UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 9, 1999
C-COR.net Corp.
(Exact name of Registrant as specified in its charter)
Pennsylvania 0-10726 24-0811591
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
60 Decibel Road, State College, Pennsylvania 16801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (814) 238-2461
(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets
On July 9, 1999, the Registrant consummated its acquisition of Convergence.com
Corporation, a Georgia corporation ("Convergence"), pursuant to an Agreement and
Plan of Merger (the "Merger Agreement") dated as of May 15, 1999 by and among
the Registrant, Convergence and C-COR Acquisition Corp., a Georgia corporation
and a wholly-owned subsidiary of the Registrant ("Acquisition Sub"). Pursuant to
the Merger Agreement, Acquisition Sub was merged (the "Merger") with and into
Convergence, with Convergence being the surviving entity as a wholly owned
subsidiary of the Registrant. As consideration for the Merger, each outstanding
share of common stock of Convergence was converted into one share of the
Registrant's common stock for an aggregate of 1,433,323 shares of the
Registrant's common stock. Each outstanding warrant to acquire Convergence
common stock was converted into a warrant to acquire Registrant's common stock
for an aggregate of warrants to acquire 366,930 shares of the Registrant's
common stock. The nature and amount of consideration paid in connection with the
Merger was determined based on arms length negotiations between the Registrant
and Convergence. Prior to the Merger, the Registrant owned 148,426 shares of
Convergence's Class A Senior Convertible Stock (which was canceled pursuant to
the Merger Agreement), and the Registrant was the exclusive reseller of
Convergence's services and products. In addition, David R. Ames and Terry L.
Wright, each an officer, director, and shareholder of Convergence prior to the
Merger, became officers of the Registrant upon consummation of the Merger. The
foregoing summary of the Merger is qualified in its entirety by reference to the
Merger Agreement filed as Exhibit 2.1 to this report and incorporated herein by
reference. The merger is being accounted for under the pooling-of-interests
method of accounting and a tax-free reorganization. Effective on the date of the
merger, the Registrant changed its name from C-COR Electronics, Inc. to
C-COR.net Corp.
Item 7. Financial Statements, Pro Forma Information and Exhibits
(a) Financial Statements of Business Acquired
Pursuant to Item 7(a) and Item 7(b), the Registrant is required to
file certain financial statements with respect to the acquisition of
Convergence and certain pro forma financial information. As of the
date hereof, it is impractical to provide such financial statements,
including the Notes thereto, as well as the required pro forma
financial information. The Registrant expects to file all such
required financial statements and pro forma financial information as
soon as it is practicable, and in any event within the time period
required by Item 7(a).
(b) Exhibits.
2.1 Agreement and Plan of Merger dated as of May 15, 1999 among C-COR
Electronics, Inc., C-COR Acquisition Corp. and Convergence.com
Corporation.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
C-COR.net Corp.
(Registrant)
/s/ David A. Woodle
----------------------------------------------
Date: July 26, 1999 By: David A. Woodle
Title: President and Chief Executive Officer
AGREEMENT AND PLAN OF MERGER
Dated as of May 15, 1999
among
C-COR Electronics, Inc.,
C-COR Acquisition Corp.
and
Convergence.com Corporation
<PAGE>
<TABLE>
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER
<S> <C> <C> <C>
SECTION 1.1 The Merger.............................................................................1
SECTION 1.2 Effective Time of the Merger...........................................................1
ARTICLE II THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 Articles of Incorporation..............................................................2
SECTION 2.2 Bylaws.................................................................................2
SECTION 2.3 Officers...............................................................................2
ARTICLE III CONVERSION OF SHARES
SECTION 3.1 Conversion of Company Shares in the Merger; Other Securities
of the Company.....................................................................2
SECTION 3.2 Consideration..........................................................................3
SECTION 3.3 Exchange of Certificates...............................................................3
SECTION 3.4 Closing................................................................................5
SECTION 3.5 Closing of the Company's Transfer Books................................................5
ARTICLE IV REPRESENTATIONS AND WARRANTIESOF PARENT AND SUBSIDIARY
SECTION 4.1 Organization and Qualification.........................................................6
SECTION 4.2 Capitalization.........................................................................6
SECTION 4.3 Authority; Non-Contravention; Approvals................................................7
SECTION 4.4 Reports and Financial Statements.......................................................8
SECTION 4.5 Labor Controversies....................................................................8
SECTION 4.6 Environmental Matters..................................................................9
SECTION 4.7 Investment............................................................................10
SECTION 4.8 Events Subsequent to Year End Financial Statements....................................10
SECTION 4.9 Pooling and Tax-Free Reorganization Matters...........................................10
SECTION 4.10 Disclosure............................................................................11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.1 Organization and Qualification........................................................12
SECTION 5.2 Capitalization........................................................................12
SECTION 5.3 Subsidiaries..........................................................................13
SECTION 5.4 Authority; Non-Contravention; Approvals...............................................13
SECTION 5.5 Financial Statements..................................................................15
SECTION 5.6 Events Subsequent to Year End Financial Statements....................................15
SECTION 5.7 Books of Account......................................................................17
SECTION 5.8 Absence of Undisclosed Liabilities....................................................17
SECTION 5.9 Proxy Statement.......................................................................18
SECTION 5.10 Litigation............................................................................18
SECTION 5.11 No Violation of Law...................................................................18
SECTION 5.12 Compliance with Agreements............................................................19
SECTION 5.13 Taxes.................................................................................19
SECTION 5.14 Employee Benefit Plans; ERISA.........................................................20
SECTION 5.15 Labor Matters; Labor Controversies....................................................21
SECTION 5.16 Environmental Matters.................................................................22
SECTION 5.17 Title to Assets.......................................................................23
SECTION 5.18 Company Stockholders'Approval.........................................................24
SECTION 5.19 No Excess Parachute Payments..........................................................24
SECTION 5.20 Trademarks and Intellectual Property. ...............................................24
SECTION 5.21 Contracts, Obligations and Commitments................................................27
SECTION 5.22 Year 2000 Compliance..................................................................27
SECTION 5.23 Pooling and Tax-Free Reorganization Matters...........................................28
SECTION 5.24 Transactions with Related Parties.....................................................30
SECTION 5.25 Insurance.............................................................................30
SECTION 5.26 Guaranties............................................................................31
SECTION 5.27 Bank Accounts.........................................................................31
SECTION 5.28 Business Relations....................................................................31
SECTION 5.29 Potential Conflicts of Interest.......................................................31
SECTION 5.30 Disclosure............................................................................32
SECTION 5.31 Powers of Attorney....................................................................32
SECTION 5.32 Accredited Investors..................................................................32
SECTION 5.33 Brokers...............................................................................32
SECTION 5.34 Company Officers......................................................................32
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 Conduct of Business by the Company Pending the Merger.................................33
SECTION 6.2 Conduct of Business by Parent and Subsidiary Pending the Merger.......................34
SECTION 6.3 Control of the Company's Operations...................................................35
SECTION 6.4 Control of Parent's or Subsidiary's Operations........................................35
SECTION 6.5 Negotiations With Others..............................................................35
ARTICLE VII ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information.................................................................36
SECTION 7.2 Stockholders' Approvals...............................................................37
SECTION 7.3 ASR 135 Agreement.....................................................................37
SECTION 7.4 Expenses and Fees.....................................................................37
SECTION 7.5 Agreement to Cooperate................................................................38
SECTION 7.6 Public Statements.....................................................................38
SECTION 7.7 Notification of Certain Matters.......................................................38
SECTION 7.8 Employment Agreements.................................................................39
SECTION 7.9 Directors'and Officers'Indemnification................................................39
SECTION 7.10 Mandatory Registration................................................................39
SECTION 7.11 Parent Common Stock...................................................................41
SECTION 7.12 Acquisition of Common Stock...........................................................42
SECTION 7.13 Exhibits and Schedules................................................................42
SECTION 7.14 [Reserved] ...........................................................................42
SECTION 7.15 Transition............................................................................42
SECTION 7.16 Nasdaq Listing........................................................................42
SECTION 7.17 Company Warrants......................................................................42
ARTICLE VIII CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligation to Effect the Merger............................43
SECTION 8.2 Conditions to Obligation of the Company to Effect the Merger..........................44
SECTION 8.3 Conditions to Obligations of Parent and Subsidiary to
Effect the Merger.................................................................45
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination...........................................................................46
SECTION 9.2 Effect of Termination.................................................................47
SECTION 9.3 Waiver................................................................................47
ARTICLE X SURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 10.1 Survival of Representations and Warranties............................................47
ARTICLE XI GENERAL PROVISIONS
SECTION 11.1 Notices...............................................................................48
SECTION 11.2 Interpretation........................................................................49
SECTION 11.3 Entire Agreement; Miscellaneous.......................................................49
SECTION 11.4 Governing Law.........................................................................49
SECTION 11.5 Counterparts..........................................................................49
SECTION 11.6 Parties In Interest...................................................................50
SECTION 11.7 Exhibits and Schedules................................................................50
SECTION 11.8 Amendment of Agreement................................................................50
SECTION 11.9 Severability..........................................................................50
SECTION 11.10 Assignment............................................................................50
SECTION 11.11 Gender and Number.....................................................................50
SECTION 11.12 No Third-Party Beneficiaries..........................................................50
</TABLE>
vi
EXHIBITS
Exhibit 1.2 Form of Articles of Merger
Exhibit 7.3 Form of ASR 135 Agreement
Exhibit 7.8 Form of Key Employee Employment Agreement
Exhibit 8.2(b) Matters to be Addressed in Opinion of Ballard Spahr
Andrews & Ingersoll, LLP
Exhibit 8.3(b) Matters to be Addressed in Opinion of Morris, Manning &
Martin, LLP
Exhibit 8.3(j) Form of Accredited Investor Questionnaire and
Representation Agreement
SCHEDULES
Schedule 2.3 List of Officers and Directors of the Surviving
Corporation
Schedule 3.1(d) Company Warrants and Ayre Warrants
Schedule 4.2(c) Rights
Schedule 4.3(b) Non-Contravention
Schedule 4.5 Labor Controversies
Schedule 4.6 Environmental Matters
Schedule 4.8 Subsequent Events
Schedule 5.2(a) Capitalization
Schedule 5.2(b) Rights
Schedule 5.3 Subsidiaries
Schedule 5.6 Subsequent Events
Schedule 5.7 Books of Account
Schedule 5.8 Absence of Undisclosed Liabilities
Schedule 5.10 Litigation
Schedule 5.11 No violation of Law
Schedule 5.15(a) Employment Agreements
Schedule 5.15(b) Labor Matters; Labor Controversies
Schedule 5.14 Employee Benefit Plans of the Company
Schedule 5.17 Title of Assets
Schedule 5.20(c) Patents and Registrations
Schedule 5.20(d) Intellectual Property
Schedule 5.21(a)(i) Contracts
Schedule 5.21(a)(ii) Status of Contracts
Schedule 5.21(b) Year 2000 Notices
Schedule 5.22 Material Expenses
Schedule 5.24 Transactions with Related Parties
Schedule 5.27 Bank Accounts
Schedule 5.29 Potential Conflicts of Interest
Schedule 7.3 Affiliates
Schedule 7.17 Employee Options
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 15, 1999 (the
"Agreement"), among C-COR Electronics, Inc., a Pennsylvania corporation
("Parent"), C-COR Acquisition Corp., a Georgia corporation and a wholly owned
subsidiary of Parent ("Subsidiary") and Convergence.com Corporation, a Georgia
corporation (the "Company").
W I T N E S S E T H:
WHEREAS the Boards of Directors of Parent, Subsidiary and the Company have
determined that the merger of the Subsidiary with and into the Company (the
"Merger") is consistent with and in furtherance of the long-term business
strategy of Parent and the Company and is fair to, and in the best interests of,
Parent and the Company and their respective stockholders; and
WHEREAS, Parent, Subsidiary and the Company intend the Merger to qualify as
a tax-free reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and to be treated as a pooling of
interests under Accounting Principles Board Opinion No. 16 ("APB 16").
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
THE MERGER
SECTION I.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the Georgia Business Corporation Code (the "GBCC"), Subsidiary shall be
merged with and into the Company and the separate existence of Company shall
thereupon cease. The Company shall be the surviving corporation in the Merger
and is hereinafter sometimes referred to as the "Surviving Corporation".
SECTION I.2 Effective Time of the Merger. The Merger shall become effective
at such time (the "Effective Time") as shall be stated in Articles of Merger,
substantially in the form attached hereto as Exhibit 1.2 or such form as is
acceptable to the parties, to be filed with the Secretary of State of the State
of Georgia in accordance with the GBCC the (the "Merger Filing"). The Merger
Filing shall be made simultaneously with or as soon as practicable after the
closing of the transactions contemplated by this Agreement in accordance with
Section 3.4.
ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION II.1 Articles of Incorporation. The Articles of Incorporation of
the Surviving Corporation shall be amended and restated at and as of the
Effective Time to read as did the Articles of Incorporation of the Subsidiary
immediately prior to the Effective Time (except that the name of the Surviving
Corporation shall remain unchanged).
SECTION II.2 Bylaws. The bylaws of the Surviving Corporation shall be
amended and restated at and as of the Effective Time to read as did the bylaws
of the Subsidiary immediately prior to the Effective Time (except that the name
of the Surviving Corporation shall remain unchanged).
SECTION II.3 Officers. The officers and directors of the Surviving
Corporation shall be as designated in Schedule 2.3, and such officers shall
serve in accordance with the bylaws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION III.1 Conversion of Company Shares in the Merger; Other Securities
of the Company. At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of any shares of common stock, no par value, of
the Company (the "Company Common Stock"):
(a) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive the
Merger Consideration (as defined in Section 3.2).
(b) Parent shall surrender to the Company for cancellation each share of
Class A Senior Convertible Stock ("Class A Senior") owned by Parent or any
subsidiary of Parent and any share of Company Common Stock held in treasury by
the Company or any subsidiary of the Company immediately prior to the Effective
Time, if any, shall be cancelled and shall cease to exist from and after the
Effective Time.
(c) At the Effective Time, by virtue of the Merger and without any action
on the part of Parent as the sole stockholder of Subsidiary, each issued and
outstanding share of common stock, par value $.01 per share, of Subsidiary
("Subsidiary Common Stock") shall be converted into one share of common stock,
no par value, of the Surviving Corporation.
