EXHIBIT (d)(1)
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TZ HOLDINGS, INC.,
TZ ACQUISITION, INC.
AND
T-NETIX, INC.
Dated as of January 22, 2004
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 22, 2004 (this
"Agreement"), by and among TZ HOLDINGS, INC., a corporation organized under the
laws of Delaware ("Buyer"), TZ ACQUISITION, INC., a corporation organized under
the laws of Delaware and a direct wholly-owned subsidiary of Buyer
("Acquisition"), and T-NETIX, INC., a corporation organized under the laws of
Delaware (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is a publicly traded company whose shares of
common stock, par value $0.01 per share (the "Common Stock"), are currently
traded on the NASDAQ stock market;
WHEREAS, the respective Boards of Directors of Buyer, Acquisition
and the Company have approved the acquisition of the Company by Buyer;
WHEREAS, in contemplation of the acquisition of the Company by
Buyer, it is proposed that Acquisition shall make a tender offer (the "Offer")
to purchase, subject to the terms and conditions of this Agreement, all of the
issued and outstanding shares of Common Stock of the Company (the "Shares") at a
price of $4.60 per Share net to the seller in cash (the "Offer Price");
WHEREAS, Buyer and Acquisition are unwilling to enter into this
Agreement unless (i) the holders of Shares listed on Annex A hereto (the
"Management Stockholders"), concurrently with the execution and delivery of this
Agreement, enter into a tender and voting agreement (the "Shareholders
Agreement") by and among Buyer, Acquisition and the Management Stockholders
providing for, among other things, the agreement of the Management Stockholders
to tender their Shares into the Offer and to vote all Shares owned by such
holders of Shares in favor of the merger of Acquisition with and into the
Company (the "Merger") and (ii) certain employees of the Company, concurrently
with the execution and delivery of this Agreement, each enter into new
employment agreements with Acquisition on customary terms and conditions
reasonably satisfactory to Buyer and Acquisition;
WHEREAS, a special committee of the Board of Directors of the
Company, duly authorized and constituted and comprised solely of directors of
the Company who are not employees of the Company and are not parties to the
Shareholders Agreement (the "Special Committee"), based in part on the written
opinion of Updata Capital, Inc., the financial advisor to the Special Committee
(the "Financial Advisor"), at a meeting thereof duly called and held, (i) has
unanimously determined that the Offer, the Merger and the other transactions
contemplated herein are fair to, and in the best interests of, the Company and
the stockholders of the Company, and has declared that the Offer and the Merger
are advisable, (ii) has unanimously approved the Offer, the Merger, the
Shareholders Agreement and this Agreement, and (iii) has unanimously recommended
to the Board of Directors of the Company to approve and adopt the Offer, the
Merger and this Agreement;
WHEREAS, the Board of Directors of the Company, based in part on the
unanimous recommendation of the Special Committee and the written opinion of the
Financial Advisor, at a meeting thereof duly called and held, (i) has determined
that the Offer, the Merger and the other transactions contemplated herein are
fair to, and in the best interests of, the Company and the stockholders of the
Company, and has declared the Offer and the Merger advisable, (ii) has approved
the Offer, the Merger, the Shareholders Agreement and this Agreement and (iii)
has resolved to recommend that the stockholders of the Company accept the Offer,
tender their Shares pursuant to the Offer and adopt this Agreement; and
WHEREAS, the respective Boards of Directors of Buyer (on its own
behalf as a party to this Agreement and as the sole stockholder of Acquisition)
and Acquisition have each approved and adopted this Agreement in conjunction
with their approval of the principal terms of the Offer and the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties intending to be legally bound, hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When used in this Agreement, the following
terms shall have the respective meanings specified therefor below (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined).
"Acquisition" shall have the meaning set forth in the preamble
hereto.
"Acquisition Proposal" shall have the meaning set forth in Section
6.6(b).
"Affiliate" of any Person shall mean any Person directly or
indirectly controlling, controlled by, or under common control with, such
Person; provided that, for the purposes of this definition, "control" (including
with correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or partnership interests, by contract or otherwise.
"Agreement" shall have the meaning set forth in the preamble hereto.
"Antitrust Authorities" shall mean the Federal Trade Commission, the
Antitrust Division of the United States Department of Justice, the attorneys
general of the several states of the United States and any other Governmental
Entity having jurisdiction with respect to the transactions contemplated hereby
pursuant to applicable Antitrust Laws.
"Antitrust Laws" shall mean the Sherman Act, as amended, the Clayton
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and
all other federal,
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state and foreign Laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade.
"Antitrust Condition" shall have the meaning set forth in Annex B
hereto.
"Authority" means any governmental, regulatory or administrative
body, agency, commission, board, arbitrator or authority, any court or judicial
authority, whether international, national, federal, state or local.
"Business Day" shall mean any day except a Saturday, a Sunday or any
other day on which commercial banks are required or authorized to close in New
York, New York.
"Buyer" shall have the meaning set forth in the preamble hereto.
"Buyer Designee" shall have the meaning set forth in Section 2.3(a).
"Certificate of Merger" shall have the meaning set forth in Section
3.1(a).
"Certificates" shall have the meaning set forth in Section 3.4(a).
"Claim" means any action, suit, claim, lawsuit, demand, inquiry,
hearing, investigation, notice of a violation or noncompliance, litigation,
proceeding, arbitration, appeal or other dispute, whether civil, criminal or
administrative.
"Clayton Act" means the Clayton Antitrust Act of 1914, as amended,
and the rules and regulations promulgated thereunder.
"Closing" shall have the meaning set forth in Section 3.12.
"Closing Date" shall have the meaning set forth in Section 3.12.
"COBRA" shall have the meaning set forth in Section 4.11(b).
"Code" shall mean the United States Internal Revenue Code of 1986,
as amended, and the regulations promulgated and the rulings issued thereunder.
"Commission" shall mean the Securities and Exchange Commission.
"Commission Filings" shall have the meaning set forth in Section
4.5.
"Commitment Letter" shall have the meaning set forth in Section
5.8(a).
"Common Stock" shall have the meaning set forth in the recitals
hereto.
"Company" shall have the meaning set forth in the preamble hereto.
"Company Disclosure Letter" shall have the meaning set forth in
Section 4.1.
"Company Property" shall have the meaning set forth in Section
4.19(b).
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"Company Senior Credit Agreement" shall mean that certain Credit
Agreement, dated as of November 14, 2002, by and among the Company, the Lenders
party thereto and JP Morgan Chase Bank, as Collateral Agent.
"Completed Commission Filings" shall mean the Commission Filings
filed with the Commission prior to the date hereof.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement, dated as of August 11, 2003, by and between the Company and H.I.G.
Capital, LLC.
"Continuing Directors" shall have the meaning set forth in Section
2.3(c).
"Contracts" shall have the meaning set forth in Section 4.17.
"Determination Time" shall have the meaning set forth in Annex B
hereto.
"DGCL" shall have the meaning set forth in Section 2.2(a).
"Dissenting Stockholders" shall have the meaning set forth in
Section 3.3.
"Effective Time" shall have the meaning set forth in Section 3.1(a).
"Employee Benefit Plans" shall have the meaning set forth in Section
4.11(a).
"Environmental Law" shall have the meaning set forth in Section
4.19(b).
"Equity Commitment" shall have the meaning set forth in Section
5.8(b).
"ERISA" shall have the meaning set forth in Section 4.11(a).
"ERISA Affiliates" shall have the meaning set forth in Section
4.11(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Expense Reimbursement" shall have the meaning set forth in Section
9.1(b).
"Federal Trade Commission Act" means the Federal Trade Commission
Act of 1914, as amended, and the rules and regulations promulgated thereunder.
"Financial Advisor" shall have the meaning set forth in the recitals
hereto.
"GAAP" shall mean generally accepted accounting principles of the
United States of America consistently applied, as in effect from time to time.
"Government Contract" means any bid, quotation, proposal, Contract,
work authorization, lease, commitment or sale or purchase order of the Company
that is with the United States government, any Authority or Government Entity,
including, without limitation, all
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Contracts and work authorizations to supply goods and services to the United
States government or any state, local or foreign Authority.
"Governmental Entity" shall mean any domestic or foreign court,
arbitral tribunal, administrative agency or commission or other governmental or
regulatory agency or authority or any securities exchange.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Immigration Laws" shall have the meaning set forth in Section 4.12.
"Indemnified Parties" shall have the meaning set forth in Section
6.10(b).
"Intellectual Property" shall mean any U.S. and non-U.S. (i) patents
and patent applications, (ii) registered and unregistered trademarks, service
marks and other indicia of origin, pending trademark and service mark
registration applications, and intent-to-use registrations or similar
reservations of marks, (iii) registered and unregistered copyrights and mask
works, and applications for registration thereof, (iv) internet domain names,
applications and reservations therefor, uniform resource locators and the
corresponding Internet sites and (v) trade secrets, proprietary information and
other intangible property rights not otherwise listed in (i) through (iv) above,
including, but not limited to, unpatented inventions, invention disclosures,
moral and economic rights of authors and inventors (however denominated),
confidential information, technical data, customer lists, corporate and business
names, trade names, trade dress, brand names, know-how, formulae, methods
(whether or not patentable), designs, processes, procedures, technology, source
codes, object codes, computer software programs, databases, data collections and
other proprietary information or material of any type, and all derivatives,
improvements and refinements thereof, howsoever recorded, or unrecorded.
"Knowledge of the Company" means the actual and constructive
knowledge of each of the Chief Executive Officer of the Company, the Chief
Financial Officer of the Company, the Company's General Counsel, Mr. John Poss
and Mr. Thomas E. Meriam, assuming such Persons act in a prudent business
fashion. Constructive knowledge shall mean the knowledge that a Person knew or
should have known in the proper performance of his or her duties.
"Law" means any law, rule, code, statute, regulation, ordinance,
requirement, policy, rule of common law, order, judgment, decree or other
binding action of or by an Authority and any judicial interpretation thereof.
"Lender" shall have the meaning set forth in Section 5.8(a).
"Letter of Transmittal" shall have the meaning set forth in Section
2.1(f).
"Lien" shall have the meaning set forth in Section 4.3(b).
"Management Stockholders" shall have the meaning set forth in the
recitals hereto.
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"Material Adverse Effect" shall mean, with respect to any Person,
any event, change, occurrence, effect, fact, violation or circumstance having a
material adverse effect on (i) the ability of such Person to perform its
obligations under this Agreement or to consummate the transactions contemplated
hereby on a timely basis or (ii) the business, assets, liabilities, prospects,
results of operations or condition (financial or otherwise) of such Person and
its Subsidiaries, taken as a whole; provided, however, that in no event shall
any change resulting from (A) conditions generally affecting the industry in
which any of the Company or its Subsidiaries operates or (B) changes in general
business, political or economic conditions, in each case in which the Company is
not disproportionately affected, constitute a Material Adverse Effect.
"Material Contracts" shall have the meaning set forth in Section
4.17.
"Merger" shall have the meaning set forth in the recitals hereto.
"Merger Consideration" shall have the meaning set forth in Section
3.2(a).
"Minimum Condition" shall have the meaning set forth in Annex B
hereto.
"Mooreland" means Mooreland Partners LLC.
"NLRB" shall have the meaning set forth in Section 4.12.
"Offer Documents" shall have the meaning set forth in Section
2.1(f).
"Offer Price" shall have the meaning set forth in the recitals
hereto.
"Offer to Purchase" shall have the meaning set forth in Section
2.1(f).
"on a fully-diluted basis" shall have the meaning set forth in Annex
B hereto.
"Option Cash Payment" shall have the meaning set forth in Section
3.7.
"Options" shall have the meaning set forth in Section 3.7.
"Paying Agent" shall have the meaning set forth in Section 3.4(a).
"Payment Fund" shall have the meaning set forth in Section 3.5.
"Permits" shall have the meaning set forth in Section 4.9(b).
"Permitted Investments" shall have the meaning set forth in Section
3.5.
"Permitted Liens" shall mean (i) Liens consisting of zoning
restrictions, easements and other restrictions on the use of, or matters of
record or otherwise affecting the title to, any real property and real property
leases, (ii) Liens reflected in the Completed Commission Filings, (iii) any
interest or title of any lessor in any real or personal property pursuant to a
lease, (iv) liens for non-delinquent taxes and assessments and (v) inchoate
liens of lessors or bailees arising under statute.
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"Person" shall mean and include an individual, a partnership, a
limited liability partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization, a group and a
Governmental Entity.
"Proxy Statement" shall have the meaning set forth in Section
6.4(b).
"Returns" shall have the meaning set forth in Section 4.13(a).
"Schedule 14D-9" shall have the meaning set forth in Section 2.2(e).
"Schedule TO" shall have the meaning set forth in Section 2.1(f).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shareholders Agreement" shall have the meaning set forth in the
recitals hereto.
"Shares" shall have the meaning set forth in the recitals hereto.
"Sherman Act" means the Sherman Antitrust Act of 1890, as amended,
and the rules and regulations promulgated thereunder.
"Special Committee" shall have the meaning set forth in the recitals
hereto.
"Stockholders' Meeting" shall have the meaning set forth in Section
6.4(a).
"Stock Incentive Plans" shall have the meaning set forth in Section
3.7.
"Stock Plans" shall have the meaning set forth in Section 3.7.
"Subsequent Filings" shall have the meaning set forth in Section
4.5(a).
"Subsequent Offer Period" shall have the meaning set forth in
Section 2.1(d).
"Subsidiary" shall mean and include, with respect to any Person, (i)
any partnership of which such Person or any of its Subsidiaries is a general
partner or (ii) any other entity in which such Person or any of its Subsidiaries
owns or has the power to vote fifty percent (50%) or more of the equity
interests in such entity having general voting power to participate in the
election of the governing body of such entity.
"Superior Proposal" shall have the meaning set forth in Section
6.6(b).
"Surviving Corporation" shall have the meaning set forth in Section
3.1(b).
"Taxes" shall have the meaning set forth in Section 4.13(a).
"Tender Offer Conditions" shall have the meaning set forth in
Section 2.1(a).
"Termination Date" shall have the meaning set forth in Section
8.1(b).
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"Termination Fee" shall have the meaning set forth in Section
9.1(b).
"Top-Up Closing" shall have the meaning set forth in Section 2.4(d).
"Top-Up Exercise Event" shall have the meaning set forth in Section
2.4(c).
"Top-Up Option" shall have the meaning set forth in Section 2.4(a).
"Top-Up Termination Date" shall have the meaning set forth in
Section 2.4(b).
"Transaction Financing" shall have the meaning set forth in Section
5.8(a).
"WARN" shall have the meaning set forth in Section 4.12.
"Warrant Cash Payment" shall have the meaning set forth in Section
3.8.
"Warrants" shall have the meaning set forth in Section 3.8.
ARTICLE II
THE OFFER
Section 2.1 The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Article VIII hereof and so long as none
of the events set forth on Annex B hereto (the "Tender Offer Conditions") shall
have occurred and are continuing, as promptly as practicable after the date of
this Agreement (but in any event no later than ten (10) Business Days after the
execution and delivery of this Agreement), Acquisition shall commence (within
the meaning of Rule 14d-2 promulgated under the Exchange Act) the Offer. The
obligation of Acquisition to accept for payment and to pay for any Shares
tendered shall be subject only to the Tender Offer Conditions, any of which may
be waived by Buyer or Acquisition in whole or in part in their sole discretion;
provided, however, that Acquisition shall not waive the Minimum Condition
without the prior consent of the Company. The Tender Offer Conditions are for
the sole benefit of Buyer and Acquisition and may be asserted by Buyer and
Acquisition regardless of the circumstances giving rise to any such Tender Offer
Conditions.
(b) Buyer and Acquisition expressly reserve the right to modify the
terms of the Offer; provided, however, that Acquisition shall not, without the
prior written consent of the Company, (i) reduce the number of Shares to be
purchased pursuant to the Offer, (ii) reduce the Offer Price, (iii) impose any
additional conditions to the Offer, (iv) change the form of consideration
payable in the Offer, (v) make any change to the terms of the Offer that is
materially adverse in any manner to the holders of the Shares, or (vi) extend
the Offer except as set forth in Section 2.1(d).
(c) Assuming prior satisfaction or waiver of the Tender Offer
Conditions, Acquisition shall, as soon as legally permissible after the
commencement of the Offer, accept for payment, in accordance with the terms of
the Offer, the Shares which have been validly tendered and not withdrawn at or
prior to the expiration of the Offer.
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(d) Acquisition shall extend the Offer for one ten (10) Business Day
period if (i) the Minimum Condition is not satisfied and (ii) all other Tender
Offer Conditions are satisfied at the expiration of the initial twenty (20)
Business Day Offer period, and thereafter, if, on any date on which the Offer is
scheduled to expire, any Tender Offer Conditions have not been satisfied or
waived, Acquisition may, without the consent of the Company and in its sole
discretion, extend the Offer from time to time for successive extension periods
for up to ten (10) Business Days on each occasion beyond the then scheduled
expiration date, as Acquisition reasonably determines is necessary to permit
such Tender Offer Condition to be satisfied, until the earlier to occur of (A)
the Termination Date, or (B) the date such conditions are satisfied or earlier
waived and Acquisition becomes obligated to accept for payment and pay for
Shares tendered pursuant to the Offer. Buyer and Acquisition may amend the
Schedule TO to permit the announcement of a subsequent offering period (as such
term is defined in Rule 14d-1 promulgated under the Exchange Act (the
"Subsequent Offer Period")) to the Offer, and Acquisition may include a
Subsequent Offer Period to the Offer for up to a maximum of twenty (20) Business
Days.
(e) Subject to the satisfaction of the Tender Offer Conditions,
Buyer shall provide or cause to be provided to Acquisition, on a timely basis,
all of the funds necessary to purchase any Shares that Acquisition becomes
obligated to purchase pursuant to the Offer.
(f) As soon as reasonably practicable on the date the Offer is
commenced, Buyer and Acquisition shall file with the Commission a Tender Offer
Statement on Schedule TO (together with all amendments and supplements thereto,
the "Schedule TO") with respect to the Offer. The Schedule TO shall contain
(included as an exhibit) or shall incorporate by reference an offer to purchase
(the "Offer to Purchase") and the related letter of transmittal (the "Letter of
Transmittal") and summary advertisement, as well as all other information and
exhibits required by law (which Schedule TO, Offer to Purchase, Letter of
Transmittal, summary advertisement and such other information and exhibits,
together with any supplements or amendments thereto, are referred to herein
collectively as the "Offer Documents"). The Company and its counsel shall be
given reasonable opportunity to review and comment upon the Offer Documents
prior to their filing with the Commission. The Offer Documents (i) shall comply
in all material respects with the provisions of applicable federal securities
laws and (ii) on the date filed with the Commission and the date first
published, sent or given to the holders of the Shares, shall not 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 not
misleading in light of the circumstances under which they are made, except that
no representation or warranty is made by Buyer or Acquisition with respect to
any information supplied in writing by the Company for inclusion in the Offer
Documents. Each of Buyer and Acquisition, on the one hand, and the Company, on
the other hand, agrees to promptly correct any information provided by it for
use in the Offer Documents if and to the extent that the Offer Documents shall
be, or shall have become, false or misleading in any material respect, and Buyer
and Acquisition further agree to take all steps necessary to cause the Schedule
TO, as so corrected, to be filed with the Commission and the other Offer
Documents as so corrected to be disseminated to holders of the Shares, in each
case as and to the extent required by applicable federal securities laws. Each
of Buyer and Acquisition agrees to provide the Company and its counsel with
information with respect to any oral comments and with copies of any written
comments Buyer and Acquisition or their counsel may receive from the Commission
or its staff with respect to the Offer Documents
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promptly after the receipt of such comments and shall provide the Company and
its counsel an opportunity to participate in the response of Buyer or
Acquisition to such comments, including the opportunity to participate with
Buyer and Acquisition or their counsel in any discussions with the Commission or
its staff.
Section 2.2 Company Actions. The Company hereby consents to the
Offer and the Merger and represents and warrants that:
(a) The Company's Board of Directors (at a meeting duly called and
held) by unanimous vote has (i) determined that each of the Offer and the Merger
is fair to, and in the best interest of, the holders of Shares, (ii) declared
that the Offer and the Merger are advisable, (iii) approved the Offer, the
Merger, the Shareholders Agreement and this Agreement in accordance with the
provisions of the Delaware General Corporation Law (the "DGCL"), (iv)
recommended acceptance of the Offer and tender of their Shares in accordance
with the Offer, and (if required by applicable Law) adoption of this Agreement
by the stockholders of the Company, and (v) taken all other action necessary to
render (and has refrained from taking any action which would not render)
inapplicable to the Offer, the Merger, the Shareholders Agreement and this
Agreement and to the transactions contemplated hereby and thereby, Section 203
of the DGCL and other state takeover statutes.
(b) The Financial Advisor has delivered to the Board of Directors of
the Company its opinion that the consideration to be received by the holders of
Shares, other than Buyer and any direct or indirect Subsidiary of Buyer
(including Acquisition), pursuant to the Offer and the Merger is fair to such
holders of Shares from a financial point of view, subject to the assumptions and
qualifications contained in such opinion, and a complete and correct executed
copy of such opinion has been, or promptly upon receipt thereof shall be,
delivered to Buyer.
