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AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
▇▇▇▇.▇▇▇ INCORPORATED
AND
PENSAT INTERNATIONAL COMMUNICATIONS, Inc.
------------------------
DATED AS OF JANUARY 12, 2001
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TABLE OF CONTENTS
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AGREEMENT AND PLAN OF MERGER, dated as of January ___, 2001 (this
"Agreement"), by and between PENSAT International Communications, Inc. ("PENSAT"
or "MergeCo"), a Delaware corporation with principal offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇. ▇.▇. Washington, D.C., and ▇▇▇.▇▇▇ Incorporated ("CDXX"), a Colorado
corporation with headquarters at Sarasota, Florida.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of PENSAT and CDXX have determined that
it is in the best interests of their respective companies and their stockholders
to consummate the transaction provided for herein in which PENSAT will, subject
to the terms and conditions set forth herein, merge with and into CDXX (the
"Merger"), so that CDXX is the surviving corporation (hereinafter sometimes
referred to in such capacity as the "Surviving Corporation") in the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement is
intended to be and is adopted as a plan of reorganization for purposes of the
Code; and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I - THE MERGER
1.1 THE MERGER.
(a) Subject to the terms and conditions of this Agreement, in
accordance with the Delaware Business Corporation Law ("Delaware Law") and
the Colorado Business Corporation Act ("Colorado Law"), at the Effective
Time, PENSAT ("MergeCo") shall merge with and into a CDXX subsidiary as
provided in Section 1.1(b), below ("MergerSub") that shall be the
Surviving Corporation in the Merger, and shall continue its corporate
existence under the laws of its jurisdiction of incorporation. Upon
consummation of the Merger, the separate corporate existence of PENSAT
shall terminate.
(b) CDXX may at any time change the method of effecting the
combination with PENSAT (including by providing for the merger of a wholly
owned subsidiary of CDXX with and into PENSAT, the merger of PENSAT with
and into a wholly owned subsidiary of CDXX, or the merger of a wholly
owned subsidiary of PENSAT with and into CDXX) if and to the extent CDXX
deems such change to be desirable; PROVIDED, HOWEVER, that no such change
shall (i) alter or change the amount or kind of consideration to be issued
to holders of the capital stock of PENSAT as provided for in this
Agreement (the "Merger Consideration"), except for appropriate adjustments
in the event of a merger described in the preceding parenthetical (which
shall in no event result in a change in the relative interests in the
Surviving Corporation of the parties' respective holders of capital stock
from the relative interests contemplated by this Agreement as currently
structured) (ii) adversely affect the tax treatment of PENSAT's
stockholders as a result of receiving the Merger Consideration or (iii)
materially impede or delay consummation of the transactions contemplated
by this Agreement; and (iv) all such changes to be made shall be completed
by the Effective Time.
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1.2 EFFECTIVE TIME. The Merger shall become effective as set forth in the
respective articles of merger (the "Articles of Merger") which shall be filed
with the Secretary of State of the state of MergerSub's jurisdiction (the
"MergerSub's Secretary") and the Secretary of State of the state of MergeCo's
jurisdiction (the "MergeCo's Secretary") on the Closing Date. The term
"Effective Time" shall be the date and time when the Merger becomes effective,
as set forth in the Articles of Merger.
1.3 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in the relevant sections of MergerSub's state
of jurisdiction and MergeCo's state of jurisdiction.
1.4 CONVERSION OF PENSAT COMMON STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of CDXX, PENSAT or the holder of
any of the following securities:
(a) Subject to Section 2.2(e), and except as provided in (i) and (ii)
below, each share of the common stock, par value $.001 per share, of
PENSAT issued and outstanding (the "PENSAT Common Stock") immediately
prior to the Effective Time, shall be converted into common stock, par
value $0.001 per share, of CDXX (the "CDXX Common Stock"), subject to
Section 1.7 (share Release Provision) below. CDX shall issue a total
of 110,000,000 shares to the Pensat shareholders for such conversion,
plus any increases for Pensat Debt Holder conversions to Pensat equity
as noted in 1.6 (d) below. The "Conversion Ratio" shall be determined
by dividing the total number of common shares of CDXX to be issued to
the Pensat Shareholders at the Effective Date (110,000,000 Shares) by
the number of shares of Pensat stock issued and outstanding just prior
to the Effective Date.
i) Dissenting Shares (as defined below), and
ii) Shares of PENSAT Common Stock owned by PENSAT as treasury stock
or owned, directly or indirectly, by PENSAT or CDXX or any of
their respective wholly-owned subsidiaries (other than shares of
PENSAT Common Stock held, directly or indirectly, in trust
accounts, managed accounts and the like, or otherwise held in a
fiduciary capacity, that are beneficially owned by third parties
(any such shares of PENSAT Common Stock or CDXX Common Stock
which are similarly held, whether held directly or indirectly by
PENSAT or CDXX, as the case may be, being referred to herein as
"Trust Account Shares") and other than any shares of PENSAT
Common Stock held by PENSAT or CDXX or any of their respective
Subsidiaries in respect of a debt previously contracted (any such
shares of PENSAT Common Stock, and shares of CDXX Common Stock
which are similarly held, whether held directly or indirectly by
PENSAT or CDXX or any of their respective Subsidiaries, being
referred to herein as "Debt Shares").
(b) All of the shares of PENSAT Common Stock converted into the right to
receive CDXX Common Stock pursuant to this Article I shall no longer
be outstanding and shall automatically be cancelled and shall cease to
exist as of the Effective Time, and each certificate (each a
"Certificate") previously representing any such shares of PENSAT
Common Stock shall thereafter represent only the right to receive (i)
a certificate representing the number of whole shares of CDXX Common
Stock and
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(ii) cash in lieu of fractional shares into which the shares
of PENSAT Common Stock represented by such Certificate have been
converted pursuant to this Section 1.4 and Section 2.2(e).
(c) Certificates previously representing shares of PENSAT Common Stock
shall be exchanged for certificates representing whole shares of CDXX
Common Stock and cash in lieu of fractional shares issued in
consideration therefor upon the surrender of such Certificates in
accordance with Section 2.2, without any interest thereon. If, prior
to the Effective Time, the outstanding shares of CDXX Common Stock or
PENSAT Common Stock shall have been increased, decreased, changed into
or exchanged for a different number or kind of shares or securities as
a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other similar
change in capitalization, an appropriate and proportionate adjustment
shall be made to the Exchange Ratio.
(d) Notwithstanding anything in the Agreement to the contrary, at the
Effective Time, all shares of PENSAT Common Stock that are owned,
directly or indirectly, by PENSAT or CDXX or any of their respective
wholly owned Subsidiaries shall be cancelled and shall cease to exist
and no stock of CDXX or other consideration shall be delivered in
exchange therefor.
(e) Notwithstanding anything in this Agreement to the contrary, shares of
PENSAT Common Stock that are outstanding immediately prior to the
Effective Time, the holders of which shall have delivered to PENSAT a
written demand for appraisal of such shares in the manner provided in
the Delaware Law ("Dissenting Shares"), shall not be converted into
the right to receive, or be exchangeable for, the shares of CDXX
Common Stock otherwise issuable in exchange for such shares of PENSAT
Common Stock pursuant to this Section 1.4 but, instead, the holders
thereof shall be entitled to payment of the appraised value of such
Dissenting Shares in accordance with the provisions of Delaware Law;
PROVIDED, HOWEVER, that
i) if any holder of Dissenting Shares shall subsequently deliver a
written withdrawal of his demand for appraisal of such shares
(with the written approval of the Surviving Corporation if such
withdrawal is not tendered within 60 days after the Effective
Time), or
ii) if any holder fails to establish his entitlement to appraisal
rights under Delaware law, such holder or holders (as the case
may be) shall forfeit the right to appraisal of such shares of
PENSAT Common Stock and each of such shares shall thereupon be
deemed to have been converted into the right to receive, and to
have become exchangeable for, as of the Effective Time, the
shares of CDXX Common Stock otherwise issuable in exchange for
such shares of PENSAT Common Stock pursuant to this Section 1.4,
without any interest thereon.
1.5 CDXX AND MERGERSUB CAPITAL STOCK. At and after the Effective Time,
each share of CDXX Common Stock (the "CDXX Capital Stock") issued and
outstanding immediately prior to the Effective Time shall remain an issued and
outstanding share of common stock of the Surviving Corporation and shall not be
affected by the Merger, and each share of MergerSub Common Stock issued and
outstanding immediately prior to the Effective Time shall remain an issued and
outstanding share of common stock of MergerSub and shall not be affected by the
Merger.
1.6 WARRANTS AND OPTIONS. At the Effective Time, each warrant or option
granted by PENSAT to purchase shares of PENSAT Common Stock which is outstanding
and unexercised immediately prior thereto shall cease to represent a right to
acquire shares of PENSAT Common Stock and shall be converted automatically into
a warrant or option to purchase shares of CDXX Common Stock in an amount and at
an exercise price determined as follows:
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(a) The number of shares of CDXX Common Stock to be subject to the new warrant
or option shall be equal to the product of the number of shares of PENSAT
Common Stock subject to the original warrant or option and the Exchange
Ratio, provided that any fractional shares of CDXX Common Stock resulting
from such multiplication shall be rounded down to the nearest whole share;
and
(b) The exercise price per share of CDXX Common Stock under the new warrant or
option shall be equal to the exercise price per share of PENSAT Common
Stock under the original warrant or option divided by the Exchange Ratio,
provided that such exercise price shall be rounded up to the nearest whole
cent.
(c) The adjustment provided herein with respect to any stock options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be
and is intended to be effected in a manner which is consistent with Section
424(a) of the Code. The duration and other terms of the new option shall be
the same as the original option except that all references to PENSAT shall
be deemed to be references to CDXX.
(d) It is anticipated that a number of Pensat Debt Holders, Note Holders, and
other creditors, including Lucent Technologies ("Debt Holders"), will agree
to convert their debt into shares of common stock of Pensat prior to the
Merger. Any shares of CDXX issued to a Pensat Debt Holders in conversion of
their debt to equity shall be in addition to the shares allocated to the
current Pensat Shareholders under Paragraph ____ above.
1.7 SHARE RELEASE PROVISION. As of the Effective Time, 50% of the CDXX
shares due each PENSAT equity holder, pursuant to the Exchange Ratio, will be
released immediately, subject to the procedures described elsewhere in this
Agreement. The remaining 50% of the CDXX shares due each PENSAT shareholder will
be released upon the following ("Release Provisions"):
(i) An additional 25% of the total shares due PENSAT equity holders will be
released upon CDXX or PENSAT closing $5 million in new equity funding or
conversion of PENSAT debt into CDXX equity.
(ii) The final 25% of the total shares due PENSAT equity holders will be
released upon CDXX or PENSAT closing a further $5 million in new equity
funding or conversion of PENSAT debt into CDXX equity.
(iii)Notwithstanding the foregoing, not more than $5 million of debt conversion
may be applied to the total $10 million amount of new equity funding or
debt conversion required to release the remaining shares of common stock to
Pensat equity holders.
The Shares subject to the Release Provisions will not be released to the PENSAT
shareholders until such time as the above conditions have been met. Any shares
that have not been released after five (5) years will be cancelled.
Notwithstanding the above Release Provisions, ownership of all of the shares
will vest in the PENSAT shareholders as of the Effective Time and each PENSAT
shareholder will have all voting rights of 100% of the Exchange Shares due to
such shareholder.
1.8 ARTICLES OF INCORPORATION OF CDXX. At the Effective Time, the Articles
of Incorporation of MergerSub ("MergerSub Articles"), as in effect at the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation. Further, at or prior to the Effective Time, CDXX shall cause the
Articles of Incorporation of CDXX to be amended to increase the number of
authorized shares of Common Stock to 500,000,000 (the "Amendment").