(d) Subject to and as more fully provided in Section 7.17, each unexpired
warrant to purchase Company Common Stock issued in connection with the Company's
private placement of Series A Convertible Preferred Stock and listed on Schedule
3.1(d) (the "Company Warrants") and each unexpired warrant granted to Frank M.
Ayre, III and listed on Schedule 3.1(d) (the "Ayre Warrants") that is
outstanding at the Effective Time shall automatically and without any action on
the part of the holder thereof be assumed by Parent and converted into a warrant
to purchase a number of shares of Parent Common Stock equal to the number of
shares of Company Common Stock that would have been issuable upon exercise of
such Company Warrants or Ayre Warrants, as the case may be, multiplied by the
Exchange Ratio (as defined in Section 3.2), at a price per share of Parent
Common Stock equal to the per share exercise price of such Company Warrants or
Ayre Warrants, as the case may be, divided by the Exchange Ratio (the "Parent
Warrants").
(e) All securities of the Company other than Company Common Stock, Company
Warrants and Ayre Warrants including, but not limited to preferred stock or
other rights to acquire securities of the Company issued and outstanding
immediately prior to the Effective Time shall be canceled and cease to exist
after the Effective Time.
(f) No share of Company Common Stock shall be deemed to be outstanding or
to have any rights other than those set forth in this Section 3.1 after the
Effective Time.
SECTION III.2 Consideration. The consideration to be issued to each holder
of Company Common Stock in the Merger (the "Merger Consideration") will be one
share of common stock, par value $0.10 per share, of Parent (the "Parent Common
Stock"). The "Exchange Ratio" shall equal one share of Parent Common Stock for
each share of Company Common Stock. If prior to the Effective Time, the number
of outstanding shares of Parent Common Stock is increased or decreased by a
permitted stock split, stock dividend, combination, reclassification or other
similar event, then the Merger Consideration and the Exchange Ratio shall be
adjusted equitably to reflect such stock split, stock dividend, combination,
reclassification or other similar event. In such event, Parent shall notify the
Exchange Agent of such change on or before the Effective Time.
SECTION III.3 Exchange of Certificates.
(a) From and after the Effective Time, all Company Common Stock shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing shares of Company
Common Stock shall cease to have any rights with respect thereto, except the
right to receive in exchange therefor, upon surrender thereof to American Stock
Transfer & Trust Company or such other agent designated by Parent (the "Exchange
Agent"), a certificate or certificates representing the number of whole shares
of Parent Common Stock to which such holder is entitled pursuant to Section 3.1.
Notwithstanding any other provision of this Agreement, (i) until holders or
transferees of certificates theretofore representing shares of Company Common
Stock have surrendered them for exchange as provided herein, no dividends shall
be paid with respect to any Parent Common Stock represented by such
certificates, and (ii) without regard to when such certificates representing
shares of Company Common Stock are surrendered for exchange as provided herein,
no interest shall be paid on any Parent Common Stock dividends. Upon surrender
of a certificate which immediately prior to the Effective Time represented
shares of Company Common Stock, there shall be paid to the holder of such
certificate the amount of any dividends which theretofore became payable, but
which were not paid by reason of the foregoing, with respect to the number of
whole shares of Parent Common Stock represented by the certificate or
certificates issued upon such surrender.
(b) If any certificate for shares of Parent Common Stock is to be issued in
a name other than that in which the certificate for shares of Company Common
Stock surrendered in exchange therefor is registered, it shall be a condition of
such exchange that the certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and the person requesting such exchange
shall have paid to Parent or its transfer agent any applicable transfer or other
taxes required by reason of such issuance.
(c) Promptly after the Effective Time, Parent shall make available to the
Exchange Agent the certificates representing shares of Parent Common Stock
required to effect the exchanges referred to in paragraph (a) above.
(d) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates that immediately prior to
the Effective Time represented outstanding shares of Company Common Stock (the
"Company Certificates") (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon actual delivery of the Company Certificates
to the Exchange Agent), and (ii) instructions for use in effecting the surrender
of the Company Certificates in exchange for certificates representing shares of
Parent Common Stock. Upon surrender of Company Certificates for cancellation to
the Exchange Agent, together with a duly executed letter of transmittal and such
other documents as the Exchange Agent shall reasonably require and the holder of
such Company Certificates shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares of Company Common Stock theretofore represented by the Company
Certificates so surrendered shall have been converted pursuant to the provisions
of Section 3.1, and the Company Certificates so surrendered shall be cancelled.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of shares of Company Common Stock for any shares of
Parent Common Stock or dividends or distributions thereon delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(e) Promptly following the date which is nine months after the Effective
Time, the Exchange Agent shall deliver to Parent all certificates (including
certificates representing shares of any Parent Common Stock), property and other
documents in its possession relating to the transactions described in this
Agreement, and the Exchange Agent's duties shall terminate. Thereafter, each
holder of a Company Certificate may surrender such Company Certificate to Parent
and (subject to applicable abandoned property, escheat and similar laws) receive
in exchange therefor the Parent Common Stock to which such person is entitled,
without any interest thereon. Notwithstanding the foregoing, none of the
Exchange Agent, Parent, Subsidiary or the Surviving Corporation shall be liable
to a holder of Company Common Stock for any Parent Common Stock delivered to a
public official pursuant to applicable abandoned property, escheat and similar
laws.
(f) In the event any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed Company
Certificate the Parent Common Stock deliverable in respect thereof determined in
accordance with this Section 3.3. When authorizing such payment in exchange
therefor, the Board of Directors of Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Company Certificate to give Parent such indemnity as it may
reasonably direct as protection against any claim that may be made against
Parent or the Surviving Corporation with respect to the Company Certificate
alleged to have been lost, stolen or destroyed.
SECTION III.4 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, 51st Floor, Philadelphia,
Pennsylvania 19103 on the date and time specified by Parent and the Company that
the parties intend to be on or before the fifth business day after the
satisfaction or waiver of the last of the conditions set forth in Article VIII
and in no event later than July 30, 1999. The parties may agree in writing to
postpone the Closing Date and/or the Effective Time one time for a period of up
to 30 days (the date on which the Closing occurs is referred to in this
Agreement as the "Closing Date").
SECTION III.5 Closing of the Company's Transfer Books. At and after the
Effective Time, holders of Company Common Stock immediately prior to the
Effective Time shall cease to have any rights as stockholders of the Company,
except for the right to receive shares of Parent Common Stock pursuant to
Section 3.1. At the Effective Time, the stock transfer books of the Company
shall be closed and no transfer of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time shall thereafter be made.
If, after the Effective Time, subject to the terms and conditions of this
Agreement, Company Certificates formerly representing Company Common Stock are
presented to Parent or the Surviving Corporation, they shall be cancelled and
exchanged for Parent Common Stock in accordance with this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant to the Company as of the
date hereof as follows:
SECTION IV.1 Organization and Qualification. Each of Parent and Subsidiary
is a corporation duly organized, validly existing and in good standing or the
local equivalent thereof under the laws of the state of its incorporation and
has the requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Parent and Subsidiary is qualified to do business and is in good standing in
each jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and be in good standing will not,
when taken together with all other such failures of qualification have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole (a "Parent Material Adverse Effect"). For
purposes of this Agreement, "Parent Material Adverse Effect" shall not include
(a) a change in the market price or trading volume of the Parent Common Stock or
(b) a failure by Parent to meet any published securities analyst estimates of
revenue or earnings for any period ending or for which earnings are released on
or after the date of this Agreement. True, accurate and complete copies of each
of Parent's and Subsidiary's Articles of Incorporation and bylaws, in each case
as in effect on the date hereof, including all amendments thereto, have been
certified as such by Parent's secretary and delivered to the Company.
SECTION IV.2 Capitalization.
(a) The authorized capital stock of Parent consists of (i) 24,000,000
shares of Parent Common Stock, of which 9,169,209 shares were outstanding as of
May 12, 1999 and (ii) 2,000,000 shares of preferred stock, no par value, none of
which is outstanding. As of May 13, 1999, there are options to acquire 1,428,132
shares of Parent Common Stock issued and outstanding. All of the issued and
outstanding shares of Parent Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights.
(b) The authorized capital stock of Subsidiary consists of 100 shares of
Subsidiary Common Stock, of which 100 shares are issued and outstanding, which
shares are owned beneficially and of record by Parent.
(c) Except as set forth in Schedule 4.2(c) or as disclosed in Parent SEC
Reports (as defined in Section 4.4), as of the date hereof there are (i) no
outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion of exchange under any outstanding security, instrument or
other agreement, obligating Parent or any subsidiary of Parent to issue, deliver
or sell, or cause to be issued, delivered or sold or otherwise to become
outstanding, additional shares or the capital stock of Parent or obligating
Parent or any subsidiary of Parent to grant, extend or enter into any such
agreement or commitment, and (ii) no voting trusts, proxies or other agreements
or understandings to which Parent and any subsidiary of Parent is a party or is
bound with respect to the voting of any shares of capital stock of Parent or any
subsidiary and there are no such trusts, proxies, agreements or understandings
by, between or among any of Parent's shareholders with respect to Parent Common
Stock. There are no outstanding or authorized stock appreciation rights, phantom
stock, profit participation or similar rights with respect to Parent.
SECTION IV.3 Authority; Non-Contravention; Approvals.
(a) Parent and Subsidiary each have all necessary corporate power and
authority to enter into this Agreement and, subject to the Parent Required
Statutory Approvals (as defined in Section 4.3(c)), to consummate the
transactions contemplated hereby. This Agreement has been approved by the Boards
of Directors of Parent and Subsidiary and the sole stockholder of Subsidiary,
and no other corporate proceedings on the part of Parent or Subsidiary are
necessary to authorize the execution and delivery of this Agreement or the
consummation by Parent and Subsidiary of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of Parent and
Subsidiary, and, assuming the due authorization, execution and delivery hereof
by the Company constitutes a valid and legally binding agreement of each of
Parent and Subsidiary enforceable against each of them in accordance with its
terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) The execution and delivery of this Agreement by each of Parent and
Subsidiary do not violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Parent or
Subsidiary under any of the terms, conditions or provisions of (i) the
respective charters or bylaws of Parent or Subsidiary, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any court or governmental authority applicable to Parent or
Subsidiary or any of their respective properties or assets, or (iii) any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which Parent or Subsidiary is now a party or by which Parent or
Subsidiary or any of their respective properties or assets may be bound. Except
as set forth in Schedule 4.3(b), the consummation by Parent and Subsidiary of
the transactions contemplated hereby will not result in any violation, conflict,
breach, termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the preceding
sentence. Excluded from the foregoing sentences of this paragraph (b), insofar
as they apply to the terms, conditions or provisions described in clauses (ii)
and (iii) of the first sentence of this paragraph (b), are such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a Parent Material Adverse Effect.
(c) Except for the making of the Merger Filing with the Secretary of State
of the State of Georgia in connection with the Merger (the filing referred to
above as the "Parent Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by Parent or Subsidiary or the consummation by Parent
or Subsidiary of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a Parent Material Adverse Effect or affect Subsidiary's ability
to consummate the Merger.
SECTION IV.4 Reports and Financial Statements. Since June 26, 1998, Parent
has filed with the Securities and Exchange Commission (the "SEC") all forms,
statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by it under each of the Securities Act
of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the respective rules and regulations
thereunder, all of which, as amended if applicable, complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. Parent has previously delivered to the Company
copies of its (a) Annual Report on Form 10-K for the fiscal year ended June 26,
1998, as filed with the SEC, (b) proxy and information statements relating to
(i) all meetings of its shareholders (whether annual or special), and (ii)
actions by written consent in lieu of a shareholders' meeting from June 26, 1998
until the date hereof, and (c) all other reports, including quarterly reports,
or registration statements filed by Parent with the SEC since June 26, 1998
(other than Registration Statements filed on Form S-8) (clauses (a), (b) and (c)
are herein collectively referred to as the "Parent SEC Reports"). As of their
respective dates, the Parent SEC Reports 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. The audited consolidated financial
statements and unaudited interim consolidated financial statements of Parent
included in such reports (collectively, the "Parent Financial Statements") have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of Parent and its
subsidiaries as of the dates thereof and the results of their operations and
changes in financial position for the periods then ended, subject, in the case
of the unaudited interim financial statements, to normal year-end and audit
adjustments and any other adjustments described therein.
SECTION IV.5 Labor Controversies. Except as set forth in Schedule 4.5 or as
disclosed in the Parent SEC Reports, (a) there are no material controversies
pending, or to the knowledge of Parent threatened, between Parent or its
subsidiaries and any representatives of any of their employees, (b) there are no
material organizational efforts presently being made involving any of the
presently unorganized employees of Parent or its subsidiaries, (c) Parent and
its subsidiaries have, complied in all material respects with all laws relating
to the employment of labor, including, without limitation, any provisions
thereof relating to wages, hours, and the payment of social security and similar
taxes, (d) no person has asserted that Parent or any of its subsidiaries is
liable in any material amount for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing, (e) to the knowledge of Parent
or the directors and officers (and employees with responsibility for employment
matters) of Parent and its subsidiaries, no executive, key employee, or group of
employees has any plans to terminate employment with Parent or its subsidiaries,
nor has any of them experienced any strikes, grievances, claims of unfair labor
practices, except for purposes of clauses (a) - (e) such controversies,
organizational efforts, non-compliance and liabilities which, singly or in the
aggregate, could not reasonably be expected to cause a Parent Material Adverse
Effect.
