AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
D&E COMMUNICATIONS, INC.
D&E ACQUISITION CORP.
and
CONESTOGA ENTERPRISES, INC.
January 9, 2002
ARTICLE I -- THE MERGER; EFFECTIVE TIME; CLOSING............................................................ 2
1.2 Effective Time............................................................................ 2
1.3 Effects of the Merger..................................................................... 2
1.4 Closing................................................................................... 3
ARTICLE II -- SURVIVING CORPORATION......................................................................... 3
2.1 Articles of Incorporation................................................................. 3
2.2 Bylaws.................................................................................... 3
2.3 Directors................................................................................. 3
2.4 Officers.................................................................................. 3
ARTICLE III -- MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF COMPANY IN THE MERGER.................... 3
3.1 Merger Consideration; Conversion or Cancellation of Company Shares in the Merger.......... 3
3.2 Standard Allocation; Election Procedure................................................... 6
3.3 Conversion of Outstanding Shares Into Parent Stock Consideration and Cash
Consideration; Proration.................................................................. 8
3.4 Conversion of Newco Shares................................................................ 10
3.5 Exchange of Certificates.................................................................. 10
3.6 Intentionally Deleted..................................................................... 11
3.7 Intentionally Deleted..................................................................... 11
3.8 Missing Certificates...................................................................... 11
3.9 No Further Rights or Transfers; Cancellation of Treasury Shares........................... 12
3.10 Stock Options............................................................................. 12
3.11 Certain Company Actions................................................................... 13
3.12 Withholding............................................................................... 13
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................. 13
4.1 Corporate Organization and Qualification.................................................. 13
4.2 Capitalization............................................................................ 13
4.3 Authority Relative to This Agreement...................................................... 14
4.4 Consents and Approvals; No Violation...................................................... 14
4.5 SEC Reports; Financial Statements......................................................... 16
4.6 Absence of Certain Changes or Events...................................................... 16
4.7 Litigation................................................................................ 17
4.8 Insurance................................................................................. 17
4.9 Taxes..................................................................................... 17
4.10 Employee Benefit Plans; Labor Matters..................................................... 19
4.11 Environmental Laws and Regulations........................................................ 21
4.12 Intangible Property....................................................................... 23
4.13 Compliance with Laws and Orders........................................................... 23
4.14 Rights Agreement.......................................................................... 24
4.15 Certain Agreements........................................................................ 24
4.16 Brokers and Finders....................................................................... 24
4.17 Opinion of Financial Advisor.............................................................. 24
4.18 Accuracy of Information Furnished......................................................... 24
4.19 Equity Investments........................................................................ 25
4.20 No Default................................................................................ 25
4.21 Material Contracts........................................................................ 25
4.22 State Takeover Statutes; Anti-Takeover Provisions......................................... 26
4.23 Transactions With Affiliates.............................................................. 26
4.24 Licenses.................................................................................. 26
4.25 Information Supplied...................................................................... 27
4.26 Title to and Condition of Assets.......................................................... 27
4.27 Undisclosed Liabilities and Commitments................................................... 28
4.28 Tax Representation Letter................................................................. 28
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO............................................. 28
5.1 Corporate Organization and Qualification.................................................. 28
5.2 Capitalization............................................................................ 28
5.3 Authority Relative to This Agreement...................................................... 29
5.4 Consents and Approvals; No Violation...................................................... 29
5.5 SEC Reports; Financial Statements......................................................... 30
5.6 Absence of Certain Changes or Events...................................................... 31
5.7 Litigation................................................................................ 31
5.8 Insurance................................................................................. 31
5.9 Taxes..................................................................................... 31
5.10 Employee Benefit Plans; Labor Matters..................................................... 32
5.11 Environmental Laws and Regulations........................................................ 34
5.12 Compliance with Laws and Orders........................................................... 34
5.13 Intentionally Deleted.................................................................... 34
5.14 Certain Agreements........................................................................ 34
5.15 Brokers and Finders....................................................................... 35
5.16 Opinion of Financial Advisor.............................................................. 35
5.17 Accuracy of Information Furnished......................................................... 35
5.18 No Default................................................................................ 35
5.19 Transactions With Affiliates.............................................................. 35
5.20 Licenses.................................................................................. 36
5.21 Information Supplied...................................................................... 36
5.22 Title to and Condition of Assets.......................................................... 36
5.23 Undisclosed Liabilities and Commitments................................................... 37
5.24 Financing; VoiceStream Wireless Agreement; Dividend Policy................................ 37
5.25 Share Ownership........................................................................... 37
5.26 Interim Operations of Newco............................................................... 37
5.27 Tax Representation Letter................................................................. 38
ARTICLE VI -- ADDITIONAL COVENANTS AND AGREEMENTS........................................................... 38
6.1 Conduct of Business of the Company........................................................ 38
6.2 Conduct of Business of Parent............................................................. 40
6.3 No Solicitation of Transactions........................................................... 41
6.4 Reasonable Efforts........................................................................ 42
6.5 Access to Information..................................................................... 43
6.6 Publicity................................................................................. 43
6.7 Indemnification of Directors and Officers................................................. 43
6.8 Employees................................................................................. 45
6.9 Registration Statement; Joint Proxy Statement............................................. 46
6.10 Shareholders' Approvals................................................................... 47
6.11 Tax Matters............................................................................... 48
6.12 Sale of the Company's Wireless Operations................................................. 49
ARTICLE VII -- CONDITIONS TO CONSUMMATION OF THE MERGER..................................................... 49
7.1 Conditions to Each Party's Obligations to Effect the Merger............................... 49
7.2 Conditions to the Company's Obligations to Effect the Merger.............................. 50
7.3 Conditions to Parent's and Newco's Obligations to Effect the Merger....................... 50
ARTICLE VIII -- TERMINATION; AMENDMENT; WAIVER.............................................................. 51
8.1 Termination by Mutual Consent............................................................. 51
8.2 Termination by Either Parent or the Company............................................... 51
8.3 Termination by Parent..................................................................... 51
8.4 Termination by the Company................................................................ 52
8.5 Effect of Termination..................................................................... 52
8.6 Extension; Waiver......................................................................... 53
ARTICLE IX -- MISCELLANEOUS AND GENERAL..................................................................... 54
9.1 Payment of Expenses....................................................................... 54
9.2 Survival of Representations and Warranties; Survival of Confidentiality................... 54
9.3 Modification or Amendment................................................................. 54
9.4 Waiver of Conditions...................................................................... 54
9.5 Counterparts.............................................................................. 54
9.6 Governing Law............................................................................. 54
9.7 Notices................................................................................... 54
9.8 Entire Agreement; Assignment.............................................................. 56
9.9 Parties in Interest....................................................................... 56
9.10 Certain Definitions....................................................................... 56
9.11 Obligation of Parent...................................................................... 59
9.12 Validity.................................................................................. 59
9.13 Captions.................................................................................. 60
SCHEDULES
Schedule 4.2 Capitalization
Schedule 4.4(a)(iii) Consents and Approvals
Schedule 4.6 Changes
Schedule 4.7 Litigation
Schedule 4.9 Taxes
Schedule 4.10 Employee Benefit Plans
Schedule 4.11 Company Environmental Matters
Schedule 4.12 Company Intangible Property
Schedule 4.15 Certain Company Agreements
Schedule 4.19 Company Equity Investments
Schedule 4.20 Company Defaults
Schedule 4.21 Company Contracts
Schedule 4.23 Company Affiliate Transactions
Schedule 4.24 Company Licenses
Schedule 4.26 Company Title to Assets
Schedule 4.27 Company Liabilities
Schedule 5.2 Parent Capitalization
Schedule 5.4(a)(iii) Parent Consents and Approvals
Schedule 5.6 Parent Changes
Schedule 5.7 Parent Litigation
Schedule 5.9 Parent Taxes
Schedule 5.10 Parent Employee Benefit Plans
Schedule 5.11 Parent Environmental Matters
Schedule 5.14 Certain Parent Agreements
Schedule 5.18 Parent Defaults
Schedule 5.19 Parent Affiliate Transactions
Schedule 5.22 Parent Title to Assets
Schedule 5.23 Parent Liabilities
Schedule 6.1 Company Conduct of Business
Schedule 6.1(k) Employment Severance and Termination Agreements
Schedule 6.2 Parent Conduct of Business
Schedule 6.8(c) Employment and Other Agreements
Exhibit A Form of Voting Agreement
Exhibit B Wireless 8-K
Exhibit C Form of Co-Bank Commitment Letter
Exhibit D Form of Affiliate Letter
Exhibit E Form of Tax Opinion
Exhibit F Form of Company Tax Representation Letter
Exhibit G Form of Parent Tax Representation Letter
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of January 9, 2002, by and among D&E COMMUNICATIONS, INC., a Pennsylvania
corporation ("Parent"), D&E ACQUISITION CORP., a Pennsylvania corporation and
wholly owned subsidiary of Parent ("Newco"), and CONESTOGA ENTERPRISES, INC., a
Pennsylvania corporation (the "Company").
RECITALS
WHEREAS, Parent, Newco and the Company have entered into an Agreement and
Plan of Merger dated as of November 21, 2001 (the "Original Agreement");
WHEREAS, Parent, Newco and the Company desire to amend and restate in its
entirety the Original Agreement in accordance with the terms contained herein;
WHEREAS, the Board of Directors of the Company (the "Board of Directors")
has, subject to the conditions of this Agreement, determined that the Merger (as
defined in Section 1.1 below) is in the best interests of the shareholders of
the Company and approved and adopted this Agreement and the transactions
contemplated hereby in accordance with the Pennsylvania Business Corporation Law
of 1988, as amended (the "PBCL");
WHEREAS, Parent, Newco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Company and Parent have each obtained voting agreements in the
form of Exhibit A attached hereto, from the directors, executive officers and
shareholders listed on Exhibit A, who have agreed to vote shares of voting
capital stock owned by them in the Company and Parent, respectively, in favor of
this Agreement, the Merger and, to the extent required, all transactions
incident thereto (collectively, the "Voting Agreements");
WHEREAS, Parent has entered into an agreement dated as of October 17, 2001
as amended (the "VoiceStream Wireless Agreement") with VoiceStream
Communications, Inc. ("VoiceStream") providing for the sale of certain wireless
partnership interests of Parent to VoiceStream. The VoiceStream Wireless
Agreement is described in a Current Report on Form 8-K (the "Wireless 8-K")
filed with the Securities and Exchange Commission (the "SEC") dated October 17,
2001; and
WHEREAS, Parent has received a commitment letter dated October 15, 2001
from Co-Bank in the form of Exhibit C (the "Co-Bank Commitment Letter") to
assist it in funding the Cash Consideration portion of the Merger Consideration
(as such terms are defined in Section 3.1 herein).
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations,
warranties, covenants and agreements set forth herein, and intending to be
legally bound, Parent, Newco and the Company hereby agree as follows:
ARTICLE I -- THE MERGER; EFFECTIVE TIME; CLOSING
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
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the Effective Time (as defined in Section 1.2 below), the Company and Newco
shall, in accordance with the PBCL, consummate a merger (the "Merger") in which
the Company shall be merged with and into Newco and the separate corporate
existence of the Company shall thereupon cease. In lieu of the Company being
merged with and into Newco, if all of the conditions set forth in Article VII
(excluding the condition set forth in Section 7.1(h) and any conditions that, by
their terms, cannot be satisfied until the Closing Date (as hereinafter
defined)) have been satisfied or waived, and if, based on a reasonable good
faith determination, the combination of (a) the trading price of Parent Common
Stock (as defined in Section 5.2 below) immediately prior to the Effective Time
(by taking into account the Reorganization Assumption (as defined in Section
6.11 below)), (b) the aggregate amount of Cash Consideration (plus the aggregate
amount of cash paid in lieu of issuing fractional shares of Parent Stock
pursuant to Section 3.1(e) hereof) received by holders of Company Shares (as
defined in Section 3.1 below) in the Merger and (c) the aggregate amount paid to
holders of the Company's Preferred Stock in connection with any redemption by
the Company of such shares (the "Redemption Amount") could result in an amount
exceeding 60% of the combination of (i) the Redemption Amount and (ii) the total
fair market value of the aggregate consideration payable and deliverable to the
holders of Company Stock as a result of the Merger (such circumstance described
above being referred to herein as a "Reverse Merger Circumstance"), then the
"Merger" shall automatically be a merger of Newco with and into the Company at
the Effective Time, in which case, as a consequence of the Merger, the separate
corporate existence of Newco shall thereupon cease. The corporation surviving
the Merger shall be governed by the laws of the Commonwealth of Pennsylvania and
is sometimes hereinafter referred to as the "Surviving Corporation." In
accordance with Section 1929 of the PBCL, all of the rights, privileges, powers,
immunities, purposes and franchises of Newco and the Company shall vest in the
Surviving Corporation and all of the debts, liabilities, obligations and duties
of Newco and the Company shall become the debts, liabilities, obligations and
duties of the Surviving Corporation. The parties acknowledge and agree that in
the event of a Reverse Merger Circumstance, the Merger is not intended to
qualify as a reorganization under Section 368(a) of the Code.
1.2 Effective Time. As soon as practicable after the satisfaction or
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waiver of the conditions set forth in Article VII hereof, the appropriate
parties hereto shall execute in the manner required by the PBCL and file with
the Pennsylvania Department of State articles of merger relating to the Merger,
and the parties shall take such other and further actions as may be required by
Law (as defined in Section 4.13 below) to make the Merger effective. The time
the Merger becomes effective in accordance with applicable Law is hereinafter
referred to as the "Effective Time."
1.3 Effects of the Merger. The Merger shall have the effects set forth
---------------------
in Section 1929 of the PBCL.
2
1.4 Closing. The closing of the Merger (the "Closing") shall take place
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(a) at the offices of Barley, Snyder, ▇▇▇▇▇ & ▇▇▇▇▇, LLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. on the first business day following
the date on which the last of the conditions set forth in Article VII hereof
shall be fulfilled or waived in accordance with this Agreement or (b) at such
other place, time and date as Parent and the Company may agree.
ARTICLE II -- SURVIVING CORPORATION
2.1 Articles of Incorporation. In the absence of a Reverse Merger
-------------------------
Circumstance, from and after the Effective Time, the Articles of Incorporation
of Newco as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
in accordance with the PBCL; provided, however, that Article I of such Articles
of Incorporation shall be amended to read in its entirety as follows: "The name
of this Corporation is "Conestoga Enterprises, Inc." In the event of a Reverse
Merger Circumstance, the Articles of Incorporation of the Company shall be the
Articles of Incorporation of the Surviving Corporation until thereafter changed
or amended as provided therein or by the PBCL.
2.2 Bylaws. From and after the Effective Time, the By-Laws of Newco in
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effect immediately prior to the Effective Time shall be the By-Laws of the
Surviving Corporation until thereafter amended in accordance with the PBCL,
provided that in the event of a Reverse Merger Circumstance, the By-Laws of the
Company in effect immediately prior to the Effective Time shall be the By-Laws
of the Surviving Corporation until thereafter amended in accordance with PBCL.
2.3 Directors. The directors of Newco at the Effective Time shall, from
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and after the Effective Time, be the initial directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and Bylaws.
2.4 Officers. The officers of the Company at the Effective Time shall,
--------
from and after the Effective Time, be the initial officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and Bylaws.
ARTICLE III -- MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF COMPANY IN
THE MERGER
3.1 Merger Consideration; Conversion or Cancellation of Company Shares in
---------------------------------------------------------------------
the Merger.
----------
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Newco, the Company, the Surviving Corporation or
the holders of any outstanding shares of capital stock of the Company (together
with any associated Company Rights (as defined below), the "Company Shares") or
capital stock of Newco:
(i) Each Company Share, together with any associated right to
purchase one common share (a "Company Right"), issued pursuant to the Rights
Agreement,
3
dated as of March 1, 2000, by and between the Company and First Union National
Bank, as Rights Agent (the "Company Rights Agreement"), issued and outstanding
immediately prior to the Effective Time (other than (A) Company Shares owned by
Parent, Newco or any direct or indirect wholly owned subsidiary of Parent
(collectively, "Parent Companies") and (B) Company Shares owned by any of the
Company's direct or indirect wholly owned subsidiaries or held in the treasury
of the Company ("Treasury Shares")) shall, by virtue of the Merger, be cancelled
and extinguished and converted into the right to receive, the Parent Stock
Consideration, Cash Consideration, without any interest thereon, or the
combination of Parent Stock Consideration and Cash Consideration, without any
interest thereon, as specified in Section 3.3 hereof (the "Merger
Consideration").
(ii) For purposes hereof, the following terms have the following
respective meanings:
"Cash Consideration" means a per Company Share amount in cash
equal to $33.00.
"Cash Consideration Cap" means the product of (i) the Maximum
Cash Percentage, (ii) the number of Outstanding Shares and (iii)
$33.00.
"Ceiling Market Price" means $23.00.
"Closing Market Price" shall be the volume weighted average of
the per share sales prices (excluding after-market trading) for Parent
Stock, calculated to two decimal places, for the twenty (20) trading
days, during which trading in Parent Stock occurs, immediately
preceding the date which is two (2) business days before the Effective
Time, as reported on the National Market System of the National
Association of Securities Dealers Automated Quotation System
("Nasdaq"), the foregoing period of twenty (20) trading days being
hereinafter sometimes referred to as the "Price Determination Period"
(For example, if March 31, 2002 were to be the Effective Date and
Parent Stock trades on each trading day during the Price Determination
Period, then the Price Determination Period would be February 28,
March 1, 4, 5, 6, 7, 8, 11, 12, 13, 14, 15, 18, 19, 20, 21, 22, 25, 26
and 27, 2002).
"Conversion Ratio" means (calculated to the nearest 0.0001):
(b) 2.5385 if the Closing Market Price is less than the Floor Market
Price;
(c) the quotient determined by dividing $33.00 (the numerator) by the
Closing Market Price (the denominator), if the Closing Market Price is equal to
or greater than the Floor Market Price and equal to or less than the Ceiling
Market Price; or
(d) 1.4348, if the Closing Market Price is greater than the Ceiling
Market Price.
"Fixed Price Parent Stock Range" means the range of Closing
Market Prices from and including the Floor Market Price to the Ceiling Market
Price.
4
"Floor Market Price" means $13.00.
"Outstanding Shares" means the aggregate number of Company Shares
outstanding immediately prior to the Effective Time, but excluding
Company Shares to be cancelled pursuant to Section 3.1(g), which
number will not be greater than the number of shares of Company Common
Stock (as defined in Section 4.2 below) outstanding on November 21,
2001 (except for shares issuable upon exercise of stock options or on
conversion of Company Preferred Stock (as defined in Section 4.2
below) outstanding on November 21, 2001).
"Parent Stock" means the common stock, par value $0.16 per share,
of Parent.
