EXHIBIT 2.1
EXCHANGE AGREEMENT
AMONG
SHARED TECHNOLOGIES COMMUNICATIONS CORPORATION
INTERACTIVE CABLE SYSTEMS, INC.
RESNET COMMUNICATIONS, LLC
RESNET COMMUNICATIONS, INC.
AND
GLOBAL INTERACTIVE TECHNOLOGIES CORPORATION
DATED AS OF NOVEMBER 30, 1998
TABLE OF CONTENTS
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1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. CREATION OF HOLDING COMPANY. . . . . . . . . . . . . . . . . . . . . .1
2.1 Formation of Delaware Corporation. . . . . . . . . . . . . . . . .1
2.2 Acquisition of STC Business. . . . . . . . . . . . . . . . . . . .2
2.3 Acquisition of ICS Business. . . . . . . . . . . . . . . . . . . .2
2.4 Acquisition of ResNet Business . . . . . . . . . . . . . . . . . .3
2.5 Merger of Contributed Subs into Newco Sub. . . . . . . . . . . . .3
2.6 Post-Closing Adjustment. . . . . . . . . . . . . . . . . . . . . .3
2.7 Financing Matters. . . . . . . . . . . . . . . . . . . . . . . . .5
3. ADDITIONAL UNDERTAKINGS AND COVENANTS. . . . . . . . . . . . . . . . .5
3.1 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . .6
3.2 News Releases. . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.3 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . .6
4. REPRESENTATION AND WARRANTIES OF NEWCO . . . . . . . . . . . . . . . .7
4.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . .7
4.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.4 Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . .8
4.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.6 Status of Shares . . . . . . . . . . . . . . . . . . . . . . . . .9
4.7 Offering of Shares . . . . . . . . . . . . . . . . . . . . . . . .9
5. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTING COMPANIES . . . . .9
5.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . .10
5.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.3 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
5.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . .10
5.5 No Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .11
5.6 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . .11
5.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .11
5.8 Conduct of Contributed Businesses; Absence of Material
Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Title to Property and Assets. . . . . . . . . . . . . . . . . .. .14
5.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
5.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . .14
5.12 Material Agreements . . . . . . . . . . . . . . . . . . . . . . .14
5.13 Books and Records . . . . . . . . . . . . . . . . . . . . . . . .15
5.14 Litigation; Disputes. . . . . . . . . . . . . . . . . . . . . . .16
5.15 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . .16
5.16 Pension and Benefit Plans . . . . . . . . . . . . . . . . . . . .17
5.16.1 Disclosure Schedule . . . . . . . . . . . . . . . . . . .17
5.16.2 Copies of Documents . . . . . . . . . . . . . . . . . . .17
5.16.3 Multiemployer Plans . . . . . . . . . . . . . . . . . . .17
5.16.4 ESOPs . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.16.5 Funding . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.16.6 Contributions and Other Obligations . . . . . . . . . . .18
5.16.7 Qualified Plans . . . . . . . . . . . . . . . . . . . . .18
5.16.8 Compliance with Law . . . . . . . . . . . . . . . . . . .18
5.16.9 ERISA; Prohibited Transactions. . . . . . . . . . . . . .19
5.16.10 Non-deductible Payments. . . . . . . . . . . . . . . . .19
5.16.11 Reportable Events. . . . . . . . . . . . . . . . . . . .19
5.16.12 Foreign Plan . . . . . . . . . . . . . . . . . . . . . .19
5.16.13 Tax Form 5330. . . . . . . . . . . . . . . . . . . . . .19
5.16.14 Welfare Plans. . . . . . . . . . . . . . . . . . . . . .19
5.16.15 Post-Retirement Plans. . . . . . . . . . . . . . . . . .19
5.16.16 Health Care Continuation Coverage Requirements . . . . .20
5.16.17 Filed Returns and Reports. . . . . . . . . . . . . . . .20
5.17 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . .20
5.18 Transactions with Related Parties . . . . . . . . . . . . . . . .20
5.19 Restrictions and Consents . . . . . . . . . . . . . . . . . . . .21
5.20 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . .21
5.21 Absence of Violation. . . . . . . . . . . . . . . . . . . . . . .22
5.22 Compliance with Law; Approvals. . . . . . . . . . . . . . . . . .22
5.23 Subscribers; Rights of Entry. . . . . . . . . . . . . . . . . . .23
5.24 Cable Systems . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.25 FCC Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . .24
5.26 FCC Applications. . . . . . . . . . . . . . . . . . . . . . . . .25
5.27 FCC Compliance. . . . . . . . . . . . . . . . . . . . . . . . . .25
5.28 Zoning, Aviation, etc. Compliance . . . . . . . . . . . . . . . .25
5.29 Compliance with the Copyright Act . . . . . . . . . . . . . . . .25
5.30 Must-Carry and Retransmission Consent . . . . . . . . . . . . . .26
5.31 Petitions for Special Relief. . . . . . . . . . . . . . . . . . .26
5.32 Rate Regulation and Effective Competition . . . . . . . . . . . .26
5.33 Hard Wire Public Right-of-Way Crossings . . . . . . . . . . . . .27
5.34 Security Services . . . . . . . . . . . . . . . . . . . . . . . .27
5.35 Copies of Documents . . . . . . . . . . . . . . . . . . . . . . .27
5.36 Binding Obligation. . . . . . . . . . . . . . . . . . . . . . . .27
5.37 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
6. RESTRICTED SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . .28
6.1 No Registration Under the Securities Act . . . . . . . . . . . . .28
6.2 Acquisition for Investment . . . . . . . . . . . . . . . . . . . .28
6.3 Evaluation of Merits and Risks of Investment . . . . . . . . . . .28
6.4 Additional Information . . . . . . . . . . . . . . . . . . . . . .28
7. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
7.1 Deliveries by Each Contributing Company. . . . . . . . . . . . . .29
7.2 Deliveries by Newco. . . . . . . . . . . . . . . . . . . . . . . .30
8. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES . . . . . . . .31
8.1 Survival of Representations. . . . . . . . . . . . . . . . . . . .31
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8.2 Agreement of the Contributing Companies to Indemnify . . . . . . .31
8.3 Conditions of Indemnification. . . . . . . . . . . . . . . . . . .32
8.4 Specific Performance . . . . . . . . . . . . . . . . . . . . . . .33
8.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . .33
9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
9.1 Additional Actions and Documents . . . . . . . . . . . . . . . . .33
9.2 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
9.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
9.4 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
9.5 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . .34
9.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
9.7 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . .35
9.8 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . .35
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .35
9.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .36
9.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
9.12 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
9.13 Execution in Counterparts . . . . . . . . . . . . . . . . . . . .38
9.14 Limitation on Benefits. . . . . . . . . . . . . . . . . . . . . .38
9.15 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . .38
EXHIBIT A DEFINITIONS
EXHIBIT B NEWCO CERTIFICATE OF INCORPORATION
EXHIBIT C NEWCO BYLAWS
EXHIBIT D STOCKHOLDERS AGREEMENT
EXHIBIT E NEWCO SUB CERTIFICATE OF INCORPORATION
EXHIBIT F NEWCO SUB BYLAWS
EXHIBIT G-1 CONTRIBUTING COMPANY OPINION OF COUNSEL
EXHIBIT G-2 CONTRIBUTING COMPANY OPINION OF COUNSEL
EXHIBIT H NEWCO OPINION OF COUNSEL
EXHIBIT I DELOITTE & TOUCHE TAX OPINION
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EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Exchange Agreement") is entered into as
of November 30, 1998 by and among Shared Technologies Communications
Corporation, a Delaware corporation ("STC"), Interactive Cable Systems, Inc., a
California corporation ("ICS"), ResNet Communications, LLC, a Delaware limited
liability company ("ResNet," and together with STC and ICS, the "Contributing
Companies"), ResNet Communications, Inc., a Delaware corporation ("ResNet,
Inc.") and Global Interactive Technologies Corporation, a Delaware corporation
("Newco").
WHEREAS, each of the Contributing Companies has previously executed a
Letter of Intent, dated August 18, 1998, relating to a proposed business
combination of the businesses of the Contributing Companies in a newly-formed
entity; and
WHEREAS, the parties hereto are entering into this Exchange Agreement
to provide for such business combination and to establish various rights and
obligations in connection therewith.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. DEFINITIONS
For all purposes of this Exchange Agreement, certain capitalized terms specified
in EXHIBIT A and used in this Exchange Agreement shall have the meanings set
forth in that EXHIBIT A, except as otherwise expressly provided.
2. CREATION OF HOLDING COMPANY
2.1 FORMATION OF DELAWARE CORPORATION
(a) Prior to the date hereof, the parties hereto have caused Newco
to be formed, and caused to be filed with the Secretary of State of the State
of Delaware a certificate of incorporation in the form attached as EXHIBIT B
(the "Certificate of Incorporation"). The initial directors of Newco as set
forth in the Certificate of Incorporation have caused Newco to adopt bylaws
in the form attached as EXHIBIT C and to undertake certain other
organizational actions. The initial directors of Newco have not caused Newco
to take any other action, except as set forth herein or otherwise with the
consent of the Contributing Companies.
(b) Newco shall have no other issued and outstanding capital stock
(or rights, options or warrants therefor) at the Closing except as expressly
contemplated by this SECTION 2. At the Closing, Newco and each Contributing
Company will execute and deliver the Stockholders Agreement in the form
attached as EXHIBIT D.
(c) Prior to the date hereof, the parties hereto have caused Newco
to form a new Delaware corporation as Newco's wholly-owned subsidiary with
the name Global Interactive Communications Corporation ("Newco Sub") to hold
the businesses of the Contributing Companies as described in more detail in
this SECTION 2, and caused to be filed with the Secretary of State of the
State of Delaware a certificate of incorporation in the form attached as
EXHIBIT E (the "Sub Certificate of Incorporation"). The initial directors of
Newco Sub as set forth in the Sub Certificate of Incorporation have caused
Newco Sub to adopt bylaws in the form attached as EXHIBIT F and to undertake
certain other organizational actions. The initial directors of Newco Sub
have not caused Newco Sub to take any other action, except as set forth
herein or otherwise with the consent of the Contributing Companies.
(d) Each of the Contributing Companies hereby represents and
warrants to each other Contributing Company that with respect to any federal
tax returns, it will report the transfer of all of the equity interests of
its Contributed Sub (as hereinafter defined) to Newco in exchange for, in the
aggregate, all of the outstanding Newco Common Stock as a tax-free exchange
pursuant to Section 351 of the Code.
2.2 ACQUISITION OF STC BUSINESS
Immediately prior to the consummation of the transactions
contemplated hereunder, STC shall transfer or contribute to a newly created
wholly-owned limited liability company (the "STC Sub") substantially all of
the assets of STC except the corporate books and records of STC, and the STC
Sub shall assume such STC current liabilities in an amount not to exceed the
STC Sub's current assets, and may assume up to $4,911,516 in operating or
capital lease obligations, the remaining term of which may not exceed six
years and one month from the date hereof (such assets and liabilities so
transferred or contributed, the "STC Business"). Immediately thereafter, STC
shall contribute all of the issued and outstanding membership interests of
the STC Sub to Newco in exchange for 1,250 shares of common stock, par value
$.01 per share, of Newco (the "Newco Common Stock").
2.3 ACQUISITION OF ICS BUSINESS
(a) Immediately prior to the consummation of the transactions
contemplated hereunder, ICS shall transfer or contribute to a newly created
wholly-owned subsidiary of ICS (the "ICS Sub") all of the assets of ICS and
its existing Subsidiaries (which assets shall include all of the issued and
outstanding capital stock of ActiveTel β.β., Inc. ("ActiveTel") except (i)
the shares of preferred and common stock of Optel, Inc. ("Optel") owned by
ICS and all right, title and interest of ICS and its subsidiaries in and to
the Optel Purchase Agreement, dated as of April 9, 1998 among Optel, ICS and
ICS Licenses, Inc., and any other agreements and instruments executed in
connection therewith, (ii) any and all assets subject to or released from
escrow agreements to which ICS and Optel are parties, and (iii) the corporate
books and records of ICS and its subsidiaries (other than the ICS Sub and
ActiveTel), and the ICS Sub shall assume such ICS current liabilities in an
amount not to exceed the ICS Sub's current assets, and may assume up to
$4,911,516 in operating or capital lease obligations, the remaining term of
which may not exceed five years from the date hereof (such assets and
liabilities so transferred or
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contributed, the "ICS Business"). Immediately
thereafter, ICS shall contribute all of the issued and outstanding shares of
capital stock of the ICS Sub to Newco in exchange for 2,000 shares of Newco
Common Stock.
2.4 ACQUISITION OF RESNET BUSINESS
(a) Immediately prior to the consummation of the transactions
contemplated hereunder, ResNet shall transfer or contribute to a newly
created wholly-owned subsidiary of ResNet (the "ResNet Sub," and together
with the STC Sub and the ICS Sub, the "Contributed Subs") all of the assets
of ResNet except the corporate books and records of ResNet, and the ResNet
Sub shall assume such ResNet current liabilities in an amount not to exceed
the ResNet Sub's current assets, and may assume up to $4,911,516 in operating
or capital lease obligations, the remaining term of which may not exceed five
years from the date hereof (such assets and liabilities so transferred or
contributed, the "ResNet Business;" each of the STC Business, the ICS
Business and the ResNet Business, a "Contributed Business" and collectively,
the "Contributed Businesses"). Immediately thereafter, ResNet shall
contribute all of the issued and outstanding shares of capital stock of the
ResNet Sub to Newco in exchange for 1,750 shares of Newco Common Stock.
