SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): August 5, 1996
WORLDCORP, INC.
(Exact name of registrant as specified in charter)
Delaware 1-5351 94-3040585
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
13873 Park Center Road, Suite 490, Herndon, Virginia 22071
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(703) 834-9200
<PAGE>
Item 5. Other Events
On August 5, 1996, US Order, Inc. ("USO") and Colonial
Data Technologies Corp. ("CDT") entered into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which USO and
CDT will be merged with and into Newco, a corporation to be
formed (the "Merger"). Under the terms of the Agreement, upon
consummation of the Merger, each outstanding share of common
stock of USO, $.001 par value, will be converted into one share
of common stock of Newco (the "Newco Common Stock"), and each
outstanding share of common stock of CDT, $.01 par value, will be
converted into one share of Newco Common Stock.
The Boards of Directors of USO and CDT have agreed to
recommend approval of the Merger to their respective
stockholders. The obligations of USO and CDT to consummate the
Merger are subject to the satisfaction of certain conditions set
forth in the Merger Agreement, including the approval of the
Merger by the stockholders of USO and CDT.
The terms of the Merger Agreement are summarized in the
press release issued by USO on August 5, 1996, a copy of which is
filed as an Exhibit attached hereto.
Item 7. Exhibits
Exhibit 2.1 Agreement and Plan of Merger, dated as of
August 5, 1996, between US Order, Inc. and
Colonial Data Technologies Corp.
Exhibit 99.1 Press Release of US Order, Inc. and Colonial Data
Technologies Corp., dated August 5, 1996.
<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.
WORLDCORP, INC.
Date: August 5, 1996 By: /s/ Andrew M. Paalborg
Andrew M. Paalborg
Vice President and General
Counsel
<PAGE>
INDEX TO EXHIBITS
2.1 Agreement and Plan of Merger, dated as of August 5,
1996, between US Order, Inc. and Colonial Data
Technologies Corp.
99.1 Press Release of US Order, Inc. and Colonial Data
Technologies Corp., dated as of August 5, 1996.
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 5, 1996
BETWEEN
US ORDER, INC.
AND
COLONIAL DATA TECHNOLOGIES CORP.
TABLE OF CONTENTS
PAGE
ARTICLE 1.THE MERGER . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1.The Merger. . . . . . . . . . . . . . . . . . 1
Section 1.2.Effective Time. . . . . . . . . . . . . . . . 1
Section 1.3.Closing of the Merger . . . . . . . . . . . . 2
Section 1.4.Effects of the Merger . . . . . . . . . . . . 2
Section 1.5.Formation of Newco; Certificate
of Incorporation and Bylaws . . . . . . . . . . . . . 2
Section 1.6.Board of Directors and Officers of Newco. . . 2
Section 1.7.Conversion of Shares. . . . . . . . . . . . . 4
Section 1.8.Exchange of Certificates. . . . . . . . . . . 4
Section 1.9.Stock Options . . . . . . . . . . . . . . . . 6
Section 1.10.Taking of Necessary Action; Further Action . 9
ARTICLE 2.REPRESENTATIONS AND WARRANTIES OF USO. . . . . . . . 9
Section 2.1.Organization and Qualification. . . . . . . . 9
Section 2.2.Capitalization of USO . . . . . . . . . . . . 9
Section 2.3.Authority Relative to this Agreement;
Recommendation. . . . . . . . . . . . . . . . . . . . 10
Section 2.4.SEC Reports; Financial Statements . . . . . . 11
Section 2.5.Information Supplied. . . . . . . . . . . . . 11
Section 2.6.Consents and Approvals; No Violations . . . . 12
Section 2.7.No Default. . . . . . . . . . . . . . . . . . 12
Section 2.8.No Undisclosed Liabilities;
Absence of Changes. . . . . . . . . . . . . . . . . . 13
Section 2.9.Litigation. . . . . . . . . . . . . . . . . . 13
Section 2.10.Compliance with Applicable Law . . . . . . . 13
Section 2.11.Employee Benefit Plans; Labor Matters. . . . 14
Section 2.12.Environmental Laws and Regulations . . . . . 15
Section 2.13.Tax Matters. . . . . . . . . . . . . . . . . 16
Section 2.14.Title to Property. . . . . . . . . . . . . . 16
Section 2.15.Intellectual Property. . . . . . . . . . . . 17
Section 2.16.Insurance. . . . . . . . . . . . . . . . . . 17
Section 2.17.Vote Required. . . . . . . . . . . . . . . . 17
Section 2.18.Tax Treatment. . . . . . . . . . . . . . . . 17
Section 2.19.Affiliates . . . . . . . . . . . . . . . . . 17
Section 2.20.Certain Business Practices . . . . . . . . . 17
Section 2.21.Insider Interests. . . . . . . . . . . . . . 18
Section 2.22.Opinion of Financial Adviser . . . . . . . . 18
Section 2.23.Brokers. . . . . . . . . . . . . . . . . . . 18
Section 2.24.Disclosure . . . . . . . . . . . . . . . . . 18
Section 2.25.No Existing Discussions. . . . . . . . . . . 18
Section 2.26.Material Contracts . . . . . . . . . . . . . 18
ARTICLE 3.REPRESENTATIONS AND WARRANTIES OF CDT. . . . . . . . 19
Section 3.1.Organization and Qualification. . . . . . . . 19
Section 3.2.Capitalization of CDT . . . . . . . . . . . . 20
Section 3.3.Authority Relative to this Agreement;
Recommendation. . . . . . . . . . . . . . . . . . . . 21
Section 3.4.SEC Reports; Financial Statements . . . . . . 21
Section 3.5.Information Supplied. . . . . . . . . . . . . 22
Section 3.6.Consents and Approvals; No Violations . . . . 22
Section 3.7.No Default. . . . . . . . . . . . . . . . . . 23
Section 3.8.No Undisclosed Liabilities;
Absence of Changes. . . . . . . . . . . . . . . . . . 23
Section 3.9.Litigation. . . . . . . . . . . . . . . . . . 23
Section 3.10.Compliance with Applicable Law . . . . . . . 24
Section 3.11.Employee Benefit Plans; Labor Matters. . . . 24
Section 3.12.Environmental Laws and Regulations . . . . . 26
Section 3.13.Tax Matters. . . . . . . . . . . . . . . . . 26
Section 3.14.Title to Property. . . . . . . . . . . . . . 26
Section 3.15.Intellectual Property. . . . . . . . . . . . 27
Section 3.16.Insurance. . . . . . . . . . . . . . . . . . 27
Section 3.17.Vote Required. . . . . . . . . . . . . . . . 27
Section 3.18.Tax Treatment. . . . . . . . . . . . . . . . 27
Section 3.19.Affiliates . . . . . . . . . . . . . . . . . 27
Section 3.20.Certain Business Practices . . . . . . . . . 28
Section 3.21.Insider Interests. . . . . . . . . . . . . . 28
Section 3.22.Opinion of Financial Adviser . . . . . . . . 28
Section 3.23.Brokers. . . . . . . . . . . . . . . . . . . 28
Section 3.24.Disclosure . . . . . . . . . . . . . . . . . 28
Section 3.25.No Existing Discussions. . . . . . . . . . . 28
Section 3.26.Material Contracts . . . . . . . . . . . . . 28
ARTICLE 4.COVENANTS. . . . . . . . . . . . . . . . . . . . . . 29
Section 4.1.Conduct of Business of USO. . . . . . . . . . 29
Section 4.2.Conduct of Business of CDT. . . . . . . . . . 31
Section 4.3.Preparation of S-4 and the Proxy Statement. . 33
Section 4.4.Other Potential Acquirers.. . . . . . . . . . 34
Section 4.5.Meetings of Stockholders. . . . . . . . . . . 36
Section 4.6.Nasdaq Listing. . . . . . . . . . . . . . . . 36
Section 4.7.Access to Information . . . . . . . . . . . . 36
Section 4.8.Additional Agreements; Reasonable Efforts . . 37
Section 4.9.Employee Benefits; Stock Option and
Employee Purchase Plans . . . . . . . . . . . . . . . 37
Section 4.10.Public Announcements . . . . . . . . . . . . 38
Section 4.11.Indemnification. . . . . . . . . . . . . . . 38
Section 4.12.Notification of Certain Matters. . . . . . . 39
Section 4.13.Affiliates . . . . . . . . . . . . . . . . . 40
ARTICLE 5.CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . 40
Section 5.1.Conditions to Each Party's
Obligations to Effect the Merger. . . . . . . . . . . 40
Section 5.2.Conditions to the Obligations of USO. . . . . 40
Section 5.3.Conditions to the Obligations of CDT. . . . . 41
ARTICLE 6.TERMINATION; AMENDMENT; WAIVER . . . . . . . . . . . 42
Section 6.1.Termination . . . . . . . . . . . . . . . . . 42
Section 6.2.Effect of Termination . . . . . . . . . . . . 44
Section 6.3.Fees and Expenses . . . . . . . . . . . . . . 44
Section 6.4.Amendment . . . . . . . . . . . . . . . . . . 45
Section 6.5.Extension; Waiver . . . . . . . . . . . . . . 45
ARTICLE 7.MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 46
Section 7.1.Nonsurvival of Representations and
Warranties. . . . . . . . . . . . . . . . . . . . . . 46
Section 7.2.Entire Agreement; Assignment. . . . . . . . . 46
Section 7.3.Validity. . . . . . . . . . . . . . . . . . . 46
Section 7.4.Notices . . . . . . . . . . . . . . . . . . . 46
Section 7.5.Governing Law . . . . . . . . . . . . . . . . 47
Section 7.6.Descriptive Headings. . . . . . . . . . . . . 47
Section 7.7.Parties in Interest . . . . . . . . . . . . . 47
Section 7.8.Certain Definitions . . . . . . . . . . . . . 47
Section 7.9.Personal Liability. . . . . . . . . . . . . . 48
Section 7.10.Specific Performance . . . . . . . . . . . . 48
Section 7.11.Counterparts . . . . . . . . . . . . . . . . 48
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated
as of August 5, 1996, is between US Order, Inc., a Delaware
corporation ("USO"), and Colonial Data Technologies Corp., a
Delaware corporation ("CDT").
WHEREAS, the Boards of Directors of USO and CDT each have,
in light of and subject to the terms and conditions set forth
herein, (i) determined that the Merger (as defined below)
is fair to their respective stockholders and in the best
interests of such stockholders and (ii) approved the Merger in
accordance with this Agreement;
WHEREAS, for Federal income tax purposes, it is intended
that the Merger qualify as a reorganization under the provisions
of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"); and
WHEREAS, USO and CDT desire to make certain representations,
warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the
Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein
contained, and intending to be legally bound hereby, USO and CDT
hereby agree as follows:
ARTICLE 1.THE MERGER
Section 1.1. The Merger. At the Effective Time (as
defined below) and upon the terms and subject to the conditions
of this Agreement and in accordance with the General Corporation
Law of the state of Delaware (the "DGCL"), USO and CDT shall each
be merged with and into Newco (as defined below) (the "Merger").
Following the Merger, Newco shall continue as the surviving
corporation (the "Surviving Corporation"), shall continue to be
governed by the laws of the jurisdiction of its incorporation or
organization and the separate corporate existence of each of USO
and CDT shall cease. Prior to the Effective Time, the parties
hereto shall mutually agree as to the name of the Surviving
Corporation. The Merger is intended to qualify as a tax-free
reorganization under Section 368 of the Code.
Section 1.2. Effective Time. Subject to the terms and
conditions set forth in this Agreement, a Certificate of Merger
(the "Merger Certificate") shall be duly executed and
acknowledged by each of CDT, USO and Newco and thereafter the
Merger Certificate reflecting the Merger shall be delivered to
the Secretary of State of the State of Delaware for filing
pursuant to the DGCL on the Closing Date (as defined in Section
1.3). The Merger shall become effective at such time as a
properly executed and certified copy of the Merger Certificate is
duly filed by the Secretary of State of the State of Delaware in
accordance with the DGCL or such later time as the parties may
agree upon and set forth in the Merger Certificate (the time at
which the Merger becomes effective shall be referred to herein as
the "Effective Time").
Section 1.3. Closing of the Merger. The closing of the Merger
(the "Closing") will take place at a time and on a date to be
specified by the parties, which shall be no later than the second
business day after satisfaction of the latest to occur of the
conditions set forth in Article 5 (the "Closing Date"), at the
offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 1875
Connecticut Avenue, N.W., Suite 1200, Washington, D.C., unless
another time, date or place is agreed to in writing by the
parties hereto.
Section 1.4. Effects of the Merger. The Merger shall have the
effects set forth in the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges, powers and franchises of USO
and CDT shall vest in the Surviving Corporation, and all debts,
liabilities and duties of USO and CDT shall become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.5. Formation of Newco; Certificate of Incorporation
and Bylaws.
(a) Prior to the Effective Time, USO and CDT agree to take
such action as is necessary to form a new corporation under the
laws of a jurisdiction to be mutually agreed upon by USO and CDT
("Newco") and shall amend this Agreement to add Newco as a party.
USO and CDT agree to take such action as is necessary to cause
Newco to perform the various covenants and agreements contained
herein which are contemplated herein to be performed by Newco.
Any covenants or agreements of Newco contained herein shall be
binding on Newco as of the time Newco becomes a party to this
Agreement.
(b) The Certificate of Incorporation of Newco shall, as
of the Effective Time, be the Certificate of Incorporation of the
Surviving Corporation after the Effective Time. Such Certificate
of Incorporation shall be amended and restated at or prior to the
Effective Time to include, among other things: (i) a change in
the name of the Surviving Corporation to such name as may be
mutually agreed by CDT and USO; (ii) an increase in the
authorized common stock to 60,000,000 shares, par value $.001 per
share; (iii) authorization of a class of 5,000,000 shares of
Preferred Stock, par value $.001 per share, to be issued, if at
all, in such series and having such rights, limitations and
preferences as may be authorized by Surviving Corporation's Board
of Directors; and (iv) a classified Board consisting of three (3)
classes of directors, which amended and restated Certificate of
Incorporation shall be in form and substance subject to the
reasonable approval of CDT and USO.
(c) The Bylaws of Newco shall, as of the Effective Time,
be the Bylaws of the Surviving Corporation after the Effective
Time.
Section 1.6. Board of Directors and Officers of Newco.
(a) At or prior to the Effective Time, each of CDT and USO
agrees to take such action as is necessary (i) to cause the
number of directors comprising the full Board of Directors of
Newco to be nine (9) persons and (ii) to cause T. Coleman Andrews
III, William F. Gorog, John C. Backus, Jr., Patrick F. Graham and
Wesley C. Tallman (the "USO Designees") and Robert J. Schock,
Walter M. Fiederowicz, Timothy R. Welles and Constantine S.
