AGREEMENT AND PLAN OF MERGER
BY AND AMONG
EGLOBE, INC.,
EGLOBE MERGER SUB NO. 3, INC.,
SWIFTCALL EQUIPMENT AND SERVICES (USA) INC.,
SWIFTCALL HOLDINGS (USA) LTD.,
AND
ANDVILLE TECHNOLOGY (IRL) LIMITED
Dated as of the 12th day of July, 1999
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER.................................................1
ARTICLE I. THE MERGER.......................................................1
SECTION 1.1. THE MERGER......................................................1
SECTION 1.2. EFFECTIVE TIME..................................................1
SECTION 1.3. EFFECT OF THE MERGER............................................2
SECTION 1.4. ARTICLES OF INCORPORATION, BYLAWS...............................2
SECTION 1.5. DIRECTORS AND OFFICERS..........................................2
SECTION 1.6. CLOSING.........................................................2
SECTION 1.7. SUBSEQUENT ACTIONS.............................................2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES...............3
SECTION 2.1. CONVERSION OF SECURITIES........................................3
SECTION 2.2. DELIVERY OF CERTIFICATES........................................4
SECTION 2.3. STOCK TRANSFER BOOKS............................................4
SECTION 2.4. RELEASE OF STOCKHOLDER AND AFFILIATE DEBT.......................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SWIFTCALL E&S AND
THE STOCKHOLDER AND THE AFFILIATE...............................5
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES....................5
SECTION 3.2. ARTICLES OF INCORPORATION AND BYLAWS............................6
SECTION 3.3. CAPITALIZATION..................................................6
SECTION 3.4. AUTHORITY.......................................................6
SECTION 3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS......................7
SECTION 3.6. FINANCIAL STATEMENTS............................................8
SECTION 3.7. ACCOUNTS RECEIVABLE.............................................9
SECTION 3.8. OWNERSHIP AND CONDITION OF THE ASSETS...........................9
SECTION 3.9. LEASES.........................................................10
SECTION 3.10. OTHER AGREEMENTS..............................................11
SECTION 3.11. REAL PROPERTY.................................................12
SECTION 3.12. ENVIRONMENTAL MATTERS.........................................13
SECTION 3.13. LITIGATION....................................................14
SECTION 3.14. COMPLIANCE WITH LAWS; LICENSES AND PERMITS....................14
SECTION 3.15. INTELLECTUAL PROPERTY.........................................14
SECTION 3.16. TAXES AND ASSESSMENTS.........................................16
SECTION 3.17. EMPLOYMENT MATTERS............................................18
SECTION 3.18. TRANSACTIONS WITH RELATED PARTIES.............................19
SECTION 3.19. INSURANCE.....................................................19
SECTION 3.20. VOTING REQUIREMENTS...........................................20
SECTION 3.21. BROKERS.......................................................20
SECTION 3.22. COMPLIANCE WITH FOREIGN CORRUPT PRACTICES ACT.................20
SECTION 3.23. DISCLOSURE....................................................20
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ARTICLE IV ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDER AND THE AFFILIATE...................................20
SECTION 4.1. TITLE TO SWIFTCALL E&S STOCK...................................21
SECTION 4.2. NO REGISTRATION UNDER THE SECURITIES ACT.......................21
SECTION 4.3. ACQUISITION FOR INVESTMENT.....................................21
SECTION 4.4. EVALUATION OF MERITS AND RISKS OF INVESTMENT...................21
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR.......................22
SECTION 5.1. ORGANIZATION AND QUALIFICATION.................................22
SECTION 5.2. CERTIFICATE OF INCORPORATION AND BYLAWS........................22
SECTION 5.3. CAPITALIZATION.................................................22
SECTION 5.4. AUTHORITY......................................................23
SECTION 5.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.....................23
SECTION 5.6. FINANCIAL STATEMENTS...........................................24
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS...........................24
SECTION 5.8. AGREEMENTS.....................................................24
SECTION 5.9. LITIGATION.....................................................25
SECTION 5.10. TAXES AND ASSESSMENTS.........................................25
SECTION 5.11. BROKERS.......................................................25
SECTION 5.12. DISCLOSURE....................................................25
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF MERGER SUB....................26
SECTION 6.1. ORGANIZATION AND QUALIFICATION.................................26
SECTION 6.2. ARTICLES OF INCORPORATION AND BYLAWS...........................26
SECTION 6.3. AUTHORITY. 26
SECTION 6.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.....................27
SECTION 6.5. DISCLOSURE.................................................... 27
ARTICLE VII COVENANTS..................................................... 27
SECTION 7.1. AFFIRMATIVE COVENANTS OF SWIFTCALL E&S AND THE
STOCKHOLDER AND THE AFFILIATE..................................27
SECTION 7.2. NEGATIVE COVENANTS OF SWIFTCALL E&S AND THE
STOCKHOLDER AND THE AFFILIATE..................................28
ARTICLE VIII ADDITIONAL AGREEMENTS.........................................30
SECTION 8.1. PREPARATION OF THE REGISTRATION STATEMENTS....................30
SECTION 8.2. CONSENTS AND APPROVALS; FILINGS AND NOTICES....................30
SECTION 8.3. ACCESS AND INFORMATION.........................................31
SECTION 8.4. CONFIDENTIALITY................................................31
SECTION 8.5. FURTHER ACTION; REASONABLE BEST EFFORTS........................32
SECTION 8.6. PUBLIC ANNOUNCEMENTS...........................................32
SECTION 8.7. NO SOLICITATION................................................32
SECTION 8.8. STOCK LISTING..................................................32
SECTION 8.9. EMPLOYEE MATTERS..............................................32
SECTION 8.10. BLUE SKY......................................................33
SECTION 8.11. ASSET TRANSFER................................................33
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SECTION 8.12. UPGRADE CREDITS...............................................33
SECTION 8.13. MINIMUM REVENUES..............................................33
SECTION 8.14. MAXIMUM DEBT..................................................34
SECTION 8.15. RACK SPACE....................................................34
ARTICLE IX. CLOSING CONDITIONS.............................................35
SECTION 9.1. CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB...........35
SECTION 9.2. CONDITIONS TO OBLIGATIONS OF SWIFTCALL E&S.....................37
ARTICLE X TERMINATION, AMENDMENT AND WAIVER................................38
SECTION 10.1. TERMINATION...................................................38
SECTION 10.2. EFFECT OF TERMINATION.........................................39
SECTION 10.3. AMENDMENT.....................................................39
SECTION 10.4. WAIVER........................................................39
ARTICLE XI SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES..........39
SECTION 11.1. SURVIVAL OF REPRESENTATIONS...................................39
SECTION 11.2. AGREEMENT OF THE STOCKHOLDER AND THE AFFILIATE
TO INDEMNIFY..................................................40
SECTION 11.3. AGREEMENT OF ACQUIROR TO INDEMNIFY............................40
SECTION 11.4. CONDITIONS OF INDEMNIFICATION.................................41
SECTION 11.5 LIMITATIONS....................................................42
SECTION 11.6. SATISFACTION OF CLAIMS........................................42
SECTION 11.7. NO RECOURSE AGAINST SWIFTCALL E&S.............................43
SECTION 11.8. REMEDIES CUMULATIVE...........................................43
ARTICLE XII GENERAL PROVISIONS.............................................44
SECTION 12.1. NOTICES.......................................................44
SECTION 12.2. CERTAIN DEFINITIONS...........................................45
SECTION 12.3. HEADINGS......................................................47
SECTION 12.4. SEVERABILITY..................................................47
SECTION 12.5. ENTIRE AGREEMENT..............................................47
SECTION 12.6. SPECIFIC PERFORMANCE..........................................48
SECTION 12.7. ASSIGNMENT....................................................48
SECTION 12.8. THIRD PARTY BENEFICIARIES.....................................48
SECTION 12.9. GOVERNING LAW.................................................48
SECTION 12.10. COUNTERPARTS.................................................48
SECTION 12.11. FEES AND EXPENSES............................................48
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is
entered into this 12th day of July, 1999, by and among EGLOBE, INC., a Delaware
corporation ("Acquiror"), EGLOBE MERGER SUB NO. 3, INC., a Virginia corporation
and a wholly-owned subsidiary of Acquiror ("Merger Sub"), SWIFTCALL EQUIPMENT
AND SERVICES (USA) INC., a Virginia corporation ("Swiftcall E&S"), SWIFTCALL
HOLDINGS (USA), LTD., a Bahamian corporation ("Swiftcall Bahamas" or
"Stockholder")), and ANDVILLE TECHNOLOGY (IRL) LIMITED, a corporation duly
organized under the laws of Republic of Ireland ("Andville" or "Affiliate").
WHEREAS, the parties hereto wish to provide that, upon the
terms and subject to the conditions of this Agreement, and in accordance with
the Virginia Stock Corporation Act ("Virginia Law"), Merger Sub will merge with
and into Swiftcall E&S.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. The Merger.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with Virginia Law, Merger Sub shall be merged with
and into Swiftcall E&S (the "Merger"). As a result of the Merger, the separate
corporate existence of Merger Sub, shall cease and Swiftcall E&S shall continue
as the surviving corporation of the Merger (the "Surviving Corporation") and
wholly owned subsidiary of Acquiror. The name of the Surviving Corporation
following the Merger shall be eGlobe Equipment and Services, Inc.
SECTION 1.2. Effective Time.
At the Closing (as defined in Section 1.6), the parties hereto
shall cause the Merger to be consummated by filing articles of merger (the
"Articles of Merger") for the Merger with the Virginia State Corporation
Commission, in such form as required by, and executed in accordance with the
relevant provisions of, Virginia Law, and in such form as approved by the
Stockholder and Acquiror prior to such filing (the date and time of the filing
and acceptance of the Articles of
Merger for the Merger or such subsequent dateor time specified therein being the
"Effective Time").
SECTION 1.3. Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of Virginia Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, except
as otherwise provided herein, all the property, rights, privileges, powers and
franchises of Merger Sub shall vest in the Surviving Corporation and all debts,
liabilities and duties of Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 1.4. Articles of Incorporation, Bylaws.
At the Effective Time, the articles of incorporation of Merger
Sub as in effect immediately prior to the Effective Time and as amended by the
Articles of Merger, shall be the articles of incorporation of the Surviving
Corporation and the bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation.
SECTION 1.5. Directors and Officers.
The directors of Merger Sub (or such other or additional
individuals as Acquiror may designate prior to the Closing) shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the articles of incorporation and bylaws of the Surviving Corporation; and the
officers of Merger Sub shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
SECTION 1.6. Closing.
Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place as promptly as practicable
after satisfaction of the latest to occur or, if permissible, waiver of the
conditions to the Merger set forth in Article IX hereof (the "Closing Date"), at
the offices of Acquiror, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇.▇. ▇▇▇▇▇, unless another date or place is agreed to in writing by the parties
hereto.
SECTION 1.7. Subsequent Actions.
If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or
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confirm of record or otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties, privileges, franchises
or assets of either of its constituent corporations acquired or to be acquired
by the Surviving Corporation as a result of, or in connection with, the Merger
or otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be directed and authorized to execute and deliver,
in the name and on behalf of either of such constituent corporations, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties,
privileges, franchises or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
ARTICLE II
CONVERSION OF SECURITIES;
EXCHANGE OF CERTIFICATES
SECTION 2.1. Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any
action on the part of the parties hereto or the holders of the following
securities:
(a) Conversion of Swiftcall E&S Stock. All of the shares of
common stock, par value $.01 per share (the "Swiftcall E&S Common Stock"), and
any other capital stock of Swiftcall E&S ("Swiftcall E&S Stock") issued and
outstanding immediately prior to the Effective Time (excluding any shares
described in Section 2.1(c)), shall be converted into and exchanged for, in the
aggregate the following (the "Purchase Price"): (i) an amount equal to
$1,645,000 (the "First Payment Amount") payable on December 3, 1999 (the "First
Payment Date") and (ii) an amount equal to $1,645,000 (the "Second Payment
Amount") payable on June 1, 2000 (the "Second Payment Date"), payable as
provided in Section 2.1(b), or in each case the Alternative Payment described in
Section 2.1(b), subject in each case to offset pursuant to Section 11.6 and to
allocation as provided in Section 2.1(e).
(b) Payment of Purchase Price. The First Payment Amount and
the Second Payment Amount shall be made, at the option of the Acquiror, in whole
or in part, (i) in cash, payable by electronic funds wire transfer, or (ii) in
stock, by issuing to the Stockholder the number of shares of common stock, par
value $.001 per share, of Acquiror ("Acquiror Common Stock"), equal to the First
Payment Amount or the Second Payment Amount, as the case may be, divided by the
Market Price (as defined below) of a share of Acquiror Common Stock (the "Stock
Equivalent Amount"); provided, however, that the Stockholder may elect, by
providing written notice of such election to Acquiror on or before November 2,
1999 (with respect to the First Payment Amount) or on or before May 1, 2000
(with respect to the Second
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Payment Amount), to receive, in lieu of the First Payment Amount or the Second
Payment Amount (whether such amount would be cash or stock or a combination
thereof), as the case may be, 226,897 shares of Acquiror Common Stock (the
"Alternative Payment"), which issuance (following such election by the
Stockholder) would be in full satisfaction of the First Payment Amount or the
Second Payment Amount, as the case may be. All amounts paid pursuant to this
Section 2.1(b) shall be subject to offset pursuant to Section 11.6.
