Agreement and Plan of Merger - Talk.com Inc. and Access One Communications Corp.
AGREEMENT AND PLAN OF MERGER
AMONG
TALK.COM, INC.,
ALADDIN ACQUISITION CORP.,
AND
ACCESS ONE COMMUNICATIONS CORP.
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TABLE OF CONTENTS
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1. Definitions...........................................................1
2. The Transaction.......................................................7
(a) The Merger...................................................7
(b) The Closing..................................................7
(c) Actions at the Closing.......................................7
(d) Effect of Merger.............................................8
(e) Procedure for Exchange......................................10
(f) Escrow......................................................11
(g) Closing of Transfer Records.................................12
3. Representations and Warranties of the Target.........................12
(a) Organization, Qualification, and Corporate Power............13
(b) Capitalization..............................................13
(c) Noncontravention............................................14
(d) Compliance with Laws; Licenses..............................14
(e) Customers...................................................15
(f) Suppliers...................................................15
(g) Brokers' Fees...............................................15
(h) Title to Assets.............................................15
(i) Subsidiaries................................................15
(j) Financial Statements........................................16
(k) Events Subsequent to Most Recent Fiscal Year End............16
(l) Undisclosed Liabilities.....................................18
(m) Legal Compliance............................................18
(n) Tax Matters.................................................19
(o) Real Property...............................................20
(p) Intellectual Property.......................................21
(q) Tangible Assets.............................................22
(r) Inventory...................................................22
(s) Contracts...................................................22
(t) Notes and Accounts Receivable...............................23
(u) Powers of Attorney..........................................23
(v) Insurance...................................................23
(w) Litigation..................................................24
(x) Employees...................................................24
(y) Employee Benefits...........................................25
(z) Guaranties..................................................27
(aa) Environmental, Health and Safety Matters....................27
(bb) Certain Business Relationships with the Target and its
Subsidiaries................................................28
(cc) Accounts; Lockboxes; Safe Deposit Boxes.....................28
(dd) Securities..................................................28
(ee) Accounting Matters..........................................28
(ff) Disclosure..................................................28
4. Representations and Warranties of Parent and the Parent Subsidiary...28
(a) Organization................................................29
(b) Capitalization..............................................29
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(c) Authorization of Transaction.........................................29
(d) Noncontravention............................................29
(e) Brokers' Fees...............................................29
(f) Continuity of Business......................................30
(g) Securities Exchange Act Reports.............................30
(h) Disclosure..................................................30
(i) Authorization for Parent Shares.............................30
(j) NASDAQ Compliance...........................................30
(k) Litigation..................................................30
(l) No Material Adverse Changes.................................31
5. Covenants............................................................31
(a) General.....................................................31
(b) Notices and Consents........................................31
(c) Regulatory Matters and Approvals............................31
(d) Operation of the Business...................................33
(e) Preservation of Business....................................33
(f) Full Access.................................................33
(g) Notice of Developments......................................34
(h) Exclusivity.................................................34
(i) Continuity of Business......................................35
(j) Employment Agreements.......................................36
(k) Listing.....................................................36
(l) Services Agreement..........................................36
(m) Voting Agreement............................................36
(n) MCG Finance Agreement.......................................36
(o) Lockup Agreement............................................36
6. Conditions to Obligation to Close....................................37
(a) Conditions to Obligation of Parent and the Parent
Subsidiary..................................................37
(b) Conditions to Obligation of the Target and Stockholders.....38
7. Remedies for Breaches of this Agreement..............................40
(a) Survival of Representations and Warranties..................40
(b) Indemnification Agreement...................................40
(c) Other Indemnification Provisions............................40
(d) Directors' and Officers' Indemnity..........................40
8. Termination..........................................................41
(a) Termination of Agreement....................................41
(b) Effect of Termination.......................................42
9. Miscellaneous........................................................42
(a) Press Releases and Public Announcements.....................42
(b) No Third-Party Beneficiaries................................42
(c) Entire Agreement............................................42
(d) Binding Effect; Assignment..................................42
(e) Counterparts................................................43
(f) Headings....................................................43
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(g) Notices.....................................................43
(h) GOVERNING LAW...............................................44
(i) Amendments and Waivers......................................44
(j) Severability................................................44
(k) Expenses....................................................45
(l) Incorporation of Exhibits...................................45
(m) Construction................................................45
(n) Incorporation of Exhibits and Schedules.....................45
(o) Specific Performance........................................45
(p) Submission to Jurisdiction..................................45
(q) WAIVER OF JURY TRIAL........................................46
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated effective
March 24, 2000, by and among TALK.COM, INC., a Delaware corporation ("Parent"),
ALADDIN ACQUISITION CORP., a Delaware corporation and a direct wholly-owned
Subsidiary of Parent (the "Parent Subsidiary"), and ACCESS ONE COMMUNICATIONS
CORP., a New Jersey corporation (the "Target"). Parent, the Parent Subsidiary
and the Target are referred to collectively herein as the "Parties."
WITNESSETH:
WHEREAS, this Agreement contemplates a transaction whereby Parent will
acquire all of the outstanding capital stock of the Target through a merger of
the Parent Subsidiary with and into the Target;
WHEREAS, the Board of Directors of each of Parent, the Parent
Subsidiary and the Target has approved the acquisition of the Target by Parent,
including the merger of the Parent Subsidiary with and into the Target (the
"Merger"), upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Target has determined that the
Merger is advisable and is fair to and in the best interests of the holders of
the Target's capital stock, par value $.001 per share (the "Target Shares"), and
has resolved to recommend the approval of the Merger and the adoption of this
Agreement by the Stockholders;
WHEREAS, the Board of Directors of Parent has determined that the
Merger is advisable and is fair to and in the best interests of the holders of
Parent's capital stock, par value $0.01 per share (the "Parent Shares");
WHEREAS, the Stockholders that are signatory to the Voting Agreement
have agreed to vote for the Merger on the terms and subject to the conditions
set forth in this Agreement; and
WHEREAS, this Agreement contemplates that for U.S. Federal income tax
purposes the Merger will qualify as a reorganization within the meaning of Code
Section 368(a).
NOW, THEREFORE, in consideration of the premises and the mutual
promises set forth herein, and in consideration of the representations,
warranties and covenants set forth herein, the Parties agree as follows:
1. Definitions.
"Acquisition Proposal" means any proposal or offer (including,
without limitation, any proposal or offer to the Stockholders) with respect to a
merger, acquisition, consolidation, recapitalization, reorganization,
liquidation, tender offer or exchange offer or similar transaction involving, or
any purchase of 25% or more of the consolidated assets of, or any equity
interest representing 25% or more of the outstanding shares of capital stock in,
the Target.
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"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of Code Section 1504(a) or any similar group defined under a similar
provision of federal, state, local or foreign law.
"Agreement" has the meaning set forth in the preamble.
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction that forms or could form the
basis for any specified consequence.
"Certificate of Merger" has the meaning set forth in Section
2(c) below.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b)
below.
"Closing Sales Price per Parent Share" means, on any day, the
average of the last reported sale price of one Parent Share on the Nasdaq for
each of the five trading days immediately preceding such day.
"COBRA" means the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B and of any similar state law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreements" means the letter agreements dated
February 9, 2000 and March 8, 2000, between Parent and the Target, providing
that, among other things, each Party would maintain confidential certain
information of the other Party.
"Deferred Intercompany Transaction" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"Delaware General Corporation Law" means Title 8, Chapter 1 of
the Delaware Code, as amended.
"Disclosure Schedule" has the meaning set forth in Section 3
below
"Effective Time" has the meaning set forth in Section 2(d)(i)
below.
"Employee Benefit Plan" means any "employee benefit plan" (as
such term is defined in ERISA Section 3(3)) and any other employee benefit plan,
program or arrangement of any kind.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
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"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Employment Agreement" has the meaning set forth in Section
5(j) below.
"Environmental, Health, and Safety Requirements" means all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyl, noise or radiation, each as amended and as
now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means each entity that is treated as a
single employer with the Target for purposes of Code Section 414.
"Escrow Agent" has the meaning set forth in Section 2(f)(i)
below.
"Escrow Agreement" has the meaning set forth in Section
2(f)(i) below.
"Escrow Amount" has the meaning set forth in Section 2(e)(i)
below.
"Excess Loss Account" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
"Exchange Agent" has the meaning set forth in Section 2(e)(i)
below.
"Exchange Fund" has the meaning set forth in Section 2(e)(i)
below.
"FCC" means the Federal Communications Commission.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section
3(j) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Governmental Entity" means any United States federal, state
or local or any foreign government, governmental regulatory or administrative
authority, agency, commission (including any department or political subdivision
of any of the foregoing), court, tribunal or judicial or arbitral body.
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"Governmental Order" means any order, ruling, writ, judgment,
injunction, decree, charge, stipulation, determination or award entered by or
with any Governmental Entity.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnification Agreement" has the meaning set forth in
Section 7(b) below.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names and corporate names,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (c) all copyrightable works,
all copyrights and all applications, registrations and renewals in connection
therewith, (d) all mask works and all applications, registrations and renewals
in connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulae,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"Knowledge" means actual knowledge after reasonable
investigation.
"Laws" mean any laws, statutes, rules, ordinances,
regulations, codes, plans, injunctions, judgments, orders, writs, decrees,
rulings and charges thereunder of any Governmental Entity.
"Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Licenses" has the meaning set forth in Section 3(d)(i) below.
"Material Adverse Effect" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding), a material adverse
change to, or, as the case may be, a materially adverse effect on (x) the
business, assets, revenues, financial condition, operations or prospects of
Target or any of its Subsidiaries identified at or prior to Closing in any
writing; (y) the ability of Target or any of its Subsidiaries to perform any of
its or their payment obligations when due or to perform any other material
obligations; or (z) any right, remedy or benefit of Parent, Parent Subsidiary or
Surviving Corporation hereunder or under any related document.
"MCG" has the meaning set forth in Section 5(n) below.
"MCG Agreement" has the meaning set forth in Section 5(n)
below.
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"Merger" has the meaning set forth in the preamble.
"Merger Consideration" has the meaning set forth in Section
2(d)(v) below.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth
in Section 3(j) below.
"Most Recent Fiscal Month End" has the meaning set forth in
Section 3(j) below.
"Most Recent Fiscal Year End" has the meaning set forth in
Section 3(j) below.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"NASD" means the National Association of Securities Dealers,
Inc.
"Nasdaq" means the Nasdaq National Market.
"Ordinary Course of Business" means the ordinary course of
business consistent with past practice.
"Parent" has the meaning set forth in the preamble.
"Parent Board" means the board of directors of Parent.
"Parent Fairness Opinion" means an opinion of Bear Stearns &
Co. Inc., addressed to the Parent Board, as to the fairness of the Merger to
Parent from a financial point of view.
"Parent SEC Documents" has the meaning set forth in Section
4(g) below.
"Parent Shares" has the meaning set forth in the preamble.
"Parent Special Meeting" has the meaning set forth in Section
5(c)(ii) below.
"Parent Stockholder" means any Person who or which holds any
Parent Shares. "Parent Subsidiary" has the meaning set forth
in the preamble.
"Parties" has the meaning set forth in the preamble.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a Governmental Entity.
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"Per Share Merger Consideration" has the meaning set forth in
Section 2(d)(v) below.
"Pledgee" has the meaning set forth in the preamble of the
Escrow Agreement.
"Principal Executive" has the meaning set forth in Section
5(j) below.
"Process Agent" has the meaning set forth in Section 9(p)
below.
"Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Registration Statement" has the meaning set forth in Section
5(c)(v) below.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"Representative" has the meaning set forth in Section 5(h)(i)
below.