(c) The Company shall file with the Commission, as soon as
practicable on the date of the commencement of the Offer, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9"), containing the
recommendations referred to in clause (a)(iv) of this Section 2.2, and shall
disseminate the Schedule 14D-9 as required by Rule 14d-9 under the Exchange Act.
Buyer and Acquisition and their counsel shall be given reasonable opportunity to
review and comment upon the Schedule 14D-9 prior to its filing with the
Commission. The Schedule 14D-9 shall comply in all material respects with the
provisions of applicable federal securities laws on the date filed with the
Commission and on the date first published, sent or given to the holders of
Shares shall not 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 not misleading in light of the circumstances under
which they are made, except that no representation or warranty is made by the
Company with respect to information supplied by Buyer or Acquisition in writing
for inclusion in the Schedule 14D-9. The Company, on the one hand, and each of
Buyer and Acquisition, on the other hand, agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that the Schedule 14D-9 shall be, or shall have become, false or misleading in
any material respect and the Company further agrees to take all steps necessary
to cause the Schedule 14D-9, as so corrected, to be filed with the Commission
and to be disseminated to holders of Shares, in each case as and to the extent
required by
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applicable federal securities laws. The Company agrees to provide Buyer and its
counsel with information with respect to any oral comments and with copies of
any written comments the Company or its counsel may receive from the Commission
or its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments and shall provide Buyer and its counsel an opportunity to
participate in the response of the Company to such comments, including by
participating with the Company and its counsel in any discussions with the
Commission or its staff.
(d) In connection with the Offer, the Company shall promptly furnish
Acquisition with mailing labels, security position listings and any available
listing or computer list containing, as of the most recent practicable date, the
names and addresses of the record holders of Shares and shall furnish
Acquisition with such additional information (including, but not limited to,
updated lists of holders of Shares and their addresses, mailing labels and lists
of security positions) and such other assistance as Acquisition or its agents
may reasonably request in communicating the Offer to the holders of Shares.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Acquisition shall hold in confidence the information
contained in any such labels, listings and files, shall use such information
only in connection with the Offer and the Merger and, if this Agreement is
terminated, shall deliver to the Company all copies of such information in its
possession.
(e) The Company represents and warrants that it has been advised
that each of its directors and executive officers intends to tender pursuant to
the Offer all Shares owned of record and beneficially by him or her except to
the extent such tender would violate applicable securities laws.
Section 2.3 Composition of the Board of Directors. (a) Promptly upon
the acceptance for payment of Shares equal to at least a majority of the
outstanding shares of Common Stock pursuant to the terms of the Offer,
Acquisition shall be entitled to designate up to such number of directors
("Buyer Designees") on the Board of Directors of the Company, rounded up to the
next whole number, as shall give Acquisition, subject to compliance with Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, representation
on the Board of Directors of the Company equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors of the Company (giving effect to the directors elected pursuant to
this sentence) multiplied by a fraction, the numerator of which shall be the
number of Shares beneficially owned by Acquisition and Buyer and the denominator
of which shall be the number of Shares then issued and outstanding, and the
Company and its Board of Directors shall, at such time, take any and all such
action necessary to cause Buyer Designees to be appointed to the Board of
Directors of the Company in such class of directors (if any) as shall ensure the
longest possible term for such Buyer Designees (including using commercially
reasonable efforts to cause relevant directors to resign and/or increasing the
size of the Board of Directors of the Company (subject to the limitations set
forth in the Company's Certificate of Incorporation and the Company's By-laws)).
The Company shall take all action required pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder to effect the election of
such Buyer Designees, including (i) mailing to its stockholders the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder or (ii) including such information in the Schedule 14D-9 filed with
the
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Commission and distributed to the stockholders of the Company, and the Company
agrees to make such mailing so long as Acquisition shall have provided to the
Company, on a timely basis, all information required by Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder with respect to the Buyer
Designees. Buyer and Acquisition shall be solely responsible for any information
with respect to either of them and their nominees, officers, directors and
Affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. At the Effective Time, the Company, if so requested by
Buyer, shall use its commercially reasonable efforts to cause Persons designated
by Buyer to constitute the same percentage of each committee of its Board of
Directors, each Board of Directors of each Subsidiary and each committee of each
such Board of Directors (in each case to the extent of the Company's ability to
elect such Persons).
(b) The provisions of Section 2.3(a) are in addition to, and shall
not limit, any rights which Buyer, Acquisition or any of their respective
Affiliates may have as holders or beneficial owners of Shares as a matter of
applicable law with respect to the election of directors or otherwise.
(c) Notwithstanding the provisions of this Section 2.3, the parties
hereto shall use their respective commercially reasonable efforts to ensure that
at least two (2) of the members of the Board of Directors shall, at all times
prior to the Effective Time, be Persons who are directors of the Company on the
date hereof (the "Continuing Directors"); provided that, if there shall be in
office less than two (2) Continuing Directors, the Board of Directors may cause
the Person designated by the remaining Continuing Director or Continuing
Directors to fill such vacancy, and such Person shall be deemed to be a
Continuing Director for all purposes of this Agreement, or if no Continuing
Directors then remain, the other directors of the Company then in office shall
designate two (2) Persons to fill such vacancies who will not be officers,
employees or Affiliates of the Company or Buyer, and such Persons shall be
deemed to be Continuing Directors for all purposes of this Agreement. Following
the election or appointment of the Buyer Designees pursuant to this Section 2.3
and prior to the Effective Time, any amendment of this Agreement, the Company's
Certificate of Incorporation or the Company's By-laws, any termination of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Buyer and Acquisition or
waiver of any of the Company's rights hereunder, and any other consent or action
by the Company hereunder, shall require the concurrence of a majority of the
Continuing Directors, if there are more than two (2) Continuing Directors, or
the concurrence of one (1) Continuing Director, if there are two (2) Continuing
Directors.
Section 2.4 Top-Up Option. (a) The Company hereby grants to
Acquisition an irrevocable option (the "Top-Up Option"), exercisable only on or
after the Determination Time, to purchase that number of shares of Common Stock
of the Company (the "Top-Up Option Shares") equal to the lowest number of shares
of Common Stock of the Company that, when added to the number of shares of
Common Stock of the Company owned by Acquisition at the time of such exercise,
shall constitute one share more than ninety percent (90%) of the then
outstanding shares of Common Stock of the Company (assuming the issuance of the
Top-Up Option Shares), at a price per share equal to the Offer Price payable in
the form of an unsecured promissory note issued by Acquisition to the Company
with a maturity of one year; provided, however, that in no event shall the
Top-Up Option be exercisable for a number of shares of
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Common Stock of the Company in excess of the Company's then authorized but
unissued shares of Common Stock of the Company (giving effect to such shares of
Common Stock of the Company reserved for issuance pursuant to outstanding
Options and Warrants).
(b) Acquisition may exercise the Top-Up Option, in whole but not in
part, at any one time after the occurrence of a Top-Up Exercise Event and prior
to the Top-Up Termination Date. The "Top-Up Termination Date" will occur upon
the earliest to occur of the following: (i) the Effective Time; (ii) the
termination of this Agreement pursuant to its terms; (iii) ten (10) Business
Days after the occurrence of a Top-Up Exercise Event; or (iv) ten (10) Business
Days after the expiration of any Subsequent Offer Period that has not been
extended.
(c) For purposes of this Agreement, a "Top-Up Exercise Event" shall
occur only if immediately after consummation of the Offer Acquisition
beneficially owns at least eighty percent (80%) of the outstanding shares of
Common Stock of the Company.
(d) In the event Acquisition wishes to exercise the Top-Up Option,
Acquisition shall so notify the Company in writing, and shall set forth in such
notice (i) the number of shares of Common Stock of the Company that are expected
to be owned by Acquisition immediately preceding the purchase of the Top-Up
Option Shares and (ii) the place and time for the closing of the purchase of the
Top-Up Option Shares (the "Top-Up Closing"). The Company shall, as soon as
practicable following receipt of such notice, notify Acquisition in writing of
the number of shares of Common Stock of the Company then outstanding and the
number of Top-Up Option Shares. At the Top-Up Closing, Acquisition shall pay the
Company the aggregate price required to be paid for the Top-Up Option Shares and
the Company shall cause to be issued to Acquisition a certificate representing
the Top-Up Option Shares.
(e) The obligation of the Company to deliver Top-Up Option Shares
upon the exercise of the Top-Up Option is subject to the following conditions:
(i) any applicable waiting period under the HSR Act and regulations analogous to
the HSR Act existing in foreign jurisdictions relating to the issuance of the
Top-Up Option Shares will have expired or been terminated; (ii) no provision of
any applicable Law and no judgment, order, or decree shall prohibit the exercise
of the Top-Up Option or the delivery of the Top-Up Option Shares in respect of
any such exercise; and (iii) Acquisition shall have notified the Company in
writing that it intends to cause the Effective Time to occur no later than one
(1) Business Day after the Top-Up Closing.
(f) Buyer and Acquisition understand that the shares of Common Stock
of the Company that Acquisition may acquire upon exercise of the Top-Up Option
will not be registered under the Securities Act and will be issued in reliance
upon an exemption thereunder for transactions not involving a public
transaction. Acquisition is, or will be upon the purchase of the Top-Up Option
Shares, an Accredited Investor, as defined in Rule 501 of Regulation D
promulgated under the Securities Act. Acquisition agrees that the Top-Up Option
and the Top-Up Option Shares to be acquired upon exercise of the Top-Up Option
are being and will be acquired by Acquisition for the purpose of investment and
not with a view to or for resale in connection with any distribution thereof
within the meaning of the Securities Act.
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(g) Certificates evidencing the Top-Up Option Shares delivered
hereunder may, at the Company's election, contain the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY
NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933 OR ANY EXEMPTION THEREFROM."
ARTICLE III
THE MERGER
Section 3.1 The Merger. (a) Upon the terms and subject to the
conditions of this Agreement, at the Closing or as soon as practicable
thereafter, a certificate of merger or, if applicable, a certificate of
ownership and merger (the "Certificate of Merger") shall be duly executed by
Acquisition and the Company in accordance with the DGCL and shall be filed with
the Secretary of State of Delaware in accordance with the provisions of the
DGCL. The Merger shall become effective upon the filing of the Certificate of
Merger (or at such later time reflected in such Certificate of Merger as shall
be agreed to by Buyer and the Company). The date and time when the Merger shall
become effective is hereinafter referred to as the "Effective Time."
(b) On the terms and subject to the conditions set forth in this
Agreement and in accordance with the DGCL, at the Effective Time, Acquisition
shall be merged with and into the Company, and the separate corporate existence
of Acquisition shall cease, and the Company shall continue as the surviving
corporation under the laws of the State of Delaware (the "Surviving
Corporation").
(c) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259(a) of the DGCL.
Section 3.2 Conversion of Stock. At the Effective Time:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares that are held (i) (A) by any wholly-owned
Subsidiary of the Company or in the treasury of the Company or (B) directly or
indirectly by Buyer or any direct or indirect Subsidiary of Buyer (including
Acquisition), all of which shall cease to be outstanding and be canceled and
none of which shall receive any payment with respect thereto and (ii) by
Dissenting Stockholders) and all rights in respect thereof shall, by virtue of
the Merger and without any action on the part of the holder thereof, forthwith
cease to exist and be converted into and represent the right to receive an
amount in cash, without interest, equal to the Offer Price (the "Merger
Consideration"); and
(b) Each share of common stock, par value $0.01 per share, of
Acquisition then issued and outstanding shall, by virtue of the Merger and
without any action on the part of
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the holder thereof, be converted into one fully paid and nonassessable share of
common stock, par value $0.01 per share, of the Surviving Corporation
Section 3.3 Dissenting Stock. Notwithstanding anything contained in
this Agreement to the contrary but only to the extent required by the DGCL,
Shares that are issued and outstanding immediately prior to the Effective Time
and are held by holders of Shares who comply with all the provisions of the DGCL
concerning the right of such holders to demand appraisal of their Shares in
connection with the Merger (such holders, "Dissenting Stockholders"), shall not
be converted into the right to receive the Merger Consideration, but shall only
become the right to receive such consideration as may be determined to be due
such Dissenting Stockholder pursuant to the law of the State of Delaware;
provided, however, that if any Dissenting Stockholder who demands appraisal of
such holder's Shares under the DGCL shall effectively withdraw or lose (through
failure to perfect or otherwise) his or her right to appraisal, then as of the
Effective Time, or the occurrence of such event, whichever occurs later, such
holder's Shares shall thereupon be deemed to have been converted as of the
Effective Time into the right to receive the Merger Consideration, without
interest thereon, and such holder shall no longer be a Dissenting Stockholder.
The Company shall give Buyer (a) prompt notice of any written demands for
appraisal, withdrawals of demands for appraisal and any other related
instruments received by the Company after the date hereof and (b) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal. The Company shall not voluntarily make any payment with respect
to any demands for appraisal and shall not, except with the prior written
consent of Buyer, settle or offer to settle any demand.
Section 3.4 Surrender of Certificates. (a) Prior to the Effective
Time, Buyer shall designate a bank or trust company located in the United States
and reasonably acceptable to the Company to act as paying agent (the "Paying
Agent") to receive funds in trust in order to make the payments contemplated by
Section 3.2(a). As soon as practicable after the Effective Time, Buyer shall
cause the Paying Agent to mail and/or make available to each record holder of a
certificate theretofore evidencing shares of Common Stock (other than those that
are held (i) by any wholly-owned Subsidiary of the Company or in the treasury of
the Company or (ii) directly or indirectly by Buyer or any direct or indirect
Subsidiary of Buyer (including Acquisition)) (the "Certificates") a notice and
letter of transmittal in customary form advising such record holder of the
effectiveness of the Merger and the procedure for surrendering to the Paying
Agent such Certificate or Certificates which immediately prior to the Effective
Time represented outstanding Common Stock in exchange for the Merger
Consideration deliverable in respect thereof pursuant to this Article III. Upon
the surrender for cancellation to the Paying Agent of such Certificates,
together with a letter of transmittal, duly executed and completed in accordance
with the instructions thereon, and any other items specified by the letter of
transmittal, the Paying Agent shall promptly pay to the Person entitled thereto
the product of the Merger Consideration and the number of shares of Common Stock
represented by such Certificates. Until so surrendered, each Certificate shall
be deemed, for all corporate purposes, to evidence only the right to receive
upon such surrender the Merger Consideration deliverable in respect thereof to
which such Person is entitled pursuant to this Article III. No interest shall be
paid or accrued in respect of such cash payments.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are
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registered, it shall be a condition to the payment of the Merger Consideration
that the Certificates so surrendered shall be properly endorsed or accompanied
by appropriate stock powers and otherwise in proper form for transfer, and that
the Person requesting such transfer pay to the Paying Agent any transfer or
other taxes payable by reason of the foregoing or establish to the satisfaction
of the Paying Agent that such taxes have been paid or are not required to be
paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Paying Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article III; provided, that the Person to whom the Merger Consideration is
paid shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond in such sum as it may direct or otherwise indemnify the
Surviving Corporation in a manner satisfactory to it against any Claim that may
be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
Section 3.5 Payment. Concurrently with or immediately prior to the
Effective Time, Buyer shall deposit or cause to be deposited in trust with the
Paying Agent cash in United States dollars in an aggregate amount equal to the
product of (a) the number of shares of Common Stock outstanding immediately
prior to the Effective Time (other than shares of Common Stock which are held
(i) by any wholly-owned Subsidiary of the Company or in the treasury of the
Company, (ii) directly or indirectly by Buyer or any direct or indirect
Subsidiary of Buyer (including Acquisition) or (iii) by any Person known at the
time of such deposit to be a Dissenting Stockholder) and (b) the Merger
Consideration (such amount being hereinafter referred to as the "Payment Fund").
The Payment Fund shall be invested by the Paying Agent as directed by
Acquisition (x) in direct obligations of the United States, obligations for
which the full faith and credit of the United States is pledged to provide for
the payment of principal and interest, commercial paper of an issuer organized
under the laws of a state of the United States rated of the highest quality by
Moody's Investors Service, Inc., or Standard & Poor's Ratings Group, or
certificates of deposit, bank repurchase agreements or bankers' acceptances of a
United States commercial bank having at least $1,000,000,000 in assets
(collectively, "Permitted Investments"), or (y) in money market funds which are
invested in Permitted Investments, and any net earnings with respect thereto
shall be paid to the Surviving Corporation as and when requested by the
Surviving Corporation. The Paying Agent shall, pursuant to irrevocable
instructions, make the payments referred to in Section 3.2(a) hereof out of the
Payment Fund. The Payment Fund shall not be used for any other purpose. Promptly
following the date which is one hundred and eighty (180) days after the
Effective Time, the Paying Agent shall return to the Surviving Corporation all
cash, certificates and other instruments in its possession that constitute any
portion of the Payment Fund, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat and
similar laws) receive in exchange therefor the Merger Consideration, without
interest, but shall have no greater rights against the Surviving Corporation
than may be accorded to general creditors of the Surviving Corporation under
applicable law. Notwithstanding the foregoing, neither the Paying Agent nor any
party hereto shall be liable to a holder of shares of Common Stock for any
Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat and similar laws.
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Section 3.6 No Further Rights of Transfers. At and after the
Effective Time, each holder of Common Stock shall cease to have any rights as a
stockholder of the Company, except as otherwise required by applicable law and
except for, in the case of a holder of a Certificate (other than Shares to be
canceled pursuant to Section 3.2(a) hereof or held by Dissenting Stockholders),
the right to surrender his or her Certificate in exchange for payment of the
Merger Consideration or, in the case of a Dissenting Stockholder, to perfect his
or her right to receive payment for his or her Shares pursuant to the laws of
the State of Delaware if such holder has validly perfected and not withdrawn or
otherwise lost his or her right to receive payment for his or her Shares, and no
transfer of shares of Common Stock shall be made on the stock transfer books of
the Surviving Corporation. Certificates presented to the Surviving Corporation
after the Effective Time shall be canceled and exchanged for cash as provided in
this Article III. At the close of business on the day of the Effective Time the
stock ledger of the Company with respect to Common Stock shall be closed.
Section 3.7 Stock Option and Other Plans. Prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate, any committee
thereof) shall use commercially reasonable efforts to obtain all necessary
consents and releases from all of the holders of all the outstanding stock
options and other rights to purchase Common Stock (the "Options") heretofore
granted under any stock option plan of the Company or otherwise (the "Stock
Plans"), to (i) provide for the cancellation, effective at the Effective Time,
subject to the payment provided for in the next sentence being made, of all
Options, (ii) terminate, as of the Effective Time, the Stock Plans and any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any Subsidiary
thereof (collectively with the Stock Plans, referred to as the "Stock Incentive
Plans") and (iii) amend, as of the Effective Time, the provisions of any other
Employee Benefit Plan providing for the issuance, transfer or grant of any
capital stock of the Company or any such Subsidiary, or any interest in respect
of any capital stock of the Company or any such Subsidiary, to provide no
continuing rights to acquire, hold, transfer or grant any capital stock of the
Company or any such Affiliate or any interest in the capital stock of the
Company or any such Affiliate. Immediately prior to the Effective Time, each
Option shall no longer be exercisable for the purchase of shares of Common Stock
but shall entitle each holder thereof, in cancellation and settlement therefor,
to payments by the Company in cash (the "Option Cash Payment"), at the Effective
Time, equal to the product of (x) the total number of shares of Common Stock
subject to such Option, whether or not then vested or exercisable and (y) the
amount by which the Merger Consideration exceeds the exercise price per share of
Common Stock subject to such Option, each such Option Cash Payment to be paid to
each holder of an outstanding Option at the Effective Time. Except as otherwise
contemplated herein, any then outstanding stock appreciation rights or limited
stock appreciation rights, and any other rights or interest in respect of the
capital stock of the Company or any Subsidiary issued by the Company or any
Subsidiary of the Company shall be canceled immediately prior to the Effective
Time without any payment therefor. The Company shall take all steps to ensure
that, immediately prior to the Effective Time, neither it nor any of its
Subsidiaries is or shall be bound by any Options, other options, warrants,
rights or agreements which would entitle any Person, other than Buyer or its
Affiliates, to own any capital stock of the Company or any of its Subsidiaries
or to receive any payment in respect thereof other than pursuant to this
Agreement. Notwithstanding any other provision of this Section 3.7 to the
contrary, payment of the Option Cash Payment may be withheld with respect to any
Option until necessary consents and releases are obtained
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Section 3.8 Warrants. Prior to the Effective Time, the Board of
Directors of the Company (or, if appropriate, any committee thereof) shall use
commercially reasonable efforts to obtain all necessary consents and releases
from all of the holders of warrants to purchase shares of Common Stock (the
"Warrants") to provide for the cancellation, effective at the Effective Time,
subject to the payment provided for in the next sentence being made, of all such
Warrants. Immediately prior to the Effective Time, each outstanding Warrant,
whether or not then vested or exercisable, shall no longer be exercisable for
the purchase of shares of Common Stock but shall entitle each holder thereof, in
cancellation and settlement therefor, to payments by the Company in cash (the
"Warrant Cash Payment"), at the Effective Time, equal to the product of (x) the
total number of shares of Common Stock subject to such Warrant and (y) the
amount by which the Merger Consideration exceeds the exercise price per share of
Common Stock subject to such Warrant, each such Warrant Cash Payment to be paid
to each holder of an outstanding Warrant at the Effective Time. Notwithstanding
any other provision of this Section 3.8 to the contrary, payment of the Warrant
Cash Payment may be withheld with respect to any Warrant until necessary
consents and releases are obtained.