(c) Treasury Stock. All shares of capital stock of Swiftcall
E&S held in the treasury of Swiftcall E&S immediately prior to the effective
time of the Merger shall be canceled and extinguished without any conversion
thereof and no cash, Acquiror Common Stock or other consideration shall be
delivered or deliverable in exchange therefor.
(d) Merger Sub Stock. Each share of common stock, par value
$.01 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one (1) duly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(e) Allocation. In the event that the Transfer Assets are
transferred to the Acquiror or a subsidiary thereof (as provided in Section
8.11), the Purchase Price shall be allocated among the Transfer Assets and the
Swiftcall E&S Stock in such proportions as reasonably determined by the
Acquiror. In the event of such an allocation, all references to the Stockholder
shall (except where the context requires otherwise) be deemed to refer to the
Stockholder and the Affiliate.
SECTION 2.2. Delivery of Certificates.
At the Closing, the Stockholder shall deliver to Acquiror
certificates evidencing all of the outstanding shares of Swiftcall E&S as of the
Effective Time, duly canceled, duly endorsed in blank or with duly executed
stock powers attached.
SECTION 2.3. Stock Transfer Books.
At the Effective Time, the stock transfer books of Swiftcall
E&S with respect to all shares of capital stock of Swiftcall E&S shall be closed
and no further registration of transfers of such shares of capital stock shall
thereafter be made on the records of Swiftcall E&S.
SECTION 2.4. Release of Stockholder and Affiliate Debt.
Prior to the Effective Time, the Stockholder and the Affiliate
shall cause all indebtedness of Swiftcall E&S to the Stockholder and the
Affiliate and their affiliates to be released without any liability to or
payment by Swiftcall E&S,
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or Swiftcall E&S recognizing any income for federal or state income tax
purposes. Such release shall be in form reasonably acceptable to Acquiror.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SWIFTCALL
E&S AND THE STOCKHOLDER AND THE AFFILIATE
Swiftcall E&S and the Stockholder and the Affiliate hereby
jointly and severally represent and warrant to Acquiror and Merger Sub as
follows:
SECTION 3.1. Organization and Qualification; Subsidiaries.
(a) Swiftcall E&S is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia.
Swiftcall E&S has the requisite power and authority to own, operate, lease and
otherwise to hold and operate its assets and properties and to carry on its
business as now being conducted and as proposed to be conducted and to perform
the terms of this Agreement and the transactions contemplated hereby. Swiftcall
E&S is duly qualified to conduct its business, and is in good standing, in each
jurisdiction in which the character of its properties owned, operated or leased
or the nature of its activities makes such qualification necessary. Swiftcall
E&S has no subsidiaries or any equity or similar interest in any entity.
(b) Swiftcall Bahamas is a corporation duly organized, validly
existing and in good standing under the laws of the Bahamas. Swiftcall Bahamas
has the requisite power and authority to own, operate, lease and otherwise to
hold and operate its assets and properties and to carry on its business as now
being conducted and as proposed to be conducted and to perform the terms of this
Agreement and the transactions contemplated hereby. Swiftcall Bahamas is duly
qualified to conduct its business, and is in good standing, in each jurisdiction
in which the character of its properties owned, operated or leased or the nature
of its activities makes such qualification necessary.
(c) Andville is a corporation duly organized, validly existing
and in good standing under the laws of the Republic of Ireland. Andville has the
requisite power and authority to own, operate, lease and otherwise to hold and
operate its assets and properties and to carry on its business as now being
conducted and as proposed to be conducted and to perform the terms of this
Agreement and the transactions contemplated hereby. Andville is duly qualified
to conduct its business, and is in good standing, in each jurisdiction in which
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary.
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SECTION 3.2. Articles of Incorporation and Bylaws.
Swiftcall E&S has heretofore delivered to Acquiror a complete
and correct copy of the articles of incorporation and bylaws of Swiftcall E&S as
amended to date. Such articles of incorporation, bylaws and other organizational
or governing documents are in full force and effect. Swiftcall E&S is not in
violation of any of the provisions of its articles of incorporation or bylaws or
other organizational or governing document.
SECTION 3.3. Capitalization.
(a) The authorized capital stock of Swiftcall E&S consists of
five thousand (5,000) shares of Swiftcall E&S Common Stock, of which five
thousand (5,000) shares are issued and outstanding; all shares of the issued and
outstanding shares of Swiftcall E&S Common Stock are owned beneficially and of
record by Swiftcall Bahamas, free and clear of all Encumbrances. There are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of Swiftcall E&S
or obligating Swiftcall E&S to issue or sell any shares of capital stock of, or
other equity interests in Swiftcall E&S including any securities directly or
indirectly convertible into or exercisable or exchangeable for any capital stock
or other equity securities of Swiftcall E&S. There are no outstanding
obligations of Swiftcall E&S to repurchase, redeem or otherwise acquire any
shares of its capital stock or make any investment (in the form of a loan,
capital contribution or otherwise) in any other person. All of the issued and
outstanding shares of Swiftcall E&S Common Stock have been duly authorized and
validly issued in accordance with applicable laws and are fully paid and
nonassessable and not subject to preemptive rights. No shares of capital stock
of Swiftcall E&S have been reserved for any purpose.
(b) Except as set forth in Schedule 3.3(b), Swiftcall E&S has
no outstanding indebtedness for borrowed money.
SECTION 3.4. Authority.
(a) The execution and delivery of this Agreement by Swiftcall
E&S and the consummation by Swiftcall E&S of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of Swiftcall E&S are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Swiftcall E&S and,
assuming the due authorization, execution and delivery by Acquiror and Merger
Sub, constitutes a legal, valid and binding obligation of Swiftcall E&S
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of
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general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
(b) The execution and delivery of this Agreement by the
Stockholder and the Affiliate and the consummation by the Stockholder and the
Affiliate of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Stockholder and the Affiliate are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Stockholder and the Affiliate and,
assuming the due authorization, execution and delivery by Acquiror and Merger
Sub, constitutes a legal, valid and binding obligation of the Stockholder and
the Affiliate enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
SECTION 3.5. No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 3.5(a), the execution and
delivery of this Agreement by Swiftcall E&S do not, and the performance by
Swiftcall E&S of its obligations under this Agreement will not, (i) conflict
with or violate the articles of incorporation or bylaws of Swiftcall E&S, (ii)
conflict with or violate any Law applicable to Swiftcall E&S or the Assets, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Swiftcall E&S is a party or
by which Swiftcall E&S is bound or by which any of the Assets is subject.
(b) Except as set forth in Schedule 3.5(b), the execution and
delivery of this Agreement by Swiftcall E&S does not, and the performance of
this Agreement by Swiftcall E&S will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Government
Entity, except for the filing and recordation of appropriate merger documents as
required by Virginia Law.
(c) Except as set forth in Schedule 3.5(c), the execution and
delivery of this Agreement by the Stockholder and the Affiliate do not, and the
performance by the Stockholder and the Affiliate of its obligations under this
Agreement will not, (i) conflict with or violate the articles of incorporation
or bylaws of any of the Stockholder and the Affiliate, (ii) conflict with or
violate any Law applicable to any of the Stockholder and the Affiliate or the
Assets, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under any
material note, bond, mortgage, indenture, contract,
7
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Stockholder and the Affiliate are a party or by which the
Stockholder and the Affiliate are bound or by which any of the Assets is
subject.
(d) Except as set forth in Schedule 3.5(d), the execution and
delivery of this Agreement by the Stockholder and the Affiliate do not, and the
performance of this Agreement by the Stockholder and the Affiliate will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Government Entity.
SECTION 3.6. Financial Statements.
(a) Swiftcall E&S has prepared and furnished to Acquiror (a)
the unaudited balance sheet of Swiftcall E&S as of the end of the fiscal year
ended December 31, 1998, and the fiscal quarter ended March 31, 1999, the
unaudited statement of income of Swiftcall E&S for such fiscal year and quarter
and the statement of cash flows for such fiscal quarter, if any, and (b) the
federal tax return of Swiftcall E&S for calendar year 1997. The financial
statements referred to in this Section 3.6(a) and the financial statements of
Swiftcall E&S provided to Acquiror pursuant to this Agreement (the "Financial
Statements") present fairly, in all material respects, the financial condition
of Swiftcall E&S as of the respective dates and the results of operations and
cash flows for the respective periods indicated and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except that such unaudited statements do
not contain all required footnotes). The tax return referred to in this Section
3.6(a) is correct and complete in all material respects. Except as reflected in
the unaudited balance sheet of Swiftcall E&S as of March 31, 1999 (the "Balance
Sheet Date") or as described on Schedule 3.6(a), Swiftcall E&S has incurred no
liabilities, contingent or absolute, matured or unmatured, known or unknown,
except for liabilities incurred in the ordinary course of business since the
Balance Sheet Date which would not have a Material Adverse Effect.
(b) Since the Balance Sheet Date, there has been no Material
Adverse Effect. Since the Balance Sheet Date, Swiftcall E&S has conducted its
business in the ordinary course, and Swiftcall E&S has not (a) paid any dividend
or distribution in respect of, or redeemed or repurchased any of, its capital
stock; (b) incurred loss of, or significant injury to, any of the Assets,
whether as the result of any natural disaster, labor trouble, accident, other
casualty, or otherwise; (c) incurred, or become subject to, any obligation or
liability (absolute or contingent, matured or unmatured, known or unknown),
except current liabilities incurred in the ordinary course of business; (d)
mortgaged, pledged or subjected to any Encumbrance any of the Assets; (e) sold,
exchanged, transferred or otherwise disposed of any of the Assets except in the
ordinary course of business, or canceled any debts or claims; (f) written down
the value of any Assets or written off as uncollectible any accounts receivable,
except write downs and write-offs in the
8
ordinary course of business, none of which, individually or in the aggregate,
are material; (g) entered into any transactions other than in the ordinary
course of business; (h) made any change in any method of accounting or
accounting practice; or (i) made any agreement to do any of the foregoing.
(c) The Stockholder and the Affiliate have, and as of the
Effective Time will have, sufficient assets and the ability to perform their
obligations pursuant to this Agreement.
SECTION 3.7. Accounts Receivable.
The accounts receivable of Swiftcall E&S shown on the balance
sheet described in Section 3.6 and on Schedule 3.7, if any, or thereafter
acquired by Swiftcall E&S, have been collected or are bona fide, arose in the
ordinary course of business, and to the knowledge of Swiftcall E&S or the
Stockholder and the Affiliate, are not subject to any disputes or offsets.
SECTION 3.8. Ownership and Condition of the Assets.
(a) Swiftcall E&S is the sole and exclusive legal and
equitable owner of and has good and marketable title to the respective Assets
(other than the Transfer Assets), as indicated on Schedule 3.8(a) and, except as
set forth in Schedule 3.8(a), such Assets are free and clear of all
Encumbrances. Schedule 3.8(a) lists all Assets, whether encumbered or not, and
indicates the owner and the extent of any Encumbrance on any encumbered Asset,
whether presently held or contemplated to be held as of the Closing Date (and in
such case the present holder). No person or Government Entity has an option to
purchase, right of first refusal or other similar right with respect to all or
any part of the Assets.
(b) Schedule 3.8(b) lists all assets to be transferred (the
"Asset Transfer") from the Stockholder and the Affiliate to Swiftcall E&S (or,
as provided in Section 8.11, to the Acquiror or a subsidiary) prior to the
Effective Time (the "Transfer Assets"), including without limitation the lease
with DSC Alcatel, dated May 11, 1998 (the "DSC Alcatel Lease"), and all rights
(the "DSC Alcatel Related Rights") of the Stockholder, Affiliate or any of their
respective affiliates relating to the DSC Alcatel Lease and the subject matter
thereof (including all rights arising from warranties and support agreements).
Following the Asset Transfer, Swiftcall E&S (or the Acquiror or its subsidiary,
as the case may be) shall be the sole and exclusive legal and equitable owner of
and have good and marketable title to the Transfer Assets and, except as set
forth in Schedule 3.8(b), such Transfer Assets shall be free and clear of all
Encumbrances.
(c) All of the personal property of Swiftcall E&S is in good
working order and repair, ordinary wear and tear excepted, and is suitable and
adequate for the uses for which it is intended or is being used.
9
(d) Schedule 3.8(d) lists all hardware, computer software,
know-how (and the manner in which such know-how is memorialized) and other
technology (collectively, the "Swiftcall E&S Technology") which Swiftcall E&S
owns or licenses and the nature of such entity's rights in each item of the
Swiftcall E&S Technology. The Swiftcall E&S Technology operates materially in
accordance with the product literature for such technology (a copy of which, to
the extent Swiftcall E&S has a copy, has provided to Acquiror), and Swiftcall
E&S and the Stockholder and the Affiliate are not aware of any significant
limitations or operational deficiencies to which the Swiftcall E&S Technology is
subject.