"Parent Stock Consideration" means a per Company Share number of
shares of Parent Stock equal to one share multiplied by the Conversion
Ratio. In the event that between November 21, 2001 and the Effective
Time, the issued and outstanding shares of Parent Stock shall have
been affected or changed into a different number of shares or a
different class of shares as a result of a stock split, reverse stock
split, stock dividend, spin-off, extraordinary dividend,
recapitalization, reclassification, subdivision, combination of shares
or other similar transaction, or there shall have been a record date
declared for any such matter, the Parent Stock Consideration shall be
proportionately adjusted.
"Parent Stock Consideration Cap" equals 9,467,068 shares of
Parent Stock.
(e) No certificates or scrip representing fractional shares of Parent
Stock shall be issued in respect of Company Shares that are to be converted in
the Merger into Parent Stock, no dividend or distribution with respect to shares
shall be payable on or with respect to any fractional share and such fractional
share interests shall not entitle the owner thereof to vote or to any other
rights of a shareholder of Parent. In lieu of any such fractional share of
Parent Stock, Parent shall pay to each former shareholder of the Company who
otherwise would be entitled to receive a fractional share of Parent Stock in
respect of Company Shares that are to be converted in the Merger into Parent
Stock an amount in cash (without interest) rounded to the nearest whole cent,
determined by multiplying (i) the Closing Market Price by (ii) the fractional
interest in a share of Parent Stock to which such holder would otherwise be
entitled.
(f) Each share of Parent Stock outstanding immediately prior to the
Merger shall remain issued and outstanding.
(g) Any shares of Company Stock owned by the Parent Companies and
Treasury Shares shall be cancelled and retired at the Effective Time and shall
cease to exist and no Parent Stock or other consideration shall be delivered in
exchange therefor.
(h) On or after the Effective Time, holders of certificates
representing Company Shares (the "Certificates") immediately prior to the
Effective Time shall cease to have
5
any rights as stockholders of the Company, except the right to receive the
Merger Consideration for each Company Share held by them.
3.2 Election Procedure.
------------------
(a) Each holder of Company Shares (other than holders of Company
Shares to be cancelled as set forth in Section 3.1(g)) shall have the right to
submit a request specifying that all of such holder's Company Shares shall be
converted into the Parent Stock Consideration, into the Cash Consideration or
into a combination of Cash Consideration and Parent Stock Consideration, without
interest in the Merger in accordance with the following procedure:
(i) Each holder of Company Stock may specify in a request made
in accordance with the provisions of this Section 3.2 (herein called an
"Election") to:
(A) convert each Company Share owned by such holder into
the right to receive the Parent Stock Consideration in the Merger (a "Stock
Election");
(B) convert each Company Share owned by such holder into
the right to receive the Cash Consideration in the Merger (a "Cash Election");
or
(C) convert all of the Company Shares owned by such holder
into the right to receive the Merger Consideration in the ratio of fifty-five
percent (55%) in the form of Cash Consideration and forty-five percent (45%) in
the form of Parent Stock Consideration (a "Cash/Stock Election").
(ii)
(A) On a per Company Share basis within the Fixed Price
Parent Stock Range, the value of the Merger Consideration on the Closing Date
based on a Stock Election (assuming no proration thereof under Section 3.3)
would be $33.00 in Parent Stock Consideration (using the Closing Market Price).
(B) On a per Company Share basis within the Fixed Price
Parent Stock Range, the value of the Merger Consideration on the Closing Date
based on a Cash Election (assuming no proration thereof under Section 3.3) would
be $33.00 in Cash Consideration.
(C) On a per Company Share basis, within the Fixed Price
Parent Stock Range, the value of the Merger Consideration on the Closing Date
based on a Cash/Stock Election would be $18.15 in Cash Consideration and $14.85
in Parent Stock Consideration (using the Closing Market Price).
(iii) A Form of Election (as defined in 3.2(b) below) shall be
included with each copy of the Joint Proxy Statement (as defined in Section 6.9)
mailed to shareholders of the Company in connection with the meeting of
shareholders called to consider the approval of this Agreement. The Company
shall use its reasonable best efforts to mail or otherwise make available the
Form of Election to all persons who become record holders of Company Shares
6
subsequent to the date of such mailing and prior to the Election Deadline (as
defined in Section 3.2(d) below).
(b) Parent shall prepare a form (the "Form of Election"), which shall
be in form and substance reasonably acceptable to the Company, pursuant to which
each holder of Company Shares as of the Effective Time may make an Election and
which shall be mailed to the Company's shareholders in accordance with Section
3.2(a) so as to permit the Company's shareholders to exercise their right to
make an Election prior to the Election Deadline.
(c) Holders of record of Company Shares who hold such shares as
nominees, trustees, or in other representative capacities may submit multiple
Forms of Election, provided that such representative certifies that each Form of
Election covers all Shares held by such representative for a particular
beneficial owner.
(d) Reasonably promptly following the initial filing of the Joint
Proxy Statement (as defined in Section 6.9 below) with the SEC, as contemplated
in Section 6.9 hereof, Parent shall appoint a bank or trust company reasonably
acceptable to the Company as the person to receive Forms of Election and to act
as exchange agent under this Agreement, which bank shall be acceptable to the
Company (the "Exchange Agent"). Any Company shareholder's Election shall have
been made properly only if the Exchange Agent shall have received, by the
Election Deadline, a Form of Election properly completed and signed and
accompanied by certificates for the Company Shares to which such Form of
Election relates (or by an appropriate guarantee of delivery of such
certificates, as set forth in such Form of Election, from a member of any
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States provided such certificates are in fact delivered to the Exchange Agent by
the time required in such guarantee of delivery). Failure to deliver Company
Shares covered by such a guarantee of delivery within the time set forth on such
guarantee shall be deemed to invalidate any otherwise properly made Election. As
used herein, "Election Deadline" means 5:00 p.m. Eastern Standard Time, on the
tenth day after the Effective Time. In the event this Agreement shall have been
terminated prior to the Effective Time, the Exchange Agent shall immediately
return any Forms of Election and Certificates for Company Shares to the
appropriate Company shareholders. Promptly after the Effective Time, Parent
shall use reasonable best efforts to cause the Exchange Agent to mail to each
holder of record as of the Effective Time a notice containing the conversion
ratio.
(e) Any Company shareholder may at any time prior to the Election
Deadline change his Election by written notice received by the Exchange Agent
prior to the Election Deadline accompanied by a revised Form of Election
properly completed and signed.
(f) Any Company shareholder may, at any time prior to the Election
Deadline, revoke his Election by written notice received by the Exchange Agent
prior to the Election Deadline or by withdrawal prior to the Election Deadline
of his certificates for Parent Stock, or of the guarantee of delivery of such
certificates, previously deposited with the Exchange Agent. All Elections shall
be revoked automatically if the Exchange Agent is notified in writing by Parent
or the Company that this Agreement has been terminated. Any Company shareholder
who shall have deposited certificates for Company Shares with the Exchange Agent
shall have the right to withdraw such certificates by written notice received by
the Exchange
7
Agent prior to the Election Deadline and thereby revoke his Election as of the
Election Deadline if the Merger shall not have been consummated prior thereto.
(g) Parent shall have the right to make rules, not inconsistent with
the terms of this Agreement, governing the validity of the Forms of Election,
the manner and extent to which Elections are to be taken into account in making
the determinations prescribed by Section 3.3, the issuance and delivery of
certificates for Parent Stock into which Company Shares are converted in the
Merger and the payment of cash for Company Shares converted into the right to
receive the Cash Consideration in the Merger.
3.3 Conversion of Outstanding Shares Into Parent Stock Consideration and
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Cash Consideration; Proration. The manner in which each Company Share (except
-----------------------------
Company Shares to be cancelled as set forth in Section 3.1(g)) shall be
converted in the Merger into Parent Stock Consideration, Cash Consideration or a
combination of Parent Stock Consideration and Cash Consideration shall be as set
forth in this Section 3.3.
(a) As is more fully set forth below, the aggregate number of Company
Shares to be converted into the right to receive Cash Consideration in the
Merger pursuant to this Agreement shall not exceed the product of (i) the number
of Outstanding Shares and (ii) the Maximum Cash Percentage. "Maximum Cash
Percentage" shall mean fifty-five percent (55%). Each of the terms of this
Article 3 (specifically including the proration provisions set forth in Sections
3.3(d) and 3.3(f)) shall be interpreted in a manner to ensure that in no event
shall either (A) the aggregate amount of the Cash Consideration received by the
holders of Company Shares in the Merger exceed the Cash Consideration Cap, or
(B) the aggregate number of shares of Parent Stock received by the holders of
Company Shares in the Merger exceed the Parent Stock Consideration Cap.
(b) Subject to the provisions of Sections 3.3(d) - (g) below, in the
event the Closing Market Price is less than the Floor Market Price, the Merger
Consideration shall be calculated as follows:
(i) On a per Company Share basis, the value of the Cash
Consideration on the Closing Date based on the Cash/Stock Election, would be
$18.15 and the value of the Parent Stock Consideration would be equal to the
product of (A) the Conversion Ratio, (B) .45 and (C) the fair market value of
the Parent Stock on the Closing Date.
(ii) On a per Company Share basis, the value of the Parent Stock
Consideration, based on a Stock Election (assuming no proration thereof under
this Section 3.3), would be the product of (A) the Conversion Ratio and (B) the
fair market value of the Parent Stock on the Closing Date; and
(iii) On a per Company Share basis, the value of the Cash
Consideration, based on a Cash Election (assuming no proration thereof under
this Section 3.3), would be $33.00 in Cash Consideration.
(c) If, based solely on the Stock Elections and Cash/Stock Elections
(including those deemed to have been made pursuant to Section 3.3(g), the
aggregate number of shares of Parent Stock that would otherwise be issued as
Parent Stock Consideration would be
8
equal to or less than the Parent Stock Consideration Cap, then each Company
Share that the holder has elected to have converted into Parent Stock
Consideration pursuant to a Stock Election or a Cash/Stock Election shall be
converted into Parent Stock Consideration.
(d) If, based solely on the Stock Elections and Cash/Stock Elections
(including those deemed to have been made pursuant to Section 3.3(g)), the
aggregate number of shares of Parent Stock that would otherwise be issued as
Parent Stock Consideration would exceed the Parent Stock Consideration Cap, then
the Company Shares for which conversion into Parent Stock Consideration has been
requested pursuant to Stock Elections shall be converted into the right to
receive Parent Stock Consideration and Cash Consideration as follows:
(i) the number of Company Shares of each holder to be converted
into the right to receive Parent Stock Consideration shall equal the product of
(A) the number of Company Shares owned by such holder and (B) a fraction, the
numerator of which will be an amount equal to the Parent Stock Consideration Cap
MINUS the aggregate number of shares of Parent Stock to be issued to holders of
Company Shares who have made (including those deemed to have done so pursuant to
Section 3.3(g)) Cash/Stock Elections, and the denominator of which will be the
Unadjusted Stock Election Number. "Unadjusted Stock Election Number" shall mean
the aggregate number of shares of Parent Stock that would be issued in the
Merger in respect of Company Shares for which the holders thereof made Stock
Elections, without taking into account the application of the proration
provisions of this Section 3.3(d).
(ii) Each Company Share covered by a Stock Election and not
converted into the right to receive Parent Stock Consideration pursuant to
clause (i) above shall be converted in the Merger into Cash Consideration.
(e) If Cash Elections and Cash/Stock Elections request the conversion
into Cash Consideration of a number of Company Shares less than the number
constituting the Maximum Cash Percentage, each Company Share for which
conversion into Cash Consideration has been requested shall be converted into
the right to receive Cash Consideration.
(f) If Cash Elections and Cash/Stock Elections (including those
deemed to have been made pursuant to Section 3.3(g) below) request the
conversion into Cash Consideration of a number of Company Shares that exceed the
product of the Outstanding Shares multiplied by the Maximum Cash Percentage, the
Company Shares for which conversion into Cash Consideration have been requested
pursuant to a Cash Election shall be converted into the right to receive Cash
Consideration and Parent Stock Consideration in the following manner:
(i) The number of Company Shares of each holder to be converted
into the right to receive Cash Consideration shall equal the product of (A) the
number of Company Shares owned by such holder and (B) a fraction, the numerator
of which will be an amount equal to the Cash Consideration Cap MINUS the
aggregate amount of Cash Consideration to be paid to holders of Company Shares
who have made (including those deemed to have done so pursuant to Section
3.3(g)) Cash/Stock Elections, and the denominator of which will be the
Unadjusted Cash Election Amount. "Unadjusted Cash Election Amount" shall mean
the aggregate amount of Cash Consideration paid in the Merger in respect of
Company
9
Shares for which the holders thereof made Cash Elections, without taking into
account the application of the proration provisions of this Section 3.3(f).
(ii) Each Company Share covered by a Cash Election and not
converted into the right to receive Cash Consideration pursuant to clause (i)
above shall be converted in the Merger into Parent Stock Consideration.
(g) Each Non-Electing Company Share shall be converted in the Merger
into Parent Stock Consideration and the Cash Consideration as if the holder
thereof had made a Cash/Stock Election. "Non-Electing Company Share" shall mean
any Outstanding Share for which an Election is not in effect at the Election
Deadline. If Parent shall determine that any Election is not properly made with
respect to any Company Shares, such Election shall be deemed to be not in
effect, and the Company Shares covered by such Election shall, for purposes
hereof, be deemed to be Non-Electing Company Shares. Parent and the Exchange
Agent shall have no obligation to notify any person of any defect in any Form of
Election submitted to the Exchange Agent.
(h) Subject to Section 3.3(a), the Exchange Agent shall make all
computations contemplated by this Section 3.3 and all such computations shall be
conclusive and binding on the holders of Company Shares absent manifest error.
3.4 Conversion of Newco Shares. Each share of common stock, par value
--------------------------
$.01, of Newco ("Newco Common Stock") issued and outstanding immediately prior
to the Effective Time shall be converted into one duly issued, validly
authorized, fully paid and nonassessable share of common stock, par value $.01
per share, of the Surviving Corporation.
3.5 Exchange of Certificates.
------------------------
(a) As soon as practicable after the Effective Time, Parent shall
deposit with the Exchange Agent, pursuant to an agreement in form and substance
reasonably acceptable to Parent and the Company, an amount of cash and
certificates representing the shares of Parent Stock required to effect the
conversion of Company Shares into Parent Stock and cash in accordance with
Section 3.3.
(b) As soon as practicable after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record as of the Effective
Time of one or more Certificates in respect of which such holder failed to
return a properly completed Form of Election in accordance with Section 3.2(d),
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent), and (ii) instructions for
effecting the surrender of the Certificates and receiving the Merger
Consideration to which such holder shall be entitled pursuant to Section 3.1.
(c) Upon surrender of a certificate for Company Shares for
cancellation to the Exchange Agent, together with a proper Form of Election in
accordance with Section 3.2(d) or a duly executed letter of transmittal in
accordance with Section 3.5(b), as applicable, the holder of such certificate
for Company Shares shall be entitled to receive in exchange therefor a
certificate representing the number of shares of Parent Stock into which the
Company Shares previously
10
represented by such certificate are converted in accordance with Section 3.1,
the cash to which such holder is entitled in accordance with Section 3.1, and/or
the cash in lieu of fractional shares which such holder has the right to receive
pursuant to Section 3.1(e) (such shares of Parent Stock and cash are
collectively the "Aggregate Consideration"). Any cash to be received under this
Section 3.5(c) shall be in the form of a bank check. In the event that the
Aggregate Consideration is to be delivered to any person in whose name the
Certificate surrendered in exchange therefor is registered in the transfer
records of the Company, the Aggregate Consideration may be delivered to a
transferee if the certificate for the Company Shares is presented to the
Exchange Agent, accompanied by all documents reasonably required to evidence and
effect such transfer and by evidence reasonably satisfactory to the Exchange
Agent that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by Section 3.2(d) or Section 3.5(b), each Certificate (other
than a Certificate representing Company Shares to be canceled in accordance with
Section 3.1(g)) shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Aggregate
Consideration contemplated by this Section 3.1(c). No interest will be paid or
will accrue on any cash payable to holders of Certificates pursuant to the
provisions of this Article III.
(d) No dividends or distributions that have been declared, if any,
will be paid to persons entitled to receive certificates for shares of Parent
Stock until such persons surrender their Certificates at which time all such
dividends and distributions shall be paid. In no event shall the persons
entitled to receive such dividends be entitled to receive interest on such
dividends. If any certificate for such Parent Stock is to be issued in a name
other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the person requesting
such exchange shall pay to the Exchange Agent any transfer taxes or other taxes
required by reason of issuance in a name other than the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable to a
holder of Company Shares for any Parent Stock or dividends thereon delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
3.6 Intentionally Deleted.
---------------------
3.7 Intentionally Deleted.
---------------------
3.8 Missing Certificates.
--------------------
(a) If any holder of Company Shares convertible into the right to
receive the Merger Consideration is unable to deliver the Certificate which
represents such shares, the Exchange Agent shall deliver to such holder the
Merger Consideration to which the holder is entitled for such shares upon
presentation of the following:
(i) evidence to the reasonable satisfaction of Parent that any
such Certificate has been lost, wrongfully taken or destroyed;
(ii) such security or indemnity as may be reasonably requested by
the Parent to indemnify and hold harmless Parent and the Exchange Agent; and
11
(iii) evidence satisfactory to Parent that such person is the
owner of the shares theretofore represented by each Certificate claimed to be
lost, wrongfully taken or destroyed and that the holder is the person who would
be entitled to present such Certificate for payment pursuant to this Agreement.
(b) Parent shall receive any remaining Cash Consideration and Parent
Stock Consideration on deposit with the Exchange Agent on the date which is one
year after the Effective Date and any shareholder of the Company who has not
surrendered his Certificate(s) to the Exchange Agent prior to such time shall be
entitled to receive the Merger Consideration without interest upon the surrender
of such Certificate(s) to Parent, subject to applicable escheat or abandoned
property laws.
3.9 No Further Rights or Transfers; Cancellation of Treasury Shares.
---------------------------------------------------------------
Except for the surrender of the certificate(s) representing the Company Shares
in exchange for the right to receive the Merger Consideration with respect to
each Share at and after the Effective Time, each holder of Company Shares shall
cease to have any rights as a shareholder of the Company, and no transfer of
Company Shares shall thereafter be made on the stock transfer books of the
Surviving Corporation. Each Share held in the Company's treasury immediately
prior to the Effective Time shall, by virtue of the Merger, be canceled and
retired and cease to exist without any conversion thereof.
