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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to Rule 14a-11(c) or Rule
14a-12
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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(5)
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Total
fee paid:
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1.Calculated
as of the close of business on October 2, 2006, the date of filing of
the preliminary proxy statement.
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Fee
paid previously with preliminary
materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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filing
with the Secretary of Talk America, at or before the Special Meeting,
a
written notice of revocation that is dated a later date than the
proxy;
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submitting,
at or before the Special Meeting, a later-dated proxy relating
to the same
shares, by mail to the Secretary of Talk America or by telephone
or the
Internet in accordance with the instructions on the proxy card,;
or
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attending
the Special Meeting and voting in person by
ballot.
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has
determined that the merger and the merger agreement are advisable,
fair to
and in the best interests of the Company’s
stockholders;
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has
approved the merger agreement; and
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recommends
that Talk America’s stockholders vote “FOR” the adoption of the merger
agreement.
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the
number of shares of our common stock subject to each stock option
as of
the effective time of the merger, multiplied
by
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the
excess of $8.10 over
the exercise price per share of common stock subject to such
option.
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certain
of our executive officers are parties to employment agreements
with the
Company that provide for severance payments by the Company if they
are
terminated or they resign for specified reasons prior to or following
the
effective time of the merger; the terms of the merger agreement
permit the
payment of up to $4.291 million in such severance payments on the
closing
date of the merger and the Company proposes to make the full amount
of
such payments on the closing date;
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under
the terms of the merger agreement, our board of directors is permitted,
in
its sole discretion, to award and pay bonuses to our employees,
including
our executive officers (but not including any of our four non-executive
directors), at or prior to the closing date of the merger, in an
aggregate
amount up to $2.5 million; while our board has generally indicated
that it
expects to award some discretionary bonuses and while our board
has not
yet made any decision as to which, if any, persons would be awarded
bonuses or any amounts thereof, it could determine to award the
full
amount permitted and to award the full amount among some or all
of our
executive officers;
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our
directors and executive officers will have their vested and unvested
stock
options canceled as of the effective time of the merger, and they
will
receive cash payments for each share underlying their options equal
to the
excess, if any, of $8.10 per share over the exercise price per
share of
their stock options, less any applicable withholding taxes. As
of October
31, 2006, our directors and executive officers held stock options
to
acquire an aggregate of 2,848,495 shares, of which options for
2,208,497
shares were vested and of which options for 647,320 shares had
an exercise
price less than $8.10; based on such options holdings, our directors
and
executive officers as a group would be entitled to an aggregate
of cash
payments in respect of such options of approximately $2,777,800
upon
consummation of the merger;
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the
merger agreement provides for indemnification and insurance arrangements
for our current and former directors and officers that will continue
for
six years following the effective time of the merger;
and
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although
Cavalier has not finalized any agreements with any executive officers
of
Talk America, Cavalier expects to enter into employment agreements
with
several of our executive officers, whereby each would continue
to serve as
an officer of the Parent after the
closing.
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the
receipt of Company stockholder
approval;
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the
absence of, or of any pending proceeding seeking, any governmental
order,
decree, judgment, injunction or other ruling that prevents or prohibits
the consummation of the merger;
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the
expiration or termination of the waiting period under the
Hart-Scott-Rodino Act, which condition has been
satisfied;
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the
receipt of applicable consents from the
FCC;
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the
receipt of applicable approvals from the State PUCs that regulate
the
Company’s business or the business of any of its
subsidiaries;
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the
truth and correctness of our representations and warranties as
of the date
of the merger agreement and, except where the failure of our
representations and warranties to be true and correct would not
reasonably
be expected to have a material adverse effect on us and our subsidiaries,
individually or in the aggregate, the truth and correctness of
our
representations and warranties (without giving effect for any materiality
or material difference qualification therein) as of the closing
date or as
of the earlier date for such representations and warranties as
expressly
relate to an earlier date, and the truth and correctness of our
representations and warranties with respect to authority and approvals,
absence of material adverse change and brokers as of the closing
date as
if made on and as of the closing
date;
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since
September 22, 2006, the date of execution of the merger agreement,
no
“material adverse effect” with respect to the Company shall have occurred
and be continuing.
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we
meet a defined minimum financial performance measure based on our
reported
operating income for the quarter ended September 30, 2006 as adjusted
for
a number of items, which condition, based on our review of preliminary
results for the quarter, will be satisfied;
and
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the
performance and compliance, in all material respects, by us of
our
agreements and conditions in the merger
agreement.
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by
either the Parent or the Company
if:
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our
stockholders fail to adopt the merger agreement at the Special
Meeting of
the stockholders or any adjournment of the Special
Meeting;
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the
closing has not occurred on or before January 31, 2007, which we
refer to
as the “termination date,” so long as the failure to complete the merger
is not the result of the failure of the terminating party to comply
with
the terms of the merger agreement;
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there
is any law or final, non-appealable government order, decree or
ruling
that prevents completion of the merger, so long as such law, government
order, decree or ruling is not the result of the failure of the
terminating party to fulfill its obligations under the merger agreement;
or
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there
is a breach by the non-terminating party of its representations,
warranties, covenants or agreements in the merger agreement such
that the
closing conditions would not be satisfied, which breach has not
been cured
within 20 business
days (or is incapable of being cured before the termination
date);
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by
the Company, prior to adoption of the merger agreement, if we receive
a
superior proposal in accordance with the terms of the merger agreement,
but only after we have provided the Parent a three-business-day
period to
make an offer that is at least as favorable as the superior
proposal;
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by
the Parent, if:
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our
board of directors withdraws or modifies its recommendation that
the
Company’s stockholders vote to adopt the merger agreement or recommends
or
approves another takeover proposal;
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our
board of directors fails to include in our proxy statement its
recommendation that the Company’s stockholders vote to adopt the merger
agreement;
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our
board of directors fails to publicly reaffirm its recommendation
of the
merger agreement and the merger within ten days after the Parent
has
requested in writing that our board of directors reaffirm its
recommendation;
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the
Company fails to recommend rejection of a tender or exchange offer
within
ten days after the commencement of such tender or exchange
offer;
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a
takeover proposal is publicly announced and the Company fails to
issue a
press release within ten days after the announcement that reaffirms
the
recommendation of our board of directors that the Company’s stockholders
vote in favor of the merger; or
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the
Company fails to call, give notice of, convene and hold the special
stockholders’ meeting and timely mail this proxy statement, which is not
cured within 10 business days following receipt by the Company
of a notice
of such breach.
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Q:
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What
is the proposed transaction?
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A:
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The
proposed transaction is the acquisition of the Company pursuant
to an
Agreement and Plan of Merger (the “merger agreement”), dated as of
September 22, 2006, by and among the Company, Cavalier Telephone
Corporation, a Delaware corporation (the “Parent”), and Cavalier
Acquisition Corp., a Delaware Corporation, an indirect wholly-owned
subsidiary of the Parent (the “Merger Sub”). Once the merger agreement has
been adopted by Talk America’s stockholders and the other closing
conditions under the merger agreement have been satisfied or waived,
the
Merger Sub will merge with and into Talk America (the “merger”). Talk
America will be the surviving corporation in the merger (the “surviving
corporation”) and will become a wholly owned subsidiary of the
Parent.
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Q:
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What
will I receive in the merger?
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A:
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Upon
completion of the merger, you will receive $8.10 in cash, without
interest, for each share of our common stock that you own. For
example, if
you own 100 shares of our common stock, you will receive $810 in
cash in
exchange for your Talk America
shares.
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Q:
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Where
and when is the Special Meeting?
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A:
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The
Special Meeting will take place at The Lambertville House, 32 Bridge
Street, Lambertville, NJ 08530, on December 15, 2006, at 10:00
a.m.
Eastern Time.
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Q:
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What
vote of our stockholders is required to adopt the merger agreement?
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A:
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For
us to complete the merger, stockholders holding at least a majority
of the
shares of our common stock outstanding at the close of business
on the
record date must vote “FOR” the adoption of the merger
agreement.
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Q:
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How
does the Company’s board of directors recommend that I vote?
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A:
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Our
board of directors recommends that you vote “FOR” the proposal to adopt
the merger agreement. You should read “The Merger — Reasons for the
Merger” for a discussion of the factors that our board of directors
considered in deciding to recommend the adoption of the merger
agreement.
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Q:
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What
do I need to do now?
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A:
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We
urge you to read this proxy statement carefully, including its
annexes,
and to consider how the merger affects you. If you are a stockholder
of
record, then you should, as soon as possible;vote your
proxy:
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by
mail by completing, dating and signing your proxy card and returning
it in
the enclosed return envelope; or
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by
telephone or electronically by the Internet by following the instructions
on your proxy card;
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Q:
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If
my shares are held in “street name” by my broker, will my broker vote my
shares for me?
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A:
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Yes,
but only if you provide instructions to your broker on how to vote.
You
should follow the directions provided by your broker regarding
how to
instruct your broker to vote your shares. Without those instructions,
your
shares will not be voted, which will have the same effect as voting
against the merger.
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Q:
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Can
I change my vote after I have mailed my proxy card?
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A:
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Yes.
You can change your vote at any time before your proxy is voted
at the
Special Meeting. You may revoke your proxy by notifying the Secretary
of
Talk America in writing or by submitting a new proxy card, by mail,
telephone or the Internet, in each case dated after the date of
the proxy
being revoked. In addition, your proxy may be revoked by attending
the
Special Meeting and voting in person. However, simply attending
the
Special Meeting will not revoke your proxy. If you have instructed
a
broker to vote your shares, the above-described options for changing
your
vote do not apply and instead you must follow the instructions
received
from your broker to change your
vote.
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Q:
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Are
appraisal rights available?
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A:
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Yes.
Under Delaware law, holders of our common stock who do not vote
in favor
of adopting the merger agreement will have the right to seek appraisal
of
the fair value of their shares as determined by the Delaware Court
of
Chancery if the merger is completed, but only if they submit a
written
demand for an appraisal prior to the vote on the adoption of the
merger
agreement and they comply with the Delaware law procedures explained
in
this proxy statement. This appraisal amount could be more than,
the same
as or less than the amount a stockholder would be entitled to receive
under the terms of the merger
agreement.
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Q:
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Is
the merger expected to be taxable to me?
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A:
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Yes.
The receipt of $8.10 in cash for each share of our common stock
pursuant
to the merger will be a taxable transaction for U.S. federal income
tax
purposes. For U.S. federal income tax purposes, generally you will
recognize a gain or loss as a result of the merger measured by
the
difference, if any, between $8.10 per share and your adjusted tax
basis in
that share. You should read “The Merger — Material U.S. Federal Income Tax
Consequences” for a more complete discussion of the U.S. federal income
tax consequences of the merger. Tax matters can be complicated,
and the
tax consequences of the merger to you will depend on your particular
tax
situation. You should also consult your tax advisor on the tax
consequences of the merger to you.
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Q:
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What
will the holders of the Company’s stock options and warrants receive in
the merger?
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A:
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As
of the effective time of the merger, all stock options and warrants
to
purchase shares of Company common stock will be canceled and the
holder of
each stock option or warrant, as the case may be, with a per share
exercise price lower than the $8.10 per share merger consideration
will be
entitled to receive a cash payment in an amount equal to the excess,
if
any, of the $8.10 per share merger consideration over the exercise
price
of such option or warrant, less any applicable withholding taxes.
However,
none of the warrants outstanding has a per share exercise price
lower than
the merger consideration, so no payments will be made in respect
of any
warrants.
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Q:
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When
do you expect the merger to be completed?
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A:
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We
are working toward completing the merger as quickly as possible,
and we
anticipate that it will be completed by December 31, 2006. In order
to
complete the merger, we must obtain stockholder approval, and the
other
closing conditions under the merger agreement must be satisfied,
including
the expiration or termination of the waiting period under federal
antitrust laws and the receipt of applicable approvals from the
FCC and
the State PUCs that regulate the Company’s business or the business of any
of its subsidiaries. See “The Merger Agreement — Conditions to the
Merger.”
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Q:
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Should
I send in my stock certificates now?
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A:
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No.
Shortly after the merger is completed, you will receive a letter
of
transmittal with instructions informing you how to send your stock
certificates to the paying agent in order to receive the merger
consideration. You should use the letter of transmittal to exchange
Talk
America stock certificates for the merger consideration to which
you are
entitled as a result of the merger. DO NOT SEND ANY STOCK CERTIFICATES
WITH YOUR PROXY.
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Q:
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Who
can help answer my other questions?
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A:
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If
you have more questions about the merger, you should contact Aloysius
T.
Lawn, IV, Executive Vice President - General Counsel and Secretary,
at
(215) 862-1500. If your broker holds your shares, you should also
call
your broker for additional
information.
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the
risk that the merger may not be consummated in a timely manner
if at
all;
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the
occurrence of any event, change or other circumstance that could
give rise
to the termination of the merger
agreement;
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the
outcome of any legal proceeding against us and others that may
be
instituted following announcement of the merger
agreement;
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risks
related to diverting management’s attention from ongoing business
operations;
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our
dependence on key personnel;
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risks
regarding employee retention;
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changes
in regulatory requirements;
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the
absence of certainty regarding the receipt of required regulatory
approvals or the timing or terms of such regulatory approvals;
and
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other
risks detailed in our current filings with the Securities and Exchange
Commission (the “SEC”), including our most recent filings on Form 10-K or
Form 10-Q, which discuss these and other important risk factors
concerning
our operations.
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if
you hold your shares in your name as a stockholder of record, by
notifying
in writing our Secretary, Aloysius T. Lawn, IV, at 6805 Route 202,
New
Hope, Pennsylvania 18938;
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by
attending the Special Meeting and voting in person (your attendance
at the
Special Meeting will not, by itself, revoke your proxy; you must
vote in
person at the Special Meeting);
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by
submitting a later-dated proxy
card;
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if
you voted by telephone or the Internet, by voting a second time
by
telephone or Internet; or
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if
you have instructed a broker, bank or other nominee to vote your
shares,
by following the directions received from your broker, bank or
other
nominee to change those
instructions.
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The
current and historical market prices of the Company’s common stock,
including the market price of the Company’s common stock relative to those
of other industry participants and general market indices, and
the fact
that cash merger price of $8.10 per share represents a substantial
premium
to the average closing share prices of the Company’s common stock over the
30-day (approximately 37.0% premium), 60-day (approximately 37.7%)
and
90-day (approximately 34.1%) periods preceding September 21, 2006,
the
last trading day prior to the execution of the merger
agreement.
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The
merger consideration is all cash.
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The
advantages and disadvantages of alternatives to the merger, including
the
Company remaining as an independent, publicly traded company and
of
growing through acquisitions or other business combinations, the
potential
for creation of stockholder value, the prospects of an alternative
transaction with a third party (based in part on the Company’s and
Blackstone’s discussions with other potential buyers besides Cavalier, and
that none of these parties was likely to offer a purchase price
greater
than the purchase price offered by Cavalier, and also on the Company’s
discussions with other acquisition and business combination candidates,
and that there were unlikely to be any significant acquisition
or business
combination opportunities available to the Company that it could
afford),
and that the merger was more favorable to the stockholders than
any other
alternative reasonably available to the Company and its stockholders.
See
“—Background of the Merger”.
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The
timing of the merger and the risk that if we do not accept Cavalier’s
offer now, we may not have another opportunity to do
so.
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The
prospects of successful implementation of the Company’s recently revised
marketing strategy and the ability of management to achieve their
forecasted results, particularly in light of recent adverse developments
and anticipated adverse developments in the Company’s business and
competitive position and in the competitive local exchange industry
generally.
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The
financial presentation of Blackstone, including its opinion to
the effect
that, as of that date and based upon and subject to the assumptions,
qualifications and limitations stated in that opinion, the merger
consideration of $8.10 per share in cash to be received by the
Company’s
stockholders pursuant to the merger agreement was fair, from a
financial
point of view, to the Company’s stockholders (see “— Opinion of The
Blackstone Group L.P.”).
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The
merger is subject to the approval and adoption of the merger agreement
by
holders of a majority of the outstanding shares of the Company’s common
stock, and the availability of appraisal rights to holders of the
Company’s common stock who comply with all of the required procedures
under Delaware law, which allows stockholders to seek appraisal
of the
fair value of their shares as determined by the Delaware Court
of
Chancery. See “DISSENTERS’ RIGHTS OF
APPRAISAL.”
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The
general terms and conditions of the merger agreement, which were
favorable
to the Company and were the product of arms’-length negotiations between
the parties, including the parties’ representations, warranties and
covenants, the conditions to the parties’ obligations, the likelihood of
consummation of the merger, the termination provisions of the merger
agreement and the time necessary to close the
transaction.
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The
Company’s board of directors also considered, among others, the following
favorable terms of the merger
agreement:
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The
merger agreement permits the Company, under certain circumstances,
to
provide non-public information to, and engage in discussions with,
any
third-party that proposes an alternative transaction involving
the
Company, and to terminate the merger agreement to accept a superior
proposal upon payment to the Parent of a $6.25 million termination
fee and
up to an additional $1.25 million for reimbursement of
expenses.
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The
limited nature of the closing conditions included in the merger
agreement
and the likelihood of satisfaction of all conditions to consummation
of
the merger, including the absence of any financing condition. The
Parent
is generally obligated to close the merger notwithstanding any
breaches of
the Company’s representations and warranties, unless those breaches would
have a material adverse effect on the
Company.
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The
Parent and the surviving corporation in the merger will indemnify
the
Company’s directors and officers for all prior acts and maintain the
existing charter and bylaw indemnification provisions for at least
six
years. The Company will purchase a fully prepaid tail insurance
policy
with respect to directors’ and officers’ insurance covering a period of
six years following the merger.
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The
Parent or the surviving corporation in the merger will provide
certain
continuing employee benefits to our employees for a period of time
following the merger.
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The
risks and costs to the Company if the merger does not close, including
the
diversion of management and employee attention, potential employee
attrition and the potential effect on business and customer
relationships.
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Our
stockholders will lose the opportunity to participate in any future
earnings growth of the Company and will not benefit from any future
appreciation in the value of the
Company.
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The
all-cash transaction is taxable to the Company’s stockholders for U.S.
federal income tax purposes.
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The
interests of the Company’s officers and directors in the merger that are
in addition to, or different from, those of our stockholders
generally.
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The
Company’s board of directors also considered, among others, the following
negative terms of the merger
agreement:
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| § |
The
restrictions on solicitation of alternative
proposals.
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| § |
The
right of Parent to obtain information with respect to any alternative
proposals and to a three-business-day period to make adjustments
to its
proposal before the Company’s board of directors can change its
recommendation or the Company can terminate the merger agreement
to enter
into a superior proposal.
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| § |
If
the merger agreement is terminated under certain circumstances,
the
Company is obligated to pay the Parent a $6.25 million termination
fee and
up to an additional $1.25 million for expenses reimbursement. This
provision will make it more costly for a third party to effect
an
alternative transaction.
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The
possibility that certain provisions in the merger agreement could
discourage a competing proposal to acquire the Company or lower
the price
per share a competing bidder may be willing to pay in an alternative
transaction. However, after considering certain factors and after
discussions with the Company’s legal and financial advisors, the Company’s
board of directors concluded that these provisions should not preclude
other parties from making a competing
proposal.
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The
restrictions on the conduct of the Company’s business prior to the
completion of the merger, requiring the Company to conduct its
business in
the ordinary course consistent with past practice, subject to specific
limitations, which may, among other things, delay or prevent the
Company
from undertaking business opportunities that may arise pending
completion
of the merger.
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has
determined that the merger and the merger agreement are advisable,
fair to
and in the best interests of the Company’s
stockholders;
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has
approved the merger agreement; and
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recommends
that the Company’s stockholders vote “FOR” the adoption of the merger
agreement.
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reviewed
certain publicly available information concerning our business
and
financial condition that it believed to be relevant to its
inquiry;
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reviewed
certain internal information concerning our business, financial
condition,
and operations that it believed to be relevant to its
inquiry;
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reviewed
certain internal financial analyses, estimates and forecasts relating
to
the Company prepared and furnished to Blackstone by our management,
including our 2006 budget and long-term business
plan;
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reviewed
the reported prices and trading activity for our common
stock;
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reviewed
an unexecuted draft of the merger agreement dated September 21,
2006;
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held
discussions with members of our senior management concerning our
business,
operating environment, financial condition, prospects and strategic
objectives;
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reviewed
publicly available financial and stock market data with respect
to certain
other competitive local exchange carriers (“CLECs”) that are in businesses
that Blackstone believed to be generally comparable to those of
the
Company;
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reviewed
the financial terms of certain recent CLEC business combinations
that
Blackstone believed to be
comparable;
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reviewed
the premiums over trading prices paid in recent acquisitions of
publicly-traded companies that Blackstone believed to be
comparable;
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| · |
performed
a discounted cash flow analysis of the Company based on our business
plan
referred to above;
|
| · |
performed
a leveraged buyout analysis of the Company based on our business
plan
referred to above; and
|
| · |
conducted
such other financial studies, analyses, and investigations, and
considered
such other information as Blackstone deemed necessary or
appropriate.
|
|
($
in millions)
|
2006E
|
2007E
|
2008E
|
2009E
|
2010E
|
|
|
Revenues
|
||||||
|
On-Net
|
$249.9
|
$264.9
|
$302.8
|
$340.1
|
$372.1
|
|
|
Off-Net
|
187.6
|
105.7
|
70.3
|
51.0
|
40.5
|
|
|
Total
|
$437.6
|
$370.6
|
$373.1
|
$391.1
|
$412.6
|
|
|
EBITDA
|
||||||
|
On-Net
|
$1.5
|
$11.6
|
$30.5
|
$45.4
|
$60.6
|
|
|
Off-Net
|
53.7
|
30.9
|
21.7
|
16.6
|
13.7
|
|
|
Total
|
$55.2
|
$42.5
|
$52.1
|
$62.0
|
$74.3
|
|
|
Capital
Expenditures / Capitalized Software Costs
|
||||||
|
On-Net
|
$29.9
|
$21.9
|
$22.1
|
$22.1
|
$22.1
|
|
|
Off-Net
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
|
|
Total
|
$29.9
|
$21.9
|
$22.1
|
$22.1
|
$22.1
|
|
| · |
Broadwing
Corporation
|
| · |
Cbeyond
Communications, Inc.
|
| · |
Covad
Communications Group, Inc.
|
| · |
Eschelon
Telecom, Inc.
|
| · |
ITC^DeltaCom,
Inc.
|
| · |
Time
Warner Telecom Inc.
|
| · |
US
LEC Corp.
|
| · |
XO
Holdings, Inc.
|
|
|
Total
Enterprise Value as a Multiple of
|
||||||
|
|
Low
|
High
|
Mean
|
Mean
CLEC,
ESCH,
ITCD
|
|||
|
2006E
Revenues
|
0.8x
|
3.7x
|
1.7x
|
1.1x
|
|||
|
2007E
Revenues
|
0.8x
|
3.5x
|
1.5x
|
1.0x
|
|||
|
2006E
EBITDA
|
6.2x
|
23.2x
|
12.5x
|
6.7x
|
|||
|
2007E
EBITDA
|
4.8x
|
17.5x
|
9.9x
|
5.8x
|
|||
|
2006E
EBITDA — Capital Expenditures
|
13.4x
|
18.8x
|
16.0x
|
14.6x
|
|||
|
2007E
EBITDA — Capital Expenditures
|
11.4x
|
23.0x
|
15.1x
|
12.8x
|
|||
|
Target
|
Acquiror
|
|
US
LEC Corp.
|
PAETEC
Communications, Inc.
|
|
Xspedius
Communications
|
Time
Warner Telecom Inc.
|
|
Mpower
Communications Corp.
|
U.S.
