Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MCLEODUSA INCORPORATED,
MCLEODUSA PUBLISHING COMPANY
PUBCO MERGING CO.
and
TALKING DIRECTORIES, INC.
Dated as of January 7, 1999
AGREEMENT AND PLAN OF MERGER, dated as of January 7, 1999 (this
"Merger Agreement"), among McLeodUSA Incorporated, a Delaware corporation
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("▇▇▇▇▇▇"), McLeodUSA Publishing Company, an Iowa corporation ("Pubco") (an
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indirect wholly-owned subsidiary of ▇▇▇▇▇▇), Pubco Merging Co., an Iowa
corporation ("Pubco Sub") (a wholly-owned subsidiary of Pubco), Talking
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Directories, Inc., a Michigan corporation (the "Company"), and each of the
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stockholders the Company listed as signatories to this Merger Agreement (the
"Principal Company Stockholders");
WHEREAS, Pubco Sub, upon the terms and subject to the conditions of
this Merger Agreement and in accordance with the General Corporation Law of the
State of Iowa ("Iowa Law"), will merge with and into the Company (the "Merger");
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WHEREAS, the Board of Directors of the Company has (i) determined that
the Merger is fair to the holders of Company Common Stock (as defined in Section
2.01(a)) and is in the best interests of such stockholders and (ii) approved and
adopted this Merger Agreement and the transactions contemplated hereby and
recommended approval and adoption of this Merger Agreement by the stockholders
of the Company (the "Company Stockholders");
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WHEREAS, the Board of Directors of ▇▇▇▇▇▇ has determined that the
Merger is in the best interests of ▇▇▇▇▇▇ and Pubco and the Boards of Directors
of Pubco and Pubco Sub have approved and adopted this Merger Agreement and the
transactions contemplated hereby; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax-free reorganization under the provisions of
Section 368(a) of the United States Internal Revenue Code of 1986, as amended
(the "Code");
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NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this Merger
Agreement, and intending to be legally bound hereby, the parties hereto agree as
follows.
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
Upon the terms and subject to the conditions set forth in this Merger
Agreement, and in accordance with Iowa Law, at the Effective Time (as defined in
Section 1.02 below) Pubco Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Pubco Sub shall cease
and the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
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SECTION 1.02. Effective Time.
Subject to the provisions of Section 2.04, as promptly as practicable
after the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII below, the parties hereto shall cause the Merger to be consummated
by filing this Merger Agreement, articles of merger or other appropriate
Documents (as defined in Article X) (in any such case, the "Articles of Merger")
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with the Secretary of State of the States of Michigan and Iowa, in such form as
required by, and executed in accordance with the relevant provisions of,
Michigan Law and Iowa Law (the date and time of such filing being the "Effective
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Time").
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SECTION 1.03. Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided
in the applicable provisions of Michigan and Iowa Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of Pubco Sub and the Company
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of Pubco Sub and the Company shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 1.04. Certificate of Incorporation; Bylaws.
(a) Unless otherwise determined by Pubco prior to the Effective Time,
at the Effective Time the certificate of incorporation of the Company shall be
amended in its entirety to conform to the certificate of incorporation of Pubco
Sub in effect immediately prior to the Effective Time, and shall become the
certificate of incorporation of the Surviving Corporation, until thereafter
amended as provided by Law (as defined in Article X) and such certificate of
incorporation.
(b) Unless otherwise determined by Pubco prior to the Effective Time,
at the Effective Time the bylaws of the Company shall be amended in their
entirety to conform to the bylaws of Pubco Sub in effect immediately prior to
the Effective Time, and shall become the bylaws of the Surviving Corporation
until thereafter amended as provided by Law, the certificate of incorporation of
the Surviving Corporation and such bylaws.
SECTION 1.05. Directors and Officers.
The directors of Pubco Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the certificate of incorporation and bylaws of the Surviving
Corporation, and the officers of Pubco Sub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities.
At the Effective Time, as provided in this Merger Agreement, by virtue
of the Merger and without any action on the part of Pubco Sub, the Company or
the Company Stockholders:
(a) Company Common Shares. Each share of common stock, $1.00 par
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value per share, of the Company ("Company Common Stock") issued and outstanding
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immediately prior to the Effective Time (other than any shares of Company Common
Stock to be canceled pursuant to Section 2.01(c)), shall be converted, subject
to Section 2.02(e), into the right to receive that number of shares of Class A
common stock, par value $.01 per share, of ▇▇▇▇▇▇ ("▇▇▇▇▇▇ Common Stock") (the
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"Merger Consideration") determined by dividing $85,000,000 by the average of
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the closing bid and ask price for ▇▇▇▇▇▇ Common Stock quoted on the National
Association of Securities Dealers' Automated Quotation System on the date hereof
as reported in the Wall Street Journal (the "Common Share Exchange Ratio").
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All such shares of Company Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each certificate previously representing any such shares shall thereafter
represent the right to receive (i) a certificate representing whole shares of
▇▇▇▇▇▇ Common Stock into which such Company Common Stock was converted pursuant
to the Merger, and (ii) an amount in cash, without interest, in lieu of
fractional shares. No fractional share of ▇▇▇▇▇▇ Common Stock shall be issued,
and, in lieu thereof, a cash payment shall be made pursuant to Section 2.02(e)
hereof. In any event, if between the date of this Merger Agreement and the
Effective Time the outstanding shares of ▇▇▇▇▇▇ Common Stock shall have been
changed into a different number of shares or a different class, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Common Share Exchange Ratio shall be
appropriately and correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares. As used in this Merger Agreement, the term "Total Outstanding
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Company Shares" shall mean the aggregate number of shares of Company Common
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Stock issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled pursuant to Section 2.01(c)).
(b) Cancellation and Retirement of Company Common Stock. All such
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shares of Company Common Stock referred to in Section 2.01(a) (other than any
shares of Company Common Stock to be canceled pursuant to Section 2.01(c)) shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each certificate previously representing any such
shares shall thereafter represent the
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right to receive the Merger Consideration as described in Section 2.01(a). The
holders of certificates which prior to the Effective Time represented shares of
Company Common Stock shall cease to have any rights with respect thereto except
as otherwise provided herein or by Law.
(c) Cancellation of Treasury Stock. Any shares of Company Common
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Stock held in the treasury of the Company and any shares of Company Common Stock
owned by ▇▇▇▇▇▇, Pubco or any direct or indirect wholly owned subsidiary of
▇▇▇▇▇▇ or Pubco or of the Company immediately prior to the Effective Time shall
be canceled and extinguished without any conversion thereof and no payment shall
be made with respect thereto.
(d) Pubco Sub Common Stock. Each share of common stock, no par value
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per share, of Pubco Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one newly and validly
issued, fully paid and non-assessable share of common stock of the Surviving
Corporation.
SECTION 2.02. Exchange of Certificates.
(a) Exchange. As of the Effective Time, Pubco shall deliver, or cause
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to be delivered, (i) certificates representing the whole shares of ▇▇▇▇▇▇ Common
Stock issuable to the Company Stockholders pursuant to Section 2.01, and (ii)
cash in an amount sufficient to permit payment of the cash payable in lieu of
fractional shares pursuant to Section 2.02(e), to the holders of Company Common
Stock pursuant to Section 2.01.
(b) Exchange Procedures. At the Closing, a certificate or
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certificates of Company Common Stock which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the "Certificates")
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shall be surrendered in exchange for certificates representing shares of ▇▇▇▇▇▇
Common Stock. Upon surrender of a Certificate for cancellation to Pubco or
▇▇▇▇▇▇, together with such other Documents as may be required, the holder of
such Certificate shall be entitled to receive in exchange therefor (i) a
certificate representing that number of whole shares of ▇▇▇▇▇▇ Common Stock
which such holder has the right to receive in respect of such Certificate (after
taking into account all shares of Company Common Stock then held by such holder
under all such Certificates so surrendered), together with any dividends or
other distributions to which such holder is entitled pursuant to Section
2.02(c), and (ii) cash in lieu of fractional shares of ▇▇▇▇▇▇ Common Stock to
which such holder is entitled pursuant to Section 2.02(e). The Certificates so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Company Common Stock that is not registered in the transfer records
of the Company, the proper number of shares of ▇▇▇▇▇▇ Common Stock may be issued
pursuant hereto to a transferee if the Certificates representing such shares of
Company Common Stock, properly endorsed or otherwise in proper form for
transfer, are presented to Pubco or ▇▇▇▇▇▇, accompanied by all Documents
required to
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evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.02, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender Merger Consideration
issuable in exchange therefor, together with any dividends or other
distributions to which such holder is entitled pursuant to Section 2.02(c). No
interest will be paid or will accrue on any cash payable pursuant to Sections
2.02(c) or 2.02(e).
(c) Distributions with Respect to Unexchanged Shares of ▇▇▇▇▇▇ Common
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Stock. No dividends or other distributions declared or made after the Effective
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Time with respect to ▇▇▇▇▇▇ Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the whole shares of ▇▇▇▇▇▇ Common Stock represented thereby until the holder
of such Certificate shall surrender such Certificate. Subject to the effect of
escheat, tax or other applicable Laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of ▇▇▇▇▇▇ Common Stock issued in exchange therefor,
without interest, (i) promptly, the amount of any cash payable with respect to
(A) the shares of Company Common Stock formerly represented by such Certificate,
and (B) a fractional share of ▇▇▇▇▇▇ Common Stock to which such holder is
entitled pursuant to Section 2.02(e), and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of ▇▇▇▇▇▇ Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions, with a record date
after the Effective Time but prior to surrender and a payment date occurring
after surrender, payable with respect to such whole shares of ▇▇▇▇▇▇ Common
Stock.
(d) No Further Rights in Company Common Stock. All shares of ▇▇▇▇▇▇
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Common Stock issued upon conversion of the shares of Company Common Stock in
accordance with the terms hereof (including any cash paid pursuant to Sections
2.02(c) or (e)) shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Company Common Stock.
(e) No Fractional Shares. No fractional shares of ▇▇▇▇▇▇ Common Stock
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shall be issued upon surrender for exchange of the Certificates, and any such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of ▇▇▇▇▇▇, but in lieu thereof each holder of shares of
Company Common Stock who would otherwise be entitled to receive a fraction of a
share of ▇▇▇▇▇▇ Common Stock, after aggregating all Certificates delivered by
such holder, and rounding down to the nearest whole share, shall receive an
amount in cash equal to the denominator used in the Common Share Exchange Ratio
described in Section 2.01(a) above, multiplied by the fraction of a share of
▇▇▇▇▇▇ Common Stock to which such holder would otherwise be entitled.
(f) Intentionally omitted.
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(g) No Liability. None of ▇▇▇▇▇▇, Pubco, Pubco Sub, the Company, the
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Surviving Corporation or the Principal Company Shareholders shall be liable to
any Person (as defined in Article X) for any shares of ▇▇▇▇▇▇ Common Stock (or
dividends or distributions with respect thereto) or cash delivered to a public
official pursuant to any abandoned property, escheat or similar Laws.
(h) Lost, Stolen or Destroyed Certificates. If any certificate
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evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, Pubco shall cause to be issued in exchange for such lost, stolen or
destroyed certificate, upon the making of an affidavit of that fact by the
holder thereof, such shares of ▇▇▇▇▇▇ Common Stock and cash, if any, as may be
required pursuant to this Article II; provided, however, that ▇▇▇▇▇▇ or Pubco
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may, in its reasonable discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against ▇▇▇▇▇▇ or Pubco, or the Surviving Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 2.03. Stock Transfer Books.
At the Effective Time, the stock transfer books of the Company shall
be closed and there shall be no further registration of transfers of shares of
Company Common Stock thereafter on the records of the Company. From and after
the Effective Time, the holders of certificates representing shares of Company
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Company Common Stock except as
otherwise provided herein or by Law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Pubco for any reason shall be
converted into shares of ▇▇▇▇▇▇ Common Stock issuable in exchange therefor
pursuant to Section 2.01(a), any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 2.02(c) and any cash in lieu of
fractional shares of ▇▇▇▇▇▇ Common Stock to which the holders thereof are
entitled pursuant to Section 2.02(e).
SECTION 2.04. Closing.
Subject to the terms and conditions of this Merger Agreement, the
closing of the Merger (the "Closing") will take place on or before February 1,
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1999, or as soon as practicable (but, in any event, within five (5) business
days) after satisfaction of the latest to occur or, if permissible, waiver of
the conditions set forth in Article VII hereof (the "Closing Date"), at the
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offices of Pubco, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
unless another date or place is agreed to in writing by the parties hereto.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth in the Disclosure Schedule delivered
by the Company to Pubco prior to the execution and delivery of this Merger
Agreement (the "Company Disclosure Schedule") (the contents of which may be
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updated or otherwise modified by the Company up to five (5) days prior to the
Closing Date), the Company hereby represents and warrants (which representation
and warranty shall be deemed to include the disclosures with respect thereto so
specified in the Company Disclosure Schedule) to, and covenants and agrees with,
▇▇▇▇▇▇, Pubco and Pubco Sub as follows, in each case as of the date of this
Merger Agreement, unless otherwise specifically set forth herein or in the
Company Disclosure Schedule:
SECTION 3.01. Organization and Standing.
The Company is a corporation duly organized, validly existing and in
good standing under Michigan Law, and has the full and unrestricted corporate
power and authority to own, operate and lease its Assets (as defined in Article
X), to carry on its business as currently conducted, to execute and deliver this
Merger Agreement and to carry out the transactions contemplated hereby. The
Company is duly qualified to conduct business as a foreign corporation and is in
good standing in the states, countries and territories listed in Section 3.01 of
the Company Disclosure Schedule. The Company is not qualified to conduct
business in any other jurisdiction, and neither the nature of the business
conducted by the Company nor the character of the Assets owned, leased or
otherwise held by it makes any such qualification necessary, except where the
absence of such qualification as a foreign corporation would not have a Company
Material Adverse Effect (as defined in Article X). The Company has elected and
qualified as an S-corporation under the applicable provisions of the Code, and
such election remains in full force and effect.
SECTION 3.02. Subsidiaries.
Except as set forth in Section 3.02 of the Company Disclosure
Schedule, the Company has no Subsidiaries (as defined in Article X) and neither
the Company nor any Subsidiary has any equity investment or other interest in,
nor has the Company or any Subsidiary made advances or loans to (other than for
customary credit extended to customers of the Company in the Ordinary Course of
Business (as defined in Article X) and reflected in the Financial Statements (as
defined in Section 3.08)), any corporation, association, partnership, joint
venture or other entity. Section 3.02 of the Company Disclosure Schedule sets
forth (a) the authorized capital stock or other equity interests of each direct
and indirect Subsidiary of the Company and the percentage of the outstanding
capital stock or other equity interests of each Subsidiary directly or
indirectly owned by the Company, and (b) the nature and amount of any such
equity investment, other interest or advance. All of such shares of capital
stock or other equity interests of Subsidiaries directly or indirectly held by
the Company have been duly authorized and
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validly issued and are outstanding, fully paid and nonassessable. The Company
directly, or indirectly through wholly owned Subsidiaries, owns all such shares
of capital stock or other equity interests of the direct or indirect
Subsidiaries free and clear of all Encumbrances (as defined in Article X). Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of its state or jurisdiction of incorporation (as listed
in Section 3.02 of the Company Disclosure Schedule), and has the full and
unrestricted corporate power and authority to own, operate and lease its Assets
and to carry on its business as currently conducted. Each Subsidiary is duly
qualified to conduct business as a foreign corporation and is in good standing
in the states, countries and territories listed in Section 3.02 of the Company
Disclosure Schedule. The Subsidiaries are not qualified to conduct business in
any other jurisdictions, and neither the nature of their businesses nor the
character of the Assets owned, leased or otherwise held by them makes any such
qualification necessary, except where the absence of such qualification as a
foreign corporation would not have a Company Material Adverse Effect.
SECTION 3.03. Certificate of Incorporation and Bylaws.
The Company has furnished to Pubco a true and complete copy of the
certificate or articles of incorporation of the Company and of each Subsidiary,
as currently in effect, certified as of a recent date by the Secretary of State
(or comparable Governmental Entity (as defined in Article X)) of the respective
jurisdictions of incorporation, and a true and complete copy of the bylaws of
the Company and of each Subsidiary, as currently in effect, certified by their
respective corporate secretaries. Such certified copies are attached as
exhibits to, and constitute an integral part of, the Company Disclosure
Schedule.
SECTION 3.04. Capitalization.
The authorized capital stock of the Company consists of 60,000 shares
of Company Common Stock, of which 40,000 shares are issued and outstanding, all
of which are duly authorized, validly issued, fully paid and nonassessable.
Except as described in this Section 3.04, no other shares of Company Common
Stock have been reserved for any purpose. There are no outstanding securities
convertible into or exchangeable for Company Common Stock, any other securities
of the Company, or any capital stock or other securities of any of the
Subsidiaries and no outstanding options, rights (preemptive or otherwise), or
warrants to purchase or to subscribe for any shares of such stock or other
securities of the Company or any of the Subsidiaries. Except as set forth in
Section 3.04 of the Company Disclosure Schedule, there are no outstanding
Agreements (as defined in Article X) affecting or relating to the voting,
issuance, purchase, redemption, registration, repurchase or transfer of Company
Common Stock, any other securities of the Company, or any capital stock or other
securities of any Subsidiary, except as contemplated hereunder. Since December
31, 1997, no shares of Company Common Stock have been issued by the Company,
except as set forth in
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Section 3.04 of the Company Disclosure Schedule. Each of the outstanding shares
of Company Common Stock and of capital stock of, or other equity interests in,
the Subsidiaries was issued in compliance with all applicable federal and state
Laws concerning the issuance of securities, and such shares or other equity
interests owned by the Company or any Subsidiary are owned free and clear of all
Encumbrances. There are no obligations, contingent or otherwise, of the Company
or any Subsidiary to provide funds to, make any investment (in the form of a
loan, capital contribution or otherwise) in, or provide any guarantee with
respect to, any Subsidiary or any other Person. There are no Agreements pursuant
to which any Person is or may be entitled to receive any of the revenues or
earnings, or any payment based thereon or calculated in accordance therewith, of
the Company or any Subsidiary.
SECTION 3.05. Authority; Binding Obligation.
The execution and delivery by the Company of this Merger Agreement,
the execution and delivery by the Company and the Subsidiaries of all other
Documents contemplated hereby, and the consummation by the Company and the
Subsidiaries of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of the Company or the Subsidiaries are necessary to authorize this
Merger Agreement and the other Documents contemplated hereby, or to consummate
the transactions contemplated hereby and thereby, other than the approval and
adoption of this Merger Agreement by the holders of a majority of the
outstanding shares of Company Common Stock in accordance with Michigan Law and
the Company's certificate of incorporation and bylaws. This Merger Agreement
has been duly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as such enforceability may be subject to the effects of any
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar Laws affecting creditors' rights generally and subject to
the effects of general equitable principles (whether considered in a proceeding
in equity or at law).