2.5 MERGER OF CONTRIBUTED SUBS INTO NEWCO SUB
(a) Upon the terms and subject to the conditions set forth in this
Exchange Agreement, following Newco's acquisition of all of the issued and
outstanding capital stock in all of the Contributed Subs in accordance with
the terms of this SECTION 2, all Contributed Subs shall be concurrently
merged with and into Newco Sub (the "Merger") and the separate corporate
existence of each Contributed Sub shall thereupon cease. Newco Sub shall be
the surviving corporation in the Merger, and the separate corporate existence
of Newco Sub with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger except as otherwise
provided herein. The Merger shall have the effects specified in the Delaware
General Corporation Law, as amended (the "DGCL").
(b) Immediately following the Closing, Newco Sub and each
Contributed Sub shall execute and deliver an Agreement and Plan of Merger,
and Newco and Newco Sub will cause a Certificate of Merger (the "Certificate
of Merger") to be executed, acknowledged and filed with and accepted for
record by the Delaware Secretary of State (the "Secretary") as provided in
Section 264 of the DGCL. The Merger shall become effective at the time the
Certificate of Merger is filed with the Secretary.
2.6 POST-CLOSING ADJUSTMENT
(a) Following the end of the sixth complete month after the
Closing, Newco shall cause Newco Sub to prepare and deliver to the
Contributing Companies a statement of assets and liabilities of each
Contributed Sub, setting forth the categories of assets and liabilities of
each Contributed Sub as of the date hereof (such date referred to herein as
the "Adjustment
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Date," such statements referred to herein as the "Adjustment Date
Statements") consistent with the projected pro forma balance sheets Furnished
to the Contributing Companies pursuant to SECTION 5.4(b) and attached as part
of the Disclosure Schedule (the "Pro Forma Statements"). The Adjustment Date
Statements shall be prepared using the same accounting principles,
methodologies and assumptions used in connection with the preparation of the
Pro Forma Statements.
(b) Except as provided in paragraph (c) below, within 30 days
following delivery of the Adjustment Date Statements to the Contributing
Companies, in the event that any Contributed Sub's Total Net Worth (as
hereinafter defined) as set forth on its Adjustment Date Statement varies
from its Total Net Worth as set forth on such Contributed Sub's Pro Forma
Statement by an amount greater than $100,000, an adjustment shall be made as
follows:
(i) if such Contributed Sub's Total Net Worth as set forth on
its Adjustment Date Statement exceeds its Total Net Worth as set forth on
its Pro Forma Statement, Newco shall issue an unsecured note payable to the
Contributing Company that transferred such Contributed Sub to Newco in form
and substance identical to the Capital Advance Notes (as defined in SECTION
2.7(b) hereof) in an aggregate principal amount equal to the difference, in
each case subordinate to the prior repayment in full of all amounts owing
under the Bridge Loans (as set forth on Schedule 2.7(a) hereof).
(ii) if such Contributed Sub's Total Net Worth as set
forth on its Adjustment Date Statement is less than its Total Net
Worth as set forth on its Pro Forma Statement, the Contributing
Company that transferred such Contributed Sub to Newco shall pay to
Newco an amount in cash representing the full amount of the
difference; provided, however, that at the election of any affected
Contributing Company, payment of such difference may be offset against
the first amounts owing to the Contributing Company (or its current or
former equity holders) under any indebtedness issued by Newco.
For purposes of this SECTION 2.6, "Total Net Worth" shall mean
stockholder's equity determined in accordance with generally accepted
accounting principles applied in a consistent manner as was applied to
determine stockholder's equity in the Pro Forma Statements.
(c) In the event that any Contributing Company shall dispute any
Adjustment Date Statement and such dispute is not resolved to the mutual
satisfaction of all of the Contributing Companies within sixty days after
delivery of the Adjustment Date Statements, such Contributing Company (the
"Contesting Party") shall have the right to require that such disputed
determinations be submitted to a major accounting firm mutually acceptable to
Newco and the Contesting Party for computation or verification in accordance
with the provisions of this Exchange Agreement. Newco and the Contesting
Party shall direct the accounting firm to use its best efforts to render its
determination in forty-five days. The foregoing provisions for certified
public accounting firm review shall be specifically enforceable by the
parties; the decision of such accounting firm shall be final and binding upon
Newco and such Contesting Party; there shall be no right of appeal from such
decision; and such accounting firm's fees and expenses for
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each such disputed determination shall be borne by Newco, unless such
disputed determination is found to be within ten percent (10%) of such
accounting firm's determination, in which case the Contesting Party shall
bear such fees and expenses.
2.7 FINANCING MATTERS
(a) Simultaneously herewith, Newco and Newco Sub will enter in the
Bridge Loan documents set forth on Schedule 2.7(a).
(b) To the extent that any current or former equity holder, or the
parent of such equity holder, in ICS or STC shall have advanced to ICS or
STC, as the case may be, funds to acquire operating assets properly
capitalized under generally accepted accounting principles applied in a
consistent manner between June 1, 1998 and the date hereof, the assets
purchased with such funds shall be contributed to that Contributing Company's
Contributed Sub, which shall assume the related obligation to repay such
advanced funds, and Newco shall cause Newco Sub to assume a note payable to
such Contributing Company (a "Capital Advance Note") in the full amount
thereof, provided that the amount of any such note issued to ICS or STC
pursuant to the terms hereof shall not exceed $1.5 million, in each case
subject to resolution of any disputed amount pursuant to SECTION 2.6.
Contemporaneously herewith, Newco shall cause Newco Sub to issue a
replacement Capital Advance Note to each of ICS and STC, as the case may be,
upon cancellation of each note so transferred and assumed.
(c) In the case of ResNet, ResNet, Inc. has advanced to ResNet,
through (i) an intercompany note payable to ResNet, Inc. (the "ResNet Capital
Advance Note") and (ii) an intercompany credit agreement and term note
payable to ResNet, Inc. (the "ResNet Intercompany Credit Agreement, and
together with the ResNet Capital Advance Note, the "ResNet Loans"), funds to
acquire operating assets properly capitalized under generally accepted
accounting principles applied in a consistent manner between June 1, 1998 and
the date hereof. At the Closing, ResNet Sub shall assume the ResNet loans
from ResNet. Thereafter, Newco shall cause Newco Sub to assume the ResNet
Loans from ResNet Sub and to issue to ResNet, Inc. (i) an replacement Capital
Advance Note in the amount of $3.0 million and (ii) a Junior Bridge Loan (as
described on Schedule 2.7(a)) in the amount of $2,853,120.00 (in each case
subject to resolution of any disputed amount pursuant to SECTION 2.6), at
which time the ResNet Loans shall be deemed repaid and shall be terminated.
3. ADDITIONAL UNDERTAKINGS AND COVENANTS
Each Contributing Company severally as to itself but not jointly
hereby covenants and agrees as follows (but only with respect to that
particular Contributing Company, its Contributed Business and its Contributed
Sub):
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3.1 CONFIDENTIALITY
Each party hereto hereby acknowledges that it has obtained and may
continue to obtain knowledge of and access to confidential and valuable
business information relating to the Contributing Companies or their
Affiliates not generally known by or available to the general public. Each
party hereto agrees at all times from and after the date hereof to use
reasonable efforts, consistent with those employed by it with respect to its
own confidential information, (i) to keep confidential all such information
that is identified as being of a confidential nature, (ii) not to use such
confidential information on its own behalf, except in connection with the
transactions contemplated hereby, or on behalf of any other person, firm or
entity, and (iii) not to disclose such confidential information to any third
party (other than to its counsel, accountants and other consultants in
connection with the transactions contemplated hereby) without the relevant
Contributing Company's or Affiliate's advance written authorization;
PROVIDED, HOWEVER, that the parties hereto shall have no such obligations
with respect to confidential information that (A) was lawfully obtained by it
not subject to restrictions of confidentiality; (B) is a matter of public
knowledge; (C) has been or is hereafter publicly disclosed other than by or
through such party, or (D) is requested by any Governmental Agency reviewing
the transactions contemplated hereby or is required, on the advice of such
party's counsel, pursuant to any legal requirement or in furtherance of the
transactions contemplated hereby, including to obtain necessary regulatory
approvals. In the event this Exchange Agreement is terminated, each party
hereto will return to the relevant Contributing Company or destroy, at such
Person's option, all documents, workpapers and other materials Furnished to
such party relating to the transactions contemplated hereunder, whether
obtained before or after the execution of this Exchange Agreement. In the
event of a breach or threatened breach by any party hereto of the provisions
of this Section, the relevant Contributing Company shall be entitled to an
injunction restraining that Person from disclosing, in whole or in part, such
information.
3.2 NEWS RELEASES
None of Newco nor any of the Contributing Companies shall issue or
approve any news release or other public announcement concerning the
transactions contemplated by this Exchange Agreement without the prior
approval of all other parties hereto (which approval shall not be
unreasonably withheld or delayed), except that any of the Contributing
Companies may make such disclosure as may be required by applicable law.
3.3 EMPLOYEE MATTERS
(a) A description of the employee benefits to be provided by Newco
and Newco Sub to their respective employees as of the date hereof is set
forth in the Disclosure Schedule. From and after the date hereof and subject
to applicable law, Newco shall provide, and shall cause Newco Sub to provide,
employees of the Contributing Companies who are offered employment with Newco
or Newco Sub, and who accept such employment ("Continuing Employees"),
benefits comparable to those set forth in the Disclosure Schedule as
reasonably determined by Newco and Newco Sub.
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(b) Continuing Employees shall receive credit for service with a
Contributing Company (including any Affiliate or predecessor thereof) for
purposes of determining eligibility to participate and vesting in all Pension
and Welfare Plans maintained by Newco or Newco Sub. No prior existing
condition limitation shall be imposed with respect to any medical coverage
plan as a result of the consummation of the transactions contemplated by this
Exchange Agreement.
(c) Continuing Employees shall be entitled initially to the amount
of vacation time per year to which they were previously entitled under the
applicable vacation policy of a Contributing Company or, if greater, the
amount of vacation time per year to which they would be entitled under the
applicable Newco or Newco Sub vacation plan or policy. Thereafter, increases
in the amount of vacation time per year shall be based solely on the
applicable Newco or Newco Sub vacation policy. Continuing Employees will
carry over current accrued vacation and no more than five (5) days (40 hours)
of sick day credit.
4. REPRESENTATION AND WARRANTIES OF NEWCO
Except as specifically set forth in the Newco Disclosure Schedule
(with a disclosure with respect to a Section of this Exchange Agreement to
require a specific reference in the Newco Disclosure Schedule to the Section
of this Exchange Agreement to which each such disclosure applies, and no
disclosure to be deemed to apply with respect to any Section to which it does
not expressly apply), Newco represents and warrants (which representations
and warranties shall be deemed to include the disclosure with respect thereto
so specified in the Newco Disclosure Schedule) to the Contributing Companies
as follows:
4.1 ORGANIZATION AND STANDING
Each of Newco and Newco Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the full and unrestricted corporate power and authority to own, operate and
lease its Assets, to carry on its business as proposed to be conducted, to
execute and deliver this Exchange Agreement and to carry out the transactions
contemplated hereby. Newco Sub is duly qualified to conduct business as a
foreign corporation and is in good standing in the states, countries and
territories listed on the Newco Disclosure Schedule. Neither Newco nor Newco
Sub is qualified to conduct business in any other jurisdiction, and neither the
nature of the business conducted by such entity nor the character of the Assets
owned, leased or otherwise held by it makes any such qualification necessary.
There is no state, country or territory wherein the absence of licensing or
qualification as a foreign corporation would have a Material Adverse Effect upon
the business of Newco and Newco Sub as proposed to be conducted.
4.2 SUBSIDIARIES
Except for Newco Sub, neither Newco nor Newco Sub has any
Subsidiaries or equity investment or other interest in, nor has Newco or
Newco Sub made advances or loans to,
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any corporation, association, partnership, joint venture or other entity,
except as set forth in the Newco Disclosure Schedule. The Newco Disclosure
Schedule sets forth (a) the authorized capital stock of each direct and
indirect Subsidiary of Newco and Newco Sub and the percentage of the
outstanding capital stock of each Subsidiary directly or indirectly owned by
Newco or Newco Sub, and (b) the nature and amount of any such equity
investment, other interest or advance.
4.3 AUTHORIZATION
The execution, delivery and performance by Newco and Newco Sub, as
the case may be, of this Exchange Agreement and all other Documents
contemplated hereby in accordance with their terms, the fulfillment of and
compliance with the respective terms and provisions hereof and thereof, and
the consummation by Newco and Newco Sub, as the case may be, 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
Newco or Newco Sub are necessary to authorize this Exchange Agreement and all
Documents contemplated hereby or to consummate the transactions contemplated
hereby, and such actions do not and will not: (a) conflict with, or violate
any provision of, any Law having applicability to Newco or Newco Sub or any
of their respective Assets, or any provision of the certificate of
incorporation or bylaws of Newco or Newco Sub; (b) conflict with, or result
in any breach of, or constitute a default under any material Agreement to
which Newco or Newco Sub is a party or by which it or any of its Assets may
be bound; or (c) result in or require the creation or imposition of or result
in the acceleration of any indebtedness, or of any Encumbrance of any nature
upon, or with respect to, the Assets of Newco or Newco Sub, except as
specifically contemplated under the Bridge Loan documents.
4.4 BINDING OBLIGATION
This Exchange Agreement constitutes a valid and binding obligation
of Newco, and assuming the due authorization, execution and delivery by each
other party hereto, enforceable in accordance with its terms; and each
Document to be executed by Newco or Newco Sub, as the case may be, pursuant
hereto, when executed and delivered in accordance with the provisions hereof,
and assuming the due authorization, execution and delivery by each other
party thereto, shall be a valid and binding obligation of Newco or Newco Sub,
as the case may be, enforceable in accordance with its terms.