SECTION IV.6 Environmental Matters. Except as set forth in Schedule 4.6 or
as disclosed in the Parent SEC Reports or other reports Parent has filed with
the SEC, (a) (i) Parent and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws (as defined in
Section 5.16), including, without limitation, having all permits, licenses and
other approvals and authorizations necessary for the operation of their
respective businesses as presently conducted, (ii) none of the properties owned
by Parent or any of its subsidiaries contain any Hazardous Substance (as defined
in Section 5.16) as a result of any activity of Parent or any of its
subsidiaries in amounts exceeding the levels permitted by applicable
Environmental Laws, (iii) neither Parent nor any of its subsidiaries has
received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that Parent or any of its subsidiaries may be in violation of, or liable under,
any Environmental Law in connection with the ownership or operation of their
businesses, (iv) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or threatened
against Parent or any of its subsidiaries relating to any violation, or alleged
violation, of, or liability under, any Environmental Law, (v) no reports have
been filed, or are required to be filed, by Parent or any of its subsidiaries
concerning the release of any Hazardous Substance or the threatened or actual
violation of any Environmental Law, (vi) no Hazardous Substance has been
disposed of, or released at, on or from any properties presently owned or
operated by Parent or any of its subsidiaries, or at, on of from any properties
previously owned or operated by Parent or any of its subsidiaries during the
time such properties were owned, leased or operated by Parent or any of its
subsidiaries, (vii) Parent and its subsidiaries have not disposed of, or
arranged for the disposal of Hazardous Substances at properties not owned or
operated by Parent; (viii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
noncompliance with any applicable Environmental Law conducted by or which are in
the possession of Parent or its subsidiaries relating to the activities of
Parent or its subsidiaries, (ix) there are no underground storage tanks on, in
or under any properties owned by Parent or any of its subsidiaries and no
underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by
Parent or any of its subsidiaries, (x) there is no asbestos or asbestos
containing material present in any of the properties owned by Parent and its
subsidiaries, and no asbestos has been removed from any of such properties
during the time such properties were owned, leased or operated by Parent or any
of its subsidiaries, and (xi) neither Parent, its subsidiaries nor any of their
respective properties are subject to any material liabilities or expenditures
(fixed or contingent) relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or claim asserted or
arising under any Environmental Law, except for violations of the foregoing
clauses (i) through (xi) that, singly or in the aggregate, would not reasonably
be expected to have a Parent Material Adverse Effect.
SECTION IV.7 Investment. Parent is not acquiring the Company Common Stock
with the view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act.
SECTION IV.8 Events Subsequent to Year End Financial Statements. Except as
set forth on Schedule 4.8 and in the Parent SEC Reports, since the date of the
last report filed by Parent on Form 10-Q, there has not been any change which
would have a Parent Material Adverse Effect.
SECTION IV.9 Pooling and Tax-Free Reorganization Matters. (a) To Parent's
knowledge and based upon consultation with its independent accountants, neither
Parent nor any of its affiliates has taken or agreed to take any, or will take
any, action that would affect the ability of Parent to account for the business
combination to be effected by the Merger as a pooling-of-interests or to treat
the Merger as a tax-free reorganization pursuant to Section 368(a)(2)(E) of the
Code.
(b) There is no plan or intention by Parent or a person related to Parent
(within the meaning of Treas. Reg. Section 1.368-1(e)(3)) to redeem (or to
acquire by means of purchase, exchange, or other transaction) any shares of
Parent Common Stock issued in the Merger.
(c) Following the Merger, the Surviving Corporation will hold at least 90
percent of the fair market value of Subsidiary's net assets and at least 70
percent of the fair market value of the gross assets held by Subsidiary as of
the Effective Time. For purposes of this representation, amounts paid by
Subsidiary to stockholders (if any who receive cash or other property), amounts
used by Subsidiary to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends) made by Subsidiary after
the commencement of negotiations by the parties to this Agreement will be
included and treated as assets held by Subsidiary as of the Effective Time.
(d) As of the Effective Time, Subsidiary will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in Subsidiary that, if exercised or
converted, would affect Parent's retention of "control" of the Subsidiary, as
defined in Section 368(c) of the Code.
(e) Parent is not an "investment company" as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code and is not under the jurisdiction of a
court in a title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
(f) As of the Effective Time, the fair market value of the assets of Parent
and Subsidiary will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
SECTION IV.10 Disclosure. No representations and warranties by Parent
contained in this Agreement, and no statement made by Parent in this Agreement
or in any document listed in any Exhibit or Schedule to this Agreement or any
document or certificate furnished or to be furnished to the Company by Parent at
or prior to Closing pursuant hereto, contains or will contain on the Closing
Date any untrue statements of a material fact or omits or will omit on the
Closing Date to state a material fact necessary in order to make the statements
therein not misleading in light of the circumstances in which they were made.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Subsidiary that the
statements contained in this Article V are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article V), except as set forth in the various
Schedules identified below in this Article V delivered by the Company to the
Parent and Subsidiary on the date hereof (the "Disclosure Schedule"). Nothing in
the Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, unless the Disclosure Schedule
identifies the exception with particularity and describes the relevant facts in
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate to
disclose an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). As provided below, the Disclosure Schedule will be arranged in
paragraphs corresponding to the Sections and lettered paragraphs contained in
this Article V.
The Company represents and warrants to Parent and Subsidiary as follows:
SECTION V.1 Organization and Qualification.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. The
Company is qualified to do business and is in good standing in each jurisdiction
in which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing will not, when taken together
with all other such failures, have a Company Material Adverse Effect (as defined
below). True, accurate and complete copies of the Company's Amended and Restated
Articles of Incorporation, as amended, and bylaws, in each case as in effect on
the date hereof, including all amendments thereto, have been certified as such
by the Company's Secretary and delivered to Parent.
(b) For purposes of this Agreement, "Company Material Adverse Effect" shall
mean a material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations of the Company and its
subsidiaries, taken as a whole or which will prevent (or would reasonably be
expected to prevent) the fundamental and basic operation of such business after
giving effect to the Merger contemplated by this Agreement.
SECTION V.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 20,000,000
shares of Company Common Stock, of which 1,133,323 shares are issued and
outstanding, (ii) 1,000,000 shares of preferred stock (the "Preferred Stock"),
of which (A) 500,000 shares are designated as Series A Convertible Preferred
Stock, 300,000 shares of which are issued and outstanding and (B) 500,000 shares
are designated as Series A-1 Convertible Preferred Stock, none of which are
issued and outstanding and (iii) 2,009,700 shares of senior stock ("Senior
Stock"), of which (A) 504,850 are designated as Class A Senior Convertible
Stock, 148,426 of which are issued and outstanding and (B) 504,850 are
designated as Class A-1 Senior Convertible Stock, none of which are issued and
outstanding. All of such issued and outstanding shares of Company Common Stock,
Preferred Stock and Senior Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights, and are held of record as set forth
in Schedule 5.2(a). There are warrants to acquire 366,930 shares of Company
Common Stock. Each holder of capital stock of the Company, other than Parent,
shall be referred to as a "Company Stockholder" and collectively as the "Company
Stockholders." Neither the Company nor any subsidiary of the Company holds any
shares of the capital stock of the Company.
(b) Except as set forth on Schedule 5.2(b), there are (i) no outstanding
subscriptions, options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement and also including any rights plan or other anti-takeover agreement,
obligating the Company or any subsidiary of the Company to issue, deliver or
sell, or cause to be issued, delivered or sold or otherwise to become
outstanding, additional shares of the capital stock of the Company or obligating
the Company or any subsidiary of the Company to grant, extend or enter into any
such agreement or commitment, and (ii) no voting trusts, proxies or other
agreements or understandings to which the Company or any subsidiary of the
Company is a party or is bound with respect to the voting of any shares of
capital stock of the Company and there are no such trusts, proxies, agreements
or understandings by, between or among any of the Company's stockholders with
respect to Company Common Stock. There are no outstanding or authorized stock
appreciation rights, phantom stock, profit participation or similar rights with
respect to the Company.
SECTION V.3 Subsidiaries. Schedule 5.3 sets forth the name and state of
incorporation of each direct and indirect subsidiary (as defined below) of the
Company. Each direct and indirect subsidiary of the Company is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. Each subsidiary of the Company is qualified to do
business, and is in good standing, in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all such other failures,
have a Company Material Adverse Effect. All of the outstanding shares of capital
stock of each subsidiary of the Company are validly issued, fully paid,
nonassessable and free of preemptive rights and are owned directly or indirectly
by the Company free and clear of any liens, claims, encumbrances, security
interests, equities, charges and options of any nature whatsoever except as set
forth in Schedule 5.3. There are no subscriptions, options, warrants, rights,
calls, contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting, transfer,
ownership or other rights with respect to any shares of capital stock of any
subsidiary of the Company, including any right of conversion or exchange under
any outstanding security, instrument or agreement.
As used in this Agreement, the term "subsidiary" shall mean, when used with
reference to any person or entity, any corporation, partnership, joint venture
or other entity which such person or entity, directly or indirectly, controls or
of which such person or entity (either acting alone or together with its other
subsidiaries) owns, directly or indirectly, 50% or more of the stock or other
voting interests, the holders of which are entitled to vote for the election of
a majority of the board of directors or any similar governing body of such
corporation, partnership, joint venture or other entity.
SECTION V.4 Authority; Non-Contravention; Approvals.
(a) The Company has all necessary corporate power and authority to enter
into this Agreement and, subject to the Company Stockholders' Approval (as
defined in Section 7.2(a)) and the Company Required Statutory Approvals (as
defined in Section 5.4(c)), to consummate the transactions contemplated hereby.
This Agreement has been approved by the Board of Directors of the Company, and
no other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement or, except for the
Company Stockholders' Approval, the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by Parent and Subsidiary, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) The execution and delivery of this Agreement by the Company do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or bylaws of the Company or any of its subsidiaries, (ii)
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any of
its subsidiaries is now a party or by which the Company or any of its
subsidiaries or any of their respective properties or assets may be bound.
Except as set forth in Schedule 5.4(b), the consummation by the Company of the
transactions contemplated hereby will not result in any violation, conflict,
breach, termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the preceding
sentence. Excluded from the foregoing sentences of this paragraph (b), insofar
as they apply to the terms, conditions or provisions described in clauses (ii)
and (iii) of the first sentence of this paragraph (b), are such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a Company Material Adverse Effect.
(c) Except for the making of the Merger Filing with the Secretary of State
of the State of Georgia in connection with the Merger (the filing is referred to
as the "Company Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not made
or obtained, as the case may be, would not, in the aggregate, have a Company
Material Adverse Effect.
SECTION V.5 Financial Statements. The audited consolidated financial
statements and unaudited interim consolidated financial statements of the
Company for the years ended 1996, 1997 and 1998 (in draft form) and for the
three-month period ended March 31, 1999 (collectively, the "Company Financial
Statements") have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present the financial position of the Company
and its subsidiaries as of the dates thereof and the results of their
operations, cash flows and changes in financial position for the periods then
ended, subject, in the case of the unaudited interim financial statements, to
normal year-end and audit adjustments and any other adjustments described
therein. Parent acknowledges that the Company Financial Statements may change
due to issues or mistakes found by KPMG LLP in the Company Financial Statements
for 1997.
SECTION V.6 Events Subsequent to Year End Financial Statements. Except as
set forth on Schedule 5.6, since the date of the Financial Statements for the
Company and its subsidiaries for the year ended December 31, 1998, there has not
been any change which would have a Company Material Adverse Effect. Without
limiting the generality of the foregoing, since December 31, 1998:
(a) none of the Company or its subsidiaries has sold, leased, transferred
or assigned any of its assets, tangible or intangible, other than for a fair
consideration in the ordinary course of business;
(b) none of the Company or its subsidiaries has entered into any agreement,
contract, lease or license (or series of related agreements, contracts, leases
and licenses) either involving more than $250,000 or outside the ordinary course
of business;
(c) no party (including the Company or its subsidiaries) has accelerated,
terminated, modified or cancelled any agreement, contract, lease or license (or
series of related agreements, contracts, leases and licenses) involving more
than $100,000 to which the Company or its subsidiaries is a party or by which
any of them is bound;
(d) none of the Company or its subsidiaries has imposed any security
interest, mortgage, pledge, lien, restriction, covenant, charge or encumbrance
of any kind or any character upon any of its assets, tangible or intangible,
involving more than $5,000 singly or $50,000 in the aggregate;
(e) none of the Company or its subsidiaries has made any capital
expenditure (or series of related capital expenditures) either involving more
than $250,000 or outside the ordinary course of business;
(f) none of the Company or its subsidiaries has made any capital investment
in, any loan to or any acquisition of the securities or assets of, any other
person (or series of related capital investments, loans and acquisitions);
(g) none of the Company or its subsidiaries has issued any note, bond or
other debt security or created, incurred, assumed or guaranteed any indebtedness
for borrowed money or capitalized lease obligations;
(h) none of the Company or its subsidiaries has cancelled, compromised,
waived or released any right or claim (or series of related rights and claims);
(i) there has been no change made or authorized in the articles of
incorporation or bylaws of the Company or its subsidiaries;
(j) none of the Company or its subsidiaries has issued, sold or otherwise
disposed of any of its capital stock, or granted any options, warrants or other
rights to purchase or obtain (including upon conversion, exchange or exercise)
any of its capital stock;
(k) none of the Company or its subsidiaries has declared, set aside or paid
any dividend or made any distribution with respect to its capital stock (whether
in cash or in kind) or redeemed, purchased or otherwise acquired any of its
capital stock;
(l) none of the Company or its subsidiaries has experienced any material
damage, destruction or loss (whether or not covered by insurance) to its
property;
(m) none of the Company or its subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors, officers and
employees outside the ordinary course of business;
(n) none of the Company or its subsidiaries has entered into any employment
contract or collective bargaining agreement, written or oral, or modified in any
material respect the terms of any existing such contract or agreement;
(o) none of the Company or its subsidiaries has granted any bonuses or a
greater than five percent (5%) increase in the base compensation of any of its
directors, officers and employees outside the ordinary course of business;
(p) none of the Company or its subsidiaries has adopted, amended, modified
or terminated any bonus, profit-sharing, incentive, severance or other plan,
contract or commitment for the benefit of any of its directors, officers and
employees (or taken any such action with respect to any other Company Plans (as
defined in Section 5.14(a));
(q) none of the Company or its subsidiaries has made any other change in
employment terms for any of its directors, officers and employees outside the
ordinary course of business;
(r) none of the Company or its subsidiaries has made or pledged to make any
charitable or other capital contribution outside the ordinary course of
business; and
(s) there has not been any other occurrence, event, incident, action,
failure to act or transaction outside the ordinary course of business involving
the Company or its subsidiaries; and
(t) there has been no notice received by the Company or any subsidiary from
any supplier, customer or other entity with which the Company or such subsidiary
has a material contractual relationship or whose non-performance of any
obligation or duty to the Company would have a Company Material Adverse Effect,
indicating that such relationship or contract would likely be modified or
terminated as a result of any failure of the Company, any subsidiary or any of
their respective Systems (as defined in Section 5.22) to be Year 2000 Compliant
(as defined in Section 5.22) in any respect.