SECTION 3.06. No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance by the Company and the
Subsidiaries of this Merger Agreement and all other Documents contemplated
hereby, the fulfillment of and compliance with the respective terms and
provisions hereof and thereof, and the consummation by the Company and the
Subsidiaries of the transactions contemplated hereby and thereby, do not and
will not: (i) conflict with, or violate any provision of, the certificate of
incorporation or bylaws of the Company or the certificate or articles of
incorporation or bylaws of any Subsidiary; (ii) subject to (A) obtaining the
requisite approval and adoption of this Merger Agreement by the holders of a
majority of the outstanding shares of Company Common Stock in accordance with
Michigan Law and the Company's certificate of incorporation and bylaws and (B)
obtaining the consents, approvals, authorizations and permits of, and making
filings with or notifications to, the
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applicable Governmental Entity, including pursuant to the applicable
requirements, if any, of the HSR Act, and the filing and recordation of the
Articles of Merger as required by Michigan Law, conflict with or violate any Law
applicable to the Company or any Subsidiary, or any of their respective Assets;
(iii) subject to obtaining the consents and approvals set forth in Section
3.06(b) of the Company Disclosure Schedule, conflict with, result in any breach
of, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under any Agreement to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary, or any of their
respective Assets, may be bound; or (iv) except as disclosed in Section 3.06(b)
of the Company Disclosure Schedule, result in or require the creation or
imposition of, or result in the acceleration of, any indebtedness or any
Encumbrance of any nature upon, or with respect to, the Company or any
Subsidiary or any of the Assets now owned or hereafter acquired by the Company
or any Subsidiary; except for any such conflict or violation described in clause
(ii), any such conflict, breach or default described in clause (iii), or any
such creation, imposition or acceleration described in clause (iv) that would
not have a Company Material Adverse Effect and that would not prevent the
Company from consummating the Merger on a timely basis.
(b) Except as set forth in Section 3.06(b) of the Company Disclosure
Schedule, the execution, delivery and performance by the Company and the
Subsidiaries of this Merger Agreement and all other Documents contemplated
hereby, the fulfillment of and compliance with the respective terms and
provisions hereof and thereof, and the consummation by the Company and the
Subsidiaries of the transactions contemplated hereby and thereby, do not and
will not: (i) require any consent, approval, authorization or permit of, or
filing with or notification to, any Person not party to this Merger Agreement,
except (A) the approval and adoption of this Merger Agreement by the holders of
a majority of the outstanding shares of Company Common Stock in accordance with
Law and the Company's certificate of incorporation and bylaws, (B) the filing
and recordation of the Articles of Merger as required by Law; or (ii) result in
or give rise to any penalty, forfeiture, Agreement termination, right of
termination, amendment or cancellation, or restriction on business operations of
Pubco, the Company, the Surviving Corporation or any Subsidiary that would have
a Company Material Adverse Effect. Section 3.06(b) of the Company Disclosure
Schedule lists all Agreements that reasonably could be interpreted or expected
to require the consent or acquiescence of any Person not party to this Merger
Agreement with respect to any aspect of the execution, delivery or performance
of this Merger Agreement by the Company and the Subsidiaries, except where
failure to obtain such consent or acquiecense would not have a Company Material
Adverse Effect.
SECTION 3.07. Licenses; Compliance.
(a) Each of the Company and each Subsidiary is in possession of all
Licenses (as defined in Article X) necessary for the Company or any Subsidiary
to own, lease and operate its Assets or to carry on its business as it is now
being conducted
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(the "Company Licenses"), except where the failure to possess any such Company
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License would not have a Company Material Adverse Effect. All Company Licenses
are valid and in full force and effect through the respective dates indicated in
the Company Disclosure Schedule, except for any such invalidity or failure to be
in full force and effect that would not, alone or in the aggregate, have a
Company Material Adverse Effect, and no suspension, cancellation, complaint,
proceeding, order or investigation of or with respect to any Company License (or
operations thereunder) is pending or, to the knowledge of the Company or any
Subsidiary, threatened. Neither the Company nor any Subsidiary is in violation
of or default under any Company License, except for any such violation or
default that would not have a Company Material Adverse Effect. Except as set
forth in Section 3.07(a) of the Company Disclosure Schedule, since December 31,
1996, neither the Company nor any Subsidiary has received written or, to the
knowledge of the Company or any Subsidiary, oral notice from any Governmental
Entity or any other Person of any allegation of any such violation or default
under a Company License.
(b) Neither the Company nor any Subsidiary is in violation of or
default under, nor has it breached, (i) any term or provision of its certificate
or articles of incorporation or bylaws or (ii) any Agreement or restriction to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary, or any of their respective Assets, is bound or affected, except for
any such violation, default or breach described in clause (ii) that would not
have a Company Material Adverse Effect. The Company and the Subsidiaries have
complied and are in full compliance with all Laws, except where the failure so
to comply would not have a Company Material Adverse Effect.
(c) All returns, reports, statements and other Documents required to
be filed by the Company or any Subsidiary with any Governmental Entity have been
filed and complied with and are true, correct and complete in all material
respects (and any related fees required to be paid have been paid in full). To
the knowledge of the Company and the Subsidiaries, all records of every type and
nature relating to the Company Licenses or the business, operations or Assets of
the Company or any Subsidiary have been maintained in all material respects in
accordance with good business practices and the rules of any Governmental Entity
and are maintained at the Company or the appropriate Subsidiary.
(d) Except as provided in Section 3.07(a) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary has any interest in any License
(including both any Company License and any License held by third parties in
which the Company or any Subsidiary has an interest) that is subject to
restrictions on assignment or transfer based on the circumstances under which
the License was granted (such as eligibility or auction rules), the status of
construction and operation (such as rules restricting resale for a certain
period after construction), or any other restrictions other than an ordinary
course requirement for prior approval of transactions such as the Merger
contemplated herein.
-11-
(e) Neither the Company nor any Subsidiary is aware of any fact or
circumstance related to them that could reasonably be expected to cause the
filing of any objection to any application for any Governmental consent required
hereunder, lead to any delay in processing such application, or require any
waiver of any Governmental rule, policy or other applicable Law.
SECTION 3.08. Financial Statements.
(a) The Company has prepared a consolidated balance sheet of the
Company and the Subsidiaries as of the end of the fiscal year ending in 1997,
(the "Reviewed Balance Sheet") and the related consolidated statement of income,
----------------------
shareholders' equity and cash flows of the Company and the Subsidiaries for such
fiscal year (the Balance Sheet and such consolidated statement of income,
shareholders' equity and cash flows are hereinafter referred to collectively as
the "Reviewed Statement"), in each case, reviewed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in
------------------
accordance with generally accepted auditing standards and accompanied by the
related report of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. A true and complete copy of each of the
Reviewed Statement has been delivered to Pubco and is attached as an exhibit to,
and constitute an integral part of, the Company Disclosure Schedule. The
Company has also prepared unaudited consolidated balance sheets of the Company
and the Subsidiaries as of the last day of each month ending after January 1,
1998 (including the unaudited consolidated balance sheets to be furnished to
Pubco pursuant to Section 6.07, the "Unaudited Balance Sheets") and the
------------------------
unaudited consolidated statements of income and cash flows of the Company and
the Subsidiaries for the one-month periods then ended (the Unaudited Balance
Sheets and such statements of income and cash flows, including the unaudited
consolidated statements of income and cash flows to be furnished to Pubco
pursuant to Section 6.07, are hereinafter referred to collectively as the
"Unaudited Statements" and, together with the Reviewed Statements, as the
---------------------
"Financial Statements").
---------------------
(b) The Financial Statements, including, without limitation, the notes
thereto, (i) are complete and correct in all material respects, (ii) have been
prepared in accordance with the books and records of the Company and the
Subsidiaries, and (iii) present fairly the consolidated financial position of
the Company and the Subsidiaries and their consolidated results of operations
and cash flows as of and for the respective dates and time periods in accordance
with GAAP applied on a basis consistent with prior accounting periods, except as
noted thereon and subject to, in the case of the Unaudited Statements, normal
and recurring year-end adjustments which were not or are not expected to be
material in amount. All changes in accounting methods (for financial accounting
purposes) made, agreed to, requested or required with respect to the Company or
any of the Subsidiaries since August 31, 1998 are reflected in the Financial
Statements.
-12-
SECTION 3.09. Absence of Undisclosed Liabilities.
Except as described in Section 3.09 of the Company Disclosure
Schedule, there are no liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown) of the Company or any
Subsidiary, including but not limited to liabilities for Taxes (as defined in
Article X), of a nature required by GAAP to be reflected, or reserved against,
in the Financial Statements and that are not so reflected, or reserved against,
in the Financial Statements. Except as described in Section 3.09 of the Company
Disclosure Schedule, since August 31, 1998, neither the Company nor any
Subsidiary has incurred any liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown) other than in the Ordinary
Course of Business (as defined in Article X).
SECTION 3.10. Absence of Certain Changes or Events.
Other than as set forth in Section 3.10 to the Company Disclosure
Schedule, since August 31, 1998, there has been no material adverse change, and
no change except in the Ordinary Course of Business, in the business,
operations, prospects, condition (financial or otherwise), Assets or liabilities
of the Company or any Subsidiary. Except as set forth in Section 3.10 to the
Company Disclosure Schedule, since August 31, 1998, the Company and the
Subsidiaries have conducted their respective businesses substantially in the
manner theretofore conducted and only in the Ordinary Course of Business, and
neither the Company nor any Subsidiary has (a) incurred any material damage,
destruction or loss not covered by insurance with respect to any Assets of the
Company or of any such Subsidiary; (b) issued any capital stock or other equity
securities or granted any options, warrants or other rights calling for the
issuance thereof; (c) issued any bonds or other long-term debt instruments,
granted any options, warrants or other rights calling for the issuance thereof,
or borrowed any funds; (d) incurred, or become subject to, any material
obligation or liability (whether absolute or contingent, matured or unmatured,
known or unknown), except current liabilities incurred in the Ordinary Course of
Business; (e) discharged or satisfied any Encumbrance or paid any material
obligation or liability (whether absolute or contingent, matured or unmatured,
known or unknown) other than current liabilities shown in the Unaudited Balance
Sheets (as defined in Section 6.08) and current liabilities incurred since
August 31, 1998, in the Ordinary Course of Business; (f) declared or made
payment of, or set aside for payment, any dividends or distributions of any
Assets, or purchased, redeemed or otherwise acquired any of its capital stock,
any securities convertible into capital stock, or any other securities;
(g) mortgaged, pledged or subjected to any Encumbrance any of its material
Assets; (h) sold, exchanged, transferred or otherwise disposed of any of its
material Assets, or canceled any debts or claims, except in each case in the
Ordinary Course of Business; (i) written down the value of any Assets or written
off as uncollectable any debt, notes or accounts receivable, except to the
extent previously reserved against in the Financial Statements and not material
in amount, and except for write-downs and write-offs in the Ordinary Course of
Business, none of which, individually or in the aggregate, are material;
(j) entered into any transactions other than in the Ordinary Course of Business;
(k) except in the Ordinary
-13-
Course of Business, increased the rate of compensation payable, or to become
payable, by it to any of its officers, employees, agents or independent
contractors over the rate being paid to them on August 31, 1998, (l) made or
permitted any amendment or termination of any material Agreement to which it is
a party; (m) through negotiation or otherwise made any commitment or incurred
any liability to any labor organization; (n) made any accrual or arrangement for
or payment of bonuses or special compensation of any kind to any director,
officer or employee, except for any accrual or arrangement for or payment of
bonuses or special compensation in the Ordinary Course of Business to employees
who are not directors or officers; (o) directly or indirectly paid any severance
or termination pay in excess of two months' salary to any officer or employee
with an annual salary in excess of $60,000; (p) made capital expenditures, or
entered into commitments therefor, not provided for in the Company's capital
budget for 1998 (a copy of which has been furnished by the Company to Pubco) or,
if applicable, the Company's capital budget for 1999 (which capital budget shall
have been approved by Pubco as provided in Section 5.01(i)), except for capital
expenditures permitted by Section 5.01; (q) made any change in any method of
accounting or accounting practice except as required by GAAP; (r) entered into
any transaction of the type described in Section 3.19; (s) made any charitable
contributions or pledges exceeding $10,000 individually or $100,000 in the
aggregate; or (t) made any Agreement to do any of the foregoing. At the Closing,
the Company shall deliver to Pubco an updated Section 3.10 to the Company
Disclosure Schedule in accordance with the provisions of Section 6.04.
SECTION 3.11. Litigation; Disputes.
(a) Except as disclosed in Section 3.11(a) of the Company Disclosure
Schedule, there are no actions, suits, claims, arbitrations, proceedings or
investigations pending or, to the knowledge of the Company or any Subsidiary,
threatened against, affecting or involving the Company or any Subsidiary or
their respective businesses or Assets, or the transactions contemplated by this
Merger Agreement, at law or in equity, or before or by any court, arbitrator or
Governmental Entity, domestic or foreign. Neither the Company nor any
Subsidiary is (i) operating under or subject to any order (except for orders
that Persons similarly situated, engaged in similar businesses and owning
similar Assets are operating under or subject to), award, writ, injunction,
decree or judgment of any court, arbitrator or Governmental Entity, or (ii) in
default with respect to any order, award, writ, injunction, decree or judgment
of any court, arbitrator or Governmental Entity.
(b) Except as set forth in Section 3.11(b) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary is currently involved in, or to
the knowledge of the Company or any Subsidiary, reasonably anticipates any
dispute with, any of its current or former employees, agents, brokers,
distributors, vendors, customers, business consultants, franchisees,
franchisors, representatives or independent contractors (or any current or
former employees of any of the foregoing Persons) affecting the
-14-
business or Assets of the Company or any Subsidiary, except for any such
disputes that, if resolved adversely to the Company or any Subsidiary, would not
have a Company Material Adverse Effect.
SECTION 3.12. Debt Instruments.
Section 3.12 of the Company Disclosure Schedule lists all mortgages,
indentures, notes, guarantees and other Agreements for or relating to borrowed
money (including, without limitation, conditional sales agreements and capital
leases) to which the Company or any Subsidiary is a party or which have been
assumed by the Company or any Subsidiary or to which any Assets of the Company
or any Subsidiary are subject and, with respect to each such Agreement so
listed, briefly describes the principal amount, interest rate, original and
maturity dates and any sinking fund installments, prepayment premiums,
restrictive covenants and any other material provisions. With respect to the
Documents listed on Section 3.12 of the Company Disclosure Schedule, the Company
and the Subsidiaries have performed all the obligations required to be performed
by any of them to date and are not in default in any respect under any of the
foregoing, and there has not occurred any event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute such a default, except for any failure so to perform or any such
default that would not have a Company Material Adverse Effect.
SECTION 3.13. Leases.
Section 3.13 of the Company Disclosure Schedule lists all leases and
other Agreements with a term in excess of one (1) year or requiring payments in
excess of $5,000 in the aggregate over its term under which the Company or any
Subsidiary is the lessee or lessor of any Asset, or holds, manages or operates
any Asset owned by any third party, or under which any Asset owned by the
Company or by any Subsidiary is held, operated or managed by a third party. The
Company and the Subsidiaries are the owners and holders of all the leasehold
estates purported to be granted to them by the Documents listed in Section 3.13
of the Company Disclosure Schedule. Each such lease and other Agreement is in
full force and effect and constitutes a legal, valid and binding obligation of,
and is legally enforceable against, the respective parties thereto and grants
the leasehold estate it purports to grant free and clear of all Encumbrances.
The Company and the Subsidiaries have in all respects performed all material
obligations thereunder required to be performed by any of them to date. To the
knowledge of the Company, no party is in default in any material respect under
any of the foregoing, and there has not occurred any event which (whether with
or without notice, lapse of time or the happening or occurrence of any other
event) would constitute such a default. All of the Assets subject to such
leases and other Agreements are in a condition adequate for the uses to which
they are currently being used.
-15-
SECTION 3.14. Other Agreements; No Default.
(a) Section 3.14(a) of the Company Disclosure Schedule lists each
Agreement to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary, or any of their respective Assets, is bound, and
which is:
(i) an Agreement with a term in excess of one (1) year or
requiring payments in excess of $5,000 in any twelve (12) month period
or $10,000 in the aggregate over its term for the employment of any
director, officer, employee, consultant or independent contractor, or
providing for severance payments to any such director, officer,
employee, consultant or independent contractor;
(ii) a license Agreement or distributor, dealer, sales
representative, sales agency, advertising, property management or
brokerage Agreement involving an annual payment in excess of $25,000;
(iii) an Agreement for the future purchase of materials,
supplies, services, merchandise or equipment involving payments of
more than $25,000 over its remaining term (including, without
limitation, periods covered by any option to renew by any party);
(iv) an Agreement for the purchase, sale or lease of any Asset
with a purchase or sale price or aggregate rental payment in excess of
$25,000;
(v) a profit-sharing, bonus, incentive compensation, deferred
compensation, stock option, severance pay, stock purchase, employee
benefit, insurance, hospitalization, pension, retirement or other
similar plan or Agreement;
(vi) an Agreement for the sale of any of its Assets or services
or the grant of any preferential rights to purchase any of its Assets,
services or rights, other than in the Ordinary Course of Business;
(vii) an Agreement that contains any provisions requiring the
Company or any Subsidiary to indemnify any other party;
(viii) a joint venture Agreement or other Agreement involving
the sharing of revenues or profits;
(ix) an Agreement with an Affiliate (as defined in Article X)
of the Company or any Subsidiary;
(x) an Agreement (including, without limitation, an Agreement
not to compete and an exclusivity Agreement) that reasonably could be
interpreted to impose any material restriction on the business or
operations
-16-
of the Company or any Subsidiary, or any of their respective
Affiliates, prior to the Effective Time, or on the business or
operations of Pubco or any of its Affiliates after the Effective Time;
(xi) an Agreement material to the Company and its Subsidiaries
not otherwise described in this Section 3.14(a) which by its terms
does not terminate or is not terminable by the Company or by a
Subsidiary within thirty (30) days or upon thirty (30) days' (or less)
notice;
(xii) an Agreement with any Governmental Entity;
(xiii) an Agreement with any of the twenty (20) largest
customers of the Company and the Subsidiaries, taken as a whole (based
on amounts billed), for each of (A) the year ended December 31, 1997
and (B) the period from January 1, 1998 through the date of this
Merger Agreement;
(xiv) an Agreement to provide any customer with free listings or
advertisements or service at rates departing from the standard rate
schedules other than in the Ordinary Course of Business; or
(xv) any other Agreement (A) that is material to the Company
and the Subsidiaries, taken as a whole, or the conduct of their
businesses or operations, or (B) the absence of which would have a
Company Material Adverse Effect,
(the foregoing Agreements referred to herein as the "Company Contracts"). The
-----------------
Company has furnished Pubco with true and complete copies of each written
Company Contract (including any amendments thereto) and a complete written
summary of each oral Company Contract.
(b) Each Company Contract is in full force and effect and constitutes
a legal, valid and binding obligation of, and is legally enforceable against,
the respective parties thereto. All necessary approvals of any Governmental
Entity with respect thereto have been obtained (except where the failure so to
obtain any such approval would not have a Company Material Adverse Effect), all
necessary filings or registrations therefor have been made, and there are no
outstanding disputes thereunder and, to the knowledge of the Company or any
Subsidiary, no threatened cancellation or termination thereof. The Company and
the Subsidiaries have performed all material obligations thereunder required to
be performed by any of them to date. To the knowledge of the Company and the
Subsidiaries, no party is in default in any material respect under any of the
Company Contracts, and there has not occurred any event which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute such a default. No Agreement has been canceled or otherwise
terminated within the twelve (12) months prior to the date of this Merger
Agreement which would have been a
-17-
"Company Contract" had such Agreement not been canceled or terminated and the
cancellation or termination of which has had or is reasonably likely to have a
Company Material Adverse Effect. Except as specifically described in Section
3.14(a) of the Company Disclosure Schedule, there has been no written or oral
modification or amendment to any Company Contract and there are no reasonably
expected changes to any Company Contract. At the Closing, the Company shall
deliver to Pubco an updated Section 3.14(a) to the Company Disclosure Schedule
in accordance with the provisions of Section 6.04.
SECTION 3.15. Labor Relations.