3.10 Stock Options. At the Effective Time, each option or other right to
-------------
purchase shares of Company Common Stock pursuant to stock options (a "Company
Option"), whether granted by the Company under the 1999 Stock Option Plan (the
"Company Option Plan") or any other plan or agreement, which is outstanding at
the Effective Time, whether or not exercisable, shall be assumed by Parent and
become rights with respect to Parent Stock ("Parent Options"), the Company
Option Plan or any such other plan or agreement which is outstanding at the
Effective Time shall be assumed by Parent, and Parent shall assume each Option,
in accordance with the terms of the Option Plan and stock option agreement by
which it is evidenced, except that from and after the Effective Time, (i) Parent
and its Compensation Committee shall be substituted for the Company and the
Committee of the Company's Board of Directors (including, if applicable, the
entire Board of Directors of the Company) administering such Option Plan, (ii)
each Option assumed by Parent may be exercised solely for shares of Parent
Stock, (iii) the number of shares of Parent Stock subject to such Option shall
be equal to the number of Company Shares subject to such Option immediately
prior to the Effective Time multiplied by the Conversion Ratio, (iv) the per
share exercise price under each such Option shall be adjusted by dividing the
per share exercise price under each such Option by the Conversion Ratio and
rounding up any fraction of a cent to the nearest cent and (v) all Parent
Options resulting from the assumption of the Company Option Plan pursuant to
this Section 3.10 shall be fully exercisable to the extent set forth in the
applicable Company Option or Company Option Plan or as stipulated by the
Company's Board of Directors pursuant to the applicable Company Option Plan.
Notwithstanding the provisions of clause (iii) of the preceding sentence, Parent
shall not be obligated to assume option obligations with respect to any fraction
of a share of Parent Stock upon exercise of a Parent Option and any fraction of
a share of Parent Stock that otherwise would be subject to a Parent Option shall
represent the right to receive a cash payment upon exercise of such Parent
Option equal to the product of such fraction and the difference between the
market value of one share of Parent Stock at the time of exercise and the per
share
12
exercise price of such Option. Each of the Company and Parent agrees to take all
necessary steps to effectuate the foregoing provisions of this Section 3.10,
including using its reasonable efforts to obtain from each holder of an Option
any consent or contract that may be deemed necessary or advisable in order to
effect the transactions contemplated by this Section 3.10.
3.11 Certain Company Actions. Prior to the Effective Time, the Company
-----------------------
shall take all such steps as may be required to cause any dispositions of
Company Shares (including derivative securities with respect to Company Shares)
resulting from the transactions contemplated by Article III of this Agreement by
each individual who is subject to the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
respect to the Company to be exempt under Rule 16b-3 promulgated under the
Exchange Act, such steps to be taken in accordance with the No-Action Letter
dated January 12, 1999 issued by the SEC to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP.
3.12 Withholding. The Exchange Agent or Parent shall be entitled to deduct
-----------
and withhold from the consideration otherwise payable pursuant to this Agreement
to any holder of Company Shares such amounts as the Exchange Agent, Parent or
the Surviving Corporation, as the case may be, is required to deduct and
withhold with respect to such payment under the Code or any provisions of state,
local or foreign tax law. Any amounts so withheld shall be treated for all
purposes of this Agreement as having been paid to the holder of the Company
Shares in respect of which such deduction and withholding was made.
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Newco as of
November 21, 2001 and as of the Effective Time that:
4.1 Corporate Organization and Qualification. Each of the Company and its
----------------------------------------
Significant Subsidiaries (as defined in Section 9.10 below) is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and is qualified and in good standing
as a foreign corporation in each jurisdiction where the properties owned, leased
or operated or the business conducted by it require such qualification, except
where failure to so qualify or be in good standing would not have a Company
Material Adverse Effect (as defined in Section 9.10 below) or materially
adversely affect the consummation of the transactions contemplated hereby. Each
of the Company and its subsidiaries has all requisite power and authority
(corporate or otherwise) to own its properties and to carry on its business as
it is now being conducted except where failure to have such power and authority
would not have a Company Material Adverse Effect. The Company has heretofore
made available to Parent complete and correct copies of its Amended and Restated
Articles of Incorporation and Bylaws, each as amended.
4.2 Capitalization. The authorized capital stock of the Company consists
--------------
of 200,000,000 Company Shares of common stock, par value $1.00 per share (the
"Company Common Stock"), of which, as of November 21, 2001, 8,077,413 shares
were issued and outstanding, and 900,000 Company Shares of
Convertible/Redeemable Preferred Stock, par value $65.00 per share (the "Company
Preferred Stock"), of which, as of November 21, 2001, 74,243 shares were issued
and outstanding. All of the outstanding shares of capital stock of the
13
Company have been duly authorized and validly issued and are fully paid and
nonassessable, except as otherwise provided in Section 1524(c) of the PBCL. As
of November 21, 2001, 143,250 shares of the Company Common Stock were reserved
for issuance upon exercise of outstanding awards pursuant to the Option Plan and
8,077,413 shares of the Company Common Stock were reserved for issuance pursuant
to the Rights Agreement. Except as set forth on Schedule 4.2, all outstanding
shares of capital stock of the Company's subsidiaries are owned by the Company
or a direct or indirect wholly owned subsidiary of the Company, free and clear
of all liens, charges, encumbrances, claims and options of any nature. Except as
set forth above and on Schedule 4.2 and except for the Company Rights, there are
not, as of the date hereof, any outstanding or authorized options, warrants,
calls, rights (including preemptive rights), commitments or any other agreements
of any character to which the Company or any of its subsidiaries is a party, or
by which they may be bound, requiring it to issue, transfer, sell, purchase,
redeem or acquire any shares of capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of capital stock of the Company or any of its subsidiaries. Except
for the Voting Agreements, there are not as of the date hereof and there will
not be at the Effective Time of the Merger any registration rights agreements,
shareholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting of
any Company Shares. There are no restrictions on the Company with respect to
voting the stock of any of its subsidiaries.
4.3 Authority Relative to This Agreement.
------------------------------------
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of the Merger and this Agreement by holders of the Company
Shares in accordance with the PBCL). This Agreement has been duly and validly
executed and delivered by the Company and, assuming this Agreement constitutes
the valid and binding agreement of Parent and Newco, constitutes the valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
(b) The Board of Directors has duly and validly approved and taken
all corporate action required to be taken by the Board of Directors for the
consummation of the transactions contemplated herein, including but not limited
to all actions required to prevent the Company Rights from distributing or
becoming exercisable pursuant to the Rights Agreement as a result of such
transactions.
4.4 Consents and Approvals; No Violation.
------------------------------------
14
(a) Neither the execution and delivery of this Agreement nor the
consummation by the Company of the transactions contemplated hereby will:
(i) conflict with or result in any breach of any provision of
the respective Amended and Restated Articles of Incorporation or Bylaws, each as
amended, of the Company or any of its subsidiaries;
(ii) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
except (A) in connection with the applicable requirements of the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (B)
pursuant to the applicable requirements of the Exchange Act, (C) the filing of
the articles of merger pursuant to the PBCL and appropriate documents with the
relevant authorities of other states in which the Company or any of its
subsidiaries is authorized to do business, (D) such filings and consents as may
be required by the Federal Communications Commission (the "FCC") or the rules
and regulations promulgated by the FCC (the "FCC Rules") and the Pennsylvania
Public Utilities Commission (the "PPUC") or the rules and regulations
promulgated by the PPUC (the "PPUC Rules"), (E) as may be required by any
applicable state securities or "blue sky" laws or state takeover laws, (F) such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated by this
Agreement, (G) where the failure to obtain such consent, approval, authorization
or permit, or to make such filing or notification, would not individually or in
the aggregate have a Company Material Adverse Effect or materially adversely
affect the consummation of the transactions contemplated hereby, or (H) such
filings, consents, approvals, orders, registrations and declarations as may be
required as a result of the status or identity of Parent and/or Newco;
(iii) except as set forth in Schedule 4.4(a)(iii), result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or lien or other charge or encumbrance) under any of the terms,
conditions or provisions of any note, license, agreement or other instrument or
obligation to which the Company or any of its subsidiaries or any of their
assets may be bound, except for such violations, breaches and defaults (or
rights of termination, cancellation or acceleration or lien or other charge or
encumbrance) as to which requisite waivers or consents have been obtained, or
which individually or in the aggregate would not have a Company Material Adverse
Effect; or
(iv) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in this Section 4.4 are duly
and timely obtained or made and, with respect to the Merger, the approval of the
Merger and this Agreement by the Company's shareholders has been obtained,
violate any material order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its subsidiaries or to any of
their respective assets.
(b) The affirmative vote of a majority of the votes cast by holders
of the outstanding Company Shares in favor of the approval and adoption of this
Agreement at a meeting at which a quorum is present (the "Company Shareholder
Approval") is the only vote
15
of the holders of any class or series of the Company's or its subsidiaries'
securities necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby.
4.5 SEC Reports; Financial Statements.
---------------------------------
(a) The Company has filed all forms, reports and documents required
to be filed by it with the SEC since January 1, 1996, pursuant to the federal
securities laws and the SEC's rules and regulations thereunder, all of which, as
of their respective dates, complied in all material respects with all applicable
requirements of the Exchange Act (collectively, the "Company SEC Reports"). None
of the Company SEC Reports, including, without limitation, any financial
statements or schedules included therein, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The consolidated balance sheets and the related consolidated
statements of income and cash flows (including the related notes thereto) of the
Company included in the Company SEC Reports, as of their respective dates,
complied in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a basis consistent with prior periods (except as otherwise noted
therein), and present fairly, in all material respects, the consolidated
financial position of the Company and its consolidated subsidiaries as of their
respective dates, and the consolidated results of their operations and their
cash flows for the periods presented therein (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
4.6 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Company SEC Reports, as set forth in Schedule 4.6 to this Agreement or as
contemplated by this Agreement, since December 31, 2000, there has not been (i)
any Company Material Adverse Effect with respect to the Company and its
subsidiaries; (ii) any declaration, setting aside or payment of any dividend
(whether in cash, stock or property) with respect to any Company Shares; (iii)
(A) any granting by the Company or any of its subsidiaries to any officer of the
Company or any of its subsidiaries of any increase in compensation, except in
the ordinary course of business consistent with prior practice or as was
required under employment agreements described in Schedule 6.8(c), (B) any
granting by the Company or any of its subsidiaries to any such officer of any
increase in severance or termination pay, except as was required under
employment, severance or termination agreements listed in Schedule 6.8(c), true
copies of which have been provided to Parent, or (C) any entry by the Company or
any of its subsidiaries into any employment, severance or termination agreement
with any such officer; (iv) any amendment of any material term of any
outstanding equity security of the Company or any subsidiary; (v) any
repurchase, redemption or other acquisition by the Company or any subsidiary of
any outstanding shares of capital stock or other equity securities of, or other
ownership interests in, the Company or any subsidiary, except as contemplated by
Company Benefit Plans (as defined in Section 4.10 below); (vi) any material
damage, destruction or other property loss, whether or not covered by insurance;
or (vii) any change in accounting methods, principles or practices by the
Company materially affecting its assets, liabilities or business, except insofar
as may have been required by a change in GAAP.
16
4.7 Litigation. Schedule 4.7 accurately discloses in all material respects
----------
as of November 21, 2001 all actions, claims, suits, proceedings and governmental
investigations pending or, to the knowledge of the Company, threatened, which
(i) are required to be disclosed therein by the Exchange Act or (ii)
individually or in the aggregate are reasonably likely to have a Company
Material Adverse Effect.
4.8 Insurance. The Company maintains insurance coverage reasonably
---------
adequate for the operation of the business of the Company and each of its
subsidiaries, and the transactions contemplated hereby will not materially
adversely affect such coverage.
4.9 Taxes.
-----
(a) Except as set forth on Schedule 4.9:
(i) the Company and its subsidiaries are members of the
affiliated group, within the meaning of Section 1504(a) of the Code, of which
the Company is the common parent; such affiliated group files a consolidated
federal income Tax Return (as defined below); and neither the Company, any of
its subsidiaries, any of its former subsidiaries, nor any entity to whose
liabilities the Company or any of its subsidiaries or any of its former
subsidiaries has succeeded, has ever filed a consolidated federal income Tax
Return with (or been included in a consolidated return of) a different
affiliated group;
(ii) each of the Company, its subsidiaries and its former
subsidiaries has filed or caused to be filed all Tax Returns required to have
been filed by or for it, and all information set forth in such Tax Returns is
correct and complete in all material respects;
(iii) each of the Company, its subsidiaries and its former
subsidiaries has paid all Taxes due and payable by it;
(iv) there are no unpaid Taxes due and payable by the Company,
its subsidiaries or its former subsidiaries or by any other person that are or
could become a lien on any asset of the Company, or otherwise materially
adversely affect the business, properties or financial condition of the Company,
any of its subsidiaries or any of its former subsidiaries;
(v) each of the Company, its subsidiaries and its former
subsidiaries is in material compliance with, and the records of each of them
contain all information and documents (including, without limitation, properly
completed IRS Forms W-9) necessary to comply with, all applicable Tax
information reporting and Tax withholding requirements;
(vi) each of the Company, its subsidiaries and its former
subsidiaries has collected or withheld all amounts required to be collected or
withheld by it for any Taxes, and all such amounts have been paid to the
appropriate governmental agencies or set aside in appropriate accounts for
future payment when due;
(vii) the balance sheets and financial statements included in
the Company SEC Reports fully and properly reflect, as of their dates, the
liabilities of the Company and its subsidiaries and (insofar as the Company or
any of its subsidiaries may be liable therefor) the former subsidiaries for all
Taxes for all periods ending on or before such dates, and the books
17
and records of the Company and its subsidiaries fully and properly reflect all
liabilities for Taxes for all periods after December 31, 2000;
(viii) none of the Company or its subsidiaries has granted (nor
is any of them subject to) any waiver currently in effect of the period of
limitations for the assessment of Tax, no unpaid Tax deficiency has been
asserted against or with respect to any of the Company or its subsidiaries or
(insofar as the Company or any of its subsidiaries may be liable therefor) the
former subsidiaries by any taxing authority, and there is no pending
examination, administrative or judicial proceeding, or deficiency or refund
litigation, with respect to any Taxes of the Company or any of its subsidiaries
or (insofar as the Company or any of its subsidiaries may be liable therefor)
any of the former subsidiaries;
(ix) none of the Company or its subsidiaries has made or
entered into, or holds any asset subject to, a consent filed pursuant to Section
341(f) of the Code and the regulations thereunder or a "safe harbor lease"
subject to former Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended before the Tax Reform Act of 1984, and the regulations thereunder;
(x) none of the Company or its subsidiaries is required to
include in income any amount from an adjustment pursuant to Section 481 of the
Code or the regulations thereunder or any similar provision of state law;
(xi) none of the Company or its subsidiaries is a party to, or
obligated under, any agreement or other arrangement providing for the payment of
any amount that would be an "excess parachute payment" under Section 280G of the
Code;
(xii) there are no excess loss accounts or deferred intercompany
gains with respect to any member of the affiliated group of which the Company is
the common parent or any subgroup thereof;
(xiii) neither the Company, any of its subsidiaries nor any of
its former subsidiaries has distributed to its stockholders or security holders
stock or securities of a controlled corporation in a transaction to which
Section 355(a) of the Code applies; and
(xiv) none of the Company or its subsidiaries is, or has been at
any time within the last five years, a "United States real property holding
corporation" for purposes of Section 897 of the Code.
(b) Schedule 4.9 sets forth all Tax elections, consents and
agreements made by or affecting any of the Company and its subsidiaries that
will be in effect after the Closing Date, all material types of Taxes paid and
Tax Returns filed by or on behalf of the Company and its subsidiaries, and all
examinations, administrative or judicial proceedings, and litigation with
respect to any Taxes of the Company, any of its subsidiaries or any of its
former subsidiaries.
(c) As used herein, "Tax" or "Taxes" shall mean all taxes of any
kind, including, without limitation, those on or measured by or referred to as
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, estimated, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes,
18
customs, duties or similar fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any governmental entity, domestic or foreign. As used herein,
"Tax Return" shall mean any return, report, statement or information required to
be filed with any governmental entity with respect to Taxes.
4.10 Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Schedule 4.10 contains a true and complete list of (A) all
employee welfare benefit and employee pension benefit plans as defined in
Sections 3(1) and 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), including, but not limited to, plans that provide
retirement income or result in a deferral of income by employees for periods
extending to termination of employment or beyond, and plans that provide
medical, surgical, or hospital care benefits or benefits in the event of
sickness, accident, disability, death or unemployment and (B) all other material
employee benefit agreements or arrangements, including without limitation
deferred compensation plans, incentive plans, bonus plans or arrangements, stock
option plans, stock purchase plans, stock award plans, golden parachute
agreements, severance pay plans, dependent care plans, cafeteria plans, employee
assistance programs, scholarship programs, employee discount programs,
employment contracts, retention incentive agreements, noncompetition agreements,
consulting agreements, confidentiality agreements, vacation policies, and other
similar plans, agreements and arrangements that were in effect as of November
21, 2001, or were approved before that date but are not yet effective, for the
benefit of any director, officer, employee or former employee (or any of their
beneficiaries) of the Company or any of its subsidiaries (collectively, a
"Company Beneficiary"), or with respect to which the Company or any of its
subsidiaries may have any liability ("Company Benefit Plans").
(b) With respect to each Company Benefit Plan, the Company has
heretofore delivered to Parent, as applicable, complete and correct copies of
each of the following documents which the Company has prepared or has been
required to prepare:
(i) the Company Benefit Plans and any amendments thereto (or
if a Company Benefit Plan is not a written agreement, a description thereof);
(ii) the three most recent annual Form 5500 reports filed with
the Internal Revenue Service (the "IRS");
(iii) the most recent statement filed with the Department of
Labor (the "DOL") pursuant to 29 U.S.C. (S) 2520.104-23;
(iv) the three most recent annual Form 990 and 1041 reports
filed with the IRS;
(v) the three most recent actuarial reports;
(vi) the three most recent reports prepared in accordance with
Statement of Financial Accounting Standards No. 106;
19
(vii) the most recent summary plan description and summaries of
material modifications thereto;
(viii) the trust agreement, group annuity contract or other
funding agreement that provides for the funding of the Company Benefit Plan;
(ix) the most recent financial statement;
(x) the most recent determination letter received from the
IRS; and
(xi) any agreement pursuant to which the Company or any of its
subsidiaries is obligated to indemnify any person.
(c) All contributions and other payments required to have been made
by the Company or any entity (whether or not incorporated) that is treated as a
single employer with the Company under Section 414 of the Code (a "Company ERISA
Affiliate") with respect to any Company Benefit Plan (or to any person pursuant
to the terms thereof) have been or will be timely made and all such amounts
properly accrued through the date of the Company SEC Reports have been reflected
therein.
(d) The terms of all Company Benefit Plans that are intended to be
"qualified" within the meaning of Section 401(a) of the Code have been
determined by the IRS to be so qualified or the applicable remedial periods will
not have ended prior to the Effective Time of the Merger. Except as disclosed in
Schedule 4.10, no event or condition exists or has occurred that could cause the
IRS to disqualify any Company Benefit Plan that is intended to be qualified
under Section 401(a) of the Code. Except as disclosed in Schedule 4.10, with
respect to each Company Benefit Plan, the Company and each Company ERISA
Affiliate are in compliance in all material respects with, and each Company
Benefit Plan and related source of benefit payment is and has been operated in
compliance with, its terms, all applicable laws, rules and regulations governing
such plan or source, including, without limitation, ERISA, the Code and
applicable local law. To the knowledge of the Company, except as set forth in
Schedule 4.10, no Company Benefit Plan is subject to any ongoing audit,
investigation, or other administrative proceeding of the IRS, the DOL, or any
other federal, state, or local governmental entity or is scheduled to be subject
to such an audit investigation or proceeding.