SECTION V.7 Books of Account. The books of account of the Company and its
subsidiaries accurately and fairly reflect, in reasonable detail and in all
material respects, the Company's and its subsidiaries' transactions and the
disposition of their assets. Except as set forth on Schedule 5.7, all notes and
accounts receivable of the Company and its subsidiaries are reflected in
accordance with generally accepted accounting principles on their books and
records, are valid receivables subject to no known material setoffs or
counterclaims, are, to the best of the Company's knowledge, current and
collectible in accordance with their terms at their recorded amounts subject
only to normal adjustments in the ordinary course of business and the reserves
for contractual allowances and bad debts set forth in the balance sheet
contained in the most recent Company Financial Statements as adjusted for the
passage of time through the Closing Date in accordance with past custom and
practice of the Company and its subsidiaries. The Company and its subsidiaries
have filed all reports and returns required by any material law or regulation to
be filed by them, and have paid all taxes, duties and charges due on the basis
of such reports and returns.
SECTION V.8 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 5.8, neither the Company nor any of its subsidiaries had at December
31, 1998, or has incurred since that date, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except: (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Company Financial Statements or reflected in the notes thereto,
or (ii) which were incurred after December 31, 1998 and were incurred in the
ordinary course of business and consistent with past practices; (b) liabilities,
obligations or contingencies which (i) would not, in the aggregate, have a
Company Material Adverse Effect, or (ii) have been discharged or paid in full
prior to the date hereof; or (c) liabilities and obligations which are of a
nature not required to be reflected or reserved against in the consolidated
financial statements of the Company and its subsidiaries prepared in accordance
with generally accepted accounting principles consistently applied and which
were incurred in the ordinary course of business.
SECTION V.9 Proxy Statement. None of the information supplied or to be
supplied by the Company or its subsidiaries for inclusion in the notice of
meeting (other than information about Parent and Subsidiary supplied by Parent
and Subsidiary), written consent and/or proxy statement to be distributed in
connection with the approval and adoption by the Company Stockholders of this
Agreement and the transactions contemplated hereby (the "Proxy Statement") or
any amendments thereof or supplements thereto will, at the time of the mailing
of the Proxy Statement and any amendments thereof or supplements thereto, and at
the time of the meeting of the Company Stockholders to be held in connection
with the transactions contemplated by this Agreement, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
SECTION V.10 Litigation. Except as set forth on Schedule 5.10, there are no
claims, suits, actions or proceedings pending, or to the knowledge of the
Company threatened, against, relating to or affecting the Company or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seek to restrain the
consummation of the Merger or which could reasonably be expected, either alone
or in the aggregate with all such claims, actions or proceedings, to have a
Company Material Adverse Effect. Neither the Company nor any of its subsidiaries
is subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator which prohibits or restricts the consummation of the transactions
contemplated hereby or would have any Company Material Adverse Effect.
SECTION V.11 No Violation of Law. Except as set forth in Schedule 5.11,
neither the Company nor any of its subsidiaries is in violation of or has been
given notice or been charged with any violation of, any law, statute, order,
rule, regulation, ordinance or judgment (including, without limitation, any
applicable environmental law, ordinance or regulation) of any governmental or
regulatory body or authority, except for violations which, in the aggregate,
could not reasonably be expected to have a Company Material Adverse Effect. As
of the date of this Agreement, no investigation or review by any governmental or
regulatory body or authority is pending, or to the knowledge of the Company
threatened, nor has any governmental or regulatory body or authority indicated
to the Company an intention to conduct the same, other than, in each case, those
the outcome of which, as far as reasonably can be foreseen, will not have a
Company Material Adverse Effect. The Company and its subsidiaries have all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct their
businesses as presently conducted (collectively, the "Company Permits"), except
for permits, licenses, franchises, variances, exemptions, orders,
authorizations, consents and approvals the absence of which, alone or in the
aggregate, would not have a Company Material Adverse Effect. The Company and its
subsidiaries are not in violation of the terms of any Company Permit, except for
delays in filing reports or violations which, alone or in the aggregate, would
not have a Company Material Adverse Effect.
SECTION V.12 Compliance with Agreements. The Company and each of its
subsidiaries are not in breach or violation of or in default in the performance
or observance of any term or provision of, and no event has occurred which, with
notice or lapse of time or action by a third party, could result in a default
under, (a) the respective charters, bylaws or similar organizational instruments
of the Company or any of its subsidiaries; or (b) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which the Company or any of its subsidiaries is
a party or by which any of them is bound or to which any of their property is
subject, which breaches, violations or defaults, in the case of clause (b) of
this Section 5.12, would have, in the aggregate, a Company Material Adverse
Effect.
SECTION V.13 Taxes.
(a) The Company and its subsidiaries have (i) duly filed with the
appropriate governmental authorities all Tax Returns (as defined below) required
to be filed by them for all periods ending on or prior to the Effective Time,
other than those Tax Returns the failure of which to file would not have a
Company Material Adverse Effect, and such Tax Returns are true, correct and
complete in all material respects, and (ii) duly paid in full or made adequate
provision in the Company Financial Statements for the payment of all Taxes for
all periods ending at or prior to the Effective Time (whether or not shown on
any Tax Return), except where the failure to pay such Taxes would not have a
Company Material Adverse Effect. The liabilities and reserves for Taxes
reflected in the Company balance sheet included in the most recent Company
Financial Statements are adequate to cover all Taxes for all periods ending at
or prior to the Effective Time and there are no material liens for Taxes upon
any property or asset of the Company or any subsidiary thereof, except for liens
for Taxes not yet due. There are no unresolved issues of law or fact arising out
of a notice of deficiency, proposed deficiency or assessment from the Internal
Revenue Service or any other governmental taxing authority with respect to Taxes
of the Company or any of its subsidiaries which, if decided adversely, singly or
in the aggregate, would have a Company Material Adverse Effect. Neither the
Company nor any of its subsidiaries is a party to any agreement providing for
the allocation or sharing of Taxes with any entity that is not, directly or
indirectly, a wholly-owned corporate subsidiary of Company or has any liability
for the Taxes of any such entity under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law). Neither the Company nor any
of its corporate subsidiaries has, with regard to any assets or property held,
acquired or to be acquired by any of them, filed a consent to the application of
Section 341(f) of the Code. The Company is not and has not been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. The Company has not agreed, nor is it required, to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
(b) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
including, without limitation, income, gross receipts, excise, property, sales,
withholding, social security, occupation, use, service, service use, license,
payroll, franchise, transfer and recording taxes, fees and charges, windfall
profits, severance, customs, import, export, employment or similar taxes,
charges, fees, levies or other assessments imposed by the United States, or any
state, local or foreign government or subdivision or agency thereof, whether
computed on a separate, consolidated, unitary, combined or any other basis, and
such term shall include any interest, fines, penalties or additional amounts and
any interest in respect of any additions, fines or penalties attributable or
imposed or with respect to any such taxes, charges, fees, levies or other
assessments.
(c) For purposes of this Agreement, the term "Tax Return" or "Tax Returns"
shall mean any return, report or other document or information required to be
supplied to a taxing authority in connection with Taxes.
SECTION V.14 Employee Benefit Plans; ERISA.
(a) Schedule 5.14 lists all employee benefit plans and collective
bargaining, employment or severance agreements or other similar arrangements to
which the Company, or any Controlled Group Affiliate, is or ever has been a
party or by which any of them is or ever has been bound, legally or otherwise,
including, without limitation, (i) any "employee welfare benefit plan" or
"employee pension benefit plan" (within the meaning of Sections 3(1) or 3(2) of
ERISA) (the "Company Plans"), (ii) any profit-sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer, consulting, retirement,
severance, welfare or incentive plan, agreement or arrangement, (iii) any plan,
agreement or arrangement providing for "fringe benefits" or perquisites to
employees, officers, directors or agents, including, but not limited to benefits
relating to Company automobiles, clubs, vacation, child care, parenting,
sabbatical, sick leave, medical, dental, hospitalization, life insurance and
other types of insurance, or (iv) any employment agreement not terminable on 30
days (or less) written notice or providing for an annual salary in excess of
$140,000. The plans, agreements and arrangements described in this Section 5.14
may be referred to herein as the "Benefit Arrangements." None of the Benefit
Arrangements is (i) a plan intended to be tax-qualified under Section 401(a) of
the Code, (ii) a plan subject to Title IV of ERISA or (iii) a "multiemployer
plan" (within the meaning of Section 3(37) of ERISA). Neither the Company nor
any Controlled Group Affiliate has ever contributed to or had an obligation to
contribute to any multiemployer plan. The Company has delivered to Parent and
Subsidiary true and complete copies of all documents and summary plan
descriptions of the Benefit Arrangements or summary descriptions of any such
Benefit Arrangement not otherwise in writing. The Company has delivered to
Parent and Subsidiary true and complete copies of the IRS Form 5500 filed in the
most recent plan year with respect to any Benefit Plan, including all schedules
thereto and financial statements with attached opinions of independent
accountants.
(b) No "prohibited transaction" (within the meaning of Section 4975 of the
Code or Sections 406 and 408 of ERISA) has occurred with respect to any Benefit
Plan.
(c) There is no negotiation, demand or proposal that is pending or has been
made which concerns matters now covered, or that would be covered, by any
Benefit Arrangement.
(d) All Benefit Plans are in full compliance with the relevant provisions
of ERISA and the Code, the regulations and published authorities thereunder, and
all other Laws applicable with respect to all such Benefit Plans. All Benefit
Arrangements have been operated in accordance with their terms, and the Company
and the Controlled Group Affiliates have performed all of their obligations
under all Benefit Arrangements. There are no actions, suits or claims (other
than routine claims for benefits in the ordinary course) pending or threatened
against any Benefit Arrangement or arising out of any Benefit Arrangement and no
fact exists which could give rise to any such actions, suits or claim (other
than routine claims for benefits in the ordinary course).
(e) Each of the Benefit Arrangements can be terminated by the Company
within a period of 30 days following the Closing Date, without any additional
contribution to such Benefit Arrangement or the payment of any additional
compensation or amount or the additional vesting or acceleration of any
benefits.
(f) All insurance premiums required with respect to any Benefit Arrangement
as of the Closing Date have been paid.
(g) For purposes of this Section 5.14, the Company's "Controlled Group
Affiliate" means any corporation, trade or business which is affiliated with the
Company, in the manner described in Section 414(b), (c), (m) and (o) of the Code
or Section 4001(a)(14) of ERISA.
SECTION V.15 Labor Matters; Labor Controversies.
(a) Schedule 5.15(a) sets forth all written employment agreements between
the Company and its employees, (b) except as set forth on Schedule 5.15(b),
there are no material controversies pending, or to the knowledge of the Company
threatened, between the Company or its subsidiaries and any of their employees,
(c) there are no material organizational efforts presently being made involving
any of the presently unorganized employees of the Company or its subsidiaries,
(d) the Company and its subsidiaries have, complied in all material respects
with all laws relating to the employment of labor, including, without
limitation, any provisions thereof relating to wages, employee benefits, hours,
equal employment opportunity/non-discrimination, occupational safety and health
and the payment of social security and similar taxes, (e) no person has asserted
that the Company or any of its subsidiaries is liable in any material amount for
any arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing, (f) to the knowledge of the Company or the directors and officers
(and employees with responsibility for employment matters) of the Company and
its subsidiaries, (i) no executive, key employee, or group of employees has any
plans to terminate employment with the Company or its subsidiaries, none of the
Company and its subsidiaries is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices, except for purposes of clauses (a)-(e) such
controversies, organizational efforts, non-compliance and liabilities which,
singly or in the aggregate, could not reasonably be expected to cause a Company
Material Adverse Effect and (ii) there is no unfair labor practice charge or
complaint against the Company or any of its subsidiaries pending or threatened
before the National Labor Relations Board or any similar state agency and there
are no complaints pending or threatened in any forum by or on behalf of any
present or former employee of the Company or any of its subsidiaries alleging
breach of any express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship.
SECTION V.16 Environmental Matters.
(a) (i) The Company and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws (as defined
below), including, without limitation, having all permits, licenses and other
approvals and authorizations necessary for the operation of their respective
businesses as presently conducted, (ii) none of the properties owned by the
Company or any of its subsidiaries contain any Hazardous Substance (as defined
below) as a result of any activity of the Company or any of its subsidiaries in
amounts exceeding the levels permitted by applicable Environmental Laws, (iii)
neither the Company nor any of its subsidiaries has received any notices, demand
letters or requests for information from any Federal, state, local or foreign
governmental entity or third party indicating that the Company or any of its
subsidiaries may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of their businesses, (iv) there are
no civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened against the Company or any
of its subsidiaries relating to any violation, or alleged violation, of, or
liability under, any Environmental Law, (v) no reports have been filed, or are
required to be filed, by the Company or any of its subsidiaries concerning the
release of any Hazardous Substance or the threatened or actual violation of any
Environmental Law, (vi) no Hazardous Substance has been disposed of, or released
at, on or from any properties presently owned or operated by the Company or any
of its subsidiaries, or at, on of from any properties previously owned or
operated by the Company or any of its subsidiaries during the time such
properties were owned, leased or operated by the Company or any of its
subsidiaries, (vii) the Company and its subsidiaries have not disposed of, or
arranged for the disposal of Hazardous Substances at properties not owned or
operated by the Company; (viii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
noncompliance with any applicable Environmental Law conducted by or which are in
the possession of the Company or its subsidiaries relating to the activities of
the Company or its subsidiaries, (ix) there are no underground storage tanks on,
in or under any properties owned by the Company or any of its subsidiaries and
no underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by the
Company or any of its subsidiaries, (x) there is no asbestos or asbestos
containing material present in any of the properties owned by the Company and
its subsidiaries, and no asbestos has been removed from any of such properties
during the time such properties were owned, leased or operated by the Company or
any of its subsidiaries, and (xi) neither the Company, its subsidiaries nor any
of their respective properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law, except for violations of the foregoing
clauses (i) through (xi) that, singly or in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect.