"Requisite Stockholder Approval" means the affirmative vote of
the holders of the outstanding Target Shares in favor of the adoption of this
Agreement in accordance with the New Jersey Business Corporation Act of the
State of New Jersey.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge or other security interest, other than (a) mechanic's,
materialman's and similar liens; (b) liens for taxes not yet due and payable;
(c) purchase money liens and liens securing rental payments under capital lease
arrangements; and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Services Agreement" has the meaning set forth in Section 5(l)
below.
"Stockholder" has the meaning set forth in Section 3(b) below.
"Stock Rights" means each option, warrant, purchase right,
subscription right, conversion right, exchange right or other contract,
commitment or security providing for the issuance or sale of any capital stock,
or otherwise causing to become outstanding any capital stock.
"Subsidiary" of a specified Person means any corporation,
limited liability company, partnership, joint venture or other legal entity of
which the specified Person (either alone or together with any other Subsidiary
of the specified Person) owns, directly or indirectly, more than 50% of the
stock or other equity, partnership, limited liability company or equivalent
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interests, the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity, or otherwise has the power to vote or direct the voting of
sufficient securities to elect a majority of such board of directors or other
governing body.
"Superior Proposal" has the meaning set forth in Section
5(h)(ii) below.
"Surviving Corporation" has the meaning set forth in Section
2(a) below.
"SWDA" has the meaning set forth in Section 3(aa)(iii).
"Target" has the meaning set forth in the preamble.
"Target Board" means the board of directors of the Target.
"Target Shares" has the meaning set forth in the preamble.
"Target Special Meeting" has the meaning set forth in Section
5(c)(i) below.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any report, return, declaration or other
information required to be supplied to a taxing authority in connection with
Taxes.
"Voting Agreement" has the meaning set forth in Section 5(m)
below.
2. The Transaction
(a) The Merger. On and subject to the terms and conditions of
this Agreement, the Parent Subsidiary will merge with and into the Target at the
Effective Time. The Target shall be the corporation surviving the Merger (the
"Surviving Corporation").
(b) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Kelley Drye
& Warren LLP, 1200 19th Street, N.W., Washington, D.C. 20036, commencing at 9:00
a.m. local time on the third business day following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate the
transactions contemplated by this Agreement (other than conditions with respect
to actions the respective Parties will take at the Closing itself) or such other
date as the Parties may mutually determine (the "Closing Date").
(c) Actions at the Closing. At the Closing, (i) the Target
will deliver to Parent and the Parent Subsidiary the various certificates,
instruments and documents referred to in
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Section 6(a) below; (ii) Parent and the Parent Subsidiary will deliver to the
Target the various certificates, instruments and documents referred to in
Section 6(b) below; (iii) the Target and the Parent Subsidiary will file with
the Secretary of State of the State of Delaware and with the Secretary of State
of the State of New Jersey a Certificate of Merger in the form attached as
Exhibit A (the "Certificate of Merger"); and (iv) Parent will deliver or cause
to be delivered the Exchange Fund to the Exchange Agent in the manner provided
below in this Section 2.
(d) Effect of Merger.
(i) General. The Merger shall become effective at the time (the
"Effective Time") the Target and the Parent Subsidiary file the
Certificate of Merger with the Secretary of State of the State of
Delaware and with the Secretary of State of the State of New Jersey or
at such later time as the Parties may agree and specify in the
Certificate of Merger. The Merger shall have the effects set forth in
the Delaware General Corporation Law and the New Jersey Business
Corporation Act. The Surviving Corporation may, at any time after the
Effective Time, take any action (including executing and delivering any
document) in the name and on behalf of either the Target or the Parent
Subsidiary in order to carry out and effectuate the transactions
contemplated by this Agreement.
(ii) Certificate of Incorporation. At the Effective Time, the
certificate of incorporation of the Surviving Corporation shall be
amended to read in its entirety in the form of Exhibit B and, as so
amended, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended in accordance with its terms and as
provided by law.
(iii) By-laws. The By-laws of the Surviving Corporation shall
be amended and restated at and as of the Effective Time to read in their
entirety as did the By-laws of the Parent Subsidiary in effect
immediately prior to the Effective Time and shall be the By-laws of the
Surviving Corporation until amended in accordance with their terms and
as provided by law.
(iv) Directors and Officers. The directors and officers of the
Parent Subsidiary immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation at and as of the
Effective Time (retaining their respective positions and terms of
office), until the earlier of their respective resignation, removal or
otherwise ceasing to be a director or officer, respectively, or until
their respective successors are duly elected and qualified, as the case
may be.
(v) Conversion of Target Shares. At and as of the Effective
Time, (A) each issued and outstanding Target Share will be converted
into the right to receive .571428 Parent Shares (the "Per Share Merger
Consideration"), and all such Target Shares will no longer be
outstanding, will be canceled and will cease to exist, and each holder
of a certificate representing any such Target Shares will thereafter
cease to have any rights with respect to such Target Shares, except the
right to receive the Per Share Merger Consideration for each such Target
Share to
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which the holder of such Target Shares is entitled pursuant to Section
2(e) upon the surrender of such certificate in accordance with Section
2(e) (collectively, the "Merger Consideration"); except that the Per
Share Merger Consideration shall be subject to equitable and
proportionate adjustment in the event of any stock split, stock dividend
or reverse stock split by Parent between the date of this Agreement and
the Closing Date, and (B) each Target Share owned by the Target shall be
canceled without payment therefor. No Target Share shall be deemed to be
outstanding or to have any rights other than those set forth above in
this Section 2(d)(v) after the Effective Time. Notwithstanding anything
to the contrary in this Section 2(d)(v), no fractional Parent Shares
shall be issued to then former holders of Target Shares. In lieu
thereof, each then former holder of a Target Share who would otherwise
have been entitled to receive a fraction of a Parent Share (after taking
into account all certificates delivered by such then former holder at
any one time) shall receive an amount in cash equal to such fraction of
a Parent Share multiplied by $14.
(vi) Conversion of Stock Rights. The Target shall take all such
action as may be necessary to cause, at the Effective Time, each Stock
Right granted by the Target to purchase Target Shares that is
outstanding and unexercised immediately prior thereto (whether or not
vested or exercisable), to be converted automatically into an equivalent
Stock Right to purchase Parent Shares in an amount and at an exercise
price determined as follows:
(x) The number of Parent Shares to be subject to the new
Stock Right will be equal to the product of the number of
Target Shares subject to the original Stock Right
multiplied by the Per Share Merger Consideration, provided
that any fractional Parent Shares resulting from this
multiplication will be rounded as provided in the
instrument governing the Stock Right or, if there is no
such instrument, up to the next whole share; and
(y) The exercise price per Parent Share under the new Stock
Right will be equal to the quotient of the exercise price
per Target Share under the original Stock Right divided by
the Per Share Merger Consideration, provided that the
exercise price resulting from this division will be rounded
as provided in the instrument governing the Stock Right or,
if there is no instrument, up to the next whole cent.
The adjustments provided in this Section 2(d)(vi) with respect
to any original Stock Rights that are "incentive stock
options" (as defined in Section 422 of the Code) must be and
are intended to be effected in a manner that is consistent
with Section 424(a) of the Code. The option plan of the Target
under which the original Stock Rights were issued will be
assumed by Parent, and the duration and other terms of the new
Stock Rights will be the same as the original Stock Rights,
except that all references to the Target will be deemed to be
references to Parent. Promptly following the Effective Time,
Parent shall deliver to the former holders
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of original Stock Rights appropriate agreements representing
the right to acquire Parent Shares on the terms and conditions
set forth in this Section 2(d)(vi); provided, however, that a
portion of any warrants issuable under such agreements, equal
in an amount that when added to the portion of the Merger
Consideration to be withheld and delivered to the Escrow Agent
in accordance with Section 2(e)(i) constitutes 10% of the
total Merger Consideration, shall be withheld from each of the
Pledgees (as defined in the Escrow Agreement) under such
agreements under the Escrow Agreement proportionately, based
on the Merger Consideration to which each such Pledgee is
entitled pursuant to this Agreement.
The Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of Parent Shares for
delivery on exercise of the new Stock Rights in accordance
with this Section 2(d)(vi). At the Effective Time, Parent
shall file a registration statement on Form S-8 (or any
successor form) or another appropriate form, and seek to cause
this Form S-8 to become effective at or as soon as practicable
after the Effective Time, with respect to Parent Shares
subject to new employee stock options included in the Stock
Rights and shall use best efforts to maintain the
effectiveness of this registration statement or registration
statements (and maintain the current status of the prospectus
or prospectuses contained therein) for so long as these
options remain outstanding. With respect to those individuals
who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Securities Exchange
Act, Parent shall administer the option plans assumed pursuant
to this Section 2(d)(vi) in a manner that complies with Rule
16b-3 promulgated under the Securities Exchange Act to the
extent the Target option plan complied with this rule prior to
the Merger.
(vii) Conversion of Capital Stock of the Parent
Subsidiary. At and as of the Effective Time, each share of
common stock, $.01 par value per share, of the Parent
Subsidiary will be converted into one share of common stock,
$.01 par value per share, of the Surviving Corporation.
(e) Procedure for Exchange.
(i) Immediately after the Effective Time, (A) Parent
shall furnish to First City Transfer Company, its transfer
agent, or such other bank or trust company reasonably
acceptable to the Target, to act as exchange agent (the
"Exchange Agent") a corpus (the "Exchange
Fund") consisting of Parent Shares and cash sufficient to
permit the Exchange Agent to make full payment
of the Merger Consideration to the holders of all of the
issued and outstanding Target Shares (other than any Target
Shares owned by the Target), less such portion of the Parent
Shares to be delivered to the holders of the issued and
outstanding Target Shares which when added to the other Merger
Consideration to be delivered to the Escrow Agent pursuant to
the Escrow Agreement pursuant to Section 2(d)(vi) above
constitutes 10% of the total Merger Consideration (the "Escrow
Amount") which will be withheld from each of the Pledgees
under the Escrow Agreement proportionately,
based on the Merger Consideration to which each such Pledgee
is entitled pursuant to this Agreement and (B) Parent will
cause the Exchange Agent
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to mail a letter of transmittal (with instructions for its
use) in a form to be mutually agreed upon by the Target and
Parent prior to Closing to each holder of issued and
outstanding Target Shares (other than any Target Shares owned
by the Target) for the holder to use in surrendering the
certificates that, immediately prior to the Effective Time,
represented his or its Target Shares against payment of the
Merger Consideration to which the holder is entitled pursuant
to Section 2(e)(ii), subject to the escrow of the Escrow
Amount pursuant to the Escrow Agreement. Upon surrender to the
Exchange Agent of these certificates, together with the letter
of transmittal, duly executed and completed in accordance with
the letter of transmittal instructions, subject to the escrow
of the Escrow Amount pursuant to the Escrow Agreement, Parent
shall promptly cause to be issued a certificate representing
that number of whole Parent Shares and a check representing
the amount of cash in lieu of any fractional shares to which
the Persons are entitled, after giving effect to any required
tax withholdings. No interest will be paid or accrued on the
cash in lieu of fractional shares payable to recipients of
Parent Shares. If payment is to be made to a Person other than
the registered holder of the certificate surrendered, it shall
be a condition of payment that the surrendered certificate
must 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 the Surviving Corporation or the Exchange
Agent that this tax has been paid or is not applicable. If any
certificate representing Target Shares is lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
Person claiming a certificate to be lost, stolen or destroyed,
the Exchange Agent will issue in exchange for this lost,
stolen or destroyed certificate the Merger Consideration
deliverable in respect thereof; except that, the Person to
whom this Merger Consideration is paid shall, as a condition
precedent to the payment thereof, indemnify the Surviving
Corporation in a manner reasonably satisfactory to it against
any claim that may be made against the Surviving Corporation
with respect to the certificate alleged to have been lost,
stolen or destroyed. No dividends or other distributions
declared after the Effective Time with respect to Parent
Shares and payable to the holders of record thereof will be
paid to the holder of any unsurrendered certificate until the
holder thereof shall surrender this certificate in accordance
with this Section 2(e). After the surrender of a certificate
in accordance with this Section 2(e), the record holder
thereof is entitled to receive any such dividends or other
distributions, without any interest thereon, which previously
had become payable with respect to the Parent Shares
represented by such certificate. No holder of an unsurrendered
certificate is entitled, until the surrender of such
certificate, to vote the Parent Shares into which his or its
Target Shares shall have been converted.