4.5 CAPITALIZATION
The authorized capital stock of Newco consists of 10,000 shares of
Newco Common Stock, none of which are issued and outstanding. The authorized
capital stock of Newco Sub consists of 100 shares of common stock, $.01 par
value per share, of which 100 shares are duly authorized, issued and
outstanding, fully paid and nonassessable and issued to Newco. No shares of
capital stock of Newco or Newco Sub have been reserved for any purpose.
There are no outstanding securities convertible into or exchangeable for
Newco Common Stock
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or for the capital stock of Newco Sub and no outstanding options, rights
(preemptive or otherwise), or warrants to purchase or to subscribe for any
shares of such stock or other securities of Newco or Newco Sub. There are no
outstanding Agreements affecting or relating to the voting, issuance,
purchase, redemption, repurchase or transfer of Newco Common Stock, any other
securities of Newco, or any securities of Newco Sub, except as contemplated
hereunder. Upon the consummation of the transactions contemplated by this
Exchange Agreement, the authorized capital stock of Newco will consist of
10,000 shares of Newco Common Stock, 5,000 of which will be duly authorized,
issued and outstanding, fully paid and nonassessable.
4.6 STATUS OF SHARES
The shares of Newco Common Stock (the "Shares") being issued to the
Contributing Companies on the date hereof have been duly authorized by all
necessary corporate action on the part of Newco, and when issued in accordance
with this Exchange Agreement, will be validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof and
will be free and clear of all Encumbrances.
4.7 OFFERING OF SHARES
Neither Newco nor any Person acting on its behalf has offered the
Shares or any similar securities of Newco for sale to, solicited any offers
to buy the Shares or any similar securities of Newco from or otherwise
approached or negotiated with respect to Newco with any Person other than the
Contributing Companies. Neither Newco nor any other Person acting on its
behalf has taken or will take any action (including, without limitation, any
offering of any securities of Newco under circumstances which would require
or result in the integration of such offering with the offering of the Shares
under the Securities Act and the rules and regulations of the Commission
thereunder) which might subject the offering, issuance and sale of the Shares
to the registration requirements of Section 5 of the Securities Act or any
applicable state securities laws.
5. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTING COMPANIES
Except as specifically set forth in the Disclosure Schedule (with a
disclosure with respect to a Section of this Exchange Agreement to require a
specific reference in the Disclosure Schedule to the Section of this Exchange
Agreement to which each such disclosure applies, and no disclosure to be
deemed to apply with respect to any Section to which it does not expressly
apply), each Contributing Company severally represents and warrants (which
representation and warranty shall be deemed to include the disclosure with
respect thereto so specified in the Disclosure Schedule) to the other
Contributing Companies as follows (but only with respect to that particular
Contributing Company, its Contributed Business and its Contributed Sub):
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5.1 ORGANIZATION AND STANDING
Each Contributed Sub (and, with respect to ICS, ActiveTel) is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has the full and unrestricted
corporate power and corporate authority to own, operate and lease its Assets,
to carry on its business as contemplated hereunder in a manner consistent
with its Contributed Business and to carry out the transactions contemplated
hereby to which it is or will be a party.
5.2 SUBSIDIARIES
All of the shares of capital stock of each Contributed Sub (and,
with respect to ICS, ActiveTel) have been duly authorized and validly issued
and are outstanding, fully paid and nonassessable. The Contributing
Companies directly, or indirectly through wholly owned Subsidiaries, own all
such shares of capital stock of the Contributed Subs free and clear of all
Encumbrances, with full right and lawful authority to sell and transfer the
shares to Newco pursuant to this Exchange Agreement. ICS Sub owns all shares
of capital stock of ActiveTel free and clear of all Encumbrances.
ActiveTel is qualified to conduct business and is in good standing in the
states, countries and territories listed in the Disclosure Schedule.
ActiveTel is not qualified to conduct business in any other jurisdictions,
and neither the nature of its business nor the character of the Assets owned,
leased or otherwise held by it makes any such qualification necessary. There
is no state, country or territory wherein the absence of licensing or
qualification as a foreign corporation would have a Material Adverse Effect
upon the business of ActiveTel as currently conducted.
5.3 EMPLOYEES
As to each Contributing Company, the Disclosure Schedule lists all
managers, employees and consultants of the Contributing Company expected to
serve in any such capacities in Newco or Newco Sub, showing each such
person's name, positions, and annual remuneration, bonuses and fringe
benefits for the current fiscal year and the most recently completed fiscal
year. Except as set forth on the Disclosure Schedule, no person has been
promised or offered employment by or on behalf of Newco or Newco Sub.
5.4 FINANCIAL STATEMENTS
(a) All of the historical financial statements, consisting of
audited financial statements for the three most recent years (to the extent
existing) and unaudited statements through July 31, 1998 and including,
without limitation, the notes thereto, of such Contributing Company included
as Exhibits and are part of the Disclosure Schedule (the "Financial
Statements"): (i) conform to the books and records of the entities to which
they pertain, (ii) present fairly the consolidated financial position of the
entities to which they pertain as of the respective dates and the results of
operations, retained earnings and cash flows for the respective periods
indicated, and (iii) have been prepared in accordance with generally accepted
accounting
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principles applied on a basis consistent with prior accounting periods,
except as described in the Disclosure Schedule . The Disclosure Schedule
sets forth all changes in accounting methods (for financial accounting
purposes) at any time made, agreed to, requested or required with respect to
any of the Contributing Companies.
(b) The projected pro forma balance sheet dated as of November 30,
1998 of each Contributed Sub Furnished to the Contributing Companies and
included as part of the Disclosure Schedule (i) are in accordance with the
books and records of the entities to which they pertain, (ii) present fairly
the information shown therein, (iii) have been properly compiled on the pro
forma bases described therein and (iv) in the opinion of such Contributing
Company, the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
5.5 NO LIABILITIES
Except as reflected in the Pro Forma Statements Furnished to the
Contributing Companies pursuant to SECTION 5.4(b) hereof or as described on
the Disclosure Schedule, as of the date hereof, there exist no liabilities
(whether contingent or absolute, matured or unmatured, known or unknown)
included in any Contributed Business other than (a) those liabilities
incurred in the Ordinary Course of Business and in amounts that are not
material to that Contributed Business, and (b) for taxes, assessments and
other governmental charges, if such taxes, assessments and other governmental
charges (i) are not yet due and payable, or (ii) are due and payable but can
be paid hereafter without penalty or interest and for which a proper accrual
relating thereto is reflected in the financial statements or the Disclosure
Schedule and which will be paid before penalty or interest begins to accrue
thereon.
5.6 ACCOUNTS RECEIVABLE
The accounts receivable of any Contributed Sub shown on the Pro
Forma Statements Furnished to the other Contributing Companies pursuant to
SECTION 5.4(b) hereof, or thereafter acquired by any of them, have been
collected or, to the knowledge of such Contributing Company, are collectible
in amounts not less than the amounts thereof carried on the books of such
Contributed Sub, except to the extent of the allowance for doubtful accounts
shown on such balance sheets.
5.7 TAXES
(a) The Contributing Company has duly filed all Tax Returns required
to be filed by such Contributing Company on or before the date hereof with
respect to all applicable Taxes. Each "affiliated group," within the meaning of
Section 1504(a) of the Code, with respect to which the Contributing Company has
been a member ("Group"), has duly filed all Tax Returns required to be filed by
such Group on or before the date hereof with respect to all applicable federal
income, withholding and excise Taxes. No penalties or other charges are or will
become due with respect to any of the Tax Returns as the result of the late
filing thereof. All
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of the Tax Returns are true and complete in all material respects. The
Contributing Company: (i) has paid all material Taxes due or claimed to be
due by any taxing authority in connection with any of the Tax Returns
(without regard to whether or not such Taxes are shown as due on such Tax
Returns); or (ii) has established in financial statements provided to the
other Contributing Companies adequate reserves (in conformity with generally
accepted accounting principles consistently applied) for the payment of such
Taxes. Each Group: (i) has paid all federal income, withholding and excise
Taxes due or claimed to be due by any taxing authority in connection with any
of the Tax Returns (without regard to whether or not such Taxes are shown as
due on such Tax Returns or (ii) has established adequate reserves (in
conformity with generally accepted accounting principles consistently
applied) for the payment of such Taxes.
(b) The Contributed Sub has no actual or potential liability with
respect to any period prior to the date hereof for any Taxes of any person or
entity other than the Contributed Sub.
(c) All examinations or audits of the Tax Returns which have been
completed prior to the date hereof have resulted in no adjustments or other
changes or, if any such examination or audit has resulted in a proposed
deficiency, such deficiency has been paid or otherwise settled. Except as
set forth on the Disclosure Schedule, there is no action, suit, proceeding,
audit, investigation or claim pending or, to the knowledge of each
Contributing Company, threatened in respect of any Taxes for which such
Contributing Company is or may become liable, nor has any deficiency or claim
for any such Taxes been proposed, asserted or, to the knowledge of each
Contributing Company, threatened. No Contributing Company or Group has
consented to any waivers or extensions of any statute of limitations with
respect to any taxable year of such Contributing Company. There is no
Agreement, waiver or consent providing for an extension of time with respect
to the assessment or collection of any Taxes against any Contributing
Company, and no power of attorney granted by any Contributing Company with
respect to any tax matters is currently in force. Except as set forth in the
Disclosure Schedule, no Contributing Company is a party to any tax sharing,
tax indemnity or other similar agreement. All Taxes that the Contributing
Company is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been timely paid to
the proper governmental authority.
(d) Each Contributing Company has Furnished or otherwise made
available to the other Contributing Companies true and complete copies of all
Tax Returns and all written communications relating to any such 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.
5.8 CONDUCT OF CONTRIBUTED BUSINESSES; ABSENCE OF MATERIAL ADVERSE CHANGE
Other than as set forth in the Disclosure Schedule, since July 31,
1998 there has been no material adverse change, and no change except in the
Ordinary Course of Business, in the business, operations, prospects,
condition (financial or otherwise), Assets or liabilities of the
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Contributed Businesses. Except as set forth in the Disclosure Schedule or as
contemplated hereunder, since July 31, 1998, each Contributing Company has
conducted its Contributed Business diligently and substantially in the manner
heretofore conducted and only in the Ordinary Course of Business and, with
respect to its Contributed Business, the Contributing Company has not (a)
incurred loss of, or significant injury to, any of its Assets as the result
of any fire, explosion, flood, windstorm, earthquake, labor trouble, riot,
accident, act of God or public enemy or armed forces, or other casualty; (b)
borrowed any funds (other than borrowings in the Ordinary Course of Business
in amounts, individually or in the aggregate, that do not exceed $25,000);
(c) incurred, or become subject to, any obligation or liability (absolute or
contingent, matured or unmatured, known or unknown), except liabilities
incurred in the Ordinary Course of Business; (d) discharged or satisfied any
Encumbrance or paid any obligation or liability (absolute or contingent,
matured or unmatured, known or unknown) other than current liabilities shown
in the Financial Statements Furnished to the other Contributing Companies,
and current liabilities incurred since July 31, 1998 in the Ordinary Course
of Business; (e) declared or made payment of, or set aside for payment, any
dividends or distributions of any Assets, or purchased, redeemed or otherwise
acquired any of its capital stock, any securities convertible into capital
stock, or any other securities; (f) mortgaged, pledged or subjected to any
Encumbrance any of its Assets, except for (i) liens reflected in the
financial statements of the Contributing Companies Furnished to the other
Contributing Companies pursuant to SECTION 5.4(a) hereof or on the Disclosure
Schedule, (ii) liens consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially detract
from the value of, or impair the use of, such property by the applicable
Contributing Company in the operation of its business, and (iii) liens for
current taxes, assessments or governmental charges or levies on property not
yet due and delinquent; (g) sold, exchanged, transferred or otherwise
disposed of any of its Assets, or canceled any debts or claims, except in
each case in the Ordinary Course of Business; (h) written down the value of
any Assets or written off as uncollectible any notes or accounts receivable,
except write-downs and write-offs in the Ordinary Course of Business, none of
which, individually or in the aggregate, are material; (i) entered into any
transactions other than in the Ordinary Course of Business; (j) increased the
rate of compensation payable, or to become payable, by it to any of its
officers, employees, agents or independent contractors over the rate being
paid to them on July 31, 1998 (other than in the Ordinary Course of Business
in amounts, individually or in the aggregate, that do not exceed 5% of
amounts previously payable to such officers, employees, agents or independent
contractors); (k) made or permitted any amendment or termination of any
material Agreement to which it is a party or which it owns; (l) through
negotiation or otherwise made any commitment or incurred any liability to any
labor organization; (m) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind to any director, officer or
employee (other than in the Ordinary Course of Business in amounts,
individually or in the aggregate, that do not exceed 5% of amounts previously
payable to such directors, officers or employees); (n) directly or indirectly
paid any severance or termination pay to any officer or employee in excess of
three months' salary; (o) made capital expenditures, or entered into
commitments therefor, aggregating more than $50,000; (p) made any change in
any method of accounting or accounting practice; (q) entered into any
transaction of the type described in SECTION 5.18; or (r) made an Agreement
to do any of the foregoing.
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5.9 TITLE TO PROPERTY AND ASSETS
Each Contributed Sub has good, valid and marketable title to all
Assets owned by it, free and clear of all Encumbrances, other than those
identified in the Disclosure Schedule or the balance sheets Furnished to the
other Contributing Companies (or the notes thereto). The Contributing
Company and its Contributed Sub do not own any Real Property. All personal
property of each Contributed Sub is in good operating condition and repair
and is suitable and adequate for the uses for which it is intended or is
being used.