SECTION 3.9. Leases.
(a) Schedule 3.9(a) lists and briefly describes all Material
Leases under which Swiftcall E&S is lessee or lessor, or holds, manages or
operates any Asset owned by any third party, or of which any Asset is the
subject. Each such Material Lease is in full force and effect and constitutes a
legal, valid and binding obligation of, and is legally enforceable against, the
respective parties thereto and grants the leasehold estate it purports to grant
free and clear of all Encumbrances. All necessary governmental approvals with
respect thereto have been obtained, all necessary filings or registrations
therefor have been made, and there have been no threatened cancellations thereof
and are no outstanding disputes thereunder which have not been resolved. Except
as provided in Section 3.9(c), Swiftcall E&S has performed in all material
respects all obligations under all Material Leases required to be performed by
it to date. Except as provided in Section 3.9(c), no party is in default in any
material respect under any of the foregoing, and to the knowledge of Swiftcall
E&S, Swiftcall E&S and the Stockholder and the Affiliate, there has not occurred
any event which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute such a default.
(b) Schedule 3.9(b) lists and briefly describes all Material
Leases under which any Stockholder and Affiliate is lessee or lessor of any
Asset, or holds, manages or operates any Asset owned by any third party, or
under which any Asset owned by any Stockholder and Affiliate is held, operated
or managed by a third party. All such Material Leases will be transferred to
Swiftcall E&S prior to Closing without any breach or default occurring
thereunder (or payment or agreement to avoid such breach or default) and as of
the Closing no Stockholder and Affiliate shall have any interest in or claim
under such Material Lease. Each such Material Lease is in full force and effect
and constitutes a legal, valid and binding obligation of, and is legally
enforceable against, the respective parties thereto and grants the leasehold
estate it purports to grant free and clear of all Encumbrances. All necessary
governmental approvals with respect thereto have been obtained, all necessary
filings or registrations therefor have been made, and there have been no
threatened cancellations thereof and are no outstanding disputes thereunder.
Except as provided in Section 3.9(c), the Stockholder and Affiliate that is a
party
10
thereto has performed in all material respects all obligations under all
Material Leases required to be performed by it to date. Except as provided in
Section 3.9(c), no party is in default in any material respect under any of the
foregoing, and to the knowledge of Swiftcall E&S and the Stockholder and the
Affiliate, there has not occurred any event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute such a default.
(c) Except for arrearages of up to $181,091.66 under the DSC
Alcatel Lease, Swiftcall E&S and any Stockholder and Affiliate party thereto
have performed in all material respects all obligations under the DSC Alcatel
Lease and all documents relating to DSC Alcatel Related Rights required to be
performed by them to date. Except for arrearages of up to $181,091.66 under the
DSC Alcatel Lease, no party is in default in any material respect under the DSC
Alcatel Lease or such documents, and to the knowledge of Swiftcall E&S and the
Stockholder and the Affiliate, there has not occurred any event which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute such a default. Upon payment of arrearages of up
to $181,091.66 under the DSC Alcatel Lease (or their deferral as contemplated by
Section 9.1(k)) and its assignment to Swiftcall E&S (or the Acquiror or its
subsidiary, as the case may be) in the Asset Transfer, Swiftcall E&S and the
Stockholder and the Affiliate will be in full compliance with the DSC Alcatel
Lease and such documents, the DSC Alcatel Lease and the DSC Alcatel Related
Rights will be in full force and effect, the DSC Alcatel Lease will constitute a
legal, valid and binding obligation of, and be legally enforceable against,
Swiftcall E&S and DSC Alcatel and grant the leasehold estate it purports to
grant, and Swiftcall E&S will be entitled and vested with all of the DSC Alcatel
Related Rights, in each case free and clear of all Encumbrances, and all
necessary governmental and other approvals with respect thereto will have been
obtained, all necessary filings or registrations therefor will have been made,
and there will be no threatened cancellations thereof and no outstanding
disputes thereunder. The outstanding lease balance under the DSC Alcatel Lease
as of July 7, 1999 equals $1,227,207.56, not including arrearages of
$181,091.66.
SECTION 3.10. Other Agreements.
(a) Schedule 3.10(a) lists all Material Contracts to which
Swiftcall E&S is a party or by which Swiftcall E&S is bound, and Swiftcall E&S
has delivered to Acquiror true and correct copies of all such agreements. Each
such Material Contract is in full force and effect and constitutes a legal,
valid and binding obligation of, and is legally enforceable against, the
respective parties thereto. All necessary governmental approvals with respect
thereto have been obtained, all necessary filings or registrations therefor have
been made, and there have been no threatened cancellations thereof and are no
outstanding disputes thereunder. Swiftcall E&S has in all material respects
performed all the obligations thereunder required to be performed by Swiftcall
E&S to date. No party is in default in any material respect under any of the
agreements described in
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Schedule 3.10(a), and there has not occurred any event which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute such a default.
(b) Schedule 3.10(b) lists all Material Contracts to which any
Stockholder and Affiliate is a party or by which any Stockholder and Affiliate
is bound relating to the business of Swiftcall E&S or which will constitute an
Asset as of the Closing Date, and the Stockholder and the Affiliate have
delivered to Acquiror true and correct copies of all such agreements. Each such
Material Contract is in full force and effect and constitutes a legal, valid and
binding obligation of, and is legally enforceable against, the respective
parties thereto. All necessary governmental approvals with respect thereto have
been obtained, all necessary filings or registrations therefor have been made,
and there have been no threatened cancellations thereof and are no outstanding
disputes thereunder. Each Stockholder and Affiliate has in all material respects
performed all the obligations thereunder required to be performed by each
Stockholder and Affiliate to date. No party is in default in any material
respect under any of the agreements described in Schedule 3.10(b), and there has
not occurred any event which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) would constitute such a default.
Each such Material Contract will be transferred to Swiftcall E&S prior to
Closing without any breach or default occurring thereunder (or payment or
agreement to avoid such breach or default) and as of the Closing no Stockholder
and Affiliate shall have any interest in or claim under any such Material
Contract.
SECTION 3.11. Real Property.
Schedule 3.11 contains a list and brief description of all
leasehold interests in real estate, easements, rights to access, rights-of-way
and other real property interests which are owned, leased, used or held for use
(collectively, the "Real Property") by Swiftcall E&S. The Real Property
described in Schedule 3.11 constitutes all real property interests necessary to
conduct the business and operations of Swiftcall E&S as now conducted or which
will constitute Assets as of the Closing. Neither Swiftcall E&S nor any
Stockholder and Affiliate is aware of any easement or other real property
interest, other than those described in Schedule 3.11, that is required, or that
has been asserted by a Government Entity or other person to be required, to
conduct the business and operations of Swiftcall E&S. Swiftcall E&S has
delivered to Acquiror true and complete copies of all deeds, leases, easements,
rights-of-way and other instruments pertaining to the Real Property (including
any and all amendments and other modifications of such instruments). All Real
Property (including the improvements thereon) (i) is in good condition and
repair consistent with its present use, (ii) is (or at Closing will be)
available to Swiftcall E&S for immediate use in the conduct of its business and
operations, and (iii) to the knowledge of either of Swiftcall E&S or any
Stockholder
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and Affiliate, complies in all material respects with all applicable building or
zoning codes and the regulations of any Government Entity having jurisdiction.
SECTION 3.12. Environmental Matters.
(a) Swiftcall E&S has complied in all material respects and
such entities and the Assets are and at Closing will be in material compliance
with all Environmental Laws (as defined below). There are no pending or, to the
knowledge of any of Swiftcall E&S or any Stockholder and Affiliate, threatened
actions, suits, claims, legal proceedings or other proceedings based on, and
neither Swiftcall E&S nor the Stockholder and the Affiliate directly or
indirectly received any notice of any complaint, order, directive, citation,
notice of responsibility, notice of potential responsibility, or information
request from any Government Entity or any other person arising out of or
attributable to: (i) the current or past presence at any part of the Real
Property of Hazardous Materials (as defined below) or any substances that pose a
hazard to human health or an impediment to working conditions; (ii) the current
or past release or threatened release into the environment from the Real
Property (including, without limitation, into any storm drain, sewer, septic
system or publicly owned treatment works) of any Hazardous Materials or any
substances that pose a hazard to human health or an impediment to working
conditions; (iii) the off-site disposal of Hazardous Materials originating on or
from the Real Property; (iv) any facility operations or procedures of Swiftcall
E&S which do not conform to requirements of the Environmental Laws; or (v) any
violation of Environmental Laws at any part of the Real Property or otherwise
arising from Swiftcall E&S's activities involving Hazardous Materials.
(b) Swiftcall E&S has been duly issued, and currently has and
will maintain through the Effective Time, all permits, licenses, certificates
and approvals required to be maintained by Swiftcall E&S under any Environmental
Law with respect to the use or ownership of the Real Property by Swiftcall E&S.
A true and complete list of such permits, licenses, certificates and approvals,
all of which are valid and in full force and effect, is set out in Schedule
3.12. Except in accordance with such permits, licenses, certificates and
approvals, there has been no discharge of any Hazardous Materials or any other
material regulated by such permits, licenses, certificates or approvals.
(c) To the knowledge of Swiftcall E&S, none of the Real
Property contains any underground storage tanks, or underground piping
associated with such tanks, used currently or in the past for Hazardous
Materials.
(d) As used herein, these terms shall have the following
meanings:
(i) "Environmental Laws" means all applicable foreign,
federal, state and local laws (including the common law), rules, requirements
and regulations relating to pollution, the environment (including, without
limitation,
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ambient air, surface water, groundwater, land surface or subsurface strata) or
protection of human health as it relates to the environment including, without
limitation, laws and regulations relating to releases of Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials or relating to
management of asbestos in buildings.
(ii) "Hazardous Materials" means wastes, substances, or
materials (whether solids, liquids or gases) that are deemed hazardous, toxic,
pollutants, or contaminants, including without limitation, substances defined as
"hazardous substances", "toxic substances", "radioactive materials", or other
similar designations in, or otherwise subject to regulation under, any
Environmental Laws.
SECTION 3.13. Litigation.
Except as described in Schedule 3.13, there is no action,
suit, investigation, claim, arbitration or litigation pending or, to the
knowledge of any of Swiftcall E&S or any Stockholder and Affiliate, threatened
against or involving Swiftcall E&S, the Assets or the business and operations of
Swiftcall E&S, at law or in equity, or before or by any court, arbitrator or
Government Entity. Swiftcall E&S is not operating under or subject to any
judgment, writ, order, injunction, award or decree of any court, judge, justice
or magistrate, including any bankruptcy court or judge, or any order of or by
any Government Entity.
SECTION 3.14. Compliance with Laws; Licenses and Permits.
Swiftcall E&S has complied and is and at Closing will be in
compliance in all material respects with all laws, ordinances, regulations,
awards, orders, judgments, decrees and injunctions applicable to Swiftcall E&S,
the Assets and the business and operations of Swiftcall E&S, including all
federal, state and local laws, ordinances, regulations and orders pertaining to
employment or labor, safety, health, environmental protection, zoning and other
matters. Swiftcall E&S has obtained and holds all permits, licenses and
approvals (none of which has been modified or rescinded and all of which are in
full force and effect) from all governmental authorities necessary to conduct
the business and operations of Swiftcall E&S as now conducted and as proposed to
be conducted (including following all transfers of Assets contemplated to occur
prior to Closing) and to own, use and maintain the Assets.
SECTION 3.15. Intellectual Property.
(a) Swiftcall E&S owns, or is or will at Closing be licensed
or otherwise possess all necessary rights to use all patents, trademarks, trade
names, service marks, copyrights and any applications therefor, maskworks, net
lists,
14
schematics, technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs and applications (in both source code and
object code form), and tangible or intangible proprietary information or
material ("Intellectual Property") constituting any Asset or that are used or
marketed in the business of Swiftcall E&S as presently conducted and as proposed
to be conducted (including following all transfers of Assets contemplated to
occur prior to Closing) or included or proposed to be included in Swiftcall
E&S's products or proposed products.
(b) Schedule 3.15(b) lists all (i) patents, registered and
unregistered trademarks, trade names and service marks, registered and
unregistered copyrights, and maskworks, included in the Intellectual Property,
including the jurisdictions in which each such Intellectual Property right has
been issued or registered or in which any application for such issuance and
registration has been filed, (ii) licenses, sublicenses and other agreements as
to which Swiftcall E&S is a party and pursuant to which any person is authorized
to use any Intellectual Property, and (iii) licenses, sublicenses and other
agreements as to which Swiftcall E&S is a party and pursuant to which Swiftcall
E&S is (or at Closing will be) authorized to use any third party patents,
trademarks or copyrights, including software ("Third Party Intellectual Property
Rights") which are incorporated in, are, or form a part of any product of
Swiftcall E&S or any Asset.