Section 3.15(a) of the Company Disclosure Schedule lists all
collective bargaining or other labor union Agreements to which the Company or
any Subsidiary is a party. There are no strikes or work stoppages, or, to the
knowledge of the Company, union organization efforts or other controversies
(other than grievance proceedings) pending, threatened or reasonably anticipated
between the Company or any Subsidiary and (a) any current or former employees of
the Company or of any Subsidiary or (b) any union or other collective bargaining
unit representing such employees. The Company and the Subsidiaries have complied
and are in compliance with all Laws relating to employment or the workplace,
including, without limitation, Laws relating to wages, hours, collective
bargaining, safety and health, work authorization, equal employment opportunity,
immigration, withholding, unemployment compensation, worker's compensation,
employee privacy and right to know, except where the failure so to comply would
not have a Company Material Adverse Effect. Except as set forth in Section
3.15(b) of the Company Disclosure Schedule, neither the Company nor any
Subsidiary has been notified by any Governmental Agency or counsel to any
claimant of any unresolved violation or alleged violation of any Law relating to
equal employment opportunity, civil or human rights, or employment
discrimination generally. Except as set forth in Section 3.15(c) to the Company
Disclosure Schedule, there are no collective bargaining Agreements, employment
Agreements between the Company or any Subsidiary and any of their respective
employees, or professional service Agreements not terminable at will relating to
the businesses and Assets of the Company or of any Subsidiary. Except as set
forth in Section 3.15(d) to the Company Disclosure Schedule, the consummation of
the transactions contemplated hereby will not cause Pubco, the Surviving
Corporation, the Company or any Subsidiary to incur or suffer any liability
relating to, or obligation to pay, severance, termination or other payments to
any Person.
-18-
SECTION 3.16. Pension and Benefit Plans.
(a) Except as set forth in Section 3.16(a) to the Company Disclosure
Schedule, neither the Company nor any Subsidiary (i) maintains or during the
past six (6) years has maintained any Plan (as defined in Article X) or Other
Arrangement (as defined in Article X), (ii) is or during the past six (6) years
has been a party to any Plan or Other Arrangement, or (iii) has obligations
under any Plan or Other Arrangement.
(b) The Company has furnished to Pubco true and complete copies of
each of the following Documents: (i) the Documents setting forth the terms of
each Plan; (ii) all related trust Agreements or annuity Agreements (and any
other funding Document) for each Plan; (iii) for the three (3) most recent plan
years, all annual reports (Form 5500 series) on each Plan that have been filed
with any Governmental Entity; (iv) the current summary plan description and
subsequent summaries of material modifications for each Title I Plan (as defined
in Article X); (v) all DOL (as defined in Article X) opinions on any Plan;
(vi) all correspondence with the PBGC (as defined in Article X) on any Plan
exchanged during the past three (3) years; (vii) all IRS (as defined in Article
X) rulings, opinions or technical advice relating to any Plan and the current
IRS determination letter issued with respect to each Qualified Plan (as defined
in Article X); and (viii) all current Agreements with service providers or
fiduciaries for providing services on behalf of any Plan. For each Other
Arrangement, the Company has furnished to Pubco true and complete copies of each
policy, Agreement or other Document setting forth or explaining the current
terms of the Other Arrangement, all related trust Agreements or other funding
Documents (including, without limitation, insurance contracts, certificates of
deposit, money market accounts, etc.), all significant employee communications,
all correspondence with or other submissions to any Governmental Entity, and all
current Agreements with service providers or fiduciaries for providing services
on behalf of any Other Arrangement.
(c) No Plan is a Multiemployer Plan (as defined in Article X).
(d) Section 3.16(d) of the Company Disclosure Schedule sets forth each
Individual Account Plan (as defined in Article X) that is an ESOP (as defined in
Article X) (indicating whether such ESOP is leveraged) or otherwise invests in
employer securities (as such term is defined in Section 409(l) of the Code).
The Company has furnished to Pubco true and complete copies of all loan
Agreements and other related Documents for each leveraged ESOP.
(e) The funding method used under each Minimum-Funding Plan (as
defined in Article X) does not violate the funding requirements in Title I,
Subtitle B, Part 3, of ERISA (as defined in Article X). For each Defined
Benefit Plan (as defined in Article X), the Company has furnished to Pubco a
true and complete copy of the actuarial valuation reports issued by the
actuaries of that Defined Benefit Plan for the three (3) most recent plan years,
setting forth: (i) the actuarial present value (based upon the same actuarial
assumptions as were used for that period for funding purposes) of all vested and
nonvested accrued benefits under that Defined Benefit Plan; (ii) the actuarial
present value (based upon the same actuarial
-19-
assumptions, other than turnover assumptions, as were used for that period for
funding purposes) of vested benefits under that Defined Benefit Plan; (iii) the
net fair market value of that Defined Benefit Plan's Assets; and (iv) a detailed
description of the funding method used under that Defined Benefit Plan.
(f) No "accumulated funding deficiency" as defined in Section
302(a)(2) of ERISA or Section 412 of the Code, whether or not waived, and no
"unfunded current liability" as determined under Section 412(l) of the Code
exists with respect to any Minimum-Funding Plan. No security is required under
Section 401(a)(29) of the Code as to any Minimum-Funding Plan. Section 3.16(f)
of the Company Disclosure Schedule sets forth all unpaid obligations and
liabilities of the Company and the Subsidiaries to provide contributions
currently due with respect to any Minimum-Funding Plan.
(g) Section 3.16(g) of the Company Disclosure Schedule sets forth the
contributions that (i) the Company or any Subsidiary has promised or is
otherwise obligated to make under each Individual Account Plan that is a
Statutory-Waiver Plan (as defined in Article X) and (ii) are unpaid as of the
date of this Merger Agreement.
(h) The Company and the Subsidiaries have made all contributions and
other payments required by and due under the terms of each Plan and Other
Arrangement and have taken no action during the past three (3) years (other than
actions required by Law) relating to any Plan or Other Arrangement that will
increase Pubco's, the Surviving Corporation's, the Company's or any Subsidiary's
obligation under any Plan or Other Arrangement.
(i) Section 3.16(i) of the Company Disclosure Schedule sets forth a
list of all Qualified Plans (as defined in Article X). All Qualified Plans and
any related trust Agreements or annuity Agreements (or any other funding
Document) comply and have complied with ERISA, the Code (including, without
limitation, the requirements for Tax qualification described in Section 401
thereof), and all other Laws, except where the failure so to comply would not
have a Company Material Adverse Effect. The trusts established under such Plans
are exempt from federal income taxes under Section 501(a) of the Code. The
Company and the Subsidiaries have received determination letters issued by the
IRS with respect to each Qualified Plan, and the Company has furnished to Pubco
true and complete copies of all such determination letters and all
correspondence relating to the applications therefor. All statements made by or
on behalf of the Company or any Subsidiary to the IRS in connection with
applications for determinations with respect to each Qualified Plan were true
and complete when made and continue to be true and complete. To the knowledge
of the Company and the Subsidiaries, nothing has occurred since the date of the
most recent applicable determination letter that would adversely affect the tax-
qualified status of any Qualified Plan.
-20-
(j) To their knowledge, the Company and the Subsidiaries have complied
in all material respects with all applicable provisions of the Code, ERISA, the
National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Fair Labor Standards Act, the Securities
Act, the Exchange Act, and all other Laws pertaining to the Plans, Other
Arrangements and other employee or employment related benefits, and all premiums
and assessments relating to all Plans or Other Arrangements. Neither the
Company nor any Subsidiary has any liability for any delinquent contributions
within the meaning of Section 515 of ERISA (including, without limitation,
related attorneys' fees, costs, liquidated damages and interest) or for any
arrearages of wages. Neither the Company nor any Subsidiary has any pending
unfair labor practice charges, contract grievances under any collective
bargaining agreement, other administrative charges, claims, grievances or
lawsuits before any court, arbiter or Governmental Entity arising under any Law
governing any Plan, and to the knowledge of the Company and the Subsidiaries
there exist no facts that could give rise to such a claim.
(k) Section 3.16(k) of the Company Disclosure Schedule describes all
transactions in which the Company or any Subsidiary or any of the Plans has
engaged in violation of Section 406(a) or 406(b) of ERISA for which no exemption
exists under Section 408 of ERISA and all "prohibited transactions" (as such
term is defined in Section 4975(c)(1) of the Code), for which no exemption
exists under Section 4975(c)(2) or 4975(d) of the Code. The Company has
furnished to Pubco true and complete copies of each request for a prohibited
transaction exemption and each exemption obtained in response to such request.
All such requests were true and complete when made and continue to be true and
complete.
(l) The Company and the Subsidiaries have paid all premiums (and
interest charges and penalties for late payment, if applicable) due to the PBGC
for each Defined Benefit Plan. The Company has reflected (or shall reflect) in
the Financial Statements the current value of such premium obligation that is
accrued and unsatisfied as of the date of each such Financial Statement.
Section 3.16(l) of the Company Disclosure Schedule sets forth the amount of all
such unpaid premium obligations (including, without limitation, proportionate
partial accruals for the current year). Other than being required to make and
making premium payments when due, no liability to the PBGC has been incurred by
the Company or by any Common Control Entity (as defined in Article X) on account
of Title IV of ERISA. During the past three (3) years, no filing has been made
by, or required of, the Company or any Common Control Entity with the PBGC, the
PBGC has not started any proceeding to terminate any Defined Benefit Plan that
was or is maintained or wholly or partially funded by the Company or any Common
Control Entity, and to the knowledge of the Company and the Subsidiaries, no
facts exist that would permit the PBGC to begin such a proceeding. Neither the
Company nor any Common Control Entity has, or will have as a result of the
transactions contemplated hereby, (i) withdrawn as a substantial employer so as
to become subject to Section 4063 of ERISA; or (ii) ceased making contributions
to any Pension Plan that is subject to
-21-
Section 4064(a) of ERISA to which the Company or any Common Control Entity made
contributions during the past five (5) years.
(m) Section 3.16(m) of the Company Disclosure Schedule identifies any
terminated Plan that covered any current or former employees of the Company or
any Subsidiary, and any other Plan that has been terminated, during the past
five (5) years. The Company has furnished to Pubco true and complete copies of
all filings with any Governmental Entity, employee communications, board minutes
and all other Documents relating to each such Plan termination.
(n) Except as set forth in Section 3.16(n) of the Company Disclosure
Schedule, no Plan or Other Arrangement, individually or collectively, provides
for any payment by the Company or any Subsidiary to any employee or independent
contractor that is not deductible under Section 162(a)(1) or 404 of the Code or
that is an "excess parachute payment" pursuant to Section 280G of the Code.
(o) No Plan has within the past three (3) years experienced a
"reportable event" (as such term is defined in Section 4043(b) of ERISA) that is
not subject to an administrative or statutory waiver from the reporting
requirement.
(p) No Plan is a "qualified foreign plan" (as such term is defined in
Section 404A(e) of the Code), and no Plan is subject to the Laws of any
jurisdiction other than the United States of America or one of its political
subdivisions.
(q) The Company and the Subsidiaries have timely filed and the Company
has furnished to Pubco true and complete copies of each Form 5330 (Return of
Excise Taxes Related to Employee Benefit Plans) that the Company or any
Subsidiary filed on any Plan during the past three (3) years. The Company and
the Subsidiaries have no liability for Taxes required to be reported on Form
5330.
(r) Section 3.16(r) of the Company Disclosure Schedule lists all
funded Welfare Plans (as defined in Article X) that provide benefits to current
or former employees of the Company or any Subsidiary, or to their beneficiaries.
The funding under each Welfare Plan does not exceed and has not exceeded the
limitations under Sections 419A(b) and 419A(c) of the Code. To their knowledge,
the Company and the Subsidiaries are not subject to taxation on the income of
any Welfare Plan's welfare benefit fund (as such term is defined in Section
419(e) of the Code) under Section 419A(g) of the Code.
(s) Section 3.16(s) of the Company Disclosure Schedule (i) identifies
all post-retirement medical, life insurance or other benefits promised, provided
or otherwise due now or in the future to current, former or retired employees of
the Company or any Subsidiary, (ii) identifies the method of funding (including,
without limitation, any individual accounting) for all such benefits, (iii)
discloses the funded status of the Plans providing or promising such benefits,
and (iv) sets forth the method of accounting for
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such benefits to any key employees (as defined in Section 416(i) of the Code) of
the Company or any Subsidiary .
(t) All Welfare Plans and the related trusts that are subject to
Section 4980B(f) of the Code and Sections 601 through 607 of ERISA comply in all
material respects with and have been administered in compliance with the health
care continuation-coverage requirements for tax-favored status under Section
4980B(f) of the Code (formerly Section 162(k) of the Code), Sections 601 through
607 of ERISA, and all proposed or final regulations under Section 162 of the
Code explaining those requirements.
(u) The Company and the Subsidiaries have (i) filed or caused to be
filed all returns and reports on the Plans that they are required to file, and
(ii) paid or made adequate provision for all fees, interest, penalties,
assessments or deficiencies that have become due pursuant to those returns or
reports or pursuant to any assessment or adjustment that has been made relating
to those returns or reports. All other fees, interest, penalties and
assessments that are due and payable by or for the Company or any Subsidiary
with respect to any Plan have been timely reported, fully paid and discharged.
There are no unpaid fees, penalties, interest or assessments due from the
Company or any Subsidiary or from any other Person that are or could become an
Encumbrance on any Asset of the Company or any Subsidiary or could otherwise
have a Company Material Adverse Effect. The Company and the Subsidiaries have
collected or withheld all amounts that are required to be collected or withheld
by them to discharge their obligations with respect to each Plan, and all of
those amounts have been paid to the appropriate Governmental Entity or set aside
in appropriate accounts for future payment when due.
SECTION 3.17. Taxes and Tax Matters.
(a) The Company and the Subsidiaries have (or, in the case of Company
Tax Returns (as defined in Article X) becoming due after the date hereof and
before the Effective Time, will have prior to the Effective Time) duly filed all
Company Tax Returns required to be filed by the Company and the Subsidiaries at
or before the Effective Time with respect to all applicable material Taxes. No
material penalties or other charges are or will become due with respect to any
such Company Tax Returns as the result of the late filing thereof. All such
Company Tax Returns are (or, in the case of returns becoming due after the date
hereof and before the Effective Time, will be) true and complete in all material
respects. The Company and the Subsidiaries: (i) have paid all Taxes due or
claimed to be due by any Taxing authority in connection with any such Company
Tax Returns (without regard to whether or not such Taxes are shown as due on any
Company Tax Returns); or (ii) have established (or, in the case of amounts
becoming due after the date hereof, prior to the Effective Time will have paid
or established) in the Financial Statements adequate reserves (in conformity
with GAAP consistently applied) for the payment of such Taxes. The amounts set
up as reserves for Taxes in the Financial
-23-
Statements are sufficient for the payment of all unpaid Taxes, whether or not
such Taxes are disputed or are yet due and payable, for or with respect to the
applicable period, and for which the Company or any Subsidiary may be liable in
its own right (including, without limitation, by reason of being a member of the
same affiliated group) or as a transferee of the Assets of, or successor to, any
Person.
(b) Neither the Company nor any Subsidiary, either in its own right
(including, without limitation, by reason of being a member of the same
affiliated group) or as a transferee, has or at the Effective Time will have any
liability for Taxes payable for or with respect to any periods prior to and
including the Effective Time in excess of the amounts actually paid prior to the
Effective Time or reserved for in the Financial Statements, except for any Taxes
due in connection with the Merger or incurred in the Ordinary Course of Business
subsequent to the date of the latest Financial Statement.
(c) Except as set forth in Section 3.17(c) of the Company Disclosure
Schedule, all Company Tax Returns have been examined by the relevant Taxing
authorities, or closed without audit by applicable Law, and all deficiencies
proposed as a result of such examinations have been paid, settled or reserved
for in the Financial Statements, for all taxable years prior to and including
the taxable year ended December 31, 1997. Except as set forth in Section
3.17(c) of the Company Disclosure Schedule, there is no action, suit,
proceeding, audit, investigation or claim pending or, to the knowledge of the
Company or any Subsidiary, threatened in respect of any Taxes for which the
Company or any Subsidiary is or may become liable, nor has any deficiency or
claim for any such Taxes been proposed, asserted or, to the knowledge of the
Company or any Subsidiary, threatened. Except as set forth in Section 3.17(c)
of the Company Disclosure Schedule, neither the Company nor any Subsidiary has
consented to any waivers or extensions of any statute of limitations with
respect to any taxable year of the Company or any Subsidiary. Except as set
forth in Section 3.17(c) of the Company Disclosure Schedule, there is no
Agreement, waiver or consent providing for an extension of time with respect to
the assessment or collection of any Taxes against the Company or any Subsidiary,
and no power of attorney granted by the Company or any Subsidiary with respect
to any Tax matters is currently in force.
(d) The Company has furnished to Pubco true and complete copies of all
Company Tax Returns and all written communications with any Governmental Entity
relating to any such Company Tax Returns or to any deficiency or claim proposed
or asserted, irrespective of the outcome of such matter, but only to the extent
such items relate to Tax years (i) which are subject to an audit, investigation,
examination or other proceeding, or (ii) with respect to which the statute of
limitations has not expired.
(e) Section 3.17(e) of the Company Disclosure Schedule sets forth
(i) all federal Tax elections that currently are in effect with respect to the
Company or any Subsidiary, and (ii) all elections for purposes of foreign, state
or local Taxes and all consents or Agreements for purposes of federal, foreign,
state or local Taxes in each case
-24-
that reasonably could be expected to affect or be binding upon the Surviving
Corporation or any Subsidiary or their respective Assets or operations after the
Effective Time. Section 3.17(e) of the Company Disclosure Schedule sets forth
all changes in accounting methods for Tax purposes at any time made, agreed to,
requested or required with respect to the Company or any of the Subsidiaries.
(f) Except as set forth in Section 3.17(f) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary (i) is or has ever been a
partner in a partnership or an owner of an interest in an entity treated as a
partnership for federal income Tax purposes; (ii) has executed or filed with the
IRS any consent to have the provisions of Section 341(f) of the Code apply to
it; (iii) is subject to Section 999 of the Code; (iv) is a passive foreign
investment company as defined in Section 1296(a) of the Code; or (v) is a party
to an Agreement relating to the sharing, allocation or payment of, or indemnity
for, Taxes (other than an Agreement the only parties to which are the Company
and the Subsidiaries).
(g) The Company has complied in all material respects with all rules
and regulations relating to the withholding of Taxes.
SECTION 3.18. Customers.
To the knowledge of the Company and the Subsidiaries, the
relationships of the Company and the Subsidiaries with their customers are good
commercial working relationships. Except as set forth in Section 3.18 of the
Company Disclosure Schedule, during the twelve (12) months prior to the date of
this Merger Agreement, no customer of the Company or any Subsidiary that
accounted for in excess of $25,000 of the revenues of the Company and the
Subsidiaries during such twelve (12) months has canceled or otherwise terminated
its relationship with the Company or any Subsidiary.
SECTION 3.19. Certain Business Practices.
Neither the Company, the Subsidiaries nor any of their officers,
directors or, to the knowledge of the Company or any Subsidiary, any of their
employees or agents (or stockholders, distributors, representatives or other
persons acting on the express, implied or apparent authority of the Company or
of any Subsidiary) have paid, given or received or have offered or promised to
pay, give or receive, any bribe or other unlawful payment of money or other
thing of value, any unlawful discount, or any other unlawful inducement, to or
from any Person or Governmental Entity in the United States or elsewhere in
connection with or in furtherance of the business of the Company or any
Subsidiary (including, without limitation, any offer, payment or promise to pay
money or other thing of value (a) to any foreign official or political party (or
official thereof) for the purposes of influencing any act, decision or omission
in order to assist the Company or any Subsidiary in obtaining business for or
with, or directing business to, any Person, or (b) to any Person, while knowing
that all or a portion of such money or other thing of value will be
-25-
offered, given or promised to any such official or party for such purposes). The
business of the Company and the Subsidiaries is not in any manner dependent upon
the making or receipt of such payments, discounts or other inducements.
SECTION 3.20. Insurance.
