EXECUTION COPY
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
COVISTA COMMUNICATIONS, INC.,
CCI ACQUISITIONS CORP.
AND
CAPSULE COMMUNICATIONS, INC.
July 17, 2001
EXECUTION COPY
TABLE OF CONTENTS
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Page
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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
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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
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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........................ 48
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
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EXECUTION COPY
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
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EXECUTION COPY
SCHEDULES
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SCHEDULE OF CONTROL AFFILIATES
TARGET DISCLOSURE SCHEDULE
ACQUIROR DISCLOSURE SCHEDULE
EXHIBITS
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Exhibit A Certificate of Merger
Exhibit B Form of Section 280G Agreement
Exhibit C Agreement of Control Affiliate
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EXECUTION COPY
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
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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
(a) 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.
(b) 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,
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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
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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
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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,
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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")
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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
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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
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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
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Schedule, except (i) as provided above in this Section 1.5(c), (ii) as set forth
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in Section 2.2 of the Target Disclosure Schedule, and (iii) that all references
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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
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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).
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(d) Capital Stock of Merger Sub. At the Effective Time, each
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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
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thereon.
1.6. Exchange Procedures
(a) Exchange Agent. Acquiror's transfer agent, or such other
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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
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Effective Time, Acquiror shall furnish to the Exchange Agent in accordance with
this Article I,
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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
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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,
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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
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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).
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(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),
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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
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Common Stock.
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(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).
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(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.
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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.
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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
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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
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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
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corresponding Section in this Article II. Any reference in this Article II to
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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,
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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
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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
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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
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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
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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
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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
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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
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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
Taret, 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.
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(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
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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
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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
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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
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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
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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
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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
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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
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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;
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(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
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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
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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.
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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
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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
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
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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
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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.
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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
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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
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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
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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.
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(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
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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
(a) 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
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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
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other necessary filings to be made with appropriate Governmental Entities. No
information or knowledge obtained in any investigation pursuant to this Section
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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.
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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.
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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
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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.
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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
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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
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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
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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
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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.
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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.
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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
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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).
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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.
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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
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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
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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.
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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.
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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 (S) 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 (S) 1.368-1(d).
5.12. 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.
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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
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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.
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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.
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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.
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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
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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.
--- --- ---
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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
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(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.
C-52
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. 00/xx/ Xxxxxx
X-00
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.
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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.
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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]
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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. (SEAL)
----------------------- --------------------------------
Secretary Name: A. Xxxx Xxxxx, Jr.
Title: President & Chief Executive
Officer
ATTEST: CCI ACQUISITIONS CORP.
/s/ Xxxxxx X. Xxxxxxx (SEAL) By: /s/ A. Xxxx Xxxxx, Jr. (SEAL)
----------------------- --------------------------------
Secretary Name: A. Xxxx Xxxxx, Jr.
Title: President & Chief Executive
Officer
ATTEST: CAPSULE COMMUNICATIONS, INC.
/s/ Xxxxxxxx X. Xxx (SEAL) By: /s/ X. X. Xxxxxxx (SEAL)
------------------------------- -----------------------------------
Chief Financial Officer Name: Xxxxx X. Xxxxxxx
Title: President & Chief Executive
Officer
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