(c) To the knowledge of any of Swiftcall E&S or any
Stockholder and Affiliate, there is no unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of
Swiftcall E&S any trade secret material to Swiftcall E&S or any Intellectual
Property right of any third party to the extent licensed by or through Swiftcall
E&S by any third party, including any employee or former employee of Swiftcall
E&S. Except as set forth in Schedule 3.15(c), Swiftcall E&S has not entered into
any agreement to indemnify any other person against any charge of infringement
of any Intellectual Property. Except as set forth in Schedule 3.15(c), there are
no royalties, fees or other payments payable by Swiftcall E&S to any person by
reason of the ownership, use, sale or disposition of Intellectual Property.
(d) Swiftcall E&S is not, nor will it be following the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement or as of the Closing Date, in breach of any license,
sublicense or other agreement relating to the Intellectual Property or Third
Party Intellectual Property Rights.
(e) Neither Swiftcall E&S nor any Stockholder and Affiliate
has (i) been served with process, is aware that any person is intending to serve
process on Swiftcall E&S in any suit, action or proceeding which involves a
claim of infringement of any patents, trademarks, service marks, copyrights or
violation of any trade secret or other proprietary right of any third party and
(ii) has not
15
brought any action, suit or proceeding for infringement of Intellectual Property
or breach of any license or agreement involving Intellectual Property against
any third party. The business of Swiftcall E&S as presently conducted and as
proposed to be conducted, and Swiftcall E&S's products or proposed products do
not infringe any patent, trademark, service ▇▇▇▇, copyright, trade secret or
other propriety right of any third party.
(f) Swiftcall E&S has, to the extent it deemed necessary and
appropriate, obtained or entered into written agreements with third parties in
connection with the disclosure to, or use or appropriation by, third parties, of
trade secret or proprietary Intellectual Property owned by Swiftcall E&S and not
otherwise protected by a patent, a patent application, copyright, trademark, or
other registration or legal scheme (the "Swiftcall Confidential Information"),
and does not know of any situation involving such third party use, disclosure or
appropriation of Swiftcall Confidential Information where the lack of such a
written agreement is likely to result in any Material Adverse Effect.
SECTION 3.16. Taxes and Assessments.
(a) Except as set forth in Schedule 3.16(a), Swiftcall E&S has
(or, in the case of returns becoming due after the date hereof and on or before
the Closing Date, will have prior to the Closing Date) duly filed all Swiftcall
E&S Tax Returns required to be filed by Swiftcall E&S on or before the Closing
Date with respect to all applicable Taxes, and no penalties or other charges are
or will become due with respect to any of Swiftcall E&S Tax Returns as the
result of the late filing thereof. All of the Swiftcall E&S Tax Returns are (or,
in the case of returns becoming due after the date hereof and on or before the
Closing Date, will be) true and complete in all material respects. Except as set
forth in Schedule 3.16(a), Swiftcall E&S: (i) has paid all Taxes due or claimed
to be due by any Taxing authority in connection with any of the Swiftcall E&S
Tax Returns; or (ii) has established (or, in the case of amounts becoming due
after the date hereof, prior to the Closing Date will have paid or established)
in the Financial Statements adequate reserves (in conformity with generally
accepted accounting principles consistently applied) for the payment of such
Taxes. The amounts set up as reserves for Taxes on the Financial Statements are
sufficient for the payment of all unpaid Taxes, whether or not such Taxes are
disputed or are yet due and payable, for or with respect to the period, and for
which Swiftcall E&S may be liable in its own right or as a transferee of the
Assets of, or successor to, any corporation, person, association, partnership,
joint venture or other entity.
(b) Except as set forth in Schedule 3.16(b), Swiftcall E&S has
not, nor will Swiftcall E&S have on the Closing Date, either in its own right
(including Taxes resulting from Swiftcall E&S having been (or ceasing to be)
included in any affiliated, consolidated, combined or unitary Swiftcall E&S Tax
Return) or as a transferee, any liability for Taxes payable for or with respect
to any periods prior to
16
and including the Closing Date in excess of the amounts actually paid prior to
the Closing Date or reserved for in the Financial Statements.
(c) There is no action, suit, proceeding, audit, investigation
or claim pending or, to the knowledge of Swiftcall E&S, threatened in respect of
any Taxes for which Swiftcall E&S is or may become liable, nor has any
deficiency or claim for any such Taxes been proposed, asserted or, to the
knowledge of Swiftcall E&S, threatened. Except as set forth in Schedule 3.16(c),
Swiftcall E&S has not consented to any waivers or extensions of any statute of
limitations with respect to any taxable year of Swiftcall E&S. Except as set
forth in Schedule 3.16(c), there is no agreement, waiver or consent providing
for an extension of time with respect to the assessment or collection of any
Taxes against Swiftcall E&S, and no power of attorney granted by Swiftcall E&S
with respect to any tax matters is currently in force.
(d) Swiftcall E&S has furnished to Acquiror true and complete
copies of all the Swiftcall E&S Tax Returns for the past two (2) years and all
written communications relating to any such Swiftcall E&S Tax Returns or to any
deficiency or claim proposed and/or asserted, irrespective of the outcome of
such matter, but only to the extent such items relate to tax years (i) which are
subject to an audit, investigation, examination or other proceeding, or (ii)
with respect to which the statute of limitations has not expired.
(e) Schedule 3.16(e) sets forth (i) all federal tax elections
that currently are in effect with respect to Swiftcall E&S and (ii) all
elections for purposes of foreign, state or local Taxes and all consents or
agreements for purposes of federal, foreign, state or local Taxes in each case
that reasonably could be expected to have a material effect on Swiftcall E&S or
any of the Assets or its operations after the Closing. Schedule 3.16(e) sets
forth all changes in accounting methods for Tax purposes at any time made,
agreed to, requested or required with respect to Swiftcall E&S within the past
five (5) years.
(f) Swiftcall E&S (i) is not and within the past five (5)
years has not been a partner in a partnership or an owner of an interest in an
entity treated as a partnership for federal income tax purposes; (ii) has not
executed or filed with the Internal Revenue Service any consent to have the
provisions of Section 341(f) of the Code apply to it; (iii) is not subject to
Section 999 of the Code; (iv) is not a passive foreign investment company as
defined in Section 1296(a) of the Code; (v) is not and has not been a United
States Real Property Holding Corporation within the meaning of Section 897(c)(2)
of the Code; and (vi) is not a party to an agreement relating to the sharing,
allocation or payment of, or indemnity for, Taxes.
(g) Except as set forth in Schedule 3.16(a), Swiftcall E&S has
withheld and paid all Taxes required to have been withheld and paid in
connection
17
with amounts paid to any employee, independent contractor, creditor, stockholder
or other third party.
(h) As used herein, the term "Taxes" shall mean all federal,
state, local and foreign taxes (including, without limitation, income, profit,
franchise, sales, use, VAT, real property, personal property, ad valorem,
excise, employment, social security and wage withholding taxes) and installments
of estimated taxes, assessments, deficiencies, levies, imports, duties, license
fees, registration, fees, withholdings or other similar charges of every kind,
character or description imposed by any governmental authorities, and any
interest, penalties or additions to tax imposed thereon or in connection
therewith.
(i) As used herein, the term "Swiftcall E&S Tax Returns" means
all federal, state, local, foreign and other applicable tax returns,
declarations of estimated tax reports required to be filed by Swiftcall E&S
(without regard to extensions of time permitted by law or otherwise).
SECTION 3.17. Employment Matters.
(a) Neither Swiftcall E&S nor any Employee Benefit Plan (as
such term is defined in ERISA) maintained by Swiftcall E&S to which Swiftcall
E&S has or has had the obligation to contribute in respect of any Swiftcall E&S
employees is in violation of any provisions of Law; no reportable event, within
the meaning of ERISA, ss. 4043(c)(1), (2), (3), (5), (6), (7) or (10), has
occurred and is continuing with respect to any such Employee Benefit Plan and no
prohibited transaction, within the meaning of Title I of ERISA, has occurred
with respect to any such Employee Benefit Plan. No Employee Benefit Plan
maintained by Swiftcall E&S is a Multiemployer Plan (as such term is defined in
ERISA), is subject to Title IV of ERISA or provides post-retirement medical,
life insurance or other benefits except to the extent required to comply with
the health care continuation coverage requirements of ERISA and the Code.
(b) There are no collective bargaining agreements applicable
to any Swiftcall E&S employees and Swiftcall E&S has no duty to bargain with any
labor organization with respect to any such persons. There is not pending any
demand for recognition or any other request or demand from a labor organization
for representative status with respect to any persons employed by Swiftcall E&S.
There are no strikes, work stoppages, grievance proceedings, union organization
efforts or other material controversies pending, or, to the knowledge of
Swiftcall E&S, threatened and (i) any current or former employees of Swiftcall
E&S or (ii) any union or other collective bargaining unit representing such
employees.
(c) Schedule 3.17(c) contains a true and complete list of
names, positions and rates of compensation of all directors, officers and
employees of Swiftcall E&S or who is expected to be an employee as of the
Closing Date showing
18
each such person's name, position, and annual remuneration, bonuses (except
bonuses which have not been determined for the current fiscal year) and fringe
benefits for the current fiscal year and the most recently completed fiscal year
(which will also be in effect as of the Closing Date). With respect to any
persons employed by Swiftcall E&S, to the knowledge of Swiftcall E&S, Swiftcall
E&S is in compliance with all Laws respecting employment conditions and
practices, has withheld all amounts required by any applicable Laws to be
withheld from wages or any Taxes or penalties for failure to comply with any of
the foregoing.
(d) With respect to any persons employed by Swiftcall E&S, (i)
Swiftcall E&S has not engaged in any unfair labor practice within the meaning of
the National Labor Relations Act or has violated any legal requirement
prohibiting discrimination on the basis of race, color, national origin, sex,
religion, age, marital status, or handicap in its employment conditions or
practices; and (ii) there are no pending or, to the knowledge of Swiftcall E&S,
threatened unfair labor practice charges or discrimination complaints relating
to race, color, national origin, sex, religion, age, marital status, or handicap
against Swiftcall E&S before any Government Entity nor, to the knowledge of
Swiftcall E&S, does any basis therefor exist.
SECTION 3.18. Transactions with Related Parties.
Except as set forth in Schedule 3.18(a), neither any present
or former officer, director, stockholder or person known by Swiftcall E&S or any
Stockholder and Affiliate to be an affiliate of Swiftcall E&S or any Stockholder
and Affiliate nor any person known by Swiftcall E&S to be an affiliate of any
such person, is currently (or will be at Closing) a party to any transaction or
agreement with Swiftcall E&S including, without limitation, any agreement
providing for the employment of, furnishing of services by, rental of Assets
from or to, or otherwise requiring payments to, any such officer, director,
stockholder or affiliate.
SECTION 3.19. Insurance.
Swiftcall E&S has made available to Acquiror copies of all
policies of title, property, fire, casualty, liability, life, workmen's
compensation and other forms of insurance of any kind relating to the Assets or
the business and operations of Swiftcall E&S. All such policies: (a) are in full
force and effect; (b) are sufficient for compliance by Swiftcall E&S with all
requirements of applicable Law and of all licenses, franchises and other
agreements to which Swiftcall E&S is a party; (c) are valid, outstanding, and
enforceable policies; and (d) insure against risks of the kind customarily
insured against and in amounts customarily carried by corporations similarly
situated and provide adequate insurance coverage for the Assets and the business
and operations of Swiftcall E&S.
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SECTION 3.20. Voting Requirements.
The affirmative vote of the holders of a majority of all
outstanding shares of Swiftcall E&S Common Stock to adopt this Agreement is the
only vote of the holders of any class or series of Swiftcall E&S capital stock
necessary to approve and adopt this Agreement and the transactions contemplated
hereby, including the Merger.
SECTION 3.21. Brokers.
Except as set forth on Schedule 3.21(a), no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Swiftcall E&S or any Stockholder
and Affiliate.
SECTION 3.22. Compliance with Foreign Corrupt Practices Act.
Swiftcall E&S is not in violation of the Foreign Corrupt
Practices Act of 1977, as amended, which prohibits businesses and business
people from providing any payment or gratuity to foreign officials in exchange
or obtaining or retaining business.
SECTION 3.23. Disclosure.
No representations or warranties by Swiftcall E&S or any
Stockholder and Affiliate in this Agreement and no statement or information
contained in the Schedules hereto or any certificate furnished or to be
furnished by Swiftcall E&S or any Stockholder and Affiliate to Acquiror or
Merger Sub pursuant to the provisions of this Agreement (taken collectively),
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was made, in order to make the statements herein or therein not
misleading.
ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER AND THE AFFILIATE
In addition to the representations and warranties made by the
Stockholder and the Affiliate in Article III hereof, the Stockholder and the
Affiliate hereby represent and warrant to Acquiror and Merger Sub as follows:
20
SECTION 4.1. Title to Swiftcall E&S Stock.
