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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
DATED AS OF DECEMBER 12, 1997
AMONG
STM WIRELESS, INC.,
A DELAWARE CORPORATION
TELECOM ACQUISITION CORP.,
A DELAWARE CORPORATION
AND
TELECOM INTERNATIONAL, INC.,
A GEORGIA CORPORATION
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AGREEMENT AND PLAN OF REORGANIZATION AND MERGER (this "Agreement")
is made as of December 12, 1997, among STM Wireless, Inc., a Delaware
corporation ("STM"), Telecom Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of STM ("Merger Sub"), Telecom International, Inc., a
Georgia corporation ("TELECOM"), and ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, INC., AS ▇▇▇ CUSTODIAN FOR ▇▇▇▇▇ ▇. ▇▇▇▇,
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
each of whom is a resident of the state indicated below their respective name
(individually, a "Shareholder" and collectively, the "Shareholders").
R E C I T A L S:
A. STM, Merger Sub, Telecom, and their respective Boards of Directors
deem it advisable to effect a reorganization within the meaning of Sections
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Tax Code"),
pursuant to which Telecom shall be merged with and into Merger Sub in accordance
with the terms and provisions of this Agreement (the "Merger").
B. As a result of the Merger the shareholders of Telecom ("Telecom
Shareholders") will receive shares of Common Stock, $.001 par value, of STM (the
"STM Common Stock") in exchange for the issued and outstanding shares of Common
Stock of Telecom (collectively, the "Telecom Stock"), all as more fully
described in and subject to the specific terms and provisions of this Agreement.
C. This Agreement sets forth the terms and conditions to which the
parties hereto have agreed and further contemplates the consummation of certain
related transactions hereinafter described.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants of the parties hereto, and subject to the terms and
conditions set forth herein, the parties herein agree as follows:
1. DEFINITIONS. Certain terms used in this Agreement are specifically
defined herein. Unless elsewhere defined in this Agreement, these definitions
are set forth or referred to in Section 14 of this Agreement.
2. REORGANIZATION AND MERGER. Subject to the terms and conditions of
this Agreement, the parties hereto agree that, following the Closing (as defined
in Section 3 below), Merger Sub and Telecom shall execute and file the
Certificate of Merger in substantially the form attached hereto as Exhibit A
with the Georgia Secretary of State and the Delaware Secretary of State,
whereupon Telecom shall be merged with and into Merger Sub and Merger Sub shall
be the surviving corporation in such merger. It is intended that for federal tax
purposes the Merger shall constitute a reorganization within the meaning of
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Section 368(a)(2)(D) of the Code. The parties intend that the Merger shall be
accounted for using the pooling-of-interests method.
2.1 SURVIVING CORPORATION. Upon the effectiveness of the
Articles of Merger (hereinafter referred to as the "Effective Time of the
Merger"), Telecom shall be merged with and into Merger Sub and the separate
existence of Telecom shall cease. Merger Sub shall be the corporation surviving
the Merger.
2.2 ARTICLES OF INCORPORATION AND BYLAWS OF MERGER. The
Articles of Incorporation and Bylaws of Merger Sub at and immediately prior to
the Effective Time of the Merger shall continue to be the Articles of
Incorporation and Bylaws of Merger Sub following the Effective Time of the
Merger.
2.3 CONVERSION OF TELECOM STOCK. All of the common stock of
Telecom issued and outstanding immediately prior to the Effective Time of the
Merger (the "Telecom Stock") shall, except as provided in Section 2.10 below, by
virtue of the Merger and without any action on the part of any holder thereof,
be converted into Four Hundred Eighty Thousand (480,000) of shares of STM Common
Stock subject to reduction computed in accordance with Section 2.4 (the "STM
Shares"). As soon as practicable following the date of this Agreement, STM will
use its best efforts to cause to be registered under the Securities Act One
Hundred Thousand (100,000) of the STM Shares (the "Registered Shares"). The
remaining STM Shares shall be "restricted securities" as such term is used in
Rule 144 promulgated under the Securities Act. Each Shareholder receiving STM
Shares shall receive a pro rata share of Registered Shares and unregistered
shares.
2.4 ADJUSTMENT TO CONSIDERATION. As of the Closing, the
Shareholders and Telecom have agreed that Telecom will have a net book value
equal to $750,000 (the "Minimum Book Value"). If and to the extent that the
actual net book value of Telecom is less than the Minimum Book Value there shall
be a reduction in the consideration which shall be reflected by a reduction in
the number of STM Shares held pursuant to the Escrow Agreement, as hereinafter
defined, pursuant to the terms hereof.
2.5 EXCHANGE OF STOCK CERTIFICATES. Immediately following the
Closing, Telecom and STM shall jointly submit to STM's registrar and transfer
agent, U.S. Stock Transfer Corp., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Exchange Agent"), an instruction letter including a list
of the names, addresses and social security numbers/taxpayer identification
numbers of each holder of shares of Telecom Stock outstanding immediately prior
to the Effective Time of the Merger who has delivered the certificate or
certificates representing all Telecom Stock held by such Telecom Shareholder to
STM and for which the holders thereof are not entitled to claim dissenters'
rights under the Georgia Code. As soon as reasonably practicable following the
Effective Time of the Merger, STM shall cause the Exchange Agent to cause each
such Telecom Shareholder to receive, in exchange for the Telecom Stock held by
such Telecom Shareholder, a certificate or certificates representing the number
of whole shares of STM Common Stock into which the shares of Telecom Stock so
surrendered shall have been converted by the Merger (less the shares of STM
Common Stock which are to be held in escrow pursuant to Section 2.12 below) and
the cash payment in lieu of a fractional share of STM Common Stock, if any, to
which such Telecom Shareholder shall be entitled. Subject to any applicable
escheat laws, until so surrendered and exchanged, each certificate which prior
to the Effective Time of the Merger represented outstanding
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shares of Telecom Stock shall be deemed for all corporate purposes of STM, other
than the payment of dividends or other distributions, to evidence the ownership
of the number of whole shares of STM Common Stock into which the shares of
Telecom Stock represented thereby shall have been converted and shall be deemed
to represent, in lieu of a fractional share of STM Common Stock, the right to
receive cash. No cash or stock dividend payable, no certificate representing
split shares deliverable, and no other distribution payable or deliverable to
holders of record of STM Common Stock at any time subsequent to the Effective
Time of the Merger shall be paid or delivered to the Telecom Shareholder of any
certificate which at the Effective Time of the Merger represented Telecom Stock
unless and until such certificate is surrendered to STM. However, subject to any
applicable escheat laws, upon such surrender there shall be paid or delivered to
the initial holder of record of the certificate or certificates for STM Common
Stock issued in exchange therefor, the amount of cash, a certificate
representing the number of shares of STM Common Stock, or the other property
resulting from any such dividends, splits, or other distributions, as the case
may be, which shall have therefore become payable or deliverable with respect to
STM Common Stock subsequent to the Effective Time of the Merger. No interest
shall be payable with respect to such payment or delivery of dividends or other
distributions upon the surrender of certificates which represented Telecom Stock
at the Effective Time of the Merger.
2.6 FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of STM Common Stock shall be issued upon surrender of
certificates of Telecom Stock converted in connection with the Merger, and no
dividend, stock split, or other distribution of STM shall relate to any such
fractional share interest, and no such fractional share interest will entitle
the owner thereof to vote or to any other rights of a stockholder of STM. In
lieu of any such fractional share, each Telecom Shareholder shall be entitled,
upon surrender of such Telecom Shareholder 's certificate or certificates
representing Telecom Stock, to receive a cash payment therefor, without
interest, at a pro rata amount based on the closing price per share of STM
Common Stock on the NASDAQ/NMS on the trading day immediately preceding the
Effective Date of the Merger. No interest shall accrue with respect to any cash
held for the benefit of Telecom Shareholders of unsurrendered certificates
representing shares of Telecom Stock.
2.7 TELECOM EMPLOYEE OPTIONS. No provision shall be made with
respect options outstanding under the Telecom [Employee Stock Option] Plan (the
"Plan") in connection with the Merger. Telecom shall provide any notice to
holders of options under the Plan who shall have the opportunity to exercise all
vested options prior to the Effective Time. The Plan and, to the extent that
outstanding options are not exercised prior to the Effective Time, all
outstanding options under the Plan shall be terminated at the Effective Time.
2.8 UNREGISTERED SECURITIES. The STM Shares to be issued to
Shareholders in the Merger, other than the Registered Shares, will not be
registered under the Securities Act of 1933, as amended (the "Act"), or under
the laws of any other jurisdiction. The Shareholders may not sell, transfer,
pledge or otherwise dispose of the STM Shares except in compliance with (i) the
provisions of the Registration Rights Agreement, a copy of which attached as
Exhibit C or (ii) in complance with Rule 144 under the Act.
2.9 TRANSFER BOOKS. The stock transfer books of Telecom
pertaining to Telecom Stock outstanding at the Effective Time of the Merger
shall be closed at the Effective Time of the Merger, and thereafter no transfer
of any such shares of Telecom Stock shall be recorded thereon. In
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the event a transfer of ownership of shares of Telecom Stock is not recorded on
the stock transfer books of Telecom, a certificate or certificates representing
the number of whole shares of STM Common Stock into which such shares of Telecom
Stock shall have been converted in connection with the Merger may be issued to
the transferee of such shares of Telecom Stock if the certificate or
certificates representing such shares of Telecom Stock is or are surrendered to
the Exchange Agent accompanied by all documents deemed necessary by the Exchange
Agent to evidence and effect such transfer of ownership of shares of Telecom
Stock and accompanied by the payment of any applicable stock transfer tax with
respect to such transfer.
2.10 TELECOM DISSENTING SHARES. Notwithstanding any provision
of this Agreement to the contrary, shares of Telecom which are issued and
outstanding immediately prior to the Effective Date and which are held by
Telecom Shareholders who have timely filed with Telecom a written objection to
the merger (the "Dissenting Shares") shall not be converted into, or represent a
right to receive STM Common Stock pursuant to Section 2.3 herein, but the holder
thereof shall be entitled only to such rights as are granted by Article 13 of
the Georgia Business Corporations Code (O.C.G.A. Section 14-2-1301 et seq.) Each
holder of the Dissenting Shares who becomes entitled to payment for such shares
pursuant to the foregoing statutory provision shall receive payment for their
shares from Telecom in accordance with such statutory provisions. If such holder
shall have failed to perfect, or shall have effectively withdrawn or lost his
right of appraisal and payment for his shares under such statutory provisions,
each such share shall be converted into STM Common Stock pursuant to Section 2.3
herein. Any amounts paid with respect to Dissenting Shares shall be deemed paid
immediately prior to the Closing shall reduce ratably (i) the amount of
unregistered STM Shares to be delivered to the Shareholders and (ii) the net
book value set forth in Section 2.4 herein.