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1.9 BY-LAWS OF CDXX. At the Effective Time, the By-Laws of MergerSub, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.10 TAX AND ACCOUNTING CONSEQUENCES. It is intended that the Merger shall
constitute a "reorganization" within the meaning of Section 368(a) of the Code,
that this Agreement shall constitute a "plan of reorganization" for the purposes
of the Code and that the Merger shall be accounted for as a "Reverse Merger"
under generally accepted accounting principles ("GAAP").
1.11 HEADQUARTERS OF SURVIVING CORPORATION; NAME OF THE SURVIVING
CORPORATION. From and after the Effective Time, the location of the headquarters
and principal executive offices of the Surviving Corporation shall be ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ and the name of the Surviving
Corporation shall be as mutually agreed upon by the parties; PROVIDED that the
parties shall consult and undertake such studies and analyses as they shall
consider necessary or desirable to determine the most suitable name for the
Surviving Corporation.
ARTICLE II
EXCHANGE OF SHARES
2.1 CDXX TO MAKE SHARES AVAILABLE. At or prior to the Effective Time, CDXX
shall deposit, or shall cause to be deposited, with the transfer agent of CDXX
or another company reasonably acceptable to each of PENSAT and CDXX (the
"Exchange Agent"), for the holders of Certificates, for exchange in accordance
with this Article II, certificates representing the shares of CDXX Common Stock,
and cash in lieu of any fractional shares (such cash and certificates for shares
of CDXX Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund"), to be issued
pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in exchange for
outstanding shares of PENSAT Stock.
2.2 EXCHANGE OF SHARES. As soon as practicable after the Effective Time,
and in no event later than five business days thereafter, the Exchange Agent
shall mail to each holder of record of one or more PENSAT Certificates, a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the PENSAT Certificates shall pass, only upon delivery of the
PENSAT Certificates to the Exchange Agent) and instructions for use in effecting
the surrender of the PENSAT Certificates in exchange for certificates
representing the shares of CDXX Common Stock and any cash in lieu of fractional
shares into which the shares of PENSAT represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. Upon proper
surrender of a Certificate or Certificates for exchange and cancellation to the
Exchange Agent, together with such properly completed letter of transmittal,
duly executed, the holder of such Certificate or Certificates shall be entitled
to receive in exchange therefor, as applicable, (i) a certificate representing
that number of whole shares of CDXX Common Stock to which such holder of PENSAT
Common Stock shall have become entitled pursuant to the provisions of Article I
and (ii) a check representing the amount of any cash in lieu of fractional
shares which such holder has the right to receive in respect of the Certificate
or Certificates surrendered pursuant to the provisions of this Article II, and
the Certificate or Certificates so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on any cash in lieu of fractional shares or on
any unpaid dividends and distributions payable to holders of Certificates.
(a) No dividends or other distributions declared with respect to CDXX Common
Stock shall be paid to the holder of any unsurrendered Certificate until
the holder thereof shall surrender such Certificate in accordance with this
Article II. After the surrender of a Certificate in accordance with this
Article II, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of CDXX Common Stock
represented by such Certificate.
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(b) If any certificate representing shares of CDXX Common Stock is to be issued
in a name other than that in which the Certificate or Certificates
surrendered in exchange therefor is or are registered, it shall be a
condition of the issuance thereof that the Certificate or Certificates so
surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that
the person requesting such exchange shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the issuance of a
certificate representing shares of CDXX Common Stock in any name other than
that of the registered holder of the Certificate or Certificates
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(c) After the Effective Time, there shall be no transfers on the stock transfer
books of PENSAT of the shares of PENSAT Capital Stock that were issued and
outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be cancelled and exchanged for
certificates representing shares of CDXX Common Stock as provided in this
Article II.
(d) Notwithstanding anything to the contrary contained herein, no certificates
or scrip representing fractional shares of CDXX Common Stock shall be
issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to CDXX Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall
not entitle the owner thereof to vote or to any other rights of a
stockholder of CDXX. In lieu of the issuance of any such fractional share,
CDXX shall pay to each former stockholder of PENSAT who otherwise would be
entitled to receive such fractional share an amount in cash determined by
multiplying (i) the fraction of a share (rounded to the nearest thousandth
when expressed in decimal form) of CDXX Common Stock to which such holder
would otherwise be entitled to receive pursuant to Section 1.4 by (ii)
$1.00.
(e) Any portion of the Exchange Fund that remains unclaimed by the stockholders
of PENSAT for 12 months after the Effective Time shall be paid to CDXX. Any
former stockholders of PENSAT who have not theretofore complied with this
Article II shall thereafter look only to CDXX for payment of the shares of
CDXX Common Stock, cash in lieu of any fractional shares and any unpaid
dividends and distributions on the CDXX Common Stock deliverable in respect
of each share of PENSAT Stock, as the case may be, such stockholder holds
as determined pursuant to this Agreement, in each case, without any
interest thereon. Notwithstanding the foregoing, none of CDXX, PENSAT, the
Exchange Agent or any other person shall be liable to any former holder of
shares of PENSAT Stock, or other PENSAT equity holder, for any amount
delivered in good faith to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if reasonably required by
CDXX, the posting by such person of a bond in such amount as CDXX may
determine is reasonably necessary as indemnity against any claim that may
be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
shares of CDXX Common Stock and any cash in lieu of fractional shares
deliverable in respect thereof pursuant to this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PENSAT
Except as disclosed in the PENSAT disclosure schedule delivered to CDXX
concurrently herewith (the "PENSAT Disclosure Schedule"), PENSAT hereby
represents and warrants to CDXX as follows:
3.1 CORPORATE ORGANIZATION.
(a) PENSAT is a corporation duly organized, validly existing and,
except as shown in Exhibit 3.1, in good standing under the laws of its
state of incorporation. PENSAT has the corporate power and authority to
own or lease all of its properties and assets and to carry on its business
as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets
owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not, either
individually or in the aggregate, have a Material Adverse Effect on
PENSAT. As used in this Agreement, the term "Material Adverse Effect"
means, with respect to CDXX, PENSAT or the Surviving Corporation, as the
case may be, a material adverse effect on (i) the business, results of
operations or financial condition of such party and its Subsidiaries taken
as a whole or (ii) the ability of such party to timely consummate the
transactions contemplated hereby; PROVIDED, HOWEVER, that Material Adverse
Effect shall not be deemed to include the impact of (a) changes in
telecommunications laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities, (b) changes
in generally accepted accounting principles or regulatory accounting
requirements applicable to telecommunications companies or their holding
companies generally, (c) actions or omissions of CDXX or PENSAT taken with
the prior written consent of the other in contemplation of the
transactions contemplated hereby, (d) any changes in general economic
conditions affecting telecommunications companies generally and (e) the
effects of the Merger and compliance by either party with the provisions
of this Agreement on the business, financial condition or results of
operations of such party and its Subsidiaries, or the other party and its
Subsidiaries, as the case may be. As used in this Agreement, the word
"Subsidiary" when used with respect to any party, means any
telecommunications company, corporation, partnership, limited liability
company, or other organization, whether incorporated or unincorporated,
which is consolidated with such party for financial reporting purposes.
True and complete copies of the Articles and By-Laws of PENSAT, as in
effect as of the date of this Agreement, have previously been made
available by PENSAT to CDXX.
(b) Each PENSAT Subsidiary (i) is duly organized and validly
existing under the laws of its jurisdiction of organization, (ii) is duly
qualified to do business and in good standing in all jurisdictions
(whether federal, state, local or foreign) where its ownership or leasing
of property or the conduct of its business requires it to be so qualified
and in which the failure to be so qualified would have a Material Adverse
Effect on PENSAT and (iii) has all requisite corporate power and authority
to own or lease its properties and assets and to carry on its business as
now conducted.
3.2 CAPITALIZATION. The authorized capital stock of PENSAT is summarized
on Exhibit 3.2(a) (all together, the "PENSAT Capital Stock"). All of the issued
and outstanding shares of PENSAT Capital Stock have been duly authorized and
validly issued and are fully paid, nonassessable and, except as disclosed on
Exhibit 3.2(d), are free of preemptive rights, with no personal liability
attaching to the ownership thereof. Prior to the Effective Time, all outstanding
equity, or equity claims, of PENSAT will be converted to PENSAT Common Stock or
common stock equivalents.
As of the date of this Agreement, except as described in this
Section 3.2 or listed in Exhibit 3.2(a), PENSAT does not have and is not bound
by any outstanding subscriptions, warrants, calls, commitments or agreements of
any character calling for the purchase or issuance of any shares of PENSAT
Capital Stock or any other equity securities of PENSAT or any securities
representing the right to purchase or otherwise receive any shares of PENSAT
Capital Stock, (collectively, the "PENSAT Rights"). Pensat will provide a final
schedule as of the Effective Time of this Merger transaction.
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PENSAT ownership interests in each of the PENSAT Subsidiaries are
shown on Exhibit 3.2(b). These ownership interests are free and clear of any
liens, pledges, charges, encumbrances and security interests whatsoever
("Liens"), and all of such shares or equity ownership interests are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. Except as disclosed in Exhibit 3.2(b), no PENSAT Subsidiary has or is
bound by any outstanding subscriptions, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such Subsidiary. Exhibit 3.2(c)
sets forth a list of the material investments of PENSAT in corporations, joint
ventures, partnerships, limited liability companies and other entities other
than its Subsidiaries (each a "Non-Subsidiary Affiliate").
3.3 AUTHORITY; NO VIOLATION.
(a) PENSAT has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of PENSAT. The Board of Directors of
PENSAT has directed that this Agreement and the transactions contemplated
hereby be submitted to PENSAT's stockholders for approval and, except for
the approval of this Agreement and the transactions contemplated hereby by
the affirmative vote of the holders of two-thirds of the outstanding
shares of PENSAT Common Stock, no other corporate proceedings on the part
of PENSAT are necessary to approve this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by PENSAT and (assuming due authorization,
execution and delivery by CDXX) constitutes a valid and binding obligation
of PENSAT, enforceable against PENSAT in accordance with its terms (except
as may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and the
availability of equitable remedies).
(b) Neither the execution and delivery of this Agreement by PENSAT
nor the consummation by PENSAT of the transactions contemplated hereby,
nor compliance by PENSAT with any of the terms or provisions hereof, will
(i) violate any provision of the PENSAT Articles or By-Laws or (ii)
assuming that the consents and approvals referred to in Section 3.4 are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to PENSAT, any of
its Subsidiaries or Non-Subsidiary Affiliates or any of their respective
properties or assets or (y) constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation
of any Lien upon any of the respective properties or assets of PENSAT, any
of its Subsidiaries or Non-Subsidiary Affiliates under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to
which PENSAT, any of its Subsidiaries or its Non-Subsidiary Affiliates is
a party, or by which they or any of their respective properties or assets
may be bound or affected, except (in the case of clause (y) above) for
such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, will not have a Material Adverse Effect
on PENSAT.
3.4 CONSENTS AND APPROVALS. Except for (i) the filing of the Articles of Merger
with MergerSub's jurisdiction of incorporation and the filing of the Articles of
Merger with MergeCo's jurisdiction of incorporation, (ii) any consents,
authorizations, approvals, filings or exemptions in connection with compliance
with the applicable provisions of federal and state securities laws relating to
the regulation of broker-dealers, investment advisers or transfer agents, and
federal commodities laws relating to the regulation of futures commission
merchants and the rules and regulations thereunder and of any applicable
industry self-regulatory organization ("SRO"), (iii) such filings and approvals
as are required to be made or obtained under the securities or "Blue Sky" laws
of various states in connection with the issuance of the shares of CDXX Capital
Stock pursuant to this Agreement, and (iv) the approval of this Agreement by the
requisite vote of stockholders of PENSAT, no consents or approvals of or filings
or registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity") are
necessary in connection with (A) the execution and delivery by PENSAT of this
Agreement and (B) the consummation by PENSAT of the Merger and the other
transactions contemplated hereby.