(e) With respect to each Company Benefit Plan, to the knowledge of
the Company, there exists no condition or set of circumstances that could
subject the Company or any Company ERISA Affiliate to any liability arising
under the Code, ERISA or any other applicable law (including, without
limitation, any liability to or under any such plan or under any indemnity
agreement to which the Company or any Company ERISA Affiliate is a party), which
liability, excluding liability for benefit claims and funding obligations, each
payable in the ordinary course, could reasonably be expected to have a Material
Adverse Effect on the Company. No claim, action or litigation has been made,
commenced or, to the knowledge of the Company, threatened, by or against any
Company Benefit Plan or the Company or any of its subsidiaries with respect to
any Company Benefit Plan (other than for benefits in the ordinary course) that
could reasonably be expected to have a Material Adverse Effect on the Company.
20
(f) Except as disclosed in Schedule 4.10, no Company Benefit Plan
that is a "welfare benefit plan" (within the meaning of Section 3(1) of ERISA)
provides benefits for any retired or former employees (other than as required
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or
other applicable state or local law that specifically mandates continued health
coverage).
(g) Except as disclosed in Schedule 4.10, the consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or in conjunction with another event, including termination of employment)
result in (i) any payment (whether of severance pay or otherwise) becoming due
from the Company or any of its subsidiaries to any Company Beneficiary or to the
trustee under any "rabbi trust" or similar arrangement, or (ii) any benefit
under any Company Benefit Plan being established or increased, or becoming
accelerated, vested or payable.
(h) Except as described on Schedule 4.10, neither the Company nor any
entity that was at any time during the six-year period ending on November 21,
2001 a Company ERISA Affiliate has ever maintained, had an obligation to
contribute to, contributed to, or had any liability with respect to any plan
that (A) is or was a pension plan (as defined in Section 3(2) of ERISA) that is
or was subject to Title IV of ERISA, Section 412 of the Code or Section 302 of
ERISA or (B) that is or was a multiemployer plan (as defined in Section 414(f)
of the Code or Sections 3(37) or 4001(a)(31) of ERISA). With respect to each
Company Benefit Plan subject to Section 412 of the Code or Section 302 of ERISA,
(i) each such Company Benefit Plan uses a funding method permissible under the
Code and ERISA and the actuarial assumptions used in connection therewith are
reasonable individually and in the aggregate, (ii) no such Company Benefit Plan
has incurred an accumulated funding deficiency, whether or not waived, and (iii)
except as otherwise disclosed on Schedule 4.10, as of the Effective Time, the
fair market value of the assets of each such Company Benefit Plan will exceed or
equal the "projected benefit obligation" (as defined in Statement of Financial
Accounting Standard No. 87) and the "amount of unfunded benefit liabilities" as
defined in Section 4001(a)(18) of ERISA is zero. With respect to each Company
Benefit Plan that is or was subject to Title IV of ERISA, no such Company
Benefit Plan has been terminated, no filing of a notice of intent to terminate
such Company Benefit Plan has been made, and the PBGC has not initiated any
proceeding to terminate any such Company Benefit Plan. To the knowledge of the
Company, no event has occurred and there exists no condition or set of
circumstances which presents a material risk that any Company Benefit Plan has
or is likely to experience a partial termination. No assets of the Company or
any of its subsidiaries are subject to any lien under Section 302 of ERISA or
Section 412 of the Code.
(i) Except as otherwise provided in an applicable collective
bargaining agreement, each Company Benefit Plan may be terminated or modified by
the Company or Parent without material liability to the Company, Parent or any
ERISA Affiliate of either.
4.11 Environmental Laws and Regulations. When used in this Section 4.11 and
----------------------------------
Section 5.11:
(a) "Environmental Laws" shall mean any and all federal, state or
local laws, rules, orders, regulations, statutes, common law, ordinances, codes,
decrees or
21
requirements of any Governmental Authority regulating, relating to or imposing
liability or standards of conduct concerning any Regulated Materials,
environmental protection, or human health protection involving Regulated
Materials as in effect as of the Effective Time of the Merger or at any time in
the past;
(b) "Governmental Authority" shall mean any federal, state, or local
governmental body, department, agency or subdivision responsible for the due
administration and/or enforcement of any Environmental Law.
(c) "Permits" shall mean all governmental approvals, authorizations,
registrations, permits and licenses, including those related to environmental
quality and the emission, discharge, storage, handling, treatment, use,
generation or transportation of Regulated Materials required by Environmental
Laws or otherwise required for the Company to conduct its business.
(d) "Regulated Materials" shall mean any pollutant, contaminant,
hazardous material, hazardous waste, infectious medical waste, hazardous or
toxic substance defined or regulated as such in or under any Environmental Law,
including, without limitation, petroleum, crude oil or fractions thereof,
petroleum products, waste or used oil, natural or synthetic gas, materials
exhibiting the characteristics of ignitability, corrosivity, reactivity or
extraction procedure toxicity, as such terms are defined in connection with
hazardous materials or hazardous wastes or hazardous or toxic substances in any
Environmental Law; and
(e) "Release" shall have the same meaning as provided in the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended,ss.101(22), 42 U.S.C.ss.9601(22).
(i) Except as set forth in Schedule 4.11, the Company is now in
compliance in all material respects with all Environmental Laws, and has been in
compliance with Environmental Laws. The conduct of the businesses of the Company
or Parent, as applicable, does not violate or conflict with in any material
respect any Environmental Laws.
(ii) Except as set forth in Schedule 4.11, the Company has
obtained all necessary Permits. The Permits are in full force and effect, and
are being complied with in all material respects. The Permits are transferable
and will remain in effect or will be replaced, renewed or transferred as
appropriate immediately following the Closing. No other governmental
authorizations are necessary for the day to day operations of the Company.
(iii) Except as set forth in Schedule 4.11, (A) the Company has
not received any formal complaint or notice from any Governmental Entity or any
other person alleging any past or present violation of any Environmental Law in
connection with the operation of its business that is currently unresolved, (B)
as of the date hereof, to the knowledge of the Company, there is no
investigative proceeding against the Company by any governmental authority in
connection with the past or present operation of its business, and (C) there are
no claims under any Environmental Law against the Company.
(iv) Except as set forth in Schedule 4.11, the Company has not
been subject to any administrative or judicial enforcement action pursuant to
any Environmental Law
22
either now or at any time during the past three years in connection with its
business or the Company.
(v) Except as set forth in Schedule 4.11, the Company is not
subject to any remedial obligation or other response action under a currently
issued and applicable administrative order, decree, or agreement pursuant to any
Environmental Law.
(vi) Except as set forth in Schedule 4.11, (A) no real property
currently or formerly owned, leased, operated or used by the Company (including
real property used for off-site disposal of any Regulated Material) is listed on
any federal list of Superfund or National Priorities List sites or similar
governmental lists, (B) to the Company's knowledge, there exist no circumstances
that could result in any such property being listed on any federal list of
Superfund or National Priorities List sites or similar governmental lists
regarding waste sites at which there has been a Release or threatened Release of
Regulated Materials, and (C) to the Company's knowledge, none of its real
property has been used at any time by any person as a hazardous waste treatment,
storage or disposal site.
(vii) Except as set forth in Schedule 4.11, there are no (A)
underground storage tanks (as defined under the Resource Conservation and
Recovery Act or any equivalent Environmental Law), or (B) capacitors,
transformers or other equipment or fixtures containing polychlorinated biphenyls
("PCBs") (other than light fixtures which contain PCBs), located in, at, under
or on the real property owned or leased by the Company.
(viii) Except as set forth in Schedule 4.11, there are no facts,
actions, activities, circumstances, conditions, occurrences, events,
liabilities, or incidents, including any Release, threatened Release,
generation, use, treatment, storage, disposal, arranging for disposal,
transportation, or the presence of Regulated Materials, that are likely to (A)
result in any environmental liability, (B) prevent or interfere with the
operation of the Company's business as it is currently being conducted, in
compliance with all applicable Environmental Laws, (C) materially affect the
assets, business or financial conditions of the Company, or (D) adversely impact
or affect the use of any real property owned, operated, or leased by the
Company.
(ix) As of the Effective Time, the Company will have addressed
those matters identified as items 2 and 3 of Schedule 4.11 in the manner
contemplated therein.
4.12 Intangible Property. The Company or a subsidiary of the Company is the
-------------------
owner of, or a licensee under a valid license for, all items of intangible
property which are material to the business of the Company and its subsidiaries
as currently conducted, taken as a whole, including, without limitation, trade
names, unregistered trademarks and service marks, brand names, patents and
copyrights. As of November 21, 2001, except as disclosed on Schedule 4.12, there
were no claims pending or, to the Company's knowledge, threatened, that the
Company or any subsidiary was in violation of any such intangible property
rights of any third party which were reasonably likely to have a Company
Material Adverse Effect.
4.13 Compliance with Laws and Orders. Except with respect to the matters
-------------------------------
described in Sections 4.9, 4.10 and 4.11, neither the Company nor any subsidiary
is in violation of or in default under any law, statute, rule or regulation
having the effect of law of the United States or
23
any state, county, city or other political subdivision thereof or of any
government or regulatory authority ("Laws") or writ, judgment, decree,
injunction or similar order of any governmental or regulatory authority, in each
case, whether preliminary or final (an "Order"), applicable to the Company or
any Subsidiary or any of their respective assets and properties the effect of
which, individually, or in the aggregate with other such violations and
defaults, could reasonably be expected to have a Company Material Adverse
Effect.
4.14 Rights Agreement. Assuming the accuracy of Parent's and Newco's
----------------
representations in Section 5.25 of this Agreement, neither the execution nor the
delivery of this Agreement will result in a "Distribution Date" (as defined in
the Company Rights Agreement). The Company has irrevocably taken all actions
necessary to make the Company Rights inapplicable to the Merger and the
transactions contemplated hereby.
4.15 Certain Agreements. Except as set forth in Schedule 4.15, neither the
------------------
Company nor any of its subsidiaries is a party to any oral or written agreement
or plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. Except as described in Schedule
4.15 or except for any such as would not result in a Company Material Adverse
Effect, the transactions contemplated by this Agreement will not constitute a
"change of control" under, require the consent from or the giving of notice to
any third party pursuant to, or accelerate the vesting or repurchase rights
under, the terms, conditions or provisions of any loan or Commitment Letter,
note, bond, mortgage, indenture, license, or any material lease, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their properties or
assets may be bound. Except as set forth in Schedule 4.15, there are no amounts
payable by the Company or its subsidiaries to any officers of the Company or its
subsidiaries (in their capacity as officers) as a result of the transactions
contemplated by this Agreement and/or any subsequent employment termination.
4.16 Brokers and Finders. Except for the fees and expenses payable to ▇▇▇▇
-------------------
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated, which fees and expenses are reflected in its
agreement with the Company, a true and correct copy of which has been furnished
to Parent, the Company has not employed any investment banker, broker, finder,
consultant or intermediary in connection with the transactions contemplated by
this Agreement which would be entitled to any investment banking, brokerage,
finder's or other fee or commission in connection with this Agreement or the
transactions contemplated hereby.
4.17 Opinion of Financial Advisor. The Company has received the opinion of
----------------------------
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated, dated as of November 19, 2001, to the
effect that, as of such date, the Merger Consideration to be received by the
shareholders of the Company pursuant to the Merger is fair to such shareholders
from a financial point of view.
4.18 Accuracy of Information Furnished. No representation, statement, or
---------------------------------
information made or furnished by the Company to Parent or any of Parent's
representatives, including those contained in this Agreement and the various
Schedules attached hereto and the other information
24
and statements referred to herein and previously furnished by the Company,
contains or shall contain any untrue statement of a material fact or omits or
shall omit any material fact necessary to make the information contained therein
not misleading. The Company has provided Parent with true, accurate and complete
copies of all documents listed or described in the various Schedules attached
hereto.
4.19 Equity Investments. Except as set forth in Schedule 4.19, the Company
------------------
does not own, directly or indirectly, any capital stock or other ownership
interest in any Person. Schedule 4.19 contains a complete and accurate list of
the Company's direct and indirect subsidiaries.
4.20 No Default. Except as set forth in Schedule 4.20, neither the Company
----------
nor any of its subsidiaries is in material breach, default or violation (and no
event has occurred which with notice or the lapse of time or both would
constitute a breach, default or violation) of any term, condition or provision
of (i) its Articles of Incorporation or Bylaws (or similar governing documents),
or (ii) any Law applicable to Company or its subsidiaries or any of their
respective properties or assets.
4.21 Material Contracts. Schedule 4.21 lists all written or oral contracts,
------------------
agreements, leases, instruments or legally binding contractual commitments
("Contracts") that are of a type described below (collectively, the "Company
Material Contracts"):
(a) any Contract with a customer of the Company or its subsidiaries
or with any entity that purchases goods or services from the Company or its
subsidiaries for consideration paid to the Company or its subsidiaries of
$100,000 or more in any fiscal year;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $100,000;
(c) any Contract for the purchase or lease of goods or services
(including without limitation, equipment, materials, software, hardware,
supplies, merchandise, parts or other property, assets or services), requiring
aggregate future payments in excess of $100,000, other than standard inventory
purchase orders executed in the ordinary course of business;
(d) any Contract relating to the borrowing of money or guaranty of
indebtedness;
(e) any collective bargaining or other arrangement with any labor
union;
(f) any Contract granting a first refusal, first offer or similar
preferential right to purchase or acquire any of the Company's capital stock or
assets;
(g) any Contract limiting, restricting or prohibiting the Company
from conducting business anywhere in the United States or elsewhere in the world
or any Contract limiting the freedom of the Company to engage in any line of
business or to compete with any other Person;
(h) any joint venture or partnership Contract;
25
(i) any Contracts requiring future payments of $100,000 or more; and
(j) any written employment Contract, severance agreement or other
similar binding agreement or policy with any employee.
The Company has delivered to Parent a true and complete copy of each written
Company Material Contract (and a written description of each oral Company
Material Contract), including all amendments or other modifications thereto.
Except as set forth in Schedule 4.21, each Company Material Contract is a valid
and legally binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject only to bankruptcy, reorganization,
receivership or other laws affecting creditors' rights generally and general
principles of equity (whether applied in an action at law or in equity). Except
as set forth in Schedule 4.21, the Company is in compliance with all obligations
required to be performed by it under the Company Material Contracts, and the
Company is not and, to the knowledge of the Company, no other party to a Company
Material Contract is, in breach or default thereunder in any material respect.
Immediately upon the effectiveness of the Original Agreement, the Company's
August 20, 2001 agreement to sell its wireless operations to VoiceStream
automatically terminated (without the payment of any fee or any other
consideration), and the Company has no further obligation to VoiceStream or any
other person in connection with the transactions contemplated by such terminated
agreement.
4.22 State Takeover Statutes; Anti-Takeover Provisions. The Company has
-------------------------------------------------
taken all actions with respect to any anti-takeover provisions of the Company's
Bylaws or Articles of Incorporation or applicable provisions of the PBCL
necessary to enter into and consummate the Merger on the terms set forth in this
Agreement.
4.23 Transactions With Affiliates. Except as set forth in Schedule 4.23, or
----------------------------
as contemplated by this Agreement, since December 31, 2000, the Company has not,
in the ordinary course of business or otherwise, purchased, leased or otherwise
acquired any material property or assets or obtained any material services from,
or sold, leased or otherwise disposed of any material property or assets or
provided any material services to (except with respect to remuneration for
services rendered as a director, officer or employee of the Company in the
ordinary course), (i) any employee of the Company, (ii) any shareholder of the
Company, (iii) any person, firm or corporation that directly or indirectly
controls, is controlled by or is under common control with the Company, or (iv)
any member of the immediate family of any of the foregoing persons
(collectively, "Company Affiliates"). Except as set forth in Schedule 4.23, (a)
the Company's Material Contracts do not include any obligation or commitment
between the Company and any Company Affiliate, (b) the assets of the Company do
not include any receivable or other obligation or commitment from a Company
Affiliate to the Company and (c) the liabilities reflected on the Company SEC
Reports do not include any obligation or commitment to any Company Affiliate.
4.24 Licenses. All licenses issued by the FCC and any applicable state
--------
agencies (the "Licenses") required for the operation of the business of the
Company and its subsidiaries are set forth in Schedule 4.24 and are in full
force and effect and there are no pending modifications, amendments or
revocation proceedings which would materially adversely affect the operations of
the Company. All material fees due and payable to governmental authorities
pursuant to the
26
rules governing the Licenses have been paid and no event has occurred with
respect to the Licenses held by the Company which, with the giving of notice or
the lapse of time or both, would constitute grounds for revocation thereof. The
Company is in compliance in all material respects with the terms of the
Licenses, as applicable, and there is no condition, event or occurrence
existing, nor is there any proceeding being conducted of which the Company has
received notice, nor, to the Company's knowledge, is there any proceeding
threatened, by any governmental entity, including the PPUC or the FCC, which
would cause the termination, suspension, cancellation or nonrenewal of any of
the Licenses, or the imposition of any penalty or fine by any regulatory
authority.
4.25 Information Supplied. None of the information supplied or to be
--------------------
supplied by the Company for inclusion in (i) the Registration Statement (as
defined in Section 6.9) will, at the time the Registration Statement is filed
with the SEC, and at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act of 1933, as amended (the "Securities
Act") contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Joint Proxy Statement will, at the date the
Joint Proxy Statement is first mailed to the Company's and Parent's shareholders
and at the time of the Company Shareholders Meeting (as defined in Section 6.10
below) and Parent's Shareholders Meeting (as defined in Section 6.10 below),
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement, as it relates to the Company Shareholders
Meeting, will comply as to form in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent for inclusion or incorporation by reference therein.
4.26 Title to and Condition of Assets.
--------------------------------
(a) Each of the Company and its subsidiaries has good title to, or
valid leasehold interests in, all its material properties and assets, except for
minor defects in title, easements, restrictive covenants and similar
encumbrances or impediments that, in the aggregate do not and will not
materially interfere with its ability to conduct its business as currently
conducted. Except as set forth in Schedule 4.26, all such assets and properties,
other than assets and properties in which the Company or any of the subsidiaries
has leasehold interests, are free and clear of all liens, pledges, security
interests, charges, claims, rights of third parties and other encumbrances of
any kind or nature ("Liens"), and except for minor Liens, that, in the
aggregate, do not and will not materially interfere with the ability of the
Company or any of its subsidiaries to conduct business as currently conducted or
as reasonably expected to be conducted.
(b) Each of the Company and each of its subsidiaries has complied in
all material respects with the terms of all leases to which it is a party and
under which it is in occupancy, and all such leases are in full force and
effect. Each of the Company and each of its subsidiaries enjoys peaceful and
undisturbed possession under all such leases.