TelePacific Corp.
|
|
TelCove,
Inc.
|
Level
3 Communications, Inc.
|
|
ICG
Communications, Inc.
|
Level
3 Communications, Inc.
|
|
Conversent
Communications, LLC
|
Choice
One Communications Inc. / CTC Communications Corp.
|
|
Electric
Lightwave, Inc.
|
Integra
Telecom, Inc.
|
|
Oregon
Telecom, Inc.
|
Eschelon
Telecom, Inc.
|
|
LDMI
Telecommunications, Inc.
|
Talk
America Holdings, Inc.
|
|
Lightship
Telecom LLC
|
CTC
Communications Corp.
|
|
Advanced
TelCom, Inc.
|
Eschelon
Telecom, Inc.
|
|
Focal
Communications Corporation
|
Corvis
Corporation
|
|
|
Transaction
Total Enterprise Value as a Multiple of
|
||||||
|
|
Low
|
High
|
Mean
|
Median
|
|||
|
Revenues
|
0.4x
|
3.2x
|
1.4x
|
1.2x
|
|||
|
EBITDA
|
5.2x
|
11.8x
|
7.8x
|
7.6x
|
|||
|
|
Premium
to Market Per Share Price
|
||||
|
|
Mean
|
Median
|
Talk
America / Cavalier
|
||
|
1
day prior to announcement
|
22.4%
|
20.6%
|
22.4%
|
||
|
1
week prior to announcement
|
23.4%
|
23.1%
|
25.7%
|
||
|
1
month prior to announcement
|
25.7%
|
23.9%
|
37.0%
|
||
| · |
purports
to be brought on behalf of all Talk America’s stockholders (excluding the
defendants and their affiliates);
|
| · |
alleges,
among other things, that the individual defendants (the Company’s
directors) breached their fiduciary obligations to the Company’s
stockholders in proposing to acquire [sic] the public shares of
Talk
America at $8.10;
|
| · |
alleges
that Cavalier has aided and abetted Talk America and its directors’
alleged wrongdoing;
|
| · |
alleges
that the merger consideration is unfair to the public stockholder
of Talk
America since (i) there is a higher bona fide offer for $9.00 per
share
(apparently referring to the conditional Sun Capital proposal);
(ii) the
$8.10 proposed acquisition price fails to reflect and is far below
the
true valuation of Talk America; and (iii) the merger agreement
does not
contain a “go-shop” provision during which period only a substantially
reduced break-up fee would be payable if a higher bid were to emerge;
|
| · |
alleges
that, as a result of defendants’ failure to take such steps as their
fiduciary obligations require, plaintiff and other class members
have been
and will be damaged in that they have not and will not receive
their
proportionate share of the value of the Company assets and business,
and
have been and will be prevented from obtaining a fair price for
their
common stock; and
|
| · |
seeks
various forms of relief, including certification of the purported
class,
an injunction against the consummation of the merger unless and
until a
fair price is paid, unspecified money damages plus interest thereon
and
attorneys’ fees and expenses incurred in connection with the respective
lawsuit.
|
| · |
the
number of shares of our common stock subject to each stock option
as of
the effective time of the merger, multiplied
by
|
| · |
the
excess of $8.10 over the exercise price per share of common stock
subject
to such stock option.
|
|
No.
of Shares Underlying Stock Options(1)
|
Weighted
Average Exercise Price of Stock Options with exercise price less
than the
$8.10
|
Resulting
Consideration for Stock Options with exercise price less than the
$8.10
|
||
|
Number
of Shares Underlying Stock Options with exercise price less than
the
$8.10
|
Number
of Shares Underlying Stock Options with exercise price equal to
or higher
than the $8.10
|
|||
|
Gabriel
Battista
Chairman
of the Board of Directors
|
183,821
|
457,844
|
$3.56
|
$835,205
|
|
Mark
Fowler
Director
|
25,000
|
50,000
|
$4.90
|
$80,100
|
|
Robert
Korzeniewski
Director
|
15,000
|
30,000
|
$7.36
|
$11,100
|
|
Ronald
Thoma
Director
|
25,000
|
40,000
|
$4.90
|
$80,100
|
|
Edward
B. Meyercord, III
Chief
Executive Officer, President and Director
|
100,000
|
616,666
|
$3.77
|
$433,500
|
|
Warren
Brasselle
Executive
Vice President - Network Operations
|
28,333
|
160,000
|
$1.53
|
$186,148
|
|
Jeffrey
Earhart
Executive
Vice President - Customer Operations
|
31,000
|
160,000
|
$6.00
|
$65,100
|
|
Aloysius
T. Lawn, IV
Executive
Vice President - General Counsel and Secretary
|
105,833
|
176,666
|
$3.47
|
$490,449
|
|
Timothy
W. Leonard
Chief
Information Officer
|
31,666
|
143,333
|
$3.23
|
$154,146
|
|
Patrick
O’Leary
Executive
Vice President - Business Services
|
--
|
--
|
N/A
|
$0
|
|
Thomas
Walsh
Senior
Vice President - Finance and Treasurer
|
1,667
|
148,333
|
$1.53
|
$10,952
|
|
Paul
Walker
Senior
Vice President - Marketing
|
50,000
|
50,000
|
$6.38
|
$86,000
|
|
Mark
Wayne
Senior
Vice President - Business Sales
|
--
|
33,333
|
N/A
|
$0
|
|
David
G. Zahka
Chief
Financial Officer
|
50,000
|
135,000
|
$1.20
|
$345,000
|
|
All
directors and executive officers as a group (14 persons)
|
647,320
|
2,201,175
|
$4.29
|
$2,777,800
|
| · |
a
citizen or individual resident of the United States for U.S. federal
income tax purposes;
|
| · |
a
corporation, or other entity taxable as a corporation for U.S.
federal
income tax purposes, created or organized in or under the laws
of the
United States, any State thereof or the District of
Columbia;
|
| · |
a
trust if it (i) is subject to the primary supervision of a court
within
the United States and one or more U.S. persons (as described in
Section
7701(a)(30) of the Code) have the authority to control all substantial
decisions of the trust or (ii) has a valid election in effect under
applicable U.S. Treasury Regulations to be treated as a U.S. person;
or
|
| · |
an
estate the income of which is subject to U.S. federal income tax
regardless of its source.
|
| · |
the
amount of cash received in exchange for such common stock;
and
|
| · |
the
U.S. holder’s adjusted tax basis in such common
stock.
|
| · |
held
in the Company’s treasury immediately prior to the effective time of the
merger;
|
| · |
held
by any wholly owned subsidiary of the Company immediately prior
to the
effective time of the merger; and
|
| · |
as
to which the Company’s stockholders demand appraisal in compliance with
Delaware law.
|
| · |
the
number of shares of our common stock subject to each stock option,
as of
the effective time of the merger, multiplied
by
|
| · |
the
excess of $8.10 over the exercise price per share of common stock
subject
to such stock option.
|
| · |
our
and our subsidiaries’ due organization, good standing and corporate power
to operate our businesses;
|
| · |
our
corporate power and authority to enter into the merger agreement
and to
consummate the transactions contemplated by the merger
agreement;
|
| · |
unanimous
determination of our board of directors that the merger agreement
and
merger are fair to and in the best interests of the Company and
our
stockholders;
|
| · |
our
capitalization;
|
| · |
the
absence of any violation of or conflict with our organizational
documents,
applicable law or certain agreements as a result of entering into
the
merger agreement and consummating the merger, except those that
have been
disclosed to the Parent;
|
| · |
the
required filing, consents and approvals of governmental entities
as a
result of the merger, except those that, individually or in the
aggregate,
the failure to obtain do not or would not reasonably be expected
to result
in a material difference;
|
| · |
our
SEC filings since January 1, 2003 and the financial statements
contained
therein;
|
| · |
our
compliance with the Sarbanes-Oxley Act of 2002 and its related
rules;
|
| · |
the
absence of liabilities, with certain
exceptions;
|
| · |
the
accuracy and completeness of information supplied by us in this
proxy
statement;
|
| · |
no
material adverse effect since December 31,
2005;
|
| · |
real
property owned and leased by us, title to assets, and all switches,
switch
locations and certain network facility
information;
|
| · |
our
material contracts;
|
| · |
environmental
matters;
|
| · |
the
absence of undisclosed litigation or outstanding court orders against
us
other than those that, individually or in the aggregate, do not
or would
not reasonably be expected to result in a material
difference;
|
| · |
our
possession of all licenses and permits necessary to operate our
properties
and carry on our business, other than those for which our failure
to hold
such licenses or permits, individually or in the aggregate, do
not and
would not reasonably be expected to result in a material
difference;
|
| · |
our
compliance with all applicable laws other than those disclosed
to the
Parent;
|
| · |
our
intellectual property;
|
| · |
tax
matters;
|
| · |
employment
and labor matters affecting us, including matters relating to our
employee
benefit plans;
|
| · |
the
absence of undisclosed interested party transactions between January
1,
2006 and the date of the merger
agreement;
|
| · |
the
absence of undisclosed broker’s
fees;
|
| · |
our
insurance policies;
|
| · |
our
relationship with our suppliers;
|
| · |
the
inapplicability of state takeover statutes to the
merger;
|
| · |
the
receipt by us of a fairness opinion from Blackstone;
and
|
| · |
the
inapplicability of the rights agreement to the merger agreement,
the
merger and the transactions contemplated by the merger
agreement.
|
| · |
the
Parent’s and the Merger Sub’s due organization, good standing and
corporate power to operate their
businesses;
|
| · |
the
Parent’s and the Merger Sub’s corporate power and authority to enter into
the merger agreement and to consummate the transactions contemplated
by
the merger agreement;
|
| · |
the
absence of any violation of or conflict with the organizational
documents
of the Parent and the Merger Sub, applicable law or certain agreements
as
a result of entering into the merger agreement and consummating
the
merger, except where any such violation or conflict, individually
or in
the aggregate, would not reasonably be expected to prevent or materially
delay the consummation of the
merger;
|
| · |
required
filings, consents and approvals of governmental entities as a result
of
the merger, except those that the failure to obtain, individually
or in
the aggregate, would not reasonably be expected to prevent or materially
delay consummation of the merger;
|
| · |
the
accuracy and completeness of information supplied by the Parent
and the
Merger Sub in this proxy statement;
|
| · |
the
absence of undisclosed broker’s
fees;
|
| · |
the
absence of litigation or pending litigation against the Parent
or the
Merger Sub that individually or in the aggregate, would reasonably
be
expected to impair the ability of the Parent or Merger Sub to perform
its
obligations under the merger agreement or prevent or materially
delay
consummation of the merger;
|
| · |
the
operations of the Merger Sub; and
|
| · |
the
Parent having sufficient funds to consummate the transactions contemplated
by the merger agreement and to perform all of its obligations under
the
merger agreement.
|
| · |
conduct
our business only in the ordinary course of business consistent
with past
practice and in compliance in all material respects with applicable
laws,
including the Communications Act of 1934, as amended, and the
communications related statutes of each state in which the Company
or any
of its subsidiaries operates, and the implementing rules, regulations,
orders and policies of the FCC and any State PUC that regulates
the
business of the Company or any of its subsidiaries;
and
|
| · |
use
commercially reasonable efforts to preserve intact our present
organization, to keep available the services of our present officers
and
employees, to preserve our goodwill and relationships with customers,
suppliers and other persons with which we have significant business
dealings, to continue our current sales, marketing and other promotional
policies and programs, to maintain our assets in good repair, order
and
condition, to maintain our insurance policies and risk management
programs
and, in the event of casualty or loss of any of our assets, repair
or
replace such assets with assets of comparable quality, and promptly
notify
the Parent of any material federal, state, local or foreign income
or
franchise and any other material suit, claim, contest, investigation,
administrative or judicial proceeding or audit initiated against
or with
respect to the Company or any of its subsidiaries in respect of
any tax
matter.
|
| · |
knowingly
cause or knowingly permit (to the extent that we have any control
over
such action being taken) any act, event or change which would reasonably
be expected to have a “material adverse effect” on the
Company;
|
| · |
incur
any indebtedness or assume, guarantee or otherwise become responsible
for
the obligations of any person, in either case, other than the capital
lease obligations permitted under the capital expenditures limitation
described below;
|
| · |
amend
or otherwise change our organizational
documents;
|
| · |
declare,
set aside or pay a dividend or other distribution with respect
to any of
our or our subsidiaries’ capital
stock;
|
| · |
split,
combine, reclassify, or repurchase, redeem or otherwise acquire
any of our
or our subsidiaries’ securities or any securities convertible into our or
our subsidiaries’ securities;
|
| · |
issue
or sell, or enter into any contract for the issuance or sale of,
any of
our or our subsidiaries’ capital stock or any securities convertible into
our or our subsidiaries’ capital
stock;
|
| · |
cause
to become effective our 2006 Employee Stock Purchase
Plan;
|
| · |
sell,
assign, pledge, encumber, transfer or otherwise dispose of any
of our or
our subsidiaries’ registered intellectual property or any other material
assets;
|
| · |
acquire
(including by merger, consolidation, or acquisition of stock or
assets)
any interest in any person or any assets other than acquisitions
of
inventory, equipment and supplies in the ordinary course of
business;
|
| · |
incur
any capital expenditures or commitments or additions to our or
our
subsidiaries’ property, plant and equipment, except for capital
expenditures, capital lease obligation or commitments or additions
of not
less than $1,500,000 in the aggregate per calendar month, as and
to the
extent mutually agreed by the Parent and the Company, and for certain
other and additional expenditures;
|
| · |
except
for the taking of certain permitted actions, increase the compensation
of
our or any of our subsidiaries’ directors, employees, consultants
(including any increase pursuant to any written bonus, pension,
profit-sharing or other benefit or compensation plan, policy or
arrangement or commitment), or increase any such compensation or
bonus
payable to any of our or our subsidiaries’ officers, stockholders,
directors, consultants or agents having an annual salary or remuneration
in excess of $100,000;
|
| · |
take
any action reasonably within our control to materially increase
or
decrease the total number of our or our subsidiaries’ employees in any
functioning department;
|
| · |
except
for the making of up to $4.3 million in severance payments as of
the
closing date and the payment of up to $2.5 million in bonuses,
and the
taking of certain other actions permitted or excepted, pay or commit
to
pay any retention, transaction bonus, severance or termination
pay other
than as required by our existing plans or agreements, or enter
into any
employment, deferred compensation, consulting or other similar
agreement
with any past or current directors, officers, employees or consultant
of
the Company; or adopt any additional employee benefit plan; or
make any
contribution to or amend or terminate or extend any pension or
profit-sharing plan or other employee benefit plan; or loan or
advance any
money or other property to any past or current directors, officers,
employees of the Company; or allow for the commencement of any
new
offering periods under the Company’s employee stock purchase plan;
|
| · |
change
our independent public accountants or change our accounting methods
or
accounting practices;
|
| · |
make
or change any material tax election, incur any material tax liability
or
file any amended tax return, enter into any closing agreement,
settlement,
or compromise with respect to any tax claim or assessment related
to the
Company or any of its subsidiaries, knowingly surrender any right
to claim
a refund of taxes, or consent to any extension or waiver of the
limitation
period applicable to any tax claim or assessment relating to the
Company
or any of its subsidiaries;
|
| · |
enter
into, amend, modify or consent to the termination of, or fail to
perform
any material obligations under, any material contract or any material
rights with respect to such material
contract;
|
| · |
pay,
discharge or settle any material claim, action, proceeding or
investigation litigation for an amount in excess of $100,000 individually
or $250,000 in the aggregate, except to the extent reserved against
in the
most recent consolidated financial statements included in the SEC
reports
filed by the Company prior to the execution of the merger agreement;
|
| · |
settle,
compromise or cancel any material debts owed to or claims by us
except in
the ordinary course consistent with past practice or consent to
the
issuance of any injunction, decree, order or judgment restricting
or
otherwise affecting our business or
operations;
|
| · |
enter
into any new line of business;
|
| · |
take
any action that would create a requirement to make a filing, registration
or application with, or seek the waiver, consent or approval of,
the FCC,
any State PUC or municipal franchising authority or any other government
entity, or discontinue or withdraw any authorized service or voluntarily
relinquish any of our permits or communications licenses;
or
|
| · |
knowingly
take or agree in writing or otherwise take any of the foregoing
actions or
any other action that would reasonably be expected to delay or
prevent the
satisfaction of any of the conditions precedent to closing the
merger.
|
| · |
directly
or indirectly solicit, initiate, knowingly encourage or take any
other
action to knowingly facilitate a takeover
proposal;
|
| · |
enter
into any agreement, arrangement or understanding with respect to
any
takeover proposal;
|
| · |
initiate
or participate in discussions relating to a takeover
proposal;
|
| · |
furnish
or disclose any information to a third party with respect to a
takeover
proposal; or
|
| · |
grant
any waiver or release under any standstill agreement relating to
our
equity securities.
|
| · |
acquisition,
directly or indirectly, of a business constituting 15% or more
of our net
revenues, net income or assets;
|
| · |
acquisition,
directly or indirectly, of 15% or more of the voting power of the
Company;
|
| · |
tender
offer or exchange offer that, if consummated, would result in a
third
party beneficially owning 15% or more of the voting power of the
Company;
or
|
| · |
merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving
us.
|
| · |
furnish
information regarding the Company and its subsidiaries to the person
who
has made the takeover proposal (provided that such person enters
into a
confidentiality agreement that is no less restrictive than our
confidentiality agreement with the Parent), provided all such information
is (or has already been) provided to the Parent;
and
|
| · |
participate
in discussions or negotiations regarding the takeover
proposal.
|
| · |
withhold,
withdraw or modify its approval or recommendation of the merger
agreement
or the merger;
|
| · |
recommend
or approve any takeover proposal;
or
|
| · |
approve
or recommend or allow entering into any letter of intent, memorandum
of
understanding, acquisition agreement or similar agreement with
respect to
any takeover proposal.
|
| · |
provide
health benefits to any of our employees that are offered and accept
continued employment by the surviving corporation, the Parent or
its
subsidiaries under an arrangement substantially similar to that
provided
to similarly-situated employees of the Parent or its subsidiaries;
|
| · |
provide
our employees that are offered and accept employment with the Parent
and
its subsidiaries, and their eligible dependents, with credit for
all
purposes (including for purposes of eligibility to participate,
vesting,
benefit accrual and eligibility to receive benefits) under any
employee
benefit plan, program or arrangement of the Parent, the surviving
corporation or their respective subsidiaries for service accrued
or deemed
accrued prior to the effective time of the merger with the Company
or its
subsidiaries to the extent that such service was credited under
the
analogous plan of the Company and its subsidiaries, except that
such
service shall not operate to duplicate any benefit or the funding
of any
such benefit, and such service shall not be required to be counted
with
respect to any equity incentive award or benefit accrual under
any defined
benefit plan;
|
| · |
for
purposes of participation in any medical plan of the Parent (i)
waive any
preexisting condition limitations to the extent waived under the
applicable medical plan of the Company and (ii) credit employees
for any
out of pocket expenditures, deductibles and employee contributions
that
were credited under our medical
plans;
|
| · |
cause
the surviving corporation to honor, in accordance with their terms,
all
contracts and commitments as in effect immediately prior to the
execution
date of the merger between us and any current or former employees
or
directors; and
|
| · |
following
the effective time of the merger, cause the surviving corporation
and its
subsidiaries to offer to pay, subject to receipt of a general release
in
customary form, severance benefits of two weeks base salary and
health
insurance benefits plus two weeks of base salary and such health
insurance
benefit for each full or partial year (in excess of the first full
year)
of employment with us to (i) management employees of the surviving
corporation and its subsidiaries whose employment is terminated
without
cause within 90 days after the closing date and (ii) employees
who left
within 90 days after the closing date whose continued employment
is
conditioned upon their accepting a reduced base salary, or their
principal
place of employment being moved more than 50 miles away from the
place
they work as of the date of the execution of the merger agreement.
However, an employee who is entitled to notice of termination under
the
WARN Act and who is terminated prior to the expiration of such
notice
period is only entitled to receive the excess amount of the severance
described above over the amount payable to such employee under
the WARN
act.
|
| · |
refrain
from taking any action that may jeopardize the validity of any
of their
communications licenses or result in the revocation, surrender
or any
adverse modification of, forfeiture of, or failure to renew under
regular
terms any of such licenses;
|
| · |
prosecute
with due diligence any pending applications with respect to their
communications licenses, including any renewals of such licenses;
and
|
| · |
with
respect to communications licenses, make all filings and reports
and pay
all fees necessary or reasonably appropriate for the continued
operation
of the businesses of the Company and its subsidiaries, as and when
such
approvals, consents, permits, licenses, filings, or reports or
other
authorizations are necessary or
appropriate.
|
| · |
reasonably
cooperate in the preparation of any offering memorandum, private
placement
memorandum, prospectuses or similar
documents;
|
| · |
make
senior management of the Company reasonably available for meetings
and due
diligence sessions;
|
| · |
reasonably
cooperate with prospective lenders, placement agents, initial purchasers
and their respective advisors in performing their due
diligence;
|
| · |
enter
into customary agreements with underwriters, initial purchasers
or
placement agents where expressly authorized and requested by the
Parent in
writing, except that no such agreement shall have any effect or
be binding
on the Company until the effective time of the merger;
and
|
| · |
enter
into or help procure pledge and security documents, landlord waivers,
other definitive financing documents or other requested certificates
or
documents where expressly authorized and requested by the Parent
in
writing except that no such agreement shall have any effect or
be binding
on the Company until the effective time of the
merger;
|
| · |
notwithstanding
the foregoing, nothing in the merger agreement requires the Company
and
its subsidiaries to pay any commitment or similar fee or incur
any other
liability in connection with any third party financing prior to
the
effective time and the Parent has agreed to, at our request, reimburse
us
for all reasonable out-of-pocket costs incurred by us in connection
with
such cooperation. In addition, no claims by the Parent may arise
out of
any compliance or non-compliance by the Company or its subsidiaries
with
the foregoing obligations and such compliance or non-compliance
may not be
a defense or mitigating factor to any claim by the Company for
breach of
the merger agreement.
|
| · |
receipt
of Company stockholder approval;
|
| · |
the
absence of any governmental order, decree, judgment, injunction
or other
ruling which prevents or prohibits the consummation of the
merger;
|
| · |
the
expiration or termination of the waiting period under the
Hart-Scott-Rodino Act;
|
| · |
the
receipt of applicable consents and approvals from the FCC;
and
|
| · |
the
receipt of applicable consents and approvals from State PUCs that
regulate
the Company’s business or the business of any of its
subsidiaries.
|
| · |
the
truth and correctness of our representations and warranties as
of the date
of the merger agreement and, except where the failure of our
representations and warranties to be true and correct would not
reasonably
be expected to have a material adverse effect on us and our subsidiaries,
individually or in the aggregate, the truth and correctness of
our
representations and warranties (without giving effect for any materiality
or material difference qualification therein) as of the closing
date or as
of the earlier date for such representations and warranties as
expressly
relate to an earlier date, and the truth and correctness of our
representations and warranties with respect to authority and approvals,
absence of material adverse change and brokers as of the closing
date as
if made on and as of the closing
date;
|
| · |
the
absence of any pending proceedings, order, decree, judgment, injunction
or
other ruling prohibiting the consummation of the
merger;
|
| · |
the
receipt of the final order of each of the applicable consents,
approvals,
orders and authorizations;
|
| · |
the
performance and compliance, in all material respects, by us of
our
agreements and conditions in the merger
agreement;
|
| · |
our
delivery to the Parent at closing of a certificate with respect
to our
representations, warranties, agreements and
conditions;
|
| · |
since
September 22, 2006, the date of execution of the merger agreement,
no
“material adverse effect” with respect to the Company shall have occurred
and be continuing;
|
| · |
our
reported consolidated operating income for the fiscal quarter ending
September 30, 2006, as adjusted (a) to add back thereto, to the
extent
included in such operating income, the amount of: (i) depreciation
and
amortization, stock-based compensation expense and losses on the
sale of
property and equipment; (ii) all legal, accounting and financial
advisor
fees (including any fairness opinion fees) and expenses incurred
in the
preparation, negotiation, approval or performance of the merger
agreement;
(iii) any amounts that may be required to be accrued by reason
of the
execution of the merger agreement or the merger; (iv) any expenses
or
charge related to the impairment of assets or goodwill; (v) any
charges or
accruals related to any minimum contractual commitments; and (vi)
any
charges or accruals related to the reconciliation of NTCorporation
network
cost accruals; and (b) to subtract therefrom, to the extent included
in
such operating income, the amount of any gains on the sale of property
and
equipment, shall equal $12,000,000 or
more;
|
| · |
the
resignation of our directors;
|
| · |
our
certification that we are not, and have not been during the past
five
years, a United States real property holding company;
and
|
| · |
the
release of certain liens and the termination of all financial statements
related to such liens.