Section 3.20 of the Company Disclosure Schedule lists and briefly
describes all policies of title, Asset, fire, hazard, casualty, liability, life,
worker's compensation and other forms of insurance of any kind owned or held by
the Company or any Subsidiary. All such policies: (a) are with insurance
companies reasonably believed by the Company to be financially sound and
reputable; (b) are in full force and effect; (c) are, to the knowledge of the
Company, sufficient for compliance by the Company and by each Subsidiary with
all requirements of Law and of all Agreements to which the Company or any
Subsidiary is a party; (d) are valid and outstanding policies enforceable
against the insurer; (e) to the knowledge of the Company, insure against risks
of the kind customarily insured against and in amounts customarily carried by
companies similarly situated and by companies engaged in similar businesses and
owning similar Assets, and provide adequate insurance coverage for the
businesses and Assets of the Company and the Subsidiaries; and (f) provide that
they will remain in full force and effect through the respective dates set forth
in Section 3.20 of the Company Disclosure Schedule.
SECTION 3.21. Potential Conflicts of Interest.
Except as set forth in Section 3.21 of the Company Disclosure
Schedule, neither any present or, to the knowledge of the Company or any
Subsidiary, former director, officer, employee with a salary in excess of
$60,000, or stockholder of the Company or any Subsidiary who beneficially owns
more than 5% of the capital stock of the Company or any Subsidiary, nor any
Affiliate of such director, officer, employee or stockholder:
(a) owns, directly or indirectly, any interest in (except for holdings
in securities that are listed on a national securities exchange, quoted on a
national automated quotation system or regularly traded in the over-the-counter
market, where such holdings are not in excess of two percent (2%) of the
outstanding class of such securities and are held solely for investment
purposes), or is a stockholder, partner, other holder of equity interests,
director, officer, employee, consultant or agent of, any Person that is a
competitor, lessor, lessee or customer of, or supplier of goods or services to,
the Company or any Subsidiary, except where the value to such individual of any
such arrangement with the Company or any Subsidiary has been less than $60,000
in the last twelve (12) months;
(b) owns, directly or indirectly, in whole or in part, any Assets with
a fair market value of $60,000 or more which the Company or any Subsidiary
currently uses in its business;
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(c) has any cause of action or other suit, action or claim whatsoever
against, or owes any amount to, the Company or any Subsidiary, except for claims
arising in the Ordinary Course of Business from any such Person's service to the
Company or any Subsidiary as a director, officer or employee;
(d) has sold or leased to, or purchased or leased from, the Company or
any Subsidiary any Assets for consideration in excess of $60,000 in the
aggregate since January 1, 1995;
(e) is a party to any Agreement pursuant to which the Company or any
Subsidiary provides office space to any such Person, or provides services of any
nature to any such Person, other than in the Ordinary Course of Business in
connection with the employment of such Person by the Company or any Subsidiary;
or
(f) has, since January 1, 1995, engaged in any other material
transaction with the Company or any Subsidiary involving in excess of $60,000,
other than (i) in the Ordinary Course of Business in connection with the
employment of such Person by the Company or any Subsidiary, and (ii) dividends,
distributions and stock issuances to all common and preferred stockholders (as
applicable) on a pro rata basis.
SECTION 3.22. Receivables.
To the knowledge of the Company, the accounts receivable of the
Company and the Subsidiaries shown on the Reviewed Balance Sheets and the
Unaudited Balance Sheets, or thereafter acquired by any of them, have been
collected or are collectible in amounts not less than the amounts thereof
carried on the books of the Company and the Subsidiaries, without right of
recourse, defense, deduction, counterclaim, offset or setoff on the part of the
obligor, and can reasonably be expected to be collected within ninety (90) days
of the date incurred or due, except to the extent of the allowance for doubtful
accounts shown on such Reviewed Balance Sheets and Unaudited Balance Sheets.
SECTION 3.23. Books and Records.
The books of account, stock records, minute books and other corporate
and financial records of the Company are complete and correct in all material
respects and have been maintained in accordance with good business practices,
and the matters contained therein are appropriately and accurately reflected in
all material respects in the Financial Statements in accordance with GAAP.
SECTION 3.24. Assets.
Except as set forth in Section 3.24 of the Company Disclosure
Schedule, the Company and the Subsidiaries have good, valid, marketable and
insurable (at standard rates) title to, or a valid leasehold interest in, all
material Assets respectively owned or
-27-
leased by them, including, without limitation, all material Assets reflected in
the Reviewed Balance Sheets and in the Unaudited Balance Sheets and all material
Assets purchased or leased by the Company or by any Subsidiary since August 31,
1998 (except for Assets reflected in such Reviewed Balance Sheets and Unaudited
Balance Sheets or acquired since August 31, 1998 which have been sold or
otherwise disposed of in the Ordinary Course of Business), free and clear of all
Encumbrances. All personal property of the Company and the Subsidiaries is in
good operating condition and repair (ordinary wear and tear excepted) and is
suitable and adequate for the uses for which it is intended or is being used.
All inventory (as defined in Article X) of the Company and the Subsidiaries
(i) consists of items which are good and merchantable and of a quality and
quantity presently usable and salable in the Ordinary Course of Business and
(ii) have been reflected in the Financial Statements at the lower of cost or
market, in accordance with GAAP, and include no absolute or discontinued items,
except to the extent reserved against in the Financial Statements.
SECTION 3.25. No Infringement or Contest.
(a) Section 3.25(a) of the Company Disclosure Schedule identifies and
describes each item of Intellectual Property (as defined in Article X) (i) owned
by the Company or a Subsidiary, (ii) owned by any third party and used by the
Company or any Subsidiary pursuant to license, sublicense or other Agreement, or
(iii) otherwise used by the Company or any Subsidiary (including, in each case,
specification of whether each such item is owned, licensed or used by the
Company or any Subsidiary).
(b) With respect to each item of Intellectual Property listed in
Section 3.25(a) of the Company Disclosure Schedule that is owned by the Company
or any Subsidiary, such Intellectual Property can be used by the Company and the
Subsidiaries in their respective businesses as presently conducted by them, free
and clear of restrictions, Encumbrances and royalties on such use, and the
Company and the Subsidiaries have the right to bring action for infringement of
such Intellectual Property. With respect to the Intellectual Property listed in
Section 3.25(a) of the Company Disclosure Schedule that is used by the Company
or a Subsidiary pursuant to license, sublicense or other Agreement, such
Intellectual Property has been licensed on an arm's-length basis and can be used
by the Company and the Subsidiaries in their respective businesses as currently
conducted by them in accordance with the terms and conditions of such licenses,
sublicenses or other Agreements. With respect to each item of Intellectual
Property listed in Section 3.25(a) of the Company Disclosure Schedule that is
otherwise used by the Company or any Subsidiary, such Intellectual Property can
be used by the Company and the Subsidiaries in their respective businesses as
presently conducted by them, free and clear of restrictions, Encumbrances and
royalties on such use Each item of Intellectual Property owned or used by the
Company or any Subsidiary immediately prior to the Closing will be owned or
available for use by the Company or such Subsidiary on identical terms and
conditions immediately after the Closing.
-28-
(c) As used in the businesses of the Company and the Subsidiaries as
conducted in the past and as currently conducted, none of the Intellectual
Property listed in Section 3.25(a) of the Company Disclosure Schedule has at any
time infringed or misappropriated or otherwise violated, or is likely to
infringe, misappropriate or violate, any Intellectual Property of any other
Person, nor is the Company or any Subsidiary otherwise in the conduct of their
respective businesses infringing upon, or alleged to be infringing upon, any
Intellectual Property of any other Person. There are no pending or, to the
knowledge of the Company or any Subsidiary, threatened claims against the
Company or any Subsidiary alleging that the conduct of the Company's or any
Subsidiary's business infringes or conflicts with any Intellectual Property
rights of others. To the knowledge of the Company or any Subsidiary, there is
no Intellectual Property of another Person that infringes, misappropriates or
violates any of the Intellectual Property listed in Section 3.25(a) of the
Company Disclosure Schedule.
(d) The Company and the Subsidiaries own or have the right to use
pursuant to a valid license, sublicense or other Agreement all Intellectual
Property used in the operation of the businesses of the Company and the
Subsidiaries as currently conducted and as currently proposed to be conducted.
(e) The Company and the Subsidiaries have not caused obscene, libelous
or indecent material to be transmitted or received through the Company's or the
Subsidiaries' services or directories and have instituted procedures to ensure
that no such material is transmitted.
SECTION 3.26. Board Recommendation.
At a meeting duly called and held, or by unanimous written consent, in
compliance with Michigan Law, the Board of Directors of the Company has adopted
by unanimous vote a resolution approving and adopting this Merger Agreement and
the transactions contemplated hereby and recommending approval and adoption of
this Merger Agreement and the transactions contemplated hereby by the Company
Stockholders.
SECTION 3.27. Vote Required.
The affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock is the only vote of the holders of any class or
series of capital stock of the Company necessary to approve the transactions
contemplated by this Merger Agreement.
-29-
SECTION 3.28. Banks; Attorneys-in-fact.
Section 3.28 of the Company Disclosure Schedule sets forth a complete
list showing the name of each bank or other financial institution in which the
Company or any Subsidiary has accounts (including a description of the names of
all Persons authorized to draw thereon or to have access thereto). Such list
also shows the name of each Person holding a power of attorney from the Company
or any Subsidiary and a brief description thereof.
SECTION 3.29. Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Merger Agreement based upon arrangements made by or on
behalf of the Company or any Subsidiary or any of their respective Affiliates.
SECTION 3.30. Environmental Matters.
(a) To the knowledge of the Company, the Company and each of the
Subsidiaries have complied and are in compliance with, and the Real Property (as
defined in Article X) and all improvements thereon are in compliance with, all
Environmental Laws (as defined in Article X), except where the failure so to
comply would not have a Company Material Adverse Effect.
(b) To the knowledge of the Company and the Subsidiaries, neither the
Company nor any Subsidiary has any liability under any Environmental Law, nor is
the Company or any Subsidiary responsible for any liability of any other Person
under any Environmental Law. Except as set forth in Section 3.30(b) of the
Company Disclosure Schedule, there are no pending or, to the knowledge of the
Company or any Subsidiary, threatened actions, suits, claims, legal proceedings
or other proceedings based on, and neither the Company nor any Subsidiary, has
received any formal or informal notice of any complaint, order, directive,
citation, notice of responsibility, notice of potential responsibility, or
information request from any Governmental Entity or any other Person since
January 1, 1993 (or prior thereto with respect to any such complaint, order,
directive, citation, notice of responsibility, notice of potential
responsibility, or information request which has not been finally resolved) or
knows any fact(s) which might reasonably be expected to form the basis for any
such actions or notices arising out of or attributable to: (i) the current or
past presence at any part of the Real Property of Hazardous Materials (as
defined in Article X) or any substances that pose a hazard to human health or an
impediment to working conditions; (ii) the current or past release or threatened
release into the environment from the Real Property (including, without
limitation, into any storm drain, sewer, septic system or publicly owned
treatment works) of any Hazardous Materials or any substances that pose a hazard
to human health or an impediment to working conditions; (iii) the off-site
disposal of Hazardous Materials originating on or from the Real Property or the
businesses or Assets of the Company or any Subsidiary; (iv) any
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facility operations, procedures or designs of the Company or any Subsidiary
which do not conform to requirements of the Environmental Laws; or (v) any
violation of Environmental Laws at any part of the Real Property or otherwise
arising from the Company's or any Subsidiary's activities (or the activities of
the Company's or any Subsidiary's predecessors in title) involving Hazardous
Materials.
(c) The Company and the Subsidiaries have been duly issued, and
currently have and will maintain through the Effective Time, all Licenses
required under any Environmental Law. A true and complete list of such
Licenses, all of which are valid and in full force and effect, is set out in
Section 3.30(c) of the Company Disclosure Schedule. Except in accordance with
such Licenses, as described in Section 3.30(c) of the Company Disclosure
Schedule or as otherwise permitted by Law, there has been no Hazardous Discharge
(as defined in Article X) or discharge of any other material regulated by such
Licenses. Except as disclosed in Section 3.30(c) of the Company Disclosure
Schedule, to the knowledge of the Company and the Subsidiaries no such Licenses
are non-transferable or which require consent, notification or other action to
remain in full force and effect following consummation of the Merger and the
other transactions contemplated hereby.
(d) Except as set forth in Section 3.30(d) of the Company Disclosure
Schedule, the Real Property contains no underground improvements, including but
not limited to treatment or storage tanks, or underground piping associated with
such tanks, used currently or in the past for the storage, throughput or other
management of Hazardous Materials, and no portion of the Real Property is or has
been used as a dump or landfill or consists of or contains filled in land or
wetlands.
SECTION 3.31. Disclosure.
To the knowledge of the Company, all facts regarding the business,
operations, prospects, condition (financial or otherwise), Assets or liabilities
of the Company and the Subsidiaries which have been disclosed in writing
(including, without limitation, in this Merger Agreement and the Company
Disclosure Schedule) or otherwise provided to Pubco by the Company have been
fully and truthfully disclosed to Pubco. No representation or warranty by the
Company, and no Document furnished or to be furnished to Pubco by the Company
pursuant to this Merger Agreement or otherwise in connection herewith or with
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
SECTION 3.32. Directors, Officers and Affiliates
Section 3.32 of the Company Disclosure Schedule lists all current
directors and officers of the Company and the Subsidiaries, showing each such
person's name,
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positions, and annual remuneration, bonuses and fringe benefits paid by the
Company or any Subsidiary for the current fiscal year and the most recently
completed fiscal year.
SECTION 3.33. Copies of Documents.
True and complete copies of all Documents listed in the Company
Disclosure Schedule have been, or will be, furnished to Pubco.
SECTION 3.34. Publication of Directories.
Section 3.34 of the Company Disclosure Schedule lists the white and
yellow page directories published by the Company, the month of publication, the
number of each directory published, and the Net Cash Revenue (as defined in
Article X) from each directory. Except as set forth in Section 3.34 of the
Company Disclosure Schedule, all sales, production and distribution of the last
edition of the directories has been completed by the Company in the same manner
as the previously published editions of such directories, including but not
limited to, the number of directories printed and distributed, the distribution
area and system, the pricing, the credit terms, the quality and size of print
and paper, and the general production standards. The Company has paid all sales
and production expenses for all editions of the directories published by the
Company.
SECTION 3.35. Reorganization.
To the knowledge of the Company, neither it nor any of the
Subsidiaries has taken any action or failed to take any action which action or
failure would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
SECTION 3.36. State Takeover Statutes; Certain Charter Provisions.
No state of Michigan takeover statutes or charter or bylaw provisions
will prevent the Merger or this Merger Agreement and the transactions
contemplated hereby or thereby.
SECTION 3.37. Dissenters Rights.
All Company Stockholders have waived any appraisal or dissenters'
rights under Michigan Law or any other Law arising from, or in connection with,
the consummation of the Merger and the other transactions contemplated hereby.
SECTION 3.38. Year 2000 Review.
(a) To the knowledge of the Company, the Company and the Subsidiaries
will not be materially adversely affected by (i) any failure of the Company's
and the
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Subsidiaries computer hardware, software, firmware or embedded chip technology
to be Year 2000 Compliant (as defined in Article X); or (ii) the cost and/or
disruption to normal activities caused by work to be carried out to ensure such
computer hardware, software or embedded chip technology is year 2000 Compliant;
provided, however, Section 3.38(a) of the Company Disclosure Schedule lists any
computer hardware, software or embedded chip technology that is not year 2000
Compliant.
(b) The Company and the Subsidiaries are currently reviewing their
information technology ("IT") and non-IT computer systems and programs to
determine which are not capable of recognizing the Year 2000 and to verify
system readiness for the millennium date (the "Company Year 2000 Review"). The
Company Year 2000 review covers all of the Company's and the Subsidiaries'
operations and is centrally managed.
SECTION 3.39. Investment Agreements.
In accordance with Section 6.01, Investment Agreements substantially
in the form attached hereto as Exhibit A (the "Investment Agreements") will be
executed and delivered to ▇▇▇▇▇▇ by the Company Stockholders and each such
Investment Agreement constitutes a legal, valid and binding obligation of the
respective Company Stockholder who is a party thereto, enforceable against such
Company Stockholder in accordance with its terms.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ▇▇▇▇▇▇, PUBCO AND PUBCO SUB
Except as specifically set forth in the Disclosure Schedule delivered
by ▇▇▇▇▇▇, Pubco and Pubco Sub to the Company prior to the execution and
delivery of this Merger Agreement (the "Pubco Disclosure Schedule"), ▇▇▇▇▇▇,
-------------------------
Pubco and Pubco Sub hereby jointly and severally represent and warrant (which
representation and warranty shall be deemed to include the disclosures with
respect thereto so specified in the Pubco Disclosure Schedule) to the Company as
follows, in each case as of the date of this Merger Agreement, unless otherwise
specifically set forth herein or in the Pubco Disclosure Schedule:
SECTION 4.01. Organization and Qualification; Subsidiaries.
Each of ▇▇▇▇▇▇, Pubco, Pubco Sub and Pubco's Significant Subsidiaries
(as defined in Article X) is a corporation duly organized, validly existing and
in good standing under the Laws of the jurisdiction of its incorporation or
organization, and has the full and unrestricted corporate power and authority to
own, operate and lease its Assets, and to carry on its business as currently
conducted. Each of ▇▇▇▇▇▇, Pubco, Pubco Sub and Pubco's Significant
Subsidiaries is duly qualified to conduct business as a foreign
-33-
corporation and is in good standing in the states, countries and territories in
which the nature of the business conducted by it or the character of the Assets
owned, leased or otherwise held by it makes such qualification necessary, except
where the absence of such qualification as a foreign corporation would not have
an Pubco Material Adverse Effect (as defined in Article X).
SECTION 4.02. Certificate of Incorporation and Bylaws.
Pubco has furnished to the Company a true and complete copy of the
Certificate of Incorporation of Pubco and the certificate of incorporation of
Pubco Sub, as currently in effect, certified as of a recent date by the
Secretary of State (or comparable Governmental Entity) of their respective
jurisdictions of incorporation, and a true and complete copy of the Bylaws of
Pubco and the Bylaws of Pubco Sub, as currently in effect, certified by their
respective corporate secretaries. Such certified copies are attached as
exhibits to, and constitute an integral part of, the Pubco Disclosure Schedule.
SECTION 4.03. Authority; Binding Obligation.
Each of ▇▇▇▇▇▇, Pubco and Pubco Sub has the full and unrestricted
corporate power and authority to execute and deliver this Merger Agreement and
to carry out the transactions contemplated hereby. The execution and delivery
by ▇▇▇▇▇▇, Pubco and Pubco Sub of this Merger Agreement and all other Documents
contemplated hereby, and the consummation by ▇▇▇▇▇▇, Pubco and Pubco Sub of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action and no other corporate proceedings on the part of
▇▇▇▇▇▇, Pubco or Pubco Sub are necessary to authorize this Merger Agreement and
the other Documents contemplated hereby, or to consummate the transactions
contemplated hereby and thereby. This Merger Agreement has been duly executed
and delivered by ▇▇▇▇▇▇, Pubco and Pubco Sub and constitutes a legal, valid and
binding obligation of ▇▇▇▇▇▇, Pubco and Pubco Sub in accordance with its terms,
except as such enforceability may be subject to the effect of any applicable
bankruptcy, insolvency fraudulent conveyance, reorganization, moratorium or
similar Laws affecting creditors' rights generally and subject to the effect of
general equitable principles (whether considered in a proceeding in equity or at
law).
SECTION 4.04. No Conflict; Required Filings and Consents.