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3.5 REPORTS. Since January 1, 2000, PENSAT and each of its Subsidiaries have
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto (the "Reports"), which were
required to be filed pursuant to the laws, rules or regulations of the United
States, any state, any foreign entity, or any Regulatory Agency, and have paid,
or made provisions for in their accounting reports, all fees and assessments due
and payable in connection therewith, except where the failure to file such
report, registration or statement or to pay such fees and assessments, either
individually or in the aggregate, will not have a Material Adverse Effect on
PENSAT.
3.6 NO PENDING INVESTIGATIONS. Except for normal examinations conducted by a
Regulatory Agency in the ordinary course of business, to the best knowledge of
PENSAT as of the date hereof, no Regulatory Agency is actively conducting, or
has pending, any proceeding or investigation into the business or operations of
PENSAT or any of its Subsidiaries, except where such proceedings or
investigation will not, either individually or in the aggregate, have a Material
Adverse Effect on PENSAT. There (i) is no unresolved violation, criticism, or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations or inspections of PENSAT or any of its Subsidiaries
and (ii) are no disagreements or disputes with, any Regulatory Agency with
respect to the business, operations, policies or procedures of PENSAT, which, in
the reasonable judgment of PENSAT, will, either individually or in the
aggregate, have a Material Adverse Effect on PENSAT.
3.7 FINANCIAL STATEMENTS. PENSAT has previously made available to CDXX
copies of the consolidated balance sheet of PENSAT and its Subsidiaries as of
December 31, for the fiscal years 1997 and 1998, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
fiscal years 1996 through 1998, inclusive. PENSAT has also made available to
CDXX copies of the unaudited consolidated balance sheets of PENSAT and its
Subsidiaries as of December 31, 1999 and September 30, 2000, and the related
unaudited consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal periods then ended. The December 31, 1998 consolidated
balance sheet of PENSAT (including the related notes, where applicable) and
subsequent unaudited financial statements of PENSAT presented to CDXX fairly
present in all material respects the consolidated financial position of PENSAT
and its Subsidiaries as of the dates thereof, and the other financial statements
referred to in this Section 3.7 (including the related notes, where applicable)
fairly present in all material respects the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of PENSAT and its Subsidiaries for the respective fiscal periods or as
of the respective dates therein set forth; each of such statements (including
the related notes, where applicable) complies in all material respects with
applicable accounting requirements with respect thereto; and each of such
statements (including the related notes, where applicable) has been prepared in
all material respects in accordance with GAAP consistently applied during the
periods involved, except, in each case, as indicated in such statements or in
the notes thereto.
3.8 BROKER'S FEES. Neither PENSAT nor any PENSAT Subsidiary nor any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with the Merger or related transactions contemplated by this
Agreement.
3.9 LEGAL PROCEEDINGS.
(a) Except as disclosed on Exhibit 3.9 hereto, neither PENSAT nor
any of its Subsidiaries is a party to any, and there are no pending or, to
the best of PENSAT's knowledge, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or
regulatory investigations of any nature against PENSAT or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement as to which, in any such case, there is a
reasonable probability of an adverse determination and which, if adversely
determined, will, either individually or in the aggregate, have a Material
Adverse Effect on PENSAT.
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(b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than those of general application that apply to
similarly situated telecommunications company holding companies or their
subsidiaries) imposed upon PENSAT, any of its Subsidiaries or the assets
of PENSAT or any of its Subsidiaries that has had, or will have, either
individually or in the aggregate, a Material Adverse Effect on PENSAT or
the Surviving Corporation.
3.10 TAXES AND TAX RETURNS.
(a) Each of PENSAT and its Subsidiaries has duly filed all material
federal, state, foreign and local information returns and tax returns required
to be filed by it on or prior to the date hereof (all such returns being
accurate and complete in all material respects) and has duly paid or made
provisions in its accounting records for the payment of all Taxes and other
governmental charges which have been incurred or are due or claimed to be due
from it by federal, state, foreign or local taxing authorities on or prior to
the date of this Agreement (including, without limitation, if and to the extent
applicable, those due in respect of its properties, income, business, capital
stock, deposits, franchises, licenses, sales and payrolls) other than (i) Taxes
or other charges which are not yet delinquent or are being contested in good
faith and have not been finally determined, or (ii) information returns, tax
returns, taxes or other governmental charges as to which the failure to file,
pay or make provision for will not, either individually or in the aggregate,
have a Material Adverse Effect on PENSAT. There are no material disputes
pending, or to PENSAT's knowledge, claims asserted for Taxes or assessments upon
PENSAT or any of its Subsidiaries.
(b) As used in this Agreement, the term "Tax" or "Taxes" means all federal,
state, local, and foreign income, excise, gross receipts, gross income, ad
valorem, profits, gains, property, capital, sales, transfer, use, payroll,
employment, severance, withholding, duties, intangibles, franchise, backup
withholding, and other taxes, charges, levies or like assessments together with
all penalties and additions to tax and interest thereon.
(c) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by PENSAT or any of its
Subsidiaries under any contract, plan, program, arrangement or understanding
would be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PENSAT.
3.11 EMPLOYEES and BENEFIT PLANS.
(a) Upon request PENSAT will make available to CDXX true and complete
copies of PENSAT benefit plans.
(b) Except as to the payment amount disclosed on Exhibit 3.11(b), each of
the PENSAT benefit plans has been operated and administered in all material
respects in compliance with applicable laws, including, but not limited to,
ERISA and the Code,
(c) Each of the PENSAT benefit plans intended to be "qualified" within the
meaning of Section 401 (a) of the Code is so qualified, and there are no
existing circumstances or any events that have occurred that will adversely
affect the qualified status of any such PENSAT Plan,
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(d) No PENSAT benefit plan provides benefits, including, without
limitation, death or medical Benefits (whether or not insured), with respect to
current or former employees or directors of PENSAT or its Subsidiaries beyond
their retirement or other termination of service, other than (A) coverage
mandated by applicable law, (B) death benefits or retirement benefits under any
"employee pension plan" (as such term is defined in Section 3(2) of ERISA), (D)
COBRA type benefits, the full cost of which is borne by the current or former
employee or director (or his beneficiary),
(e) No liability under Title IV of ERISA has been incurred by PENSAT, its
Subsidiaries or any PENSAT ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to PENSAT, its
Subsidiaries or any PENSAT ERISA Affiliate of incurring a liability thereunder,
(f) No PENSAT benefit plan is a "multi-employer pension plan" (as such term
is defined in Section 3(37) of ERISA), nor has PENSAT or any of its Subsidiaries
ever been a participating employer in a multi-employer plan or incurred any
withdrawal liability in connection therewith,
(g) All contributions or other amounts payable by PENSAT or its
Subsidiaries as of the Effective Time with respect to each PENSAT benefit plan
in respect of current or prior plan years have been paid or accrued in
accordance with GAAP and Section 412 of the Code.
(h) None of PENSAT, its Subsidiaries or any other person, including any
fiduciary, has engaged in a transaction in connection with which PENSAT, its
Subsidiaries or any PENSAT benefit plan will be subject to either a material
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material
tax imposed pursuant to Section 4975 or 4976 of the Code, and
(i) To the best knowledge of PENSAT there are no pending, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the PENSAT benefit plans or any trusts related thereto that will
have, either individually or in the aggregate, a Material Adverse Effect on
PENSAT.
(j) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) (i) result in any payment (including, without
limitation, severance, unemployment compensation, "excess parachute payment"
(within the meaning of Section 280G of the Code), forgiveness of indebtedness or
otherwise) becoming due to any director or any employee of PENSAT or any of its
affiliates from PENSAT or any of its affiliates under any PENSAT benefit plan or
otherwise, (ii) increase any benefits otherwise payable under any PENSAT benefit
plan or (iii) result in any acceleration of the time of payment or vesting of
any such benefits.
3.12 COMPLIANCE WITH APPLICABLE LAW.
(a) PENSAT and each of its Subsidiaries hold all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to each, and have complied in all
material respects with and are not in default in any material respect under any,
applicable law, statute, order, rule, regulation, policy and/or guideline of any
Governmental Entity relating to PENSAT or any of its Subsidiaries, except where
the failure to hold such license, franchise, permit or authorization or such
noncompliance or default will not, either individually or in the aggregate, have
a Material Adverse Effect on PENSAT.
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(b) Except as disclosed on Exhibit 3.12(b), or except as will not have,
either individually or in the aggregate, a Material Adverse Effect on PENSAT,
PENSAT and each PENSAT Subsidiary have properly administered all accounts for
which it acts as a fiduciary, including accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents,
applicable state and federal law and regulation and common law. None of PENSAT,
any PENSAT Subsidiary, or any director, officer or employee of PENSAT or of any
PENSAT Subsidiary, has committed any breach of trust with respect to any such
fiduciary account that will have a Material Adverse Effect on PENSAT, and the
accountings for each such fiduciary account are true and correct in all material
respects and accurately reflect the assets of such fiduciary account.
3.13 CERTAIN CONTRACTS. Neither PENSAT nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) with respect to the employment of any directors,
officers or employees, other than in the ordinary course of business consistent
with past practice, (ii) which, upon the consummation or stockholder approval of
the transactions contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from CDXX, PENSAT, the Surviving
Corporation, or any of their respective Subsidiaries to any officer or employee
thereof, (iii) which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the PENSAT
Reports, (iv) which materially restricts the conduct of any line of business by
PENSAT or upon consummation of the Merger will materially restrict the ability
of the Surviving Corporation to engage in any line of business in which Pensat
may lawfully engage, (v) with or to a labor union or guild (including any
collective bargaining agreement) or (vi) except as disclosed on Exhibit 3.13,
(including any stock warrant plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan) any of the Benefits of which will be
increased, or the vesting of the Benefits of which will be accelerated, by the
occurrence of any stockholder approval or the consummation of any of the
transactions contemplated by this Agreement. Neither PENSAT nor any of its
Subsidiaries knows of, or has received notice of, any violation of the above by
any of the other parties thereto which, either individually or in the aggregate,
will have a Material Adverse Effect on PENSAT.
3.14 AGREEMENTS WITH REGULATORY AGENCIES. Neither PENSAT nor any of its
Subsidiaries is currently subject to any cease-and-desist or other order or
enforcement action issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or has been ordered to pay any civil money
penalty by, or, since inception, has adopted any policies, procedures or board
resolutions at the request or suggestion of any Regulatory Agency or other
Governmental Entity that currently restricts in any material respect the conduct
of its business or that in any material manner relates to its capital adequacy,
its ability to pay dividends, its credit or risk management policies, its
management or its business (each item in this sentence, whether or not set forth
in the PENSAT Disclosure Schedule, a "PENSAT Regulatory Agreement"), nor has
PENSAT or any of its Subsidiaries , to the best of its knowledge, been advised
that any Regulatory Agency or other Governmental Entity is considering issuing,
initiating, ordering, or requesting any such PENSAT Regulatory Agreement.
3.15 INTERNATIONAL OPERATIONS. All non-U.S. telecommunications operations
have been conducted in compliance with the requirements of all applicable
federal and foreign laws, statutes, orders, rules, regulations or policies and
guidelines of any Regulatory Agency or Governmental Entity, except for such
noncompliance as would not have a Material Adverse Effect on PENSAT. Other than
in the ordinary course of business, neither PENSAT nor any Subsidiary is subject
to any Regulatory Agreement with any non-U.S. Regulatory Agency or Governmental
Entity, nor has PENSAT or any of its Subsidiaries been advised that any such
authority or entity is considering issuing or requesting any such agreement.