|
| · |
changes
in unbundled network element availability and rates consistent
and in
accordance with the rules, regulations and laws established and
implemented by the FCC and the applicable State
PUCs;
|
| · |
changes
or effects that are or result from occurrences relating to the
United
States economy or securities or financial markets generally or
the
industries in which the Company operates that in either case do
not
disproportionately affect the Company and its
subsidiaries;
|
| · |
changes
or effects that result from the announcement of the merger agreement,
the
merger or the transactions contemplated by the merger
agreement;
|
| · |
changes
or effects that are or result from changes in applicable laws after
the
execution of the merger agreement but only if such changes do not
disproportionately affect the Company and its subsidiaries relative
to
similarly situated companies;
|
| · |
changes
or effects that are or result from changes in GAAP after the execution
of
the merger agreement; or
|
| · |
changes
or effects that are or result from actions taken by the Parent
with
respect to the merger or the Company and its subsidiary, including
the
Parent’s unreasonably withholding its consent to the Company’s taking
certain action otherwise
prohibited.
|
| · |
the
truth and correctness of the Parent’s and the Merger Sub’s representations
and warranties (without regard to materiality qualifications),
except
where the failure of the Parent’s and the Merger Sub’s representations and
warranties to be true and correct would not, individually or in
the
aggregate, reasonably be expected to have a material adverse effect
on the
ability of the Parent and the Merger Sub to perform their obligations
under the merger agreement;
|
| · |
the
performance, in all material respects, by the Parent and the Merger
Sub of
their agreements and conditions in the merger agreement;
and
|
| · |
the
delivery at closing by the Parent of a certificate with respect
to the
Parent’s and the Merger Sub’s representations, warranties, agreements and
conditions.
|
| · |
by
mutual written consent of the
parties;
|
| · |
by
either the Parent or the Company
if:
|
| · |
our
stockholders fail to adopt the merger agreement at the Special
Meeting or
any adjournment of the Special
Meeting;
|
| · |
the
closing has not occurred on or before January 31, 2007, so long
as the
failure to complete the merger is not the result of the failure
of the
terminating party to comply with the terms of the merger
agreement;
|
| · |
there
is any law or final, non-appealable government order, decree or
ruling
that prevents completion of the merger, so long as such law, government
order, decree or ruling is not the result of the failure of the
terminating party to fulfill its obligations under the merger agreement;
or
|
| · |
there
is a breach by the non-terminating party of its representations,
warranties, agreements or covenants in the merger agreement such
that the
closing conditions would not be satisfied, which breach has not
been cured
within 20 business days (or is incapable of being cured before
the
termination date);
|
| · |
by
us if:
|
| · |
prior
to adoption of the merger agreement by our stockholders (i) our
board of
directors has received a superior proposal, (ii) our board determines
in
good faith (after consultation with outside counsel and a financial
advisor of nationally recognized reputation) that taking such action
is
required for the members of our board of directors to comply with
their
fiduciary duties to our stockholders under applicable law, (iii)
we have
complied with our non-solicitation covenant and have prepared this
proxy
solicitation and called a meeting of our stockholders, (iv) we
provide the
Parent written notice that our board of directors intends to take
such
action, (v) we negotiate in good faith with the Parent for three
business
days to modify the terms and conditions of the merger agreement
such that
the revised terms and conditions would enable us to proceed with
the
consummation of the merger and (vi) we pay the termination fee
described
below under “The Merger Agreement — Termination Fees and
Expenses”;
|
| · |
by
the Parent if:
|
| · |
our
board withdraws or modifies in a manner adverse to the Parent our
board’s
recommendation that the Company’s stockholders adopt the merger agreement
or recommends, approves or adopts a takeover
proposal;
|
| · |
we
fail to include in this proxy statement the recommendation of our
board
that you vote in favor of the
merger;
|
| · |
our
board fails to publicly reaffirm its recommendation within 10 days
of
being requested by the Parent to do
so;
|
| · |
a
third party commences a tender or exchange offer for the Company
and our
board does not recommend rejection of the offer within 10
days;
|
| · |
a
takeover proposal is publicly announced and we fail to issue within
10
days of such announcement a press release reaffirming the board’s
recommendation of the merger agreement;
or
|
| · |
we
fail to call and hold the Special Meeting and timely mail this
proxy
statement, which is not cured within 10 business days following
receipt by
the Company of a notice of such
breach.
|
| · |
either
the Company or the Parent has terminated the merger agreement because
of
the failure to receive Company stockholder approval;
and
|
| · |
prior
to termination of the merger agreement, a takeover proposal has
been
publicly announced or otherwise communicated to our board of directors;
and
|
| · |
within
12 months after the termination, the Company enters into or completes
a
takeover proposal;
|
| · |
either
the Company or the Parent has terminated the merger agreement because
the
merger has not been completed by January 31, 2007;
and
|
| · |
prior
to termination of the merger agreement, a takeover proposal has
been
publicly announced or otherwise communicated to our board of directors;
and
|
| · |
within
12 months after the termination, the Company enters into or completes
a
takeover proposal;
|
| · |
the
Parent has terminated the merger agreement due to a breach by us
of our
representations, warranties, agreements or conditions such that
the
closing conditions would not be satisfied, which breach has not
been cured
within 20 business days; and
|
| · |
prior
to termination of the merger agreement, a takeover proposal has
been
publicly announced or otherwise communicated to our board of directors;
and
|
| · |
within
12 months after the termination, we enter into or complete a takeover
proposal;
|
| · |
the
Company has terminated the merger agreement, prior to the Special
Meeting,
if we receive a superior proposal in accordance with the terms
of the
merger agreement, but only after we have provided notice to the
Parent
regarding the superior proposal and provided the Parent with a
three
business day period, during which time we negotiated in good faith
with
the Parent, to make an offer that is at least as favorable as the
superior
proposal; or
|
| · |
the
Parent has terminated the merger agreement because (i) our board
withdraws
or modifies in a manner adverse to the Parent its recommendation
that the
Company’s stockholders adopt the merger agreement or recommends, approves
or adopts a takeover proposal, (ii) we fail to include in this
proxy
statement (or any amendment) the recommendation of our board that
you vote
in favor of the merger, (iii) our board fails to publicly reaffirm
its
recommendation within 10 days of being requested by the Parent
to do so,
(iv) a third party commences a tender or exchange offer for the
Company
and our board does not recommend rejection of the offer within
10 days,
(v) a takeover proposal is publicly announced and we fail to issue
within
10 days of such announcement a press release reaffirming the board’s
recommendation of the merger agreement, or (vi) we fail to call
and hold
the Special Meeting and timely mail this proxy statement, which
is not
cured within 10 business days following receipt by the Company
of a notice
of such breach.
|
| · |
either
the Company or the Parent has terminated the merger agreement because
of
the failure to receive Company stockholder approval and, prior
to
termination of the merger agreement, a takeover proposal has been
publicly
announced or otherwise communicated to our board of
directors;
|
| · |
either
the Company or the Parent has terminated the merger agreement because
the
merger has not been completed by January 31, 2007, and, prior to
termination of the merger agreement, a takeover proposal has been
publicly
announced or otherwise communicated to our board of
directors;
|
| · |
the
Parent has terminated the merger agreement due to a breach by us
of our
representations, warranties, agreements or conditions such that
the
closing conditions would not be satisfied, which breach has not
been cured
within 20 business days, and, prior to termination of the merger
agreement, a takeover proposal has been publicly announced or otherwise
communicated to our board of
directors;
|
| · |
the
Company has terminated the merger agreement, prior to the Special
Meeting,
if we receive a superior proposal in accordance with the terms
of the
merger agreement, but only after we have provided notice to the
Parent
regarding the superior proposal and provided the Parent with a
three
business day period, during which time we negotiated in good faith
with
the Parent, to make an offer that is at least as favorable as the
superior
proposal; or
|
| · |
the
Parent has terminated the merger agreement because (i) our board
withdraws
or modifies in a manner adverse to the Parent its recommendation
that the
Company’s stockholders adopt the merger agreement or recommends, approves
or adopts a takeover proposal, (ii) we fail to include in this
proxy
statement (or any amendment) the recommendation of our board that
you vote
in favor of the merger, (iii) our board fails to publicly reaffirm
its
recommendation within 10 days of being requested by the Parent
to do so,
(iv) a third party commences a tender or exchange offer for the
Company
and our board does not recommend rejection of the offer within
10 days,
(v) a takeover proposal is publicly announced and we fail to issue
within
10 days of such announcement a press release reaffirming the board’s
recommendation of the merger agreement, or (vi) we fail to call
and hold
the Special Meeting and timely mail this proxy statement, which
is not
cured within 10 business days following receipt by the Company
of a notice
of such breach.
|
| · |
acquisition,
directly or indirectly, of a business constituting 35% or more
of our net
revenues, net income or assets;
|
| · |
acquisition,
directly or indirectly, of 35% or more of the voting power of the
Company;
|
| · |
tender
offer or exchange offer that, if consummated, would result in a
third
party beneficially owning 35% or more of the voting power of the
Company;
or
|
| · |
merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving
us.
|
|
Common
Stock
|
||
|
High
|
Low
|
|
|
Fiscal
Year Ended December 31, 2006:
|
||
|
1st
Quarter
|
$10.20
|
$8.36
|
|
2nd
Quarter
|
$9.25
|
$6.06
|
|
3rd
Quarter
|
$9.69
|
$5.47
|
|
4th
Quarter (through November [·],
2006)
|
||
|
Fiscal
Year Ended December 31, 2005:
|
||
|
1st
Quarter
|
$
6.71
|
$
5.85
|
|
2nd
Quarter
|
$
10.21
|
$
6.26
|
|
3rd
Quarter
|
$
11.61
|
$
8.58
|
|
4th
Quarter
|
$
10.01
|
$
8.63
|
|
Fiscal
Year Ended December 31, 2004:
|
||
|
1st
Quarter
|
$
12.05
|
$
8.14
|
|
2nd
Quarter
|
$
10.05
|
$
7.07
|
|
3rd
Quarter
|
$
7.70
|
$
5.05
|
|
4th
Quarter
|
$
7.47
|
$
5.01
|
|
Name
of Beneficial Owner or Identity of Group
|
|
Number
of Shares Beneficially Owned (1)
|
|
Percent
of Shares Beneficially Owned
|
|
|
|
|
|
|
|
Sun
Capital Securities, LLC, SCSF Equities, LLC, Sun Capital Securities
Offshore Fund, Ltd., Sun Capital Securities Fund, LP, Sun Capital
Securities Advisors, LP, Marc J. Leder, Rodger R. Krouse
5200
Town Center Circle, Suite 470
Boca
Raton, Florida 33486
|
4,242,520
(2)
|
13.8%
|
||
|
Eton
Park Fund, L.P., Eton Park Master Fund, Ltd., Eton Park Associates,
L.P.,
Eton Park Capital Management, L.P., Eric M. Mindich
825
Third Avenue, 8th
Floor
New
York, NY 10022
|
|
2,800,000(3)
|
|
9.1%
|
|
Flagg
Street Capital LLC, Flagg Street Partners LP, Flagg Street Partners
Qualified LP, Flagg Street Offshore LP, Jonathan Starr.
44
Brattle Street
Cambridge,
MA 02138
|
|
2,777,882(4)
|
|
9.0%
|
|
North
Run Capital, LP, North Run GP, LP, North Run Advisors, LLC, Todd
B.
Hammer, Thomas B. Ellis
One
International Place, Suite 2401
Boston,
MA 02110
|
2,438,500
(5)
|
7.9%
|
||
|
Barclays
Global Investors, NA., Barclays
Global
Fund Advisors, Barclays Global Investors, Ltd., Barclays Global
Investors
Japan Trust and Banking Company Limited
45
Fremont Street
San
Francisco, CA 94105
|
2,406,912(6)
|
7.8%
|
||
|
Paul
Rosenberg
650
N. E. 5th Avenue
Boca
Raton, FL 33432
|
1,919,995(7)
|
6.2%
|
||
|
Mellon
Financial Corporation
One
Mellon Center
Pittsburgh,
PA 15258
|
|
1,751,170(8)
|
|
5.8%
|
|
Dimensional
Fund Advisors Inc.
1299
Ocean Avenue, 11th
Floor
Santa
Monica, CA 90401
|
1,684,002(9)
|
5.5%
|
||
|
Gabriel
Battista
|
|
651,666(10)
|
|
2.1%
|
|
Mark
S. Fowler
|
|
147,374(10)
|
|
*
|
|
Edward
B. Meyercord, III
|
|
556,667(10)
|
|
1.8%
|
|
Ronald
R. Thoma
|
|
69,311(10)
|
|
*
|
|
Robert
Korzeniewski
|
|
31,000(10)
|
|
*
|
|
Aloysius
T. Lawn, IV
|
|
232,499(10)
|
|
*
|
|
Jeffrey
Earhart
|
|
145,768(10)
|
|
*
|
|
Warren
Brasselle
|
|
148,166(10)
|
|
*
|
|
Patrick
O’Leary
|
|
--
|
|
*
|
|
All
directors and executive officers as a group (14 persons)
|
|
2,410,450(10)
|
|
7.3%
|
| · |
You
must deliver to the Company a written demand for appraisal of your
shares
before the vote with respect to the merger is taken. This written
demand
for appraisal must be in addition to and separate from any proxy
or vote
abstaining from or voting against the adoption of the merger agreement.
A
holder of shares of common stock of the Company wishing to exercise
appraisal rights must hold the shares of record on the date that
the
written demand for appraisal is made and must continue to hold
the shares
of record through the effective date of the merger, since appraisal
rights
will be lost if the shares are transferred prior to the effective
date of
the merger. Voting against or failing to vote for the adoption
of the
merger agreement by itself does not constitute a demand for appraisal
within the meaning of Section 262.
|
| · |
You
must not vote in favor of the adoption of the merger agreement.
A vote in
favor of the adoption of the merger agreement, by proxy or in person,
will
constitute a waiver of your appraisal rights in respect of the
shares so
voted and will nullify any previously filed written demands for
appraisal.
A proxy that is signed and does not contain voting instructions
will,
unless revoked, be voted in favor of the adoption of the merger
agreement,
and it will constitute a waiver of the stockholder’s right of appraisal
and will nullify any previously delivered written demand for appraisal.
Therefore, a stockholder who votes by proxy and who wishes to exercise
appraisal rights must vote against the adoption of the merger agreement
or
abstain from voting on the merger
agreement.
|
| (a) |
The
certificate of incorporation of Merger Sub, as in effect immediately
prior
to the Effective Time, shall be the certificate of incorporation
of the
Surviving Corporation until thereafter amended as provided
by Law and such
certificate of incorporation.
|
| (b) |
The
by-laws of Merger Sub, as in effect immediately prior to the
Effective
Time, shall be the by-laws of the Surviving Corporation, until
thereafter
amended as provided by Law and such
by-laws.
|
| (a) |
Each
share of common stock of Merger Sub issued and outstanding
immediately
prior to the Effective Time shall be converted into and become
one validly
issued, fully paid and nonassessable share of common stock
of the
Surviving Corporation.
|
| (b) |
Each
share of Common Stock, together with the related Right attached
thereto,
that is owned by (i) the Company as treasury stock or (ii)
any wholly
owned Subsidiary of the Company, shall be canceled without
any conversion
thereof and no payment or distribution shall be made with respect
thereto.
|
| (c) |
Except
as otherwise provided in clause (b) above and subject to Section 2.4,
each share of Common Stock outstanding immediately prior to
the Effective
Time, together with the related Right attached thereto, shall
be converted
into the right to receive $8.10 in cash, payable to the holder
thereof,
without interest (the “Common
Stock Consideration”).
All shares of Common Stock converted into the right to receive
the Common
Stock Consideration pursuant to this Section 2.1(c) shall cease
to be
outstanding as of the Effective Time, and shall be cancelled
and retired
and shall cease to exist, and each holder of a certificate
that
immediately prior to the Effective Time represented shares
of Common
Stock, together with the related Rights, shall thereafter cease
to have
any rights with respect to such shares or to such related Rights,
except
the right to receive the Common Stock Consideration to be issued
in
consideration therefor upon the surrender of such
certificate.
|
| (d) |
Each
Warrant issued and outstanding immediately prior to the Effective
Time
shall be converted as of the Effective Time into the right
to receive a
sum in cash equal to such Warrant’s Warrant Cancellation Payment, without
interest, and all such Warrants shall no longer be outstanding
and shall
automatically be cancelled and shall cease to exist, and each
former
Warrant Holder shall cease to have any rights with respect
thereto, other
than the right to receive the Warrant Cancellation Payment
in respect of
each Warrant held by such Warrant Holder as set forth herein.
The Company
shall use its commercially reasonable efforts to take all actions
necessary to effectuate the foregoing.
|
| (e) |
Each
Option issued and outstanding immediately prior to the Effective
Time,
whether or not then exercisable, shall be converted immediately
after
giving effect to the Effective Time into the right to receive,
as promptly
as practicable after the Effective Time, a sum in cash equal
to such
Option’s Option Cancellation Payment, without interest, and all such
Options shall no longer be outstanding and shall automatically
be
cancelled and shall cease to exist, and each former Option
Holder shall
cease to have any rights with respect thereto, other than the
right to
receive the Option Cancellation Payment in respect of each
Option held by
such Option Holder as set forth herein. Notwithstanding anything
to the
contrary contained in this Agreement, if the exercise price
per share of
Common Stock of any Option is equal to or greater than the
Common Stock
Consideration, such Option shall be cancelled without any cash
payment
being made in respect thereof. The Company shall use its commercially
reasonable efforts to take all actions necessary to effectuate
the
foregoing. As of the Effective Time, the Stock Plans shall
terminate and
all rights under any provision of any other plan, program or
arrangement
of the Company or any Subsidiary of the Company providing for
the issuance
or grant of any other interest in respect of the capital stock
of the
Company or any Subsidiary of the Company shall be
cancelled.
|
| (f) |
The
Common Stock Consideration and amount of the Option Cancellation
Payments
and Warrant Cancellation Payments payable pursuant to Section
2.1(c), (d)
and (e), respectively, have been calculated based upon the
representations
and warranties made by the Company in Section 3.3. Without
limiting the
effect of the failure of the representations and warranties
made by the
Company in Section 3.3 to be true and correct, in the event
that, at the
Effective Time, the actual number of shares of Common Stock
and other
shares of capital stock of the Company outstanding or the actual
number of
shares of capital stock of the Company issuable upon the exercise
of
outstanding Options, Warrants or similar agreements or upon
conversion of
securities (including without limitation, as a result of any
stock split,
stock dividend, including any dividend or distribution of securities
convertible into Shares, or recapitalization) is greater than
as described
in Section 3.3 (including the exercise or conversion of any
currently
outstanding Options, Warrants or similar agreements described
in Section
3.3), the Common Stock Consideration, Option Cancellation Payments
and
Warrant Cancellation Payments payable as contemplated herein
shall be
adjusted downward, but only to the extent necessary to ensure
that the
aggregate amount of the Common Stock Consideration and amounts
payable in
respect of Option Cancellation Payments and Warrant Cancellation
Payments
shall not exceed the sum of: (i) $247,175,000 plus
(ii) an amount equal to (A) $8.10 multiplied by (B) the number
of shares
of Common Stock issued as the result of the exercise of any
currently
outstanding Options or Warrants prior to the Effective Time,
plus (iii)
$3,835,077, less for each share of Common Stock described in
clause (ii)
above, the difference between $8.10 and the exercise price
paid to the
Company upon the exercise of the Option or Warrant pursuant
to which such
share is issued.
|
| (a) |
Prior
to the Effective Time, Buyer shall appoint the Paying Agent
to act as
agent for the holders of shares of Common Stock and Warrants
in connection
with the Merger and to receive the funds to which such holders
shall
become entitled pursuant to this Article
II.
|
| (b) |
Promptly
following the Effective Time, the Surviving Corporation shall
cause to be
mailed, or otherwise make available, to each holder of record
of
Certificates entitled to receive consideration pursuant to
Section 2.1 the
form of Letter of Transmittal. After the Effective Time, each
holder of
certificates or other instruments formerly evidencing shares
of Common
Stock or Warrants (the “Certificates”),
upon surrender of such Certificates to the Paying Agent, together
with a
properly completed Letter of Transmittal and such other documents
as may
be reasonably required by the Paying Agent, shall be entitled
to receive
from the Paying Agent, in exchange therefor, the aggregate
consideration
for such shares of Common Stock or Warrants as set forth herein,
as the
case may be, in cash as contemplated by this Agreement, and
the
Certificates so surrendered shall be cancelled. Until surrendered
as
contemplated by this Section 2.2 (other than Certificates representing
Dissenting Shares), each Certificate shall be deemed at any
time after the
Effective Time to represent only the right to receive the aggregate
consideration for such shares of Common Stock or Warrants,
as the case may
be, in cash as contemplated by this Agreement, without interest
thereon.
All cash consideration delivered upon the surrender of Certificates
in
accordance with the terms of this Section 2.2 shall be deemed
to have been
paid in full satisfaction of all rights pertaining to shares
of Common
Stock and Warrants theretofore represented by such
Certificates.
|
| (c) |
If
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 and, if required by the Buyer, the
posting by
such Person of a bond or other surety in such amount as the
Buyer may
reasonably direct as indemnity against any claim that may be
made with
respect to such Certificate and subject to such other reasonable
conditions as the Buyer may impose, the Paying Agent shall
deliver in
exchange for such Certificate the consideration into which
shares of
Common Stock or Warrants theretofore represented by such Certificate
shall
have been converted pursuant to this Article
II.
|
| (d) |
If
any payment under this Article II is to be made to a Person
other than the
Person in whose name any Certificate surrendered in exchange
therefor is
registered, it shall be a condition of payment that the Certificate
so
surrendered shall be properly endorsed or otherwise in proper
form for
transfer and that the Person requesting such payment shall
pay any
transfer or other similar Taxes required by reason of the payment
to a
Person other than the registered holder of the Certificate
surrendered or
such Person shall establish to the satisfaction of the Surviving
Corporation that such Taxes have been paid or are not
applicable.
|
| (e) |
None
of Buyer, Merger Sub or the Surviving Corporation shall be
liable to any
Person in respect of any cash delivered to a public official
pursuant to
any applicable abandoned property, escheat or similar Law.