Macricostas (the "CDT Designees") to be elected as directors of
Newco. In addition, CDT and USO, as the stockholders of Newco
prior to the Effective Time shall take all action necessary to
cause, to the greatest extent practicable, the USO Designees and
the CDT Designees to serve in equal numbers in each of Newco's
three classes of directors until the 1997 Annual Meeting, 1998
Annual Meeting and 1999 Annual Meeting. If any of the USO
Designees or the CDT Designees, respectively, shall decline or be
unable to serve as a director prior to the Effective Time, USO
(if such person was a USO Designee) or CDT (if such person was a
CDT Designee), as the case may be, shall nominate another person
to serve in such person's stead which such person shall be
subject to approval of the other party. If any of the USO
Designees or the CDT Designees, respectively, shall decline or be
unable to serve as a director during his initial term following
the Effective Time, the remaining USO Designees (if such person
was a USO Designee) or the CDT Designees (if such person was a
CDT Designee), as the case may be, shall nominate another person
to serve in such person's stead, which such person shall be
subject to the approval of the other party's designees.
(b) Prior to or at the Effective Time, the Newco Board
shall take action to establish an Executive Committee, a
Compensation Committee, an Audit Committee and a Nominating
Committee on which as of the Effective Time there shall be equal
representation of the USO Designees and the CDT Designees, and
initially William F. Gorog and John C. Backus, Jr. shall be the
USO Designees, and Robert J. Schock and Timothy R. Welles shall
be the CDT Designees to serve on the Executive Committee, each
such Executive Committee member to serve until the next annual
meeting of stockholders of Newco at which such Executive
Committee member first stands for reelection to the Board. The
members of the other committees shall be selected by the full
Board. If a vacancy occurs on any committee prior to the 1997
Annual Meeting of Stockholders, the Newco Board shall use its
best efforts to seek nominations to such committee to accomplish
an equal representation of USO Designees and CDT Designees.
(c) From and after the Effective Time, until successors
are duly elected or appointed and qualified in accordance with
applicable law, the directors of all of the subsidiaries of Newco
shall be Robert J. Schock, John C. Backus, Jr. and Timothy R.
Welles.
(d) From and after the Effective Time, and until
successors are duly elected or appointed and qualified in
accordance with applicable law, Robert J. Schock shall be Chief
Executive Officer and Vice Chairman of Newco, William F. Gorog
shall be Chairman of Newco, John C. Backus, Jr. shall be
President and Chief Operating Officer of Newco, Timothy R. Welles
shall be Executive Vice President of Newco, Joseph Smith shall
be Executive Vice President of Newco, Albert N. Wergley shall be
Vice President, General Counsel and Secretary of Newco, Mark S.
Lynch shall be Vice President-Finance of Newco, and John N.
Giamalis shall be Vice President, Treasurer and Chief Financial
Officer of Newco. It is the current intention of the parties
that between six months and nine months from the Effective Date,
Mr. Schock shall become Chairman, Mr. Gorog shall become Vice
Chairman and Mr. Backus shall become President and Chief
Executive Officer of Newco.
(e) From and after the Effective Time, Newco shall take
such action as is necessary to appoint and cause to be elected in
accordance with applicable law, until their successors are duly
elected, John C. Backus, Jr. as President, Albert N. Wergley as
Secretary and John N. Giamalis as Treasurer of each of the
subsidiaries of Newco.
Section 1.7. Conversion of Shares.
(a) At the Effective Time, each share of common stock,
par value $.001 per share, of USO (individually a "USO Share" and
collectively, the "USO Shares") issued and outstanding
immediately prior to the Effective Time (other than (i) USO
Shares held in the USO's treasury and (ii) USO Shares held by
CDT) shall, by virtue of the Merger and without any action on the
part of CDT, Newco, USO or the holder thereof, be converted into
and shall become one (1.0) fully paid and nonassessable share of
common stock, par value $.001 per share, of Newco (individually a
"Newco Share" and collectively, the "Newco Shares").
(b) At the Effective Time, each share of common stock,
par value $.01 per share of CDT (individually a "CDT Share" and
collectively, the "CDT Shares") issued and outstanding
immediately prior to the Effective Time (other than (i) CDT
Shares held in CDT's Treasury and (ii) CDT Shares held by USO)
shall, by virtue of the Merger and without any action on the part
of CDT, USO, Newco or the holder thereof, be converted into and
shall become one (1.0) fully paid and nonassessable Newco Share.
USO Shares and CDT Shares are sometimes referred to collectively
herein as "Shares."
(c) At the Effective Time, each outstanding share of the
common stock of any subsidiaries of CDT shall remain outstanding.
(d) At the Effective Time, each USO Share or CDT Share
held in the treasury of either of USO or CDT, respectively, and
each Newco Share held by CDT or USO immediately prior to the
Effective Time shall, by virtue of the Merger and without any
action on the part of Newco, CDT or USO be canceled, retired and
cease to exist and no payment shall be made with respect thereto.
At the Effective Time, each USO Share held by CDT and each CDT
Share held by USO shall, by virtue of the Merger and without any
action on the part of CDT or USO, be cancelled, retired and cease
to exist and no payment shall be made with respect thereto.
Section 1.8. Exchange of Certificates.
(a) Prior to the Effective Time, Newco shall enter into
an agreement with, and shall deposit with, American Stock
Transfer & Trust Company, or such other agent or agents as may be
satisfactory to USO and CDT (the "Exchange Agent"), for the
benefit of the holders of CDT Shares and USO Shares, for exchange
through the Exchange Agent in accordance with this Article I: (i)
certificates representing the appropriate number of Newco Shares
to be issued to holders of USO Shares and to holders of CDT
Shares and (ii) cash to be paid in lieu of fractional Newco
Shares (such Newco Shares and such cash are hereinafter referred
to as the "Exchange Fund") issuable pursuant to Section 1.7 in
exchange for outstanding CDT Shares and USO Shares.
(b) As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding USO Shares or CDT
Shares (the "Certificates") whose shares were converted into the
right to receive Newco Shares pursuant to Section 1.7: (i) a
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as
CDT and USO may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for
certificates representing Newco Shares. Upon surrender of a
Certificate to the Exchange Agent, together with such letter of
transmittal, duly executed, and any other required documents, the
holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole
Newco Shares and, if applicable, a check representing the cash
consideration to which such holder may be entitled on account of
a fractional Newco Share, which such holder has the right to
receive pursuant to the provisions of this Article I, and the
Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of USO Shares or CDT Shares
which is not registered in the transfer records of either USO or
CDT, a certificate representing the proper number of Newco Shares
may be issued to a transferee if the Certificate representing
such CDT Shares or USO Shares is presented to the Exchange Agent,
accompanied by all documents required by the Exchange Agent or
Newco to evidence and effect such transfer and by evidence that
any applicable stock transfer or other taxes have been paid.
Until surrendered as contemplated by this Section 1.8, each
Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the
certificate representing Newco Shares and cash in lieu of any
fractional Newco Shares as contemplated by this Section 1.8.
(c) No dividends or other distributions declared or made
after the Effective Time with respect to Newco Shares with a
record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate with respect to the Newco Shares
represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section
1.8(f) until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole
Newco Shares issued in exchange therefor, without interest, (i)
at the time of such surrender, the amount of any cash payable in
lieu of a fractional Newco Share to which such holder is entitled
pursuant to Section 1.8(f) and the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole Newco Shares, and
(ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole Newco Shares.
(d) In the event that any Certificate for CDT Shares or
USO Shares shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange therefor, upon the making
of an affidavit of that fact by the holder thereof such Newco
Shares and cash in lieu of fractional Newco Shares, if any, as
may be required pursuant to this Agreement; provided, however,
that Newco or the Exchange Agent, may, in its respective
discretion, require the delivery of a suitable bond, opinion or
indemnity.
(e) All Newco Shares issued upon the surrender for
exchange of CDT Shares or USO Shares in accordance with the terms
hereof (including any cash paid pursuant to Section 1.8(c) or
1.8(f)) shall be deemed to have been issued in full satisfaction
of all rights pertaining to such CDT Shares or USO Shares. There
shall be no further registration of transfers on the stock
transfer books of either of CDT or USO of the CDT Shares or USO
Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented
to Newco for any reason, they shall be canceled and exchanged as
provided in this Article I.
(f) No fractional Newco Shares shall be issued in the
Merger, but in lieu thereof each holder of USO Shares or CDT
Shares otherwise entitled to a fractional Newco Share shall, upon
surrender of its, his or her Certificate or Certificates, be
entitled to receive an amount of cash rounded to the nearest cent
(without interest) determined by multiplying the fair market
value of a Newco Share as determined by the Newco Board of
Directors by the fractional share interest to which such holder
would otherwise be entitled. The parties acknowledge that
payment of the cash consideration in lieu of issuing fractional
shares was not separately bargained for consideration but merely
represents a mechanical rounding off for purposes of simplifying
the corporate and accounting complexities which would otherwise
be caused by the issuance of fractional shares.
(g) Any portion of the Exchange Fund which remains
undistributed to the stockholders of either USO or CDT for six
months after the Effective Time shall be delivered to Newco, upon
demand, and any stockholders of either USO or CDT who have not
theretofore complied with this Article I shall thereafter look
only to Newco for payment of their claim for Newco Shares, any
cash in lieu of fractional Newco Shares and any applicable
dividends or distributions with respect to Newco Shares, as the
case may be.
(h) Neither Newco, CDT nor USO shall be liable to any
holder of CDT Shares, USO Shares or Newco Shares, as the case may
be, for such shares (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
Section 1.9.Stock Options.
(a) At the Effective Time, each outstanding option to
purchase USO Shares (a "USO Stock Option" or collectively, "USO
Stock Options") issued pursuant to the USO 1991 Stock Option
Plan, the USO 1995 Incentive Plan, the USO Non-Employee
Directors' Stock Option Plan and the USO Outside Directors Stock
Option Plan, and a one-time grant of 25,000 options to an
individual which is described in Section 1.9 of the USO
Disclosure Schedule, whether vested or unvested, shall be assumed
by Newco (all of such plans or agreements pursuant to which any
USO Stock Option has been issued or may be issued are referred to
collectively as the "USO Plans"). Each USO Stock Option shall be
deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such USO Stock Option, the
same number of Newco Shares as the holder of such USO Stock
Option would have been entitled to receive pursuant to the Merger
had such holder exercised such option in full immediately prior
to the Effective Time, at a price per share equal to (y) the
aggregate exercise price for the USO Shares otherwise purchasable
pursuant to such USO Stock Option divided by (z) the number of
full Newco Shares deemed purchasable pursuant to such USO Stock
Option; provided, however, that in the case of any option to
which section 421 of the Code applies by reason of its
qualification under section 422 of the Code ("incentive stock
options" or "ISOs"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions
of exercise of such option shall be determined in order to comply
with section 424(a) of the Code.
(b) At the Effective Time, each outstanding option to
purchase CDT Shares (a "CDT Stock Option" or collectively, "CDT
Stock Options") issued pursuant to the CDT 1983 Stock Option Plan
or the CDT 1994 Long Term Incentive Plan, whether vested or
unvested, shall be assumed by Newco (all of such plans or
agreements pursuant to which any CDT Stock Option has been issued
or may be issued are referred to collectively as the "CDT
Plans"). Each CDT Stock Option shall be deemed to constitute an
option to acquire, on the same terms and conditions as were
applicable under such CDT Stock Option, the same number of Newco
Shares as the holder of such CDT Stock Option would have been
entitled to receive pursuant to the Merger had such holder
exercised such option in full immediately prior to the Effective
Time, at a price per share equal to (y) the aggregate exercise
price for the CDT Shares otherwise purchasable pursuant to such
CDT Stock Option divided by (z) the number of Newco Shares deemed
purchasable pursuant to such CDT Stock Option; provided, however,
that in the case of any ISOs, the option price, the number of
shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in
order to comply with section 424(a) of the Code.
(c) As soon as practicable after the Effective Time,
Newco shall deliver to the holders of USO Stock Options and CDT
Stock Options appropriate notices setting forth such holders'
rights pursuant to the respective USO Plans and CDT Plans and the
agreements evidencing the grants of such CDT Options and USO
Options shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 1.9 after
giving effect to the Merger). Newco shall comply with the terms
of the USO Plans and CDT Plans and ensure, to the extent required
by, and subject to the provisions of, such Plans, that USO Stock
Options and CDT Stock Options which qualified as incentive stock
options immediately prior to the Effective Time continue to
qualify as incentive stock options of Newco after the Effective
Time.
(d) Newco shall take all corporate action necessary to
reserve for issuance a sufficient number of Newco Shares for
delivery upon exercise of USO Stock Options and CDT Stock Options
assumed in accordance with this Section 1.9. As soon as
practicable after the Effective Time, Newco shall file a
registration statement on Form S-8 (or any successor or other
appropriate forms) with respect to the Newco Shares subject to
any USO Stock Options and CDT Stock Options held by persons who
are or were directors, officers or employees of USO or CDT or
their subsidiaries and shall use its best efforts to maintain the
effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options
remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), where applicable, Newco
shall administer USO Plans and CDT Plans assumed pursuant to this
Section 1.9 in a manner that complies with Rule 16b-3 promulgated
under the Exchange Act, as it may be amended from time to time,
to the extent the applicable USO Plan and CDT Plan complied with
such rule immediately prior to the Merger.
(e) At the Effective Time, each of the (i) 371,429
warrants to purchase USO Shares (each a "USO Warrant") issued
pursuant to the Warrant Agreement between US Order, Inc. and
WorldCorp, Inc. dated as of May 1, 1993, and (ii) 14,802 warrants
to purchase CDT Shares (each a "CDT Warrant") which then remains
outstanding shall be deemed to constitute a warrant to purchase,
on the same terms and conditions as were applicable under such
USO Warrant or CDT Warrant, as the case may be, the same number
of Newco Shares as the holder of such USO Warrant or CDT Warrant
would have been entitled to receive pursuant to the Merger had
such holder exercised such warrant in full immediately prior to
the Effective Time, at a price per share equal to (y) the
aggregate exercise price for the USO Shares or CDT Shares
otherwise purchasable pursuant to such USO Warrant or CDT
Warrant, as the case may be, divided by (z) the number of full
Newco Shares deemed purchasable pursuant to such USO Warrant or
CDT Warrant, as the case may be.
As soon as practicable after the Effective Time,
Newco shall deliver to each holder of a USO Warrant or CDT
Warrant appropriate notices setting forth such holder's rights
pursuant to the warrants to purchase Newco Shares and the
agreements evidencing such USO Warrants or CDT Warrants shall
continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 1.9(d) after giving
effect to the Merger).
Newco shall take all corporate action necessary to
reserve for issuance a sufficient number of Newco Shares for
delivery upon exercise of USO Warrants or CDT Warrants assumed in
accordance with this Section 1.9(d).
(f) The parties will take such action as may be
necessary to cause Newco to assume USO's rights and obligations
with respect to the shares of Home Financial Network, Inc.
("HFN") pursuant to a certain shareholders agreement between USO,
HFN, Daniel M. Schley and Eric T. Jacobsen (the "Founders"),
dated October 18, 1995, as amended (the "HFN Shareholders
Agreement"), and a certain shareholders agreement among USO, HFN,
the Founders and Fleet Venture Resources, Inc., dated April 19,
1996 (the "Fleet Agreement"), and to reserve out of the
authorized Newco Shares a sufficient number of Newco Shares for
delivery pursuant to the HFN Shareholders Agreement and the Fleet
Agreement.