(b) For purposes of this Agreement, "Environmental Law" or "Environmental
Laws" means any Federal, state, local or foreign law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval, consent, legal
doctrine, order, judgment, decree, injunction, requirement or agreement with any
governmental entity relating to (x) the protection, preservation or restoration
of public health or safety or the environment (including, without limitation,
air, water vapor, surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource) or
(y) the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances, in each case as amended and as in effect on the Closing
Date. The term Environmental Law includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act, the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970, each as
amended and as in effect on the Closing Date, or any state counterpart thereof,
and (ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligations for injuries, damages
or penalties due to, or threatened as a result of, the presence of, effects of
or exposure to any Hazardous Substance.
(c) For purposes of this Agreement, "Hazardous Substance" means any
substance presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under any
Environmental Law. Hazardous Substance includes any substance to which exposure
is regulated by any government authority or any Environmental Law including,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial substance
or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos or asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
SECTION V.17 Title to Assets. Schedule 5.17 sets forth a list of all real
property leased or owned by the Company and its subsidiaries. The Company and
each of its subsidiaries has good title to all its leasehold interests and other
properties, as reflected in the most recent balance sheet included in the
Company Financial Statements, except for properties and assets that have been
disposed of in the ordinary course of business since the date of such balance
sheet, free and clear of all mortgages, liens, pledges, charges or encumbrances
of any nature whatsoever, except (i) the lien for current Taxes, payments of
which are not yet delinquent, (ii) such imperfections in title and easements and
encumbrances, if any, as are not material in character, amount or extent and do
not materially and adversely affect the value or interfere with the present use
of the property subject thereto or affected thereby, or otherwise materially
impair the Company's business operations (in the manner presently carried on by
the Company), or (iii) mortgages incurred in the ordinary course of business,
and except for such matters which, singly or in the aggregate, could not
reasonably be expected to cause a Company Material Adverse Effect. All leases
under which the Company leases real or personal property have been delivered to
Parent and are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event which with notice or lapse of time or both would become a
default other than defaults under such leases which in the aggregate will not
have a Company Material Adverse Effect.
SECTION V.18 Company Stockholders' Approval. The affirmative vote of
stockholders of the Company required for approval and adoption of this Agreement
and the Merger is a majority of the outstanding shares of Company Common Stock,
a majority of the outstanding shares of Preferred Stock and a majority of the
outstanding shares of the Senior Stock.
SECTION V.19 No Excess Parachute Payments. The Company has no contracts,
arrangements or understandings pursuant to which any person may receive any
amount or entitlement from the Company or any of its subsidiaries (including
cash or property or the vesting of property) that may be characterized as an
"excess parachute payment" (as such term is defined in Section 280G(b)(1) of the
Code) (any such amount being an "Excess Parachute Payment") as a result of any
of the transactions contemplated by this Agreement. No person is entitled to
receive any additional payment from the Company, its subsidiaries or any other
person (a "Parachute Gross-up Payment") in the event that the 20% parachute
excise tax of Section 4999(a) of the Code is imposed on such person. The board
of directors of the Company has not during the six months prior to the date of
this Agreement granted to any officer, director or employee of the Company any
right to receive any Parachute Gross-Up Payment.
SECTION V.20 Trademarks and Intellectual Property.
(a) The Company and its subsidiaries own or have the right to use, without
any material payment to any other party, all of their patents, trademarks
(registered or unregistered), trade names, service marks, copyrights and
applications ("Company Intellectual Property"), and the consummation of the
transactions contemplated hereby will not alter or impair such rights in any
material respect. No claims are pending by any person with respect to the
ownership, validity, enforceability or use of any Company Intellectual Property
challenging or questioning the validity or effectiveness of any of the foregoing
which claims could reasonably be expected to have a Company Material Adverse
Effect. The Company has taken all necessary action to maintain and protect all
Company Intellectual Property.
(b) To the best of the Company's knowledge, none of the Company, its
stockholders or its directors, officers or employees has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
intellectual property rights of third parties, and none of the stockholders and
the directors and officers (and employees with responsibility for Company
Intellectual Property matters) of the Company and its subsidiaries has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that any of the Company and its subsidiaries must license or refrain from using
any Company Intellectual Property). To the knowledge of the Company (and
employees with responsibility for Company Intellectual Property matters) of the
Company and its subsidiaries, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Company
Intellectual Property.
(c) Schedule 5.20(c) identifies each patent or registration which has been
issued to any of the Company and its subsidiaries with respect to any of the
Company Intellectual Property, identifies each pending patent application or
application for registration which any of the Company and its subsidiaries has
made with respect to any of the Company Intellectual Property, and identifies
each license, agreement, or other permission which any of the Company and its
subsidiaries has granted to any third party with respect to any of the Company
Intellectual Property (together with any exceptions). The Company has delivered
to Parent and Subsidiary correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date) and have made available to Parent and Subsidiary correct and complete
copies of all other written documentation evidencing ownership and prosecution
(if applicable) of each such item. Schedule 5.20(c) also identifies each trade
name or unregistered trademark used by any of the Company and its subsidiaries
in connection with any of its businesses. With respect to each item of Company
Intellectual Property identified or required to be identified in Schedule
5.20(c):
(i) the Company and its subsidiaries possess all right, title, and interest
in and to the item, free and clear of any security interest, license, or other
restriction;
(ii) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending, or to the knowledge of any of the
Company is threatened, which challenges the legality, validity, enforceability,
use, or ownership of the item; and
(iv) none of the Company and its subsidiaries has ever agreed to indemnify
any person for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(d) Schedule 5.20(d) identifies each item of Company Intellectual Property
that any third party owns and that any of the Company and its subsidiaries uses
pursuant to license, sublicense, agreement, or permission. The Company has
delivered to Parent and subsidiary correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Company Intellectual Property Rights required to be
identified in Schedule 5.20(d):
(i) the license, sublicense, agreement, or permission covering the item is
legal, valid, binding, enforceable, and in full force and effect as to the
Company and to the best of the Company's knowledge, as to the other parties
thereto;
(ii) the license, sublicense, agreement, or permission will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby;
(iii) no party to the license, sublicense, agreement, or permission is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) no party to the license, sublicense, agreement, or permission has
repudiated any provision thereof;
(v) with respect to each sublicense, the representations and warranties set
forth in subsections (i) through (iv) above are true and correct with respect to
the underlying license;
(vi) the underlying item of Company Intellectual Property Rights is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand about which the Company has received notice is
pending, or to the knowledge of the Company and its subsidiaries is threatened,
which challenges the legality, validity, or enforceability of the underlying
item of Company Intellectual Property Rights; and
(viii) none of the Company and its subsidiaries has granted any sublicense
or similar right with respect to the license, sublicense, agreement, or
permission.
(e) On the date hereof the Company and its subsidiaries has no knowledge of
any new products, inventions, procedures, or methods of manufacturing or
processing that any competitors or other third parties have developed which
reasonably could be expected to supersede or make obsolete any product or
process of any of the Company and its subsidiaries.
SECTION V.21 Contracts, Obligations and Commitments.
(a) Schedule 5.21 (a)(i) sets forth an accurate and complete list of all
contracts, agreements, options, leases (other than leases referred to in Section
5.17), commitments and instruments involving average payment or receipt by the
Company of value equal to or greater than $25,000 ("Contracts") entered into by
the Company or its subsidiaries. The Company and its subsidiaries have provided
Parent with complete and correct copies of all such items listed on Schedule
5.21(a)(i). Except for such items listed on Schedule 5.21(a)(i), there are no
other material contracts or other arrangements under which goods, equipment or
services are provided, leased or rendered by, or are to be provided, leased or
rendered to, the Company and its subsidiaries. Except as set forth in Schedule
5.21(a)(ii): (i) the Contracts have not been modified, pledged, assigned or
amended in any material respect, are legally valid, binding and enforceable in
accordance with their respective terms and are in full force and effect with
respect to the Company and, to the best of the Company's knowledge, the other
parties thereto; (ii) there are no material defaults by the Company and its
subsidiaries and, to the best of the Company's knowledge, by any other party to
the Contracts; (iii) the Company and its subsidiaries have not received notice
of any material default, offset, counterclaim or defense under any Contract;
(iv) no condition or event has occurred which with the passage of time or the
giving of notice or both would constitute a default or breach by the Company and
its subsidiaries of the terms of any Contract, except for any consents required
to consummate the transactions contemplated by this Agreement; and (v) there
does not now, and at Closing will not, exist any material security interest,
mortgage, pledge, restriction, charge, lien, encumbrance or claim of others on
any interest created under any Contract. None of the Contracts is subject to
termination from and after the Closing Date and prior to the expiration of its
stated term by any party to such Contract, except as stated in each such
Contract.
(b) Schedule 5.21(b) contains a list and description of all notices,
statements, certificates, representations, warranties, questionnaires and
responses relating to problems associated with failures to be the Year 2000
Compliant (as defined in Section 5.22), whether oral or written, made, executed
or completed by the Company or any subsidiary or any of their respective
officers, directors, employees, agents or representatives, and whether sent to
or received from any third party ("Year 2000 Certificates"). A true and correct
copy or summary of each Year 2000 Certificate has previously been made available
to Purchaser.
SECTION V.22 Year 2000 Compliance. Each system, comprising of software,
hardware, databases, or embedded control systems (microprocessor controlled,
robotic or other device) (collectively, a "System"), that constitutes any part
of, or is used in connection with the use, operation or enjoyment of any
material tangible or intangible asset or real property of the Company and its
subsidiaries (i) is designed (or has been modified) to be used prior to and
after January 1, 2000, (ii) will operate without error arising from the
creation, recognition, acceptance, calculation, display, reporting, storage,
retrieval, accessing, comparison, sorting, manipulation, processing or other use
of dates, or date-based, date-dependent or date-related data, including but not
limited to century recognition, day-of-the-week recognition, leap years, date
values and interfaces of date functionalities, and (iii) will not be adversely
affected by the advent of the year 2000 or subsequent years, the advent of the
twenty-first century or the transition from the twentieth century through the
year 2000 and into the twenty-first century (collectively, items (i) through
(iii) are referred to herein as "Year 2000 Compliant"). To the best of its
knowledge and except as set forth on Schedule 5.22, no System that is material
to the business, finances or operations of the Company or any subsidiary
receives data from or communicates with any component or system external to
itself (whether or not such external component or system is the Company's, any
subsidiary's or any third party's) that is not itself Year 2000 Compliant
excepting the parts of the external component or system within which
noncompliance will have no effect on the data or communications sent to the
Company or its subsidiaries, nor on the Systems of the Company or its
subsidiaries. To the best of its knowledge and except as set forth on Schedule
5.22, all licenses for the use of any System-related software, hardware,
databases or embedded control system are certified by the manufacturer to be
Year 2000 Compliant and to contain the capabilities required to enable them to
be Year 2000 Compliant within Company and subsidiary computer Systems (hardware
and software), or the licenses permit the Company or its subsidiaries or a third
party to make all modifications, bypasses, de-bugging, work-arounds, repairs,
replacements, conversions or corrections necessary to permit the System to
operate compatibly, in conformance with their respective specifications, and to
be Year 2000 Compliant. Except as set forth on Schedule 5.22, neither the
Company nor any of its subsidiaries has any reason to believe that it may incur
material expenses arising from or relating to the failure of any of its Systems
as a result of not being Year 2000 Compliant.
SECTION V.23 Pooling and Tax-Free Reorganization Matters.
(a) The Company has not, during the two years preceding the earlier of the
date of this Agreement or the date the plan of combination was initiated, been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded and, within the past two years, there has not been any sale
or spin-off of a significant amount of assets of the Company or any affiliate of
the Company. Neither the Company, David R. Ames nor Terry Wright (the "Principal
Stockholders") owns any capital stock of Parent or Subsidiary. The Company has
not acquired any of its own capital stock during the past two years. Except for
the Class A Senior which is expected to be canceled and except for the Series A
Convertible Preferred Stock which is expected to be converted to Company Common
Stock, the Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of the shares of its own common stock or any
interest therein or to pay any dividend or make any distribution in respect
thereof. Neither the voting capital structure of the Company nor the relative
ownership of shares among any of the holders of capital stock or other
securities of the Company has been altered or changed within the last two years
in contemplation of the transactions contemplated hereby. No shares of capital
stock or other securities of the Company were issued and are outstanding
pursuant to awards, grants or bonuses under the terms of any plan which was
adopted less than two years prior to the date the combination was initiated.
Prior to the Closing or the earlier termination of this Agreement pursuant to
the terms thereof, neither the Company nor its affiliates have purchased nor
will they purchase or otherwise acquire directly or indirectly any Parent Common
Stock other than as provided herein. Any indebtedness owed or incurred by the
Company to any of the Company Stockholders has been incurred and repaid on
commercially reasonable and customary terms. There are no related businesses or
business assets owned or controlled by the Company Stockholders which are
integral to this business and thus should be included as a part of this
transaction pursuant to the pooling-of-interest rules. There have not been any
dividends to Company Stockholders during the two years prior to the date the
Merger was initiated, or up to the date of Merger.
(b) There is no plan or intention by any stockholder of the Company: to
redeem (or to sell, exchange, or otherwise dispose of, to a person related to
the Parent (within the meaning of Treas. Reg. Section 1.368-1(e)(3))) a number
of shares of Parent Common Stock received in the Merger that, in the aggregate
(taking into account all such redemptions, sales, exchanges and dispositions),
would reduce the ownership of shares of Parent Common Stock by the Company
Stockholders to a number of shares having a value, as of the Effective Time, of
less than 50% of the aggregate value of all of the outstanding shares of the
Company as of the Effective Time. For purposes of this representation, shares of
the Company held by the Company Stockholders that, prior to the Merger, (i) have
been redeemed (excluding the recission of options to acquire the Company Common
Stock and the cancellation of Class A Senior), (ii) with respect to which an
extraordinary distribution (within the meaning of Treas. Reg. Section
1.368-1T(e)(1)(ii)(A)) has been made, (iii) have been sold, exchanged, or
otherwise disposed of to a person related to the Company (within the meaning of
Treas. Reg. Section 1.368-1(e)(3) but without regard to Treas. Reg. Section
1.368-1(e)(3)(i)(A)), and (iv) have been sold, exchanged, or otherwise disposed
of to a person related to the Parent (within the meaning of Treas. Reg. Section
1.368-1(e)(3)) have been treated, and taken into account, as outstanding shares
of the Company as of the Effective Time.