The Stockholder is and as of the Effective Time will be the
sole legal, beneficial and record owner of all shares of Swiftcall E&S Stock
outstanding. Since the date of issuance or sale of such shares of Swiftcall E&S
Stock to the Stockholder, there has been no event, or action taken (or failure
to take action) by or against the Stockholder, which has resulted or might
result in the creation of any Encumbrance on such shares. The Stockholder has,
and as of the Effective Time the Stockholder will have, good, valid and
marketable title to all shares of Swiftcall E&S Stock free and clear of all
Encumbrances, except such restrictions on the transfer of such shares as may be
applicable under federal and state securities laws, with full right and lawful
authority to sell and transfer the shares to Acquiror pursuant to this
Agreement. Immediately following the Effective Time, Acquiror will acquire good,
valid and marketable title thereto, free and clear of all Encumbrances, except
such restrictions on the transfer of such shares as may be applicable under
federal and state securities laws.
SECTION 4.2. No Registration Under the Securities Act.
The Stockholder understands that any shares of Acquiror Common
Stock which may be issued to the Stockholder under this Agreement have not been
and will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), when issued in reliance upon exemptions contained in the
Securities Act or interpretations thereof, and such shares of Acquiror Common
Stock can not be offered for sale, sold or otherwise transferred unless such
shares are so registered or qualify for exemption from registration under the
Securities Act.
SECTION 4.3. Acquisition for Investment.
The shares of Acquiror Common Stock which may be issued to the
Stockholder under this Agreement, if any, would be acquired by the Stockholder
in good faith solely (in each case) for the Stockholder's own account, for
investment and not with a view toward resale or other distribution within the
meaning of the Securities Act. Such shares will not be offered for sale, sold or
otherwise transferred by the Stockholder without either registration or
exemption from registration under the Securities Act.
SECTION 4.4. Evaluation of Merits and Risks of Investment.
The Stockholder has such knowledge and experience in financial
and business matters that the Stockholder is capable of evaluating the merits
and risks of the Stockholder's investment in any shares of Acquiror Common Stock
issued under this Agreement. The Stockholder understands and is able to bear any
21
economic risks associated with such investment (including, without limitation,
the necessity of holding such shares for an indefinite period of time, inasmuch
as the shares have not been registered under the Securities Act). The
Stockholder confirms that Acquiror has made available to the Stockholder and its
representatives and agents the opportunity to ask questions of the officers and
management employees of Acquiror about the business and financial condition of
Acquiror as the Stockholder or its representatives have requested.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to Swiftcall E&S and the
Stockholder and the Affiliate as follows:
SECTION 5.1. Organization and Qualification.
Acquiror is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Acquiror has the
requisite power and authority to own, lease and operate its assets and
properties, to carry on its business as now being conducted and to perform the
terms of this Agreement and the transactions contemplated hereby. Acquiror is
duly qualified to conduct its business, and is in good standing, in each
jurisdiction where the ownership or leasing of its properties or the nature of
its activities in connection with the conduct of its business makes such
qualification necessary.
SECTION 5.2. Certificate of Incorporation and Bylaws.
Acquiror has herewith delivered to Swiftcall E&S and the
Stockholder and the Affiliate a complete and correct copy of the certificate of
incorporation and the bylaws of Acquiror, each as amended to date. Such
certificate of incorporation and bylaws are in full force and effect. Acquiror
is not in violation of any of the provisions of its certificate of incorporation
or bylaws or other organizational or governing document.
SECTION 5.3. Capitalization.
The authorized capital stock of Acquiror consists of: (i) one
hundred million (100,000,000) shares of Acquiror Common Stock of which nineteen
million nine hundred nineteen thousand six hundred ninety-four (19,919,694)
shares are issued and outstanding on the date of execution of this Agreement;
and (ii) ten million (10,000,000) shares of preferred stock, par value $.001 per
share, of which; (a) one million (1,000,000) shares of Series A Participation
Preferred Stock are authorized, of which no shares are issued and outstanding;
(b) five hundred
22
thousand (500,000) shares of Series B Convertible Preferred Stock are
authorized, issued and outstanding; (c) two hundred (200) shares of 8% Series C
Cumulative Convertible Preferred Stock are authorized, of which no shares are
issued and outstanding; (d) one hundred twenty-five (125) shares of 8% Series D
Cumulative Convertible Preferred Stock are authorized, of which fifty (50)
shares are issued and outstanding; (e) one hundred twenty-five (125) shares of
8% Series E Cumulative Convertible Redeemable Preferred Stock are authorized, of
which fifty (50) shares are issued and outstanding; (f) 2,020,000 shares of
Series F Convertible Preferred Stock are authorized, of which 1,010,000 shares
are issued and outstanding; and (g) 1 share of 6% Series G Cumulative
Convertible Redeemable Preferred Stock is authorized, issued and outstanding.
Except as set forth in Schedule 5.3, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of Acquiror or obligating Acquiror to issue or
sell any shares of capital stock of, or other equity interests in Acquiror,
including any securities directly or indirectly convertible into or exercisable
or exchangeable for any capital stock or other equity securities of Acquiror.
Except as set forth in Schedule 5.3, there are no outstanding obligations of
Acquiror to repurchase, redeem or otherwise acquire any shares of its capital
stock or make any investment (in the form of a loan, capital contribution or
otherwise) in any other person.
SECTION 5.4. Authority.
The execution and delivery of this Agreement by Acquiror and
the consummation by Acquiror of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Acquiror are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Acquiror and, assuming the due
authorization, execution and delivery by Swiftcall E&S and the Stockholder and
the Affiliate, constitutes a legal, valid and binding obligation of Acquiror,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors' rights
generally and by the application of general principles of equity.
SECTION 5.5. No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 5.5, the execution and
delivery of this Agreement by Acquiror do not, and the performance by Acquiror
of its obligations under this Agreement will not, (i) conflict with or violate
the certificate of incorporation or bylaws of Acquiror, (ii) conflict with or
violate any Law applicable to Acquiror or its assets and properties, or (iii)
result in any breach of or constitute a default under any Acquiror Material
Contracts (as defined below).
23
(b) Except as set forth in Schedule 5.5, the execution and
delivery of this Agreement by Acquiror do not, and the performance of this
Agreement by Acquiror will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Government Entity, except for
the filing and recordation of appropriate merger documents as required by
Virginia Law.
SECTION 5.6. Financial Statements.
The audited consolidated balance sheet of Acquiror as of the
end of the nine-month fiscal year commencing April 1, 1998 and ending December
31, 1998, and the consolidated audited statement of income and cash flows for
such period (collectively, the "Audited Financial Statements") and the
consolidated unaudited balance sheet of the Acquiror as of March 31, 1999 and
the consolidated unaudited statements of income and cash flows for the
three-month period ended March 31, 1999 (the "Unaudited Financial Statements")
present fairly, in all material respects, the financial condition of Acquiror as
of the respective dates and the results of operations and cash flows for the
respective periods indicated and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except that such unaudited statements do not contain all
required footnotes and are subject to normal recurring year-end adjustments).
Except as reflected in the unaudited balance sheet of Acquiror as of March 31,
1999 (the "Acquiror Balance Sheet Date"), Acquiror has no liabilities,
contingent or absolute, matured or unmatured, known or unknown, except for
liabilities incurred in the ordinary course of business since the Acquiror
Balance Sheet Date that would not have an Acquiror Material Adverse Effect.
SECTION 5.7. Absence of Certain Changes or Events.
Except as set forth in Schedule 5.7, since March 31, 1999,
Acquiror has not incurred any material liability, except in the ordinary course
of its business consistent with its past practices, and Acquiror has conducted
its business in the ordinary course consistent with its past practices. Except
as set forth in Schedule 5.7, since March 31, 1999, there has not been any
change in the business, condition (financial or otherwise) or results of
operations of Acquiror, including any transaction, commitment, dispute, damage,
destruction or loss, whether or not covered by insurance, or other event of any
character (whether or not in the ordinary course of business) individually or in
the aggregate which has had, or is reasonably likely to have, an Acquiror
Material Adverse Effect.
SECTION 5.8. Agreements.
Except as set forth in Schedule 5.8, all existing agreements
that are or will be required to be filed as an exhibit to reports filed by the
Acquiror with the Securities and Exchange Commission (the "SEC") (collectively,
the "Acquiror
24
Material Contracts") are valid and in full force and effect on the date hereof,
and Acquiror has not (and has no knowledge that any party thereto has) violated
any provision of, or committed or failed to perform any act which with or
without notice, lapse of time or both would constitute a default under the
provisions of, any Acquiror Material Contract, except for defaults which would
not reasonably be expected to have an Acquiror Material Adverse Effect.
SECTION 5.9. Litigation.
Except as set forth in Schedule 5.9, there is no action, suit,
investigation, claim, arbitration or litigation pending or, to the knowledge of
Acquiror, threatened against or involving Acquiror or the business and
operations of Acquiror, at law or in equity, or before or by any court,
arbitrator or Government Entity. Acquiror is not operating under or subject to
any judgment, writ, order, injunction, award or decree of any court, judge,
justice or magistrate, including any bankruptcy court or judge, or any order of
or by any Government Entity.
SECTION 5.10. Taxes and Assessments.
Except as set forth in Schedule 5.10, Acquiror has (i) duly
and timely paid all Taxes which have become due and payable by it; (ii) Acquiror
has received no notice of, nor does Acquiror have any knowledge of, any notice
of deficiency or assessment or proposed deficiency or assessment from any taxing
Government Entity; and (iii) to Acquiror's knowledge, there are no audits
pending and there are no outstanding agreements or waivers by Acquiror that
extend the statutory period of limitations applicable to any federal, state,
local, or foreign tax returns or Taxes.
SECTION 5.11. Brokers.
Except as set forth on Schedule 5.11, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Acquiror.
SECTION 5.12. Disclosure.
No representations or warranties by Acquiror in this Agreement
and no statement or information contained in the Schedules hereto or any
certificate furnished or to be furnished by Acquiror to Swiftcall E&S and the
Stockholder and the Affiliate pursuant to the provisions of this Agreement
(taken collectively), contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
25
ARTICLE Vi
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Acquiror and Merger Sub jointly and severally represent and
warrant to Swiftcall E&S and the Stockholder and the Affiliate as follows:
SECTION 6.1. Organization and Qualification.
Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia. Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement. As of the date of this Agreement, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement, Merger Sub has not incurred,
directly or indirectly, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 6.2. Articles of Incorporation and Bylaws.
Merger Sub has heretofore made available to Swiftcall E&S and
the Stockholder and the Affiliate a complete and correct copy of the articles of
incorporation and the bylaws of Merger Sub, as amended to date. Such articles of
incorporation and bylaws are in full force and effect. Merger Sub is not in
violation of any of the provisions of its articles of incorporation or bylaws or
other organizational or governing document.
SECTION 6.3. Authority.
Merger Sub has the necessary corporate power and authority to
enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Merger Sub and the consummation by Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Merger Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Merger Sub and, assuming the due authorization, execution and
delivery by Swiftcall E&S, the Stockholder and the Affiliate and Acquiror,
constitutes a legal, valid and binding obligation of Merger Sub, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
26
SECTION 6.4. No Conflict; Required Filings and Consents.
(a) Except as set forth in Schedule 6.4, the execution and
delivery of this Agreement by Merger Sub do not, and the performance by Merger
Sub of its obligations under this Agreement will not, (i) conflict with or
violate the certificate of incorporation or bylaws of Merger Sub, (ii) conflict
with or violate any Law applicable to Merger Sub or its assets and properties,
or (iii) result in any breach of or constitute a default under any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Merger Sub is a party or by which Merger
Sub is bound, or by which any of its properties or assets is subject.
(b) Except as set forth in Schedule 6.4, the execution and
delivery of this Agreement by Merger Sub do not, and the performance of this
Agreement by Merger Sub will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Government Entity, except
for the filing and recordation of appropriate merger documents as required by
Virginia Law.
SECTION 6.5. Disclosure.
No representations or warranties by Merger Sub in this
Agreement and no statement or information contained in the Schedules hereto or
any certificate furnished or to be furnished by Merger Sub to Swiftcall E&S and
the Stockholder and the Affiliate pursuant to the provisions of this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was made, in order to make the statements herein or therein not
misleading.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants of Swiftcall E&S and the
Stockholder and the Affiliate.
Swiftcall E&S and the Stockholder and the Affiliate hereby
covenant and agree that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by Acquiror, (a) the
business of Swiftcall E&S and the Assets shall be operated in the usual and
ordinary course consistent with past practices and in accordance with applicable
Laws; (b) Swiftcall E&S shall preserve substantially intact its business
organization, rights and franchises, services of its respective principal
officers and key employees and relationships with suppliers, contractors,
distributors, customers and others having business relationships with it; (c)
Swiftcall E&S shall maintain
27
its properties and assets (including the Assets) in as good repair and condition
as at present, ordinary wear and tear excepted, and (d) Swiftcall E&S shall keep
insurance in full force and effect comparable in amount and scope of coverage to
that currently maintained.