5.10 INSURANCE
The Disclosure Schedule lists all policies of title, Asset, fire,
hazard, casualty, liability, life, worker's compensation and other forms of
insurance of any kind maintained by or with respect to the Contributing
Company. All such policies: (a) are with insurance companies reasonably
believed by the Contributing Company to be financially sound and reputable;
(b) are in full force and effect; (c) are sufficient for compliance by the
Contributing Company with all requirements of Law and of all Agreements to
which the Contributing Company is a party or to which its respective
properties are subject; (d) are valid and outstanding policies enforceable
against the insurer; and (e) insure against risks of the kind customarily
insured against and in amounts customarily carried by companies similarly
situated and by companies engaged in similar businesses and owning similar
properties, and to the best knowledge of the Contributing Company, provide
adequate insurance coverage for the Contributing Company.
5.11 INTELLECTUAL PROPERTY
The Disclosure Schedule lists all trademarks, service marks, trade
names, copyrights, patents and applications therefor owned or licensed by or
registered in the name of any Contributing Company included in the
Contributed Businesses. The Contributed Subs own or have valid license
rights to all of the Intellectual Property listed in the Disclosure Schedule
purported to be owned by or licensed to each of them, pay no royalty to
anyone with respect to any Intellectual Property and have the right to bring
action for the infringement of such Intellectual Property. The Contributed
Subs own or possess adequate rights to use all Intellectual Property
necessary to the conduct of the present business of the Contributed
Businesses. The Contributing Company does not have any knowledge, and has
not received any notice to the effect, that any product such Contributing
Company manufactures or sells or that any service such Contributing Company
renders, or that the marketing or use by such Contributing Company or another
of any such product or service, may or is claimed to infringe any
Intellectual Property or legally protectable right of another.
5.12 MATERIAL AGREEMENTS
(a) The Disclosure Schedule lists all material Agreements which are
to be assigned to the Contributed Subs by the Contributing Companies prior to
Closing or which are otherwise legally binding upon the Contributed Subs.
Each such Agreement is in full force and
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effect and constitutes a legal, valid and binding obligation of, and is
legally enforceable against, the Contributing Company a party thereto and, to
such Contributing Company's knowledge, the other parties thereto. All
necessary governmental approvals with respect thereto have been obtained and
all necessary filings or registrations therefor have been made, in each case
to the extent that a Contributing Company is responsible therefor, and there
have been no threatened cancellations thereof and are no outstanding disputes
thereunder. The Contributing Companies have in all material respects
performed all the obligations thereunder required to be performed by any of
them to date. No Contributing Company, or to the knowledge of the
Contributing Companies, any other party is in material default in any respect
under any of the Agreements described in the Disclosure Schedule, 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) Except as specified in the Disclosure Schedule (and without
limiting the foregoing), no Contributed Sub will be a party to, or will be
otherwise legally bound by, any oral or written (i) Agreement for the
employment of any officer, employee, consultant or independent contractor;
(ii) license Agreement or distributor, dealer, manufacturer's representative,
sales agency, advertising, property management or brokerage agreement
involving payments of more than $100,000 over its remaining term (including,
without limitation, periods covered by any option to renew by either party);
(iii) Agreement with any labor organization or other collective bargaining
unit; (iv) Agreement for the future purchase of materials, supplies,
services, merchandise or equipment involving payments of more than $100,000
over its remaining term (including, without limitation, periods covered by
any option to renew by either party); (v) Agreement for the purchase, sale or
lease of any real estate or other Assets involving payments of more than
$25,000 over its remaining term (including, without limitation, periods
covered by any option to renew by either party); (vi) profit-sharing, bonus,
incentive compensation, deferred compensation, stock option, severance pay,
stock purchase, employee benefit, insurance, hospitalization, pension,
retirement or other similar plan or Agreement; (vii) Agreement for the sale
of any of its Assets or the grant of any preferential rights to purchase any
of its Assets or rights, other than in the Ordinary Course of Business;
(viii) Agreement which contains any provisions requiring any Contributed Sub
to indemnify any other party thereto, other than in the Ordinary Course of
Business; (ix) joint venture agreement or other Agreement involving the
sharing of profits; (x) outstanding loan to any person or entity or
receivable due from any stockholder of a Contributing Company or persons or
entities controlling, controlled by or under common control with a
Contributing Company; (xi) any Agreement (including, without limitation,
Agreements not to compete and exclusivity Agreements) that reasonably could
be interpreted to impose any restriction on any business operations of any
Contributed Sub; or (xii) other Agreement which by its terms does not
terminate or is not terminable by a Contributed Sub within 30 days or upon 30
days' (or less) notice.
5.13 BOOKS AND RECORDS
The books of account, stock records, minute books and other records
of the Contributing Company are true and accurate in all material respects
and have been maintained in
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accordance with good business practices, and the matters contained therein
are appropriately and accurately reflected in the financial statements
Furnished to the Contributing Companies.
5.14 LITIGATION; DISPUTES
(a) There are no actions, suits, complaints, claims, arbitrations,
proceedings or known investigations pending or, to the knowledge of the
Contributing Companies, threatened or reasonably anticipated against or
adversely affecting the Contributing Company or its business, Assets or
Approvals, or the transactions contemplated by this Exchange Agreement, at law
or in equity or admiralty, or before or by any court, arbitrator or Governmental
Agency, domestic or foreign. The Contributing Company is not operating under,
subject to or in default with respect to any order, award, writ, injunction,
decree or judgment of any court, arbitrator or governmental authority.
(b) The Disclosure Schedule sets forth each action, suit, complaint,
arbitration, proceeding and investigation to which the Contributing Company is a
party or is otherwise affected and which is included in its Contributed
Business, the rights and responsibilities of which will be assumed by Newco or
Newco Sub following the consummation of the transactions contemplated hereby.
(c) The Contributing Company is not currently involved in any dispute
with any of its current or former employees, agents, brokers, distributors,
vendors, customers, business consultants, franchisees, franchisors,
representatives or independent contractors (or any current or former employees
of any of the foregoing persons or entities), or any property owners with whom
the Contributed Company has contracted to provide services to a particular
property affecting or reasonably likely to affect the business or Assets of its
Contributed Business, other than disputes in the Ordinary Course of Business and
not material in amount.
5.15 LABOR RELATIONS
There are no strikes, work stoppages, grievance proceedings, union
organization efforts or other controversies pending or, to the knowledge of the
Contributing Company, threatened or reasonably anticipated between the
Contributing Company and (i) any current or former employees of the Contributing
Company or (ii) any union or other collective bargaining unit representing such
employees. The Contributing Company has complied and is in compliance with all
Laws relating to employment or the workplace, including, without limitation,
provisions relating to wages, hours, collective bargaining, safety and health,
work authorization, equal employment opportunity, immigration, withholding,
unemployment compensation, worker's compensation, employee privacy and right to
know except when a failure to comply, singly or in the aggregate, would not have
a material adverse effect on such Contributing Company. There are no collective
bargaining agreements, employment agreements between the Contributing Company
and any of its employees, or professional service agreements not terminable at
will relating to the business and Assets of its Contributed Business. The
consummation of the transactions contemplated hereby will not cause Newco, Newco
Sub, any
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Contributed Sub or any stockholder of Newco to incur or suffer any
liability relating to, or obligation to pay, severance, termination or other
payments to any person or entity.
5.16 PENSION AND BENEFIT PLANS
5.16.1 DISCLOSURE SCHEDULE
Except as set forth in the Disclosure Schedule, no Contributing
Company (i) maintains any Plan or Other Arrangement, (ii) is a party to any
Plan or Other Arrangement or (iii) has obligations under any Plan or Other
Arrangement.
5.16.2 COPIES OF DOCUMENTS
The Contributing Company has Furnished or otherwise made available
to the other Contributing Companies true and complete copies of each of the
following Documents: (i) the Documents setting forth the terms of each Plan;
(ii) all related trust agreements or annuity agreements (and any other
funding Document) for each Plan; (iii) for the three most recent plan years,
all annual reports (Form 5500 series) on each Plan that have been filed with
any governmental agency; (iv) the current summary plan description and
subsequent summaries of material modifications for each Title I Plan; (v) all
DOL opinions on any Plan and all correspondence relating to the request for
and receipt of each opinion; (vi) all correspondence with the PBGC on any
Plan; (vii) all IRS rulings, opinions or technical advice relating to any
Plan and all correspondence relating to the request for and receipt of each
ruling, opinion or technical advice; and (viii) all Agreements with service
providers or fiduciaries for providing services on behalf of any Plan. For
each Other Arrangement, the Contributing Company has Furnished to the other
Contributing Companies true and complete copies of each policy, Agreement or
other Document setting forth or explaining the terms of the Other
Arrangement, all related trust agreements or other funding Documents
(including, without limitation, insurance contracts, certificates of deposit,
money market accounts, etc.), all material employee communications, all
material correspondence or other submissions with any governmental agency,
and all Agreements with service providers or fiduciaries for providing
services on behalf of any Other Arrangement.
5.16.3 MULTIEMPLOYER PLANS
No Plan is a Multiemployer Plan.
5.16.4 ESOPS
No Plan is an ESOP.
5.16.5 FUNDING
No Plan is a Defined Benefit Plan.
- 17 -
5.16.6 CONTRIBUTIONS AND OTHER OBLIGATIONS
The Contributing Company has made all contributions and other
payments required by and due under the terms of each Plan and Other
Arrangement and have taken no action (including, without limitation, actions
required by Law) relating to any Plan or Other Arrangement that will
materially increase any Contributed Sub's, Newco's or Newco Sub's obligation
under any Plan or Other Arrangement.
5.16.7 QUALIFIED PLANS
The Disclosure Schedule sets forth a list of all Qualified Plans.
All Qualified Plans and any related trust agreements or annuity agreements
(or any other funding Document) comply and have complied, in all material
respects, with ERISA, the Code (including, without limitation, the
requirements for Tax qualification described in Section 401 thereof), and all
other Laws. The trusts established under such Plans are exempt from federal
income taxes under Section 501(a) of the Code. The Contributing Company has
received determination letters issued by the IRS with respect to each
Qualified Plan, and the Contributing Company has Furnished to the other
Contributing Companies true and complete copies of all such determination
letters and all correspondence relating to the applications therefor. To the
best knowledge of the Contributing Company, all statements made by or on
behalf of such Contributing Company to the IRS in connection with
applications for determinations with respect to each Qualified Plan were true
and complete when made and continue to be true and complete. To the best
knowledge of the Contributing Company, nothing has occurred since the date of
the most recent applicable determination letter that could reasonably be
expected to adversely affect the tax-qualified status of any Qualified Plan.
5.16.8 COMPLIANCE WITH LAW
The Contributing Company has complied in all material respects with
all applicable provisions of the Code, ERISA, the National Labor Relations
Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Fair Labor Standards Act, and all other Laws pertaining
to the Plans, Other Arrangements and other employee or employment related
benefits, and all premiums and assessments relating to all Plans or Other
Arrangements. The Contributing Company has no liability for any delinquent
contributions within the meaning of Section 515 of ERISA (including, without
limitation, related attorneys' fees, costs, liquidated damages and interest)
or for any arrearages of wages. The Contributing Company has no pending
unfair labor practice charges, contract grievances under any collective
bargaining agreement, other administrative charges, claims, grievances or
lawsuits before any court, governmental agency, regulatory body, or arbiter
arising under any Law governing any Plan, and to the knowledge of the
Contributing Company there exist no facts that could give rise to such a
claim.
- 18 -
5.16.9 ERISA; PROHIBITED TRANSACTIONS
To the best knowledge of the Contributing Company, the Disclosure
Schedule describes all transactions in which such Contributing Company or any
of the Plans has engaged in violation of Section 406(a) or 406(b) of ERISA
for which no exemption exists under Section 408 of ERISA and all "prohibited
transactions" (as such term is defined in Section 4975(c)(1) of the Code),
for which no exemption exists under Section 4975(c)(2) or 4975(d) of the
Code. The Contributing Company has Furnished to the other Contributing
Companies true and complete copies of each request for a prohibited
transaction exemption and each exemption obtained in response to such
request. All such requests were true and complete when made and continue to
be true and complete.
5.16.10 NON-DEDUCTIBLE PAYMENTS
No Plan or Other Arrangement, individually or collectively,
provides for any payment by the Contributing Company to any employee or
independent contractor that is not deductible under Section 162(a)(1) or 404
of the Code or that is an "excess parachute payment" pursuant to Section 280G
of the Code.
5.16.11 REPORTABLE EVENTS
No Plan has experienced a "reportable event" (as such term is
defined in Section 4043(b) of ERISA) that is not subject to an administrative
or statutory waiver from the reporting requirement.
5.16.12 FOREIGN PLAN
No Plan is a "qualified foreign plan" (as such term is defined in
Section 404A(e) of the Code), and no Plan is subject to the Laws of any
jurisdiction other than the United States of America or one of its political
subdivisions.
5.16.13 TAX FORM 5330
The Contributing Company has timely filed and has Furnished to the
other Contributing Companies true and complete copies of each Form 5330 (Return
of Excise Taxes Related to Employee Benefit Plans) that such Contributing
Company filed on any Plan. The Contributing Company has no liability for Taxes
required to be reported on Form 5330.
5.16.14 WELFARE PLANS
No Plan is a funded Welfare Plan.
5.16.15 POST-RETIREMENT PLANS
No Plan promises or provides post-retirement medical or life insurance
coverage now or in the future to current, former or retired employees of the
Contributing Company.