2.11 FURTHER ASSURANCES. Telecom agrees that if, at any time
after the Effective Time of the Merger, STM considers or is advised that any
further deeds, assignments or assurances are reasonably necessary or desirable
to be obtained from Telecom or its officers or directors, to consummate the
Merger or to carry out the purposes of this Agreement at or after the Effective
Time of the Merger, then STM, Telecom and their respective officers and
directors may execute and deliver all such proper deeds, assignments and
assurances and do all other things necessary or desirable to consummate the
Merger and to carry out the purposes of this Agreement, in the name of Telecom
or otherwise.
2.12 ESCROW AGREEMENT. Pursuant to an Escrow Agreeement to be
entered into on or before the Closing (as defined in Section 3 below) in
substantially the form of Exhibit B (the "Escrow Agreement"), among STM, the
Escrow Agent and the Telecom Shareholders (as those terms are defined in the
Escrow Agreement), STM will withhold, pro rata, from the shares of STM Common
Stock that would otherwise be delivered to holders of Telecom Stock in the
Merger, ten percent (10%) of the shares of STM Common Stock issued in the Merger
upon the conversion of outstanding Telecom Stock, all of which shall be
unregistered shares (the "Escrow Shares") (the withholding of shares of STM
Common Stock pursuant to this subparagraph (a) will be allocated among the
holders of the shares of Telecom Stock that are outstanding immediately prior to
the Effective Time of the Merger, pro rata according to the number of
outstanding shares of Telecom Stock held by each such holder immediately prior
to the Effective Time of the Merger).
STM will deposit in an escrow pursuant to the Escrow Agreement
(the "Escrow") stock certificates representing the Escrow Shares and related
stock powers. The Escrow Shares and
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such stock powers, and any other property with respect thereto delivered to the
Escrow Agent as provided in the Escrow Agreement will be held as collateral to
secure the indemnification obligations of the Telecom Shareholders under Section
12 hereof in accordance with the Escrow Agreement.
3. THE CLOSING. The delivery of the various opinions, certificates,
consents, instruments and documents which this Agreement contemplates (the
"Closing") shall take place at the offices of Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ on December 16,
1997, or such other day and time as shall be mutually agreed upon by STM and
Telecom, but in no event later than January 31, 1998. The date of, and the time
at which, the Closing takes place is herein referred to as the "Closing Date."
As soon as practicable after the Closing, the appropriate officers of STM,
Merger Sub and Telecom shall take all necessary action to bring about the
Effective Time of Merger.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. The
Shareholders, jointly and severally, make the representations and warranties set
forth below as of the date of this Agreement and as of the date of the Closing.
Except as otherwise provided to the contrary, each Shareholder make the
representations and warranties without qualification as to knowledge. When a
representation or warranty is made "to the best knowledge of" Telecom, such
knowledge shall be deemed to include, without limitation, the actual knowledge
of ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇.
4.1 ORGANIZATION AND EXISTENCE OF TELECOM. Telecom is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia and has all requisite corporate power to carry on its
business as now conducted and as proposed to be conducted and to enter into and,
subject to shareholder approval, perform its obligations under this Agreement
and the other agreements contemplated hereby to which it is as party. Except as
set forth on Schedule 4.1, and to the best knowledge of Telecom, Telecom is
qualified to do business as a foreign corporation and is in good standing in
every jurisdiction in which the character or location of the assets owned by it
or the nature of the business transacted by it requires such qualification where
the failure to so qualify would have a Material Adverse Effect. Telecom has
delivered to STM, or will deliver at the Closing, true and complete copies of
(a) the Articles of Incorporation (duly certified by the Georgia Secretary of
State), (b) the Bylaws (certified by the Secretary of Telecom), and (c) the
Minute and Stock Books of Telecom (certified by the Secretary of Telecom).
4.2 AUTHORITY AND BINDING EFFECT. Each Shareholder represents
and warrants solely as to himself or herself that he or she has the full legal
right and capacity to execute and deliver this Agreement and each agreement
referenced herein to which he or she is a party and to consummate the
transactions contemplated by, and comply with his or her obligations under, such
agreements. Telecom has the full corporate power and authority to execute and
deliver this Agreement and each agreement referenced herein to which it is a
party and to consummate the transactions contemplated by, and comply with its
obligations under, such agreements. This Agreement and each agreement referenced
herein to which Telecom is a party, and the consummation by Telecom of its
obligations herein and therein, have been duly authorized by all necessary
corporate action of Telecom, other than the approval of its shareholders in
accordance with applicable law. This Agreement has been, and at the Closing each
agreement referenced herein will be, duly executed and delivered by Telecom and,
to the extent he or she is a party thereto, the Shareholders. This Agreement is,
and when duly executed and delivered at the Closing each agreement referenced
herein will be, the valid and binding agreement
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of Telecom and/or the Shareholders, as the case may be, enforceable against
Telecom and/or the Shareholders, as the case may be, in accordance with their
respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights generally and (ii) general principles of equity relating to the
availability of equitable remedies. No further action is required to be taken by
Telecom, or the Shareholders, nor is it necessary to obtain any action, approval
or consent by or from any third persons, governmental or other, to enable each
of the such parties to enter into or perform their respective obligations under
this Agreement and each agreement referenced herein to which it is a party,
except for the consents of third parties to the Merger, as required by the
Contracts, which shall be obtained by Telecom on or before the Closing (unless
waived in writing by STM). Such consents are set forth in Schedule 4.2 hereto.
4.3 AUTHORIZED CAPITAL STOCK OF TELECOM. As of the date
hereof, the authorized capital stock of Telecom consists of 10,000,000 shares of
Common Stock, no par value, of which 1,078,100 shares of Common Stock are
validly issued and outstanding, fully paid and nonassessable and not issued in
violation of the preemptive rights of any person. All of the outstanding shares
of Preferred Stock and Common Stock of Telecom have been issued in transactions
which were either exempt from registration under the Securities Act of 1933,
(the "Securities Act") as amended, and all applicable state securities laws and
blue sky acts. All shares of Telecom Stock which have been reacquired by Telecom
have reverted to the status of authorized but unissued shares and are no longer
outstanding. Schedule 4.3 hereto contains a true, correct and complete list of
any outstanding convertible securities, subscriptions, options, warrants,
preemptive rights or other agreements or commitments obligating Telecom to issue
shares of Telecom Stock or relating to the transfer or registration of Telecom
Stock, none of which have been issued in violation of applicable securities laws
or the preemptive rights of any person.
4.4 NO SUBSIDIARIES. Telecom has no subsidiaries or equity
investments in any person.
4.5 TELECOM FINANCIAL STATEMENTS. Telecom has delivered to STM
(a) the balance sheets of Telecom at December 31, 1996, and the related
statements of income and shareholders' equity of Telecom for each of the fiscal
year then ended, together with the related notes thereto, in each case as
reviewed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, (b) the unaudited balance sheet of Telecom at
December 31, 1995 and the related unaudited statements of income and
shareholders' equity of Telecom for the fiscal year then ended, and (c) the
unaudited balance sheet of Telecom (hereinafter referred to as the "Telecom
Balance Sheet") at September 30, 1997 (hereinafter referred to as the "Balance
Sheet Date"), and the related unaudited statements of income and shareholders'
equity of Telecom for the nine-month period then ended which have been prepared
by management (the financial statements referenced in clauses (a), (b) and (c)
above are collectively referred to herein as the "Financial Statements"). Such
Financial Statements are in accordance with the books of account and records of
Telecom, and present fairly in all material respects the financial position of
Telecom at the dates indicated and the results of its operations and the changes
in its financial position for the periods then ended, in accordance with
generally accepted accounting principles ("GAAP") consistently applied except
the omission of footnote disclosure with respect to the financial statements
referenced in clause (c) above.
4.6 LEASES, TITLE TO PROPERTIES, ETC. Telecom owns no real
property. Attached hereto as Schedule 4.6 is a general description of each
parcel of real property leased by Telecom.
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Schedule 4.6 hereto also describes each lease agreement under which Telecom has
any leasehold interest in any real property. Telecom is in possession of all
such real properties owned or leased by it and described in Schedule 4.6 hereto.
Telecom has good title to all properties and assets owned by it, including those
reflected in the Telecom Balance Sheet (other than properties and assets
reflected in the Telecom Balance Sheet which have since been sold or otherwise
disposed of in the Ordinary Course of Business) and those described in Schedule
4.6 hereto free and clear of all liens, mortgages, security interests and
encumbrances, including any conditional sale or other title retention agreement
(collectively, "Liens"), except:
(a) liens for taxes not yet due and payable;
(b) statutory liens in immaterial amounts which are not
yet delinquent;
(c) minor defects and irregularities in title or
encumbrances which do not impair the use thereof for the purposes for which they
are held; and
(d) as set forth in the Telecom Balance Sheet or in
Schedule 4.6 hereto.
The leases set forth in Schedule 4.6 hereto are in full force and
effect and there is no existing default of a material nature under any of such
leases on the part of Telecom or, to the best knowledge of Telecom, the other
party thereunder. Such leases consist only of documents described in Schedule
4.6 hereto, true and complete copies of which have been provided by Telecom to
STM. The buildings and items of equipment and machinery reflected on the Telecom
Balance Sheet having an original equipment cost of at least Two Thousand Five
Hundred Dollars ($2,500) are generally in such operating condition and repair,
ordinary wear and tear excepted, as is adequate for the conduct of Telecom's
business.