Section 1.10.Taking of Necessary Action; Further Action.
If, at any time after the Effective Time, Newco, CDT or USO
reasonably determines that any deeds, assignments, or instruments
or confirmations of transfer are necessary or desirable to carry
out the purposes of this Agreement and to vest Newco with full
right, title and possession to all assets, property, rights,
privileges, powers and franchises of USO or CDT, the officers and
directors of Newco, USO and CDT are fully authorized in the name
of their respective corporations or otherwise to take, and will
take, all such lawful and necessary or desirable action.
ARTICLE 2.REPRESENTATIONS AND WARRANTIES OF USO
Except as set forth on the Disclosure Schedule delivered
by USO to CDT (the "USO Disclosure Schedule"), USO hereby
represents and warrants to CDT as follows:
Section 2.1.Organization and Qualification.
(a) USO is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation
or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses
as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power
and authority would not have a Material Adverse Effect (as
defined below) on USO. When used in connection with USO, the
term "Material Adverse Effect" means any change or effect (i)
that is or is reasonably likely to be materially adverse to the
business, results of operations, condition (financial or
otherwise) or prospects of USO, other than any change or effect
arising out of general economic conditions unrelated to any
business in which USO is engaged, or (ii) that may impair the
ability of USO to perform its obligations hereunder or to
consummate the transactions contemplated hereby.
(b) USO has heretofore delivered to CDT accurate and
complete copies of the Certificate of Incorporation and Bylaws
(or similar governing documents), as currently in effect, of USO.
Except as set forth on Schedule 2.1 of the USO Disclosure
Schedule, USO is duly qualified or licensed and in good standing
to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a Material Adverse
Effect on USO.
Section 2.2.Capitalization of USO.
(a) The authorized capital stock of USO consists of: (i)
Thirty-Five Million (35,000,000) USO Shares, of which, as of July
31, 1996, 15,887,407 USO Shares were issued and outstanding, and
no USO Shares were held in treasury, and (ii) Five Million
(5,000,000) shares of Preferred Stock, par value $.001 per share,
no shares of which are outstanding. All of the outstanding USO
Shares have been duly authorized and validly issued, and are
fully paid, nonassessable and free of preemptive rights. As of
July 31, 1996, approximately 2,519,923 USO Shares were reserved
for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding USO Stock Options
issued pursuant to the USO Plans, 1,000,000 USO Shares were
reserved for issuance pursuant to the USO Employee Stock Purchase
Plan (the "ESPP"), and 371,429 USO Shares were reserved for
issuance with respect to USO Warrants. All of the USO Warrants
expire on September 4, 1996. In addition, pursuant to an
agreement dated September 14, 1995, certain parties have the
right to require USO to acquire their shares in Home Financial
Network, Inc. in exchange for USO Shares pursuant to a formula
contained in such agreement. Between July 31, 1996 and the date
hereof, no shares of USO's capital stock have been issued other
than pursuant to USO Stock Options already in existence on such
date, and, between July 31, 1996 and the date hereof, no stock
options have been granted. Except as set forth above, as of the
date hereof, there are no outstanding (i) shares of capital stock
or other voting securities of USO, (ii) securities of USO
convertible into or exchangeable for shares of capital stock or
voting securities of USO, (iii) options or other rights to
acquire from USO and, except as described in the USO SEC Reports
(as defined below), no obligations of USO to issue, any capital
stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of USO, and
(iv) equity equivalents, interests in the ownership or earnings
of USO or other similar rights (collectively, "USO Securities").
As of the date hereof, except as set forth on Schedule 2.2(a) of
the USO Disclosure Schedule there are no outstanding obligations
of USO or its subsidiaries to repurchase, redeem or otherwise
acquire any USO Securities or stockholder agreements, voting
trusts or other agreements or understandings to which USO is a
party or by which it is bound relating to the voting or
registration of any shares of capital stock of USO. For purposes
of this Agreement, "Lien" means, with respect to any asset
(including, without limitation, any security) any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in
respect of such asset.
(b) The USO Shares constitute the only class of equity
securities of USO registered or required to be registered under
the Exchange Act.
(c) USO does not own directly or indirectly more than
fifty percent (50%) of the outstanding voting securities or
interests (including membership interests) of any entity.
Section 2.3. Authority Relative to this Agreement;
Recommendation.
(a) USO has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of USO (the "USO Board") and no other
corporate proceedings on the part of USO are necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby, except, as referred to in Section 2.17, the
approval and adoption of this Agreement by the holders of at
least a majority of the then outstanding USO Shares. This
Agreement has been duly and validly executed and delivered by USO
and constitutes a valid, legal and binding agreement of USO,
enforceable against USO in accordance with its terms.
(b) The USO Board has resolved to recommend that the
stockholders of USO approve and adopt this Agreement.
Section 2.4. SEC Reports; Financial Statements.
(a) USO has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC")
since June 1, 1995, each of which has complied in all material
respects with all applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the Exchange Act
(and the rules and regulations promulgated thereunder,
respectively), each as in effect on the dates such forms, reports
and documents were filed. USO has heretofore delivered or
promptly will deliver prior to the Effective Date to Newco and
CDT, in the form filed with the SEC (including any amendments
thereto but excluding any exhibits), (i) its Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, (ii) all
definitive proxy statements relating to USO's meetings of
stockholders (whether annual or special) held since June 1, 1995
and (iii) all other reports or registration statements filed by
USO with the SEC since June 1, 1995 (all of the foregoing,
collectively, the "USO SEC Reports"). None of such USO SEC
Reports, including, without limitation, any financial statements
or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading. The audited financial statements
of USO included in the USO SEC Reports fairly present, in
conformity with generally accepted accounting principles applied
on a consistent basis (except as may be indicated in the notes
thereto), the financial position of USO as of the dates thereof
and its results of operations and changes in financial position
for the periods then ended. All material agreements, contracts
and other documents required to be filed as exhibits to any of
the USO SEC Reports have been so filed.
(b) USO has heretofore made available or promptly will
make available to Newco and CDT a complete and correct copy of
any amendments or modifications, which are required to be filed
with the SEC but have not yet been filed with the SEC, to
agreements, documents or other instruments which previously had
been filed by USO with the SEC pursuant to the Exchange Act.
Section 2.5. Information Supplied. None of the information
supplied or to be supplied by USO for inclusion or incorporation
by reference in (i) the registration statement on Form S-4 to be
filed with the SEC by Newco in connection with the issuance of
Newco Shares in the Merger (the "S-4") will, at the time the S-4
is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and (ii) the proxy statement relating to the meeting
of USO's stockholders and the meeting of CDT's stockholders to be
held in connection with the Merger (the "Proxy Statement") will,
at the date mailed to stockholders of USO and at the times of the
meeting or meetings of stockholders of USO to be held in
connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement, insofar as it relates to
the meeting of USO's stockholders to vote on the Merger, will
comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
Section 2.6. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the
Securities Act, the Exchange Act, state securities or blue sky
laws, the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), the rules of the National Association
of Securities Dealers, Inc. ("NASD"), the filing and recordation
of the Merger Certificate as required by the DGCL, and as set
forth on Schedule 2.6 of the USO Disclosure Schedule no filing
with or notice to, and no permit, authorization, consent or
approval of, any court or tribunal or administrative,
governmental or regulatory body, agency or authority (a
"Governmental Entity") is necessary for the execution and
delivery by USO of this Agreement or the consummation by USO of
the transactions contemplated hereby, except where the failure to
obtain such permits, authorizations, consents or approvals or to
make such filings or give such notice would not have a Material
Adverse Effect on USO.
Except as set forth in Section 2.6 of the USO Disclosure
Schedule, neither the execution, delivery and performance of this
Agreement by USO nor the consummation by USO of the transactions
contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Certificate of
Incorporation or Bylaws (or similar governing documents) of USO,
(ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give
rise to any right of termination, amendment, cancellation or
acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to
which USO is a party or by which any of its properties or assets
may be bound, or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to USO or any
of its properties or assets, except in the case of (ii) or (iii)
for violations, breaches or defaults which would not have a
Material Adverse Effect on USO.
Section 2.7. No Default. Except as set forth in Section
2.7 of the USO Disclosure Schedule, USO is not in breach, default
or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a breach, default or
violation) of any term, condition or provision of (i) its
Certificate of Incorporation or Bylaws (or similar governing
documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to
which USO is now a party or by which any of its respective
properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable
to USO or any of its respective properties or assets, except in
the case of (ii) or (iii) for violations, breaches or defaults
that would not have a Material Adverse Effect on USO. Except as
set forth in Section 2.7 of the USO Disclosure Schedule, each
note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which USO is now a
party or by which its respective properties or assets may be
bound that is material to USO and that has not expired is in full
force and effect and is not subject to any material default
thereunder of which USO is aware by any party obligated to USO
thereunder.
Section 2.8. No Undisclosed Liabilities; Absence of
Changes. Except as set forth in Section 2.8 of the USO
Disclosure Schedule and except as and to the extent publicly
disclosed by USO in the USO SEC Reports, as of December 31, 1995,
USO does not have any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be
required by generally accepted accounting principles to be
reflected on a balance sheet of USO (including the notes thereto)
or which would have a Material Adverse Effect on USO. Except as
publicly disclosed by USO, since December 31, 1995, USO has not
incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, which could reasonably be expected to
have, and there have been no events, changes or effects with
respect to USO having or which reasonably could be expected to
have, a Material Adverse Effect on USO. Except as and to the
extent publicly disclosed by USO in the USO SEC Reports and
except as set forth in Section 2.8 of the USO Disclosure
Schedule, since December 31, 1995, there has not been (i) any
material change by USO in its accounting methods, principles or
practices (other than as required after the date hereof by
concurrent changes in generally accepted accounting principles),
(ii) any revaluation by USO of any of its assets having a
Material Adverse Effect on USO, including, without limitation,
any write-down of the value of any assets other than in the
ordinary course of business or (iii) any other action or event
that would have required the consent of any other party hereto
pursuant to Section 4.1 of this Agreement had such action or
event occurred after the date of this Agreement.
Section 2.9. Litigation. Except as publicly disclosed by
USO in the USO SEC Reports, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of USO,
threatened against USO or any of its subsidiaries or any of their
respective properties or assets before any Governmental Entity
which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on USO or could
reasonably be expected to prevent or delay the consummation of
the transactions contemplated by this Agreement. Except as
publicly disclosed by USO in the USO SEC Reports, USO is not
subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen in the future, could
reasonably be expected to have a Material Adverse Effect on USO
or could reasonably be expected to prevent or delay the
consummation of the transactions contemplated hereby.
Section 2.10. Compliance with Applicable Law. Except as
publicly disclosed by USO in the USO SEC Reports, USO holds all
permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "USO Permits"), except for
failures to hold such permits, licenses, variances, exemptions,
orders and approvals which would not have a Material Adverse
Effect on USO. Except as publicly disclosed by USO in the USO
SEC Reports, USO is in compliance with the terms of the USO
Permits, except where the failure so to comply would not have a
Material Adverse Effect on USO. Except as publicly disclosed by
USO in the USO SEC Reports, the business of USO is not being
conducted in violation of any law, ordinance or regulation of any
Governmental Entity except that no representation or warranty is
made in this Section 2.10 with respect to Environmental Laws (as
defined in Section 2.12 below) and except for violations or
possible violations which do not, and, insofar as reasonably can
be foreseen, in the future will not, have a Material Adverse
Effect on USO. Except as publicly disclosed by USO in the USO
SEC Reports, no investigation or review by any Governmental
Entity with respect to USO is pending or, to the knowledge of
USO, threatened, nor, to the knowledge of USO, has any
Governmental Entity indicated an intention to conduct the same,
other than, in each case, those which USO reasonably believes
will not have a Material Adverse Effect on USO.
Section 2.11. Employee Benefit Plans; Labor Matters.
(a) Except as set forth in Section 2.11(a) of the USO
Disclosure Schedule, with respect to each employee benefit plan,
program, policy, arrangement and contract (including, without
limitation, any "employee benefit plan," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), maintained or contributed to at any time by
USO or any entity required to be aggregated with USO pursuant to
Section 414 of the Code (each, a "USO Employee Plan"), no event
has occurred and to the knowledge of USO, no condition or set of
circumstances exists in connection with which USO could
reasonably be expected to be subject to any liability which would
have a Material Adverse Effect on USO.
(b) (i) No USO Employee Plan is or has been subject to
Title IV of ERISA or Section 412 of the Code; and (ii) each USO
Employee Plan intended to qualify under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a) of
the Code is the subject of a favorable Internal Revenue Service
determination letter, and nothing has occurred which could
reasonably be expected to adversely affect such determination.
(c) Section 2.11(c) of the USO Disclosure Schedule sets
forth a true and complete list, as of the date of this Agreement,
of each person who holds any USO Stock Options, together with the
number of USO Shares which are subject to such option, the date
of grant of such option, the extent to which such option is
vested (or will become vested as a result of the Merger), the
option price of such option (to the extent determined as of the
date hereof), whether such option is a nonqualified stock option
or is intended to qualify as an incentive stock option within the
meaning of Section 422(b) of the Code, and the expiration date of
such option. Section 2.11(c) of the USO Disclosure Schedule also
sets forth the total number of such incentive stock options and
such nonqualified options. USO has furnished CDT with complete
copies of the plans pursuant to which the USO Stock Options were
issued. Other than the automatic vesting of USO Stock Options
that may occur without any action on the part of USO or its
officers or directors, USO has not taken any action that would
result in any USO Stock Options that are unvested becoming vested
in connection with or as a result of the execution and delivery
of this Agreement or the consummation of the transactions
contemplated hereby.
(d) USO has made available to CDT (i) a description of
the terms of employment and compensation arrangements of all
officers of USO and a copy of each such agreement currently in
effect; (ii) copies of all agreements with consultants who are
individuals obligating USO to make annual cash payments in an
amount exceeding $60,000; (iii) a schedule listing all officers
of USO who have executed a non-competition agreement with USO and
a copy of each such agreement currently in effect; (iv) copies
(or descriptions) of all severance agreements, programs and
policies of USO with or relating to its employees, except
programs and policies required to be maintained by law; and (v)
copies of all plans, programs, agreements and other arrangements
of USO with or relating to its employees which contain change in
control provisions all of which are set forth in Section 2.11(d)
of the USO Disclosure Schedule.
(e) There shall be no payment, accrual of additional
benefits, acceleration of payments, or vesting in any benefit
under any USO Employee Plan or any agreement or arrangement
disclosed under this Section 2.11 solely by reason of entering
into or in connection with the transactions contemplated by this
Agreement.
