingent or otherwise (including any liability under any guaranties, letter
of credit, performance credits or with respect to insurance loss accruals).
2.6. Disclosure Documents
None of the written information supplied or to be supplied by Target for
inclusion in and that is actually included in (i) the Joint Proxy
Statement/Prospectus (as defined in Section 5.5), and (ii) the Registration
Statement (as defined in Section 5.5), will, in the case of the Joint Proxy
Statement/Prospectus, at the time of mailing of the Joint Proxy
Statement/Prospectus and at the time of the meeting of the shareholders of
Target to be held in connection with the Merger and at the Effective Time,
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 are made,
not misleading or will, in the case of the Registration Statement, at the time
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
2.7. Accounts Receivable
The accounts receivable reflected in the Target Financial Statements
arose in the ordinary course of business and consistent with past practice,
are not subject, except as set forth in Section 2.7 of the Target Disclosure
Schedule, to disputes, defense offsets, returns, set off, counter claim,
allowances or credits of any kind, and are collectible (subject to the reserve
for bad debt set forth in the Target Financial Statements), and represent bona
fide claims against debtors for sales or services performed or other charges,
and all goods sold or services performed that gave rise to such accounts were
delivered or performed in all material respects in accordance with applicable
orders, contracts or customer requirements. Allowances for doubtful accounts
and returns have been prepared in accordance with the past practices of
Target. The accounts receivable of Target arising after the Target Balance
Sheet Date and prior to the date hereof arose in the ordinary course of
business and consistent with past practice. Target has no knowledge of any
facts or circumstances generally (other than general economic conditions)
which would result in any material increase in the uncollectibility of such
receivables as a class in excess of the reserves therefor set forth on the
Target Financial Statements. Except as set forth in Section 2.7 of the Target
Disclosure Schedule with respect to the resolution of disputes, no agreement
for deduction or discount has been made with respect to any accounts
receivable.
2.8. Litigation
Except as set forth in Section 2.8 of the Target Disclosure Schedule,
there is no private or Governmental Entity (as defined in Section 2.19)
action, suit, proceeding, claim, arbitration or investigation pending, or to
the knowledge of Target, threatened before any agency, court or tribunal,
foreign or domestic, against Target, any of the Target Subsidiaries or any of
their respective properties or assets or any of their officers or directors
(in their capacities as such). There is no judgment, decree, writ,
injunction, or order against Target, any of the Target Subsidiaries or any of
its directors or officers (in their capacities as such), that would prevent,
enjoin, or materially alter or delay any of the transactions contemplated by
this Agreement. Further, there are no actions, suits, proceedings, claims,
arbitrations or investigations initiated by Target or any of the Target
Subsidiaries, or that Target or any of the Target Subsidiaries currently
intends to initiate that would prevent, enjoin or materially alter or delay
any of the transactions contemplated by this Agreement. Neither Target nor
any of the Target Subsidiaries is aware of any fact or condition now existing
that could reasonably be expected to give rise to any material action, suit,
proceeding, claim, arbitration or investigation against Target or any of the
Target Subsidiaries or any of its properties or any of its officers or
directors (in their capacities as such).
2.9. Restrictions on Business Activities
There is no agreement, judgment, injunction, order or decree binding upon
Target or any of the Target Subsidiaries which would reasonably be expected to
have the effect of prohibiting or changing in a materially adverse way any
current business practice of Target or any of the Target Subsidiaries, any
acquisition of property by Target or any of the Target Subsidiaries or the
conduct of business by Target as currently conducted by Target or any of the
Target Subsidiaries.
2.10. Title to Property; Absence of Liens
Target and each of the Target Subsidiaries has good and valid title to
all material items of its properties, interests in properties and assets, real
and personal, reflected in the Target Balance Sheet or acquired after the
Target Balance Sheet Date (except properties, interests in properties and
assets sold or otherwise disposed of since the Target Balance Sheet Date in
the ordinary course of business and consistent with past practice), or with
respect to leased properties and assets, valid leasehold interests in such
properties or assets, free and clear of all Liens of any kind or character,
except for (a) Permitted Liens of Target, (b) such imperfections of title and
Liens as do not and will not materially detract from or interfere with the use
of the properties subject thereto or affected thereby, or otherwise materially
impair business operations involving such properties, and (c) those Liens
shown on Section 2.10 of the Target Disclosure Schedule. The real properties,
structures, buildings, and the material items of tangible personal property
owned, operated, or leased by Target or any of the Target Subsidiaries are (x)
maintained properly and in good working condition, except for depletion,
depreciation, and ordinary wear and tear, (y) suitable for the uses for which
they are currently used, and (z) free from any known structural defects.
There are no Laws, conditions of record, or other impediments which materially
interfere with the intended uses by Target or any of the Target Subsidiaries
of the real property or material items of tangible personal property owned or
leased by them. Neither Target nor any of the Target Subsidiaries has
received any notice of any violation of any applicable Law, building code,
zoning ordinance, or other similar Law. All properties used in the operations
of Target and each of the Target Subsidiaries are reflected in the Target
Balance Sheet to the extent GAAP requires the same to be reflected. Section
2.10 of the Target Disclosure Schedule identifies each parcel of real property
owned or leased by Target and all of the Target Subsidiaries and sets forth
with respect to each lease: (i) the term thereof; (ii) the renewal options, if
any, applicable thereto; (iii) the number of square feet of leased space; and
(iv) the rents and other financial terms applicable thereto.
2.11. Intellectual Property
(a) To the knowledge of Target, each of the Target and the Target
Subsidiaries owns or is licensed for, and in any event possesses sufficient
and legally enforceable rights with respect to, all Intellectual Property (as
hereinafter defined) that is used, exercised or exploited ("Used") in, or that
is necessary for, its business as currently conducted ("Target Intellectual
Property," which term will also include all other Intellectual Property now
owned by or licensed to Target or any of the Target Subsidiaries). To the
knowledge of Target, the Target Intellectual Property, excluding any
Intellectual Property of a third party, does not conflict with, infringe or
misappropriate any rights or property of others ("Infringement"). Such
ownership, licenses and rights are exclusive except (i) with respect to
Inventions (as hereinafter defined) in the public domain that the loss of
which would not have a Material Adverse Effect on the business as currently,
or proposed by Target or the applicable Target Subsidiary in the short term to
be, conducted by Target or any of the Target Subsidiaries, or (ii) with
respect to standard, generally commercially available, "off-the-shelf" third
party products that form a part of any current product, or service offering of
Target or any of the Target Subsidiaries. Except as set forth in Section
2.11(a) of the Target Disclosure Schedule, neither Target nor any of the
Target Subsidiaries is party to any agreement or arrangement, or has granted
any Lien, or any other right of any character entitling any entity other than
the Acquiror to any interests in the Target Intellectual Property.
(b) To the knowledge of Target, no Target Intellectual Property was
conceived or developed directly or indirectly with or pursuant to funding with
or from a Governmental Entity or in connection with a Governmental Entity
contract. In this Agreement, "Intellectual Property" means: (A) inventions
(whether or not patentable); trade names, trademarks, service marks, logos and
other designations (collectively, "Marks"); works of authorship; mask works;
data; technology, know-how, trade secrets, ideas and information; designs;
formulas; algorithms; processes; schematics; computer software (in source code
and/or object code form); and all other intellectual and industrial property
of any sort (collectively, "Inventions") and (B) patent rights; Xxxx rights;
copyrights; mask work rights; sui generis database rights; trade secret
rights; rights to domain names; moral rights; and all other intellectual and
industrial property rights of any sort throughout the world, and all
applications, registrations, issuances and the like with respect thereto of
Target and each of the Target Subsidiaries (collectively, "IP Rights"). To
the knowledge of Target, all copyrightable matter within Target Intellectual
Property, excluding any Intellectual Property of a third party, has been
created by persons who were employees or contractors, covered by
work-made-for-hire agreements, of Target or the Target Subsidiaries at the
time of creation and no third party has or will have "moral rights" or rights
to terminate any assignment or license with respect thereto. To the knowledge
of Target, neither Target nor any of the Target Subsidiaries has received any
written or verbal communication alleging that Target or any of the Target
Subsidiaries have been or may be (whether in its current or proposed business
or otherwise) engaged in, liable for or contributing to any Infringement
(collectively, an "Infringement Communication"), nor are Target or any of the
Target Subsidiaries aware of any fact or condition now existing that could
reasonably be expected to give rise to any material Infringement Communication
in the future.
(c) To the extent included in Target Intellectual Property (but
excluding Intellectual Property licensed to Target or the Target Subsidiaries,
Section 2.11 of the Target Disclosure Schedule lists (by name, number,
jurisdiction, owner and, where applicable, the name and address of each
inventor and a brief description of) all patents and patent applications; all
registered and unregistered Marks; and all registered and, if material,
unregistered copyrights and mask works; and all other issuances,
registrations, applications and the like with respect to those or any other IP
Rights. To the knowledge of Target and except as set forth in Section 2.11 of
the Target Disclosure Schedule, no cancellation, termination, expiration or
abandonment of any of the foregoing (except natural expiration or termination
at the end of the full possible term, including extensions and renewals, and
failures to obtain allowable subject matter for patent applications from
applicable registration authorities) is anticipated by Target or any of the
Target Subsidiaries. Further, to the knowledge of Target, the validity of the
IP Rights has not been otherwise challenged by any third party. To the
knowledge of Target, the IP rights have also not been and are not the subject
of any pending or threatened litigation or claim of infringement or
invalidation.
(d) To the knowledge of Target, there is no unauthorized Use,
disclosure, infringement or misappropriation of any Target Intellectual
Property (excluding any such activity with respect to third party Intellectual
Property by any third party, including, without limitation, any employee or
former employee of Target or any of the Target Subsidiaries.
(e) Each of Target and the Target Subsidiaries has taken necessary
and appropriate steps to protect and preserve the confidentiality of all
Target Intellectual Property owned by Target that is not otherwise disclosed
in published patents or patent applications or registered copyrights
(collectively, the "Target Confidential Information"). All use by and
disclosure to employees or third parties of Target Confidential Information
has been on a need-to-know basis and pursuant to the terms of valid and
binding written confidentiality and nonuse/restricted-use agreements. Neither
Target nor any of the Target Subsidiaries has disclosed or delivered to any
third party, or permitted the disclosure or delivery to any escrow holder or
other person any part of any Target Intellectual Property and/or any computer
program source code or object code owned by Target.
(f) To the knowledge of Target, each of Target and the Target
Subsidiaries has not in the past and each is not currently using, exercising
or exploiting (i) any Inventions of any of its past or present employees or
contractors (or people currently intended to be hired) made prior to or
outside the scope of their employment by Target or the Target Subsidiaries or
(ii) any confidential information or trade secrets of any former employer of
any such person.
2.12. Environmental Matters
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal,
state, local or foreign Laws, ordinances, codes, regulations, rules and orders
relating to the protection of the environment, or that classify, regulate,
call for the remediation of, require reporting with respect to, or list or
define air, water, groundwater, solid waste, hazardous or toxic substances,
materials, wastes, pollutants or contaminants, or which relate to the health
and safety of employees, workers or other persons, including the public, as in
effect on the date hereof.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious or
radioactive substance or material, including without limitation, such
substances, materials, wastes, pollutants defined in or regulated under any
Environmental and Safety Laws.
(iii) "Property" shall mean all real property leased or owned
by Target either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements
on the Property leased or owned by Target, either currently or in the past.
(b) Except as set forth in Section 2.12 of the Target Disclosure
Schedule, and in each case to the knowledge of Target, Target and each of the
Target Subsidiaries represents and warrants as follows: (i) neither Target nor
any of the Target Subsidiaries has received any written notice of any
noncompliance of the Facilities or of its past or present operations with
Environmental and Safety Laws; (ii) no notices, administrative actions or
suits are pending or threatened against Target or any of the Target
Subsidiaries relating to a violation of any Environmental and Safety Laws;
(iii) neither Target nor any of the Target Subsidiaries has received written
notice that it is a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), or analogous state statute or any similar foreign law or
regulation requiring assessment or clean up, arising out of events occurring
prior to the Closing Date; (iv) there have not been, during the term of
occupancy of the Target or any of the Target Subsidiaries, as the case may
be, any Hazardous Materials on, under or migrating to or from the Facilities
or Property, for which Target or any of the Target Subsidiaries could
reasonably be expected to have a Liability; (v) there have not been during the
term of occupancy of Target or the Target Subsidiaries, as the case may be,
any underground tanks at, on or under the Property including without
limitation, treatment or storage tanks, sumps, or water, gas or oil xxxxx;
(vi) there are no polychlorinated biphenyls ("PCBs") deposited, stored,
disposed of or located on the Property or Facilities or any equipment on the
Property containing PCBs at levels in excess of 50 parts per million; (vii)
there is no formaldehyde on the Property or in the Facilities, nor any
insulating material containing urea formaldehyde in the Facilities; (viii) the
Facilities and the activities of Target and each of the Target Subsidiaries
therein have at all times been in material compliance with all Environmental
and Safety Laws; (ix) each of Target and the Target Subsidiaries has all the
permits and licenses required to be issued under the applicable Environmental
and Safety Laws for its respective operations and each is in full compliance
with the terms and conditions of those permits; and (x) all written
environmental assessments known to Target or any of the Target Subsidiaries of
its current or past Properties or Facilities are listed in Schedule 2.12 of
the Target Disclosure Schedule and have been provided to Acquiror.