27
(c) Except as set forth in Schedule 4.26, to the knowledge of the
Company, the buildings and premises of the Company and each of its subsidiaries
that are used in its business are in adequate operating condition and in a state
of adequate maintenance and repair, normal wear and tear excepted, are adequate
for the purpose for which they are currently being used, and have access to
adequate utility services necessary for the conduct of the business. All items
of operating equipment of the Company and its subsidiaries are in adequate
operating condition and in a state of reasonable maintenance and repair,
ordinary wear and tear excepted.
4.27 Undisclosed Liabilities and Commitments. Except as set forth in
---------------------------------------
Schedule 4.27, at the date of the most recent Company SEC Report, neither the
Company nor any of its subsidiaries had, and since such date neither the Company
nor any of such subsidiaries has incurred (except in the ordinary course of
business consistent with past practice), any liabilities, commitments or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
required by GAAP to be set forth on a financial statement or in the notes
thereto or which, individually or in the aggregate, could reasonably be expected
to have a Company Material Adverse Effect.
4.28 Tax Representation Letter. If the Merger were to become effective as
-------------------------
of the date hereof, the Company could execute a Tax Representation Letter
substantially in the form of Exhibit F.
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Each of Parent and Newco represent and warrant jointly and severally to the
Company as of November 21, 2001 and as of the Effective Time that:
5.1 Corporate Organization and Qualification. Each of Parent and its
-----------------------------------------
Significant Subsidiaries and Newco is an entity duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation or organization, as applicable, and is qualified and in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification, except where the failure to so qualify or be in such good
standing would not have a Parent Material Adverse Effect or adversely affect the
consummation of the transactions contemplated hereby. Each of Parent and its
Significant Subsidiaries has all requisite power and authority (corporate or
otherwise) to own its properties and to carry on its business as it is now being
conducted except where failure to have such power and authority would not have a
Parent Material Adverse Effect or materially adversely affect the consummation
of the transactions contemplated hereby. Parent and Newco have heretofore made
available to the Company complete and correct copies of their respective
Articles of Incorporation and Bylaws, each as amended.
5.2 Capitalization. The authorized capital stock of Parent consists of
--------------
(a) 30,000,000 Shares of common stock, par value $0.16 per share (the "Parent
Common Stock"), of which, as of November 21, 2001, 7,350,838 shares were issued
and outstanding. All of the outstanding shares of capital stock of Parent have
been duly authorized and validly issued and are fully paid and nonassessable. As
of June 30, 2001, 525,000 shares of Parent Common Stock were reserved for
issuance under Parent's 1999 Long Term Incentive Plan, 256,064 shares of Parent
Common Stock were reserved for issuance under Parent's Employee Stock Purchase
Plan, 284,454 shares
28
of Parent Common Stock were reserved for issuance under Parent's 2000 Employee
Stock Purchase Plan, 175,713 shares of Parent Common Stock were reserved for
issuance under Parent's Dividend Reinvestment and Stock Purchase Plan and 13,960
shares of Parent Common Stock were reserved for issuance under Parent's Stock
Compensation Plan for Non-Employee Directors. Except as set forth on Schedule
5.2, all outstanding shares of capital stock of Parent's subsidiaries are owned
by Parent or a direct or indirect wholly owned subsidiary of Parent, free and
clear of all liens, charges, encumbrances, claims and options of any nature.
Except as set forth above and on Schedule 5.2, there are not, as of the date
hereof, any outstanding or authorized options, warrants, calls, rights
(including preemptive rights), commitments or any other agreements of any
character to which Parent or any of its subsidiaries is a party, or by which
they may be bound, requiring it to issue, transfer, sell, purchase, redeem or
acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock of Parent or any of its subsidiaries. Except for the Voting
Agreements and as set forth on Schedule 5.2, there are not as of the date hereof
and there will not be at the Effective Time of the Merger any registration
rights agreements, shareholder agreements, voting trusts or other agreements or
understandings to which Parent is a party or by which it is bound relating to
the voting of any shares of Parent capital stock. There are no restrictions on
Parent with respect to voting the stock of any of its subsidiaries. The shares
of Parent Common Stock to be issued to shareholders of the Company will be duly
authorized, validly issued, fully paid and nonassessable.
5.3 Authority Relative to This Agreement. Each of Parent and Newco has the
------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. This Agreement and the
consummation by Parent and Newco of the transactions contemplated hereby have
been duly and validly authorized by the respective Boards of Directors of Parent
and Newco and by Parent as sole shareholder of Newco, and no other corporate
proceedings on the part of Parent and Newco are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by each of Parent and Newco
and, assuming this Agreement constitutes the valid and binding agreement of the
Company, constitutes the valid and binding agreement of each of Parent and
Newco, enforceable against each of them in accordance with its terms, except
that such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
5.4 Consents and Approvals; No Violation.
------------------------------------
(a) Neither the execution and delivery of this Agreement by Parent or
Newco nor the consummation by Parent and Newco of the transactions contemplated
hereby will:
(i) conflict with or result in any breach of any provision of
the Articles of Incorporation or the Bylaws, as amended, respectively, of Parent
or Newco;
(ii) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
except (A) in connection with the applicable requirements of the HSR Act, (B)
pursuant to the applicable requirements of the
29
Exchange Act, (C) the filing of the articles of merger pursuant to the PBCL and
appropriate documents with the relevant authorities of other states in which
Parent is authorized to do business, (D) such filings and consents as may be
required by the FCC or the FCC Rules and the PPUC or the PPUC Rules, (E) as may
be required by any applicable state securities or "blue sky" laws or state
takeover laws, (F) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, (G) where the failure to obtain
such consent, approval, authorization or permit, or to make such filing or
notification, would not individually or in the aggregate have a Parent Material
Adverse Effect or materially adversely affect the consummation of the
transactions contemplated hereby or (H) such filings, consents, approvals,
orders, registrations and declarations as may be required as a result of the
status or identity of the Company;
(iii) except as set forth in Schedule 5.4(a)(iii), result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or lien or other charge or encumbrance) under any of the terms,
conditions or provisions of any note, license, agreement or other instrument or
obligation to which Parent or any of its Significant Subsidiaries may be bound,
except for such violations, breaches and defaults (or rights of termination,
cancellation or acceleration or lien or other charge or encumbrance) as to which
requisite waivers or consents have been obtained or which individually or in the
aggregate would not have a Parent Material Adverse Effect; or
(iv) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in this Section 5.4 are duly
and timely obtained or made, and, with respect to this Agreement, the approval
by Parent's Shareholders has been obtained, violate any material order, writ,
injunction, decree, statute, rule or regulation applicable to Parent or any of
its subsidiaries or to any of their respective assets.
(b) The affirmative vote of a majority of the voting power of the
outstanding shares of Parent's voting capital stock in favor of the issuance of
shares of Parent capital stock in connection with the Merger ("Parent
Shareholder Approval") is the only vote of the holders of any class or series of
Parent's or its subsidiaries' securities necessary to approve this Agreement and
the transactions contemplated hereby.
5.5 SEC Reports; Financial Statements.
---------------------------------
(a) Parent has filed all forms, reports and documents required to be
filed by it with the SEC since January 1, 1998 pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of which as of
their respective dates complied in all material respects with all applicable
requirements of the Exchange Act (collectively, the "Parent SEC Reports"). None
of the Parent SEC Reports, including, without limitation, any financial
statements or schedules included therein, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
30
(b) The consolidated balance sheets and the related consolidated
statements of operations, shareholders' equity and cash flows (including the
related notes thereto) of Parent included in the Parent SEC Reports, as of their
respective dates, complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods (except as otherwise
noted therein), and present fairly, in all material respects, the consolidated
financial position of Parent and its consolidated subsidiaries as of their
respective dates, and the consolidated results of their operations and their
cash flows for the periods presented therein (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
5.6 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Parent SEC Reports, as set forth in Schedule 5.6 to this Agreement or as
contemplated by this Agreement, since December 31, 2000, there has not been (i)
any Parent Material Adverse Effect with respect to Parent and its subsidiaries;
(ii) any declaration, setting aside or payment of any dividend (whether in cash,
stock or property) with respect to any Parent Stock; (iii) any amendment of any
material term of any outstanding equity security of Parent or any subsidiary;
(iv) any repurchase, redemption or other acquisition by Parent or any subsidiary
of any outstanding shares of capital stock or other equity securities of, or
other ownership interests in, Parent or any subsidiary, except as contemplated
by Parent Benefit Plans (as defined in Section 5.10 herein); (v) any material
damage, destruction or other property loss, whether or not covered by insurance;
or (vi) any change in accounting methods, principles or practices by Parent
materially affecting its assets, liabilities or business, except insofar as may
have been required by a change in GAAP.
5.7 Litigation. Schedule 5.7 accurately discloses in all material respects
----------
as of November 21, 2001 all actions, claims, suits, proceedings and governmental
investigations pending or, to the knowledge of Parent or Newco, threatened,
which (i) are required to be disclosed therein by the Exchange Act or (ii)
individually or in the aggregate are reasonably likely to have a Company
Material Adverse Effect.
5.8 Insurance. Parent maintains insurance coverage reasonably adequate for
---------
the operation of the business of Parent and each of its subsidiaries, and the
transactions contemplated hereby will not materially adversely affect such
coverage
5.9 Taxes. Except as set forth on Schedule 5.9:
-----
(a) both Parent and Newco, their subsidiaries and their former
subsidiaries have filed or caused to be filed all Tax Returns required to have
been filed by or for them, and all information set forth in such Tax Returns is
correct and complete in all material respects;
(b) both Parent and Newco, their subsidiaries and their former
subsidiaries have paid all Taxes due and payable by each;
(c) the balance sheets and financial statements included in the
Parent SEC Reports fully and properly reflect, as of their dates, the
liabilities of Parent and Newco and their subsidiaries and (insofar as Parent or
Newco or any of their subsidiaries may be liable therefor) the former
subsidiaries for all Taxes for all periods ending on or before such dates, and
the books
31
and records of Parent and Newco and their subsidiaries fully and properly
reflect all liabilities for Taxes for all periods after December 31, 2000;
(d) none of Parent or Newco or their subsidiaries have granted (nor
is any of them subject to) any waiver currently in effect of the period of
limitations for the assessment of Tax, no unpaid Tax deficiency has been
asserted against or with respect to any of Parent or Newco or their subsidiaries
or (insofar as Parent and Newco or any of their subsidiaries may be liable
therefor) the former subsidiaries by any taxing authority, and there is no
pending examination, administrative or judicial proceeding, or deficiency or
refund litigation, with respect to any Taxes of Parent and Newco or any of their
subsidiaries or (insofar as Parent and Newco or any of their subsidiaries may be
liable therefor) any of the former subsidiaries.
5.10 Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Schedule 5.10 contains a true and complete list of (i) all
employee welfare benefit and employee pension benefit plans as defined in
Sections 3(1) and 3(2) of ERISA, including, but not limited to, plans that
provide retirement income or result in a deferral of income by employees for
periods extending to termination of employment or beyond, and plans that provide
medical, surgical, or hospital care benefits or benefits in the event of
sickness, accident, disability, death or unemployment and (ii) all other
material employee benefit agreements or arrangements, including without
limitation deferred compensation plans, incentive plans, bonus plans or
arrangements, stock option plans, stock purchase plans, stock award plans,
golden parachute agreements, severance pay plans, dependent care plans,
cafeteria plans, employee assistance programs, scholarship programs, employee
discount programs, employment contracts, retention incentive agreements,
noncompetition agreements, consulting agreements, confidentiality agreements,
vacation policies, and other similar plans, agreements and arrangements that
were in effect as of November 21, 2001, or were approved before that date but
are not yet effective, for the benefit of any director, officer, employee or
former employee (or any of their beneficiaries) of Parent or Newco or any of
their subsidiaries (collectively, a "Parent Beneficiary"), or with respect to
which Parent or Newco or any of their subsidiaries may have any liability
("Parent Benefit Plans").
(b) With respect to each Parent Benefit Plan, Parent has heretofore
delivered to the Company, as applicable, complete and correct copies of each of
the following documents which Parent has prepared or has been required to
prepare:
(i) the Parent Benefit Plans and any amendments thereto (or if
a Parent Benefit Plan is not a written agreement, a description thereof);
(ii) the three most recent annual Form 5500 reports filed with
the IRS;
(iii) the most recent statement filed with the DOL pursuant to
29 U.S.C. (S) 2520.104-23;
(iv) the three most recent annual Form 990 and 1041 reports
filed with the IRS;
(v) the three most recent actuarial reports;
32
(vi) the three most recent reports prepared in accordance with
Statement of Financial Accounting Standards No. 106;
(vii) the most recent summary plan description and summaries of
material modifications thereto;
(viii) the trust agreement, group annuity contract or other
funding agreement that provides for the funding of the Parent Benefit Plan;
(ix) the most recent financial statement;
(x) the most recent determination letter received from the
IRS; and
(xi) any agreement pursuant to which Parent or any of its
subsidiaries is obligated to indemnify any person.
(c) All contributions and other payments required to have been made
by Parent or Newco or any entity (whether or not incorporated) that is treated
as a single employer with Parent or Newco under Section 414 of the Code (a
"Parent ERISA Affiliate") with respect to any Parent Benefit Plan (or to any
person pursuant to the terms thereof) have been or will be timely made and all
such amounts properly accrued through the date of the Parent SEC Reports have
been reflected therein.
(d) The terms of all Parent Benefit Plans that are intended to be
"qualified" within the meaning of Section 401(a) of the Code have been
determined by the IRS to be so qualified or the applicable remedial periods will
not have ended prior to the Effective Time of the Merger. Except as disclosed in
Schedule 5.10, no event or condition exists or has occurred that could cause the
IRS to disqualify any Parent Benefit Plan that is intended to be qualified under
Section 401(a) of the Code. Except as disclosed in Schedule 5.10, with respect
to each Parent Benefit Plan, Parent and Newco and each Parent ERISA Affiliate
are in compliance in all material respects with, and each Parent Benefit Plan
and related source of benefit payment is and has been operated in compliance
with, its terms, all applicable laws, rules and regulations governing such plan
or source, including, without limitation, ERISA, the Code and applicable local
law. To the knowledge of Parent or Newco, except as set forth in Schedule 5.10,
no Parent Benefit Plan is subject to any ongoing audit, investigation, or other
administrative proceeding of the IRS, the DOL, or any other federal, state, or
local governmental entity or is scheduled to be subject to such an audit
investigation or proceeding.
(e) With respect to each Parent Benefit Plan, to the knowledge of
Parent and Newco, there exists no condition or set of circumstances that could
subject Parent or Newco or any Parent ERISA Affiliate to any liability arising
under the Code, ERISA or any other applicable law (including, without
limitation, any liability to or under any such plan or under any indemnity
agreement to which Parent or Newco or any Parent ERISA Affiliate is a party),
which liability, excluding liability for benefit claims and funding obligations,
each payable in the ordinary course, could reasonably be expected to have a
Material Adverse Effect on Parent or Newco. No claim, action or litigation has
been made, commenced or, to the knowledge of Parent or Newco, threatened, by or
against any Parent Benefit Plan or Parent or Newco or any of its
33
subsidiaries with respect to any Parent Benefit Plan (other than for benefits in
the ordinary course) that could reasonably be expected to have a Material
Adverse Effect on Parent or Newco.
(f) Except as disclosed in Schedule 5.10, no Parent Benefit Plan that
is a "welfare benefit plan" (within the meaning of Section 3(1) of ERISA)
provides benefits for any retired or former employees (other than as required
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or
other applicable state or local law that specifically mandates continued health
coverage).
(g) Except as disclosed in Schedule 5.10, the consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or in conjunction with another event, including termination of employment)
result in (i) any payment (whether of severance pay or otherwise) becoming due
from Parent or Newco or any of their subsidiaries to any Parent Beneficiary or
to the trustee under any "rabbi trust" or similar arrangement, or (ii) any
benefit under any Parent Benefit Plan being established or increased, or
becoming accelerated, vested or payable.
(h) Except as disclosed in Schedule 5.10, neither Parent nor Newco
nor any entity that was at any time during the six-year period ending on
November 21, 2001 a Parent ERISA Affiliate has ever maintained, had an
obligation to contribute to, contributed to, or had any liability with respect
to any plan that (i) is or was a pension plan (as defined in Section 3(2) of
ERISA) that is or was subject to Title IV of ERISA, Section 412 of the Code or
Section 302 of ERISA or (ii) that is or was a multiemployer plan (as defined in
Sections 414(f) of the Code or 3(37) or 4001(a)(31) of ERISA).
5.11 Environmental Laws and Regulations. Except as set forth in Schedule
----------------------------------
5.11, Parent and Newco are in compliance in all material respects with all
Environmental Laws. The conduct of the businesses of Parent and Newco do not
violate or conflict with, in any material respect, any Environmental Laws.
5.12 Compliance with Laws and Orders. Except with respect to the matters
-------------------------------
described in Sections 5.9, 5.10 and 5.11, neither Parent nor Newco nor any
subsidiary is in violation of or in default under any Law or Order, applicable
to Parent or Newco or any subsidiary or any of their respective assets and
properties the effect of which, individually or in the aggregate with other such
violations and defaults could not reasonably be expected to have a Parent
Material Adverse Effect.
5.13 Intentionally Deleted
5.14 Certain Agreements. Except as set forth in Schedule 5.14, neither
------------------
Parent nor Newco nor any of their subsidiaries are a party to any oral or
written agreement or plan, including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement. Except as
described in Schedule 5.14 or except for any such as would not result in a
Parent Material Adverse Effect, the transactions
34
contemplated by this Agreement will not constitute a "change of control" under,
require the consent from or the giving of notice to any third party pursuant to,
or accelerate the vesting or repurchase rights under, the terms, conditions or
provisions of any loan or Commitment Letter, note, bond, mortgage, indenture,
license, or any material lease, contract, agreement or other instrument or
obligation to which Parent or Newco or any of their subsidiaries is a party or
by which any of them or any of their properties or assets may be bound. Except
as set forth in Schedule 5.14, there are no amounts payable by Parent or Newco
or their subsidiaries to any officers of Parent or Newco or their subsidiaries
(in their capacity as officers) as a result of the transactions contemplated by
this Agreement and/or any subsequent employment termination.
5.15 Brokers and Finders. Except for the fees and expenses payable to
-------------------
▇▇▇▇▇▇▇▇▇ & Company, Inc. which fees and expenses are reflected in its agreement
with Parent, a true and correct copy of which has been furnished to the Company,
Parent has not employed any investment banker, broker, finder, consultant or
intermediary in connection with the transactions contemplated by this Agreement
which would be entitled to any investment banking, brokerage, finder's or other
fee or commission in connection with this Agreement or the transactions
contemplated hereby.
5.16 Opinion of Financial Advisor. Parent has received the opinion of
----------------------------
▇▇▇▇▇▇▇▇▇ & Company, Inc., dated as of November 21, 2001, to the effect that, as
of such date, the Merger Consideration is fair to Parent from a financial point
of view.