(f) There are no controversies pending or, to the
knowledge of USO, threatened, between USO and any of their
employees, which controversies have or could reasonably be
expected to have a Material Adverse Effect on USO. Neither USO
nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to
persons employed by USO or any of its subsidiaries (and neither
USO nor any of its subsidiaries has any outstanding material
liability with respect to any terminated collective bargaining
agreement or labor union contract), nor does USO know of any
activities or proceedings of any labor union to organize any of
its or employees. USO has no knowledge of any strike, slowdown,
work stoppage, lockout or threat thereof, by or with respect to
any of its employees.
Section 2.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by USO in the USO SEC
Reports, (i) USO is in material compliance with all applicable
federal, state, local and foreign laws and regulations relating
to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), except for non-compliance that would not
have a Material Adverse Effect on USO, which compliance includes,
but is not limited to, the possession by USO of all material
permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and
conditions thereof; (ii) USO has not received written notice of,
or, to the knowledge of USO, is the subject of, any action, cause
of action, claim, investigation, demand or notice by any person
or entity alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim") that could
reasonably be expected to have a Material Adverse Effect on USO;
and (iii) to the knowledge of USO, there are no circumstances
that are reasonably likely to prevent or interfere with such
material compliance in the future.
(b) Except as publicly disclosed by USO, there are no
Environmental Claims which could reasonably be expected to have a
Material Adverse Effect on USO that are pending or, to the
knowledge of USO, threatened against USO or, to the knowledge of
USO, against any person or entity whose liability for any
Environmental Claim USO has or may have retained or assumed
either contractually or by operation of law.
Section 2.13. Tax Matters.
(a) Except as set forth in Section 2.13 of the USO
Disclosure Schedule: (i) USO has filed or has had filed on its
behalf in a timely manner (within any applicable extension
periods) with the appropriate Governmental Entity all income and
other material Tax Returns (as defined herein) with respect to
Taxes (as defined herein) of USO and all Tax Returns were in all
material respects true, complete and correct; (ii) all material
Taxes with respect to USO have been paid in full or have been
provided for in accordance with GAAP on USO's most recent balance
sheet which is part of the USO SEC Documents; (iii) there are no
outstanding agreements or waivers extending the statutory period
of limitations applicable to any federal, state, local or foreign
income or other material Tax Returns required to be filed by or
with respect to USO; (iv) to the knowledge of USO none of the Tax
Returns of or with respect to USO is currently being audited or
examined by any Governmental Entity; and (v) no deficiency for
any income or other material Taxes has been assessed with respect
to USO which has not been abated or paid in full.
(b) For purposes of this Agreement, (i) "Taxes" shall
mean all taxes, charges, fees, levies or other assessments,
including, without limitation, income, gross receipts, sales,
use, ad valorem, goods and services, capital, transfer,
franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by
any taxing authority and (ii) "Tax Return" shall mean any report,
return, documents, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction
with respect to Taxes.
Section 2.14. Title to Property. USO has good and
defensible title to all of its properties and assets, free and
clear of all liens, charges and encumbrances except liens for
taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from
the value of or interfere with the present use of the property
affected thereby or which, individually or in the aggregate,
would not have a Material Adverse Effect on USO; and, to USO's
knowledge, all leases pursuant to which USO leases from others
real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is
not, to the knowledge of USO, under any of such leases, any
existing material default or event of default (or event which
with notice of lapse of time, or both, would constitute a default
and in respect of which USO has not taken adequate steps to
prevent such a default from occurring) except where the lack of
such good standing, validity and effectiveness, or the existence
of such default or event, would not have a Material Adverse
Effect on USO.
Section 2.15. Intellectual Property.
(a) USO owns, or possesses adequate licenses or other
valid rights to use, all existing United States and foreign
patents, trademarks, trade names, service marks, copyrights,
trade secrets and applications therefor that are material to its
business as currently conducted (the "USO Intellectual Property
Rights").
(b) The validity of the USO Intellectual Property Rights
and the title thereto of USO is not being questioned in any
litigation to which USO is a party.
(c) Except as set forth in Section 2.15(c) of the USO
Disclosure Schedule, the conduct of the business of USO as now
conducted does not, to USO's knowledge, infringe any valid
patents, trademarks, trade names, service marks or copyrights of
others. The consummation of the transactions completed hereby
will not result in the loss or impairment of any USO Intellectual
Property Rights.
(d) USO has taken steps it believes appropriate to
protect and maintain its trade secrets as such, except in cases
where USO has elected to rely on patent or copyright protection
in lieu of trade secret protection.
Section 2.16. Insurance. USO maintains general liability
and other business insurance that USO believes to be reasonably
prudent for its business.
Section 2.17. Vote Required. The affirmative vote of the
holders of at least a majority of the outstanding USO Shares is
the only vote of the holders of any class or series of USO's
capital stock necessary to approve and adopt this Agreement and
the Merger.
Section 2.18. Tax Treatment. Neither USO nor, to the
knowledge of USO, any of its affiliates has taken or agreed to
take action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a)
of the Code.
Section 2.19. Affiliates. Except for Principal USO
Stockholder ("PCS") and the directors and executive officers of
USO, each of whom is listed in Section 2.19 of the USO Disclosure
Schedule, there are no persons who, to the knowledge of USO, may
be deemed to be affiliates of USO under Rule 1-02(b) of
Regulation S-X of the SEC (the "USO Affiliates").
Section 2.20. Certain Business Practices. None of USO or
any directors, officers, agents or employees of USO has (i) used
any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (ii) made
any unlawful payment to foreign or domestic government officials
or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended (the "FCPA"), or (iii) made any
other unlawful payment.
Section 2.21. Insider Interests. Except as set forth in
Section 2.21 of the USO Disclosure Schedule, neither PCS nor any
officer or director of USO has any interest in any material
property, real or personal, tangible or intangible, including
without limitation, any computer software or USO Intellectual
Property Rights, used in or pertaining to the business of USO,
expect for the ordinary rights of a stockholder or employee stock
optionholder.
Section 2.22. Opinion of Financial Adviser. Salomon
Brothers Inc (the "USO Financial Adviser") has delivered to the
USO Board its written opinion, dated the date of this Agreement,
to the effect that, as of such date, the exchange ratio
contemplated by the Merger is fair to the holders of USO Shares.
Section 2.23. Brokers. No broker, finder or investment
banker (other than the USO Financial Adviser, a true and correct
copy of whose engagement agreement has been provided to CDT) is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of USO.
Section 2.24. Disclosure. No representation or warranty of
USO in this Agreement or any certificate, schedule, document or
other instrument furnished or to be furnished to CDT pursuant
hereto or in connection herewith contains, as of the date of such
representation, warranty or instrument, or will contain any
untrue statement of a material fact or, at the date thereof,
omits or will omit to state a material fact necessary to make any
statement herein or therein, in light of the circumstances under
which such statement is or will be made, not misleading.
Section 2.25. No Existing Discussions. As of the date
hereof, USO is not engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to
any Third Party Acquisition (as defined in Section 4.4).
Section 2.26. Material Contracts.
(a) USO has delivered or otherwise made available to CDT
true, correct and complete copies of all contracts and agreements
(and all amendments, modifications and supplements thereto and
all side letters to which USO is a party affecting the
obligations of any party thereunder) to which USO is a party or
by which any of its properties or assets are bound that are,
material to the business, properties or assets of USO taken as a
whole, including, without limitation, to the extent any of the
following are, individually or in the aggregate, material to the
business, properties or assets of USO taken as a whole, all: (i)
employment, product design or development, personal services,
consulting, non-competition, severance, golden parachute or
indemnification contracts (including, without limitation, any
contract to which USO is a party involving employees of USO);
(ii) licensing, publishing, merchandising or distribution
agreements; (iii) contracts granting rights of first refusal or
first negotiation; (iv) partnership or joint venture agreements;
(v) agreements for the acquisition, sale or lease of material
properties or assets or stock or otherwise entered into since
June 1, 1995; (vi) contracts or agreements with any Governmental
Entity; and (vii) all commitments and agreements to enter into
any of the foregoing (collectively, together with any such
contracts entered into in accordance with Section 4.1 hereof, the
"USO Contracts"). USO is not a party to or bound by any
severance, golden parachute or other agreement with any employee
or consultant pursuant to which such person would be entitled to
receive any additional compensation or an accelerated payment of
compensation as a result of the consummation of the transactions
contemplated hereby.
(b) Each of the USO Contracts is valid and enforceable in
accordance with its terms, and there is no default under any USO
Contract so listed either by USO or, to the knowledge of USO, by
any other party thereto, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a
default thereunder by USO or, to the knowledge of USO, any other
party, in any such case in which such default or event could
reasonably be expected to have a Material Adverse Effect on USO.
(c) No party to any such USO Contract has given notice to
USO of or made a claim against USO with respect to any breach or
default thereunder, in any such case in which such breach or
default could reasonably be expected to have a Material Adverse
Effect on USO.
ARTICLE 3.REPRESENTATIONS AND WARRANTIES OF CDT
Except as set forth on the Disclosure Schedule delivered by
CDT to USO (the "CDT Disclosure Schedule"), CDT hereby represents
and warrants to USO as follows:
Section 3.1.Organization and Qualification.
(a) Each of CDT and its subsidiaries is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted,
except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a
Material Adverse Effect (as defined below) on CDT. When used in
connection with CDT, the term "Material Adverse Effect" means any
change or effect (i) that is or is reasonably likely to be
materially adverse to the business, results of operations,
condition (financial or otherwise) or prospects of CDT and its
subsidiaries, taken as a whole, other than any change or effect
arising out of general economic conditions unrelated to any
businesses in which CDT and its subsidiaries are engaged, or (ii)
that may impair the ability of CDT to consummate the transactions
contemplated hereby.
(b) CDT has heretofore delivered to USO accurate and
complete copies of the Certificate of Incorporation and Bylaws
(or similar governing documents), as currently in effect, of CDT.
Each of CDT and its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be
so duly qualified or licensed and in good standing would not have
a Material Adverse Effect on CDT.
Section 3.2. Capitalization of CDT.
(a) As of July 31, 1996, the authorized capital stock of
CDT consists of Twenty Million (20,000,000) CDT Shares,
15,525,035 CDT Shares (including 63,780 CDT Shares held in CDT's
treasury) were issued and 15,461,225 shares were outstanding.
All of the outstanding CDT Shares have been duly authorized and
validly issued, and are fully paid, nonassessable and free of
preemptive rights. As of July 31, 1996, approximately 329,500
CDT Shares were reserved for issuance and issuable upon or
otherwise deliverable in connection with the exercise of
outstanding CDT Stock Options issued pursuant to the CDT Plans.
As of July 31, 1996, 14,802 CDT Shares were reserved for issuance
and issuable upon or otherwise deliverable in connection with the
exercise of outstanding warrants (collectively, the "CDT
Warrants").
(b) Except as set forth in Section 3.2(b) of the CDT
Disclosure Schedule, CDT is the record and beneficial owner of
all of the issued and outstanding shares of capital stock of its
subsidiaries.
(c) Except as set forth in Section 3.2(c) of the CDT
Disclosure Schedule, between July 31, 1996 and the date hereof,
no shares of CDT's capital stock have been issued other than
pursuant to CDT Stock Options already in existence on such date,
and, between July 31, 1996 and the date hereof, no CDT Stock
Options have been granted. Except as set forth in Section 3.2(a)
above, as of the date hereof, there are no outstanding (i) shares
of capital stock or other voting securities of CDT, (ii)
securities of CDT or its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of
CDT, (iii) options or other rights to acquire from CDT or its
subsidiaries, or obligations of CDT or its subsidiaries to issue,
any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of
CDT, or (iv) equity equivalents, interests in the ownership or
earnings of CDT or its subsidiaries or other similar rights
(collectively, "CDT Securities"). As of the date hereof, there
are no outstanding obligations of CDT or any of its subsidiaries
to repurchase, redeem or otherwise acquire any CDT Securities.
There are no stockholder agreements, voting trusts or other
agreements or understandings to which CDT is a party or by which
it is bound relating to the voting or registration of any shares
of capital stock of CDT.
(d) Except as set forth in Section 3.2(d) of the CDT
Disclosure Schedule, there are no securities of CDT convertible
into or exchangeable for, no options or other rights to acquire
from CDT, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of any capital stock or other
ownership interests in, or any other securities of, any
subsidiary of CDT.
(e) The CDT Shares constitute the only class of equity
securities of CDT or its subsidiaries registered or required to
be registered under the Exchange Act.
(f) Except as set forth in Section 3.2(f) of the CDT
Disclosure Schedule, CDT does not own directly or indirectly more
than fifty percent (50%) of the outstanding voting securities or
interests (including membership interests) of any entity.
Section 3.3. Authority Relative to this Agreement;
Recommendation.
(a) CDT has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of CDT (the "CDT Board"), and no other
corporate proceedings on the part of CDT are necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby, except, as referred to in Section 3.17, the
approval and adoption of this Agreement by the holders of at
least a majority of the then outstanding CDT Shares. This
Agreement has been duly and validly executed and delivered by CDT
and constitutes a valid, legal and binding agreement of CDT,
enforceable against CDT in accordance with its terms.
(b) The CDT Board has resolved to recommend that the
stockholders of CDT approve and adopt this Agreement.
Section 3.4. SEC Reports; Financial Statements.
(a) CDT has filed all required forms, reports and
documents with the SEC since January 1, 1993, each of which has
complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act (and the
rules and regulations promulgated thereunder, respectively), each
as in effect on the dates such forms, reports and documents were
filed. CDT has heretofore delivered or promptly will deliver
prior to the Effective Date to Newco and USO, in the form filed
with the SEC (including any amendments thereto but excluding any
exhibits), (i) its Annual Reports on Form 10-K for the fiscal
years ended December 31, 1993, December 31, 1994 and December 31,
1995, (ii) all definitive proxy statements relating to CDT's
meetings of stockholders (whether annual or special) held since
January 1, 1993 and (iii) all other reports or registration
statements filed by CDT with the SEC since January 1, 1993 (all
of the foregoing, collectively, the "CDT SEC Reports"). None of
such CDT SEC Reports, including, without limitation, any
financial statements or schedules included or incorporated by
reference therein, contained, when filed, any untrue statement of
a material fact or omitted to state a material fact required to
be stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
audited consolidated financial statements of CDT included in the
CDT SEC Reports fairly present, in conformity with generally
accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto), the
consolidated financial position of CDT and its consolidated
subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the
periods then ended. All material agreements, contracts and other
documents required to be filed as exhibits to any of the CDT SEC
Reports have been so filed.
(b) CDT has heretofore made available or promptly will
make available to Newco and USO a complete and correct copy of
any amendments or modifications, which are required to be filed
with the SEC but have not yet been filed with the SEC, to
agreements, documents or other instruments which previously had
been filed by CDT with the SEC pursuant to the Exchange Act.
