<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
COMMISSION FILE NUMBER 0-22247
NM HOLDINGS, INC.
(Exact name of Small Business Issuer as specified in its charter)
MINNESOTA 41-1756256
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
9850 51ST AVENUE NORTH, SUITE 110, MINNEAPOLIS, MN 55442
(Address of principal executive offices)
(612) 551-9595
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date:
<TABLE>
<CAPTION>
Class Outstanding as of May 1, 1999
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<S> <C>
Common Stock, $.04 par value 1,238,876 shares
</TABLE>
Transitional Small Business Disclosure Format (Check one): Yes No X
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NM HOLDINGS, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Item 1. Financial Statements
Statements of Operations (Unaudited) For the Three
Months Ended March 31, 1999 and 1998 2
Balance Sheets (Unaudited) As of March 31, 1999
and December 31, 1998 3
Statements of Cash Flows (Unaudited) For the Three
Months Ended March 31, 1999 and 1998 4
Notes to Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NM HOLDINGS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
--------------------------
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
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<S> <C> <C>
Investment income $ 17,534 $ --
Administrative expenses (59,511) --
----------- -----------
Income from continuing operations (41,977) --
Loss from discontinued operations -- 49,153
----------- -----------
Net income (loss) $ (41,977) $ 49,153
=========== ===========
Loss per share data (basic and diluted):
Loss from continuing operations $ (.04) $ --
Income from discontinued operations -- .04
----------- -----------
Net income (loss) per share $ (.04) $ .04
=========== ===========
Weighted average number of shares outstanding 1,152,145 1,364,006
</TABLE>
See accompanying notes to financial statements
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NM HOLDINGS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
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(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,939,275 $ 1,935,368
Net assets of discontinued operations 7,905 --
Prepaid expenses 28,283 6,547
----------- -----------
Total current assets 1,975,463 1,941,915
Investment in GalaGen Inc. 617,675 498,125
Equipment and office furniture, net 745 6,102
----------- -----------
Total assets $ 2,593,883 $ 2,446,142
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,344 $ --
Accrued payroll -- 4,690
Net liabilities of discontinued operations -- 58,658
----------- -----------
Total current liabilities 23,344 63,348
Shareholders' equity:
Undesignated Preferred Stock, $.04 par value:
Authorized shares - 1,250,000
Issued and outstanding shares - none -- --
Common Stock, $.04 par value:
Authorized shares - 5,000,000 shares
Issued and outstanding shares - 1,226,626 - 1999; 1,150,251 - 1998 49,065 46,010
Paid-in capital 8,813,552 8,706,435
Accumulated other comprehensive income 119,550 --
Accumulated deficit (6,411,628) (6,369,651)
----------- -----------
Total shareholders' equity 2,570,539 2,382,794
----------- -----------
Total liabilities and shareholders' equity $ 2,593,883 $ 2,446,142
=========== ===========
</TABLE>
See accompanying notes to financial statements
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NM HOLDINGS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (41,977) $ 49,153
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation 1,002 75,829
Changes in operating assets and liabilities:
Accounts receivable -- 48,601
Inventories -- 756,893
Prepaid expenses (21,736) 18,684
Accounts payable 23,344 (370,862)
Accrued liabilities (4,690) (191,968)
----------- -----------
Net cash provided by (used in) operating activities (44,057) 386,330
INVESTING ACTIVITIES
Sale (purchase) of equipment and office furniture 4,355 (52,422)
Decrease in net liabilities of discontinued operations (66,563) --
----------- -----------
Net cash used in investing activities (62,208) (52,422)
FINANCING ACTIVITIES
Proceeds from issuance of Common Stock 110,172 --
----------- -----------
Net cash provided by financing activities 110,172 --
----------- -----------
Increase in cash 3,907 333,908
Cash at beginning of period 1,935,368 1,647,482
----------- -----------
Cash at end of period $ 1,939,275 $ 1,981,390
=========== ===========
</TABLE>
See accompanying notes to financial statements
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NM HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed financial statements as of March 31, 1999 and for the
three-month periods ended March 31, 1999 and 1998 included in this Form 10-QSB
have been prepared by NM Holdings, Inc. (the "Company") pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the financial statements and related notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
The condensed financial statements presented herein as of March 31, 1999
and for the three-month periods ended March 31, 1999 and 1998 are unaudited, but
in the opinion of management, reflect all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position,
results of operations and cash flows for the periods presented. The results of
operations for any interim period are not necessarily indicative of results for
the full year.
2. NATURE OF OPERATIONS
NM Holdings, Inc., as a result of the disposition of its nutrition business
operations in December 1998, has no meaningful operations. The Company intends
to use its existing cash resources, together with debt or equity financing that
may be available, to pursue the potential acquisition of other business
opportunities. Prior to the December 1998 disposition, the Company, operating
under the name Nutrition Medical, Inc., focused on the development and marketing
of a line of branded generic critical care nutrition products for the
hospital/nursing home market, as well as private label nutrition products for
sale through retail chains.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT IN MARKETABLE SECURITIES
The Company's investments are comprised of marketable securities (common
stock received in December 1998 relating to the sale of the Company's critical
care nutrition formula product line to GalaGen Inc.) and are classified as
available-for-sale. Available-for-sale securities are reported at fair value
with a corresponding entry for any unrealized gains and losses recorded as a
component of Shareholders' Equity in the account "Accumulated other
comprehensive income."
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NM HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. MERGER WITH MJK HOLDINGS, INC.
On March 25, 1999, the Company entered into an agreement with MJK Holdings,
Inc. ("MJK") pursuant to which a newly formed wholly-owned subsidiary of the
Company will merge with and into MJK, which shall then be a wholly-owned
subsidiary of the Company. MJK is the parent company of Miller, Johnson & Kuehn,
Incorporated, a brokerage and investment banking firm located in Minneapolis,
Minnesota. Company shareholders will retain an approximate 6.4% interest in the
Company following the merger transaction. The closing of the transaction is
subject to various closing conditions, including, but not limited to, the
approval of the Company's shareholders.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. When used in
this Form 10-QSB and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer, the words or phrases
"believes," "anticipates," "intends," "will likely result," "estimates,"
"projects" or similar expressions are intended to identify such forward-looking
statements, but are not the exclusive means of identifying such statements.
These forward-looking statements involve risks and uncertainties that may cause
the Company's actual results to differ materially from the results discussed in
the forward-looking statements. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made. The Company undertakes no obligation to revise any
forward-looking statements in order to reflect events or circumstances after the
date of such statements. Readers are urged to carefully review and consider the
various disclosures made by the Company in this report and in the Company's
other reports filed with the Securities and Exchange Commission that attempt to
advise interested parties of the risks and factors that may affect the Company's
business. Such forward-looking statements are qualified in their entirety by the
cautions and risk factors set forth under the "Cautionary Statement" filed as
exhibit 99.1 to this Form 10-QSB.
GENERAL
Prior to December 23, 1998, the Company developed and sold generic critical
care nutrition formula products and related delivery equipment and accessories
for the hospital, nursing home and home health care markets, as well as private
label adult nutrition products for sale through retail chains. In January 1998,
the Company announced its intention to discontinue its private label adult
nutrition business due to continued losses. Since its inception, the Company
also incurred losses in its critical care nutrition business. Company management
believed that the continued operation of the Company's critical care nutrition
business was not viable due to the lack of synergy between its critical care
products and the acquired feeding pump and plastic disposables business.
Furthermore, the Company was experiencing increased competition from larger
organizations and faced the risk of product obsolescence due to the limited
amount of available research and development funding. Certain patent
infringement lawsuits also adversely affected the Company's ability to market
its product lines effectively.
In light of the foregoing, the Board of Directors determined that it was
in the best interest of the Company and its shareholders to discontinue the
Company's critical care nutrition business operations. The Board of Directors
believed that the Company would maximize shareholder value by selling the
assets comprising the Company's current businesses and using the proceeds to
settle outstanding debt incurred from the purchase of the pump and plastic
disposables business from Elan Pharma, Inc. ("Elan"), and pursue the
acquisition of other businesses. On December 23, 1998, the Company closed a
sale transaction with ZEVEX, Inc. pursuant to which the Company sold all of
its
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assets used in its pump and plastic disposables business, and a sale
transaction with GalaGen Inc. pursuant to which the Company sold all of its
assets used in its critical care business. The Company does not currently
conduct any active business operations. Since December 23, 1998, the Company
has used its existing cash resources to pursue a business combination with
another entity engaged in other lines of business.
The Company believes that the sale of its product lines, its reduction
in liabilities through the cancellation of the Elan subordinated promissory
note, and the reduction in the number of shares outstanding through the
reacquisition of the Company's $.04 par value common stock (the "Common
Stock") issued to Elan has positioned the Company as an attractive business
partner for an entity seeking a strategic combination with a publicly traded
corporation. Company management and the Board of Directors believe that such
a combination will serve the interests of the Company's shareholders better
than a liquidation of the Company and distribution of its assets to
shareholders.
On March 25, 1999, the Company entered into an agreement with MJK
Holdings, Inc. ("MJK") pursuant to which a newly formed wholly-owned
subsidiary of the Company will merge with and into MJK, which shall then be a
wholly-owned subsidiary of the Company. MJK is the parent company of Miller,
Johnson & Kuehn, Incorporated a brokerage and investment banking firm located
in Minneapolis, Minnesota. Company shareholders will retain an approximate
6.4% interest in the Company following the merger transaction. The closing of
the transaction is subject to various closing conditions, including, but not
limited to, the approval of the Company's shareholders.
If the Company's shareholders approve the agreement with MJK, it is the
Board of Directors' intention to complete the transaction with MJK. If for
any reason the transaction with MJK is not consummated, it is the Board of
Directors' intention to pursue business combinations with entities engaged in
other lines of business, using the Company's cash resources (approximately
$1.9 million as of March 31, 1999) together with other resources. The
consummation of any such alternative transaction may require additional debt
or equity financing. However, the Company has no current plan to obtain
additional financing and no assurance can be given that such financing will
be available to acquire a particular business.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
CONTINUING OPERATIONS
The loss from continuing operations totaled $41,977 as of March 31,1999,
and consists of recurring administrative expenses incurred in the period,
offset by interest income earned in the same period.
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DISCONTINUED OPERATIONS
The Company discontinued all operations in 1998. All pre-disposal activity
associated with these operations in the 1998 period has been segregated and
reported in a single line item "Loss from discontinued operations" in the
Company's Statements of Operations.
Sales included in discontinued operations for the three months ended March
31, 1998 totalled $2.2 million. During this period, the Company incurred direct
and indirect expenses of approximately $2.15 million, resulting in net income of
the $49,000 or $.04 per share, based on average outstanding shares of 1.4
million.
YEAR 2000
The Company is addressing the issues associated with computing difficulties
that may affect existing computer systems as a result of programming code
malfunctions in distinguishing 21st century dates from 20th century dates (the
"Year 2000" issue). The Year 2000 issue is a pervasive problem affecting many
information technology systems and embedded technologies in all industries. The
Company has reviewed its internal financial and other process control systems in
order to assess and remediate Year 2000 concerns.
The Company's information technology ("IT") systems consist of computer
hardware systems and software supplied by third parties. The Company utilizes
current generation off-the-shelf software for its contact management and
accounting systems. As a result, the Company expects its exposure to be minimal
since such software has been determined by the Company to be Year 2000
compliant.
The Company's assessment of internal systems includes a review of
non-information technology ("non-IT" systems) (systems that contain embedded
technology in process control equipment containing microprocessors or other
similar circuitry). This assessment includes a review of the Company's internal
equipment and facilities (including building maintenance, security, electrical,
lighting, fire protection, telephone, heating and cooling systems). Based on
this review, the Company believes that its non-IT systems and equipment are Year
2000 compliant.
The Company's current plans, as previously discussed, involve the
pursuit of new investment opportunities. Due diligence with any potential
acquisition candidate will include a review of any Year 2000 exposure.
Since the Company has not yet consummated a business acquisition, the
Company is unable to estimate Year 2000 compliance costs that may arise from
such business acquisition opportunities.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has incurred losses and negative cumulative
cash flows from operations. On September 26, 1996, the Company's initial
public offering was declared effective and, in a transaction that closed on
October 1, 1996, the Company sold 359,375 shares of the Company's common
stock at $14.00 per share, including an over-allotment of 49,375 shares.
After
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deducting all offering costs, net proceeds to the Company totaled $4.24
million. Prior to the initial public offering, the Company's principal source
of cash and working capital had been from the private placement of the
Company's common stock, through which the Company received approximately $2.8
million in net proceeds. In connection with activities and results of
discontinued operations described above, the Company's net cash used in
operations for the three months ended March 31, 1999, totaled $44,057,
compared with cash provided by operations totaling $386,330 in the 1998
period. Net cash used in investing activities related to the discontinued
operations totaled $262,293. As of March 31, 1999, cash and cash equivalents
totaled $1,939,275. All unused funds are invested in U.S.Treasury-backed
funds with maturities, generally ranging under three months.
Management is unable to assess the Company's future liquidity and
capital requirements due to the Company's stated desire to enter into
different business opportunities. There can be no assurance that the Company
will not be required to raise additional capital before the end of 1999, or
any time thereafter, or that such capital will be available on acceptable
terms, or at all, in order to successfully consummate business transactions.
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
(a) On May 7, 1999, the Company received a determination from a Nasdaq
List Qualification Panel (the "Panel") that the Common Stock would be
delisted from trading on The Nasdaq SmallCap Market effective as of the close
of trading on the same date. The determination follows an oral delisting
hearing held on March 26, 1999. In its decision, the Panel noted that the
Company's current status as a "shell" corporation with no active business
operations did not provide investors sufficient information to determine the
potential of an investment in the Company. The Company's current market
makers are in the process of complying with the applicable requirements for
trading the Common Stock in the Over the Counter Bulletin Board. In its
order, the Panel invited the Company to apply for initial listing of its
securities upon the consummation of the merger transaction with MJK (the
"Merger"). In light of the Panel's invitation to apply for listing upon
consummation of the Merger, the Company and MJK intend to proceed with the
consummation of the Merger and intend to apply for listing of the Company's
securities, including shares of Common Stock issued to MJK shareholders in
connection with the Merger, on The Nasdaq National Market System.
(b) Hilding C. Nelson resigned as a director of the Company effective March
31, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included with this quarterly report on Form
10-QSB as required by Item 601 of Regulation S-B.
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
2.1 Agreement and Plan of Reorganization by and among the Company, MJK
Holdings, Inc., and NM Merger Co. dated March 25, 1999, as amended on
May 7, 1999
11.1 Statement of Computation of Loss Per Share
27 Financial Data Schedule
99.1 Cautionary Statement
</TABLE>
(b) Reports on Form 8-K. The Company filed a Form 8-K on January 7,
1999, in connection with the consummation of the sale transactions between
the Company and ZEVEX, Inc. and GalaGen Inc., respectively, the Company's
corporate name change from Nutrition Medical, Inc. to NM Holdings, Inc., and
the settlement of the litigation proceeding with Novartis Nutrition. The
Company filed a Form 8-K/A on March 3, 1999, which included proforma
financial information of the Company in connection with the ZEVEX, Inc. and
GalaGen Inc. sale transactions.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 17, 1999 NM HOLDINGS, INC.
By: /s/ Richard J. Hegstrand
----------------------------------------
Richard J. Hegstrand
Chief Operating Officer
(both on behalf of the Registrant and as
principal financial officer)
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EXHIBIT 2.1
AMENDMENT NO. 1 TO AGREEMENT AND
PLAN OF REORGANIZATION AND CONSENT
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION AND CONSENT
(the "Amendment") is entered into as of May 7, 1999 by MJK Holdings, Inc.
("MJK"), NM Holdings, Inc. ("NM"), and NM Merger Co. ("NM Merger").
WHEREAS, MJK, NM and NM Merger entered into an Agreement and Plan of
Reorganization dated March 25, 1999 ("Agreement"); and
WHEREAS, MJK sold more shares of Series I Preferred Stock than originally
anticipated and may issue options to purchase shares of common stock and the
undersigned desire to amend the exchange ratio contained in Section 2.2(a) of
the Agreement (the "Exchange Ratio") to account for the additional sales of
preferred stock by MJK, to provide for certain adjustments to the Exchange Ratio
in certain circumstances, and to memorialize NM's and NM Merger's consent to the
granting of certain options by MJK;
NOW, THEREFORE, it is hereby agreed by and between the parties as follows:
1. The undersigned agree and acknowledge that Section 2.2(a) of the
Agreement shall be amended to stated that the Exchange Ratio shall be 3.72382.
2. Sections 6.14, 7.1(h) and the first sentence of Section 7.3(e) of the
agreement are hereby deleted and of no further legal effect. Any other
references to the term "Registration Rights Agreement" set forth in the
Agreement shall be deleted to be of no legal effect.