(ii) The Parent shall pay, or shall cause the Surviving
Corporation to pay, all charges and expenses of the Exchange
Agent.
(f) Escrow.
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(i) At the Effective Time, Parent, the Parent
Subsidiary, Target, Kenneth G. Baritz and the Escrow Agent
shall execute and deliver an escrow agreement substantially in
the form of the attached Exhibit C (the "Escrow Agreement")
under which a person mutually satisfactory to Parent, the
Parent Subsidiary and Target shall act as escrow agent (the
"Escrow Agent") with respect to the Parent Shares and other
securities convertible into Parent Shares deposited with the
Escrow Agent. Parent shall deposit the Escrow Amount with the
Escrow Agent, which shall be withheld from the Merger
Consideration as provided in Section 2(e) in connection with
the indemnification obligations set forth in Section 7 below
and the Indemnification Agreement.
(ii) Subject to the provisions of this Section 2(f),
the Escrow Agreement and the Indemnification Agreement, the
Escrow Amount shall be paid to the Stockholders one year
following the Effective Time, as reduced by the amount of any
Material Adverse Effect the Parent, Parent Subsidiary or
Surviving Corporation may suffer based on, arising from or in
connection with all claims for indemnification asserted in
writing within such one year period pursuant to the
Indemnification Agreement that have not been fully resolved.
(iii) For all purposes of this Agreement and the Escrow
Agreement, whenever Parent Shares shall be required to be
delivered to satisfy an indemnity or contribution obligation
of any Party hereto, each Parent Share shall be valued at the
Closing Sales Price per Parent Share on the date when a notice
asserting a claim under the Indemnification Agreement is given
pursuant thereto. In the event of any stock split, reverse
stock split, stock combination or reclassification of the
Parent Shares or any merger, consolidation or combination of
Parent with any other entity or entities, the deemed value
specified above for the Parent Shares shall be proportionally
adjusted so that the deemed value of the Parent Shares after
such event shall be the same as the deemed value of the Parent
Shares prior to such event. All such adjustments shall be made
successively.
(iv) Kenneth G. Baritz and his representatives shall be
entitled to inspect all of the work papers, schedules and
other supporting documentation relating to the calculation of
any Material Adverse Effect pursuant to Section 2(f)(ii).
(g) Closing of Transfer Records. After the Effective Time, no
transfer of Target Shares outstanding prior to the Effective Time may be made on
the stock transfer books of the Surviving Corporation. If, after the Effective
Time, certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be canceled and exchanged for certificates
representing Parent Shares and cash in lieu of fractional shares, if any, as
provided in Section 2(e).
3. Representations and Warranties of the Target. The Target
represents and warrants to the Parent and Parent Subsidiary that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3 unless otherwise specifically provided),
except as set forth
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in the disclosure schedule delivered by the Target to the Parent on the date
hereof and initialed by the Parties (the "Disclosure Schedule"). Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with particularity and describes the relevant facts.
Without limiting the generality of the foregoing, the mere listing (or inclusion
of a copy) of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). All information that is necessary to make a given section of the
Disclosure Schedule complete and accurate, but is not fully disclosed therein,
shall nevertheless be deemed to be complete and accurate if it is contained in
any other paragraph of the Disclosure Schedule provided that appropriate
cross-references are included in all applicable sections of the Disclosure
Schedule. The Disclosure Schedule will be arranged in paragraphs corresponding
to the lettered and numbered paragraphs contained in this Section 3.
(a) Organization, Qualification, and Corporate Power. Each of
the Target and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of the Target and its Subsidiaries is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required except if such failure would not have a
Material Adverse Effect. Each of the Target and its Subsidiaries has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used by
it. Section 3(a) of the Disclosure Schedule lists for each of the Target and its
Subsidiaries (i) the directors and officers; (ii) the state of incorporation;
and (iii) the jurisdictions in which the corporation is qualified to do
business. The Target has delivered to the Parent correct and complete copies of
the charter and bylaws of each of the Target and its Subsidiaries (as amended to
date). The minute books (containing the records of meetings of the stockholders,
the board of directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of each of the Target and its
Subsidiaries are correct and complete, and the Target has delivered to the
Parent copies of all such items. None of the Target and its Subsidiaries is in
default under or in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the
Target consists of 57,500,000 Target Shares, of which 50,000,000 shares are
designated as common stock and 7,500,000 shares are designated as preferred
stock. Of the authorized common stock, 19,236,833 Target Shares are issued and
outstanding and 30,000 Target Shares are held in treasury. All of the issued and
outstanding Target Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the respective stockholders
as set forth in Section 3(b) of the Disclosure Schedule (each a "Stockholder"
and collectively, "Stockholders"). Other than options that are exercisable into
2,180,278 Target Shares and warrants that are exercisable into 3,582,889 Target
Shares (as identified in Section 3(b) of the Disclosure Schedule with all
relevant material information including but not limited to exercise price,
exercise term, transferability restrictions, employment related conditions (if
any) and vesting rights), there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Target to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or
22
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similar rights with respect to the Target. There are no voting trusts, proxies,
or other agreements or understandings with respect to the voting of the capital
stock of the Target (other than the Voting Agreement). Each Stockholder holds of
record and, to Target's Knowledge, owns beneficially the number of Target Shares
set forth next to his or its name in Section 3(b) of the Disclosure Schedule,
free and clear of any restrictions on transfer (other than any restrictions
under the Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities, claims and
demands. To Target's Knowledge, no Stockholder is a party to any option,
warrant, purchase right or other contract or commitment that could require the
Stockholder to sell, transfer or otherwise dispose of any capital stock of the
Target (other than this Agreement).
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any Law or Governmental Order to which any of the Target and
its Subsidiaries is subject or any provision of the charter or bylaws of any of
the Target and its Subsidiaries or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which any of the Target and its Subsidiaries is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets). None of the Target and its
Subsidiaries needs to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any Governmental Entity in order for the
Parties to consummate the transactions contemplated by this Agreement except for
(x) the filing of a Notification and Report Form by Target under the
Hart-Scott-Rodino Act; (y) the filings pursuant to the Delaware General
Corporation Law and the New Jersey Business Corporation Act; and (z) the filings
with and the approvals of the FCC and state public utility commissions or other
Governmental Entities identified in Section 3(c) of the Disclosure Schedule.
(d) Compliance with Laws; Licenses. Except as set forth in
Section 3(d) of the Disclosure Schedule, Target and its Subsidiaries have
conducted and continue to conduct their respective businesses in accordance with
all Laws, Licenses and Governmental Orders applicable to any of the businesses
in which any of the Target and its Subsidiaries is engaged and in which they
presently propose to engage, and Target and its Subsidiaries are not in
violation of any such Law, License or Governmental Order except to the extent
that noncompliance would not have a Material Adverse Effect.
(i) Target and its Subsidiaries hold all permits,
licenses, certificates, variances, exemptions, orders,
approvals, tariffs, rate schedules and similar documents from
Governmental Entities (collectively, "Licenses") that are
necessary to own, lease and operate the assets and
properties they currently own, lease and operate and to
conduct their respective businesses and operations in the
manner previously conducted and as proposed to be conducted.
Section 3(d)(i) of the Disclosure Schedule sets forth all
Licenses issued by the FCC or any state public utility
commission and all other Licenses held by Target or its
Subsidiaries, together with any pending applications
23
<PAGE>
filed by Target or its Subsidiaries for other Licenses. Target
has delivered to Parent correct and complete copies of all
Licenses (including the applications related thereto) and all
pending applications listed on Section 3(d)(i) of the
Disclosure Schedule. No event has occurred with respect to any
such License or application that would permit the revocation,
termination, suspension or denial thereof or would result in
any impairment of the rights of the holder thereof. No notice
has been received and to Target's Knowledge no investigation
or review is pending or threatened by any Governmental Entity
with regard to any alleged violation by Target or any of its
Subsidiaries of any License or any alleged failure by Target
or any of its Subsidiaries to have any Licenses.
(e) Customers. Listed in Section 3(e) of the Disclosure
Schedule are the names and addresses of the ten most significant customers (by
revenue) of Target and its Subsidiaries for the twelve-month period ended
December 31, 1999 and the amount for which each such customer was invoiced
during such period. Target has not received any notice or has any Knowledge that
any significant customer of Target or any of its Subsidiaries has ceased, or
will cease, to use the products, equipment, goods or services of Target or any
of its Subsidiaries, or has substantially reduced or will substantially reduce,
the use of such products, equipment, goods or services at any time.
(f) Suppliers. Listed in Section 3(f) of the Disclosure
Schedule are the names and addresses of all the suppliers from which Target or
any of its Subsidiaries ordered services, raw materials, supplies, merchandise
and other goods from with an aggregate purchases price of $500,000 or more
during the twelve-month period ended December 31, 1999. Except as disclosed in
Section 3(f) of the Disclosure Schedule, Target has not received any notice or
has any Knowledge that any such supplier will not sell services, raw materials,
supplies, merchandise and other goods to Target or any of its Subsidiaries at
any time, on terms and conditions substantially similar to those used in its
current sales to Target or any of its Subsidiaries, subject only to general and
customary price increases.
(g) Brokers' Fees. Neither the Target and its Subsidiaries nor
any Stockholder has any Liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated by
this Agreement.
(h) Title to Assets. Except as identified in Section 3(h) of
the Disclosure Schedule, the Target and its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by them, located on their premises, or shown on the Most Recent Balance
Sheet or acquired after the date thereof, free and clear of all Security
Interests, except for properties and assets disposed of in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet.
(i) Subsidiaries. Section 3(i) of the Disclosure Schedule sets
forth for each Subsidiary of the Target (i) its name and jurisdiction of
incorporation, (ii) the number of shares of authorized capital stock of each
class of its capital stock, (iii) the number of issued and outstanding shares of
each class of its capital stock, the names of the holders thereof, and the
number of shares held by each such holder, and (iv) the number of shares of its
capital stock held in treasury. All of the issued and outstanding shares of
capital stock of each Subsidiary of the Target have been duly authorized and are
validly issued, fully paid and nonassessable. All of the outstanding shares of
each Subsidiary of the Target is free and clear of any restrictions on
24
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transfer (other than restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights or other contracts or commitments that could require any
of the Target and its Subsidiaries to sell, transfer or otherwise dispose of any
capital stock of any of its Subsidiaries or that could require any Subsidiary of
the Target to issue, sell or otherwise cause to become outstanding any of its
own capital stock. There are no outstanding stock appreciation, phantom stock,
profit participation or similar rights with respect to any Subsidiary of the
Target. There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any capital stock of any Subsidiary
of the Target. None of the Target and its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust or other business association which is not a
Subsidiary of the Target.
(j) Financial Statements. Attached hereto as Exhibit D are the
following financial statements (collectively the "Financial Statements"): (i)
audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended October
31, 1997, October 31, 1998, and October 31, 1999 (the "Most Recent Fiscal Year
End") for the Target and its Subsidiaries; and (ii) unaudited consolidated
balance sheets and statements of income, changes in stockholders' equity, and
cash flow (the "Most Recent Financial Statements") as of and for the month ended
December 31, 1999 (the "Most Recent Fiscal Month End") for the Target and its
Subsidiaries. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of the Target
and its Subsidiaries as of such dates and the results of operations of the
Target and its Subsidiaries for such periods, are correct and complete, and are
consistent with the books and records of the Target and its Subsidiaries (which
books and records are correct and complete).