5.17 Accuracy of Information Furnished. No representation, statement, or
---------------------------------
information made or furnished by the Company to Parent or any of Parent's
representatives, including those contained in this Agreement and the various
Schedules attached hereto and the other information and statements referred to
herein and previously furnished by the Company, contains or shall contain any
untrue statement of a material fact or omits or shall omit any material fact
necessary to make the information contained therein not misleading. Parent has
provided the Company with true, accurate and complete copies of all documents
listed or described in the various Schedules attached hereto.
5.18 No Default. Except as set forth in Schedule 5.18, neither Parent nor
----------
any of its subsidiaries is in material breach, default or violation (and no
event has occurred which with notice or the lapse of time or both would
constitute a breach, default or violation) of any term, condition or provision
of (a) its Articles of Incorporation or Bylaws (or similar governing documents),
(b) any Law applicable to Parent or its subsidiaries or any of their respective
properties or assets or (c) any material contract.
5.19 Transactions With Affiliates. Except as set forth in Schedule 5.19, or
----------------------------
as contemplated by this Agreement, since December 31, 2000, Parent has not, in
the ordinary course of business or otherwise, purchased, leased or otherwise
acquired any material property or assets or obtained any material services from,
or sold, leased or otherwise disposed of any material property or assets or
provided any material services to (except with respect to remuneration for
services rendered as a director, officer or employee of Parent in the ordinary
course), (a) any employee of Parent, (b) any shareholder of Parent, (c) any
Person, firm or corporation that directly or indirectly controls, is controlled
by or is under common control with Parent, or (d) any member of the immediate
family of any of the foregoing persons (collectively,
35
"Parent Affiliates"). Except as set forth in Schedule 5.19, (i) Parent's
Material Contracts do not include any obligation or commitment between Parent
and any Parent Affiliate, (ii) the assets of Parent do not include any
receivable or other obligation or commitment from a Parent Affiliate to Parent
and (iii) the liabilities reflected on Parent SEC Reports do not include any
obligation or commitment to any Parent Affiliate.
5.20 Licenses. All Licenses required for the operation of the business of
--------
Parent and its subsidiaries are in full force and effect and there are no
pending modifications, amendments or revocation proceedings which would
materially adversely affect the operations of Parent. All material fees due and
payable to governmental authorities pursuant to the rules governing the Licenses
have been paid and no event has occurred with respect to the Licenses held by
Parent which, with the giving of notice or the lapse of time or both, would
constitute grounds for revocation thereof. Parent is in compliance in all
material respects with the terms of the Licenses, as applicable, and there is no
condition, event or occurrence existing, nor is there any proceeding being
conducted of which Parent has received notice, nor, to Parent's knowledge, is
there any proceeding threatened, by any governmental entity, including the PPUC
or the FCC, which would cause the termination, suspension, cancellation or
nonrenewal of any of the Licenses, or the imposition of any penalty or fine by
any regulatory authority.
5.21 Information Supplied. None of the information supplied or to be
--------------------
supplied by Parent for inclusion in (a) the Registration Statement will, at the
time the Registration Statement is filed with the SEC, and at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (b) the Joint Proxy Statement will, at the date the
Joint Proxy Statement is first mailed to the Company's and Parent's shareholders
and at the time of the Company Shareholders Meeting and Parent's Shareholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement, as it relates to the Parent Shareholders
Meeting, will comply as to form in all material respects with the applicable
requirements of the Exchange Act, and the rules and regulations thereunder,
except that no representation or warranty is made by Parent with respect to
statements made or incorporated by reference therein based on information
supplied by the Company for inclusion or incorporation by reference therein.
5.22 Title to and Condition of Assets.
--------------------------------
(a) Each of Parent and its subsidiaries has good title to, or valid
leasehold interests in, all its material properties and assets, except for minor
defects in title, easements, restrictive covenants and similar encumbrances or
impediments that, in the aggregate, do not and will not materially interfere
with its ability to conduct its business as currently conducted. Except as set
forth in Schedule 5.22, all such assets and properties, other than assets and
properties in which Parent or any of the subsidiaries has leasehold interests,
are free and clear of all Liens, and except for minor Liens, that, in the
aggregate, do not and will not materially interfere with the ability of Parent
or any of its subsidiaries to conduct business as currently conducted or as
reasonably expected to be conducted.
36
(b) Each of Parent and each of its subsidiaries has complied in all
material respects with the terms of all leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect. Each
of Parent and each of its subsidiaries enjoys peaceful and undisturbed
possession under all such leases.
(c) Except as set forth in Schedule 5.22, to the knowledge of Parent,
the buildings and premises of Parent and each of its subsidiaries that are used
in its business are in adequate operating condition and in a state of adequate
maintenance and repair, normal wear and tear excepted, and are adequate for the
purpose for which they are currently being used, have access to adequate utility
services necessary for the conduct of the business. All items of operating
equipment of Parent and its subsidiaries are in adequate operating condition and
in a state of reasonable maintenance and repair, ordinary wear and tear
excepted.
5.23 Undisclosed Liabilities and Commitments. Except as set forth in
---------------------------------------
Schedule 5.23, at the date of the most recent Parent SEC Report, neither Parent
nor any of its subsidiaries had, and since such date neither Parent nor any of
such subsidiaries has incurred (except in the ordinary course of business
consistent with past practice), any liabilities, commitments or obligations of
any nature (whether accrued, absolute, contingent or otherwise), required by
GAAP to be set forth on a financial statement or in the notes thereto or which,
individually or in the aggregate, could reasonably be expected to have a Parent
Material Adverse Effect.
5.24 Financing; VoiceStream Wireless Agreement; Dividend Policy.
----------------------------------------------------------
(a) Parent has provided to the Company a copy of the binding Co-Bank
Commitment Letter in the form of Exhibit B attached hereto, including all
exhibits, schedules or amendments thereto. The Co-Bank Commitment Letter is
effective and has not been withdrawn or modified. To the knowledge of Parent,
the conditions set forth in the Co-Bank Commitment Letter (including commitment
fees) will be able to be satisfied prior to the Effective Time and Parent or
Newco will have available at the Effective Time all funds necessary to
consummate the Merger, the Agreement and the other transactions contemplated
hereby. Parent shall keep the Company reasonably informed of the status of its
financing for the Merger in a timely manner.
(b) The VoiceStream Wireless Agreement is effective and has not been
modified or terminated. To the knowledge of Parent, the conditions to closing
set forth in the VoiceStream Wireless Agreement will be able to be satisfied
prior to the Effective Time. Parent shall keep the Company reasonably informed
with respect to the status of the VoiceStream Wireless Agreement in a timely
manner.
(c) Parent has no present intention to alter its present dividend
policy with respect to the Parent Stock.
5.25 Share Ownership. Neither Parent, Newco nor any of their affiliates
---------------
beneficially owns, directly or indirectly, more than twenty percent (20%) of the
Company Shares.
5.26 Interim Operations of Newco. Newco was formed solely for the purpose
---------------------------
of engaging in the transactions contemplated hereby and has not engaged in any
business activities or conducted any operations other than in connection with
the transactions contemplated hereby.
37
5.27 Tax Representation Letter. If the Merger were to become effective as
-------------------------
of the date hereof, Parent could execute a Tax Representation Letter
substantially in the form of Exhibit G.
ARTICLE VI -- ADDITIONAL COVENANTS AND AGREEMENTS
6.1 Conduct of Business of the Company. The Company agrees that during the
----------------------------------
period from November 21, 2001 to the Effective Time (unless Parent shall
otherwise agree in writing and except as otherwise contemplated by this
Agreement), the Company will, and will cause each of its subsidiaries to,
conduct its operations according to its ordinary and usual course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise permitted in this Agreement, as set forth in
Schedule 6.1 or as set forth in the Company's 2001 operating and capital budget
as submitted in writing to Parent prior to the date hereof (or as otherwise set
forth with respect to such budget in Schedule 6.1) (and, if applicable, the
Company's 2002 operating and capital budget as approved by Parent, in its
reasonable discretion) prior to the Effective Time, neither the Company nor any
of its subsidiaries will, without the prior written consent of Parent:
(a) except for shares to be issued or delivered pursuant to the
Company Option Plan with respect to options or commitments outstanding on
November 21, 2001, issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge or
other encumbrance of (i) any additional shares of capital stock of any class
(including the Company Shares), or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for any shares of capital
stock, or any rights, warrants, options, calls, commitments or any other
agreements of any character to purchase or acquire any shares of capital stock
or any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for, any shares of capital stock, or (ii) any other
securities in respect of, in lieu of, or in substitution for, Company Shares
outstanding on the date hereof;
(b) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding Company Shares; provided,
however, that the Company may in its discretion redeem the outstanding Company
Rights at any time;
(c) split, combine, subdivide or reclassify any Company Shares or
declare, set aside for payment or pay any dividend, or make any other actual,
constructive or deemed distribution in respect of any Company Shares or
otherwise make any payments to shareholders in their capacity as such, other
than the declaration and payment of regular quarterly cash dividends not in
excess of $0.21 per share per quarter and except for dividends by a wholly owned
subsidiary of the Company to the Company;
38
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries not constituting an inactive
subsidiary (other than the Merger);
(e) adopt any amendments to its Articles of Incorporation or Bylaws
or alter through merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of any subsidiary not
constituting an inactive subsidiary of the Company;
(f) except in accordance with the Asset Acquisition Agreement among
the Company (and certain of its affiliates) and Mountain Union Telecom, LLC
dated March 15, 2001 (as in effect on the date hereof, with any modifications,
amendments or waivers as Parent may agree in writing), make any material
divestiture or acquisition, by means of merger, consolidation or otherwise, or
material disposition, of assets or securities;
(g) other than as set forth in the Company's 2002 capital and
operating budget, incur any indebtedness for borrowed money or guarantee any
such indebtedness or make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any wholly owned
subsidiary of the Company;
(h) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(i) grant any increases in the compensation of any of its directors,
officers or employees, except in the ordinary course of business and in
accordance with past practice;
(j) pay or agree to pay any pension, retirement allowance or other
employee benefit not required or contemplated by any of the existing benefit,
severance, termination, pension or employment plans, agreements or arrangements
as in effect on the date hereof;
(k) except as set forth on Schedule 6.1(k), enter into any new or
materially amend any existing employment or severance or termination agreement
with any director, officer or employee;
(l) except as may be required to comply with applicable law, become
obligated under any new pension plan, welfare plan, multiemployer plan, employee
benefit plan, severance plan, benefit arrangement, or similar plan or
arrangement, which was not in existence on the date hereof, or amend any such
plan or arrangement in existence on the date hereof if such amendment would have
the effect of materially enhancing any benefits thereunder;
(m) make or agree to make any capital expenditures or material
commitments;
(n) neither the Company nor any executive officer or director of the
Company or any Subsidiary nor any shareholder of the Company who may be deemed
to be an "affiliate" (as that term is defined for purposes of Rules 145 and 405
promulgated by the SEC under the Securities Act) of the Company shall purchase
or sell or submit a bid to purchase or an offer to sell directly or indirectly
any shares of Parent Common Stock or any options rights or other
39
securities convertible into shares of Parent Common Stock during the Price
Determination Period; or
(o) take any action or fail to take any action which could reasonably
be expected to result in a breach of any representation, warranty or covenant
hereunder.
6.2 Conduct of Business of Parent.
-----------------------------
(a) Parent agrees that during the period from November 21, 2001 to
the Effective Time (unless the Company shall otherwise agree in writing and
except as otherwise contemplated by this Agreement), Parent will, and will cause
each of its Subsidiaries to conduct its operations according to its ordinary and
usual course of business consistent with past practice. Without limiting the
generality of the foregoing, and except as otherwise permitted in this
Agreement, as set forth in Schedule 6.2 or as set forth in Parent's 2001
operating budget as submitted in writing to the Company prior to the date hereof
(and, if applicable, Parent's 2002 operating and capital budget), prior to the
Effective Time, neither Parent nor any of its Subsidiaries will, without the
prior written consent of the Company:
(i) (A) enter into an agreement to effect, or effecting, a
change of control with respect to Parent, (B) alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate structure or
organization of Parent or any Subsidiary, (C) adopt any amendments to its
Articles of Incorporation or Bylaws which would alter the terms of the Parent
Common Stock, (D) enter into any transaction, or series of transactions, whereby
Parent, directly or indirectly, acquires another company (whether through
merger, purchase of stock, acquisition of all or substantially all of the assets
of another company or otherwise) if the company being acquired would qualify as
a Significant Subsidiary; or (E) enter into any agreement relating to a
transaction which would require the approval of its shareholders under the PBCL
or the listing standards of Nasdaq;
(ii) adopt a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other reorganization of Parent
or of its Subsidiaries (other than with respect to the Merger);
(iii) adopt any amendments to its Articles of Incorporation or
otherwise alter its capital structure;
(iv) other than in the ordinary course of business consistent
with past practice, incur any indebtedness for borrowed money or guarantee any
such indebtedness or make any loans, advances or capital contributions to, or
investments in, any other person, other than to Parent or any wholly owned
subsidiary of Parent;
(v) authorize, recommend, propose or announce an intention to
do any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing; or
(vi) take any action or fail to take any action which could
reasonably be expected to result in a breach of any representation, warranty or
covenant hereunder.
40
(b) In addition, during the period from November 21, 2001 until the
Effective Time:
(i) Parent shall not amend the Co-Bank Commitment Letter or the
VoiceStream Wireless Agreement in any material respect and shall use its best
efforts to do or cause to be done all things necessary or appropriate on its
part in order to fulfill the conditions precedent set forth in the Co-Bank
Commitment Letter and the VoiceStream Wireless Agreement and to consummate the
transactions contemplated by the Co-Bank Commitment Letter and the VoiceStream
Wireless Agreement;
(ii) Parent shall maintain its current dividend policy; and
(iii) Neither Parent nor any Subsidiary, nor any executive
officer or director of Parent or any Subsidiary, nor any shareholder of Parent
who may be deemed to be an "affiliate" (as that term is defined for purposes of
Rules 145 and 405 promulgated by the SEC under the Securities Act) of Parent
shall purchase or sell on Nasdaq, or submit a bid to purchase or an offer to
sell on Nasdaq, directly or indirectly, any shares of Parent Common Stock or any
options, rights or other securities convertible into shares of Parent Common
Stock during the Price Determination Period.
6.3 No Solicitation of Transactions.
-------------------------------
(a) The Company agrees that, as of November 21, 2001, it has, and has
caused each officer, director or employee of, or any investment banker, attorney
or other advisor or representative of the Company or any subsidiary (the
"Company Representatives"), to immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Third Party (as
defined below) conducted heretofore with respect to any Competing Transaction
(as defined below). The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any Company Representatives to
(i) solicit or initiate, encourage, or facilitate, directly or indirectly, any
inquiries relating to, or the submission of, any proposal or offer, whether in
writing or otherwise, from any person other than Parent, Newco or any affiliates
thereof (a "Third Party") to acquire beneficial ownership (as defined under Rule
13(d) of the Exchange Act) of all or more than 5% of the assets of the Company
and its subsidiaries, taken as a whole, or 5% or more of any class of equity
securities of the Company pursuant to a merger, consolidation or other business
combination, sale of shares of stock, sale of assets, tender offer, exchange
offer or similar transaction or series of related transactions, which is
structured to permit such Third Party to acquire beneficial ownership of more
than 5% of the assets of the Company and its Subsidiaries, taken as a whole, or
5% or more of any class of equity securities of the Company (a "Competing
Transaction"); (ii) participate in any discussions or negotiations regarding, or
furnish to any person any information or data with respect to or access to the
properties of, or take any other action to knowingly facilitate the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction; or waive the provisions of any "standstill" or similar
agreement; or (iii) enter into any agreement with respect to any Competing
Transaction, approve or recommend or resolve to approve or recommend any
Competing Transaction or enter into any agreement requiring it to abandon,
terminate or fail to consummate the Merger and the other transactions
contemplated by this Agreement.
41
Notwithstanding the foregoing sentence, if the Company receives a
bona fide, unsolicited, written proposal or offer for a Competing Transaction by
a Third Party, which the Board of Directors determines in good faith (after
consulting the Board of Directors' independent financial advisor) (A) will
result in terms which are more favorable from a financial point of view to the
holders of Company Shares than the Merger and the other transactions
contemplated by this Agreement and, after consultation with counsel, determines
that failure to take such action may result in a breach of its fiduciary duties
under applicable laws; and (B) is reasonably capable of being consummated
(provided that the Company, including the Board of Directors, and any of its
advisors shall be permitted to contact such Third Party and its advisors solely
for the purpose of clarifying the proposal and any material contingencies and
the capability of consummation) and (C) is subject to a confidentiality
agreement with such Third Party on terms no less favorable to the Company, in
all material respects, than the confidentiality agreement with Parent (each if
amended or restated a "Superior Competing Transaction"), then the Company may,
in response to an unsolicited request therefor and subject to compliance with
Section 6.2(b), furnish information with respect to the Company and its
subsidiaries to and participate in discussions and negotiations directly or
through its representatives with, such Third Party, provided that the Company
shall have delivered to Parent prior written notice that it intends to take such
action.
The Board of Directors of the Company shall be permitted to
withhold, withdraw or modify in a manner adverse to Parent, its recommendation
to the holders of the Company Shares, but only if (i) such Third Party submits
an unsolicited Competing Transaction that the Board of Directors believes, in
its good faith judgment, is reasonably likely to result in a Superior Competing
Transaction and after consultation with counsel, determines that failure to take
such action may result in a breach of fiduciary duties under applicable law and
(ii) the Company shall have delivered to Parent prior written notice that it
intends to take such action, including therein the identity of such Third Party
and the terms and conditions of such Superior Competing Transaction. The
Company, its officers, directors, advisors, and representatives shall
immediately cease all activities, discussions and negotiations, if any, with any
person conducted prior to the date hereof. Nothing contained in this Agreement
shall prevent the Board of Directors from complying with Rule 14d-9 and Rule
14e-2 promulgated under the Exchange Act.
(b) The Company shall promptly advise Parent orally and in writing of
(i) any Competing Transaction or any inquiry with respect to or which could
reasonably be expected to lead to any Competing Transaction received by any
officer or director of the Company or, to the knowledge of the Company, any
financial advisor, attorney or other advisor or representative of the Company;
(ii) the identity of the Third Party submitting such Competing Transactions or
making such inquiry; and (iii) the material terms and conditions of such
Competing Transaction. The Company will keep Parent reasonably informed on a
current basis of the status and details of any such Competing Transaction
(including amendments and proposed amendments) proposal or inquiry in a timely
manner.
6.4 Reasonable Efforts. Subject to the terms and conditions herein
------------------
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its reasonable efforts to obtain all necessary or appropriate
waivers, consents and
42
approvals, to effect all necessary registrations, filings and submissions
(including, but not limited to, (a) the Registration Statement (which shall be
filed as soon as reasonably practicable after the date of this Agreement),
filings under the HSR Act and any other submissions requested by the PPUC, FCC,
Federal Trade Commission or Department of Justice and (b) such filings,
consents, approvals, orders, registrations and declarations as may be required
under the laws of any foreign country in which the Company or any of its
subsidiaries conducts any business or owns any assets) and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed with
the Merger as expeditiously as possible), subject, however, to the requisite
votes of the shareholders of any or all of the Company, Newco and Parent.