Section 3.9 Certificate of Incorporation of the Surviving
Corporation. The Certificate of Incorporation of Acquisition, as in effect
immediately prior to the Effective Time and as set forth on Schedule 3.9 hereto,
shall be the Certificate of Incorporation of the Surviving Corporation and shall
be amended as of the Effective Time so that Article I of the Certificate of
Incorporation of the Surviving Corporation shall read in its entirety as
follows: "The name of the Corporation is T-NETIX, Inc."
Section 3.10 By-laws of the Surviving Corporation. The By-laws of
Acquisition, as in effect immediately prior to the Effective Time and as set
forth on Schedule 3.10 hereto, shall be the By-laws of the Surviving
Corporation.
Section 3.11 Directors and Officers of the Surviving Corporation. At
the Effective Time, the persons set forth on Schedule 3.11(a) hereto shall be
appointed as the directors of the Surviving Corporation, each of such directors
to hold office, subject to the applicable provisions of the Certificate of
Incorporation and By-laws of the Surviving Corporation, until their respective
successors shall be duly elected or appointed and qualified. At the Effective
Time, the persons set forth on Schedule 3.11(b) shall be appointed as the
officers of the Surviving Corporation, each such person holding the office or
offices set opposite their name on Schedule 3.11(b) hereto, until their
respective successors shall be duly elected or appointed and qualified. Buyer
and Acquisition shall take all actions necessary to appoint such persons as the
directors and officers (as applicable) of the Surviving Corporation as of the
Effective Time.
Section 3.12 Closing. Unless this Agreement shall have been
terminated and the transactions contemplated hereby shall have been abandoned
pursuant to Article VIII, and subject to the satisfaction or waiver of all of
the conditions set forth in Article VII, the closing of the Merger (the
"Closing") shall take place at 10:00 A.M. at the offices of White & Case LLP,
Wachovia Financial Center, 200 South Biscayne Boulevard, Miami, Florida 33131 or
at such other place as the parties hereto shall agree in writing, as soon as
practicable, but in any event within three (3) Business Days after the last of
the conditions set forth in Article VII hereof is satisfied or waived, other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of those conditions, or at such other
date, time or
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place as the parties hereto shall agree in writing. Such date is herein referred
to as the "Closing Date".
Section 3.13 Withholding Rights. Buyer shall be entitled to deduct
and withhold, or cause to be deducted or withheld, from (i) the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
Common Stock or (ii) any Option Cash Payment or Warrant Cash Payment otherwise
payable pursuant to Section 3.6 or Section 3.8, respectively, such amounts as
are required to be deducted and withheld with respect to the making of such
payment under the Code, or any provision of applicable state, local or foreign
tax law. To the extent that amounts are so deducted and withheld, such deducted
and withheld amounts shall be treated for all purposes of this Agreement as
having been paid to such holders in respect of which such deduction and
withholding was made.
Section 3.14 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the constituent corporations in the Merger, or (b) otherwise to carry
out the purposes of this Agreement, the Surviving Corporation and its officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the constituent corporations in the Merger,
all such deeds, bills of sale, assignments and assurances and do, in the name
and on behalf of such constituent corporations, all such other acts and things
necessary, desirable or proper, consistent with the terms of this Agreement, to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of such constituent
corporations and otherwise to carry out the purposes of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer and Acquisition
as follows:
Section 4.1 Due Organization, Good Standing and Corporate Power. (a)
Each of the Company and its Subsidiaries is a corporation duly incorporated (or,
if not a corporation, duly organized), validly existing and in good standing
under the laws of the jurisdiction of its incorporation (or, if not a
corporation, organization) and each such Person has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company and each of its Subsidiaries is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it, or the
nature of the business conducted by it makes such qualification necessary,
except in such jurisdictions where the failure to be so qualified or licensed
and in good standing has not had, does not have, and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. The Company has, prior to the date of this Agreement, made
available to Buyer and Acquisition complete and
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correct copies of the Company's Certificate of Incorporation, as amended, and
the Company's By-laws and the comparable governing documents of each of its
Subsidiaries, in each case as amended and in full force and effect as of the
date of this Agreement. Other than as set forth in Schedule 4.1(a) of the
disclosure letter delivered by the Company to Buyer and Acquisition upon or
prior to entering into this Agreement (the "Company Disclosure Letter"), the
respective Certificates of Incorporation and By-laws or other organizational
documents of the Subsidiaries of the Company do not contain any provision
limiting or otherwise restricting the ability of the Company to control its
Subsidiaries.
(b) Schedule 4.1(b) of the Company Disclosure Letter sets forth a
complete and accurate list of the Subsidiaries and a description of the
Company's direct or indirect equity interest(s) therein. Except for the
Company's interest in the Subsidiaries and other than loans, extensions of
credit or advances constituting trade receivables arising in the ordinary course
of business consistent with past practice, or as set forth in Schedule 4.1(b) of
the Company Disclosure Letter, neither the Company nor any of the Subsidiaries
owns directly or indirectly any interest or investment (whether equity or debt)
in, nor is the Company or any of the Subsidiaries subject to any obligation or
requirement to provide for or to make any investment (whether equity or debt) to
or in, any Person.
Section 4.2 Authorization and Validity of this Agreement. The
Company has the requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and (subject to the
approval of the stockholders of the Company) to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company, and the consummation by it of the transactions contemplated
hereby, have been duly authorized and approved by its Board of Directors, and no
other corporate action on the part of the Company is necessary to authorize the
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby (other than the adoption of
this Agreement by the stockholders of the Company and the filing of appropriate
merger documents as required by the DGCL). This Agreement has been duly executed
and delivered by the Company and, assuming that this Agreement constitutes a
valid and binding obligation of Buyer and Acquisition, constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles.
Section 4.3 Capitalization. (a) The authorized capital stock of the
Company consists of (1) 70,000,000 shares of Common Stock, par value $0.01 per
share, and (2) 10,000,000 shares of preferred stock, par value $0.01 per share.
As of the close of business on the date hereof: (i) with respect to Common
Stock, (A) 15,052,210 shares are issued and outstanding, (B) no shares are
issued and held in the treasury of the Company, (C) 595,924 shares of Common
Stock were reserved for issuance pursuant to the Warrants and (D) 1,656,483
shares of Common Stock were subject to issuance upon exercise of outstanding
Options; and (ii) with respect to preferred stock, (A) no shares are issued and
outstanding and (B) no shares are issued and held in the treasury of the
Company. Schedule 4.3(a) of the Company Disclosure Letter sets forth the
exercise price, grant date, expiration date for and number of shares subject to
all outstanding Options and Warrants. All outstanding shares of capital stock of
the Company
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are duly authorized, validly issued, fully paid and non-assessable, and are not
subject to, nor were issued in violation of, any preemptive rights, purchase
option, call option, right of first refusal, subscription right or any similar
right, and were issued in compliance with applicable securities Laws. All shares
of capital stock of the Company subject to issuance on the terms and conditions
set forth in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and non-assessable, and will not be
subject to, nor issued in violation of, any preemptive rights, purchase option,
call option, right of first refusal, subscription right or any similar right,
and will be issued in compliance with applicable securities Laws. Except as set
forth above or set forth on Schedule 4.3(a) of the Company Disclosure Letter and
except for the transactions contemplated by this Agreement, (i) there are no
shares of capital stock or other securities (voting or nonvoting) of the Company
or any of the Subsidiaries authorized, issued or outstanding, (ii) there are no
outstanding or authorized options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible or exchangeable securities, "phantom"
stock rights, stock appreciation rights, stock-based performance units,
agreements, arrangements, commitments or claims of any character, contingent or
otherwise, relating to the issued or unissued capital stock of the Company or
any of the Subsidiaries or obligating the Company or any of the Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or other equity interests in the Company or any of the
Subsidiaries or securities convertible into or exchangeable for such shares or
equity interests, or obligating the Company or any of the Subsidiaries to grant,
extend or enter into any such option, warrant, call, preemptive right,
subscription or other right, convertible or exchangeable security, agreement,
arrangement, commitment or claim, (iii) there are no outstanding contractual
obligations of the Company or any of the Subsidiaries to repurchase, redeem or
otherwise acquire any Shares or any capital stock of the Company or any
Subsidiary and (iv) neither the Company nor any of the Subsidiaries has
authorized or outstanding bonds, debentures, notes or other indebtedness or
obligations which entitle the holders thereof to vote (or which are convertible
into or exercisable or exchangeable for securities which entitle the holders
thereof to vote) with the stockholders of the Company or such Subsidiary, as the
case may be, on any matter (collectively, "Voting Debt").
(b) Except as set forth on Schedule 4.3(b) of the Company Disclosure
Letter, all of the outstanding shares of capital stock or other equity interests
of each of the Subsidiaries are owned, of record and beneficially, by the
Company, directly or indirectly, and all such shares or ownership interests have
been duly authorized, validly issued, fully paid and non-assessable, and are not
subject to, nor were issued in violation of, any preemptive rights and all such
shares or ownership interests are owned, of record and beneficially, by either
the Company or one or more of the Subsidiaries, in each case free and clear of
all liens, security interests, charges, Claims or encumbrances of any kind or
nature (each, a "Lien"). No shares of capital stock of, or ownership interests
in, any of the Subsidiaries are reserved for issuance.
(c) Except as set forth on Schedule 4.3(c) of the Company Disclosure
Letter, there are no voting trusts, proxies, registration rights agreements, or
other agreements, commitments, arrangements or understandings of any character
by which the Company or any of its Subsidiaries is bound with respect to the
voting of any shares of capital stock or other equity interests of the Company
or any of the Subsidiaries or with respect to the registration of the offering,
sale or delivery of any shares of capital stock or other equity interests of the
Company or any of the Subsidiaries under the Securities Act.
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(d) Except as set forth on Schedule 4.3(d) of the Company Disclosure
Letter, none of the Company or its Subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock or other equity
interests of the Company or any of its Subsidiaries as a result of the
transactions contemplated by this Agreement.
(e) Except as set forth on Schedule 4.3(e) of the Company Disclosure
Letter and except as contemplated by the Company Senior Credit Agreement, there
are no restrictions of any kind which prevent or restrict the payment of
dividends by the Company or any of the Subsidiaries other than those imposed by
laws of general applicability of their respective jurisdictions of organization.
(f) At the close of business on December 31, 2003, the consolidated
long-term debt (including current maturities) of the Company and the
Subsidiaries was $19,598,000.
Section 4.4 Consents and Approvals; No Violations. Assuming (a) the
filings required under the Antitrust Laws are made and the applicable waiting
periods thereunder have been terminated or have expired, (b) the requirements of
the Exchange Act relating to the Offer and the Proxy Statement, if any, are met,
(c) the filing of the Certificate of Merger and other appropriate merger
documents, if any, as required by the DGCL, are made and (d) approval of this
Agreement and the Merger by the stockholders of the Company, if required by the
DGCL, is received, the execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby
shall not: (i) violate or conflict with any provision of the Company's
Certificate of Incorporation or the Company's By-Laws or the comparable
governing documents of any of its Subsidiaries; (ii) violate or conflict with
any Law applicable to the Company or any of its Subsidiaries or by which any of
their respective properties or assets may be bound; (iii) except as set forth on
Schedule 4.4 of the Company Disclosure Letter, require any filing with, or
Permit, consent or approval of, or the giving of any notice to, any Governmental
Entity; or (iv) except as set forth on Schedule 4.4 of the Company Disclosure
Letter, result in a violation or breach of, conflict with, constitute (with or
without due notice or lapse of time or both) a default under (or give rise to
any right of termination, cancellation, payment or acceleration or any right
which becomes effective upon the occurrence of a merger, consolidation, or
change of control under), result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, or give
rise to any obligation, right of termination, cancellation, acceleration or
increase of any obligation or a loss of a material benefit or any right which
becomes effective upon the occurrence of a merger, consolidation or change of
control under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, franchise, Permit, agreement, contract,
arrangement, lease, franchise agreement or other instrument or obligation to
which the Company or any of its Subsidiaries is a party, or by which any such
Person or any of its properties or assets are bound, other than any such
breaches, conflicts, defaults, obligations, rights of termination,
cancellations, accelerations or losses that are immaterial in nature.
Section 4.5 Company Reports and Financial Statements. (a) Since
December 31, 2001, the Company (including any predecessor entity) has filed all
forms, reports, schedules, statements, registration statements and other
documents with the Commission relating to periods commencing on or after such
date required to be filed by it pursuant to the federal securities Laws and the
Commission rules and regulations thereunder (such forms, reports, schedules,
-22-
statements, registration statements and other documents being hereinafter
referred to as the "Commission Filings"), and, as of their respective dates, the
Commission Filings complied in all material respects with all applicable
requirements of the federal securities Laws and the Commission rules and
regulations promulgated thereunder. The Company has, prior to the date of this
Agreement, made available to Buyer true and complete copies of all portions of
any Commission Filings not publicly available. Except to the extent amended or
superseded by a subsequent filing with the Commission made prior to the date
hereof, as of their respective dates (and if so amended or superseded, then on
the date of such filing prior to the date hereof), the Commission Filings
(including, without limitation, any financial statements or schedules included
therein) and any forms, reports, schedules, statements, registration statements,
proxy statements and other documents (including in each case, exhibits,
schedules, amendments or supplements thereto, and any other information
incorporated by reference therein) filed by the Company with the Commission
subsequent to the date hereof (collectively, the "Subsequent Filings") (i) did
not, and in the case of Subsequent Filings will not, contain any untrue
statement of a material fact or omit, or in the case of Subsequent Filings will
not omit, 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 and (ii) complied, and in the case of Subsequent
Filings will comply, in all material respects with the applicable requirements
of the Exchange Act and the Securities Act, as the case may be, and the
applicable rules and regulations of the Commission thereunder. None of the
Subsidiaries is required to file any forms, reports or other documents with the
Commission.
(b) Each of the consolidated financial statements of the Company and
its consolidated Subsidiaries contained in the Commission Filings have been
prepared in accordance with GAAP (except (i) as may be indicated therein or in
the notes or schedules thereto and (ii) in the case of unaudited quarterly
financial statements, as permitted by Form 10-Q of the Commission) and present
fairly the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and changes in cash flows for the periods then ended (subject, in the
case of unaudited quarterly statements, to normal year end audit adjustments,
none of which would be material or recurring). Except as set forth on Schedule
4.5 of the Company Disclosure Letter, the Company has not prepared, or caused to
be prepared, any amendments and/or modifications to any Commission Filings which
have not yet been filed with the Commission but that are required to be filed
with the Commission in accordance with applicable federal securities Laws and
the Commission rules and regulations promulgated thereunder.
Section 4.6 No Undisclosed Liabilities. Neither the Company nor any
of its Subsidiaries has outstanding any material claims, liabilities or
indebtedness, contingent or otherwise, of any kind whatsoever (whether accrued,
absolute, contingent or otherwise, and whether or not required to be reflected
in the Company's financial statements in accordance with GAAP), except (a)
liabilities or obligations under this Agreement or incurred in connection with
the transactions contemplated hereby, (b) as set forth on Schedule 4.6 of the
Company Disclosure Letter, (c) as set forth in the Completed Commission Filings
and (d) for liabilities, immaterial in amount, incurred since the date of the
most recent financial statements included in the Completed Commission Filings in
the ordinary course of business consistent with past practice (none of which was
a breach of Contract, tort or warranty claim).
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Section 4.7 Absence of Certain Changes. Except as set forth on
Schedule 4.7 of the Company Disclosure Letter or the Commission Filings, since
December 31, 2002, (a) there has been no Material Adverse Effect on the Company,
(b) the businesses of the Company and each of its Subsidiaries have been
conducted only in the ordinary course, (c) neither the Company nor any of its
Subsidiaries have increased the compensation of any officer or granted any
general salary or benefits increase to their respective employees, other than in
the ordinary course of business, (d) neither the Company nor any of its
Subsidiaries has taken any action referred to in Section 6.3 hereof except as
permitted thereby, (e) there has been no declaration, setting aside or payment
of any dividend or other distribution with respect to any class of stock or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any stock or other securities of the Company or any of its
Subsidiaries and (f) there has been no material change by the Company in
accounting principles, practices or methods.
Section 4.8 Title to Properties; Encumbrances. Except as set forth
on Schedule 4.8 of the Company Disclosure Letter, the Company and each of its
Subsidiaries has good, valid and marketable title to, or, in the case of leased
properties and assets, valid leasehold interests in, (a) all of its material
tangible properties and assets (real and personal), including all the properties
and assets reflected in the consolidated balance sheets as of December 31, 2002
and September 30, 2003 contained in the Commission Filings, except as indicated
in the notes thereto and except for properties and assets reflected in the
consolidated balance sheets as of December 31, 2002 and September 30, 2003
contained in the Commission Filings, which have been sold or otherwise disposed
of in the ordinary course of business after such dates, and (b) all the tangible
properties and assets purchased by the Company and any of its Subsidiaries since
December 31, 2002, except for such properties and assets which have been sold or
otherwise disposed of in the ordinary course of business, in each case subject
to no Liens other than Permitted Liens.
Section 4.9 Compliance with Laws. Except as set forth (i) on
Schedule 4.9 of the Company Disclosure Letter or (ii) in the Commission Filings,
since January 1, 2000:
(a) The Company and its Subsidiaries have operated in material
compliance with all applicable Laws and have not received written notification
of any asserted present or past failure to so comply; provided, however, that no
representation or warranty is made in this Section 4.9(a) with respect to
Environmental Laws, Tax Laws, labor Laws or Laws relating to Employee Benefit
Plans (including ERISA).
(b) The Company and its Subsidiaries have held all material federal,
state and local and foreign permits, approvals, licenses, authorizations,
certificates, rights, exemptions and orders from Governmental Entities (the
"Permits") that are necessary for the operation of the business of the Company
and its Subsidiaries as now conducted, and there has not occurred any material
default under any such Permit; provided, however, that no representation or
warranty is made in this Section 4.9(b) with respect to Permits required under
Environmental Laws, Tax Laws, labor Laws or Laws relating to Employee Benefit
Plans (including ERISA).
Section 4.10 Litigation. Except as set forth on Schedule 4.10(a) of
the Company Disclosure Letter, since January 1, 2000 there has not been any
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the Knowledge of the
Company any investigation by) any Governmental Entity, pending, or,
-24-
to the Knowledge of the Company, threatened, against the Company or any of its
Subsidiaries, or any of their respective properties or rights, which has had,
has, or could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company. There are no Claims pending or, to the
Knowledge of the Company, threatened, seeking to prevent or challenging the
transactions contemplated by this Agreement. Except as set forth on Schedule
4.10(b) of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is subject to any judgment, order or decree entered in any lawsuit
or proceeding.
Section 4.11 Employee Benefit Plans. (a) Set forth on Schedule
4.11(a) of the Company Disclosure Letter is an accurate and complete list of
each domestic and foreign employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations thereunder ("ERISA"), whether or not subject to ERISA, and
each stock option, stock appreciation right, restricted stock, stock purchase,
stock unit, performance share, incentive, bonus, profit-sharing, savings,
deferred compensation, health, medical, dental, life insurance, disability,
accident, supplemental unemployment or retirement, employment, severance or
salary or benefits continuation, change in control, "parachute payment," or
fringe benefit plan, program, arrangement, agreement or commitment maintained by
the Company or any Affiliate thereof (including, for this purpose and for the
purpose of all of the representations in this Section 4.11, any predecessors to
the Company or its Affiliates and all employers (whether or not incorporated)
that would be treated together with the Company, any such Affiliate and/or the
stockholder as a single employer within the meaning of Section 414 of the Code
("ERISA Affiliates")) or to which the Company or any Affiliate thereof
contributes (or has any obligation to contribute), has any liability or is a
party (collectively, the "Employee Benefit Plans"). Neither the Company nor any
other ERISA Affiliate has at any time sponsored, contributed to, had an
obligation to contribute to or otherwise participated in any "employee benefit
plan," within the meaning of Section 3(3) of ERISA, that is subject to Title IV
or Section 302 of ERISA or Section 412 of the Code, including any "multiemployer
plan," within the meaning of Section 3(37) of ERISA.