There are no unresolved violations, criticisms or exceptions by any non-U.S.
Regulatory Agency or Governmental Entity relating to any examinations or
inspections of PENSAT or any Subsidiary.
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3.16 UNDISCLOSED LIABILITIES. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of PENSAT
included in the PENSAT October 31, 2000 unaudited financial report and for
liabilities incurred in the ordinary course of business consistent with past
practice, since then, neither PENSAT nor any of its Subsidiaries has incurred
any liability of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due) that, either individually or in the
aggregate, has had or will have a Material Adverse Effect on PENSAT.
3.17 ENVIRONMENTAL LIABILITY. There are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that could reasonably result in the imposition, on
PENSAT of any liability or obligation arising under common law or under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), pending or
threatened against PENSAT. PENSAT is not subject to any agreement, order,
judgment, decree, letter or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any liability or obligation
with respect to the foregoing.
3.18 REORGANIZATION; REVERSE MERGER. As of the date of this Agreement,
PENSAT has no reason to believe that the Merger will not qualify as a
"reorganization" within the meaning of Section 368(a) of the Code and as a
"Reverse Merger" for accounting purposes.
3.19 OWNERSHIP OF CDXX COMMON STOCK; AFFILIATES AND ASSOCIATES. Except with
respect to this Agreement, as of the date hereof, neither PENSAT nor any of its
affiliates or associates (as such terms are defined under the Exchange Act) (i)
beneficially owns, directly or indirectly, or (ii) is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of CDXX.
3.20 OPINIONS. Prior to the execution of this Agreement, PENSAT has determined
that as of the date thereof and based upon and subject to the matters set forth
therein, the Exchange Ratio pursuant to this Agreement is fair from a financial
point of view to PENSAT and its shareholders.
3.21 PENSAT INFORMATION. The information relating to PENSAT and its
Subsidiaries which is contained herein or is provided by PENSAT or its
representatives for inclusion in any document filed with any regulatory agency
in connection herewith, will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CDXX
CDXX represents and warrants to PENSAT as follows:
4.1 CORPORATE ORGANIZATION. CDXX is a corporation duly organized, validly
existing and in good standing under the laws of the State of COLORADO. CDXX has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not, either
individually or in the aggregate, have a Material Adverse Effect on CDXX.
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4.2 ARTICLES OF INCORPORATION. True and complete copies of the Restated Articles
of Incorporation (the "CDXX Articles") and By-Laws of CDXX, as in effect as of
the date of this Agreement, have previously been made available by CDXX to
PENSAT.
4.3 SUBSIDIARY ORGANIZATION. Each CDXX Subsidiary (i) is duly organized and
validly existing under the laws of its jurisdiction of organization, (ii) is
duly qualified to do business and in good standing in all jurisdictions (whether
Federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and in which the
failure to be so qualified would have a Material Adverse Effect on CDXX, and
(iii) has all requisite corporate power and authority to own or lease its
properties and assets and to carry on its business as now conducted.
4.4 CAPITALIZATION. The authorized, issued and reserved capital stock of CDXX
and all outstanding or potential claims for equity such as options, warrants, or
other forms of equity interest is outlined on Exhibit 4.4. The list of
outstanding or potential claims for equity, if any, will disclose the purchase
prices for the equity related to such claims.
As of the date hereof, no shares of CDXX Common Stock or CDXX Preferred
Stock were reserved for issuance, except as described in Exhibit 4.4.
All of the issued and outstanding shares of CDXX Capital Stock have been
duly authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof.
As of the date of this Agreement, except as otherwise disclosed on Exhibit
4.4 and this Agreement, CDXX does not have and is not bound by any outstanding
subscriptions, warrants, calls, commitments or agreements of any character
calling for the purchase or issuance of any shares of CDXX Capital Stock or any
other equity securities of CDXX or any securities representing the right to
purchase or otherwise receive any shares of CDXX Capital Stock (collectively,
"CDXX Rights").
Except as described on Exhibit 4.4, CDXX will not issue any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock after the date hereof without written approval from PENSAT.
CDXX owns, directly or indirectly, all of the issued and outstanding
shares of capital stock or other equity ownership interests of each of the CDXX
Subsidiaries, free and clear of any Liens, and all of such shares or equity
ownership interests are duly authorized and validly issued and are fully paid,
nonassessable (subject to 12 U.S.C. Section 55) and free of preemptive rights,
with no personal liability attaching to the ownership thereof.
No CDXX Subsidiary has, or is bound by, any outstanding subscriptions,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of capital stock or any other equity security
of such Subsidiary or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity security of
such Subsidiary. Exhibit 4.4(b) sets forth a list of the material investments of
CDXX in Non-Subsidiary Affiliates.
4.5 AUTHORITY, NO VIOLATION. (a) CDXX has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of CDXX.
No other corporate proceedings on the part of CDXX are necessary to
approve this Agreement and to consummate the transactions contemplated hereby.
20
This Agreement has been duly and validly executed and delivered by CDXX
and (assuming due authorization, execution and delivery by PENSAT) constitutes a
valid and binding obligation of CDXX, enforceable against CDXX in accordance
with its terms (except as may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally and
the availability of equitable remedies).
Neither the execution and delivery of this Agreement by CDXX, nor the
consummation by CDXX of the transactions contemplated hereby, nor compliance by
CDXX with any of the terms or provisions hereof, will (i) violate any provision
of the CDXX Articles or By-Laws, or (ii) assuming that the consents and
approvals referred to in Section 4.6 are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to CDXX, any of its Subsidiaries or Non-Subsidiary Affiliates or any
of their respective properties or assets or (y) violate, conflict with, result
in a breach of any provision of or the loss of any benefits under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of CDXX, any of its Subsidiaries or its Non-Subsidiary Affiliates under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which CDXX, any of its Subsidiaries or Non-Subsidiary Affiliates
is a party, or by which they or any of their respective properties or assets may
be bound or affected, except (in the case of clause (y) above) for such
violations, conflicts, breaches or defaults which either individually or in the
aggregate will not have a Material Adverse Effect on CDXX.
4.6 CONSENTS AND APPROVALS. Except for (i) the filing of the Articles of Merger
with MergerSub's jurisdiction of incorporation and the issuance by MergerSub's
jurisdiction of incorporation of a Certificate of Merger and the filing of the
Articles of Merger with MergeCo's jurisdiction of incorporation and the issuance
by MergeCo's jurisdiction of incorporation of a Certificate of Merger, (ii) any
consents, authorizations, approvals, filings or exemptions in connection with
compliance with the applicable provisions of federal and state securities laws
and listing or quotation requirements, which are required, and (iii) such
filings and approvals as are required to be made or obtained under the
securities or "Blue Sky" laws of various states in connection with the issuance
of the shares of CDXX Capital Stock pursuant to this Agreement, no consents or
approvals of or filings or registrations with any Governmental Entity are
necessary in connection with (A) the execution and delivery by CDXX of this
Agreement and (B) the consummation by CDXX of the Merger and the other
transactions contemplated hereby.
4.7 REPORTS. CDXX and each of its Subsidiaries have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since January 1, 1998 with
the Regulatory Agencies, and all other reports and statements required to be
filed by them since inception, including, without limitation, any report or
statement required to be filed pursuant to the laws, rules or regulations of the
United States, any state, any foreign entity or any Regulatory Agency, and have
paid all fees and assessments due and payable in connection therewith, except
where the failure to file such report, registration or statement or to pay such
fees and assessments, either individually or in the aggregate, will not have a
Material Adverse Effect on CDXX. Except for normal examinations conducted by a
Regulatory Agency in the ordinary course of the business of CDXX and its
Subsidiaries, no Regulatory Agency has initiated or has pending any proceeding
or, to the best knowledge of CDXX, investigation into the business or operations
of CDXX or any of its Subsidiaries since inception, except where such
proceedings or investigation will not have, either individually or in the
aggregate, a Material Adverse Effect on CDXX.
There (i) is no unresolved violation, criticism, or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations or inspections of CDXX or any of its Subsidiaries, and (ii) has
been no formal or informal inquiries by, or disagreements or disputes with, any
Regulatory Agency with respect to the business, operations, policies or
procedures of CDXX since January 1, 1998, which, in the reasonable judgment of
CDXX, will have, either individually or in the aggregate, a Material Adverse
Effect on CDXX.
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4.8 FINANCIAL STATEMENTS.
(a) CDXX has previously provided to PENSAT copies of the audited balance
sheets of CDXX as of June 30, for the fiscal years 2000 and 1999, and the
related audited consolidated statements of income, changes in stockholders'
equity and cash flows for the fiscal years 1999 through 2000, inclusive (the
"CDXX 2000 Financial Information"), in each case accompanied by the audit report
of their independent public accountants with respect to CDXX. In addition, CDXX
has provided PENSAT with unaudited financial statements as of September 30, 2000
and the three months ended September 30, 2000. The June 30, 2000 and the
September 30, 2000 balance sheets of CDXX (including the related notes, where
applicable) fairly presents in all material respects the financial position of
CDXX and its Subsidiaries as of the date thereof, and the other financial
statements referred to in this Section 4.8 (including the related notes, where
applicable) fairly present in all material respects the results of the
operations and changes in stockholders' equity and financial position of CDXX
for the respective fiscal periods or as of the respective dates therein set
forth, subject to normal year-end audit adjustments in the case of unaudited
statements; each of such statements (including the related notes, where
applicable) complies in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto; and each of such statements (including the related notes, where
applicable) has been prepared in all material respects in accordance with GAAP
consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes thereto. The books and records of
CDXX and its Subsidiaries have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.
(b) Exhibit 4.8(b) presents a projected Balance Sheet ("Proforma Balance
Sheet") as of the Effective Time reflecting the Balance Sheet of CDXX, on a
fully consolidated basis, and the effect of the divesture of the current
operations of CDXX pursuant to the Asset Purchase Contract dated November 21,
2000 between CDXX and Cyber Diagnostics Medical, Inc., a Rhode Island
corporation ("Spinout Agreement"), all excluding the PENSAT Balance sheet
amounts. CDXX warrants that the amounts presented in the Proforma Balance Sheet
are accurate in all material aspects.
4.9 INTERIM LOAN. Within ten days of the date of execution of this Agreement,
CDXX will have acquired the promissory note issued by PENSAT and dated December
1, 2000, in the principal amount of $1 million. Subsequently, prior to the
Effective Time, as additional investments or loans into CDXX are obtained, CDXX,
at its sole option, may, but is not obligated to, extend further loans to
PENSAT.
4.10 BROKER'S FEES. Neither CDXX nor any CDXX Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with the Merger or related transactions contemplated by this Agreement.
4.11 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as publicly disclosed in CDXX Reports filed prior to the date
hereof, since June 30, 2000, no event or events have occurred which has
had, individually or in the aggregate, a Material Adverse Effect on CDXX.
(b) Except as publicly disclosed in CDXX Reports filed prior to the date
hereof, since June 30, 2000, CDXX and its Subsidiaries have carried on
their respective businesses in all material respects in the ordinary
course.
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(c) Since June 30, 2000, neither CDXX nor any of its Subsidiaries has (i)
except for normal increases for employees (other than officers subject to
the reporting requirements of Section 16(a) of the Exchange Act) made in
the ordinary course of business consistent with past practice or as
required by applicable law, increased the wages, salaries, compensation,
pension, or other fringe benefits or perquisites payable to any executive
officer, employee, or director from the amount thereof in effect as of June
30, 2000, granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or paid any
bonus other than the customary year-end bonuses for fiscal 2000 in amounts
consistent with past practice, (ii) granted any stock appreciation rights
or granted any rights to acquire any shares of its capital stock to any
executive officer, director or employee other than grants to employees
(other than officers subject to the reporting requirements of Section 16(a)
of the Exchange Act) made in the ordinary course of business consistent
with past practice under the CDXX Stock Plans and suffered any strike, work
stoppage, slow-down, or other labor disturbance.