3. The undersigned acknowledge, agree and consent to MJK's grant of options
to purchase 6,723 shares of its common stock which shall upon completion of the
transactions contemplated by the Agreement convert into an option to purchase
25,000 shares of NM common stock.
3. The undersigned acknowledge, agree and consent to the granting of up to
21,000 additional options to purchase shares of MJK common stock; provided,
however, that granting of additional options by MJK shall require a downward
adjustment of the Exchange Ratio to account for the additional shares that could
be issued upon exercise of said additional options, and that such additional
options, upon the consummation of the merger (as defined in the Agreement) shall
not, in any manner, dilute the aggregate ownership interest of NM's current
shareholders in NM.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the day
and year first above written.
MJK HOLDINGS, INC. NM HOLDINGS, INC.
By By
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Senior Vice President President and Chief Executive Officer
NM MERGER CO.
By
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President and Chief Executive Officer
A-1
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MARCH 25, 1999
BY AND BETWEEN
MJK HOLDINGS, INC.,
NM HOLDINGS, INC.
AND
NM MERGER CO.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1.....................................................................1
DEFINITIONS AND PRELIMINARY TRANSACTIONS......................................1
1.1. Definitions....................................................1
ARTICLE 2.....................................................................3
MERGER........................................................................3
2.1. Effect of Merger...............................................3
2.2. Effect on MJK Capital Stock and Merger Sub Capital Stock.......5
2.3. Rights of Holders of MJK Capital Stock.........................5
2.4. Procedure for Exchange of MJK Common Stock and Series I
Convertible Preferred Stock.................................6
2.5. Dissenting Shares..............................................7
ARTICLE 3.....................................................................7
REPRESENTATIONS AND WARRANTIES OF MJK.........................................7
3.1. Organization and Qualification.................................7
3.2. Authority Relative to this Agreement;
Non-Contravention...........................................8
3.3. Capitalization.................................................9
3.4. Financial Statements and NASD Reports..........................9
3.5. Subsidiaries...................................................9
3.6. Litigation....................................................10
3.7. No Brokers or Finders.........................................10
3.8. Absence of Undisclosed Liabilities............................10
3.9. No Material Adverse Changes...................................10
3.10. Leased Premises...............................................11
3.11. Tax Matters...................................................11
3.12. Contracts and Commitments.....................................12
3.13. Intellectual Property Rights..................................13
3.14. Employees.....................................................13
3.15. Employee Benefit Plans........................................14
3.16. Insurance.....................................................14
3.17. Affiliate Transactions........................................15
3.18. Compliance with Laws; Permits.................................15
3.19. Environmental Matters.........................................16
3.20. Year 2000 Compliance..........................................17
3.21. Absence of Certain Developments...............................17
3.22. Disclosure....................................................18
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ARTICLE 4....................................................................18
REPRESENTATIONS AND WARRANTIES OF NM.........................................18
4.1. Organization and Qualification................................18
4.2. Authority Relative to this Agreement;
Non-Contravention..........................................18
4.3. Capitalization................................................19
4.4. Exchange Act Reports..........................................19
4.5. Absence of Certain Developments...............................20
4.6. Absence of Undisclosed Liabilities............................21
4.7. No Material Adverse Changes...................................21
4.8. Litigation....................................................21
4.9. No Brokers or Finders.........................................22
4.10. Proxy Statement...............................................22
4.11. Validity of the Surviving Corporation Common Stock..... ......22
4.12. Title to Properties...........................................22
4.13. Tax Matters...................................................23
4.14. Contracts and Commitments.....................................23
4.15. Intellectual Property Rights..................................24
4.16. Employees.....................................................25
4.17. Employee Benefit Plans........................................25
4.18. Insurance.....................................................26
4.19. Affiliate Transactions........................................26
4.20. Compliance with Laws; Permits.................................26
4.21. Environmental Matters.........................................27
4.22. Year 2000 Compliance..........................................28
4.23. Disclosure....................................................28
ARTICLE 5....................................................................29
CONDUCT OF BUSINESS PENDING THE MERGER.......................................29
5.1. Conduct of Business by NM.....................................29
5.2. Conduct of Business by MJK....................................29
ARTICLE 6....................................................................30
ADDITIONAL COVENANTS AND AGREEMENTS..........................................30
6.1. Governmental Filings..........................................30
6.2. Expenses......................................................30
6.3. Due Diligence; Access to Information; Confidentiality.........30
6.4. Proxy Statement...............................................32
6.5. Tax Treatment.................................................32
6.6. Press Releases................................................32
6.7. Securities Reports............................................33
6.8. Stock Listing.................................................33
6.9. Shareholder Approvals.........................................33
6.10. No Solicitation...............................................33
6.11. Failure to Fulfill Conditions.................................34
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6.12. Tax Opinion...................................................34
6.13. Resignations and Election of Directors........................34
6.14. Registration Rights Agreement.................................34
6.15. Filing of Reports Necessary for use of Rule 145...............34
6.16. Notification of Certain Matters...............................34
ARTICLE 7....................................................................35
CONDITIONS...................................................................35
7.1. Conditions to Obligations of Each Party.......................35
7.2. Additional Conditions to Obligation of NM.....................36
7.3. Additional Conditions to Obligation of MJK....................37
ARTICLE 8....................................................................38
TERMINATION, AMENDMENT AND WAIVER............................................38
8.1. Termination...................................................38
8.2. Amendment.....................................................39
8.3. Waiver........................................................39
ARTICLE 9....................................................................39
GENERAL PROVISIONS...........................................................39
9.1. Notices.......................................................39
9.2. Interpretation................................................40
9.3. Severability..................................................40
9.4. Miscellaneous.................................................41
9.5. Non-Survival of Representations, Warranties and Covenants.....41
9.6. Schedules.....................................................41
9.7. Counterparts..................................................41
9.8. Third Party Beneficiaries.....................................41
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated March 25, 1999, by and between
MJK HOLDINGS, INC., a Minnesota corporation ("MJK"), NM HOLDINGS, INC., a
Minnesota corporation ("NM"), and NM MERGER CO., a Minnesota corporation and a
wholly-owned subsidiary of NM ("Merger Sub").
WITNESSETH:
WHEREAS, the Boards of Directors of MJK and NM have determined that it is
in the best interests of MJK and NM and their respective shareholders to
consummate the merger (the "Merger") of Merger Sub, a newly-formed subsidiary of
NM, with and into MJK with MJK as the surviving corporation;
WHEREAS, MJK and NM desire that the Merger be made on the terms and subject
to the conditions set forth in this Agreement and qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended; and
WHEREAS, as a condition to the Merger, MJK requires that NM amend and
restate its Second Restated Articles of Incorporation, as amended, to change the
name of NM and to authorize additional shares of Common Stock.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND PRELIMINARY TRANSACTIONS
1.1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
AFFILIATE: as defined in Regulation 12b-2 promulgated under the Exchange
Act, as such Regulation is in effect on the date hereof.
ARTICLES OF MERGER: the Articles of Merger in substantially the form of
EXHIBIT A hereto.
CODE: the Internal Revenue Code of 1986, as amended, or any successor
legislation.
EFFECTIVE DATE: as defined in Section 2.1(e).
EFFECTIVE TIME: as defined in Section 2.1(e).
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
EXCHANGE RATIO: as defined in Section 2.2(a).
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GAAP: generally accepted accounting principles.
IRS: the Internal Revenue Service.
LIABILITIES: any and all debts, liabilities, accounts payable, Taxes,
claims and other obligations, absolute or contingent, mature or not mature,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever
arising (unless otherwise specified in this Agreement), including all costs and
expenses relating thereto, and including, without limitation, those debts,
liabilities and obligations arising under any law, rule, regulation, or any
actual or threatened action, suit, proceeding or investigation by or before any
court, any governmental or other regulatory or administrative agency or
commission or any arbitration tribunal, any order or consent decrees of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
MATERIAL ADVERSE EFFECT: with respect to an entity means any condition,
event, change or occurrence, individually or collectively, that has had or may
reasonably be expected to have a material adverse effect on the business,
operations, results of operations or financial condition of such entity on a
consolidated basis.
MBCA: Minnesota Business Corporation Act, as amended.
MERGER: as defined in the preambles of this Agreement.
MJK SUBSIDIARY: as defined in Section 3.5.
NEW ARTICLES: the third amended and restated articles of incorporation
of NM in substantially the form of EXHIBIT B hereto which will be effective
on or before the Effective Date.
NM 10-K REPORTS: as defined in Section 4.4.
NM 10-Q REPORTS: as defined in Section 4.4.
NM BOARD: the Board of Directors of NM immediately prior to the Effective
Date.
NM COMMON STOCK: the Common Stock, par value $.04 per share, of NM, prior
to the Effective Date.
PROXY STATEMENT: as defined in Section 6.4.
REGISTRATION RIGHTS AGREEMENT: means the agreement between the Surviving
Corporation and certain shareholders of MJK attached as EXHIBIT C hereto.
REQUISITE MJK SHAREHOLDER VOTE: as defined in Section 3.2.
REQUISITE NM SHAREHOLDER VOTE: as defined in Section 4.2.
SEC: the Securities and Exchange Commission.
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SERIES I CONVERTIBLE PREFERRED STOCK: Series I preferred stock of MJK
Holdings, Inc. par value $7.85 per share.
SECURITIES ACT: the Securities Act of 1933, as amended.
SUBSIDIARY: with respect to any entity shall mean each corporation in which
such entity owns directly or indirectly fifty percent (50%) or more of the
voting securities of such corporation and shall, unless otherwise indicated, be
deemed to refer to both direct and indirect subsidiaries of such entity.
SURVIVING CORPORATION: as defined in Article 2.
SURVIVING CORPORATION COMMON STOCK: the common stock, par value $.01 per
share, of the Surviving Corporation.
TAX OR TAXES: any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, environmental taxes, customs duties, capital
stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, workers' compensation,
employment-related insurance, real property, personal property, sales, use,
transfer, value added, alternative or add-on minimum or other governmental tax,
fee, assessment or charge of any kind whatsoever including any interest,
penalties or additions to any Tax or additional amounts in respect of the
foregoing.
ARTICLE 2
MERGER
Subject to the satisfaction or waiver of the conditions set forth in
Article 7, at the Effective Time, (i) Merger Sub will merge with and into MJK,
(ii) MJK will become a wholly-owned subsidiary of NM, (iii) NM will file with
the Minnesota Secretary of State the New Articles; and (iv) NM will change its
name to a name acceptable to MJK. MJK, as a wholly-owned subsidiary of NM after
giving effect to the Merger, shall be defined herein as the "Surviving
Corporation." The Merger will be effected pursuant to the Articles of Merger and
pursuant to the provisions of, and with the effect provided in Section 302A.641
of the MBCA.
2.1. EFFECT OF MERGER.
(a) From and after the Effective Time and until further amended in
accordance with law, (i) the Articles of Incorporation of MJK as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation, and (ii) the Bylaws of MJK as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation. From and after the Effective Time, the directors and officers of
the Surviving Corporation shall be the persons who were directors of MJK
immediately prior to the Effective Time and the officers of MJK immediately
prior to the Effective Time. These directors and officers of the Surviving
Corporation shall hold office for the term specified in, and subject to the
provisions contained in, the Articles of Incorporation and Bylaws of the
Surviving Corporation and applicable law. If, at or after the Effective Time, a
vacancy shall exist on the Board of Directors or in any of the offices of the
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Surviving Corporation, such vacancy shall be filled in the manner provided in
the Articles of Incorporation and Bylaws of the Surviving Corporation.
The initial Board of Directors of NM immediately after the Effective Time
will consist of seven (7) members of which six (6) directors will be designated
by MJK's Board of Directors immediately prior to the Effective Time and one (1)
will be designated by NM's Board of Directors immediately prior to the Effective
Time. Immediately after the Effective Time, the Board of Directors of NM will
elect the officers of MJK immediately prior to the Effective Time as the
officers of NM. The initial directors and officers of NM shall hold office for
the term specified in, and subject to the provisions contained in, the New
Articles and Bylaws of NM and applicable law. If, at or after the Effective
Time, a vacancy shall exist on the Board of Directors or in any of the offices
of NM, such vacancy shall be filled in the manner provided in the New Articles
and Bylaws of NM.
(b) At the Effective Time, the Surviving Corporation shall thereupon and
thereafter be responsible and liable for all the liabilities, debts, duties,
restrictions, disabilities and obligations of each of MJK and the Merger Sub,
all without further action.
(c) At the Effective Time, the Surviving Corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises, of a
public as well as of a private nature, of each of MJK and Merger Sub; all
property, real, personal and mixed, and all debts due on whatever account, and
all and every other interest, of or belonging to or due to each of MJK and
Merger Sub, shall be taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed; and the title to any real
estate or any interest therein, vested in MJK and Merger Sub shall not revert or
be in any way impaired by reason of the Merger.
(d) NM, Merger Sub and MJK, respectively, shall each use its best
efforts to take all such action as may be necessary or appropriate to effectuate
the Merger under the MBCA at the Effective Time. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all properties, rights, privileges, immunities,
powers and franchises of either MJK or Merger Sub, the officers of the Surviving
Corporation are fully authorized in the name of MJK and Merger Sub or otherwise
to take, and shall take, all such lawful and necessary action.
(e) Subject to the provisions of Articles 7 and 8 hereof, the closing
(the "Closing") of the transactions contemplated hereby shall take place at such
location, on such date (the "Closing Date") and at such time as MJK and NM
mutually agree at the earliest practicable time after the satisfaction or waiver
of the conditions in Article 7, but in no event later than ten (10) business
days after all such conditions have been satisfied or waived, or on such other
date as may be mutually agreed by the parties hereto. On the Closing Date, to
effect the Merger, the parties hereto will cause the Articles of Merger to be
filed with the Minnesota Secretary of State in accordance with the MBCA. Also on
the Effective Date, the parties hereto will effect the other transactions
contemplated hereby, including, if not previously filed, the filing of the New
Articles with the Minnesota Secretary of State. The Merger, shall be effective
when the Articles of Merger are filed with the Minnesota Secretary of State (the
"Effective Time"). As used herein, the term "Effective Date" shall mean the date
on which the Articles of Merger are filed with the Minnesota Secretary of State.
2.2. EFFECT ON MJK CAPITAL STOCK AND MERGER SUB CAPITAL STOCK.
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To effectuate the Merger, and subject to the terms and conditions of this
Agreement, at the Effective Time:
(a) each issued and outstanding share of MJK Common Stock and
Convertible Preferred Stock immediately prior to the Effective Time (other than
shares to be extinguished pursuant to Section 2.2(c) below and Dissenting Shares
as defined in Section 2.5 below) shall be converted into and exchangeable for
3.76378 share(s) (the "Exchange Ratio") of NM Common Stock (after giving effect
to the adoption of the New Articles on the Effective Date as provided in Section
2.1 (a) above) and NM shall issue to holders of MJK Common Stock and Series I
Convertible Preferred Stock shares of NM Common Stock based on the Exchange
Ratio in exchange for such outstanding shares of MJK Common Stock and Series I
Convertible Preferred Stock;
(b) the Stock Option Plan of NM and all outstanding options to purchase
shares of NM Common Stock issued pursuant to the NM Stock Option Plan shall be
continued by NM;
(c) each share of MJK Common Stock and Series I Convertible Preferred
Stock issued and outstanding immediately prior to the Effective Time and owned
by MJK, Merger Sub or NM shall be cancelled and extinguished without any
conversion thereof and no payment shall be made with respect thereto; and
(d) all issued and outstanding shares of common stock, $.01 par value,
of the Merger Sub held by NM immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of the
Surviving Corporation Common Stock.
2.3. RIGHTS OF HOLDERS OF MJK CAPITAL STOCK.
(a) On and after the Effective Date and until surrendered for exchange,
each outstanding stock certificate which immediately prior to the Effective Date
represented shares of MJK Common Stock and Series I Convertible Preferred Stock
(except Dissenting Shares and shares extinguished pursuant to Section 2.2(a))
shall be deemed for all purposes, to evidence ownership of and to represent the
number of whole shares of NM Common Stock into which such shares of MJK Common
Stock and Series I Convertible Preferred Stock shall have been converted
pursuant to Section 2.2(a) above, and the record holder of such outstanding
certificate shall, after the Effective Date, be entitled to vote the shares of
NM Common Stock into which such shares of MJK Common Stock and Series I
Convertible Preferred Stock shall have been converted on any matters on which
the holders of record of the NM Common Stock, as of any date subsequent to the
Effective Date, shall be entitled to vote. In any matters relating to such
certificates of MJK Common Stock and Series I Convertible Preferred Stock, NM
may rely conclusively upon the record of shareholders maintained by MJK
containing the names and addresses of the holders of record of MJK Common Stock
and Series I Convertible Preferred Stock on the Effective Date.
(b) On and after the Effective Date, NM shall reserve a sufficient
number of authorized but unissued shares of NM Common Stock for issuance in
connection with the conversion of MJK Common Stock and Series I Convertible
Preferred Stock into NM Common Stock.