4.7 ABSENCE OF CERTAIN EVENTS. Except as set forth in Schedule
4.7 attached hereto, since September 30, 1997, Telecom has not:
(a) made any changes in its authorized capital or
outstanding securities;
(b) issued, sold, delivered or agreed to issue, sell or
deliver any of its capital stock, bonds or other corporate securities, pursuant
to existing employee stock options, or granted or agreed to grant any options,
warrants or other rights calling for the issuance, sale or delivery thereof;
(c) borrowed or agreed to borrow any funds or incurred,
or become subject to, any obligations or liability (absolute or contingent),
except obligations and liabilities incurred in the Ordinary Course of Business;
(d) paid any obligations or liability (absolute or
contingent) other than current liabilities reflected in or shown on the Telecom
Balance Sheet and current liabilities incurred since the Balance Sheet Date in
the Ordinary Course of Business;
(e) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kinds whatsoever in
respect of its capital stock, or
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purchased, redeemed or otherwise acquired, or agreed to purchase, redeem or
otherwise acquire, any of its outstanding capital stock;
(f) except in the Ordinary Course of Business, sold,
transferred, or otherwise disposed of, or agreed to sell, transfer, or otherwise
dispose of, any of its assets, properties, or rights, or canceled or otherwise
terminated, or agreed to cancel or otherwise terminate, any debts or claims;
(g) except in the Ordinary Course of Business, entered or
agreed to enter into any agreement or arrangement granting any preferential
right to purchase any of its assets, properties, or rights, or requiring the
consent of any party to the transfer and assignment of any such assets,
properties, or rights;
(h) waived any rights of value, without consideration
therefor, which in the aggregate would have a Material Adverse Effect on
Telecom;
(i) made or permitted any amendment or termination of any
non-trade contract, agreement, or license to which it is a party or to which it
or any of its assets or properties are subject;
(j) made, directly or indirectly, any accrual or
arrangement for or payment of bonuses or special compensation of any kind or any
severance or termination to pay any of its present or former officers,
directors, or employees;
(k) increased or agreed to increase the rate of
compensation payable or to become payable by it to any of its officers,
directors, or employees (other than those made in connection with regularly
scheduled employee reviews and which are in amounts and on terms consistent with
prior practice) or adopted any new, or made any increase in, any existing,
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan, payment or arrangement made to, for,
or with any of such officers, directors, or employees;
(l) made any capital expenditures (or commitments
therefor) in excess of $10,000 individually or in the aggregate;
(m) entered into any other material transaction other
than in the Ordinary Course of Business;
(n) experienced any labor trouble or been informed of the
loss or potential loss of any management or technical personnel which has, or
can be anticipated to have, a Material Adverse Effect;
(o) been cited for any material violations of the federal
Occupational Safety Health Act of 1970 or any rules or regulations promulgated
thereunder or any other act, rules or regulations of any other governmental
agency;
(p) suffered any damages, destruction or losses which in
the aggregate are material to Telecom's business, or incurred or become subject
to any material claim or liability for any
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damages or alleged damages for any actual or alleged negligence or other tort
or breach of contract which are in the aggregate material to Telecom's business;
(q) failed to operate the business of Telecom in the
ordinary course so as to use reasonable efforts to preserve the business intact,
to keep available to STM the services of Telecom's employees, and to preserve
for STM the goodwill of Telecom's suppliers, customers and others having
business relations with it except where such failure would not have a Material
Adverse Effect;
(r) changed its accounting methods or practices by
Telecom materially adversely affecting its assets, liabilities or business; or
(s) experienced any change in Telecom's condition
(financial or otherwise), assets, liabilities, working capital, reserves,
earnings, business or prospects, except for changes contemplated hereby or
changes which have not, individually or in the aggregate, been materially
adverse.
4.8 INDEBTEDNESS. The Telecom Balance Sheet reflects all
indebtedness for borrowed money owed by Telecom or to which any of its assets or
properties are subject as of the date thereof and which is required to be
reflected by GAAP therein. A complete and correct copy of each note, loan,
credit or other similar instrument pursuant to which any such indebtedness for
borrowed money was incurred has been delivered to STM.
4.9 GUARANTIES AND SURETYSHIP. Telecom is not a party to or
bound by any guaranties, matters of suretyship, or other similar instruments.
4.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
set forth or reflected or reserved against in the Telecom Balance Sheet or in
Schedule 4.10, Telecom does not have any debts, obligations, liabilities or
commitments of any nature, whether due or to become due, absolute, contingent or
otherwise, that, in accordance with GAAP, are required to be disclosed on the
face of a balance sheet, and are not shown on the Telecom Balance Sheet
delivered pursuant hereto, other than liabilities incurred after the Balance
Sheet Date in the Ordinary Course of Business and consistent with past practice.
Such post-Balance Sheet Date liabilities are not material in amount and have not
had and are not expected to have, individually or in the aggregate, a Material
Adverse Effect. As to each liability, debt, obligation or commitment, fixed or
contingent, that is set forth on Schedule 4.10, Telecom shall provide the
following information, in writing as an attachment to such Schedule: (i) a
summary description of the liability, debt, obligation or commitment, together
with copies of all relevant documentation relating thereto, the amounts claimed
and any other action or relief sought and, if in connection with a claim, suit
or proceeding, the name of the claimant and all other parties involved therewith
and the identity of the court or agency in which such claim, suit or proceeding
is being prosecuted, and (ii) the best estimate of Telecom of the maximum
amount, if any, which is likely to become payable with respect to any contingent
liability.
4.11 TAXES AND TAX RETURNS.
(a) Except as set forth on Schedule 4.11:
(i) Telecom has duly filed all Tax Returns (as hereinafter defined) which are
required by law to be filed by it on or prior to the date hereof; (ii) Telecom
has duly paid all Taxes (as hereafter defined) due or claimed to be due from it
with
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respect to all taxable periods or portions of periods ended on or before the
date hereof (whether or not shown on any Tax Return), and there are no
assessments or claims for payment of Taxes now pending or, to the best knowledge
of Telecom , threatened, nor any audit of the records of Telecom being made or
threatened by any taxing authority for any such periods or portions thereof; and
(iii) to the knowledge of Telecom, there are no facts or circumstances which
could reasonably be expected to constitute a basis for assessments or claims for
the payment of additional Taxes. The amounts set up as provisions for Taxes, if
any, on the most recent balance sheet included in the Financial Statements are
sufficient for the payment of all unpaid Taxes of Telecom, accrued for or
applicable to the periods ended on such date and all years and periods prior
thereto and for which Telecom, at those dates, was liable. True and correct
copies of Telecom's tax returns filed since its inception have been delivered to
STM. Telecom has properly withheld and paid, or accrued for payment, when due,
to appropriate state and/or federal authorities, all sales and use taxes, if
any, and all amounts required to be withheld from payments made to its
employees, independent contractors, creditors, shareholders, or other third
parties and has also paid all employment taxes as required under applicable
laws.
(b) Telecom has not waived any statute of
limitation in respect of any Taxes or assessments by any federal, state, county,
local, foreign or other taxing jurisdiction or agreed to any extension of time
with respect to an assessment or deficiency in any Tax. Telecom has not filed a
consent under Section 341(f) of the Tax Code concerning collapsible
corporations.
(c) Telecom has not made any payments, and is
not obligated to make any payments, nor is Telecom a party to any agreement that
under any circumstances could obligate it to make any payments, that would not
be deductible under Section 280G of the Tax Code. Telecom has not been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Tax Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Tax Code. Telecom is not a party to any tax allocation
or tax sharing agreement.
(d) Except as set forth on Schedule 4.11,
Telecom is not, and has never been, required to file a consolidated or combined
state or federal income Tax Return with any other person or entity and is not
liable for the Taxes of any person under Treas. Reg. ss. 1.1502-6 (or any
similar provision of state, local, or foreign law), as transferee or successor,
by contract or otherwise.
(e) For purposes of this Agreement, the term
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Tax Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security, unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not, which is due to any governmental
agency of the United States, or any state or locality situated therein.
(f) For purposes of this Agreement, the term
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
4.12 NOTES AND ACCOUNTS RECEIVABLE; WORK IN PROGRESS. Attached
hereto as Schedule 4.12 are (i) a true and complete list of all accounts and
notes receivable of Telecom, including any accounts or notes receivable not
reflected in the Telecom Balance Sheet and (ii) an aging of all
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such accounts and notes receivable showing amounts due in 30-day aging
categories. All such accounts and notes receivable on such listing arose from,
and all accounts and notes receivable of Telecom created between the date hereof
and the Closing will have arisen from, the provision of services or sale of
products by Telecom in the ordinary course of business. Telecom has not received
any notice and does not know of any counterclaim or set-off with respect to any
such accounts or notes receivable or work in process, or any facts or
circumstances that would be the basis for any such counterclaim or set-off,
which is not reflected or taken into account in the contractual allowance or bad
debt reserves set forth in the Telecom Balance Sheet or accrued in the Ordinary
Course of Business. Except to the extent collected since the Balance Sheet Date,
all notes and accounts receivable or reflected on the Telecom Balance Sheet are,
and all notes and accounts receivable accruing between the Balance Sheet Date
and the Closing Date will be (i) bona fide claims against debtors for sale or
other charges, (ii) subject to no material expenses, set-offs or counterclaims,
and (iii) collected in an amount equal to the net amount thereof as set forth on
the Telecom Balance Sheet (or, in the case of those arising after the Telecom
Balance Sheet Date, less the reasonable reserves provided therefor) within 180
days of the date when due. Set forth on Schedule 4.12 is a true and complete
list of all accounts receivable of Telecom as of the date hereof subject to any
"factoring" or similar arrangement.
4.13 FIXED ASSETS. Schedule 4.13 is a list of all of the fixed
assets used in the Business, other than any fixed asset the replacement cost of
which would be less than $10,000.00 and which is not of material importance to
Telecom's operations. The fixed assets are in good working order and condition,
ordinary wear and tear excepted, have been properly maintained, are suitable for
the uses for which they are being utilized in the Business, do not require more
than regularly scheduled maintenance in the ordinary course, consistent with
Telecom's established maintenance policies, to keep them in good operating
condition and comply with all requirements under applicable laws, regulations
and licenses which govern the use and operation thereof.
4.14 MATERIAL CONTRACTS. Except only as to contracts and
documents listed in Schedule 4.14 hereto or any other Schedule attached to this
Agreement, Telecom is not a party to or bound by, and none of its assets and
properties are subject to, any:
(a) contract not made in the Ordinary Course of
Business;
(b) employment, consulting, or representation
contract;
(c) contract with any labor union or
association;
(d) bonus, pension, profit sharing, retirement,
stock purchase, stock option, hospitalization, insurance or other plan or
agreement providing employee benefits;
(e) lease with respect to any property, real or
personal, whether as lessor or lessee, providing for an annual rental in excess
of $10,000;
(f) continuing contract which involves payments
by Telecom of in excess of $10,000 individually or $50,000 in the aggregate;
(g) contract or commitment for any capital
expenditures exceeding $10,000 individually or in the aggregate; or
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(h) executory contracts for the provision of
services by Telecom exceeding $50,000 in any year.
A complete and correct copy of each contract listed on
Schedule 4.14 hereto or on any other Schedule attached hereto (collectively, the
"Contracts") has been provided to STM, and each such contract is in full force
and effect and Telecom is not, and to the best knowledge of Telecom, no other
party thereto is in default thereunder.
Each of such contracts, agreements, leases, licenses and
instruments so listed, or required to be so listed, in Schedule 4.14 is a valid
and binding obligation of Telecom and, to the best knowledge of Telecom, the
other parties thereto, enforceable in accordance with its terms, except as may
be affected by bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally and general principles of equity relating to the
availability of equitable remedies. Except as otherwise set forth in Schedule
4.14 hereto, there have not been any defaults by Telecom or, to the best
knowledge of Telecom, defaults or any claims of default or claims of
nonenforceability by the other party or parties which, individually or in the
aggregate, would have a Material Adverse Effect on Telecom, and there are no
facts or conditions that have occurred or that are anticipated to occur which,
through the passage of time or the giving of notice, or both, would constitute a
default by Telecom, or to the best knowledge of Telecom, by the other party or
parties, under any of such contracts, agreements, leases, licenses and
instruments or would cause a creation of a lien, security interest or
encumbrance upon any of the assets of Telecom or otherwise have a Material
Adverse Effect on Telecom.