- 19 -
5.16.16 HEALTH CARE CONTINUATION COVERAGE REQUIREMENTS
To the best knowledge of the Contributing Company, all Welfare
Plans and the related trusts that are subject to Section 4980B(f) of the Code
and Sections 601 through 607 of ERISA comply with and have been administered
in compliance with the health care continuation-coverage requirements of
Section 4980B(f) of the Code, Sections 601 through 607 of ERISA, and all
proposed or final Treasury regulations under Section 162 of the Code
explaining those requirements.
5.16.17 FILED RETURNS AND REPORTS
The Contributing Company has (i) filed or caused to be filed all
returns and reports on the Plans that they are required to file and (ii) paid
or made adequate provision for all material fees, interest, penalties,
assessments or deficiencies that have become due pursuant to those returns or
reports or pursuant to any assessment or adjustment that has been made
relating to those returns or reports. To the best knowledge of the
Contributing Company, all other fees, interest, penalties and assessments
that are payable by or for the Contributing Company have been timely
reported, fully paid and discharged. To the best knowledge of the
Contributing Company, there are no unpaid fees, penalties, interest or
assessments due from the Contributing Company or from any other person that
are or could become a lien on any Asset of its Contributed Sub or Newco Sub
or could otherwise adversely affect the businesses or Assets of its
Contributed Sub or Newco Sub. The Contributing Company has collected or
withheld all amounts that are required to be collected or withheld by them to
discharge their obligations, and all of those amounts have been paid to the
appropriate governmental agencies or set aside in appropriate accounts for
future payment when due.
5.17 ENVIRONMENTAL
The Contributing Company has complied and is in compliance with all
Environmental Laws relating to or affecting the Contributed Businesses.
5.18 TRANSACTIONS WITH RELATED PARTIES
Except as set forth on the Disclosure Schedule, neither any present
or former officer, director, stockholder or member of the Contributing
Company, nor any Affiliate of such officer, director, stockholder or member,
is currently a party to any transaction with such Contributing Company, the
rights and obligations of which are included in its Contributed Business,
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.
- 20 -
5.19 RESTRICTIONS AND CONSENTS
(a) There are no material Agreements, Laws, Approvals or other
restrictions of any kind to which the Contributing Company or its
stockholders are party (or any Asset thereof is subject) that would prevent
or restrict the execution, delivery or performance of this Exchange Agreement
in accordance with its terms or Newco's or Newco Sub's continued operation of
the Contributed Businesses after the date hereof on substantially the same
basis as heretofore operated. The Disclosure Schedule lists all such
material Agreements and Laws that reasonably could be interpreted or expected
to require the consent or acquiescence of any person or entity not party to
this Exchange Agreement with respect to any aspect of the execution, delivery
or performance of this Exchange Agreement by the Contributing Companies.
(b) Neither the nature of the Contributed Businesses or any of the
businesses, assets, Approvals or properties used in the Contributed
Businesses, nor any relationship between a Contributing Company and any other
Person, nor any circumstance in connection with the transactions contemplated
by this Exchange Agreement is such as to require on behalf of a Contributing
Company any consent, approval or other action by or any notice to or filing
with any court or administrative body or Governmental Agency in connection
with the execution, delivery and performance of this Exchange Agreement,
except for filings under ββββ-βββββ-ββββββ and consents, approvals and other
actions, notices and filings which are described in the Disclosure Schedule
and which, except as specified in the Disclosure Schedule, have been
obtained, taken and completed, as applicable, including, but not limited to,
all required prior consents, approvals, filings or notifications to or from
the FCC and any other Governmental Agency.
5.20 AUTHORIZATION
The execution, delivery and performance by the Contributing Company
of this Exchange Agreement and all other Documents contemplated hereby in
accordance with their respective terms, the fulfillment of and compliance
with the respective terms and provisions hereof and thereof, and the
consummation by the Contributing Company of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
corporate or other action, no other corporate or other proceedings on the
part of the Contributing Company are necessary to authorize this Exchange
Agreement and all Documents contemplated hereby or to consummate the
transactions contemplated hereby, and such actions do not and will not: (a)
conflict with, or violate any provision of, any Law or any Approval having
applicability to the Contributing Company or any of its Assets, or any
provision of the certificate or articles of incorporation or bylaws or
operating agreement or certificate of formation of the Contributing Company;
(b) conflict with, or result in any breach of, or constitute a default under
any material Agreement to which the Contributing Company is a party or by
which it or any of its Assets may be bound; or (c) result in or require the
creation or imposition, or result in the acceleration, of any indebtedness,
or of any Encumbrance of any nature upon, or with respect to, the Assets of
the Contributing Company.
- 21 -
5.21 ABSENCE OF VIOLATION
The Contributing Company is not in violation of or default under,
nor has it breached, any term or provision of its certificate or articles of
incorporation or formation or bylaws or operating agreement or any material
Agreement or restriction to which it is a party or by which the Contributing
Company or any Asset thereof is bound or affected. The Contributing Company
and its officers, directors, employees or agents (or stockholders, members,
distributors, representatives or other persons acting on the express, implied
or apparent authority of such entity) have not paid, given or received or
have offered or promised to pay, give or receive, any bribe or other
unlawful, questionable or unusual payment of money or other thing of value,
any extraordinary discount, or any other unlawful or unusual inducement, to
or from any person, business association or governmental official or entity
in the United States or elsewhere in connection with or in furtherance of the
business of the Contributing Company (including, without limitation, any
offer, payment or promise to pay money or other thing of value (i) to any
foreign official or political party (or official thereof) for the purposes of
influencing any act, decision or omission in order to assist the Contributing
Company in obtaining business for or with, or directing business to, any
person, or (ii) to any person, while knowing that all or a portion of such
money or other thing of value will be offered, given or promised to any such
official or party for such purposes). The business of the Contributing
Company is not in any manner dependent upon the making or receipt of such
payments, discounts or other inducements.
5.22 COMPLIANCE WITH LAW; APPROVALS
Except as set forth in the Disclosure Schedule and to the extent
not addressed by other representations contained in this Exchange Agreement:
(a) The operations of the Contributed Business has been conducted
in accordance with all applicable Laws and other requirements of all courts
and other Governmental Agencies having jurisdiction over the Contributing
Company and its Assets, Approvals, properties and operations, except for
violations that individually or in the aggregate would not and, insofar as
may reasonably be foreseen, in the future will not, have a Material Adverse
Effect;
(b) The Contributing Company has not received notice of any
violation of any such Law or other legal requirement, and is not in material
default with respect to any order, writ, judgment, award, injunction or
decree of any federal, state or local court or Governmental Agency or
arbitrator, domestic or foreign, applicable to the Contributing Company or
any of its Assets, Approvals, properties or operations;
(c) The Contributing Company has no knowledge of any proposed
change in any such Laws that would materially adversely affect the
transactions contemplated by this Exchange Agreement or all or any material
part of the Assets or the business of any of the Contributed Business;
- 22 -
(d) Each of the Contributed Subs has, and all professional
employees or agents of each of the Contributed Businesses have, been granted
and presently hold, all licenses, franchises, permits, registrations,
certificates, authorizations or approvals from all governmental or regulatory
authorities, including the FCC, state governmental agencies having
jurisdiction over intrastate communications and local authorities
("Approvals"), required or necessary for the conduct of the Contributed
Business, except where the failure to have such Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on any of
the Contributed Businesses. The Disclosure Schedule truly and completely
lists all such Approvals. All of such Approvals are in full force and
effect, are not subject to any conditions outside of the ordinary course, and
none of the Contributed Subs or the professional employees or agents of any
of the Contributed Businesses lack any such Approval or are in violation of
any terms or conditions thereof, except for such violations as would not,
individually or in the aggregate, have a Material Adverse Effect on any of
the Contributed Businesses;
(e) No Contributing Company has received any notice or
correspondence from any Governmental Agency (or from any third party or other
Person requesting such action) revoking, canceling, rescinding, modifying or
refusing to renew, or threatening to take any action with respect to, any
such Approval; and
(f) Except as set forth on the Disclosure Schedule, all such
Approvals are freely transferable to Newco Sub subject to prior Governmental
Agency approvals (including approvals of the FCC, state governmental agencies
having jurisdiction over intrastate communications and local authorities),
where applicable, and upon the consummation of the transactions contemplated
hereunder and receipt of any Government Agency and FCC approvals, Newco Sub
will receive the benefits (without any diminution) of all such Approvals.
5.23 SUBSCRIBERS; RIGHTS OF ENTRY
The Disclosure Schedule sets forth a complete and correct list as
of September 30, 1998, of all Rights of Entry possessed by the Contributing
Businesses transferred to the Contributed Subs prior to Closing and the
number of Cable Subscribers and Billable Phone Subscribers served pursuant to
each such Right of Entry. True, accurate and complete copies of all Rights
of Entry listed in the Disclosure Schedule have been furnished by the
Contributing Company to the other Contributing Companies. Except as set
forth in the Disclosure Schedule, all Rights of Entry, including all
amendments thereto, (a) are in writing and are legal, valid, binding and
enforceable in accordance with their terms, and (b) the validity and
enforceability of the same will not be adversely affected by the consummation
of any of the transactions contemplated by this Exchange Agreement. Except
as set forth on the Disclosure Schedule, no material default of any Person
exists under any of the Rights of Entry, and to the best knowledge of the
Contributing Company, the parties thereto other than the Contributing Company
have no offsets or defenses to the enforcement thereof. Additionally, the
Disclosure Schedule accurately sets forth the properties to which each
Contributed Business provides service (the "Relevant Properties"), the
locations of such properties, the number of units to such services at each of
such locations, the number of Cable Subscribers and Billable Phone
Subscribers to such services at each of such locations, the date of the
Rights of Entry relating to each property and the
- 23 -
expiration of such Right of Entry. Additionally, the Disclosure Schedule sets
forth a complete and correct list, for each Relevant Property, of the source
of signal feed used, specifying whether such feed is SMATV on premises, 18ghz
or another type of feed (and a description thereof).
5.24 CABLE SYSTEMS
The Disclosure Schedule lists all "cable systems," as defined by
the Communications Act and FCC Rules, operated by the Contributed Businesses
transferred to the Contributed Subs prior to Closing (collectively, "Cable
Systems"), the name of the franchise authority ("Franchisor"), if any, the
date on which the franchise was awarded and the date on which the franchise
is scheduled to expire (if not renewed). Except as set forth on the
Disclosure Schedule with respect to each such Cable System, each Contributing
Company (a) has timely filed all required registration statements with the
FCC pursuant to FCC Rule 76.12, (b) has timely filed all required equal
employment opportunity reports with the FCC pursuant to FCC Rule 76.77, such
reports are true and accurate, and the FCC has certified compliance in
response to each such report, (c) is in compliance with all FCC programming
requirements, including the children's programming provisions of FCC Rule
76.225, (d) has timely filed all reports, including those required by FCC
Rule 76.403, and is in material compliance with the record-keeping and
inspection requirements of FCC Rules 76.307 and 76.601, (e) has not received
any notice of non-compliance from any franchisor pursuant to Rule 76.309 and
meets or exceeds the customer service provisions set forth in that rule, (f)
materially complies with the requirements of FCC Rule 76.601 and is in
material compliance with the applicable technical standards of FCC Rule
76.605, (g) is in material compliance with the aeronautical interference
provisions of FCC Rules 76.610-76.615 and (h) has timely paid all appropriate
Federal regulatory fees.
5.25 FCC LICENSES
The Disclosure Schedule correctly sets forth all of the FCC
licenses, permits, approvals and authorizations (collectively, the "FCC
Licenses") used or planned to be used by the Contributed Businesses in
connection with their business and correctly sets forth the entity holding
such FCC License, the call sign or file number and expiration date of each
such FCC License. All of the FCC Licenses have been transferred to the
Contributed Subs prior to Closing. No Contributed Business is required to
hold any other FCC License to conduct its business. Each such FCC License
has been duly and validly issued or assigned to the applicable Contributing
Company, and will be duly and validly assigned to the applicable Contributed
Sub prior to Closing, by or with the consent of the FCC pursuant to
procedures which comply with all requirements of applicable law, is in full
force and effect, and is unimpaired, and Contributed Sub at Closing will have
the right to use all of its FCC Licenses in the ordinary course of business
for the operation of its business. The Contributing Company is in compliance
in all material respects with the FCC Licenses, all provisions of the
Communications Act of 1934, as amended (the "Communications Act") and the
rules and regulations promulgated and policies adopted under the
Communications Act (collectively, the "FCC Rules"), and there is no known
conflict with the valid rights of others which could adversely affect the FCC
Licenses or the business of any Contributed Business. There is no complaint
or proceeding pending before the
- 24 -
FCC, or to the best knowledge of the Contributing Company threatened, or
other event that has occurred, which could reasonably be expected to result
in the forfeiture, revocation, impairment, non-renewal or adverse
modification, of any such FCC License, or the imposition of a financial or
other penalty upon such Contributing Company. All facilities authorized
pursuant to the FCC Licenses were timely constructed in accordance with such
FCC License, the Communications Act and FCC Rules and are operating in
compliance therewith.
5.26 FCC APPLICATIONS
The Disclosure Schedule sets forth all applications (collectively,
the "FCC Applications") that are pending before the FCC with respect to each
Contributed Business, the file number of each such application and the date
on which it was accepted for filing by the FCC. Each of the FCC Applications
complies in all material respects with the Communications Act and the FCC
Rules. There are no petitions, protests, oppositions, objections, or other
proceedings, formal or informal, pending or threatened, before the FCC
requesting dismissal, denial, reconsideration or reinstatement which, if
granted, could result in the denial, dismissal, return, or non-grant of any
FCC Application, the issuance of a cease and desist order, or the imposition
of any administrative or judicial sanction.