(k) Events Subsequent to Most Recent Fiscal Year End. Since
the Most Recent Fiscal Year End, there has not been any Material Adverse Effect
involving any of the Target and its Subsidiaries. Without limiting the
generality of the foregoing, since that date:
(i) none of the Target and its Subsidiaries has sold,
leased, transferred, or assigned any of its assets, tangible
or intangible, other than in the Ordinary Course of Business;
(ii) none of the Target and its Subsidiaries has
entered into any agreement, contract, lease or license (or
series of related agreements, contracts, leases and licenses)
either involving more than $250,000 or other than in the
Ordinary Course of Business;
(iii) no party (including any of the Target and its
Subsidiaries) has accelerated, terminated, modified or
cancelled any agreement, contract, lease or license (or series
of related agreements, contracts, leases and licenses)
involving more than $250,000 to which any of the Target and
its Subsidiaries is a party or by which any of them is bound;
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(iv) none of the Target and its Subsidiaries has made
any capital expenditure (or series of related capital
expenditures) either involving more than $250,000 or other
than in the Ordinary Course of Business;
(v) none of the Target and its Subsidiaries has made
any capital investment in, any loan to, or any acquisition of
the securities or assets of, any other Person (or series of
related capital investments, loans or acquisitions) either
involving more than $50,000 or other than in the Ordinary
Course of Business;
(vi) none of the Target and its Subsidiaries has issued
any note, bond or other debt security or created, incurred,
assumed or guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than
$50,000 singly or $250,000 in the aggregate;
(vii) none of the Target and its Subsidiaries has
delayed or postponed the payment of accounts payable and other
Liabilities other than in the Ordinary Course of Business;
(viii) none of the Target and its Subsidiaries has
cancelled, compromised, waived or released any right or claim
(or series of related rights and claims) either involving more
than $50,000 or other than in the Ordinary Course of Business;
(ix) none of the Target and its Subsidiaries has
granted any license or sublicense of any rights under or with
respect to any Intellectual Property;
(x) other than as contemplated by this Agreement, there
has been no change made or authorized in the charter or bylaws
of any of the Target and its Subsidiaries;
(xi) none of the Target and its Subsidiaries has
issued, sold or otherwise disposed of any of its capital
stock, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange or
exercise) any of its capital stock other than as described in
Section 3(k)(xi) of the Disclosure Schedule;
(xii) none of the Target and its Subsidiaries has
declared, set aside or paid any dividend or made any
distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased or otherwise acquired
any of its capital stock;
(xiii) none of the Target and its Subsidiaries has
experienced any damage, destruction or loss (whether or not
covered by insurance) to its property which could have a
Material Adverse Effect;
(xiv) none of the Target and its Subsidiaries has made
any loan to, or entered into any other transaction with, any
of its directors, officers or employees other than in the
Ordinary Course of Business;
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(xv) none of the Target and its Subsidiaries has
entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any such
existing contract or agreement;
(xvi) none of the Target and its Subsidiaries has
granted any increase in the base compensation of any of its
directors, officers or employees other than in the Ordinary
Course of Business;
(xvii) none of the Target and its Subsidiaries has
adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance or other plan, contract
or commitment for the benefit of any of its directors,
officers or employees (or taken any such action with respect
to any other Employee Benefit Plan);
(xviii) none of the Target and its Subsidiaries has
made any other change in employment terms for any of its
directors, officers or employees other than in the Ordinary
Course of Business;
(xix) none of the Target and its Subsidiaries has made
or pledged to make any charitable or other capital
contribution other than in the Ordinary Course of Business;
(xx) there has not been any other occurrence, event,
incident, action, failure to act or transaction other than in
the Ordinary Course of Business involving any of the Target
and its Subsidiaries that could have a Material Adverse
Effect; and
(xxi) none of the Target and its Subsidiaries has
committed to any of the foregoing.
(l) Undisclosed Liabilities. None of the Target and its
Subsidiaries has any Liability (and to the Knowledge of the Target) there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet and (ii) Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of or was caused by
any breach of contract, breach of warranty, tort, infringement or violation of
law).
(m) Legal Compliance. Each of the Target, its Subsidiaries,
and their respective predecessors and Affiliates has complied in all material
respects with all Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or, to the Target's
Knowledge, commenced against any of them alleging any failure so to comply the
failure of which could have a Material Adverse Effect.
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(n) Tax Matters.
(i) Each of the Target and its Subsidiaries has filed
all Tax Returns that it was required to file. All such Tax
Returns were correct and complete in all material respects.
All Taxes owed by any of the Target and its Subsidiaries
(whether or not shown on any Tax Return) have been paid. None
of the Target and its Subsidiaries currently is the
beneficiary of any extension of time within which to file any
Tax Return. No claim has ever been made by a Governmental
Entity in a jurisdiction where any of the Target and its
Subsidiaries does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of any of the Target
and its Subsidiaries that arose in connection with any failure
(or alleged failure) to pay any Tax.
(ii) Each of the Target and its Subsidiaries has
withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third
party.
(iii) There is no dispute or claim concerning any
Liability for any Tax of any of the Target and its
Subsidiaries either (A) claimed or raised by any Governmental
Entity in writing received by the Target or any of its
Subsidiaries or (B) as to which any of the directors and
officers (and employees responsible for Tax matters) of the
Target and its Subsidiaries has Knowledge based on personal
contact with any agent of such Governmental Entity. Section
3(n) of the Disclosure Schedule lists all federal, state,
local and foreign income Tax Returns filed with respect to any
of the Target and its Subsidiaries for taxable periods ended
on or after October 31, 1998, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Target has delivered
to the Parent correct and complete copies of all federal
income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the
Target and its Subsidiaries since October 31, 1998.
(iv) None of the Target and its Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to a Tax assessment or
deficiency.
(v) None of the Target and its Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible
corporations. None of the Target and its Subsidiaries has made
any payments, is obligated to make any payments, or is a party
to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible
under Code Section 280G. None of the Target and its
Subsidiaries has been a United States real property holding
corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section
897(c)(1)(A)(ii). Each of the Target and its Subsidiaries has
disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial
understatement of federal income Tax
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within the meaning of Code Section 6662. None of the Target
and its Subsidiaries is a party to any Tax allocation or
sharing agreement. None of the Target and its Subsidiaries (A)
has been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common
parent of which was the Target) or (B) has any Liability for
the Taxes of any Person (other than any of the Target and its
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(vi) Section 3(n) of the Disclosure Schedule sets forth
the following information with respect to each of the Target
and its Subsidiaries (or, in the case of clause (B) below,
with respect to each of the Subsidiaries) as of the most
recent practicable date (as well as on an estimated pro forma
basis as of the Closing giving effect to the consummation of
the transactions contemplated hereby): (A) the amount of any
net operating loss, net capital loss, unused investment or
other credit, unused foreign tax, or excess charitable
contribution allocable to the Target or Subsidiary; and (B)
the amount of any deferred gain or loss allocable to the
Target or Subsidiary arising out of any Deferred Intercompany
Transaction. Promptly following the execution of this
Agreement, Target shall update Section 3(n) of the Disclosure
Schedule to add (C) the basis of the Target or Subsidiary in
its assets; and (D) the basis of the stockholder(s) of the
Subsidiary in its stock (or the amount of any Excess Loss
Account).
(vii) The unpaid Taxes of the Target and its
Subsidiaries (A) did not, as of the Most Recent Fiscal Month
End, exceed the reserve for Taxes (other than any reserve for
deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and
(B) do not exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the past
custom and practice of the Target and its Subsidiaries in
filing their Tax Returns.
(o) Real Property.
(i) Neither the Target nor any of its Subsidiaries owns
any real property.
(ii) Section 3(o)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to any
of the Target and its Subsidiaries. The Target has delivered
to the Parent correct and complete copies of the leases and
subleases listed in Section 3(o)(ii) of the Disclosure
Schedule (as amended to date). With respect to each lease and
sublease listed in Section 3(o)(ii) of the Disclosure
Schedule:
(1) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
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<PAGE>
(2) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby;
(3) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification or acceleration
thereunder;
(4) no party to the lease or sublease has repudiated any
provision thereof;
(5) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(6) with respect to each sublease, the representations and
warranties set forth in subsections (1) through (5) above are true and correct
with respect to the underlying lease;
(7) none of the Target and its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in
the leasehold or subleasehold;
(8) all facilities leased or subleased thereunder have
received all approvals of Governmental Entities (including Licenses) required in
connection with the operation thereof and have been operated and maintained in
accordance with all Laws;
(9) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities; and
(10) to the Knowledge of the Target, there are no restrictions
that impair the current use or occupancy of the property that is subject to the
lease.
(p) Intellectual Property.
(i) Set forth in Section 3(p) of the Disclosure
Schedule is a complete and correct list of all Intellectual
Property owned or used by the Target or its Subsidiaries.
Except as set forth in 3(p) of the Disclosure Schedule, (A)
the Target and/or its subsidiaries own or have the right to
use all of such Intellectual Property free and clear of any
Security Interest, license or other restriction; (B) no
proceedings have been instituted, are pending or, to the
Knowledge of the Target are threatened, which challenge the
rights of the Target and/or its Subsidiaries in respect of
such Intellectual Property or the validity thereof and, to the
Knowledge of the Target, there is no Basis for any such
proceedings; (C) none of such Intellectual Property violates
any Laws, or has at any time infringed on or violated any
rights of others, or is being infringed by others; and (D)
none of such Intellectual Property is subject to any
outstanding Governmental Order.
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(ii) The Target and its Subsidiaries own or have the
right to use pursuant to license, sublicense, agreement or
permission all Intellectual Property necessary or desirable
for the operation of the businesses of the Target and its
Subsidiaries as presently conducted and as presently proposed
to be conducted. Each item of Intellectual Property owned or
used by any of the Target and its Subsidiaries immediately
prior to the Closing hereunder will be owned or available for
use by the Surviving Corporation or the Target's Subsidiary on
identical terms and conditions immediately subsequent to the
Closing hereunder. Each of the Target and its Subsidiaries has
taken all necessary and desirable action to maintain and
protect each item of Intellectual Property that it owns or
uses. None of the Target and its Subsidiaries has ever agreed
to indemnify any Person for or against any interference,
infringement, misappropriation or other conflict with respect
to any item included in such Intellectual Property.
(q) Tangible Assets. The Target and its Subsidiaries own or
lease all buildings, machinery, equipment and other tangible assets necessary
for the conduct of their businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
(r) Inventory. Neither the Target nor its Subsidiaries holds
any supplies, manufactured or purchased parts, goods in process or finished
goods for sale in the Ordinary Course of Business.
(s) Contracts. Section 3(s) of the Disclosure Schedule lists
the following contracts and other agreements to which any of the Target and its
Subsidiaries is a party:
(i) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing
for annual lease payments in excess of $50,000 per annum;
(ii) any agreement (or group of related agreements) for
the purchase or sale of raw materials, commodities, supplies,
products or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over
a period of more than one year, result in a loss to any of the
Target and its Subsidiaries, or involve annual consideration
in excess of $250,000;
(iii) any agreement concerning a partnership or joint
venture;
(iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed or guaranteed
any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $50,000 or under which it has imposed
a Security Interest on any of its assets, tangible or
intangible;
(v) any agreement concerning confidentiality or
noncompetition;
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(vi) any agreement with any of the Stockholders and
their Affiliates (other than the Target and its Subsidiaries);
(vii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance or other
plan or arrangement for the benefit of its current or former
directors, officers or employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual
on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $70,000 or providing
severance benefits;
(x) any agreement under which it has advanced or loaned
any amount to any of its directors, officers or employees
outside the Ordinary Course of Business;
(xi) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect;
or
(xii) any other agreement (or group of related
agreements) the performance of which involves annual
consideration in excess of $50,000.