(c) The Exchange Ratio set forth in Section 2.2(a) shall be adjusted
equitably to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution
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of securities convertible into MJK Common Stock or NM Common Stock),
reorganization or other like change occurring after the date of this Agreement
and prior to the Effective Time.
2.4. PROCEDURE FOR EXCHANGE OF MJK COMMON STOCK AND SERIES I CONVERTIBLE
PREFERRED STOCK.
(a) After the Effective Date, holders of certificates theretofore
evidencing outstanding shares of MJK Common Stock and Series I Convertible
Preferred Stock (except Dissenting Shares and shares extinguished pursuant to
Section 2.2(c)), upon surrender of such certificates to the Secretary of NM,
shall be entitled to receive certificates representing the number of whole
shares of NM Common Stock into which shares of MJK Common Stock and Series I
Convertible Preferred Stock theretofore represented by the certificates so
surrendered shall have been converted as provided in Section 2.2(a) hereof. NM
shall not be obligated to deliver the consideration to which any former holder
of shares of MJK Common Stock and Series I Convertible Preferred Stock is
entitled as a result of the Merger until such holder surrenders the certificate
or certificates representing such shares. Upon surrender, each certificate
evidencing MJK Common Stock and Series I Convertible Preferred Stock shall be
canceled. If there is a transfer of MJK Common Stock ownership which is not
registered in the transfer records of MJK, a certificate representing the proper
number of shares of NM Common Stock may be issued to a person other than the
person in whose name the certificate so surrendered is registered if: (i) upon
presentation to NM, such certificate shall be properly endorsed or otherwise be
in proper form for transfer, (ii) the person requesting such payment shall pay
any transfer or other taxes required by reason of the issuance of shares of NM
Common Stock to a person other than the registered holder of such certificate or
establish to the reasonable satisfaction of NM that such tax has been paid or is
not applicable, and (iii) the issuance of such NM Common Stock shall not, in the
sole discretion of NM, violate the requirements of the Regulation D "safe
harbor" of the Securities Act with respect to the private placement of NM Common
Stock that will result from the Merger.
(b) No fractional shares of NM Common Stock shall be issued in exchange
for shares of MJK Common Stock and Series I Convertible Preferred Stock. In lieu
thereof, NM shall pay to the owner thereof cash equal to the pro rata market
price of a share of NM Common Stock based on the closing sales price of the NM
Common Stock on the Effective Date as reported on the NASDAQ Small Cap Market as
published by THE WALL STREET JOURNAL.
(c) All shares of NM Common Stock issued upon the surrender for exchange
of MJK Common Stock and Series I Convertible Preferred Stock in accordance with
the above terms and conditions shall be deemed to have been issued and paid in
full satisfaction of all rights pertaining to such shares of MJK Common Stock
and Series I Convertible Preferred Stock.
(d) In the event any certificate for MJK Common Stock or Series I
Convertible Preferred Stock shall have been lost, stolen or destroyed, NM shall
issue and pay in exchange for such lost, stolen or destroyed certificate, upon
the making of an affidavit of that fact by the holder thereof, such shares of
the NM Common Stock and cash for fractional shares, if any, as may be required
pursuant to this Agreement; provided, however, that NM, in its discretion and as
a condition precedent to the issuance and payment thereof, may require the owner
of such lost, stolen or destroyed certificate to deliver a bond in such sum as
it may direct as indemnity against any claim that may be made against NM or any
other party with respect to the certificate alleged to have been lost, stolen or
destroyed.
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2.5. DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary, if
Section 302A.471 of the MBCA shall be applicable to the Merger, shares of MJK
Common Stock and Series I Convertible Preferred Stock that are issued and
outstanding immediately prior to the Effective Time and which are held by
shareholders who have not voted such shares in favor of the Merger, who shall
have delivered, prior to any vote on the Merger, a written demand for the fair
value of such shares in the manner provided in Section 302A.473 of the MBCA and
who, as of the Effective Time, shall not have effectively withdrawn or lost such
right to dissenters' rights ("Dissenting Shares") shall not be converted into or
represent a right to receive shares of NM Common Stock pursuant to Section
2.2(a) above, but the holders thereof shall be entitled only to such rights as
are granted by Section 302A.473 of the MBCA. Each holder of Dissenting Shares
who becomes entitled to payment for such shares pursuant to Sections 302A.471
and 302A.473 of the MBCA shall receive payment therefor from the Surviving
Corporation in accordance with the MBCA; provided, however, that if any such
holder of Dissenting Shares shall have effectively withdrawn such holder's
demand for appraisal of such shares or lost such holder's right to appraisal and
payment of such shares under Section 302A.473 of the MBCA, such holder or
holders (as the case may be) shall forfeit the right to appraisal of such shares
and each such share shall thereupon be deemed to have been canceled,
extinguished and converted, as of the Effective Time, into and represent the
right to receive payment from NM of shares of NM Common Stock as provided in
Section 2.2(a) above.
(b) If the holder of any shares of MJK Common Stock or Series I
Convertible Preferred Stock shall become entitled to receive payment for such
shares pursuant to Sections 302A.471 and 302A.473 of the MBCA and this Section
2.5, such payment shall be made by the Surviving Corporation in accordance with
this Section 2.5.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MJK
MJK hereby represents and warrants to NM as follows:
3.1. ORGANIZATION AND QUALIFICATION.
MJK is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota, and has the requisite corporate power
to carry on its business as now conducted. Each of the MJK Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. The copies of the Articles and Bylaws of MJK
which have been made available to NM prior to the date of this Agreement are
correct and complete copies of such documents as in effect as of the date of
this Agreement. As used in this Agreement, the term "Articles" with respect to
any corporation shall mean those instruments that at that time constitute its
articles of incorporation as filed or recorded under the general corporation or
other applicable law of the jurisdiction of its incorporation or organization,
including the articles or certificate of incorporation and any and all
amendments thereto. Each of MJK and the MJK Subsidiaries is licensed or
qualified to do business in every jurisdiction in which the nature of its
business or its ownership of property requires it to be licensed or qualified,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect on MJK or any MJK Subsidiary. Miller, Johnson & Kuehn,
Incorporated is duly licensed as a broker dealer under the
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Exchange Act and all applicable state securities laws, and is a member in good
standing of the National Association of Securities Dealers, Inc.
3.2. AUTHORITY RELATIVE TO THIS AGREEMENT; NON-CONTRAVENTION.
MJK has the requisite corporate power and authority to enter into this
Agreement and the Articles of Merger and to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement and the Articles of
Merger by MJK and the consummation by MJK of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of MJK
and, except for approval of this Agreement and the Merger by the requisite vote
of MJK's shareholders, no other corporate proceedings on the part of MJK are
necessary to authorize the execution and delivery of this Agreement, the
Articles of Merger and the consummation of the transactions contemplated hereby
and thereby. This Agreement has been duly executed and delivered by MJK and,
assuming it is a valid and binding obligation of NM, constitutes a valid and
binding obligation of MJK enforceable in accordance with its terms except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally. The Articles of Merger, when
executed and delivered by MJK, will constitute the valid and binding obligation
of MJK, enforceable in accordance with its terms. Except as set forth in
Schedule 3.2, neither MJK nor any of the MJK Subsidiaries is subject to, or
obligated under, any provision of (a) its Articles or Bylaws, (b) any agreement,
arrangement or understanding, (c) any license, franchise or permit or (d)
subject to obtaining the approvals referred to in the next sentence, any law,
regulation, order, judgment or decree, which would conflict with, be breached or
violated, or in respect of which a right of termination or acceleration or any
security interest, charge or encumbrance on any of its assets would be created,
by the execution, delivery or performance of this Agreement, the Articles of
Merger, or the consummation of the transactions contemplated hereby or thereby,
other than any such conflicts, breaches, violations, rights of termination or
acceleration or security interests, charges or encumbrances which, in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect on MJK or any MJK Subsidiary. Except for (a) the approval of the Merger,
the Articles of Merger and this Agreement by a requisite vote of the
shareholders of MJK (the "Requisite MJK Shareholder Vote"), (b) approvals under
applicable Blue Sky laws, (c) the filing of the Articles of Merger with the
Minnesota Secretary of State in accordance with the MBCA, and (d) such filings,
authorizations or approvals as may be set forth in Schedule 3.2, no
authorization, consent or approval of, or filing with, any public body, court or
authority is necessary on the part of MJK or any of the MJK Subsidiaries for the
consummation by MJK of the transactions contemplated by this Agreement, except
for such authorizations, consents, approvals and filings as to which the failure
to obtain or make the same will not, in the aggregate, have a Material Adverse
Effect on MJK or any MJK Subsidiary or adversely affect the consummation of the
transactions contemplated hereby.
3.3. CAPITALIZATION.
The authorized, issued and outstanding shares of capital stock of MJK as of
the date hereof is correctly set forth on Schedule 3.3. The issued and
outstanding shares of capital stock of MJK are duly authorized, validly issued,
fully paid and nonassessable and have not been issued in violation of any
preemptive rights. MJK has no other equity securities or securities containing
any equity features authorized, issued or outstanding. Except as set forth in
Schedule 3.3 hereto, there are no agreements or other rights or arrangements
existing which provide for the sale or issuance of capital
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stock by MJK and there are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or otherwise
acquire from MJK any shares of capital stock or other securities of MJK of any
kind. Except as set forth on Schedule 3.3, there are no agreements or other
obligations (contingent or otherwise) which may require MJK to repurchase or
otherwise acquire any shares of its capital stock.
3.4. FINANCIAL STATEMENTS AND NASD REPORTS.
Prior to the execution of this Agreement, MJK has delivered or made
available to NM complete and accurate copies of MJK's audited financial
statements for the year ended March 31, 1998, unaudited balance sheets and
income statements at and for the quarterly periods ended June 30, September 30
and December 31, 1998 (the "Financial Statements"), and Miller, Johnson & Kuehn,
Incorporated's Focus Reports for the year ended March 31, 1998 and the monthly
periods from April 1, 1998 to the date of this Agreement as filed with the NASD.
As of their respective date, or as subsequently amended prior to the date
hereof, such documents (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
to make the statements therein, in light of the circumstances under which they
were made, not misleading and (ii) as to the Focus Reports, complied as to form
in all material respects with the applicable rules and regulations of the SEC
and the NASD. The Financial Statements are based upon the information contained
in the books and records of MJK and fairly present the financial condition of
MJK as of the dates thereof and results of operations for the periods referred
to therein. The audited Financial Statements have been prepared in accordance
with GAAP. The unaudited Financial Statements have been prepared in accordance
with GAAP applicable to unaudited interim financial statements (and thus may not
contain all notes and may not contain prior period comparative data which are
required to be prepared in accordance with GAAP) consistently with the audited
Financial Statements and reflect all adjustments necessary to a fair statement
of the results for the interim periods presented.
3.5. SUBSIDIARIES.
Schedule 3.5 correctly sets forth the name and jurisdiction of
incorporation of each Subsidiary of MJK (each a "MJK Subsidiary" and
collectively the "MJK Subsidiaries"). Except as disclosed on Schedule 3.5, all
of the issued and outstanding shares of capital stock of each MJK Subsidiary are
owned directly or indirectly by MJK free and clear of any options, lien, pledge,
security interest, encumbrance or charge of any kind. All of the outstanding
shares of capital stock of each MJK Subsidiary have been duly and validly
authorized and issued, and are fully paid and nonassessable. Except as set forth
in Schedule 3.5, MJK does not own any stock, partnership interest, joint venture
interest or any other security or ownership interest issued by any other
corporation, organization or entity.
3.6. LITIGATION.
As of the date hereof, there are no actions, suits, proceedings, orders or
investigations pending or, to the knowledge of MJK, threatened against MJK, at
law or in equity, or before or by any federal, state or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign which challenges or seeks to make illegal or to delay or otherwise
directly or indirectly to restrain or prohibit the consummation of the
transactions contemplated hereby or seeks to obtain material damages in
connection with the transactions
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contemplated hereby. As used in this Agreement, the phrase "to the knowledge
of," or words of similar import, with respect to an entity means to the
knowledge of management officials of such entity having responsibility for the
matter in question.
3.7. NO BROKERS OR FINDERS.
Except as disclosed on Schedule 3.7, there are no claims for brokerage
commissions, finders' fees, investment advisory fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement, understanding, commitment or agreement made by or on behalf of MJK
or any of the MJK Subsidiaries.
3.8. ABSENCE OF UNDISCLOSED LIABILITIES.
Except as reflected in the unaudited balance sheet of MJK dated December
31, 1998 (the "Latest Balance Sheet Date"), MJK has no liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due, whether known or unknown, and regardless of when asserted) arising
out of transactions or events heretofore entered into, or any action or
inaction, or any state of facts existing, with respect to or based upon
transactions or events heretofore occurring, except (i) liabilities which have
arisen after the Latest Balance Sheet Date in the ordinary course of business
(none of which is a material uninsured liability for breach of contract, breach
of warranty, tort, infringement, claim or lawsuit), or (ii) as otherwise set
forth in Schedule 3.8 attached hereto.
3.9. NO MATERIAL ADVERSE CHANGES.
Since the Latest Balance Sheet Date, there has been no material adverse
change in the assets, financial condition, operating results, customer, employee
or supplier relations, or business condition of MJK.
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3.10. LEASED PREMISES.
(a) Neither MJK nor any MJK Subsidiary owns any real property. The real
property demised to MJK or any MJK Subsidiary by the leases (the "Leases")
described in Schedule 3.10 hereto constitutes all of the real property used or
occupied by MJK (the "Real Property").
(b) The Leases are in full force and effect, and MJK or the applicable
MJK Subsidiary holds a valid and existing leasehold interest under each of the
Leases for the term set forth in Schedule 3.10 hereto. To MJK's knowledge,
neither MJK nor any MJK Subsidiary is in default, and to MJK's knowledge no
circumstances exist which, if unremedied, would, either with or without notice
or the passage of time or both, result in such default under any of the Leases;
nor, to the knowledge of MJK, is any other party to any of the Leases in
default.
(c) Each of the tangible properties and tangible assets reflected on the
Latest Balance Sheet or acquired since the date thereof, free and clear of all
liens and encumbrances, except for (i) liens for current taxes not yet due and
payable, (ii) liens set forth in Schedule 3.10 hereto, (iii) the properties
subject to the Leases, (iv) assets disposed of since the date of the Latest
Balance Sheet in the ordinary course of business, (v) liens imposed by law and
incurred in the ordinary course of business for obligations not yet due to
carriers, warehousemen, laborers and materialmen and (vi) liens in respect of
pledges or deposits under workers' compensation laws.
3.11. TAX MATTERS.
(a) To MJK's knowledge, MJK and each MJK Subsidiary have, individually
or on a consolidated basis: (i) timely filed (or has had timely filed on its
behalf) all returns, declarations, reports, estimates, information returns, and
statements ("Returns") required to be filed or sent by it in respect of any
Taxes or required to be filed or sent by it by any taxing authority having
jurisdiction; (ii) timely and properly paid (or has had paid on its behalf) all
Taxes shown to be due and payable on such Returns; (iii) established on its
Latest Balance Sheet, in accordance with GAAP, reserves that are adequate for
the payment of any Taxes not yet due and payable; (iv) complied with all
applicable laws, rules, and regulations relating to the withholding of Taxes and
the payment thereof (including, without limitation, withholding of Taxes under
Sections 1441 and 1442 of the Internal Revenue Code of 1986, as amended (the
"Code"), or similar provisions under any foreign laws), and timely and properly
withheld from individual employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws.
(b) To MJK's knowledge, there are no liens for Taxes upon any assets of
MJK or of any MJK Subsidiary, except liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or assessed
against MJK or any MJK Subsidiary that has not been resolved and paid in full or
is hereby contested in good faith. Except as disclosed in Schedule 3.11, no
waiver, extension or comparable consent given by MJK or any MJK Subsidiary
regarding the application of the statute of limitations with respect to any
Taxes or Returns is outstanding, nor is any request for any such waiver or
consent pending. Except as disclosed in Schedule 3.11, there has been no Tax
audit or other administrative proceeding or court proceeding with regard to any
Taxes or Returns, nor is any such Tax audit or other proceeding pending, nor has
there been any notice to MJK or any MJK Subsidiary by any Taxing authority
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regarding any such Tax, audit or other proceeding, or, to the knowledge of MJK,
is any such Tax audit or other proceeding threatened with regard to any Taxes or
Returns. MJK does not expect the assessment of any additional Taxes of MJK or
any MJK Subsidiary for any period prior to the date hereof and is not aware of
any unresolved questions, claims or disputes concerning the liability for Taxes
of MJK or any MJK Subsidiary which would exceed the estimated reserves
established on their respective books and records.