5.27 FCC COMPLIANCE
Except as set forth in the Disclosure Schedule, the Contributing
Company has timely filed with the FCC all reports and filings (collectively,
the "Reports") which are required to be filed by it under the Communications
Act and FCC Rules, including, without limitation, FCC Rules relating to equal
employment opportunity.
5.28 ZONING, AVIATION, ETC. COMPLIANCE
Except as set forth in the Disclosure Schedule, none of the
facilities used in the business of any Contributed Business violates the
provisions of any applicable federal, state, or local aviation regulation
(including FCC and Federal Aviation Administration tower markings and
lighting requirements), building restriction, zoning ordinance or regulation,
and each such facility is zoned, if required, so as to permit the commercial
uses intended by the owner or occupier thereof, and there are no outstanding
variances or special use permits affecting any of such facilities or the uses
thereof.
5.29 COMPLIANCE WITH THE COPYRIGHT ACT
Except as set forth in the Disclosure Schedule, the Contributing
Company has (i) (a) duly filed in a timely manner all registration
statements, statements of account and other filings which are required to be
filed under the Copyright Act, 17 U.S.C. Section 111, et seq., and under any
local laws and rules, (b) conducted its business in compliance with the
Copyright Act and the rules and regulations of the Copyright Office, and (c)
timely submitted any and all notices, statements of account, or other
instruments required under the Copyright Act and the
- 25 -
Rules and Regulations of the Copyright Office for a license to carry all
broadcast stations previously or currently carried on such Contributing
Company's systems; and (ii) timely remitted all required payments and royalty
fees for the carriage of such stations. The Contributing Company is not
aware of any pending inquiry from the Copyright Office or any other party
regarding the filing of the above-referenced statement of accounts. The
Contributing Company is not liable to any Person for copyright infringement
under the Copyright Act or trademark infringement under the applicable
federal and state statutes and regulations as a result of its business
operations, its conduct of its business or otherwise.
5.30 MUST-CARRY AND RETRANSMISSION CONSENT
The Disclosure Schedule lists each Broadcast Station (as defined
below) which is carried on each Cable System pursuant to the must-carry
provisions of the Communications Act and FCC Rules 76.51-76.62, and the
channel on which it is carried. The Disclosure Schedule also separately
lists each Broadcast Station carried pursuant to a retransmission consent
agreement, and the channel on which it is carried. Except as set forth on
the Disclosure Schedule, there is no dispute pending or threatened with
respect to the carriage of any Broadcast Station. Each Contributing Company,
as applicable, has complied with all Broadcast Station notification
provisions of FCC Rule 76.58 and the must-carry record-keeping provisions of
FCC Rule 76.302 with respect to each Cable System, and with all other FCC
Rules regarding must-carry and retransmission consent. Each Broadcast
Station signal carried by the Cable Systems is carried either pursuant to the
must-carry obligations of the Cable Systems or pursuant to a valid and
binding agreement between a Contributing Company and the Broadcast Station
(or License Company and the Broadcast Station) authorizing the retransmission
of the Broadcast Station signal. For purposes of this section, the term
"Broadcast Station" means, in connection with signals retransmitted, a local
commercial television station, as defined in FCC Rule 76.55(c), a qualified
low power station, as defined in FCC Rule 76.55(d), a qualified noncommercial
educational television broadcasting station as defined in FCC Rule 76.55(a)
or a qualified local noncommercial educational television station as defined
in FCC Rule 76.55(b), but does not include a "superstation" as defined by FCC
Rule 76.64(c)(2).
5.31 PETITIONS FOR SPECIAL RELIEF
The Contributing Company has not received and does not have knowledge
of any petition for special relief or documents so styled filed against or with
respect to such Contributing Company concerning any matters which under FCC
Rules can be raised in a petition for special relief.
5.32 RATE REGULATION AND EFFECTIVE COMPETITION
The Cable Systems are either exempt from rate regulation or are
subject to "effective competition" as defined in FCC Rule 76.905(b). No
Franchisor has certified to the FCC as a pre-condition to rate regulation and
there are no subscriber or franchising authority complaints against the cable
product service tier on the Cable Systems.
- 26 -
5.33 HARD WIRE PUBLIC RIGHT-OF-WAY CROSSINGS
The Disclosure Schedule sets forth a complete and correct list of
all hard wire public right-of-way crossings relating to the business of the
Contributed Businesses. Except as set forth on the Disclosure Schedule, at
Closing each Contributed Sub will have valid, binding and enforceable rights
and franchises to maintain such crossings. The Disclosure Schedule also
indicates which hard wire public rights-of-way crossings may be required to
have, but do not have, franchises.
5.34 SECURITY SERVICES
The Disclosure Schedule is a true, complete and correct list of all
Relevant Properties for which each Contributing Company has agreements to be
transferred to the Contributed Subs prior to Closing with respect to the
provision of security services, specifying the corresponding Right of Entry,
whether such security service is performed at such Contributing Company's
option or is required by the Right of Entry and all subcontract arrangements
to provide the security services. The Contributing Company has provided the
other Contributing Companies with copies of all contracts and subcontracts
relating to such security services.
5.35 COPIES OF DOCUMENTS
True and complete copies of all Documents listed in the Disclosure
Schedule have been Furnished or otherwise made available to the Contributing
Companies.
5.36 BINDING OBLIGATION
This Exchange Agreement constitutes a valid and binding obligation
of each Contributing Company, and assuming the due authorization, execution
and delivery by each other party hereto, enforceable in accordance with its
terms; and each Document to be executed by any Contributing Company pursuant
hereto, when executed and delivered in accordance with the provisions hereof
and assuming the due authorization, execution and delivery by each other
party thereto, shall be a valid and binding obligation of such Contributing
Company, enforceable in accordance with its terms.
5.37 DISCLOSURE
No representation or warranty by the Contributing Companies in this
Exchange Agreement, and no Document Furnished or to be Furnished pursuant to
this Exchange Agreement, or in connection herewith or with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact or omits or will omit any material fact necessary to make the
statements contained herein or therein, in light of the circumstances under
which made, not misleading.
- 27 -
6. RESTRICTED SECURITIES
Each Contributing Company represents, warrants and covenants to
each other Contributing Company and to Newco as follows:
6.1 NO REGISTRATION UNDER THE SECURITIES ACT
Such Contributing Company understands that the Shares to be
acquired by it at the Closing pursuant to the terms of this Exchange
Agreement will not be registered under the Securities Act, in reliance upon
exemptions contained in the Securities Act or interpretations thereof, and
cannot be offered for sale, sold or otherwise transferred unless such shares
being acquired hereunder subsequently are so registered or qualify for
exemption from registration under the Securities Act.
6.2 ACQUISITION FOR INVESTMENT
The Shares are being acquired under this Exchange Agreement by such
Contributing Company in good faith solely for its own account, for investment
and not with a view toward distribution within the meaning of the Securities
Act. The Shares will not be offered for sale, sold or otherwise transferred
by such Contributing Company without either registration or exemption from
registration under the Securities Act except to permitted transferees as
listed on Schedule 6.2 hereto.
6.3 EVALUATION OF MERITS AND RISKS OF INVESTMENT
Such Contributing Company has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of its investment in the Shares being acquired hereunder. Such
Contributing Company is an "accredited investor" within the meaning of one or
more of paragraphs (1), (2), (3) or (8) of Rule 501(a) under the Securities
Act. Such Contributing Company understands and is able to bear any economic
risks associated with such investment (including, without limitation, the
necessity of holding the Shares for an indefinite period of time, inasmuch as
the Shares have not been registered under the Securities Act).
6.4 ADDITIONAL INFORMATION
Such Contributing Company acknowledges that it has been afforded
the opportunity to ask questions and receive answers to its satisfaction
concerning all of the Contributing Businesses and to obtain any additional
information that is necessary to verify the accuracy of the information
contained herein.
- 28 -
7. CLOSING
Subject to the terms and conditions of this Exchange Agreement, the
Closing shall take place at the offices of ββββ ββββββββ ββββββββ & ββββββ
LLP, βββ ββββ ββββββ, βββ ββββ, βββ ββββ on the date hereof or at such other
time, place and date as is mutually agreed to by the parties hereto.
7.1 DELIVERIES BY EACH CONTRIBUTING COMPANY
Contemporaneously with the execution of this Exchange Agreement, each
Contributing Company shall deliver to Newco or each other Contributing Company,
as the case may be, the following:
(a) to Newco, stock certificates representing all of the issued and
outstanding shares of capital stock of its Contributed Sub, duly endorsed in
blank for transfer, or, in the case of STC, evidence satisfactory to Newco of
the transfer of all ownership interests in STC Sub to Newco;
(b) to Newco and each other Contributing Company, a certified copy of
the resolutions adopted by its Board of Directors or other governing body and,
if applicable, stockholders or members, of the Contributing Company authorizing
the transactions contemplated by this Exchange Agreement;
(c) to Newco and each other Contributing Company, opinions of the
Contributing Company's counsel, dated as of the date hereof, to the effect and
substantially in the form of EXHIBITS G-1 and G-2;
(d) [intentionally omitted];
(e) to Newco and each other Contributing Company, certificates of
incumbency and specimen signatures of the signatory officers of such
Contributing Company;
(f) to Newco and each other Contributing Company, good standing
certificates as of a recent date issued by the Secretary of State of the State
of Delaware as to its Contributed Sub;
(g) to Newco, the certificate of incorporation, bylaws, minute books
and stock books of its Contributed Sub (and, with respect to ICS, ActiveTel, and
with respect to STC Sub, its certificate of formation and operating agreement)
and all other books and records of the Contributed Sub (and ActiveTel)
reasonably requested by Newco;
(h) to Newco and each other Contributing Company, an executed copy of
the Stockholders Agreement;
(i) to Newco and each other Contributing Company, true and complete
copies of all consents, notices or approvals (including any required under
SECTION 5.22(f)) necessary to
- 29 -
be obtained or made by such Contributing Company in connection with the
transactions contemplated by this Agreement, other than those set forth on
Schedule 7.1(i) and those which would otherwise be required under SECTION
5.23.
(j) with respect to STC only, to Newco, an executed copy of its
Secondment Agreement with Newco Sub;
(k) to Newco, an executed copy of its Agreement Regarding Key
Management with Newco Sub;
(l) to Newco and the lenders under the Bridge Loans, documentation
evidencing the release of any and all liens on the Assets being delivered by
such Contributing Company; and
(m) such other documents as Newco or any other Contributing Company
may reasonably request.
7.2 DELIVERIES BY NEWCO
Contemporaneously with the execution of this Agreement, Newco shall
deliver or shall cause Newco Sub to deliver, as appropriate, to each
Contributing Company the following:
(a) stock certificates issued in the name of such Contributing
Company for the Shares acquired by such Contributing Company pursuant to SECTION
2 hereof;
(b) a certified copy of the resolutions adopted by the Board of
Directors of Newco authorizing the transactions contemplated by this Exchange
Agreement;
(c) an opinion of βββββ & βββββββ L.L.P., counsel to Newco, dated as
of the date hereof, in substantially the form attached hereto as EXHIBIT H;
(d) an opinion from Deloitte & Touche L.L.P., Newco's independent
certified public accountants, addressed to Newco and each Contributing Company
and dated as of the date hereof, to the effect and in substantially the form
attached hereto as EXHIBIT I;
(e) certificates of incumbency and specimen signatures of the
signatory officers of Newco;
(f) executed copies of the Bridge Loan documents, as set forth on
Schedule 2.7(a) hereto and evidence of the funding of all amounts thereunder;
(g) an executed copy of the Stockholders Agreement;
(h) a good standing certificate and copy of the charter, certified by
the Secretary of State of the State of Delaware for ActiveTel;
(i) an executed copy of the Secondment Agreement with STC;
- 30 -
(j) an executed copy of the Agreement Regarding Key Management with
each respective Contributing Company; and
(k) such other Documents any Contributing Company may reasonably
request.
8. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
8.1 SURVIVAL OF REPRESENTATIONS
All representations and warranties in this Exchange Agreement shall
survive for a period of eighteen (18) months after the date hereof.
Notwithstanding anything herein to the contrary, any representation or warranty
which is the subject of a claim that is asserted in writing prior to the
expiration of the 18-month period set forth above shall survive with respect to
such claim or dispute until the final resolution thereof.
8.2 AGREEMENT OF THE CONTRIBUTING COMPANIES TO INDEMNIFY
(a) Subject to the conditions and provisions of this SECTION 8,
each Contributing Company hereby agrees to indemnify, defend and hold
harmless Newco, Newco Sub and their respective officers, directors,
employees, agents and representatives (collectively, the "Newco Indemnified
Persons") from and against and in respect of all Claims asserted against,
resulting to, imposed upon or incurred by the Newco Indemnified Persons
(whether such Claims are by, against or relate to Newco, Newco Sub, a
Contributing Company or any other party, including, without limitation, a
Governmental Agency), directly or indirectly, arising out of, by reason of or
resulting from (i) any misrepresentation or breach of any representation or
warranty, or noncompliance with any conditions or other Agreements, given or
made by such Contributing Company in this Exchange Agreement or in any
Document, certificate or Agreement Furnished by or on behalf of any such
party pursuant to this Exchange Agreement or (ii) the Assets or the business
and operations of such Contributing Company during the period prior to the
date hereof (to the extent not reflected or reserved against in such
Contributing Company's Pro Forma Statement). It shall be a condition to the
right of any Newco Indemnified Person to indemnification pursuant to this
Section that such Newco Indemnified Person shall assert a claim for such
indemnification within the 18-month period set forth in SECTION 8.1 hereof.