At any time
following the expiration of one (1) year after the Effective
Time, the
Surviving Corporation shall, in its sole discretion, be entitled
to
require the Paying Agent to deliver to it any funds (including
any
interest received with respect thereto) that had been made
available to
the Paying Agent and that have not been disbursed to holders
of
Certificates, and such funds shall thereafter become the property
of the
Surviving Corporation. Such funds may be commingled with the
general funds
of the Surviving Corporation and shall be free and clear of
any claims or
interests of any Person. Thereafter, such holders shall be
entitled to
look to the Surviving Corporation (subject to any applicable
abandoned
property, escheat or similar Law) only as general creditors
thereof with
respect to the applicable consideration payable as contemplated
by this
Agreement (net of any amounts that would be subject to withholding)
upon
due surrender of their Certificates, without any interest
thereon.
|
| (f) |
At
the Effective Time, the stock transfer books of the Company
shall be
closed, and there shall be no further registration of transfer
in the
stock transfer books of the Surviving Corporation of the shares
of Common
Stock, Warrants or Options, as the case may be, that were outstanding
immediately prior to the Effective Time. If, after the Effective
Time,
Certificates are presented to the Surviving Corporation or
the Paying
Agent for any reason, they shall be canceled and exchanged
as provided in
this Section 2.2.
|
| (g) |
As
soon as practicable following the Effective Time, the Surviving
Corporation shall, in exchange for the Options that became
entitled to
receive the consideration specified in Section 2.1, make the
Option
Cancellation Payment in respect of each such Option to each
Option Holder.
|
| (a) |
Notwithstanding
any provision of this Agreement to the contrary, shares of
the Company’s
capital stock that are outstanding immediately prior to the
Effective Time
and that are held by holders who shall not have voted in favor
of the
Merger or consented thereto in writing and who shall have demanded
properly in writing appraisal for such shares in accordance
with Section
262 of the DGCL (collectively, the “Dissenting
Shares”)
shall not be converted into or represent the right to receive
the
consideration set forth in Section 2.1. Such holders shall
be entitled to
receive such consideration as is determined to be due with
respect to such
Dissenting Shares in accordance with the provisions of Section
262 of the
DGCL, except that all Dissenting Shares held by holders who
shall have
failed to perfect or who effectively shall have withdrawn or
lost their
rights to appraisal of such shares under Section 262 of the
DGCL shall
thereupon be deemed to have been converted into and to have
become
exchangeable for, as of the Effective Time, the right to receive
the
consideration specified in Section 2.1, without any interest
thereon, upon
surrender, in the manner provided in Section 2.2, of the certificate
or
certificates that formerly evidenced such Dissenting
Shares.
|
| (b) |
The
Company shall deliver to Buyer prompt written notice of any
demands for
appraisal received by the Company, withdrawals of such demands
and any
other instruments served pursuant to the DGCL and received
by the Company,
and the Company shall afford Buyer the opportunity to direct
all
negotiations and proceedings with respect to demands for appraisal
under
the DGCL. The Company shall not, except with the prior written
consent of
Buyer, make any payment with respect to any demands for appraisal
or offer
to settle or settle any such
demands.
|
| (a) |
The
execution, delivery and performance of this Agreement by the
Company and
the consummation of the transactions contemplated hereby are
within its
corporate powers and authority and have been duly and validly
authorized
by all necessary corporate action on the part of the Company
(other than
the adoption of this Agreement by the Required Company Stockholders).
This
Agreement has been duly and validly executed and delivered
by the Company,
and (assuming due authorization, execution and delivery by
Buyer and
Merger Sub) constitutes the valid and binding obligation of
the Company,
enforceable against the Company in accordance with its terms,
except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general
applicability
relating to or affecting creditor’s rights generally and by the
application of general principles of
equity.
|
| (b) |
The
Board of Directors of the Company (the “Company
Board”)
has unanimously (i) determined that this Agreement and the
Merger are fair
to, and in the best interests of, the Company and its stockholders;
(ii)
resolved that the Merger is fair to, and in the bests interests
of, the
Company and its stockholders and declared this Agreement and
the Merger to
be advisable; (iii) resolved to approve this Agreement; and
(iv) resolved
to recommend that the Company’s stockholders adopt this Agreement, and, as
of the date hereof, none of the aforesaid actions by the Board
of
Directors of the Company has been amended, rescinded or
modified.
|
| (c) |
The
affirmative vote of the holders of a majority of outstanding
shares of
Common Stock (the “Required
Company Stockholders”)
is the only vote of the holders of any class or series of the
Company’s
capital stock necessary to approve the
Merger.
|
| (a) |
The
authorized capital stock of the Company consists of 100,000,000
shares of
Common Stock and 5,000,000 shares of preferred stock, par value
$0.01 per
share (the “Preferred
Stock”).
As of the date of this Agreement, (i) 30,508,638 shares of
Common Stock,
including the associated Rights, were issued and outstanding
(none of
which are shares of Restricted Stock); (ii) 1,333,683 shares
of Common
Stock are held in the treasury of the Company; (iii) no shares
of Common
Stock are held by Subsidiaries of the Company; and (iv) no
shares of
Preferred Stock are outstanding.
|
| (b) |
Section
3.3(b)(i) of the Disclosure
Letter
sets forth a true and correct list of all of the Company’s Subsidiaries,
together with their respective authorized capital stock, number
of shares
issued and outstanding and record ownership of such shares.
Except as set
forth in Section 3.3(b)(ii) of the Disclosure
Letter,
the Company does not have any Subsidiaries or own or hold,
directly or
indirectly, any Capital Securities of, or has made any investment,
in any
other Person. Except as set forth in Section 3.3(b) of the
Disclosure
Letter,
all issued and outstanding shares of capital stock of the Company’s
Subsidiaries have been duly authorized, were validly issued,
are fully
paid and nonassessable and subject to no preemptive rights
and are
directly or indirectly owned beneficially and of record by
the Company,
free and clear of all Encumbrances, and free of any other limitation
or
restriction (including any restriction on the right to vote,
sell or
otherwise dispose of such Capital
Securities).
|
| (c) |
Except
for (i) issued and outstanding Common Stock referenced in Sections
3.3(a)(i) and 3.3(a)(ii); (ii) 4,984,060
shares of Common Stock reserved for issuance upon exercise
of Options, as
described in Section 3.3(d) of the Disclosure
Letter;
(iii) 150,000 shares of Common Stock reserved for issuance
upon exercise
of the Warrants, as described in Section 3.3(e) of the Disclosure
Letter;
(iv) the shares of Preferred Stock designated as “Series
A Preferred Stock”
reserved for issuance in accordance with the Rights Agreement;
and (v) as
set forth in Sections 3.3(b) of the Disclosure
Letter,
at the time of execution of this Agreement, no shares of capital
stock or
other voting securities of the Company or any of its Subsidiaries
are
issued, reserved for issuance or outstanding. All outstanding
shares of
capital stock of the Company have been duly authorized, were
validly
issued, are fully paid and nonassessable and subject to no
preemptive
rights. Except for the Common Stock, there are no bonds, debentures,
notes
or other indebtedness or securities of the Company or any of
its
Subsidiaries having the right to vote (or convertible into,
or
exchangeable for, securities having the right to vote) on any
matters on
which stockholders of the Company or such Subsidiary may vote.
Except for
the Options, Warrants and Rights, there are no securities,
options,
warrants, calls, rights, commitments, agreements, arrangements
or
undertakings of any kind to which the Company or any of its
Subsidiaries
is a party relating to the issued or unissued Capital Securities
of the
Company or any Subsidiary. Except for the Options, Warrants
and Rights,
there are no securities, options, warrants, calls, rights,
commitments,
agreements, arrangements or undertakings of any kind to which
the Company
or any of its Subsidiaries is a party or by which any such
Person is bound
obligating such Person to issue, deliver or sell, or cause
to be issued,
delivered or sold, additional shares of Capital Securities
of the Company
or any of its Subsidiaries or obligating such Person to issue,
grant,
extend or enter into any such security, option, warrant, call
right,
commitment, agreement, arrangement or undertaking. There are
no
outstanding rights, commitments, agreements, arrangements or
undertakings
of any kind obligating the Company or any of its Subsidiaries
(i) to
repurchase, redeem or otherwise acquire any Capital Securities
of the
Company or any of its Subsidiaries or any securities of the
type described
in this Section 3.3(c) or (ii) to purchase or otherwise acquire
any
Capital Securities of any other Person. No Restricted Stock
is
outstanding, and no stock appreciation rights have been issued
by the
Company or any of its Subsidiaries.
|
| (d) |
The
names of the optionee of each Option, the date of grant of
each Option,
the number of shares subject to each such Option, the expiration
date of
each such Option, and the price at which each such Option may
be exercised
are set forth in Section 3.3(d) of the Disclosure
Letter.
No option that became vested and exercisable on or after January
1, 2005
was granted with an exercise price per share that was less
than the per
share fair market value of the Company Common Stock underlying
such Option
on the grant date thereof.
|
| (e) |
The
name of each holder of Warrants as of the date hereof, the
date of
issuance of each Warrant, the number of shares subject to each
such
Warrant, the expiration date of each such Warrant, and the
price at which
each such Warrant may be exercised, are set forth in Section
3.3(e) of the
Disclosure
Letter.
|
| (a) |
The
execution, delivery and performance by the Company of this
Agreement and
the consummation of the transactions contemplated hereby, and
compliance
by the Company with the terms and provisions hereof, do not
and will not
(i) conflict with or result in a breach of the certificates
of
incorporation, by-laws or other constitutive documents of the
Company or
any of its Subsidiaries; (ii) violate, conflict with, breach,
result in
the loss of any benefit, constitute a default (or an event
that, with or
without notice or lapse of time, or both, would constitute
a default), or
except as set forth in Section 3.4 of the Disclosure
Letter,
give rise to any right of termination, cancellation or acceleration,
under
any of the provisions of any note, bond, lease, mortgage, indenture,
or
any license, franchise, permit, agreement or other instrument
or
obligation to which any of the Company or its Subsidiaries
is a party, or
by which any such Person or its properties or assets are bound,
which in
any case may result in any loss (including loss of current
or future
benefits) or other liability to the Company or its Subsidiaries;
(iii)
violate any Laws applicable to the Company or any of its Subsidiaries
or
any such Person’s properties or assets, which in any case may result in
the imposition of any fees, penalties or other liability to
the Company or
its Subsidiaries; or (iv) result in the creation or imposition
of any
Encumbrance upon any property or assets used or held by the
Company or any
of its Subsidiaries.
|
| (b) |
Except
for (1) the filing of a premerger notification and report form
under the
Hart-Scott-Rodino Act of 1976, as amended, and the rules and
regulations
promulgated thereunder (the “HSR
Act”)
and the expiration or early termination of the applicable waiting
period
thereunder; (2) any filings as may be required under the DGCL
or the
Exchange Act in connection with the Merger; (3) any consents
or approvals
of or registrations or filings with the Federal Communications
Commission
(“FCC”),
any state public service or public utilities commissions or
similar state
regulatory agency or body that regulates the business of the
Company or
any of its Subsidiaries (each, a “State
PUC”);
and (4) where the failure to obtain such consents or approvals,
or to make
such notifications, registrations or filings, that, individually
or in the
aggregate, do not or would not reasonably be expected to result
in a
Material Difference, no consent or approval by, or notification
of or
registration or filing with, any Governmental Entity is required
in
connection with the execution, delivery and performance by
the Company of
this Agreement or the consummation of the transactions contemplated
hereby.
|
| (a) |
The
Company has timely filed with the Securities and Exchange Commission
(the
“SEC”)
and made available to Buyer all forms, reports, schedules,
statements and
other documents required to be filed by it since January 1,
2003 (together
with all exhibits and schedules thereto and all information
incorporated
therein by reference, the “Company
SEC Reports”).
The Company SEC Reports, as of the date filed with the SEC
(and, in the
case of registration statements and proxy statements, on the
dates of
effectiveness and the dates of mailing, respectively, and,
in the case of
any Company SEC Report amended or superseded by a filing prior
to the date
of this Agreement, then on the date of such amending or superseding
filing), (i) did not 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 (ii) complied
in all
material respects with the applicable requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”)
and the Securities Act, as the case may be, and the applicable
rules and
regulations of the SEC thereunder. None of the Company’s Subsidiaries is
subject to the periodic reporting requirements of the Exchange
Act or
required to file any form, report or other document with the
SEC, the
Nasdaq National Market or any other national stock exchange.
The Company
has made available to Buyer true, correct and complete copies
of all
correspondence with the SEC occurring since January 1, 2004
and prior to
the date hereof and will, promptly following the receipt thereof,
make
available to Buyer any such correspondence sent or received
after the date
hereof. To the Company’s knowledge, as of the date hereof none of the
Company SEC Reports is the subject of ongoing SEC review. As
of the date
hereof, there
are no outstanding comments from or unsolved issues raised
by the SEC with
respect to any of the Company SEC Reports.
|
| (b) |
The
consolidated financial statements of the Company included or
incorporated
by reference in the Company SEC Reports, as of the date filed
with the SEC
(and, in the case of registration statements and proxy statements,
on the
dates of effectiveness and the dates of mailing, respectively,
and, in the
case of any Company SEC Reports amended or superseded by a
filing prior to
the date of this Agreement, then on the date of such amending
or
superseding filing), complied with applicable accounting requirements
and
with the published rules and regulations of the SEC with respect
thereto,
were prepared in accordance with GAAP applied on a consistent
basis during
the periods indicated (except as may be indicated in the notes
thereto or,
in the case of unaudited statements, as permitted by Form 10-Q
of the
SEC), and fairly presented in all material respects (subject,
in the case
of the unaudited statements, to normal, recurring audit adjustments
not
material in amount) the consolidated financial position of
the Company and
its consolidated Subsidiaries as of the date of such financial
statements
and the consolidated results of their operations and cash flows
for each
of the periods then ended. The books and records of the Company
have been
and are being maintained in accordance with GAAP and all other
applicable
legal and accounting requirements and reflect only actual
transactions.
|
| (c) |
The
Company and its Subsidiaries do not have any liabilities or
obligations
(whether absolute, accrued, contingent or otherwise, known
or unknown, and
whether due or to become due), except for (i) liabilities and
obligations
to the extent reflected in the consolidated balance sheet of
the Company
and its Subsidiaries at December 31, 2005 or readily apparent
in the notes
thereto, which balance sheet was filed with the SEC by the
Company on
March 28, 2006 in its 2005 Annual Report on Form 10-K/A and
made available
to Buyer (the “2005
Balance Sheet”),
(ii) liabilities and obligations incurred in the ordinary course
of
business consistent with past practice since December 31, 2005,
or (iii)
liabilities and obligations to the extent reflected in the
consolidated
balance sheet of the Company and its Subsidiaries at June 30,
2006 or
readily apparent in the notes thereto, which balance sheet
was filed with
the SEC by the Company on August 9, 2006 in its Quarterly Report
on Form
10-Q for the quarter ended June 30, 2006 and made available
to Buyer (the
“June
30 Balance Sheet”),
(iv) liabilities and obligations set forth in Section 3.5(c)
of the
Disclosure Letter or (v) liabilities and obligations that,
individually or
in the aggregate, do not or would not reasonably be expected
to result in
a Material Difference.
|
| (d) |
Since
the enactment of the Sarbanes-Oxley Act of 2002 and the related
rules and
regulations promulgated under such Act (the “Sarbanes-Oxley
Act”),
neither the Company nor any of its Subsidiaries has made any
loans to any
executive officer or director of the Company or any of its
Subsidiaries.
|
| (e) |
The
management of the Company has (x)
designed and implemented disclosure controls and procedures
(as defined in
Rule 13a-15(e) of the Exchange Act), or caused such disclosure
controls
and procedures to be designed and implemented under their supervision,
to
ensure that material information relating to the Company, including
its
Subsidiaries, is made known to the management of the Company
by others
within those entities and (y)
disclosed, based on its most recent evaluation of internal
control over
financial reporting (as defined in Rule 13a-15(f) of the Exchange
Act), to
the Company’s outside auditors and the audit committee of the Company
Board and to Buyer (A) all significant deficiencies and material
weaknesses in the design or operation of internal control over
financial
reporting that are reasonably likely to adversely affect the
Company’s
ability to record, process, summarize and report financial
information and
(B) any fraud, whether or not material, that involves management
or other
employees who have a significant role in the Company’s internal control
over financial reporting as of the date of such evaluation.
Since December
31, 2003, any material change in internal control over financial
reporting
required to be disclosed in any Company SEC Reports has been
so disclosed
except as is indicated otherwise in any Company SEC Reports
since December
31, 2003.
|
| (f) |
Since
December 31, 2003 and except as is indicated in any Company
SEC Report
since December 31, 2003, or in Section 3.5(f) of the Disclosure
Letter,
(x)
neither the Company nor any of its Subsidiaries nor, to the
knowledge of
the Company, any director, officer, employee, auditor, accountant
or
representative of the Company or any of its Subsidiaries, has
received or
otherwise obtained knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the
accounting or
auditing practices, procedures, methodologies or methods of
the Company or
any of its Subsidiaries or their respective internal accounting
controls
relating to periods after December 31, 2003, including any
material
complaint, allegation, assertion or claim that the Company
or any of its
Subsidiaries has engaged in questionable accounting or auditing
practices
(except for any of the foregoing after the date hereof that
have no
reasonable basis), and (y)
to
the knowledge of the Company, no attorney representing the
Company or any
of its Subsidiaries, whether or not employed by the Company
or any of its
Subsidiaries, has reported evidence of a material violation
of securities
laws, breach of fiduciary duty or similar violation, relating
to periods
after December 31, 2003, by the Company or any of its officers,
directors,
employees or agents to the Company Board or any committee thereof
or to
any director or officer of the
Company.
|
| (a) |
Section
3.8(a) of the Disclosure
Letter
sets forth a true and complete list of all real property owned
or leased
by the Company or any of its Subsidiaries, including all collocation
agreements to which the Company or any of its Subsidiaries
is a party.
Except as set forth in Section 3.8(a) of the Disclosure
Letter,
each of the Company and its Subsidiaries has good fee simple
title to, or
a valid leasehold interest in, as applicable, all of its owned
or leased
real property, including all such property interests identified
in Section
3.8(a) of the Disclosure
Letter
(including all rights, title, privileges and appurtenances
pertaining or
relating thereto) free and clear of any and all Encumbrances,
except for
defects in title or failures to be in full force and effect
that,
individually or in the aggregate, do not or would not reasonably
be
expected to result in a Material Difference. All leases, including
all
collocation agreements to which the Company or any of its Subsidiaries
is
a party, in respect of real property leased by the Company
or any of its
Subsidiaries are in full force and effect, neither the Company
nor any of
its Subsidiaries has received any written notice of a breach
or default
thereunder, and to the Company’s knowledge, no event has occurred that,
with notice or lapse of time or both, would constitute a breach
or default
thereunder, except for such breach or default that, individually
or in the
aggregate, do not or would not reasonably be expected to result
in a
Material Difference.
|
| (b) |
Each
of the Company and its Subsidiaries has good title to, or a
valid
leasehold interest in, as applicable, all personal property
used in their
respective businesses, except for defects in title or failures
to be in
full force and effect that, individually or in the aggregate,
do not or
would not reasonably be expected to result in a Material Difference.
Such
personal property and the structural elements of the owned
and leased
property (taken as a whole) are in good operating condition
and repair,
ordinary wear and tear and deferred maintenance excepted, and
except for
such failures to be in good operating condition and repair
that,
individually or in the aggregate, do not or would not reasonably
be
expected to result in a Material
Difference.
|
| (c) |
Section
3.8(c) of the Disclosure
Letter
sets forth the following information relating to the network
of the
Company and its Subsidiaries: (i) all switches and switch locations
of the
Company and its Subsidiaries; (ii) a description of fibers
and fiber miles
owned or leased by the Company and its Subsidiaries; (iii)
any pending
asset sale of any of the foregoing; and (iv) any material agreement,
arrangement or understanding with municipalities governing
access to
municipal rights of way involving payments in excess of $100,000
in any
one year. The information provided in Section 3.8(c) of the
Disclosure
Letter
is
accurate and complete in all material respects; provided,
however,
that the operation of the network of the Company and its Subsidiaries
is
subject to embedded software owned by third parties and licensed
to the
Company or its Subsidiaries, as to which (unless indicated
otherwise in
Section 3.8(c) of the Disclosure
Letter)
the Company has valid licenses as of the date hereof. The Company
has
provided Buyer with correct and complete copies of all leases
with respect
to the network of the Company and its Subsidiaries. Each of
the network
facilities described in Section 3.8(c) of the Disclosure
Letter
is
in good operating condition and repair, ordinary wear and tear
and
deferred maintenance excepted, and except for such failures
to be in good
operating condition and repair that, individually or in the
aggregate, do
not or would not reasonably be expected to result in a Material
Difference.
|
| (a) |
Section
3.9(a) of the Disclosure
Letter
sets forth a true, correct and complete list, as of the date
of this
Agreement, of each contract, agreement, commitment or lease
of the Company
and its Subsidiaries currently in effect (i) that by its terms
is a
“material contract” (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC); (ii) that materially restricts
the conduct of
any material line of business by the Company or any of its
Subsidiaries,
or the ability of any such Person to operate in any geographic
area; (iii)
relating to the borrowing of money or any guarantee in respect
of any
indebtedness in excess of $100,000 of any Person (other than
any guarantee
made by the Company in respect of any real property or personal
property
leased by any Subsidiary); (iv) that extends “most favored nations” or
similar pricing to the counterparty to such contract and such
contract
involving aggregate payments in excess of $100,000 per year;
(v) with
respect to employment of an officer or director; (vi) with
respect to
engagement of a consultant involving payments of more than
$100,000 in any
one year; (vii) that restricts the ability of the Company or
any of its
Subsidiaries to consummate the transactions contemplated hereby
on a
timely basis; or (viii) that is an interconnection agreement.
Each
contract, agreement, commitment or lease of the type described
in this
Section 3.9(a), whether or not set forth in Section 3.9(a)
of the
Disclosure
Letter,
is referred to herein as a “Material
Contract”.
True, correct and complete copies of all Material Contracts
have
previously been made available to
Buyer.
|
| (b) |
All
of the Material Contracts are in full force and effect, and
are
enforceable against the Company or its applicable Subsidiary
and, to the
knowledge of the Company, the other parties thereto in accordance
with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws
of general
applicability relating to or affecting creditor’s rights generally and by
the application of general principles of equity, and except
to the extent
that the failure of one or more such Material Contracts to
be in full
force and effect and enforceable, individually or in the aggregate,
do not
or would not reasonably be expected to result in a Material
Difference.
Neither the Company nor any of its Subsidiaries nor, to the
knowledge of
the Company, any other party to such Material Contracts is
in breach of or
default under any obligation thereunder or has given notice
of default to
any other party thereunder and, to the knowledge of the Company,
no
condition exists that with notice or lapse of time or both
would
constitute a default thereunder.
|
| (a) |
Except
as set forth in Section 3.12(a) of the Disclosure
Letter,
each of the Company and its Subsidiaries is in compliance with
all Laws
applicable to the Company, any of its Subsidiaries or their
respective
businesses (including without limitation, (i) the Communications
Act of
1934, as amended, and the communications-related statutes of
each state in
which the Company or any of its Subsidiaries operates; (ii)
the rules,
regulations, orders, and policies of the FCC and State PUCs;
(iii) any and
all Universal Service Fund obligations; and (iv) the Communications
Assistance to Law Enforcement Act), except in each case for
failures to
comply that, individually or in the aggregate, do not or would
not
reasonably be expected to result in a
Material Difference.
|
| (b) |
Each
of the Company and its Subsidiaries holds all federal, state,
local and
foreign governmental approvals, authorizations, certificates,
filings,
franchises, licenses, notices, permits and rights (collectively,
“Permits,”
a
true, correct and complete list of which is contained in Section
3.12(b)(i) of the Disclosure
Letter)
that are necessary to conduct their respective businesses as
presently
being conducted, except for such Permits the failure to hold
that,
individually or in the aggregate, do not or would not reasonably
be
expected to result in a
Material Difference.
Except as set forth in Section 3.12(b)(ii) of the Disclosure
Letter
and except as would not, individually or in the aggregate,
reasonably be
expected to result in a Material
Difference,
(i) such Permits are in full force and effect; (ii) no material
violations are or have been alleged in respect of any thereof;
(iii) no
proceeding is pending or, to the knowledge of the Company,
threatened,
against the Company or any of its Subsidiaries in connection
with the
right to operate under the Permits; and (iv) the consummation
of the
Merger and the transactions contemplated by this Agreement
will not result
in the non-renewal, revocation or termination of any such
Permit.
|
| (c) |
The
Company and its Subsidiaries are the authorized legal holders
or otherwise
have rights to all Permits issued by the FCC, State PUCs or
any other
Governmental Entity that regulates telecommunications in each
applicable
jurisdiction held by the Company or its Subsidiaries (collectively,
“Communications
Licenses,”
a true, correct and complete list of which is contained in
Section
3.12(b)(i) of the Disclosure
Letter),
and the Communications Licenses constitute all of the licenses
from the
FCC, the State PUCs or any other Governmental Entity that regulates
telecommunications in each applicable jurisdiction that are
necessary or
required for the operation of the businesses of the Company
and its
Subsidiaries as now conducted other than any such licenses
the absence of
which would not, individually or in the aggregate, reasonably
be expected
to result in a Material
Difference.