(d) Except as set forth on Schedule 3.11, neither MJK nor any MJK
Subsidiary is a party to any agreement, contract or arrangement that would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code and the consummation of
the transactions contemplated by this Agreement will not be a factor causing
payments to be made by MJK or any MJK Subsidiary that are not deductible (in
whole or in part) under Section 280G of the Code.
(e) Except as set forth on Schedule 3.11, neither MJK nor any MJK
Subsidiary has requested any extension of time within which to file any Return,
which Return has not since been filed.
3.12. CONTRACTS AND COMMITMENTS.
(a) Schedule 3.12 hereto lists the following agreements, whether oral or
written, to which MJK or, where expressly referred to herein, an MJK Subsidiary
is a party, which are currently in effect, and which relate to the operation of
MJK's business or, where applicable, the business of the applicable MJK
Subsidiary: (i) collective bargaining agreement or contract with any labor
union; (ii) bonus, pension, profit sharing, retirement or other form of deferred
compensation plan; (iii) hospitalization insurance or other welfare benefit plan
or practice, whether formal or informal; (iv) stock purchase or stock option
plan; (v) contract for the employment of any officer, individual employee or
other person on a full-time or consulting basis or relating to severance pay for
any such person; (vi) confidentiality agreement; (vii) contract, agreement or
understanding relating to the voting of MJK Common Stock or the election of
directors of MJK; (viii) agreement or indenture relating to the borrowing of
money or to mortgaging, pledging or otherwise placing a lien on any of the
assets of MJK or any MJK Subsidiary; (ix) guaranty of any obligation for
borrowed money or otherwise; (x) lease or agreement under which MJK or any MJK
Subsidiary is lessee of, or holds or operates any property, real or personal,
owned by any other party, for which the annual rental exceeds $150,000; (xi)
lease or agreement under which MJK or any MJK Subsidiary is lessor of, or
permits any third party to hold or operate, any property, real or personal, for
which the annual rental exceeds $100,000; (xii) contract which prohibits MJK or
any MJK Subsidiary from freely engaging in business anywhere in the world;
(xiii) license agreement or agreement providing for the payment or receipt of
royalties or other compensation by MJK or any MJK Subsidiary in connection with
the intellectual property rights listed in Schedule 3.13 hereto; (xiv) contract
or commitment for capital expenditures in excess of $100,000; (xv) agreement for
the sale of any capital asset; (xvi) contract with any MJK Subsidiary or
affiliate thereof which in any way relates to MJK (other than for employment on
customary terms); or (xxii) other agreement which is either material to MJK's
business or was not entered into in the ordinary course of business.
(b) To MJK's knowledge, MJK and each MJK Subsidiary, where applicable,
have performed all obligations required to be performed by them in connection
with the contracts or commitments required to be disclosed in Schedule 3.12
hereto and are not in receipt of any claim
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of default under any contract or commitment required to be disclosed under such
caption; MJK and each MJK Subsidiary, where applicable, have no present
expectation or intention of not fully performing any material obligation
pursuant to any contract or commitment required to be disclosed under such
caption; and MJK has no knowledge of any breach or anticipated breach by any
other party to any contract or commitment required to be disclosed under such
caption.
3.13. INTELLECTUAL PROPERTY RIGHTS.
Schedule 3.13 hereto describes all rights in patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights, mask works,
trade secrets, know-how or other intellectual property rights owned by, licensed
to or otherwise controlled by MJK or used in, developed for use in or necessary
to the conduct of MJK's business as now conducted or planned to be conducted.
MJK owns and possesses all right, title and interest, or holds a valid license,
in and to the rights set forth in such schedule. Schedule 3.13 describes all
intellectual property rights which have been licensed to third parties and those
intellectual property rights which are licensed from third parties. MJK has
taken all necessary action to protect the intellectual property rights set forth
in such schedule. MJK has not received any notice of, nor are there any facts
known to MJK which indicate a likelihood of, any infringement or
misappropriation by, or conflict from, any third party with respect to the
intellectual property rights which are listed; no claim by any third party
contesting the validity of any intellectual property rights listed in Schedule
3.13 hereto has been made, is currently outstanding or, to the best knowledge of
MJK, is threatened; MJK has not received any notice of any infringement,
misappropriation or violation by MJK of any intellectual property rights of any
third parties and MJK has not infringed, misappropriated or otherwise violated
any such intellectual property rights.
3.14. EMPLOYEES.
(a) To the knowledge of MJK, neither any executive employee of MJK nor
any group of MJK's employees has any plans to terminate his, her or its
employment; (b) to the knowledge of MJK, MJK has complied with all laws relating
to the employment of labor, including provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes; (c) MJK has no material labor relations problem
pending and its labor relations are satisfactory; (d) there are no workers'
compensation claims pending against MJK nor is MJK aware of any facts that would
give rise to such a claim; (e) to the knowledge of MJK, no employee of MJK is
subject to any secrecy or noncompetition agreement or any other agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the business of MJK; and (f) to the knowledge of MJK, no employee or former
employee of MJK has any claim with respect to any intellectual property rights
of MJK set forth in Schedule 3.13 hereto.
3.15. EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Schedule 3.15 hereto, with respect to all
employees and former employees of MJK and each MJK Subsidiary and all dependents
and beneficiaries of such employees and former employees, (i) MJK does not
maintain or contribute to any nonqualified deferred compensation or retirement
plans, contracts or arrangements; (ii) MJK does not maintain or contribute to
any qualified defined contribution plans (as defined in Section 3(34) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 414(i) of the Code; (iii)
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MJK does not maintain or contribute to any qualified defined benefit plans (as
defined in Section 3(35) of ERISA or Section 414(j) of the Code); and (iv) MJK
does not maintain or contribute to any employee welfare benefit plans (as
defined in Section 3(1) of ERISA).
(b) To the extent required (either as a matter of law or to obtain the
intended tax treatment and tax benefits), all employee benefit plans (as defined
in Section 3(3) of ERISA) which MJK does maintain or to which it does contribute
(collectively, the "Plans") comply in all material respects with the
requirements of ERISA and the Code. With respect to the Plans, (i) all required
contributions which are due have been made and a proper accrual has been made
for all contributions due in the current fiscal year; (ii) there are no actions,
suits or claims pending, other than routine uncontested claims for benefits; and
(iii) there have been no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Code).
(c) MJK does not contribute (and has not ever contributed) to any
multi-employer plan, as defined in Section 3(37) of ERISA. MJK has no actual or
potential liabilities under Section 4201 of ERISA for any complete or partial
withdrawal from a multi-employer plan. MJK has no actual or potential liability
for death or medical benefits after separation from employment, other than (i)
death benefits under the employee benefit plans or programs (whether or not
subject to ERISA) set forth in Schedule 3.15 hereto and (ii) health care
continuation benefits described in Section 4980B of the Code.
(d) Neither MJK nor any of its directors, officers, employees or other
"fiduciaries", as such term is defined in Section 3(21) of ERISA, has committed
any breach of fiduciary responsibility imposed by ERISA or any other applicable
law with respect to the Plans which would subject MJK, NM, Merger Sub, the
Surviving Corporation, or any of their respective directors, officers or
employees to any liability under ERISA or any applicable law.
(e) MJK has not incurred any liability for any tax or civil penalty or
any disqualification of any employee benefit plan (as defined in Section 3(3) of
ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6 of Title I and
Section 502(i) of ERISA.
3.16. INSURANCE.
Schedule 3.16 hereto, lists and briefly describes each insurance policy
maintained by MJK and each MJK Subsidiary with respect to MJK's and such MJK
Subsidiary's properties, assets and operations and sets forth the date of
expiration of each such insurance policy. All of such insurance policies are in
full force and effect and are issued by insurers of recognized responsibility.
To the knowledge of MJK, MJK and each MJK Subsidiary are not in default with
respect to their respective obligations under any of such insurance policies.
3.17. AFFILIATE TRANSACTIONS.
Except as set forth in Schedule 3.17 hereto, and other than pursuant to
this Agreement, no officer, director or employee of MJK, any MJK Subsidiary or
any member of the immediate family of any such officer, director or employee, or
any entity in which any of such persons owns any beneficial interest (other than
any publicly-held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than five percent of the
stock of which is beneficially owned by any of such persons) (collectively
"insiders"), has any agreement with MJK
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or any MJK Subsidiary (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible, used
in or pertaining to the business of MJK or any MJK Subsidiary (other than
ownership of capital stock of MJK). None of the insiders has any direct or
indirect interest in any competitor, supplier or customer of MJK or any MJK
Subsidiary or in any person, firm or entity from whom or to whom MJK or any MJK
Subsidiary leases any property, or in any other person, firm or entity with whom
MJK or any MJK Subsidiary transacts business of any nature. For purposes of this
Section 3.17, the members of the immediate family of an officer, director or
employee shall consist of the spouse, parents, children and siblings of such
officer, director or employee.
3.18. COMPLIANCE WITH LAWS; PERMITS.
(a) To the knowledge of MJK, MJK, each MJK Subsidiary and their
respective officers, directors, agents and employees have complied in all
material respects with all applicable laws, regulations and other requirements,
including, but not limited to, federal, state, local and foreign laws,
ordinances, rules, regulations and other requirements pertaining to equal
employment opportunity, employee retirement, affirmative action and other hiring
practices, occupational safety and health, workers' compensation, unemployment
and building and zoning codes, which materially affect the business of MJK or
each MJK Subsidiary and to which MJK or any MJK Subsidiary may be subject, and
no claims have been filed against MJK or any MJK Subsidiary alleging a violation
of any such laws, regulations or other requirements. MJK is not relying on any
exemption from or deferral of any such applicable law, regulation or other
requirement that would not be available to NM after it acquires MJK's
properties, assets and business.
(b) MJK has, in full force and effect, all licenses, permits and
certificates, from federal, state, local and foreign authorities (including,
without limitation, federal and state agencies regulating occupational health
and safety) necessary to conduct its business and operate its properties (other
than Environmental Permits, as such term is defined in Section 3.19 hereof)
(collectively, the "Permits"). A true, correct and complete list of all the
Permits is set forth in Schedule 3.18 hereto. To the knowledge of MJK, MJK has
conducted its business in compliance with all material terms and conditions of
the Permits.
(c) In particular, but without limiting the generality of the foregoing,
MJK has not violated and has no liability, and has not received a notice or
charge asserting any violation of or liability under, the federal Occupational
Safety and Health Act of 1970 or any other federal or state acts (including
rules and regulations thereunder) regulating or otherwise affecting employee
health and safety.
3.19. ENVIRONMENTAL MATTERS.
(a) As used in this Section 3.19, the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any dangerous, toxic
or hazardous pollutant, contaminant, chemical, waste, material or substance
as defined in or governed by any federal, state or local law, statute,
code, ordinance, regulation, rule or other requirement relating to such
substance or otherwise relating to the environment or human health or
safety, including without limitation any waste, material, substance,
pollutant or contaminant that
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might cause any injury to human health or safety or to the environment or
might subject MJK or any MJK Subsidiary to any imposition of costs or
liability under any Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state,
local and foreign laws, rules, regulations, codes, ordinances, orders,
decrees, directives, permits, licenses and judgments relating to pollution,
contamination or protection of the environment (including, without
limitation, all applicable federal, state, local and foreign laws, rules,
regulations, codes, ordinances, orders, decrees, directives, permits,
licenses and judgments relating to Hazardous Materials in effect as of the
date of this Agreement).
(iii) "Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any
other release or threatened release, however defined, whether intentional
or unintentional, of any Hazardous Material.
(b) To the knowledge of MJK, MJK, each MJK Subsidiary and the Real
Property are in material compliance with all applicable Environmental Laws.
(c) MJK and each MJK Subsidiary have obtained, and maintained in full
force and effect, all environmental permits, licenses, certificates of
compliance, approvals and other authorizations necessary to conduct its business
(collectively, the "Environmental Permits"). MJK and each MJK Subsidiary have
conducted their respective business in compliance with all terms and conditions
of the Environmental Permits. To the knowledge of MJK, MJK and each MJK
Subsidiary have filed all reports and notifications required to be filed under
and pursuant to all applicable Environmental Laws.
(d) Except as set forth in Schedule 3.19 hereto, neither MJK nor any MJK
Subsidiary has received notice alleging in any manner that MJK or such MJK
Subsidiary is, or might be potentially responsible for any Release of Hazardous
Materials, or any costs arising under or violation of Environmental Laws.
(e) No expenditure will be required in order for NM, Merger Sub or the
Surviving Corporation to comply with any Environmental Laws in effect at the
time of the Closing in connection with the operation or continued operation of
the business in order to operate or continue operation of the business of MJK,
any MJK Subsidiary or the Real Property in a manner consistent with the current
operation thereof by MJK and the MJK Subsidiaries.
(f) MJK and each MJK Subsidiary are not and have not been listed on the
United States Environmental Protection Agency National Priorities List of
Hazardous Waste Sites, or any other list, schedule, law, inventory or record of
hazardous or solid waste sites maintained by any federal, state or local agency.
(g) No lien has been attached or filed against MJK, any MJK Subsidiary
or the Real Property in favor of any governmental or private entity for (i) any
liability or imposition of costs under or violation of any applicable
Environmental Law; or (ii) any Release of Hazardous Materials.
(h) MJK, on behalf of itself and its successors and assigns, hereby
waives, releases and agrees not to bring any claim, demand, cause of action or
proceeding, including without limitation
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any cost recovery action, against NM, Merger Sub or the Surviving Corporation
under any Environmental Law.
3.20. YEAR 2000 COMPLIANCE.
MJK has no reason to believe that all software and hardware used by MJK or
any MJK Subsidiary is not Year 2000 Compliant, including date century
recognition, calculations which accommodate same century and multi-century
formulas and date values that reflect the century. As used herein, "Year 2000
Compliant" shall mean the ability of such software and hardware to (i)
consistently handle date information before, during and after January 1, 2000,
including but not limited to accepting date input, providing date output, and
performing calculations on dates or portions of dates; (ii) function accurately
in accordance with all documentation without interruption before, during and
after January 1, 2000, without any change of operations associated with the
advent of the new century; (iii) respond to two-digit date input in a way that
resolves any ambiguity as to century in a disclosed, defined and predetermined
manner; and (iv) store and provide output of date information in ways that are
unambiguous as to century.
3.21. ABSENCE OF CERTAIN DEVELOPMENTS.
Since the Latest Balance Sheet date, MJK has not:
(a) borrowed any amount or incurred or become subject to any liability
in excess of $100,000, except (i) current liabilities incurred in the ordinary
course of business and (ii) liabilities under contracts entered into in the
ordinary course of business;
(b) mortgaged, pledged, or subjected to any lien, charge or any other
encumbrance, any of its assets with a fair market value in excess of $150,000,
except (i) liens for current property taxes not yet due and payable, (ii) liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers, warehousemen, laborers, materialmen and the like, (iii)
liens in respect of pledges or deposits under workers' compensation laws, (iv)
liens set forth in Schedule 3.21 attached hereto, or (v) liens voluntarily
created in the ordinary course of business, all of which liens aggregate less
than $100,000;
(c) declared or paid any dividends or other distributions with respect
to any shares of MJK's capital stock or redeemed or purchased, directly or
indirectly, any shares of MJK's capital stock or any options;
(d) issued, sold or transferred any of its equity securities, securities
convertible into or exchangeable for its equity securities or warrants, options
or other rights to acquire its equity securities, or any bonds or debt
securities, except as otherwise described in Schedule 3.21 hereto; or
(e) made any change in accounting principles or practices from those
utilized in the preparation of the Financial Statements.
3.22. DISCLOSURE.
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The representations and warranties of MJK contained in this Agreement are
true and correct in all material respects, and such representations and
warranties do not omit any material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to MJK which has not been disclosed to NM
pursuant to this Agreement, the Schedules hereto, the MJK Focus Reports, all
taken together as a whole, which has had or could reasonably be expected to have
a Material Adverse Effect on MJK or any MJK Subsidiary or materially adversely
affect the ability of MJK to consummate in a timely manner the transactions
contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF NM
NM hereby represents and warrants to MJK as follows:
4.1. ORGANIZATION AND QUALIFICATION.
NM is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota, and has the requisite corporate power
to carry on its business as now conducted. NM has no Subsidiaries. The copies of
the Articles and Bylaws of NM and Merger Sub which have been made available to
MJK on or prior to the date of this Agreement are correct and complete copies of
such documents as in effect as of the date of this Agreement. NM is licensed or
qualified to do business in every jurisdiction which the nature of its business
or its ownership of property requires it to be licensed or qualified, except
where the failure to be so licensed or qualified would not have a Material
Adverse Effect on NM.