Notwithstanding the foregoing, the Company shall not be obligated to use its
reasonable efforts or take any action pursuant to this Section 6.4 if in the
good faith opinion of the Board of Directors in accordance with Section 6.3(a)
after consultation with its counsel such actions might be inconsistent with its
fiduciary duties to the Company's shareholders under applicable law.
6.5 Access to Information. Upon reasonable notice, each party shall (and
---------------------
shall cause each of its subsidiaries to) afford to officers, employees, counsel,
accountants and other authorized representatives of such party
("Representatives"), in order to evaluate the transactions contemplated by this
Agreement, reasonable access, during normal business hours and upon reasonable
notice throughout the period prior to the Effective Time, to its properties,
books and records and, during such period, shall (and shall cause each of its
subsidiaries to) furnish or make available reasonably promptly to such
Representatives all information concerning its business, properties and
personnel as may reasonably be requested. Each party agrees that it will not,
and will cause its Representatives not to, use any information obtained pursuant
to this Section 6.5 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. The confidentiality agreements,
dated May 15, 2001 and October 24, 2001, respectively (the "Confidentiality
Agreements"), by and between the Company and Parent shall apply with respect to
information furnished by each party, its subsidiaries and its Representatives to
the other hereunder.
6.6 Publicity. The parties will consult with each other and will mutually
---------
agree upon any press releases or public announcements pertaining to the Merger
and shall not issue any such press releases or make any such public
announcements prior to such consultation and agreement, except as may be
required by applicable law or by obligations pursuant to any agreement with any
national securities exchange or automated quotation system, in which case the
party proposing to issue such press release or make such public announcement
shall consult in good faith with the other party before issuing any such press
releases or making any such public announcements.
6.7 Indemnification of Directors and Officers.
-----------------------------------------
(a) In the event of any threatened or actual claim, action, suit,
demand, proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, demand, proceeding
or investigation in which any person who is now, or has been at any time prior
to the date hereof, or who becomes prior to the Effective Time, a director,
officer, employee, fiduciary or agent of the Company or any subsidiary of the
Company (the "Indemnified Parties") is, or is threatened to be, made a party
based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that
43
he is or was a director, officer, employee, fiduciary or agent of the Company or
any subsidiary of the Company, or is or was serving at the request of the
Company or any subsidiary of the Company as a director, officer, employee,
fiduciary or agent of another corporation, partnership, joint venture, trust or
other enterprise or (ii) the negotiation, execution or performance of this
Agreement or any of the transactions contemplated hereby, whether in any case
asserted or arising before or after the Effective Time, the parties hereto agree
to cooperate and use their commercially reasonable efforts to defend against and
respond thereto. It is understood and agreed that the Company shall indemnify
and hold harmless, and after the Effective Time, Parent shall cause the
Surviving Corporation to, and the Surviving Corporation shall, indemnify and
hold harmless, as and to the full extent permitted by applicable Law, each
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses), judgments, fines
and amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, demand, proceeding or investigation, and in the event of
any such threatened or actual claim, action, suit, demand, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
(A) the Company, and after the Effective Time, Parent shall cause the Surviving
Corporation to, and the Surviving Corporation shall, promptly pay expenses in
advance of the final disposition of any claim, suit, proceeding or investigation
to each Indemnified Party to the full extent permitted by law, subject to the
provision by such Indemnified Party of an undertaking to reimburse the amounts
so advanced in the event of a final non-appealable determination by a court of
competent jurisdiction that such Indemnified Party is not entitled to such
amounts, (B) the Indemnified Parties may retain one counsel satisfactory to them
(except in case of a conflict of interest among two or more Indemnified Parties,
in which case more than one counsel may be retained), and the Company, and after
the Effective Time, Parent shall cause the Surviving Corporation to, and the
Surviving Corporation shall, pay all reasonable fees and expenses of such
counsel for the Indemnified Parties within 30 days after statements therefor are
received and (C) the Company and the Surviving Corporation will, and Parent will
cause the Surviving Corporation to, use their commercially reasonable efforts to
assist in the defense of any such matter; provided that neither the Company nor
the Surviving Corporation shall be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably withheld);
and provided further, that the Surviving Corporation shall have no obligation
hereunder to any Indemnified Party when and if, but only to the extent that, a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim indemnification under
this Section 6.7, upon learning of any such claim, action, suit, demand,
proceeding or investigation, shall notify the Company and, after the Effective
Time, the Surviving Corporation, thereof, provided that the failure to so notify
shall not affect the obligations of the Company and the Surviving Corporation
except to the extent such failure to notify materially prejudices such party.
(b) Parent and Newco agree that all rights to indemnification
existing in favor of, and all exculpations and limitations of the personal
liability of, the directors, officers, employees and agents of the Company and
the subsidiaries of the Company in the Articles of Incorporation and Bylaws of
the Company as in effect as of the date hereof with respect to matters occurring
at or prior to the Effective Time, including the Merger, shall continue in full
force and effect for a period of not less than six years from the Effective
Time; provided, however, that all rights to indemnification in respect of any
claims (each, a "Claim") asserted or
44
made within such period shall continue until the disposition of such Claim. For
a period of six years after the Effective Time, the Surviving Corporation shall,
and Parent shall cause the Surviving Corporation to, cause to be maintained in
effect the existing directors' and officers' liability insurance and fiduciary
insurance policies with an amount of coverage not less than 100% of the amount
of existing coverage, or policies that are no less favorable to the Indemnified
Parties, and with an amount of coverage not less than 100% of the amount of
existing coverage, than the policies which are currently maintained by the
Company, with respect to claims arising from facts or events which occurred at
or before the Effective Time, so long as such policies are available for an
annual premium which is no more than 200% of the current annual premium for the
existing policies; provided, that if such policies are not available for an
annual premium of no more than 200% of the current annual premium, then policies
in an amount and scope as great as can be obtained for an annual premium of 200%
of the current annual premium shall be obtained.
(c) This Section 6.7 is intended for the irrevocable benefit of, and
to grant third party rights to, the Indemnified Parties and shall be binding on
all successors and assigns of Parent, the Company and the Surviving Corporation.
Each of the Indemnified Parties shall be entitled to enforce the covenants
contained in this Section 6.7.
(d) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving entity of such consolidation
or merger or (ii) transfers or conveys a majority of its properties and assets
to any person or entity, then, and in each such case, proper provision shall be
made so that the successors, assigns and transferees of the Surviving
Corporation, as the case may be, assume the obligations set forth in this
Section 6.7.
(e) To the extent permitted by law, all rights of indemnification for
the benefit of any Indemnified Party shall be mandatory rather than permissive.
6.8 Employees.
---------
(a) Following the Effective Time, (i) Parent shall cause the
Surviving Corporation and its successors: (A) to satisfy each of the agreements
and arrangements (the "Employment Obligations") described in subsection (c)
below with respect to the employees (the "Contract Employees") subject to such
agreements and arrangements, (B) use its commercially reasonable efforts to
retain each present full-time employee of the Company at such employee's current
position with such current responsibilities (or, if offered to, and accepted by,
an employee, a position for which the employee is qualified with the Surviving
Corporation or Parent at a salary commensurate with the position), (C) pay
compensation to each person who was employed as of the Effective Time and who
continues to be employed by the Surviving Corporation or Parent on and after the
Effective Time, that is at least equal to the aggregate compensation that such
person was receiving from the Company prior to the Effective Time (unless there
is a material change in the duties and responsibilities of such employee), (ii)
in the event that Parent continues or causes the Surviving Corporation to
continue to employ officers or employees of the Company as of the Effective
Time, the Surviving Corporation or Parent or their successors shall employ such
persons on the Effective Time who are not Contract Employees as "at will"
employees, (iii) officers and employees of the Company who continue
45
employment with the Surviving Corporation or Parent or their successors after
the Effective Time and who are Contract Employees will be employed pursuant to
the terms and conditions of their respective Employment Obligations, and (iv) in
the event the Surviving Corporation or Parent or their successors do not employ,
or terminate the employment (other than as a result of unsatisfactory
performance of their respective duties or for cause) of any officers or
employees of the Company as of the Effective Time who are not Contract
Employees, Parent shall or shall cause the Surviving Corporation or their
successors to pay the following severance benefits to such employees: a minimum
of 2 weeks' salary, with an additional one week for each year of service, with a
maximum of 26 weeks' salary.
(b) Following the Effective Time, Parent agrees (i) to provide
employee benefit plans, programs, arrangements and policies for the benefit of
current retired employees and current retired non-employee directors (each as of
the date hereof) of the Company and its subsidiaries that in the aggregate are
no less favorable to such retired employees and retired non-employee directors
than the Company Plans and (ii) to allow future retired non-employee directors
(including any spouse or surviving spouse thereof) to participate in an
applicable health and welfare plan, provided that all expenses associated with
such participation shall be the sole responsibility of such retired non-employee
directors (or, as applicable, a spouse or surviving spouse thereof). For a
period of two (2) years following the Effective Time, Parent agrees to provide
employee benefit plans, programs, arrangements and policies for the benefit of
employees and future retired employees (i.e., employees who retire after the
date hereof) of the Company and its subsidiaries that in the aggregate are no
less favorable to such employees and future retired employees than the Company
Plans. In the case of benefit plans and programs under which benefits are paid
or determined by reference to the value of Company Shares, Parent agrees that
such benefits shall be paid or determined by reference to the value of shares of
common stock of Parent in an equitable manner. All service credited to each
employee and retired employee by the Company through the Effective Time shall be
recognized by Parent for purposes of eligibility and vesting (but not benefit
accruals) under the Parent Benefit Plans. Without limiting the foregoing, Parent
shall not treat any Company employee as a "new" employee or retired employee for
purposes of any pre-existing condition exclusions, waiting periods, evidence of
insurability requirements or similar provision under any health or other welfare
plan, and will use commercially reasonable efforts to make appropriate
arrangements with its insurance carrier(s), to the extent applicable, to ensure
such result.
(c) Parent and the Surviving Corporation hereby agree to honor
(without modification) and assume the employment agreements, executive
termination agreements and individual benefit arrangements listed on Schedule
6.8(c) (except to the extent that such agreements have been waived prior to the
Effective Time), all as in effect at the Effective Time.
6.9 Registration Statement; Joint Proxy Statement.
---------------------------------------------
(a) As promptly as practicable after the execution of this Agreement,
(i) Parent and the Company shall prepare and file with the SEC a Joint Proxy
Statement (the "Joint Proxy Statement"), and (ii) Parent shall prepare and file
with the SEC a registration statement on Form S-4 (together with all amendments
thereto, the "Registration Statement") in which the Joint Proxy Statement shall
be included as a prospectus in connection with the registration under the
Securities Act of the shares of Parent Common Stock to be issued to the
shareholders of the
46
Company pursuant to the Merger. Parent and the Company shall each use all
commercially reasonable efforts to cause the Registration Statement to become
effective as promptly as practicable, and, prior to the effective date of the
Registration Statement, Parent shall take all or any action required under any
applicable federal or state securities laws in connection with the issuance of
shares of Parent Common Stock pursuant to the Merger. In connection with the
preparation of the Registration Statement and Joint Proxy Statement, the Company
shall furnish all information concerning the Company as Parent may reasonably
request, and Parent shall furnish all information concerning Parent as the
Company may reasonably request. As promptly as practicable after the
Registration Statement shall have become effective, each of Parent and the
Company shall mail the Joint Proxy Statement to its respective shareholders.
(b) Subject to Section 6.3, the Joint Proxy Statement shall include
the unanimous recommendation of the Board of Directors of the Company to the
shareholders of the Company in favor of Company Shareholder Approval;
notwithstanding anything to the contrary in this Agreement, the Board of
Directors of the Company may withhold, withdraw, modify or amend its
recommendation if in the good faith opinion of the Board of Directors, arrived
at in accordance with the provisions of Section 6.3(a), after consultation with
counsel, such recommendation might be inconsistent with its fiduciary duties to
the Company's shareholders under applicable law; and any such withholding,
withdrawal, modification or amendment shall not constitute a breach of this
Agreement.
(c) The Joint Proxy Statement shall include the unanimous
recommendation of the Board of Directors of Parent to the shareholders of Parent
in favor of Parent Shareholder Approval.
(d) Except as may be required by law, no amendment or supplement to
the Joint Proxy Statement or the Registration Statement will be made by Parent
or the Company without the approval of the other party, which will not be
unreasonably withheld or delayed. Parent and the Company each will advise the
other, promptly after it receives notice thereof, of the time when the
Registration Statement has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the Parent Common Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, any request by the SEC for amendment of the Joint
Proxy Statement or the Registration Statement or comments thereon or requests
for additional information by the SEC.
(e) Parent shall promptly prepare and submit to the Nasdaq a listing
application covering the shares of Parent Common Stock issuable in the Merger,
and shall use commercially reasonable efforts to obtain, prior to the Effective
Time of the Merger, approval for the listing of such Parent Common Stock,
subject to official notice of issuance, and the Company shall cooperate with
Parent with respect to such listing.
6.10 Shareholders' Approvals.
-----------------------
(a) The Company, acting through its Board of Directors, shall, in
accordance with the provisions of this Agreement, the PBCL, any other applicable
law and its Articles of Incorporation and Bylaws, promptly and duly call, give
notice of, and convene and hold as soon as practicable following the date upon
which the Registration Statement becomes effective the
47
meeting of the Company's shareholders (the "Company Shareholders Meeting") for
the purpose of obtaining the Company Shareholder Approval.
(b) Parent, acting through its Board of Directors, shall, in
accordance with the provisions of this Agreement, the PBCL, any other applicable
law and its Articles of Incorporation and Bylaws, promptly and duly call, give
notice of, and convene and hold as soon as practicable following the date upon
which the Registration Statement becomes effective the meeting of Parent's
shareholders (the "Parent Shareholders Meeting," together with any Company
Shareholders Meeting, the "Shareholders Meetings") for the purpose of obtaining
the Parent Shareholder Approval.
(c) Parent and the Company shall use commercially reasonable efforts
to solicit from their respective shareholders proxies in favor of such
approvals, and shall take all other action necessary or advisable to secure the
vote or consent of shareholders required by the PBCL or the Nasdaq, as
applicable, to obtain such approvals, in accordance with the provisions of this
Agreement unless, in the good faith opinion of the Company's Board of Directors,
arrived at in accordance with the provisions of Section 6.3(a), after
consultation with its counsel, obtaining such approvals might be inconsistent
with its fiduciary duties to the Company's shareholders under applicable law.
6.11 Tax Matters. The parties acknowledge their respective desire to
-----------
structure the Merger to constitute a reorganization within the meaning of
Section 368(a) of the Code. Parent and the Company will use their reasonable
good faith efforts to achieve such tax treatment. If based upon the
Reorganization Assumption, the fair market value (determined as of the Effective
Time) of the Stock Consideration provided in the Merger would be at least 40% of
the fair market value of the total consideration received by the holders of the
Company Shares pursuant to the Merger, Parent shall (subject to the satisfaction
of the conditions to the issuance of the Tax Opinion (defined below) in the
immediately following sentence) deliver to the Company an opinion of ▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, special counsel to Parent, (or such other tax counsel
reasonably agreed to by the parties) in the form attached hereto as Exhibit "E"
(the "Tax Opinion") to the effect that, for federal income tax purposes: (a) the
Merger will be a reorganization within the meaning of Section 368(a) of the
Code; (b) neither the Company, Parent nor Newco will recognize any gain or loss
upon consummation of the Merger; (c) a Company shareholder will not recognize
any gain or loss upon the exchange of Company Shares solely for shares of Parent
Stock in the Merger; (d) a Company shareholder who receives cash and shares of
Parent Stock in exchange for Company Shares in the Merger will recognize any
gain realized (including any gain treated as a dividend) up to the amount of
cash received, but will not recognize any loss; and (e) a Company shareholder
who receives cash in lieu of a fractional share of Parent Stock would recognize
gain or loss with respect to the receipt of such cash. The issuance of the Tax
Opinion shall be conditioned on (i) the reasonable opinion of such tax counsel
(or other tax counsel reasonably agreed to by the parties) that the Tax Opinion
can be given and (ii) the receipt by such tax counsel of representation letters
from each of the Company, Parent, and Newco, in each case, in form and substance
reasonably satisfactory to ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP. The specific provisions
of each such representation letter shall be in form and substance reasonably
satisfactory to such tax counsel, and each such representation letter shall be
dated on or before the date of such opinion and shall not have been withdrawn or
modified in any material respect. Each of the Company and Parent covenant and
agree to use
48
reasonable best efforts to provide such representation letters in substantially
the same form as Exhibit F and G. For purposes of this Agreement the term
"Reorganization Assumption" shall mean the following assumption: the fair market
value of Parent Common Stock as of the Effective Time is equal to the closing
price of Parent Common Stock on Nasdaq at the end of the trading day immediately
preceding the Effective Time of the Merger.
6.12 Sale of the Company's Wireless Operations. Parent and the Company
-----------------------------------------
shall cooperate and use their best efforts to enter into an agreement with an
appropriate third party to sell the Company's wireless operations (pursuant to a
sale of all or substantially all of the assets of such operations) on terms and
conditions acceptable to Parent and the Company, the consummation of such sale
being contingent upon the consummation of the Merger.
ARTICLE VII -- CONDITIONS TO CONSUMMATION OF THE MERGER
7.1 Conditions to Each Party's Obligations to Effect the Merger. The
-----------------------------------------------------------
respective obligations of each party to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) There shall not be in effect any statute, rule, regulation,
executive order, decree, ruling or injunction or other order of a court or
governmental or regulatory agency of competent jurisdiction directing that the
transactions contemplated herein not be consummated; provided, however, that
prior to invoking this condition each party shall use all commercially
reasonable efforts to have any such decree, ruling, injunction or order vacated.
(b) All governmental consents, orders and approvals legally required
for the consummation of the Merger and the transactions contemplated hereby
shall have been obtained and be in effect at the Effective Time, and the waiting
periods under the HSR Act shall have expired or been terminated.
(c) Company Shareholder Approval shall have been obtained.
(d) Parent Shareholder Approval shall have been obtained in
accordance with applicable law, the Nasdaq and Parent's Articles of
Incorporation.
(e) The shares of Parent Common Stock issuable in connection with the
Merger shall have been approved for trading on the Nasdaq, subject to official
notice of issuance.
(f) The Registration Statement shall have become effective under the
Securities Act, and all post-effective amendments shall have been declared
effective or shall have been withdrawn; and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings for that purpose
shall have been initiated or, to the knowledge of the parties, threatened by the
SEC.
(g) There shall have been obtained any and all material permits,
approvals and consents of securities or "blue sky" authorities of any
jurisdiction that are necessary so that the consummation of the Merger and the
transactions contemplated thereby will be in compliance with applicable laws,
the failure to comply with which would have a Parent Material Adverse Effect.