Section 3.5. Information Supplied. None of the information
supplied or to be supplied by CDT for inclusion or incorporation
by reference to (i) the S-4 will, at the time the S-4 is filed
with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and
(ii) the Proxy Statement will, at the date mailed to stockholders
of CDT and at the times of the meeting or meetings of
stockholders of CDT to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The
Proxy Statement, insofar as it relates to the meeting of CDT's
stockholders to vote on the Merger, will comply as to form in all
material respects with the provisions of the Exchange Act and the
rules and regulations thereunder, and the S-4 will comply as to
form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
Section 3.6. Consents and Approvals; No Violations. Except as
set forth in Section 3.6 of the CDT Disclosure Schedule, and for
filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the
Securities Act, the Exchange Act, state securities or blue sky
laws, the HSR Act, the rules of the NASD, and the filing and
recordation of the Merger Certificate as required by the DGCL, no
filing with or notice to, and no permit, authorization, consent
or approval of, any Governmental Entity is necessary for the
execution and delivery by CDT of this Agreement or the
consummation by CDT of the transactions contemplated hereby,
except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice
would not have a Material Adverse Effect on CDT.
Neither the execution, delivery and performance of this
Agreement by CDT nor the consummation by CDT of the transactions
contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Certificate of
Incorporation or Bylaws (or similar governing documents) of CDT
or any of CDT's subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien)
under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which CDT or any of CDT's
subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or (iii) violate any
order, writ, injunction, decree, law, statute, rule or regulation
applicable to CDT or any of CDT's subsidiaries or any of their
respective properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults which would not have a
Material Adverse Effect on CDT.
Section 3.7. No Default. None of CDT or any of its
subsidiaries is in breach, default or violation (and no event has
occurred which with notice or the lapse of time or both would
constitute a breach, default or violation) of any term, condition
or provision of (i) its Certificate of Incorporation or Bylaws
(or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other
instrument or obligation to which CDT or any of its subsidiaries
is now a party or by which any of them or any of their respective
properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable
to CDT, its subsidiaries or any of their respective properties or
assets, except in the case of (ii) or (iii) for violations,
breaches or defaults that would not have a Material Adverse
Effect on CDT. Each note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to
which CDT or any of its subsidiaries is now a party or by which
any of them or any of their respective properties or assets may
be bound that is material to CDT and its subsidiaries taken as a
whole and that has not expired is in full force and effect and is
not subject to any material default thereunder of which CDT is
aware by any party obligated to CDT or any subsidiary thereunder.
Section 3.8. No Undisclosed Liabilities; Absence of
Changes. Except as and to the extent publicly disclosed by CDT
in the CDT SEC Reports, as of December 31, 1995, none of CDT or
its subsidiaries had any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that
would be required by generally accepted accounting principles to
be reflected on a consolidated balance sheet of CDT and its
consolidated subsidiaries (including the notes thereto) or which
would have a Material Adverse Effect on CDT. Except as publicly
disclosed by CDT, since December 31, 1995, none of CDT or its
subsidiaries has incurred any liabilities of any nature, whether
or not accrued, contingent or otherwise, which could reasonably
be expected to have, and there have been no events, changes or
effects with respect to CDT or its subsidiaries having or which
could reasonably be expected to have, a Material Adverse Effect
on CDT. Except as and to the extent publicly disclosed by CDT in
the CDT SEC Reports or except as set forth in Section 3.8 of the
CDT Disclosure Schedule, since December 31, 1995, there has not
been (i) any material change by CDT in its accounting methods,
principles or practices (other than as required after the date
hereof by concurrent changes in generally accepted accounting
principles), (ii) any revaluation by CDT of any of its assets
having a Material Adverse Effect on CDT, including, without
limitation, any write-down of the value of any assets other than
in the ordinary course of business or (iii) any other action or
event that would have required the consent of any other party
hereto pursuant to Section 4.2 of this Agreement had such action
or event occurred after the date of this Agreement.
Section 3.9. Litigation. Except as set forth in Schedule
3.9 of the CDT Disclosure Schedule or as publicly disclosed by
CDT in the CDT SEC Reports, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of CDT,
threatened against CDT or any of its subsidiaries or any of their
respective properties or assets before any Governmental Entity
which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on CDT or could
reasonably be expected to prevent or delay the consummation of
the transactions contemplated by this Agreement. Except as
publicly disclosed by CDT in the CDT SEC Reports, none of CDT or
its subsidiaries is subject to any outstanding order, writ,
injunction or decree which, insofar as can be reasonably foreseen
in the future, could reasonably be expected to have a Material
Adverse Effect on CDT or could reasonably be expected to prevent
or delay the consummation of the transactions contemplated
hereby.
Section 3.10. Compliance with Applicable Law. Except as
publicly disclosed by CDT in the CDT SEC Reports, CDT and its
subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for
the lawful conduct of their respective businesses (the "CDT
Permits"), except for failures to hold such permits, licenses,
variances, exemptions, orders and approvals which would not have
a Material Adverse Effect on CDT. Except as publicly disclosed
by CDT in the CDT SEC Reports, CDT and its subsidiaries are in
compliance with the terms of the CDT Permits, except where the
failure so to comply would not have a Material Adverse Effect on
CDT. Except as publicly disclosed by CDT in the CDT SEC Reports,
the businesses of CDT and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any
Governmental Entity except that no representation or warranty is
made in this Section 3.10 with respect to Environmental Laws and
except for violations or possible violations which do not, and,
insofar as reasonably can be foreseen, in the future will not,
have a Material Adverse Effect on CDT. Except as publicly
disclosed by CDT in the CDT SEC Reports, no investigation or
review by any Governmental Entity with respect to CDT or its
subsidiaries is pending or, to the knowledge of CDT, threatened,
nor, to the knowledge of CDT, has any Governmental Entity
indicated an intention to conduct the same, other than, in each
case, those which CDT reasonably believes will not have a
Material Adverse Effect on CDT.
Section 3.11. Employee Benefit Plans; Labor Matters.
(a) With respect to each employee benefit plan, program,
policy, arrangement and contract (including, without limitation,
any "employee benefit plan," as defined in Section 3(3) of
ERISA), maintained or contributed to at any time by CDT, any of
its subsidiaries or any entity required to be aggregated with CDT
or any of its subsidiaries pursuant to Section 414 of the Code
(each, a "CDT Employee Plan"), no event has occurred and, to the
knowledge of CDT, no condition or set of circumstances exists in
connection with which CDT or any of its subsidiaries could
reasonably be expected to be subject to any liability which would
have a Material Adverse Effect on CDT.
(b) (i) No CDT Employee Plan is or has been subject to
Title IV of ERISA or Section 412 of the Code; and (ii) each CDT
Employee Plan intended to qualify under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a) of
the Code is the subject of a favorable Internal Revenue Service
determination letter, and nothing has occurred which could
reasonably be expected to adversely affect such determination.
(c) Section 3.11(c) of the CDT Disclosure Schedule sets
forth a true and complete list, as of the date of this Agreement,
of each person who holds any CDT Stock Options, together with the
number of CDT Shares which are subject to such option, the date
of grant of such option, the extent to which such option is
vested (or will become vested as a result of the Merger), the
option price of such option (to the extent determined as of the
date hereof), whether such option is a nonqualified stock option
or is intended to qualify as an incentive stock option within the
meaning of Section 422(b) of the Code, and the expiration date of
such option. Section 3.11(c) of the CDT Disclosure Schedule also
sets forth the total number of such incentive stock options and
such nonqualified options. CDT has furnished USO with complete
copies of the plans pursuant to which the CDT Stock Options were
issued. Other than the automatic vesting of CDT Stock Options
that may occur without any action on the part of CDT or its
officers or directors, CDT has not taken any action that would
result in any CDT Stock Options that are unvested becoming vested
in connection with or as a result of the execution and delivery
of this Agreement or the consummation of the transactions
contemplated hereby.
(d) CDT has made available to USO (i) a description of
the terms of employment and compensation arrangements of all
officers of CDT and a copy of each such agreement currently in
effect; (ii) copies of all agreements with consultants who are
individuals obligating CDT to make annual cash payments in an
amount exceeding $60,000; (iii) a schedule listing all officers
of CDT who have executed a non-competition agreement with CDT and
a copy of each such agreement currently in effect; (iv) copies
(or descriptions) of all severance agreements, programs and
policies of CDT with or relating to its employees, except
programs and policies required to be maintained by law; and (v)
copies of all plans, programs, agreements and other arrangements
of the CDT with or relating to its employees which contain change
in control provisions.
(e) Except as disclosed in Section 3.11(e) of the CDT
Disclosure Schedule, there shall be no payment, accrual of
additional benefits, acceleration of payments, or vesting in any
benefit under any CDT Employee Plan or any agreement or
arrangement disclosed under this Section 3.11 solely by reason of
entering into or in connection with the transactions contemplated
by this Agreement.
(f) There are no controversies pending or, to the
knowledge of CDT, threatened, between CDT or any of its
subsidiaries and any of their respective employees, which
controversies have or could reasonably be expected to have a
Material Adverse Effect on CDT. Neither CDT nor any of its
subsidiaries is a party to any collective bargaining agreement or
other labor union contract applicable to persons employed by CDT
or any of its subsidiaries (and neither CDT nor any of its
subsidiaries has any outstanding material liability with respect
to any terminated collective bargaining agreement or labor union
contract), nor does CDT know of any activities or proceedings of
any labor union to organize any of its or any of its
subsidiaries' employees. CDT has no knowledge of any strike,
slowdown, work stoppage, lockout or threat thereof, by or with
respect to any of its or any of its subsidiaries' employees.
Section 3.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by CDT in the CDT SEC
Reports, (i) each of CDT and its subsidiaries is in material
compliance with all Environmental Laws, except for non-
compliance that would not have a Material Adverse Effect on CDT,
which compliance includes, but is not limited to, the possession
by CDT and its subsidiaries of all material permits and other
governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions
thereof; (ii) none of CDT or its subsidiaries has received
written notice of, or, to the knowledge of CDT, is the subject
of, any Environmental Claim that could reasonably be expected to
have a Material Adverse Effect on CDT; and (iii) to the knowledge
of CDT, there are no circumstances that are reasonably likely to
prevent or interfere with such material compliance in the future.
(b) Except as publicly disclosed by CDT, there are no
Environmental Claims which could reasonably be expected to have a
Material Adverse Effect on CDT that are pending or, to the
knowledge of CDT, threatened against CDT or any of its
subsidiaries or, to the knowledge of CDT, against any person or
entity whose liability for any Environmental Claim CDT or its
subsidiaries has or may have retained or assumed either
contractually or by operation of law.
Section 3.13. Tax Matters. Except as set forth in
Section 3.13 of the CDT Disclosure Schedule: (i) CDT and each of
its subsidiaries has filed or has had filed on its behalf in a
timely manner (within any applicable extension periods) with the
appropriate Governmental Entity all income and other material Tax
Returns with respect to Taxes of CDT and each of its subsidiaries
and all Tax Returns were in all material respects true, complete
and correct; (ii) all material Taxes with respect to CDT and each
of its subsidiaries have been paid in full or have been provided
for in accordance with GAAP on CDT's most recent balance sheet
which is part of the CDT SEC Documents; (iii) there are no
outstanding agreements or waivers extending the statutory period
of limitations applicable to any federal, state, local or foreign
income or other material Tax Returns required to be filed by or
with respect to CDT or its subsidiaries; (iv) to the knowledge of
CDT none of the Tax Returns of or with respect to CDT or any of
its subsidiaries is currently being audited or examined by any
Governmental Entity; and (v) no deficiency for any income or
other material Taxes has been assessed with respect to CDT or any
of its subsidiaries which has not been abated or paid in full.
Section 3.14. Title to Property. CDT and each of its
subsidiaries have good and defensible title to all of their
properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and
such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the
present use of the property affected thereby or which,
individually or in the aggregate, would not have a Material
Adverse Effect on CDT; and, to CDT's knowledge, all leases
pursuant to which CDT or any of its subsidiaries lease from
others real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is
not, to the knowledge of CDT, under any of such leases, any
existing material default or event of default (or event which
with notice or lapse of time, or both, would constitute a
material default and in respect of which CDT or such subsidiary
has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity
and effectiveness, or the existence of such default or event of
default would not have a Material Adverse Effect on CDT.
Section 3.15. Intellectual Property.
(a) Each of CDT and its subsidiaries owns, or possesses
adequate licenses or other valid rights to use, all existing
United States and foreign patents, trademarks, trade names,
services marks, copyrights, trade secrets, and applications
therefor that are material to its business as currently conducted
(the "CDT Intellectual Property Rights").
(b) Except as set forth in Section 3.15(b) of the CDT
Disclosure Schedule, the validity of the CDT Intellectual
Property Rights and the title thereto of CDT or any subsidiary,
as the case may be, is not being questioned in any litigation to
which CDT or any subsidiary is a party.
(c) The conduct of the business of CDT and its
subsidiaries as now conducted does not, to CDT's knowledge,
infringe any valid patents, trademarks, tradenames, service marks
or copyrights of others. The consummation of the transactions
contemplated hereby will not result in the loss or impairment of
any CDT Intellectual Property Rights.
(d) Each of CDT and its subsidiaries has taken steps it
believes appropriate to protect and maintain its trade secrets as
such, except in cases where CDT has elected to rely on patent or
copyright protection in lieu of trade secret protection.
Section 3.16. Insurance. CDT and its subsidiaries
maintain general liability and other business insurance that CDT
believes to be reasonably prudent for its business.
Section 3.17. Vote Required. The affirmative vote of the
holders of at least a majority of the outstanding CDT Shares is
the only vote of the holders of any class or series of CDT's
capital stock necessary to approve and adopt this Agreement and
the Merger.
Section 3.18. Tax Treatment. Neither CDT nor, to the
knowledge of CDT, any of its affiliates has taken or agreed to
take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a)
of the Code.
Section 3.19. Affiliates. Except for the directors and
executive officers of CDT, each of whom is listed in Section 3.19
of the CDT Disclosure Schedule, there are no persons who, to the
knowledge of CDT, may be deemed to be affiliates of CDT under
Rule 1-02(b) of Regulation S-X of the SEC (the "CDT Affiliates").
Section 3.20. Certain Business Practices. None of CDT,
any of its subsidiaries or any directors, officers, agents or
employees of CDT or any of its subsidiaries has (i) used any
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or
campaigns or violated any provision of the FCPA, or (iii) made
any other unlawful payment.
Section 3.21. Insider Interests. Except as set forth in
Section 3.21 of the CDT Disclosure Schedule, no officer or
director of CDT has any interest in any material property, real
or personal, tangible or intangible, including without
limitation, any computer software or CDT Intellectual Property
Rights, used in or pertaining to the business of CDT or any
subsidiary, except for the ordinary rights of a stockholder or
employee stock optionholder.
Section 3.22. Opinion of Financial Adviser. First Albany
Corporation (the "CDT Financial Adviser") has delivered to the
CDT Board its written opinion, dated as of the date of this
Agreement, to the effect that, as of such date, the exchange
ratio contemplated by the Merger is fair to the holders of CDT
Shares.
Section 3.23. Brokers. No broker, finder or investment
banker (other than the CDT Financial Adviser, a true and correct
copy of whose engagement agreement has been provided to USO) is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of CDT.