4.12 LEGAL PROCEEDINGS.
(a) CDXX is not a party to any, and there are no pending or, to the best of
CDXX's knowledge, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of any
nature against CDXX or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by this Agreement as to which, in any
such case, there is a reasonable probability of an adverse determination and
which, if adversely determined, will have, either individually or in the
aggregate, a Material Adverse Effect on CDXX.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon CDXX, any of its Subsidiaries or the assets of CDXX or
any of its Subsidiaries that has had or will have, either individually or in the
aggregate, a Material Adverse Effect on CDXX or the Surviving Corporation.
4.13 TAXES AND TAX RETURNS.
(a) Each of CDXX and its Subsidiaries has duly filed all federal, state,
foreign and local information returns and tax returns required to be filed by it
on or prior to the date hereof (all such returns being accurate and complete in
all material respects) and has duly paid or made provisions for the payment of
all Taxes and other governmental charges which have been incurred or are due or
claimed to be due from it by federal, state, foreign or local taxing authorities
on or prior to the date of this Agreement (including, without limitation, if and
to the extent applicable, those due in respect of its properties, income,
business, capital stock, deposits, franchises, licenses, sales and payrolls)
other than (i) Taxes or other charges which are not yet delinquent or are being
contested in good faith and have not been finally determined, or (ii)
information returns, tax returns, Taxes or other governmental charges as to
which the failure to file, pay or make provision for will not have, either
individually or in the aggregate, a Material Adverse Effect on CDXX. Any
liability with respect to the tax returns or their audits has been satisfied or
any liability with respect to deficiencies asserted as a result of such
examination is covered by adequate reserves. There are no disputes pending, or
to CDXX's knowledge, claims asserted for, Taxes or assessments upon CDXX or any
of its Subsidiaries for which CDXX does not have adequate reserves.
(b) No disallowance of a deduction under Section 162(m) of the Code for
employee remuneration of any amount paid or payable by CDXX or any of its
Subsidiaries under any contract, plan, program, arrangement or understanding
would be reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CDXX.
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4.14 EMPLOYEES.
(a) Exhibit 4.14 sets forth a true and complete list of each
employee benefits and compensation plan, arrangement or agreement and any
material bonus, incentive, deferred compensation, vacation, stock
purchase, stock warrant, severance, employment, change of control or
fringe benefits plan, program or agreement that is maintained, or
contributed to, as of the date of this Agreement (the "CDXX Benefit
Plans") by CDXX, any of its Subsidiaries or by any trade or business,
whether or not incorporated (a "CDXX ERISA Affiliate"), all of which
together with CDXX would be deemed a "single employer" within the meaning
of Section 4001 of ERISA.
(b) CDXX has heretofore made available to PENSAT true and complete
copies of each of the CDXX Benefit Plans and certain related documents,
including, but not limited to, (i) the actuarial report for such CDXX
Benefit Plan (if applicable) for each of the last two years, and (ii) the
most recent determination letter from the IRS (if applicable) for such
CDXX Benefit Plan.
(c) (i) Each of the CDXX Benefit Plans has been operated and
administered in all material respects in compliance with applicable laws,
including, but not limited to, ERISA and the Code, (ii) each of the CDXX
Benefit Plans intended to be "qualified" within the meaning of Section 401
(a) of the Code is so qualified, and there are no existing circumstances
or any events that have occurred that will adversely affect the qualified
status of any such CDXX Benefit Plan, (iii) with respect to each CDXX
Benefit Plan which is subject to Title IV of ERISA, the present value of
accrued benefits under such CDXX Benefit Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such CDXX Benefit Plan's actuary with respect to such CDXX
Benefit Plan, did not, as of its latest valuation date, exceed the then
current value of the assets of such CDXX Benefit Plan allocable to such
accrued Benefit s, (iv) no CDXX Benefit Plan provides Benefits, including,
without limitation, death or medical Benefits (whether or not insured),
with respect to current or former employees or directors of CDXX or its
Subsidiaries beyond their retirement or other termination of service,
other than (A) coverage mandated by applicable law, (B) death Benefits or
retirement Benefits under any "employee pension plan" (as such term is
defined in Section 3(2) of ERISA), (C) deferred compensation Benefits
accrued as liabilities on the books of CDXX or its Subsidiaries or (D)
Benefits the full cost of which is borne by the current or former employee
or director (or his beneficiary), (v) no liability under Title IV of ERISA
has been incurred by CDXX, its Subsidiaries or any CDXX ERISA Affiliate
that has not been satisfied in full, and no condition exists that presents
a risk to CDXX, its Subsidiaries or any CDXX ERISA Affiliate of incurring
a material liability thereunder, (vi) no CDXX Benefit Plan is a
"multi-employer pension plan" (as such term is defined in Section 3(37) of
ERISA), (vii) all contributions or other amounts payable by CDXX or its
Subsidiaries as of the Effective Time with respect to each CDXX Benefit
Plan in respect of current or prior plan years have been paid or accrued
in accordance with GAAP and Section 412 of the Code, (viii) none of CDXX,
its Subsidiaries or any other person, including any fiduciary, has engaged
in a transaction in connection with which CDXX, its Subsidiaries or any
CDXX Benefit Plan will be subject to either a material civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best
knowledge of CDXX there are no pending, threatened or anticipated claims
(other than routine claims for Benefit s) by, on behalf of or against any
of the CDXX Benefit Plans or any trusts related thereto which will have,
either individually or in the aggregate, a Material Adverse Effect on
CDXX.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or
in conjunction with any other event) (i) result in any payment (including,
without limitation, severance, unemployment compensation, "excess
parachute payment" (within the meaning of Section 280G of the Code),
forgiveness of indebtedness or otherwise) becoming due to any director or
any employee of CDXX or any of its affiliates from CDXX or any of its
affiliates under any CDXX Benefit Plan or otherwise, (ii) increase any
Benefits otherwise payable under any CDXX Benefit Plan or (iii) result in
any acceleration of the time of payment or vesting of any such Benefit.
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4.15 SEC REPORTS. CDXX has previously made available to PENSAT an accurate
and complete copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement filed since January 1, 1998 by CDXX with
the SEC pursuant to the Securities Act or the Exchange Act (the "CDXX Reports")
and prior to the date hereof and (b) communication mailed by CDXX to its
stockholders since January 1, 1998 and prior to the date hereof, and no such
CDXX Report or communication, as of the date thereof, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading, except that
information as of a later date (but before the date hereof) shall be deemed to
modify information as of an earlier date. Since inception, as of their
respective dates, except as disclosed on Exhibit 4.15, all CDXX Reports filed
under the Securities Act and the Exchange Act complied in all material respects
with the published rules and regulations of the SEC with respect thereto.
4.16 BULLETIN BOARD QUOTATION, CDXX shall cause the shares of CDXX Common
Stock to be approved for quotation on the Over the Counter Bulletin Board, prior
to the Effective Time.
4.17 COMPLIANCE WITH APPLICABLE LAW.
(a) CDXX and each of its Subsidiaries hold all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of
their respective businesses under and pursuant to each, and have complied
in all material respects with and are not in default in any material
respect under any, applicable law, statute, order, rule, regulation,
policy and/or guideline of any Governmental Entity relating to CDXX or any
of its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or default will
not, either individually or in the aggregate, have a Material Adverse
Effect on CDXX.
(b) Except as will not have, either individually or in the
aggregate, a Material Adverse Effect on CDXX, CDXX and each CDXX
Subsidiary have properly administered all accounts for which it acts as a
fiduciary, including accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment
advisor, in accordance with the terms of the governing documents,
applicable state and federal law and regulation and common law. None of
CDXX, any CDXX Subsidiary, or any director, officer or employee of CDXX or
of any CDXX Subsidiary, has committed any breach of trust with respect to
any such fiduciary account that will have a Material Adverse Effect on
CDXX, and the accountings for each such fiduciary account are true and
correct in all material respects and accurately reflect the assets of such
fiduciary account.
4.18 CERTAIN CONTRACTS.
(a) Neither CDXX nor any of its Subsidiaries is a party to or bound
by any contract, arrangement, commitment or understanding (whether written
or oral) (i) with respect to the employment of any directors, officers or
employees other than in the ordinary course of business consistent with
past practice, (ii) which, upon the consummation or stockholder approval
of the transactions contemplated by this Agreement will (either alone or
upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from CDXX,
PENSAT, the Surviving Corporation, or any of their respective Subsidiaries
to any officer, director, or employee thereof, (iii) which is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of
the SEC) to be performed after the date of this Agreement that has not
been filed or incorporated by reference in the CDXX Reports, (iv) which
materially restricts the conduct of any line of business by CDXX or upon
consummation of the Merger will materially restrict the ability of the
Surviving Corporation to engage in any line of business in which a
telecommunications company holding company may lawfully engage, (v) with
or to a labor union or guild (including any collective bargaining
agreement) or (vi) (including any stock warrant plan, stock appreciation
25
rights plan, restricted stock plan or stock purchase plan)any of the
Benefits of which will be increased, or the vesting of the Benefits of
which will be accelerated, by the occurrence of any stockholder approval
or the consummation of any of the transactions contemplated by this
Agreement, or the value of any of the Benefits of which will be calculated
on the basis of any of the transactions contemplated by this Agreement.
CDXX has previously made available to PENSAT true and correct copies of
all employment and deferred compensation agreements which are in writing
and to which CDXX or any of its Subsidiaries is a party. Each contract,
arrangement, commitment or understanding of the type described in this
Section 4.18(a), whether or not set forth in the CDXX Disclosure Schedule,
is referred to herein as a "CDXX Contract," and neither CDXX nor any of
its Subsidiaries knows of, or has received notice of, any violation of the
above by any of the other parties thereto which will have, individually or
in the aggregate, a Material Adverse Effect on CDXX.
(b) (i) Each CDXX Contract is valid and binding on CDXX and/or one
of its Subsidiaries, as applicable, and in full force and effect, (ii)
CDXX and each of its Subsidiaries has in all material respects performed
all obligations required to be performed by it to date under each CDXX
Contract, except where such noncompliance, either individually or in the
aggregate, will not have a Material Adverse Effect on CDXX, and (iii) no
event or condition exists which constitutes or, after notice or lapse of
time or both, will constitute, a material default on the part of CDXX or
any of its Subsidiaries under any such CDXX Contract, except where such
default, either individually or in the aggregate, will not have a Material
Adverse Effect on CDXX.
(c) As of the Effective Time, CDXX will have executed an agreement
(the "Spinout Agreement") to divest the existing operations of CDXX to an
independent company (the "Spinout Company"). The Spinout Agreement will
provide that all operations, assets (except for cash and a PENSAT note
aggregating $1 million in value) and all actual and contingent liabilities
are divested to Spinout Company and that Spinout Company indemnifies CDXX
for any past or future liabilities associated with CDXX's prior
operations. A copy of the Spinout Agreement is attached hereto as Exhibit
4.18.
4.19 AGREEMENTS WITH REGULATORY AGENCIES. Neither CDXX nor any of its
Subsidiaries is subject to any cease-and-desist or other order or enforcement
action issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or has been
since inception, a recipient of any supervisory letter from, or has been ordered
to pay any civil money penalty by, or since inception, has adopted any policies,
procedures or board resolutions at the request of any Regulatory Agency or other
Governmental Entity that currently restricts in any material respect the conduct
of its business or that in any material manner relates to its capital adequacy,
its ability to pay dividends, its credit or risk management policies, its
management or its business (each, whether or not set forth in the CDXX
Disclosure Schedule, a "CDXX Regulatory Agreement"), nor has CDXX or any of its
Subsidiaries been advised since inception, by any Regulatory Agency or other
Governmental Entity that it is considering issuing, initiating, ordering or
requesting any such CDXX Regulatory Agreement.