49
(h) In the absence of a Reverse Merger Circumstance, the Company and
Parent shall have received the Tax Opinion.
7.2 Conditions to the Company's Obligations to Effect the Merger. The
------------------------------------------------------------
obligations of the Company to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following additional conditions:
(a) The representations and warranties of Parent and Newco contained
in this Agreement shall be true and correct (in all material respects, in the
case of representations and warranties not already qualified as to materiality
by their terms) at and as of the Effective Time as though made on and as of such
date (except (i) for changes specifically permitted by this Agreement and (ii)
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date), and the Company
shall have received a certificate of the President or a Vice President of Parent
to the foregoing effect.
(b) Parent and Newco shall have performed and complied with in all
material respects their obligations under this Agreement to be performed or
complied with on or prior to the Effective Time, and the Company shall have
received a certificate of the President or a Vice President of Parent to the
foregoing effect.
(c) There shall have been no Parent Material Adverse Effect since
November 21, 2001.
(d) Parent shall have increased the number of its Board of Directors
to include ▇▇▇▇ ▇. ▇▇▇▇▇ as a Class A Director. Such person so appointed shall
serve until such time as his successor has been duly elected, qualified, or
appointed. Parent's Board of Directors shall nominate ▇▇. ▇▇▇▇▇ for reelection
in 2002 as a Class A Director, and support his reelection at Parent's 2002
annual meeting of shareholders.
7.3 Conditions to Parent's and Newco's Obligations to Effect the Merger.
-------------------------------------------------------------------
The obligations of Parent and Newco to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct (in all material respects, in the case
of representations and warranties not already qualified as to materiality by
their terms) at and as of the Effective Time as though made on and as of such
date (except (i) for changes specifically permitted by this Agreement and (ii)
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date), and Parent shall
have received a certificate of the President or a Vice President of the Company
to the foregoing effect.
(b) The Company shall have performed and complied with in all
material respects its obligations under this Agreement to be performed or
complied with on or prior to the Effective Time, and Parent shall have received
a certificate of the President or a Vice President of the Company to the
foregoing effect.
(c) No Distribution Date (as defined in the Company Rights Agreement)
shall have occurred.
50
(d) All of the Company's Preferred Stock shall have been redeemed or
converted into shares of the Company's Common Stock in accordance with the
provisions of Sections 5, 7 and 11 of such Preferred Stock, and on terms and
conditions reasonably satisfactory to Parent.
(e) The Company shall have delivered to Parent agreements in the form
of Exhibit D ("Company Affiliate Agreements") executed by each person who could
reasonably be deemed to be an "affiliate" of the Company (as that term is used
in Rule 145 of the Securities Act).
(f) There shall have been no Company Material Adverse Effect since
November 21, 2001.
ARTICLE VIII -- TERMINATION; AMENDMENT; WAIVER
8.1 Termination by Mutual Consent. This Agreement may be terminated and
-----------------------------
the Merger may be abandoned at any time prior to the Effective Time, by the
mutual written consent of Parent and the Company.
8.2 Termination by Either Parent or the Company. This Agreement may be
-------------------------------------------
terminated and the Merger may be abandoned by Parent or the Company if (a) any
court of competent jurisdiction in the United States or some other governmental
body or regulatory authority shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable, (b) the Company Shareholder Approval shall not
have been received at the Company Shareholders Meeting duly called and held, (c)
the Parent Shareholder Approval shall not have been received at the Parent
Shareholder Meeting duly called and held, or (d) the Effective Time shall not
have occurred on or before August 31, 2002, unless otherwise extended in
accordance with the terms of this Agreement (the "Termination Date"); provided
that the right to terminate this Agreement pursuant to this Section 8.2(iii)
shall not be available to any party whose failure to fulfill any of its
obligations under this Agreement results in such failure to close.
8.3 Termination by Parent. This Agreement may be terminated by Parent
---------------------
prior to the Effective Time, if (a) the Company shall have failed to perform in
any material respect any of its material obligations under this Agreement to be
performed at or prior to such date of termination, which failure is not cured,
or is incapable of being cured, within 30 days after the receipt by the Company
of written notice of such failure, (b) any representation or warranty of the
Company contained in this Agreement shall not be true and correct as of the
Effective Time (in all material respects in the case of representations and
warranties not already qualified as to materiality by their terms and except for
changes permitted by this Agreement and those representations which address
matters only as of a particular date shall remain true and correct as of such
date and except, in any case, such failures to be true and correct which are not
reasonably likely to have a Company Material Adverse Effect); provided that such
failure is not cured, or is incapable of being cured, within 30 days after the
receipt by the Company of written notice of such failure or (c) the Company
breaches the provisions of Section 6.3 or the Board of Directors of the
51
Company withholds, withdraws or materially modifies or amends its recommendation
of this Agreement or the Merger.
8.4 Termination by the Company. This Agreement may be terminated by the
--------------------------
Company and the Merger may be abandoned through a resolution adopted by its
Board of Directors at any time prior to the Effective Time if (a) Newco or
Parent shall have failed in any material respect any of their material
obligations under this Agreement to be performed at or prior to such date of
termination, which failure to perform is not cured, or is incapable of being
cured, within 30 days after the receipt by Parent of written notice of such
failure; (b) any representation or warranty of Newco or Parent contained in this
Agreement shall not be true and correct as of the Effective Time (in all
material respects, in the case of representations and warranties not already
qualified as to materiality by their terms and except for changes permitted by
this Agreement and those representations which address matters only as of a
particular date shall remain true and correct as of such date and except, in any
case, such failures to be true and correct which are not reasonably likely to
have a Parent Material Adverse Effect); provided that such failure to be true
and correct is not cured, or is incapable of being cured, within 30 days after
receipt by Parent of written notice of such failure; (c) the volume weighted
average of the per share sales price (excluding after-market trading) for Parent
Stock, calculated to two decimal places, for any consecutive ten (10) days
during which trading in Parent Stock occurs after November 21, 2001 is less than
$8.00, provided the Company exercises such termination right within two (2)
business days after the end of the applicable ten trading day period; or (d) the
Board of Directors of the Company withholds, withdraws or materially modifies or
changes its recommendation of this Agreement or the Merger if there exists at
such time a proposal or offer for a Competing Transaction that constitutes a
Superior Competing Transaction; provided that the Company may not terminate this
Agreement pursuant to this Section 8.4 (d) unless and until (i) ten (10)
business days have elapsed following delivery to Parent of written notice of
such determination by the Board of Directors and during such ten (10) business
day period the Company has given Parent reasonable opportunity to discuss with
the Company the Superior Competing Transaction and any proposed amendments to
this Agreement; (ii) at the of end such ten (10) business day period the
Superior Competing Transaction continues to be such (taking into consideration
any modifications to the terms hereof proposed by Parent) and the Board of
Directors confirms its determination, after consultation with its counsel and
its independent financial advisor, that it is a Superior Competing Transaction,
and (iii) it shall be a condition to termination pursuant to this Section 8.4(d)
that the Company shall have made the payment to Parent required by Section
8.5(b).
8.5 Effect of Termination.
---------------------
(a) In the event of the termination and abandonment of this Agreement
pursuant to Article VIII, this Agreement shall forthwith become void and have no
effect, without any liability on the part of any party hereto or its affiliates,
directors, officers or shareholders, other than the provisions of this Section
8.5 and the provisions of Sections 9.1 and 9.2 and the last two sentences of
Section 6.3. Nothing contained in this Section 8.5 (except for Section 8.5(c))
shall relieve any party from liability for any willful breach of any covenant or
other agreement contained in this Agreement.
52
(b) In the event of termination of this Agreement without
consummation of the transactions contemplated hereby:
(i) (A) by Parent pursuant to Section 8.3(c) or
(B) by the Company pursuant to Section 8.4(d), then the
Company shall make payment to Parent by wire transfer of immediately available
funds of a fee in the amount equal to $10,000,000 (the "Termination Fee"), such
amount to constitute liquidated (and exclusive) damages, in the case of clause
(i) (A) above, within two business days following such termination, or, in the
case of clause (i)(B) above, concurrently with such termination;
(ii) by either Parent or the Company pursuant to Section 8.2(b)
if prior to such termination the Company receives a proposal or offer for a
Superior Competing Transaction, then the Company shall make payment to Parent by
wire transfer of immediately available funds in an amount equal to Parent's
documented expenses incurred in connection with the transactions contemplated by
this Agreement ("Parent's Expenses") within five business days following receipt
of such documentation; and further, if, within nine months after the termination
of this Agreement pursuant to this Section 8.5(b)(ii) the Company enters into a
definitive agreement in respect of, or approves or recommends any Competing
Transaction or agrees or resolves to do the foregoing, then the Company shall
make payment to Parent by wire transfer of immediately available funds in an
amount equal to the Termination Fee less Parent's Expenses not later than the
earliest of the date of such definitive agreement, approval, recommendation,
agreement or resolution; or
(iii) by the Company pursuant to Section 8.4(c), then the
Company shall make payment to Parent by wire transfer of immediately available
funds in an amount equal to Parent's Expenses within five (5) business days
following receipt of appropriate documentation.
(c) Notwithstanding anything herein to the contrary, in the event of
any termination of this Agreement by the Company solely under clause (a) or (b)
of Section 8.4 (at a time when there is no other basis for any party to
terminate), then Parent shall pay the Company $10,000,000 within two business
days following such termination, by wire transfer of immediately available
funds, such amount to constitute liquidated (and exclusive) damages for the
breach or breaches giving rise to such termination.
8.6 Extension; Waiver. At any time prior to the Effective Time, each of
-----------------
Parent, Newco and the Company may (a) extend the time for the performance of any
of the obligations or other acts of the other party, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document, certificate or writing delivered pursuant hereto or (c) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of either party hereto to any such extension
or waiver shall be valid only if set forth in any instrument in writing signed
on behalf of such party. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
53
ARTICLE IX -- MISCELLANEOUS AND GENERAL
9.1 Payment of Expenses. Whether or not the Merger shall be consummated,
-------------------
each party hereto shall pay its own expenses incident to preparing for, entering
into and carrying out this Agreement and the consummation of the transactions
contemplated hereby, provided that the Surviving Corporation shall pay, with
funds of the Company and not with funds provided by any of Parent Companies, any
and all property or transfer taxes imposed on the Surviving Corporation.
9.2 Survival of Representations and Warranties; Survival of
-------------------------------------------------------
Confidentiality. The representations and warranties made herein shall not
---------------
survive beyond the earlier of (a) termination of this Agreement or (b) the
Effective Time. This Section 9.2 shall not limit any covenant or agreement of
the parties hereto which by its terms contemplates performance after the
Effective Time. The Confidentiality Agreements shall survive any termination of
this Agreement, and the provisions of such Confidentiality Agreements shall
apply to all information and material delivered by any party hereunder.
9.3 Modification or Amendment. Subject to the applicable provisions of the
-------------------------
PBCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval of this Agreement by the shareholders of the Company, no amendment
shall be made which changes the consideration payable in the Merger or adversely
affects the rights of the Company's shareholders hereunder without the approval
of such shareholders.
9.4 Waiver of Conditions. The conditions to each of the parties'
--------------------
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.5 Counterparts. For the convenience of the parties hereto, this
------------
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
9.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to the principles of conflicts of law thereof.
9.7 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party to the other parties shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile transmission (with a confirming copy sent by overnight courier),
as follows:
(a) If to the Company, to
Conestoga Enterprises, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
54
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
with copies to:
Barley, Snyder, ▇▇▇▇▇ & ▇▇▇▇▇, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esquire
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
and
Barley, Snyder, ▇▇▇▇▇ & ▇▇▇▇▇, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
(b) If to Parent or Newco, to
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman & President
D&E Communications, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
with copies to:
Attention: G. ▇▇▇▇▇▇▇ ▇▇▇▇, Chief Executive Officer
D&E Communications, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
and
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (telephone)
55
(▇▇▇) ▇▇▇-▇▇▇▇ (telecopier)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
9.8 Entire Agreement; Assignment. This Agreement (including the documents
----------------------------
and the instruments referred to herein) and the Confidentiality Agreements (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof, and (b) shall not be assigned by operation of law or otherwise.
9.9 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, other than the right to
receive the consideration payable in the Merger pursuant to Article III hereof
following the Effective Time, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement; provided, however, that the provisions of Section 6.6
shall inure to the benefit of and be enforceable by the Indemnified Parties.
9.10 Certain Definitions.
-------------------
(a) As used herein:
(i) "Company Material Adverse Effect" shall mean any adverse
change in the financial condition, business, assets or results of operations of
the Company or any of its subsidiaries which is material to the Company or any
of its Significant Subsidiaries, taken as a whole, excluding any changes or
effects (A) resulting from general changes in economic, market, regulatory or
political conditions or changes in conditions generally applicable to the
industries in which the Company and its subsidiaries are involved, (B) resulting
from the execution of this Agreement or the transactions contemplated hereby, or
(C) identified in the Company's 2000 or 2001 operating and capital budget, as
amended, and other forecasted financial information, in each case in the form
furnished to Parent in writing prior to the date hereof.
(ii) "Parent Material Adverse Effect" shall mean any adverse
change in the financial condition, business, assets or results of operations of
Parent or any of its Significant Subsidiaries which is material to Parent and
its subsidiaries, taken as a whole, excluding any changes or effects (A)
resulting from general changes in economic, market, regulatory or political
conditions or changes in conditions generally applicable to the industries in
which Parent and its subsidiaries are involved, (B) resulting from the execution
of this Agreement or the transactions contemplated hereby, or (C) identified in
Parent's 2000 or 2001 operating and capital budget, as amended, and other
forecasted financial information, in each case in the form furnished to the
Company in writing prior to the date hereof.
(iii) "Significant Subsidiary" shall have the meaning ascribed
to it under Rule 1-02 of Regulation S-X of the SEC.
56
(iv) "Subsidiary" shall mean, when used with reference to any
entity, any corporation a majority of the outstanding voting securities of which
are owned directly or indirectly by such former entity.
(b) The following capitalized terms defined elsewhere in this
Agreement are defined in the sections indicated below.
Term Section
Aggregate Consideration.................................3.5
Agreement .....................................Introduction
Board of Directors ................................Recitals
Cash Consideration......................................3.1
Cash Consideration Cap..................................3.1
Cash Election...........................................3.2
Cash/Stock Election.....................................3.2
Ceiling Market Price....................................3.1
Certificates............................................3.1
Claim...................................................6.7
Closing.................................................1.4
Closing Market Price....................................3.1
Co-Bank Commitment Letter..........................Recitals
Code...............................................Recitals
Company........................................Introduction
Company Affiliate Agreements............................7.3
Company Affiliates.....................................4.23
Company Beneficiary....................................4.10
Company Benefit Plans..................................4.10
Company Common Stock....................................4.2
Company ERISA Affiliate................................4.10
Company Material Adverse Effect........................9.10
Company Material Contracts.............................4.21
Company Option.........................................3.10
Company Option Plan....................................3.10
Company Preferred Stock.................................4.2
Company Representatives.................................6.3
Company Right...........................................3.1
Company Rights Agreement................................3.1
Company SEC Reports.....................................4.5
Company Shareholder Approval............................4.4
Company Shareholders Meeting...........................6.10
Company Shares..........................................3.1
Competing Transaction...................................6.3
Confidentiality Agreements..............................6.5
Contract Employees......................................6.8
Contracts..............................................4.21
Conversion Ratio........................................3.1
Distribution Date......................................4.14
57
DOL....................................................4.10
Effective Time..........................................1.2
Election................................................3.2
Election Deadline.......................................3.2
Employment Obligations..................................6.8
Environmental Laws.....................................4.11
ERISA..................................................4.10
Exchange Act...........................................3.11
Exchange Agent..........................................3.2
FCC.....................................................4.4
FCC Rules...............................................4.4
Fixed Price Parent Stock Range..........................3.1
Floor Market Price......................................3.1
Form of Election........................................3.2
GAAP....................................................4.5
Governmental Authority.................................4.11
HSR Act.................................................4.4
Indemnified Parties.....................................6.7
IRS....................................................4.10
Joint Proxy Statement...................................6.9
Laws...................................................4.13
Licenses...............................................4.24
Liens..................................................4.26
Maximum Cash Percentage.................................3.3
Merger..................................................1.1
Merger Consideration....................................3.1
Nasdaq..................................................3.1
Newco..........................................Introduction
Newco Common Stock......................................3.4
Non-Electing Company Share..............................3.3
Order..................................................4.13
Outstanding Shares......................................3.1
Parent.........................................Introduction
Parent Affiliates......................................5.19
Parent Beneficiary.....................................5.10
Parent Benefit Plans...................................5.10
Parent Common Stock.....................................5.2
Parent Companies........................................3.1
Parent ERISA Affiliate.................................5.10
Parent Material Adverse Effect.........................9.10
Parent Options.........................................3.10
Parent SEC Reports......................................5.5
Parent's Expenses.......................................8.5
Parent Shareholder Approval.............................5.4
Parent Shareholders Meeting............................6.10
Parent Stock............................................3.1
58
Parent Stock Consideration..............................3.1
Parent Stock Consideration Cap..........................3.1
PBCL...............................................Recitals
PCBs...................................................4.11
Permits................................................4.11
PPUC....................................................4.4
PPUC Rules..............................................4.4
Price Determination Period..............................3.1
Redemption Amount.......................................1.1
Registration Statement..................................6.9
Regulated Materials....................................4.11
Release................................................4.11
Reorganization Assumption..............................6.11
Representatives.........................................6.5
Reverse Merger Circumstance.............................1.1
SEC................................................Recitals
Securities Act.........................................4.25
Shareholders Meetings..................................6.10
Stock Election..........................................3.2
Subsidiary.............................................9.10
Significant Subsidiary.................................9.10
Superior Competing Transaction..........................6.3
Surviving Corporation...................................1.1
Tax Opinion............................................6.11
Tax Return..............................................4.9
Tax, Taxes..............................................4.9
Termination Date........................................8.2
Termination Fee.........................................8.5
Third Party.............................................6.3
Treasury Shares.........................................3.1
Unadjusted Cash Election Amount......................3.3(f)
Unadjusted Stock Election Number.....................3.3(d)
VoiceStream........................................Recitals
VoiceStream Wireless Agreement.....................Recitals
Voting Agreements..................................Recitals
Wireless 8-K.......................................Recitals
9.11 Obligation of Parent. Whenever this Agreement requires Newco to take
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any action, such requirement shall be deemed to include an undertaking on the
part of Parent to cause Newco to take such action and a guarantee of the
performance thereof.
9.12 Validity. The invalidity or unenforceability of any provision of this
--------
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
59
9.13 Captions. The Article, Section and paragraph captions herein are for
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convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
CONESTOGA ENTERPRISES, INC.
By:_______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
and
By:_______________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
D&E COMMUNICATIONS, INC.
By:_______________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman & President
D&E ACQUISITION CORP.
By:_______________________________
Name: G. ▇▇▇▇▇▇▇ ▇▇▇▇
Title: President