(a) The execution, delivery and performance by ▇▇▇▇▇▇, Pubco and Pubco
Sub of this Merger Agreement and all other Documents contemplated hereby, the
fulfillment of and compliance with the respective terms and provisions hereof
and thereof, and the consummation by ▇▇▇▇▇▇, Pubco and Pubco Sub of the
transactions contemplated hereby and thereby, do not and will not: (i) conflict
with, or violate any provision of, the Certificate of Incorporation or the
Bylaws of ▇▇▇▇▇▇ or Pubco, or the Certificate or Articles of Incorporation or
Bylaws of Pubco Sub or any of Pubco's
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Significant Subsidiaries; or (ii) subject to obtaining the consents, approvals,
authorizations and permits of, and making filings with or notifications to, the
applicable Governmental Entity pursuant to the applicable requirements, if any,
of the Securities Act, the Exchange Act, Blue Sky Laws, the HSR Act, the
Communications Act, the Federal Aviation Act, applicable state utility Laws and
applicable municipal franchise Laws, and the filing and recordation of the
Articles of Merger as required by Michigan Law and Iowa Law, conflict with or
violate any Law applicable to ▇▇▇▇▇▇, Pubco, Pubco Sub or any of Pubco's
Significant Subsidiaries, or any of their respective Assets; (iii) conflict
with, result in any breach of, constitute a default (or an event that with
notice or lapse of time or both would become a default) under any Agreement to
which ▇▇▇▇▇▇, Pubco, Pubco Sub or any of Pubco's Significant Subsidiaries is a
party or by which ▇▇▇▇▇▇, Pubco, Pubco Sub or any of Pubco's Significant
Subsidiaries, or any of their respective Assets, may be bound; or (iv) result in
or require the creation or imposition of, or result in the acceleration of, any
indebtedness or any Encumbrance of any nature upon, or with respect to, ▇▇▇▇▇▇,
Pubco, Pubco Sub or any of Pubco's Significant Subsidiaries or any of the Assets
of ▇▇▇▇▇▇, Pubco, Pubco Sub or any of Pubco's Significant Subsidiaries; except
for any such conflict or violation described in clause (ii), any such conflict,
breach or default described in clause (iii), or any such creation, imposition or
acceleration described in clause (iv) that would not have an Pubco Material
Adverse Effect and that would not prevent ▇▇▇▇▇▇, Pubco or Pubco Sub from
consummating the Merger on a timely basis.
(b) Except as set forth in Section 4.04(b) of the Pubco Disclosure
Schedule, the execution, delivery and performance by ▇▇▇▇▇▇, Pubco and Pubco Sub
of this Merger Agreement and all other Documents contemplated hereby, the
fulfillment of and compliance with the respective terms and provisions hereof
and thereof, and the consummation by ▇▇▇▇▇▇, Pubco and Pubco Sub of the
transactions contemplated hereby and thereby, do not and will not: (i) require
any consent, approval, authorization or permit of, or filing with or
notification to, any Person not party to this Merger Agreement, except (A)
pursuant to the applicable requirements, if any, of the Securities Act, the
Exchange Act, Blue Sky Laws, the HSR Act, the Communications Act, the Federal
Aviation Act, and applicable state utility Laws and applicable municipal
franchise Laws and (B) the filing and recordation of the Articles of Merger as
required by Michigan and Iowa Law; or (ii) result in or give rise to any
penalty, forfeiture, Agreement termination, right of termination, amendment or
cancellation, or restriction on business operations of ▇▇▇▇▇▇, Pubco, the
Surviving Corporation or Pubco Sub.
SECTION 4.05. No Prior Activities of Pubco Sub.
Pubco Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Merger Agreement and has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
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SECTION 4.06. Brokers.
No broker or finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Merger Agreement based upon arrangements made by or on
behalf of ▇▇▇▇▇▇, Pubco, Pubco Sub or any of its Affiliates.
SECTION 4.07. SEC Documents.
▇▇▇▇▇▇ has filed all required reports, schedules, forms, statements
and other Documents with the SEC (as defined in Article X) since January 1, 1997
(including the ▇▇▇▇▇▇ Post-Signing SEC Documents (as defined in Section 6.10),
the "▇▇▇▇▇▇ SEC Documents"). As of their respective dates, the ▇▇▇▇▇▇ SEC
--------------------
Documents complied or, in the case of the ▇▇▇▇▇▇ Post-Signing SEC Documents,
will comply as to form in all material respects with the applicable requirements
of the Securities Act or the Exchange Act, as the case may be, and none of the
▇▇▇▇▇▇ SEC Documents contained or, in the case of the ▇▇▇▇▇▇ Post-Signing SEC
Documents, will contain, any untrue statement of a material fact or omitted or,
in the case of the ▇▇▇▇▇▇ Post-Signing SEC Documents, will omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of ▇▇▇▇▇▇ included in the
▇▇▇▇▇▇ SEC Documents comply or, in the case of the ▇▇▇▇▇▇ Post-Signing SEC
Documents, will comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been or, in the case of the ▇▇▇▇▇▇ Post-Signing SEC
Documents, will have been prepared in accordance with GAAP (except, in the case
of unaudited statements, for the absence of footnotes and as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods subject
thereto (except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of ▇▇▇▇▇▇ and its consolidated subsidiaries as
of the dates thereof and the consolidated results of operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end adjustments and the absence of footnotes). Except as disclosed
in the ▇▇▇▇▇▇ SEC Documents, as required by GAAP or as required by any
Governmental Entity, ▇▇▇▇▇▇ has not, since December 31, 1997, made any change in
accounting practices or policies applied in the preparation of financial
statements.
SECTION 4.08. ▇▇▇▇▇▇ Common Stock.
The ▇▇▇▇▇▇ Common Stock to be issued and delivered to the Company
Stockholders pursuant to the Merger has been duly authorized and, when issued in
the Merger in accordance with this Merger Agreement, will be validly issued,
fully paid and nonassessable and will have been approved for listing by The
Nasdaq Stock Market's National Market System.
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SECTION 4.09. Capitalization.
The authorized capital stock of ▇▇▇▇▇▇ consists of (a) 250,000,000
shares of ▇▇▇▇▇▇ Common Stock, of which, as of January 5, 1999: (i)
63,545,925shares were issued and outstanding, all of which were duly authorized,
validly issued, fully paid and nonassessable; (ii) no shares were held in the
treasury of ▇▇▇▇▇▇;(iii) 12,278,323 shares were reserved for issuance pursuant
to outstanding options to purchase ▇▇▇▇▇▇ Common Stock granted to employees and
certain other Persons; (iv) 245,536 shares were reserved for issuance pursuant
to a Stock Option Agreement dated August 21, 1998 between ▇▇▇▇▇▇ and QST
Enterprises, Inc.; (vi) 10,414 shares were reserved for issuance pursuant to a
Stock Option Agreement dated November 25, 1998 between ▇▇▇▇▇▇, Inlet, Inc. and
certain shareholders of Inlet, Inc.; (vi) 917,398 shares were reserved for
issuance pursuant to the McLeodUSA Incorporated Employee Stock Purchase Plan;
and (vii) 961,920 shares were reserved pursuant to the McLeodUSA 401(k) Profit
Sharing Plan; (b) 22,000,000 shares of Class B common stock, par value $.01 per
share ("▇▇▇▇▇▇ Class B Common Stock"), of which, as of January 5, 1999: (i) no
---------------------------
shares were issued and outstanding; (ii) no shares were held in the treasury of
▇▇▇▇▇▇; and (iii) 1,300,688shares were reserved for issuance pursuant to
outstanding options to purchase ▇▇▇▇▇▇ Class B Common Stock granted to a
significant stockholder of ▇▇▇▇▇▇; and (c) 2,000,000 shares of serial preferred
stock, par value $.01 per share, of which: (i) no shares are issued and
outstanding; and (ii) no shares are held in the treasury of ▇▇▇▇▇▇. Except for
the options set forth in clauses (a)(iii) through (a)(vi) and (b)(iii) above and
as set forth in Section 4.09(a) of the Pubco Disclosure Schedule, as of January
5, 1999, there were no outstanding securities convertible into or exchangeable
for capital stock or any other securities of ▇▇▇▇▇▇, or any capital stock or
other securities of any of ▇▇▇▇▇▇'▇ or Pubco's Significant Subsidiaries and no
outstanding options, rights (preemptive or otherwise), or warrants to purchase
or to subscribe for any shares of such capital stock or other securities of
▇▇▇▇▇▇ or any of ▇▇▇▇▇▇'▇ or Pubco's Significant Subsidiaries. Except as set
forth in Section 4.09(b) of the Pubco Disclosure Schedule and except for
Agreements relating to the options specified in clauses (a)(iii) through (a)(vi)
and (b)(iii) above, there are no outstanding Agreements to which ▇▇▇▇▇▇, Pubco
or any of its Significant Subsidiaries is a party affecting or relating to the
voting, issuance, purchase, redemption, registration, repurchase or transfer of
capital stock or any other securities of ▇▇▇▇▇▇, or any capital stock or other
securities of any of ▇▇▇▇▇▇'▇ or Pubco's Significant Subsidiaries, except as
contemplated hereunder. Each of the outstanding shares of ▇▇▇▇▇▇ Common Stock,
and of capital stock of, or other equity interests in, ▇▇▇▇▇▇'▇ or Pubco's
Significant Subsidiaries was issued in compliance with all applicable federal
and state Laws concerning the issuance of securities, and, except as set forth
in Section 4.09(d) of the Pubco Disclosure Schedule, such shares or other equity
interests owned by ▇▇▇▇▇▇, Pubco or any of its Significant Subsidiaries are
owned free and clear of all Encumbrances. There are no obligations, contingent
or otherwise, of ▇▇▇▇▇▇, Pubco or any of its Significant Subsidiaries to provide
funds to, make any investment (in the form of a loan, capital contribution or
otherwise) in, or provide any guarantee with respect to, any of ▇▇▇▇▇▇'▇ or
Pubco's Significant Subsidiaries or any other Person. Except as set forth in
Section 4.09(e) of the Pubco Disclosure Schedule, there are no Agreements
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pursuant to which any Person is or may be entitled to receive any of the
revenues or earnings, or any payment based thereon or calculated in accordance
therewith, of ▇▇▇▇▇▇, Pubco or any of their Significant Subsidiaries. No vote
of the stockholders of ▇▇▇▇▇▇ or Pubco is required in connection with the
consummation of the Merger and the other transactions contemplated hereby.
SECTION 4.10. Reorganization.
To the knowledge of ▇▇▇▇▇▇ and Pubco, neither ▇▇▇▇▇▇, Pubco, Pubco Sub
nor any of Pubco's Significant Subsidiaries has taken any action or failed to
take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 4.11. Compliance.
Neither ▇▇▇▇▇▇, Pubco nor Pubco Sub is aware of any fact or
circumstance related to them that could reasonably be expected to cause the
filing of any objection to any application for any Governmental consent required
hereunder, lead to any delay in processing such application, or require any
waiver of any Governmental rule, policy or other applicable Law.
SECTION 4.12. Disclosure.
All material facts regarding the business, operations, prospects,
condition (financial or otherwise), Assets or liabilities of ▇▇▇▇▇▇, Pubco,
Pubco Sub and Pubco's Significant Subsidiaries that have been disclosed orally
or in writing (including, without limitation, in this Merger Agreement and the
Pubco Disclosure Schedule) or otherwise provided to the Company by Pubco have
been fully and truthfully disclosed to the Company. No representation or
warranty by ▇▇▇▇▇▇, Pubco or Pubco Sub, and no Document furnished or to be
furnished to the Company by ▇▇▇▇▇▇, Pubco or Pubco Sub pursuant to this Merger
Agreement or otherwise in connection herewith or with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary in order to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
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ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01. Conduct of Business of the Company.
The Company hereby covenants and agrees that, from the date of this
Merger Agreement until the Effective Time, the Company, unless otherwise
expressly contemplated by this Merger Agreement or consented to in writing by
Pubco, will, and will cause the Subsidiaries to, carry on their respective
businesses only in the Ordinary Course of Business, use their respective
reasonable best efforts to preserve intact their business organizations and
Assets, maintain their rights and franchises, retain the services of their
officers and key employees and maintain their relationships with customers,
suppliers, licensors, licensees and others having business dealings with them,
and use their respective reasonable best efforts to keep in full force and
effect liability insurance and bonds comparable in amount and scope of coverage
to that currently maintained. Without limiting the generality of the foregoing,
except as otherwise expressly contemplated by this Merger Agreement, from the
date of this Merger Agreement until the Effective Time the Company shall not,
and shall not permit any of the Subsidiaries to:
(a) (i) increase in any manner the compensation or fringe benefits of,
or pay any bonus to, any director, officer or employee, except for increases or
bonuses in the Ordinary Course of Business to employees who are not directors or
officers; (ii) grant any severance or termination pay (other than pursuant to
the normal severance practices or existing Agreements of the Company or any
Subsidiary in effect on the date of this Merger Agreement as described in
Schedule 5.01(a)(ii)) to, or enter into any severance Agreement with, any
director, officer or employee, or enter into any employment Agreement with any
director, officer or employee; (iii) establish, adopt, enter into or amend any
Plan or Other Arrangement, except as may be required to comply with applicable
Law; (iv) pay any benefit not provided for under any Plan or Other Arrangement;
(v) grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Plan or Other Arrangement (including the
grant of stock options, stock appreciation rights, stock-based or stock-related
awards, performance units or restricted stock, or the removal of existing
restrictions in any Plan or Other Arrangement or Agreement or awards made
thereunder), except for grants in the Ordinary Course of Business or as required
under the Agreements set forth in Schedule 5.01(a)(v), or (vi) take any action
to fund or in any other way secure the payment of compensation or benefits under
any Agreement, except as required under the Agreements set forth in Schedule
5.01(a)(vi);
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of capital
stock of the Company or any Subsidiary or any securities or obligations
convertible into or exchangeable for any shares of capital stock of the Company
or any Subsidiary, or any options, warrants or conversion or other rights to
acquire any shares of capital stock of the Company or any Subsidiary or any such
securities or obligations, or any other securities thereof; (ii) effect any
reorganization or recapitalization; or (iii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock;
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(d) issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any limitations in voting
rights or other Encumbrances) of, any shares of any class of its capital stock
(including shares held in treasury), any securities convertible into or
exercisable or exchangeable for any such shares, or any rights, warrants or
options to acquire, any such shares, or amend or otherwise modify the terms of
any such rights, warrants or options the effect of which shall be to make such
terms more favorable to the holders thereof;
(e) except as contemplated by Agreements that have been identified in
Section 3.14(a) of the Company Disclosure Schedule, acquire or agree to acquire,
by merging or consolidating with, by purchasing an equity interest in or a
portion of the Assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any Assets of any other Person
(other than the purchase of assets from suppliers or vendors in the Ordinary
Course of Business);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
subject to any Encumbrance or dispose of, or agree to sell, lease, exchange,
mortgage, pledge, transfer or otherwise subject to any Encumbrance or dispose
of, any of its Assets, except; as identified in Schedule 5.01;
-------------
(g) adopt any amendments to its articles or certificate of
incorporation, bylaws or other comparable charter or organizational documents;
(h) make or rescind any express or deemed election relating to Taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ended December 31, 1997, except in either case as
may be required by Law, the IRS or GAAP;
(i) make or agree to make any new capital expenditure or expenditures
which are not included in the Company's 1999 capital budget, a copy of which was
furnished to Pubco, and which are, individually, in excess of $25,000 or, in the
aggregate, in excess of $50,000;
(j) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any
Subsidiary, guarantee any debt securities of another Person, enter into any
"keep well" or other Agreement to maintain any financial statement condition of
another Person or enter into any Agreement having the economic effect of any of
the foregoing, except for short-term borrowings
-40-
incurred in the Ordinary Course of Business, or (ii) make any loans, advances or
capital contributions to, or investments in, any other Person other than intra-
group loans, advances, capital contributions or investments between or among the
Company and any of its wholly owned Subsidiaries;
(k) pay, discharge, settle or satisfy any claims, liabilities or
obligations (whether absolute or contingent, matured or unmatured, known or
unknown), other than the payment, discharge or satisfaction, in the Ordinary
Course of Business or in accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the most recent Financial Statement
or incurred in the Ordinary Course of Business, or waive any material benefits
of, or agree to modify in any material respect, any confidentiality, standstill
or similar Agreements to which the Company or any Subsidiary is a party;
(l) except in the Ordinary Course of Business, waive, release or
assign any rights or claims, or modify, amend or terminate any Agreement to
which the Company or any Subsidiary is a party;
(m) make any change in any method of accounting or accounting practice
or policy other than those required by GAAP or a Governmental Entity;
(n) take any action or fail to take any action which could reasonably
be expected to have a Company Material Adverse Effect prior to or after the
Effective Time or an Pubco Material Adverse Effect after the Effective Time, or
that could reasonably be expected to adversely affect the ability of the Company
or any Subsidiary prior to the Effective Time, or Pubco or any of its
subsidiaries after the Effective Time, to obtain consents of third parties or
approvals of Governmental Entities required to consummate the transactions
contemplated in this Merger Agreement; or
(o) authorize, or commit or agree to do any of the foregoing.
SECTION 5.02. Other Actions.
The Company and Pubco shall not, and shall not permit any of their
respective Affiliates to, take any action that would, or that could reasonably
be expected to, result in (a) any of the representations and warranties of such
party set forth in this Merger Agreement becoming untrue, or (b) any of the
conditions to the Merger set forth in Article VII not being satisfied.
SECTION 5.03. Certain Tax Matters.
From the date hereof until the Effective Time, the Company and the
Subsidiaries (a) will prepare and timely file with the relevant Taxing authority
all Company Tax Returns ("Post-Signing Returns") required to be filed, which
--------------------
Post-Signing Returns shall
-41-
be accurate in all material respects, (b) will timely pay all Taxes due and
payable with respect to such Post-Signing Returns, (c) will pay or otherwise
make adequate provision for all Taxes payable by the Company and the
Subsidiaries for which no Post-Signing Return is due prior to the Effective
Time, and (d) will promptly notify Pubco of any action, suit, proceeding, claim
or audit pending against or with respect to the Company or any Subsidiary in
respect of any Taxes.
SECTION 5.04. Access and Information.
For so long as this Merger Agreement is in effect, the Company shall,
and shall cause each Subsidiary to, (a) afford to Pubco and its officers,
employees, accountants, consultants, legal counsel and other representatives
reasonable access during normal business hours, subject to reasonable advance
notice, to all of their respective properties, Agreements, books, records and
personnel and (b) furnish promptly to Pubco (i) a copy of each Document filed
with, or received from any Governmental Entity and (ii) all other information
concerning their respective businesses, operations, prospects, conditions
(financial or otherwise), Assets, liabilities and personnel as Pubco may
reasonably request.
SECTION 5.05. No Solicitation.