4.20 INTERNATIONAL OPERATIONS. All non-U.S. operations have been conducted
in compliance with the requirements of all applicable federal and foreign laws,
statutes, orders, rules, regulations or policies and guidelines of any
Regulatory Agency or Governmental Entity, except for such noncompliance as would
not have a Material Adverse Effect on CDXX. Neither CDXX nor any Subsidiary is
subject to any Regulatory Agreement with any non-U.S. Regulatory Agency or
Governmental Entity, nor has CDXX or any of its Subsidiaries been advised that
any such authority or entity is considering issuing or requesting any such
agreement. There (i) is no unresolved violation, criticism or exception by any
non-U.S. Regulatory Agency or Governmental Entity relating to any examinations
or inspections of CDXX or any Subsidiary and (ii) has been no formal or informal
inquiries by, or disagreements or disputes with, any non-U.S. Regulatory Agency
or Governmental Entity with respect to the business, operations, policies and
procedures of CDXX or any of its Subsidiaries since January 1, 1997.
26
4.21 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. Except as otherwise
disclosed herein, there are no interest rate risk management instruments in use
by CDXX.
4.22 UNDISCLOSED LIABILITIES. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of CDXX included
in the CDXX 2000 Financial Information and for liabilities incurred in the
ordinary course of business consistent with past practice, since June 30, 2000,
neither CDXX nor any of its Subsidiaries has incurred any liability of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either individually or in the aggregate, has
had or will have, a Material Adverse Effect on CDXX.
4.23 ENVIRONMENTAL LIABILITY. There are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably could result in the imposition, on
CDXX of any liability or obligation arising under common law or under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, CERCLA, pending or threatened against CDXX. To the knowledge
of CDXX, there is no reasonable basis for any such proceeding, claim, action or
governmental investigation that would impose any liability or obligation on
CDXX.
CDXX is not subject to any agreement, order, judgment, decree, letter or
memorandum by or with any court, governmental authority, regulatory agency or
third party imposing any liability or obligation with respect to the foregoing
that will have, either individually or in the aggregate, a Material Adverse
Effect on CDXX.
4.24 REORGANIZATION; REVERSE MERGER. As of the date of this Agreement,
CDXX has no reason to believe that the Merger will not qualify as a
"reorganization" within the meaning of Section 368(a) of the Code and as a
"Reverse Merger" for accounting purposes.
4.25 OPINIONS. Prior to the execution of this Agreement, CDXX has
determined that as of the date thereof and based upon and subject to the matters
set forth therein, the Exchange Ratio pursuant to this Agreement is fair from a
financial point of view to CDXX and its shareholders.
4.26 CDXX INFORMATION. The information relating to CDXX and its
Subsidiaries provided herein or provided by CDXX or its representatives for
inclusion in any document filed with any regulatory agency in connection
herewith, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. Any SEC filing (except for
such portions thereof that relate only to PENSAT or any of its Subsidiaries)
will comply with the provisions of the Exchange Act and the rules and
regulations thereunder.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 CONDUCT OF BUSINESSES PRIOR TO THE EFFECTIVE TIME. During the period from
the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement, or otherwise disclosed to the other
party, each of CDXX and PENSAT shall, and shall cause each of their respective
Subsidiaries to, (a) conduct its business in the ordinary course, (b) use
reasonable best efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and retain the
services of its key officers and key employees and (c) take no action which
would adversely affect or delay the ability of either CDXX or PENSAT to obtain
any necessary approvals of any Regulatory Agency or other Governmental Entity
required for the transactions contemplated hereby or to perform its covenants
and agreements under this Agreement or to consummate the transactions
contemplated hereby or thereby.
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5.2 BROKERS' FEES. Each party to this agreement will be responsible for payment
of any broker's fees, commissions or finder's fees they incurred in connection
with the Merger or related transactions contemplated by this Agreement.
5.3 FORBEARANCES. During the period from the date of this Agreement to the
Effective Time, except as expressly contemplated or permitted by this Agreement,
neither CDXX nor PENSAT shall, and neither CDXX nor PENSAT shall permit any of
their respective Subsidiaries to, without the prior written consent of the other
party to this Agreement:
(a) For PENSAT and its subsidiaries: other than indebtedness,
guarantees, endorsements or accommodations incurred to finance ongoing
operations, refinance short-term indebtedness and indebtedness of PENSAT or
any of its wholly-owned Subsidiaries to PENSAT or any of its Subsidiaries,
incur any indebtedness for borrowed money, assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other individual, corporation or other entity, or make any loan or advance
(it being understood and agreed that incurrence of indebtedness in the
ordinary course of business shall include, without limitation, the creation
of deposit liabilities, purchases of Federal funds, sales of certificates
of deposit and entering into repurchase agreements);
(b) For CDXX and its subsidiaries: incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or
other entity, or make any loan or advance;
(c) Adjust, split, combine or reclassify any capital stock;
(d) Make, declare or pay any dividend, or make any other distribution
on, or directly or indirectly redeem, purchase or otherwise acquire, any
shares of its capital stock or any securities or obligations convertible
(whether currently convertible or convertible only after the passage of
time or the occurrence of certain events) into or exchangeable for any
shares of its capital stock (except (A) in the case of PENSAT, for regular
cash dividends on its preferred stock or convert Preferred Stock or other
equity interest into Common stock for the purposes of this merger (B)
dividends paid by any of the Subsidiaries of each of CDXX and PENSAT to
CDXX or PENSAT or any of their Subsidiaries, respectively, and (C) the
acceptance of shares of PENSAT Common Stock or CDXX Common Stock, as the
case may be, as payment for the exercise price of stock warrants or stock
option plans or for withholding taxes incurred in connection with the
exercise of stock warrants or options or the vesting of restricted stock,
in each case in accordance with past practice and the terms of the
applicable award agreements;
(e) Grant any stock appreciation rights or grant any individual,
corporation or other entity any right to acquire any shares of its capital
stock; or
(f) Issue any additional shares of capital stock except (i) pursuant
to the exercise of stock warrants or options outstanding as of the date
hereof, (ii) pursuant to any conversions of debt or other obligations, or
(iii) in the case of PENSAT, in the ordinary course of business;
(g) Sell, transfer, mortgage, encumber or otherwise dispose of any of
its material properties or assets to any individual, corporation or other
entity other than a Subsidiary, or cancel, release or assign any
indebtedness to any such person or any claims held by any such person, in
each case other than in the ordinary course of business or pursuant to
contracts or agreements in force at the date of this Agreement;
(h) Except for transactions in the ordinary course of business or
pursuant to contracts or agreements in force at the date of or permitted by
this Agreement, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of
any property or assets of any other individual, corporation or other entity
other than a Subsidiary thereof;
28
(i) Except for transactions in the ordinary course of business,
terminate, or waive any material provision of, any PENSAT Contract or CDXX
Contract, as the case may be, or make any change in any instrument or
agreement governing the terms of any of its securities, or material lease
or contract, other than normal renewals of contracts and leases without
material adverse changes of terms;
(j) Increase in any manner the compensation or fringe Benefits of any
of its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees or become a party to,
amend or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee other than in the ordinary course of business;
(k) Settle any material claim, action or proceeding involving money
damages, except in the ordinary course of business;
(l) Knowingly take any action that would prevent or impede the Merger
from qualifying (i) for "Reverse Merger" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code;
(m) Amend its articles of incorporation, its bylaws or comparable
governing documents, or any Takeover or similarly restrictive provisions of
such party's organizational documents;
(n) Take any action that is intended or expected to result in any of
its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time prior to the Effective
Time, or in any of the conditions to the Merger set forth in Article VII
not being satisfied or in a violation of any provision of this Agreement,
except, in every case, as may be required by applicable law;
(o) Implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP or regulatory
guidelines; or
(p) Agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the actions
prohibited by this Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGULATORY MATTERS.
(a) If determined necessary, CDXX and PENSAT shall promptly prepare
a joint proxy statement and CDXX shall promptly file with the SEC the
joint proxy statement and any other required documents. After the
expiration of any preliminary filing period, CDXX and PENSAT shall
thereafter mail or deliver the joint proxy statement to their respective
stockholders. CDXX shall also use its reasonable best efforts to obtain
all necessary state securities law or "Blue Sky" permits and approvals
required to carry out the transactions contemplated by this Agreement, and
PENSAT shall furnish all information concerning PENSAT and the holders of
PENSAT Capital Stock as may be reasonably requested in connection with any
such action.
29
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings,
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, the Merger), and to comply with
the terms and conditions of all such permits, consents, approvals and
authorizations of all such Governmental Entities. CDXX and PENSAT shall
have the right to review in advance, and, to the extent practicable, each
will consult the other on, in each case subject to applicable laws
relating to the exchange of information, all the information relating to
PENSAT or CDXX, as the case may be, and any of their respective
Subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection
with the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other apprised
of the status of matters relating to completion of the transactions
contemplated herein.
(c) CDXX and PENSAT shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Joint Proxy Statement, or any other
statement, filing, notice or application made by or on behalf of CDXX,
PENSAT or any of their respective Subsidiaries to any Governmental Entity
in connection with the Merger and the other transactions contemplated by
this Agreement.
(d) CDXX and PENSAT shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval
is required for consummation of the transactions contemplated by this
Agreement that causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval will not be obtained or
that the receipt of any such approval will be materially delayed.
6.2 ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws relating
to the exchange of information, each of CDXX and PENSAT, for the purposes
of verifying the representations and warranties of the other and preparing
for the Merger and the other matters contemplated by this Agreement,
shall, and shall cause each of their respective Subsidiaries to, afford to
the officers, employees, accountants, counsel and other representatives of
the other party, access, during normal business hours during the period
prior to the Effective Time, to all its properties, books, contracts,
commitments and records, and, during such period, each of CDXX and PENSAT
shall, and shall cause their respective Subsidiaries to, make available to
the other party (i) a copy of each report, schedule, registration
statement and other document filed or received by it during such period
pursuant to the requirements of federal securities laws or federal or
state telecommunications companying laws (other than reports or documents
which CDXX or PENSAT, as the case may be, is not permitted to disclose
under applicable law) and (ii) all other information concerning its
business, properties and personnel as such party may reasonably request.
Neither CDXX nor PENSAT nor any of their respective Subsidiaries shall be
required to provide access to or to disclose information where such access
or disclosure would violate or prejudice the rights of CDXX's or PENSAT's,
as the case may be, customers, jeopardize the attorney-client privilege of
the institution in possession or control of such information or contravene
any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this Agreement. The
parties hereto will make appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentence
apply.
30
(b) Each of CDXX and PENSAT shall hold all information furnished by
or on behalf of the other party or any of such party's Subsidiaries or
representatives pursuant to Section 6.2(a) in confidence to the extent
required by, and in accordance with, the provisions of the confidentiality
agreement attached hereto as Exhibit 6.2(b), and incorporated herein, (the
"Confidentiality Agreement").
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the
other set forth herein.
(d) Promptly upon receipt of PENSAT's audited financial statements
for fiscal 1999, PENSAT will deliver copies of such financial statements
to CDXX.
6.3 STOCKHOLDERS' APPROVALS. Each of CDXX and PENSAT shall call a meeting
of its stockholders to be held as soon as reasonably practicable for the purpose
of voting upon the requisite stockholder approvals required in connection with
this Agreement and the Merger (including approval of the Amendment by the
stockholders of CDXX), and each shall use its reasonable best efforts to cause
such meetings to occur as soon as reasonably practicable and on the same date.