Swiftcall E&S shall notify Acquiror promptly of any material
adverse change in the business, operations, prospects, condition (financial or
otherwise), assets or liabilities of Swiftcall E&S or any Asset, including,
without limitation, information (including, without limitation, copies of all
documents relating thereto) concerning all claims instituted, threatened or
asserted against or affecting Swiftcall E&S or its business or Assets at law or
in equity, before or by any court or governmental authority. Swiftcall E&S also
shall notify Acquiror promptly in writing of the occurrence of any event, or the
failure of any event to occur, prior to the Closing that results in a material
omission from, or material breach of, any of the covenants, representations or
warranties made by or on behalf of Swiftcall E&S or the Stockholder and the
Affiliate in this Agreement or the Disclosure Schedule. Swiftcall E&S shall keep
proper books of record and account in which true and complete entries will be
made of all transactions in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods, and shall supply to
Acquiror such documents (financial or otherwise) with respect thereto as
Acquiror shall reasonably request. Swiftcall E&S shall inform and discuss with
Acquiror on a regular and ongoing basis the management of the business of
Swiftcall E&S and Assets, including, without limitation, (i) any significant new
agreements or transactions proposed to be entered into, (ii) persons proposed to
be employed or terminated by Swiftcall E&S outside of the ordinary course of
business, and (iii) any other significant developments relating to the business
of Swiftcall E&S or the Assets.
SECTION 7.2. Negative Covenants of Swiftcall E&S and the Stockholder
and the Affiliate.
Except as expressly contemplated by this Agreement or
otherwise consented to in writing by Acquiror, from the date hereof until the
Effective Time, Swiftcall E&S and the Stockholder and the Affiliate shall cause
Swiftcall E&S not to do any of the following:
(a) (i) increase the compensation payable to or to become
payable to any of its directors, officers or employees, except for increases in
salary, wages or bonuses payable or to become payable in the ordinary course of
business and consistent with past practice; (ii) grant any severance or
termination pay to, or enter into or modify any employment or severance
agreement with, any of its directors, officers or employees; or (iii) adopt or
amend any employee benefit plan or arrangement, except as may be required by
applicable Law;
28
(b) declare, set aside or pay any dividend on, or make any
other distribution in respect of, any of its capital stock;
(c) (i) redeem, repurchase or otherwise reacquire any share of
its capital stock or any securities or obligations convertible into or
exchangeable for any share of its capital stock, or any options, warrants or
conversion or other rights to acquire any shares of its capital stock or any
such securities or obligations; (ii) effect any reorganization or
recapitalization; or (iii) split, combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities in respect
of, in lieu of, or in substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale (including the grant of any
Encumbrances) of, any shares of any class of its capital stock (including shares
held in treasury) or other equity securities, any securities or obligations
directly or indirectly convertible into or exercisable or exchangeable for any
such shares or securities, or any rights, warrants or options directly or
indirectly to acquire any such shares or securities; or (ii) amend or otherwise
modify the terms of any such securities, obligations, rights, warrants or
options in a manner inconsistent with the provisions of this Agreement or the
effect of which shall be to make such terms more favorable to the holders
thereof;
(e) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets of any other person (other than the purchase of inventory
in the ordinary course of business and consistent with past practice), or make
or commit to make any capital expenditures other than capital expenditures in
the ordinary course of business consistent with past practice;
(f) sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its assets except for dispositions of
inventory in the ordinary course of business and consistent with past practice;
(g) propose or adopt any amendments to its articles of
incorporation or bylaws;
(h) (i) change any of its methods of accounting in effect at
January 1, 1998, or (ii) make or rescind any express or deemed election relating
to taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ending
29
December 31, 1997, except, in the case of clause (i) or clause (ii), as may be
required by law or generally accepted accounting principles, consistently
applied;
(i) prepay, before the scheduled maturity thereof, any of its
long-term debt, or incur any obligation for borrowed money, whether or not
evidenced by a note, bond, debenture or similar instrument, other than trade
payables incurred in the ordinary course of business consistent with past
practices;
(j) enter into or modify in any material respect any agreement
which, if in effect as of the date hereof, would have been required to be
disclosed on Schedule 3.10, or enter into any agreement, understanding,
commitment or other arrangement (whether written or oral) with any affiliate or
any officer, director, employee or agent thereof; except as required to carry
out the Asset Transfer;
(k) take any action that would or could reasonably be expected
to result in any of its representations and warranties set forth in this
Agreement being untrue or in any of the conditions to the Merger set forth in
Article IX not being satisfied; or
(l) agree in writing or otherwise to do any of the foregoing.
ARTICLE VIIi
ADDITIONAL AGREEMENTS
Section 8.1. Preparation of the Registration Statements.
In the event that shares of Acquiror Common Stock are issued in payment
of the Purchase Price, as soon as reasonably practicable, with a goal of filing
within sixty (60) days, but in any event no later than one hundred twenty (120)
days after each of the First Payment Date or the Second Payment Date, as
applicable, at Acquiror's sole expense, Acquiror shall prepare and file with the
SEC one or more registration statements (the "Registration Statements")
registering such shares of Acquiror Common Stock for resale under the Securities
Act.
Acquiror shall maintain the effectiveness of each Registration
Statement until all Acquiror Common Stock issued pursuant to this Agreement and
registered pursuant to such Registration Statement has been disposed of by the
Stockholder and the Affiliate or such Acquiror Common Stock is otherwise
eligible for public resale under applicable securities laws.
SECTION 8.2. Consents and Approvals; Filings and Notices.
Swiftcall E&S and the Stockholder and the Affiliate shall use
reasonable efforts to as promptly as possible make all filings with, provide all
30
notices to and obtain all consents and approvals from third parties required to
be obtained by Swiftcall E&S and the Stockholder and the Affiliate in connection
with the transactions contemplated hereunder, including, without limitation, all
filings, with, notices to and consents and approvals from Government Entity and
other persons.
SECTION 8.3. Access and Information.
From the date hereof to the Effective Time, Swiftcall E&S and
the Stockholder and the Affiliate shall afford to Acquiror and its officers,
employees, accountants, consultants and legal counsel of Acquiror access during
normal business hours to the properties, books, records, contracts, facilities,
premises, and equipment relating to the Assets and Swiftcall E&S (including
without limitation, operating and financial information with respect to
Swiftcall E&S) as Acquiror may reasonably request.
SECTION 8.4. Confidentiality.
Notwithstanding anything to the contrary contained in this
Agreement, and subject only to any disclosure requirements which may be imposed
upon any party under applicable state or federal securities or antitrust laws,
it is expressly understood and agreed by the parties that, except with respect
to matters or information which are publicly available other than by reason of a
breach of this Section 8.4, each party hereto will, and will cause its officers,
employees, counsel, accountants and other authorized representatives to,
maintain strictly confidential all financial information, business records and
other non-public documents or information, concerning any party hereto, obtained
in connection with the transactions contemplated by this Agreement except as
otherwise consented to in writing by the other parties hereto or thereto. The
parties hereto shall use their best efforts to avoid disclosure of any of the
foregoing or undue disruption of any of the business operations or personnel of
the parties, and no party shall issue any press release or other public
announcement regarding the transactions contemplated hereby without the prior
written approval of each other party (such approval not to be unreasonably
withheld or delayed) unless otherwise required under applicable laws and
regulations, including SEC rules and regulations. In the event that the
transactions contemplated hereby shall not be consummated for any reason, each
party covenants and agrees that neither it nor any of its representatives shall
retain (other than information which is publicly available other than by reason
of a breach of this Section 8.4) any documents, lists or other writings of any
other party which it may have received or obtained in connection herewith or any
documents incorporating any of the information contained in any of the same (all
of which, and all copies thereof in the possession or control of the recipient
or its representatives, shall be returned to the party which provided the
information).
31
SECTION 8.5. Further Action; Reasonable Best Efforts.
Each of the parties shall use reasonable best efforts to take, or cause
to be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Laws or otherwise to consummate
and make effective the transactions contemplated by this Agreement as promptly
as practicable, including, without limitation, using its reasonable best efforts
to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Government Entities and parties to contracts with
Swiftcall E&S (or the Stockholder and the Affiliate, in the case of Assets held
by them) or Acquiror as are necessary for the transactions contemplated herein.
SECTION 8.6. Public Announcements.
Swiftcall E&S, the Stockholder and the Affiliate, and Acquiror
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the Merger and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Law.
SECTION 8.7. No Solicitation.
During the term of this Agreement, neither Swiftcall E&S, the
Stockholder and the Affiliate nor any of their affiliates or any person acting
on behalf of such party shall (a) solicit or favorably respond to indications of
interest from, or enter into negotiations with, any third party for any proposed
merger, consolidation, sale or acquisition of Swiftcall E&S, the Assets or any
capital stock of Swiftcall E&S or (b) furnish or cause to be furnished any
nonpublic information concerning Swiftcall E&S or the Assets to any person other
than in the ordinary course of business or pursuant to applicable Law and after
prior written notice to Acquiror.
SECTION 8.8. Stock Listing.
In the event that shares of Acquiror Common Stock are issued
in payment of the Purchase Price, Acquiror shall use reasonable best efforts, at
Acquiror's expense, to cause such shares of Acquiror Common Stock to be approved
for listing on the Nasdaq National Market, subject to official notice of
issuance, prior to the first date on which such shares of Acquiror Common Stock
are issued.
SECTION 8.9. Employee Matters.
Acquiror shall have the right, but not the obligation, to
cause the Surviving Corporation to offer employment following the Effective
Time, to any
32
number of the employees of Swiftcall E&S; provided, however, that nothing in
this Section 8.9 shall require the Acquiror or the Surviving Corporation to
offer such employment or require particular terms and conditions for any such
offer that is made voluntarily, and nothing in this Section 8.9 shall limit or
otherwise restrict the ability of Acquiror or the Surviving Corporation to
terminate, lay off or reduce the work hours with respect to the employment of
any such employees following any initial employment with the Surviving
Corporation or the Acquiror after the Effective Time.
SECTION 8.10. Blue Sky.
Acquiror shall use reasonable best efforts to obtain prior to
the Closing Date any necessary blue sky permits and approvals required to permit
the distribution of the shares of the Acquiror Common Stock, if any, to be
issued in accordance with the provisions of this Agreement.
SECTION 8.11. Asset Transfer.
The Stockholder and the Affiliate shall transfer good and
marketable title of the Transfer Assets to Swiftcall E&S prior to the Closing on
terms acceptable to the Acquiror in its sole discretion, provided, however, that
if the Acquiror so requests, the Transfer Assets shall be transferred at Closing
to the Acquiror or a subsidiary thereof designated by the Acquiror.
SECTION 8.12. Upgrade Credits.
To the extent that Andville, Swiftcall Bahamas or any other
Swiftcall entity has credits, discounts or other similar interests for future
switch or equipment upgrades from DSC Alcatel, the Stockholder and the Affiliate
will use reasonable best efforts to ensure that these will be transferred to
Swiftcall E&S prior to Closing.
SECTION 8.13. Minimum Revenues.
(a) Swiftcall Bahamas shall cause VIP Communications, Inc.
(formerly Swiftcall (USA) Inc.), a Virginia corporation wholly-owned by
Swiftcall Bahamas ("VIP"), to purchase services from Acquiror or its
subsidiaries of the type presently being purchased by VIP from IDX
International, Inc., a subsidiary of the Acquiror ("IDX"), at a price which is
the lower of (i) the average cost to IDX of the best two off-net routes (as
defined below) to each destination for transport, plus an Overhead Recovery
Factor (as defined below) or (ii) the best price offered to any other customer
of Acquiror or its subsidiaries. Initially the Overhead Recovery Factor shall
equal $0.0025 per minute. If requested by either Acquiror or VIP, the Overhead
Recovery Factor shall be re-calculated every three (3) months, such
re-
33
calculated cost to be the average of the cost per minute across the circuits
in the U.S. to Acquiror's U.S. carriers using an average cost of $600 per T1
circuit. For purposes of this Section 8.13(a), "off-net route" means a route
sending traffic from Acquiror's Reston, VA switch to Acquiror's U.S.-based
carriers.
(b) Such purchases shall result in revenue to Acquiror or its
subsidiaries of at least five hundred thousand dollars ($500,000) during the
period beginning on the Effective Date and ending on the twelve (12) month
anniversary date thereof (the "Revenue Date"). On the Second Payment Date, if
100% of such minimum revenue is not reached, the shortfall shall be subtracted
from the Second Payment Amount (or Alternative Payment, as applicable) and
placed in an escrow account ("Revenue Escrow Amount"), under the terms of the
Escrow Agreement (as defined in Section 11.6 hereto). In the event that 100% of
such minimum revenue amount is not reached by the Revenue Date (a "Revenue
Shortfall"), the shortfall shall constitute a claim (a "Revenue Shortfall
Claim") which shall be satisfied from the Revenue Escrow Amount. To the extent
there is no Revenue Shortfall Claim, the Revenue Escrow Amount shall be paid on
the Revenue Date.
SECTION 8.14. Maximum Debt.