(b) Except as set forth in Schedule 4.11(b) of the Company
Disclosure Letter:
(i) each Employee Benefit Plan is in substantial compliance with all
applicable Laws (including, without limitation, ERISA, the Code, and any
foreign tax, labor, securities, data privacy, currency exchange control
and other Laws) and has been administered and operated in all material
respects in accordance with its terms;
(ii) except for any formal written qualification requirement with
respect to which the remedial amendment period set forth in section 401(b)
of the Code, and any regulations, rulings or other IRS releases
thereunder, has not expired, each Employee Benefit Plan that is intended
to be "qualified" within the meaning of Section 401(a) of the Code has
received, on or after December 31, 1993, a favorable determination letter
from the Internal Revenue Service and, to the Knowledge of the Company, no
event has occurred and no condition exists that could reasonably be
expected to result in the revocation of any such determination;
-25-
(iii) no Employee Benefit Plan is a "multiple employer plan" (within
the meaning of the Code or ERISA);
(iv) full payment has been timely made of all amounts that the
Company and/or its Affiliates is required to have paid under applicable
law or under any Employee Benefit Plan or related agreement as of the last
day of the most recent fiscal year of each Employee Benefit Plan ended
prior to the date hereof, and the Company and each such Affiliate have
made adequate provisions in accordance with GAAP in their financial
statements for all obligations and liabilities that have accrued under any
Employee Benefit Plans, but which have not been paid because they are not
yet due under the terms of any such Employee Benefit Plan or any related
agreement or applicable law, and, to the Knowledge of the Company, no
event has occurred or condition exists that would reasonably be expected
to result in a material increase in the level of such amounts paid or
accrued for the most recently ended fiscal year;
(v) neither the Company nor any of its Affiliates has incurred or
expects to incur any material liability (including, without limitation,
additional contributions, fines, taxes or penalties) as a result of a
failure to administer or operate any Employee Benefit Plan that is a
"group health plan" (as such term is defined in Section 607(1) of ERISA or
Section 5000(b)(1) of the Code and in Section 160.103 of the U.S. Code of
Federal Regulations) in compliance with the applicable requirements of
Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code
("COBRA"), and the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996 and the regulations promulgated
thereunder;
(vi) no Employee Benefit Plan provides for post-employment or
retiree health, life insurance or other welfare benefits (except to the
extent required by COBRA);
(vii) neither the Company nor any of its Affiliates has any unfunded
liabilities pursuant to any Employee Benefit Plan which is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) that
is not intended to be qualified under Section 401(a) of the Code;
(viii) neither the Company nor any of its Affiliates, nor any of
their respective directors, officers or employees, nor, to the Knowledge
of the Company, any other "disqualified person" or "party in interest" (as
defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively) has engaged in any transaction, act or omission to act in
connection with any Employee Benefit Plan that could reasonably be
expected to result in the imposition of a material penalty or fine
pursuant to Section 502 of ERISA, damages pursuant to Section 409 of ERISA
or a tax pursuant to Section 4975 of the Code;
(ix) except as set forth and qualified on Schedule 4.11(b)(ix) of
the Company Disclosure Letter, the execution of this Agreement and the
consummation of the transactions contemplated hereby do not constitute a
triggering event under any Employee Benefit Plan, policy, arrangement,
statement, commitment or agreement,
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which (either alone or upon the occurrence of any additional or subsequent
event) shall or may result in any payment, "parachute payment" (as such
term is defined in Section 280G of the Code), severance, bonus, retirement
or job security or similar-type benefit, or increase any benefits or
accelerate the payment or vesting of any benefits to any employee or
former employee or director of the Company or any of its Affiliates;
(x) except as set forth on Schedule 4.11(b)(x) of the Company
Disclosure Letter, no Employee Benefit Plan provides for the payment of
severance, termination, change in control or similar-type payments or
benefits;
(xi) no liability, Claim, audit, examination or administrative
proceeding has been made, commenced or, to the Knowledge of the Company,
threatened with respect to any Employee Benefit Plan (other than routine
claims for benefits payable in the ordinary course) which could result in
a material liability of the Company or any Affiliate thereof; and
(xii) except as required to maintain the tax-qualified status of any
Employee Benefit Plan intended to qualify under Section 401(a) of the
Code, no condition or circumstance exists that would prevent the amendment
or termination of any Employee Benefit Plan.
(c) The Company has delivered or caused to be delivered to Buyer or
its counsel true and complete copies of each Employee Benefit Plan, together
with all amendments thereto, and, to the extent applicable, (i) all current
summary plan descriptions, (ii) the annual report on Internal Revenue Service
Form 5500-series, including any attachments thereto, for each of the last three
plan years, (iii) all minutes with respect to the meetings or each Employee
Benefit Plans' administrative committee and/or plan administration and (iv) the
most recent determination letter.
Section 4.12 Employment Relations and Agreements. Except as set
forth on Schedule 4.12(a) of the Company Disclosure Letter, since January 1,
2000: (a) each of the Company and its Subsidiaries has operated in substantial
compliance with all federal, foreign, state or other applicable Laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and has not and is not engaged in any unfair labor practice as
determined by the National Labor Relations Board ("NLRB"), (b) no material
unfair labor practice charge or complaint against the Company or any of its
Subsidiaries is pending before the NLRB or an equivalent tribunal under
applicable foreign Law, (c) there has been no labor strike, slowdown, stoppage
or material dispute pending or, to the Knowledge of the Company, threatened
against or involving the Company or any of its Subsidiaries, (d) no
representation question exists respecting the employees of the Company or any of
its Subsidiaries, (e) no collective bargaining agreement is currently being
negotiated by the Company or any of its Subsidiaries and neither the Company nor
any of its Subsidiaries is or has been a party to a collective bargaining
agreement, (f) neither the Company nor any of its Subsidiaries is experiencing
or has experienced any material labor difficulty, (g) no grievance or
arbitration proceeding arising out of or under a collective bargaining agreement
is pending and no claim thereunder exists or, to the Knowledge of the Company,
is threatened with respect to
-27-
the Company's or its Subsidiaries' operations, (h) neither the Company nor any
of its Subsidiaries has any Equal Employment Opportunity Commission charges or
other claims of employment discrimination pending or, to the Knowledge of the
Company, currently threatened against the Company or any such Subsidiary, (i) no
wage and hour department investigation has been made of the Company or any of
its Subsidiaries, (j) neither the Company nor any of its Subsidiaries had any
occupational health and safety claims against the Company or any such
Subsidiary, (k) the Company and each of its Subsidiaries has operated in
compliance in all material respects with the terms and provisions of the
Immigration Reform and Control Act of 1986, as amended, and all related
regulations promulgated thereunder (the "Immigration Laws") and (l) there has
been no "mass layoff" or "plant closing" by the Company as defined in the
Federal Workers Adjustment Retraining and Notification Act ("WARN") or state law
equivalent, or any other mass layoff or plant closing that would trigger notice
pursuant to WARN or state law equivalent, within ninety (90) days prior to the
Closing Date. At no time since January 1, 2000 has the Company and its
Subsidiaries been the subject of any inspection or investigation relating to its
compliance with or violation of the Immigration Laws, nor have they been warned,
fined or otherwise penalized by reason of any such failure to comply with the
Immigration Laws, nor is any such proceeding pending or to the Knowledge of the
Company, threatened. Except as set forth on Schedule 4.12(b) of the Company
Disclosure Letter, there currently exist no employment, consulting, severance,
indemnification agreements or deferred compensation agreements between the
Company and any director, officer or employee of the Company or any agreement
that would give any Person the right to receive any payment from the Company as
a result of the Offer or the Merger.
Section 4.13 Taxes. Except as set forth on Schedule 4.13 of the
Company Disclosure Letter:
(a) Tax Returns. The Company and each of its Subsidiaries has timely
filed or caused to be timely filed or shall timely file or cause to be timely
filed with the appropriate taxing authorities all returns, statements, forms and
reports (including elections, declarations, disclosures, schedules, estimates
and information Returns) for Taxes (as hereinafter defined) (the "Returns") that
are required to be filed by, or with respect to, the Company and its
Subsidiaries on or prior to the Closing Date. The Returns have accurately
reflected and shall reflect accurately all liability for Taxes of the Company
and each of its Subsidiaries for the periods covered thereby, except for any
liabilities for Taxes that are (i) de minimis in amount or (ii) being contested
by the Company or its Subsidiaries in good faith. "Taxes" shall mean all taxes,
assessments, charges, duties, fees, levies or other governmental charges
including all United States federal, state, local, foreign and other income,
franchise, profits, gross receipts, capital gains, capital stock, transfer,
property, sales, use, value-added, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, social security, withholding and
other taxes, assessments, charges, duties, fees, levies or other governmental
charges of any kind whatsoever (whether payable directly or by withholding and
whether or not requiring the filing of a Return), all estimated taxes,
deficiency assessments, additions to tax, penalties and interest, and shall
include any liability for such amounts as a result either of being a member of a
combined, consolidated, unitary or affiliated group, or of a contractual
obligation to indemnify any Person or other entity.
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(b) Payment of Taxes. All Taxes and Tax liabilities due by or with
respect to the income, assets or operations of the Company and its Subsidiaries
for all taxable years or periods that end on or prior to the Closing Date and,
with respect to any taxable year or period beginning on or prior to and ending
after the Closing Date, the portion of such taxable year or period ending on and
including the Closing Date, have been timely paid or shall be timely paid in
full on or prior to the Closing Date or accrued and adequately disclosed and
fully provided for on the financial statements of the Company and its
Subsidiaries in accordance with GAAP.
(c) Other Tax Matters. (i) In the past six years, neither the
Company nor any of its Subsidiaries has been the subject of any audit or other
examination of Taxes by the tax authorities of any nation, state or locality and
no such audit or other examination is pending, nor has the Company or any of its
Subsidiaries received any written notices from any taxing authority relating to
any issue that could materially affect the Tax liability of the Company or any
of its Subsidiaries.
(ii) Neither the Company nor any of its Subsidiaries has been
included in any "consolidated," "unitary" or "combined" Return (other than
Returns which include only the Company and any Subsidiaries of the Company)
provided for under the Laws of any jurisdiction or any state or locality with
respect to Taxes, for any taxable period for which the statute of limitations
has not expired.
(iii) All Taxes that the Company or any of its Subsidiaries is (or
was) required by Law to withhold or collect in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder, or other
third party have been duly withheld or collected, and have been timely paid over
to the proper authorities to the extent due and payable.
(iv) There are no tax sharing, allocation, indemnification or
similar agreements or arrangements in effect as between the Company, any
Subsidiary, or any predecessor or Affiliate of any of them and any other party
under which Buyer, the Surviving Corporation, the Company or any of their
respective Subsidiaries could be liable for any Taxes or other claims of any
party.
(v) No indebtedness of the Company or any of its Subsidiaries
consists of "corporate acquisition indebtedness" within the meaning of Section
279 of the Code or bears interest that is otherwise nondeductible pursuant to
Section 163 of the Code.
(vi) Neither the Company nor any of its Subsidiaries has applied
for, been granted, or agreed to any accounting method change for which it shall
be required to take into account any adjustment under Section 481 of the Code or
any similar provision of the Code or the corresponding tax laws of any nation,
state or locality and, to the Knowledge of the Company, neither the IRS nor any
other taxing authority has proposed to require any such adjustment or change in
accounting method, and, to the Knowledge of the Company, no such adjustment
under Section 481 of the Code or the corresponding tax laws of any nation, state
or locality will be required of the Company or its subsidiaries upon the
completion of, or by reason of, the transaction contemplated by this Agreement.
-29-
(vii) Neither the Company nor any of its Subsidiaries, as of the
Closing Date, (w) has entered into an agreement or waiver to extend, has
received a written request to extend or, to the Knowledge of the Company, has
been requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes of the Company or any
of its Subsidiaries that has not expired, (x) is presently contesting the Tax
liability of the Company or any of its Subsidiaries before any Governmental
Entity, (y) has granted any power-of-attorney related to Tax matters to any
Person, or (z) in the past six years, has applied for and/or received a ruling
or determination from a taxing authority regarding a past or prospective
transaction of the Company or any of its Subsidiaries.
(viii) Neither the Company nor any of its Subsidiaries is a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code at any time during the five-year period ending on the date
hereof.
(ix) There are no material security interest on any of the assets
of the Company or any of its Subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Taxes.
(x) Neither the Company nor any of its Subsidiaries is a party to
any agreement that would require the Company or any of its Subsidiaries to make
any payment that would constitute an "excess parachute payment" for purposes of
Sections 280G and 4999 of the Code or that would not be deductible pursuant to
Section 162(m) of the Code.
(xi) No written Claim has ever been made by any taxing authority in
a jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that the Company or any of its Subsidiaries is, or may be, subject to
taxation by that jurisdiction.
(xii) (A) There are no deferred intercompany transactions between
the Company and any of its Subsidiaries or between its Subsidiaries and there is
no excess loss account (within the meaning of Treasury Regulations Section
1.1502-19 with respect to the stock of the Company or any of its Subsidiaries)
that will or may result in the recognition of income upon the consummation of
the transaction contemplated by this Agreement, and (B) there are no other
transactions or facts existing with respect to the Company and/or its
Subsidiaries that by reason of the consummation of the transaction contemplated
by this Agreement will result in the Company and/or its Subsidiaries recognizing
income.
Section 4.14 Intellectual Property. (a) Schedule 4.14(a) of the
Company Disclosure Letter contains a complete list of all patents, patent
applications, trademark and service mark registrations, applications for
trademark and service mark registration, copyright registrations and
applications for registration thereof, owned by the Company or any of its
Subsidiaries. To the extent indicated on such Schedule, the Intellectual
Property listed on Schedule 4.14(a) of the Company Disclosure Letter has been
duly registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Copyright Office, a duly accredited and appropriate
domain name registrar, in the appropriate offices in the various states of the
United States or the appropriate offices of other jurisdictions, and each such
registration, filing and issuance remains in full force and effect.
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(b) Except as set forth on Schedule 4.14(b) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
any license or agreement, whether as licensor, licensee or otherwise, with
respect to any material Intellectual Property. To the extent any Intellectual
Property is used under license in the business of the Company and/or any of its
Subsidiaries, no notice of a default has been sent or received by the Company or
any of its Subsidiaries under any such license which remains uncured, and,
except as set forth on Schedule 4.14(b) of the Company Disclosure Letter, the
execution, delivery or performance of the Company's obligations hereunder shall
not result in such a default under any Intellectual Property license. Each such
license agreement is a legal, valid and binding obligation of the Company and/or
its Subsidiaries and, to the Knowledge of the Company, each of the other parties
thereto and is enforceable in accordance with the terms thereof.
(c) Except for Liens granted in connection with the Company Senior
Credit Agreement and the Company's other lending arrangements disclosed in the
Completed Commission Filings, the Company and/or its Subsidiaries owns the
entire right, title and interest in and to, or is licensed to use, all of the
Intellectual Property used in its business, free and clear of any Liens or other
adverse Claims, without obligation to pay any royalty or any other fees with
respect thereto, except as set forth on Schedule 4.14(c) of the Company
Disclosure Letter. To the Knowledge of the Company, neither the Company's nor
any of its Subsidiaries' use of Intellectual Property infringes or
misappropriates any third party rights. No material Intellectual Property set
forth on Schedule 4.14(a) of the Company Disclosure Letter has been canceled,
abandoned or otherwise terminated, and all renewal and maintenance fees in
respect thereof that have come due have been duly paid. Except as set forth on
Schedule 4.14(c) of the Company Disclosure Letter, there are no actions that
must be taken or payments that must be made with respect to the Intellectual
Property set forth on Schedule 4.14(a) of the Company Disclosure Letter within
six (6) months of the Closing Date that, if not taken, will adversely affect any
Intellectual Property owned by the Company or any of its Subsidiaries. Except as
set forth on Schedule 4.14(c) of the Company Disclosure Letter, the Company and
its Subsidiaries have the exclusive right to file, prosecute and maintain all
applications and registrations with respect to the Intellectual Property that is
owned by the Company or any of its Subsidiaries.
(d) Except as set forth on Schedule 4.14(d) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries has received
any written notice or Claim from any Person challenging the right of the Company
or any of its Subsidiaries to use any Intellectual Property.
(e) Except as set forth on Schedule 4.14(e) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries has made any
Claim in writing of a violation, infringement, misuse or misappropriation by any
Person of its rights to, or in connection with, any Intellectual Property which
Claim is still pending.
(f) Except as set forth on Schedule 4.14(f) of the Company
Disclosure Letter, to the Knowledge of the Company, there is no pending or
threatened proceedings, litigation or other adverse Claims by any Person of a
violation, infringement, misuse or misappropriation by the Company or any of its
Subsidiaries of any Intellectual Property owned by any Person, or challenging
the validity, enforceability, ownership or patentability of any Intellectual
Property owned or claimed to be owned by the Company or any of its Subsidiaries.
To the Knowledge of
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the Company, neither the Company nor any of its Subsidiaries knows of any valid
basis for Claims challenging the validity, enforceability, ownership or, with
respect to patents and patent applications that have been filed, patentability
of any Intellectual Property owned or claimed to be owned by the Company or any
of its Subsidiaries.
(g) Except as set forth on Schedule 4.14(g) of the Company
Disclosure Letter, there are no interferences, oppositions, or other contested
proceedings, either pending or, to the Knowledge of the Company, threatened, in
the United States Copyright Office, the United States Patent And Trademark
Office, or any Governmental Entity relating to any pending application with
respect to any Intellectual Property owned by the Company.
(h) The Company and each of its Subsidiaries have taken all
reasonable steps to protect and preserve the confidentiality of all trade
secrets and confidential proprietary information used or held for use in their
respective businesses and that the Company desires to maintain as a trade
secret.
(i) With respect to the action entitled T-NETIX, Inc. v. Global
Tel*Link Corporation No. 2-01 CV 189 DF: (A) the settlement of such action was
and is in full compliance with all Antitrust Laws; (B) except as set forth on
Schedule 4.14(i) of the Company Disclosure Letter, all prior art of which the
Company or any Subsidiary is aware which pertains to the validity of the patents
asserted in such action, including without limitation, any prior art identified
in any non-infringement or invalidity opinions directly or indirectly obtained
by the Company or any Subsidiary were either cited in the course of prosecution
of the patents or in the submissions made by Global Tel*Link Corporation in such
action; and (C) no amounts are owed to any third party with respect to the
proceeds of the settlement of such action under any agreement relating to
Intellectual Property.
Section 4.15 Proxy Statement; Offer Documents and Schedule 14D-9.
Neither the Schedule 14D-9 nor any of the information supplied or to be supplied
by the Company in writing for inclusion in the Offer Documents shall, at the
times the Schedule 14D-9, the Offer Documents or any amendments or supplements
thereto are filed with the Commission or are first published, sent or given to
stockholders of the Company, as the case may be, 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, in the light of the circumstances
under which they were made, not misleading. In the event a Stockholders' Meeting
is held, the Proxy Statement to be sent to the stockholders of the Company in
connection with such Stockholders' Meeting will not, on the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company or at the time of the Stockholders' 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 were made, not
misleading. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information supplied or to be supplied by Buyer,
Acquisition or any of their respective representatives in writing for inclusion
in the foregoing documents. The Schedule 14D-9 and the Proxy Statement, if
applicable, shall comply in all material respects with the requirements of the
Exchange Act.
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Section 4.16 Broker's or Finder's Fee. Except for the fees of
Mooreland and the Financial Advisor (whose fees and expenses shall be paid by
the Company in accordance with the Company's agreement with such firm, a true
and correct copy of which has been previously delivered to Buyer by the
Company), no agent, broker, Person or firm (other than legal counsel to the
Company, legal counsel to the Special Committee and legal counsel to the
Management Stockholders) acting on behalf of the Company is, or shall be,
entitled to any fee, commission or broker's or finder's fees in connection with
this Agreement or any of the transactions contemplated hereby from any of the
parties hereto or from any Affiliate of any of the parties hereto. The fees and
expenses of Mooreland and the Financial Advisor referred to above shall not be
in excess of $1,145,000.
Section 4.17 Certain Contracts and Arrangements. As of the date
hereof, except as set forth on Schedule 4.17(a) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or bound
by any contracts, agreements, instruments or understandings ("Contracts") of the
following nature (collectively, the "Material Contracts"):
(a) Contracts (other than those filed as exhibits to the Completed
Commission Filings) with any current or former employee, director or officer of
the Company or any of its Subsidiaries (other than any such officer who receives
or received (during his or her last year of employment with the Company or any
of its Subsidiaries) less than $75,000 in total annual cash compensation from
the Company or any of its Subsidiaries);
(b) Contracts other than contracts entered into in the ordinary
course of business (i) for the sale of any assets of the Company or any of its
Subsidiaries involving aggregate consideration of $50,000 or more, or (ii) for
the grant to any Person of any preferential rights to purchase any such amount
of its assets;
(c) Contracts which materially restrict the Company or any of its
Affiliates from competing in any material line of business or with any Person in
any geographical area, or which materially restrict any other Person from
competing with the Company or any of its Affiliates in any material line of
business or in any geographical area;
(d) Contracts which are material to the Company and which restrict
the Company or any of its Subsidiaries from disclosing any information
concerning or obtained from any other Person, or which restrict any other Person
from disclosing any information concerning or obtained from the Company or any
of its Subsidiaries (other than contracts entered into in the ordinary course of
business consistent with past practice);
(e) any confidentiality, nondisclosure or similar Contracts which
contain any "standstill" provisions or similar restrictions on Acquisition
Proposals by any third party (other than Buyer or its Affiliates);
(f) Contracts involving (i) the acquisition, merger or purchase of
all or substantially all of the assets or business of a third party, involving
aggregate consideration of $50,000 or more, or (ii) the purchase, lease or sale
of assets, or a series of purchases, leases or sales of assets, involving
aggregate consideration of $50,000 or more;
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(g) Contracts with any Affiliate that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act;
(h) Contracts which are material to the Company and contain a
"change in control" or similar provision;
(i) Contracts, including mortgages or other grants of security
interests, guarantees and notes, relating to the borrowing of money in an
aggregate amount in excess of $50,000 in the aggregate;
(j) Contracts to be performed relating to capital expenditures with
a value in excess of $600,000 in any calendar year, or in the aggregate capital
expenditures with a value in excess of $1,800,000;
(k) Contracts which contain restrictions with respect to the payment
of dividends or any other distribution in respect of its capital stock (other
than the Company Senior Credit Agreement);
(l) Contracts containing covenants purporting to restrict the
Company or any of its Affiliates from hiring or terminating any individual or
group of individuals;
(m) Contracts relating to any material joint venture, partnership,
strategic alliance or similar arrangement; and
(n) Contracts existing on the date hereof involving revenues or
payments in excess of $500,000 per year.