All the Communications Licenses were duly obtained and are
valid and in
full force and effect, unimpaired by any material condition,
except those
conditions that may be contained within the terms of such Communications
Licenses. As of the date hereof, no action by or before the
FCC, any State
PUC or any other Governmental Entity that regulates telecommunications
in
each applicable jurisdiction is pending or, to the knowledge
of the
Company, threatened in which the requested remedy is (i) the
revocation,
suspension, cancellation, rescission or modification or refusal
to renew
any of the Communications Licenses, or (ii) fines and/or forfeitures
that
would, individually or in the aggregate, reasonably be expected
to result
in a Material
Difference.
Except as set forth in Section 3.12(c) of the Disclosure Letter,
and
except as would not reasonably be expected to result in a Material
Difference, as of the date of this Agreement, the Universal
Service
Administration Company has not initiated any inquiries, audits
or other
proceedings against the Company or its Subsidiaries and, to
the knowledge
of the Company, no such actions are threatened that, in each
case, could
result in fines, penalties or other
losses.
|
| (a) |
Section
3.13(a)(1) of the Disclosure
Letter
sets forth an accurate and complete list of all registered
Marks owned (in
whole or in part) by the Company or any of its Subsidiaries
(collectively
“Company
Registered Marks”),
Section 3.13(a)(2) of the Disclosure
Letter
sets forth an accurate and complete list of all registered
Patents or
pending applications for registered Patents owned (in whole
or in part) by
the Company or any of its Subsidiaries (collectively the “Company
Registered Patents”)
and Section 3.13(a)(3) of the Disclosure
Letter
sets forth an accurate and complete list of all registered
Copyrights
owned (in whole or in part) by the Company or any of its Subsidiaries,
and
all pending applications for registration of Copyrights filed
anywhere in
the world that are owned (in whole or in part) by the Company
or any of
its Subsidiaries (collectively the “Company
Registered Copyrights”
and, together with the Company Registered Marks and the Company
Registered
Patents, the “Company
Registered IP”).
Except as set forth on Section 3.13(a)(4) of the Disclosure
Letter,
no Company Registered IP has been or is now involved in any
interference,
reissue, reexamination, opposition, cancellation or similar
proceeding and
the Company has not received written notice of the threat of
any such
action with respect to any of the Company Registered IP. To
the knowledge
of the Company, the Company Registered IP is valid, subsisting
and
enforceable, and neither the Company nor any of its Subsidiaries
has
received any written notice or claim challenging or questioning
the
validity or enforceability or alleging the misuse of any of
the Company
Registered IP. Except as may be set forth in Section 3.13(a)(5)
of the
Company Disclosure
Letter,
neither the Company nor any of its Subsidiaries has knowingly
taken any
action or failed to take any action, which action or failure
reasonably
could be expected to result in the abandonment, cancellation,
forfeiture,
relinquishment, invalidation or unenforceability of any of
the Company
Registered IP, except for such actions or failures that, individually
or
in the aggregate, do not or would not reasonably be expected
to result in
a Material Difference.
|
| (b) |
Each
of the Company and its Subsidiaries has taken all reasonable
steps to
maintain the confidentiality of all information that constitutes
a
material Trade Secret of the Company or any of its
Subsidiaries.
|
| (c) |
To
the knowledge of the Company, the Company owns exclusively
all right,
title and interest to the Company Registered IP and all other
material
Intellectual Property used by the Company or any of its Subsidiaries
that
is not licensed to the Company or any of its Subsidiaries pursuant
to a
written license agreement, free and clear of any Encumbrance
or other
adverse claims or interests, and neither the Company nor any
of its
Subsidiaries has received any written notice or claim challenging
the
Company’s or such Subsidiary’s ownership of any of such material
Intellectual Property. None of such material Intellectual Property
owned
by the Company or any of its Subsidiaries is subject to any
outstanding
order, judgment, or stipulation restricting the use thereof
by the Company
or such Subsidiary.
|
| (d) |
Section
3.13(d)(1) of the Disclosure
Letter
sets forth a complete and accurate list of all material agreements
granting to the Company or any of its Subsidiaries any material
right
under or with respect to any Intellectual Property owned by
a third party
that is used in connection with the business of the Company
or any such
Subsidiary other than commercially available standard Software
applications used in the Company’s or any such Subsidiary’s operations
(collectively, the “Inbound
License Agreements”),
indicating for each the title and the parties thereto. Section
3.13(d)(2)
of the Company Disclosure
Letter
sets forth a complete and accurate list of all material license
agreements
under which the Company or any of its Subsidiaries grants any
rights under
any Intellectual Property, excluding non-exclusive licenses
granted by the
Company or any of its Subsidiaries in the ordinary course of
business in
substantially the Company’s standard forms (which have previously been
provided to Buyer). Except for such losses or expirations that,
individually or in the aggregate, do not or would not reasonably
be
expected to result in a Material Difference, no loss or expiration
of any
material Intellectual Property licensed to the Company or any
of its
Subsidiaries under any Inbound License Agreement is pending
or, to the
knowledge of the Company, reasonably foreseeable or, to the
knowledge of
the Company, threatened in writing. There is no outstanding
or, to the
Company’s knowledge, threatened (in writing) dispute or disagreement
with
respect to any Inbound License Agreement or any license agreements
under
which the Company or any of its Subsidiaries grants any rights
under any
Intellectual Property (collectively, the “Outbound
License Agreements”)
that, individually or in the aggregate, do not or would not
reasonably be
expected to result in a Material
Difference.
The execution, delivery and performance by the Company of this
Agreement,
and the consummation of the transactions contemplated hereby,
will not
result in the loss or impairment of, or give rise to any right
of any
third party to terminate or reprice or otherwise modify any
of the
Company’s or any of its Subsidiaries’ rights or obligations under any
Inbound License Agreement or any Outbound License Agreement,
except for
such losses, impairments or rights to terminate, reprice or
otherwise
modify that, individually or in the aggregate, do not or would
not
reasonably be expected to result in a Material
Difference.
|
| (e) |
To
the knowledge of the Company, the Intellectual Property owned
by the
Company or any of its Subsidiaries or licensed under the Inbound
License
Agreements to the Company or any of its Subsidiaries constitutes
all the
material Intellectual Property rights necessary for the conduct
of the
businesses of the Company and its Subsidiaries as each is currently
conducted, excluding commercially available standard Software
applications
used in the Company’s or any such Subsidiary’s
operations.
|
| (f) |
Except
as would not reasonably be expected to have, individually or
in the
aggregate, a Company Material Adverse Effect, none of the products
or
services distributed, sold or offered by the Company or any
of its
Subsidiaries, nor any technology, content, materials or other
Intellectual
Property used, displayed, published, sold, distributed or otherwise
commercially exploited by or for the Company or any of its
Subsidiaries
has infringed upon, misappropriated, or violated, or does infringe
upon,
misappropriate or violate any Intellectual Property of any
third party.
Neither the Company nor any of its Subsidiaries has received
any written
notice or claim asserting that any such material infringement,
misappropriation or violation is occurring or has occurred.
To the
Company’s Knowledge, no third party is misappropriating or infringing
any
material Intellectual Property owned by the Company or any
of its
Subsidiaries in any material
respect.
|
| (a) |
Each
of the Company and its Subsidiaries has filed all Tax Returns
required to
be filed by it within the time and in the manner prescribed
by law (with
due regard to lawful extensions of time). All such Tax Returns
are true,
correct and complete in all material respects, and all Taxes
owing by the
Company or any of its Subsidiaries, whether or not shown on
any Tax
Return, have been paid when due. No claim made by any taxing
authority in
any jurisdiction in which 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 is outstanding or
unresolved. The
Company and each of its Subsidiaries has made adequate provision
on its
financial statements included or incorporated by reference
in the most
recent Company SEC Reports (or adequate provision has been
made on its
behalf), in accordance with GAAP, for all accrued Taxes not
yet due
(excluding any reserve for deferred Taxes to reflect timing
differences
between book and Tax income). There are no Liens with respect
to Taxes on
any assets or properties of the Company or any Subsidiary,
other than
Liens for Taxes not yet due and
payable.
|
| (b) |
The
Company and its Subsidiaries have not been and are not currently
in
violation (or, with or without notice or lapse of time or
both, would be
in violation) of any applicable law or regulation relating
to any
withholding or payroll Tax requirements (including reporting).
No person
holds Common Stock that is subject to a substantial risk
of forfeiture
(within the meaning of Section 83 of the Code) with respect
to which a
valid election under Section 83(b) of the Code has not been
made, and no
payment to any holder of Common Stock of any portion of the
consideration
payable hereunder will result in compensation or other income
to such
person with respect to which Buyer or the Surviving Corporation
would be
required to deduct or withhold any Tax. Section
3.14(b) of the Disclosure Letter lists (i) each person that
has, to the
knowledge of the Company, disposed of any stock of the Company
or any of
its Subsidiaries on or after January 1, 2006 in a transaction
that would
constitute a “disqualifying disposition” (as defined in Section 421(b) of
the Code), and (ii) each person for whom the transactions
contemplated by
this Agreement would constitute a disqualifying disposition,
in each case
identifying the stock disposed of in such transaction and
the exercise
date and exercise price of the option pursuant to which such
stock was
acquired.
|
| (c) |
The
Company has made available to Buyer correct and complete
copies of all
income Tax Returns filed by, and all examination reports
and statements of
deficiencies issued to, assessed against, or agreed to
by, the Company or
any of its Subsidiaries for each of its last three taxable
years. The
federal income Tax Returns of the Company and each of
its Subsidiaries
have been audited by the Internal Revenue Service or
are closed by the
applicable statute of limitations for all taxable years
through the
taxable year specified in Section 3.14(c) of the Disclosure
Letter.
No examination or audit of any Tax Return of the Company
or any of its
Subsidiaries by any Governmental Entity is currently
in progress or
threatened in writing. No deficiency for any Taxes has
been proposed in
writing against the Company or any of its Subsidiaries,
which deficiency
has not been paid in full. Neither the Company nor any
of its Subsidiaries
has participated or engaged in any “reportable transaction” within the
meaning of Treasury Regulations Section 1.6011-4 (or
any corresponding or
similar provision of state, local or foreign
law).
|
| (d) |
There
are no outstanding rulings of, or requests for rulings
with, any Tax
authority addressed to the Company or any of its Subsidiaries
that are, or
if issued would be, binding on the Company or any of
its Subsidiaries.
There are no outstanding agreements, waivers, or arrangements
extending
the statutory period of limitation applicable to any
claim for, or the
period for the collection or assessment of, Taxes due
from or with respect
to the Company or any of its Subsidiaries for any taxable
period, no power
of attorney granted by or with respect to the Company
or any of its
Subsidiaries relating to Taxes is currently in force,
and no extension of
time for filing of any Tax Return required to be filed
by or on behalf of
the Company or any of its Subsidiaries is in
force.
|
| (e) |
Neither
the Company nor any of its Subsidiaries has agreed,
nor is it required, to
make any adjustment under Section 481(a) of the
Code (or any similar
provision of applicable state, local, or foreign
law). Neither the Company
nor any of its Subsidiaries has used the installment
method under Section
453 of the Code (or any similar provision of
applicable state, local or
foreign law) to defer any material income to
any taxable period ending
after the Effective Date. No indebtedness of
either the Company or any of
its Subsidiaries constitutes “corporate acquisition indebtedness” within
the meaning of Section 279(b) of the
Code.
|
| (f) |
Neither
the Company nor any of its Subsidiaries has distributed
stock of another
corporation, or has had its stock distributed by another
corporation, in a
transaction that was governed, or purported or intended
to be governed, in
whole or in part, by Code Section 355 or 361. There
is no limitation on
the utilization by the Company or any of its Subsidiaries
of its net
operating losses, built-in losses, tax credits or other
similar items
under Sections 382, 383 or 384 of the Code (or any
corresponding or
similar provisions of applicable state, local, or foreign
law) or the
separate return limitation year rules under the consolidated
return
provisions of the Regulations (or any corresponding
or similar provisions
of applicable state, local, or foreign law), other
than any such
limitation arising as a result of the consummation
of the transactions
contemplated by this
Agreement.
|
| (g) |
The
Company is not and has not been during the
applicable period specified in
Section 897(c)(1)(A)(ii) of the Code, a United
States real property
holding corporation within the meaning of Section
897(c)(2) of the
Code.
|
| (h) |
Neither
the Company nor any of its Subsidiaries
has ever been (i) a member of an
affiliated group filing or required
to file a consolidated, combined, or
unitary Tax Return (other than a group
the common parent of which was the
Company) or (ii) a party to or bound
by, nor does it have or has it ever
had any obligation under, any Tax sharing
agreement or similar contact or
arrangement. Neither the Company nor
any of its Subsidiaries has any
liability for the Taxes of any other
Person under Treasury Regulation
Section 1.1502-6 (or any similar provision
of state, local, or foreign
law), as a transferee or successor,
by contract, or
otherwise.
|
| (a) |
Except
as set forth in Section 3.15(a) of the Disclosure
Letter,
as of the date hereof: (i) the Company and its Subsidiaries
are in
compliance in all material respects with all applicable Laws
respecting
employment and employment practices, terms and conditions of
employment,
wages, hours or work and occupational safety and health, and
is not
engaged in any act or practice that constitutes or would reasonably
be
expected to constitute an unfair labor practice as defined
in the National
Labor Relations Act or other applicable Laws; (ii) there is
no unfair
labor practice charge or complaint against the Company pending
or
threatened in writing before the National Labor Relations Board
or any
similar state or foreign agency; (iii) since December 31, 2003,
no labor
strikes, disputes, slowdowns, stoppages or lockouts have occurred,
are
pending, or threatened in writing, involving the Company or
any of its
Subsidiaries; (iv) neither the Company nor any of its Subsidiaries
is not
a party to or bound by any collective bargaining or similar
agreement; and
(v) there are no union organizing activities among the employees
of the
Company. Neither the Company nor any of its Subsidiaries has
received
written notice of the intent of any governmental entity responsible
for
the enforcement of labor or employment laws to conduct an investigation
with respect to or relating to employees and no such investigation
is in
progress.
|
| (b) |
Section
3.15(b) of the Disclosure
Letter
contains a list of each pension, profit-sharing or other
retirement,
bonus, employment, consulting or termination agreement, deferred
compensation, change in control, retention, deal bonus, stock
option,
stock appreciation, stock purchase or other equity based,
performance
share, bonus or other incentive, severance or termination
pay, health, and
group insurance plan, agreement, program or arrangement,
as well any other
“employee benefit plan” (within the meaning of Section 3(3) of ERISA) that
the Company and its Subsidiaries or any of their ERISA Affiliates
sponsor,
maintain, or contribute to or is required to be contributed
to by the
Company and its Subsidiaries or any of their ERISA Affiliates
with respect
to employees (current and former), directors or consultants
of the Company
and its Subsidiaries, or with respect to which the Company
or any
Subsidiary has or may reasonably be expected to have any
liability,
whether contingent or direct (each such plan, program or
arrangement being
hereinafter referred to in this Agreement individually as
a “Plan”).
|
| (c) |
Except
as set forth in Section 3.15(c) of the Disclosure Letter,
the Company has
made available to Buyer or Buyer’s counsel a true and complete copy of (i)
each Plan (or, to the extent no such copy exists, an
accurate description
thereof) and all amendments thereto, (ii) each trust
agreement, group
annuity contract and summary plan description, if any,
relating to such
Plan, (iii) the most recent IRS determination letter
(if any), (iv) the
three most recent annual reports (Form 5500) filed with
the IRS and
attached schedules, and (v) for the three most recent
years, audited
financial statements and actuarial valuations relating
to each
Plan.
|
| (d) |
Each
Plan has been established and has been operated
in all material respects
in accordance with its terms and applicable Laws,
including but not
limited to ERISA and the Code. Each Plan that is
intended to be
“qualified” within the meaning of Section 401(a) of the Code
has received
a favorable determination letter from the IRS that
remains in effect on
the date hereof. No event has occurred since the
date such favorable
determination letter was issued that could reasonably
be expected to
affect the tax-qualified status of such Plan. Other
than routine claims
for benefits, there are no governmental audits,
actions, claims, lawsuits
or arbitrations pending or, to the knowledge of
the Company, threatened in
writing with respect to any Plan and no facts or
circumstances exist that
could reasonably be expected to give rise to any
such audit, actions,
suits or claims.
|
| (e) |
Except
as set forth in Section 3.15(e) of the
Disclosure
Letter,
all required contributions due with respect
to any Plan have been made as
required under ERISA. The reserves reflected
in the 2005 Balance Sheet for
the obligations of the Company under all
Plans were determined in
accordance with GAAP.
|
| (f) |
Neither
the Company, any of its Subsidiaries
nor any of their ERISA Affiliates
(i)
maintains or has ever maintained
a Plan that is or was ever subject
to
Section 412 of the Code, Part
3 of Subtitle B of Title I of
ERISA, or
Title IV of ERISA, (ii) is obligated
or has ever been obligated to
contribute to a “multiemployer plan” (as defined in Section 4001(a)(3)
of
ERISA). No Plan is a “multiple employer plan” for purposes of Sections
4063 or 4064 of ERISA.
|
| (g) |
No
event has occurred
and no condition exists
that would reasonably
be
expected to subject
the Company, any of
its Subsidiaries nor
any of their
ERISA Affiliates to
any material tax, fine,
lien, penalty or other
liability imposed by
ERISA, the Code or
other applicable Laws.
|
| (h) |
Except
as set forth in Section 3.15(h) of the
Disclosure Letter, no Plan provides
welfare benefits after termination of
employment to any employee, former
employee, director or consultant, except
to the extent required by Section
4980B of the Code, or applicable state
law.
|
| (i) |
Except
as set forth in Section 3.15(i) of the Disclosure
Letter,
neither the Company nor any of its Subsidiaries
is a party to any contract
or agreement, plan, or arrangement, including,
without limitation, the
execution of this Agreement, the consummation
of the transactions or other
events contemplated by this Agreement, concerning
any person that,
individually or collectively with other similar
agreements, and taking
into account any transactions or payments contemplated
by this Agreement,
could reasonably be expected to give rise to
the payment of any amount
that would not be deductible by the Company or
any of its Subsidiaries by
reason of Section 280G of the Code. Neither the
Company nor any of its
Subsidiaries has any obligation to make any reimbursement
or other payment
to any such person with respect to any Tax imposed
under Section 4999 of
the Code. No Plan exists that, as a result of
the execution of this
Agreement or the consummation of the transactions
contemplated by this
Agreement, either standing alone or in combination
with any subsequent
event, will (A) result in any payment becoming
due to any current or
former employee or director of the Company after
the date of this
Agreement; (B) increase any benefits otherwise
payable under, or result in
any other material obligation pursuant to, any
Plan; (C) result in the
acceleration of time of payment or vesting of
any such benefits to any
extent or result in any payment or funding (through
a grantor trust or
otherwise) of any compensation or benefits under
any Plan; or (D) limit or
restrict the right of the Company to merge, amend
or terminate any
Plan.
|
| (j) |
Section
3.15(j) of the Disclosure
Letter
identifies each nonqualified deferred
compensation plan, within the
meaning of Section 409A(d)(1) of
the Code and associated Treasury
Department guidance, including
IRS Notice 2005-1 and Proposed
Treasury
Regulations at 70 Fed. Reg. 57930
(October 4, 2005) in connection
with the
Company may have any liability
with respect to current or former
employees
and directors (each a “NQDC
Plan”).
With respect to each NQDC Plan,
it either (i) has been operated
in full
compliance with Code Section 409A
since January 1, 2005, or (ii)
does not
provide for the payment of any
benefits that have or will be deferred
or
vested after December 31, 2004
and since October 3, 2004, it has
not been
“materially modified” within the meaning of Section 409A
of the Code and
associated Treasury Department
guidance, including IRS Notice
2005-1,
Q&A 18 and the proposed regulations
at 70 Fed. Reg. 57930 (October
4,
2005). No NQDC Plan has assets
set aside directly or indirectly
in the
manner described in Section 409A(b)(1)
of the Code or contains a provision
that would be subject to Section
409A(b)(2) of the
Code.
|
| (a) |
The
execution, delivery and performance by each of Buyer and Merger
Sub of
this Agreement and the consummation of the transactions contemplated
hereby, and compliance by Buyer and Merger Sub with the terms
and
provisions hereof, does not and will not (i) conflict with
or result in a
breach of the certificates of incorporation, by-laws or other
constitutive
documents of Buyer or Merger Sub; (ii) violate, conflict with,
breach,
result in the loss of any benefit, constitute a default (or
an event that,
with or without notice or lapse of time, or both, would constitute
a
default), or give rise to any right of termination, cancellation
or
acceleration, under any of the provisions of any note, bond,
lease,
mortgage, indenture, or any license, franchise, permit, agreement
or other
instrument or obligation to which any of Buyer or Merger Sub
is a party,
or by which any such Person or its properties or assets are
bound; or
(iii) violate any Laws applicable to Buyer or Merger Sub or any such
Person’s properties or assets, except where the occurrence of any
of the
foregoing described in clauses (ii) or (iii) above, individually
or in the
aggregate, would not reasonably be expected to prevent or materially
delay
the consummation of the Merger.
|
| (b) |
Except
for (A) the filing of a premerger notification and report form
under the
HSR Act and the expiration or early termination of the applicable
waiting
period thereunder; (B) any filings as may be required under
the DGCL in
connection with the Merger; (C) the consents or approvals of
or
registrations or filings with the FCC, any State PUC and any
Municipal
Franchising Authority having regulatory authority over the
business of
Buyer and its Subsidiaries as conducted in any given jurisdiction
in
connection with the transactions contemplated hereby; (D) any
filings that
may be required under securities Laws; and (E) such consents,
approvals,
notifications, registrations or filings the failure to obtain
which,
individually or in the aggregate, would not reasonably be expected
to
prevent or materially delay consummation of the Merger, no
consent or
approval by, or notification of or registration or filing with,
any
Governmental Entity is required in connection with the execution,
delivery
and performance by Buyer or Merger Sub of this Agreement or
the
consummation of the transactions contemplated
hereby.
|
| (a) |
From
the date of this Agreement until the Closing, except as set
forth on
Section 5.1 of the Disclosure
Letter,
as expressly permitted or required by this Agreement, as required
by
applicable Law or as otherwise consented to by Buyer in writing,
the
Company shall, and shall cause each of its Subsidiaries to,
operate its
business only in the ordinary course of business consistent
with past
practice and in compliance in all material respects with all
applicable
Laws, including the Communications Act of 1934, as amended,
and the
communications-related statutes of each state in which the
Company or any
of its Subsidiaries operates, and the implementing rules, regulations,
orders, and policies of the FCC and each State PUC, and without
limitation
of the foregoing, shall use its commercially reasonable efforts
to do the
following:
|
| (i) |
Preserve
intact the present organization of the Company and its
Subsidiaries;
|
| (ii) |
keep
available the services of the present officers and employees
of the
Company and its Subsidiaries;
|
| (iii) |
preserve
the Company’s and its Subsidiaries’ goodwill and relationships with
customers, suppliers, licensors, licensees, contractors, lenders
and other
Persons having significant business dealings with the Company
and its
Subsidiaries;
|
| (iv) |
continue
all current sales, marketing and other promotional policies,
programs and
activities of the Company and its
Subsidiaries;
|
| (v) |
maintain
the assets of the Company and its Subsidiaries in good repair,
order and
condition;
|
| (vi) |
maintain
the Company’s and its Subsidiaries’ insurance policies and risk management
programs, and in the event of casualty, loss or damage to any
assets of
the Company or any of its Subsidiaries, repair or replace such
assets with
assets of comparable quality, as the case may be;
and
|
| (vii) |
promptly
notify Buyer of any material federal, state, local or foreign
income or
franchise and any other material suit, claim, contest, investigation,
administrative or judicial proceeding or audit initiated against
or with
respect to the Buyer or any of its Subsidiaries in respect
of any Tax
matter.