2.13. Taxes
Target, each of the Target Subsidiaries and any consolidated, combined,
unitary or aggregate group (and all members thereof) for Tax purposes of which
Target or any of the Target Subsidiaries is or has been a member, have
properly completed and timely filed with all appropriate Governmental
Entities, all material Tax Returns, estimates and reports required to be filed
by any of them, except as set forth in Section 2.13 of the Target Disclosure
Schedule, and have paid all Taxes shown thereon to be due or which otherwise
are or have become due and payable prior to the date hereof. The accruals and
reserves reflected in the Target Financial Statements specified as being with
respect to Taxes have been determined in accordance with GAAP and are
sufficient in amount to cover all Taxes that are or may become payable or that
have accrued as a result of the operations of each of Target and the Target
Subsidiaries for all periods prior to the date of such Target Financial
Statements and that have not been paid as of the date hereof. Neither Target
nor any of the Target Subsidiaries has any Liability for unpaid Taxes accruing
after the Target Balance Sheet Date except for Taxes incurred in the ordinary
course of business subsequent to the Target Balance Sheet Date. Except as set
forth in Section 2.13 of the Target Disclosure Schedule, there is: (a) no
claim for Taxes that is a Lien against the property of Target or any of the
Target Subsidiaries being asserted against Target or any of the Target
Subsidiaries other than Liens for Taxes not yet due and payable; (b) no audit
of any Tax Return of Target or any of the Target Subsidiaries being conducted
or, to the knowledge of Target, threatened or contemplated by a Tax Authority;
and (c) no extension of any statute of limitations on the assessment of any
Taxes granted by Target or any of the Target Subsidiaries and currently in
effect. Neither Target nor any of the Target Subsidiaries has been or will be
required to include any material adjustment in Taxable income for any Tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax Laws as a result of
transactions, events or accounting methods employed prior to the Merger.
Target and the Target Subsidiaries have not filed, nor will they file, any
consent to have the provisions of paragraph 341(f)(2) of the Code (or
comparable provisions of any state Tax Laws) apply to Target or any of the
Target Subsidiaries. Neither Target nor any of the Target Subsidiaries is a
party to any Tax sharing or Tax allocation agreement, nor does Target or any
of the Target Subsidiaries have any Liability or potential Liability to
another party under any such agreement. Neither Target nor any of the Target
Subsidiaries has filed any disclosures under Section 6662 or comparable
provisions of state, local or foreign Law to prevent the imposition of
penalties with respect to any Tax reporting position taken on any Tax Return.
Neither Target nor any of the Target Subsidiaries has ever been a member of a
consolidated, combined, unitary or aggregate group of which Target or any of
the Target Subsidiaries was not the ultimate parent corporation. None of the
Target Subsidiaries has an obligation for Taxes pursuant to Treas. Reg.
Section 1.1502-6 (or any state or local equivalent law) for any period prior
to the date hereof, for any consolidated group other than one in which Target
is the common parent. Neither Target nor any of the Target Subsidiaries has
in its possession receipts for any Taxes paid to foreign Tax Authorities.
Neither Target nor any of the Target Subsidiaries is or has ever been a
"United States real property holding corporation" within the meaning of
Section 897 of the Code. For purposes of this Agreement, the following terms
have the following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (x) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom
duty or other like assessment or charge, together with any interest or any
penalty, addition to tax or additional amount imposed by any Governmental
Entity (a "Tax Authority") responsible for the imposition of any such tax
(domestic or foreign), (y) any liability for the payment of any amounts of the
type described in (x) as a result of being a member of an affiliated,
consolidated, combined, unitary or aggregate group for any Taxable period, and
(z) any liability for the payment of any amounts of the type described in (x)
or (y) as a result of being a transferee of or successor to any person or as a
result of any express or implied obligation to indemnify any other person. As
used herein, "Tax Return" shall mean any return, statement, report or form
(including, without limitation, estimated tax returns and reports, withholding
tax returns and reports and information returns and reports) required to be
filed with respect to Taxes.
2.14. Employee Benefit Plans
(a) Section 2.14 of the Target Disclosure Schedule lists, with
respect to Target and each of the Target Subsidiaries, and also with respect
to any trade or business (whether or not incorporated) which is treated as a
single employer with Target or with any of the Target Subsidiaries (an "ERISA
Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of the Code,
(i) all material employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (ii)
each loan to any non-officer employee, officer or director, (iii) any stock
option, stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code Section 125) or dependent care
benefit (Code Section 129), life insurance or accident insurance plans,
programs or arrangements, (iv) all bonus, pension, profit sharing, savings,
deferred compensation or incentive plans, programs or arrangements, (v) other
fringe or employee benefit plans, programs or arrangements that apply to
senior management of Target or any of the Target Subsidiaries and that do not
generally apply to all employees, and (vi) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of Target or any of the Target Subsidiaries of
greater than $10,000 remain for the benefit of, or relating to, any present or
former employee, consultant or director of Target or any of the Target
Subsidiaries (together, the "Target Employee Plans").
(b) Target has furnished to Acquiror a copy of each of the Target
Employee Plans and related plan documents and amendments thereto (including
trust documents, insurance policies or contracts, employee booklets, summary
plan descriptions and other authorizing documents, and any material employee
communications required by Law relating thereto) and has, with respect to each
Target Employee Plan which is subject to ERISA reporting requirements,
provided copies of the Form 5500 reports filed for the last three plan years.
Any Target Employee Plan intended to be qualified under Section 401(a) of the
Code has either obtained from the Internal Revenue Service a favorable
determination letter as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has applied (or has time remaining in which to apply) to the
Internal Revenue Service for such a determination letter prior to the
expiration of the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for such
determination letter and to make any amendments necessary to obtain a
favorable determination or has been established under a standardized prototype
plan for which an Internal Revenue Service opinion letter has been obtained by
the plan sponsor and is valid as to the adopting employer. Target has also
furnished Acquiror with the most recent Internal Revenue Service determination
or opinion letter issued with respect to each such Target Employee Plan, and
nothing has occurred since the issuance of each such letter which could
reasonably be expected to cause the loss of the tax-qualified status of any
Target Employee Plan subject to Code Section 401(a). Target has also
furnished Acquiror with all registration statements and prospectuses prepared
in connection with each Target Employee Plan.
(c)(i) None of the Target Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person other than as
required under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"); (ii) there has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Target Employee Plan, which would reasonably be expected to have, in the
aggregate, a Material Adverse Effect on Target; (iii) each Target Employee
Plan has been administered in all material respects in accordance with its
terms and in compliance with the requirements prescribed by any and all
statutes, rules and regulations (including ERISA and the Code), and each ERISA
Affiliate has performed in all material respects all obligations required to
be performed by it under, is not in any material respect in default under or
violation of, and has no knowledge of any material default or violation by any
other party to, any of the Target Employee Plans; (iv) neither Target, nor any
of the Target Subsidiaries, nor any ERISA Affiliate is subject to any material
Liability or penalty under Sections 4976 through 4980 of the Code or Title I
of ERISA with respect to any of the Target Employee Plans; (v) all material
contributions required to be made by Target, the Target Subsidiaries and any
ERISA Affiliate to any Target Employee Plan have been made on or before their
due dates and a reasonable amount has been accrued for contributions to each
Target Employee Plan for the current plan years; (vi) with respect to each
Target Employee Plan, no "reportable event" within the meaning of Section 4043
of ERISA (excluding any such event for which the 30-day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; (vii) no Target
Employee Plan is covered by, and none of Target, the Target Subsidiaries and
any ERISA Affiliate has incurred or expects to incur any material Liability
under Title IV of ERISA or Section 412 of the Code; and (viii) each Target
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without any material Liability to
Target or Acquiror (other than ordinary administrative expenses typically
incurred in a termination event). For purposes of subparts (iv), (v), (vii)
and (viii) of this Section 2.14(c), "material" shall be deemed to include any
amount in excess of $10,000 in the aggregate. With respect to each Target
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within
the meaning of Section 3(1) of ERISA, each of Target and the Target
Subsidiaries has prepared in good faith and timely filed all requisite
Governmental Entity reports (which were true and correct as of the date filed)
and has properly and timely filed and distributed or posted all notices and
reports to employees required to be filed, distributed or posted with respect
to each such Target Employee Plan. No suit, administrative proceeding, action
or other litigation has been brought, or to the knowledge of Target or any of
the Target Subsidiaries, is threatened against or with respect to any such
Target Employee Plan, including any audit or inquiry by the Internal Revenue
Service or United States Department of Labor. Except as set forth in Section
2.14 of the Target Disclosure Schedule, no payment or benefit which will or
may be made by Target or any of the Target Subsidiaries to any person will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
(d) With respect to each Target Employee Plan, Target and the
Target Subsidiaries have complied in all material respects with (i) the
applicable health care continuation and notice provisions of COBRA and the
regulations (including proposed regulations) thereunder, (ii) the applicable
requirements of the Family Medical and Leave Act of 1993 and the regulations
(including proposed regulations) thereunder, and (iii) the applicable
requirements of the Health Insurance Portability and Accountability Act of
1996 and the regulations (including proposed regulations) thereunder.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target, the Target Subsidiaries or
any ERISA Affiliate relating to, or change in participation or coverage under,
any Target Employee Plan which would materially increase the expense of
maintaining such plan above the level of expense incurred with respect to that
plan for the most recent fiscal year included in Target's Financial
Statements.
(f) Neither Target nor any of the Target Subsidiaries currently
maintains, sponsors, participates in or contributes to, nor have they ever
maintained, established, sponsored, participated in, or contributed to, any
pension plan (within the meaning of Section 3(2) of ERISA) which is subject to
Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of
the Code.
(g) None of Target, the Target Subsidiaries or any ERISA Affiliate
is a party to, or has made any contribution to or otherwise incurred any
obligation under, any "multiemployer plan" as defined in Section 3(37) of
ERISA.
(h) Except as set forth in Section 2.14 of the Target Disclosure
Schedule, there is no agreement, contract or arrangement to which Target or
any of the Target Subsidiaries is a party that may result in the payment of
any amount that would not be deductible by reason of Section 280G or Section
404 of the Code.
2.15. Employees and Consultants
Target has made available to Acquiror a true and complete list of all
persons employed as of June 30, 2001 by Target and each of the Target
Subsidiaries, all persons who perform work for Target and each of the Target
Subsidiaries pursuant to any agreement(s) between Target or any of the Target
Subsidiaries and any employment agency, and all independent contractors,
agents or distributors of Target and Target Subsidiaries as of June 30, 2001
and the position and total compensation, including base salary or wages,
bonus, commissions, and all other available forms of compensation, payable to
each such individual. Section 2.15 of the Target Disclosure Schedule lists
all current written or oral employment agreements, independent contractor
agreements, consulting agreements or termination or severance agreements to
which Target and each of the Target Subsidiaries is a party. A true and
correct copy of any employment, independent contractor or consulting agreement
which varies in any material terms from the standard form agreement of Target
or any of the Target Subsidiaries has been provided to Acquiror. This
Agreement and the transactions contemplated hereby do not and will not violate
any such employment, independent contractor or consulting agreements. Target
and each of the Target Subsidiaries is in compliance in all material respects
with all currently applicable Laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not
engaged in any unfair labor practice. All individuals performing services for
Target or any of the Target Subsidiaries as independent contractors (defined
as any individual who provides services for Target or any of the Target
Subsidiaries who is not treated as a common-law employee for purposes of
statutory withholdings and/or employment benefits) at any time are properly
classified as independent contractors pursuant to all applicable regulations,
including but not limited to I.R.S. Revenue Ruling 87-41, 1987-1 C.B. 296.
Except as would not have a Material Adverse Effect on the business of Target,
Target and each of the Target Subsidiaries has withheld and remitted to the
appropriate Governmental Entity (as defined in Section 2.19) all amounts
required by Law or by agreement to be withheld from the wages, salaries, and
other payments to employees; and is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing. Neither
Target nor any of the Target Subsidiaries is liable for any payment to any
trust or other fund or to any Governmental Entity, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending claims against Target or any of the Target Subsidiaries under any
workers' compensation plan or policy or for long term disability. There are
no claims or controversies pending or, to the knowledge of Target, threatened,
between Target or any of the Target Subsidiaries and any of their employees,
which claims or controversies have or could reasonably be expected to result
in a Material Adverse Effect on Target. Neither Target nor any of the Target
Subsidiaries is a party to any collective bargaining agreement or other labor
union contract nor does Target or any of the Target Subsidiaries know of any
activities or proceedings of any labor union to organize any such employees.
To the knowledge of Target, no employees or independent contractors of Target
or any of the Target Subsidiaries are in violation of any term of any
employment contract, patent disclosure agreement, enforceable noncompetition
agreement, or any enforceable restrictive covenant to a former employer or
customer relating to the right of any such employee or independent contractor
to be employed by Target or any of the Target Subsidiaries because of the
nature of the business conducted or presently proposed to be conducted by
Target or any of the Target Subsidiaries or to the use of trade secrets or
proprietary information of others. Except as set forth in Section 2.15 of the
Target Disclosure Schedule, as of the date hereof, no employees or independent
contractors of Target or any of the Target Subsidiaries have given notice to
Target or to any of the Target Subsidiaries, nor is Target or any of the
Target Subsidiaries otherwise aware, that any such employee intends to
terminate his or her employment with Target or any of the Target Subsidiaries.
2.16. Certain Agreements Affected by the Merger
Except as set forth in Section 2.16 of the Target Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (a) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director, employee or
consultant of Target or any of the Target Subsidiaries, (b) increase any
benefits otherwise payable by Target, or any of the Target Subsidiaries or (c)
result in the acceleration of the time of payment or vesting of any such
benefits.
2.17. Related-Party Transactions
Except as set forth in Section 2.17 of the Target Disclosure Schedule,
neither the Target nor any of the Target Subsidiaries has any contract,
agreement, extension of credit, business arrangement, or other business
relationship of any kind with any of the following persons: (a) any officer
or director of Target or any of the Target Subsidiaries; (b) any stockholder
owning five percent (5%) or more of the outstanding Common Stock of Target or
any of the Target Subsidiaries; or (c) any Affiliate of the foregoing persons
or any business in which any of the foregoing persons is an officer, director,
employee, or five percent (5%) or greater equity owner.