4.2. AUTHORITY RELATIVE TO THIS AGREEMENT; NON-CONTRAVENTION.
Each of NM and Merger Sub has the requisite corporate power and authority
to enter into this Agreement, the Articles of Merger and the other agreements
described herein to which it is or will be a party and to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement, the Articles of Merger by NM and Merger Sub and the other agreements
described herein, and the consummation by NM and Merger Sub of the transactions
contemplated hereby and thereby have been duly authorized by the Boards of
Directors of NM and Merger Sub. Except for approval of this Agreement, the
Merger and NM's New Articles by the requisite vote of NM's shareholders, no
other corporate proceedings on the part of NM or Merger Sub are necessary to
authorize the execution and delivery of this Agreement, the Articles of Merger
and the New Articles and the consummation of the transactions contemplated
hereby and thereby. This Agreement has been duly executed and delivered by NM
and Merger Sub and, assuming it is a valid and binding obligation of MJK,
constitutes a valid and binding obligation of NM and Merger Sub enforceable in
accordance with its terms except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally. The Articles of Merger, when executed and delivered by
Merger Sub, will constitute the valid and binding obligation of Merger Sub
enforceable in accordance with its terms. Except as set forth in Schedule 4.2,
NM is not subject to, nor obligated under, any provision of (a) its Articles or
Bylaws, (b) any agreement, arrangement or understanding, (c) any license,
franchise or permit, nor (d) subject to obtaining the approvals referred to in
the next sentence, any law, regulation, order, judgment or decree, which would
conflict with, be breached or
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violated, or in respect of which a right of termination or acceleration or any
security interest, charge or encumbrance on any of its assets would be created,
by the execution, delivery or performance of this Agreement and the Articles of
Merger, or the consummation of the transactions contemplated hereby or thereby,
other than any such conflicts, breaches, violations, rights of termination or
acceleration or security interests, charges or encumbrances which, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
NM. Except for (a) the filings, notices, consents and approvals described in
Section 3.2 hereof, (b) approval of the Merger, this Agreement and NM's New
Articles by the requisite vote of the shareholders of NM (the "Requisite NM
Shareholder Vote"), (c) the filing of the Articles of Merger and the New
Articles with the Minnesota Secretary of State, and (d) such filings,
authorizations or approvals as may be set forth in Schedule 4.2, no
authorization, consent or approval of, or filing with, any public body, court or
authority is necessary on the part of NM for the consummation by NM or Merger
Sub of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals and filings as to which the failure to
obtain or make the same will not, in the aggregate, have a Material Adverse
Effect on NM or Merger Sub.
4.3. CAPITALIZATION.
The authorized, issued and outstanding shares of capital stock of each of
NM and Merger Sub as of the date hereof is correctly set forth on Schedule 4.3.
The issued and outstanding shares of capital stock of each of NM and Merger Sub
are duly authorized, validly issued, fully paid and nonassessable and have not
been issued in violation of any preemptive rights. Except as disclosed on
Schedule 4.3, there are no options, warrants, conversion privileges or other
rights, agreements, arrangements or commitments obligating NM or Merger Sub to
issue, sell, purchase or redeem any shares of its capital stock or securities or
obligations of any kind convertible into or exchangeable for any shares of its
capital stock. Schedule 4.3 contains true and correct copies of all such
agreements, arrangements (including all stock plans, but excluding individual
stock option agreements) or commitments. The outstanding shares of NM Common
Stock have been listed for trading on the NASDAQ Small Cap market system.
4.4. EXCHANGE ACT REPORTS.
Prior to the Closing Date, NM has delivered or made available to MJK
complete and accurate copies of (a) NM's Annual Reports on Form 10-K (as
amended) for the years ended December 31, 1996 and 1997 (the "NM 10-K Reports")
as filed with the SEC, (b) all NM proxy statements and annual reports to
shareholders used in connection with meetings of NM shareholders held since
January 1, 1996 other than the Proxy Statement described in Section 4.10 below
(the "NM Proxy Statements"); (c) NM's Quarterly Reports on Form 10-Q (as
amended) for the quarters ended March 31, June 30, and September 30, 1998 (the
"NM 10-Q Reports") as filed with the SEC; and (d) all current reports on Form
8-K filed with the SEC after September 30, 1998 (the "NM 8-K Reports"). As of
their respective dates or as subsequently amended prior to the date hereof, such
documents (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 to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) complied as to form in all material respects with the
applicable rules and regulations of the SEC. Since January 1, 1995, NM has filed
in a timely manner all reports that it was required to file with the SEC
pursuant to Section 13(a), 14(a), 14(c) and 15(d) of the Exchange Act. The
aforementioned NM financial statements (including footnotes thereto) contained
in the NM 10-K Reports and the NM 10-Q Reports were prepared in
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accordance with GAAP applied on a consistent basis during the periods involved
(except as otherwise noted therein) are based upon the information contained in
the books and records of NM and fairly present the financial condition of NM as
of the dates thereof and results of operations for the periods referred to
therein. NM's audited financial statements as set forth in the NM 10-K Reports
and NM Proxy Statements have been prepared in accordance with GAAP. NM's
unaudited financial statements as set forth in the NM 10-Q Reports and the NM
Proxy Statements have been prepared in accordance with GAAP applicable to
unaudited interim financial statements (and thus may not contain all notes and
may not contain prior period comparative data which are required to be prepared
in accordance with GAAP) consistently with NM's audited financial statements as
described above and reflect all adjustments necessary to a fair statement of the
results for the interim periods presented.
4.5. ABSENCE OF CERTAIN DEVELOPMENTS.
Except as disclosed in NM's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998, in its Proxy Statement dated December 8, 1998, in the
NM 8-K Reports or on Schedules 4.5 or 4.8, unless otherwise expressly
contemplated or permitted by this Agreement or as contemplated in the foregoing
Proxy Statement described in Section 4.10 below, since September 30, 1998 to the
date hereof, NM has not:
(a) issued or sold any of its equity securities other than NM Common
Stock, securities convertible into or exchangeable for its equity securities
other than NM Common Stock, warrants, options or other rights to acquire its
equity securities other than NM Common Stock;
(b) reclassified any of its outstanding shares of capital stock except
pursuant to this Agreement;
(c) entered into a written agreement to do any of the foregoing;
(d) sold or otherwise disposed of any assets other than in the ordinary
course of business;
(e) borrowed any amount or incurred or become subject to any liability
in excess of $100,000, except (i) current liabilities incurred in the ordinary
course of business and (ii) liabilities under contracts entered into in the
ordinary course of business;
(f) mortgaged, pledged, or subjected to any lien, charge or any other
encumbrance, any of its assets with a fair market value in excess of $150,000,
except (i) liens for current property taxes not yet due and payable, (ii) liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers, warehousemen, laborers, materialmen and the like, (iii)
liens in respect of pledges or deposits under workers' compensation laws, (iv)
liens set forth in Schedule 4.5 attached hereto, or (v) liens voluntarily
created in the ordinary course of business, all of which liens aggregate less
than $100,000;
(g) declared or paid any dividends or other distributions with respect
to any shares of NM's capital stock or redeemed or purchased, directly or
indirectly, any shares of NM's capital stock or any options; or
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(h) made any change in accounting principles or practices from those
utilized in the preparation of the Financial Statements.
4.6. ABSENCE OF UNDISCLOSED LIABILITIES.
Except as reflected in the audited balance sheet of NM dated December 31,
1998 (the "Latest Balance Sheet Date"), NM has no liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due,
whether known or unknown, and regardless of when asserted) arising out of
transactions or events heretofore entered into, or any action or inaction, or
any state of facts existing, with respect to or based upon transactions or
events heretofore occurring, except (i) liabilities which have arisen after the
Latest Balance Sheet Date in the ordinary course of business (none of which is a
material uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit), or (ii) as otherwise set forth in Schedule 4.6
attached hereto.
4.7. NO MATERIAL ADVERSE CHANGES.
Since the Latest Balance Sheet Date, there has been no material adverse
change in the assets, financial condition, operating results, customer, employee
or supplier relations, business condition or prospects of NM.
4.8. LITIGATION.
Except as set forth in Schedule 4.8, as of the date hereof, there are no
actions, suits, proceedings, orders or investigations pending or, to the
knowledge of NM, threatened against NM, at law or in equity, or before or by any
federal, state or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign which challenges or seeks to make
illegal or to delay or otherwise directly or indirectly to restrain or prohibit
the consummation of the transactions contemplated hereby or seeks to obtain
material damages in connection with the transactions contemplated hereby.
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4.9. NO BROKERS OR FINDERS.
Except as disclosed on Schedule 4.9, there are no claims for brokerage
commissions, finders' fees, investment advisory fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement, understanding, commitment or agreement made by or on behalf of NM.
4.10. PROXY STATEMENT.
At the time the Proxy Statement is mailed to the shareholders of NM in
order to obtain approvals referred to in Section 6.9 hereof and at all times
subsequent to such mailing up to and including the times of such approvals, the
Proxy Statement (including any amendments or supplements thereto), with respect
to all information set forth therein relating to NM and its shareholders, this
Agreement, the Articles of Merger, and all other transactions contemplated
hereby, will (a) comply in all material respects with applicable provisions of
the Securities Act and the Exchange Act, and (b) not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in light
of the circumstances under which they are made, not misleading, except that, in
each case, no such representations shall apply to any written information,
including financial statements, of or provided by MJK or any MJK Subsidiary for
such Proxy Statement.
4.11. VALIDITY OF THE SURVIVING CORPORATION COMMON STOCK.
The shares of NM Common Stock to be issued to holders of MJK Common Stock
and Series I Convertible Preferred Stock pursuant to this Agreement will be,
when issued, duly authorized, validly issued, fully paid and nonassessable.
4.12. TITLE TO PROPERTIES.
(a) The real property demised by the leases (the "NM Leases") described
in Schedule 4.12 hereto constitutes all of the real property used or occupied by
NM (the "NM Real Property").
(b) The NM Leases are in full force and effect, and NM holds a valid and
existing leasehold interest under each of the NM Leases for the term set forth
in Schedule 4.12 hereto. NM is not in default, and no circumstances exist which,
if unremedied, would, either with or without notice or the passage of time or
both, result in such default under any of the Leases; nor, to the best knowledge
of NM, is any other party to any of the NM Leases in default.
(c) The NM Real Property and tangible assets reflected on NM's audited
balance sheet dated as of December 31, 1998 (the "Latest Balance Sheet") or
acquired since the date thereof, free and clear of all liens and encumbrances,
except for (i) liens for current taxes not yet due and payable, (ii) liens set
forth in Schedule 4.12 hereto, (iii) the properties subject to the NM Leases,
(iv) assets disposed of since the date of the Latest Balance Sheet in the
ordinary course of business, (v) liens imposed by law and incurred in the
ordinary course of business of obligations not yet due to carriers,
warehousemen, laborers and materialmen and (vi) liens in respect of pledges or
deposits under workers' compensation laws.
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4.13. TAX MATTERS.
(a) To NM's knowledge, it has: (i) timely filed (or has had timely filed
on its behalf) all returns, declarations, reports, estimates, information
returns, and statements ("Returns") required to be filed or sent by it in
respect of any Taxes or required to be filed or sent by it by any taxing
authority having jurisdiction; (ii) timely and properly paid (or has had paid on
its behalf) all Taxes shown to be due and payable on such Returns; (iii)
established on its Latest Balance Sheet, in accordance with GAAP, reserves that
are adequate for the payment of any Taxes not yet due and payable; (iv) complied
with all applicable laws, rules, and regulations relating to the withholding of
Taxes and the payment thereof (including, without limitation, withholding of
Taxes under Sections 1441 and 1442 of the Internal Revenue Code of 1986, as
amended (the "Code"), or similar provisions under any foreign laws), and timely
and properly withheld from individual employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under all applicable laws.
(b) To NM's knowledge, there are no liens for Taxes upon any assets of
NM, except liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or assessed
against NM that has not been resolved and paid in full. No waiver, extension or
comparable consent given by NM regarding the application of the statute of
limitations with respect to any Taxes or Returns is outstanding, nor is any
request for any such waiver or consent pending. There has been no Tax audit or
other administrative proceeding or court proceeding with regard to any Taxes or
Returns, nor is any such Tax audit or other proceeding pending, nor has there
been any notice to NM by any Taxing authority regarding any such Tax, audit or
other proceeding, or, to the best knowledge of NM, is any such Tax audit or
other proceeding threatened with regard to any Taxes or Returns. NM does not
expect the assessment of any additional Taxes of NM and is not aware of any
unresolved questions, claims or disputes concerning the liability for Taxes of
NM which would exceed the estimated reserves established on its books and
records.
(d) NM is not a party to any agreement, contract or arrangement that
would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code and the
consummation of the transactions contemplated by this Agreement will not be a
factor causing payments to be made by NM that are not deductible (in whole or in
part) under Section 280G of the Code.
(e) Except as set forth in Schedule 4.13, NM has not requested any
extension of time within which to file any Return, which Return has not since
been filed.
4.14. CONTRACTS AND COMMITMENTS.
(a) Schedule 4.14 hereto lists the following agreements, whether oral or
written, to which NM is a party, which are currently in effect, and which relate
to the operation of NM's business: (i) collective bargaining agreement or
contract with any labor union; (ii) bonus, pension, profit sharing, retirement
or other form of deferred compensation plan; (iii) hospitalization insurance or
other welfare benefit plan or practice, whether formal or informal; (iv) stock
purchase or stock option plan; (v) contract for the employment of any officer,
individual employee or other person on a full-time or consulting basis or
relating to severance pay for any such person; (vi) confidentiality
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agreement; (vii) contract, agreement or understanding relating to the voting of
NM Common Stock or the election of directors of NM; (viii) agreement or
indenture relating to the borrowing of money or to mortgaging, pledging or
otherwise placing a lien on any of the assets of NM; (ix) guaranty of any
obligation for borrowed money or otherwise; (x) lease or agreement under which
NM is lessee of, or holds or operates any property, real or personal, owned by
any other party, for which the annual rental exceeds $50,000; (xi) lease or
agreement under which NM is lessor of, or permits any third party to hold or
operate, any property, real or personal, for which the annual rental exceeds
$50,000; (xii) contract which prohibits NM from freely engaging in business
anywhere in the world; (xiii) license agreement or agreement providing for the
payment or receipt of royalties or other compensation by NM in connection with
the intellectual property rights listed in Schedule 4.15 hereto; (xiv) contract
or commitment for capital expenditures in excess of $50,000; (xv) agreement for
the sale of any capital asset; (xvi) contract with any affiliate which in any
way relates to NM (other than for employment on customary terms); or (xxii)
other agreement which is either material to NM's business or was not entered
into in the ordinary course of business.
(b) To NM's knowledge, NM has performed all obligations required to be
performed by them in connection with the contracts or commitments required to be
disclosed in Schedule 4.14 hereto and is not in receipt of any claim of default
under any contract or commitment required to be disclosed under such caption; NM
has no present expectation or intention of not fully performing any material
obligation pursuant to any contract or commitment required to be disclosed under
such caption; and NM has no knowledge of any breach or anticipated breach by any
other party to any contract or commitment required to be disclosed under such
caption.
4.15. INTELLECTUAL PROPERTY RIGHTS.
Schedule 4.15 hereto describes all rights in patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights mask works,
trade secrets, know-how or other intellectual property rights owned by, licensed
to or otherwise controlled by NM or used in, developed for use in or necessary
to the conduct of NM's business as now conducted or planned to be conducted. NM
owns and possesses all right, title and interest, or holds a valid license, in
and to the rights set forth in such schedule. Schedule 4.15 describes all
intellectual property rights which have been licensed to third parties and those
intellectual property rights which are licensed from third parties. NM has taken
all necessary action to protect the intellectual property rights set forth in
such schedule. NM has not received any notice of, nor are there any facts known
to NM which indicate a likelihood of, any infringement or misappropriation by,
or conflict from, any third party with respect to the intellectual property
rights which are listed; no claim by any third party contesting the validity of
any intellectual property rights listed in Schedule 4.15 hereto has been made,
is currently outstanding or, to the best knowledge of NM, is threatened; NM has
not received any notice of any infringement, misappropriation or violation by NM
of any intellectual property rights of any third parties and NM has not
infringed, misappropriated or otherwise violated any such intellectual property
rights.
4.16. EMPLOYEES.
(a) Except as otherwise set forth in Schedule 4.16, to the best
knowledge of NM, neither any executive employee of NM nor any group of NM's
employees has any plans to terminate his, her or its employment; (b) NM has
complied with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
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the payment of social security and other taxes; (c) NM has no material labor
relations problem pending and its labor relations are satisfactory; (d) there
are no workers' compensation claims pending against NM nor is NM aware of any
facts that would give rise to such a claim; (e) to the best knowledge of NM, no
employee of NM is subject to any secrecy or noncompetition agreement or any
other agreement or restriction of any kind that would impede in any way the
ability of such employee to carry out fully all activities of such employee in
furtherance of the business of NM; and (f) no employee or former employee of NM
has any claim with respect to any intellectual property rights of NM set forth
in Schedule 4.15 hereto.