(a) The Company shall, and shall cause its directors, officers,
employees, representatives, agents and Subsidiaries and their respective
directors, officers, employees, representatives and agents to, immediately cease
any discussions or negotiations with any Person that may be ongoing with respect
to a Competing Transaction (as defined in this Section 5.05(a)). The Company
shall not, and shall cause the Subsidiaries not to, initiate, solicit or
encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or enter into discussions or furnish any information or negotiate
with any Person or otherwise cooperate in any way in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize any of the directors, officers, employees,
agents or representatives of the Company or any Subsidiary to take any such
action, and the Company shall, and shall cause the Subsidiaries to, direct and
instruct and use its or their reasonable best efforts to cause the directors,
officers, employees, agents and representatives of the Company and the
Subsidiaries (including, without limitation, any investment banker, financial
advisor, attorney or accountant retained by the Company or any Subsidiary) not
to take any such action, and the Company shall promptly notify Pubco if any such
inquiries or proposals are received by the Company or any Subsidiary, or any of
its or their respective directors, officers, employees, agents, investment
bankers, financial advisors, attorneys, accountants or other representatives,
and the Company shall promptly inform Pubco as to the material terms of such
inquiry or proposal and, if in writing, promptly deliver or cause
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to be delivered to Pubco a copy of such inquiry or proposal, and the Company
shall keep Pubco informed, on a current basis, of the nature of any such
inquiries and the status and terms of any such proposals. For purposes of this
Merger Agreement, "Competing Transaction" shall mean any of the following
---------------------
involving the Company or the Subsidiaries (other than the transactions
contemplated by this Merger Agreement): (i) any merger, consolidation, share
exchange, business combination, or other similar transaction; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of ten percent
(10%) or more of the Assets of the Company and the Subsidiaries, taken as a
whole, or issuance of ten percent (10%) or more of the outstanding voting
securities of the Company or any Subsidiary in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for ten percent (10%) or
more of the outstanding shares of capital stock of the Company or any Subsidiary
or the filing of a registration statement under the Securities Act in connection
therewith; (iv) any solicitation of proxies in opposition to approval by the
Company Stockholders of the Merger; (v) any Person shall have acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act) shall
-----
have been formed after the date of this Merger Agreement which beneficially owns
or has the right to acquire beneficial ownership of, ten percent (10%) or more
of the then outstanding shares of capital stock of the Company or any
Subsidiary; or (vi) any Agreement to, or public announcement by the Company or
any other Person of a proposal, plan or intention to, do any of the foregoing.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Pubco or Pubco Sub, the approval or recommendation by such
Board of Directors or any such committee of this Merger Agreement or the Merger,
(ii) approve or recommend, or propose to approve or recommend, any Competing
Transaction or (iii) enter into any Agreement with respect to any Competing
Transaction.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Investment Agreements.
(a) As promptly as practicable after the date of this Merger
Agreement, the Company shall use its best efforts to obtain Investment
Agreements from each Company Stockholder who is to receive shares of ▇▇▇▇▇▇
Common Stock in the Merger.
(b) The parties hereto acknowledge, agree, and confirm that the ▇▇▇▇▇▇
Common Stock to be issued pursuant to Section 2.01,(i) will not be registered
under the Securities Act of 1933, as amended (as defined in Article X), or
registered or qualified
-43-
under any state securities laws, (ii) must be held indefinitely unless a
subsequent disposition thereof is made pursuant to an effective registration
thereof under the Securities Act or is exempt from such registration and cannot
be offered for sale, sold or otherwise transferred unless the ▇▇▇▇▇▇ Common
Stock is subsequently so registered or qualified for exemption from registration
under the Securities Act, (iii) will bear a legend to that effect (and ▇▇▇▇▇▇
will make a notation on its transfer of books to that effect), and (iv) will be
considered "registered securities" within the meaning of Rule 144 of the
Securities Act; Rule 144 may not be available to exempt from the registration
requirements of the Securities Act the sale of such "restricted securities;" if
Rule 144 is available, sale may be made in reliance upon Rule 144 only in
accordance with the terms and conditions of Rule 144; and if an exemption for
such sale is not available, registration of the ▇▇▇▇▇▇ Common Stock may be
required, but ▇▇▇▇▇▇ is under no obligation to register the ▇▇▇▇▇▇ Common Stock
or to facilitate compliance or to comply with any exemption, except as expressly
set out in Section 6.19 below.
SECTION 6.02. Meeting of Stockholders.
The Company shall promptly after the date of this Merger Agreement
take all action necessary in accordance with Michigan and Iowa Law and its
certificate of incorporation and bylaws to duly call, give notice of, convene
and hold the Stockholders' Meeting, and the Company shall consult with Pubco in
connection therewith. The Company shall use its reasonable best efforts to
solicit from the Company Stockholders proxies or consents to approve this Merger
Agreement and the transactions contemplated hereby and shall take all other
actions reasonably necessary or advisable to secure the vote or consent of the
Company Stockholders required by Michigan and Iowa Law to approve this Merger
Agreement and the transactions contemplated hereby.
SECTION 6.03. Appropriate Action; Consents; Filings.
(a) Upon the terms and subject to the conditions set forth in this
Merger Agreement, the Company, ▇▇▇▇▇▇ and Pubco shall use all reasonable efforts
to take, or cause to be taken, all appropriate action, and do, or cause to be
done, and to assist and cooperate with the other parties in doing all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Merger Agreement as
promptly as practicable, including (i) executing and delivering any additional
instruments necessary, proper or advisable to consummate the transactions
contemplated by, and to carry out fully the purposes of, this Merger Agreement,
(ii) obtaining from any Governmental Entities any Licenses required to be
obtained or made by ▇▇▇▇▇▇, Pubco or the Company or any of their subsidiaries in
connection with the authorization, execution and delivery of this Merger
Agreement and the consummation of the transactions contemplated herein,
including, without limitation, the Merger, and (iii) making all necessary
filings, and thereafter making any other required submissions, with respect to
this Merger Agreement and the Merger required under (A) the
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Securities Act and any other applicable federal or state securities Laws, (B)
the HSR Act and (C) any other applicable Law; provided that ▇▇▇▇▇▇, Pubco and
--------
the Company shall cooperate with each other in connection with the making of all
such filings, including providing copies of all such Documents to the non-filing
party and its advisors prior to filing and discussing all reasonable additions,
deletions or changes suggested in connection therewith. The Company, ▇▇▇▇▇▇ and
Pubco shall furnish to each other all information required for any application
or other filing to be made pursuant to the rules and regulations of any
applicable Law in connection with the transactions contemplated by this Merger
Agreement.
(b) (i) The Company, ▇▇▇▇▇▇ and Pubco shall give (or shall cause
their respective subsidiaries to give) any notices to third parties, and use,
and cause their respective subsidiaries to use, all reasonable efforts to obtain
any third party consents, approvals or waivers (A) necessary, proper or
advisable to consummate the transactions contemplated in this Merger Agreement,
(B) disclosed or required to be disclosed in the Company Disclosure Schedule or
the Pubco Disclosure Schedule, as the case may be, or (C) required to prevent a
Company Material Adverse Effect from occurring prior to or after the Effective
Time or an Pubco Material Adverse Effect from occurring prior to or after the
Effective Time.
(ii) If any party shall fail to obtain any third party consent,
approval or waiver described in subsection (b)(i) above, such party shall use
all reasonable efforts, and shall take any such actions reasonably requested by
the other parties hereto, to minimize any adverse effect upon the Company and
Pubco, their respective subsidiaries, and their respective businesses resulting,
or which could reasonably be expected to result after the Effective Time, from
the failure to obtain such consent, approval or waiver.
(c) From the date of this Merger Agreement until the Effective Time,
the Company, ▇▇▇▇▇▇ and Pubco shall promptly notify each other in writing of any
pending or, to the knowledge of the Company, ▇▇▇▇▇▇ or Pubco (or their
respective subsidiaries), threatened action, proceeding or investigation by any
Governmental Entity or any other Person (i) challenging or seeking damages in
connection with the Merger or the conversion of the Company Common Stock into
▇▇▇▇▇▇ Common Stock pursuant to the Merger or (ii) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the right of Pubco or
its subsidiaries to own or operate all or any portion of the businesses or
Assets of the Company or any Subsidiary. The Company and Pubco shall cooperate
with each other in defending any such action, proceeding or investigation,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed.
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SECTION 6.04. Update Disclosure; Breaches.
From and after the date of this Merger Agreement until the Effective
Time, each party hereto shall promptly notify the other parties hereto by
written update to its Disclosure Schedule of (i) any representation or warranty
made by it in connection with this Merger Agreement becoming untrue or
inaccurate, (ii) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would be likely to cause any condition to the
obligations of any party to effect the Merger and the other transactions
contemplated by this Merger Agreement not to be satisfied, or (iii) the failure
of the Company, ▇▇▇▇▇▇, Pubco or Pubco Sub, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it pursuant to this Merger Agreement which would be likely to result in any
condition to the obligations of any party to effect the Merger and the other
transactions contemplated by this Merger Agreement not to be satisfied. The
Company shall deliver to Pubco updated versions of Sections 3.10 and 3.14(a) of
the Company Disclosure Schedule as of the Closing Date, solely to reflect events
occurring between the date of this Merger Agreement and the Closing Date, or
shall have notified Pubco that no changes to such Sections of the Company
Disclosure Schedule are required.
SECTION 6.05. Public Announcements.
Pubco, Pubco Sub and the Company shall consult with each other before
issuing or making, and shall give each other the opportunity to review and
comment upon, any press release or other public statement with respect to the
Merger and the other transactions contemplated in this Merger Agreement, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by Law or any listing agreement
with the NASD (as defined in Article X).
SECTION 6.06. Employee Matters.
The Company and Pubco shall use their respective reasonable best
efforts to cause the officers and employees of the Company and the Subsidiaries
listed in Schedule 6.06 (the "Company Key Employees") to enter into employment,
------------- ---------------------
confidentiality and non-competition agreements, substantially in the form of
Pubco's standard Employment, Confidentiality and Non-Competition Agreement, a
copy of which is attached hereto as Exhibit B (the "Employment Agreements"), at
--------- ---------------------
or prior to the Effective Time.
SECTION 6.07. Unaudited Financial Information.
The Company will cause to be prepared and will furnish to Pubco as
promptly as possible an unaudited consolidated balance sheet of the Company and
the Subsidiaries as of the last day of each month ending after August 31, 1998
and the related unaudited consolidated statements of income and cash flows of
the Company and the Subsidiaries for the one-month periods then ended. The
Company will ensure that such Unaudited Statements are complete and correct in
all material respects, have been
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prepared in accordance with the books and records of the Company and the
Subsidiaries, and present fairly the consolidated financial position of the
Company and the Subsidiaries and their consolidated results of operations and
cash flows as of and for the respective dates and time periods applied on a
basis consistent with prior accounting periods, except as noted thereon and
subject to normal and recurring year-end adjustments.
SECTION 6.08. Environmental Matters.
The Company will promptly furnish to Pubco written notice of any
Hazardous Discharge or of any actions or notices described in Section 3.30(b).
SECTION 6.09. Post-Signing SEC Documents.
▇▇▇▇▇▇ and Pubco will file with the SEC all reports, schedules, forms,
statements and other Documents required to be filed by it after the date of this
Merger Agreement but before the Effective Time (the "▇▇▇▇▇▇ Post-Signing SEC
-----------------------
Documents").
---------
SECTION 6.10. Indemnification by Principal Company Stockholders.
(a) After the Effective Time, the Principal Company Stockholders,
individually and as Trustees, shall, severally and not jointly, indemnify and
hold harmless ▇▇▇▇▇▇, Pubco, the Surviving Corporation and their respective
officers and directors, and each person, if any, who controls or may control
▇▇▇▇▇▇, Pubco or the Surviving Corporation within the meaning of the Securities
Act (all such persons hereinafter are referred to individually as an
"Indemnified Person" and collectively as "Indemnified Persons," but in no event
------------------- -------------------
shall any stockholder of the Company be such an Indemnified Person), from and
against any and all losses, costs, damages, liabilities and expenses, including
reasonable attorneys' fees and expenses, ("Damages") actually suffered and
-------
arising out of the breach of the representations, warranties, covenants and
agreements given or made by the Company or the Principal Company Stockholders in
this Merger Agreement, in the Articles of Merger or in the Exhibits or Schedules
hereto or in any certificate or document delivered by or on behalf of the
Company or the Principal Company Stockholders pursuant hereto. The Principal
Company Stockholders shall have no liability under this Section 6.10 to the
extent claims for Damages hereunder do not exceed an aggregate of $250,000 (the
"Bucket") (other than for Damages incurred in connection with any income tax
liabilities of the Company or the Principal Company Stockholders, in which case
the Basket shall not apply); provided, further, that if such Damages exceed an
-------- -------
aggregate of $250,000 then the indemnification provided for hereunder shall
apply only to Damages exceeding the $250,000 threshold provided for above. It
shall be a condition of the right of each Indemnified Person to indemnification
pursuant to this Section 6.10 that such Indemnified Person shall assert a claim
for such indemnification on or prior to the date that the particular
representation, warranty, covenant or agreement for the breach of which the
indemnification is being sought, expires under the terms of this Merger
Agreement.
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(b) Any payment to be made to an Indemnified Person by a Principal
Company Stockholder under this Section 6.10 shall be made in cash.
(c) The amount of any Damages under this Section 6.10 shall be
computed net of (i) any tax benefit realized therefrom to an Indemnified Person,
and (ii) any insurance proceeds received with respect thereto that reduces the
Damages that would otherwise be sustained. Additionally, the Principal Company
Stockholders shall be entitled to a credit against any Damages for which they
are liable for indemnification under this Section 6.10 in an amount equal to the
sum of the amount, if any, by which the actual amount of any liability shown on
the balance sheet of the Company as of the Closing Date is less than the amount
of such liability or reserve therefor as recorded on such balance sheet.
SECTION 6.11. Procedures; Conditions of Indemnification.
With respect to any indemnification provided pursuant to this Merger
Agreement, the Indemnified Person agrees to give prompt written notice to the
Principal Company Stockholders of any claim or other assertion of liability by
third parties (hereinafter called collectively "Claims"), it being understood
------
that the failure to give such notice shall not affect the Indemnified Person's
right to indemnification and the indemnifying party's obligation to indemnify as
set forth in this Agreement, unless the Principal Company Stockholders' rights
with respect to such Claim are thereby demonstrably and materially prejudiced.
The obligations and liabilities of the parties hereto with respect to
their respective indemnities pursuant to this Merger Agreement resulting from
any Claim shall be subject to the following terms and conditions:
(a) The Principal Company Stockholders shall have the right to
undertake, by counsel or other representatives of their own choosing, the
defense of such Claim.
(b) If the Principal Company Stockholders elect not to undertake such
defense, or within a reasonable time after notice of any such Claim from the
Indemnified Person shall fail to defend, the Indemnified Person (upon further
written notice to the Principal Company Stockholders) shall have the right to
undertake the defense, compromise or settlement of such Claim, by counsel or
other representatives of its own choosing, on behalf of and for the account and
risk of the Principal Company Stockholders (subject to the right of the
Principal Company Stockholders to assume defense of such Claim at any time prior
to settlement, compromise or final determination thereof).
(c) Anything in this Section 6.11 to the contrary notwithstanding, (i)
if the Indemnified Person notifies the Principal Company Stockholder that the
Indemnified Person has concluded that a Claim may materially and adversely
affect the Indemnified Person other than as a result of money damages or other
money payments, the
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Indemnified Person shall have the right, at its own cost and expense, to
participate in the defense, compromise or settlement of the Claim, (ii) the
Principal Company Stockholders shall not, without the Indemnified Person's
written consent, settle or compromise any Claim or consent to entry of any
judgment that does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Person of a release from all
liability in respect of such Claim, and (iii) in the event that the Principal
Company Stockholders undertake defense of any Claim, the Indemnified Person, by
counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the Principal Company Stockholders
and their counsel or other representatives concerning such Claim and the
Principal Company Stockholders and the Indemnified Person and their respective
counsel or other representatives shall cooperate with respect to such Claim.
(d) Notwithstanding any other provision of this Section 6.11, the
Indemnified Person may at any time assume full control over the responsibility
for any Claim, by written notice to the Principal Company Stockholders releasing
the Principal Company Stockholders from any further indemnity obligation
pursuant to this Merger Agreement with respect to said Claim.
(e) Any decision with respect to any matter under this Section 6.11
(including, without limitation, the defense, prosecution, settlement or
resolution of Claims) shall be binding on all Principal Company Stockholders if
consented to by those Principal Company Stockholders who, immediately prior to
the Effective Time, hold a majority of the Company Common Stock held by all
Principal Company Stockholders.
SECTION 6.12. Tax Treatment.
Each party hereto shall use its reasonable best efforts to cause the
Merger to qualify, and shall not take any actions which could prevent the Merger
from qualifying, as a reorganization qualifying under the provisions of Section
368(a) of the Code.
SECTION 6.13. Tax Returns.
To the extent permitted under applicable Tax Laws, the Merger shall be
reported as a "reorganization" within the meaning of Section 368(a) of the Code
in all federal, state and local Tax Returns filed after the Effective Time.
Notwithstanding any other provision of this Merger Agreement, the obligations
set forth in this Section 6.13 shall survive the Effective Time without
limitation as to time or in any other respect.
SECTION 6.14. Reorganization.
During the period from the date of this Merger Agreement through the
Effective Time, unless Pubco and the Company shall otherwise agree in writing,
Pubco
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and the Company shall not, and shall cause their respective subsidiaries not to
knowingly take or fail to take any action which action or failure would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 6.15. Directors' and Officers' Insurance; Indemnification.
Pubco agrees that for the entire period from the Effective Time until
at least six (6) years after the Effective Time, (a) Pubco will cause the
Surviving Corporation to maintain the Company's current directors' and officers'
insurance and indemnification policy and related arrangements, if any, or an
equivalent policy and related arrangements, subject in either case to terms and
conditions no less advantageous to the present and former directors and officers
of the Company than those contained in the policy and arrangements in effect on
the date hereof, for all present and former directors and officers of the
Company, covering claims made and insurable events occurring prior to or within
six (6) years after the Effective Time (provided that the Surviving Corporation
will not be required to maintain such policy except to the extent that the
aggregate annual cost of maintaining such policy is not in excess of two hundred
percent (200%) of the current annual cost, in which case the Surviving
Corporation shall maintain such policies up to an annual cost of two hundred
percent (200%) of the current annual cost); and (b) Pubco will cause the
Surviving Corporation to maintain indemnification provisions, including, without
limitation, provisions for expense advances, for present and former officers and
directors in the Surviving Corporation's certificate of incorporation and bylaws
to the fullest extent permitted by Iowa Law. In the event of any threatened or
actual claim, action, suit, proceeding or investigation, whether civil, criminal
or administrative, including, without limitation, any such claim, action, suit
proceeding or investigation in which any of the present or former officers or
directors (the "Managers") of the Company is, or is threatened to be, made a
--------
party by reason of the fact that such Manager is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other entity, whether before or after the
Effective Time, the parties hereto agree to cooperate and use their reasonable
best efforts to defend against and respond thereto. It is understood and agreed
that the Company shall indemnify and hold harmless, and after the Effective Time
each of the Surviving Corporation and Pubco shall indemnify and hold harmless,
as and to the full extent that the Surviving Corporation would be permitted by
applicable Law (and as to matters arising from or relating to this Merger
Agreement and the possible change in control of the Company, to the full extent
that Pubco would be permitted under applicable Law), each such Manager against
any losses, claims, damages, liabilities, costs, expenses (including reasonable
attorneys' fees), judgments, fines and amounts paid in settlement in connection
with any such claim, action, suit, proceeding or investigation; and in the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) the Managers may retain counsel
satisfactory to them, and the Company, or the Surviving Corporation and Pubco
after the Effective Time, shall pay all reasonable fees and expenses
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of such counsel for the Managers promptly as statements therefor are received
whether before or after final determination of the matter, and (ii) the Company,
or the Surviving Corporation and Pubco after the Effective Time, will use their
respective reasonable best efforts to assist in the vigorous defense of any such
matter; provided that neither the Company nor the Surviving Corporation or Pubco
--------
shall be liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld); and provided further that
-------- -------
the Company's, the Surviving Corporation's and Pubco's obligations hereunder
shall only be reduced or relieved when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final and
non-appealable, that indemnification of such Manager in the manner contemplated
is prohibited by applicable Law.
SECTION 6.16. Obligations of Pubco Sub.
Pubco shall take all action necessary to cause Pubco Sub to perform
its obligations under this Merger Agreement and to consummate the Merger on the
terms and conditions set forth in this Merger Agreement.
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SECTION 6.17. Payment of Certain Debt.