4.15 INTELLECTUAL PROPERTY. Attached hereto as Schedule 4.15
is a true and complete list and description of all patents, patent applications,
patent licenses, copyrights, copyright licenses, trademarks, trademark
applications and trademark licenses, and other trade secrets, know-how or
intellectual property rights (the "Intellectual Property") owned, held, utilized
or applied for by Telecom. Except as set forth on Schedule 4.15, Telecom owns
all Intellectual Property rights that are required for the conduct of its
business as presently conducted, such rights are sufficient for such conduct of
its business as presently conducted, and no royalties, honoraria, fees or other
payments are payable with respect to such Intellectual Property. Except as set
forth in Schedule 4.15 hereto:
(a) Telecom has not infringed, is not now
infringing, and has no knowledge of any infringement or claimed infringement by
Telecom of any patent, patent right, copyright, trademark, trademark right,
trade secret or other intellectual property right of others;
(b) Telecom has no knowledge of any infringement
of the patents, patent rights, copyrights, trademarks, trademark rights, trade
secrets, or other intellectual property rights of, or under license to, Telecom,
nor of pending or threatened opposition proceedings relating to any pending or
contemplated patent or trademark application of Telecom;
(c) Telecom has no knowledge of any threatened
or contemplated cancellation or revocation of any agreement granting to Telecom
any patent, copyright or trademark license or right; or
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(d) in no instance has the eligibility of any
copyright to any material property included in the Intellectual Property been
forfeited to the public domain by omission of any required notice or any other
action.
Telecom has validly and effectively obtained
the right and license to use, copy, modify and distribute any third-party
programming and materials contained in Telecom's software programs and related
technical documentation pursuant to contracts listed on Schedule 4.15. Telecom
has no obligation for royalties, fees, payments or other obligations to any
third party except as expressly set forth in Schedule 4.15.
4.16 INSURANCE. Schedule 4.16 contains copies or an accurate
description of all policies of fire, general liability, property, worker's
compensation, errors and omissions and other forms of insurance maintained by or
on behalf of Telecom in connection with the Business as protection for Telecom's
assets and the Business. Except as set forth in Schedule 4.16 hereto, all of
such policies are now in full force and effect and policies covering the same
risks and in substantially the same amounts have been in full force and effect
since July 1, 1995. Telecom has not received any notice of cancellation or
material amendment of any such policies; no coverage thereunder is being
disputed; and all material claims thereunder have been filed in a timely
fashion.
4.17 LICENSES, PERMITS, ETC. Attached hereto as Schedule 4.17
is a list and description of all material licenses, franchises, permits,
easements, certificates, consents, rights and privileges, and other governmental
authorizations necessary or appropriate to the conduct of the business of
Telecom other than those listed on Schedule 4.1. All such items are in full
force and effect and true and complete copies thereof have been furnished to
STM. Telecom is in compliance in all material respects with all conditions or
requirements imposed by or in connection with such Licenses and Permits and with
respect to its operation of the Business, and Telecom has not received any
notice, nor does Telecom have any knowledge that any governmental authority
intends to cancel, terminate or modify any of such licenses or permits or that
valid grounds for any such cancellation, termination or modification currently
exist.
4.18 LITIGATION. Except as set forth in Schedule 4.18 hereto,
there is neither (a) any action, suit, proceeding or investigation, nor (b) any
counter or cross-claim in an action brought by or on behalf of Telecom, whether
at law or in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind, that is pending or, to the best knowledge of Telecom,
threatened, against Telecom, which (i) could reasonably be expected to affect
adversely Telecom's ability to perform its obligations under this Agreement or
the agreements referenced herein or complete any of the transactions
contemplated hereby or thereby, or (ii) involves the reasonable possibility of
any judgment or liability, or which may become a claim, against STM, Merger Sub,
the Business or any of the assets of Telecom prior to or subsequent to the
Effective Time of the Merger. Except as set forth in Schedule 4.18, Telecom is
not subject to any judgment, order, writ, injunction or decree of any court,
arbitrator or governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over Telecom, any of its assets or the
Business.
4.19 COMPLIANCE WITH LAWS. Since the date of its
incorporation, to the knowledge of Telecom, Telecom has complied in all material
respects with all applicable foreign, federal, state, municipal and other
political subdivision or governmental agency statutes, ordinances and
regulations,
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including, without limitation, those imposing taxes, in every applicable
jurisdiction, in respect of the ownership of its assets and properties and the
conduct of its business where the effect of failure to so comply would have a
Material Adverse Effect. Except as disclosed in Schedule 4.19 hereto, and
without limiting the generality of this Section 4.19, there are no unresolved
(i) proceedings or investigations instituted or, to the best knowledge of
Telecom, threatened, by any such governmental authorities against Telecom or
relating to the Business, or (ii) citations issued or, to the best knowledge of
Telecom, threatened against Telecom or the Business by any governmental
authorities, or (iii) other notices of deficiency or charges of violation
brought or, to the best knowledge of Telecom, threatened against Telecom or the
Business, including under any federal or state regulation or otherwise, which
could have, individually or in the aggregate, a Material Adverse Effect, or
interfere with the maintenance of the permits, licenses, franchises,
certificates, authorizations or any right to operate held by Telecom; and, to
the best knowledge of Telecom, there are no facts or circumstances upon which
any such proceedings, investigations, citations, notices, disallowances or
charges may be instituted, issued or brought hereafter.
4.20 EMPLOYEES. Attached hereto as Schedule 4.20 is a list of
the names and annual rates of salary and other compensation of all the present
officers, directors and employees of Telecom. Schedule 4.20 hereto summarizes
the bonus, profit sharing, incentive, percentage compensation, vacation and
other like benefits, if any, payable to such officers, directors, employees, and
agents as of the date hereof. Except as disclosed in Schedule 4.20 the
transactions contemplated by this Agreement will not trigger any obligations of
Telecom under any employment, severance or other agreement, whether written or
oral, with any of Telecom's employees, nor will they give rise to any form of
indemnity, claim or right to or of any employee of Telecom under any agreement,
law, rule or regulation, whether as a change in the condition of employment of
such employee or otherwise. There are no claims, actions, suits, proceedings, or
investigations pending, or to the best knowledge of Telecom, threatened against
Telecom or any of its officers, directors, employees or agents in regard to
race, creed, gender, age or other forms of discrimination, sexual harassment,
wrongful discharge, or any other similar allegations.
4.21 EMPLOYEE BENEFIT PLANS. Schedule 4.21 hereto contains a
complete list of Telecom's Employee Plans. True and complete copies or
descriptions of such Employee Plans have been delivered to STM. For purposes of
this Section 4.21, the term "Employee Plan" includes all present (including
those terminated or transferred within the past five years) plans, programs,
agreements, arrangements, and methods of contribution or compensation (including
all amendments to and components of the same, such as a trust with respect to a
plan) providing any remuneration or benefits, other than current cash
compensation, to any current or former employee of Telecom or to any other
person who provides services to Telecom, whether or not such plan or plans,
programs, agreements, arrangements, and methods of contribution or compensation
are subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and whether or not such plan or plans, programs, agreements,
arrangements and methods of contribution or compensation are qualified under the
Tax Code. The term Employee Plan includes, but is not limited to, pension,
retirement, profit sharing, stock option, stock bonus, and nonqualified deferred
compensation plans and includes any Employee Plan that is a multiemployer plan
as defined in Section 3(37) of ERISA. The term Employee Plan also includes, but
is not limited to, disability, medical, dental, health insurance, life
insurance, incentive plans, vacation benefits, and fringe benefits. Any and all
tax returns, reports, forms or other documents required to be filed by Telecom
under applicable federal, state or local law with respect to Telecom's Employee
Plans have been timely filed and are correct and complete in all respects; and
any
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and all amounts due by Telecom to any governmental agency or entity with
respect to the Employee Plans have been timely and fully paid. Except as set
forth in Schedule 4.21, all Employee Plans are now, and have always been,
established, maintained and operated in accordance with all applicable laws
(including, but not limited to, ERISA and the Tax Code) and all regulations and
interpretations thereunder and in accordance with their plan documents. All
written communications with respect to each Employee Plan by any person
(including, but not limited, to the members of any plan committee, all plan
fiduciaries, plan administrators, Telecom and its management, and Telecom's
employees) accurately reflect the documents and operations of each such Employee
Plan. Except as disclosed in Schedule 4.21, each funded Employee Plan providing
for payment of deferred compensation is and always has been qualified under
Section 401 of the Tax Code. Except as disclosed in Schedule 4.21, the Internal
Revenue Service has issued one or more determination letters with respect to
each funded Employee Plan stating that, from the inception of each such Employee
Plan, such Employee Plan has been and is qualified under Section 401 of the Tax
Code and each trust maintained in connection with each such Employee Plan has
been and is exempt under Section 501 of the Tax Code. Except set forth in
Schedule 4.21, there is no unfunded liability for vested or nonvested benefits
under any funded Employee Plan, and all contributions required to be made to or
with respect to each Employee Plan have been completely and timely paid. All
reports, forms and other documents required to be filed with any governmental
entity with respect to any Employee Plan have been timely filed and, to the best
knowledge of Telecom, are accurate. There have been no filings with respect to
any Employee Plan with the Pension Benefit Guaranty Corporation ("PBGC"). No
liability to the PBGC has been incurred or is expected with respect to any
Employee Plan except for insurance premiums, and all insurance premiums incurred
or accrued up to and including the Closing Date have been or will be timely paid
by Telecom. No amount is, and as of the Closing Date no amount will be, due or
owing from Telecom to any "multiemployer plan" (as defined in Section 3(37) of
ERISA) on account of any withdrawal therefrom. There has been no event or
condition, nor is any event or condition expected, that would present a risk of
termination of any Employee Plan, or which would constitute a "reportable event"
within the meaning of Section 404(3) of ERISA and the regulations and
interpretations thereunder. There has been no merger, consolidation, or transfer
of assets or liabilities (including, but not limited to, a split-up or
split-off) with respect to any Employee Plan. There is and there has been no
actual or, to the best knowledge of Telecom, anticipated, threatened or expected
litigation or arbitration concerning or involving any Employee Plan. No
complaints to or by any governmental entity have been filed or, to the best
knowledge of Telecom, have been threatened or are expected with respect to any
Employee Plan. No Employee Plan or any other person has any liability to any
plan participant, beneficiary or other person under any provision of ERISA, the
Tax Code or any other applicable law by reason of any transaction as described
in Section 406 of ERISA and Section 4975 of the Tax Code with respect to any
Employee Plan. No Employee Plan provides medical benefits to one or more former
employees (including retirees), other than benefits required to be provided
under Section 4980B of the Tax Code. There is no contract, agreement or benefit
arrangement covering any employee of Telecom which individually or collectively
would constitute an "excess parachute payment" under Section 280G of the Tax
Code.