Notwithstanding the foregoing, no Contributing Company shall have any
indemnification obligation or liability under this SECTION 8 for or in
respect of any breach or asserted breach of any representation or warranty
set forth in SECTION 5.4(b), SECTION 5.5 or SECTION 5.6 (without limiting,
however, any indemnification obligation or liability under any other Section
arising out of the same facts).
(b) A Contributing Company will have no liability for
indemnification under this SECTION 8.2 until the total of all damages
incurred by the Newco Indemnified Persons resulting from such Contributing
Company's actions or inactions exceeds $100,000.
- 31 -
(c) In the event that ResNet shall be liquidated prior to the
expiration of the 18-month period set forth in SECTION 8.1 above and the
shares of Newco Common Stock shall be distributed to its members, ResNet,
Inc. hereby agrees to assume any and all obligations of ResNet under this
SECTION 8.
(d) Except with respect to Claims based upon fraud by any such
Contributing Company, the maximum aggregate amount of indemnification which
the Newco Indemnified Persons shall be entitled to from any Contributing
Company under this SECTION 8.2 shall be an amount equal to the aggregate
value on the date hereof of the Shares being issued to such indemnifying
party hereunder, at an assumed price per share of $16,800.
8.3 CONDITIONS OF INDEMNIFICATION
The obligations and liabilities of each Contributing Company
hereunder with respect to their respective indemnities pursuant to this
SECTION 8, resulting from any Claim shall be subject to the following terms
and conditions:
(a) The indemnified party shall give prompt written notice to the
indemnifying party of any Claim which is asserted against, resulting to,
imposed upon or incurred by such indemnified party and which may give rise to
liability of the indemnifying party pursuant to this SECTION 8, stating (to
the extent known or reasonably anticipated) the nature and basis of such
Claim and the amount thereof.
(b) The indemnifying party shall promptly and timely engage counsel
for representation with respect to any such Claim, such representation
(including the compromise or settlement of any Claim) to be undertaken on
behalf of the indemnified party, and the indemnified party shall have the
right to approve such counsel (such approval not to be unreasonably
withheld). In the event the indemnifying party elects not to undertake the
defense of such Claim by its own counsel, the indemnifying party shall give
prompt written notice of such election to the indemnified party, and the
indemnified party will undertake the defense thereof by counsel or other
representatives designated by it, at the cost and expense of the indemnifying
party (such costs and expenses of such defense to be advanced by the
indemnifying party as incurred by the indemnified party).
(c) In the event that with respect to any Claim Newco and Newco
Sub, on the one hand, and the Contributing Companies, on the other hand, are
liable or reasonably likely to be held liable for part of the liability or
obligation arising therefrom, then the parties shall, each choosing its or
his own counsel and bearing its or his own expense, defend such Claim, and no
settlement or compromise of such Claim may be made without the joint consent
or approval of all parties (which consents shall not be unreasonably
withheld).
(d) The amount which any indemnifying party is or may be required
to pay any indemnified party pursuant to this SECTION 8 shall be measured
taking into account (i) any income tax savings (and income tax cost
attributable to the indemnity payment) actually realized (or occurred) that
affect the overall economic impact of the losses to the indemnified party,
and
- 32 -
(ii) any insurance proceeds actually realized and adverse insurance
consequences incurred (such as premium adjustments and other detriments) that
affect the overall economic impact of the Claims to the indemnified party.
8.4 SPECIFIC PERFORMANCE
In addition to any other remedies which the Contributing Companies
may have at law or in equity, the Contributing Companies hereby acknowledge
that the Contributing Businesses are unique, and that the harm to each of the
Contributing Companies resulting from breaches by the other parties hereto of
their respective obligations cannot be adequately compensated by damages.
Accordingly, the parties hereto agree that the Contributing Companies shall
have the right to have all obligations, undertakings, Agreements, covenants
and other provisions of this Exchange Agreement specifically performed by the
other parties hereto, as the case may be, and that any such party shall have
the right to obtain an order or decree of such specific performance in any of
the courts of the United States of America or of any state or other political
subdivision thereof.
8.5 REMEDIES CUMULATIVE
The remedies provided herein shall be cumulative and shall not
preclude the assertion by Newco or any Contributing Company of any other
rights or the seeking of any other remedies against the other, or their
respective successors or assigns.
9. MISCELLANEOUS
9.1 ADDITIONAL ACTIONS AND DOCUMENTS
Each of the parties hereto hereby agrees to take or cause to be
taken such further actions, to execute, deliver and file or cause to be
executed, delivered and filed such further Documents, and will obtain such
consents, as may be necessary or as may be reasonably requested in order to
fully effectuate the purposes, terms and conditions of this Exchange
Agreement, including, but not limited to those consents set forth on Schedule
7.1(i). ICS further agrees to cause its subsidiary, ICS Licenses, Inc. to
take all necessary action to transfer its FCC Microwave License (Call Sign
WNTU955) to Newco within 45 days of the Closing Date.
9.2 NO BROKERS
Each of the parties hereto represents and warrants to the other
parties (and to each of them) that such party has not engaged any broker,
finder or agent in connection with the transactions contemplated by this
Exchange Agreement and has not incurred (and will not incur) any unpaid
liability to any broker, finder or agent for any brokerage fees, finders'
fees or commissions, with respect to the transactions contemplated by this
Exchange Agreement. Each party agrees to indemnify, defend and hold harmless
each of the other parties from and against
- 33 -
any and all claims asserted against such parties for any such fees or
commissions by any persons purporting to act or to have acted for or on
behalf of the indemnifying party.
9.3 EXPENSES
Newco and each Contributing Company shall be represented by its own
independent counsel and will be responsible for its respective legal and
consulting expenses, except that the Contributing Companies shall bear
equally the expenses incurred by Newco, including the fees and expenses of
βββββ & βββββββ L.L.P., counsel to Newco, which fees and expenses shall not
exceed $300,000 without the consent of the Contributing Companies.
9.4 ASSIGNMENT
Each Contributing Company shall have the right to assign its rights
and obligations under this Exchange Agreement, in whole or in part, to an
Affiliate or to designate any of its Affiliates (to the extent permitted by Law)
to receive directly the Shares to be acquired hereunder or to exercise any of
the rights of such Contributing Company, or to perform any of its obligations
and shall be permitted to pledge all or any portion of such Shares to any lender
thereof as collateral to secure indebtedness owed by such party. Except as
provided in the foregoing sentence, no Contributing Company shall assign its
rights and obligations under this Exchange Agreement, in whole or in part,
whether by operation of law or otherwise, and any such assignment contrary to
the terms hereof shall be null and void and of no force and effect. In no event
shall the assignment by a Contributing Company of its respective rights or
obligations under this Exchange Agreement, whether before or after the Closing,
release such Contributing Company from its respective liabilities and
obligations hereunder.
9.5 ENTIRE AGREEMENT; AMENDMENT
This Exchange Agreement, including the Disclosure Schedule, the
Exhibits and other Documents referred to herein or Furnished pursuant hereto,
constitutes the entire Agreement among the parties hereto with respect to the
transactions contemplated herein, and it supersedes all prior oral or written
Agreements, commitments or understandings with respect to the matters provided
for herein. No amendment, modification or discharge of this Exchange Agreement
shall be valid or binding unless set forth in writing and duly executed and
delivered by the party against whom enforcement of the amendment, modification,
or discharge is sought.
9.6 WAIVER
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Exchange Agreement or under any other
Documents Furnished in connection with or pursuant to this Exchange 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. No waiver shall
- 34 -
be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
9.7 CONSENT TO JURISDICTION
(a) This Exchange Agreement and the duties and obligations of the
Contributing Companies hereunder and under each of the Documents referred to
herein shall be enforceable against each and all of the Contributing Companies
in the courts of the United States of America and of the State of New York. For
such purpose, each of the Contributing Companies hereby irrevocably submits to
the non-exclusive jurisdiction of such courts, and agrees that all claims in
respect of this Exchange Agreement and such other Documents may be heard and
determined in any of such courts.
(b) Each of the Contributing Companies hereby irrevocably agrees that
a final judgment of any of the courts specified above in any action or
proceeding relating to this Exchange Agreement or to any of the other Documents
referred to herein or therein shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
9.8 ARBITRATION
The parties to this Exchange Agreement agree that the exclusive remedy
for resolution of any and all disputes arising out of or related to this
Agreement, including any request for injunctive relief, shall be resolved by
confidential binding arbitration in accordance with the J.A.M.S./ENDISPUTE
Arbitration Rules and Procedures then in force, except as may be expressly
modified by this Exchange Agreement. Such arbitration shall be conducted in New
York, New York unless otherwise mutually agreed upon in writing by the parties.
The costs of arbitration, including fees and expenses of the arbitrator, shall
be shared equally by the parties unless the arbitration award provides
otherwise. Each party shall bear its own fees and costs for the preparation and
presentation of its case. The parties agree that this provision and the
Arbitrator's authority to grant relief shall be subject to the United States
Arbitration Act, 9 U.S.C. Sections 1-16 et seq. ("USAA"), the provisions of this
Exchange Agreement, and the ABA-AAA Code of Ethics for Arbitrators in Commercial
Disputes. The parties agree that in no event shall the arbitrator have the
authority to make any award that provides for punitive or exemplary damages.
The arbitrator's decision shall be final and binding. The parties hereby agree
to subject themselves to the jurisdiction of any court in the State of New York
for (i) confirmation and enforcement of any decision of the arbitrator pursuant
to this SECTION 9.8 and (ii) injunctive relief solely to compel arbitration in
accordance with this SECTION 9.8. All post-award proceedings shall be governed
by the USAA and relevant laws of the State of New York.
9.9 SEVERABILITY
If any part of any provision of this Exchange Agreement or any other
Agreement or document given pursuant to or in connection with this Exchange
Agreement shall be invalid or
- 35 -
unenforceable in any respect, such part shall be ineffective to the extent of
such invalidity or unenforceability only, without in any way affecting the
remaining parts of such provision or the remaining provisions of this
Exchange Agreement.
9.10 GOVERNING LAW
This Exchange Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of New York (excluding the
conflicts of law rules thereof).
9.11 NOTICES
All notices, demands, requests, or other communications which may be
or are required to be given, served, or sent by any party to any other party
pursuant to this Exchange Agreement shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
telegram, telecopy or telex, addressed as follows:
(a) If to STC:
Shared Technologies Communications Corporation
βββ ββββββββββββ βββββ, βββββ ββββ
ββββββββ, βββββββββββ βββββ
Attention: βββββββ β. ββββββββ
with a copy (which shall not constitute notice) to:
Day, βββββ & ββββββ LLP
CityPlace I
ββββββββ, βββββββββββ βββββ
Attention: ββββ β. βββββββββ
(b) If to ICS:
Interactive Cable Systems, Inc.
ββββ βββββ βββββββββ ββββ, βββββ βββ
ββββββββββ, βββββ βββββ
Attention: βββββ βββββββββββββ
with a copy (which shall not constitute notice) to:
Fulbright & ββββββββ L.L.P.
βββ βββββ ββββββββ ββββββ, ββββ βββββ
βββ βββββββ, ββββββββββ βββββ
Attention: βββ β. ββββββββ
- 36 -
(c) If to ResNet or ResNet, Inc.:
ResNet Communications, LLC
ββββ ββββ ββββββββββ ββββββ
βββββ βββββ, βββββ ββββββ βββββ
Attention: βββββ β. ββββββββ
with a copy (which shall not constitute notice) to:
Pillsbury Madison & Sutro LLP
βββ ββββββββββ ββββββ
βββ βββββββββ, ββββββββββ βββββ
Attention: βββββ ββββββ
(d) If to Newco:
Global Interactive Technologies Corporation
ββββ βββββ βββββββββ ββββ, βββββ βββ
ββββββββββ, βββββ βββββ
Attention: βββββ βββββββββββββ
with a copy (which shall not constitute notice) to:
βββββ & βββββββ L.L.P.
βββ βββββ βββββββ ββββββ, βββββ ββββ
βββββββββ, ββββββββ βββββ
Attention: βββββββ β. ββββββββββ
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, telecopied or telexed in the manner described above, or which
shall be delivered to a telegraph company, shall be deemed sufficiently given,
served, sent, received or delivered for all purposes at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt, or
(with respect to a telecopy or telex) the answerback being deemed conclusive,
but not exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
9.12 HEADINGS
Section headings contained in this Exchange Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this Exchange
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
- 37 -
9.13 EXECUTION IN COUNTERPARTS
To facilitate execution, this Exchange Agreement may be executed in as
many counterparts as may be required to obtain signatures from all parties. It
shall not be necessary that the signatures of, or on behalf of, each party, or
that the signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single Agreement. It shall not be necessary in making proof of
this Exchange Agreement to produce or account for more than a number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto.
9.14 LIMITATION ON BENEFITS
The covenants, undertakings and agreements set forth in this Exchange
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
9.15 BINDING EFFECT
Subject to any provisions hereof restricting assignment, this Exchange
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, heirs, executors, administrators, legal
representatives and assigns.
- 38 -
IN WITNESS WHEREOF, the parties hereto have duly executed this
Exchange Agreement, or have caused this Exchange Agreement to be duly executed
on their behalf, as of the day and year first above written.
SHARED TECHNOLOGIES
COMMUNICATIONS CORPORATION
By: /s/ ββββ β. βββββ
---------------------------------------
ββββ β. βββββ, President
INTERACTIVE CABLE
SYSTEMS, INC.
By: /s/ βββββ βββββββββββββ
---------------------------------------
βββββ βββββββββββββ, President
RESNET COMMUNICATIONS, LLC
By: ResNet Communications, Inc.