The Company shall pay in full all mortgages, indentures, notes and
other agreements for or relating to borrowed money to which the Company or any
Subsidiary is a party as listed in Section 3.12 of the Company Disclosure
Schedule, other than the debt obligation to Old Kent Bank, or make such other
arrangements or adjustments reasonably acceptable to Pubco.
SECTION 6.18. Lease Modification.
The Company shall cause the real estate lease for the Company's
headquarters in Wyoming, Michigan, described in Section 3.13 of the Company
Disclosure Schedule, to be modified, as of the Effective Date, to allow the
Surviving Corporation to terminate the Lease at any time upon six months notice
to the Landlord under such Leases.
SECTION 6.19. Agreement to Register Stock.
(a) Subject to Section 6.19(b) below, within ninety (90) days
following the Closing, ▇▇▇▇▇▇ shall prepare and file a registration statement on
Form S-3 (the "Resale Registration Statement") under the Securities Act of 1933
(the "Securities Act") covering the resale of a maximum of 25% of the ▇▇▇▇▇▇
Common Stock to be issued in the Merger (and any shares of the capital stock of
▇▇▇▇▇▇ that may be issued with respect to the ▇▇▇▇▇▇ Common Stock issued in the
Merger as a result of a reclassification, recapitalization, dividend, stock
split or comparable event). ▇▇▇▇▇▇ shall thereafter use its reasonable best
efforts to have such Resale Registration Statement declared effective by the
Securities and Exchange Commission ("SEC") as soon after the filing as
practicable and to keep that Resale Registration Statement effective and
current, including through the filing of any amendments and supplements that may
be required under provisions of applicable law, for one year after its original
effectiveness. ▇▇▇▇▇▇ may include other shares of ▇▇▇▇▇▇ Common Stock on the
Resale Registration Statement. At ▇▇▇▇▇▇'▇ option, ▇▇▇▇▇▇ may satisfy its
obligations under this Section 6.19(a) on another form of registration statement
under the Securities Act. ▇▇▇▇▇▇ agrees to notify each holder of ▇▇▇▇▇▇ Common
Stock registered on the Resale Registration Statement (i)when the Resale
Registration Statement (or any post-effective amendment thereto) has become
effective, (ii) if the SEC has issued any stop order with respect to the Resale
Registration Statement or initiated any proceedings for that purpose, and (iii)
if ▇▇▇▇▇▇ has received any written notification with respect to the suspension
of qualification of any ▇▇▇▇▇▇ Common Stock for sale in any jurisdiction or on
any securities exchange or market or with respect to the initiation or threat of
any proceeding for such purpose. ▇▇▇▇▇▇ further agrees to furnish holders of
▇▇▇▇▇▇ Common Stock registered on the Resale Registration Statement such numbers
of copies of a prospectus, in conformity with the requirements of applicable
law, and such other documents as each such holder may
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reasonably request in order to facilitate the disposition of the ▇▇▇▇▇▇ Common
Stock owned by such holder.
(b) Intentionally omitted.
(c) ▇▇▇▇▇▇ will give notice to holders of ▇▇▇▇▇▇ Common Stock
registered on the Resale Registration Statement, at any time when a prospectus
relating thereto is required to be delivered under applicable law, of the
happening of any event as a result of which the prospectus included in such
Resale Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing. Any such holder shall cease using such
prospectus immediately upon receipt of notice from ▇▇▇▇▇▇ to that effect. If so
requested by ▇▇▇▇▇▇, each holder shall return promptly to ▇▇▇▇▇▇ any copies of
any prospectus in its possession that contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing. At the request of such holder, ▇▇▇▇▇▇ shall
prepare and furnish to each holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include 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 not
misleading in light of the circumstances then existing.
(d) (i) ▇▇▇▇▇▇ shall bear all costs incurred in preparing and
filling the Resale Registration Statement including, without limitation, all
applicable legal, accounting, printing, blue sky and SEC filing fees, provided,
however, that ▇▇▇▇▇▇ shall not be responsible for any underwriting commissions
or discounts, brokerage fees or legal fees or disbursements incurred by any
person or entity (other than ▇▇▇▇▇▇) that sells any shares of ▇▇▇▇▇▇ Common
Stock under the Resale Registration Statement. ▇▇▇▇▇▇ shall also bear all costs
of keeping the Resale Registration Statement current during the applicable
period described in Section 6.19(a).
(ii) ▇▇▇▇▇▇ will indemnify and hold harmless each holder of
▇▇▇▇▇▇ Common Stock registered on the Resale Registration Statement against any
losses, claims, damages or liabilities to which such holder may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Resale Registration
Statement, any final prospectus contained therein, or any amendment or
supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
▇▇▇▇▇▇ will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue
-53-
statement or omission or alleged omission so made in conformity with information
furnished by such holder in writing specifically for use in the Resale
Registration Statement or prospectus.
(iii) Each holder of ▇▇▇▇▇▇ Common Stock registered on the Resale
Registration Statement shall furnish to ▇▇▇▇▇▇ in writing such information with
respect to such holder as ▇▇▇▇▇▇ may reasonably request or as may be required by
law for use in connection with the Resale Registration Statement and the final
prospectus contained therein, and each such holder will indemnify and hold
harmless ▇▇▇▇▇▇ against any losses, claims, damages or liabilities to which
▇▇▇▇▇▇ may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Resale Registration Statement, any final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading to the same
extent as the foregoing indemnity from ▇▇▇▇▇▇ to the holders of ▇▇▇▇▇▇ Common
Stock registered on the Resale Registration Statement, but only with respect to
(i) any such information with respect to such holder furnished in writing to
▇▇▇▇▇▇ expressly for use therein or (ii) a breach of any obligations of such
holder under this Section 6.19; provided, however, that the total amount to be
indemnified by such holder under this Section 6.19(d)(iii) shall be limited to
the net proceeds received by such holder in the offering to which the Resale
Registration Statement or prospectus relates.
(e) The rights described in this Section 6.19 shall not be
transferable and shall not be afforded to any person or entity to whom holders
of ▇▇▇▇▇▇ Common Stock received in the Merger transfer such stock.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Obligations of Each Party Under This Merger
Agreement.
The respective obligations of each party to effect the Merger and the
other transactions contemplated herein shall be subject to the satisfaction at
or prior to the Effective Time of the following conditions, any or all of which
may be waived by agreement of Pubco and the Company, in whole or in part, to the
extent permitted by applicable Law:
(a) Stockholder Approval. This Merger Agreement and the Merger shall
--------------------
have been approved and adopted by the requisite vote of the Company
Stockholders.
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(b) No Order. No Governmental Entity or federal or state court of
--------
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in any
case which is in effect and which prevents or prohibits consummation of the
Merger; provided, however, that each of the parties shall use its reasonable
-------- -------
best efforts to cause any such decree, judgment, injunction or other order to be
vacated or lifted.
(c) HSR Act. The applicable waiting period, together with any
-------
extensions thereof, under the HSR Act shall have expired or been terminated.
(d) Other Approvals. All consents, waivers, approvals and
---------------
authorizations required to be obtained, and all filings or notices required to
be made, by ▇▇▇▇▇▇, Pubco or the Company prior to consummation of the
transactions contemplated in this Merger Agreement (other than the filing of the
Articles of Merger in accordance with Michigan and Iowa Law) shall have been
obtained from and made with all required Governmental Entities, except for such
consents, waivers, approvals or authorizations which the failure to obtain, or
such filings or notices which the failure to make, would not have a Company
Material Adverse Effect or an Pubco Material Adverse Effect or be reasonably
likely to subject the Company, any Subsidiary, ▇▇▇▇▇▇, Pubco, Pubco Sub or any
of their respective directors or officers to criminal liability or substantial
penalties.
SECTION 7.02. Additional Conditions to Obligations of ▇▇▇▇▇▇, Pubco and Pubco
Sub.
The obligations of ▇▇▇▇▇▇, Pubco and Pubco Sub to effect the Merger
and the other transactions contemplated herein are also subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived by Pubco, in whole or in part, to the extent
permitted by applicable Law:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company contained in this Merger Agreement shall be true and
correct as of the date of this Merger Agreement and shall be true and correct in
all material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects giving effect to such standard) as of the
Effective Time as though made as of the Effective Time, except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects giving
effect to such standard) as of such date, and except (A) for changes permitted
or contemplated by this Merger Agreement, or (B) in a representation and
warranty that does not expressly include a standard of materiality, any untrue
or incorrect statements therein that, considered in the aggregate, do not
indicate a Company Material Adverse Effect. Pubco shall have received a
certificate of the chief executive officer or chief financial officer of the
Company to that effect.
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(b) Updated Company Disclosure Schedule. The revised versions of
-----------------------------------
Sections 3.10 and 3.14(a) of the Company Disclosure Schedule delivered to Pubco
pursuant to Section 6.04 shall not disclose any Company Material Adverse Effect
as compared to such Sections of the Company Disclosure Schedule as of the date
of this Merger Agreement.
(c) Agreements and Covenants. The Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Merger Agreement to be performed or complied with by it on or prior to the
Effective Time. Pubco shall have received a certificate of the chief executive
officer or chief financial officer of the Company to that effect.
(d) Consents Under Agreements. The Company or the appropriate
-------------------------
Subsidiary shall have obtained the consent or approval of each Person whose
consent or approval shall be required in connection with the Merger under all
Agreements to which the Company or any Subsidiary is a party, except where the
failure to obtain any such consents or approvals, considered in the aggregate,
would not have a Company Material Adverse Effect or an Pubco Material Adverse
Effect.
(e) Opinion of Counsel. Pubco shall have received from ▇▇▇▇▇▇,
------------------
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Cumminskey, P.L.C., counsel to the Company, an opinion dated
the Closing Date, in form usual and customary for similar transactions and
reasonably acceptable to Pubco and the Company.
(f) No Challenge. There shall not be pending any action, proceeding
------------
or investigation by any Governmental Entity (i) challenging or seeking material
damages in connection with the Merger or the conversion of Company Common Stock
into ▇▇▇▇▇▇ Common Stock pursuant to the Merger, or seeking to place limitations
on the ownership of shares of Company Common Stock (or shares of common stock of
the Surviving Corporation) by Pubco or Pubco Sub, (ii) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the right of the
Company, any Subsidiary, Pubco or any of its subsidiaries to own or operate all
or any portion of the business or Assets of the Company and the Subsidiaries, or
(iii) which otherwise is likely to have a Company Material Adverse Effect or an
Pubco Material Adverse Effect.
(g) Accountant Letters. ▇▇▇▇▇▇ and Pubco shall have received from
------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, its accountants, an opinion, satisfactory in form and substance
to ▇▇▇▇▇▇ and Pubco, to the effect that the Merger may be treated as a "pooling
of interest" for accounting purposes.
(h) Employment Agreements. Pubco shall have received executed copies
---------------------
of Employment Agreements from the Company Key Employees.
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(i) Company Material Adverse Effect. Since August 31, 1998, there
-------------------------------
shall not have occurred a Company Material Adverse Effect (or any development
that, insofar as reasonably can be foreseen, is reasonably likely to result in
any Company Material Adverse Effect) not disclosed in the Company Disclosure
Schedule.
(j) Due Diligence Investigation. Pubco shall have completed its due
---------------------------
diligence investigation of the Company and the Subsidiaries and shall have
determined (in Pubco's reasonable discretion) that no development has occurred
or information been discovered that has, or is reasonably likely to have, or
indicates a Company Material Adverse Effect.
(k) Tax Opinion. ▇▇▇▇▇▇ and Pubco shall have received the opinion of
-----------
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., counsel to ▇▇▇▇▇▇ and Pubco, dated the Closing Date, to
the effect that the Merger and any other transactions contemplated herein, will
not result in taxation to ▇▇▇▇▇▇, Pubco or Pubco Sub under the Code. In
rendering such opinion, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. shall require delivery of and
rely upon the representation letters delivered by ▇▇▇▇▇▇, Pubco, Pubco Sub and
the Company substantially in the forms of Exhibit C and Exhibit D hereto.
---------- ---------
(l) Environmental Matters. Any Environmental Reports shall indicate
---------------------
that the Real Property does not contain any Hazardous Materials and is not
subject to any risk of contamination from any off-site Hazardous Materials,
except to the extent that the presence of any such Hazardous Materials or the
risk of such contamination would not have a Company Material Adverse Effect or
an Pubco Material Adverse Effect.
(m) Board Approval. The principal terms of this Agreement shall have
---------------
been approved and adopted by ▇▇▇▇▇▇'▇ and Pubco's Boards of Directors in
accordance with applicable law and their respective Articles of Incorporation
and Bylaws.
(n) Investment Agreements. ▇▇▇▇▇▇ and Pubco shall have received from
----------------------
each Company Stockholder that is to receive shares of ▇▇▇▇▇▇ Common Stock in the
Merger a duly executed and delivered Investment Agreement. The number of
Company Stockholders that are to receive shares of ▇▇▇▇▇▇ Common Stock in the
Merger and that are not "accredited investors" within the meaning of 501(a)
under the Securities Act shall not exceed thirty-five (35), and each Company
Stockholder that is not an accredited investor shall have such knowledge and
experience in financial and business matters, either alone or with an
appropriate purchaser representative that has been appointed by such Company
Stockholder, that it is capable of evaluating the merits and risks of the Merger
and its investment in the ▇▇▇▇▇▇ Common Stock.
SECTION 7.03. Additional Conditions to Obligations of the Company.
The obligations of the Company to effect the Merger and the other
transactions contemplated herein are also subject to the satisfaction at or
prior to the
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Effective Time of the following conditions, any or all of which may be waived by
the Company, in whole or in part, to the extent permitted by applicable Law:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of ▇▇▇▇▇▇, Pubco and Pubco Sub contained in this Merger Agreement
shall be true and correct as of the date of this Merger Agreement and shall be
true and correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving effect to such
standard) as of the Effective Time as though made as of the Effective Time,
except that those representations and warranties which address matters only as
of a particular date shall remain true and correct in all material respects
(except that where any statement in a representation or warranty expressly
includes a standard of materiality, such statement shall be true and correct in
all respects giving effect to such standard) as of such date, and except (A) for
changes permitted or contemplated by this Merger Agreement or (B) in a
representation and warranty that does not expressly include a standard of
materiality, any untrue or incorrect statements therein that, considered in the
aggregate, do not indicate an Pubco Material Adverse Effect. The Company shall
have received a certificate of the chief executive officer or chief financial
officer of Pubco to that effect.
(b) Agreements and Covenants. ▇▇▇▇▇▇, Pubco and Pubco Sub shall have
------------------------
performed or complied in all material respects with all agreements and covenants
required by this Merger Agreement to be performed or complied with by them on or
prior to the Effective Time. The Company shall have received a certificate of
the chief executive officer or chief financial officer of ▇▇▇▇▇▇, Pubco and
Pubco Sub to that effect.
(c) Opinion of Counsel. The Company shall have received from ▇▇▇▇▇▇▇
------------------
& ▇▇▇▇▇, P.C. an opinion dated the Closing Date, in form usual and customary for
similar transactions and reasonably acceptable to the Company and Pubco.
(d) No Challenge. There shall not be pending any action, proceeding
------------
or investigation by any Governmental Entity (i) challenging or seeking material
damages in connection with the Merger or the conversion of Company Common Stock
into ▇▇▇▇▇▇ Common Stock pursuant to the Merger, or (ii) seeking to restrain or
prohibit the consummation of the Merger.
(e) Tax Opinion. The Company shall have received the opinion of
-----------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, its accountants, dated the Closing Date, to the effect that the
Merger, and any other transactions contemplated herein, will not result in
taxation to the Company or the Company Stockholders under the Code. In
rendering such opinion, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall require delivery of and rely upon
the representation letters delivered by ▇▇▇▇▇▇, Pubco, Pubco Sub and the Company
substantially in the forms of Exhibit C and Exhibit D hereto.
--------- ---------
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.
This Merger Agreement may be terminated at any time (except where
otherwise indicated) prior to the Effective Time, whether before or after
approval of this Merger Agreement and the Merger by the Company Stockholders:
(a) by mutual written consent of Pubco and the Company;
(b) (i) by Pubco, if there has been a breach by the Company of any
of its representations, warranties, covenants or agreements contained in this
Merger Agreement, or any such representation and warranty shall have become
untrue, in any such case such that Section 7.02(a), Section 7.02(b) or Section
7.02(c) will not be satisfied and such breach or condition has not been cured
within ten (10) business days following receipt by the Company of written notice
of such breach;
(ii) by the Company, if there has been a breach by ▇▇▇▇▇▇, Pubco
or Pubco Sub of any of its representations, warranties, covenants or agreements
contained in this Merger Agreement, or any such representation and warranty
shall have become untrue, in any such case such that Section 7.03(a) or Section
7.03(b) will not be satisfied and such breach or condition has not been cured
within ten (10) business days following receipt by Pubco of written notice of
such breach ;
(c) by Pubco, upon Pubco's determination, based on its due diligence
investigation and review of the Company and the Subsidiaries, that (i) there is,
or is reasonably likely to be, any material diminution in the benefits expected
to be derived by Pubco as a result of the transactions contemplated by this
Merger Agreement or (ii) any development has occurred or information been
discovered that has, or is reasonably likely to have, or that indicates a
Company Material Adverse Effect;
(d) by either Pubco or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting consummation
of the Merger shall have become final and non-appealable;
(e) by either Pubco or the Company if the Agreement shall fail to
receive the requisite vote for approval and adoption by the Company Stockholders
at the Stockholders' Meeting;
(f) by either Pubco or the Company if the Merger shall not have been
consummated by February 15, 1999;; provided however, that the right to terminate
-------- -------
this Merger Agreement under this Section 8.01(f) shall not be available to (i)
Pubco, where Pubco's willful failure to fulfill any obligation under this Merger
Agreement has been the
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cause of, or resulted in, the failure of the Effective Time to occur on or
before such date, or (ii) the Company, where the Company's willful failure to
fulfill any obligation under this Merger Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date;
and
(g) By the Company if the average of the closing bid and ask price for
▇▇▇▇▇▇ Common Stock quoted on the National Association of Securities Dealers'
Automated Quotation System on the Closing Date, as reported in the Wall Street
-----------
Journal, is $20.00 or less per share.
-------
SECTION 8.02. Effect of Termination.
In the event of termination of this Merger Agreement by either Pubco
or the Company as provided in Section 8.01, this Merger Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of ▇▇▇▇▇▇, Pubco, Pubco Sub or the Company or any of their respective directors
or officers except (i) as set forth in Sections 8.03 and 9.01 hereof, (ii)
nothing herein shall relieve any party from liability for any breach hereof,
(iii) each party shall be entitled to any remedies at law or in equity for such
breach and (iv) Sections 8.02 and 8.03 and Article IX shall remain in full force
and effect and survive any termination of this Merger Agreement.
SECTION 8.03. Expenses.
All costs and expenses incurred in connection with this Merger
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense. Pubco shall pay the applicable HSR filing fee.
SECTION 8.04. Amendment.
This Merger Agreement may be amended by the parties hereto at any time
prior to the Effective Time; provided, however, that, after approval of the
-------- -------
Merger by the Company Stockholders, no amendment may be made which would reduce
the amount or change the type of consideration into which each share of Company
Common Stock shall be converted pursuant to this Merger Agreement upon
consummation of the Merger. This Merger Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
SECTION 8.05. Extension; Waiver.
At any time prior to the Effective Time, the parties hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any Document delivered pursuant hereto and (c)
subject to the proviso of Section 8.04, waive compliance with any of the
agreements or conditions contained
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herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby. The
failure of any party to assert any of its rights under this Merger Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Survival of Representations and Warranties.