2.18. Insurance
Section 2.18 of the Target Disclosure Schedule lists all policies of
insurance and bonds, and the respective amounts of such policies and bonds,
carried by Target or any of the Target Subsidiaries. There is no claim
pending under any of such policies or bonds or as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and Target and the Target Subsidiaries are otherwise in compliance with the
terms of such policies and bonds. Neither Target nor any of the Target
Subsidiaries has any knowledge of any threatened termination of, nor has it
received notice of, any material premium increase with respect to, any of such
policies.
2.19. Compliance with Laws; Governmental Authorizations
Target and each of the Target Subsidiaries, during the applicable statute
of limitations period, have complied with, and each is in compliance in all
material respects with, all laws, statutes, ordinances, rules, regulations
(collectively, "Law(s)"), judgments, orders, decrees, directives, consent
agreements, memoranda of understanding, permits, concessions, grants,
franchises, licenses, and other Governmental Entity authorizations or
approvals applicable to it, or any of its properties. Except for
Telecommunications Licenses, which are specifically covered in Section 2.34,
all licenses, authorizations, consents and approvals (collectively,
"Governmental Authorizations") of any court, administrative agency or
commission or other federal, state, county, municipal, domestic or foreign
governmental or regulatory authority or instrumentality ("Governmental Entity"
or "Governmental Entities") and all other permits, concessions, grants and
franchises necessary for the conduct of the business of Target and the Target
Subsidiaries as now conducted have been duly obtained and are in full force
and effect, and there are no proceedings pending or, to the knowledge of
Target, threatened which may result in the revocation, cancellation,
suspension, or materially adverse modification of any thereof, except to the
extent the foregoing would not have a Material Adverse Effect on Target.
2.20. Brokers' and Finders' Fees
Except as expressly provided in the letter agreement, dated April 17,
2001, between Target and Xxxxxx, Xxxxx Xxxxx, Inc., a true and complete copy
of which has been furnished to the Acquiror, no agent, broker, investment
banker, person or firm acting directly or indirectly on behalf of Target or
any of the Target Subsidiaries under the authority of Target or any of the
Target Subsidiaries is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly from any of the
parties hereto in connection with any of the transactions contemplated hereby.
2.21. Board Approval; Stockholder Approval
The Board of Directors of Target has (a) approved this Agreement and the
Merger, (b) determined that in its opinion the Merger is advisable and in the
best interests of the stockholders of Target and (c) recommended that the
stockholders of Target approve this Agreement and the Merger. The affirmative
vote of the holders of a majority of the outstanding shares of Target Common
Stock outstanding on the record date set for the determination of stockholders
entitled to vote on or consent to the Merger is the only vote or consent of
the holders of Target capital stock necessary to approve this Agreement and
the Merger.
2.22. Customers and Suppliers
Except as set forth in Section 2.22 of the Target Disclosure Schedule,
there is no customer or group of customers that accounted for more than 5% of
Target's gross revenues during the 12-month period ending June 30, 2001,
which, as of the date hereof, has canceled or otherwise terminated, or made
any threat to Target or any of the Target Subsidiaries to cancel or otherwise
terminate its relationship with Target or with any of the Target Subsidiaries
for any reason, including without limitation the consummation of the
transactions contemplated hereby, or has at any time on or after the Target
Balance Sheet Date decreased its usage of the services or products of Target
or any of the Target Subsidiaries to a degree that it would have a Material
Adverse Effect on Target, and all amounts owing from such customers, if not in
dispute, are being or have been paid in accordance with their respective
terms. Except as set forth in Section 2.22 of the Target Disclosure Schedule,
there is no supplier or group of suppliers of Target or any of the Target
Subsidiaries that accounted for more than 5% of Target's cost of sales during
the 12-month period ending June 30, 2001, which, as of the date hereof, has
canceled or otherwise terminated, or made any threat to Target or any of the
Target Subsidiaries to cancel or otherwise terminate its relationship with
Target or with any of the Target Subsidiaries for any reason, including
without limitation the consummation of the transactions contemplated hereby,
or has at any time on or after the Target Balance Sheet Date and prior to the
date hereof decreased their services or supplies to Target or any of the
Target Subsidiaries to a degree that it would have a Material Adverse Effect
on Target. Target and each of the Target Subsidiaries have not knowingly
breached, so as to provide a benefit to Target that was not intended by the
parties, any agreement with, or engaged in any fraudulent conduct with respect
to, any customer or supplier of Target or any of the Target Subsidiaries.
Section 2.22 of the Target Disclosure Schedule lists all customer and supplier
disputes in excess of $5,000 which are pending as of the date hereof.
2.23. Material Contracts
Section 2.23 of the Target Disclosure Schedule sets forth a list of all
material agreements or commitments ("Material Contracts") of any nature to
which Target or any of the Target Subsidiaries is a party or by which it is
bound, including without limitation:
(a) each agreement which requires future expenditures by Target, or
any of the Target Subsidiaries, in excess of $10,000 or which might result in
payments to Target or to any of the Target Subsidiaries in excess of $10,000;
(b) all employment and consulting agreements;
(c) employee benefit, Target Employee Plans, severance, bonus,
pension, profit sharing, stock option, stock purchase and similar plans and
arrangements;
(d) any agreement between Target or any of the Target Subsidiaries
and a third party relating to sharing, licensing, or developing any product,
technology or Target Intellectual Property;
(e) any agreement for the borrowing of money or line of credit,
trust indenture, mortgage, promissory note, loan agreement or any currency
exchange, commodities or other hedging arrangement or any leasing transaction
of the type required to be capitalized in accordance with GAAP;
(f) agreements with respect to Liens and Permitted Liens of Target;
(g) any agreement which provides for the restraint or restriction
of the right to compete with any person in the conduct of its business by
Target or any of the Target Subsidiaries;
(h) any confidentiality, secrecy or non-disclosure agreement with
any party other than those that are on Target's standard form previously
provided to Acquiror or those that by their terms prohibit disclosure of such
agreement to Acquiror;
(i) any distributor, reseller, agency or manufacturer's
representative contract other than those that are terminable at will by Target
without Target incurring, directly or indirectly, any premium, penalty, fees,
taxes or other obligation relating to such termination;
(j) any material contract to support or maintain the products or
services of Target or any of the Target Subsidiaries, that expires or may be
renewed at the option of any person other than Target or any of the Target
Subsidiaries;
(k) any agreement of guarantee, support, assumption or endorsement
of, or any similar commitment with respect to, the Liabilities (as defined in
Section 2.5) of any other person or entity;
(l) any agreement pursuant to which Target or any of the Target
Subsidiaries has deposited or is required to deposit with an escrow holder or
any other person or entity, all or part of the source code (or any algorithm
or documentation contained in or relating to any source code) of any Target
Intellectual Property;
(m) any agreement to indemnify, hold harmless or defend any other
person with respect to any assertion of personal injury, damage to property or
Intellectual Property infringement, misappropriation or violation (or any
agreement warranting the absence of personal injury, damage to property or
Intellectual Property infringement, misappropriation or violation) other than
indemnification provisions contained in a customary purchase orders/purchase
agreements/product licenses arising in the ordinary course of business and
consistent with past practice;
(n) any joint venture agreement or shareholders' agreement;
(o) any agreement with any labor union;
(p) any lease of real property ;
(q) any lease of personal property with an annual lease or other
payment in excess of $5,000; and
(r) any agreement with any person with whom Target does not deal at
arm's length.
2.24. No Breach of Material Contracts
Except to the extent they have previously expired in accordance with
their terms, Target and each of the Target Subsidiaries have performed in all
material respects all of the obligations required to be performed by each of
them, and neither Target nor any of the Target Subsidiaries is in default
under any Material Contract. Each of the Material Contracts is (as to Target
and each of the Target Subsidiaries) in full force and effect, unamended, and
there exists no default or event of default or event, occurrence, condition or
act, with respect to Target or any of the Target Subsidiaries or, to the
knowledge of Target, with respect to the other contracting party, or otherwise
that, with or without the giving of notice, the lapse of time or the happening
of any other event or condition, would reasonably be expected to (a)_become a
default or event of default under any Material Contract, (b) result in the
loss or expiration of any material right or option by Target or by any of the
Target Subsidiaries (or the gain thereof by any third party) under any
Material Contract or (c) result in the release, disclosure or delivery to any
third party of any source materials. True, correct and complete copies of all
Material Contracts have been delivered to the Acquiror.
2.25. Minute Books
The minute books of Target and each of the Target Subsidiaries have been
made available to Acquiror and contain true and complete copies of all
resolutions adopted and all other material actions taken at all meetings of
directors and stockholders and all actions by written consent since the time
of incorporation of Target and each of the Target Subsidiaries through the
date of this Agreement, except resolutions or discussions relating to this
Agreement and the transactions contemplated hereby.
2.26. Complete Copies of Materials
Copies of each document which has been delivered by Target to Acquiror or
its counsel or other representatives in connection with their legal and
accounting due diligence review of Target and the Target Subsidiaries are true
and complete.
2.27. Year 2000 Compatibility
Target and each of the Target Subsidiaries are Year 2000 compliant. None
of the products and services sold, licensed, rendered, or otherwise provided
by Target and the Target Subsidiaries in the conduct of their business has
malfunctioned, ceased to function, generated materially incorrect data or
produced materially incorrect results or caused any of the above with respect
to the property or business of third parties using such products or services
when processing, providing or receiving (a) date-related data from, into and
between the Twentieth (20th) and Twenty-First (21st) centuries or (b)
date-related data in connection with any valid date in the Twentieth (20th)
and Twenty-First (21st) centuries, including leap year calculations. Target
and the Target Subsidiaries have not made any other representations or
warranties specifically relating to the ability of any product or service
sold, licensed, rendered or otherwise provided by Target or the Target
Subsidiaries in the conduct of their business to operate without malfunction,
to operate without ceasing to function, to generate correct data or to produce
correct results when processing, providing or receiving (x) date-related data
from, into and between the Twentieth (20th) and Twenty-First (21st) centuries
and (y) date-related data in connection with any valid date in the Twentieth
(20th) and Twenty-First (21st) centuries.
2.28. Reorganization
Neither Target, the Target Subsidiaries, nor to Target's knowledge, any
of their Affiliates have taken or agreed to take any action, nor does Target
or any of the Target Subsidiaries have knowledge of any fact or circumstance,
that would prevent the Merger from qualifying as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
2.29. Export Control Laws and Foreign Corrupt Practices Act
Target and the Target Subsidiaries have conducted their export
transactions in accordance with applicable provisions of United States export
control Laws, including but not limited to the Export Administration Act and
implementing Export Administration Regulations. Without limiting the
foregoing, to the knowledge of Target and except as would not have a Material
Adverse effect on Target:
(a) Each of Target and the Target Subsidiaries has obtained all
export licenses and other approvals required for exports of its respective
products, software and technologies from the United States;
(b) Each of Target and the Target Subsidiaries is in compliance
with the terms of all applicable export licenses or other approvals;
(c) There are no pending or threatened claims against Target or any
of the Target Subsidiaries with respect to such export licenses or other
approvals;
(d) There are no actions, conditions or circumstances pertaining to
the export transactions of Target and the Target Subsidiaries that may give
rise to any future claims; and
(e) No consents or approvals for the transfer of export licenses to
Acquiror are required, or such consents and approvals can be obtained
expeditiously without material cost.
There are no situations with respect to Target or any of the Target
Subsidiaries which involved or involves (w) the use of any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
related to political activity; (x) the making of any direct or indirect
unlawful payments from corporate funds or the establishment or maintenance of
any unlawful or unrecorded funds for such purposes; (y) the receipt of any
illegal discounts or rebates or any other violation of the antitrust laws; or
(z) any investigation by the SEC or any other Governmental Authority with
respect to any of the foregoing.
2.30. Registration Rights
There is no agreement of Target or any of the Target Subsidiaries to
register under the Securities Act any shares of Target Common Stock or any
shares of Target capital stock issuable upon the exercise of Target Stock
Options or other securities, except pursuant to agreements that will be
terminated or that will terminate pursuant to their terms at or prior to the
Closing.
2.31. Functionality of Technology
All materials and technology (including but not limited to all hardware,
software, platforms, cables, and switches) required by each of Target and the
Target Subsidiaries to perform its respective business as currently conducted
or as proposed to be conducted are free from material defects and can
reasonably be expected to continue to perform substantially in the manner in
which they currently perform. Each of Target and the Target Subsidiaries has
all permissions, rights, authority and documentation necessary to perform its
respective business as currently conducted or as proposed to be conducted.
2.32. Beneficial Ownership of Acquiror Stock
As of the date hereof, Target does not beneficially own any shares of
Acquiror Common Stock or have any option, warrant, or right of any kind to
acquire the beneficial ownership of any Acquiror Common Stock, except pursuant
to the terms of this Agreement.
2.33. Immigration Matters
Target has complied with all Laws relating to verification of employment
eligibility of its employees, including but not limited to, Verification of
the Employment eligibility of Target's employees in accordance with Section
274A of the Immigration and Nationality Act, as amended (8 U.S.C. Section 1324
(a)).
2.34. Telecommunications Licenses
(a) Section 2.34(a) of the Target Disclosure Schedule contains a
complete list of all Federal Communications Commission ("FCC") licenses and
authorizations held by Target (the "FCC Licenses"), and all state certificates
of public convenience and necessity and other operating authorizations issued
by state public utility commissions or similar state governmental agencies
(collectively, "PUCs") (such PUC certificates and authorizations collectively,
the "State Authorizations," and together with the FCC Licenses, the
"Telecommunications Licenses"). The FCC Licenses are all of the licenses,
authorizations, consents and approvals necessary from the FCC for each of
Target and the Target Subsidiaries to conduct its respective business as
currently conducted. Except as set forth in Section 2.34(a) of the Target
Disclosure Schedule, the State Authorizations are all of the licenses,
authorizations, consents and approvals necessary from the PUCs for each of
Target and the Target Subsidiaries to conduct its respective business as
currently conducted.