In the event that Swiftcall E&S's total indebtedness and
liabilities on the Closing Date ("Indebtedness"), including, but not limited to,
indebtedness in connection with the Assets, plus the indebtedness owed by VIP to
IDX and to Acquiror, exceeds $1,815,000, the excess shall constitute a claim (an
"Excess Debt Claim") which shall be paid in cash by the Stockholder on the
Closing Date, or if not so paid, shall be satisfied by offset against the First
Payment Amount. In the event that Swiftcall E&S's Indebtedness plus VIP's
indebtedness to IDX and to Acquiror on the Closing Date is less than $1,815,000,
the difference between the amount and $1,815,000 shall be added to the First
Payment Amount (or Alternative Payment, as applicable).
SECTION 8.15. Rack Space.
Acquiror shall ensure that the Surviving Corporation makes
available, free of charge, to VIP the use of up to two (2) racks designated by
the Surviving Corporation on an as-available basis, for a period of twenty-four
(24) months beginning on the Effective Date.
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ARTICLE IX.
CLOSING CONDITIONS
SECTION 9.1. Conditions to Obligations of Acquiror and Merger Sub.
The obligations of Acquiror and Merger Sub to effect the
Merger and the other transactions contemplated in this Agreement are also
subject to the following conditions, any or all of which may be waived, in whole
or in part, to the extent permitted by applicable law, in writing by Acquiror
and Merger Sub:
(a) Representations and Warranties. The representations and
warranties of Swiftcall E&S and the Stockholder and the Affiliate made in this
Agreement shall be true and correct in all material respects, on and as of the
Effective Time with the same effect as though such representations and
warranties had been made on and as of the Effective Time (provided that any
representation or warranty contained herein that is qualified by a materiality
standard shall not be further qualified hereby), except for representations and
warranties that speak as of a specific date or time other than the Effective
Time (which need only be true and correct in all material respects as of such
date or time). Acquiror shall have received a certificate of the president or
vice-president of Swiftcall E&S and a certificate of the Stockholder and the
Affiliate to that effect.
(b) Agreements and Covenants. The agreements and covenants of
Swiftcall E&S and the Stockholder and the Affiliate required to be performed on
or before the Effective Time shall have been performed in all material respects.
Acquiror shall have received a certificate of the president or vice-president of
Swiftcall E&S and a certificate of the Stockholder and the Affiliate to that
effect.
(c) No Order. No Government Entity or federal or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in any
case which is in effect and which prevents or prohibits consummation of the
Merger or any other transactions contemplated in this Agreement; provided,
however, that the parties shall use their reasonable efforts to cause any such
decree, judgment, injunction or other order to be vacated or lifted, and any
such action or proceeding to be dismissed.
(d) Legal Proceedings. No action or proceeding before any
Government Entity shall have been instituted or threatened (and not subsequently
settled, dismissed, or otherwise terminated) which is reasonably expected to
restrain, prohibit or invalidate the Merger or other transactions contemplated
by
35
this Agreement other than an action or proceeding instituted or threatened by
Acquiror.
(e) No Material Adverse Effect. Since the date of this
Agreement, no Material Adverse Effect shall have occurred and be continuing.
(f) Required Consents. Swiftcall E&S and the Stockholder and
the Affiliate shall have delivered to Acquiror at or before Closing all
consents, assignments or notices necessary to be obtained or made by Swiftcall
E&S and the Stockholder and the Affiliate in connection with the transactions
contemplated by this Agreement.
(g) Appraisal. Acquiror shall have received an appraisal of
the value of the Assets from American Appraisal Associates reasonably
satisfactory to Acquiror.
(h) Merger Filings. Evidence of the filing of the Articles of
Merger with the Virginia State Corporation Commission.
(i) Swiftcall E&S Stock Certificates. Delivery by Swiftcall
Bahamas of the Swiftcall E&S Stock certificates as provided in Section 2.2
hereof.
(j) Asset Transfer. The Asset Transfer shall have been
completed no later than three (3) days prior to the Effective Time (or at the
Effective Time, in the case of an Asset Transfer to the Acquiror or its
subsidiary) and all documentation effecting such Asset Transfer shall have been
reasonably approved in writing by Acquiror. The Asset Transfer documentation
shall be delivered to the Acquiror no later than seven (7) days prior to the
Asset Transfer.
(k) DSC Alcatel Switch. Acquiror shall have reached an
agreement with DSC Alcatel to waive all outstanding defaults under the DSC
Alcatel Lease and documents evidencing the DSC Alcatel Related Rights, which
other than such waivers (and changes acceptable to Acquiror in its discretion)
shall be in the form provided to Acquiror prior to the date hereof, and shall
have reached an agreement satisfactory to Acquiror in its discretion with DSC
Alcatel to defer payment of an agreed portion of the amounts in arrears under
the lease with DSC Alcatel as of the Closing Date until the date on which the
final monthly payment under the lease with DSC Alcatel (as provided to Acquiror
prior to the date hereof) is due and to ensure that Acquiror or the Surviving
Corporation has full benefit of and entitlement to the DSC Alcatel Related
Rights.
(l) Other Closing Documents. Swiftcall E&S and the Stockholder
and the Affiliate shall have executed and/or delivered to Acquiror such
additional documents, certificates and agreements as Acquiror may reasonably
request.
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SECTION 9.2. Conditions to Obligations of Swiftcall E&S.
The obligations of Swiftcall E&S and the Stockholder and the
Affiliate to effect the Merger and the other transactions contemplated in this
Agreement are also subject to the following conditions any or all of which may
be waived, in whole or in part, to the extent permitted by applicable law in
writing by Swiftcall E&S:
(a) Representations and Warranties. The representations and
warranties of Acquiror and Merger Sub made in this Agreement shall be true and
correct in all material respects, on and as of the Effective Time with the same
effect as though such representations and warranties had been made on and as of
the Effective Time (provided that any representation or warranty contained
herein that is qualified by a materiality standard shall not be further
qualified hereby), except for representations and warranties that speak as of a
specific date or time other than the Effective Time (which need only be true and
correct in all material respects as of such date or time). The Stockholder and
the Affiliate shall have received a certificate of the Chief Executive Officer
or Chief Financial Officer of Acquiror and Merger Sub to that effect.
(b) Agreements and Covenants. The agreements and covenants of
Acquiror and Merger Sub required to be performed on or before the Effective Time
shall have been performed in all material respects. The Stockholder and the
Affiliate shall have received a certificate of the Chief Executive Officer or
Chief Financial Officer of Acquiror and Merger Sub to that effect.
(c) No Order. No Government Entity or federal or state court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in any
case which is in effect and which prevents or prohibits consummation of the
Merger or any other transactions contemplated in this Agreement; provided,
however, that the parties shall use their reasonable efforts to cause any such
decree, judgment, injunction or other order to be vacated or lifted, and any
such action or proceeding to be dismissed.
(d) Legal Proceedings. No action or proceeding before any
Government Entity shall have been instituted or threatened (and not subsequently
settled, dismissed, or otherwise terminated) which is reasonably expected to
restrain, prohibit or invalidate the Merger or other transactions contemplated
by this Agreement other than an action or proceeding instituted or threatened by
Swiftcall E&S or the Stockholder and the Affiliate.
(e) Merger Filings. Evidence of the filing of the Articles of
Merger with the Virginia State Corporation Commission.
37
(f) Other Closing Documents. Acquiror shall have executed
and/or delivered to the Stockholder and the Affiliate such additional documents,
certificates and agreements as Swiftcall E&S and the Stockholder and the
Affiliate may reasonably request.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1. Termination.
This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual written consent of Acquiror and Swiftcall E&S
and the Stockholder and the Affiliate;
(b) by Acquiror if Swiftcall E&S or the Stockholder and the
Affiliate shall have breached any of its or their representations, warranties,
covenants or agreements contained in this Agreement, or any such representation
or warranty shall have become untrue, in any such case such that the conditions
precedent to the obligations of Acquiror to close specified in Section 9.1 will
not be satisfied;
(c) by Swiftcall E&S and the Stockholder and the Affiliate if
Acquiror or Merger Sub shall have breached any of their representations,
warranties, covenants or agreements contained in this Agreement, or any such
representation or warranty shall have become untrue, in any such case such that
the conditions precedent to the obligation of Swiftcall E&S and the Stockholder
and the Affiliate to close specified in Section 9.2 will not be satisfied;
(d) by either Acquiror or Swiftcall E&S and the Stockholder
and the Affiliate if any decree, permanent injunction, judgment, order or other
action by any court of competent jurisdiction or any Government Entity
preventing or prohibiting consummation of the Merger shall have become final and
nonappealable; or
(e) by either Acquiror or Swiftcall E&S and the Stockholder
and the Affiliate if the Effective Time has not occurred on or prior to July 31,
1999 (unless such date shall be extended by the mutual written consent of the
parties); provided, that the right to terminate this Agreement under this
Section 10.1(e) shall not be available to any party whose breach of
representations, warranties, covenants or agreements contained in this Agreement
has been the cause of, or resulted in, the failure of the Closing to occur by
such date or the inability of such condition to be satisfied.
38
SECTION 10.2. Effect of Termination.
If this Agreement is terminated pursuant to Section 10.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party hereto, except that the provisions of
Sections 8.4 and 12.11 shall not be extinguished but shall survive such
termination, and nothing herein shall relieve any party from liability for any
breach hereof and each party shall be entitled to any remedies at law or in
equity for such breach.
SECTION 10.3. Amendment.
This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 10.4. Waiver.
At any time prior to the Effective Time the parties may (a)
extend the time for the performance of any of the obligations or other acts of
the other party, (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant to
this Agreement and (c) waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or under any other
instrument or document given in connection with or pursuant to this Agreement
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
SECTION 11.1. Survival of Representations.
All representations, warranties, covenants, indemnities and
other agreements made by any party to this Agreement herein or pursuant hereto,
shall be deemed made on and as of the Effective Time as though such
representations, warranties, covenants, indemnities and other agreements were
made on and as of such date, and all such representations, warranties,
covenants, indemnities and other agreements shall survive the Effective Time and
any investigation, audit or inspection at any time made by or on behalf of any
party hereto, as follows:
39
(a) unless otherwise specified below, representations and warranties shall
survive for a period of one (1) year after the Effective Time; (b)
representations and warranties with respect to Taxes shall survive until the
expiration of the applicable statute of limitations; (c) representations,
warranties and covenants for matters relating to title to the capital stock of
Swiftcall E&S and the Assets shall continue in full force and effect in
perpetuity; and (d) the covenants and agreements in this Article XI and the
covenants and agreements which by their terms survive the Effective Time shall
continue in full force and effect until fully discharged. Notwithstanding
anything herein to the contrary, any representation, warranty, covenant or
agreement which is the subject of a claim which is asserted in writing prior to
the expiration of the applicable period set forth above shall survive with
respect to such claim or dispute until the final resolution thereof.
SECTION 11.2. Agreement of the Stockholder and the Affiliate to
Indemnify.
Subject to the conditions and provisions of this Article XI,
the Stockholder and the Affiliate hereby agree, jointly and severally, to
indemnify, defend and hold harmless Acquiror and its officers, directors,
employees, agents and representatives (collectively, the "Acquiror Indemnified
Persons") from and against and in respect of all Losses resulting from, imposed
upon or incurred by the Acquiror Indemnified Persons, directly or indirectly, by
reason of or resulting from any misrepresentation or breach of any
representation or warranty, or noncompliance with any conditions or other
agreements including, without limitation, failure to obtain consents required in
Sections 3.5, and failure to complete the Asset Transfer as provided for in
Sections 8.11 and 9.1 hereof, given or made by it, Swiftcall E&S or the
Stockholder and the Affiliate in this Agreement or in any document, certificate
or agreement furnished by or on behalf of any such party pursuant to this
Agreement. It shall be a condition to the right of any Acquiror Indemnified
Person to indemnification pursuant to this Section that such Acquiror
Indemnified Person shall assert a claim for such indemnification within the
applicable survival periods set forth in Section 11.1 hereof.
SECTION 11.3. Agreement of Acquiror to Indemnify.
Subject to the conditions and provisions of this Article XI,
Acquiror hereby agrees to indemnify, defend and hold harmless the Stockholder
and the Affiliate from and against and in respect of all Losses resulting from,
imposed upon or incurred by the Stockholder and the Affiliate, directly or
indirectly, by reason of or resulting from any misrepresentation or breach of
any representation or warranty, or noncompliance with any conditions or other
agreements, given or made by Acquiror or Merger Sub in this Agreement or in any
document, certificate or agreement furnished by or on behalf of Acquiror or
Merger Sub pursuant to this Agreement. It shall be a condition to the rights of
the Stockholder and the Affiliate
40
to indemnification pursuant to this Section that such party shall assert a claim
for such indemnification within the applicable survival periods set forth in
Section 11.1 hereof.
SECTION 11.4. Conditions of Indemnification.