Except as set forth on Schedule 4.17(b) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is in material breach or
default under any Material Contract nor, to the Knowledge of the Company, is any
other party to any Material Contract in breach or default thereunder.
Section 4.18 Government Contracts. Except as set forth on Schedule
4.18 of the Company Disclosure Letter hereto:
(a) Except for Contracts containing customary "termination for
convenience" provisions, the Company is not a party to any Contract or subject
to any Law that would result in the termination of any Government Contract or
that would impose any limitation on the Company's ability to perform a
Government Contract or to continue its business as presently conducted and
proposed to be conducted.
(b) No payment has been made by the Company or by any Person
authorized to act on its behalf, to any Person in connection with any Government
Contract of the Company, in violation of applicable United States or foreign
procurement Laws, including without limitation any criminal or civil Laws
relating to bribes or gratuities, or in violation of the Foreign Corrupt
Practices Act.
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(c) With respect to each Government Contract to which the Company is
a party: (i) all representations and certifications executed, acknowledged or
set forth in or pertaining to such Government Contract were complete and correct
as of their effective date, and the Company has complied with all such
representations and certifications; (ii) neither the United States government
nor any prime contractor, subcontractor or other Person has notified the
Company, either orally or in writing, that the Company has breached or violated
any Law, or any certificate, representation, clause, provision or requirement
pertaining to such Government Contract; and (iii) no termination for convenience
or termination for default has occurred within the last five (5) years and no
cure notice or show cause notice is currently in effect pertaining to such
Government Contract.
(d) (i) Neither the Company nor any of its directors, officers,
employees or stockholders is (or during the last five (5) years has been) under
administrative, civil or criminal investigation or indictment by any
Governmental Entity with respect to any alleged irregularity, misstatement or
omission arising under or relating to any Government Contract; and (ii) during
the last five (5) years, the Company has not conducted or initiated any internal
investigation or made a voluntary disclosure to the United States government
related to the same.
(e) There exist (i) no outstanding Claims against the Company,
either by the United States government or by any prime contractor,
subcontractor, vendor or other third party, arising under or relating to any
Government Contract; and (ii) no disputes between the Company and the United
States government under the Contract Disputes Act or any other federal Law or
between the Company and any prime contractor, subcontractor or vendor arising
under or relating to any Government Contract.
(f) Neither the Company nor any of its directors, officers,
employees or stockholders is (or during the last five (5) years has been)
suspended or debarred from doing business with the United States government or
other Authority or is (or during such period was) the subject to a finding of
nonresponsibility or ineligibility for United States government contracting.
Section 4.19 Environmental Laws and Regulations. (a) Except as set
forth on Schedule 4.19 of the Company Disclosure Letter, (i) the Company and
each of its Subsidiaries have operated in material compliance with all
applicable Environmental Laws, and have obtained, and have been in material
compliance with, all Permits required of them under applicable Environmental
Laws, (ii) there are no Claims by any Governmental Entity or other Person or
entity pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries under any Environmental Law, (iii) no present
Company Property is subject to any Lien, or to any restriction on its ownership,
use, occupancy or transferability, under any Environmental Law and (iv) there
are no facts, circumstances or conditions (including the disposal of any wastes,
hazardous substances or other materials, the existence of any contractual
obligations, or any other matters in respect of the past or present business or
operations of the Company or any of its Subsidiaries, or any predecessor of the
Company or any of its Subsidiaries) that could reasonably be expected to give
rise to any Claim against the Company or any of its Subsidiaries, or to any
material liability on the part of the Company or any of its Subsidiaries, under
any Environmental Law.
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(b) For purposes of this Agreement, the following terms shall have
the following meanings: (i) "Environmental Law" shall mean any Law, Order or
other requirement of law, including any principle of common law, relating to the
protection of human health or the environment, or to the manufacture, use,
transport, treatment, storage, disposal, release or threatened release of
petroleum products, asbestos, urea formaldehyde insulation, polychlorinated
biphenyls or any substance listed, classified or regulated as hazardous or
toxic, or any similar term, under such Environmental Law; and (ii) "Company
Property" shall mean any real property and improvements owned (directly,
indirectly, or beneficially), leased, used, operated or occupied by the Company
or its Subsidiaries.
Section 4.20 State Takeover Statutes. The Board of Directors of the
Company has approved the Offer, the Merger, the Shareholders Agreement and this
Agreement, and such approval is sufficient to render the restrictions contained
in Section 203(a) of the DGCL inapplicable to the Offer, the Merger, the
Shareholders Agreement, this Agreement and the other transactions contemplated
therein and herein. Except for Section 203 of the DGCL (which has been rendered
inapplicable), no other "fair price", "moratorium", "control share acquisition",
"business combination" or other state takeover statute or similar statute or
regulation of any state is applicable to the Offer, the Merger, the Shareholders
Agreement or this Agreement (including all of the transactions contemplated
thereby or hereby).
Section 4.21 Voting Requirements. In the event that Section 253 of
the DGCL is unavailable to effectuate the Merger, the affirmative vote of the
holders of at least a majority of the outstanding shares of Common Stock (voting
as one class, with each share of Common Stock having one (1) vote), entitled to
be cast in adopting this Agreement, is the only vote of the holders of any class
or series of the Company's capital stock necessary to adopt this Agreement and
approve the transactions contemplated by this Agreement.
Section 4.22 Opinion of Financial Advisor. The Company has received
the opinion of the Financial Advisor, a complete and correct signed copy of
which has been, or promptly upon receipt thereof shall be, delivered to Buyer to
the effect that, as of the date of this Agreement, the consideration to be
received in the Offer and the Merger by the holders of Shares, other than Buyer
and Acquisition, is fair to such holders from a financial point of view, subject
to the qualifications and assumptions contained therein, and such opinion has
not been withdrawn or modified. The Company has been authorized by the Financial
Advisor to permit the inclusion of such fairness opinion (or a reference
thereto) in the Proxy Statement.
Section 4.23 Insurance. The Company has made available to Buyer and
Acquisition, prior to the date of this Agreement, copies of all insurance
policies which are owned by the Company or its Subsidiaries or which name the
Company or any of its Subsidiaries as an insured, additional insured, or loss
payee, including those which pertain to the Company's or any of its
Subsidiaries' assets, employees or operations. All such insurance policies are
in full force and effect, are valid and enforceable, and all premiums due
thereunder have been paid and cover against the risks of the nature normally
insured against by entities in the same or similar lines of business, in
coverage amounts typically and reasonably carried by such entities. Neither the
Company nor any of its Subsidiaries has received any written notice of
cancellation or modification in coverage amounts of any such insurance policies.
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Section 4.24 Affiliate Transactions. Except as set forth on Schedule
4.24 of the Company Disclosure Letter or the Completed Commission Filings, (a)
there are no pending transactions between the Company or any of the
Subsidiaries, on the one hand, and any officer, director or holder of in excess
of five percent (5%) of capital stock of the Company, or any affiliate of any of
them and (b) no officer, director or holder of in excess of five percent (5%) of
capital stock of the Company has any material interest in (i) any assets used or
held for use in the business of the Company or any of the Subsidiaries or (ii)
any creditor, supplier or franchisee of the Company or any or the Subsidiaries.
Section 4.25 Cumulative Breach. The breaches, if any, of the
representations and warranties made by the Company in this Agreement that would
occur if all references in such representations and warranties to phrases
concerning materiality, including references to the qualifications "material" or
"Material Adverse Effect" were deleted, in the aggregate, have not had, do not
have, and could not reasonably be expected to have, a Material Adverse Effect on
the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION
Each of Buyer and Acquisition hereby represents and warrants to the
Company as follows:
Section 5.1 Due Organization, Good Standing and Corporate Power.
Buyer and Acquisition are each a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and have all
requisite corporate power and authority to own, lease and operate their
respective properties and to carry on their respective business as now being
conducted.
Section 5.2 Authorization and Validity of Agreement. Each of Buyer
and Acquisition has the requisite corporate power and authority to execute and
deliver this Agreement and the Shareholders Agreement, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Shareholders Agreement by Buyer and Acquisition and the
consummation by each of them of the transactions contemplated hereby and thereby
have been duly authorized by the Board of Directors of each of Buyer and
Acquisition. No other corporate action on the part of either Buyer or
Acquisition is necessary to authorize the execution, delivery and performance of
this Agreement or the Shareholders Agreement by each of Buyer and Acquisition
and the consummation of the transactions contemplated hereby (other than the
filing of the appropriate merger documents as required by the DGCL). This
Agreement and the Shareholders Agreement have been duly executed and delivered
by each of Buyer and Acquisition and, assuming that this Agreement constitutes a
valid and binding obligation of the Company and that the Shareholders Agreement
constitutes a valid and binding obligation of the Management Stockholders,
constitute valid and binding obligations of each of Buyer and Acquisition,
enforceable against each of Buyer and Acquisition in accordance with their
terms, except that their enforceability may be subject to applicable bankruptcy,
insolvency,
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reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally, and by general equitable principles.
Section 5.3 Consents and Approvals; No Violations. Assuming (i) the
filings required under the Antitrust Laws are made and the applicable waiting
periods thereunder have been terminated or have expired, (ii) the requirements
of the Exchange Act relating to the Offer and the Proxy Statement, if any, are
met, (iii) the filing of the Certificate of Merger and other appropriate merger
documents, if any, as required by the DGCL, are made, and (iv) approval of the
Merger and this Agreement by the stockholders of the Company, if required by the
DGCL, is received, the execution and delivery of this Agreement and the
Shareholders Agreement by Buyer and Acquisition and the consummation by Buyer
and Acquisition of the transactions contemplated hereby and thereby shall not
(A) violate or conflict with any provision of the Certificate of Incorporation
or By-laws of Buyer or Acquisition, (B) violate or conflict with any Law
applicable to Buyer or Acquisition or by which either of their respective
properties or assets may be bound, (C) require any filing with, consent or
approval of, Permit from, or the giving of any notice to, any Governmental
Entity or (D) result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a default under (or give
rise to any right of termination, cancellation or acceleration or any right
which becomes effective upon the occurrence of a merger, consolidation or change
of control under), or result in the creation of any Lien upon any of the
properties or assets of Buyer or Acquisition under, or give rise to any
obligation, right of termination, cancellation, acceleration or increase of any
obligation or a loss of a material benefit or any right which becomes effective
upon the occurrence of a merger, consolidation or change of control under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, Permit, agreement, contract, arrangement, lease or other
instrument or obligation to which Buyer or Acquisition is a party, or by which
any such Person or any of its properties or assets may be bound.
Section 5.4 Offer Documents, Schedule 14D-9 and Proxy Statement.
None of the information supplied or to be supplied by Buyer or Acquisition for
inclusion in the Offer Documents shall, at the time the Offer Documents are
filed with the Commission or are first published, sent or given to stockholders
of the Company, as the case may be, 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 made therein, in the light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by Buyer and Acquisition in writing for
inclusion in the Proxy Statement and the Schedule 14D-9 (or any amendment or
supplement thereto) shall, on the date mailed to stockholders of the Company or
at the time of the Stockholders' 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 were made, not misleading. Notwithstanding the
foregoing, Buyer and Acquisition make no representation or warranty with respect
to any information supplied or to be supplied by the Company for inclusion in
any of the foregoing documents or the Offer Documents. The Offer Documents shall
comply in all material respects with the requirements of the Exchange Act.
Section 5.5 Proxy Statement. None of the information supplied or to
be supplied by Buyer or Acquisition in writing for inclusion in the Proxy
Statement (or any amendment or supplement thereto) shall, on the date mailed to
stockholders of the Company or
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at the time of the Stockholders' 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 were made, not misleading. Notwithstanding the
foregoing, Buyer and Acquisition make no representation or warranty with respect
to any information supplied or to be supplied by the Company for inclusion in
the Proxy Statement. The Proxy Statement shall comply in all material respects
with the requirements of the Exchange Act.
Section 5.6 Broker's or Finder's Fee. Except for H.I.G. Capital, LLC
and Crest Advisors, LLC (whose fees and expenses shall not be payable by the
stockholders of the Company), no agent, broker, Person or firm acting on behalf
of Buyer or Acquisition is or shall be entitled to any fee, commission or
broker's or finder's fees in connection with this Agreement or any of the
transactions contemplated hereby from any of the parties hereto, or from any
Affiliate of the parties hereto.
Section 5.7 Acquisition's Operations. Acquisition was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement
and the Shareholders Agreement and has not engaged in any business activities or
conducted any operations other than in connection with such transactions.
Section 5.8 Financing. (a) Buyer has obtained commitment letters,
true, complete and executed copies of which have been delivered to Company
(collectively, the "Commitment Letter"), from Dymas Funding Company, LLC and
Prudential Capital Partners, L.P. (collectively, "Lender") pursuant to which
Lender has agreed to provide Buyer and Acquisition, subject to the conditions
set forth in the Commitment Letter, funds that, together with the Equity
Commitment (as defined in Section 5.8(b)), would enable Buyer and Acquisition to
timely perform their obligations to pay in full (i) the aggregate Offer Price,
(ii) the aggregate Merger Consideration, (iii) the aggregate Option Cash
Payment, (iv) the aggregate Warrant Cash Payment and (v) all fees and expenses
payable by Buyer, Acquisition and the Surviving Corporation in connection with
this Agreement and the transactions contemplated by this Agreement (assuming
that the representations and warranties of the Company set forth in Section 4.16
are true and correct as of the date hereof and will be true and correct as of
the proposed date for the initial purchase of Shares by Acquisition pursuant to
the Offer) (the "Transaction Financing"). The Commitment Letter is in full force
and effect and has not been amended as of the date of this Agreement. Buyer and
Acquisition are not aware of any fact or occurrence that makes any of the
assumptions set forth in the Commitment Letter unreasonable or would result in
any of the conditions set forth in the Commitment Letter not being satisfied
prior to the Termination Date. Lender has not advised either Buyer or
Acquisition or any of their respective affiliates of any reason why the
financing contemplated by the Commitment Letter will not be consummated in
accordance with its terms. All commitment and other fees required to be paid
pursuant to the Commitment Letter and the fee letter referred to therein on or
prior to the date of this Agreement have been paid.
(b) The total equity financing to be provided to Buyer and
Acquisition that is contemplated by the Commitment Letter (the "Equity
Commitment") will consist of equity contributed to Buyer by private equity funds
managed by H.I.G. Capital, LLC and investors in such private equity funds. As of
the date of this Agreement, such private equity funds and such
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investors have, collectively, and at all times prior to the Effective Time, will
have, collectively, funds readily available to them, subject to no conditions
(other than (i) advance notice requirements, (ii) the conditions in favor of
Buyer and Acquisition set forth in this Agreement and Annex B to this Agreement
and (iii) other non-material conditions capable of being satisfied prior to the
purchase of Shares by Acquisition pursuant to the Offer), to fund the Equity
Commitment.
ARTICLE VI
TRANSACTIONS PRIOR TO CLOSING DATE
Section 6.1 Access to Information Concerning Properties and Records.
During the period commencing on the date hereof and ending on the earlier of (i)
the Closing Date and (ii) the date on which this Agreement is terminated
pursuant to Section 8.1 hereof, subject to (x) applicable Antitrust Laws
relating to the exchange of information, (y) applicable Laws protecting the
privacy of employees and personnel files and (z) the confidentiality of
documents or other information subject to the attorney-client privilege, the
Company shall, and shall cause each of its Subsidiaries to, upon reasonable
notice, afford Buyer and Acquisition and their respective employees, counsel,
accountants, consultants and other authorized representatives, reasonable access
during normal business hours to the officers, directors, employees, accountants,
properties, books and records of the Company and its Subsidiaries in order that
they may have the opportunity to make such investigations as they shall desire
of the affairs of the Company and its Subsidiaries; provided, however, that such
investigation shall not affect the representations and warranties made by the
Company in this Agreement. The Company shall furnish promptly to Buyer and
Acquisition a copy of each form, report, schedule, statement, registration
statement and other document filed by it or its Subsidiaries during such period
pursuant to the requirements of United States federal or state securities Laws,
subject to (A) applicable Antitrust Laws relating to the exchange of
information, (B) applicable laws protecting the privacy of employees and
personnel files and (C) the confidentiality of documents or other information
subject to the attorney-client privilege. The Company agrees to cause its
officers and employees to furnish such additional financial and operating data
and other information and respond to such inquiries as Acquisition shall from
time to time reasonably request.
Section 6.2 Confidentiality. Except as may be required by lawful
order of an Authority of competent jurisdiction, each of Buyer, Acquisition and
the Company hereby agree that, unless and until the transactions contemplated
hereby have been consummated, each of Buyer, Acquisition and the Company, and
their respective Affiliates, representatives and advisors will hold in strict
confidence all data and information obtained from Buyer or Acquisition (in the
case of the Company) or the Company (in the case of Buyer or Acquisition) in
connection with the transactions contemplated hereby, except any of the same
that (a) was, is now, or becomes generally available to the public (but not as a
result of a breach of any duty of confidentiality by which Buyer, Acquisition,
the Company or any of their respective Affiliates, representatives and advisors
are bound); (b) was known to the party receiving such information on a
non-confidential basis prior to its disclosure to such party as demonstrated by
the written records of such party; (c) is disclosed to Buyer, Acquisition or the
Company by a third party not subject to any duty of confidentiality to Buyer,
Acquisition or the Company, as applicable, prior
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to its disclosure in connection with the transactions contemplated hereby; or
(d) may be required to be disclosed by applicable Law (provided, that the
affected party first uses reasonable efforts to preserve the confidentiality of
such information). If this Agreement is properly terminated in accordance with
Article VIII hereunder, each of the Buyer and Acquisition, on the one hand, and
the Company, on the other hand, and their representatives and advisors will
promptly return to the other party or destroy all such data, information and
other written material (including all copies thereof) which has been obtained by
such party in connection with the transactions contemplated by this Agreement,
and each such party will make no further use whatsoever of any of such or the
information and knowledge contained therein or derived therefrom. The provisions
of this Section 6.2 shall supersede any confidentiality or similar Contract that
may exist between Buyer, Acquisition or any of their respective Affiliates, on
the one hand, and the Company, on the other hand, prior to the date hereof
(including, but not limited to, the Confidentiality Agreement), and shall
survive until August 11, 2008.