Section 3.24. Disclosure. No representation or warranty
of CDT in this Agreement or any certificate, schedule, document
or other instrument furnished or to be furnished to USO pursuant
hereto or in connection herewith contains, as of the date of such
representation, warranty or instrument, or will contain any
untrue statement of a material fact or, at the date thereof,
omits or will omit to state a material fact necessary to make any
statement herein or therein, in light of the circumstances under
which such statement is or will be made, not misleading.
Section 3.25. No Existing Discussions. As of the date
hereof, CDT is not engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to
any Third Party Acquisition (as defined in Section 5.4).
Section 3.26. Material Contracts.
(a) CDT has delivered or otherwise made available to
USO true, correct and complete copies of all contracts and
agreements (and all amendments, modifications and supplements
thereto and all side letters to which CDT is a party affecting
the obligations of any party thereunder) to which CDT or any of
its subsidiaries is a party or by which any of their properties
or assets are bound that are, material to the business,
properties or assets of CDT and its subsidiaries taken as a
whole, including, without limitation, to the extent any of the
following are, individually or in the aggregate, material to the
business, properties or assets of CDT and its subsidiaries taken
as a whole, all: (i) employment, product design or development,
personal services, consulting, non-competition, severance, golden
parachute or indemnification contracts (including, without
limitation, any contract to which CDT is a party involving
employees of CDT); (ii) licensing, publishing, merchandising or
distribution agreements; (iii) contracts granting rights of first
refusal or first negotiation; (iv) partnership or joint venture
agreements; (v) agreements for the acquisition, sale or lease of
material properties or assets or stock or otherwise entered into
since January 1, 1993, (vi) contracts or agreements with any
Governmental Entity; and (vii) all commitments and agreements to
enter into any of the foregoing (collectively, together with any
such contracts entered into in accordance with Section 5.2
hereof, the "CDT Contracts"). Neither CDT nor any of its
subsidiaries is a party to or bound by any severance, golden
parachute or other agreement with any employee or consultant
pursuant to which such person would be entitled to receive any
additional compensation or an accelerated payment of compensation
as a result of the consummation of the transactions contemplated
hereby.
(b) Each of the CDT Contracts is valid and enforceable in
accordance with its terms, and there is no default under any CDT
Contract so listed either by CDT or, to the knowledge of CDT, by
any other party thereto, and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a
default thereunder by CDT or, to the knowledge of CDT, any other
party, in any such case in which such default or event could
reasonably be expected to have a Material Adverse Effect on CDT.
(c) No party to any such CDT Contract has given notice to
CDT of or made a claim against CDT with respect to any breach or
default thereunder, in any such case in which such breach or
default could reasonably be expected to have a Material Adverse
Effect on CDT.
ARTICLE 4. COVENANTS
Section 4.1. Conduct of Business of USO. Except as
contemplated by this Agreement or as described in Section 4.1 of
the USO Disclosure Schedule, during the period from the date
hereof to the Effective Time, USO will conduct its operations in
the ordinary course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence
and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business
organization, keep available the service of its current officers
and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end
that goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the
foregoing, except as otherwise expressly provided in this
Agreement or as described in Section 4.1 of the USO Disclosure
Schedule, prior to the Effective Time, USO will not, without the
prior written consent of CDT:
(a) amend its Certificate of Incorporation or Bylaws (or
other similar governing instrument);
(b) amend the terms of the USO Warrants, authorize for
issuance, issue, sell, deliver or agree or commit to issue, sell
or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (except
bank loans) or equity equivalents (including, without limitation,
any stock options or stock appreciation rights), except for (i)
the issuance and sale of USO Shares pursuant to options
previously granted under the USO Plans; (ii) the issuance and
sale of USO Shares pursuant to USO Warrants outstanding on the
date hereof; and (iii) the granting of stock options to employees
in the ordinary course of business and consistent with past
practices of USO, provided that the aggregate number of USO
Shares issuable pursuant to such options shall not exceed
200,000;
(c) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, make any
other actual, constructive or deemed distribution in respect of
its capital stock or otherwise make any payments to stockholders
in their capacity as such, or redeem or otherwise acquire any of
its securities;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of USO (other than the
Merger);
(e) (i) incur or assume any long-term or short-term debt
or issue any debt securities except for borrowings or issuances
of letters of credit under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other
person; (iii) make any loans, advances or capital contributions
to, or investments in, any other person; (iv) pledge or otherwise
encumber shares of capital stock of USO; or (v) mortgage or
pledge any of its material assets, tangible or intangible, or
create or suffer to exist any material Lien thereupon (other than
tax Liens for taxes not yet due);
(f) except as may be required by law, enter into, adopt
or amend or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any
manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan
and arrangement as in effect as of the date hereof (including,
without limitation, the granting of stock appreciation rights or
performance units); provided, however, that this paragraph (f)
shall not prevent USO from (i) entering into employment
agreements or severance agreements with employees in the ordinary
course of business and consistent with past practice or (ii)
increasing annual compensation and/or providing for or amending
bonus arrangements for employees for fiscal 1997 in the ordinary
course of year-end compensation reviews consistent with past
practice and paying bonuses to employees for fiscal 1996 in
amounts previously disclosed to CDT (to the extent that such
compensation increases and new or amended bonus arrangements do
not result in a material increase in benefits or compensation
expense to USO);
(g) acquire, sell, lease or dispose of any assets in any
single transaction or series of related transactions (other than
in the ordinary course of business);
(h) except as may be required as a result of a change in
law or in generally accepted accounting principles, change any of
the accounting principles or practices used by it;
(i) revalue in any material respect any of its assets,
including, without limitation, writing down the value of
inventory or writing-off notes or accounts receivable other than
in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership or other
business organization or division thereof or any equity interest
therein; (ii) enter into any contract or agreement other than in
the ordinary course of business consistent with past practice
which would be material to USO; (iii) authorize any new capital
expenditure or expenditures which, individually, is in excess of
$500,000 or, in the aggregate, are in excess of $1,000,000;
provided, however that none of the foregoing shall limit any
capital expenditure required pursuant to existing contracts;
(k) make any tax election or settle or compromise any
income tax liability material to USO;
(l) settle or compromise any pending or threatened suit,
action or claim which (i) relates to the transactions
contemplated hereby or (ii) the settlement or compromise of which
could have a Material Adverse Effect on USO;
(m) commence any material research and development
project or terminate any material research and development
project that is currently ongoing, in either case, except
pursuant to the terms of existing contracts or in the ordinary
course of business; or
(n) take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(a) through 4.1(m) or any
action which would make any of the representations or warranties
of USO contained in this Agreement untrue or incorrect.
Section 4.2. Conduct of Business of CDT. Except as
contemplated by this Agreement or as described in Section 4.2 of
the CDT Disclosure Schedule, during the period from the date
hereof to the Effective Time, CDT will conduct its operations in
the ordinary course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence
and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business
organization, keep available the service of its current officers
and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end
that goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the
foregoing, except as otherwise expressly provided in this
Agreement or as described in Section 4.2 of the CDT Disclosure
Schedule, prior to the Effective Time, CDT will not, without the
prior written consent of USO:
(a) amend its Certificate of Incorporation or Bylaws (or
other similar governing instrument);
(b) amend the terms of the CDT Warrants, authorize for
issuance, issue, sell, deliver or agree or commit to issue, sell
or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (except
bank loans) or equity equivalents (including, without limitation,
any stock options or stock appreciation rights), except for (i)
the issuance and sale of CDT Shares pursuant to options
previously granted under the CDT Plans (ii) the issuance and sale
of CDT Shares pursuant to CDT Warrants outstanding on the date
hereof; and (iii) the granting of stock options to employees in
the ordinary course of business and consistent with past
practices of CDT, provided that the aggregate number of CDT
Shares issuable pursuant to such options shall not exceed
200,000;
(c) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, make any
other actual, constructive or deemed distribution in respect of
its capital stock or otherwise make any payments to stockholders
in their capacity as such, or redeem or otherwise acquire any of
its securities;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of CDT (other than the
Merger);
(e) (i) incur or assume any long-term or short-term debt
or issue any debt securities except for borrowings or issuances
of letters of credit under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other
person; (iii) make any loans, advances or capital contributions
to, or investments in, any other person; (iv) pledge or otherwise
encumber shares of capital stock of CDT or its subsidiaries; or
(v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien
thereupon (other than tax Liens for taxes not yet due);
(f) except as may be required by law, enter into, adopt
or amend or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee in any manner, or increase in any
manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan
and arrangement as in effect as of the date hereof (including,
without limitation, the granting of stock appreciation rights or
performance units); provided, however, that this paragraph (f)
shall not prevent CDT or its subsidiaries from (i) entering into
employment agreements or severance agreements with employees in
the ordinary course of business and consistent with past practice
or (ii) increasing annual compensation and/or providing for or
amending bonus arrangements for employees for fiscal 1997 in the
ordinary course of year-end compensation reviews consistent with
past practice and paying bonuses to employees for fiscal 1996 in
amounts previously disclosed to USO (to the extent that such
compensation increases and new or amended bonus arrangements do
not result in a material increase in benefits or compensation
expense to CDT);
(g) acquire, sell, lease or dispose of any assets in any
single transaction or series of related transactions other than
in the ordinary course of business;
(h) except as may be required as a result of a change in
law or in generally accepted accounting principles, change any of
the accounting principles or practices used by it;
(i) revalue in any material respect any of its assets,
including, without limitation, writing down the value of
inventory of writing-off notes or accounts receivable other than
in the ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition
of stock or assets) any corporation, partnership, or other
business organization or division thereof or any equity interest
therein; (ii) enter into any contract or agreement other than in
the ordinary course of business consistent with past practice
which would be material to CDT; (iii) authorize any new capital
expenditure or expenditures which, individually, is in excess of
$500,000 or, in the aggregate, are in excess of $1,000,000:
provided, however that none of the foregoing shall limit any
capital expenditure required pursuant to existing contracts;
(k) make any tax election or settle or compromise any
income tax liability material to CDT and its subsidiaries taken
as a whole;
(l) settle or compromise any pending or threatened suit,
action or claim which (i) relates to the transactions
contemplated hereby or (ii) the settlement or compromise of which
could have a Material Adverse Effect on CDT;
(m) commence any material research and development
project or terminate any material research and development
project that is currently ongoing, in either case, except
pursuant to the terms of existing contracts or except in the
ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.2(a) through 4.2(m) or any
action which would make any of the representations or warranties
of the CDT contained in this Agreement untrue or incorrect.
Section 4.3. Preparation of S-4 and the Proxy Statement.
CDT and USO shall promptly prepare and file with the SEC the
Proxy Statement, and the parties shall prepare and file with the
SEC the S-4, in which the Proxy Statement will be included as a
prospectus. Each of the parties shall use its best efforts to
have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing. The parties shall
also take any action (other than qualifying to do business in any
jurisdiction in which it is now not so qualified) required to be
taken under any applicable state securities laws in connection
with the issuance of Newco Shares in the Merger and upon the
exercise of USO Stock Options and CDT Stock Options. Each party
shall furnish all information concerning such party and the
stockholders and holders of stock options of such party as may be
reasonably requested in connection with any such action.
Section 4.4. Other Potential Acquirers.
(a) Each of CDT and USO, its affiliates and their
respective officers, directors, employees, representatives and
agents shall immediately cease any existing discussions or
negotiations, if any, with any parties conducted heretofore with
respect to any Third Party Acquisition (as defined below). CDT
or USO may, directly or indirectly, furnish information and
access, in each case only in response to unsolicited requests
therefor, to any person or group pursuant to confidentiality
agreements with terms no less favorable to CDT or USO than the
Confidentiality Agreement dated June 24, 1996 between USO and CDT
is with respect to CDT, or USO, as the case may be, and may
participate in discussions and negotiate with such entity or
group concerning any Third Party Acquisition, if (i) such entity
or group has submitted a Superior Proposal (as defined in
paragraph (b) below) to the CDT Board or the USO Board, as the
case may be, relating to any such Third Party Acquisition and
(ii) such Board by a majority vote determines in its good faith
judgment, after consultation with and based upon the advice of
independent legal counsel, that it is required to do so in order
to comply with its fiduciary duties; provided, and subject to
Section 6.1 below, if CDT shall have received a Superior Proposal
it shall not, in any event, be entitled to terminate this
Agreement as a result of the occurrence of the events described
in clauses (i) and (ii) of this sentence; provided further, if
USO shall have received a Superior Proposal it shall not, in any
event, be entitled to terminate this Agreement as a result of the
occurrence of the events described in clauses (i) and (ii) of
this sentence. The CDT Board or the USO Board, as the case may
be, shall provide a copy of any such written Superior Proposal
and a summary of any such oral Superior Proposal to the other
party to this Agreement immediately after receipt thereof and
thereafter keep such other party promptly advised of any
development with respect thereto. Except as set forth above,
neither CDT nor USO nor any of their respective affiliates shall,
nor shall CDT or USO authorize or permit any of its or their
respective officers, directors, employees, representatives or
agents to, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or
provide any information to, any person or group (other than to
the other party to this Agreement, any affiliate or associate of
or any designees of the other party to this Agreement) concerning
any Third Party Acquisition; provided, however, that nothing
herein shall prevent the CDT Board or the USO Board from taking,
and disclosing to the CDT's or USO's stockholders, as the case
may be, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender
offer.
(b) Except as set forth in this Section 4.4(b), neither
the CDT Board nor the USO Board shall withdraw its recommendation
of the transactions contemplated hereby or approve or recommend,
or cause CDT or USO, as the case may be, to enter into any
agreement with respect to, any Third Party Acquisition.
Notwithstanding the foregoing, if the CDT Board or the USO Board,
respectively, by a majority vote determines in its good faith
judgment, after consultation with and based upon the advice of
independent legal counsel, that it is required to do so in order
to comply with its fiduciary duties, the CDT Board or the USO
Board, as the case may be, may withdraw its recommendation of the
transactions contemplated hereby and may approve or recommend a
Superior Proposal, but in each case only (i) after providing
reasonable written notice to USO or CDT, as the case may be, (a
"Notice of Superior Proposal") advising USO or CDT that the CDT
Board or the USO Board has received a Superior Proposal,
specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior
Proposal, and (ii) if USO or CDT does not, within seven business
days after such party's receipt of the Notice of Superior
Proposal, make a counter offer which such party's Board by a
majority vote determines in its good faith judgment (based on the
written advice of the USO Financial Advisor or the CDT Financial
Advisor or another financial adviser of nationally recognized
reputation) to be as favorable to the stockholders of the party
who has received the original Superior Proposal; provided,
however, no party hereto shall be entitled to enter into any
agreement with respect to a Superior Proposal unless and until
this Agreement is terminated by its terms pursuant to Section
6.1. For the purposes of this Agreement, "Third Party
Acquisition" means the occurrence of any of the following events:
(i) the acquisition of CDT or USO by merger or otherwise by any
person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than by USO, CDT, or
Newco or any affiliate thereof (a "Third Party"); (ii) the
acquisition by a Third Party of more than 30% of the total assets
of USO or CDT; (iii) the acquisition by a Third Party of 30% or
more of the outstanding USO Shares or CDT Shares; (iv) the
adoption by CDT or USO of a plan of liquidation or the
declaration or payment of an extraordinary dividend; (v) the
repurchase by CDT or USO of more than 20% of its outstanding
shares; or (vi) the acquisition by CDT or USO, by merger,
purchase of stock or assets, joint venture or otherwise, of a
direct or indirect ownership interest or investment in any
business whose annual revenues, net income or assets is equal or
greater than 40% of its annual revenues, net income or assets
together with its subsidiaries taken as whole. For purposes of
this Agreement, a "Superior Proposal" means any bona fide
proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the shares
then outstanding or all or substantially all of the assets of CDT
or USO, as the case may be, and otherwise on terms which the CDT
Board or the USO Board, as the case may be, by a majority vote
determines in its good faith judgment (based on the written
advice of the USO Financial Advisor or the CDT Financial Advisor
or another financial adviser of nationally recognized reputation)
to be more favorable to such party's stockholders than the
Merger.