The Target has delivered to the Parent a correct and complete copy of each
written agreement listed in Section 3(s) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 3(s) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C) no
party is in material breach or material default, and no event has occurred which
with notice or lapse of time would constitute a material breach or material
default, or permit termination, modification or acceleration under the
agreement; and (D) no party has repudiated any material provision of the
agreement.
(t) Notes and Accounts Receivable. All notes and accounts
receivable of the Target and its Subsidiaries are reflected properly on their
books and records, are valid receivables and subject to no setoffs or
counterclaims, are current and collectible (except as described in Section 3(t)
of the Disclosure Schedule), subject only to the reserve for bad debts set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Target and its Subsidiaries. Listed in
Section 3(t) of the Disclosure Schedule are notes or accounts receivable of the
Company or any of its Subsidiaries in excess of $50,000.
(u) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of the Target and its Subsidiaries.
(v) Insurance. Section 3(v) of the Disclosure Schedule sets
forth the following information with respect to each current insurance policy
(including policies providing property,
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casualty, liability and workers' compensation coverage and bond and surety
arrangements) to which any of the Target and its Subsidiaries are a party, a
named insured, or otherwise the beneficiary of coverage:
(i) the name, address and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence or other basis) and
amount (including a description of how deductibles and
ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither any of the Target and its Subsidiaries nor any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and to the Knowledge of the Target, no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification or acceleration under the
policy; and (D) no party to the policy has repudiated any provision thereof.
Each of the Target and its Subsidiaries has been covered during the past 5 years
by insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. Neither Target nor any of
its Subsidiaries has maintained any self-insurance arrangements during the past
5 years.
(w) Litigation. Section 3(w) of the Disclosure Schedule sets
forth each instance in which any of the Target and its Subsidiaries (i) is
subject to any outstanding Governmental Order or (ii) is a party or to the
Knowledge of the Target is threatened to be made a party to any action, suit,
proceeding, hearing or investigation of, in or before, any Governmental Entity
or quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction or before any arbitrator or mediator. Except as set forth
in Section 3(w) of the Disclosure Schedule, none of such actions, suits,
proceedings, hearings and investigations could result in any Material Adverse
Effect.
(x) Employees. To the Knowledge of the Target, no executive,
key employee, or group of employees has any plans to terminate employment with
any of the Target and its Subsidiaries and there is no organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of any of the Target and its Subsidiaries. None of the
Target and its Subsidiaries is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. None of the
Target and its Subsidiaries has committed any unfair labor practice.
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(y) Employee Benefits.
(i) Section 3(y) of the Disclosure Schedule lists each
Employee Benefit Plan that any of the Target and its
Subsidiaries maintains, to which any of the Target and its
Subsidiaries contributes or has any obligation to contribute,
and describes any Liability or potential Liability that may be
incurred by or imposed on the Target or any of its
Subsidiaries with respect thereto.
(1) To the Knowledge of the Target, each such Employee Benefit
Plan (and each related trust, insurance contract or fund) has been maintained,
funded and administered in accordance with the terms of such Employee Benefit
Plan and complies in form and in operation in all material respects with the
applicable requirements of ERISA, the Code, and other applicable laws.
(2) To the Knowledge of the Target, all material required
reports and descriptions (including annual reports (IRS Form 5500), summary
annual reports, and summary plan descriptions) have been timely filed and/or
distributed in accordance with the applicable requirements of ERISA and the Code
with respect to each such Employee Benefit Plan. To the Knowledge of the Target,
the requirements of COBRA have been met in all material respects with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan
subject to COBRA.
(3) All material contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been made within the time period prescribed by ERISA to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan and all material
contributions for any period ending on or before the Closing Date which are not
yet due have been made to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Target and its Subsidiaries.
All premiums or other payments for all periods ending on or before the Closing
Date, that are due on or before the Closing Date, have been paid with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(4) Each such Employee Benefit Plan which is intended to meet
the requirements of a "qualified plan" under Code Section 401(a) has received a
determination from the Internal Revenue Service that such Employee Benefit Plan
is so qualified, and to the Knowledge of the Target nothing has occurred since
the date of such determination that could adversely affect the qualified status
of any such Employee Benefit Plan.
(5) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested and
nonvested Liabilities thereunder as determined by the independent actuary for
the Employee Pension Benefit Plan in accordance with PBGC methods, factors, and
assumptions applicable to an Employee Pension Benefit Plan terminating on the
Closing Date.
(6) The Target has delivered to the Parent correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination
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letter received from the Internal Revenue Service, the most recent annual report
(IRS Form 5500, with all applicable attachments), and all related trust
agreements, insurance contracts, and other funding arrangements which implement
each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that
any of the Target, its Subsidiaries, and any ERISA Affiliate
maintains, to which any of them contributes or has any
obligation to contribute, and describes any Liability or
potential Liability that may be incurred by or imposed on the
Target or any of its Subsidiaries with respect thereto:
(1) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely or
partially terminated or to the Knowledge of the Target been the subject of a
Reportable Event. No proceeding by the PBGC to terminate any such Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been instituted or
threatened.
(2) To the Knowledge of the Target, there have been no
Prohibited Transactions with respect to any such Employee Benefit Plan. No
Fiduciary has any material Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or investment of
the assets of any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or the investment
of the assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or to the Knowledge of the Target is threatened. None of
the directors and officers (and employees with responsibility for employee
benefits matters) of the Target and its Subsidiaries has any Knowledge of any
Basis for any such action, suit, proceeding, hearing or investigation.
(3) None of the Target and its Subsidiaries has incurred any
material Liability to the PBGC (other than with respect to PBGC premium payments
not yet due) or otherwise under Title IV of ERISA (including any withdrawal
liability as defined in ERISA Section 4201) or under the Code with respect to
any such Employee Benefit Plan which is an Employee Pension Benefit Plan, or
under COBRA with respect to any such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(iii) None of the Target, its Subsidiaries, and any
ERISA Affiliate contributes to, has any obligation to
contribute to, or has any Liability (including withdrawal
liability as defined in ERISA Section 4201) under or with
respect to any Multiemployer Plan.
(iv) Section 3(y)(iv) of the Disclosure Schedule lists
each Employee Welfare Benefit Plan that any of the Target and
its Subsidiaries maintains, to which any of the Target and its
Subsidiaries contributes or has any obligation to contribute,
and describes any Liability or potential Liability that may be
incurred by or imposed on the Target or any of its
Subsidiaries with respect to medical, health or life insurance
or other welfare-type benefits for current or future retired
or terminated employees, their spouses, or their dependents
(other than in accordance with COBRA).
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(z) Guaranties. None of the Target and its Subsidiaries is a
guarantor or otherwise is liable for any Liability or obligation (including
indebtedness) of any other Person.
(aa) Environmental, Health and Safety Matters.
(i) The properties and facilities currently occupied by
the Target and its Subsidiaries are not being used by Target
or its Subsidiaries to make, store, handle, treat, dispose,
generate, or transport hazardous substances in violation of
any Environmental, Health, and Safety Requirement.
(ii) To the Knowledge of Target, hazardous substances
have never been made, stored, handled, treated, disposed of,
generated, or transported on or from the properties and
facilities occupied by the Target and its Subsidiaries during
the term of such occupancy, except in accordance with Law.
(iii) The properties, facilities and operations of the
Target and its Subsidiaries and their respective predecessors
and Affiliates have complied and are in compliance in all
material respects with all applicable Environmental, Health,
and Safety Requirements. Without limiting the generality of
the foregoing, each of the Target, its Subsidiaries and their
respective Affiliates has obtained and complied with, and is
in compliance with, all permits, licenses and other
authorizations that are required pursuant to Environmental,
Health, and Safety Requirements for the occupation of its
facilities and the operation of its business; a list of all
such permits, licenses and other authorizations is set forth
in Section 3(aa)(iii) of the Disclosure Schedule.
(iv) To the Knowledge of Target, none of the
properties, facilities or operations of the Target and its
Subsidiaries is subject to any judicial or administrative
proceedings alleging the violation of any applicable
Environmental, Health, and Safety Requirements.
(v) To the Knowledge of Target, none of the properties,
facilities or operations of the Target and its Subsidiaries is
the subject of federal, state or local investigation
evaluating whether any remedial action is needed to respond to
a release of any hazardous or toxic waste, substance or
constituent, any petroleum or petroleum product, or any other
hazardous, illegal or unlawful substance into the environment.
(vi) Neither the Target nor its Subsidiaries has filed
any notice under any Law indicating past or present treatment
or disposal of a hazardous waste, hazardous substance or any
petroleum or petroleum product, or reporting a spill or
release of a hazardous or toxic waste, substance or
constituent, any petroleum or petroleum product, or any other
substance into the environment.
(vii) None of the Target and its Subsidiaries have
within the past year received written notice nor are they
aware of any contingent liability in connection with any
release of any hazardous or toxic waste, substance or
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constituent, any petroleum or petroleum product, or any other
substance into the environment.
(bb) Certain Business Relationships with the Target and its
Subsidiaries. Except as described in Section 3(bb) of the Disclosure Schedule,
none of the Stockholders and their Affiliates has been involved in any business
arrangement or relationship with any of the Target and its Subsidiaries within
the past 12 months, and none of the Stockholders and their Affiliates owns any
asset, tangible or intangible, which is used in the business of any of the
Target and its Subsidiaries.
(cc) Accounts; Lockboxes; Safe Deposit Boxes. Section 3(cc) of
the Disclosure Schedule contains a true and complete list of (i) the names of
each bank, savings and loan association, securities or commodities broker or
other financial institution in which any of the Target and its Subsidiaries has
an account, including cash contribution accounts, and the names of all persons
authorized to draw thereon or have access thereto and (ii) the location of all
lockboxes and safe deposit boxes of the Target or its Subsidiaries and the names
of all persons authorized to draw thereon or have access thereto. At the
Effective Time, neither Target nor any of its Subsidiaries shall have any such
account, lockbox or safe deposit box other than those listed in Section 3(cc) of
the Disclosure Schedule, nor shall any additional person have been authorized,
from the date of this Agreement, to draw thereon or have access thereto. The
Stockholders and their Affiliates have not commingled monies or accounts of
Target or its Subsidiaries with other monies or accounts of the Stockholders and
their Affiliates or relating to their other businesses nor have the Stockholders
or their Affiliates transferred monies or accounts of Target or its Subsidiaries
other than to an account of Target or its Subsidiaries. At the Effective Time,
all monies and accounts of Target and its Subsidiaries shall be held by, and be
accessible only to, Target or its Subsidiaries.
(dd) Securities. To the Knowledge of the Target, the
outstanding shares of Target were issued in accordance with the registration or
qualification provisions of the Securities Act, and any relevant state
securities laws or pursuant to valid exemptions therefrom.
(ee) Accounting Matters. Listed in Section 3(ee) of the
Disclosure Schedule are all predecessor companies of the Target, the names of
any Persons from which, since January 1, 1994, the Target previously acquired
material properties or assets, and the changes in the Target's capital structure
and capital stock ownership since October 1, 1998.
(ff) Disclosure. All written information contained in any
schedule, report, certificate or any other document furnished to Parent by
Target or any other Person (on behalf of Target) in connection with this
Agreement is true, accurate and complete, and no such Person (including Target)
has stated therein (or included in any such document) any untrue material fact
or omitted to state any material fact necessary to make such information not
misleading. The representations and warranties contained in this Section 3 do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Section 3 not misleading.
4. Representations and Warranties of Parent and the Parent Subsidiary.
The Parent represents and warrants to the Target that the statements contained
in this Section 4 are correct
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and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4).