4.22 BANK ACCOUNTS AND POWERS OF ATTORNEY. Attached hereto as Schedule
4.22 is a list setting forth:
(a) the name of each bank, savings and loan or other financial
institution in which Telecom has any account or safe deposit box, the account
name and number of each such
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account or safe deposit box, and the names of all persons authorized to draw
thereon or have access thereto; and
(b) the name of each person, corporation, firm
association, or business entity or enterprise holding a general or special power
of attorney from Telecom and a summary of the terms thereof.
4.23 PRODUCT WARRANTIES AND LIABILITIES. Except as set forth
on Schedule 4.23 attached hereto and except for the warranties contained in
certain of the contracts listed in Schedule 4.14, Telecom has not given or made
any express warranties to third parties with respect to any services performed
or products sold by it. Telecom does not have any knowledge of any fact or of
the occurrence of any event forming the basis of any present or future claim
against Telecom not fully covered by insurance, for liability on account of
products liability or on account of any express or implied product warranty,
except for warranty obligations and product returns in the Ordinary Course of
Business and as set forth on Schedule 4.23.
4.24 LABOR MATTERS. Telecom is not a party to a collective
bargaining agreement with any labor union or association. There are no
discussions, negotiations, demands or proposals which are pending or have been
conducted or made with or by any labor union or association, and there are no
pending or threatened labor disputes, strikes, or work stoppages which may have
a Material Adverse Effect. Telecom is in substantial compliance with all
foreign, federal and state laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and is not engaged in
any unfair labor practices.
4.25 QUESTIONABLE PAYMENTS. Telecom has not made, and Telecom
does not have any knowledge that any shareholder, officer, director, employee,
agent or other representative acting on its behalf has made, directly or
indirectly, any bribes, kickbacks, or political contributions with corporate
funds, payments from corporate funds not recorded on the books and records of
Telecom, payments from corporate funds which were falsely recorded on the books
and records of Telecom, payments from corporate funds to governmental officials
in their individual capacities or illegal payments from corporate funds to
obtain or retain business either within the United States of America or abroad.
4.26 BROKERS. Telecom is not a party to or in any way
obligated under any contract or other agreement regarding, and there are no
outstanding claims against it for the payment of, any broker's or finder's fee
in connection with the origin, negotiation, execution, or performance of this
Agreement or the transactions contemplated hereby.
4.27 CONFLICT OF INTEREST. Except as set forth in Schedule
4.27, to the best knowledge of Telecom, no shareholder, officer, director or
employee of Telecom or any Member of the Immediate Family of any such person:
(a) has any direct or indirect interest in (i)
any entity which does business with Telecom, or (ii) except by virtue of being a
shareholder of Telecom, any property, asset or right which is used by Telecom in
the conduct of its business;
(b) has any contractual relationship with
Telecom other than with respect to the performance of services as an officer or
director; or
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(c) has been involved in any transaction with
Telecom during the past three (3) years other than with respect to the
performance of service as an officer or director as to the issuance of
securities of Telecom.
4.28 BOOKS AND RECORDS. The books and records of Telecom are
in all material respects true and complete and have been maintained in
accordance with good business practice and sound accounting principles and
reflect a true record of all meetings or proceedings of its Board of Directors
and shareholders to the knowledge of Telecom.
4.29 ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth in
Schedule 4.29, to the knowledge of Telecom, Telecom has complied with, and the
operation of the Business is in compliance with, in all material respects, all
federal, state, local and regional statutes, laws, ordinances, rules,
regulations and orders relating to the protection of human health and safety,
natural resources or the environment, including, but not limited to, air
pollution, water pollution, noise control, on-site or off-site hazardous
substance discharge, disposal or recovery, toxic or hazardous substances,
training, information and warning provisions relating to toxic or hazardous
substances, and employee safety relating to or adversely affecting the Business
or Telecom's assets (collectively the "Environmental Laws"); and no notice of
violation of any Environmental Laws or of any permit, license or other
authorization relating thereto has been received, nor is any such notice pending
or, to the best knowledge of Telecom, threatened. Except as set forth in
Schedule 4.29, (i) except in compliance with applicable Environmental Laws and
any licenses or permits relating thereto, there has been no generation, use
treatment, storage, transfer, disposal, release or threatened release, in, at,
under, from, to or into, or on such properties of toxic or hazardous substances
during the ownership or occupancy thereof by Telecom or, to the best knowledge
of Telecom, prior to such ownership or occupancy, and (ii) in no event has there
been any generation, use, treatment, storage, transfer, disposal, release or
threatened release, in, at, under, from, to or into, or on such properties of
toxic or hazardous substances that has resulted in or is reasonably likely to
result in a material adverse effect on the Business or any Telecom's assets. For
the purposes of this Section 4.30, "toxic or hazardous substances" shall include
any material, substance or waste that, because of its quantity, concentration or
physical or chemical characteristics, is deemed under any federal, state, local
or regional statute, law, ordinance, regulation or order, or by any governmental
agency pursuant thereto, to pose a present or potential hazard to human health
or safety or the environment, including, but not limited to, (i) any material,
waste or substance which is defined as a "hazardous substance" pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(42 U.S.C. ss. 9601, et seq.), as amended, and its related state and local
counterparts, (ii) asbestos and asbestos containing materials and
polychlorinated biphenyls, and (iii) any petroleum hydrocarbon including oil,
gasoline (refined and unrefined) and their respective constituents and any
wastes associated with the exploration, development or production of crude oil,
nature gas or geothermal energy.
4.30 [INTENTIONALLY OMITTED]
4.31 REPRESENTATIONS REGARDING POOLING OF INTERESTS. Except as
set forth in Schedule 4.31:
(a) Telecom is not and has never been a
subsidiary or division of another corporation.
(b) Telecom does not own and has never owned any
STM Common Stock.
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(c) Telecom has not changed the equity interest
of the voting Telecom Stock in contemplation of effecting this Agreement, either
within two years before the merger anticipated hereunder was initiated or
between the dates the anticipated merger was initiated and consummated, except
as permitted by Accounting Principles Board Opinion ▇▇. ▇▇ ("▇▇▇ ▇▇. ▇▇"). For
purposes of the foregoing, the anticipated merger is deemed to be initiated on
the earlier of (i) the date that the major terms of the merger, including the
ratio of conversion of stock, were announced publicly, which was December 16,
1997, or otherwise formally made known to the shareholders of either STM or
Telecom or (ii) the date that shareholders of either company were notified in
writing of an exchange offer or a merger, as the case may be. The foregoing
sentence is to be interpreted with reference to ▇▇▇ ▇▇. ▇▇.
(d) Telecom has not reacquired any of its own
stock during the two-year period immediately preceding the date hereof.
4.32 FULL DISCLOSURE. All of the representations and
warranties made by Shareholders in this Agreement, and all statements set forth
in the certificates delivered by Shareholders at the Closing pursuant to this
Agreement, are true, correct and complete in all material respects and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make such representations, warranties or statements,
in light of the circumstances under which they were made, misleading.
5. REPRESENTATIONS AND WARRANTIES OF STM AND MERGER SUB. STM and Merger
Sub, jointly and severally, represent and warrant to and agree with Telecom
that:
5.1 ORGANIZATION AND EXISTENCE. Each of STM and Merger Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the States of Delaware and has all requisite corporate power to carry on
its business as now conducted. Each of STM and Merger Sub is qualified to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the character or location of the assets owned by it or the nature of
the business transacted by it require such qualification where the failure to so
qualify would not have a Material Adverse Effect.
5.2 AUTHORITY. STM and Merger Sub have the corporate power and
have taken or will take all necessary and proper corporate action to authorize
and approve this Agreement and the consummation hereof, and the execution and
delivery of this Agreement and consummation hereof do not and will not violate
any provision of any judicial or governmental decree, order, or judgment or
conflict with, or result in a breach of or constitute a default under, the
Certificate of Incorporation or Bylaws of either STM or Merger Sub or any
agreement or instrument to which either of them is a party or by which either is
bound. The execution, delivery, and performance by STM and Merger Sub of this
Agreement, each agreement referenced herein to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by the Board of Directors of STM and Merger Sub and by
STM as the sole shareholder of Merger Sub and no further corporate action is
necessary on the part of STM or Merger Sub, assuming due execution by the other
parties hereto and thereto. This Agreement has been, and at the Closing each
agreement referenced herein to which it is a party will be, duly executed and
delivered by STM and Merger Sub. This Agreement is, and when duly executed and
delivered at the Closing each agreement referenced herein will be, the valid and
binding agreement of STM, and, to the extent it is a party thereto, Merger Sub,
enforceable against it in accordance with their respective terms, except as such
enforceability may be
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limited by (i) bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally and (ii) general principles of equity
relating to the availability of equitable remedies.
5.3 ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there
has been no change in the business, prospects, or condition, financial or
otherwise, of STM, except as set forth in the SEC Filings and changes in the
Ordinary Course of Business that in the aggregate have not been materially
adverse. To the knowledge of STM, except as set forth in the SEC Filings, there
are no new developments in any business conducted by STM, nor any new or
improved materials, products, processes, or services useful in connection with
the business of STM or its customers or suppliers, which can reasonably be
expected to have a Material Adverse Effect.
5.4 VALIDITY OF STM COMMON STOCK. The STM Common Stock to be
issued pursuant to the provisions of this Agreement in connection with the
Merger will be, when issued upon the terms and for the consideration specified
in this Agreement, validly issued and outstanding, fully paid and nonassessable.
5.5 CAPITAL STOCK OF MERGER SUB. The authorized capital stock
of Merger Sub consists of 500,000 shares of Preferred Stock, $.001 par value,
none of which are issued and outstanding and 1,000,000 shares of Common Stock,
$.001 par value, 50,000 of which shares are validly issued and outstanding,
fully paid, nonassessable and owned by STM as of the date hereof.
5.6 INVESTMENT INTENT. The Telecom Stock to be acquired by STM
as a result of the Merger is being and will be acquired by STM for its own
account for investment and not with any present intention of distribution
thereof.