4.17. EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Schedule 4.17 hereto, with respect to all
employees and former employees of NM and all dependents and beneficiaries of
such employees and former employees, (i) NM does not maintain or contribute to
any nonqualified deferred compensation or retirement plans, contracts or
arrangements; (ii) NM does not maintain or contribute to any qualified defined
contribution plans (as defined in Section 3(34) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 414(i) of the
Code; (iii) NM does not maintain or contribute to any qualified defined benefit
plans (as defined in Section 3(35) of ERISA or Section 414(j) of the Code); and
(iv) NM does not maintain or contribute to any employee welfare benefit plans
(as defined in Section 3(1) of ERISA).
(b) To the extent required (either as a matter of law or to obtain the
intended tax treatment and tax benefits), all employee benefit plans (as defined
in Section 3(3) of ERISA) which NM does maintain or to which it does contribute
(collectively, the "Plans") comply in all material respects with the
requirements of ERISA and the Code. With respect to the Plans, (i) all required
contributions which are due have been made and a proper accrual has been made
for all contributions due in the current fiscal year; (ii) there are no actions,
suits or claims pending, other than routine uncontested claims for benefits; and
(iii) there have been no prohibited transactions (as defined in Section 406 of
ERISA or Section 4975 of the Code).
(c) NM does not contribute (and has not ever contributed) to any
multi-employer plan, as defined in Section 3(37) of ERISA. NM has no actual or
potential liabilities under Section 4201 of ERISA for any complete or partial
withdrawal from a multi-employer plan. NM has no actual or potential liability
for death or medical benefits after separation from employment, other than (i)
death benefits under the employee benefit plans or programs (whether or not
subject to ERISA) set forth in Schedule 4.17 hereto and (ii) health care
continuation benefits described in Section 4980B of the Code.
(d) Neither NM nor any of its directors, officers, employees or other
"fiduciaries", as such term is defined in Section 3(21) of ERISA, has committed
any breach of fiduciary responsibility imposed by ERISA or any other applicable
law with respect to the Plans which would subject NM, Merger Sub, the Surviving
Corporation, or any of their respective directors, officers or employees to any
liability under ERISA or any applicable law.
(e) NM has not incurred any liability for any tax or civil penalty or
any disqualification of any employee benefit plan (as defined in Section 3(3) of
ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6 of Title I and
Section 502(i) of ERISA.
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4.18. INSURANCE.
Schedule 4.18 hereto, lists and briefly describes each insurance policy
maintained by NM with respect to NM's properties, assets and operations and sets
forth the date of expiration of each such insurance policy. All of such
insurance policies are in full force and effect and are issued by insurers of
recognized responsibility. NM is not in default with respect to its obligations
under any of such insurance policies.
4.19. AFFILIATE TRANSACTIONS.
Except as set forth in Schedule 4.19 hereto, and other than pursuant to
this Agreement, no officer, director or employee of NM or any member of the
immediate family of any such officer, director or employee, or any entity in
which any of such persons owns any beneficial interest (other than any
publicly-held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than one percent of the
stock of which is beneficially owned by any of such persons) (collectively
"insiders"), has any agreement with NM (other than normal employment
arrangements) or any interest in any property, real, personal or mixed, tangible
or intangible, used in or pertaining to the business of NM (other than ownership
of capital stock of NM). None of the insiders has any direct or indirect
interest in any competitor, supplier or customer of NM or in any person, firm or
entity from whom or to whom NM leases any property, or in any other person, firm
or entity with whom NM transacts business of any nature. For purposes of this
Section 4.19, the members of the immediate family of an officer, director or
employee shall consist of the spouse, parents and children of such officer,
director or employee.
4.20. COMPLIANCE WITH LAWS; PERMITS.
(a) To NM's knowledge, NM and its respective officers, directors, agents
and employees have complied in all material respects with all applicable laws,
regulations and other requirements, including, but not limited to, federal,
state, local and foreign laws, ordinances, rules, regulations and other
requirements pertaining to equal employment opportunity, employee retirement,
affirmative action and other hiring practices, occupational safety and health,
workers' compensation, unemployment and building and zoning codes, which
materially affect the business of NM or the NM Real Property and to which NM may
be subject, and no claims have been filed against NM alleging a violation of any
such laws, regulations or other requirements. NM is not relying on any exemption
from or deferral of any such applicable law, regulation or other requirement
that would not be available to MJK after it acquires NM's properties, assets and
business.
(b) NM has, in full force and effect, all licenses, permits and
certificates, from federal, state, local and foreign authorities (including,
without limitation, federal and state agencies regulating occupational health
and safety) necessary to conduct its business and own and operate its properties
(other than Environmental Permits, as such term is defined in Section 4.21
hereof) (collectively, the "Permits"). A true, correct and complete list of all
the Permits is set forth in Schedule 4.20 hereto. NM has conducted its business
in compliance with all material terms and conditions of the Permits.
(c) In particular, but without limiting the generality of the foregoing,
NM has not violated and has no liability, and has not received a notice or
charge asserting any violation of or liability under, the federal Occupational
Safety and Health Act of 1970 or any other federal or state acts
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(including rules and regulations thereunder) regulating or otherwise affecting
employee health and safety.
4.21. ENVIRONMENTAL MATTERS.
(a) As used in this Section 4.21, the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or substance as
defined in or governed by any federal, state or local law, statute, code,
ordinance, regulation, rule or other requirement relating to such substance
or otherwise relating to the environment or human health or safety,
including without limitation any waste, material, substance, pollutant or
contaminant that might cause any injury to human health or safety or to the
environment or might subject NM to any imposition of costs or liability
under any Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state,
local and foreign laws, rules, regulations, codes, ordinances, orders,
decrees, directives, permits, licenses and judgments relating to pollution,
contamination or protection of the environment (including, without
limitation, all applicable federal, state, local and foreign laws, rules,
regulations, codes, ordinances, orders, decrees, directives, permits,
licenses and judgments relating to Hazardous Materials in effect as of the
date of this Agreement).
(iii) "Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any
other release or threatened release, however defined, whether intentional
or unintentional, of any Hazardous Material.
(b) To the knowledge of NM, NM and the Real Property are in material
compliance with all applicable Environmental Laws.
(c) NM has obtained, and maintained in full force and effect, all
environmental permits, licenses, certificates of compliance, approvals and other
authorizations necessary to conduct its business and own or operate the NM Real
Property (collectively, the "Environmental Permits"). NM has conducted its
business in compliance with all terms and conditions of the Environmental
Permits. To NM's knowledge, it has filed all reports and notifications required
to be filed under and pursuant to all applicable Environmental Laws.
(d) Except as set forth in Schedule 4.21 hereto, NM has not received
notice alleging in any manner that NM might be potentially responsible for any
Release of Hazardous Materials, or any costs arising under or violation of
Environmental Laws.
(e) No expenditure will be required in order for NM, Merger Sub or the
Surviving Corporation to comply with any Environmental Laws in effect at the
time of the Closing in connection with the operation or continued operation of
the business of NM or the NM Real Property in a manner consistent with the
current operation thereof by NM.
(f) NM and the NM Real Property are not and have not been listed on the
United States Environmental Protection Agency National Priorities List of
Hazardous Waste Sites, or any other
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list, schedule, law, inventory or record of hazardous or solid waste sites
maintained by any federal, state or local agency.
(g) No lien has been attached or filed against NM or the NM Real
Property in favor of any governmental or private entity for (i) any liability or
imposition of costs under or violation of any applicable Environmental Law; or
(ii) any Release of Hazardous Materials.
(h) NM, on behalf of itself and its successors and assigns, hereby
waives, releases and agrees not to bring any claim, demand, cause of action or
proceeding, including without limitation any cost recovery action, against NM,
Merger Sub or the Surviving Corporation under any Environmental Law.
4.22. YEAR 2000 COMPLIANCE.
NM has no reason to believe that all software and hardware used by NM is
not Year 2000 Compliant, including date century recognition, calculations which
accommodate same century and multi-century formulas and date values that reflect
the century. As used herein, "Year 2000 Compliant" shall mean the ability of
such software and hardware to (i) consistently handle date information before,
during and after January 1, 2000, including but not limited to accepting date
input, providing date output, and performing calculations on dates or portions
of dates; (ii) function accurately in accordance with all documentation without
interruption before, during and after January 1, 2000, without any change of
operations associated with the advent of the new century; (iii) respond to
two-digit date input in a way that resolves any ambiguity as to century in a
disclosed, defined and predetermined manner; and (iv) store and provide output
of date information in ways that are unambiguous as to century.
4.23. DISCLOSURE.
The representations and warranties of NM contained in this Agreement are
true and correct in all material respects, and such representations and
warranties do not omit any material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to NM which has not been disclosed to MJK
pursuant to this Agreement, the Schedules hereto and the NM 10-K Reports, the NM
10-Q Reports, the NM 8-K Reports and the Proxy Statement dated December 8, 1998,
all taken together as a whole, which has had or could reasonably be expected to
have a Material Adverse Effect on NM or materially adversely affect the ability
of NM or Merger Sub to consummate in a timely manner the transactions
contemplated hereby.
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ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1. CONDUCT OF BUSINESS BY NM.
From the date of this Agreement to the Effective Date, unless MJK shall
otherwise agree in writing or as otherwise expressly contemplated or permitted
by other provisions of this Agreement, including but not limited to, this
Section 5.1, NM shall not, directly or indirectly, (a) amend or propose to amend
its Articles or Bylaws except for the New Articles, (b) issue, sell or grant any
of its equity securities convertible into or exchangeable for its equity
securities, or grants, warrants, options or other rights to acquire its equity
securities, (c) reclassify, subdivide or otherwise change outstanding shares of
capital stock of NM whether by stock dividend, reverse stock split, distribution
of securities convertible into NM capital stock or otherwise, (d) acquire (by
merger, exchange, consolidation, acquisition of stock or assets or otherwise)
any corporation, partnership, joint venture or other business organization or
division or assets thereof, (e) default in its obligations under any material
debt, contract or commitment which default results in the acceleration of
obligations due thereunder, (f) enter into or propose to enter into, or modify
or propose to modify, any agreement, arrangement, or understanding with respect
to any of the foregoing matters; or (g) conduct its business other than in the
ordinary course on an arm's length basis and in accordance in all material
respects with all applicable laws, rules and regulations and NM's past custom
and practice.
5.2. CONDUCT OF BUSINESS BY MJK.
From the date of this Agreement to the Effective Date, unless NM shall
otherwise agree in writing or as otherwise expressly contemplated or permitted
by other provisions of this Agreement, including but not limited to, this
Section 5.2, MJK shall not, directly or indirectly, (a) amend its Articles or
Bylaws, (b) split, combine or reclassify any outstanding shares of capital stock
of MJK, (c) declare, set aside, make or pay any dividend or distribution in
cash, stock, property or otherwise with respect to the capital stock of MJK, (d)
default in its obligations under any material debt, contract or commitment which
default results in the acceleration of obligations due thereunder, except for
such defaults arising out of this Agreement for which consents, waivers or
modifications are required to be obtained as set forth on Schedule 3.2, (e)
conduct its business other than in the ordinary course on an arms length basis
and in accordance in all material respects with all applicable laws, rules and
regulations and MJK's past custom and practice, (f) issue or sell any additional
shares of, or options, warrants, conversions, privileges or rights of any kind
to acquire any shares of, any of its capital stock, except as otherwise set
forth in Schedule 5.2 hereto, or (g) acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture or other business organization or division or
material assets thereof.
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ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1. GOVERNMENTAL FILINGS.
Each party will use all reasonable efforts and will cooperate with the
other party in the preparation and filing, as soon as practicable, of all
filings, applications or other documents required under applicable laws,
including, but not limited to, the Exchange Act, to consummate the transactions
contemplated by this Agreement. Prior to submitting each filing, application,
registration statement or other document with the applicable regulatory
authority, each party will, to the extent practicable, provide the other party
with an opportunity to review and comment on each such application, registration
statement or other document to the extent permitted by applicable law. Each
party will use all reasonable efforts and will cooperate with the other party in
taking any other actions necessary to obtain such regulatory or other approvals
and consents at the earliest practicable time, including participating in any
required hearings or proceedings. Subject to the terms and conditions herein
provided, each party will use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement.
6.2. EXPENSES.
Except as otherwise provided in this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
6.3. DUE DILIGENCE; ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Between the date hereof and the date of filing the Definitive Proxy
Statement referred to in Paragraph 6.4 with the SEC, MJK and NM shall afford to
the other party and their authorized representatives the opportunity to conduct
and complete a due diligence investigation of the other party as described
herein. In light of the foregoing, each party shall permit the other party full
access on reasonable notice and at reasonable hours to its properties and shall
disclose and make available (together with the right to copy) to the other party
and its officers, employees, attorneys, accountants and other representatives,
all books, papers and records relating to the assets, stock, properties,
operations, obligations and liabilities of such party and its subsidiaries,
including, without limitation, all books of account (including, without
limitation, the general ledger), tax records, minute books of directors' and
shareholders' meetings, organizational documents, bylaws, contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files (including, without limitation, legal research memoranda),
attorney's audit response letters, documents relating to assets and title
thereto (including, without limitation, abstracts, title insurance policies,
surveys, environmental reports, opinions of title and other information relating
to the real and personal property), plans affecting employees, securities
transfer records and shareholder lists, and any books, papers and records
relating to other assets or business activities in which such party may have a
reasonable interest, and otherwise provide such assistance as is reasonably
requested in order that each party may have a full opportunity to make such
investigation and evaluation as it shall reasonably desire to make of the
business and affairs of the other party; provided, however, that the foregoing
rights granted to each party shall, whether or not and regardless of the extent
to which
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the same are exercised, in no way affect the nature or scope of the
representations, warranties and covenants of the respective party set forth
herein. In addition, each party and its officers and directors shall cooperate
fully (including providing introductions, where necessary) with such other party
to enable the party to contact third parties, including customers, prospective
customers, specifying agencies or others as the party deems reasonably necessary
to complete its due diligence; provided that such party agrees not to initiate
such contacts without the prior approval of the other party, which approval will
not be unreasonably withheld.
(b) NM or MJK may, in their respective sole discretion, elect not to
proceed with the Merger based upon its due diligence investigation performed
pursuant to Section 6.3(a) above, if the results of such due diligence
investigation, in either party's reasonable judgment, (i) causes the other
party's value to be materially less than it would have been in the absence of
such information or (ii) reveals any event, condition or occurrence (not
previously disclosed in this Agreement or the schedules attached hereto) that
materially adversely affects the financial condition, assets, operating results,
business condition or prospects of the other party, by providing such other
party with written notice thereof on or before the date of the definitive Proxy
Statement referred to in Section 6.4.
(c) Prior to closing and if, for any reason, the transactions
contemplated by this Agreement are not consummated, neither NM nor MJK nor any
of their officers, employees, attorneys, accountants and other representatives,
shall disclose to third parties or otherwise use any confidential information
received from the other party in the course of investigating, negotiating, and
performing the transactions contemplated by this Agreement; provided, however,
that nothing shall be deemed to be confidential information which:
(i) is known to the party receiving the information at the
time of disclosure;
(ii) becomes publicly known or available without the
disclosure thereof by the party receiving the information in violation of
this Agreement; or
(iii) is rightfully received by the party receiving the
information from a third party.
This provision shall not prohibit the disclosure of information required to be
made under federal or state securities laws. If any disclosure is so required,
the party making such disclosure shall consult with the other party prior to
making such disclosure, and the parties shall use all reasonable efforts, acting
in good faith, to agree upon a text for such disclosure which is satisfactory to
both parties.
(d) IF NM or MJK elects not to proceed with the Merger under this
Section, Agreement shall terminate in accordance with the terms of Article 8
below.
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<PAGE>
6.4. PROXY STATEMENT.
(a) For the purpose (i) of holding a meeting of the shareholders of NM
to approve the Merger and the New Articles, the parties hereto shall cooperate
in the preparation of an appropriate Proxy Statement, which shall satisfy all
applicable requirements of the Exchange Act and the rules and regulations
thereunder (such proxy statement, together with any and all amendments or
supplements thereto, being herein referred to as the "Proxy Statement").
(b) MJK shall furnish such information concerning MJK and the MJK
Subsidiaries as is necessary in order to cause the Proxy Statement, insofar as
it relates to MJK, the MJK Subsidiaries and MJK securities, to be prepared in
accordance with Section 6.4(a). MJK agrees promptly to advise NM if at any time
prior to the NM shareholders' meeting any information provided by MJK in the
Proxy Statement becomes incorrect or incomplete in any material respect, and to
provide NM the information needed to correct such inaccuracy or omission.
(c) NM shall use all reasonable efforts to promptly prepare and submit
the Proxy Statement with the SEC and the NASD. NM shall use reasonable efforts
to file the definitive Proxy Statement at the earliest practicable date. NM
agrees to provide MJK and its counsel with reasonable opportunity to review and
comment on the Proxy Statement and any amendment thereto before filing with the
SEC or any other governmental entity and agrees not to make such filing if MJK
and its counsel reasonably object to the completeness or accuracy of any
information contained therein. MJK authorizes NM to utilize in the Proxy
Statement the information concerning MJK, the MJK Subsidiaries and MJK
securities provided to NM for the purpose of inclusion in the Proxy Statement.