(b) Except as described in Section 2.34(b) of the Target
Disclosure Schedule (the "Required Telecommunications Consents"), there is no
consent, approval, authorization, or order of, or filing with, the FCC or any
other federal, state or local governmental or regulatory authority, or
consent, approval, authorization, agreement or verification of or by any of
the customers of Target or any of the Target Subsidiaries, that is required to
consummate the transactions contemplated by this Agreement and for the
Surviving Corporation to continue operating the business of Target or the
business of the Target Subsidiaries in the same manner as Target and the
Target Subsidiaries currently conduct business;
(c) Each of Target and the Target Subsidiaries currently are in
material compliance with the Communications Act of 1934, as amended, and the
FCC rules, regulations and policies, including the FCC rules, regulations and
policies concerning "slamming," as well as all applicable state regulation of
local exchange and inter-exchange telecommunications services, including the
rules concerning "slamming", and substantially performed all obligations
imposed upon Target and the Target Subsidiaries thereunder; and
(d) The Telecommunications Licenses are valid and in full force and
effect, unimpaired by any material condition, and are under the exclusive
control of Target or any of the Target Subsidiaries, and each of Target and
the Target Subsidiaries has timely and completely performed its respective
obligations required thereunder. No application, complaint, action,
investigation or proceeding is pending or, to the knowledge of Target,
threatened, that would reasonably be expected to result in loss, revocation,
cancellation or suspension of the Telecommunications Licenses or other
administrative or judicial sanction with respect to Target and the Target
Subsidiaries.
2.35. Representations Complete
None of the representations or warranties made by Target herein or in any
Schedule hereto, including the Target Disclosure Schedule, or in any
certificate furnished by Target pursuant to this Agreement, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact, or omits or will omit
at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub represent and warrant to Target that the
statements contained in this Article III are true and correct, including
disclosures as set forth in the disclosure schedule delivered by Acquiror to
Target immediately prior to the execution and delivery of this Agreement (the
"Acquiror Disclosure Schedule"), but in each case subject to the exceptions
set forth in the Acquiror Disclosure Schedule. The Acquiror Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered
Sections contained in this Article III, and the disclosure in any Section
shall qualify only the corresponding Section in this Article III. Any
reference in this Article III to an agreement being "enforceable" shall be
deemed to be qualified to the extent such enforceability is subject to (i)
Laws of general application relating to bankruptcy, insolvency, moratorium,
fraudulent conveyance and the relief of debtors and (ii) the availability of
specific performance, injunctive relief and other equitable remedies. In this
Article III, "Acquiror" will be deemed to include Acquiror and its
predecessors, unless the context otherwise requires.
3.1. Organization, Standing and Power
(a) Section 3.1 of the Acquiror Disclosure Schedule sets forth a
list of each subsidiary of Acquiror and each joint venture and partnership in
which Acquiror has an interest (collectively, the "Acquiror Subsidiaries").
Except for the interests of Acquiror Subsidiaries set forth in Section 3.1 of
the Acquiror Disclosure Schedule, neither Acquiror nor any of the Acquiror
Subsidiaries owns, directly or indirectly, 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. Acquiror and each of the Acquiror
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of its respective jurisdiction of incorporation and
each has full corporate power and authority to conduct its respective business
as presently conducted. Acquiror has full corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated by
this Agreement.
(b) Acquiror and each of the Acquiror Subsidiaries is duly
qualified and in good standing to do business as a foreign corporation in each
jurisdiction where the character of the property owned or leased by each of
them respectively or the nature of their activities makes such qualification
necessary, except where the failure to be so qualified would not have a
Material Adverse Effect on Acquiror. Acquiror and each of the Acquiror
Subsidiaries have furnished to Target true and complete copies of their
respective certificates of incorporation and bylaws, each as amended to date
and currently in effect, and said copies are true, correct and complete, and
contain all amendments through the date hereof. Acquiror and each of the
Acquiror Subsidiaries are not in violation of any of the provisions of their
respective certificates of incorporation or bylaws. Acquiror is the sole
owner of all outstanding shares of capital stock of each of the Acquiror
Subsidiaries and all such shares are duly authorized, validly issued, fully
paid and nonassessable. There are no outstanding subscriptions, options,
warrants, puts, calls, rights, exchangeable or convertible securities or other
commitments or agreements of any character relating to the issued or unissued
capital stock or other securities of the Acquiror Subsidiaries, or otherwise
obligating Acquiror or any of the Acquiror Subsidiaries to issue, transfer,
sell, purchase, redeem or otherwise acquire any such securities of the
Acquiror Subsidiaries. Merger Sub was formed solely to effectuate the Merger
and owns no assets and is subject to no liabilities, other than under this
Agreement or as required to complete the Merger.
(c) All of the outstanding shares of capital stock of each of the
Acquiror Subsidiaries are owned by Acquiror free and clear of any Liens other
than (i) mechanic's, materialmen's and similar Liens, Liens for Taxes not yet
due and payable and (ii) those Liens shown on Section 3.1(c) of the Acquiror
Disclosure Schedule ((i) and (ii) collectively, the "Permitted Liens of
Acquiror").
3.2. Capital Structure
The authorized capital stock of Acquiror consists of 50,000,000 shares of
Acquiror Common Stock, par value $0.05 per share, of which 11,409,405 shares
are issued and outstanding as of June 30, 2001. The authorized capital stock
of Merger Sub consists of 1,000 shares of common stock, par value $0.01 per
share ("Merger Sub Common Stock"), of which 100 shares are issued and
outstanding and held by Acquiror. All of the outstanding shares of Acquiror
Common Stock and Merger Sub Common Stock have been duly authorized and validly
issued, and are fully paid and are nonassessable. All of the outstanding
shares of Merger Sub are free of any Liens other than Permitted Liens of
Acquiror and those Liens shown on Section 3.2 of the Acquiror Disclosure
Schedule. The shares of Acquiror Common Stock to be issued pursuant to the
Merger will be, upon issuance, duly authorized, validly issued, fully paid and
nonassessable, and no stockholder of Acquiror will have any preemptive right
of subscription or purchase in respect thereof.
3.3. Authority; No Conflict
The execution, delivery and performance by Acquiror and Merger Sub of
this Agreement, and the consummation by Acquiror and Merger Sub of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Acquiror and Merger Sub, subject only to the
approval of this Agreement and the Merger by the affirmative vote of the
holders of a majority of the outstanding shares of Acquiror Common Stock.
This Agreement has been duly executed and delivered by Acquiror and Merger Sub
and constitutes a valid and binding obligation of Acquiror and Merger Sub
enforceable against Acquiror and Merger Sub in accordance with its terms.
The execution, delivery and performance of this Agreement by Acquiror and
Merger Sub do not, and the consummation of the transactions contemplated
hereby will not, (i) conflict with, or result in any violation of, or breach
of or default under (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under, or require a waiver or consent under
(x) the certificate of incorporation or bylaws (each as amended to date) of
Acquiror or any of the Acquiror Subsidiaries, (y) any mortgage, indenture,
material lease, material contract or other material agreement or material
instrument binding upon the Acquiror, Merger Sub or any of the Acquiror
Subsidiaries, or (z) any permit, concession, franchise, material license,
judgment, order, decree, Law, judgment, or injunction, or other similar
authorization held by Acquiror, Merger Sub or any of the Acquiror Subsidiaries
or applicable to Acquiror, Merger Sub or any of the Acquiror Subsidiaries or
any of their properties or assets.
No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any Governmental
Entity is required to be obtained by Acquiror or Merger Sub or any of the
Acquiror Subsidiaries in connection with the execution and delivery of this
Agreement or the consummation of the other transactions contemplated by this
Agreement, except for (i) the filing of the Certificate of Merger, (ii)
compliance with any applicable requirements of the Securities Act and the
rules and regulations promulgated thereunder, (iii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable state securities or "blue sky" Laws and the
securities Laws of any foreign country, (iv) such other filings or
registrations with, or authorizations, consents or approvals of, Governmental
Entities, the failure of which to make or obtain would not reasonably be
expected to have a Material Adverse Effect on Acquiror, and (v) any required
telecommunication consents of Acquiror.
3.4. SEC Documents; Financial Statements
As of their respective filing dates and, except to the extent that
subsequent Exchange Act statements, reports and filings supplement earlier
Exchange Act statements, reports and filings, as of the date hereof, each
statement, report, filing, registration statement (with the prospectus in the
form filed pursuant to Rule 424(b) of the Securities Act), definitive proxy
statement and other document filed with the SEC by Acquiror since January 31,
2001 (collectively, the "Acquiror SEC Documents") complied and do comply in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, and none of the Acquiror SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading, except to the extent supplemented by a subsequently filed Acquiror
SEC Document.
Acquiror has filed with the SEC an Annual Report on Form 10-K for the
fiscal year ended January 31, 2001 (the "Acquiror 10-K") and a Quarterly
Report on Form 10-Q for the fiscal quarter ended April 30, 2001 (the "Acquiror
Form 10-Q"). The financial statements included in the Acquiror 10-K and the
Acquiror 10-Q (collectively, the "Acquiror Financial Statements") are complete
and correct in all material respects as of their respective dates, and were
prepared in accordance with GAAP (except that the unaudited financial
statements do not have complete notes thereto and are subject to normal
year-end audit adjustments) applied on a consistent basis throughout the
periods indicated and with each other (except as may be indicated in the notes
thereto). The Acquiror Financial Statements fairly present in all material
respects the consolidated financial condition and operating results of
Acquiror as of the dates, and for the periods, indicated therein, subject in
the case of the Acquiror Financial Statements set forth in the Acquiror Form
10-Q to normal year-end audit adjustments. Acquiror maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with GAAP. The Acquiror Financial Statements
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates. The balance sheet of Acquiror,
dated as of January 31, 2001, included in the Acquiror 10-K is herein
referred to as the "Acquiror Balance Sheet
3.5. Absence of Certain Changes
Since January 31, 2001 (the "Acquiror Balance Sheet Date"), and except in
connection with this Agreement and the transactions contemplated hereby,
Acquiror, Merger Sub and the Acquiror Subsidiaries have conducted their
business in the ordinary course consistent with past practice and there has
not occurred: (a)_any change, event, condition or development (whether or not
covered by insurance) that has resulted in, or would result in, a Material
Adverse Effect on Acquiror, provided, however, that losses shown on Acquiror's
financial statements for the quarter ended April 30, 2001 shall not be deemed
to be a condition or development that would result in a Material Adverse
Effect on Acquiror; (b) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by
Acquiror, Merger Sub or any of the Acquiror Subsidiaries or any revaluation by
Acquiror, Merger Sub or any of the Acquiror Subsidiaries of any of its assets;
(c) any amendment or termination of, or default under, any contract or
agreement to which Acquiror, Merger Sub or any of the Acquiror Subsidiaries is
a party or by which it is bound which would reasonably be expected to have a
Material Adverse Effect on Acquiror; (d) any amendment or change to the
certificate or articles of incorporation or bylaws of Acquiror, Merger Sub or
any of the Acquiror Subsidiaries or any proposal by the Board of Directors or
stockholders of Acquiror, Merger Sub or any of the Acquiror Subsidiaries
relating thereto; or (e) any negotiation or agreement by Acquiror, Merger Sub
or any of the Acquiror Subsidiaries to do any of the things described in the
preceding clauses (a) through (d) (other than negotiations with Target and its
representatives regarding the transactions contemplated by this Agreement).
3.6. Disclosure Documents
None of the written information supplied or to be supplied by Acquiror or
Merger Sub for inclusion in and that is actually included in (i) the Joint
Proxy Statement/Prospectus, and (ii) the Registration Statement, will, in the
case of the Joint Proxy Statement/Prospectus, at the time of mailing of the
Joint Proxy Statement/Prospectus and at the time of the meeting of the
shareholders to be held in connection with the Merger and at the Effective
Time, 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 are made,
not misleading or will, in the case of the Registration Statement, at the time
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
3.7. Litigation
Except as set forth in Section 3.7 of the Acquiror Disclosure Schedule,
there is no private or Governmental Entity action, suit, proceeding, claim,
arbitration or investigation pending or, to the knowledge of Acquiror or
Merger Sub, threatened before any agency, court or tribunal, foreign or
domestic, against Acquiror, Merger Sub, any of the Acquiror Subsidiaries or
any of their respective properties or any of their officers or directors (in
their capacities as such) which, if adversely decided, would have a Material
Adverse Effect on Acquiror. There is no judgment, decree, writ, injunction,
or order against Acquiror, Merger Sub, any of the Acquiror Subsidiaries or any
of their respective directors or officers (in their capacities as such), that
would prevent, enjoin or materially alter or delay any of the transactions
contemplated by this Agreement. Further, there are no actions, suits,
proceedings, claims, arbitrations or investigations initiated by Acquiror,
Merger Sub or any of the Acquiror Subsidiaries, or that Acquiror, Merger Sub
or any of the Acquiror Subsidiaries presently intends to initiate that would
prevent, enjoin or materially alter or delay any of the transactions
contemplated by this Agreement.
3.8. Restrictions on Business Activities
There is no agreement, judgment, injunction, order or decree binding upon
Acquiror, Merger Sub or any of the Acquiror Subsidiaries which would
reasonably be expected to have the effect of prohibiting or impairing any
current business practice of Acquiror, Merger Sub or any of the Acquiror
Subsidiaries, any acquisition of property by Acquiror, Merger Sub or any of
the Acquiror Subsidiaries or the conduct of business by Acquiror as currently
conducted by Acquiror, Merger Sub or any of the Acquiror Subsidiaries.