|
| (b) |
Without
limiting the generality of the foregoing, except as set forth
on Section
5.1 of the Disclosure
Letter,
as expressly permitted or required by this Agreement or as
required by
applicable Law, the Company shall not, and shall not permit
any of its
Subsidiaries to, without the prior written consent of Buyer,
directly or
indirectly do any of the following:
|
| (i) |
knowingly
cause or knowingly permit (to the extent that the Company or
any of its
Subsidiaries has any control over such action being taken)
to be taken any
act, event or change that would reasonably be expected to have
a Company
Material Adverse Effect;
|
| (ii) |
incur
any indebtedness for borrowed money or assume, guarantee, endorse
or
otherwise as an accommodation become responsible for the obligations
of
any Person, in either case, other than capital lease obligations
permitted
within the limitations set forth in Section 5.1(b)(viii)
below;
|
| (iii) |
amend
or otherwise change its certificate of incorporation or by-laws
or
equivalent organizational
documents;
|
| (iv) |
declare,
set aside or pay any dividend or other distribution with respect
to any
shares of capital stock of the Company or any of its Subsidiaries,
other
than dividends from one Company Subsidiary to another Company
Subsidiary
or to the Company;
|
| (v) |
(A)
split, combine or reclassify any shares of its capital stock,
or issue or
authorize or propose the issuance of any other securities in
respect of,
in lieu of or in substitution for shares of its capital stock;
(B)
repurchase, redeem or otherwise acquire any shares of the capital
stock of
the Company or any of its Subsidiaries, or any securities convertible
into
or exercisable for any shares of the capital stock of the Company
or any
of its Subsidiaries; (C) issue or sell, or enter into any contract
for the
issuance or sale, of any shares of capital stock or securities
convertible
into or exercisable for shares of capital stock of the Company
or any of
its Subsidiaries (other than the issuance of shares of Common
Stock upon
the exercise of Warrants or Options outstanding on the date
hereof in
accordance with their terms in existence as of the date of
this
Agreement); or (D) cause to become effective its 2006 Employee
Stock
Purchase plan;
|
| (vi) |
sell,
assign, pledge, encumber, transfer or otherwise dispose of
any Company
Registered IP or any other material asset of the Company or
any of its
Subsidiaries;
|
| (vii) |
acquire
(including, without limitation, by merger, consolidation, or
acquisition
of stock or assets) any interest in any Person or any assets,
other than
acquisitions of inventory, equipment and supplies in the ordinary
course
of business;
|
| (viii) |
incur
any capital expenditures or commitments or additions to property,
plant or
equipment of the Company and its Subsidiaries (including IT
Expenditures),
except for capital expenditures, capital lease obligations
or commitments
or additions of at least $1,500,000 in the aggregate per calendar
month
(commencing October, 2006) from and after the date hereof as
mutually
agreed by the Company and Buyer (whether or not such expenditures,
commitments or additions were heretofore planned by the
Company);
|
| (ix) |
except
in each case for regular annual salary increases or promotions
in the
ordinary course of business and except as specified in Section
5.1 of the
Disclosure
Letter,
(A) increase the compensation of current or former directors,
employees or
consultants of the Company or any of its Subsidiaries (including
any
increase pursuant to any written bonus, pension, profit-sharing
or other
benefit or compensation plan, policy or arrangement or commitment)
or (B)
increase any such compensation or bonus payable to any officer,
stockholder, director, consultant or agent of the Company or
any of its
Subsidiaries having an annual salary or remuneration in excess
of
$100,000, (C) take any action reasonably within its control
to materially
increase or decrease the total number of employees of the Company
and its
Subsidiaries in any functioning department of the Company and
its
Subsidiaries; (D) pay or commit to pay any retention, transaction
bonus,
severance or termination pay other than severance or termination
pay that
is required to be paid pursuant to the terms of any Plan; (E)
enter into
any employment, deferred compensation, consulting, severance
or other
similar agreement (or any amendment to any such existing agreement)
with
any current or former director, officer, employee or consultant
of the
Company or any of its Subsidiaries; (F) adopt or make any commitment
to
adopt any additional employee benefit plan or other arrangement
that would
be a Plan if it were in existence on the date of this Agreement;
(G) make
any contribution to any Plan, other than (1) regularly scheduled
mandatory
contributions and (2) contributions (excluding discretionary
matching or
profit sharing contributions) required pursuant to the terms
thereof or
applicable Law; (H) except as necessary so as to comply with
subclause (J)
below or Section 5.14(c), amend, extend or terminate (or make
any
commitments to amend, extend or terminate) any Plan, except
for amendments
required by applicable Law; (I) loan or advance any money or
other
property to any current or former director, officer or employee
of the
Company or any of its Subsidiaries other than advances of travel
and
entertainment expenses to current directors, officers and employees
in the
ordinary course; or (J) allow for the commencement of any new
offering
periods under the Company Employee Stock Purchase Plan.
|
| (x) |
change
the independent public accountants of the Company and its Subsidiaries
or,
except as required by GAAP or applicable Law, change the accounting
methods or accounting practices followed by the
Company;
|
| (xi) |
make
or change any material Tax election, incur any material liability
for
Taxes other than in the ordinary course of business, adopt
or change any accounting period or method, file an amended
Tax Return,
enter into any closing agreement, settlement, or compromise
with respect
to any Tax claim or assessment related to the Company or any
of its
Subsidiaries, knowingly surrender any right to claim a refund
of Taxes, or
consent to any extension or waiver of the limitation period
applicable to
any Tax claim or assessment relating to the Company or any
of its
Subsidiaries;
|
| (xii) |
enter
into, amend, modify or consent to the termination of, or fail
to perform
any material obligation under, any Material Contract (including
entering
into any network or other agreements that cannot be terminated
without
penalty upon thirty days’ or less notice), or amend, waive, modify or
consent to the termination of the Company’s or any Subsidiary’s material
rights with respect to any such Material
Contract;
|
| (xiii) |
(x)
pay, discharge, settle or compromise any material claim, action,
proceeding or investigation for an amount in excess of $100,000
individually or $250,000 in the aggregate, except to the extent
reserved
against in the most recent consolidated financial statements
included in
the Company SEC Reports filed prior to the date hereof (and
existing as of
the date hereof in accordance with GAAP); (y)
settle, compromise or cancel any material debts owed to or
claims held by
them (including the settlement of any claims or litigation)
except in the
ordinary course consistent with past practice or (z)
consent to the issuance of any injunction, decree, order or
judgment
restricting or otherwise affecting its business or
operations;
|
| (xiv) |
enter
into any new line of business;
|
| (xv) |
take
any action that will create a requirement to make a filing,
registration
or application with, or seek the waiver, consent or approval
of, the FCC,
any State PUC or Municipal Franchising Authority or any other
Governmental
Entity other than in the ordinary course of the operation of
the business,
or discontinue or withdraw any authorized service or voluntary
relinquish
any Permits or Communications Licenses;
or
|
| (xvi) |
knowingly
take or agree in writing or otherwise take any of the actions
described in
(i) through (xv) above or any other action that would reasonably
be
expected to delay or prevent the satisfaction of any condition
to closing
set forth in Article VI.
|
| (a) |
From
the date of this Agreement until the earlier of (i) the Closing
and
(ii) the termination of this Agreement in accordance with Article
VII, the Company shall allow Buyer and its financing parties
and their
respective representatives to make such reasonable investigation
of the
business, operations and properties of the Company and its
Subsidiaries,
including environmental site assessments in respect of owned
real
property, as Buyer deems reasonably necessary in connection
with the
transactions contemplated by this Agreement. Such investigation
shall
include reasonable access to the respective directors, officers,
employees, agents and representatives (including legal counsel
and
independent accountants) of the Company and its Subsidiaries
and their
respective properties, books, records and commitments. The
Company shall
promptly furnish Buyer and its representatives with such financial,
operating and other data and information and copies of documents
with
respect to the Company and its Subsidiaries or any of the transactions
contemplated by this Agreement as Buyer shall from time to
time reasonably
request. The Company shall promptly advise Buyer orally and
in writing if
the Board of Directors of the Company has reason to believe
that a change,
effect, event, occurrence, state of facts or development constitutes
a
Material Difference or that a Company Material Adverse Effect
has occurred
or is reasonably likely to occur. All access and investigation
pursuant to
this Section 5.2 shall occur only upon reasonable notice and
during normal
business hours and shall be conducted at Buyer’s expense and in such a
manner as not to interfere with the normal operations of the
business of
the Company and its Subsidiaries. During the period prior to
the Closing
Date, the Company shall provide Buyer consolidated monthly
balance sheets,
statements of operations, stockholders’ equity and cash flows within
fifteen calendar days after the end of each
month.
|
| (b) |
The
parties hereto will hold any non-public information regarding
the other
parties, their Subsidiaries and their respective businesses
in confidence
in accordance with the terms of the Confidentiality
Agreement.
|
| (a) |
As
promptly as practicable after the execution of this Agreement,
but in no
event later than ten (10) days after the date hereof (subject
to the last
sentence of this paragraph), the Company (in consultation with
Buyer)
shall prepare and the Company shall cause to be filed with
the SEC a proxy
statement (together with any amendments thereof or supplements
thereto,
the “Proxy
Statement”).
The Company will cause the Proxy Statement and all other documents
it is
responsible for filing in connection therewith to comply as
to form in all
material respects with all applicable provisions of applicable
Law. The
Company shall provide to Buyer the opportunity to review and
comment on
the initial preliminary Proxy Statement and all subsequent
forms or
versions of or amendments to the Proxy Statement and the Company
shall
take into good faith consideration all of Buyer’s reasonable comments to
each version of or amendment to the Proxy Statement. Buyer
shall furnish
all information concerning it as may reasonably be requested
by the
Company in connection with the preparation of the Proxy Statement.
Neither
the initial preliminary or any subsequent version of, or any
amendment or
supplement to, the Proxy Statement will be filed by the Company
without
Buyer’s prior written consent, which shall not be unreasonably delayed
or
withheld.
|
| (b) |
The
Company shall notify Buyer promptly after receipt by the Company
of any
comments of the SEC on, or of any request by the SEC for amendments
or
supplements to, the Proxy Statement. The Company shall supply
Buyer with
copies of all correspondence between the Company or any of
its
representatives and the SEC with respect to the Proxy Statement.
If at any
time prior to the Effective Time, any event shall occur relating
to the
Company or any of its Subsidiaries or any of their respective
officers,
directors or Affiliates that should be described in an amendment
or
supplement to the Proxy Statement, the Company shall inform
Buyer promptly
after becoming aware of such event. Whenever the Company learns
of the
occurrence of any event that should be described in an amendment
of, or
supplement to, the Proxy Statement, the parties shall cooperate
to
promptly cause such amendment or supplement to be prepared,
filed with and
cleared by the SEC and, if required by applicable Law, disseminated
to the
persons and in the manner required.
|
| (a) |
The
Company shall, and shall cause its Affiliates, Subsidiaries,
and its and
each of their respective officers, directors, employees, consultants,
financial advisors, attorneys, accountants and other advisors,
representatives and agents (collectively, “Representatives”)
to, immediately cease and cause to be immediately terminated
any
discussions or negotiations with any parties that may be ongoing
with
respect to, or that are intended to or could reasonably be
expected to
lead to, a Takeover Proposal and to request the prompt return
or
destruction of all confidential information previously furnished
to any
such parties. The Company shall not, and shall cause its Affiliates,
Subsidiaries and its and their respective Representatives not
to, (i)
directly or indirectly solicit, initiate, knowingly encourage
or take any
other action to knowingly facilitate (including by way of furnishing
or
disclosing information) any inquiries or the making of any
proposal that
constitutes or could reasonably be expected to lead to a Takeover
Proposal; (ii) enter into any agreement, arrangement or understanding
with
respect to any Takeover Proposal (including any letter of intent,
memorandum of understanding or agreement in principle) or enter
into any
agreement, arrangement or understanding (including any letter
of intent,
memorandum of understanding or agreement in principle) that
requires, or
is intended to or that could reasonably be expected to result
in, the
abandonment, termination or the failure to consummate the Merger
or any
other transaction contemplated by this Agreement; (iii) initiate
or
participate in any way in any negotiations or discussions regarding,
or
furnish or disclose to any Person (other than a party to this
Agreement)
any information with respect to any Takeover Proposal; or (iv)
grant any
waiver or release under any standstill or any similar agreement
with
respect to any class of the Company’s equity securities; provided,
however,
that at any time prior to the adoption of this Agreement by
the Required
Company Stockholders, in response to a bona
fide
written unsolicited Takeover Proposal received after the date
hereof that
the Board of Directors of the Company determines in good faith
(after
consultation with outside counsel and a financial advisor of
nationally
recognized reputation) constitutes, or would reasonably be
expected to
lead to, a Superior Proposal, and which Takeover Proposal was
not,
directly or indirectly, the result of a breach of this Section
5.5, the
Company may, if its Board of Directors determines in good faith
(after
consulting with a financial advisor of nationally recognized
reputation
and outside counsel) that it is required to do so in order
to comply with
its fiduciary duties to the stockholders of the Company under
applicable
Law, and subject to compliance with Section 5.5(b), (x)
furnish information with respect to the Company and its Subsidiaries
to
the Person making such Takeover Proposal (and its representatives)
pursuant to a customary confidentiality agreement not less
restrictive of
such Person than the Confidentiality Agreement; provided
that all such information has previously been provided to Buyer
or is
provided to Buyer prior to or concurrently with the time it
is provided to
such Person, and (y)
participate in discussions or negotiations with the Person
making such
Takeover Proposal (and its representatives) regarding such
Takeover
Proposal.
|
| (b) |
Neither
the Board of Directors of the Company nor any committee thereof
shall (i)
(A) withhold, withdraw (or modify or change in a manner adverse
to Buyer
or Merger Sub), or publicly propose
to withhold or withdraw (or modify or change in a manner adverse
to Buyer
or Merger Sub), the approval, recommendation or declaration
of
advisability by such Board of Directors or any such committee
thereof of,
this Agreement, the Merger or the other transactions contemplated
by this
Agreement or make any other public statement inconsistent with
such
recommendation or (B) recommend, adopt or approve, or publicly
propose to
recommend, adopt or approve, any Takeover Proposal (any action
described
in this clause (i) being referred to as a “Company
Adverse Recommendation Change”)
or (ii) approve or recommend, or propose to approve or recommend,
or allow
the Company or any of its Subsidiaries to execute or enter
into, any
letter of intent, memorandum of understanding, agreement in
principle,
merger agreement, acquisition agreement, option agreement,
joint venture
agreement, partnership agreement or other agreement constituting
or
related to, or that is intended to or would reasonably be expected
to lead
to, any Takeover Proposal (other than a confidentiality agreement
referred
to in and as permitted by Section 5.5(a)) (an “Acquisition
Agreement”)
or that is intended to or that could reasonably be expected
to result in
the abandonment, termination or failure to consummate the Merger
or any
other transaction contemplated by this Agreement. Notwithstanding
the
foregoing, at any time prior to the adoption of this Agreement
by the
Required Company Stockholders, the Board of Directors of the
Company may
make a Company Adverse Recommendation Change in response to
a Superior
Proposal if such Board of Directors determines in good faith
(after
consultation with outside counsel and a financial advisor of
nationally
recognized reputation) that it is required to do so in order
to comply
with its fiduciary duties to the stockholders of the Company
under
applicable Law; provided,
however,
that (i) no such Company Adverse Recommendation Change may
be made if the
Company failed to comply with this Section 5.5; (ii) no such
Company
Adverse Recommendation Change shall be made until after the
third (3rd)
Business Day following Buyer’s receipt of written notice (a “Notice
of Adverse Recommendation”)
from the Company advising Buyer that the Board of Directors
of the Company
intends to take such action and specifying the reasons therefor,
including
the terms and conditions of any Superior Proposal that is the
basis of the
proposed action by the Board of Directors and the identity(ies)
of the
Person or group making such Superior Proposal (it being understood
and
agreed that any amendment to the financial terms or any other
material
term of such Superior Proposal shall require a new Notice of
Adverse
Recommendation and a new three (3) Business Day period) and
representing
that the Company has complied with this Section 5.5; (iii)
during such
three (3) Business Day period, the Company shall negotiate
with Buyer in
good faith to make such amendments to the terms and conditions
of this
Agreement as would enable the Company to proceed with its recommendation
of this Agreement as so amended and not make a Company Adverse
Recommendation Change; and (iv) the Company shall not make
a Company
Adverse Recommendation Change if, prior to the expiration of
such three
(3) Business Day period, Buyer makes a proposal to amend the
terms and
conditions of this Agreement that the Company’s Board of Directors
determines in good faith (after consultation with its outside
counsel and
with financial advisors of nationally recognized reputation)
to be at
least as favorable as the Superior Proposal after giving effect
to, among
other things, the payment of the Termination Fee set forth
in Section 7.3
hereof.
|
| (c) |
Promptly
on the date of receipt thereof, the Company shall advise Buyer
orally and
in writing of any request for information or any Takeover Proposal,
and
the terms and conditions of such request, Takeover Proposal,
inquiry,
discussions or negotiations, and the Company shall promptly
on the date of
receipt thereof 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 or group making any such request, Takeover Proposal
or
inquiry or with whom any discussions or negotiations are taking
place. The
Company agrees that it shall keep Buyer fully and promptly
informed of the
status and details (including amendments or changes or proposed
amendments
or changes) of any such request, Takeover Proposal or inquiry
and keep
Buyer fully and promptly informed as to the details of any
information
requested of or provided by the Company and as to the details
of all
discussions or negotiations with respect to any such request,
Takeover
Proposal or inquiry.
|
| (d) |
Nothing
contained in this Section 5.5 shall prohibit the Company from
taking and
disclosing to its stockholders a position contemplated by Rule
14e-2 or
Rule 14d-9 promulgated under the Exchange Act; provided,
however,
that in no event shall the Company or its Board of Directors
or any
committee thereof take, or agree or resolve to take, any action
prohibited
by Section 5.5(b).
|
| (a) |
Upon
the terms and subject to the conditions set forth in this Agreement,
including, without limitation, Section 5.6(b) hereof, each
of the parties
hereto will use its reasonable best efforts to take, or cause
to be taken,
all actions, and to do, or cause to be done, all lawful things
necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement as soon as practicable after
the date
hereof and to ensure that the conditions set forth in Article
VI are
satisfied, insofar as such matters are within its control,
including,
without limitation, the following: (i) making the requisite
filings
pursuant to the HSR Act; (ii) making all necessary notifications
required
by and filing all necessary applications with the FCC seeking
the consent
of the FCC to the transfer of the Permits and Communications
Licenses
issued by the FCC to the Company and each of its Subsidiaries
in
connection with the consummation of the transactions contemplated
by this
Agreement (the “FCC
Consents”);
(iii) making all necessary notifications required by and filing
all
necessary applications with the State PUCs seeking the consent
of the
applicable State PUC to the assignment of the Permits and Communications
Licenses issued or granted by such State PUC to the Company
or any of its
Subsidiaries in connection with the consummation of the transactions
contemplated by this Agreement (the “State
PUC Consents”);
and (iv) making all necessary notifications required by and
filing all
necessary applications with each Municipal Franchising Authority
seeking
the consent of the Municipal Franchising Authority to the transfer
of the
Permits and Communications Licenses issued by the Municipal
Franchising
Authority to the Company and each of its Subsidiaries in connection
with
the consummation of the transactions contemplated by this Agreement
(the
“Municipal
Franchising Authority Consents”).
Without limiting the generality of the foregoing, and subject
to Section
5.2, the Company, on the one hand, and Buyer and Merger Sub,
on the other
hand, shall each furnish to the other such necessary information
and
reasonable assistance as the other party may reasonably request
in
connection with the foregoing.
|
| (b) |
In
furtherance and not in limitation of the foregoing, each of
the parties
hereto will use its reasonable best efforts to (i) make or
cause to be
made the applications or filings required to be made by Buyer
or the
Company or any of their respective Subsidiaries under or with
respect to
the HSR Act or with respect to the FCC Consents, PUC Consents,
and
Municipal Franchising Authority Consents, and to pay any fees
due of it in
connection with such applications or filings, within ten (10)
days after
the date hereof (but in the case of HSR filings, fifteen (15)
days after
the date hereof); and (ii) comply as expeditiously as practicable
with any
request under or with respect to the HSR Act or with respect
to the FCC
Consents and PUC Consents for additional information, documents
or other
materials received from the Federal Trade Commission, the Department
of
Justice, the FCC or any State PUC in connection with such applications
or
filings or the Merger and the other transactions contemplated
by this
Agreement. For purposes hereof, it is understood and agreed
that Buyer and
its counsel will prepare the applications and related materials
necessary
to apply for the State PUC approvals and thereafter use its
reasonable
best efforts to file and prosecute such applications; and the
Company’s
obligation hereunder with respect to seeking PUC approvals
is to use its
reasonable best efforts to cooperate with and assist Buyer
in such
process. Each party hereto shall promptly inform the others
of any
communications from any Governmental Entity regarding any of
the
transactions contemplated by this Agreement. Notwithstanding
anything to
the contrary contained in this Section 5.6, Buyer shall be
under no
obligation whatsoever to take any action requested by any Governmental
Entity in order to consummate the Merger or other transactions
contemplated by this Agreement, including, without limitation,
making any
divestiture of any asset or agreeing to any type of behavioral
relief that
a Governmental Entity may request that would require Buyer
or its
Subsidiaries (i) to forgo revenue through the provision of
free or reduced
rate services (measured by Buyer’s or its Subsidiaries’ standard rates) or
otherwise of more than $10,000,000 over any three year period
or (ii) to
expend any amount that, when combined with any such forgone
revenue,
exceeds $10,000,000 in the
aggregate.
|
| (c) |
Between
the date hereof and the Closing Date, the Company shall, and
shall cause
its Subsidiaries to, maintain the validity of the Communications
Licenses
and comply in all material respects with all requirements of
the
Communications Licenses and the rules and regulations of the
FCC, and
State PUCs. The Company shall, and shall cause its Subsidiaries
to, use
reasonable best efforts to (a) refrain from taking any action
that may
jeopardize the validity of any of the Communications Licenses
or result in
the revocation, surrender or any adverse modification of, forfeiture
of,
or failure to renew under regular terms, any of the Communications
Licenses; (b) prosecute with due diligence any pending applications
with
respect to the Communications Licenses, including any renewals
thereof;
and (c) with respect to Communications Licenses, make all filings
and
reports and pay all fees necessary or reasonably appropriate
for the
continued operation of the businesses of the Company and its
Subsidiaries,
as and when such approvals, consents, permits, licenses, filings,
or
reports or other authorizations are necessary or
appropriate.
|
| (d) |
The
parties shall cooperate with each other in taking, or causing
to be taken,
all actions necessary to delist the Common Stock from the Nasdaq
National
Market and terminate registration of the Common Stock under
the Exchange
Act; provided,
that such delisting and termination shall not be effective
until after the
Effective Time.
|
| (e) |
Subject
to Section 5.6(b), in case at any time after the Effective
Time any
further action is necessary to carry out the purposes of this
Agreement,
each of the parties to this Agreement shall take or cause to
be taken all
such necessary action, including the execution and delivery
of such
further instruments and documents, as may be reasonably requested
by any
party hereto for such purposes or otherwise to complete or
perfect the
transactions contemplated by this
Agreement.