(c) Immediately following the Merger, the Company will hold at least 90
percent of the fair market value of its net assets and at least 70 percent of
the fair market value of its gross assets held as of the Effective Time. For
purposes of this representation, amounts paid by the Company to stockholders,
amounts used by the Company to pay reorganization expenses, and all redemptions
and distributions (except for regular, normal dividends) made by the Company
after the commencement of negotiations by the parties to this Agreement will be
included and treated as assets held by the Company as of the Effective Time.
(d) As of the Effective Time, the Company will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in the Company that, if exercised or
converted, would affect Parent's acquisition or retention of "control" of the
Company, as defined in Section 368(c) of the Code.
(e) The Company is not an "investment company" as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code and is not under the jurisdiction of a
court in a title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
(f) As of the Effective Time, the fair market value of the assets of the
Company will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which the assets are subject.
(g) In order to preserve the tax-free treatment of the Merger under Section
368(a)(2)(E) of the Code, no Principal Stockholder has any plan or intention to
redeem (or to sell, exchange, or otherwise dispose of, to a person related to
the Parent (within the meaning of Treas. Reg. Section 1.368-1(e)(3))) a number
of shares of Parent Common Stock received in the Merger that, in the aggregate
(taking into account all such redemptions, sales, exchanges and dispositions),
would reduce the ownership of shares of Parent Common Stock by the Company
Stockholders to a number of shares having a value, as of the Effective Time, of
less than 50% of the aggregate value of all of the outstanding shares of the
Company as of the Effective Time. For purposes of this representation, shares of
the Company held by the Company Stockholders that, prior to the Merger, (i) have
been redeemed, (ii) with respect to which an extraordinary distribution (within
the meaning of Treas. Reg. Section 1.368-1T(e)(1)(ii)(A)) has been made, (iii)
have been sold, exchanged, or otherwise disposed of to a person related to the
Company (within the meaning of Treas. Reg. Section 1.368-1(e)(3) but without
regard to Treas. Reg. Section 1.368-1(e)(3)(i)(A)), and (iv) have been sold,
exchanged, or otherwise disposed of to a person related to the Parent (within
the meaning of Treas. Reg. Section 1.368-1(e)(3)) have been treated, and taken
into account, as outstanding shares of the Company as of the Effective Time.
SECTION V.24 Transactions with Related Parties. Except as set forth on
Schedule 5.24, (a) there have been no transactions by the Company or its
subsidiaries with any officer or director of the Company or its subsidiaries,
any beneficial owner of more than 5% of the Company Common Stock or their
affiliates ("Related Parties") since the date of the most recent Company
Financial Statements, and (b) there are no agreements or understandings now in
effect between the Company or its subsidiaries and any Related Parties except
for employment agreements or understandings with Related Parties who are
employees of the Company and agreements or understandings with Related Parties
who are stockholders of the Company relating to their rights as stockholders of
the Company, all of which have been delivered to Parent.
SECTION V.25 Insurance. All of the Company's and its subsidiaries'
liability, theft, life, health, fire, title, worker's compensation and other
forms of insurance, surety bonds and umbrella policies, insuring the Company and
its subsidiaries and their directors, officers, employees, independent
contractors, properties, assets and business, are valid and in full force and
effect and without any premium past due or pending notice of cancellation, are,
in the reasonable judgment of the Company, adequate for the business of the
Company and its subsidiaries as now conducted, and there are no claims, singly
or in the aggregate, under such policies in excess of $200,000, which, in any
event, are not in excess of the limitations of coverage set forth in such
policies. The Company and its subsidiaries have taken all actions reasonably
necessary to insure that their independent contractors obtain and maintain
adequate insurance coverage. All of the insurance policies referred to in this
Section 5.25 are "occurrence" policies and no such policies are "claims made"
policies. The Company has no knowledge of any fact indicating that such policies
will not continue to be available to the Company and its subsidiaries upon
substantially similar terms subsequent to the Effective Time. The provision
and/or reserves in the most recent Company Financial Statements are adequate for
any and all self insurance programs maintained by the Company or its
subsidiaries. Except as set forth on Schedule 5.25, neither the Company nor any
of its subsidiaries has received with respect to its insurance policies, any
notice of actual or proposed cancellation of or reduction in coverage of, or of
any material increase in premium under, or of any exclusion of or intent to
exclude coverage of actual or potential claims by or against the Company or any
subsidiary, or their respective officers, directors or employees, arising from
or relating to any failure of the Company or any subsidiary or any System of any
of them to be Year 2000 Compliant.
SECTION V.26 Guaranties. None of the Company or its subsidiaries is a
guarantor or otherwise is liable for any liability or obligation (including
indebtedness) of any other person.
SECTION V.27 Bank Accounts. Schedule 5.27 sets forth all banks or other
financial institutions with which the Company has an account or maintains a safe
deposit box, showing the type and account number of each such account and safe
deposit box and the names of the persons authorized as signatories thereon or to
act or deal in connection therewith.
SECTION V.28 Business Relations. On the date hereof the Company does not
know and has no reason to believe that any customer or supplier of the Company
or the subsidiaries of the Company will cease to do business with the Company or
the subsidiaries of the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company or the subsidiaries of the Company as the case may
be.
SECTION V.29 Potential Conflicts of Interest.
(a) Except as set forth on Schedule 5.29, no officer, director, or
stockholder of the Company or any of its subsidiaries (i) owns, directly or
indirectly, any interest (excepting not more than 1% stock holdings for
investment purposes in securities of publicly held and traded companies) in, or
is an officer, director, employee, or consultant of, any person or entity that
is a competitor, lessor, lessee, customer, or supplier of the Company or any of
its subsidiaries; (ii) owns, directly or indirectly, in whole or in part, any
tangible or intangible property that the Company or any of its subsidiaries is
using or the use of which is necessary for the business of the Company or any of
its subsidiaries; or (iii) has any cause of action or other claim whatsoever
against, or owes any amount to, the Company or any of its subsidiaries, except
for claims in the ordinary course of business, such as for accrued vacation pay,
accrued benefits under employee benefit plans, and similar matters and
agreements.
(b) To the best of the Company's knowledge, no officer, director, employee,
or consultant of the Company or any of its subsidiaries is presently obligated
under or bound by any agreement or instrument, or any judgment, decree, or order
of any court of administrative agency, that (i) conflicts or may conflict with
his or her agreements and obligations to use his or her best efforts to promote
the interests of the Company or any of its subsidiaries, (ii) conflicts or may
conflict with the business or operations of the Company or any of its
subsidiaries as presently conducted or as proposed to be conducted in the short
term, or (iii) restricts or may restrict the use or disclosure of any
information that may be useful to the Company or any of its subsidiaries.
SECTION V.30 Disclosure. No representations and warranties by the Company
contained in this Agreement, and no statement made by the Company in this
Agreement or in any document listed in any Exhibit or Schedule to this Agreement
or any document or certificate furnished or to be furnished to Parent at or
prior to Closing pursuant hereto, contains or will contain on the Closing Date
any untrue statements of a material fact or omits or will omit on the Closing
Date to state a material fact necessary in order to make the statements therein
not misleading in light of the circumstances in which they were made. The
Company represents and warrants that the Principal Stockholders and the
directors and officers of the Company and its subsidiaries have made due and
reasonable inquiry and investigation concerning the matters to which
representations and warranties of the Company under this Agreement pertain.
SECTION V.31 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company or its subsidiaries, except for tax
or litigation powers of attorney.
SECTION V.32 Accredited Investors. To the best of the Company's knowledge,
each Company Stockholder is an "accredited investor" within the meaning of Rule
501 of Regulation D promulgated under Section 4(2) of the Securities Act.
SECTION V.33 Brokers. The Company represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company and
the Company Stockholders.
SECTION 5.34 Company Officers. David R. Ames and Terry Wright are the only
officers of the Company.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION VI.1 Conduct of Business by the Company Pending the Merger. Except
as otherwise contemplated by this Agreement, after the date hereof and prior to
the Closing Date or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company shall, and shall cause its subsidiaries
to:
(a) conduct their respective businesses in the ordinary and usual course of
business and consistent with past practice (except changes in its business and
operations which have been approved in writing by Parent);
(b) not (i) amend or propose to amend their respective charters or bylaws,
(ii) split, combine or reclassify their outstanding capital stock; or (iii)
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise, except for the payment of dividends or distributions by a
wholly owned subsidiary of the Company;
(c) except for the conversion of the Company's Series A Convertible
Preferred Stock to Company Common Stock, not issue, sell, pledge or dispose of,
or agree to issue, sell, pledge or dispose of or otherwise cause to become
outstanding, any additional shares of, or any options, warrants or rights of any
kind to acquire any shares of their capital stock of any class or any debt or
equity securities convertible into or exchangeable for such capital stock;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money, (ii) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock or any options, warrants or
rights to acquire any of its capital stock or any security convertible into or
exchangeable for its capital stock, except for the conversion of the Company's
Series A Convertible Preferred Stock to Company Common Stock, (iii) take any
action which would jeopardize the treatment of the Merger as a
pooling-of-interests under APB 16, (iv) take or fail to take any action which
action or failure would cause the Company or its stockholders to recognize gain
or loss for federal income tax purposes as a result of the consummation of the
Merger, (v) make any acquisition of any assets or businesses other than
expenditures for fixed or capital assets in the ordinary course of business
which, in such cases of $200,000 or more, shall be on terms reasonably
acceptable to Parent, (vi) sell, pledge, dispose of or encumber any assets or
businesses other than sales in the ordinary course of business which, in such
cases involving $200,000 or more, shall be on terms reasonably acceptable to
Parent, or (vii) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(e) use all reasonable efforts to preserve intact their respective business
organizations and goodwill, keep available the services of their respective
present officers and key employees, and preserve the goodwill and business
relationships with customers and others having business relationships with them
and not engage in any action, directly or indirectly, with the intent to
adversely impact the transactions contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more representatives
of Parent to report operational matters of materiality and the general status of
ongoing operations;
(g) not enter into or amend any employment (including any changes to
salaries in excess of five percent), severance, special pay arrangement with
respect to termination of employment or other similar arrangements or agreements
with any directors, officers or key employees, and except in the ordinary course
and consistent with past practice;
(h) not adopt, enter into or amend any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation, health care,
employment or other employee benefit plan, agreement, trust, fund or arrangement
for the benefit or welfare of any employee or retiree, except as required to
comply with changes in applicable law; and
(i) maintain with adequately capitalized insurance companies insurance
coverage for its assets and its businesses in such amounts and against such
risks and losses as are consistent with past practice.
SECTION VI.2 Conduct of Business by Parent and Subsidiary Pending the
Merger. Except as otherwise contemplated by this Agreement, after the date
hereof and prior to the Closing Date or earlier termination of this Agreement,
unless the Company shall otherwise agree in writing, Parent shall, and shall
cause Subsidiary to:
(a) conduct their respective businesses in the ordinary and usual course of
business and consistent with past practice (provided that nothing stated herein
shall limit Parent from executing a letter of intent providing for the
acquisition of a company identified by Parent on the date hereof where the
number of shares of Parent Common Stock issued in connection with such
transaction will not exceed the number of shares of Parent Common Stock issued
in connection with the Merger plus the number of shares of Parent Common Stock
issuable in connection with the Parent Warrants, unless approved by the
President of the Company);
(b) preserve its business organization and not (i) except as necessary to
consummate the transactions contemplated hereby or to change Parent or
Subsidiary's name or to implement any anti-takeover device or to provide for any
stock split or dividend permitted hereunder, amend or propose to amend their
respective charters or bylaws, (ii) stock split, or a dividend in the form of a
stock split (except where the Merger Consideration is adjusted to reflect such
split), combine or reclassify their outstanding capital stock, (iii) declare,
set aside or pay any dividend or distribution payable in cash, stock, property
or otherwise, except as provided in clause (ii) above and for the payment of
dividends or distributions by a wholly owned subsidiary of Parent, or (iv)
except as provided in clauses (i) or (ii) above or in connection with the
potential acquisition discussed in clause (a) or in connection with Parent's
stock option or purchase plans issue any additional shares of its capital stock
or any security convertible into such stock;
(c) use all reasonable efforts to preserve intact their respective business
organizations and goodwill, keep available the services of their respective
present officers and key employees, and preserve the goodwill and business
relationships with customers and others having business relationships with them
and not engage in any action, directly or indirectly, with the intent to
adversely impact the transactions contemplated by this Agreement; and
(d) maintain with adequately capitalized insurance companies insurance
coverage for its tangible assets and its businesses in such amounts and against
such risks and losses as are consistent with past practice.
SECTION VI.3 Control of the Company's Operations. Nothing contained in this
Agreement shall give to Parent, directly or indirectly, rights to control or
direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with and subject to the
terms and conditions of this Agreement, complete control and supervision of its
operations.
SECTION VI.4 Control of Parent's or Subsidiary's Operations. Nothing
contained in this Agreement shall give to the Company, directly or indirectly,
rights to control or direct Parent's or Subsidiary's operations prior to the
Effective Time. Prior to the Effective Time, Parent shall exercise, consistent
with and subject to the terms and conditions of this Agreement, complete control
and supervision of its operations.
SECTION VI.5 Negotiations With Others.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Company shall not, and shall not permit any
of the stockholders of the Company, subsidiaries, officers, directors, agents
representatives or affiliates to, directly or indirectly, take any of the
following actions with any party other than Parent and its designees: (i)
solicit, initiate or participate in or encourage any negotiations or discussions
with respect to, any offer or proposal to acquire all or substantially all of
the Company's business and properties or capital stock whether by merger,
purchase of assets or otherwise, (ii) disclose any information not customarily
disclosed to any person concerning the Company's business and properties or
afford to any person or entity access to its properties, books or records, or
(iii) assist or cooperate with any proposal for a transaction of the type
referred to in clause (i). In the event the Company shall receive any offer or
proposal, directly or indirectly, of the type referred to in clause (i) or (iii)
above, or any request for disclosure or access pursuant to clause (ii) above, it
shall promptly inform Parent as to any such offer or proposal and will cooperate
with Parent by furnishing copies of any such offer or proposal and any
information relating thereto Parent may reasonably request.