Section 6.3 Conduct of the Business of the Company Pending the
Closing Date. The Company agrees that, except as (1) set forth on Schedule 6.3
of the Company Disclosure Letter, (2) expressly permitted or required by this
Agreement or (3) otherwise consented to in writing by Buyer, during the period
commencing on the date hereof and ending at the earlier of (x) such time as
nominees of Buyer shall comprise a majority of the members of the Board of
Directors of the Company and (y) termination of this Agreement pursuant to
Section 8.1:
(a) the Company and each of its Subsidiaries shall conduct their
respective operations only according to their ordinary and usual course of
business consistent with past practice and shall use their commercially
reasonable efforts to preserve intact their respective business organization,
keep available the services of their officers and employees and maintain
satisfactory relationships with licensors, suppliers, distributors, clients,
customers and others having significant business relationships with them;
(b) neither the Company nor any of its Subsidiaries shall:
(i) make any change in or amendment to its Certificate of
Incorporation or its By-laws (or comparable governing documents);
(ii) issue or sell, or authorize to issue or sell, any shares of its
capital stock or any other securities, or issue or sell, or authorize to
issue or sell, any securities convertible into or exchangeable for, or
options, warrants or rights to purchase or subscribe for, or enter into
any arrangement or contract with respect to the issuance or sale of, any
shares of its capital stock or any other securities, or make any other
changes in its capital structure, except for the possible issuance by the
Company of shares of Common Stock pursuant to the terms of any vested
Options or Warrants;
(iii) sell, pledge or dispose of or agree to sell, pledge or dispose
of any stock or other equity interest owned by it in any other Person;
(iv) declare, pay or set aside any dividend or other distribution or
payment with respect to, or split, combine, redeem or reclassify, or
purchase or otherwise acquire,
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any shares of its capital stock or its other securities, except pursuant
to the exercise of any currently outstanding Options or Warrants;
(v) enter into any contract or commitment with respect to capital
expenditures with a value in excess of, or requiring expenditures by the
Company and its Subsidiaries in excess of, $600,000, individually, or
enter into contracts or commitments with respect to capital expenditures
with a value in excess of, or requiring expenditures by the Company and
its Subsidiaries in excess of, $1,200,000, in the aggregate;
(vi) acquire, by merging or consolidating with, by purchasing an
equity interest in or a portion of the assets of, or by any other manner,
any business of any Person, or otherwise acquire any assets of any Person
(other than the purchase of assets in the ordinary course of business and
consistent with past practice);
(vii) except to the extent required under existing employee and
director benefit plans, agreements or arrangements in effect on the date
of this Agreement, increase the compensation or fringe benefits of any of
its directors, officers or employees, or grant any severance or
termination pay not currently required to be paid under existing severance
plans, or enter into any employment, consulting, indemnification or
severance agreement or arrangement with any present or former director,
officer or other employee of the Company or any of its Subsidiaries, or
establish, adopt, enter into or amend or terminate, except to the extent
that amendments are required by applicable Law, any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(viii) transfer, lease, license, guarantee, sell, mortgage, pledge,
dispose of, subject to any Lien (other than a Permitted Lien) or otherwise
encumber any material assets, or incur or modify any material indebtedness
or other material liability, other than in the ordinary course of business
consistent with past practice, or issue any debt securities;
(ix) agree to the settlement of or waive any material Claim;
(x) file or cause to be filed any amended Returns or claims for
refund of Taxes;
(xi) except to the extent permitted by Section 6.11 or required by
Law or by any listing agreement with a national securities exchange or
automated quotation system to which the Company is a party, issue any
press release or otherwise make any public announcements without prior
consultation and review by, and consent (which consent shall not be
unreasonably withheld) of, Buyer, other than in the ordinary course of
business consistent with past practice;
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(xii) except as required by applicable Law or GAAP, make any
material change in its accounting practices, policies or procedures or any
of its methods of reporting income, deductions or other items for income
tax purposes;
(xiii) adopt or enter into a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries (other than the Merger) or any agreement relating to an
Acquisition Proposal, except as expressly permitted in Section 6.6;
(xiv) (A) incur, assume or prepay any indebtedness for borrowed
money or guarantee any such indebtedness of another Person, other than
indebtedness owing to or guarantees of indebtedness owing to the Company
or any direct or indirect wholly-owned Subsidiary of the Company, or (B)
make any loans, extensions of credit or advances to any other Person,
other than to the Company, or to any direct or indirect wholly-owned
Subsidiary of the Company, except, in the case of clause (A), for
borrowings under the Company Senior Credit Agreement in the ordinary
course of business consistent with past practice for working capital
purposes and in the case of clause (B) for loans, extensions of credit or
advances constituting trade payables in the ordinary course of business;
(xv) accelerate the payment, right to payment or vesting of any
bonus, severance, profit sharing, retirement, deferred compensation, stock
option, insurance or other compensation or benefits, except pursuant to
Section 3.6;
(xvi) pay, discharge or satisfy any material Claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction (A) of any
such Claims, liabilities or obligations in the ordinary course of business
and consistent with past practice or (B) of Claims, liabilities or
obligations reflected or reserved against in the most recent consolidated
financial statements (or the notes thereto) contained in the Completed
Commission Filings;
(xvii) enter into any Material Contract other than in the ordinary
course of business consistent with past practice, except pursuant to
Section 6.6;
(xviii) other than as disclosed in the Completed Commission Filings,
plan, announce, implement or effect any reduction in force, lay-off, early
retirement program, severance program or other program or effort
concerning the termination of employment of employees of the Company or
its Subsidiaries; provided, however, that routine employee terminations
for cause shall not be considered subject to this clause (xviii);
(xix) (A) take any action, engage in any transaction or enter into
any agreement which would cause (1) any of the representations or
warranties set forth in Article IV that are subject to, or qualified by, a
"Material Adverse Effect", "material adverse change" or other materiality
qualification to be untrue as of the Effective Time, or any such
representations and warranties that are not so qualified to be untrue in
any material
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respect or (2) any of the Tender Offer Conditions not being satisfied; or
(B) purchase or acquire, or offer to purchase or acquire, any shares of
Common Stock of the Company;
(xx) take any action, including the adoption of any
shareholder-rights plan or amendments to its Certificate of Incorporation
or By-laws (or comparable governing documents), which would, directly or
indirectly, restrict or impair the ability of Buyer to vote or otherwise
to exercise the rights and receive the benefits of a stockholder with
respect to securities of the Company that may be acquired or controlled by
Buyer or Acquisition (including, without limitation, pursuant to the
Shareholders Agreement), or which would permit any stockholder to acquire
securities of the Company from the Company on a basis not available to
Buyer or Acquisition in the event that Buyer or Acquisition were to
acquire any shares of Common Stock;
(xxi) materially modify, amend or terminate any Material Contract
(except pursuant to Section 8.1) or waive any of its material rights or
Claims except in the ordinary course of business consistent with past
practice;
(xxii) (A) prepare any Return in a manner that is materially
inconsistent with the past practices of the Company or a Subsidiary, as
the case may be, with respect to the treatment of items on such Returns;
(B) incur any material liability for Taxes other than in the ordinary
course of business; or (C) enter into any settlement or closing agreement
with a taxing authority that materially affects or may materially affect
the Tax liability of the Surviving Corporation, the Company or any of
their respective Subsidiaries, as the case may be, for any period;
(xxiii) fail to maintain insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are
consistent with past practice; or
(xxiv) authorize, agree or announce an intention, in writing or
otherwise, to take any of the foregoing actions.
Section 6.4 Company Stockholders' Meeting; Preparation of Proxy
Statement; Short Form Merger. (a) Promptly following the purchase of Shares
pursuant to the Offer and, if applicable, the Subsequent Offer Period, if
required by law in order to consummate the Merger, the Company, acting through
its Board of Directors, shall, in accordance with applicable Law, duly call,
convene and hold a special meeting of the stockholders of the Company (the
"Stockholders' Meeting") as promptly as practicable following the preparation of
the Proxy Statement, for the purpose of voting upon this Agreement and the
Merger, and the Company agrees that this Agreement and the Merger shall be
submitted at such Stockholders' Meeting. The Company shall take all commercially
reasonable actions to solicit from its stockholders proxies, and shall take all
other action necessary and advisable to secure the vote of stockholders required
by applicable Law and by the Certificate of Incorporation of the Company or the
By-laws of the Company to obtain their adoption of this Agreement. The Board of
Directors of the Company shall recommend that the holders of Common Stock vote
in favor of the adoption of this Agreement and the Merger at the Stockholders'
Meeting, and the Company agrees that it shall include in the Proxy Statement
such recommendation of its Board of Directors that the
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stockholders of the Company adopt this Agreement. Buyer shall cause all shares
of Common Stock of the Company owned by Buyer and its direct and indirect
Subsidiaries (including Acquisition) to be voted in favor of the adoption of
this Agreement and the Merger. Without limiting the generality of the foregoing,
the Company agrees that its obligations pursuant to the first sentence of this
Section 6.4 shall not be affected by (i) the commencement, public proposal,
public disclosure or communication to the Company, any of its Subsidiaries or
any of their respective affiliates (or any of their respective officers,
directors, investment bankers or attorneys) of any Acquisition Proposal or (ii)
the withdrawal or modification by the Board of Directors of the Company of its
approval or recommendation of this Agreement or the Merger.
(b) If stockholder approval of the Merger is required by Law, as
promptly as practicable following Buyer's request, the Company shall promptly
prepare and, after consultation with and approval of Buyer (not to be
unreasonably withheld), file with the Commission a preliminary proxy statement
or information statement (together with any amendment or supplement thereto, the
"Proxy Statement") and shall promptly use its commercially reasonable efforts to
respond to the comments of the Commission, if any, in connection therewith and
to furnish all information regarding the Company that is required in the
definitive Proxy Statement (including financial statements and supporting
schedules and certificates and reports of independent public accountants).
Buyer, Acquisition and the Company shall cooperate with each other in the
preparation of the Proxy Statement. Without limiting the generality of the
foregoing, each of Buyer and Acquisition shall furnish to the Company for
inclusion in the Proxy Statement the information relating to it required by the
Exchange Act to be set forth in the Proxy Statement. Promptly after the
expiration or termination of the Offer, if required by the DGCL in order to
consummate the Merger, the Company shall cause the definitive Proxy Statement to
be mailed to the stockholders of the Company and, if necessary under the
Exchange Act, after the definitive Proxy Statement shall have been so mailed,
promptly circulate amended, supplemental or supplemented proxy material and, if
required by the Exchange Act in connection therewith, resolicit proxies. The
Company shall not use any proxy material in connection with the meeting of its
stockholders to approve this Agreement and the Merger without Buyer's prior
approval (which shall not be unreasonably withheld).
(c) The Company shall promptly notify Buyer of the receipt of the
comments of the Commission and of any request from the Commission for amendments
or supplements to the preliminary Proxy Statement or the definitive Proxy
Statement or for additional information, and will promptly supply Buyer with
copies of all correspondence between the Company or its representatives, on the
one hand, and the Commission or members of its staff, on the other hand, with
respect to the preliminary Proxy Statement, the definitive Proxy Statement or
the Merger.
(d) The Company shall promptly inform Buyer if at any time prior to
the Stockholders' Meeting any event should occur that is required by applicable
Law to be set forth in an amendment of, or a supplement to, the Proxy Statement,
in which case the Company, with the cooperation and approval of Buyer and
Acquisition (not to be unreasonably withheld), will, upon learning of such
event, promptly prepare and mail such amendment or supplement.
(e) For the avoidance of doubt, it is expressly understood and
agreed that (i) Buyer, Acquisition and the Company will cooperate with each
other in connection with all aspects of the preparation, filing and clearance by
the Commission of the Proxy Statement
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(including the preliminary proxy and any and all amendments or supplements
thereto), (ii) the Company shall give Buyer and its counsel the opportunity to
review the Proxy Statement prior to it being filed with the Commission and shall
give Buyer and its counsel the opportunity to review all amendments and
supplements to the Proxy Statement and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the Commission and each of the Company, Buyer and Acquisition agrees to use its
commercially reasonable efforts, after consultation with the other, to respond
promptly to all such comments of and requests by the Commission, (iii) to the
extent practicable, the Company and its counsel shall permit Buyer and its
counsel to participate in all communications with the Commission and its staff
(including, without limitation, all meetings and telephone conferences) relating
to the Proxy Statement, this Agreement or any of the transactions contemplated
thereby (provided, that in the event that such participation by Buyer is not
practicable, the Company shall promptly inform Buyer and its counsel of the
content of all such communications and the participants involved therein), and
(iv) the Company will not file with, or send to, the Commission the Proxy
Statement (including the preliminary proxy statement and any and all amendments
or supplements thereto and any and all responses to requests for additional
information and replies to comments relating thereto) or mail any Proxy
Statement (including the preliminary proxy statement and any and all amendments
or supplements thereto) or use any proxy material in connection with the
Stockholders' Meeting to approve this Agreement and the Merger, in each case
without Buyer's prior approval (not to be unreasonably withheld).
Section 6.5 Commercially Reasonable Efforts. Subject to the terms
and conditions provided herein, each of the Company, Buyer and Acquisition
shall, and the Company shall cause each of its Subsidiaries to, cooperate and
use their commercially reasonable efforts to take, or cause to be taken, all
appropriate action, and do, or cause to be done, and assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Offer, the Merger and the other transactions contemplated hereby, including the
satisfaction of the respective conditions set forth in Article VII, and to make,
or cause to be made, all filings necessary, proper or advisable under applicable
Laws to consummate and make effective the transactions contemplated by this
Agreement, including their commercially reasonable efforts to (a) obtain, prior
to the Closing Date, all licenses, Permits, consents, approvals, authorizations,
qualifications and orders of Governmental Entities and parties to contracts with
the Company and its Subsidiaries as are necessary for consummation of the
transactions contemplated by this Agreement and to fulfill the conditions to the
Offer and the Merger and (b) defend any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of any of the transactions contemplated hereby (including seeking
to have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed), it being understood and agreed that
the Company shall promptly notify Buyer of any litigation (including any
stockholder litigation), other than where Buyer or Acquisition is the adverse
party, against the Company and/or its directors relating to any of the
transactions contemplated by this Agreement and the Company shall give Buyer the
opportunity to participate in the defense or settlement of any such litigation
(provided, that no settlement with respect to any such litigation shall be
agreed to without Buyer's prior consent, which shall not be unreasonably
withheld); provided, however, that no loan agreement or contract for borrowed
money shall be repaid, in whole or in part, except as currently required by its
terms, and no Contract shall be amended to increase the amount payable
thereunder or otherwise to be more
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burdensome to the Company or any of its Subsidiaries in order to obtain any such
consent, approval or authorization without first obtaining the written approval
of Buyer.
Section 6.6 No Solicitation of Other Offers. (a) The Company shall,
and shall use its commercially reasonable efforts to cause its Affiliates and
each of its and their respective officers, directors, employees,
representatives, consultants, investment bankers, attorneys, accountants and
other agents immediately to, cease any discussions or negotiations with any
other Person or Persons that may be ongoing with respect to any Acquisition
Proposal. The Company shall not take, and shall use its commercially reasonable
efforts to cause its Affiliates and its and their respective officers,
directors, employees, representatives, consultants, investment bankers,
attorneys, accountants or other agents or Affiliates not to take, any action (i)
to encourage, solicit, initiate or facilitate, directly or indirectly, the
making or submission of any Acquisition Proposal, (ii) to enter into any
agreement, arrangement or understanding with respect to any Acquisition
Proposal, or to agree to approve or endorse any Acquisition Proposal or enter
into any agreement, arrangement or understanding that would require the Company
to abandon, terminate or fail to consummate the Merger or any other transaction
contemplated by this Agreement, (iii) to initiate or participate in any way in
any discussions or negotiations with, or furnish or disclose any information to,
any Person (other than Buyer or Acquisition) in connection with any Acquisition
Proposal, (iv) to facilitate or further in any other manner any inquiries or the
making or submission of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal, or (v) to grant any waiver or
release under any standstill, confidentiality or similar agreement entered into
by the Company or any of its Affiliates or representatives; provided, however,
that the Company, in response to an unsolicited Acquisition Proposal that did
not result from a breach of this Section 6.6(a) and otherwise in compliance with
its obligations under Section 6.6(c) hereof, may (x) request clarifications
from, or furnish information to, (but not enter into discussions with) any
Person (other than Buyer or Acquisition) which makes such unsolicited
Acquisition Proposal if (A) such action is taken solely for the purpose of
obtaining information reasonably necessary to ascertain whether such Acquisition
Proposal is, or could reasonably likely lead to, a Superior Proposal, and (B) a
majority of the members of the entire Board of Directors of the Company
reasonably determines in good faith, based on the recommendation of the Special
Committee and after receiving consultation with outside legal counsel to the
Company, that it is necessary to take such actions in order to comply with the
fiduciary duties of the Board of Directors of the Company under applicable Law
or (y) participate in discussions with, request clarifications from, or furnish
information to, any Person (other than Buyer or Acquisition) which makes such
unsolicited Acquisition Proposal if (A) after consultation by the Special
Committee with an independent, nationally recognized investment bank, a majority
of the members of the entire Board of Directors of the Company, based on the
recommendation of the Special Committee, reasonably determines in good faith
that such Acquisition Proposal is a Superior Proposal and (B) a majority of the
members of the entire Board of Directors of the Company reasonably determines in
good faith, based on the recommendation of the Special Committee and after
receiving consultation with outside legal counsel to the Company, that it is
necessary to take such actions in order to comply with the fiduciary duties of
the Board of Directors under applicable Law. Without limiting the foregoing,
Buyer, Acquisition and the Company agree that any violation of the restrictions
set forth in this Section 6.6(a) by any Affiliate, officer, director, employee,
representative, consultant, investment banker, attorney, accountant or other
agent of the Company or any of its Affiliates, whether or not such Person is
purporting to act on behalf of the Company or any
-47-
of its Affiliates, shall constitute a breach by the Company of this Section
6.6(a). The Company shall enforce, to the fullest extent permitted under
applicable Law, the provisions of any standstill, confidentiality or similar
agreement entered into by the Company or any of its Affiliates or
representatives including, but not limited to, where necessary obtaining
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court having jurisdiction.
(b) Neither the Board of Directors of the Company nor any committee
thereof (including, without limitation, the Special Committee) shall (i)
withdraw, modify or amend, or publicly propose to withdraw, modify or amend, in
a manner materially adverse to Buyer or Acquisition, the approval, adoption or,
as the case may be, recommendation of the Offer, the Merger, this Agreement or
the Shareholders Agreement, (ii) approve or recommend, or publicly propose to
approve or recommend, any Acquisition Proposal or (iii) resolve to do any of the
foregoing; provided, that the Company may recommend to its stockholders an
Acquisition Proposal and, in connection therewith, withdraw or modify its
approval or recommendation of the Offer or the Merger if (w) the Company has
complied with its obligations under Sections 6.6(a) and 6.6(c), (x) the
Acquisition Proposal is a Superior Proposal, (y) all the conditions to the
Company's right to terminate this Agreement in accordance with Section 8.1(c)(i)
hereof have been satisfied (including the expiration of the five (5) Business
Day period described therein and the payment of all amounts required pursuant to
Section 9.1 hereof) and (z) simultaneously with such withdrawal, modification or
recommendation, this Agreement is terminated in accordance with Section
8.1(c)(i) hereof. Nothing in this Section 6.6 shall prohibit the Company or its
Board of Directors from taking and disclosing to the Company's stockholders a
position with respect to an Acquisition Proposal by a third party to the extent
required under Rule 14e-2 of the Exchange Act.
For purposes of this Agreement, the term "Acquisition Proposal"
shall mean (i) any proposal or offer (including any proposal to stockholders of
the Company) from any Person or group relating to any direct or indirect
acquisition or purchase of ten percent (10%) or more of the consolidated assets
of the Company and its Subsidiaries or ten percent (10%) or more of any class of
equity securities of the Company or any of its Subsidiaries, (ii) any tender
offer or exchange offer (including a self tender offer or exchange offer) that,
if consummated, would result in any Person beneficially owning ten percent (10%)
or more of any class of equity securities of the Company or any of its
Subsidiaries, (iii) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries, (iv) any other transaction with the Company
or its stockholders, the consummation of which could reasonably be expected to
prevent or materially delay the Offer or the Merger or which could reasonably be
expected to dilute materially the benefits to Buyer or Acquisition of the
transactions contemplated hereby or (v) any public announcement by or on behalf
of the Company, any of its Subsidiaries or any of their respective affiliates
(or any of their respective officers, directors, employees, representatives,
consultants, investment bankers, attorneys, accountants and other agents) or by
any third party of a proposal, plan or intention to do any of the foregoing or
any agreement to engage in any of the foregoing, in each case, other than by
Buyer, Acquisition or their Affiliates and each of their respective officers,
directors, employees, representatives, consultants, investment bankers,
attorneys, accountants and other agents.
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For purposes of this Agreement, the term "Superior Proposal" shall
mean a bona fide binding written offer not solicited by or on behalf of the
Company made by a third party to acquire all of the Common Stock pursuant to a
tender offer, a merger or a sale of all or substantially all of the assets of
the Company (i) on terms which a majority of the members of the entire Board of
Directors of the Company (based on the written advice of an independent
nationally recognized investment bank) reasonably determines in good faith to be
more favorable from a financial point of view to the stockholders of the Company
(in their capacity as such) than the transactions contemplated hereby (to the
extent the transactions contemplated hereby are proposed to be modified by Buyer
in accordance with Section 8.1(e)(i)), (ii) which is reasonably capable of being
consummated (taking into account, among other things, all legal, financial,
regulatory (including, but not limited to, compliance with all Antitrust Laws)
and other aspects of such proposal, the proposed timing of such proposal and the
identity of the Person making such proposal) and (iii) that is not conditioned
on obtaining any financing.
(c) In addition to the obligations of the Company set forth in
paragraph (a), within one (1) Business Day of the receipt or occurrence thereof,
the Company shall advise Buyer of any request for information with respect to
any Acquisition Proposal or of any Acquisition Proposal, or any inquiry,
proposal, discussions or negotiation with respect to any Acquisition Proposal,
the terms and conditions of such request, Acquisition Proposal, inquiry,
proposal, discussion or negotiation and the Company shall, within one (1)
Business Day of the receipt thereof, promptly provide to Buyer copies of any
written materials received by the Company in connection with any of the
foregoing, and the identity of the Person making any such Acquisition Proposal
or such request, inquiry or proposal or with whom any discussion or negotiation
are taking place. The Company shall keep Buyer informed of the status and
material details (including amendments or proposed amendments) of any such
request or Acquisition Proposal and keep Buyer informed as to the material
details of any information requested of or provided by the Company and as to
details of all discussions or negotiations with respect to any such request,
Acquisition Proposal, inquiry or proposal. The Company shall promptly provide to
Buyer any non-public information concerning the Company provided to any other
Person in connection with any Acquisition Proposal that was not previously
provided to Buyer.
(d) The Company shall immediately request each Person that has
heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company or any portion thereof to return all
confidential information heretofore furnished to such Person by or on behalf of
the Company, and the Company shall use its commercially reasonable efforts to
have such information returned.
Section 6.7 Notification of Certain Matters. Buyer and the Company
shall promptly notify each other of the occurrence or non-occurrence of any fact
or event which has caused or could reasonably likely cause (i) any
representation or warranty made by it (including, in the case of Buyer,
Acquisition) in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or (ii) any
covenant, condition or agreement under this Agreement not to be complied with or
satisfied by it (including, in the case of Buyer, Acquisition) in any material
respect; provided, however, that no such notification shall modify the
representations and warranties of any party or the conditions to the obligations
of any party hereunder. Each of the Company, Buyer and Acquisition shall give
prompt notice to the other parties hereof of any notice or other communication
from any third party alleging that the
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consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement.