The obligations and liabilities of the Stockholder and the
Affiliate and Acquiror hereunder with respect to their respective indemnities
pursuant to this Article XI, resulting from any Third Party Claim shall be
subject to the following terms and conditions:
(a) The party seeking indemnification (the "Indemnified
Party") must give the other party (the "Indemnifying Party"), notice of any
Third Party Claim which is asserted against, imposed upon or incurred by the
Indemnified Party and which may give rise to liability of the Indemnifying Party
pursuant to this Article XI, stating (to the extent known or reasonably
anticipated) the nature and basis of such Third Party Claim and the amount
thereof; provided that the failure to give such notice shall not affect the
rights of the Indemnified Party hereunder except to the extent that the
Indemnifying Party shall have suffered actual material damage by reason of such
failure.
(b) Subject to Section 11.4(c) below, the Indemnifying Party
shall have the right to undertake, by counsel or other representatives of its
own choosing, the defense of such Third Party Claim at the Indemnifying Party's
risk and expense.
(c) In the event that (i) the Indemnifying Party shall elect
not to undertake such defense, (ii) within a reasonable time after notice from
the Indemnified Party of any such Third Party Claim, the Indemnifying Party
shall fail to undertake to defend such Third Party Claim, or (iii) there is a
reasonable probability that such Third Party Claim may materially and adversely
affect the Indemnified Party other than as a result of money damages or other
money payments, then the Indemnified Party (upon further written notice to the
Indemnifying Party) shall have the right to undertake the defense, compromise or
settlement of such Third Party Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the Indemnifying
Party. In the event that the Indemnified Party undertakes the defense of a Third
Party Claim under this Section 11.4(c), the Indemnifying Party shall pay to the
Indemnified Party, in addition to the other sums required to be paid hereunder,
the reasonable costs and expenses incurred by the Indemnified Party in
connection with such defense, compromise or settlement as and when such costs
and expenses are so incurred.
(d) Anything in this Section 11.4 to the contrary
notwithstanding, (i) the Indemnifying Party shall not, without the Indemnified
Party's written
41
consent, settle or compromise such Third Party Claim or consent to entry of any
judgment which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such Third Party Claim in form and substance reasonably
satisfactory to the Indemnified Party; (ii) in the event that the Indemnifying
Party undertakes the defense of such Third Party Claim, the Indemnified Party,
by counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to participate in the defense, compromise or
settlement thereof and each party and its counsel and other representatives
shall cooperate with the other party and its counsel and representatives in
connection therewith; and (iii) in the event that the Indemnifying Party
undertakes the defense of such Third Party Claim, the Indemnifying Party shall
have an obligation to keep the Indemnified Party informed of the status of the
defense of such Third Party Claim and furnish the Indemnified Party with all
documents, instruments and information that the Indemnified party shall
reasonably request in connection therewith.
SECTION 11.5 Limitations.
Anything contained herein to the contrary notwithstanding, no claim
shall be made by Acquiror under this Article XI until the aggregate of any such
damages exceeds $50,000; provided, however, if the aggregate of such damage
exceeds $50,000, the Stockholder and the Affiliate shall be liable for all such
damages, not just the excess over $50,000; provided, further, that this
limitation shall not apply to any claims relating to matters described in
Section 3.8(a), 3.18, 3.21, 4.1, 8.10, 8.11, 8.12, 8.13 or 8.14, hereof. All
claims made by Acquiror under this Article XI shall be satisfied, and shall be
subject to the limitations, as provided in Section 11.6.
SECTION 11.6. Satisfaction of Claims.
(a) Each claim for indemnification by Acquiror Indemnified
Persons, including under this Article XI, that is agreed to or approved by the
Stockholder prior to the Second Payment Date; any Revenue Shortfall Claim; any
Unpaid Taxes Claim; and any Excess Debt Claim shall be satisfied by offset
against the First Payment Amount (or, if such claim is not made (or agreed to or
approved, if applicable) prior to the First Payment Date, against the Second
Payment Amount).
(b) In the event one or more claims for indemnification made
by Acquiror Indemnified Persons (which claims shall be made in good faith,
providing a detailed explanation of the basis of such claim), including under
this Article XI, are not agreed to or approved by the Stockholder prior to the
Second Payment Date, Acquiror may withhold a portion of the Second Payment equal
to the lesser of the aggregate amount of such claims and $500,000, and place it
into escrow under the terms of the Escrow Agreement (the "Escrow Agreement"), a
form of which is
42
attached hereto as Exhibit A, to be entered into in such event at the Second
Payment Date by and among Acquiror, Swiftcall E&S, the Stockholder and the
Escrow Agent named therein (the "Escrow Agent"). The amount deposited into
escrow (the "Escrow Amount") shall be held by the Escrow Agent in escrow until
the final resolution thereof. The Acquiror shall have the option to deliver the
Escrow Amount in Acquiror Common Stock (the number of shares of which shall be
determined in the same manner as the Second Payment Amount) or cash. Any
Acquiror Common Stock delivered as part of the Escrow Amount and ultimately
applied toward satisfaction of any claim against the escrow shall be valued, for
such purpose, at the Market Price of the Acquiror Common Stock on the Second
Payment Date.
(c) Nothing in this Article XI shall preclude any Acquiror
Indemnified Person from pursuing the resolution of an indemnification claim in
any federal or state court, nor shall any Acquiror Indemnified Person be
required to pursue such indemnification claim through arbitration or any other
alternative dispute resolution process. However, in the event any amounts are
placed in escrow following a claim, the claiming party shall pursue resolution
of such claim diligently with a view to obtaining a prompt resolution of the
matter.
(d) In the event of an allocation under Section 2.1(e), any
claim shall be allocated against, and deducted from, the First Payment Amount
and the Second Payment Amount in the same proportions as contemplated by the
allocation of the Purchase Price under Section 2.1(e).
SECTION 11.7. No Recourse Against Swiftcall E&S.
The Stockholder and the Affiliate hereby irrevocably waive any
and all right to recourse against Swiftcall E&S with respect to any
misrepresentation or breach of any representation, warranty or indemnity, or
noncompliance with any conditions or covenants, given or made by the Stockholder
and the Affiliate or Swiftcall E&S in this Agreement or any document,
certificate or agreement entered into or delivered pursuant hereto. The
Stockholder and the Affiliate shall not be entitled to contribution from,
subrogation to or recovery against Swiftcall E&S with respect to any liability
of the Stockholder and the Affiliate or Swiftcall E&S that may arise under or
pursuant to this Agreement or the transactions contemplated hereby.
SECTION 11.8. Remedies Cumulative.
The remedies provided herein shall be cumulative and shall not
preclude the assertion by the parties hereto of any other rights or the seeking
of any other remedies against the other, or their respective successors or
assigns.
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ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1. Notices.
All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to Acquiror or Merger Sub:
eGlobe, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel and Vice President of
Corporate Development
(b) If to Swiftcall E&S or Stockholder and the Affiliate:
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ Peabody LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
44
SECTION 12.2. Certain Definitions.
For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
(b) "Assets" shall mean the assets, rights and properties,
whether owned, leased or licensed, real, personal or mixed, tangible or
intangible, including without limitation the Transfer Assets, that are used,
useful or held for use in connection with the business of Swiftcall E&S or are
contemplated to be so held following the Asset Transfer or as of the Closing
Date, or transferred pursuant to the Asset Transfer to the Acquiror or a
subsidiary thereof, as contemplated by Section 8.11.
(c) "Acquiror Material Adverse Effect" means any material
adverse effect on the assets, business, financial condition or results of
operations of Acquiror and its subsidiaries, taken as a whole.
(d) "Closing Price" of each share of Acquiror Common Stock
means the composite closing price of the sales of the Acquiror Common Stock on
all securities exchanges on which such security may at the time be listed (as
reported in The Wall Street Journal), or, if there has been no sale on any such
exchange on any day, the average of the highest bid and lowest asked prices of
the Acquiror Common Stock on all such exchanges at the end of such day, or, if
such security is not so listed, the closing price (or last price, if applicable)
of sales of the Acquiror Common Stock in the Nasdaq National Market (as reported
in The Wall Street Journal) on such day, or if such security is not quoted in
the Nasdaq National Market but is traded over-the-counter, the average of the
highest bid and lowest asked prices on such day in the over-the-counter market
as reported by the National Quotation Bureau Incorporated, or any similar
successor organization.
(e) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise.
(f) "Encumbrances" means mortgages, liens, pledges,
encumbrances, security interests, deeds of trust, options, encroachments,
reservations, orders, decrees, judgments, restrictions, charges, contract
rights, claims or equity of any kind.
(g) "Government Entity" means any United States or other
national, state, municipal or local government, domestic or foreign, any
subdivision,
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agency, entity, commission or authority thereof, or any quasi-governmental or
private body exercising any regulatory, taxing, importing or other governmental
or quasi-governmental authority.
(h) "Laws" means all foreign, federal, state and local
statutes, laws, ordinances, regulations, rules, resolutions, orders,
determinations, writs, injunctions, awards (including, without limitation,
awards of any arbitrator), judgments and decrees applicable to the specified
persons or entities.
(i) Losses" means all demands, losses, claims, actions or
causes of action, assessments, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements.
(j) "Market Price" means (1) if the Acquiror Common Stock is
listed on any securities exchange, quoted in the Nasdaq National Market, or
quoted in the over-the-counter market throughout the period of 15 consecutive
trading days consisting of the day as of which the Market Price is being
determined and the 14 consecutive trading days prior to such day (the "Pricing
Period"), the Closing Price of the Acquiror Common Stock averaged over the 15
consecutive trading days constituting the Pricing Period, or (2) if the Acquiror
Common Stock is not listed on any securities exchange, quoted in the Nasdaq
National Market, or quoted in the over-the-counter market throughout the Pricing
Period, the fair value of the Acquiror Common Stock determined by agreement
between the Acquiror and the Stockholder or, if they are unable to reach
agreement within a reasonable period of time, the fair value of the Acquiror
Common Stock as determined by an independent appraiser selected by the Acquiror
and the Stockholder (the fees and expenses of such appraiser shall be borne by
the Acquiror), which determination shall be final and binding upon the Acquiror
and the Stockholder.
(k) "Material Adverse Effect" means any material adverse
effect on the Assets or on the business, financial condition or results of
operations of Swiftcall E&S.
(l) "Material Contracts" means, collectively, all contracts
which (1) involve an aggregate annual expenditure by Swiftcall E&S of $5,000 or
more, (2) are not cancelable by Swiftcall E&S without cost on 60 days or less
notice, (3) are with any current customer, supplier or distribution partner and
have an unexpired term of 2 or more years, and (4) restrict or regulate in any
manner the conduct of business of Swiftcall E&S, require the referral of any
business by Swiftcall E&S, or require or purport to require the payment of money
or the acceleration of performance of any obligations of Swiftcall E&S by virtue
of the Closing and "Material Contract" means each of the Material Contracts,
individually.
(m) "Material Leases" means, collectively, all leases which
(a) involve an aggregate annual expenditure by Swiftcall E&S of $5,000 or more,
(b) are not cancelable by Swiftcall without cost on 60 days or less notice, or
(c) have a term which
46
extends for more than one year from the Closing and "Material Lease" means each
of the Material Leases, individually.
(n) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group.
(o) "Subsidiary" means a corporation, partnership, joint
venture or other entity of which Swiftcall E&S owns, directly or indirectly, at
least 50% of the outstanding securities or other interests the holders of which
are generally entitled to vote for the election of the board of directors or
other governing body or otherwise exercise control of such entity.
(p) "Third Party Claim" means any claim or other assertion of
liability by a third party.
SECTION 12.3. Headings.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 12.4. Severability.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 12.5. Entire Agreement.
This Agreement (together with the Exhibits, the Schedules and
the other documents delivered pursuant hereto) constitutes the entire agreement
of the parties and supersede all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other person any rights or remedies hereunder.
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SECTION 12.6. Specific Performance.
The transactions contemplated by this Agreement are unique.
Accordingly, each of the parties acknowledges and agrees that, in addition to
all other remedies to which it may be entitled, each of the parties hereto is
entitled to a decree of specific performance, provided such party is not in
material default hereunder.
SECTION 12.7. Assignment.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party; provided, however, that Acquiror and Merger Sub shall have the right to
assign this Agreement for collateral purposes without the prior written consent
of Swiftcall E&S or the Stockholder and the Affiliate. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 12.8. Third Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, except for
the Acquiror Indemnified Persons under Article XI hereof.
SECTION 12.9. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Virginia (without regard to the
choice of law rules thereof).
SECTION 12.10. Counterparts.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
SECTION 12.11. Fees and Expenses.
Except as otherwise provided for in this Agreement, each party
hereto shall pay its own fees, costs and expenses incurred in connection with
this
48
Agreement and in the preparation for and consummation of the transactions
provided for herein.
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IN WITNESS WHEREOF, the parties hereto have caused this
AGREEMENT AND PLAN OF MERGER to be executed and delivered as of the date first
written above.
EGLOBE, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
EGLOBE MERGER SUB NO. 3, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
SWIFTCALL EQUIPMENT AND SERVICES (USA) INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President/Director
SWIFTCALL HOLDINGS (USA), LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Attorney-in-Fact
ANDVILLE TECHNOLOGY (IRL) LIMITED
By: /s/ ▇▇▇ ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: Director
50