3.9. Employee Benefit Plans
(a) Section 3.9 of the Acquiror Disclosure Schedule lists, with
respect to Acquiror, Merger Sub and each of the Acquiror Subsidiaries, and
also with respect to any trade or business (whether or not incorporated) which
is treated as a single employer with Acquiror, Merger Sub or with any of the
Acquiror Subsidiaries (an "Acquiror ERISA Affiliate") within the meaning of
Section 414(b), (c), (m) or (o) of the Code, (i) all material employee benefit
plans (as defined in Section 3(3) of ERISA), (ii) any material stock option,
stock purchase, phantom stock, stock appreciation right, supplemental
retirement, severance, sabbatical, medical, dental, vision care, disability,
employee relocation, cafeteria benefit (Code Section 125) or dependent care
benefit (Code Section 129), life insurance or accident insurance plans,
programs or arrangements, (iii) all material bonus, pension, profit sharing,
savings, deferred compensation or incentive plans, programs or arrangements,
(iv) other material fringe or employee benefit plans, programs or arrangements
that apply to senior management of Acquiror, Merger Sub or any of the Acquiror
Subsidiaries and that do not generally apply to all employees, and (v) any
current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of
Acquiror, Merger Sub or any of the Acquiror Subsidiaries of greater than
$10,000 remain for the benefit of, or relating to, any present or former
employee, consultant or director of Acquiror, Merger Sub or any of the
Acquiror Subsidiaries (together, the "Acquiror Employee Plans").
(b) Acquiror has furnished to Target a copy of each of the Acquiror
Employee Plans and related plan documents and amendments thereto (including
trust documents, insurance policies or contracts, employee booklets, summary
plan descriptions and other authorizing documents, and any material employee
communications required by Law relating thereto) and has, with respect to each
Acquiror Employee Plan which is subject to ERISA reporting requirements,
provided copies of the Form 5500 reports filed for the last three plan years.
Any Acquiror Employee Plan intended to be qualified under Section 401(a) of
the Code has either obtained from the Internal Revenue Service a favorable
determination letter as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has applied (or has time remaining in which to apply) to the
Internal Revenue Service for such a determination letter prior to the
expiration of the requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for such
determination letter and to make any amendments necessary to obtain a
favorable determination, or has been established under a standardized
prototype plan for which an Internal Revenue Service opinion letter has been
obtained by the plan sponsor and is valid as the adopting employer. Acquiror
has also furnished Target with the most recent Internal Revenue Service
determination or opinion letter issued with respect to each such Acquiror
Employee Plan, and nothing has occurred since the issuance of each such letter
which could reasonably be expected to cause the loss of the tax-qualified
status of any Acquiror Employee Plan subject to Code Section 401(a). Acquiror
has also furnished Target with all registration statements and prospectuses
prepared in connection with each Acquiror Employee Plan.
(c)(i) None of the Acquiror Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person other than as
required under the COBRA; (ii) there has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code,
with respect to any Acquiror Employee Plan, which would reasonably be expected
to have, in the aggregate, a Material Adverse Effect on Acquiror; (iii) each
Acquiror Employee Plan has been administered in all material respects in
accordance with its terms and in compliance with the requirements prescribed
by any and all statutes, rules and regulations (including ERISA and the Code),
and each Acquiror ERISA Affiliate has performed in all material respects all
obligations required to be performed by it under, is not in any material
respect in default under or violation of, and has no knowledge of any material
default or violation by any other party to, any of the Acquiror Employee
Plans; (iv) neither Acquiror, Merger Sub, any of the Acquiror Subsidiaries,
nor any Acquiror ERISA Affiliate is subject to any material Liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
respect to any of the Acquiror Employee Plans; (v) all material contributions
required to be made by Acquiror, Merger Sub, the Acquiror Subsidiaries and any
Acquiror ERISA Affiliate to any Acquiror Employee Plan have been made on or
before their due dates and a reasonable amount has been accrued for
contributions to each Acquiror Employee Plan subject to Title IV of ERISA for
the current plan years; (vi) with respect to each Acquiror Employee Plan
subject to Title IV of ERISA, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the 30-day notice
requirement has been waived under the regulations to Section 4043 of ERISA)
nor any event described in Section 4062, 4063 or 4041 of ERISA has occurred;
(vii) no Acquiror Employee Plan is covered by, and none of Acquiror, Merger
Sub, the Acquiror Subsidiaries and any Acquiror ERISA Affiliate has incurred
or expects to incur any material Liability under Title IV of ERISA or Section
412 of the Code; and (viii) each Acquiror Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance
with its terms, without any material Liability to Acquiror (other than
ordinary administrative expenses typically incurred in a termination event).
For purposes of subparts (iv), (v), (vii) and (viii) of this Section 3.9(c),
"material" shall be deemed to include any amount in excess of $10,000 in the
aggregate. With respect to each Acquiror Employee Plan subject to ERISA as
either an employee pension plan within the meaning of Section 3(2) of ERISA or
an employee welfare benefit plan within the meaning of Section 3(1) of ERISA,
Acquiror, Merger Sub and the Acquiror Subsidiaries have prepared in good faith
and timely filed all requisite Governmental Entity reports (which were true
and correct as of the date filed) and have properly and timely filed and
distributed or posted all notices and reports to employees required to be
filed, distributed or posted with respect to each such Acquiror Employee Plan.
Except for routine claims for benefits, no suit, administrative proceeding,
claim, action or other litigation has been brought, or to the knowledge of
Acquiror, Merger Sub or any of the Acquiror Subsidiaries is threatened against
or with respect to any such Acquiror Employee Plan, including any audit or
inquiry by the Internal Revenue Service or United States Department of Labor.
(d) With respect to each Acquiror Employee Plan, Acquiror, Merger
Sub and the Acquiror Subsidiaries have complied in all material respects with
(i) the applicable health care continuation and notice provisions of COBRA and
the regulations (including proposed regulations) thereunder, (ii) the
applicable requirements of the Family Medical and Leave Act of 1993 and the
regulations (including proposed regulations) thereunder, and (iii) the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996 and the regulations (including proposed regulations) thereunder.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Acquiror, Merger Sub, the Acquiror
Subsidiaries or any Acquiror ERISA Affiliate relating to, or change in
participation or coverage under, any Acquiror Employee Plan which would
materially increase the expense of maintaining such plan above the level of
expense incurred with respect to that plan for the most recent fiscal year
included in Acquiror's Financial Statements.
(f) Neither Acquiror, nor Merger Sub, nor the Acquiror
Subsidiaries currently maintains, sponsors, participates in or contributes to
any pension plan (within the meaning of Section 3(2) of ERISA) which is
subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or
Section 412 of the Code.
(g) None of Acquiror, Merger Sub, the Acquiror Subsidiaries or any
Acquiror ERISA Affiliate is a party to, or has made any contribution to or
otherwise incurred any obligation under, any "multiemployer plan" as defined
in Section 3(37) of ERISA.
(h) There is no agreement, contract or arrangement to which
Acquiror, Merger Sub or any of the Acquiror Subsidiaries is a party that may
result in the payment of any amount that would not be deductible by reason of
Section 280G or Section 404 of the Code.
3.10. Compliance with Laws; Governmental Authorizations
Acquiror, Merger Sub and each of the Acquiror Subsidiaries, during the
applicable statute of limitations period, has complied with, and each is in
compliance in all material respects with, all Laws, judgments, orders,
decrees, directives, consent agreements, memoranda of understanding, permits,
concessions, grants franchises, licenses, and other Governmental Entity
authorizations or approvals applicable to it, or any of its properties. All
Governmental Authorizations of any Governmental Entity and all other permits,
concessions, grants and franchises necessary for the conduct of the business
of Acquiror, Merger Sub and the Acquiror Subsidiaries as now conducted have
been duly obtained and are in full force and effect, and there are no
proceedings pending or, to the knowledge of Acquiror, threatened which may
result in the revocation, cancellation, suspension, or materially adverse
modification of any thereof, except to the extent the foregoing would not have
a Material Adverse Effect on Target.
3.11. Brokers' and Finders' Fees
No agent, broker, investment banker, person or firm acting directly or
indirectly on behalf of Acquiror, Merger Sub or any of the Acquiror
Subsidiaries or under the authority of Acquiror, Merger Sub, or any of the
Acquiror Subsidiaries is or will be entitled to any broker's or finder's fee
or any other commission or similar fee directly or indirectly from any of the
parties hereto in connection with any of the transactions contemplated hereby.
3.12. Board Approval; Stockholder Approval
The Boards of Directors of Acquiror and Merger Sub have (a) approved this
Agreement and the Merger, (b) determined that in their respective opinions
the Merger is advisable and in the best interests of the stockholders of
Acquiror and Merger Sub, respectively, and (c) recommended that the
stockholders of Acquiror and Merger Sub, respectively, approve this Agreement
and the Merger. Acquiror, as the sole stockholder of Merger Sub, has approved
this Agreement and the Merger. The affirmative vote of the holders of a
majority of the outstanding shares of Acquiror Common Stock outstanding on the
record date set for the determination of stockholders entitled to vote on or
consent to the Merger is the only vote or consent of the holders of Acquiror
capital stock necessary to approve this Agreement and the Merger.
3.13. Reorganization
Neither Acquiror nor to Acquiror's knowledge any of its Affiliates has
taken or agreed to take any action, nor does Acquiror have knowledge of any
fact or circumstance, that would prevent the Merger from qualifying as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
3.14. Beneficial Ownership of Target Stock
As of the date hereof, neither Acquiror nor Merger Sub beneficially owns
any shares of Target Common Stock or has any option, warrant, or right of any
kind to acquire the beneficial ownership of any Target Common Stock, except
pursuant to the terms of this Agreement.
3.15. Representations Complete
None of the representations, warranties or statements made by Acquiror or
Merger Sub herein or in any Schedule hereto, including the Acquiror Disclosure
Schedule, or certificate furnished by Acquiror pursuant to this Agreement,
when all such documents are read together in their entirety, contains or will
contain at the Effective Time any untrue statement of a material fact, or
omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of
the circumstances under which made, not misleading.
3.16. Intentions Regarding Target
Acquiror does not have any present intent to liquidate or dissolve Target
or merge Target with or into Acquiror or cause Target to take any other
extraordinary corporate action for at least one year following the Closing
Date.
ARTICLE IV
COVENANTS OF TARGET
Except as otherwise consented to in writing by Acquiror after the date of
this Agreement, Target covenants to and agrees with Acquiror and Merger Sub
as follows:
4.1. Information
Target shall, upon reasonable notice, give to Acquiror and to its
officers, employees, accountants, counsel, financial advisors, and other
representatives, reasonable access during their normal business hours
throughout the period prior to the Effective Date to all of their properties,
books, contracts, commitments, and stockholder lists and records. Target
will, at its own expense, furnish Acquiror during such period with all such
information concerning its affairs and the affairs of all Target Subsidiaries
as Acquiror may reasonably request, including information for use in
determining if the conditions of Article VI have been satisfied, information
necessary to prepare the regulatory filings or applications to be filed with
Governmental Entities to obtain the approvals referred to in Section 4.2, and
information for use in any other necessary filings to be made with appropriate
Governmental Entities. No information or knowledge obtained in any
investigation pursuant to this Section 4.1 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
4.2. Regulatory Approvals
Target shall cooperate with Acquiror's efforts, at Acquiror's expense, to
obtain all necessary regulatory approvals of Governmental Entities of the
transactions contemplated by this Agreement including, but not limited to, the
Required Telecommunication Consents and shall use its commercially reasonable
efforts to secure favorable action on such applications, including without
limitation commercially reasonable efforts to pursue an appeal of a denial of
a regulatory approval.
4.3. Conduct of Business
After the date of this Agreement and pending the Effective Date, neither
Target nor any of the Target Subsidiaries shall cause or permit, directly or
indirectly, through Target, any of the Target Subsidiaries or otherwise, any
of the following, without the prior written consent of Acquiror: (a) any
change, supplement or amendment in their respective certificates of
incorporation or by-laws; (b) in the case of Target only, declaration or
payment of any cash or other dividends in respect of any shares of its
capital stock; (c) any change in any of their respective accounting policies
or practices unless required by GAAP; (d)_taking, or agreement in writing or
otherwise to take, directly or indirectly, any of the actions described in
clauses (a) through (c) above, or any action which would make any of Target's
or the Target Subsidiaries' or warranties contained in this Agreement untrue
or incorrect or prevent any of them from performing or cause any of them not
to perform their respective covenants hereunder or delay, deter or prevent the
conditions in Articles VI and VII of this Agreement from being satisfied.
Notwithstanding the foregoing, upon Acquiror's request, Target shall terminate
Target's 401(k) Plan, effective as of the date immediately preceding the
Effective Date.
Furthermore, pending the Effective Date, Target shall, and shall cause
each of the Target Subsidiaries to, (a) conduct its business only in the
ordinary course and use commercially reasonable efforts consistent with past
practice and policies to preserve intact its present business organizations,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others having business dealings with it, to the end that its
goodwill and ongoing business shall be unimpaired at the Effective Time,
(b)_continue in effect the present method of conducting its business, (c)_give
all notices and other information required to be given to its employees and
any applicable Government Entity under the Code, the Consolidated Omnibus
Budget Reconciliation Act, and other applicable Law in connection with the
transactions provided for in this Agreement, (d) consult with Acquiror as to
making decisions or actions in matters other than those in the ordinary course
of business, and (e) use its commercially reasonable efforts to maintain all
Telecommunications Licenses.
4.4. Meeting of Stockholders of Target; Document Preparation
(a) Target will duly call and convene a meeting of its
stockholders to act upon the transactions contemplated hereby as soon as
reasonably practicable. Except to the extent legally required for the
discharge by Target's Board of Directors of its fiduciary duties, Target and
its Board of Directors will recommend approval of this Agreement and the
Merger to its stockholders, and will use commercially reasonable efforts to
obtain a favorable vote thereon. The calling and holding of such meeting and
all notices, transactions, documents, and information related thereto will be
in material compliance with all applicable Laws.