5.7 STM FINANCIAL STATEMENTS. The financial statements of STM
as of and for its year ended December 31, 1996, as contained in STM's Annual
Report on Form 10-K, and as of and for the nine-month period ended September 30,
1997, as contained in STM's Quarterly Report or Form 10-Q for such quarter, are
complete and correct in all material respects in accordance with the books of
account and records of STM, and present fairly the financial position of STM, at
the dates indicated and the results of its operations and the changes in their
respective shareholders equity for the periods then ended, in accordance with
generally accepted accounting principles consistently applied.
5.8 BROKERS. Except as disclosed in Schedule 5.8, neither STM
nor Merger Sub is a party to or in any way obligated under any contract or other
agreement regarding, and there are no outstanding claims against either of them
for the payment of, any broker's or finder's fee in connection with the origin,
negotiation, execution, or performance of this Agreement or the transactions
contemplated hereby.
5.9 SEC REPORTS OF STM. STM has furnished Telecom copies of
the SEC Reports. The SEC Reports are accurate and complete in all material
respects and do not omit any material information required to be set forth
therein. STM has filed with the Securities and Exchange Commission all reports
required to be filed by it since becoming subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended.
5.10 LITIGATION. There is neither (a) any action, suit,
proceeding or investigation, nor (b) any counter or cross-claim in an action
brought by or on behalf of STM, whether at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or
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instrumentality, domestic or foreign, or before any arbitrator of any kind, that
is pending or, to the best knowledge of STM, threatened, against STM, which (i)
could reasonably be expected to affect adversely STM's ability to perform its
obligations under this Agreement or the agreements referenced herein or complete
any of the transactions contemplated hereby or thereby, or (ii) which may
reasonably be expected to have a Material Adverse Effect on STM or Merger Sub
prior to or subsequent to the Effective Time of the Merger. STM is not subject
to any judgment, order, writ, injunction or decree of any court, arbitrator or
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over STM, any of its assets or the Business.
5.11 REPRESENTATIONS REGARDING POOLING OF INTERESTS.
(a) STM has not been a subsidiary or division of
another corporation during the preceding two years.
(b) STM did not own and has never owned any
Telecom Stock prior to the consummation of the transactions contemplated herein.
(c) STM does not presently intend to directly or
indirectly retire or reacquire all or part of the STM Common Stock issued to the
Telecom Shareholders hereunder.
(d) STM does not intend or plan to dispose, or
cause Telecom to dispose, of a significant portion of the assets of either
company within two years after the combination, or to liquidate or merge
Telecom, except as provided herein. The foregoing shall be interpreted with
reference to ▇▇▇ ▇▇. ▇▇.
(e) STM has no plan or intention to cause
Telecom to issue additional shares of capital stock or to sell or otherwise
dispose of any of the Telecom Stock acquired hereunder that would result in STM
losing control of the Company within the meaning of Section 368(c) of the Tax
Code.
(f) STM intends that Telecom will continue its
historic business or use a significant portion of its historic business assets
in a business.
(g) None of the compensation received by any
shareholder-employee of Telecom will be separate consideration for, or allocable
to, any of their shares of Telecom Stock, none of the shares of STM Common Stock
received by any shareholder-employee will be separate consideration for, or
allocable to, any employment agreement.
5.12 FULL DISCLOSURE. All of the representations and
warranties made by STM in this Agreement, and all statements set forth in the
certificates delivered by STM at the Closing pursuant to this Agreement, are
true, correct and complete in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make such representations, warranties or statements, in light of the
circumstances under which they were made, misleading.
6. COVENANTS OF TELECOM. Telecom (and, to the extent set forth in
Section 6.4, the Shareholders) covenant with STM and Merger Sub that:
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6.1 CONDUCT OF BUSINESS. Except as specifically contemplated
in this Agreement, from the date of this Agreement to the Effective Time of the
Merger, the business of Telecom will be operated diligently and only in the
Ordinary Course of Business, and, in particular, Telecom, without the prior
written consent of STM, will not:
(a) cancel or permit any insurance of a material
nature to lapse or terminate, unless renewed or replaced by like coverage;
(b) amend its Articles of Incorporation or
Bylaws;
(c) be in material default under any material
contract, agreement, commitments or undertaking of any kind;
(d) violate or fail to comply with any laws
applicable to it or its properties or business where the effect of the failure
to so comply would have a Material Adverse Effect;
(e) commit any act or permit the occurrence of
any event or the existence of any condition of the type described in clauses (a)
through (s) of Section 4.7 hereof;
(f) enter into any contract, agreement or other
commitment of the type described in Section 4.14 hereof;
(g) fail to maintain and repair any material
amount of its assets in accordance with good standards of maintenance and as
required in any leases or other agreements pertaining thereto;
(h) acquire, purchase, or redeem any Telecom
Stock;
(i) issue or enter into any subscriptions,
options, agreements or other binding commitments in respect of the issuance,
transfer, sale, registration, or encumbrance of any shares of Telecom Stock, or
accelerate the vesting of any stock option or restricted stock grant;
(j) cause or voluntarily permit a change in any
method of accounting for tax purposes during or applicable to its current tax
year which would render inaccurate, misleading or incomplete the information
concerning Taxes set forth or referred to in Section 4.11 hereof, or that would
have a Material Adverse Effect for any period prior to the Effective Time of the
Merger; or
(k) permit any affiliate to sell or reduce its
risk relative to the shares received by such affiliate until financial results
covering at least thirty (30) days of post-merger combined results have been
published.
6.2 ACCESS TO INFORMATION. From and after the date of this
Agreement, Telecom shall give to STM, its counsel, accountants, engineers, and
other representatives, reasonable access to all the properties, books,
contracts, commitments and records of Telecom so that STM may have the
opportunity to make such investigation as it deems necessary, provided that such
investigation shall not (i) unreasonably interfere with the employees, business,
or operations of Telecom, or (ii) violate any governmental regulations or laws
or any customers or vendor confidentiality agreements now in effect
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and to which Telecom is a party. Any such investigation shall not affect the
representations and warranties of Telecom contained in this Agreement.
6.3 PRESERVATION OF GOODWILL. Telecom will use its reasonable
best efforts to preserve its business organization, to keep available to STM the
services of the respective officers and employees of Telecom and to preserve for
STM the goodwill of all suppliers, customers, and others having business
relations with Telecom.
6.4 SHAREHOLDERS' APPROVAL. This Agreement and the transaction
contemplated hereby have been approved by the Board of Directors of Telecom. The
Board of Directors of Telecom shall solicit the written consent or call a
special meeting of its shareholders for the purpose of approving the terms and
provisions of this Agreement and the Merger as soon as practicable after the
date hereof. The Board of Directors of Telecom shall recommend that Telecom's
Shareholders approve this Agreement and the Merger, and shall endeavor to secure
such approval.
6.5 TRADE SECRETS. From and after the date hereof, Telecom
will not use or divulge to any competitor of Telecom or any unauthorized person,
and will use its reasonable best efforts to insure that the employees and agents
of Telecom do not use or divulge, any confidential information, trade secrets,
processes, formulas or know-how relating to the business or properties of
Telecom at the date hereof.
6.6 CLEARANCE CERTIFICATES. Telecom shall use its reasonable
best efforts to obtain at or prior to closing hereof (i) certificates of the
appropriate state agencies of each state other than Georgia in which Telecom is
qualified to do business, indicating that Telecom is not delinquent in the
payment of income, franchise, sales or other state taxes or the filing of any
tax returns; and (ii) a Certificate of Release from the Employment Authority of
appropriate states, other than Georgia, stating that, as of a date not more than
thirty (30) days prior to the Closing Date, no contributions, interest or
penalties are due by Telecom to that Employment Authority.
6.7 FURTHER ASSURANCES. Telecom hereby agrees to execute and
deliver from time to time at the request of STM and without consideration such
additional instruments of conveyance and transfer and to take such other actions
as STM may reasonably require to more effectively carry out and effectuate the
Merger and the transactions contemplated hereby.
7. MUTUAL COVENANTS. STM, Merger Sub, and Telecom (and, to the extent
set forth in Section 7.3, the Shareholders) covenant and agree, each with the
other, that:
7.1 BLUE SKY COMPLIANCE. STM will use its best efforts to
obtain prior to the Effective Time of the Merger all necessary state securities
law and blue sky act permits and approvals required to permit the issuance of
the shares of STM Common Stock to be issued in connection with the Merger, and
Telecom shall furnish to STM all information concerning Telecom and the Telecom
Shareholders that STM may reasonably request in connection with any such action.
7.2 PUBLIC ANNOUNCEMENTS. Neither STM nor Telecom shall make
any public announcement or statement with respect to this Agreement or the
Merger without the prior written consent of the other party; provided, however,
STM may disclose the existence and terms of this Agreement or the Merger if, in
its judgment, it is required to do so under applicable securities laws. If any
party desires to make a joint announcement or statement, the parties will
consult with each other
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and exercise reasonable efforts to agree upon the text of a joint public
announcement or statement to be made by STM and Telecom.
7.3 REASONABLE EFFORTS TO SATISFY CONDITIONS. Consistent with
applicable law and with their fiduciary duties to their respective shareholders,
(i) Telecom and the Shareholders agree to use their respective reasonable best
efforts to bring about the satisfaction of the covenants and conditions
specified in Sections 6, 7, 9 and 10 hereof, and (ii) STM and Merger Sub agree
to use their reasonable best efforts to bring about the satisfaction of the
covenants and conditions specified in Sections 7, 8 and 10 hereof.
7.4 TRANSACTION EXPENSES. Each party will pay all expenses
incurred by them in connection with the negotiation, execution and performance
of this Agreement or any other agreement or transaction, whether or not the
transactions contemplated hereby are consummated, including the fees and
expenses of counsel and brokers, if any, for Telecom and the Telecom
Shareholders.
7.5 POOLING OF INTERESTS. The parties shall not take any
action which would preclude the use of the pooling-of-interests method of
accounting for the Merger, and shall take all actions reasonably required for
the use of the pooling-of-interests method of accounting for the Merger.
8. CONDITIONS TO OBLIGATIONS OF TELECOM. The obligations of Telecom and
the Shareholders to complete the Closing as set forth in Section 3 under this
Agreement shall, at the option of Telecom and the Shareholders, be subject to
the following conditions precedent:
8.1 STM'S AND MERGER SUB'S REPRESENTATIONS AND WARRANTIES TRUE
AT CLOSING. Telecom shall not have discovered any material error, misstatement
or omission in the representations and warranties made by STM and Merger Sub in
Section 5 hereof; the representations and warranties made by STM and Merger Sub
herein shall be deemed to have been made again at and as of the time of Closing
and shall then be true in all material respects; STM and Merger Sub shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed by them at or prior to the Closing; and Telecom shall
have received a certificate, dated the Closing Date, of the President or a Vice
President of each of STM and Merger Sub to the effect set forth in this Section
8.1.