(b) The Company (i) acknowledges that a breach of any of its covenants
contained in Section 6.5(a) will result in irreparable harm to Parent which will
not be compensable in money damages, and (ii) agrees that such covenant shall be
specifically enforceable and that specific performance and injunctive relief
shall be a remedy properly available to Parent for a breach of such covenant. In
addition, the Company agrees that if the covenants contained in Section 6.5(a)
are breached, the Company will promptly, following notice of such breach,
execute an assignment agreement prepared by Parent that assigns all business
prospects, proposals, and executed contracts developed jointly by the Company
and Parent or executed in connection with the Reseller Agreement dated December
2, 1998 among the Company, Parent and C-COR Electronics Co.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION VII.1 Access to Information.
(a) The Company and its subsidiaries shall afford to Parent and Subsidiary
and their respective accountants, counsel, financial advisors and other
representatives (the "Parent Representatives") and Parent and its subsidiaries
shall afford to the Company and its accountants, counsel, financial advisors and
other representatives (the "Company Representatives") full access during normal
business hours throughout the period after the date hereof and prior to the
Effective Time to all of their respective properties, books, contracts,
commitments and records (including, but not limited to, Tax Returns) and, during
such period, shall furnish promptly to one another (i) a copy of each report,
schedule and other document filed or received by any of them pursuant to the
requirements of federal or state securities laws or filed by any of them with
the SEC or which may have a material effect on their respective businesses,
properties or personnel, and (ii) such other information concerning their
respective businesses, operations, properties, assets, condition (financial or
other) results of operations and personnel as Parent or Subsidiary or the
Company, as the case may be, shall reasonably request; provided that no
investigation pursuant to this Section 7.1 shall amend or modify any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Parent and its subsidiaries
shall hold and shall use their reasonable best efforts to cause the Parent
Representatives to hold, and the Company and its subsidiaries shall hold and
shall use their reasonable best efforts to cause the Company Representatives to
hold, in strict confidence all non-public documents and information furnished to
Parent and Subsidiary or to the Company, as the case may be, in connection with
the transactions contemplated by this Agreement in accordance with the terms of
the Confidentiality Agreement dated the date hereof, which is incorporated
herein by reference and made a part hereof (the "Confidentiality Agreement").
(b) In the event that this Agreement is terminated in accordance with its
terms, each party shall promptly redeliver or destroy, as applicable, to the
other all non-public written material provided in connection with the
transactions contemplated herein in accordance with the terms of the
Confidentiality Agreement.
(c) The Company shall promptly advise Parent and Parent shall promptly
advise the Company in writing of any change or the occurrence of any event after
the date of this Agreement having, or which, insofar as can reasonably be
foreseen, in the future may have, a Company Material Adverse Effect or a Parent
Material Adverse Effect, as the case may be.
SECTION VII.2 Stockholders' Approvals.
The Company shall, as promptly as practicable, submit this Agreement and
the transactions contemplated hereby for the approval of its stockholders (i) at
a meeting of stockholders, or (ii) by written consent of stockholders, and,
subject to the fiduciary duties of the board of directors of the Company under
applicable law, shall use its reasonable best efforts to obtain the stockholder
approval and adoption as described in Section 5.18 (the "Company Stockholders'
Approval") of this Agreement and the transactions contemplated hereby as soon as
practicable following the date hereof. The Company shall, through its board of
directors, but subject to the fiduciary duties of the members thereof, recommend
to its stockholders approval of the transactions contemplated by this Agreement.
The Company (i) acknowledges that a breach of the Company's covenants contained
in this Section 7.2(a) to convene a meeting of its stockholders and call for a
vote thereat or to submit a written consent to stockholders with respect to the
approval of this Agreement and the Merger will result in irreparable harm to
Parent which will not be compensable in money damages, and (ii) agrees that such
covenants shall be specifically enforceable and that specific performance and
injunctive relief shall be a remedy properly available to Parent for a breach of
such covenants.
SECTION VII.3 ASR 135 Agreement. Set forth on Schedule 7.3 is a list
identifying all persons who may be deemed affiliates of the Company under Rule
145 of the Securities Act ("Rule 145"), including, without limitation, all
directors and executive officers of the Company. The Company has advised the
persons identified on Schedule 7.3 of the resale restrictions imposed by
applicable securities laws, including Accounting Series Release No. 135 ("ASR
135") and obtained from such persons a written agreement dated the date hereof
and substantially in the form of Exhibit 7.3 (each an "ASR 135 Agreement"). The
Company shall use its best efforts to obtain as soon as practicable, but prior
to Closing, any other person who may be deemed to have become an affiliate of
the Company after the date of this Agreement, a written ASR 135 Agreement.
SECTION VII.4 Expenses and Fees.
(a) Each party hereto agrees to bear its own expenses, including reasonable
and customary fees and expenses payable to attorneys, accountants and investment
bankers in connection with the transactions contemplated hereby.
(b) If all of the conditions set forth in Article VIII have been satisfied
or waived by the party entitled to so waive and one of the parties (for purposes
of this paragraph Parent and Subsidiary shall constitute one party) advises the
other that it is ready, willing and able to effect the Merger and the other
party fails to effect the Merger (the "Failing Party") such Failing Party shall
pay the other party by certified check or wire transfer to an account designated
by such party an amount equal to $5 million (the "Break-Up Fee") within three
days after written demand. In addition, if the condition set forth in Section
8.1(a) (as to the shareholder vote) is not satisfied and within one year
following the termination of this Agreement the Company completes either a
merger, consolidation, other business combination or sale of a substantial
portion of the Company's assets with any third party acquiror or the sale of 50%
or more (in voting power) of the voting securities of the Company, the Company
shall pay the Break-Up Fee to Parent as provided above.
SECTION VII.5 Agreement to Cooperate.
(a) Subject to the terms and conditions herein provided and, subject to the
fiduciary duties of the board of directors of any party under applicable law,
each of the parties hereto shall use all reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable pursuant to all agreements, contracts, indentures or other
instruments to which the parties hereto are a party, or under any applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its reasonable efforts to (i)
obtain all necessary or appropriate waivers, consents and approvals from
lenders, landlords, security holders or other parties whose waiver, consent or
approval is required to consummate the Merger, (ii) effect all necessary
registrations, filings and submissions, and (iii) lift any injunction or other
legal bar to the Merger (and, in such case, to proceed with the Merger as
expeditiously as possible).
(b) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, Parent shall have
the right, at its own expense, to participate therein, and the Company will not
settle any such litigation without the consent of Parent, which consent will not
be unreasonably withheld.
SECTION VII.6 Public Statements. Unless required by law, the parties (i)
shall consult with each other prior to issuing any press release or any written
public statement with respect to this Agreement or the transactions contemplated
hereby, and (ii) shall not issue any such press release or written public
statement prior to such consultation.
SECTION VII.7 Notification of Certain Matters. Each of the Company, Parent
and Subsidiary agrees to give prompt notice to each other of, and to use their
respective reasonable best efforts to prevent or promptly remedy, (i) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time, and (ii) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.7 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION VII.8 Employment Agreements. Prior to Closing, each of the
Principal Stockholders shall have entered into an employment agreement with
Parent and such other employee related agreements previously delivered by Parent
to the Principal Stockholders (each a "Key Employee Employment Agreement"),
substantially in the form of Exhibit 7.8.
SECTION VII.9 Directors' and Officers' Indemnification. Parent and
Subsidiary agree that the articles of incorporation and bylaws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are currently set forth in Article 8 of the bylaws of the
Company, which provisions shall not be amended, repealed or otherwise modified
for a period of two years from the Effective Time in any manner that would
affect adversely the rights thereunder of individuals who at the Effective Time
were directors or officers of the Company unless such modification shall be
required by law; provided, however, the obligation in this Section 7.9 is
conditioned on the inclusion in materials delivered to the Company Stockholders
prior to the Effective Time of an acknowledgment from such Company Stockholders
that they have no claims against the officers and directors of the Company.
SECTION VII.10 Mandatory Registration.
(a) Within 15 days following the Effective Time, Parent shall prepare and
file with the SEC, a registration statement and such other documents, including
a prospectus, as may be necessary in order to comply with the provisions of the
Securities Act so as to permit a resale of the shares of Parent Common Stock
issued as Merger Consideration and the shares of Parent Common Stock underlying
the Parent Warrants by the holders thereof ("Holders") for a consecutive period
of two years or until the distribution described in the registration statement
has been completed, whichever is shorter, provided that, for not more than 30
consecutive trading days (or not more than 60 consecutive trading days if the
event giving rise thereto is an acquisition required to be reported in a Current
Report on Form 8-K pursuant to Item 2 thereof) or for a total of not more than
90 trading days in any 12 month period, Parent may delay the disclosure of
material non-public information concerning Parent (as well as prospectus or
registration statement updating) the disclosure of which at the time is not, in
the good faith opinion of Parent, in the best interests of Parent (an "Allowed
Delay"); provided, further, that Parent shall promptly (i) notify the Holders in
writing of the existence of (but in no event, without the prior written consent
of the Holders, shall Parent disclose to Holders any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the Holders, in writing to cease all sales under
such registration statement until the end of the Allowed Delay. Parent shall use
its best efforts to cause the registration statement to become effective at the
earliest possible time.
(b) In connection with any registration under this Section 7.10 hereof,
Parent covenants and agrees as follows:
(i) Parent shall furnish each Holder desiring to sell its securities such
number of prospectuses as shall reasonably be requested.
(ii) Parent shall pay all costs (excluding fees and expenses of Holder(s)'
counsel and any underwriting or selling commissions or other charges of any
broker-dealer acting on behalf of Holder(s)), fees and expenses in connection
with all registration statements filed pursuant to this Section 7.10 including,
without limitation, Parent's legal and accounting fees, printing expenses and
blue sky fees and expenses.
(iii) Parent will take all necessary action which may be required in
qualifying or registering the securities included in the registration statement
for resale under the securities or blue sky laws of such states as are
reasonably requested by the Holder(s), provided that Parent shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(c) Parent hereby agrees that it will indemnify the Holders of the
securities to be sold pursuant to any registration statement referred to in
clause (a) above and each person, if any, who controls such Holders within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the
Securities Act, the Exchange Act or any other statute, common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained (i) in such registration statement (as from time to
time amended and supplemented); (ii) in any post-effective amendment or
amendments; or (iii) in any application or other document or written
communication (in this Section 7.10 collectively called an "application")
executed by Parent or based upon written information furnished by Parent filed
in any jurisdiction in order to qualify the above-referenced securities under
the securities laws thereof or filed with the SEC, any state securities
commission or agency, the American Stock Exchange, the National Association of
Securities Dealers, Inc., The Nasdaq Stock Market or any securities exchange, or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, unless such statement of omission was made in reliance upon and in
conformity with written information furnished to Parent by the Company, any
Holder or any placement agent on behalf of the Holders expressly for use in such
registration statement, any amendment or supplement thereto or any application,
as the case may be. The indemnity provided in this Section 7.10(c) is subject to
the condition that if any action is brought against any Holder or any
controlling person of such Holder in respect of which indemnity may be sought
against Parent pursuant to this Section 7.10(c), such Holder or such controlling
person shall as soon as practicable and in no event more than 20 days after the
receipt thereby of a summons or complaint notify Parent in writing of the
institution of such action and Parent shall assume the defense of such action,
including the employment and payment of reasonable fees and expenses of counsel
(which counsel shall be reasonably satisfactory to such Holder or controlling
person). Such Holder or controlling person shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such Holder or controlling person unless the
employment of such counsel shall have been authorized in writing by Parent in
connection with the defense of such action, Parent shall not have employed
counsel to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be defenses available
to it or them which are different from or additional to those available to
Parent (in which case Parent shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events the fees and expenses of not more than one additional firm of attorneys
for such Holder and/or controlling person shall be borne by Parent. Except as
expressly provided in the previous sentence, in the event that Parent shall not
previously have assumed the defense of any such action or claim, Parent shall
not thereafter be liable to such Holder or controlling person in investigating,
preparing or defending any such action or claim. Parent hereby agrees promptly
to notify all Holders of the commencement of any litigation or proceedings
against Parent or any of its officers, directors or controlling persons in
connection with the offering and sale of the securities referred to above or in
connection with such registration statement. Parent, in the defense of any such
action or claim will not, except with the consent of such Holder being
indemnified, consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof, the giving by the claimant or
plaintiff to such Holder being indemnified of a full and complete release from
all liability in respect of such claim or litigation in form and substance
reasonably satisfactory to such Holder being indemnified.
SECTION VII.11 Parent Common Stock.
(a) Each certificate representing Parent Common Stock received as Merger
Consideration will be imprinted with a legend substantially in the following
form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"). The
securities have been acquired for investment and may not be sold, transferred or
assigned in the absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form, substance and
scope reasonably acceptable to the Company, that registration is not required
under said Act.
This certificate and the shares represented hereby have been issued
pursuant to a transaction governed by Rule 145 ("Rule 145") promulgated under
the Securities Act, and may not be sold or otherwise disposed of unless
registered under the Securities Act pursuant to a Registration Statement in
effect at the time or unless the proposed sale or disposition can be made in
compliance with Rule 145 or without registration in reliance on another
exemption therefrom.
The transfer of such shares is subject to certain restrictions set forth in
an Agreement and Plan of Merger dated as of May 15, 1999 by and between the
issuer of such shares and certain other parties thereto. The issuer of such
shares will furnish a copy of these provisions to the holder hereof without
charge upon written request.
SECTION VII.12 Acquisition of Common Stock. Prior to the Closing or the
earlier termination of this Agreement pursuant to the terms hereof, the
Principal Stockholders, the Company and its subsidiaries and their affiliates
have not purchased and will not purchase or otherwise acquire directly or
indirectly any Parent Common Stock other than as provided in this Agreement.
SECTION VII.13 Exhibits and Schedules. The Company has made available to
Parent on or prior to the Closing Date, copies of all items set forth on
Exhibits or Schedules to this Agreement and any and all other consents,
documents or agreements to be delivered hereunder which have not previously been
delivered to Parent on the date hereof, which items and any such other consents,
documents or agreements shall be in form and substance reasonably satisfactory
to Parent and the Company. In addition, prior to the Closing the Company and
Parent may update the Schedules as necessary, subject to Parent's or the
Company's respective approval of any material updates of the Schedules.