(b) Target shall furnish Acquiror with such information concerning
Target as is necessary in order to cause the Joint Proxy Statement/Prospectus
(as defined in Section 5.5), insofar as it relates to Target, to comply with
Section 5.5. The Joint Proxy Statement/Prospectus shall contain, among other
matters, the recommendation of the Board of Directors of Target that the
Target stockholders approve the Merger and this Agreement and the conclusion
of the Target Board of Directors that the terms and conditions of the Merger
are fair and reasonable to the stockholders of Target (subject in each case to
any limitations or qualifications required by Law for the discharge by
Target's Board of Directors of its fiduciary duties). Target agrees promptly
to advise Acquiror if at any time prior to the Target stockholders' meeting,
any information provided by Target in the Joint Proxy Statement/Prospectus
becomes incorrect or incomplete in any material respect and to provide
Acquiror with the information needed to correct such inaccuracy or omission.
Target shall furnish Acquiror with such supplemental information as may be
necessary in order to cause the Joint Proxy Statement/Prospectus, insofar as
it relates to Target, to comply with Section 5.5 after the mailing thereof to
Target stockholders. The information provided and the representations made by
Target to Acquiror in connection with the Registration Statement described in
Section 5.5, both at the time such information and representations are
provided and made and at the Effective Date, will be true and accurate in all
material respects and will not contain any false or misleading statement with
respect to any material fact or omit to state any material fact required to be
stated therein or necessary in order (i) to make the statements made therein
not false or misleading, or (ii) to correct any statement contained in an
earlier communication with respect to such information or representations
which has become false or misleading. Target may rely upon all information
provided to it by Acquiror and its representatives in the preparation of the
Joint Proxy Statement/Prospectus and shall not be liable for any untrue
statement of a material fact or any omission of a material fact in the Joint
Proxy Statement/Prospectus, if such statement is made in reliance upon any
written information provided to it by Acquiror or by any of its officers or
authorized representatives specifically for inclusion in the Joint Proxy
Statement/Prospectus.
(c) Target shall promptly furnish Acquiror with such information
regarding the Target stockholders as Acquiror requires to enable it to
determine what filings are required under applicable state securities Laws.
Target authorizes Acquiror to utilize in such filings the information
concerning Target provided to Acquiror in connection with, or contained in,
the Joint Proxy Statement/Prospectus. Target shall promptly notify Acquiror
of all communications, oral, or written, with the SEC concerning the
Registration Statement and the Joint Proxy Statement/Prospectus.
4.5. Consents
Target will use commercially reasonable efforts to obtain any
consents,approvals, landlord estoppel certificates or waivers from third
parties required in connection with the transactions contemplated hereunder,
but shall not be required to pay fees for such to any such third party.
4.6. Advice of Changes
Between the date of this Agreement and the Effective Time, Target shall
promptly advise Acquiror, by written update to the Target Disclosure Schedule,
of (a) the occurrence or non-occurrence of any event which would be likely to
cause any condition to the obligations of Acquiror to effect the Merger and
the other transactions contemplated by this Agreement not to be satisfied, or
(b) the failure of Target or any of the Target Subsidiaries to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by any of them pursuant to this Agreement which would be likely to result in
any condition to the obligations of Acquiror to effect the Merger and the
other transactions contemplated by this Agreement not to be satisfied. The
delivery of any notice pursuant to this Section 4.6 shall not cure any breach
of any representation or warranty requiring disclosure of such matter prior to
the date of this Agreement or otherwise limit or affect the remedies available
hereunder to Acquiror.
4.7. Taxes
Target shall have filed with appropriate federal, state, county,
municipal or foreign Tax Authorities all material Tax Returns required to be
filed (taking any applicable extensions into consideration) on or before the
Effective Date and shall have paid (or shall have made adequate provision or
set up an adequate actual reserve on the financial statements referred to in
Section 2.4 for the payment of) all Taxes imposed by any Tax Authority with
respect to any Pre-Closing Tax Period (as hereinafter defined), together with
any interest, additions, or penalties related to any such taxes. For purposes
of this Section 4.7, any reference to Target shall be deemed to include any
corporation at least eighty percent (80%) of the outstanding capital stock
(by vote or value) of which is owned by Target. "Pre-Closing Tax Period"
shall mean (i) each taxable period that ends on or before the Effective Date,
and (ii) any taxable period that includes (but does not end on) the Effective
Date (the period described in this clause (ii) being hereafter referred to as
a "Straddle Period"). In the case of any Tax for a Straddle Period, the
covenant in this Section 4.7 shall be limited to the Pre-Closing Tax Amount
determined as follows:
(a) In the case of a periodic Tax that is not based on income or
receipts (e.g., an ad valorem property tax), the "Pre-Closing Tax Amount"
shall be an amount equal to the amount of such Tax for the entire Straddle
Period multiplied by a fraction the numerator of which is the number of days
elapsed between the beginning of the Straddle Period and the Effective Date,
and the denominator of which is the total number of days in the Straddle
Period; and
(b) in the case of any other Tax, the "Pre-Closing Tax Amount"
shall be the amount of such Tax for which Target would have been liable if the
Straddle Period had ended as of the close of business on the day of the
Effective Date.
4.8. Public Announcements
Between the date of this Agreement and the Effective Date, Target will
consult with Acquiror before issuing any press release or otherwise making any
public statements with respect to this Agreement and the transactions
contemplated hereby and shall not issue any such press release or make any
such public statement prior to such consultation, except as counsel may advise
is required by Law.
4.9. Cooperation and Conditions
Target shall use its commercially reasonable efforts to ensure that the
conditions specified in Article VI have been satisfied on a prompt basis.
Target agrees to use its commercially reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, including cooperating fully with
the other party, including by provision of information.
4.10. Tax Free Reorganization
Target will not take any action, directly or indirectly, either before or
after consummation of the Merger, which would cause the Merger to fail to
constitute a "reorganization" within the meaning of Code Sections 368(a)(1)(A)
and 368(a)(2)(E), and Target will use commercially reasonable efforts not to
permit any of its directors, officers, employees, stockholders, agents,
consultants or other representatives to take any such action.
ARTICLE V
COVENANTS OF ACQUIROR AND MERGER SUB
Except as otherwise consented to in writing by Target after the date of
this Agreement, Acquiror and Merger Sub covenant to and agree with Target as
follows:
5.1. Information
Acquiror and Merger Sub shall, upon reasonable notice, give to Target and
to its officers, accountants, counsel, financial advisors, and other
representatives, reasonable access during Acquiror's normal business hours
throughout the period prior to the Effective Date to all of their properties,
books, contracts, commitments, reports of examination (consistent with
applicable Law) and records. Acquiror and Merger Sub will, at their own
expense, furnish Target during such period with all such information
concerning their affairs as Target may reasonably request, including
information for use in determining if the conditions of Article VII have been
satisfied and for use in any other necessary filings to be made by Target with
appropriate Governmental Entities. No information or knowledge obtained in
any investigation pursuant to this Section 5.1 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the Merger.
5.2. Applications to Governmental Entities
Acquiror will promptly prepare and file with the appropriate Governmental
Entities an application requesting the regulatory approvals including, but not
limited to the Required Telecommunication Consents and shall use its
commercially reasonable efforts to secure favorable action on such
applications, including without limitation commercially reasonable efforts to
pursue an appeal of a denial of a regulatory approval.
5.3. Conduct of Business
After the date of this Agreement and pending the Effective Date, neither
Acquiror nor Merger Sub shall cause or permit, directly or indirectly, through
Acquiror, Merger Sub or otherwise, any of the following, without the prior
written consent of Target: (a) any change or amendment in their respective
certificates of incorporation or by-laws; (b) in the case of Acquiror only,
declaration or payment of any cash dividends in respect of its Common Stock;
(c) any change in any of Acquiror's accounting policies or practices in a
manner materially affecting the consolidated assets, liabilities or results of
operations of Acquiror, unless required by GAAP, or (d) the taking, or
agreement in writing or otherwise to take, directly or indirectly, any of the
actions described in clauses (a) through (c) above, or any action which would
make any of the representations or warranties of either of them contained in
this Agreement untrue or incorrect or prevent either of them from
performing or cause either of them not to perform their respective covenants
hereunder or delay, deter or prevent the conditions in Articles VI and VII of
this Agreement from being satisfied.
Furthermore, pending the Effective Date, Acquiror shall, and shall cause
each of the Acquiror Subsidiaries to, (a) use commercially reasonable efforts
consistent with past practice and policies to preserve intact its present
business organizations, keep available the services of its present officers
and key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees and others having business dealings with
it, to the end that its goodwill and ongoing business shall be unimpaired at
the Effective Time, (b) continue in effect the present method of conducting
its business, (c) give all notices and other information required to be given
to its employees and any applicable Government Entity under the Code, the
Consolidated Omnibus Budget Reconciliation Act, and other applicable Law in
connection with the transactions provided for in this Agreement, and (d) use
its commercially reasonable efforts to maintain all Telecommunications
Licenses.
5.4. Acquiror Common Stock
On the Effective Date, the Acquiror Common Stock to be issued in exchange
for the Target Common Stock pursuant to the terms of this Agreement shall be
duly authorized, validly issued, fully paid, and non-assessable, free of
preemptive rights and free and clear of all Liens created by or through
Acquiror, with no personal liability attaching to the ownership thereof. The
Acquiror Common Stock to be issued upon exchange for the Target Common Stock
pursuant to the terms of this Agreement will be issued in all material
respects in accordance with applicable state and federal Laws, rules, and
regulations.
5.5. Registration of Shares
Acquiror, with the assistance of Target and its representatives, will
promptly file a Registration Statement on an appropriate form with the SEC
which shall include a joint proxy statement for Target and for Acquiror and a
prospectus which shall satisfy all applicable requirements of applicable state
and federal Laws, including the Securities Act, the Exchange Act, and
applicable state securities Laws and the rules and regulations thereunder
(such joint proxy statement and prospectus, together with any and all
amendments or supplements thereto, being herein referred to as the "Joint
Proxy Statement/Prospectus," and the various documents to be filed by Acquiror
under the Securities Act with the SEC to register the Acquiror Common Stock
into which shares of Target Common Stock held by stockholders will be
converted, including the Joint Proxy Statement/Prospectus, are referred to
herein as the "Registration Statement"). The number of shares to be
registered will be an amount sufficient to allow all of the shares of the
Acquiror Common Stock issued to holders of the Target Common Stock pursuant
to this Agreement to be registered under the Securities Act. Acquiror will
use commercially reasonable efforts to secure the effectiveness of the
Registration Statement and, after the Registration Statement has been declared
effective, will issue the shares so registered to the holders of the Target
Common Stock on the Effective Date. Acquiror may rely upon all information
provided to it by Target and its representatives in the preparation of the
Registration Statement, any post-effective amendment thereto and the Joint
Proxy Statement/Prospectus and shall not be liable for any untrue statement of
a material fact or any omission to state a material fact in the Registration
Statement, the post-effective amendment, or the Joint Proxy
Statement/Prospectus, if such statement is made in reliance upon any
information provided to it by Target or by any of its officers or
representatives. Acquiror shall promptly take all such actions as may be
necessary or appropriate in order to comply in all material respects with all
applicable securities Laws of any state having jurisdiction over the
transactions contemplated by this Agreement and the Merger. Acquiror shall
furnish Target with copies of all such filings and keep Target advised of the
status thereof. Acquiror shall promptly notify Target of all communications,
oral or written, with the SEC concerning the Registration Statement and the
Joint Proxy Statement/Prospectus. Prior to the Effective Time, Acquiror shall
file with The Nasdaq Stock Market ("Nasdaq") a Notification Form for Listing
of Additional Shares with respect to the shares of Acquiror Common Stock
issuable upon conversion of the Target Common Stock in the Merger.
Acquiror shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Acquiror Common Stock for delivery
upon exercise of the Acquiror Stock Options in accordance with Section
1.5(c). Acquiror shall file a registration statement on Form S-8 (or any
successor form) or another appropriate form, and use its commercially
reasonable efforts to cause such Form S-8 to become effective as soon as
practicable after the Effective Time, with respect to Acquiror Common Stock
subject to the Acquiror Stock Options and shall use commercially reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain
outstanding. With respect to those individuals who, as of the Effective Time,
will be subject to the reporting requirements under Section 16(a) of the
Exchange Act, with regard to transactions in Acquiror securities, Acquiror
shall take such action as may be necessary at or before the Effective Time to
cause the receipt of Acquiror Stock Options pursuant to Section 1.5(c) to be
exempt from Section 16(b) of the Exchange Act.
5.6. Meeting of Stockholders of Acquiror; Document Preparation
(a) Acquiror shall duly call and convene a meeting of its
stockholders to act upon the transactions contemplated hereby as soon as
reasonably practicable. Except to the extent legally required for the
discharge by the board of directors of its fiduciary duties, Acquiror and its
Board of Directors will recommend approval of this Agreement and the Merger to
its stockholders and will use commercially reasonable efforts to obtain a
favorable vote thereon. The calling and holding of such meeting and all
notices, transactions, documents, and information related thereto will be in
material compliance with all applicable Laws.
(b) Acquiror shall furnish such information concerning Acquiror as
is necessary in order to cause the Joint Proxy Statement/Prospectus, insofar
as it relates to it, to comply with Section 5.5. Acquiror agrees promptly to
advise Target if at any time prior to the Acquiror stockholders' meeting, any
information provided by Acquiror in the Joint Proxy Statement/Prospectus
becomes incorrect or incomplete in any material respect and to provide Target
with the information needed to correct such inaccuracy or omission. Acquiror
shall furnish Target with such supplemental information as may be necessary in
order to cause the Joint Proxy Statement/Prospectus, insofar as it relates to
Acquiror, to comply with Section 5.5 after the mailing thereof to Acquiror
stockholders. The information provided and the representations made by
Acquiror to Target in connection with the Joint Proxy Statement/Prospectus,
both at the time such information and representations are provided and made
and at the Effective Date, will be true and accurate in all material respects
and will not contain any false or misleading statement with respect to any
material fact or omit to state any material fact required to be stated therein
or necessary in order (i) to make the statements made therein not false or
misleading, or (ii) to correct any statement contained in an earlier
communication with respect to such information or representations which has
become false or misleading. Acquiror may rely upon all information provided
to it by Target and its representatives in the preparation of the Joint Proxy
Statement/Prospectus and shall not be liable for any untrue statement of a
material fact or any omission to state a material fact in the Joint Proxy
Statement/Prospectus, if such statement is made in reliance upon any written
information provided to it by Target or by any of its officers or authorized
representatives specifically for inclusion in the Joint Proxy
Statement/Prospectus.