(a) Organization. Each of the Parent and the Parent Subsidiary
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation.
(b) Capitalization. The entire authorized capital stock of the
Parent consists of 305,000,000 Parent Shares, of which 300,000,000 shares are
designated as common stock and 5,000,000 shares are designated as preferred
stock. Of the authorized common stock, 66,972,960 shares are issued and
outstanding and 1,183,808 shares are held in treasury. The entire authorized
capital stock of the Parent Subsidiary consists of 1,000 shares, $.01 par value
per share, all of one class designated as common, of which 100 shares are issued
and outstanding. Other than options that are outstanding as of March 17, 2000
for 7,205,595 shares of Parent's common stock and convertible debentures that
are convertible into 3,437,756 shares of Parent's common stock, there are no
outstanding options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments as of such date that
could require the Parent to issue, sell or otherwise cause to become outstanding
any of its capital stock.
(c) Authorization of Transaction. Each of the Parent and the
Parent Subsidiary has full power and authority (including full corporate power
and authority) to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of each of the Parent and the Parent Subsidiary, enforceable in
accordance with its terms and conditions.
(d) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any Law or Governmental Order to which either the Parent or the
Parent Subsidiary is subject or any provision of the charter or bylaws of either
the Parent or the Parent Subsidiary or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which either the Parent or the Parent Subsidiary is a party or by
which it is bound or to which any of its assets is subject. Other than in
connection with the provisions of the Hart-Scott-Rodino Act, the Delaware
General Corporation Law, the New Jersey Business Corporation Act, the Securities
Exchange Act, the Securities Act, the Trust Indenture Act, the state securities
laws and the FCC's and the state public utility commissions' or similar state
regulatory bodies' rules, regulations and policies, neither the Parent nor the
Parent Subsidiary needs to give any notice to, make any filing with, or obtain
any authorization, consent or approval of any Governmental Entity in order for
the Parties to consummate the transactions contemplated by this Agreement.
(e) Brokers' Fees. Neither the Parent nor the Parent
Subsidiary has any Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which any of the Target and its Subsidiaries could become liable
or obligated; provided, however, that the parties acknowledge that the
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Parent has retained Bear Stearns & Co. Inc. in connection with the Merger for
which the Parent shall be obligated to pay any fees or commissions.
(f) Continuity of Business. It is the present intention of the
Parent to continue at least one significant historic business line of the
Target, or to use at least a significant portion of the Target's historic
business assets in a business, in each case within the meaning of Treas. Reg.
Section 1.368-1(d).
(g) Securities Exchange Act Reports. Parent has filed all
reports, proxy statements, forms and other documents required to be filed with
the SEC prior to the date of this Agreement. The Parent has delivered to the
Target and the Stockholders complete and accurate copies of a (i) Parent's
Annual Report on Form 10-K for the year ended December 31, 1999, as filed under
the Securities Exchange Act with the SEC, (ii) all of Parent's Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1999, June 30, 1999 and September
30, 1999, as filed under the Securities Exchange Act with the SEC and (iii) all
of Parent's proxy statements and annual reports to shareholders used in
connection with meetings of Parent Stockholders held since December 31, 1998
(the "Parent SEC Documents"). As of their respective dates, the Parent SEC
Documents (x) did not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (y) complied as to form in all material respects with
applicable laws and rules and regulations of the SEC.
(h) Disclosure. All written information contained in any
schedule, report, certificate or any other document furnished to Target by
Parent or any other Person (on behalf of Parent) in connection with this
Agreement is true, accurate and complete, and no such Person (including Parent)
has stated therein (or included in any such document) any untrue material fact
or omitted to state any material fact necessary to make such information not
misleading. The representations and warranties contained in this Section 4 do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Section 4 not misleading.
(i) Authorization for Parent Shares. Parent will take all
necessary action prior to the Closing Date to permit it to issue the number of
Parent Shares and options and/or warrants to purchase Parent Shares required to
be issued in the Merger pursuant to this Agreement. All of the Parent Shares to
be issued in the Merger have been duly authorized and, upon consummation of the
Merger, will be validly issued, fully paid and nonassessable, and no Person will
have any preemptive right of subscription or purchase in respect thereof. All
Parent Shares issued pursuant to this Agreement will, when issued, be registered
or exempt from registration under the Securities Act and the Securities Exchange
Act and registered or exempt from registration under any applicable state
securities laws.
(j) NASDAQ Compliance. Parent is in compliance with all
applicable maintenance criteria and other requirements necessary to permit
continued listing of the Parent Shares on the NASDAQ, and Parent has not
received evidence to the contrary from the NASD.
(k) Litigation. Exhibit E sets forth each instance in which
any of the Parent and its Subsidiaries (i) is subject to any outstanding
Governmental Order or (ii) is a party or to the
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Knowledge of the Parent and the Parent Subsidiary is threatened to be made a
party to any action, suit, proceeding, hearing or investigation of, in or
before, any Governmental Entity or quasi-judicial or administrative agency of
any federal, state, local or foreign jurisdiction or before any arbitrator or
mediator.
(l) No Material Adverse Changes. Since the date of filing of
the most recent Parent SEC Document, there has been no Material Adverse Effect
involving the Parent or its Subsidiaries.
5. Covenants. The Parties agree as follows with respect to the period
from and after the execution of this Agreement.
(a) General. Each of the Parties will use its best efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 6 below).
(b) Notices and Consents. The Target will give (and will cause
each of its Subsidiaries to give) any notices to third parties, and the Target
will use commercially reasonable efforts (and will cause each of its
Subsidiaries to use its best efforts) to obtain any third party consents, that
the Parent may request in connection with the matters referred to in Section
3(c) above. Each of the Parties will (and the Target will cause each of its
Subsidiaries to) give any notices to, make any filings with, and use
commercially reasonable efforts to obtain any authorizations, consents and
approvals of Governmental Entities in connection with the matters referred to in
Sections 3(c) and 4(d) above. Without limiting the generality of the foregoing,
each of the Parties will file (and the Target will cause each of its
Subsidiaries to file) any Notification and Report Forms and related material
that it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act, will use commercially reasonable efforts to obtain (and
the Target will cause each of its Subsidiaries to use its best efforts to
obtain) an early termination of the applicable waiting period, and will make
(and the Target will cause each of its Subsidiaries to make) any further filings
pursuant thereto that may be necessary, proper, or advisable in connection
therewith.
(c) Regulatory Matters and Approvals. Each of the Parties,
promptly after the date hereof, will (and the Target, promptly after the date
hereof, will cause each of its Subsidiaries to) give any notices to, make any
filings with and use all commercially reasonable efforts to obtain any
authorizations, consents and approvals of Governmental Entities in connection
with the matters referred to in Section 3(c) and 4(d) above. Without limiting
the generality of the foregoing:
(i) New Jersey Business Corporation Act. The Target
will take all action, to the extent necessary in accordance
with applicable law, its certificate of incorporation and
by-laws, to convene a special meeting of its Stockholders (the
"Target Special Meeting"), as soon as reasonably practicable
in order that the Stockholders may consider and vote on the
adoption of this Agreement and the
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approval of the Merger in accordance with the New Jersey
Business Corporation Act of the State of New Jersey.
(ii) Delaware General Corporation Law. The Parent will
take all action, to the extent necessary in accordance with
applicable law, its certificate of incorporation and by-laws,
to convene a special meeting of the Parent Stockholders (the
"Parent Special Meeting"), as soon as reasonably practicable
in order that the Parent Stockholders may consider and vote on
the adoption of this Agreement and the approval of the Merger
in accordance with Delaware General Corporation Law.
(iii) Hart-Scott-Rodino Act. Each of the Parties shall
file (and the Target will cause each of its Subsidiaries to
file) any Notification and Report Forms and related material
that it may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will
use its best efforts to obtain (and the Target will cause each
of its Subsidiaries to use its best efforts to obtain) an
early termination of the applicable waiting period, and will
make (and the Target will cause each of its Subsidiaries to
make) any further filings pursuant thereto that may be
necessary, proper or advisable.
(iv) Telecommunications Laws. Parent shall be
responsible for preparing and filing the appropriate
applications, notifications and other documentation necessary
or appropriate to request from Governmental Entities with
jurisdiction over the telecommunications industry all
necessary authorizations, consents and approvals to the Merger
and the transactions contemplated hereby. The Target, at its
sole cost and expense, will cooperate with Parent in this
regard, providing such assistance as Parent shall reasonably
request.
(v) Securities Act. With respect to the Parent Shares
to be issued in connection with the Merger and any Parent
Shares into which any warrants that are part of the Stock
Rights to be issued by Parent in connection with the Merger,
Parent shall promptly prepare and file with the SEC a
registration statement on Form S-4 (the "Registration
Statement") under the Securities Act and will use its best
efforts to cause such Registration Statement to become
effective at the earliest possible time, and with respect to
the Parent Shares into which any warrants that are part of the
Stock Rights to be issued by Parent in connection with the
Merger to maintain the effectiveness of such Registration
Statement for a period of one year, which Registration
Statement shall comply as to form in all material respects
with the provisions of the Securities Act and the rules and
regulations promulgated thereunder, and will not contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however,
that Parent makes no and shall not make any representation,
warranty or covenant with respect to any information furnished
to it by the Target, the Stockholders or any of their
accountants, counsel or authorized representatives
specifically for inclusion in the
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Registration Statement. The Target represents and covenants
that it can deliver and it shall cause to be delivered to
Parent at the earliest possible time any financial statements
that may be required to be filed with the Registration
Statement together with a letter from Target's independent
certified public accountant that such financial statements
comply with the requirements of Regulation S-X (17 CFR Part
210). The Target hereby indemnifies and holds harmless the
Parent (and its directors, officers, employees, financial
advisors, stockholders, agents and representatives) against
any losses, claims, damages or liabilities to which any of
such Persons may become subject based on any untrue statement
of any material fact contained in the Registration Statement,
or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, but only to the extent that
such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement in
reliance on and in conformity with information furnished to
the Parent by the Target, the Stockholders or any of their
accountants, counsel or authorized representatives
specifically for use therein. The Parent and the Parent
Subsidiary hereby indemnify and hold harmless the Target (and
its directors, officers, employees, financial advisors,
stockholders, agents and representatives) against any losses,
claims, damages or liabilities to which any of such Persons
may become subject based on any untrue statement of any
material fact contained in the Registration Statement, or the
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, except to the extent that such
untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement in
reliance on and in conformity with information furnished to
the Parent by the Target, the Stockholders or any of their
accountants, counsel or authorized representatives
specifically for use therein.
(d) Operation of the Business. The Target shall not (and shall
not cause or permit any of its Subsidiaries to) engage in any practice, take any
action, or enter into any transaction other than in the Ordinary Course of
Business. Without limiting the generality of the foregoing, the Target shall not
(and shall not cause or permit any of its Subsidiaries to) (i) declare, set
aside, or pay any dividend or make any distribution with respect to its capital
stock or redeem, purchase or otherwise acquire any of its capital stock or (ii)
otherwise engage in any practice, take any action, or enter into any transaction
of the sort described in Section 3(k) above.
(e) Preservation of Business. The Target shall keep (and will
cause each of its Subsidiaries to keep) its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers and employees.
(f) Full Access. Each Party shall permit (and shall cause each
of its Subsidiaries to permit) representatives of the other Parties to have full
access to all premises, properties, personnel, books, records (including Tax
records), contracts and documents of or pertaining to each Party and their
respective Subsidiaries.
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(g) Notice of Developments. Each Party shall give prompt
written notice to the other Party of any material adverse development causing a
breach of any of its own representations and warranties in Section 3, and
Section 4 above. No disclosure by any Party pursuant to this Section 5(g),
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty or breach of covenant.
(h) Exclusivity.