The Board of Directors of each of PENSAT and CDXX shall use its reasonable best
efforts to obtain from the stockholders of PENSAT and CDXX, as the case may be,
the vote in favor of the Amendment, in the case of CDXX, and the votes in favor
of the adoption of this Agreement required by Delaware Law, in the case of
PENSAT, in each case to consummate the transactions contemplated hereby.
6.4 LEGAL CONDITIONS TO MERGER. Each of CDXX and PENSAT shall, and shall
cause its Subsidiaries to, use their reasonable best efforts (a) to take, or
cause to be taken, all actions necessary, proper or advisable to comply promptly
with all legal requirements that may be imposed on such party or its
Subsidiaries with respect to the Merger and, subject to the conditions set forth
in Article VII hereof, to consummate the transactions contemplated by this
Agreement, and (b) to obtain (and to cooperate with the other party to obtain)
any material consent, authorization, order or approval of, or any exemption by,
any Governmental Entity and any other third party that is required to be
obtained by PENSAT or CDXX or any of their respective Subsidiaries in connection
with the Merger and the other transactions contemplated by this Agreement.
6.5 AFFILIATES; PUBLICATION OF COMBINED FINANCIAL RESULTS. The Surviving
Corporation shall use its best efforts to publish as promptly as reasonably
practical, but in no event later than 90 days after the end of the first month
after the Effective Time in which there are at least 30 days of post-Merger
combined operations (which month may be the month in which the Effective Time
occurs), combined sales and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
6.6 EMPLOYEE BENEFIT PLANS.
(a) From and after the Effective Time, unless otherwise mutually
determined, the PENSAT Benefit Plans and CDXX Benefit Plans in effect as of
the date of this Agreement shall remain in effect with respect to employees
of PENSAT and CDXX (and their respective Subsidiaries), respectively,
covered by such plans at the Effective Time until such time as the
Surviving Corporation shall, subject to applicable law, the terms of this
Agreement and the terms of such plans, adopt new benefit plans with respect
to employees of the Surviving Corporation and its Subsidiaries (the "New
Benefit Plans"). Prior to the Closing Date, PENSAT and CDXX shall cooperate
in reviewing, evaluating and analyzing the CDXX Benefit Plans and PENSAT
Benefit Plans with a view towards developing appropriate New Benefit Plans
for the employees covered thereby.
(b) The foregoing notwithstanding, the Surviving Corporation agrees to
honor in accordance with their terms all Benefits vested as of the date
hereof under the CDXX Benefit Plans or under other contracts, arrangements,
commitments, or understandings from PENSAT or PENSAT subsidiaries.
31
(c) Nothing in this Section 6.7 shall be interpreted as preventing
the Surviving Corporation from amending, modifying or terminating any CDXX
Benefit Plans, PENSAT Benefit Plans, or other contracts, arrangements,
commitments or understandings, in accordance with their terms and
applicable law.
6.7 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) 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 individual who is now, or has been at any time
prior to the date of this Agreement, or who becomes prior to the Effective
Time, a director or officer or employee of PENSAT or any of its
Subsidiaries or CDXX (the "Indemnified Parties"), is, or is threatened to
be, made a party based in whole or in part on, or arising in whole or in
part out of, or pertaining to (i) the fact that he is or was a director,
officer or employee of PENSAT or any of its Subsidiaries or (ii) this
Agreement, or any of the transactions contemplated hereby or thereby,
whether in any case asserted or arising before or after the Effective Time,
the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that after the
Effective Time, CDXX and PENSAT mutually shall indemnify and hold harmless,
as and to the fullest extent permitted by law, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses
(including reasonable attorney's fees and expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of
any undertaking required by applicable law), judgments, fines and amounts
paid in settlement in connection with any such threatened or actual claim,
action, suit, proceeding or investigation.
(b) At the request of Pensat, CDXX shall use its reasonable best
efforts to cause the individuals serving as officers and directors of
PENSAT or any of its Subsidiaries immediately prior to the Effective Time
to be covered for a period of six (6) years from the Effective Time (or the
period of the applicable statute of limitations, if longer) by a directors'
and officers' liability insurance policy maintained by CDXX with respect to
acts or omissions occurring prior to the Effective Time which were
committed by such officers and directors in their capacity as such.
(c) In the event CDXX or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of CDXX assume the obligations set forth in this Section 6.8.
(d) The provisions of this Section 6.8 shall survive the Effective
Time and are intended to be for the Benefit of, and shall be enforceable
by, each Indemnified Party and his or her heirs and representatives.
6.8 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
CDXX, on the one hand, and a Subsidiary of PENSAT, on the other) or to vest the
Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of any of the parties to the Merger, the
proper officers and directors of each party to this Agreement and their
respective Subsidiaries shall take all such necessary action as may be
reasonably requested by, and at the sole expense of, CDXX.
6.9 ADVICE OF CHANGES. CDXX and PENSAT shall each promptly advise the other
party of any change or event (i) having a Material Adverse Effect on it or (ii)
which it believes would or would be reasonably likely to cause or constitute a
material breach of any of its representations, warranties or covenants contained
herein.
32
6.10 DIVIDENDS. After the date of this Agreement, each of CDXX and PENSAT shall
not declare dividends on any stock, other than with respect to PENSAT, dividends
on its preferred stock in the normal course of business, consistent with past
practices.
6.11 RESTRUCTURING EFFORTS. If either PENSAT or CDXX shall have failed to obtain
the requisite vote or votes of its shareholders for the consummation of the
transactions contemplated by this Agreement at a duly held meeting of its
shareholders or at any adjournment or postponement thereof, each of the parties
shall in good faith use its reasonable best efforts to negotiate a restructuring
of the transaction provided for herein for the purpose of resubmitting the
transaction to their respective shareholders for approval.
6.12 EXECUTIVE OFFICERS, SUCCESSION. Immediately after the Effective Time, the
individuals named on Exhibit 6.13(a) will hold the offices named and the Board
of Directors will be as stated on Exhibit 6.13(b).
If any of such persons is unable or unwilling to hold the offices set
forth on Exhibit 6.13 (a) or 6.13(b), his successor shall be selected by the
Board of Directors of CDXX in the manner set forth in the bylaws of the
Surviving Corporation.
6.13 BOARD OF DIRECTORS AND COMMITTEES
(a) Immediately after execution of this Agreement and Plan of Merger,
the total number of persons serving on the Board of Directors of CDXX shall
be seven (7), (1) shall be appointed by CDXX directors and six (6) of whom
shall be PENSAT Directors (as such terms are defined below). The one (1)
person to serve initially on the Board of Directors of CDXX as of the
Effective Time who is a CDXX appointed Director shall be selected by the
Board of Directors of CDXX prior to the Effective Time; and the six (6)
persons to serve on the Board of Directors of CDXX as of the Effective Time
who are PENSAT appointed Directors shall be selected by the Board of
Directors of PENSAT prior to the Effective Time. In the event that, prior
to the Effective Time, any person so selected to serve on the Board of
Directors of CDXX after the Effective Time is unable or unwilling to serve
in such position, the Board of Directors which selected such person shall
designate another of its members to serve in such person's stead in
accordance with the provisions of the immediately preceding sentence. Prior
to the Effective Time, CDXX shall cause its Board of Directors to approve
and adopt resolutions effecting the Board composition contemplated by this
Section 6.13. I'm not sure what that last language means.
(b) The term "CDXX Director" means (i) any person serving as a
Director of CDXX on the date of this Agreement who continues as a Director
of CDXX at the Effective Time and (ii) any person who becomes a Director
of CDXX and who is designated as such by the CDXX Directors prior to his
or her election; and the term "PENSAT Director" means (i) any person
serving as a Director of PENSAT on the date of this Agreement who becomes
a Director of CDXX at the Effective Time and (ii) any person who becomes a
Director of CDXX and who is designated as such by the PENSAT Directors
prior to his or her election.
33
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of the parties to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. The Amendment shall have been adopted by
the requisite affirmative vote of the holders of CDXX Common Stock
entitled to vote thereon, and this Agreement shall have been adopted by
the requisite affirmative votes of the holders of PENSAT Common Stock
entitled to vote thereon.
(b) Bulletin Board Listing. The CDXX Common Stock shall have been
authorized for quotation on the Over the Counter Bulletin Board.
(c) Merger. The Merger shall have become effective under applicable
state law.
(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the other transactions contemplated by
this Agreement shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits, materially restricts
or makes illegal consummation of the Merger.
(e) FEDERAL TAX TREATMENT. The parties hereto shall have independently
determined, in a manner satisfactory to CDXX and PENSAT, as the case may
be, that, on the basis of the state of facts existing at the Effective
Time, the Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code.
(f) REVERSE MERGER. CDXX and PENSAT shall each have received an
informal determination from their respective independent accountants as the
case may be, to the effect that the Merger will qualify for "Reverse
Merger" accounting treatment.
7.2 CONDITIONS TO OBLIGATIONS OF CDXX. The obligation of CDXX to effect the
Merger is also subject to the satisfaction, or waiver by CDXX, at or prior to
the Effective Time, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
PENSAT set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date; PROVIDED, HOWEVER, that for
purposes of this paragraph, such representations and warranties (other than the
representation set forth in the last sentence of Section 3.2(a)) shall be deemed
to be true and correct unless the failure or failures of such representations
and warranties to be so true and correct, either individually or in the
aggregate, and without giving effect to any qualification as to materiality or
Material Adverse Effect set forth in such representations or warranties, will
have a Material Adverse Effect on PENSAT or the Surviving Corporation.
(b) PERFORMANCE OF OBLIGATIONS OF PENSAT. PENSAT shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) APPRAISAL RIGHTS. Holders of not more than 20% of the outstanding
PENSAT Capital Stock shall have demanded appraisal rights under Delaware law.
34
7.3 CONDITIONS TO OBLIGATIONS OF PENSAT. The obligation of PENSAT to effect
the Merger is also subject to the satisfaction or waiver by PENSAT at or prior
to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
CDXX set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, PROVIDED, HOWEVER, that for
purposes of this paragraph, such representations and warranties (other than the
representation set forth in the last sentence of Section 4.2(a) shall be deemed
to be true and correct unless the failure or failures of such representations
and warranties to be so true and correct, either individually or in the
aggregate, and without giving effect to any qualification as to materiality or
Material Adverse Effect set forth in such representations or warranties, will
have a Material Adverse Effect on CDXX.
(b) PERFORMANCE OF OBLIGATIONS OF CDXX. CDXX shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) ARTICLES AMENDMENT/BOARD RESOLUTIONS. CDXX shall have taken all such
actions as shall be necessary so that (i) the Articles Amendment shall have been
adopted by the Board of Directors and the stockholders of CDXX effective not
later than the Effective Time and (ii) the resolutions contemplated by Section
6.14 of this Agreement shall have been adopted by the Board of Directors of CDXX
effective not later than the Effective Time.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of CDXX or PENSAT:
(a) By mutual consent of CDXX and PENSAT in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of
the members of its entire Board;
(b) By either the Board of Directors of CDXX or the Board of
Directors of PENSAT if any Governmental Entity that must grant a Requisite
Regulatory Approval has denied approval of the Merger and such denial has
become final and nonappealable, or any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order permanently
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) By either the Board of Directors of CDXX or the Board of
Directors of PENSAT if the Merger shall not have been consummated on or
before 45 days after the date of this Agreement, unless the failure of the
Closing to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein;
(d) By either the Board of Directors of CDXX or the Board of
Directors of PENSAT (provided that the terminating party is not then in
breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a breach of any of the
covenants or agreements or and of the representations or warranties set
forth in this Agreement on the part of PENSAT, in the case of a
termination by CDXX, or CDXX, in the case of a termination by PENSAT,
which breach, either individually or in the aggregate, would constitute,
if occurring or continuing on the Closing Date, the failure of the
conditions set forth in Section 7.2 or 7.3, as the case may be, and which
is not cured within 5 days following written notice to the party
committing such breach or by its nature or timing cannot be cured prior to
the Closing Date; or
35
(e) By either PENSAT or CDXX, if its Board of Directors determines
in good faith by a majority vote that the other party has substantially
engaged in bad faith in breach of its obligations under this Agreement.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement by
either CDXX or PENSAT as provided in Section 8.1, this Agreement shall forthwith
become void and have no effect, and none of CDXX, PENSAT, any of their
respective Subsidiaries or any of the officers or directors of any of them shall
have any liability of any nature whatsoever hereunder, or in connection with the
transactions contemplated hereby, except that (i) Sections 6.2(b), 8.2, 9.2 and
9.3 shall survive any termination of this Agreement, and (ii) notwithstanding
anything to the contrary contained in this Agreement, neither CDXX nor PENSAT
shall be relieved or released from any liabilities or damages arising out of its
willful breach of any provision of this Agreement.