The representations and warranties of the Company contained in this
Merger Agreement shall survive the Effective Time for a period of eighteen (18)
months, except for the representations and warranties contained in Sections
3.05, 3.16, 3.17 and 3.30, which shall survive until the expiration of the
statute of limitations. The representations and warranties of ▇▇▇▇▇▇ and Pubco
contained in the Merger Agreement shall survive the Effective Time for a period
of eighteen (18) months. Notwithstanding anything herein to the contrary, any
representation, warranty, covenant or agreement that is the subject of a Claim
asserted in writing prior to the expiration of the applicable period set out
above, shall survive with respect to such Claim until the final resolution
thereof.
SECTION 9.02. Notices.
All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made as of
the date delivered, mailed or transmitted if delivered personally, mailed by
registered or certified mail (postage prepaid, return receipt requested) or sent
by overnight courier (providing proof of delivery) to the parties at the
following addresses or sent by electronic transmission to the following
telecopier numbers (or at such other address or telecopy number for a party as
shall be specified by like notice):
(a) If to ▇▇▇▇▇▇, Pubco or Pubco Sub:
McLeodUSA Incorporated
McLeodUSA Technology Park
▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ Rings
Vice President, General Counsel and Secretary
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With a copy (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Columbia Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
(b) If to the Company:
Talking Directories, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.:
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
With a copy (which shall not constitute notice) to:
Miller, Johnson, ▇▇▇▇▇ & Cumminskey
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SECTION 9.03. Headings.
The headings contained in this Merger Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Merger Agreement.
SECTION 9.04. Severability.
If any term or other provision of this Merger Agreement is invalid,
illegal or incapable of being enforced by any rule of Law or public policy, all
other conditions and provisions of this Merger Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Merger Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
-62-
SECTION 9.05. Entire Agreement.
This Merger Agreement (together with the Exhibits, Schedules, the
Company Disclosure Schedule and the Pubco Disclosure Schedule and the other
Documents delivered pursuant hereto) and the Confidentiality Agreement (as
defined in Article X) constitute the entire agreement of the parties and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof and,
except as otherwise expressly provided herein, are not intended to confer upon
any other Person any rights or remedies hereunder.
SECTION 9.06. Assignment.
This Merger Agreement shall not be assigned by operation of Law or
otherwise.
SECTION 9.07. Parties in Interest.
This Merger Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Merger Agreement, express or
implied, other than the right to receive the consideration payable in the Merger
pursuant to Article II, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Merger Agreement.
SECTION 9.08. Mutual Drafting.
Each party hereto has participated in the drafting of this Merger
Agreement, which each party acknowledges is the result of extensive negotiations
between the parties.
SECTION 9.09. Specific Performance.
In addition to any other remedies ▇▇▇▇▇▇ or Pubco may have at law or
in equity, the Company hereby acknowledges that the Company Common Stock and the
Company and the Subsidiaries are unique, and that the harm to ▇▇▇▇▇▇ or Pubco
resulting from breaches by the Company of its obligations cannot be adequately
compensated by damages. Accordingly, the Company agrees that ▇▇▇▇▇▇ or Pubco
shall have the right to have all obligations, undertakings, agreements,
covenants and other provisions of this Merger Agreement specifically performed
by the Company and that ▇▇▇▇▇▇ or Pubco shall have the right to obtain an order
or decree of such specific performance in any of the courts of the United States
of America or of any state or other political subdivision thereof.
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SECTION 9.10. Governing Law.
This Merger Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Iowa, regardless of the Laws that
might otherwise govern under applicable principles of conflicts of law.
SECTION 9.11. Counterparts.
This Merger Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
SECTION 9.12. Confidentiality.
Except to the extent disclosure, filing, reporting or announcement of
this Merger Agreement is required by law, including by any rules or regulations
of any applicable governmental, regulatory or stock exchange agency or
authority, the existence and substance of this Merger Agreement shall remain
confidential until publically announced by ▇▇▇▇▇▇ or Pubco. If the transactions
contemplated by this Merger Agreement are not consummated, Pubco agrees that it
will return to the Company, and the Company agrees that it will return to Pubco,
all records and other documents of the other then in that party's possession and
will not itself use, or disclose, directly or indirectly, to any Business
Information with respect to the other party or the business learned by the party
during the period between the date hereof and the termination of this Merger
Agreement. The term "Business Information" as used herein means all information
of a business or technical nature relevant to each party's business that is not
generally known to or by those persons generally knowledgeable about such types
of business. The foregoing shall survive the closing or any termination of this
Merger Agreement without limitation.
ARTICLE X
DEFINITIONS
For purposes of this Merger Agreement, the following terms, and the
singular and plural thereof, shall have the meanings set forth below:
"Affiliate" means: (a) with respect to an individual, any member of such
---------
individual's family; (b) with respect to an entity, any officer, director,
stockholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a Person, any Person which directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with such person or entity.
-64-
"affiliate" means, with respect to any Person, a Person that directly or
---------
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such Person.
"Agreement" means any legally binding concurrence of understanding and intention
---------
between two or more Persons with respect to their relative rights and/or
obligations or with respect to a thing done or to be done (whether or not
conditional, executory, express, implied, in writing or meeting the requirements
of contract), including, without limitation, contracts, leases, promissory
notes, covenants, easements, rights of way, covenants, commitments, arrangements
and understandings.
"Articles of Merger" is defined in Section 1.02.
------------------
"Assets" means assets of every kind and everything that is or may be available
------
for the payment of liabilities (whether inchoate, tangible or intangible),
including, without limitation, real and personal property.
"beneficial owner" means, with respect to any shares of Company Common Stock, a
----------------
Person who shall be deemed to be the beneficial owner of such shares (i) which
such Person or any of its affiliates or associates beneficially owns, directly
or indirectly, (ii) which such Person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 under the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any Agreement
or upon the exercise of conversion rights, exchange rights, warrants or options,
or otherwise, or (B) the right to vote pursuant to any Agreement, (iii) which
are beneficially owned, directly or indirectly, by any other Persons with whom
such Person or any of its affiliates or associates has any Agreement for the
purpose of acquiring, holding, voting or disposing of any such shares, or (iv)
pursuant to Section 13(d) of the Exchange Act and any rules or regulations
promulgated thereunder.
"business day" means a day other than a Saturday, a Sunday or any other day on
------------
which commercial banks in the State of Michigan and in the State of Iowa are
authorized or obligated to be closed.
"Blue Sky Laws" means state securities or blue sky laws and the rules and
-------------
regulations thereunder.
"Certificates" is defined in Section 2.02(b).
------------
"Closing" is defined in Section 2.04.
-------
"Closing Date" is defined in Section 2.04.
------------
"Code" is defined in the Preamble to this Merger Agreement.
----
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"Common Control Entity" means any trade or business under common control (as
---------------------
such term is defined in Section 414(b) or 414(c) of the Code) with the Company
or any Subsidiary.
"Common Share Exchange Ratio" is defined in Section 2.01(a).
---------------------------
"Company" is defined in the Preamble to this Merger Agreement.
-------
"Company Common Stock" is defined in Section 2.01(a).
--------------------
"Company Contracts" is defined in Section 3.14(a).
-----------------
"Company Disclosure Schedule" is defined in Article III.
---------------------------
"Company Key Employees" is defined in Section 6.06.
---------------------
"Company Licenses" is defined in Section 3.07(a).
----------------
"Company Material Adverse Effect" means any event, change or effect that,
-------------------------------
individually or when taken together with all other such events, changes or
effects, is or is reasonably likely to be materially adverse to the business,
operations, condition (financial or otherwise), Assets or liabilities of the
Company and the Subsidiaries, taken as a whole.
"Company Preferred Stock" is defined in Section 3.04.
-----------------------
"Company Stockholders" is defined in the Preamble to this Merger Agreement.
--------------------
"Company Tax Returns" means all Tax Returns required to be filed by the Company
-------------------
or any of the Subsidiaries (without regard to extensions of time permitted by
law or otherwise).
"Competing Transaction" is defined in Section 5.05(a).
---------------------
"Control" (including the terms "Controlled by" and "under common Control with")
------- ------------- -------------------------
means, as used with respect to any Person, possession, directly or indirectly or
as a trustee or executor, of power to direct or cause the direction of
management or policies of such Person (whether through ownership of voting
securities, as trustee or executor, by Agreement or otherwise).
"Damages" is defined in Section 6.10.
-------
"Defined Benefit Plan" means a Plan that is or was a "defined benefit plan" as
--------------------
such term is defined in Section 3(35) of ERISA.
"Documents" means any paper or other material (including, without limitation,
---------
computer storage media) on which is recorded (by letters, numbers or other
marks) information that may be evidentially used, including, without limitation,
legal opinions, mortgages, indentures, notes, instruments, leases, Agreements,
insurance policies, reports, studies,
-66-
financial statements (including, without limitation, the notes thereto), other
written financial information, schedules, certificates, charts, maps, plans,
photographs, letters, memoranda and all similar materials.
"DOL" means the United States Department of Labor and its successors.
---
"Effective Time" is defined in Section 1.02.
--------------
"Employment Agreements" is defined in Section 6.06.
---------------------
"Encumbrance" means any mortgage, lien, pledge, security interest, deed of
-----------
trust, option, encroachment, reservation, order, decree, judgment, condition,
restriction, charge, or Agreement of any kind.
"Environmental Laws" means any Laws (including, without limitation, the
------------------
Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans, other criteria, or guidelines promulgated pursuant to such
Laws, now or hereafter in effect relating to Hazardous Materials generation,
production, use, storage, treatment, transportation or disposal, or noise
control, or the protection of human health or the environment.
"Environmental Reports" is defined in Section 6.08.
---------------------
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
-----
and all Laws promulgated pursuant thereto or in connection therewith.
"ESOP" means an "employee stock ownership plan" as such term is defined in
----
Section 407(d)(6) of ERISA or Section 4975(e)(7) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and all
------------
Laws promulgated pursuant thereto or in connection therewith.
"FCC" means the United States Federal Communications Commission and its
---
successors.
"Financial Statements" is defined in Section 3.08.
--------------------
"GAAP" means United States generally accepted accounting principles.
----
"Governmental Entities" (including the term "Governmental") means any
--------------------- ------------
governmental, quasi-governmental or regulatory authority, whether domestic or
foreign.
"group" is defined in Section 5.05(a).
-----
"Hazardous Discharge" means any emission, spill, release or discharge (whether
-------------------
on Real Property, on property adjacent to the Real Property, or at any other
location or disposal site) into or upon the air, soil or improvements, surface
water or groundwater, or the sewer, septic system, or waste treatment, storage
or disposal systems servicing the Real
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Property, in each case of Hazardous Materials used, stored, generated, treated
or disposed of at the Real Property.
"Hazardous Materials" means any wastes, substances, radiation or materials
-------------------
(whether solids, liquids or gases) that are regulated by a Governmental Entity
or defined or listed by a Governmental Entity as hazardous, toxic, pollutants or
contaminants, including, without limitation, substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive materials," or
other similar designations in, or otherwise subject to regulation under, any
Environmental Laws. "Hazardous Materials" includes polychlorinated biphenyls
-------------------
(PCBs), asbestos, lead-based paints, and petroleum and petroleum products
(including, without limitation, crude oil or any fraction thereof).
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
-------
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"Individual Account Plan" means a Plan that is or was an "individual account
-----------------------
plan" as such term is defined in Section 3(34) of ERISA.
"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, all rights to database
information, and all applications, registrations, and renewals in connection
therewith, (d) all moral rights, including all rights of paternity and
integrity, all rights to claim authorship of copyrightable works, to object to a
modification of copyrightable works, and all similar rights existing under the
judicial or statutory Law of any country in the world or under any treaty,
regardless of whether or not such right is denominated or generally referred to
as a "moral right," (e) all mask works and all applications, registrations, and
renewals in connection therewith, (f) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, 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),
(g) all computer software (including data and related documentation), (h) all
rights, including rights of privacy and publicity, to use the names, likenesses
and other personal characteristics of any individual, (i) all other proprietary
rights, and (j) all copies and tangible embodiments thereof (in whatever form or
medium) existing in any part of the world.
"Inventory" means all new materials, work in process and finished goods and
---------
inventorable supplies.
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"IRS" means the United States Internal Revenue Service and its successors.
---
"knowledge" will be deemed to be present with respect to the Company and the
---------
Subsidiaries or Pubco, when the matter in question was brought to the attention
of or, if due diligence had been exercised, would have been brought to the
attention of, any officer or responsible employee of the Company or any
Subsidiary, on the one hand, or Pubco, on the other hand.
"Laws" means all foreign, federal, state and local statutes, laws, ordinances,
----
regulations, rules, resolutions, orders, tariffs, determinations, writs,
injunctions, awards (including, without limitation, awards of any arbitrator),
judgments and decrees applicable to the specified Person and to the businesses
and Assets thereof (including, without limitation, Laws relating to securities
registration and regulation; the sale, leasing, ownership or management of real
property; employment practices, terms and conditions, and wages and hours;
building standards, land use and zoning; safety, health and fire prevention; and
environmental protection, including Environmental Laws).
"License" means any franchise, grant, authorization, license, tariff, permit,
-------
easement, variance, exemption, consent, certificate, approval or order of any
Governmental Entity.
"▇▇▇▇▇▇ Common Stock" is defined in Section 2.01.
-------------------
"▇▇▇▇▇▇ Post-Signing SEC Documents" is defined in Section 6.09.
---------------------------------
"▇▇▇▇▇▇ SEC Documents" is defined in Section 4.07.
--------------------
"Merger" is defined in the Preamble to this Merger Agreement.
------
"Merger Agreement" is defined in the Preamble to this Merger Agreement.
----------------
"Merger Consideration" is defined in Section 2.01(a).
--------------------
"Minimum-Funding Plan" means a Pension Plan that is subject to Title I, Subtitle
--------------------
B, Part 3, of ERISA (concerning "funding").
"Multiemployer Plan" means a "multiemployer plan" as such term is defined in
------------------
Section 3(37) of ERISA.
"NASD" means the National Association of Securities Dealers, Inc.
----
"Net Cash Revenue" means all contracted for revenue in the form of cash paid or
----------------
accounts receivable, including national revenue, but excluding cancellations,
promotional discounts, payment plan discounts, and any revenue traded for value
other than cash or accounts receivable.
-69-
"Other Arrangement" means a benefit program or practice providing for bonuses,
-----------------
incentive compensation, vacation pay, severance pay, insurance, restricted
stock, stock options, employee discounts, company cars, tuition reimbursement or
any other perquisite or benefit (including, without limitation, any fringe
benefit under Section 132 of the Code) to employees, officers or independent
contractors that is not a Plan.
"Ordinary Course of Business" means ordinary course of business consistent with
---------------------------
past practices and prudent business operations.
"PBGC" means the Pension Benefit Guaranty Corporation or its successors.
----
"Pension Plan" means an "employee pension benefit plan" as such term is defined
------------
in Section 3(2) of ERISA.
"Person" means an individual, corporation, partnership, joint venture, trust,
------
unincorporated organization or other entity, or a Governmental Entity.
"Plan" means any plan, program or arrangement, whether or not written, that is
----
or was an "employee benefit plan" as such term is defined in Section 3(3) of
ERISA and (a) which was or is established or maintained by the Company or any
Subsidiary; (b) to which the Company or any Subsidiary contributed or was
obligated to contribute or to fund or provide benefits; or (c) which provides or
promises benefits to any person who performs or who has performed services for
the Company or any Subsidiary and because of those services is or has been (i) a
participant therein or (ii) entitled to benefits thereunder.
"Post-Signing Returns" is defined in Section 5.03.
--------------------
"Pubco" is defined in the Preamble to this Merger Agreement.
-----
"Pubco Disclosure Schedule" is defined in Article IV.
-------------------------
"Pubco Material Adverse Effect" means any event, change or effect that,
-----------------------------
individually or when taken together with all other such events, changes or
effects, is or is reasonably likely to be materially adverse to the business,
operations, condition (financial or otherwise), Assets or liabilities of Pubco
and its subsidiaries, taken as a whole.
"Pubco Sub" is defined in the Preamble to this Merger Agreement.
---------
"Qualified Plan" means a Pension Plan that satisfies, or is intended by the
--------------
Company to satisfy, the requirements for Tax qualification described in Section
401 of the Code.
"Real Property" means the real property owned, operated, or used by the Company
-------------
or any of the Subsidiaries as of December 31, 1996, and any additional real
property owned, operated, or used since that date, and, for purposes of Section
3.30, any real property formerly owned or operated by the Company or any of the
Subsidiaries.
-70-
"Reviewed Balance Sheets" is defined in Section 3.08(a).
-----------------------
"Reviewed Statements" is defined in Section 3.08(a)
-------------------
"SEC" means the United States Securities and Exchange Commission and its
---
successors.
"Securities Act" means the Securities Act of 1933, as amended, and all Laws
--------------
promulgated pursuant thereto or in connection therewith.
"Significant Subsidiary" means any subsidiary of ▇▇▇▇▇▇ or Pubco disclosed in
----------------------
its most recent Annual Report on Form 10-K, and any other subsidiary that would
constitute a "Significant Subsidiary" of Pubco within the meaning of Rule 1-02
of Regulation S-X of the SEC.
"Statutory-Waiver Plan" means a Pension Plan that is not subject to Title I,
---------------------
Subtitle B, Part 3, of ERISA (concerning "funding").
"Stockholders' Meeting" is defined in Section 6.02.
---------------------
"Subsidiary" means a corporation, partnership, joint venture or other entity of
----------
which the Company owns, directly or indirectly, at least 50% of the outstanding
securities or other interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body or
otherwise exercise Control of such entity.
"Taxes" (including the terms "Tax" and "Taxing") means all federal, state, local
----- --- ------
and foreign taxes (including, without limitation, income, profit, franchise,
sales, use, real property, personal property, ad valorem, excise, employment,
social security and wage withholding taxes) and installments of estimated taxes,
assessments, deficiencies, levies, imports, duties, license fees, registration
fees, withholdings, or other similar charges of every kind, character or
description imposed by any Governmental Entity, and any interest, penalties or
additions to tax imposed thereon or in connection therewith.
"Tax Returns" means all federal, state, local, foreign and other applicable
-----------
returns, declarations, reports and information statements with respect to Taxes
required to be filed with the IRS or any other Governmental Entity or Tax
authority or agency, including, without limitation, consolidated, combined and
unitary tax returns.
"Title I Plan" means a Plan that is subject to Title I of ERISA.
------------
"Total Outstanding Company Shares" is defined in Section 2.01(a).
--------------------------------
"Unaudited Balance Sheets" is defined in Section 6.07.
------------------------
"Unaudited Financial Statements" is defined in Section 6.07.
------------------------------
-71-
"Welfare Plan" means an "employee welfare benefit plan" as such term is defined
------------
in Section 3(1) of ERISA.
"Year 2000 Complaint" means that neither performance nor functionality is
-------------------
affected by dates prior to, during or after the year 2000; in particular (i) no
value for current date will cause any interruption in operation; (ii) date-based
functionality must behave consistently for dates before, during and after the
year 2000; (iii) in all interfaces and data storage, the century in any date is
specified either explicitly or by unambiguous algorithms or inferencing rules;
and (iv) the year 2000 must be recognized as a leap year. IN WITNESS WHEREOF,
▇▇▇▇▇▇, Pubco, Pubco Sub, the Company and the Principal Company Stockholders
have caused this Merger Agreement to be executed and delivered as of the date
first written above.
McLEODUSA INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, Group Vice
President, Publishing Services
McLEODUSA PUBLISHING COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, President
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PUBCO MERGING CO.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, President
TALKING DIRECTORIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, President
PRINCIPAL COMPANY STOCKHOLDERS
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, individually
and as Trustee of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Trust dated August 30, 1988
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, individually and as
First Trustee of the ▇▇▇▇ ▇. ▇▇▇▇▇▇
Trust under a Trust Agreement dated
May 24, 1988, as amended and restated
in its entirety on February 22, 1991
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