5.7. Consents
Acquiror will use commercially reasonable efforts to obtain any consents,
approvals, landlord estoppel certificates or waivers from third parties
required in connection with the transactions contemplated hereunder.
5.8. Advice of Changes
Between the date of this Agreement and the Effective Time, Acquiror shall
promptly advise Target, by written update to the Acquiror Disclosure Schedule,
of (a) the occurrence or non-occurrence of any event which would be likely to
cause any condition to the obligations of Target to effect the Merger and the
other transactions contemplated by this Agreement not to be satisfied, or (b)
the failure of Acquiror to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it pursuant to this Agreement
which would be likely to result in any condition to the obligations of Target
to effect the Merger and the other transactions contemplated by this Agreement
not to be satisfied. The delivery of any notice pursuant to this Section 5.8
shall not cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of this Agreement or otherwise
limit or affect the remedies available hereunder to Target .
5.9. Public Announcements
Between the date of this Agreement and the Effective Date, Acquiror will
consult with Target before issuing any press release or otherwise making any
public statements with respect to this Agreement and the transactions
contemplated hereby and shall not issue any such press release or make any
such public statement prior to such consultation, except as counsel may advise
is required by Law.
5.10. Cooperation and Conditions
Acquiror shall use commercially reasonable efforts to ensure that the
conditions specified in Article VII have been satisfied on a prompt basis.
Acquiror agrees to use commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including
cooperating fully with the other party, including by provision of information.
5.11. Continuity of Business Enterprise
Acquiror and/or the Surviving Corporation and any other member of the
qualified group (as defined in Treasury Regulation Section 1.368-1(d)) will
continue at least one significant historic business line of Target or use at
least a significant portion of Target's historic business assets in a
business, in each case within the meaning of Treasury Regulation Section
1.368-1(d). Tax Free Reorganization Acquiror will not take any action,
directly or indirectly, either before or after consummation of the Merger,
which would cause the Merger to fail to constitute a "reorganization" within
the meaning of Code Section 368, and the Acquiror will use commercially
reasonable efforts not to permit any of its directors, officers, employees,
stockholders, agents, consultants, or other representatives to take any such
action.
5.13. Nasdaq Listing
Acquiror shall use commercially reasonable efforts to cause the Acquiror
Common Stock to be issued in connection with the Merger and under the Target
Employee Plans to be approved for listing on Nasdaq, subject to official
notice of issuance, prior to the Closing Date.
5.14. Purchases and Offers to Purchase Acquiror Stock
During the period beginning 30 days prior to the Effective Date, neither
Acquiror nor any of its directors or officers shall purchase or offer to
purchase any shares of Acquiror Common Stock, and Acquiror shall undertake its
commercially reasonable best efforts to cause affiliates or any family members
of any such persons not to purchase or offer to purchase any shares of
Acquiror Common Stock, except in a private transaction.
ARTICLE VI
CONDITIONS TO ACQUIROR'S AND MERGER SUB'S OBLIGATIONS
Unless waived in writing by Acquiror in its sole discretion, all
obligations of Acquiror and Merger Sub hereunder shall be subject to the
fulfillment prior to or at the Effective Date of the following conditions:
6.1. Representations, Warranties, and Covenants
Except as disclosed in the Target Disclosure Schedule dated the date of
this Agreement or as disclosed pursuant to Section 4.6, (i) the
representations and warranties of Target in this Agreement shall be true and
correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality
which representations and warranties as so qualified shall be true in all
respects) on and as of the Effective Time as though such representations and
warranties were made on and as of such time (except that representations and
warranties which by their express terms are made on and as of a specified
earlier date shall be made only on and as of such specified earlier date) and
(ii) Target shall have performed and complied in all material respects with
all covenants, obligations and conditions of this Agreement required to be
performed and complied with by them as of the Effective Time.
6.2. No Adverse Changes
There shall not have been any change in the condition (financial or
otherwise), results of operations, assets, liabilities, business or prospects
of Target or any of the Target Subsidiaries from December 31, 2000 to the
Effective Date, which would reasonably be expected to have a Material Adverse
Effect on Acquiror or Surviving Corporation; provided, however, that losses
shown on Target's financial statements for the quarter ended March 31, 2001
shall not constitute a change which would reasonably be expected to have a
Material Adverse Effect on Target for purposes of this condition.
6.3. Stockholder Approval
The holders of not less than a majority of the issued and outstanding
voting stock of Target and Acquiror shall have approved this Agreement and the
Merger.
6.4. Other Evidence
Target shall have delivered to Acquiror such further certificates and
documents evidencing due action in accordance with this Agreement, including
certified copies of all applicable proceedings of stockholders and directors
of Target pertaining to the transactions under this Agreement, as Acquiror
shall reasonably request.
6.5. No Adverse Proceedings, Events or Regulatory Requirements
No action or proceeding, including but not limited to any temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restraint
or prohibition, preventing the consummation of the Merger shall be in effect,
nor shall any action or proceeding brought by an administrative agency or
commission or other Governmental Entity, seeking any of the foregoing be
pending to the knowledge of Target; nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
The parties shall have procured all other regulatory approvals, consents,
waivers, or administrative actions of Governmental Entities or other persons
or agencies that are necessary or appropriate to the consummation of the
transactions contemplated by this Agreement, including but not limited to
those specifically referenced in Section 4.2 hereof, and no approval, consent,
waiver, or administrative action shall have included any condition or
requirement that would (i) result in a Material Adverse Effect on Acquiror or
Target, or (ii) so materially and adversely affect the economic or business
benefits of the Merger that Acquiror, in the sole judgment of Acquiror, would
not have entered into this Agreement had such conditions or requirements been
known at the date hereof.
6.6. Consents, Etc.
All requisite consents, approvals, landlord estoppel certificates,
waivers, undertakings, memoranda, agreements, exercises, and terminations by
third parties which Target has covenanted to use commercially reasonable
efforts to obtain under Sections 4.2 and 4.5 shall have been obtained by
Target or waived by Acquiror.
6.7. Dissenting Shares
The Dissenting Shares of Target shall comprise not more than five percent
(5%) of the issued and outstanding shares of Target Common Stock.
6.8. Securities Matters
Acquiror shall have filed a Registration Statement with the SEC under the
Securities Act pertaining to the shares of Acquiror Common Stock to be issued
to the stockholders of Target pursuant to this Agreement and the Merger, and
such Registration Statement shall have become effective and there shall not be
in effect a stop order with respect thereto.
6.9. 280G and Control Affiliate Agreements
Acquiror shall have received and executed copies of Section 280G
Agreements substantially in the form of Exhibit B hereto from each person
identified by Target as potentially receiving excess parachute payments, as
defined in Section 280G of the Code, in connection with the Merger. Acquiror
shall have received a copy of the Agreement of Control Affiliate substantially
in the form of Exhibit C hereto executed by the Control Affiliate and Target.
6.10. Resignation of Directors and Officers
The directors and officers of Target and each of the Target Subsidiaries
in office immediately prior to the Effective Time shall have resigned
effective as of the Effective Time and duly executed resignation letters shall
have been delivered to Acquiror from each such director and officer.
6.11. Target Certificate
Target shall have delivered to Acquiror a certificate dated as of the
Closing Date and signed by its Chief Executive Officer and Secretary to the
effect that each of the conditions specified above in Sections 6.1, 6.2 6.3,
6.4, 6.5, 6.6 and 6.12 is satisfied in all material respects.
6.12. Termination of Pension Plan
Unless otherwise stated by Acquiror in writing, Target shall, immediately
prior to the Closing Date, terminate Target's 401(k) Plan (the "401(k) Plan")
and no further contributions shall be made to the 401(k) Plan, provided that
as a condition of such termination Target's employees shall be eligible to
participate in Acquiror's 401(k) plan immediately following the Closing Date.
Target shall provide to Acquiror (i) executed resolutions by the Board of
Directors of Target authorizing the termination and (ii) resolutions
authorizing an executed amendment to the 401(k) Plan sufficient to assure
compliance with all applicable requirements of the Code and regulations
thereunder so that the tax-qualified status of the 401(k) Plan will be
maintained at the time of termination.
6.13. Nasdaq Listing
The Acquiror Common Stock to be issued in connection with the Merger and
under the Target Employee Plans shall have been approved for listing on
Nasdaq, subject to official notice of issuance.
6.14. Target Receipt of Agreement of Control Affiliate
Target shall have received a copy of the Agreement of Control Affiliate
substantially in the form of Exhibit C hereto executed by the Control
Affiliate, Acquiror and Merger Sub.
ARTICLE VII
CONDITIONS TO TARGET'S OBLIGATIONS
Unless waived in writing by Target in its sole discretion, all
obligations of Target hereunder shall be subject to the fulfillment prior to
or at the Effective Date of the following conditions:
7.1. Representations, Warranties, and Covenants
Except as disclosed in the Acquiror Disclosure Schedule dated the date of
this Agreement or as disclosed pursuant to Section 5.8, (i) the
representations and warranties of Acquiror and Merger Sub in this Agreement
shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms by a
reference to materiality, which representations and warranties as so qualified
shall be true in all respects) on and as of the Effective Time as though such
representations and warranties were made on and as of such time (except that
representations and warranties which by their express terms are made on and as
of a specified earlier date shall be made only on and as of such specified
earlier date) and (ii) Acquiror and Merger Sub shall have performed and
complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by
them as of the Effective Time.
7.2. No Adverse Changes
There shall not have been any change in the condition (financial or
otherwise), results of operations, assets, liabilities, business or prospects
of Acquiror from January 31, 2001 to the Effective Date, which would
reasonably be expected to have a Material Adverse Effect on Target or
Acquiror; provided, however, that losses shown on Acquiror's financial
statements for the quarter ended April_30, 2001 shall not constitute a change
which would reasonably be expected to have a Material Adverse Effect on
Acquiror for purposes of this condition.
7.3. Stockholder Approval
The holders of not less than a majority of the issued and outstanding
voting stock of Acquiror and Target shall have approved this Agreement and the
Merger.
7.4. Other Evidence
Acquiror and Merger Sub shall have delivered to Target such further
certificates and documents evidencing due action in accordance with this
Agreement, including certified copies of all applicable proceedings of
stockholders and directors of Acquiror and Merger Sub pertaining to the
transactions under this Agreement, as Target shall reasonably request.
7.5. No Adverse Proceedings, Events or Regulatory Requirements
No action or proceeding, including but not limited to any temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restraint
or prohibition, preventing the consummation of the Merger shall be in effect,
nor shall any action or proceeding brought by an administrative agency or
commission or other Governmental Entity seeking any of the foregoing be
pending to the knowledge of Acquiror; nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
The parties shall have procured all other regulatory approvals, consents,
waivers, or administrative actions of Governmental Entities or other persons
or agencies that are necessary or appropriate to the consummation of the
transactions contemplated by this Agreement, including but not limited to
those specifically referenced in Section 4.2, and no approval, consent,
waiver, or administrative action shall have included any condition or
requirement that would (i) result in a Material Adverse Effect on Acquiror or
Target, or (ii) so materially and adversely affect the economic or business
benefits of the Merger that Target, in the sole judgment of Target, would not
have entered into this Agreement had such conditions or requirements been
known at the date hereof.
7.6. Consents, Etc.
All requisite consents, approvals, landlord estoppel certificates or
waivers, undertakings, memoranda, agreements, exercises, and terminations by
third parties which Acquiror has covenanted to use commercially reasonable
efforts to obtain under Sections 5.2 and 5.7 shall have been obtained by
Acquiror or waived by Target
7.7. Securities Matters
Acquiror shall have filed a Registration Statement with the SEC under the
Securities Act, pertaining to the shares of Acquiror Common Stock to be issued
to the stockholders of Target pursuant to this Agreement and the Merger, and
such Registration Statement shall have become effective and there shall not be
in effect a stop order with respect thereto.
7.8. Nasdaq Listing
The Acquiror Common Stock to be issued in connection with the Merger and
under the Target Employee Plans shall have been approved for listing on
Nasdaq, subject to official notice of issuance.
7.9. Acquiror Certificate
Acquiror shall have delivered to Target a certificate dated as of the
Closing Date and signed by its Chief Executive Officer and Secretary to the
effect that each of the conditions specified above in Sections_7.1, 7.2, 7.3,
7.5, 7.6 and 7.8 is satisfied in all material respects.