|
| (f) |
The
Company shall reasonably cooperate with Buyer, to the extent
reasonably
requested by Buyer in connection with any third-party financing
Buyer and
Merger Sub may seek to obtain in order to fund the transactions
contemplated by this Agreement, including without limitation:
(i)
reasonably cooperate in the preparation of any offering memorandum,
private placement memorandum, prospectuses or similar documents;
(ii) make
senior management of the Company reasonably available for meetings
and due
diligence sessions; (iii) reasonably cooperate with prospective
lenders,
placement agents, initial purchasers and their respective advisors
in
performing their due diligence; (iv) if expressly authorized
and requested
by Buyer in writing to do so, enter into customary agreements
with
underwriters, initial purchasers or placement agents, provided
that no
such agreement shall have any effect or be binding on the Company
unless
and until the Effective Time; and (v) if expressly authorized
and
requested by Buyer in writing to do so, enter into or help
procure pledge
and security documents, landlord waivers, other definitive
financing
documents or other requested certificates or documents, including,
without
limitation, documents relating to the release of liens; provided
that no
such agreement, document, waiver or certificate shall have
any effect or
be binding on the Company unless and until the Effective Time;
provided
that none of the Company or any Subsidiary shall be required
to pay any
commitment or similar fee or incur any other liability in connection
with
any such third-party financing prior to the Effective Time,
and,
provided
further that Buyer shall, promptly upon request by the Company,
reimburse
the Company for all reasonable out-of-pocket costs incurred
by the Company
or the Subsidiaries in connection with such cooperation. It
is expressly
understood and agreed that, notwithstanding anything to the
contrary
herein or elsewhere, neither Buyer nor Merger Sub nor any other
Person
shall have a claim against any of the Company, its Subsidiaries,
its and
their directors, officers, employees and advisers and Company
stockholders
and affiliates, and none of such Persons shall have any liability
to any
Person, based upon, resulting from or otherwise arising out
of any
compliance or non-compliance or breach or otherwise with or
under the
provisions of this Section 5.6(f), and none of Buyer or Merger
Sub may
raise any such compliance or non-compliance or breach as a
defense or
mitigating factor or otherwise to any claim by the Company
or its
stockholders for breach of this Agreement.
|
| (a) |
For
not less than six years from and after the Effective Time,
Buyer agrees
to, and to cause the Surviving Corporation to, indemnify and
hold harmless
all past and present directors and officers of the Company
(“Covered
Persons”)
to the same extent such persons are indemnified as of the date
of this
Agreement by the Company
pursuant to the Company’s
amended and restated certificate of incorporation and amended
and restated
by-laws and indemnification agreements, if any, in existence
on the date
of this Agreement for acts or omissions occurring at or prior
to the
Effective Time; provided, however,
that Buyer agrees to, and to cause the Surviving Corporation
to, indemnify
and hold harmless such persons to the fullest extent permitted
by
applicable Law for acts or omissions occurring in connection
with the
approval of this Agreement and the consummation of the transactions
contemplated hereby. Each Covered Person shall be entitled
to advancement
of expenses incurred in the defense of any claim, action, suit,
proceeding
or investigation with respect to any matters subject to indemnification
hereunder, provided that any person to whom expenses are advanced
undertakes, to the extent required by the DGCL, to repay such
advanced
expenses if it is ultimately determined that such person is
not entitled
to indemnification. Notwithstanding
anything herein to the contrary, if any claim, action, suit,
proceeding or
investigation (whether arising before, at or after the Effective
Time) is
made against any Covered Person with respect to matters subject
to
indemnification hereunder on or prior to the sixth anniversary
of the
Effective Time, the provisions of this Section 5.8 shall continue
in
effect until the final disposition of such claim, action, suit,
proceeding
or investigation.
|
| (b) |
Immediately
before the Closing, the Company
or
Buyer shall purchase, and Buyer and the Surviving Corporation
shall
provide to the Covered
Persons,
a
fully prepaid insurance and indemnification policy (“D&O
Insurance”)
in amount and scope not materially less favorable in the aggregate
than
those in the D&O Insurance policy in effect on the date hereof, that
provides coverage for events occurring on or before the Effective
Time and
that remains in effect until at least the sixth anniversary
of the
Effective Time. If such prepaid policies have been obtained
prior to the
Effective Time, Buyer shall, and shall cause the Surviving
Corporation to,
maintain such policies in full force and effect, and continue
to honor the
obligations thereunder. The Company
represents that the current annual premiums paid by the Company
in
respect of D&O Insurance are as set forth in Section 5.8(b) of the
Disclosure Letter.
|
| (c) |
The
obligations under this Section 5.8 shall not be terminated
or modified in
such a manner as to affect adversely any indemnitee to whom
this Section
5.8 applies without the consent of such affected indemnitee
(it being
expressly agreed that the indemnities to whom this Section
5.8 apply and
their respective heirs, successors and assigns shall be express
third-party beneficiaries of this Section 5.8). In the event
Buyer or the
Surviving Corporation (i) consolidates with or merges into
any other
Person and is not the continuing or surviving corporation or
entity of
such consolidation or merger or (ii) transfers all or substantially
all of
its properties and assets to any Person, then, and in each
such case,
proper provision shall be made so that such continuing or surviving
corporation or entity or transferee of such assets, as the
case may be,
shall assume the obligations set forth in this Section
5.8.
|
| (d) |
The
provisions of this Section 5.8 are intended to be for the benefit
of, and
shall be enforceable by, each Covered Person or indemnitee
and his or her
heirs and representatives.
|
| (a) |
Buyer,
the Company and their respective Board of Directors shall (i)
take all
reasonable action necessary to ensure that no state takeover
statute or
similar statute or regulation is or becomes applicable to this
Agreement,
or the transactions contemplated by this Agreement and (ii)
if any state
takeover statute or similar statute becomes applicable to this
Agreement
or the transactions contemplated by this Agreement, take all
reasonable
action necessary to ensure that the transactions contemplated
by this
Agreement may be consummated as promptly as practicable on
the terms
contemplated by this Agreement and otherwise to minimize the
effect of
such statute or regulation on this Agreement or the transactions
contemplated by this Agreement.
|
| (b) |
The
Board of Directors of the Company shall take all action to
the extent
necessary in order to render the Rights Agreement inapplicable
to the
Merger and the other transactions contemplated by this Agreement.
Except
in connection with the foregoing sentence, the Board of Directors
of the
Company shall not, without the prior written consent of Buyer,
(i) amend or waive any provision of the Rights Agreement; or
(ii)
take any action with respect to, or make any determination
under, the
Rights Agreement, including a redemption of the Rights, in
each case in
order to facilitate any Takeover Proposal with respect to
the
Company.
|
| (a) |
Buyer
hereby agrees that it shall provide (or cause the Surviving
Corporation to
provide) health benefits to any employees of the Company
and its Subsidiaries that are offered (and accept) continued
employment by
the Surviving Corporation, Buyer or its Subsidiaries under
an arrangement
substantially similar to that provided to Buyer’s or its Subsidiaries’
similarly-situated employees.
|
| (b) |
Employees
of the Company
and its Subsidiaries that are offered (and accept) employment
with the
Buyer and its Subsidiaries, and their eligible dependents,
shall receive
credit for all purposes (including, without limitation, for
purposes of
eligibility to participate, vesting, benefit accrual and
eligibility to
receive benefits) under any employee benefit plan, program
or arrangement
established or maintained by Buyer, the Surviving Corporation
or any of
their respective Subsidiaries for service accrued or, in
accordance with
policies in effect on the date hereof, deemed accrued prior
to the
Effective Time with the Company
or
any of its Subsidiaries to the extent that such service was
credited under
the analogous plan of the Company and its Subsidiaries; provided,
however,
that such crediting of service shall not operate to duplicate
any benefit
or the funding of any such benefit and that in no event shall
such service
be required to be counted with respect to any equity incentive
award or
for purposes of benefit accrual under any defined benefit
pension plan. In
addition, for purposes of participation by employees of the
Company
and its Subsidiaries that are offered (and accept) continued
employment
with the Buyer, Surviving Corporation or their respective
Subsidiaries,
and their eligible dependents, in any medical plan of Buyer
or its
Subsidiaries, Buyer or its applicable Subsidiary shall waive
any
preexisting condition limitations to the extent waived under
the
applicable medical plan of the Company
and, with respect to the plan year in which such employees
first
participate in such medical plan, shall credit such employees
for any
out-of-pocket expenditures, deductibles and employee contributions
that
were credited under any predecessor medical plan of the Company
or
any of its Subsidiaries for such plan
year.
|
| (c) |
Buyer
hereby agrees that following the Effective Time it shall,
or shall cause
the Surviving Corporation and its Subsidiaries to, offer to pay,
subject to receipt of a general release in customary
form, severance benefits of two weeks base salary and health
insurance benefits (with the terminated employee paying
the employee’s
portion of the monthly health insurance premium) plus
two weeks of base salary and such health insurance benefit for
each full or partial year (in excess of the first full year)
of employment with the Company or any of its Subsidiaries
to (i)
management employees of the Surviving Corporation and its
Subsidiaries
whose employment with any of the Surviving Corporation,
Buyer or any of
their respective Subsidiaries is terminated by the Surviving
Corporation, Buyer or any of their respective Subsidiaries without
cause within 90 days after the Closing Date and (ii) employees
who
terminate their employment with the Surviving Corporation,
Buyer or any of
their respective Subsidiaries within 90 days after the
Closing Date whose
continued employment is conditioned upon their accepting
a reduction in
base salary as in effect on the date hereof or their principal
place of employment being moved to a location more than
50 miles from
their principal place of employment as of the date hereof.
For purposes of
determining the amount of their minimum severance benefits
under this
Section 5.14(c), employees of the Company
and its Subsidiaries shall receive credit for all service
accrued and, in
accordance with policies in effect on the date hereof,
deemed accrued
prior to the Effective Time with the Company
or
any of its Subsidiaries. Notwithstanding the foregoing,
an employee who is
entitled under the WARN Act to notice of the termination
of such
employee’s employment and who is terminated prior to the expiration
of
such notice period shall not be entitled to severance upon
such
termination except to the extent the amount of severance
otherwise
provided for herein with respect to such employee exceeds
the amount
payable to such employee in satisfaction of any WARN Act
obligations (and
the Company shall prior to Closing and to the extent permitted
by Law
amend any Plan or policy regarding severance as necessary
in order to give
effect thereto).
|
| (d) |
From
and after the Effective Time, Buyer shall, and shall
cause the Surviving
Corporation and its Subsidiaries to, honor in accordance
with their terms
all contracts of the Company and its Subsidiaries as
in effect immediately
prior to the date hereof between the Company or any of
its Subsidiaries
and any current or former employees or directors of the
Company or any of
its Subsidiaries as well as any commitments of the Company
or any of its
Subsidiaries made after the date hereof and consented
to by Buyer to any
current employees or directors of the
Company.
|
| (e) |
During
the period commencing on the date of this Agreement
and ending on the
Effective Time, the Company shall use reasonable
best efforts to file any
and all outstanding annual reports on Form 5500 in
respect of the Plans
with the United States Department of Labor (“DOL”)
under the DOL’s Delinquent Filer Voluntary Compliance Program and
shall
deliver to Buyer any such filings for review and
comment prior to
submission.
|
| (a) |
Stockholder
Approval.
This Agreement shall have been adopted by the Required Company
Stockholders.
|
| (b) |
No
Order.
No court of competent jurisdiction or other Governmental Entity
shall have
enacted, issued, promulgated, enforced or entered any order,
decree,
judgment, injunction or other ruling (whether temporary, preliminary
or
permanent), in any case which is in effect and which prevents
or prohibits
consummation of the Merger.
|
| (c) |
HSR.
Any applicable waiting period, together with any extensions
thereof, under
the HSR Act shall have expired or been
terminated.
|
| (d) |
Other
Governmental Approvals.
(i) All consents, approvals or orders of, authorizations of,
or actions by
the FCC, including the FCC Consents and (ii) all State PUC
approvals under
the Laws of the Requisite Jurisdictions to consummate the Merger
and the
other transactions contemplated hereby shall have been obtained;
provided,
however,
that no such FCC Consent or State PUC approval shall impose
or be
conditioned upon Buyer’s, Merger Sub’s or their Affiliates’ agreement to
or compliance with any term, condition or restriction, or result
in the
waiver of rights asserted by any of the foregoing, that would
reasonably
be likely to be materially adverse to Buyer, Surviving Corporation
or any
of their Affiliates in the reasonable judgment of
Buyer.
|
| (a) |
Representations
and Warranties.
|
| (b) |
Pending
Orders.
There shall not be pending before any court of competent
jurisdiction, and
no Governmental Entity shall have initiated any proceeding
that is
pending, seeking any order, decree, judgment, injunction
or other ruling
(whether temporary, preliminary or permanent) prohibiting
the consummation
of the Merger.
|
| (c) |
Governmental
Approvals.
Each of the consents, approvals, orders, authorizations and
actions
referenced in Section 6.1(d)(i) shall have become a Final
Order.
|
| (d) |
Performance
of Obligations.
The Company shall have performed in all material respects and
complied in
all material respects with all agreements and conditions contained
in this
Agreement (other than Section 5.6(f)) that are required to
be performed or
complied with by it prior to or at the Closing
Date.
|
| (e) |
Closing
Certificate.
Buyer shall have received a certificate dated the Closing Date
and signed
by an authorized officer of the Company, certifying that the
conditions
specified in Sections 6.2(a) and 6.2(d) have been
satisfied.
|
| (f) |
Company
Material Adverse Effect.
Since the date of this Agreement, no Company Material Adverse
Effect shall
have occurred and be continuing.
|
| (g) |
Performance
Measure.
The Performance Measure shall have been at least
$12,000,000.
|
| (h) |
FIRPTA
Certificate.
Buyer shall have received (i) certification from the Company,
dated no
more than thirty (30) days before the Effective Date and signed
by a
responsible corporate officer of the Company, that the Company
is not, and
has not been at any time during the five years preceding the
date of such
certification, a United States real property holding company,
as defined in Section 897(c)(2) of the Code, and (ii) a copy
of the notice
of such certification provided by the Company to the IRS in
accordance
with the provisions of Treasury Regulations §1.897-2(h)(2) and a certified
mail receipt indicating the mailing of such
notice.
|
| (i) |
Director
Resignations.
The Company shall have delivered to Buyer a resignation from
each member
of the Board of Directors of the Company or comparable body
for each
Subsidiary of the Company, which shall be effective as of immediately
after the Effective Time, unless specified by Buyer no later
than five
Business Days prior to Closing.
|
| (j) |
Liens.
The liens set forth on Section 6.2(j) of the Disclosure Letter
shall have
been released and all financial statements related to such
liens shall
have been terminated.
|
| (a) |
Representations
and Warranties.
Each of Buyer’s and Merger Sub’s representations and warranties contained
in this Agreement (without giving effect to any “material” or
“materiality” qualification on such representations and warranties) shall
be true and correct on and as of the date of this Agreement
and on and as
of the Closing Date with the same effect as though such representations
and warranties were made on and as of the Closing Date, except
to the
extent that such representations and warranties expressly relate
to an
earlier date, in which case such representations and warranties
shall be
as of such earlier date, except where the failure to be true
and correct,
individually or in the aggregate, would not reasonably be expected
to have
a material adverse effect on the ability of Buyer and Merger
Sub to
perform their respective obligations under this
Agreement.
|
| (b) |
Performance
of Obligations.
Buyer and Merger Sub shall have performed in all material respects
and
complied in all material respects with all agreements and conditions
contained in this Agreement that are required to be performed
or complied
with by them prior to or at the
Closing.
|
| (c) |
Closing
Certificate.
The Company shall have received a certificate dated the Closing
Date and
signed by an authorized officer of Buyer, certifying that the
conditions
specified in Sections 6.3(a) and 6.3(b) have been
satisfied.
|
| (a) |
by
mutual written consent of Buyer and the
Company;
|
| (b) |
by
either Buyer or the Company:
|
| (i) |
if
this Agreement is not adopted by the Required Company Stockholders
at the
Company Stockholders’ Meeting or any adjournment thereof at which this
Agreement has been voted upon (if, in the case of the Company,
it has not
violated Sections 5.3, 5.4 or 5.5);
|
| (ii) |
if
the Merger shall not have been consummated by January 31, 2007,
(the
“Termination
Date”);
provided,
however,
that the right to terminate this Agreement under this Section
7.1(b)(ii)
shall not be available to any party whose breach of any provision
of this
Agreement has been the cause of, or resulted in, the failure
of the Merger
to occur on or before the Termination Date;
or
|
| (iii) |
if
there shall be any final non-appealable order, decree, ruling
or other
action issued by a Governmental Entity permanently restraining,
enjoining
or otherwise prohibiting consummation of the Merger; provided,
however,
that the right to terminate this Agreement pursuant to this
Section
7.1(b)(iii) shall not be available to any party whose failure
to fulfill
any obligation under this Agreement has been a principal cause
of or
resulted in any such order, decree, ruling or other
action.
|
| (c) |
by
the Company:
|
| (i) |
if
Buyer or Merger Sub (A) shall have breached any of the covenants
or
agreements contained in this Agreement to be complied with
by Buyer or
Merger Sub such that the closing condition set forth in Section
6.3(b)
would not be satisfied or (B) there exists a breach of any
representation
or warranty of Buyer or Merger Sub contained in this Agreement
such that
the closing condition set forth in Section 6.3(a) would not
be satisfied,
and, in the case of both (A) and (B), such breach is incapable
of being
cured by the Termination Date or is not cured by Buyer or Merger
Sub
within twenty (20) Business Days after Buyer or Merger Sub
receives
written notice of such breach from the
Company;
|
| (ii) |
or
if, prior to the adoption of this Agreement by the Required
Company
Stockholders at the Company
Stockholders’ Meeting, (A) the Company’s
Board of Directors has received a Superior Proposal, (B) the
Company’s
Board of Directors determines in good faith, after consultation
with a
financial advisor of nationally recognized reputation and outside
legal
counsel, that such action is required to comply with the fiduciary
duties
of the Board of Directors to the Company’s stockholders under applicable
Law, (C) the Company has complied with Sections 5.3, 5.4 and
5.5 and (D)
at the time of such termination, Buyer has received the fee
set forth in
Section 7.3, provided that the Company’s Board of Directors shall only be
able to terminate this Agreement pursuant to this clause (ii)
after three
(3) Business Days following Buyer’s receipt of written notice advising
Buyer that the Company’s Board of Directors is prepared to do so, and only
if, during such three (3) Business Day period, the Company
and its
advisors shall have negotiated in good faith with Buyer to
make such
adjustments in the terms and conditions of this Agreement as
would enable
the parties hereto to proceed with the transactions contemplated
herein on
such adjusted terms.
|
| (d) |
by
Buyer:
|
| (i) |
if
the Company (A) shall have breached any of the covenants or
agreements
contained in this Agreement to be complied with by the Company
such that
the closing condition set forth in Section 6.2(d) would not
be satisfied
or (B) there exists a breach of any representation or warranty
of the
Company contained in this Agreement such that the closing condition
set
forth in Section 6.2(a) would not be satisfied, and, in the
case of both
(A) and (B), such breach is incapable of being cured by the
Termination
Date or is not cured by the Company within twenty (20) Business
Days after
the Company receives written notice of such breach from Buyer
or Merger
Sub; or
|
| (ii) |
if,
prior to the adoption of this Agreement by the Required Company
Stockholders at the Company Stockholders’ Meeting, (A) a Company Adverse
Recommendation Change shall have occurred; (B) the Company
shall have
failed to include in the Proxy Statement the recommendation
of the Board
of Directors of the Company that its stockholders vote in favor
of the
Merger and the transactions contemplated hereby; (C) the Board
of
Directors of the Company fails publicly to reaffirm its recommendation
of
this Agreement, the Merger or the other transactions contemplated
by this
Agreement within ten (10) days after Buyer requests in writing
that such
recommendation or determination be reaffirmed; (D) a tender
or exchange
offer relating to any shares of Common Stock will have been
commenced and
the Company will not have sent to its security holders, within
ten (10)
days after the commencement of such tender or exchange offer,
a statement
disclosing that the Company recommends rejection of such tender
or
exchange offer; (E) a Takeover Proposal is publicly announced,
and the
Company fails to issue, within ten (10) days after such Takeover
Proposal
is announced, a press release that reaffirms the recommendation
of the
Board of Directors of the Company that its stockholders vote
in favor of
the Merger and the transactions contemplated hereby; or (F)
the Company
has breached any of its obligations under Sections 5.3 or 5.4
to call, give notice of, convene and hold the Company Stockholders’
Meeting and timely mail the Proxy Statement as contemplated
thereby, which
has not been cured (or is not capable of being cured) within
ten (10)
Business Days following receipt by the Company of written notice
of such
breach.
|
| (a) |
If
this Agreement shall be terminated pursuant
to:
|
| (i) |
Section
7.1(b)(i), 7.1(b)(ii) or 7.1(d)(i) and (x)
at
any time after the date hereof and before such termination
a Takeover
Proposal shall have been publicly announced or otherwise communicated
to
the Company’s Board of Directors and (y) within
twelve (12) months of the termination of this Agreement, the
Company
enters into a definitive agreement with any third party with
respect to a
Takeover Proposal or any such transaction involving a Takeover
Proposal is
consummated; or
|
| (ii) |
Section
7.1(c)(ii) or 7.1(d)(ii) hereof,
|
| (b) |
If
this Agreement is terminated under any of the circumstances
described in
Section 7.3(a) (but with respect to Section 7.3(a)(i), without
regard to
whether any of the circumstances described in clause (y) thereof
have
occurred), the Company shall reimburse Buyer for all its documented
out-of-pocket fees and expenses up to a maximum amount of $1,250,000
(including attorney’s fees and any commitment and other fees payable by
Buyer under any financing commitment letter Buyer has secured)
incurred in
connection herewith and the transactions contemplated hereby
(the
“Company
Expense Reimbursement Amount”),
which reimbursement shall be made in cash by wire transfer
of immediately
available funds to an account designated in writing to the
Company by
Buyer, not later than the close of business on the fifth (5th)
Business
Day following such termination. Notwithstanding anything to
the contrary
in this Agreement, the parties hereby acknowledge that in the
event that
both the Termination Fee and the Company Expense Reimbursement
Amount are
paid by the Company pursuant to this Section 7.3, the Termination
Fee and
Company Expense Reimbursement Amount shall be Buyer’s and Merger Sub’s
sole and exclusive remedy for monetary damages under this
Agreement.
|
| (c) |
If
the Company fails to promptly pay the Termination Fee or the
Company
Expense Reimbursement Amount, and, in order to obtain such
payment Buyer
commences a suit that results in a judgment against the Company
for the
Termination Fee or the Company Expense Reimbursement Amount,
the Company
shall pay to Buyer its costs and expenses (including attorney’s fees) in
connection with such suit, together with interest on the amount
of the
Termination Fee at a rate equal to the prime rate announced
from time to
time by Wachovia Bank, National Association plus 3% per annum.
|
| (a) |
This
Agreement shall not be assigned by any party hereto without
the prior
written consent of the other parties hereto; provided,
however,
that Buyer shall be permitted to (i) assign this Agreement
to any
Affiliate of Buyer (provided
that Buyer shall remain liable for all of its obligations hereunder
following such assignment) and (ii) from and after the Effective
Time,
grant a collateral security interest in its rights hereunder
to its
lenders. All the terms and provisions of this Agreement shall
be binding
upon and inure to the benefit of and be enforceable by the
respective
successors and assigns of the parties
hereto.
|
| (b) |
Except
as provided in Section 5.8(c), nothing in this Agreement, express
or
implied, is intended or shall be construed to create any third-party
beneficiaries of this Agreement; provided, however,
that from and after the Effective Time, the Stockholders, the
Option
Holders and the Warrant Holders shall be deemed third-party
beneficiaries
solely for purposes of, and with respect to, the right to receive,
respectively, the Common Stock Consideration, the Option Cancellation
Payments and the Warrant Cancellation Payments in accordance
with Article
II.
|
| (a) |
This
Agreement may be amended by the parties hereto by action taken
by or on
behalf of their respective Boards of Directors at any time
prior to the
Effective Time; provided,
however,
that, after approval of the Merger by the stockholders of the
Company, no
amendment may be made that, by Law, requires further approval
by such
stockholders. This Agreement may not be amended except by an
instrument in
writing signed by the parties
hereto.
|
| (b) |
At
any time prior to the Effective Time, Buyer and Merger Sub,
on the one
hand, and the Company, on the other hand, may (i) extend the
time for the
performance of any of the obligations or other acts of the
other; (ii)
waive any inaccuracies in the representations and warranties
of the other
contained herein or in any document delivered pursuant hereto;
and
(iii) waive compliance by the other with any of the agreements or
conditions contained herein; provided,
however,
that after any approval of the Merger by the stockholders of
the Company,
there may not be any extension or waiver of this Agreement
or any portion
thereof which, by Law, requires further approval by such stockholders.