Section 4.5. Meetings of Stockholders. Each of CDT and
USO shall take all action necessary, in accordance with the DGCL,
and its respective certificate of incorporation and bylaws, to
duly call, give notice of, convene and hold a meeting of its
stockholders as promptly as practicable, to consider and vote
upon the adoption and approval of this Agreement and the
transactions contemplated hereby. The stockholder votes required
for the adoption and approval of the transactions contemplated by
this Agreement shall be the vote required by the DGCL and its
charter and bylaws, in the case of USO, and the DGCL and its
charter and bylaws, in the case of CDT. USO and CDT will,
through their respective Boards of Directors, recommend to their
respective stockholders approval of such matters; provided,
however, that, subject to the provisions of Section 6.3, the USO
Board or the CDT Board may withdraw its recommendation if (i) USO
or CDT, as the case may be, receives a Superior Proposal, and
(ii) after complying with the provisions of Section 4.4(b), the
USO Board or the CDT Board by a majority vote determines in its
good faith judgment, after consultation with and based upon the
advice of independent legal counsel, that it is required, in
order to comply with its fiduciary duties, to recommend the
Superior Proposal; provided further, however, that neither USO
nor CDT, respectively, if such party shall have received a
Superior Proposal, shall, in any event, be permitted to terminate
this Agreement as a result of the occurrence of the events
described in clauses (i) and (ii) of this sentence. USO and CDT
shall coordinate and cooperate with respect to the timing of such
meetings and shall use their best efforts to hold such meetings
on the same day and as soon as practicable after the date hereof.
Section 4.6. Nasdaq Listing. The parties shall use all
reasonable efforts to cause the Newco Shares to be issued in the
Merger and the Newco Shares to be reserved for issuance upon
exercise of USO Stock Options or CDT Stock Options to be approved
for listing on the Nasdaq National Market ("Nasdaq"), subject to
official notice of issuance, prior to the Effective Time.
Section 4.7.Access to Information.
(a) Between the date hereof and the Effective Time, USO
will give CDT and its authorized representatives, and CDT will
give USO and its authorized representatives, reasonable access to
all employees, plants, offices, warehouses and other facilities
and to all books and records of itself and its subsidiaries, will
permit the other party to make such inspections as such party may
reasonably require and will cause its officers and those of its
subsidiaries to furnish the other party with such financial and
operating data and other information with respect to the business
and properties of itself and its subsidiaries as the other party
may from time to time reasonably request.
(b) Between the date hereof and the Effective Time, USO
shall furnish to CDT, and CDT will furnish to USO, within 25
business days after the end of each calendar month (commencing
with June 1996, and, in the case of June 1996, within 90 days),
an unaudited balance sheet of the party furnishing such
information as of the end of the such month and the related
statements of earnings, stockholders' equity (deficit) and,
within 25 business days after the end of each calendar quarter
(or, in the case of the quarter ended June 30, within 90 days),
cash flows for the quarter then ended, each prepared in
accordance with generally accepted accounting principles in
conformity with the practices consistently applied by such party
with respect to its monthly or quarterly financial statements.
All the foregoing shall be in accordance with the books and
records of the party furnishing such information and shall fairly
present its financial position (taking into account the
differences between the monthly and quarterly statements prepared
by such party in conformity with its past practices) as of the
last day of the period then ended.
(c) Each of the parties hereto will hold and will cause
its consultants and advisers to hold in confidence all documents
and information furnished to it in connection with the
transactions contemplated by this Agreement pursuant to the terms
of that certain Confidentiality Agreement entered into between
USO and CDT dated June 24, 1996.
Section 4.8. Additional Agreements; Reasonable Efforts.
Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done,
all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including,
without limitation, (i) cooperating in the preparation and filing
of the Proxy Statement and the S-4, any filings that may be
required under the HSR Act, and any amendments to any thereof;
(ii) obtaining consents of all third parties and Governmental
Entities necessary, proper or advisable for the consummation of
the transactions contemplated by this Agreement; (iii) contesting
any legal proceeding relating to the Merger and (iv) the
execution of any additional instruments necessary to consummate
the transactions contemplated hereby. Subject to the terms and
conditions of this Agreement, CDT, Newco and USO agree to use all
reasonable efforts to cause the Effective Time to occur as soon
as practicable after the stockholder votes with respect to the
Merger. In case at any time after the Effective Time any further
action is necessary to carry out the purposes of this Agreement,
the proper officers and directors of each party hereto shall take
all such necessary action.
Section 4.9 Employee Benefits; Stock Option and Employee
Purchase Plans.
(a) Subject to the provisions of Section 1.6(d) hereof,
prior to the Effective Time, Newco will take or cause to be taken
all action necessary to adopt the employment agreements of Robert
J. Schock and John C. Backus, Jr. with CDT and USO, respectively,
and to enter into employment agreements with Timothy R. Welles
and Joseph Smith. It is the parties' present intent to provide
after the Effective Time to employees of CDT and USO and their
subsidiaries employee benefit plans (other than stock option or
other plans involving the potential issuance of securities of
Newco) which, in the aggregate, are not less favorable than those
currently provided by CDT and USO, respectively. Notwithstanding
the foregoing, nothing contained herein shall be construed as
requiring the parties to continue any specific employee benefit
plans.
(b) The parties agree to work together prior to the
Effective Time to cause Newco to develop and adopt (i) an
incentive plan authorizing the issuance of up to 1,500,000 Newco
Shares pursuant to stock options or other incentive awards to
employees of Newco and its subsidiaries; (ii) a stock option plan
authorizing the issuance of up to 200,000 Newco Shares to
nonemployee directors of Newco; and (iii) an employee stock
purchase plan authorizing the issuance of up to 500,000 Newco
Shares to employees of Newco and its subsidiaries and providing
for a vesting period of not less than one year.
(c) The parties agree to work together prior to the
Effective Time to develop and design such plans, programs and
arrangements and to prepare for the implementation of such plans,
programs and arrangements described in this Section 4.9 following
the Effective Time.
Section 4.10. Public Announcements. CDT, and USO will
consult with one another before issuing any press release or
otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including, without
limitation, the Merger, and shall not issue any such press
release or make any such public statement prior to such
consultation, except as may be required by applicable law or by
obligations pursuant to any listing agreement with the Nasdaq as
determined by CDT or USO.
Section 4.11. Indemnification.
(a) To the extent, if any, not provided by an existing
right under one of the parties' directors and officers liability
insurance policies, from and after the Effective Time, Newco
shall, to the fullest extent permitted by applicable law,
indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof, or who becomes
prior to the Effective Time, a director, officer or employee of
the parties hereto or any subsidiary thereof (each an
"Indemnified Party" and, collectively, the "Indemnified Parties")
against all losses, expenses (including reasonable attorneys'
fees and expenses), claims, damages or liabilities or, subject to
the proviso of the next succeeding sentence, amounts paid in
settlement, arising out of actions or omissions occurring at or
prior to the Effective Time and whether asserted or claimed prior
to, at or after the Effective Time) that are in whole or in part
(i) based on, or arising out of the fact that such person is or
was a director, officer or employee of such party or a subsidiary
of such party or (ii) based on, arising out of or pertaining to
the transactions contemplated by this Agreement. In the event of
any such loss, expense, claim, damage or liability (whether or
not arising before the Effective Time), (i) Newco shall pay the
reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably
satisfactory to Newco, promptly after statements therefor are
received and otherwise advance to such Indemnified Party upon
request reimbursement of documented expenses reasonably incurred,
in either case to the extent not prohibited by the DGCL or its
certificate of incorporation or bylaws, (ii) Newco will cooperate
in the defense of any such matter and (iii) any determination
required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under the
DGCL and Newco's certificate of incorporation or bylaws shall be
made by independent counsel mutually acceptable to Newco and the
Indemnified Party; provided, however, that Newco shall not be
liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld). The
Indemnified Parties as a group may retain only one law firm with
respect to each related matter except to the extent there is, in
the opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, a conflict on any significant
issue between positions of any two or more Indemnified Parties.
(b) For a period of three years after the Effective Time,
Newco shall cause to be maintained in effect the policies of
directors' and officers' liability insurance maintained by USO
and CDT for the benefit of those persons who are covered by such
policies at the Effective Time (or Newco may substitute therefor
policies of at least the same coverage with respect to matters
occurring prior to the Effective Time).
(c) In the event Newco or any of its successors or
assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity or
such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person,
then and in either such case, proper provision shall be made so
that the successors and assigns of Newco shall assume the
obligations set forth in this Section 4.11.
(d) To the fullest extent permitted by law, from and
after the Effective Time, all rights to indemnification now
existing in favor of the employees, agents, directors or officers
of USO and CDT and their subsidiaries with respect to their
activities as such prior to the Effective Time, as provided in
USO's and CDT's certificate of incorporation or bylaws, in effect
on the date thereof or otherwise in effect on the date hereof,
shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective
Time.
(e) The provisions of this Section 4.11 are intended to
be for the benefit of, and shall be enforceable by, each
Indemnified Party, his or her heirs and his or her
representatives.
Section 4.12. Notification of Certain Matters. The
parties hereto shall give prompt notice to the other parties, of
(i) the occurrence or nonoccurrence of any event the occurrence
or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at or prior to the
Effective Time, (ii) any material failure of such party to comply
with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, (iii) any notice of,
or other communication relating to, a default or event which,
with notice or lapse of time or both, would become a default,
received by such party or any of its subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under
any contract or agreement material to the financial condition,
properties, businesses or results of operations of such party and
its subsidiaries taken as a whole to which such party or any of
its subsidiaries is a party or is subject, (iv) any notice or
other communication from any third party alleging that the
consent of such third party is or may be required in connection
with the transactions contemplated by this Agreement, or (v) any
material adverse change in their respective financial condition,
properties, businesses, results of operations or prospects, taken
as a whole, other than changes resulting from general economic
conditions; provided, however, that the delivery of any notice
pursuant to this Section 4.12 shall not cure such breach or
non-compliance or limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 4.13. Affiliates.
(a) CDT and USO shall use all reasonable efforts to
obtain from any CDT Affiliate or USO Affiliate who has not
previously executed such letter agreement and from any person who
may be deemed to have become a CDT Affiliate or USO Affiliate
after the date of this Agreement and on or prior to the Effective
Time, a letter agreement substantially in the form of Exhibit A
hereto as soon as practicable.
(b) Newco shall not be required to maintain the
effectiveness of the S-4 for the purpose of resale of Newco
Shares by stockholders of CDT or USO who may be affiliates of CDT
or USO or Newco pursuant to Rule 145 under the Securities Act.
ARTICLE 5.CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1. Conditions to Each Party's Obligations to
Effect the Merger. The respective obligations of each party
hereto to effect the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) this Agreement shall have been approved and adopted
by the requisite vote of the stockholders of USO and CDT;
(b) no statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or enforced by any United States court or United
States governmental authority which prohibits, restrains, enjoins
or restricts the consummation of the Merger;
(c) any waiting period applicable to the Merger under the
HSR Act shall have terminated or expired, and any other
governmental or regulatory notices or approvals required with
respect to the transactions contemplated hereby shall have been
either filed or received; and
(d) the S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and all state securities laws
or "blue sky" permits and authorizations necessary to issue Newco
Shares in exchange for USO Shares and CDT Shares in the Merger
shall have been obtained.
Section 5.2. Conditions to the Obligations of USO. The
obligation of USO to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations of CDT and Newco contained in
this Agreement or in any other document delivered pursuant hereto
shall be true and correct (except to the extent that the breach
thereof would not have a Material Adverse Effect on CDT or Newco)
at and as of the Effective Time with the same effect as if made
at and as of the Effective Time (except to the extent such
representations specifically related to an earlier date, in which
case such representations shall be true and correct as of such
earlier date), and at the Closing CDT and Newco shall have
delivered to USO a certificate to that effect;
(b) each of the covenants and obligations of CDT and
Newco to be performed at or before the Effective Time pursuant to
the terms of this Agreement shall have been duly performed in all
material respects at or before the Effective Time and at the
Closing CDT and Newco shall have delivered to USO a certificate
to that effect;
(c) the Newco Shares issuable to the USO stockholders
pursuant to this Agreement and such other shares required to be
reserved for issuance in connection with the Merger shall have
been authorized for listing on the Nasdaq upon official notice of
issuance;
(d) the opinion of Hunton & Williams, counsel to USO,
dated the Closing Date and addressed to USO to the effect that
(i) the merger of USO into Newco will be treated for Federal
income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code; (ii) each of Newco and USO will be a
party to the reorganization within the meaning of Section 368(b)
of the Code; and (iii) no gain or loss for Federal income tax
purposes will be recognized by Newco, USO or a stockholder of USO
as a result of the Merger (other than with respect to cash
received by a stockholder in lieu of a fractional Newco Share),
and such opinion shall not have been withdrawn or modified in any
material respect. Such opinion may be conditioned upon the
receipt of representations of USO, CDT and Newco, all in form and
substance reasonably satisfactory to such counsel and other
reasonable assumptions set forth therein;
(e) CDT shall have obtained the consent or approval of
each person whose consent or approval shall be required in order
to permit the succession by Newco pursuant to the Merger to any
obligation, right or interest of CDT under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement or
instrument, except those for which failure to obtain such
consents and approvals would not, in the reasonable opinion of
USO, individually or in the aggregate, have a Material Adverse
Effect on CDT; and
(f) there shall have been no events, changes or effects
with respect to CDT or its subsidiaries having or which could
reasonably be expected to have a Material Adverse Effect on CDT.