NM shall advise MJK promptly when the definitive Proxy Statement has been filed
and shall furnish MJK with copies of all such documents.
(d) NM shall bear all printing and mailing costs in connection with the
preparation and mailing of the Proxy Statement to NM shareholders. MJK and NM
shall each bear their own legal and accounting expenses in connection with the
Proxy Statement.
6.5. TAX TREATMENT.
Neither NM nor MJK, nor Surviving Corporation after the Effective Date,
shall knowingly take any action which would disqualify the Merger as a
"reorganization" that would be tax free to the shareholders of NM and MJK
pursuant to Section 368(a) of the Code.
6.6. PRESS RELEASES.
MJK and NM shall agree with each other as to the form and substance of any
press release or public announcement related to this Agreement or the
transactions contemplated hereby, provided, however, that nothing contained
herein shall prohibit either party, following notification to the other party,
from making any disclosure which is required by law or regulation. If any such
press release or public announcement is so required, the party making such
disclosure shall consult with the other party prior to making such disclosure,
and the parties shall use all reasonable efforts, acting in good faith, to agree
upon a text for such disclosure which is satisfactory to both parties.
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6.7. SECURITIES REPORTS.
NM agrees to provide to MJK copies of all reports and other documents filed
under the Securities Act or Exchange Act with the SEC by it between the date
hereof and the Effective Date within two (2) days after the date such reports or
other documents are filed with the SEC.
6.8. STOCK LISTING.
NM and MJK shall use all reasonable efforts to list on the NASDAQ Small Cap
Market System the shares of NM Common Stock to be issued in connection with the
Merger, and to change its current trading symbol for NM Common Stock.
6.9. SHAREHOLDER APPROVALS.
Each of MJK and NM shall call a meeting of its shareholders for the purpose
of voting upon this Agreement and the Merger, and, in the case of NM, the New
Articles, and shall hold such meeting on such dates as mutually agreed by NM and
MJK. The Board of Directors of NM and MJK shall recommend approval of this
Agreement, the Merger and, in the case of NM, the New Articles, and use all
reasonable efforts (including, without limitation, soliciting proxies for such
approvals) to obtain approvals thereof from its shareholders, provided, however,
the Board of Directors may fail to make such recommendation, and/or to seek to
obtain the shareholder approval referred to in this sentence, or withdraw,
modify or change any such recommendation, if such Board of Directors determines,
in good faith, after consultation with counsel, that the making of such
recommendation, the seeking to obtain such shareholder approval, or the failure
to so withdraw, modify or change its recommendation, may constitute a breach of
the fiduciary or legal obligations of such Board of Directors.
6.10. NO SOLICITATION.
(a) Unless and until this Agreement shall have been terminated pursuant
to Section 8.1, neither NM nor its officers, directors or agents shall, directly
or indirectly, encourage, solicit or initiate discussions or negotiations with,
or engage in negotiations or discussions with, or provide non-public information
to, any corporation, partnership, person or other entity or groups concerning
any merger, sale of capital stock, sale of substantial assets or other business
combination; provided that NM may engage in such discussion in response to an
unsolicited proposal from an unrelated party if the Board of Directors of NM
determines, in good faith, after consultation with counsel, that the failure to
engage in such discussions may constitute a breach of the fiduciary or legal
obligations of the Board of Directors of NM. NM will promptly advise MJK if it
receives a proposal or inquiry with respect to the matters described above.
(b) Unless and until this Agreement shall have been terminated pursuant
to Section 8.1, neither MJK nor its officers, directors or agents shall,
directly or indirectly, encourage, solicit or initiate discussions or
negotiations with, or engage in negotiations or discussions with, or provide
non-public information to, any corporation, partnership, person or other entity
or groups concerning any merger, sale of capital stock, sale of substantial
assets or other business combination, except for any such transaction pursuant
to which (i) MJK is the surviving corporation in such transaction, and (ii) the
shareholders of MJK immediately preceding such transaction will own at least
fifty-one percent (51%) of the outstanding shares of MJK after giving effect to
such transaction; provided that
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MJK may engage in such discussion in response to an unsolicited proposal from an
unrelated party if the Board of Directors of MJK determines, in good faith,
after consultation with counsel, that the failure to engage in such discussions
may constitute a breach of the fiduciary or legal obligations of the Board of
Directors of MJK. MJK will promptly advise NM if it receives a proposal or
inquiry with respect to the matters described above.
6.11. FAILURE TO FULFILL CONDITIONS.
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated hereby
cannot be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party.
6.12. TAX OPINION.
MJK and NM shall reasonably cooperate with each other in obtaining a
federal tax opinion as contemplated by Section 7.1(c).
6.13. RESIGNATIONS AND ELECTION OF DIRECTORS.
At the Effective Time, NM shall deliver the voluntary resignations of each
officer of NM and each director of NM who is not designated to be a director of
NM in accordance with Section 2.1(a) and the continuing NM directors shall
appoint the other persons who shall be directors of NM in accordance with
Section 2.1(a) to be directors of NM upon the consummation of the Merger.
6.14. REGISTRATION RIGHTS AGREEMENT.
At the Effective Date, NM shall execute and deliver the Registration Rights
Agreement.
6.15. FILING OF REPORTS NECESSARY FOR USE OF RULE 145.
After the Effective Date, NM shall use reasonable efforts to file all
reports and data with the SEC necessary to permit the shareholders of MJK and NM
who may be deemed "underwriters" (within the meaning of Rule 145 under the
Securities Act) of MJK Common Stock and Series I Convertible Preferred Stock to
sell NM Common Stock received by them in connection with the Merger pursuant to
Rules 144 and 145(d) under the Securities Act if they would otherwise be so
entitled. After the Effective Date, NM will use reasonable efforts to file with
the SEC reports, statements, and other materials required by the federal
securities laws on a timely basis.
6.16. NOTIFICATION OF CERTAIN MATTERS.
On or prior to the Effective Date, each party shall give prompt notice to
the other party of (i) the occurrence or failure to occur of any event or the
discovery of any information, which occurrence, failure or discovery would be
likely to cause any representation or warranty on its part contained in this
Agreement to be untrue, inaccurate or incomplete after the date hereof in any
material respect or, in the case of any representation or warranty given as of a
specific date, would be likely to cause any such representation or warranty on
its part contained in this Agreement to be untrue, inaccurate or incomplete in
any material respect as of such specific date, and (ii) any material
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<PAGE>
failure of such party to comply with or satisfy any covenant or agreement to be
complied with or satisfied by it hereunder.
ARTICLE 7
CONDITIONS
7.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY.
The respective obligations of each party to effect the transactions
contemplated hereby shall be subject to the fulfillment or waiver at or prior to
the Effective Date of the following conditions:
(a) NO INJUNCTION. No injunction or other order entered by a state or
federal court of competent jurisdiction shall have been issued and remain in
effect which would prohibit or make illegal the consummation of the transactions
contemplated hereby.
(b) NO PROHIBITIVE CHANGE OF LAW. There shall have been no law, statute,
rule or regulation, domestic or foreign, enacted or promulgated which would
prohibit or make illegal the consummation of the transactions contemplated
hereby.
(c) FEDERAL TAX OPINION. MJK shall have received a tax opinion addressed
to MJK by counsel or independent certified accountants acceptable to MJK based
on customary reliance and subject to customary qualifications, to the effect
that for federal income tax purposes:
(i) The formation of Merger Sub and the merger of Merger Sub
into MJK will be disregarded for federal income tax purposes, and the
transaction will be treated as an acquisition by NM of the stock of MJK in
exchange solely for the shares of the Surviving Corporation Common Stock.
(ii) The Merger will qualify as a reorganization under
Section 368(a) of the Code. NM and MJK will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
(iii) No gain or loss will be recognized by shareholders of MJK
upon the receipt of the Surviving Corporation Common Stock pursuant to
Section 356(a)(1)(B) of the Code.
(d) LISTING. The NM Common Stock to be issued in connection with the
merger shall have been approved for listing on the NASDAQ Small Cap Market
System.
(e) CONSENTS AND APPROVALS. All consents and approvals necessary to
consummate the transactions contemplated by this Agreement shall have been
obtained, including, but not limited to, those set forth on Schedules 3.2 and
4.2 as well as any and all approvals required from the NASD in order that the
transactions contemplated herein not constitute a breach or violation of, or
result in a right of termination or acceleration of, or creation of any
encumbrance on any of MJK's assets pursuant to the provisions of, any agreement
arrangement or undertaking of or affecting MJK or any MJK Subsidiary or any
license, franchise or permit of or affecting MJK or any MJK Subsidiary.
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(f) ADVERSE PROCEEDINGS. There shall not be threatened, instituted or
pending any action or proceeding before any court or governmental authority or
agency, domestic or foreign, (i) challenging or seeking to make illegal, or to
delay or otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated hereby or seeking to obtain
material damages in connection with the transactions contemplated hereby, (ii)
seeking to prohibit direct or indirect ownership or operation by NM or Merger
Sub of all or a material portion of the business and assets of MJK or any MJK
Subsidiary, or to NM or Merger Sub or to MJK to dispose of or to hold separately
all or a material portion of the business or assets of NM, Merger Sub, MJK or
MJK Subsidiaries, as a result of the transactions contemplated hereby, (iii)
seeking to invalidate or render unenforceable any material provision of this
Agreement, the Articles of Merger or any of the other agreements attached as
exhibits hereto, or (iv) otherwise relating to and materially adversely
affecting the transactions contemplated hereby.
(g) GOVERNMENTAL ACTION. There shall not be any action taken, or any
statute, rule, regulation, judgment, order or injunction proposed, enacted,
entered, enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby by any federal, state or other court, government or
governmental authority or agency, which could reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in Section
7.1(f).
(h) REGISTRATION RIGHTS AGREEMENT. NM and the MJK shareholders that are
parties hereto shall have executed and delivered the Registration Rights
Agreement.
(i) INVESTMENT LETTER. Each of the MJK shareholders shall have executed
and delivered to NM the Investment Letter (in the form attached hereto as
EXHIBIT D).
(j) MARKET CONDITION. There shall not have occurred any general
suspension of trading on the New York Stock Exchange or NASDAQ NMS or NASDAQ
Small Cap Market System, or any suspension of trading in NM Common Stock, or any
general bank moratorium or closing or any war, national emergency or other event
affecting the economy or securities trading markets generally that would make
completion of the Merger impossible.
7.2. ADDITIONAL CONDITIONS TO OBLIGATION OF NM.
The obligation of NM to consummate the transactions contemplated hereby in
accordance with the terms of this Agreement is also subject to the fulfillment
or waiver of the following conditions:
(a) REPRESENTATIONS AND COMPLIANCE. The representations and warranties
of MJK set forth in Article 3 shall have been true and correct as of the date
hereof, and, except to the extent such representations and warranties are made
as of a specified date, shall be true and correct as of the Effective Date as if
made at and as of the Effective Date, except where the failure to be true and
correct would not have, or would not reasonably be expected to have, a Material
Adverse Effect on MJK. MJK shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed and
complied with by it hereunder at or prior to the Effective Date.
(b) OFFICERS' CERTIFICATE. MJK shall have furnished to NM a certificate
of the Chief Executive Officer and the Chief Financial Officer of MJK, dated as
of the Effective Date, in which
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<PAGE>
such officers shall certify that, to their best knowledge, the conditions set
forth in Section 7.2(a) have been fulfilled.
(c) SECRETARY'S CERTIFICATE. MJK shall have furnished to NM (i) copies
of the text of the resolutions by which the corporate action on the part of MJK
necessary to approve this Agreement, the Articles of Merger and the transactions
contemplated hereby and thereby were taken, (ii) a certificate dated as of the
Effective Date executed on behalf of MJK by its corporate secretary or one of
its assistant corporate secretaries certifying to NM that such copies are true,
correct and complete copies of such resolutions and that such resolutions were
duly adopted and have not been amended or rescinded, (iii) an incumbency
certificate dated as of the Effective Date executed on behalf of MJK by its
corporate secretary or one of its assistant corporate secretaries certifying the
signature and office of each officer of MJK executing this Agreement, the
Articles of Merger or any other agreement, certificate or other instrument
executed pursuant hereto by MJK, and (iv) a copy of the Articles of MJK,
certified by the Secretary of State of Minnesota, and certificates of good
standing from the Secretary of State of Minnesota evidencing the good standing
of MJK in such jurisdiction.
(d) SHAREHOLDER APPROVAL. This Agreement, the Merger, and the New
Articles shall have been approved by the Requisite NM Shareholder Vote.
(e) FAIRNESS OPINION. Within five (5) days prior to mailing the Proxy
Statement to the shareholders of NM, NM shall have received a written opinion in
a form reasonably acceptable to NM from an investment banking firm reasonably
acceptable to NM to the effect that the Merger is fair from a financial point of
view to the holders of NM Common Stock prior to the Effective Date.
7.3. ADDITIONAL CONDITIONS TO OBLIGATION OF MJK.
The obligation of MJK to consummate the transactions contemplated hereby in
accordance with the terms of this Agreement is also subject to the fulfillment
or waiver of the following conditions:
(a) REPRESENTATIONS AND COMPLIANCE. The representations and warranties
of NM set forth in Article 4 shall have been true and correct as of the date
hereof, and, except to the extent such representations and warranties are made
as of a specified date, shall be true and correct as of the Effective Date as if
made at and as of the Effective Date, except where the failure to be true and
correct would not have, or would not reasonably be expected to have, a Material
Adverse Effect on NM. NM shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed and
complied with by it hereunder at or prior to the Effective Date.
(b) OFFICERS' CERTIFICATE. NM shall have furnished to MJK a certificate
of the Chief Executive Officer and the Chief Financial Officer of NM, dated as
of the Effective Date, in which such officers shall certify that, to their best
knowledge, the conditions set forth in Section 7.3(a) have been fulfilled.
(c) SECRETARY'S CERTIFICATE. NM shall have furnished to MJK (i) copies
of the text of the resolutions by which the corporate action on the part of NM
necessary to approve this Agreement, the Articles of Merger, and the New
Articles, the election of the directors of the Surviving Corporation and the
transactions contemplated hereby and thereby were taken, (ii) Articles dated as
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<PAGE>
of the Effective Date executed on behalf of NM by its corporate secretary or one
of its assistant corporate secretaries certifying to MJK that such copies are
true, correct and complete copies of such resolutions and that such resolutions
were duly adopted and have not been amended or rescinded, (iii) an incumbency
certificate dated as of the Effective Date executed on behalf of NM by its
corporate secretary or one of its assistant corporate secretaries certifying the
signature and office of each officer of NM executing this Agreement, the
Articles of Merger, the New Articles, or any other agreement, certificate or
other instrument executed pursuant hereto, and (iv) a copy of the New Articles
of NM, certified by the Secretary of State of Minnesota, and certificates of
good standing from the Secretary of State of Minnesota evidencing the good
standing of NM in such jurisdiction.
(d) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved by the Requisite MJK Shareholder Vote.
(e) OTHER AGREEMENTS AND RESIGNATIONS. The Registration Rights
Agreement shall have been duly executed and delivered by the parties thereto.
Each of the officers and non-continuing directors of NM immediately prior to the
Effective Time shall deliver duly executed resignations from their positions
with NM effective immediately after the Effective Time.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1. TERMINATION.
(a) This Agreement may be terminated prior to the Effective Date:
(b) by mutual consent of MJK and NM, if the board of directors of each
so determines by vote of a majority of the members of its entire board;
(c) by either MJK or NM, if there has been a material misrepresentation,
breach of warranty or breach of covenant on the part of the other in the
representations, warranties and covenants set forth in this Agreement, or if any
of the conditions to such party's obligation to consummate the transactions
contemplated in this Agreement shall have become impossible to satisfy as a
result of no negligent or willful action by such party;
(d) by either MJK or NM, if (i) the Merger and this Agreement is not
duly approved by the shareholders of each of MJK or NM, including if a
shareholder meeting is not held as contemplated by the first sentence of Section
6.9, or (ii) the New Articles are not approved by the shareholders of NM,
including if a shareholder meeting is not held as contemplated by the first
sentence of Section 6.9;
(e) by either MJK or NM if the Effective Date is not on or before
July 15, 1999, or such later date as MJK and NM may mutually agree (unless the
failure to consummate the Merger by such date shall be due to the action or
failure to act of the party seeking to terminate this Agreement in breach of
such party's obligations under this Agreement);
(f) by either NM or MJK pursuant to Section 6.3 above; or
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<PAGE>
(g) by NM or MJK if, after the date hereof, there shall have been a
material adverse change in the financial condition or business of the other
party or if an event shall have occurred which, so far as reasonably can be
foreseen, would result in any such change, except to the extent such change is
directly caused by the party so terminating.