8.2 ESCROW AGREEMENT; REGISTRATION RIGHTS AGREEMENT. STM shall
have executed and delivered to Telecom an Escrow Agreement in the form of
Exhibit B hereto and a Registration Rights Agreement in the form of Exhibit C
hereto.
8.3 OPINION OF STM'S AND MERGER SUB'S COUNSEL. The
Shareholders shall have received an opinion of Stradling, Yocca, ▇▇▇▇▇▇▇ &
▇▇▇▇▇, a Professional Corporation, counsel for STM and Merger Sub, dated the
Closing Date, substantially in the form and to the effect of Exhibit D hereto.
8.4 NO MATERIAL ADVERSE CHANGES. Prior to Closing there shall
have been no changes in the business, properties, or operations of STM since
September 30, 1997 which would have, or could reasonably be expected to have, a
Material Adverse Effect.
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9. CONDITIONS TO OBLIGATIONS OF STM AND MERGER SUB. The obligations of
STM and Merger Sub under this Agreement shall, at the option of STM and Merger
Sub, be subject to the following conditions:
9.1 TELECOM'S REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING.
STM and Merger Sub shall have not discovered any material error, misstatement,
or omission in the representations and warranties made by the Shareholders in
Section 4 hereof; provided, however, that no such representation or warranty
shall be deemed materially incorrect if (i) it results from the consummation of
any transactions specifically permitted or contemplated by this Agreement, (ii)
it is not materially adverse and significant to the business, financial
condition, or operations of Telecom taken as a whole, or (iii) its effect could
not reasonably be expected to have a Material Adverse Effect, and, Telecom shall
have performed and complied with all material agreements required by this
Agreement to be performed or complied with by it at or prior to the Closing.
9.2 OPINION OF TELECOM'S COUNSEL. STM shall have received an
opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., counsel for Telecom and the Shareholders,
dated the Closing Date, substantially in the form and to the effect of Exhibit E
hereto.
9.3 NO DAMAGE OR DESTRUCTION. Prior to Closing there shall not
have occurred any casualty to any facility, property, or equipment owned or used
by Telecom which is materially adverse and significant to the business,
financial condition, or operations of Telecom taken as a whole.
9.4 CERTIFICATES. STM shall have received the following
documents:
(a) A Certificate of Existence, as of a recent date,
from the Georgia Secretary of State and a Tax Compliance Certificate from the
Georgia Tax Commission;
(b) A certificate signed by a duly authorized officer
of Telecom and dated as of the Closing Date, certifying that (i) all
representations and warranties of such parties were true and correct in all
material respects when made and remain true and correct in all material respects
as of the Closing Date; and (ii) all of the respective covenants, agreements,
obligations and conditions of such parties required to have been performed as of
or prior to the Closing have been fully performed and complied with;
(c) A certificate signed by the Secretary of Telecom,
and dated as of the Closing Date, as to the incumbency of each officer of
Telecom executing this Agreement and the other agreements being delivered
pursuant hereto, and certifying the effectiveness, accuracy and completeness of
the copies attached to such certificate of resolutions duly adopted by Telecom's
Board of Directors and its shareholders, as the case may be, authorizing the
execution and delivery of this Agreement by Telecom, and the performance by
Telecom of its obligations hereunder and the consummation of the transactions
contemplated hereby;
(d) Consents to the assignment of all agreements,
licenses and/or permits listed or required to be listed on Schedules 4.2 and
4.17 hereto; and
(e) A schedule listing the aggregate price paid by
the Telecom Shareholders and received by Telecom for the shares of Telecom Stock
held by the Telecom Shareholders or, if different, such Telecom Shareholders'
basis in their shares.
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9.5 NO MATERIAL ADVERSE CHANGES. There shall have been no
change in the business, financial condition, or results of operations of Telecom
since the date hereof which has had a Material Adverse Effect or could
reasonably be expected to have a Material Adverse Effect.
9.6 SECURITIES COMPLIANCE. STM shall have obtained all
necessary approvals to qualify the issuance of the STM Common Stock under all
applicable State Blue Sky laws, or in the alternative, STM shall have
determined, to the reasonable satisfaction of its legal counsel, that such
issuance is exempt from the requirements under such Blue Sky laws.
9.7 ESCROW AGREEMENT; REGISTRATION RIGHTS AGREEMENT. Each
Shareholder shall have executed and delivered to STM the Escrow Agreement,
substantially in the form of Exhibit B hereto and a Registration Rights
Agreement substantially in the form of Exhibit C hereto.
9.8 NON-DISCLOSURE AND ASSIGNMENT OF INVENTIONS AGREEMENTS.
Each employee or independent contractor of Telecom with access to confidential
or proprietary information shall have executed and delivered to Telecom a
Non-Disclosure and Assignment of Inventions Agreement, in form accceptable to
STM.
10. MUTUAL CONDITIONS TO OBLIGATIONS OF STM, MERGER SUB AND TELECOM.
The obligations of STM, Merger Sub and Telecom under this Agreement shall, at
the option of any of them, be subject to the following conditions.
10.1 APPROVALS. STM, Merger Sub and Telecom shall have
received any necessary consents to, or approvals of, the transactions
contemplated by this Agreement of any governmental agencies and authorities, and
such approvals and the transactions contemplated hereby shall not have been
contested by any federal or state governmental authority by formal proceeding
and no party hereto shall have any knowledge of the existence of any fact or the
occurrence of any event forming the basis for a reasonable belief that such
approvals or the transactions contemplated hereby will be contested by any
federal or state governmental authority or by any other third party by formal
proceeding.
10.2 NO LITIGATION. No material claim, action, suit,
proceeding, litigation, or investigation which challenges the consummation of
the transactions contemplated in this Agreement or which seeks to enjoin any of
the transactions contemplated herein, shall be instituted or threatened against
any party hereto by any governmental authority or by any other third party and
no party hereto shall have any knowledge of the existence of any fact or the
occurrence of any event forming the basis for a reasonable belief that any such
claim, action, suit, proceeding, litigation, or investigation will be instituted
or threatened against any party hereto.
10.3 NATURE OF STATEMENTS. All covenants, agreements, and
statements contained herein, in any Schedule hereto or in any certificate or
other instrument delivered by or on behalf of Telecom or STM and Merger Sub
pursuant to this Agreement or in connection with the transactions contemplated
hereby, shall be deemed representations and warranties by Telecom or STM and
Merger Sub, as the case may be.
10.4 POOLING LETTER. STM shall have received from KPMG Peat
Marwick LLP, independent auditors, a letter confirming that the Merger shall be
treated for accounting purposes as a pooling of interests.
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10.5 TELECOM SHAREHOLDERS' APPROVAL. The Telecom Shareholders
shall have approved the terms and provisions of this Agreement and of the Merger
Telecom Shareholders called by Telecom or by written consent pursuant to Section
6.4 hereof in accordance with applicable provisions of the Georgia Code and the
Articles of Incorporation and Bylaws of Telecom. Holders of no more than 5% of
the shares of Telecom Stock outstanding shall be entitled to claim dissenters'
rights under Section 14-2-1301 et seq. of the Georgia Code with respect to such
shares.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Except as otherwise
provided in this Agreement, all representations and warranties made in this
Agreement or in any certificate delivered pursuant hereto or otherwise shall
survive the consummation of the transactions contemplated hereby for a period of
one (1) year following the Closing and after one (1) year shall be terminated
and extinguished, except insofar as the damaged party shall have asserted in
writing pursuant to Section 12.4 hereof, a specific claim setting forth the
specific facts and circumstances relating thereto with respect to such
representations, warranties, covenants and agreements prior to the expiration of
such rights, in which event the party liable shall remain liable with respect to
such claim.
12. INDEMNITY.
12.1 INDEMNIFICATION OF STM. Subject to the limitations
contained in this section, the Shareholders (for purposes of this Section 12,
the "Telecom Indemnitors") shall, jointly and severally, defend, indemnify and
hold harmless STM, and its officers, directors, shareholders, employees and
agents ("Affiliates") from and against any and all losses, claims, judgments,
liabilities, demands, charges, suits, penalties, costs or expenses, including
court costs and attorneys' fees ("Claims") with respect to or arising from (i)
the breach of any warranty or any inaccuracy of any representation made by
Telecom in this Agreement, or (ii) the breach of any covenant or agreement made
by Telecom or the Shareholders in this Agreement.
12.2 LIMITATIONS. Anything to the contrary notwithstanding,
STM shall not be indemnified and held harmless in respect of any Claims; (i)
which are covered by insurance owned by Telecom to the extent that any net loss
is reduced by such insurance; (ii) until the aggregate amount of all such Claims
exceed $150,000 and then only to the extent of seventy percent (70%) of such
excess; and (iii) if and to the extent that the aggregate liability of any
Shareholder pursuant to this Section 12 exceeds an amount equal to the value of
the STM Stock or other consideration received by such Shareholder with respect
to Telecom Shares purchased from such Shareholder pursuant to this Agreement.
12.3 INDEMNIFICATION OF TELECOM. STM shall defend, indemnify
and hold harmless Telecom, and its officers, directors, employees and agents and
the Shareholders against and in respect to all Claims and Liabilities with
respect to or arising from (i) breach of any warranty or any inaccuracy of any
representation made by STM or Merger Sub, or (ii) breach of any covenant or
agreement made by STM or Merger Sub in this Agreement. Notwithstanding the
foregoing, no party to be indemnified pursuant to this Section 12.3 shall be
indemnified with respect to a Claim until the aggregate amount of all such
Claims exceed $150,000 and then only to the extent of such excess.