ARTICLE VIII
TERMINATION, EXPENSES, AMENDMENT AND WAIVER
8.1. Termination
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with
the Merger by the stockholders of Target or Acquiror, in the following manner:
(a) by mutual consent duly authorized by the boards of directors of
Acquiror and Target;
(b) by either Acquiror or Target, if, (i) without fault of the
terminating party, the Closing shall not have occurred on or before January
31, 2002 (provided, that a later date may be agreed upon in writing by the
parties hereto, and provided further, that the right to terminate this
Agreement under this clause (b)(i) shall not be available to any party whose
action or willful failure to act has been a principal cause of or resulted in
the failure of the Closing to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement), (ii) any permanent
injunction or other order of a court or other competent authority preventing
the consummation of the Merger shall have become final and nonappealable or
(iii) the board of directors of either Acquiror or Target, in the exercise of
its fiduciary duties, fails to recommend or withdraws, or modifies or changes
in a manner adverse to Acquiror (in the case of an action by the board of
directors of Target ) or Target, (in the case of an action by the board of
directors of Acquiror), as applicable, its approval or recommendation of this
Agreement or the Merger;
(c) by Target, if, (i) any representation or warranty of Acquiror
set forth in this Agreement and not qualified by its terms as to materiality
shall have been untrue when made in any material respect (or any
representation or warranty qualified as to materiality shall have been untrue
in any respect when made), or (ii) Acquiror shall materially breach any
obligation or agreement hereunder in a manner causing any condition precedent
to the Closing not to be satisfied and such breach shall not have been cured
within 30 days of receipt by Acquiror of written notice of such breach;
provided, that the right to terminate this Agreement by Target under this
paragraph (c) shall not be available to Target where Target is at that time in
material breach of this Agreement;
(d) by Acquiror, if, (i) any representation or warranty of Target
set forth in this Agreement and not qualified by its terms as to materiality
shall have been untrue when made in any material respect (or any
representation or warranty qualified as to materiality shall have been untrue
in any respect when made) or (ii) Target shall materially breach any
obligation or agreement hereunder in a manner causing any condition precedent
to the Closing not to be satisfied and such breach shall not have been cured
within 30 days of receipt by Target of written notice of such breach;
provided, that the right to terminate this Agreement by Acquiror under this
paragraph (d) shall not be available to Acquiror where Acquiror is at that
time in material breach of this Agreement; and
(e) by Target, if the average of the daily high and low trade prices
of Acquiror Common Stock on the Nasdaq National Market for the 15 trading days
ending on the trading date that is one day before the Effective Time, weighted
based on the volume of trades during each of those 15 trading days, is less
than $2.00.
8.2. Effect of Termination
In the event of termination of this Agreement as provided in Section 8.1,
this Agreement shall forthwith become void and there shall be no Liability on
the part of Acquiror or Target or their respective officers, directors,
stockholders or Affiliates, except to the extent that such termination results
from the breach by a party hereto of any of its representations, warranties or
covenants set forth in this Agreement; provided that the provisions of this
Section 8.2 (Effect of Termination), Section 8.3 (Expense) and Article IX
shall remain in full force and effect and survive any termination of this
Agreement.
8.3. Expense
(a) Subject to paragraphs (b) and (c) below, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of advisers, accountants and legal counsel)
shall, except as provided in Section_4.2, be paid by the party incurring such
expense and, except as provided in Section_4.2, Target and Acquiror shall each
pay its own filing fees in respect of any regulatory approvals required in
order to consummate the Merger;
(b) In the event that Acquiror shall terminate this Agreement
pursuant to Section 8.1(d), Target shall reimburse Acquiror for all reasonable
out-of-pocket fees and expenses incurred by Acquiror in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel).
(c) In the event that Target shall terminate this Agreement
pursuant to Section 8.1(c), Acquiror shall reimburse Target for all reasonable
out-of-pocket fees and expenses incurred by Target in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel).
8.4. Extension; Waiver
At any time prior to the Effective Time, any party hereto 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 made to such party
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations, Warranties, and Covenants
None of the representations and warranties set forth in this Agreement
shall survive the Closing; provided, however, that there shall be no
limitation period for matters involving fraud. The covenants and agreements
of the parties shall survive until the expiration of the time period for their
performance as provided herein.
9.2. Notices
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery
service, or mailed by registered or certified mail (return receipt requested)
or sent via facsimile (with confirmation of receipt and copy sent by regular
mail) to the parties at the following address (or at such other address for a
party as shall be specified by like notice):
(a) if to Acquiror or Merger Sub, to:
Covista Communications, Inc.
000 Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
Attention: A. Xxxx Xxxxx, Jr.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Covista Communications, Inc.
000 Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
0000 X Xxxxxx., X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. XxXxxxxxxx
Facsimile No.: 000-000-0000
Telephone No.: 000-000-0000
and
Law Offices of Xxx X. Xxxxxx
000 X. 00xx Xxxxxx
Xxxxx 0X
Xxx Xxxx, XX 00000
Attention: Xxx X. Xxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) if to Target, to:
Capsule Communications, Inc.
0 Xxxxxxxxx Xxxxxx
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
00xx & Xxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxx
Facsimile No.: (215) 981- 4750
Telephone No.: (215) 000- 0000
9.3. Interpretation
When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. The
words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is
to be made available. The phrases "the date of this Agreement", "the date
hereof", and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to July___, 2001. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
9.4. Counterparts
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
9.5. Entire Agreement; Third Party Beneficiaries
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, the Target Disclosure Schedule and the Acquiror
Disclosure Schedule (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) are not intended to confer upon any other
person any rights or remedies hereunder.
9.6. Severability
In the event that any provision of this Agreement, or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue
in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business
and other purposes of such void or unenforceable provision.
9.7. Remedies Cumulative
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by Law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy.
9.8. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to applicable principles of
conflicts of law or, to the extent applicable, the federal Laws of the United
States of America. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction of any court located within the State of Delaware, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon it in any
manner authorized by the Laws of the State of Delaware for such person and
waives and covenants not to assert or plead any objection which it might
otherwise have to such jurisdiction and such process. THE PARTIES HERETO
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF THE PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR ACQUIROR
TO ENTER INTO THIS AGREEMENT.
9.9. Assignment; Amendment; Binding Effect
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of Law or otherwise) without the prior written consent of the other parties.
The parties hereto may cause this Agreement to be amended at any time by
execution of an instrument in writing signed on behalf of each of the parties
hereto and approved by their respective boards of directors; provided that an
amendment made subsequent to adoption of this Agreement by the stockholders of
any of the parties hereto shall not (a) alter or change the amount or kind of
consideration to be received on conversion of the Target Common Stock, (b)
alter or change any term of the certificate of incorporation of the Surviving
Corporation to be effected by the Merger, or (c) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of Target Common Stock. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
9.10. Rules of Construction
The parties hereto agree that they have been represented by counsel,
during the negotiation, preparation and execution of this Agreement and,
therefore, waive the application of any Law, holding or rule of construction
providing that ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, Target, Acquiror and Merger Sub, have caused this
Agreement to be executed and delivered, by their respective officers thereunto
duly authorized in the case of corporate parties as the case may be, all as of
the date first written above.
ATTEST: COVISTA COMMUNICATIONS, INC.
/s/ Xxxxxx X. Xxxxxxx
-----------------------------(SEAL) By: /s/ A. Xxxx Xxxxx, Jr.
Secretary -------------------------(SEAL)
Name: A. Xxxx Xxxxx, Jr.
Title: President & Chief Executive
ATTEST: CCI ACQUISITIONS CORP.
/s/ Xxxxxx Xxxxxxx
-----------------------------(SEAL) By: /s/ A. Xxxx Xxxxx, Jr.
Secretary -------------------------(SEAL)
Name: A. Xxxx Xxxxx, Jr.
Title: President & Chief Executive
Officer
ATTEST: CAPSULE COMMUNICATIONS, INC.
/s/ Xxxxxxxx Xxxx
-----------------------------(SEAL) By: /s/ Xxxxx X. Xxxxxxx
Chief Financial Officer -------------------------(SEAL)
Name: Xxxxx X. Xxxxxxx
Title: President & Chief Executive
Officer
EXHIBIT A
Certificate of Merger
---------------------
CERTIFICATE OF MERGER
MERGING
CCI ACQUISITIONS CORP.
(a Delaware Corporation)
INTO
CAPSULE COMMUNICATIONS, INC.
(a Delaware Corporation)
Pursuant to Section 251 of the General
Corporation Law of the State of Delaware
The undersigned corporation, organized and existing under and by virtue
of the General Corporation Law of Delaware ("DGCL"), hereby certifies that:
FIRST: The name and state of incorporation of each of the constituent
corporations of the merger are CCI ACQUISITIONS CORP., a Delaware corporation
("CCI") and CAPSULE COMMUNICATIONS, INC., a Delaware corporation ("Capsule").
SECOND: An Agreement and Plan of Reorganization between the parties
to the merger has been approved, adopted, certified, executed and acknowledged
by each of the constituent corporations in accordance with Section 251 of the
DGCL.
THIRD: The name of the surviving corporation in the merger is Capsule
Communications, Inc., a Delaware corporation.
FOURTH: The Certificate of Incorporation of Capsule, a Delaware
corporation, which will survive the merger, shall be the Certificate of
Incorporation of the surviving corporation.
FIFTH: The executed Agreement and Plan of Reorganization is on file
at the principal place of business of the surviving corporation at 0 Xxxxxxxxx
Xxxxxx, 0000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, XX 00000. A copy of the
Agreement and Plan of Reorganization will be furnished by the surviving
corporation, on request and without cost, to any stockholder of any
stockholder of any constituent corporation.
SIXTH: The merger shall become effective as of the date of filing
this Certificate of Merger with the Secretary of State of the State of
Delaware.
IN WITNESS WHEREOF, Capsule has caused this Certificate of Merger to be
signed by its duly authorized officers, as of the ____ day of ____________,
2001.
ATTEST: CAPSULE COMMUNICATIONS, INC.
By: By:
----------------------- -----------------------
Name:
Title:
EXHIBIT B
280G Agreement
--------------
SECTION 280G AGREEMENT
THIS SECTION 280G AGREEMENT (this "Agreement") is entered into as of
________, 2001 by and between Covista Communications, Inc., a New Jersey
corporation ("Acquiror"), and the undersigned service provider or Disqualified
Person (the "Disqualified Person") of Capsule Communications, Inc., a Delaware
corporation ("Target").
RECITALS
A. Acquiror, CCI Acquisitions Corp., a Delaware corporation ("Merger
Sub"), and Target have entered into an Agreement and Plan of Reorganization
dated as of July 17, 2001 (the "Reorganization Agreement"), pursuant to which
Merger Sub will be merged with and into Target (the "Merger").
B. Upon or following the consummation of the Merger and in connection
therewith, the undersigned Disqualified Person may receive certain payments
that are considered to be "parachute payments" under Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"). Parachute payments
include cash payments, such as bonus and severance payments, as well as
accelerated vesting of options and restricted stock.
C. Section 4999 of the Code imposes a 20% excise tax on any excess
parachute payments received in connection with a change in control of a
company. The excise tax is a withholding tax that is automatically collected
at the time of payment with respect to any parachute payments that are
considered to be wages.
D. Pursuant to the Reorganization Agreement, the parties agreed that
on or before the consummation of the Merger, Target would cause each
Disqualified Person to execute and deliver a Section 280G Agreement containing
the terms and conditions set forth in an exhibit to the Reorganization
Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements, provisions and covenants set forth in the Reorganization Agreement
and in this Agreement, it is hereby agreed as follows:
1. Agreement to Pay Excise Tax. To the extent any payment or benefit
to which the Disqualified Person becomes entitled in connection with the
Merger is determined by Acquiror's independent auditors, pursuant to written
calculations provided to the Disqualified Person, to constitute an excess
parachute payment under Code Section 280G and with respect to which no
withholding taxes have been collected, such Disqualified Person hereby
covenants and agrees to pay to the Internal Revenue Service, on or before
April 15th of the year following the year in which each such excess parachute
payment occurred, the excise tax imposed under Code Section 4999 upon that
excess parachute payment, and the Disqualified Person shall provide Acquiror
with appropriate proof of such payment. Acquiror shall issue a Form W-2 or a
Form 1099, as appropriate, for the amount of such excess parachute payment no
later than January 31st of the year following the year in which such excess
parachute payment occurred.
2. Acknowledgement of Code Section 83(b) Filings. The Disqualified
Person has filed on a timely basis with the appropriate Internal Revenue
Service Center an Internal Revenue Code Section 83(b) election with respect to
any restricted stock awards or other unvested securities or property such
individual has received from Target or its affiliates so that such
Disqualified person shall not recognize any taxable income under Internal
Revenue Code Section 83 at the time such restricted stock or other securities
or property vests.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
ACQUIROR DISQUALIFIED PERSON
By: By:
------------------------- ------------------------
(Signature)
Name:
----------------------- -----------------------
(Print Name)
Title:
---------------------- -----------------------
(Print Address)
------------------------
(Print Telephone Number)
-------------------------
(Social Security or Tax I.D. Number)
EXHIBIT C
AGREEMENT OF CONTROL AFFILIATE
Reference is hereby made to that certain Agreement and Plan of
Reorganization (the "Merger Agreement"), dated as of July_17, 2001, by and
among Covista Communications, Inc., CCI Acquisitions Corp. and Capsule
Communications, Inc. ("Capsule"). Capitalized terms used herein without
definition are as defined in the Merger Agreement.
As a material inducement to Capsule to enter into the Merger Agreement,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the undersigned, as the Control Affiliate,
hereby agrees to accept the portion of the Merger Consideration issuable to
such Control Affiliate in accordance with Section 1.5(a) of the Merger
Agreement, such consideration being less than that paid to all other
stockholders of Capsule.
--------------------------
Dated: ________, 0000 Xxxxx X. Xxxxx, XXX
[SIGNATURE PAGE FOLLOWS]
AGREED TO AND ACCEPTED:
ATTEST: COVISTA COMMUNICATIONS, INC.
-----------------------------(SEAL) By:
Secretary -------------------------(SEAL)
Name: A. Xxxx Xxxxx, Jr.
Title: President & Chief Executive
ATTEST: CCI ACQUISITIONS CORP.
-----------------------------(SEAL) By:
Secretary -------------------------(SEAL)
Name: A. Xxxx Xxxxx, Jr.
Title: President & Chief Executive
Officer
ATTEST: CAPSULE COMMUNICATIONS, INC.
-----------------------------(SEAL) By:
Secretary -------------------------(SEAL)
Name: Xxxxx X. Xxxxxxx
Title: President & Chief Executive
Officer