Section 6.8 Antitrust Laws. (a) Each party hereto shall (i) take
promptly all actions necessary to make the filings required of it or any of its
Affiliates under any applicable Antitrust Laws in connection with this Agreement
and the transactions contemplated hereby, (ii) comply at the earliest
practicable date with any formal or informal request for additional information
or documentary material received by it or any of its Affiliates from any
Antitrust Authority and (iii) cooperate with one another in connection with any
filing under applicable Antitrust Laws and in connection with resolving any
investigation or other inquiry concerning the transactions contemplated by this
Agreement initiated by any Antitrust Authority.
(b) Each party hereto shall use its commercially reasonable efforts
to resolve such objections, if any, as may be asserted with respect to the
transactions contemplated by this Agreement under any Antitrust Law. Without
limiting the generality of the foregoing, "commercially reasonable efforts"
shall include:
(i) in the case of each of Buyer and the Company:
(A) filing with the appropriate Antitrust Authorities no later
than the fifth (5th) Business Day following the date hereof a
Notification and Report Form with respect to the transactions
contemplated by this Agreement; and
(B) if Buyer or the Company receives a formal request for
additional information or documentary material from an Antitrust
Authority, substantially complying with such formal request within
sixty (60) days following the date of its receipt thereof or such;
and
(ii) in the case of the Company only, subject to Buyer's compliance
with clause (i) above, not frustrating or impeding Buyer's strategy or
negotiating positions with any Antitrust Authority.
(c) Each party hereto shall promptly inform the other parties of any
material communication made to, or received by such party from, any Antitrust
Authority or any other Governmental Entity regarding any of the transactions
contemplated hereby.
Section 6.9 Employee Benefits. (a) During the period commencing at
the Closing and ending on the first anniversary thereof, Buyer shall cause the
current and former employees of the Company and its Subsidiaries who are, on the
Closing Date, entitled to receive compensation or any benefits from the Company
or any of its Subsidiaries to be provided with compensation and employee benefit
plans (other than stock option or other plans involving the potential issuance
of securities of the Company, Buyer or any of their respective Subsidiaries, and
incentive compensation or similar programs) which in the aggregate are not
materially less favorable than those currently provided to such employees by the
Company and its Subsidiaries, taken as a whole, to the extent permitted under
Laws in force from time to time. The provisions of this Section 6.9(a) shall not
create in any current or former employee of the Company or its Subsidiaries any
rights to employment or continued employment with Buyer, the Surviving
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Corporation or the Company or any of their respective Subsidiaries or Affiliates
or any right to specific terms or conditions of employment.
(b) Notwithstanding anything in this Agreement to the contrary, from
and after the Effective Time, the Surviving Corporation shall have sole
discretion over the hiring, promotion, retention, termination and other terms
and conditions of the employment of the employees of the Surviving Corporation.
Nothing herein shall prevent Buyer or the Surviving Corporation from amending or
terminating any Employee Benefit Plan or other employee benefit or fringe
benefit plan in accordance with its terms.
Section 6.10 Directors' and Officers' Insurance. (a) The Certificate
of Incorporation and the By-laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in the Company's Certificate of Incorporation, as amended, and By-laws as
in effect on the date of this Agreement, which provisions shall not be amended,
repealed or otherwise modified for a period of six (6) years from the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who on or prior to the Effective Time were directors or officers of
the Company, unless such modification is required by Law.
(b) For a period of six (6) years from the Effective Time, the
Surviving Corporation shall maintain in effect the Company's current directors'
and officers' liability insurance covering those Persons who are currently
covered on the date of this Agreement by the Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered to
Buyer) (the "Indemnified Parties"); provided, however, that in no event shall
Buyer be required to expend in any one year an amount in excess of one hundred
and fifty percent (150%) of the annual premiums currently paid by the Company
for such insurance which the Company represents and warrants to be $141,000 for
the twelve month period ending on February 5, 2004; provided, further, that if
the annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount; and provided, further, that the
Surviving Corporation may substitute for such Company policies other policies
with at least the same coverage containing terms and conditions which are no
less advantageous, and provided that said substitution does not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time.
(c) The Surviving Corporation shall indemnify all Indemnified
Parties to the fullest extent permitted by Section 145 of the DGCL with respect
to all acts and omissions arising out of such individuals' services as officers,
directors, employees or agents of the Company or any of its Subsidiaries or as
trustees or fiduciaries of any plan for the benefit of employees of the Company
or any of its Subsidiaries, occurring prior to the Effective Time, including the
transactions contemplated by this Agreement. Without limitation of the
foregoing, in the event any such Indemnified Party is or becomes involved, in
any capacity, in any Claim in connection with any matter, including the
transactions contemplated by this Agreement, occurring prior to and including
the Effective Time, the Surviving Corporation, from and after the Effective
Time, shall pay, as incurred, such Indemnified Party's reasonable legal and
other expenses (including the cost of any investigation and preparation)
incurred in connection therewith. Subject to Section 6.10(d) below, the
Surviving Corporation shall pay all reasonable
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expenses, including attorneys' fees, that may be incurred by any Indemnified
Party in enforcing this Section 6.10 or any action involving an Indemnified
Party resulting from the transactions contemplated by this Agreement.
(d) Any Indemnified Party wishing to claim indemnification under
paragraph (a) or (c) of this Section 6.10, upon learning of any such Claim,
shall promptly notify the Surviving Corporation thereof. In the event of any
such Claim (whether arising before or after the Effective Time), (i) the
Surviving Corporation shall have the right, from and after the Effective Time,
to assume the defense thereof (with counsel engaged by the Surviving Corporation
to be reasonably acceptable to the relevant Indemnified Party), and the
Surviving Corporation shall not be liable to such Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof, (ii) such
Indemnified Party shall cooperate in the defense of any such matter and (iii)
the Surviving Corporation shall not be liable for any settlement effected
without its prior written consent; provided that the Surviving Corporation shall
not have any obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall ultimately determine, and such determination
shall have become final, that the indemnification of such Indemnified Party in
the manner contemplated hereby is prohibited by Section 145 of the DGCL. The
Indemnified Parties shall be third party beneficiaries of, and entitled to seek
enforcement of, this Section 6.10.
Section 6.11 Public Announcements. Buyer and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation and review by the other party of such
release or statement, or without the prior consent of the other party, which
shall not be unreasonably withheld; provided, however, that a party may, without
the prior consent of the other party, issue such press release or make such
public statement as may be required by Law or by any listing agreement with a
national securities exchange or automated quotation system to which Buyer or any
Affiliate of Buyer or, as the case may be, the Company is a party, if it has
used commercially reasonable efforts to consult with the other party and to
obtain such party's consent, but has been unable to do so in a timely manner.
Section 6.12 Subsequent Filings. Until the Effective Time, the
Company will timely file with the Commission each Subsequent Filing required to
be filed by the Company and will promptly deliver to Acquisition copies of each
such Subsequent Filing filed with the Commission. As of their respective dates,
none of such Subsequent Filings (a) shall contain any untrue statement of a
material fact or omit 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 and (b) shall comply, in all material
respects with all applicable requirements of the federal securities Laws and the
Commission rules and regulations promulgated thereunder. Each of the audited
consolidated financial statements and unaudited interim financial statements
(including, in each case, any related notes and schedules) contained or to be
contained in the Subsequent Filings shall be prepared from, and shall be in
accordance with, the books and records of the Company and its consolidated
Subsidiaries, shall comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission with
respect thereto, shall be prepared in accordance with GAAP
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(except as may be indicated in the notes thereto) and shall fairly present the
consolidated financial position and the consolidated results of operations and
cash flows of the Company and its consolidated Subsidiaries at the dates and for
the periods covered thereby.
Section 6.13 Communication to Employees. The Company and Acquisition
will cooperate with each other with respect to all written communications or
disclosure to employees of the Company or any of the Subsidiaries with respect
to the Merger and any other transactions contemplated by this Agreement.
Section 6.14 Material Consents and Waivers. The Company shall, prior
to the date of the initial purchase of Shares by Acquisition pursuant to the
Offer, obtain or file (and furnish to Buyer evidence thereof) any and all
material authorizations, approvals, consents or orders of, or declarations or
filings with, any Governmental Entity or other third party that are required in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement except for those
authorizations, approvals consents or orders that are listed on Schedule 6.14 of
the Company Disclosure Letter, and such material authorizations, approvals,
consents and orders shall not expire or be withdrawn prior to the date of the
initial purchase of Shares by Acquisition pursuant to the Offer.
Section 6.15 Transaction Financing Cooperation. The Company agrees
to provide, and will cause its Subsidiaries and its and their respective
officers, employees and advisers to provide, upon the reasonable request of
Buyer, and at Buyer's sole cost and expense (and if such costs and expenses are
first paid by the Company, Buyer and Acquisition shall promptly reimburse the
Company for such costs and expenses upon request), all cooperation reasonably
necessary in connection with the arrangement of any financing to be consummated
contemporaneously with or at or after the Closing in respect of the transactions
contemplated by this Agreement, including participation in meetings, due
diligence sessions, road shows, the preparation of offering memoranda, private
placement memoranda, prospectuses and similar documents, the execution and
delivery of any commitment letters, underwriting or placement agreements, pledge
and security documents, other definitive financing documents, or other requested
certificates or documents, including a certificate of the chief financial
officer of the Company with respect to solvency matters, comfort letters of
accountants and legal opinions as are customary for transactions of this type
and as may be reasonably requested by Buyer and taking such other actions as are
customary for transactions of this type and as are reasonably required to be
taken by the Company in connection with the Transaction Financing. In addition,
in connection with the obtaining of any such financing, the Company agrees, at
the reasonable request of Buyer, to call for prepayment or redemption, or to
prepay, redeem and/or renegotiate, as the case may be, any then existing
indebtedness of the Company; provided, that no such prepayment, redemption or
renegotiation shall actually be made or consummated prior to the consummation of
the Offer.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions Precedent to Each Party's Obligation to
Effect the Merger. The respective obligations of each party to this Agreement to
effect the Merger shall be
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subject to the satisfaction or waiver (to the extent permissible by applicable
Law) at or prior to the Effective Time of each of the following conditions:
(a) Approval of the Company's Stockholders. To the extent required
by applicable Law, the Agreement shall have been adopted by holders of a
majority of the shares of Common Stock entitled to vote thereon (voting as one
class, with each share of Common Stock having one (1) vote) in accordance with
applicable Law, the Company's Certificate of Incorporation and the Company's
By-laws;
(b) Injunction. No temporary restraining order, preliminary or
permanent injunction or other order shall have been issued by any federal, state
or foreign court or by any federal, state or foreign Governmental Entity, and no
other legal restraint or prohibition preventing the consummation of the Merger
shall be in effect; provided, that the right to assert this condition shall not
be available to any party whose material failure to fulfill any obligation under
this Agreement has been the principal cause of or resulted in the failure of
this condition to be satisfied;
(c) Illegality. There shall have been no action taken, or Law
promulgated, entered, enforced, enacted, issued or deemed applicable to the
Merger by any Governmental Entity, that directly or indirectly prohibits or
makes illegal the consummation of the Merger or the other transactions
contemplated by this Agreement; and
(d) Antitrust Laws. The waiting periods (and any extensions thereof)
applicable to the consummation of the Merger under applicable Antitrust Laws
shall have expired or been terminated; and
(e) Consummation of the Offer. Acquisition shall have accepted for
payment and paid for all Shares validly tendered (and not withdrawn) in the
Offer and, where applicable, the Subsequent Offer Period.
ARTICLE VIII
TERMINATION AND ABANDONMENT
Section 8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether before or after approval of the Merger by the Company's
stockholders:
(a) by mutual consent of the Company, on the one hand, and of Buyer
and Acquisition, on the other hand;
(b) by either Buyer and Acquisition, on the one hand, or the
Company, on the other hand, if the purchase of Shares pursuant to the Offer
shall not have occurred within one hundred and eighty (180) days after the
commencement of the Offer (the "Termination Date"), unless (i) the purchase of
Shares pursuant to the Offer shall not have been consummated because of a breach
of any representation, warranty, obligation, covenant, agreement or condition
set forth in this Agreement on the part of the party seeking to terminate this
Agreement or (ii) on such Termination Date the Agreement was terminable under
Section 8.1(c);
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(c) by either Buyer and Acquisition, on the one hand, or the
Company, on the other hand, if (i) any court of competent jurisdiction or any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action permanently restricting, enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, Shares pursuant to
the Offer or shares of Common Stock pursuant to the Merger, and such order,
decree or ruling or other action shall have become final and nonappealable;
provided, that the right to terminate this Agreement under this Section 8.1(c)
shall not be available to any party whose material failure to fulfill any
obligation under this Agreement has been the principal cause of or resulted in
such order, decree ruling or action, or (ii) there shall have been an action
taken, or Law promulgated, entered, enforced, enacted, issued or deemed
applicable to the Offer or the Merger by any Governmental Entity, that directly
or indirectly prohibits or makes illegal the purchase of Shares pursuant to the
Offer, the consummation of the Merger or the other transactions contemplated by
this Agreement;
(d) by the Company, at any time prior to the purchase of Shares
pursuant to the Offer, if:
(i) a Superior Proposal is received and a majority of the
independent members of the entire Board of Directors of the Company, or a
committee of the Board of Directors of the Company composed entirely by
independent directors, reasonably determines in good faith that it is
necessary to terminate this Agreement and enter into an agreement to
effect the Superior Proposal in order to comply with the fiduciary duties
of the Board of Directors under applicable Law; provided, however, that
the Company may not terminate this Agreement pursuant to this Section
8.1(d)(i) unless and until (A) five (5) Business Days have elapsed
following delivery to Buyer of a written notice of such determination by
the Board of Directors and during such five (5) Business Day period the
Company has informed Buyer of the terms and conditions of such Superior
Proposal and the identity of the Person making such Superior Proposal,
with the intent of enabling Buyer to propose modifications to the terms
and conditions of this Agreement so that the transactions contemplated
hereby may be effected, (B) at the end of such five (5) Business Day
period the Acquisition Proposal continues to constitute a Superior
Proposal, and a majority of the independent members of the entire Board of
Directors of the Company, or a committee of the Board of Directors of the
Company composed entirely by independent directors, (after consultation
with outside legal counsel to the Company) continues to reasonably
determine in good faith that it is necessary to terminate this Agreement
and enter into an agreement to effect the Superior Proposal in order to
comply with the fiduciary duties of the Board of Directors under
applicable Law and (C) (1) prior to such termination, Buyer has received
all fees and expense reimbursements set forth in Section 9.1 hereof by
wire transfer in immediately available funds and (2) simultaneously or
substantially simultaneously with such termination the Company enters into
a definitive acquisition, merger or similar agreement to effect the
Superior Proposal; or
(ii) (A) there shall be a breach of any representation or warranty
of Buyer or Acquisition in this Agreement that is qualified as to Material
Adverse Effect, (B) there shall be a breach of any representation or
warranty of Buyer or Acquisition in this Agreement that is not so
qualified, other than any such breaches that, in the aggregate,
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have not had, do not have, and could not reasonably be expected to have, a
Material Adverse Effect on Acquisition, or (C) there shall be a material
breach by Buyer or Acquisition of any of their respective covenants or
agreements contained in this Agreement, which breach, in the case of any
of clauses (A), (B) or (C), either is not reasonably capable of being
cured, or if it is reasonably capable of being cured, has not been cured
by the earlier of (1) ten (10) days after the giving of written notice to
Buyer of such breach or (2) one (1) Business Day prior to the expiration
of the Offer; provided, that the Company may not terminate this Agreement
pursuant to this Section 8.1(d)(ii) if the Company is in material breach
of this Agreement; or
(iii) Lender shall have (A) notified Buyer in writing that it has
withdrawn its financing commitment, (B) notified Buyer in writing that it
does not intend to, or will be unable to, advance funds to Buyer or
Acquisition pursuant to the Commitment Letter or (C) notified Buyer that
it had commenced voluntarily or involuntarily any proceeding under
bankruptcy or insolvency Laws, become subject to a receivership, made an
assignment for the benefit of creditors or become subject to any other
similar Law or proceeding and, in the case of (A), (B) or (C), Buyer shall
not have obtained replacement financing sufficient to consummate the
merger within the earlier of (1) 45 days after the occurrence of the
earliest event specified in (A), (B) or (C) or (2) the Termination Date;
provided, that the Company may not terminate this Agreement pursuant to
this Section 8.1(d)(iii) if the Company is in material breach of this
Agreement; and provided further, that Buyer shall notify the Company
within five days after the occurrence of any of the events specified in
(A), (B) or (C); or
(iv) (A) Buyer or Acquisition shall have failed to commence the
Offer in accordance with the first sentence of Section 2.1(a) or (B) the
Offer is terminated or has expired without Acquisition purchasing any
Shares pursuant thereto, unless such failure or expiration shall have been
caused by the failure of the conditions set forth in clauses (iv)(d) or
(e) of Annex B to be satisfied.
(e) by Buyer, at any time prior to the purchase of Shares pursuant
to the Offer, if:
(i) the Offer is terminated or expires in accordance with its terms
without Acquisition having purchased any Shares thereunder due to an
occurrence which would result in a failure to satisfy any one or more of
the conditions set forth on Annex B hereto, unless any such failure shall
have been caused by or resulted from the failure of Buyer or Acquisition
to perform in any material respect any covenant or agreement of either of
them contained in this Agreement or from the material breach by Buyer or
Acquisition of any representation or warranty of either of them contained
in this Agreement;
(ii) (A) there shall be a breach of any representation or warranty
of the Company in this Agreement that is qualified as to Material Adverse
Effect or as to materiality, (B) there shall be a material breach of any
representation or warranty of the Company in this Agreement that is not so
qualified or (C) there shall be a material breach by the Company of any of
its covenants or agreements contained in this Agreement,
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which breach, in the case of any of clauses (A), (B) or (C), either is not
reasonably capable of being cured or, if it is reasonably capable of being
cured, has not been cured by the earlier of (1) ten (10) days after Buyer
giving written notice to the Company of such breach or (2) one (1)
Business Day prior to the expiration of the Offer; provided, that Buyer
may not terminate this Agreement pursuant to this Section 8.1(e)(ii) if
either Buyer or Acquisition is in material breach of this Agreement;
(iii) (A) the Company shall have (1) withdrawn, modified or amended,
or publicly disclosed its intention to withdraw, modify or amend, in a
manner materially adverse to Buyer or Acquisition, the approval, adoption
or recommendation, as the case may be, of the Offer, the Merger, this
Agreement, the Shareholders Agreement or any of the transactions
contemplated hereby or thereby, (2) approved or recommended, or publicly
disclosed its intention to approve or recommend, or entered into any
agreement for an Acquisition Proposal or (3) announced a neutral position
with respect to any Acquisition Proposal, and does not reject or recommend
such Acquisition Proposal within three (3) Business Days of the
announcement of such neutral position or (B) the Company's Board of
Directors or any committee thereof shall have adopted a resolution
resolving to take any of the actions set forth in the foregoing; or
(iv) if there shall have been a material breach by the Company of
any provision of Section 6.6.
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of such terminating party, any Person
controlling such terminating party or any of their respective officers or
directors, whether prior to or after the execution of this Agreement.
Section 8.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.1 by Buyer or Acquisition, on the one
hand, or the Company, on the other hand, written notice thereof shall forthwith
be given to the other party or parties specifying the provision hereof pursuant
to which such termination is made, and this Agreement shall become void and have
no effect, and there shall be no liability hereunder on the part of Buyer,
Acquisition or the Company, except that Section 6.2, this Section 8.2 and
Article IX shall survive any termination of this Agreement. Nothing in this
Section 8.2 shall relieve any party to this Agreement of liability for their
material breach of a covenant in this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Fees and Expenses. (a) Except as provided in paragraph
(b) below, all costs and expenses incurred in connection with this Agreement and
the consummation of the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses.
(b) If this Agreement is terminated:
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(i) at a time when Buyer or Acquisition is entitled to terminate
this Agreement in accordance with Section 8.1(b), Section 8.1(e)(i) hereof
(solely due to the Minimum Condition not having been met at the time of
such termination) or Section 8.1(e)(ii) and, within twelve (12) months of
such termination, the Company enters into an agreement, arrangement or
understanding (including a letter of intent) with respect to or
consummates any Acquisition Proposal (provided, however, if prior to the
time of delivery of the written notice of such termination in accordance
with Section 8.2: (A) but in no event later than ten (10) days prior to
the date of termination of this Agreement, (1) the Company had given Buyer
written notice of a breach of any representation, warranty or covenant of
Buyer or Acquisition in this Agreement in accordance with Section
8.1(d)(ii) and (2) such breach had not been cured by Buyer or Acquisition
in accordance with Section 8.1(d)(ii); or (B) the Company was properly
entitled to terminate this Agreement in accordance with Section
8.1(d)(iii), and in the case of either clause (A) or (B), the Company was
not in material breach of this Agreement, then the Company shall not be
obligated to pay, and Buyer shall not be entitled to receive, any Expense
Reimbursement or Termination Fee pursuant to this Section 9.1(b)(i));
(ii) pursuant to Section 8.1(d)(i), Section 8.1(e)(iii) or Section
8.1(e)(iv);
then Buyer shall be entitled to receive from the Company (in accordance with
Section 9.1(c) below) (A) reimbursement for the out-of-pocket expenses of Buyer
and Acquisition (including printing fees, filing fees and fees and expenses of
their legal and financial advisors and all fees and expenses payable to any
financing sources) related to this Agreement, the Shareholders Agreement, the
transactions contemplated hereby and thereby and any related financing up to a
maximum of $750,000 (such reimbursement amount, the "Expense Reimbursement") and
(B) an amount equal to $3,500,000 (such amount, the "Termination Fee");
provided, however, that in no event shall more than one (1) Termination Fee or
one (1) Expense Reimbursement be paid to Buyer by the Company.