8.3 AMENDMENT. Subject to compliance with applicable law and Section
1.1(b), this Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with Merger by the stockholders
of CDXX and PENSAT; PROVIDED, HOWEVER, that after any approval of the
transactions contemplated by this Agreement by the respective stockholders of
CDXX or PENSAT, there may not be, without further approval of such stockholders,
any amendment of this Agreement that changes the amount or the form of the
consideration to be delivered hereunder to the holders of PENSAT Common Stock,
other than as contemplated by this Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Board of Directors,
may, to the extent legally allowed, (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) waive compliance with any of the
agreements or conditions contained herein; PROVIDED, HOWEVER, that after any
approval of the transactions contemplated by this Agreement by the respective
stockholders of CDXX or PENSAT, there may not be, without further approval of
such stockholders, any extension or waiver of this Agreement or any portion
thereof which reduces the amount or changes the form of the consideration to be
delivered to the holders of CDXX Common Stock hereunder, other than as
contemplated by this Agreement. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date
and at a place to be specified by the parties, which shall be no later than
three (3) business days after the satisfaction or waiver (subject to applicable
law) of the latest to occur of the conditions set forth in Article VII hereof,
unless extended by mutual agreement of the parties (the "Closing Date").
9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement, shall survive the Effective
Time, except for Section 6.8 and for those other covenants and agreements
contained herein and therein which by their terms apply in whole or in part
after the Effective Time, or to the extent, if any, to which they were
inaccurate as of the Effective Time.
36
9.3 EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense, PROVIDED,
HOWEVER, that the costs and expenses of printing and mailing a
Joint Proxy Statement, if required, and all filing and other
fees paid to the SEC in connection with the Merger, shall be
borne by CDXX.
9.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), mailed by
registered or certified mail (return receipt requested) or
delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to CDXX, to:
▇▇▇▇.▇▇▇ Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇-▇▇▇-▇▇▇▇
(b) if to PENSAT, to:
PENSAT International Communications, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇(▇▇) ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
9.5 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
9.6 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
9.7 ENTIRE AGREEMENT. This Agreement (including the documents and the
instruments referred to herein) together with the Warrant Agreements and the
Confidentiality Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
9.8 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the District of Columbia, without regard to any
applicable conflicts of law principles.
9.9 PUBLICITY. Except as otherwise required by applicable law or the rules
of the Over the Counter Bulletin Board, neither CDXX nor PENSAT shall, or shall
permit any of its Subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to, or otherwise make any
public statement concerning, the transactions contemplated by this Agreement
without the consent of PENSAT, in the case of a proposed announcement or
statement by CDXX, or CDXX, in the case of a proposed announcement or statement
by PENSAT, which consent shall not be unreasonably withheld.
37
9.10 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement
nor any of the rights, interests or obligations shall be
assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the
other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and
assigns. Except as otherwise specifically provided in Section
6.8, this Agreement (including the documents and instruments
referred to herein) is not intended to confer upon any person
other than the parties hereto any rights or remedies
hereunder.
IN WITNESS WHEREOF, CDXX and PENSAT Corporation have caused this Agreement
to be executed under seal by their respective officers thereunto duly authorized
as of the date first above written.
PENSAT INTERNATIONAL COMMUNICATIONS, INC.
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
CDXX
Name:
Title:
[Agreement and Plan of Merger]
38
EXHIBIT 3.1
CORPORATE ORGANIZATION
Pensat has not paid all of its financial obligations as they have become due.
Included in the unpaid amounts is approximately $85,000.00 related to the
Delaware Franchise Tax for the year ended 1999. Accordingly, Pensat is currently
not in good standing in Delaware at this time. Notwithstanding the foregoing,
PENSAT shall be in good standing prior to the Effective Time.
39
EXHIBIT 3.2a
PENSAT CAPITALIZATION
PREFERRED AND COMMON STOCK,
WARRANTS, OPTIONS AND SUBSCRIPTIONS
ATTACHED
40
EXHIBIT 3.2 b
PENSAT OWNERSHIP INTEREST
IN SUBSIDIARIES
FULL FORMAL NAMES AND OWNERSHIP %
Pensat Communications ME, LLC. Is a Michigan Limited Liability Company in which
Pensat International Communications, Inc. ("Pensat") is both the Managing entity
and sole economic partner. Pensat Communications ME, LLC conducts business in
the Middle East.
Pensat Espana, SA is a Spanish Corporation in which Pensat owns ninety- nine
(99%) percent of the stock of the company. This Company was established to do
all of the marketing for Iberian Network Communication, SA.
Iberian Network Communication, SA ("Iberian") is a Spanish corporation in which
Pensat owns ninety-nine (99%) percent of the stock of the company. Iberian is
Pensat's operating company in Spain and owns licenses to operate as well as owns
network hardware. It is Pensat's intention at this time to merge Pensat Espana,
SA into Iberian.
Pensat do Brasil, LTDA is a Brazilian corporation in which Pensat owns
ninety-nine (99%) percent of the stock of the company. This is a non-operating
company created for the sole purpose of owning the stock of Pensat do Brasil,
the operating company. There is a requirement under Brazilian law that a local
company must own a majority of the stock in an operating telecommunication
company.
PICI, LTDA is the Pensat Brazilian operating company. Pensat do Brasil, LTDA
owns ninety-nine (99%) percent of PICI, LTDA. In Brazil, PICI, LTDA holds
operating licenses in Brazil as well as owns network hardware.
Pensat of New York, LLC. Is a New York Limited Liability Company in which Pensat
was the Managing Partner and owned fifty-one (51%) percent of the economic
interest of the company. Pensat of New York, LLC ceased its operation on March
1, 2000.
WE APPARENTLY DO HAVE A SYRIA OF PENSAT LEGAL ENTITY ACCORDING TO ▇▇▇ WEDNESDAY
NIGHT.
41
EXHIBIT 3.2 C
PENSAT INVESTMENT IN NON-SUBSIDIARY AFFILIATES
NONE
42
EXHIBIT 3.2d
PREEMPTIVE RIGHTS
To the extent any preemptive rights exist currently, all such rights will be
extinguished prior to, or in connection with the Merger, except as follows:
1) As part of a financing transaction with Lucent Technologies, Inc.("Lucent")
Pensat provided a Common Stock Purchase Warrant dated May 28, 1999. The
Warrant provides that for a period of sixty days beginning April 1, 2002,
at Lucent's option Pensat may be required to purchase its Warrants for
sixty-five (65%) of the then fair market trading value of the company. This
option also occurs in the event there is a "Change of Control." This Change
of Control option period is sixty (60) days from the date Lucent receives
notice of the Change of Control..
2) As part of a financing with the ▇▇▇▇ ▇▇▇▇▇▇ investment group, an agreement
has been drafted although it is unexecuted at this time, that provides for
Pensat to repurchase the shares of the Docter investment group common stock
during a period of fifteen (15) days beginning December 31, 2001. This
option is solely that of the Docter group. The purchase price shall be
equal to the original purchase price of the shares plus twenty (20%)
percent. This right to require repurchase shall be extinguished by a
liquidation event in which the group may recover its initial purchase
price. Liquidation event is further defined in the agreement.
43
EXHIBIT 3.8
PENSAT BROKER'S FEES
NONE
44
EXHIBIT "3.9"
PENSAT LEGAL PROCEEDINGS
1) Other than for any issues which may arise relating to this agreement,
there is a potential for legal proceedings or actions related to the
following:
a) Suits related to payment for monies overdue.
2) There currently exits a threatened action for an EECO claim that Pensat
has vehemently denied.
3) The only existing litigation is for monies owed on financial obligations:
a) Suit for payment of an overdue promissory note of the company.
The case is pending in the Supreme Court of Queens County, New
York Index No: 23045/00 captioned ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
International Trade Club, Inc. vs. Pensat International
Communications, Inc. The Company has negotiated for the
adjournment of the proceedings until January 25, 2001.
b) Suit for payment of amounts due to a vendor of the company which
includes a claim for consequential damages. The case is pending
in the Superior Court of Washington, D.C. captioned ▇▇▇▇▇▇▇ vs.
Pensat International Communications, Inc. The Company has entered
into a settlement agreement and expects the lawsuit to be
dismissed within ten (10) days. Litigation has been dismissed.
c) Suit from a former employee for severance payments claimed to be
due.
d) Suit from a former carrier for services rendered under a
telecommunications contract.
45
EXHIBIT 3.11(j)
ACCELERATED VESTING
In connection with this merger, employee options granted under The PENSAT Stock
Option Plan will realize an accelerated vesting. On the Effective Time, 50% of
the remaining balance of any unvested options will vest and the balance of the
unvested options will vest 12 months after the Effective Time.
46
EXHIBIT 3.12 (b)
FIDUCIARY ACCOUNTS
NONE
47
EXHIBIT "4.2b"
CDXX INVESTMENT IN NON-SUBSIDIARY AFFILIATES
NONE
48
EXHIBIT 4. 4
CAPITALIZATION OF CDXX
As of the date hereof, there are 4,888,094 shares of common stock outstanding.
Prior to the Effective Time, CDXX will issue (i) 7,111,906 shares of common
stock pursuant to a Registration Statement on Form S-8, and (ii) 28,000,000
shares of common stock as a stock dividend. There will be a total of 40,000,000
shares of CDXX common stock outstanding immediately prior to the Effective Time.
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EXHIBIT 4. 4 (b)
CDXX INVESTMENT IN NON-SUBSIDIARY AFFILIATES
NONE
50
EXHIBIT 4.8 (b)
PROFORMA PROJECTED BALANCE SHEET
51
EXHIBIT 4.14
BENEFIT & COMPENSATION PLANS
WITH ANY EFFECT ON, OR AFTER, THE EFFECTIVE TIME
NONE
52
EXHIBIT 4. 15
SEC REPORT EXCEPTIONS
Certain annual and quarterly filed were not timely filed, but have now been
filed. The lack of timely filing will not have any adverse impacts on CDXX's
standing with the SEC and eligibility for quotation.
53
EXHIBIT 4.18
COPY OF "SPINOUT" AGREEMENT
Previously Provided to Pensat
54
EXHIBIT 6.13 (a)
OFFICERS OF CDXX AFTER EFFECTIVE TIME
Chairman of the Board - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Treasurer/Chief Financial Officer - L. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Secretary/General Counsel - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
55
EXHIBIT 6.13 (B)
BOARD OF DIRECTORS OF CDXX AFTER EFFECTIVE TIME
1. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Chairman)
2. L. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
3. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
4. ▇▇▇▇ ▇. ▇▇▇▇▇
5. ___________________
6. ___________________
7. ___________________
NOTE: The Board of Directors may appoint other members after the Effective Time.
56