SECTION VII.14 [Reserved]
SECTION VII.15 Transition. The Company shall not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of the Company and its
subsidiaries from maintaining the same business relationships with the Company
and its subsidiaries after the Closing as it maintained with the Company and its
subsidiaries prior to the Closing unless such action is taken in accordance with
prudent business practices.
SECTION VII.16 Nasdaq Listing. Parent shall use its reasonable best efforts
to effect, at or before the Effective Time, authorization for listing on The
Nasdaq National Market, upon official notice of issuance, that number of the
shares of Parent Common Stock to be issued pursuant to the Merger and the shares
of Parent Common Stock to be reserved for issuance upon exercise of Exchanged
Options.
SECTION VII.17 Company Warrants. At the Effective Time, the Company and
Parent shall take such action as may be necessary to cause each Company Warrant
and each Ayre Warrant, whether immediately exercisable, exercisable at Closing
by virtue of acceleration attributable to the Merger or exercisable only after
Closing, to be automatically converted at the Effective Time into a Parent
Warrant. At the Effective Time, all references in the Company Warrants and the
Ayre Warrants to the Company shall be deemed to refer to Parent. At the
Effective Time, Parent shall assume all of the Company's obligations with
respect to Company Warrants and the Ayre Warrants and Parent shall (i) reserve
for issuance the number of shares of Parent Common Stock that will become
issuable upon the exercise of the Parent Warrants and (ii) at the Effective
Time, issue to each holder of a Parent Warrant a document evidencing Parent's
assumption of the Company's obligations under the Company Warrants or the Ayre
Warrants, as the case may be. Except as set forth in this paragraph, the Parent
Warrants shall have the same terms and conditions as the Company Warrants or the
Ayre Warrants, as the case may be.
ARTICLE VIII
CONDITIONS
SECTION VIII.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have been
approved and adopted by the requisite vote of the stockholders of the Company
(with the number of stockholders of the Company invoking dissenters' rights
limited to that which would permit the merger to proceed, in light of such
dissenters, and continue to qualify as both a pooling-of-interests transaction
under APB 16 and as a tax-free reorganization under Section 368 of the Code)
under applicable law;
(b) no preliminary or permanent injunction or other order or decree by any
federal or state court which prevents the consummation of the Merger shall have
been issued and remain in effect (each party agreeing to use its reasonable
efforts to have any such injunction, order or decree lifted);
(c) no action shall have been taken, and no statute, rule or regulation
shall have been enacted, by any state or federal government or governmental
agency in the United States which would prevent the consummation of the Merger
or make the consummation of the Merger illegal;
(d) all governmental waivers, consents, orders and approvals legally
required for the consummation of the Merger and the transactions contemplated
hereby shall have been obtained and be in effect at the Effective Time;
(e) all required consents and approvals of third parties to material
contracts with the Parent or the Company shall have been obtained and be in
effect at the Effective Time; provided, however, that the failure to obtain such
consents or approvals shall not be due to the default or delay of the party
responsible for obtaining such consents and approvals;
(f) the Merger will be treated for federal income tax purposes as a
tax-free reorganization within the meaning of Section 368(a) of the Code and no
gain or loss will be recognized for federal income tax purposes as a result of
the conversion of the Company Common Stock as provided herein.
(g) KPMG LLP, as public accountants for Parent and Subsidiary, shall have
delivered a letter, dated the Closing Date, addressed to Parent stating that the
Merger will qualify as a pooling-of-interests transaction under APB 16; and
(h) KPMG LLP, as public accountants for the Company, shall have delivered a
letter, dated the Closing Date, addressed to the Company stating that the Merger
will qualify as a pooling-of-interests transaction under APB 16.
SECTION VIII.2 Conditions to Obligation of the Company to Effect the
Merger. Unless waived by the Company, the obligation of the Company to effect
the Merger shall be subject to the fulfillment at or prior to the Closing Date
of the following additional conditions:
(a) Parent and Subsidiary shall have performed in all material respects
their agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of Parent and
Subsidiary contained in this Agreement shall be true and correct in all material
respects on and as of the date made and (except to the extent such
representation speaks as of an earlier date) on and as of the Closing Date as if
made at and as of such date, and the Company shall have received a certificate
of the Chief Executive Officer, the President or a Vice President of Parent and
of the Chief Executive Officer, the President or a Vice President of Subsidiary,
in form and substance reasonably satisfactory to the Company, to that effect;
(b) the Company shall have received an opinion from Ballard Spahr Andrews &
Ingersoll, LLP, special counsel to Parent and Subsidiary, dated the Closing
Date, reasonably satisfactory to the Company setting forth the matters set forth
in Exhibit 8.2(b);
(c) since the date hereof, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted in or
constitute a Parent Material Adverse Effect;
(d) all governmental waivers, consents, orders, and approvals legally
required for the consummation of the Merger and the transactions contemplated
hereby shall have been obtained and be in effect at the Closing Date, and no
governmental authority shall have promulgated any statute, rule or regulation
which, when taken together with all such promulgations, would materially impair
the value to the Company of the Merger; and
(e) the Key Employment Agreements shall have been executed and delivered by
Parent.
SECTION VIII.3 Conditions to Obligations of Parent and Subsidiary to Effect
the Merger. Unless waived by Parent and Subsidiary, the obligations of Parent
and Subsidiary to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date and the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects on and as
of the date made and on and (except to the extent such representation speaks as
of an earlier date) as of the Closing Date as if made at and as of such date,
and Parent shall have received a Certificate of the Chief Executive Officer,
President or a Vice President of the Company in form and substance reasonably
satisfactory to Parent, to that effect;
(b) Parent shall have received an opinion from Morris, Manning & Martin,
L.L.P., special counsel to the Company effective as of the Closing Date,
reasonably satisfactory to Parent setting forth the matters set forth in Exhibit
8.3(b);
(c) There shall have been no changes that constitute, and no event or
events shall have occurred which have resulted in or constitute a Company
Material Adverse Effect;
(d) All governmental waivers, consents, orders and approvals legally
required for the consummation of the Merger and the transactions contemplated
hereby shall have been obtained and be in effect at the Closing Date, and no
governmental authority shall have promulgated any statute, rule or regulation
which, when taken together with all such promulgations, would materially impair
the value to Parent of the Merger;
(e) The Key Employment Agreements described in Section 7.8 and the ASR 135
Agreements described in Section 7.3 shall have been executed by the appropriate
parties and delivered to Parent;
(f) As of the Closing Date, the aggregate debt of the Company and its
subsidiaries, including funded debt, term lease obligations, overdrafts,
accounts payable over 30 days from invoice date and similar obligations, shall
not exceed $500,000 unless approved in writing by Parent;
(g) [Reserved]
(h) All of the Series A Convertible Preferred Stock shall have been
converted to Company Common Stock and the Class A Series shall have been
canceled and, except for the Common Stock, the Company Warrants and Ayre
Warrants, there shall be no shares of Preferred Stock or other capital stock of
the Company issued, outstanding or owned by the Company or any of its
subsidiaries;
(i) Parent shall have received the written resignations, effective as of
Closing, of each director and officer of the Company and its subsidiaries at
least five days prior to Closing;
(j) Each of the Company Stockholders (other than those dissenting
stockholders of the Company holding shares which in the aggregate do not prevent
the Merger from proceeding and continuing to qualify as both a
pooling-at-interests transaction under APB 16 and as a tax-free reorganization
under 368 of the Code) shall have executed an accredited investor questionnaire
and representation agreement in substantially the form set forth as Exhibit
8.3(j) with such changes as are mutually acceptable to the parties (the
"Stockholder Questionnaire and Agreement") and the information provided to
Parent in connection with such documents shall indicate, in the opinion of
counsel to Parent, that the issuance of Parent Common Stock as Merger
Consideration will comply with state and federal securities laws; or
(k) Section 5 of the Employment Agreement dated October 1, 1994 between the
Company and Frank M. Ayre, III shall be clarified to provide that the number of
Ayre Warrants shall equal 66,930 notwithstanding anything to the contrary stated
therein.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION IX.1 Termination. This Agreement may be terminated by the mutual
consent of the parties or at any time prior to the Closing Date, as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) if the Merger is not completed by July 30, 1999 other than on account
of delay or default on the part of the Company;
(ii) if the Merger is enjoined by a final, unappealable court order not
entered at the request or with the support of the Company or any of its five
percent stockholders or any of their affiliates or associates; or
(iii) if Parent (A) fails to perform any of its covenants in this
Agreement, and (B) does not cure such default within 30 days after written
notice of such default is given to Parent by the Company.
(b) Parent shall have the right to terminate this Agreement:
(i) if the Merger is not completed by July 30, 1999 other than on account
of delay or default on the part of Parent;
(ii) if the Merger is enjoined by a final, unappealable court order not
entered at the request or with the support of Parent or Subsidiary or any of its
five percent stockholders or any of their affiliates or associates; or
(iii) if the Company (A) fails to perform any of its covenants in this
Agreement, and (B) does not cure such default within 30 days after written
notice of such default is given to the Company by Parent.
SECTION IX.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company as provided in 9.1, this Agreement
shall forthwith become void and there shall be no further obligation on the part
of the Company, Parent, Subsidiary or their respective officers or directors
(except those obligations set forth in Section 7.1, Section 7.4 this Section
9.2, Article X or Article XI, all of which shall survive the termination).
Nothing in this Section 9.2 shall relieve any party from liability for any
breach of this Agreement.
SECTION IX.3 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any such waiver shall not be deemed to be
continuing or to apply to any future obligation or requirement of any party
hereto provided herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
SECTION 10.1 Survival of Representations and Warranties. All of the
representations, warranties and covenants of the Company contained in this
Agreement shall survive the Closing even if Parent or Subsidiary knew or had
reason to know of any misrepresentation or breach of warranty at the time and
continue in full force and effect for a period of 12 months thereafter. Recourse
for any action for any misrepresentation or breach of warranty during such
period shall be limited to recovery as provided in the ASR 135 Agreements
executed by David Ames and Terry Ames.
ARTICLE XI
GENERAL PROVISIONS
SECTION XI.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or overnight courier, or
sent via facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to Parent or Subsidiary to:
C-COR Electronics, Inc.
60 Decibel Road
State College, PA 16801
Attention: David A. Woodle
Facsimile Number: 814-231-4427
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street
Philadelphia, Pennsylvania 19103
Attention: Robert C. Gerlach, Esquire
Facsimile Number: 215-864-8999
(b) If to the Company, to:
Convergence.com Corporation
3950 Johns Creek Road
Suite 300
Suwanee, Georgia 30024
Attention: David R. Ames
Facsimile Number: 770-416-9994
with a copy to:
Morris, Manning & Martin, LLP
3343 Peachtree Road, N.E.
1600 Atlanta Financial Center
Atlanta, GA 30326
Attention: Neil Dickson, Esquire
Facsimile Number: 404-365-4532
SECTION XI.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. In this Agreement, unless a contrary intention
appears, (i) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, and (ii) reference to any Article or
Section means such Article or Section hereof. The parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation. The
parties intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty, or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
SECTION XI.3 Entire Agreement; Miscellaneous. This Agreement, the
Confidentiality Agreement and any other agreements between the parties dated the
date hereof supersede any and all other agreements, either oral or in writing,
between the parties hereto with respect to the subject matter and contain all
the covenants and agreements between the parties with respect to the subject
matter of this Agreement in any manner whatsoever. Each party to this Agreement
acknowledges that no representations, inducements, promises or agreements,
orally or otherwise, have been made by any party, or anyone acting on behalf of
any party, which are not included herein, and that no other agreement, statement
or promise not contained in this Agreement or referred to herein shall be valid
or binding. This Agreement constitutes the entire Agreement between the parties
with respect to the subject matter hereof and shall bind and inure to the
benefit of the parties and their respective successors, assigns, heirs and
personal representatives, subject to the restriction on assignment contained
herein.
SECTION XI.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL LAWS OF
THE COMMONWEALTH OF PENNSYLVANIA APPLICABLE TO CONTRACTS EXECUTED AND TO BE
PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
SECTION XI.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement. Each of the parties agrees to
accept and be bound by facsimile signatures hereto.
SECTION XI.6 Parties In Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION XI.7 Exhibits and Schedules. All Exhibits and Schedules referred to
in this Agreement shall be attached hereto and are incorporated herein by
reference.
SECTION XI.8 Amendment of Agreement. No amendments or variations of the
terms or conditions of this Agreement shall be valid unless made in writing
signed by all parties hereto.
SECTION XI.9 Severability. If any term, provision, condition or covenant of
this Agreement or the application thereof to any party or circumstances shall be
held to be invalid or unenforceable to any extent in any jurisdiction, then the
remainder of this Agreement and the application of such term, provision,
condition or covenant in any other jurisdiction or to persons or circumstances
other than those as to whom or which it is held to be invalid or unenforceable,
shall not be affected thereby, and each term, provision, condition and covenant
of this Agreement shall be valid and enforceable to the fullest extent permitted
by law.
SECTION XI.10 Assignment. The parties hereto may not assign any of their
rights or obligations hereunder without obtaining the prior written consent of
the other parties hereto, which consent shall not be unreasonably withheld,
provided that in the case of any assignment or transfer under the terms of this
Section 11.10, this Agreement shall be binding upon and inure to the benefit of
the successor, and the successor shall discharge and perform all of the
obligations of Parent under this Agreement and such assignment or transfer shall
not act as a release of the obligation of Parent hereunder.
SECTION XI.11 Gender and Number. All references to the neuter gender shall
include the feminine or masculine gender and vice versa, where applicable, and
all references to the singular shall include the plural and vice versa, where
applicable.
SECTION XI.12 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person or entity other than the parties and
their respective successors and permitted assigns.
IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers as of the date first written
above.
C-COR ELECTRONICS, INC.
By: /s/ David A. Woodle
Name: David A. Woodle
Title: President and CEO
C-COR ACQUISITION CORP
By: /s/ David A. Woodle
Name: David A. Woodle
Title: President and CEO
CONVERGENCE.COM CORPORATION
By: /s/ David R. Ames
Name: David R. Ames
Title: President and CEO