(c) Any amounts owing by the Company to Buyer pursuant to Section
9.1(b) above shall be paid as follows:
(i) if either the Company, on the one hand, or Buyer or Acquisition,
on the other hand, shall have terminated this Agreement (but only to the
extent such terminating party is entitled to do so) pursuant to the
circumstances contemplated by Section 9.1(b)(i) above, then such amounts
shall be paid by the Company to Buyer by wire transfer of immediately
available funds on the date on which the Company shall have entered into
an agreement, arrangement or understanding (including a letter of intent)
with respect to any Acquisition Proposal or, if earlier, the date of
consummation of any Acquisition Proposal;
(ii) if the Company shall have terminated this Agreement (but only
to the extent it is entitled to do so) pursuant to the circumstances
contemplated by Section 9.1(b)(ii) above, then such amounts shall be paid
by the Company to Buyer by wire transfer of immediately available funds on
the date of such termination and as a condition precedent for such
termination; and
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(iii) if Buyer or Acquisition shall have terminated this Agreement
(but only to the extent it is entitled to do so) pursuant to the
circumstances contemplated by Section 9.1(b)(ii) above, then such amounts
shall be paid by the Company to Buyer by wire transfer of immediately
available funds no later than the next Business Day succeeding the date of
such termination.
(d) The Company acknowledges that the Termination Fee and Expense
Reimbursement provided for in this Section 9.1 are an integral part of the
transactions contemplated by this Agreement and not a penalty, and that, without
the Termination Fee and Expense Reimbursement provided for above, Buyer and
Acquisition would not enter into this Agreement. Furthermore, nothing in this
Section 9.1 shall be deemed to limit any liability of any party for any breach
in any material respect of any representations, warranties or covenants
contained in this Agreement that occurs prior to termination of this Agreement.
Section 9.2 Representations and Warranties. The respective
representations and warranties of the Company, on the one hand, and Buyer and
Acquisition, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party. Each and every such
representation and warranty shall expire with, and be terminated and
extinguished by, the Closing, and thereafter none of the Company, Buyer or
Acquisition shall be under any liability whatsoever with respect to any such
representation or warranty. This Section 9.2 shall have no effect upon any other
obligation of the parties hereto, whether to be performed before or after the
Effective Time.
Section 9.3 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the Boards of
Directors of the Company, Buyer or Acquisition, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
Section 9.4 Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered in
person or mailed, by next day delivery service, or sent by facsimile (upon
confirmation of receipt), as follows:
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(a) if to the Company:
T-NETIX, Inc.
2155 Chenault Drive
Suite 410
Carrollton, Texas 75006
Attention: Mr. Richard Cree
Facsimile: (972) 241-1537
with a copy (which shall not constitute notice) to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: Darrel A. Rice, Esq.
Facsimile: (214) 200-0664
(b) if to either Buyer or Acquisition:
c/o H.I.G. Capital, LLC
1001 Brickell Bay Drive, 27th Floor
Miami, Florida 33131
Attention: Mr. Brian Schwartz
Facsimile: (305) 379-2013
with a copy (which shall not constitute notice) to:
White & Case LLP
200 S. Biscayne Boulevard, Suite 4900
Miami, Florida 33131
Attention: Jorge L. Freeland, Esq.
James M. Moakley, Esq.
Facsimile: (305) 358-5744
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third (3rd) Business Day after
the mailing thereof, except for a notice of a change of address, which shall be
effective only upon receipt thereof.
Section 9.5 Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein and supersedes all prior agreements and understandings, oral and written,
with respect thereto, other than the Shareholders Agreement.
Section 9.6 Binding Effect; Benefit; Assignment. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and, with
respect to the provisions of
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Section 6.9 and Section 6.10, shall inure to the benefit of the Persons or
entities benefiting from the provisions thereof who are intended to be
third-party beneficiaries thereof. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of each of the other parties, except
that Acquisition may assign and transfer its right and obligations hereunder to
any of its Affiliates. Except as provided in the first sentence of this Section
9.6, nothing in this Agreement, expressed or implied, is intended to confer on
any Person (including any current or former employees of the Company), other
than the parties hereto, any rights or remedies.
Section 9.7 Amendment and Modification. Subject to applicable Law,
this Agreement may be amended, modified and supplemented in writing by the
parties hereto in any and all respects before the Effective Time
(notwithstanding any stockholder approval), by action authorized by the
respective Boards of Directors of Buyer, Acquisition and the Company or, in the
case of Buyer or Acquisition, by the officers authorized by their its Board of
Directors; provided, however, that after any such stockholder approval, no
amendment shall be made which by Law requires further approval by such
stockholders without such further approval.
Section 9.8 Time Is of the Essence. With regard to the dates and
time periods set forth or referred to in this Agreement, time is of the essence.
Section 9.9 Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only, do
not constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 9.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
Section 9.11 APPLICABLE LAW. THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS RULES
THEREOF, EXCEPT THAT THE DGCL SHALL APPLY TO THE EXTENT REQUIRED IN CONNECTION
WITH THE STOCKHOLDERS' MEETING, IF ANY, AND THE MERGER. THE STATE OR FEDERAL
COURTS LOCATED WITHIN THE STATE OF NEW YORK SHALL HAVE JURISDICTION OVER ANY AND
ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT
OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS
CONTEMPLATED HEREBY AND THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES HEREBY WAIVES AND AGREES NOT TO
ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY CLAIM THAT (I) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
SUCH COURTS, (II) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL
PROCESS ISSUED BY SUCH COURTS OR (III) ANY LITIGATION OR OTHER PROCEEDING
COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM. THE PARTIES HEREBY
AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH
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ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 9.4, OR IN SUCH
OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE
THEREOF AND HEREBY WAIVE ANY OBJECTIONS TO SERVICE ACCOMPLISHED IN THE MANNER
HEREIN PROVIDED.
Section 9.12 Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable term, provision, covenant or restriction or
any portion thereof had never been contained herein.
Section 9.13 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for convenience of reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
Section 9.14 Specific Enforcement. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at Law or in equity.
Section 9.15 Waiver of Jury Trial. Each of the parties to this
Agreement hereby irrevocably waives all right to a trial by jury in any action,
proceeding or counterclaim arising out of or relating to this Agreement or the
transactions contemplated hereby.
* * * * *
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IN WITNESS WHEREOF, each of Buyer, Acquisition and the Company have
caused this Agreement to be executed by their respective officers thereunto duly
authorized, all as of the date first above written.
TZ HOLDINGS, INC.
By /s/ Brian D. Schwartz
-------------------------------
Name: Brian D. Schwartz
Title: President
TZ ACQUISITION, INC.
By /s/ Brian D. Schwartz
-------------------------------
Name: Brian D. Schwartz
Title: President
T-NETIX, INC.
By /s/ Richard E. Cree
-------------------------------
Name: Richard E. Cree
Title: Chief Executive Officer
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS........................................................2
Section 1.1 Definitions................................................2
ARTICLE II THE OFFER.........................................................8
Section 2.1 The Offer..................................................8
Section 2.2 Company Actions...........................................10
Section 2.3 Composition of the Board of Directors.....................11
Section 2.4 Top-Up Option.............................................12
ARTICLE III THE MERGER......................................................14
Section 3.1 The Merger................................................14
Section 3.2 Conversion of Stock.......................................14
Section 3.3 Dissenting Stock..........................................15
Section 3.4 Surrender of Certificates.................................15
Section 3.5 Payment...................................................16
Section 3.6 No Further Rights of Transfers............................17
Section 3.7 Stock Option and Other Plans..............................17
Section 3.8 Warrants..................................................18
Section 3.9 Certificate of Incorporation of the Surviving
Corporation...............................................18
Section 3.10 By-laws of the Surviving Corporation......................18
Section 3.11 Directors and Officers of the Surviving Corporation.......18
Section 3.12 Closing...................................................18
Section 3.13 Withholding Rights........................................19
Section 3.14 Further Assurances .......................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................19
Section 4.1 Due Organization, Good Standing and Corporate Power.......19
Section 4.2 Authorization and Validity of this Agreement..............20
Section 4.3 Capitalization............................................20
Section 4.4 Consents and Approvals; No Violations.....................22
Section 4.5 Company Reports and Financial Statements..................22
Section 4.6 No Undisclosed Liabilities................................23
Section 4.7 Absence of Certain Changes................................24
Section 4.8 Title to Properties; Encumbrances.........................24
Section 4.9 Compliance with Laws......................................24
Section 4.10 Litigation................................................24
Section 4.11 Employee Benefit Plans....................................25
Section 4.12 Employment Relations and Agreements.......................27
Section 4.13 Taxes.....................................................28
Section 4.14 Intellectual Property.....................................30
Section 4.15 Proxy Statement; Offer Documents and Schedule 14D-9.......32
Section 4.16 Broker's or Finder's Fee..................................33
(i)
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Section 4.17 Certain Contracts and Arrangements........................33
Section 4.18 Government Contracts......................................34
Section 4.19 Environmental Laws and Regulations........................35
Section 4.20 State Takeover Statutes...................................36
Section 4.21 Voting Requirements.......................................36
Section 4.22 Opinion of Financial Advisor..............................36
Section 4.23 Insurance.................................................36
Section 4.24 Affiliate Transactions....................................37
Section 4.25 Cumulative Breach.........................................37
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER AND ACQUISITION...........37
Section 5.1 Due Organization, Good Standing and Corporate Power.......37
Section 5.2 Authorization and Validity of Agreement...................37
Section 5.3 Consents and Approvals; No Violations.....................38
Section 5.4 Offer Documents, Schedule 14D-9 and Proxy Statement.......38
Section 5.5 Proxy Statement...........................................38
Section 5.6 Broker's or Finder's Fee..................................39
Section 5.7 Acquisition's Operations..................................39
Section 5.8 Financing.................................................39
ARTICLE VI TRANSACTIONS PRIOR TO CLOSING DATE...............................40
Section 6.1 Access to Information Concerning Properties and Records...40
Section 6.2 Confidentiality...........................................40
Section 6.3 Conduct of the Business of the Company Pending the
Closing Date..............................................41
Section 6.4 Company Stockholders' Meeting; Preparation of Proxy
Statement; Short Form Merger..............................44
Section 6.5 Commercially Reasonable Efforts...........................46
Section 6.6 No Solicitation of Other Offers...........................47
Section 6.7 Notification of Certain Matters...........................49
Section 6.8 Antitrust Laws............................................50
Section 6.9 Employee Benefits.........................................50
Section 6.10 Directors' and Officers' Insurance........................51
Section 6.11 Public Announcements......................................52
Section 6.12 Subsequent Filings........................................52
Section 6.13 Communication to Employees................................53
Section 6.14 Material Consents and Waivers.............................53
Section 6.15 Transaction Financing Cooperation.........................53
ARTICLE VII CONDITIONS PRECEDENT............................................53
Section 7.1 Conditions Precedent to Each Party's Obligation to
Effect the Merger.........................................53
ARTICLE VIII TERMINATION AND ABANDONMENT....................................54
Section 8.1 Termination...............................................54
(ii)
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Section 8.2 Effect of Termination.....................................57
ARTICLE IX MISCELLANEOUS...................................................57
Section 9.1 Fees and Expenses.........................................57
Section 9.2 Representations and Warranties............................59
Section 9.3 Extension; Waiver.........................................59
Section 9.4 Notices...................................................59
Section 9.5 Entire Agreement..........................................60
Section 9.6 Binding Effect; Benefit; Assignment.......................60
Section 9.7 Amendment and Modification................................61
Section 9.8 Time Is of the Essence....................................61
Section 9.9 Headings..................................................61
Section 9.10 Counterparts..............................................61
Section 9.11 APPLICABLE LAW............................................61
Section 9.12 Severability..............................................62
Section 9.13 Interpretation............................................62
Section 9.14 Specific Enforcement......................................62
Section 9.15 Waiver of Jury Trial......................................62
(iii)
ANNEX A
Management Stockholders
1. Mr. W. P. (Paul) Buckthal;
2. Mr. Daniel M. Carney;
3. Ms. Frances Cree;
4. Mr. Harold A. Cree;
5. Mr. Richard E. Cree;
6. The Richard J. Cree Revocable Trust (Richard E. Cree, Trustee);
7. Mr. William R. Cree;
8. Mr. Robert A. Geist;
9. Mr. Daniel J. Taylor; and
10. Mr. Irvin Wall
ANNEX B
Tender Offer Conditions
The capitalized terms used in this Annex B shall have the meanings set
forth in the Agreement to which it is annexed, except that the term "Merger
Agreement" shall be deemed to refer to the Agreement to which this Annex B is
annexed.
Notwithstanding any other provision of the Offer or the Merger Agreement,
Acquisition shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Acquisition's obligation to pay for or
return tendered shares promptly after termination or withdrawal of the Offer),
to pay for any Shares tendered pursuant to the Offer and may terminate or amend
the Offer and may postpone the acceptance for payment of, and payment for, any
Shares, if: (i) there shall not have been validly tendered and not properly
withdrawn prior to the expiration of the Offer (including any extensions thereof
in accordance with Section 2.1(a) of the Merger Agreement) (the "Determination
Time") a number of Shares which represents at least a majority of all issued and
outstanding Shares, on a fully diluted basis ("on a fully-diluted basis"
meaning, at any time, the number of Shares outstanding, together with the Shares
which the Company may be required to issue pursuant to Warrants or Options or
other obligations outstanding at such time under employee stock or similar
benefit plans or otherwise, whether or not vested or then exercisable), on the
date of purchase (the "Minimum Condition"); (ii) any applicable waiting period
(and any extension thereof) under any Antitrust Laws shall not have expired or
been terminated (the "Antitrust Condition"); (iii) the Transaction Financing
shall not have been obtained prior to the proposed date for the initial purchase
of Shares by Acquisition pursuant to the Offer; or (iv) if, at any time on or
after the date of the Merger Agreement and at or before the time of payment for
any such Shares (whether or not any Shares have theretofore been accepted for
payment, or paid for, pursuant to the Offer), any of the following shall exist:
(a) there shall be threatened, instituted or pending any action or
proceeding by any Governmental Entity or by any other Person,
domestic or foreign, before any court of competent jurisdiction or
Governmental Entity: (i) challenging or seeking to, or which could
reasonably be expected to, make illegal, impede, delay or otherwise
directly or indirectly restrain, prohibit or make materially more
costly the Offer or the Merger or seeking to obtain material
damages; (ii) seeking to prohibit or materially limit the ownership
or operation by Buyer or Acquisition of all or any material portion
of the business or assets of the Company and its Subsidiaries taken
as a whole or to compel Buyer or Acquisition to dispose of or hold
separately all or any material portion of the business or assets of
Buyer and its subsidiaries taken as a whole or the Company and its
Subsidiaries taken as a whole, or seeking to impose any limitation
on the ability of Buyer or Acquisition to conduct its business or
own such assets; (iii) seeking to impose limitations on the ability
of Buyer or Acquisition effectively to exercise full rights of
ownership of the shares of Common Stock, including, without
limitation, the right to vote any shares of Common Stock acquired or
owned by Acquisition or Buyer on all matters properly presented to
the Company's stockholders; (iv) seeking to require
ANNEX B
divestiture by Buyer or Acquisition of any shares of Common Stock;
(v) seeking any material diminution in the benefits expected to be
derived by Buyer or Acquisition as a result of the transactions
contemplated by the Offer or the Merger; or (vi) otherwise directly
or indirectly relating to the Offer or the Merger and which could
reasonably be expected to have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole or on Buyer and its
Subsidiaries taken as a whole;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended or issued and applicable to
or deemed applicable to (i) Buyer, Acquisition, the Company or any
Subsidiary of the Company or (ii) the Offer or the Merger, by any
Governmental Entity other than the routine application of the
waiting period and second request provisions of the Antitrust Laws
to the Offer or to the Merger, that could reasonably be expected to
result directly or indirectly in any of the consequences referred to
in paragraph (a) above;
(c) there shall have occurred: (i) any general suspension of trading in,
or limitation on prices for, securities on any United States
securities exchange or in any United States over-the-counter market
(excluding any coordinated trading halt triggered solely as a result
of a specified decrease in a market index); (ii) any material
adverse change in the general political, market, economic or
financial conditions in the United States or abroad; (iii) any
material change in United States or any other currency exchange
rates or a suspension of, or limitation on, the markets therefor;
(iv) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States; (v) any material
limitation (whether or not mandatory) by any United States federal
or United States state Governmental Entity on the extension of
credit by banks or other lending institutions; or (vi) in the case
of any of the foregoing existing at the time of the commencement of
the Offer, an acceleration or worsening thereof;
(d) (i) any representation or warranty of the Company contained in the
Agreement that is qualified as to Material Adverse Effect shall not
be true and correct as of the date of consummation of the Offer as
though made on or as of such date (other than representations and
warranties which, by their terms, address matters only as of another
specified date, which shall be true and correct only as of such
other specified date), (ii) any representation or warranties of the
Company contained in the Agreement that is not qualified as to
Material Adverse Effect (other than the representations and
warranties of the Company in Section 2.2(a), Section 2.2(b), Section
2.2(e), Section 4.2, Section 4.3, Section 4.5, Section 4.7(a),
Section 4.15, Section 4.20, Section 4.21 and Section 4.22) shall not
be true and correct (except where the failure of any such
representations or warranties referred to in this clause (ii) to be
so true and correct in the aggregate has not had, does not have, and
could not reasonably be expected to have, a Material Adverse Effect
on the Company) as of the date of consummation of the Offer as
though made on or as of such date (other than representations and
warranties which, by their terms,
(ii)
ANNEX B
address matters only as of another specified date, which shall be
true and correct only as of such other specified date) and (iii) any
representation or warranty of the Company contained in Section
2.2(e), Section 4.2, Section 4.3, Section 4.5 and Section 4.15 shall
not be materially true and correct or any representation or warranty
of the Company contained in Section 2.2(a), Section 2.2(b), Section
4.7(a), Section 4.20, Section 4.21 and Section 4.22 shall not be
true and correct as of the date of consummation of the Offer as
though made on or as of such date (other than representations and
warranties which, by their terms, address matters only as of another
specified date, which shall be materially true and correct or true
and correct, as the case may be, as of such other specified date);
(e) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement
or covenant of the Company to be performed or complied with by the
Company under the Merger Agreement;
(f) the Board of Directors of the Company or any committee thereof
shall: (i) have withdrawn, modified or amended, or proposed to
withdraw, modify or amend, in a manner adverse to Buyer or
Acquisition, the approval, adoption or recommendation, as the case
may be, of the Offer, the Merger, the Merger Agreement or the
Shareholders Agreement; (ii) shall have approved or recommended, or
proposed to approve or recommend, any Acquisition Proposal; (iii)
shall have announced a neutral position with respect to any
Acquisition Proposal and has not rejected such Acquisition Proposal
within three (3) Business Days of the announcement of such neutral
position; or (iv) shall have resolved to do any of the foregoing;
(g) there shall have occurred any event, change, occurrence, effect,
fact, violation or circumstance having a Material Adverse Effect;
(i) (i) any representation or warranty of the Management Stockholders
contained in the Shareholders Agreement shall not be true and
correct as of the date of consummation of the Offer as though made
on or as of such date (other than representations and warranties
which, by their terms, address matters only as of another specified
date, which shall be true and correct only as of such other
specified date) or (ii) the Management Stockholders shall have
failed to perform any obligation or to comply with any agreement or
covenant of the Management Stockholders to be performed or complied
with by such Management Stockholders under the Shareholders
Agreement (except where the failure of (A) any such representations
or warranties referred to in clause (i) to be so true and correct or
(B) the Management Stockholders to perform such obligations or to
comply with such agreements or covenants referred to in clause (ii)
has not had, does not have, and could not reasonably be expected to
have, in the aggregate, a material adverse effect on the ability of
Acquisition to complete the Offer or the Merger); or
(j) the Merger Agreement shall have been terminated in accordance with
its terms;
(iii)
ANNEX B
which, in the sole judgment of Acquisition, in any such case and
regardless of the circumstances (including any action or inaction by Buyer or
Acquisition) giving rise to any such condition, makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of, or payment for,
Shares.
The foregoing conditions are for the sole benefit of Buyer and Acquisition and
may be asserted by Buyer or Acquisition, or may be waived by Buyer or
Acquisition, in whole or in part in their respective sole discretion at any time
and from time to time prior to the expiration of the Offer or, with respect to
the Antitrust Condition or the conditions set forth in paragraphs (iv)(a) and
(iv)(b), before payment for Shares. The failure by Buyer or Acquisition at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
(iv)