12.4 CLAIMS PROCEDURE. Promptly after the receipt by any
indemnified party (the "Indemnitee") of notice of the commencement of any action
or proceeding against such Indemnitee, such Indemnitee shall, if a claim with
respect thereto is or may be made against any indemnifying party (the
"Indemnifying Party") pursuant to this Section 12, give such Indemnifying Party
written notice of
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the commencement of such action or proceeding and give such Indemnifying Party a
copy of such claim and/or process and all legal pleadings in connection
therewith. The failure to give such notice shall not relieve any Indemnifying
Party of any of his or its indemnification obligations contained in this Section
12, except where, and solely to the extent that, such failure actually and
materially prejudices the rights of such Indemnifying Party. Such Indemnifying
Party shall have, upon request within sixty (60) days after receipt of such
notice, but not in any event after the settlement or compromise of such claim,
the right to defend, at his or its own expense and by his or its own counsel,
any such matter involving the asserted liability of the Indemnitee; provided,
however, that if the Indemnitee determines that, as a result of an existing or
prospective business relationship between STM or any of its subsidiaries on the
one hand and any other party or parties to such claim on the other hand, or as a
result of other reasonable circumstances, there is a reasonable probability that
a claim may materially and adversely affect him or it, other than solely as a
result of money payments required to be reimbursed in full by such Indemnifying
Party under this Section 12, the Indemnitee shall have the right to defend,
compromise or settle such claim or suit; and, provided, further, that such
settlement or compromise shall not, unless consented to in writing by such
Indemnifying Party, be conclusive as to the liability of such Indemnifying Party
to the Indemnitee. In any event, the Indemnitee, such Indemnifying Party and his
or its counsel shall cooperate in the defense against, or compromise of, any
such asserted liability, and in cases where the Indemnifying Party shall have
assumed the defense, the Indemnitee shall have the right to participate in the
defense of such asserted liability at the Indemnitee's own expense. In the event
that such Indemnifying Party shall decline to participate in or assume the
defense of such action, prior to paying or settling any claim against which such
Indemnifying Party is, or may be, obligated under this Section 12 to indemnify
an Indemnitee, the Indemnitee shall first supply such Indemnifying Party with a
copy of a final court judgment or decree holding the Indemnitee liable on such
claim or, failing such judgment or decree, the terms and conditions of the
settlement or compromise of such claim. An Indemnitee's failure to supply such
final court judgment or decree or the terms and conditions of a settlement or
compromise to such Indemnifying Party shall not relieve such Indemnifying Party
of any of his or its indemnification obligations contained in this Section 12,
except where, and solely to the extent that, such failure actually and
materially prejudices the rights of such Indemnifying Party. If the Indemnifying
Party is defending the claim as set forth above, the Indemnifying Party shall
have the right to settle the claim only with the consent of the Indemnitee;
provided, however, that if the Indemnitee shall fail to consent to the
settlement of such a claim by the Indemnifying Party, which settlement (i) the
claimant has indicated it will accept, and (ii) includes an unconditional
release of the Indemnitee and its affiliates by the claimant and imposes no
material restrictions on the future activities of the Indemnitee and its
affiliates, the Indemnifying Party shall have no liability with respect to any
payment required to be made to such claimant in respect of such claim in excess
of the proposed amount of settlement. If the Indemnitee is defending the claim
as set forth above, the Indemnitee shall have the right to settle or compromise
any claim against it after consultation with, but without the prior approval of,
any Indemnifying Party; provided, however, that such settlement or compromise
shall not, unless consented to in writing by such Indemnifying Party, be
conclusive as to the liability of such Indemnifying Party to the Indemnitee.
12.5 TREATMENT OF INDEMNITY PAYMENTS. Any payment made to an
Indemnified Person pursuant to this Section 12 or the Escrow Agreement shall be
treated as a reduction in the consideration paid by STM in connection with the
Merger.
12.6 AGREEMENT OF TELECOM INDEMNITORS. By virtue of the
approval of the Merger by the shareholders of Telecom and the acceptance by the
Telecom Indemnitors of the
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consideration payable by STM to the Telecom Indemnitors upon the Closing and
consummation of the Merger as provided herein, the Telecom Indemnitors will,
without the need for any further action on their part, have agreed and consented
to (i) their indemnification and other obligations under this Section 12; (ii)
all of the terms and conditions of the Escrow Agreement and the establishment of
the Escrow pursuant to the terms and conditions of this Agreement and the Escrow
Agreement to secure their indemnification obligations under this Section 12; and
(iii) the appointment of the Representative as the Telecom Indemnitors'
representative for purposes of this Section 12 and the Escrow Agreement and as
attorney-in-fact and agent for and on behalf of each Telecom Indemnitor, and the
taking by the Representative of any and all actions and making of any decisions
required or permitted to be taken or made by the Representative on their behalf
under this Section 12 or the Escrow Agreement. Telecom agrees that, in
connection with the solicitation of votes, proxies and/or consents of Telecom
Shareholders for the approval fo the merger, Telecom will use its best efforts
to ensure that each Telecom Shareholder is advised of the provisions of this
Section, and agrees that the provisions of this Section 12 and the Escrow
Agreement will be personally binding on each Telecom Shareholder.
13. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time of the Merger, whether before or after approval by the
shareholders of Telecom and Merger Sub:
(a) by the mutual consent of the respective Boards of
Directors of STM, Merger Sub, and Telecom;
(b) by the Board of Directors of STM if any condition
to the obligation of STM or Merger Sub under this Agreement to be complied with
or performed by Telecom at or before the Closing shall not have been complied
with or performed at the time required for such compliance or performance and
such noncompliance or nonperformance shall not have been waived by STM;
(c) by the Board of Directors of Telecom if any
condition to the obligation of Telecom under this Agreement to be complied with
or performed by STM or Merger Sub at or before the Closing shall not have been
complied with or performed at the time required for such compliance or
performance and such noncompliance or nonperformance shall not have been waived
by Telecom; or
(d) by the Board of Directors of either Telecom or
STM if the Closing shall not have been consummated on or before January 31,
1998.
Notice of such termination by any party hereto pursuant to
this Section 13 shall be given as soon as practicable to the other parties
hereto. In the event of a termination of this Agreement pursuant to this Section
13, this Agreement, and any further obligation of STM, Telecom and the
Shareholders under this Agreement, shall terminate without any obligation or
liability of any party to any other parties hereto.
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14. DEFINITIONS.
14.1 CROSS REFERENCE TABLE. The following terms defined
elsewhere in this Agreement in the Sections set forth below shall have the
respective meanings therein defined:
Term Definition
Agreement Preamble
APB No. 16 4.31
Balance Sheet Date 4.5
Claims and Liabilities 12.1
Closing 3
Closing Date 3
Contracts 4.14
Conversion Number 2.4
Telecom Preamble
Telecom Balance Sheet 4.5
Telecom Convertible Security 14.2
Telecom Employee Options 2.5
Telecom Indemnitors 12.1
Telecom Rights 4.15
Telecom Shareholders Recitals
Telecom Stock Recitals
Telecom Warrants 14.2
Effective Time of the Merger 2.1
Environmental Laws 4.29
ERISA 4.21
Escrow 2.13
Escrow Agreement 2.13
Escrow Shares 2.13
Exchange Agent 2.7
Financial Statements 4.5
GAAP 4.5
Indemnifying Party 12.4
Indemnitee 12.4
Intellectual Property 4.15
Intellectual Property Contract 4.15
Liens 4.6
Merger Recitals
Merger Sub Preamble
Merger Sub Common Stock 2.3
Georgia Code 2.7
PBGC 4.21
Shareholders Preamble
STM Preamble
STM Common Stock Recitals
Proxy Statement 6.6
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SEC Filings 5.3
SEC Reports 5.10
Securities Act 4.3
To the best knowledge of 4
Tax Code Recitals
14.2 CERTAIN DEFINITIONS. The following terms shall have the
following meanings:
(a) BUSINESS. The term "Business" shall mean the
business as now operated by Telecom or as it evolves.
(b) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. The
term "generally accepted accounting principles" shall mean generally accepted
accounting principles, as defined by the Financial Accounting Standards Board as
of the date hereof.
(c) MATERIAL ADVERSE EFFECT. The term "Material
Adverse Effect" shall mean any change in or effect on the business, operations,
assets or financial condition of Telecom or STM, as applicable, which is
materially adverse to such party.
(d) MEMBER OF THE IMMEDIATE FAMILY. The term "Member
of the Immediate Family" shall mean, with respect to any individual, each
spouse, parent, brother, sister or child of such individual, each trust created
in whole or in part for the benefit of the aforementioned and each custodian or
guardian of any property of one or more of the aforementioned.
(e) ORDINARY COURSE OF BUSINESS. The term "Ordinary
Course of Business" shall mean the ordinary course of business consistent with
past custom and practice (including, without limitation, with respect to
quantity and frequency).
(f) SEC REPORTS. The term "SEC Reports" shall mean
the STM's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q for each of
the first three quarters of 1997.
15. MISCELLANEOUS.
15.1 EXPENSES. Whether or not the merger is consummated, each
party hereto shall pay its own expenses (including, without limitation, counsel
and accounting fees and expenses) incident to the presentation and carrying out
of this Agreement and the consummation of the transactions contemplated herein.
15.2 NOTICES. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed to have been
properly given or made on the date personally delivered or on the date mailed,
by first class registered or certified mail with postage prepaid, by private
nationally recognized courier service or by facsimile and confirmed, if
delivered, mailed, courier or facsimile to the respective parties hereto at the
following addresses:
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If to STM or Merger Sub, to:
STM Wireless, Inc.
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, President
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇, Esq.
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Shareholders, to:
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇.▇.▇.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ 400 Tower
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may designate a different address by providing written
notice of such new address to the other parties hereto.
15.3 ASSIGNMENT. This Agreement may not be assigned by Telecom
without the written consent of STM.
15.4 SUCCESSORS BOUND. Subject to the provisions of Section
15.3, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
15.5 CAPTIONS. The captions of the sections and paragraphs of
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
15.6 AMENDMENT. This Agreement may be amended only by an
instrument in writing executed by the parties hereto.
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15.7 ENTIRE AGREEMENT. This Agreement and the Exhibits,
Schedules, certificates, and documents referred to herein constitute the entire
agreement of the parties hereto, and supersede all prior understandings with
respect to the subject matter hereof, and no representation or warranty not
included herein has been relied upon by any party hereto.
15.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
15.9 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware.
15.10 ATTORNEYS' FEES. In the event of any dispute,
controversy, or proceeding between the parties concerning this Agreement or the
transactions contemplated hereby, the prevailing party shall be entitled to
receive from the other party its costs and expenses, including attorneys' fees.
15.11 WAIVER. All waivers hereunder must be made in writing,
and failure of any party at any time to require another party's performance of
any obligation under this Agreement shall not affect, limit or waive a party's
right of any time to require strict performance of that obligation thereafter.
Any waiver of any breach of any provision of this Agreement shall not be
construed in any way as a waiver of any continuing or succeeding breach of such
provision or waiver or modification of the provision.
15.12 SEVERABILITY. In the event any court, administrative
agency or other governmental entity with appropriate jurisdiction and authority
determines that any term or part of this Agreement is invalid or unenforceable,
the remainder of this Agreement shall remain in full force and effect.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first written above.
STM WIRELESS, INC., a Delaware corporation
By: _____________________________________
Its: _____________________________________
TELECOM ACQUISITION CORP., a Delaware
corporation
By: _____________________________________
Its: _____________________________________
TELECOM INTERNATIONAL, INC., a Georgia
corporation
By: _____________________________________
Its: _____________________________________
SHAREHOLDERS
__________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
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__________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
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__________________________________________
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
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__________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
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__________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
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__________________________________________
▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
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__________________________________________
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
__________________________________________
__________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇ INC. AS ▇▇▇ CUSTODIAN FOR
▇▇▇▇▇ ▇. ▇▇▇▇
Address:
__________________________________________
__________________________________________
Social Security Number:
__________________________________________
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