Any party desiring to terminate this Agreement shall give prior written
notice of such termination and the reasons therefor to the other party.
8.2. AMENDMENT.
This Agreement may not be amended except by an instrument in writing
approved by the parties to this Agreement and signed on behalf of each of the
parties hereto.
8.3. WAIVER.
At any time prior to the Effective Date, any party hereto may (a) extend
the time for the performance of any of the obligations or other acts of the
other party hereto or (b) waive compliance with any of the agreements of the
other party or with any conditions to its own obligations, in each case only to
the extent such obligations, agreements and conditions are intended for its
benefit. Any such extension or waiver shall only be effective if made in writing
and duly executed by the party giving such extension or waiver.
ARTICLE 9
GENERAL PROVISIONS
9.1. NOTICES.
All notices and other communications hereunder shall be in writing and
shall be sufficiently given if made by hand delivery, by fax, by telecopier, by
overnight delivery service, or by registered or certified mail (postage prepaid
and return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by it by like notice):
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If to MJK:
MJK Holdings, Inc.
5500 Wayzata Boulevard
Suite 800
Minneapolis, Minnesota 55416
Attn: Chairman and Chief Executive Officer
with copies to:
Maun & Simon, PLC
2000 Midwest Plaza Building West
801 Nicollet Mall
Minneapolis, Minnesota 55402-2534
Attn: Albert A. Woodward
If to NM or Merger Sub:
NM Holdings, Inc.
9850 51st Avenue North
Suite 110
Minneapolis, Minnesota 55442
Attention: President and Chief Executive Officer
with copies to:
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Kenneth L. Cutler
All such notices and other communications shall be deemed to have been duly
given as follows: when delivered by hand, if personally delivered, when
received; if delivered by registered or certified mail (postage prepaid and
return receipt requested), when receipt acknowledged; if faxed or telecopied,
when received, and the next day delivery after being timely delivered to a
recognized overnight delivery service.
9.2. INTERPRETATION.
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
References to Sections and Articles refer to Sections and Articles of this
Agreement unless otherwise stated. Words such as "herein," "hereinafter,"
"hereof," "hereto," "hereby" and "hereunder," and words of like import, unless
the context requires otherwise, refer to this Agreement (including the Exhibits
and Schedules hereto). As used in this Agreement, the masculine, feminine and
neuter genders shall be deemed to include the others if the context requires.
9.3. SEVERABILITY.
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way
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<PAGE>
be affected, impaired or invalidated, and the parties shall negotiate in good
faith to modify this Agreement and to preserve each party's anticipated benefits
under this Agreement.
9.4. MISCELLANEOUS.
This Agreement (together with all other documents and instruments referred
to herein): (a) constitutes the entire agreement, and supersedes all other prior
agreements and undertakings, both written and oral, among the parties, with
respect to the subject matter hereof; (b) shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the State
of Minnesota, without giving effect to the principles of conflict of laws
thereof; and (c) shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, but shall not be assignable
by either party hereto without the prior written consent of the other party
hereto.
9.5. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations and warranties of the parties set forth herein shall
not survive the consummation of the Merger, but covenants that specifically
relate to periods, activities or obligations subsequent to the Merger shall
survive the Merger. In addition, if this Agreement is terminated pursuant to
Section 8.1, the covenants contained in Section 6.3(c) shall survive such
termination.
9.6. SCHEDULES.
The Schedules and other disclosure items that are not exhibits hereto
referred to in this Agreement shall be delivered as soon as practicable, but in
no event later than the close of business on April 9, 1999. If on April 9, 1999
any party hereto shall have failed to deliver such Schedules, the other party
shall have the right to terminate this Agreement.
At least five (5) days prior to the Closing Date, the parties hereto shall
deliver to all other parties hereto a list of any and all amendments to the
Schedules necessary to update the Schedules from and after the date hereof.
9.7. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
9.8. THIRD PARTY BENEFICIARIES.
Except as provided in the next following sentence, each party hereto
intends that this Agreement shall not benefit or create any right or cause of
action in or on behalf of any person other than the parties hereto. The
provisions of Section 6.15 are intended for the benefit of Affiliates of NM and
MJK.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first written above by their respective officers.
MJK HOLDINGS, INC.
By
-------------------------------------------
Eldon C. Miller
Chairman and Chief Executive Officer
NM HOLDINGS, INC.
By
-------------------------------------------
-------------------------------------------
President and Chief Executive Officer
NM MERGER CO.
By
-------------------------------------------
-------------------------------------------
President and Chief Executive Officer
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<PAGE>
EXHIBIT 11.1 -- STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
NM HOLDINGS, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
MARCH 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
BASIC LOSS PER SHARE:
Weighted average shares outstanding 1,152,145 1,364,006
----------- -----------
Net income (loss) applicable to common stockholders $ (41,977) $ 49,153
----------- -----------
Basic net loss per share applicable to common stockholders:
Loss from continuing operations (.04) --
Income from discontinued operations -- .04
----------- -----------
Net income (loss) per share $ (.04) $ .04
=========== ===========
DILUTED LOSS PER SHARE:
Weighted average shares outstanding 1,152,145 1,364,006
Dilutive potential common shares -- --
----------- -----------
Total 1,152,145 1,364,006
----------- -----------
Net income (loss) applicable to common stockholders (41,977) 49,153
----------- -----------
Diluted net loss per share applicable to common stockholders:
Loss from continuing operations (.04) --
Income from discontinued operations -- .04
----------- -----------
Net income (loss) per share $ (.04) $ .04
=========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,939,275
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,975,463
<PP&E> 33,969
<DEPRECIATION> 33,224
<TOTAL-ASSETS> 2,593,883
<CURRENT-LIABILITIES> 23,344
<BONDS> 0
0
0
<COMMON> 49,065
<OTHER-SE> 2,524,474
<TOTAL-LIABILITY-AND-EQUITY> 2,593,883
<SALES> 0
<TOTAL-REVENUES> 17,534
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 59,511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (41,977)
<INCOME-TAX> 0
<INCOME-CONTINUING> (41,977)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,977)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
<PAGE>
Exhibit 99.1
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
NM Holdings, Inc. (the "Company") wishes to take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") and is filing this cautionary statement in connection with such safe
harbor legislation.
The Company's Form 10-KSB, any Form 10-QSB or Form 8-K filed by the
Company or any other written or oral statements made by or on behalf of the
Company may include "forward- looking statements" as defined in the Act. The
words "believe," "expect," "anticipate," "intend," "estimate," "forecast,"
"project" and similar expressions identify such forward-looking statements.
Forward-looking statements reflect the Company's current views with respect
to future events and financial performance, and the Company wishes to caution
investors that any forward-looking statements made by or on behalf of the
Company are subject to uncertainties and other factors that could cause
actual results to differ materially from such statements. These uncertainties
and other factors include, but are not limited to, the factors listed below
(many of which have been discussed in the Company's prior filings with the
Securities and Exchange Commission).
Although the Company has attempted to list comprehensively these important
factors, the Company wishes to caution investors that other factors may in the
future prove to be important in affecting the Company's results of operations.
New factors emerge from time to time, and it is not possible for Company
management to predict all of such factors, nor can Company management assess the
impact of each such factor on the business, or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
Investors are further cautioned not to place undue reliance on such
forward-looking statements because such statements reflect the Company's views
only as of the date the statement was made. The Company undertakes no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.
CONTROL BY CERTAIN SHAREHOLDERS
Directors and executive officers of the Company beneficially own
approximately 13.7% of the outstanding Common Stock. Directors, executive
officers and certain principal shareholders of MJK beneficially own
approximately 7.7% of the outstanding Common Stock. As a result, such directors,
officers and certain principal shareholders of the Company and MJK may have the
ability to effectively control the election of the Company's entire Board of
Directors and the affairs of the Company, including, but not limited to, all
fundamental corporate transactions such as acquisitions, mergers, consolidations
and the sale of substantially all of the Company's assets.
UNDESIGNATED STOCK
The Company's authorized capital consists of 6,250,000 shares of capital
stock, of which 5,000,000 shares are designated as Common Stock and 1,250,000
are preferred shares undesignated as to series. The Company has no outstanding
shares of preferred stock, and there are no current plans to designate or issue
any shares of preferred stock. Nevertheless, the Company's Board of Directors
has the power to issue any or all of these shares of unissued stock, including
the authority to establish the rights and preferences of the unissued shares,
without shareholder approval. Furthermore, as a Minnesota corporation, the
Company is subject to certain "anti-takeover" provisions of the MBCA. These
provisions and the power to issue additional shares and to establish separate
classes or series of common or preferred stock may, in certain circumstances,
deter or discourage take-over attempts and other changes in control of the
Company not approved by the Board of Directors.
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LIMITATIONS ON BROKER-DEALER SALES OF COMMON STOCK; APPLICABILITY OF "PENNY
STOCK" RULES; NO ASSURANCE OF QUALIFICATION FOR LISTING ON THE NASDAQ
SMALLCAP MARKET
Effective May 7, 1999, the Common Stock was delisted from trading on The
Nasdaq SmallCap Market. In a press release dated May 10, 1999, the Company
indicated that it intended to reapply for initial listing of the Common Stock
upon consummation of the merger transaction with MJK (the "Merger"). The Company
must comply with the applicable requirements for initial inclusion on The Nasdaq
SmallCap Market. To qualify for initial listing on The Nasdaq SmallCap Market,
common and preferred stock must have a minimum bid price of $4.00. All companies
listed on The Nasdaq SmallCap Market must meet specific corporate governance
requirements, including distributing annual and interim reports, maintaining a
minimum of two independent directors, holding an annual shareholder meeting,
meeting quorum requirements, soliciting proxies, reviewing conflicts of
interest, obtaining shareholder approval for certain corporate actions and
having certain shareholder voting rights. A company applying for listing on The
Nasdaq SmallCap Market must meet three additional requirements: (a) the company
must have either net tangible assets of more than $4 million, a market
capitalization of $50 million or net income of $750,000; (b) the company must
have a public float of 1 million shares; and (c) the market value of such public
float must be more than $5 million. Additionally, the company must have a
minimum of 300 round lot shareholders and there must be at least three market
makers in the company's common stock. Failure by a company to comply with these
requirements may result in the company's common stock not qualifying for listing
on The Nasdaq SmallCap Market.
Federal regulations promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") regulate the trading of so-called "penny stocks"
(the "Penny Stock Rules"), which are generally defined as any security not
listed on a national securities exchange or The Nasdaq Stock Market ("Nasdaq"),
priced at less than $5.00 per share and offered by an issuer with limited net
tangible assets and revenues. In addition, equity securities listed on Nasdaq
that are priced at less than $5.00 per share are deemed penny stocks for the
limited purpose of Section 15(b)(6) of the Exchange Act. Therefore, if the
Common Stock is listed on The Nasdaq SmallCap Market, and the Common Stock is
priced below $5.00 per share, trading of the Common Stock will be subject to the
provisions of Section 15(b)(6) of the Exchange Act, which make it unlawful for
any broker-dealer to participate in a distribution of any penny stock without
the consent of the Commission if, in the exercise of reasonable care, the
broker-dealer is aware of or should have been aware of the participation of a
previously sanctioned person. In such event, it may be more difficult for
broker-dealers to sell the Common Stock, and purchasers of shares of Common
Stock may experience difficulty in selling such shares in the future in
secondary trading markets.
While the Common Stock is excluded from The Nasdaq SmallCap Market,
trading, if any, in shares of the Common Stock is subject to the full range of
the Penny Stock Rules. Under Exchange Act Rule 15g-8, broker-dealers must take
certain steps prior to selling a penny stock, which steps include: (a) obtaining
financial and investment information from the investor; (b) obtaining a written
suitability questionnaire and purchase agreement signed by the investor; (c)
providing the investor with a written identification of the shares being offered
and in what quantity; and (d) delivering to the investor a written statement
setting forth the basis on which the broker-dealer approved the investor's
account for the transaction. If the Penny Stock Rules are not followed by a
broker-dealer, the investor has no obligation to purchase the shares.
Accordingly, the application of the comprehensive Penny Stock Rules may make it
more difficult for broker-dealers to sell the Common Stock and purchasers of
shares of Common Stock may have difficulty in selling such shares in secondary
trading markets.
DEPENDENCE UPON MANAGEMENT
The ability of the Company to consummate the Merger or to identify and
evaluate suitable other business opportunities and consummate another business
combination transaction if the Merger is not consummated is substantially
dependent upon certain key management personnel, particularly George E. Kline.
The loss of such key management personnel could have a material adverse effect
on the Company's ability to consummate the Merger or to identify and evaluate
suitable other business opportunities and consummate another business
combination transaction.
Page 2 of 4 pages
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SPECULATIVE NATURE OF COMPANY'S PROPOSED OPERATIONS
The success of the Company's proposed plan of operation will depend to a
great extent on the operations, financial condition and management of the
identified business combination entity. While Company management intends to seek
business combinations with entities having established operating histories,
there can be no assurance that the Company will be successful in locating
candidates meeting such criteria. In the event the Company completes a business
combination transaction, the success of the Company's operations may be
dependent upon management of the successor entity and numerous other factors
beyond the Company's control.
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES
The Company is an insignificant participant in the business of seeking
business combination transactions with other entities. A large number of
established and well financed entities, including venture capital firms, are
active in mergers and acquisitions of business entities that may be desirable
candidates for a strategic combination with the Company. Such competitors may
have significantly greater financial resources, technical expertise and
managerial capabilities than the Company. Consequently, the Company may be at a
competitive disadvantage in identifying possible business combination
opportunities and successfully completing a business combination transaction.
NO STANDARDS FOR BUSINESS OPPORTUNITIES
There can be no assurance that the Company will be successful in
consummating the Merger or identifying and evaluating suitable other business
opportunities or consummating another business combination transaction if the
Merger is not consummated. There is no assurance that the Board of Directors
will be able to negotiate a business combination on terms favorable to the
Company. The Company has not established a specific length of operating history
or a specified level of earnings, assets, net worth or other criteria that it
will require a target business opportunity to have achieved, and without which
the Company will not consider a business combination with such entity.
Accordingly, the Company may enter into a business combination with an entity
having losses, limited or no potential for earnings, limited assets, no
significant operating history, negative net worth or other negative
characteristics.
REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT
The Exchange Act requires companies subject thereto to provide certain
information about significant acquisitions, including certified financial
statements for the acquired company or entity, covering one or two years
depending on the size of the acquisition. The time and additional costs that may
be incurred by some target entities to prepare such statements may significantly
delay or preclude consummation of an otherwise desirable acquisition by the
Company. Acquisition prospects that do not have or are unable to obtain the
required audited financial statements may not be appropriate for acquisition so
long as the reporting requirements of the Exchange Act are applicable.
LACK OF DIVERSIFICATION
The Company's proposed operations may result in the Company engaging in a
business combination with only one business opportunity entity. Consequently,
the Company's activities may be limited to those engaged in by the business
opportunity which the Company acquires. The Company's inability to diversify its
activities into a number of areas may subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
Page 3 of 4 pages
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CHANGE IN CONTROL AND MANAGEMENT
A business combination transaction involving the issuance of Common
Stock may result in shareholders of a business opportunity entity obtaining a
controlling interest in the Company. Any such business combination may
require Company management to sell or transfer all or a portion of their
shares of Common Stock, or resign as directors and officers of the Company.
The resulting change in control of the Company could result in the removal of
one or more Company officers and directors and a corresponding reduction in
or elimination of their participation in the future affairs of the Company.
In addition, the issuance of shares of Common Stock in connection with a
business combination transaction would result in the reduction in percentage
of shares of Common Stock owned by present shareholders of the Company. The
consummation of the Merger would be expected to result in the occurrence of
many such effects.
DISADVANTAGES OF BLANK CHECK OFFERINGS
The Company may enter into a business combination transaction with an
entity that desires to establish a public trading market for its shares. An
issuance of the Company's shares of Common Stock in connection with such a
business combination transaction may be subject to applicable federal and state
laws regarding the issuance of "blank check" stock. The consequences of such
laws include, but are not limited to, time delays of the registration process,
significant expenses incurred in connection with such an offering, and
comprehensive disclosure regarding the Company's business, management and
financial condition.
POSSIBLE VOLATILITY OF STOCK PRICE
If the Merger is consummated, the market price of the Common Stock may be
highly volatile and could be subject to wide fluctuations in response to
quarterly variation in operating results, announcements of technological
innovations or new software, services or products by the Company or its
competitors, changes in financial estimates by securities analysts or other
events or factors, many of which are beyond its control. In addition, the stock
market has experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of many technology
and services companies and that often have been unrelated to the operating
performance of such companies. These broad market fluctuations may adversely
affect the market price of the Common Stock. In the past, following periods of
volatility in the market price for a company's securities, securities class
action litigation often has been instituted. Such litigation could result in
substantial costs and a diversion of management attention and resources, which
could have a material adverse effect on the Company's business, financial
condition and operating results.
Page 4 of 4 pages