(i) The Target shall, and shall cause its Subsidiaries
and any of their respective Affiliates to, immediately cease
and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any
Persons conducted heretofore by the Target, its Subsidiaries
or any of their respective Affiliates, officers, directors,
employees, financial advisors, stockholders, agents or
representatives (each a "Representative") with respect to any
proposed, potential or contemplated Acquisition Proposal.
(ii) From and after the date hereof, without the prior
written consent of Parent, the Target will not authorize or
permit any of its Subsidiaries to, and shall cause any and all
of its Representatives not to, directly or indirectly, (A)
solicit, initiate or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, an
Acquisition Proposal, or (B) engage in negotiations or
discussions with any Third Party concerning, or provide any
non-public information to any person or entity relating to, an
Acquisition Proposal, or (C) enter into any letter of intent,
agreement in principle or any acquisition agreement or other
similar agreement with respect to any Acquisition Proposal;
provided, however, that nothing contained in this Section
5(h)(ii) shall prevent the Target or the Target Board, from
furnishing non-public information to, or entering into
discussions or negotiations with, any Third Party in
connection with an unsolicited, bona fide written proposal for
an Acquisition Proposal by such Third Party, if and only to
the extent that (1) such Third Party has made a written
proposal to the Target Board to consummate an Acquisition
Proposal, (2) the Target Board determines in good faith, based
on the advice of a financial advisor of nationally recognized
reputation, that such Acquisition Proposal is reasonably
capable of being completed on substantially the terms
proposed, and would, if consummated, result in a transaction
that would provide greater value to the holders of the Target
Shares than the transaction contemplated by this Agreement (a
"Superior Proposal"), (3) the failure to take such action
would, in the reasonable good faith judgment of the Target
Board, based on a written opinion of Target's outside legal
counsel, be a violation of its fiduciary duties to the
Stockholders under applicable law, and (4) prior to furnishing
such non-public information to, or entering into discussions
or negotiations with, such Person, the Target Board receives
from such Person an executed confidentiality agreement with
material terms no less favorable to the Target than those
contained in the Confidentiality Agreements and provides prior
notice to the Parent of its decision to take such action. The
Target shall not release any Third Party from, or waive any
provision of, any standstill agreement to which it is a party
or any confidentiality agreement between it and another Person
who has made, or who
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may reasonably be considered likely to make, an Acquisition
Proposal, unless the failure to take such action would, in the
reasonable good faith judgment of the Target Board, based on a
written opinion of Target's outside legal counsel, be a
violation of its fiduciary duties to the Stockholders under
applicable law. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in
the preceding sentence by any Representative of the Target or
any of its Subsidiaries shall be deemed to be a breach of this
Section 5(h) by the Target.
(iii) The Target shall notify Parent promptly after
receipt by the Target or the Target's Knowledge of the receipt
by any of its Representatives of any Acquisition Proposal or
any request for non-public information in connection with an
Acquisition Proposal or for access to the properties, books or
records of the Target by any Person that informs such party
that it is considering making or has made an Acquisition
Proposal. Such notice shall be made orally and in writing and
shall indicate the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact. The Target
shall keep Parent informed of the status (including any change
to the material terms) of any such Acquisition Proposal or
request for non-public information.
(iv) The Target Board may not withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent,
the approval or recommendation by the Target Board of this
Agreement or the Merger unless, following the receipt of a
Superior Proposal, in the reasonable good faith judgment of
the Target Board, based on the written opinion of Target's
outside legal counsel, the failure to do so would be a
violation of the Target Board's fiduciary duties to the
Stockholders under applicable law; provided, however, that,
the Target Board shall submit this Agreement and the Merger to
the Stockholders for adoption and approval, whether or not the
Target Board at any time subsequent to the date hereof
determines that this Agreement is no longer advisable or
recommends that the Stockholders reject it or otherwise
modifies or withdraws its recommendation. Unless the Target
Board has withdrawn its recommendation of this Agreement in
compliance herewith, the Target shall use commercially
reasonable efforts to solicit from the Stockholders proxies in
favor of the adoption and approval of this Agreement and the
Merger and to secure the vote or consent of the Stockholders
required by the New Jersey Business Corporation Act and its
certificate of incorporation and by-laws to adopt and approve
this Agreement and the Merger.
(i) Continuity of Business . Parent, Surviving Corporation or
any other member of the qualified group (as defined in Treas. Reg. Section
1.368-1(d)) shall, for the foreseeable future, continue at least one significant
historic business line of the Target or use at least a significant portion of
the Target's historic business assets in a business, in each case within the
meaning of Treas. Reg. Section 1.368-1(d).
(j) Employment Agreements. Contemporaneously with the
execution of this Agreement, each of Kenneth G. Baritz and Kevin Griffo (the
"Principal Executives") shall enter
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into an employment agreement with Parent in the form attached as Exhibit F (the
"Employment Agreement").
(k) Listing. Parent shall use commercially reasonable efforts
to cause the Parent Shares to be issued in connection with the Merger to be
approved for listing on Nasdaq, subject to official notice of issuance, prior to
the Closing Date.
(l) Services Agreement. Contemporaneously with the execution
of this Agreement, Parent (or a Subsidiary of Parent) and Target shall enter
into the Services Agreement in the form attached as Exhibit G (the "Services
Agreement") pursuant to which for a five (5) year term Target shall furnish to
Parent (or to a Subsidiary of Parent) the services it delivers in the ordinary
course of business to its end user customers or is capable of delivering to its
end user customers, at Target's cost, for resale by Parent (or by a Subsidiary
of Parent) to the end user customers of Parent and its Subsidiaries.
(m) Voting Agreement. Contemporaneously with the execution of
this Agreement, Parent and the other signatories identified in the Voting
Agreement in the form attached as Exhibit H (the "Voting Agreement") shall enter
into the Voting Agreement pursuant to which such signatories shall grant to
Parent their proxy to vote their Target Shares in favor of the Merger.
(n) MCG Finance Agreement. Within 30 days of the execution of
this Agreement, Target shall secure and furnish a copy thereof to Parent the
written agreement of MCG Finance Corporation ("MCG"), in form and substance
acceptable to Parent in its reasonable discretion, to accept at the Closing a
warrant exercisable for Parent Shares in full satisfaction of MCG's rights under
the Warrant Agreement by and between MCG and Target dated June 30, 1999, such
warrant for Parent Shares to be consistent with the provisions set forth in
Section 2(d)(vi) above (the "MCG Agreement").
(o) Lockup Agreement. The Parties agree that for the period
ending on the earlier of October 31, 2000 or 90 days following the Effective
Time, the holders of Target securities that receive Merger Consideration as part
of the Merger shall not offer, sell, contract to sell, pledge, grant any option
to purchase, make any short sale or otherwise dispose of any part of the Merger
Consideration consisting of Parent Shares, any options or warrants convertible
or exercisable into Parent Shares, or any other securities convertible into,
exchangeable for or that represent the right to receive the Parent Shares
(except pursuant to the Escrow Agreement and the Indemnification Agreement). The
foregoing restriction is expressly agreed to preclude the such holders of Target
securities from engaging in any hedging or other transaction that is designed to
or which reasonably could be expected to lead to or result in a sale or
disposition of such securities received as part of the Merger Consideration even
if such Merger Consideration would be disposed of by someone other than such
holder of a Target security. Such prohibited hedging or other transactions would
include without limitation any short sale or any purchase, sale or grant of any
right (including without limitation any put or call option) with respect to any
of the Merger Consideration or with respect to any security that includes,
relates to, or derives any part of its value from such Merger Consideration.
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6. Conditions to Obligation to Close.
(a) Conditions to Obligation of Parent and the Parent
Subsidiary. The obligation of each of Parent and the Parent Subsidiary to
consummate the Merger is subject to satisfaction or waiver by Parent or Parent
Subsidiary of the following conditions at or prior to the Closing Date:
(i) this Agreement and the Merger shall have received
the Requisite Stockholder Approval;
(ii) the Target and its Subsidiaries shall have
procured all of the third party consents specified in Section
3(c) above;
(iii) the representations and warranties set forth in
Section 3 and Section 4 above shall be true and correct in all
material respects at and as of the Closing Date;
(iv) the Target shall have performed and complied with
all of its covenants hereunder in all material respects
through the Closing;
(v) neither any Law or Governmental Order shall be
enacted, promulgated, entered, enforced or deemed applicable
to the Merger nor any other action shall have been taken by
any Governmental Entity (A) that prohibits the consummation of
the transactions contemplated by this Agreement; (B) that
prohibits Parent's or the Parent Subsidiary's ownership or
operation of all or any portion of their or the Target's
business or assets, or which compels Parent or the Parent
Subsidiary to dispose of or hold separate all or any portion
of Parent's or the Parent Subsidiary's or the Target's
business or assets as a result of the transactions
contemplated by this Agreement; (C) that makes the purchase
of, or payment for, some or all of the Target Shares illegal;
(D) that imposes limitations on the ability of Parent or the
Parent Subsidiary to acquire or hold or to exercise
effectively all rights of ownership of Target Shares,
including, without limitation, the right to vote any Target
Shares purchased by Parent on all matters properly presented
to the Stockholders; or (E) that imposes any limitations on
the ability of Parent or the Parent Subsidiary, or any of
their respective Subsidiaries, effectively to control in any
respect the business or operations of the Target or any of its
Subsidiaries;
(vi) the Target shall have delivered to Parent and the
Parent Subsidiary a certificate to the effect that each of the
conditions specified above in Section 6(a)(i) - 6(a)(v) is
satisfied in all respects;
(vii) all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated;
(viii) the Parent and the Parent Subsidiary shall have
received from counsel to the Target an opinion in form and
substance as set forth in Exhibit I attached hereto, addressed
to the Parent and the Parent Subsidiary, and dated as of the
Closing Date;
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(ix) the Parent and the Parent Subsidiary shall have
received from counsel to the Target that is reasonably
acceptable to Parent and its counsel an opinion concerning
regulatory matters in form and substance reasonably acceptable
to Parent and its counsel, addressed to the Parent and the
Parent Subsidiary, and dated as of the Closing Date;
(x) the Parent and the Parent Subsidiary shall have
received the resignations, effective as of the Closing, of
each director and officer of the Target and its Subsidiaries
other than those whom the Parent shall have specified in
writing at least five business days prior to the Closing;
(xi) Target and Kenneth G. Baritz shall have delivered
to Parent and the Parent Subsidiary an executed counterpart of
the Escrow Agreement;
(xii) each of the Employment Agreements shall be in
full force and effect;
(xiii) the Parent shall have received the Parent
Fairness Opinion;
(xiv) the Parent shall have procured all of the third
party consents specified in Section 55(c) above;
(xv) the MCG Agreement shall be in full force and
effect;
(xvi) the Indemnification Agreement shall be in full
force and effect; and
(xvii) all actions to be taken by the Target in
connection with consummation of the transactions contemplated
by this Agreement and all certificates, opinions, instruments
and other documents required to effect the transactions
contemplated herein will be reasonably satisfactory in form
and substance to the Parent and the Parent Subsidiary.
Subject to the provisions of applicable law, Parent and the
Parent Subsidiary may waive, in whole or in part, any condition specified in
this Section 6(a) if they execute a writing so stating at or prior to the
Closing.
(b) Conditions to Obligation of the Target and Stockholders.