Any
such extension or waiver shall be valid only if set forth in
an instrument
in writing signed by the party or parties to be bound thereby,
but such
extension or waiver or failure to insist on strict compliance
with an
obligation, covenant, agreement or condition shall not operate
as a waiver
of, or estoppel with respect to, any subsequent or other
failure.
|
| (a) |
THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS
OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICTS
OR CHOICE
OF LAW PROVISIONS THEREOF THAT WOULD GIVE RISE TO THE APPLICATION
OF THE
DOMESTIC SUBSTANTIVE LAW OF ANY OTHER
JURISDICTION.
|
| (b) |
All
actions, suits and proceedings arising out of or relating to
this
Agreement shall be heard and determined exclusively in any
Delaware state
or federal court. The parties hereto hereby (a) submit to the
exclusive jurisdiction of any state or federal court sitting
in the State
of Delaware for the purpose of any action, suit or proceeding
arising out
of or relating to this Agreement brought by any party hereto,
and (b)
irrevocably waive, and agree not to assert by way of motion,
defense, or
otherwise, in any such action, suit, or proceeding, any claim
that it is
not subject personally to the jurisdiction of the above-named
courts, that
its property is exempt or immune from attachment or execution,
that such
action, suit or proceeding is brought in an inconvenient forum,
that the
venue of such action, suit or proceeding is improper, or that
this
Agreement or the transactions contemplated hereby may not be
enforced in
or by any of the above-named
courts.
|
| (a) |
“Affiliate”
of a Person means any other Person who directly or indirectly
through one
or more intermediaries Controls, is Controlled by or is under
common
Control with such Person.
|
| (b) |
“Business
Day”
means a day other than Saturday or Sunday or a day on which
banks are
required or authorized to close in the State of
Delaware.
|
| (c) |
“Capital
Securities”
means as to any Person that is a corporation, the authorized
shares of
such Person’s capital stock, including all classes of common, preferred,
voting and nonvoting capital stock, and, as to any Person that
is not a
corporation or an individual, the ownership or membership interests
in
such Person, including, without limitation, the right to share
in profits
and losses, the right to receive distributions of cash and
property, and
the right to receive allocations of items of income, gain,
loss, deduction
and credit and similar items from such Person, whether or not
such
interests include voting or similar rights entitling the holder
thereof to
exercise control over such Person.
|
| (d) |
“Code”
means the Internal Revenue Code of 1986, as
amended.
|
| (e) |
“Common
Stock”
means the common stock of the Company, par value $0.01 per
share.
|
| (f) |
“Company
Material Adverse Effect”
means any event, change or effect regarding or affecting the
Company and
its Subsidiaries that has had, or would reasonably be expected
to have, a
material adverse effect on either:
|
| (A) |
the
business, operation, financial condition, assets, liabilities
or results
of operations of the Company and its Subsidiaries, taken as
a whole, other
than such event, change or effect resulting from (i) changes
in unbundled
network element availability and rates consistent and in accordance
with
the rules, regulations and Laws established, applied or implemented
by the
FCC or applicable State PUC’s, (ii) occurrences, changes or conditions
relating to or affecting the United States economy or securities
or
financial markets generally or the industries in which the
Company
operates that in either case do not disproportionately affect
the Company
and its Subsidiaries relative to similarly situated companies,
(iii) the
announcement or consummation of this Agreement, the Merger
or the
transactions contemplated hereby or compliance with the terms
hereof, (iv)
changes in applicable Laws or the application thereof after
the date
hereof that do not disproportionately affect the Company
and its Subsidiaries relative to similarly situated companies,
(v) changes in GAAP after the date hereof or (vi) any action taken
by
Buyer or its Affiliates with respect to the transactions contemplated
hereby or with respect to the Company
or
its Subsidiaries, including Buyer’s unreasonably withholding its consent
to the Company’s taking any action otherwise prohibited under Section
5.1(b)(vii), (xii) or (xiii); or
|
| (B) |
the
ability of the Company
to
perform its obligations under this Agreement or to consummate
the
transactions contemplated hereby.
|
| (g) |
“Confidentiality
Agreement”
means the letter agreement, dated as of July 19, 2006 between
the Company
and Buyer, as amended by the Company’s email correspondence to Buyer dated
August 14, 2006.
|
| (h) |
“Control”
means the direct or indirect possession of the power to elect
at least a
majority of the Board of Directors or other governing body
of a Person
through the ownership of Capital Securities, by contract or
otherwise or,
if no such governing body exists, the direct or indirect ownership
of 50%
or more of the Capital Securities of a
Person.
|
| (i) |
“Encumbrances”
means Liens, security interests, deeds of trust, encroachments,
reservations, orders of Governmental Entities, decrees or judgments
of any
kind.
|
| (j) |
“Environmental
Laws”
means all applicable Laws relating to protection and clean-up
of the
environment and activities or conditions related thereto, including
those
relating to the generation, handling, disposal, transportation,
Release,
Remediation of, or exposure of Persons to Hazardous
Substances.
|
| (k) |
“ERISA”
means the Employee Retirement Income Security Act of 1974,
as amended, and
all Laws promulgated pursuant thereto or in connection
therewith.
|
| (l) |
“ERISA
Affiliate”
means, with respect to any Person, (i) a member of any “controlled group”
(as defined in Section 414(b) of the Code) of which that Person
is also a
member; (ii) a trade or business, whether or not incorporated,
under
common control (within the meaning of Section 414(c) of the
Code) with
that Person; or (iii) a member of any affiliated service group
(within the
meaning of Section 414(m) of the Code) of which that Person
is also a
member, any of which includes or included the Company or a
Subsidiary of
the Company.
|
| (m) |
“Final
Order”
means an action or decision that has been granted by the FCC
or any State
PUC or Municipal Franchise Authority as to which (a) no request
for a stay
or similar request is pending, no stay is in effect, the action
or
decision has not been vacated, reversed, set aside, annulled
or suspended
and any deadline for filing such request that may be designated
by statute
or regulation has passed; (b) no petition for rehearing or
reconsideration
or application for review is pending and the time for the filing
of any
such petition or application has passed; (c) neither the FCC
nor the
issuing State PUC or Municipal Franchise Authority, as appropriate,
has
the action or decision under reconsideration on its own motion
and the
time within which it may effect such reconsideration has passed;
and (d)
no appeal is pending, including other administrative or judicial
review,
or in effect and any deadline for filing any such appeal that
may be
designated by statute or rule has
passed.
|
| (n) |
“GAAP”
means United States generally accepted accounting
principles.
|
| (o) |
“Governmental
Entity”
means any United States or other national, state, municipal
or local
government, domestic or foreign, any subdivision, agency, entity,
commission or authority thereof, or any quasi-governmental
or private body
exercising any regulatory, taxing, importing or other governmental
or
quasi-governmental authority.
|
| (p) |
“Hazardous
Substances”
means any and all hazardous or toxic substances, wastes or
materials, any
pollutants, contaminants or dangerous materials (including,
without
limitation, polychlorinated biphenyls, asbestos, volatile and
semi-volatile organic compounds, oil, petroleum products and
fractions,
and any materials which include hazardous constituents or become
hazardous, toxic, or dangerous when their composition or state
is
changed), or any other similar substances or materials which
are included
under or regulated by any Environmental
Laws.
|
| (q) |
“Intellectual
Property”
means any and all of the following in the United States or
any other
jurisdiction throughout the world: (i) all inventions (whether
patentable
or unpatentable and whether or not reduced to practice), all
improvements
thereto, and all patents and patent rights, patent applications,
and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, amendments divisionals, extensions,
and
reexaminations thereof (collectively, “Patents”);
(ii) all trademarks, service marks, designs, trade dress, logos,
slogans,
trade names, business names, corporate names, and Internet
domain names,
together with all translations, adaptations, derivations, and
combinations
thereof, whether registered or unregistered, all applications,
registrations, and renewals in connection therewith, and all
goodwill
associated with any of the foregoing (collectively, “Marks”);
(iii) all works of authorship, copyrights, and moral rights,
and all
applications, registrations, and renewals in connection therewith
(collectively, “Copyrights”);
(iv) all trade secrets and confidential information (including
ideas,
research and development, know-how, compositions, technical
data, designs,
drawings, specifications, customer and supplier lists, pricing
and cost
information, and business and marketing plans and proposals),
technologies, processes, formulae, algorithms, architectures,
layouts,
look-and-feel, designs, specifications, and methodologies,
in each case
that derives economic value (actual or potential) from not
being generally
known to other Persons who can obtain economic value from its
disclosure
or use, excluding any Patents or Copyrights that may cover
or protect any
of the foregoing (collectively, “Trade
Secrets”);
(v) all software, including source code, executable code, data,
databases,
Web sites, firmware, and related documentation (collectively,
“Software”);
and (vii) all other proprietary, intellectual or industrial
property
rights of any kind or nature that do not comprise or are not
protected by
Patents, Marks, Copyrights, Trade Secrets or
Software.
|
| (r) |
“IT
Expenditures”
means any capital expenditures or commitments or additions,
whether
tangible or intangible, relating to or arising out of the Company’s or any
of its Subsidiaries’ information technology infrastructure (including,
without limitation, network software and hardware, back-office
systems and
related items), but does not include software development
costs.
|
| (s) |
“knowledge
of the Company”
or “to the Company’s knowledge” or similar words means the current actual
knowledge, after due inquiry, of any of the individuals listed
in Section
9.1(s) of the Disclosure
Letter.
|
| (t) |
“Laws”
means all foreign, federal, state and local constitutions,
statutes, laws,
ordinances, regulations, rules, resolutions, orders, determinations,
writs, injunctions, awards (including, without limitation,
awards of any
arbitrator), judgments and decrees applicable to the specified
Persons.
|
| (u) |
“Letter
of Transmittal”
means (i) a letter of transmittal in customary form (which
shall specify
that delivery shall be effected, and risk of loss and title
to the
Certificates shall pass, only upon proper delivery to the Paying
Agent by
a Stockholder or a Warrant Holder, as the case may be, of his,
her or its
Certificates in accordance with the instructions thereto),
together with
(ii) the instructions thereto for use in effecting the surrender
of the
Certificates in exchange for the consideration contemplated
to be paid
pursuant to this Agreement, each in form and substance reasonably
acceptable to Buyer and the
Company.
|
| (v) |
“Liens”
means any mortgage, pledge, lien, conditional or installment
sale
agreement, encumbrance, covenants, conditions, restrictions,
charge or
other claims or interests of third parties of any
kind.
|
| (w) |
“Material
Difference”
means with respect to a representation and warranty so qualified,
any
Undisclosed Conditions with respect to such representation and
warranty that, when added to the amount of all Undisclosed Conditions
of all other representations and warranties so qualified, equals
or
exceeds $7,500,000.
|
| (x) |
“Municipal
Franchising Authority”
means any municipal Governmental Entity with authority over
the Company
and its Subsidiaries.
|
| (y) |
“Option
Cancellation Payment”
means, with respect to each Option, an amount equal to the
product of (i)
the number of shares of Common Stock subject to such Option,
multiplied by
(ii) (x)
the Common Stock Consideration, minus (y)
the per share exercise price of the
Option.
|
| (z) |
“Option
Holder”
means a Person holding Options.
|
| (aa) |
“Options”
means the issued and outstanding options to purchase shares
of Common
Stock granted pursuant to a Stock
Plan.
|
| (bb) |
“Paying
Agent”
means a financial institution selected by Buyer, which is reasonably
acceptable to the Company, and which has been appointed to
act as agent
for the holders of shares of Common Stock and Warrants in connection
with
the Merger and to receive the funds to which such holders shall
become
entitled pursuant to Article II.
|
| (cc) |
“Performance
Measure”
means the consolidated operating income of the Company and
its
consolidated Subsidiaries for the Company’s fiscal quarter ending
September 30, 2006 as included in the Company’s consolidated financial
statements included in its Quarterly Report for the quarter
ending
September 30, 2006 and filed with the SEC, plus
the amounts of each of the following included in such operating
income for
such quarter:
|
| (dd) |
“Person”
means any individual, corporation, partnership, limited partnership,
limited liability company, trust, business trust, joint stock
company,
unincorporated association, joint venture, Governmental Entity
or other
entity or organization.
|
| (ee) |
“Release”
when used in connection with Hazardous Substances, has the
meaning
ascribed to that term in 42 U.S.C. §
9601(22).
|
| (ff) |
“Remediation”
means (a) any remedial action, response or removal as those
terms are
defined in 42 U.S.C. § 9601; or (b) any “corrective action” as that term
has been construed by Governmental Entities pursuant to 42
U.S.C. §
6924.
|
| (gg) |
“Requisite
Jurisdictions”
means Delaware, Georgia, Maryland, Michigan, New York, Ohio,
Pennsylvania
and Virginia and each other state where the failure to obtain
the
requisite State PUC approval would materially disrupt or interfere
with
Buyer’s, the Surviving Corporation’s or their respective Subsidiaries’
businesses or operations or otherwise subject any of them to
fines or
other material sanctions.
|
| (hh) |
“Restricted
Stock”
means any outstanding share of Common Stock issued by the Company
pursuant
to a Stock Plan or otherwise that is subject to vesting or
other ownership
or transfer restrictions imposed by the Company (other than
transfer
restrictions pursuant to federal or state securities
laws).
|
| (ii) |
“Rights”
means, collectively, the rights issued under the Rights
Agreement.
|
| (jj) |
“Rights
Agreement”
means the Rights Agreement, dated as of August 19, 1999, as
amended, by
and between the Company and Stocktrans, Inc., as the successor
rights
agent thereunder.
|
| (kk) |
“Securities
Act”
means the Securities Act of 1933, as
amended.
|
| (ll) |
“Stockholder”
means any holder of record of shares of Common Stock immediately
prior to
the Effective Time.
|
| (mm) |
“Stock
Plan(s)”
means the Company's 1998 Long Term Incentive Plan, 2000 Long
Term
Incentive Plan, 2001 Long Term Incentive Plan, 2003 Long Term
Incentive
Plan, 2005 Incentive Plan and the Restated Access One Communications
Corp.
1999 Stock Option Plan, Options disclosed in Section 3.3(d)
of the
Disclosure Letter not granted under one or more of the aforementioned
plans and the Talk America Employee Stock Purchase
Plan.
|
| (nn) |
“Subsidiary”
of any Person means another Person under the Control of such
Person.
|
| (oo) |
“Superior
Proposal”
means a bona
fide
written Takeover Proposal (except that references in the definition
of
“Takeover Proposal” to “15%” should be replaced by “50%”), on terms that
the Company’s Board of Directors determines in good faith (after
consultation with its financial advisors and taking into account
all of
the terms and conditions of the Takeover Proposal and this
Agreement
deemed relevant by the Board, including any termination or
break-up fees,
conditions to and expected timing and risks of consummation
and the
ability of the party making such proposal to obtain financing
for such
Takeover Proposal, and taking into account all legal, financial,
regulatory and other aspects of the proposal) would result
in a
transaction that is more favorable, from a financial point
of view, to
holders of the Common Stock than the
Merger.
|
| (pp) |
“Takeover
Proposal”
means, other than the transactions contemplated by this Agreement,
any
offer or proposal, or any indication of interest from any Person
or group
relating to any (i) direct or indirect acquisition or purchase
of a
business that constitutes 15% or more of the net revenues,
net income or
assets of the Company or its Subsidiaries, taken as a whole;
(ii) direct
or indirect acquisition or purchase of 15% or more of the voting
power of
the Company; (iii) tender offer or exchange offer that, if
consummated,
would result in any Person beneficially owning 15% or more
of the voting
power of the Company; or (iv) merger, consolidation, business
combination,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its
Subsidiaries.
|
| (qq) |
“Tax”
(and, with correlative meaning, “Taxes” and “Taxable”) means any
and all United States federal, state, local, or foreign taxes,
charges,
fees, duties, levies, deficiencies or other assessments of
whatever kind
or nature, including without limitation all net income, gross
income,
profits, gross receipts, excise, value added, real or personal
property,
sales, ad valorem, withholding, social security, social insurance,
retirement, employment, unemployment, minimum estimated, severance,
stamp,
property, occupation, environmental, windfall profits, use,
service, net
worth, payroll, franchise, license, gains, customs, transfer,
recording
and other taxes, fees, assessments or charges of any kind whatsoever,
imposed by any taxing authority, including any liability therefor
for a
predecessor entity or as a transferee under Section 6901 of
the Code or
any similar provision of applicable United States federal,
state, local,
or foreign law, as a result of U.S. Treasury Regulation §1.1502-6 or any
similar provision of federal, state, local or foreign applicable
law, or
as a result of any Tax sharing or similar agreement, together
with any
interest, penalties or additions to tax relating thereto.
|
| (rr) |
“Tax
Return”
means any
return, declaration, report, claim for refund, information
return, or
statement, and any schedule, attachment, or amendment thereto,
including
without limitation any consolidated, combined, or unitary return
or other
document and any schedule, attachment, or amendment thereto,
filed or
required to be filed by any taxing authority in connection
with the
determination, assessment, collection, imposition, payment,
refund or
credit of any United States federal, state, local, or foreign
Tax or the
administration of the laws relating to any Tax.
|
| (ss) |
“Undisclosed
Conditions”
means with respect to any representation or warranty qualified
by a
“Material Difference” standard, a loss, liability, obligation or
out-of-pocket cost to or of the Company or any of its Subsidiaries
in
excess of the amount of any established reserve specified on
the June
30 Balance
Sheet or other work papers disclosed or otherwise made available
to
Buyer with
respect to the subject matter of such representation and warranty
that
would have to be disclosed in such representation and warranty in
order for such representation and warranty to be true and
correct as written without regard to such
qualification.
|
| (tt) |
“WARN
Act”
means The Worker Adjustment and Retraining Notification Act,
as
amended.
|
| (uu) |
“Warrant
Cancellation Payment”
means, with respect to each Warrant, the product of (i) the
number of
shares of Common Stock subject to such Warrant immediately
prior to the
Effective Time, multiplied by (ii) (x)
the Common Stock Consideration, minus (y)
the per share exercise price of the
Warrant.
|
| (vv) |
“Warrant
Holder”
means a Person holding Warrants.
|
| (ww) |
“Warrants”
means the issued and outstanding warrants to purchase shares
of Common
Stock.
|
| (a) |
The
parties hereto and their respective counsel have participated
jointly in
the negotiation and drafting of this Agreement. In the event
an ambiguity
or question of intent or interpretation arises, this Agreement
shall be
construed as drafted jointly by the parties hereto with the
advice and
participation of counsel and no presumption or burden of proof
shall arise
favoring or disfavoring any party hereto by virtue of the authorship
of
any of the provisions of this
Agreement.
|
| (b) |
For
purposes of this Agreement: (i) the headings contained in this
Agreement
are for reference purposes only and shall in no way modify
or restrict any
of the terms or provisions hereof; (ii) except as expressly
provided
herein, the terms “include,” “includes” or “including” are not limiting;
(iii) the words “hereof” and “herein” and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement
as a
whole and not to any particular provision of this Agreement;
(iv) article,
section, paragraph, exhibit, annex and schedule references
are to the
articles, sections, paragraphs, exhibits, annexes and schedules
of this
Agreement unless otherwise specified; (v) the meaning assigned
to each
term defined herein are equally applicable to both the singular
and the
plural forms of such term, and words denoting any gender include
all
genders; (vi) a reference to any party to this Agreement or
any other
agreement or document include also such party’s successors and permitted
assigns; (vii) a reference to any Laws or other legislation
or to any
provision of any Law or legislation shall include any amendment
to, and
any modification or re-enactment thereof, any provision substituted
therefor and all regulations and statutory instruments issued
thereunder
or pursuant thereto; (viii) all references to “$”or “dollars” are
references to United States dollars; and (ix) capitalized terms
used and
not defined in the exhibits, annexes and schedules attached
to this
Agreement are used with the respective meanings ascribed thereto
as set
forth in this Agreement.
|
| § |
Reviewed
certain publicly available information concerning the business
and
financial condition of the Company that we believe to be relevant
to our
inquiry;
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| § |
Reviewed
certain internal information concerning the business, financial
condition,
and operations of the Company that we believe to be relevant
to our
inquiry;
|
| § |
Reviewed
certain internal financial analyses, estimates and forecasts
relating to
the Company prepared and furnished to us by the management of
Talk
America, including the Company’s 2006 budget and long-term business
plan;
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| § |
Reviewed
the reported prices and trading activity for the Common
Stock;
|
| § |
Reviewed
an unexecuted draft of the Agreement dated September 21,
2006;
|
| § |
Held
discussions with members of senior management of the Company
concerning
the Company’s business, operating environment, financial condition,
prospects and strategic objectives;
|
| § |
Reviewed
publicly available financial and stock market data with respect
to certain
other competitive local exchange carriers (“CLECs”) that are in businesses
that we believe to be generally comparable to those of the
Company;
|
| § |
Reviewed
the financial terms of certain recent CLEC business combinations
that we
believe to be comparable;
|
| § |
Review
the premiums over trading prices paid in recent acquisitions
of
publicly-traded companies that we believe to be
comparable;
|
| § |
Performed
a discounted cash flow analysis of the Company based on the Company’s
business plan;
|
| § |
Performed
a leveraged buyout analysis of the Company based on the Company’s business
plan; and
|
| § |
Conducted
such other financial studies, analyses, and investigations, and
considered
such other information as we deemed necessary or
appropriate.
|
|
THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL
BE VOTED “FOR” ALL PROPOSALS.
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|
|
|
1.
The Board of Directors recommends a
vote
FOR:
|
|
|
|
|
|
|
|
2.
The Board of Directors recommends
a
vote FOR:
|
|
|
|
|
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||||||
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|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
||||||
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Adoption
of the Agreement and Plan of Merger, dated as of September
22, 2006, by
and among Talk America Holdings, Inc., Cavalier Acquisition
Corp. and
Cavalier Telephone Corporation.
|
|
¨
|
|
|
¨
|
|
|
¨
|
|
|
Approval
of an adjournment or postponement of the Special Meeting of
Stockholders,
if necessary or appropriate, to solicit additional proxies
if there are
insufficient votes at the time of the Special Meeting to adopt
the
Agreement and Plan of Merger.
|
|
¨
|
|
|
¨
|
|
|
¨
|
|
|
IF
VOTING BY MAIL, PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD
PROMPTLY USING THE ENCLOSED POSTAGE-PAID
ENVELOPE.
|
|
IF
YOU ARE SUBMITTING YOUR PROXY BY TELEPHONE OR THROUGH THE INTERNET,
PLEASE
DO
NOT
MAIL THIS PROXY CARD
|
||||||||||||||||||
|
Internet
http://www.votestock.com
|
|
|
Telephone
1-866-626-4508
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|
|
Mail
|
||
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|
||||||
|
Use
the Internet to vote your proxy. Have your proxy card in hand
when you
access the above voting website.
|
|
OR
|
|
Use
any touch-tone telephone to vote your proxy. Have your proxy
card in hand
when you call the above number.
|
|
OR
|
|
Mark,
sign, date and return
your
proxy card
in
the enclosed postage-paid
envelope.
|