As Managing Member
By: /s/ βββββ β. ββββββββ
---------------------------------------
βββββ β. ββββββββ, President
GLOBAL INTERACTIVE TECHNOLOGIES
CORPORATION
By: /s/ βββββ βββββββββββββ
---------------------------------------
βββββ βββββββββββββ, President
RESNET COMMUNICATIONS, INC.
For purposes of Sections 2.7 and 8 only:
By: /s/ βββββ β. ββββββββ
---------------------------------------
βββββ β. ββββββββ, President
- 39 -
EXHIBIT A
TO EXCHANGE AGREEMENT
DATED AS OF NOVEMBER 30, 1998
DEFINITIONS
"ACTIVETEL" means ActiveTel β.β., Inc., a Delaware corporation.
"ADJUSTMENT DATE" has the meaning set forth in SECTION 2.6(a) hereof.
"ADJUSTMENT DATE STATEMENT" has the meaning set forth in SECTION
2.6(a) hereof.
"AFFILIATE" means: (a) with respect to a person, any member of such
person's family; (b) with respect to an entity, any officer, director,
stockholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a person or entity, any person or entity
which directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with such person or entity.
"AGREEMENT" means any concurrence of understanding and intention
between two or more persons (or entities) with respect to their relative rights
and/or obligations or with respect to a thing done or to be done (whether or not
conditional, executory, express, implied, in writing or meeting the requirements
of contract), including, without limitation, contracts, leases, promissory
notes, covenants, easements, rights of way, covenants, commitments, arrangements
and understandings.
"AGREEMENT REGARDING KEY MANAGEMENT" means the Agreements Regarding
Key Management by and between Newco Sub and each Contributing Company,
separately, and dated the date hereof, whereby Newco Sub agrees to permit
certain of its Key Employees (as defined therein) to provide certain services to
a Contributing Company.
"APPROVALS" has the meaning set forth in SECTION 5.22 hereof.
"ASSETS" means assets of every kind and everything that is or may be
available for the payment of liabilities (whether inchoate, tangible or
intangible), including, without limitation, real and personal property.
"BILLABLE PHONE SUBSCRIBER" means residential subscribers receiving
service on a for-charge basis at a Contributing Company's undiscounted rates
in a Relevant Property, whose account is not more than 90 days past due for a
retail contract and excluding those properties for which (a) there is no PBX
or service is not being offered or (b) there is either no contract or a
month-to-month contract where a Contributing Company has received notice that
its service to such properties is or will be terminated or such Contributing
Company has knowledge that another operator has been granted the right to
service such properties.
A-1
"BRIDGE LOANS" means the senior and junior bridge loans being obtained
by Newco and Newco Sub on the date hereof as set forth on SCHEDULE 2.7(a).
"BROADCAST STATION" has the meaning set forth in SECTION 5.30 hereof.
"CABLE SUBSCRIBERS" means individual residential subscribers to the
basic cable service tier in retail properties and fully activated units in bulk
contract properties, which comprise the Relevant Properties, and which, as of
the Closing, are active subscribers to the cable services offered by the
applicable Contributing Company, whose account is not more that 90 days past due
for a retail contract and 60 days past due for a bulk contract and excluding
those properties for which there is no contract or a month-to-month contract
where a Contributing Company has received notice that its service to such
properties is or will be terminated or such Contributing Company has knowledge
that another operator has been granted the right to service such properties.
"CABLE SYSTEMS" has the meaning set forth in SECTION 5.24 hereof.
"CAPITAL ADVANCE NOTE" has the meaning set forth in SECTION 3.2
hereof.
"CERTIFICATE OF MERGER" has the meaning set forth in SECTION 2.5
hereof.
"CLAIMS" means all demands, claims, actions or causes of action,
assessments, losses, damages (including, without limitation, diminution in
value), liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and disbursements.
"CLOSING" means the closing of the sale and purchase of the equity
interests in Newco pursuant to this Exchange Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended,
47 U.S.C. Section 151, et seq.
"CONTINUING EMPLOYEES" has the meaning set forth in SECTION 3.3
hereof.
"CONTRIBUTED BUSINESSES" means the ICS Business, the STC Business and
the ResNet Business.
"CONTRIBUTED SUBS" means the ICS Sub, the STC Sub and the ResNet Sub.
"CONTRIBUTING COMPANIES" means STC, ICS and ResNet.
"CONTROL" means possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
voting securities, by Agreement or otherwise).
A-2
"DEFINED BENEFIT PLAN" means a Plan that is or was a "defined benefit
plan" as such term is defined in Section 3(35) of ERISA.
"DGCL" means the Delaware General Corporation Law, as amended.
"DISCLOSURE SCHEDULE" means the disclosure schedule identified as the
Disclosure Schedule to the Exchange Agreement, which is hereby incorporated by
reference.
"DOCUMENTS" means any paper or other material (including, without
limitation, computer storage media) on which is recorded (by letters, numbers or
other marks) information that may be evidentially used, including, without
limitation, legal opinions, mortgages, indentures, notes, instruments, leases,
Agreements, insurance policies, reports, studies, financial statements
(including, without limitation, the notes thereto), other written financial
information, schedules, certificates, charts, maps, plans, photographs, letters,
memoranda and all similar materials.
"DOL" means the Department of Labor or its successors.
"ENCUMBRANCE" means any mortgage, lien, pledge, encumbrance, security
interest, deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Agreement, claim or equity of any
kind.
"ENVIRONMENTAL LAWS" means any Laws (including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act),
including any plans, other criteria, or guidelines promulgated pursuant to such
Laws, now or hereafter in effect relating to the generation, production,
installation, use, storage, treatment, transportation, release, threatened
release, or disposal of Hazardous Materials, noise control, or the protection of
human health, safety, natural resources, animal health or welfare, or the
environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"ESOP" means an "EMPLOYEE STOCK OWNERSHIP PLAN" as such term is
defined in Section 407(d)(6) of ERISA or Section 4975(e)(7) of the Code.
"EXHIBIT" means an exhibit attached to the Exchange Agreement.
"FCC" means the Federal Communications Commission or any successor
thereto.
"FCC APPLICATIONS" has the meaning set forth in SECTION 5.26 hereof.
"FCC LICENSES" has the meaning set forth in SECTION 5.25 hereof.
"FCC RULES" has the meaning set forth in SECTION 5.25 hereof.
"FRANCHISOR" has the meaning set forth in SECTION 5.24 hereof.
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"FURNISHED" means supplied, delivered or provided in any way.
"GOVERNMENTAL AGENCY" means (a) any international, foreign,
federal, state, county, local or municipal government or administrative
agency or political subdivision thereof, (b) any governmental agency,
authority, board, bureau, commission, department or instrumentality, (c) any
court or administrative tribunal, (d) any non-governmental agency, tribunal
or entity that is vested by a governmental agency with applicable
jurisdiction, or (e) any arbitration tribunal or other non-governmental
authority with applicable jurisdiction.
"ββββ-βββββ-ββββββ" means the ββββ-βββββ-ββββββ Antitrust Improvements
Act of 1976, as amended, and all Laws promulgated pursuant thereto or in
connection therewith.
"HAZARDOUS MATERIALS" means any wastes, substances, radiation, or
materials (whether solids, liquids or gases) (i) which are hazardous, toxic,
infectious, explosive, radioactive, carcinogenic, or mutagenic; (ii) which are
or become defined as a "pollutants" "contaminants", "hazardous materials,"
"HAZARDOUS WASTES," "HAZARDOUS SUBSTANCES," "TOXIC SUBSTANCES," "RADIOACTIVE
MATERIALS," "solid wastes," or other similar designations in, or otherwise
subject to regulation under, any Environmental Laws; (iii) the presence of which
on the Real Property cause or threaten to cause a nuisance pursuant to
applicable statutory or common law upon the Real Property or to adjacent
properties; (iv) without limitation, which contain polychlorinated biphenyls
(PCBs), asbestos, lead-based paints, urea-formaldehyde foam insulation, and
petroleum or petroleum products (including, without limitation, crude oil or
any fraction thereof) or (iv) which pose a hazard to human health, safety,
natural resources, industrial hygiene, or the environment, or an impediment to
working conditions.
"ICS" means Interactive Cable Systems, Inc., a California corporation.
"ICS BUSINESS" has the meaning set forth in SECTION 2.3(a) hereof.
"ICS SUB" has the meaning set forth in SECTION 2.3(a) hereof.
"INTELLECTUAL PROPERTY" means all franchises, patents, patent
qualifications, trademarks, service marks, trade names, trade styles, brands,
private labels, copyrights, know-how, computer software, industrial designs and
drawings and general intangibles of a like nature, trade secrets, licenses, and
rights and filings with respect to the foregoing, and all reissues, extensions
and renewals thereof.
"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 and to the
businesses and Assets thereof (including, without limitation, Laws relating to
securities registration and regulation; the sale, leasing, ownership or
management of real property; employment practices, terms and conditions, and
wages and hours; building standards, land use and zoning; safety, health and
fire prevention; environmental protection, including Environmental Laws; and
Laws relating to communications and cable television regulation, including the
Communications Act).
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"MATERIAL ADVERSE EFFECT" means any material adverse effect on the
assets, properties, business, operations, prospects, condition (financial or
otherwise) or liabilities of any of the Contributing Companies or their
Affiliates, if any, taken as a whole.
"MERGER" has the meaning set forth in SECTION 2.5 hereof.
"MULTIEMPLOYER PLAN" means a "MULTIEMPLOYER PLAN" as such term is
defined in Section 3(37) of ERISA.
"NEWCO" means Global Interactive Technologies Corporation, a Delaware
corporation.
"NEWCO COMMON STOCK" means the common stock, par value $.01 per share,
of Newco.
"NEWCO DISCLOSURE SCHEDULE" means the disclosure schedule identified
as the Newco Disclosure Schedule to the Exchange Agreement, which is hereby
incorporated by reference.
"NEWCO SUB" means Global Interactive Communications Corporation, a
Delaware corporation.
"ORDINARY COURSE OF BUSINESS" means ordinary course of business
consistent with past practices and prudent business operations.
"OTHER ARRANGEMENT" means a benefit program or practice providing for
bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not a Plan.
"PBGC" means the Pension Benefit Guaranty Corporation or its
successor.
"PENSION PLAN" means an "EMPLOYEE PENSION BENEFIT PLAN" as such term
is defined in Section 3(2) of ERISA.
"PERSON" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, government or department or
agency of a government.
"PLAN" means any plan, program or arrangement, whether or not written,
that is or was an "EMPLOYEE BENEFIT PLAN" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by a
Contributing Company; (b) to which a Contributing Company contributed or was
obligated to contribute or to fund or provide benefits; or (c) which provides or
promises benefits to any person who performs or who has performed services for a
Contributing Company and because of those services is or has been (i) a
participant therein or (ii) entitled to benefits thereunder.
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"PRO FORMA STATEMENT" has the meaning set forth in SECTION 2.6(a)
hereof.
"QUALIFIED PLAN" means a Pension Plan that satisfies, or is intended
by Company to satisfy, the requirements for tax qualification described in
Section 401 of the Code.
"REAL PROPERTY" means the real property owned, operated, or used by
the Contributing Companies in the Contributed Businesses as of July 31, 1998,
any additional real property owned, operated, or used since that date, and, for
purposes of SECTION 5.17, any real property formerly owned or operated.
"RELEVANT PROPERTIES" has the meaning set forth in SECTION 5.23
hereof.
"REPORTS" has the meaning set forth in SECTION 5.27 hereof.
"RESNET" means ResNet Communications, LLC, a Delaware limited
liability company.
"RESNET BUSINESS" has the meaning set forth in SECTION 2.4(a) hereof.
"RESNET SUB" has the meaning set forth in SECTION 2.4(a) hereof.
"RIGHTS OF ENTRY" means valid, lawful, binding and enforceable written
agreements in favor of a Contributing Company to provide exclusive video
programming delivery service, telephone service and/or telecommunications
service to Cable Subscribers and/or Billable Phone Subscribers.
"SECTION" means a Section (or a subsection) of this Exchange
Agreement.
"SECONDMENT AGREEMENT" means the Secondment Agreement by and between
Newco Sub and STC, dated the date hereof, regarding STC seconding certain of its
employees to Newco Sub.
SECURITIES ACT" means the Securities Act of 1933, as amended, and all
laws promulgated pursuant thereto or in connection therewith.
"SHARES" has the meaning set forth in SECTION 4.6 hereof.
"STC" means Shared Technologies Communications Corporation, a Delaware
corporation.
"STC BUSINESS" has the meaning set forth in SECTION 2.2(a) hereof.
"STC SUB" has the meaning set forth in SECTION 2.2(a) hereof.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement in the form
attached hereto as EXHIBIT D.
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"SUBSIDIARY" means a corporation or other entity of which at least 80%
of the outstanding securities or other interests having rights to vote or
otherwise exercise control are held, directly or indirectly, by a Contributing
Company.
"TAXES" means all federal, state, local and foreign taxes (including,
without limitation, income, profit, franchise, sales, use, real property,
personal property, ad valorem, excise, employment, social security and wage
withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings, or other similar charges of every kind, character or description
imposed by any governmental or quasi-governmental authorities, and any interest,
penalties or additions to tax imposed thereon or in connection therewith.
"TAX RETURNS" means all federal, state, local, foreign and other
applicable tax returns, declarations of estimated tax reports required to be
filed by any Contributing Company or "affiliated group" within the meaning of
Section 1504(a) of the Code (without regard to extensions of time permitted by
law or otherwise).
"TITLE I PLAN" means a Plan that is subject to Title I of ERISA.
"WELFARE PLAN" means an "EMPLOYEE WELFARE BENEFIT PLAN" as such term
is defined in Section 3(1) of ERISA.
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