The obligation of the Target and the Stockholders to consummate the Merger is
subject to satisfaction or waiver by the Target of the following conditions at
or prior to the Closing Date:
(i) this Agreement and the Merger shall have received
the Requisite Stockholder Approval;
(ii) the Parent shall have procured all of the third
party consents specified in Section 55(c) above;
(iii) the representations and warranties set forth in
Section 4 above shall be true and correct in all material
respects at and as of the Closing Date;
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(iv) each of Parent and the Parent Subsidiary shall
have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(v) neither any Law or Governmental Order shall be
enacted, promulgated, entered, enforced or deemed applicable
to the Merger nor any other action shall have been taken by
any Governmental Entity (A) that prohibits the consummation of
the transactions contemplated by this Agreement; (B) that
prohibits Parent's or the Parent Subsidiary's ownership or
operation of all or any portion of their or the Target's
business or assets, or which compels Parent or the Parent
Subsidiary to dispose of or hold separate all or any portion
of Parent's or the Parent Subsidiary's or the Target's
business or assets as a result of the transactions
contemplated by this Agreement; (C) that makes the purchase
of, or payment for, some or all of the Target Shares illegal;
(vi) the Parent shall have delivered to the Target a
certificate to the effect that each of the conditions
specified above in Section 6(b)(i) - 6(b)(v) is satisfied in
all respects;
(vii) all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have
expired or otherwise been terminated;
(viii) Parent shall have delivered to Target an
executed counterpart of the Escrow Agreement;
(ix) each of the Employment Agreements shall be in full
force and effect;
(x) Parent shall have satisfied and paid in full the
liabilities listed on Section 6(b)(x) of the Disclosure
Schedule (representing those liabilities and obligations that
are required by contractual terms to be satisfied as a result
of the transactions contemplated herein), which payment in no
circumstances shall exceed $17 million;
(xi) The Registration Statement shall be declared
effective by the SEC and no stop order shall be issued in
connection therewith;
(xii) The Parent Shares to be issued in connection with
the Merger shall be approved for listing on Nasdaq, subject to
official notice of issuance;
(xiii) Kenneth G. Baritz shall be elected to the Parent
Board;
(xiv) the Target shall have received from general
counsel of the Parent an opinion in form and substance as set
forth in Exhibit J attached hereto, addressed to the Target,
and dated as of the Closing Date;
(xv) the Target shall have received an opinion from
counsel of its choice that the Merger qualifies as a
"reorganization" within the meaning of Code Section 368(a);
and
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(xvi) all actions to be taken by the Parent and the
Parent Subsidiary in connection with consummation of the
transactions contemplated by this Agreement and all
certificates, opinions, instruments and other documents
required to effect the transactions contemplated herein will
be reasonably satisfactory in form and substance to the
Target.
Subject to the provisions of applicable law, the Target may
waive, in whole or in part, any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
7. Remedies for Breaches of this Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty or covenant at the time of
Closing) and continue in full force and effect for one year thereafter (subject
to any applicable statutes of limitations).
(b) Indemnification Agreement. Contemporaneously with the
execution of this Agreement, Parent and Target shall execute and deliver an
indemnification agreement substantially in the form of the attached Exhibit K
(the "Indemnification Agreement")
(c) Other Indemnification Provisions. No Stockholder shall
make any claim for indemnification against any of the Surviving Corporation, the
Target and its Subsidiaries by reason of the fact that he or it was a director,
officer, employee or agent of any such entity or was serving at the request of
any such entity as a partner, trustee, director, officer, employee or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such claim is pursuant to any statute, charter document, bylaw, agreement or
otherwise) with respect to any action, suit, proceeding, complaint, claim or
demand brought by the Parent, Parent Subsidiary or Surviving Corporation against
such Stockholder (whether such action, suit, proceeding, complaint, claim or
demand is pursuant to this Agreement, applicable law or otherwise). Nothing
contained in this Agreement shall void, abrogate or otherwise eliminate the
rights of a former director or officer of Target or any of its Subsidiaries
under any directors and officers insurance policy previously maintained by
Target or its Subsidiaries (including any "tail" coverage purchased in
connection therewith).
(d) Directors' and Officers' Indemnity. Notwithstanding
anything to the contrary contained in this Agreement, following the Effective
Time, Parent will take no action to abrogate or diminish any right accorded
under the articles of incorporation or by-laws of Target as they existed
immediately prior to the Effective Time to any person who, on or prior to the
Effective Time, was a director or officer of Target to indemnification from or
against losses, expenses, claims, demands, damages, liabilities, judgements,
fines, penalties, costs, expenses (including without limitation reasonable
attorneys fees) and amounts paid in settlement pertaining to or incurred in
connection with any threatened or actual action, suit, claim, or proceeding
(whether civil, criminal, administrative, arbitration, or investigative) arising
out of events, matters, actions, or omissions that are specifically described in
the Disclosure Schedule, and Parent will honor
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such obligations in accordance with their terms with respect to events, acts or
omissions that are specifically described in the Disclosure Schedule.
8. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement with the prior authorization of their respective board of directors as
provided below:
(i) the Parties may terminate this Agreement, and the
Merger may be abandoned, by mutual written consent at any time
prior to the Effective Time before or after the approval by
the Stockholders, or the Parent Subsidiary stockholder;
(ii) the Parent may terminate this Agreement by giving
written notice to the Target at any time prior to the Closing
in the event the Target has breached any representation,
warranty or covenant contained in this Agreement in any
material respect, the Parent has notified the Target of the
breach, and the breach has continued without cure for a period
of 30 days after the notice of breach;
(iii) the Target may terminate this Agreement by giving
written notice to the Parent at any time prior to the Closing
in the event the Parent or Parent Subsidiary has breached any
representation, warranty or covenant contained in this
Agreement in any material respect, the Target has notified the
Parent of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach;
(iv) the Parent may terminate this Agreement by giving
written notice to the Target at any time prior to the Closing
(A) if the Target Board in the exercise of its fiduciary duty
(x) enters into an agreement or agreement in principle with
respect to an Acquisition Proposal, (y) withdraws it
recommendation to the Stockholders of this Agreement or the
Merger or (z) after the receipt of an Acquisition Proposal,
fails to confirm publicly, within ten days after the request
of Parent, its recommendation to the Stockholders that the
Stockholders adopt and approve this Agreement and the Merger
or (B) if the Target or any of its Representatives takes any
of the actions that would be proscribed by Section 5(h) above,
notwithstanding the exceptions therein allowing certain
actions to be taken pursuant to the proviso in the first
sentence of Section 5(h)(ii) above; or
(v) either the Target or the Parent may terminate this
Agreement by giving written notice to the other Parties if the
Closing shall not have occurred on or before March 23, 2001,
by reason of the failure of any condition precedent under
Section 6 hereof (unless the failure results primarily from
the terminating Party's breach of any representation, warranty
or covenant contained in this Agreement or under any other
agreement contemplated hereunder).
(b) Effect of Termination.
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(i) Except as provided in clauses (ii) or (iii) of this
Section 8(b), if any Party terminates this Agreement pursuant
to Sections 8(a)(i) - 8(a)(v) above, all rights and
obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party; except that the
provisions of the Confidentiality Agreements shall survive any
such termination.
(ii) If this Agreement is terminated by the Parent
pursuant to Section 8(a)(ii) or Section 8(a)(iv), then within
five (5) days after such termination, the Target shall pay the
Parent the sum of $6,000,000 plus all expenses incurred by
Parent to third parties in connection with the transactions
contemplated hereunder in immediately available funds and the
Services Agreement shall remain in full force and effect.
(iii) If this Agreement is terminated by the Target
pursuant to Section 8(a)(iii), then within five (5) days after
such termination, the Parent shall pay the Target the sum of
$6,000,000 plus all expenses incurred by Target to third
parties in connection with the transactions contemplated
hereunder in immediately available funds and the Services
Agreement shall terminate in accordance with its terms.
9. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the other Parties;
except that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use all
reasonable efforts to advise the other Parties prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the Confidentiality
Agreements and the other documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements
or representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
(d) Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign or delegate either this Agreement or any
of its rights, interests or obligations hereunder, by operation of law or
otherwise, without the prior written approval of the other Parties. Any
purported assignment or delegation without such approval shall be void and of no
effect.
(e) Counterparts. This Agreement may be executed (including by
facsimile) in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
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(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below:
If to the Target:
Access One Communications Corp.
3427 NW 55th Street
Fort Lauderdale, FL 33309
Attention: Kenneth G. Baritz
Facsimile: (954) 739-2476
with a Copy to: Blank Rome Tenzer Greenblatt LLP
405 Lexington Avenue
New York, NY 10174
Attention: Michael S. Mullman, Esq.
Facsimile: (212) 885-5001
If to Parent: Talk.com, Inc.
6805 Route 202
New Hope, PA 18938
Attention: Aloysius T. Lawn, IV, Esq.
Executive Vice President -
General Counsel and Secretary
Facsimile: (215) 862-1960
with a Copy to: Kelley Drye & Warren LLP
1200 19th Street, N.W., Suite 500
Washington, DC 20036
Attention: Joseph B. Hoffman, Esq.
Facsimile: (202) 955-9792
If to the Parent Subsidiary: Aladdin Acquisition Corp.
6805 Route 202
New Hope, PA 18938
Attention: Aloysius T. Lawn, IV, Esq.
Executive Vice President -
General Counsel and Secretary
Facsimile: (215) 862-1960
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with a Copy to: Kelley Drye & Warren LLP
1200 19th Street, N.W., Suite 500
Washington, DC 20036
Attention: Joseph B. Hoffman, Esq.
Facsimile: (202) 955-9792
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using
personal delivery, expedited courier, messenger service, telecopy or ordinary
mail, but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
intended recipient. Any Party may change the address to which notices, requests,
demands, claims and other communications hereunder are to be delivered by giving
the other Parties notice in the manner set forth in this Section 9(g), provided
that no such change of address shall be effective until it actually is received
by the intended recipient.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(i) Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; except that any
amendment effected subsequent to Requisite Stockholder Approval will be subject
to the restrictions contained in the Delaware General Corporation Law, to the
extent applicable. No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by all of the Parties. No
waiver by any Party of any default, misrepresentation or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Expenses. Except as expressly set forth elsewhere in this
Agreement, each of Target and Parent shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
(l) Incorporation of Exhibits. The Exhibits identified in this
Agreement are incorporated herein by reference and made a part hereof.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation
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arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean including
without limitation. The phrase "business day" shall mean any day other than a
day on which banks in the State of New York are required or authorized to be
closed. The Parties intend that each representation, warranty and covenant
contained herein shall have independent significance. If any Party has breached
any representation, warranty or covenant contained herein in any respect, the
fact that there exists another representation, warranty or covenant relating to
the same subject matter (regardless of the relative levels of specificity) that
the Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or covenant.
(n) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 9(p) below), in addition to any other remedy to which they may
be entitled, at law or in equity.
(p) Submission to Jurisdiction. Each of the Parties submits to
the jurisdiction of any state or federal court sitting in the Commonwealth of
Virginia in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each Party also agrees not to bring
any action or proceeding arising out of or relating to this Agreement in any
other court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety
or other security that might be required of any other Party with respect
thereto. Each Party appoints C-T Corporation (the "Process Agent") as his or its
agent to receive on his or its behalf service of copies of the summons and
complaint and any other process that might be served in the action or
proceeding. Any Party may make service on any other Party by sending or
delivering a copy of the process (A) to the Party to be served at the address
and in the manner provided for the giving of notices in Section 9(g) above or
(B) to the Party to be served in care of the Process Agent at the address and in
the manner provided for the giving of notices in Section 9(g) above. Nothing in
this Section 9(p), however, shall affect the right of any Party to serve legal
process in any other manner permitted by law or at equity. Each Party agrees
that a final judgment in any action or proceeding so brought shall be conclusive
and may be enforced by suit on the judgment or in any other manner provided by
law or at equity.
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(q) WAIVER OF JURY TRIAL. EACH OF PARENT, THE PARENT
SUBSIDIARY AND TARGET, AND EACH INDEMNIFIED PARTY, HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
effective the date first above written.
ACCESS ONE COMMUNICATIONS CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
ALADDIN ACQUISITION CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
TALK.COM, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------