Section 5.3. Conditions to the Obligations of CDT. The
respective obligations of CDT to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the
following conditions:
(a) the representations of USO and Newco contained in
this Agreement or in any other document delivered pursuant hereto
shall be true and correct (except to the extent that the breach
thereof would not have a Material Adverse Effect on USO or Newco)
at and as of the Effective Time with the same effect as if made
at and as of the Effective Time (except to the extent such
representations specifically related to an earlier date, in which
case such representations shall be true and correct as of such
earlier date), and at the Closing USO and Newco shall have
delivered to CDT a certificate to that effect;
(b) each of the covenants and obligations of USO and
Newco to be performed at or before the Effective Time pursuant to
the terms of this Agreement shall have been duly performed in all
material respects at or before the Effective Time and at the
Closing USO and Newco shall have delivered to CDT a certificate
to that effect;
(c) the Newco Shares issuable to the CDT stockholders
pursuant to this Agreement and such other shares to be reserved
for issuance in connection with the Merger shall have been
authorized for listing on Nasdaq upon official notice of
issuance;
(d) the opinion of LeBoeuf, Lamb, Greene & MacRae,
L.L.P., counsel to CDT, dated the Closing Date and addressed to
CDT, to the effect that (i) the merger of CDT into Newco will be
treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code; (ii) each of
CDT and Newco will be a party to the reorganization within the
meaning of Section 368(b) of the Code; and (iii) no gain or loss
for Federal income tax purposes will be recognized by CDT or
Newco or a stockholder of CDT as a result of the Merger (other
than with respect to cash received by a stockholder of CDT in
lieu of a fractional Newco Share), and such opinion shall not
have been withdrawn or modified in any material respect. Such
opinion may be conditioned upon the receipt of representations of
USO, CDT and Newco, all in form and substance reasonably
satisfactory to such counsel and other reasonable assumptions set
forth therein.
(e) USO shall have obtained the consent or approval of
each person whose consent or approval shall be required in order
to permit the succession by Newco pursuant to the Merger to any
obligation, right or interest of USO under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement or
instrument, except for those for which failure to obtain such
consents and approvals would not, in the reasonable opinion of
CDT, individually or in the aggregate, have a Material Adverse
Effect on USO; and
(f) there shall have been no events, changes or effects
with respect to USO having or which could reasonably be expected
to have a Material Adverse Effect on USO.
ARTICLE 6.TERMINATION; AMENDMENT; WAIVER
Section 6.1. Termination. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time, whether before or after approval and adoption
of this Agreement by USO's or CDT's stockholders:
(a) by mutual written consent of USO and CDT;
(b) by CDT or USO if (i) any court of competent
jurisdiction in the United States or other United States
Governmental Entity shall have issued a final order, decree or
ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling
or other action is or shall have become nonappealable or (ii) the
Merger has not been consummated by February 28, 1997; provided,
however, that no party may terminate this Agreement pursuant to
this clause (ii) if such party's failure to fulfill any of its
obligations under this Agreement shall have been the reason that
the Effective Time shall not have occurred on or before said
date;
(c) by USO if (i) there shall have been a breach of any
representation or warranty on the part of CDT or Newco set forth
in this Agreement, or if any representation or warranty of CDT or
Newco shall have become untrue, in either case such that the
conditions set forth in Section 5.2(a) would be incapable of
being satisfied by February 28, 1997 (or as otherwise extended),
(ii) there shall have been a breach by CDT or Newco of any of
their respective covenants or agreements hereunder having a
Material Adverse Effect on CDT or Newco or materially adversely
affecting (or materially delaying) the consummation of the
Merger, and CDT or Newco, as the case may be, has not cured such
breach within 20 business days after notice by USO thereof,
provided that USO has not breached any of its obligations
hereunder, (iii) the CDT Board shall have recommended to CDT's
stockholders a Superior Proposal, (iv) the CDT Board shall have
withdrawn, modified or changed its approval or recommendation of
this Agreement or the Merger or shall have failed to call, give
notice of, convene or hold a stockholders' meeting to vote upon
the Merger, or shall have adopted any resolution to effect any of
the foregoing, (v) CDT shall have convened a meeting of its
stockholders to vote upon the Merger and shall have failed to
obtain the requisite vote of its stockholders or (vi) USO shall
have convened a meeting of its stockholders to vote upon the
Merger and shall have failed to obtain the requisite vote of its
stockholders; or
(d) by CDT if (i) there shall have been a breach of any
representation or warranty on the part of USO or Newco set forth
in this Agreement, or if any representation or warranty of USO or
Newco shall have become untrue, in either case such that the
conditions set forth in Section 5.3(a) would be incapable of
being satisfied by February 28, 1997 (or as otherwise extended),
(ii) there shall have been a breach by USO or Newco of its
covenants or agreements hereunder having a Material Adverse
Effect on USO or Newco or materially adversely affecting (or
materially delaying) the consummation of the Merger, and USO or
Newco, as the case may be, has not cured such breach within
twenty business days after notice by CDT thereof, provided that
CDT has not breached any of its obligations hereunder, (iii) the
USO Board shall have recommended to USO's stockholders a Superior
Proposal, (iv) the USO Board shall have withdrawn, modified or
changed its approval or recommendation of this Agreement or the
Merger or shall have failed to call, give notice of, convene or
hold a stockholders' meeting to vote upon the Merger, or shall
have adopted any resolution to effect any of the foregoing, (v)
CDT shall have convened a meeting of its stockholders to vote
upon the Merger and shall have failed to obtain the requisite
vote of its stockholders or (vi) USO shall have convened a
meeting of its stockholders to vote upon the Merger and shall
have failed to obtain the requisite vote of its stockholders.
Section 6.2. Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section
6.1, this Agreement shall forthwith become void and have no
effect, without any liability on the part of any party hereto or
its affiliates, directors, officers or stockholders, other than
the provisions of this Section 6.2 and Sections 4.7(c) and 6.3
hereof. Nothing contained in this Section 6.2 shall relieve any
party from liability for any breach of this Agreement.
Section 6.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated
by USO pursuant to Section 6.1(c)(iii) or 6.1 (c)(iv), then CDT
shall pay to USO the amount of Three Million Dollars ($3,000,000)
within five business days after such termination. In the event
that this Agreement shall be terminated by CDT pursuant to
Section 6.1(d)(iii) or 6.1(d)(iv) then USO shall pay to CDT the
amount of Three Million Dollars ($3,000,000) within five (5)
business days after such termination. In the event that, within
twelve months after the termination of this Agreement as
described in the first sentence of this Section 6.3(a), CDT
enters into an agreement with respect to a Third Party
Acquisition, involving any party (or any affiliate thereof) (x)
with whom CDT (or its agents) had negotiations with a view to a
Third Party Acquisition, (y) to whom CDT (or its agents)
furnished information with a view to a Third Party Acquisition or
(z) who had submitted a proposal or expressed an interest in a
Third Party Acquisition, in the case of each of clauses (x), (y)
and (z) after the date hereof and prior to such termination, and
such Third Party Acquisition is consummated within twelve (12)
months thereafter, then CDT shall pay to USO an additional amount
equal to Four Million Five Hundred Thousand Dollars ($4,500,000)
on the next business day following the consummation of such Third
Party Acquisition. In the event that, within twelve months after
the termination of this Agreement as described in the second
sentence of this Section 6.3(a), USO enters into an agreement
with respect to a Third Party Acquisition, involving any party
(or any affiliate thereof) (x) with whom USO (or its agents) had
negotiations with a view to a Third Party Acquisition, (y) to
whom USO (or its agents) furnished information with a view to a
Third Party Acquisition or (z) who had submitted a proposal or
expressed an interest in a Third Party Acquisition, in the case
of each of clauses (x), (y) and (z) after the date hereof and
prior to such termination, and such Third Party Acquisition is
consummated within twelve (12) months thereafter, then USO shall
pay to CDT an additional amount equal to Four Million Five
Hundred Thousand Dollars ($4,500,000) on the next business day
following the consummation of such Third Party Acquisition. Each
party acknowledges that upon the occurrence of any of the events
described above in this Section 6.3(a), the party terminating
this Agreement would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To
compensate the terminating party for such damages, the party
causing such damages shall pay to the other party hereto the
amounts described in this Section 6.3(a) as liquidated damages
and not as a penalty.
(b) In the event that this Agreement shall be terminated
by USO pursuant to a willful breach of any material
representation or warranty made by CDT hereunder or any material
covenant contained in Sections 4.2 (excluding the first sentence
contained therein), 4.3, 4.4, 4.5 and 4.8 of this Agreement on
the part of CDT, and within twelve months after the termination
of this Agreement as described in the preceding sentence of this
Section 6.3(b), CDT enters into an agreement with respect to a
Third Party Acquisition, involving any party (or any affiliate
thereof) (x) with whom CDT (or its agents) had negotiations with
a view to a Third Party Acquisition, (y) to whom CDT (or its
agents) furnished information with a view to a Third Party
Acquisition or (z) who had submitted a proposal or expressed an
interest in a Third Party Acquisition, in the case of each of
clauses (x), (y) and (z) after the date hereof and prior to such
termination, and such Third Party Acquisition is consummated
within 12 months thereafter, then CDT shall pay to USO an amount
equal to Seven Million Dollars ($7,000,000) in immediately
available funds on the next business day following the
consummation of the Third Party Acquisition.
(c) In the event that this Agreement shall be terminated
by CDT pursuant to a willful breach of any material
representation or warranty made by USO hereunder or any material
covenant contained in Sections 4.1 (excluding the first sentence
contained therein), 4.3, 4.4, 4.5 and 4.8 of this Agreement on
the part of USO, and within twelve months after the termination
of this Agreement as described in the preceding sentence of this
Section 6.3(c), USO enters into an agreement with respect to a
Third Party Acquisition, involving any party (or any affiliate
thereof) (x) with whom USO (or its agents) had negotiations with
a view to a Third Party Acquisition, (y) to whom USO (or its
agents) furnished information with a view to a Third Party
Acquisition or (z) who had submitted a proposal or expressed an
interest in a Third Party Acquisition, in the case of each of
clauses (x), (y) and (z) after the date hereof and prior to such
termination, and such Third Party Acquisition is consummated
within 12 months thereafter, then USO shall pay to CDT an amount
equal to Seven Million Dollars ($7,000,000) in immediately
available funds on the next business day following the
consummation of the Third Party Acquisition.
(d) Except as specifically provided in this Section 6.3,
each party shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby.
Section 6.4. Amendment. This Agreement may be amended by
action taken by USO and CDT at any time before or after approval
of the Merger by the stockholders of USO and CDT (if required by
applicable law) but, after any such approval, no amendment shall
be made which requires the approval of such stockholders under
applicable law without such approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of
the parties hereto.
Section 6.5. Extension; Waiver. At any time prior to
the Effective Time, each party hereto may (i) extend the time for
the performance of any of the obligations or other acts of any
other party, (ii) waive any inaccuracies in the representations
and warranties of any other party contained herein or in any
document, certificate or writing delivered pursuant hereto or
(iii) waive compliance by any other party with any of the
agreements or conditions contained herein. Any agreement on the
part of any party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party hereto to assert
any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE 7.MISCELLANEOUS
Section 7.1. Nonsurvival of Representations and
Warranties. The representations and warranties made herein shall
not survive beyond the Effective Time or a termination of this
Agreement. This Section 7.1 shall not limit any covenant or
agreement of the parties hereto which by its terms requires
performance after the Effective Time.
Section 7.2. Entire Agreement; Assignment. This
Agreement (a) constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject
matter hereof and (b) shall not be assigned by operation of law
or otherwise.
Section 7.3. Validity. If any provision of this
Agreement, or the application thereof to any person or
circumstance, is held invalid or unenforceable, the remainder of
this Agreement, and the application of such provision to other
persons or circumstances, shall not be affected thereby, and to
such end, the provisions of this Agreement are agreed to be
severable.
Section 7.4. Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by facsimile or by
registered or certified mail (postage prepaid, return receipt
requested), to each other party as follows:
If to CDT:
Colonial Data Technologies Corp.
80 Pickett District Road
New Milford, CT 06776
Attention: Timothy R. Welles
Telecopy: (860) 355-3186
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
225 Asylum Street
Hartford, Connecticut 06103
Attention: Thomas L. Fairfield, Esq.
Telecopy: (860) 293-3555
if to USO:
US Order, Inc.
13873 Park Center Road
Suite 353
Herndon, VA 22071
Attention: John C. Backus, Jr.
Telecopy: (703) 904-8809
with a copy to:
Hunton & Williams
River Front Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23212
Telecopy: (804) 788-8218
Attention: David M. Carter, Esq.
or to such other address as the person to whom notice is given
may have previously furnished to the others in writing in the
manner set forth above.
Section 7.5. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without regard to the principles of conflicts
of law thereof.
Section 7.6. Descriptive Headings. The descriptive
headings herein are inserted for convenience of reference only
and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
Section 7.7. Parties in Interest. This Agreement shall
be binding upon and inure solely to the benefit of each party
hereto and its successors and permitted assigns, and except as
provided in Sections 4.9 and 4.11, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 7.8. Certain Definitions. For the purposes of
this Agreement, the term:
(a) "affiliate" means (except as otherwise provided in
Sections 2.19, 3.19 and 4.13) a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first
mentioned person;
(b) "business day" means any day other than a day on
which Nasdaq is closed;
(c) "capital stock" means common stock, preferred stock,
partnership interests, limited liability company interests or
other ownership interests entitling the holder thereof to vote
with respect to matters involving the issuer thereof;
(d) "knowledge" or "known" means, with respect to any
matter in question, if an executive officer of USO or CDT or its
subsidiaries, as the case may be, has actual knowledge of such
matter;
(e) "person" means an individual, corporation,
partnership, limited liability company, association, trust,
unincorporated organization or other legal entity; and
(f) "subsidiary" or "subsidiaries" of Newco, USO, CDT or
any other person, means any corporation, partnership, limited
liability company, association, trust, unincorporated association
or other legal entity of which Newco, USO, CDT or any such other
person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, 50% or
more of the capital stock, the holders of which are generally
entitled to vote for the election of the board of directors or
other governing body of such corporation or other legal entity.
Section 7.9. Personal Liability. This Agreement shall
not create or be deemed to create or permit any personal
liability or obligation on the part of any direct or indirect
stockholder of USO, CDT or Newco or any officer, director,
employee, agent, representative or investor of any party hereto.
Section 7.10. Specific Performance. The parties hereby
acknowledge and agree that the failure of any party to perform
its agreements and covenants hereunder, including its failure to
take all actions as are necessary on its part to the consummation
of the Merger, will cause irreparable injury to the other parties
for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance
of injunctive relief by any court of competent jurisdiction to
compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of
its obligations hereunder; provided, however, that, if a party
hereto is entitled to receive any payment or reimbursement of
expenses pursuant to Sections 6.3(a), (b) or (c), it shall not be
entitled to specific performance to compel the consummation of
the Merger.
Section 7.11. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one
and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed on its behalf as of the day and
year first above written.
US ORDER, INC.
By: /s/ John C. Backus, Jr.
Name: John C. Backus, Jr.
Title: President and Chief
Operating Officer
COLONIAL DATA TECHNOLOGIES CORP.
By: /s/ Robert J. Schock
Name: Robert J. Schock
Title: President and Chief
Executive Officer
NEWS BULLETIN - US ORDER & COLONIAL DATA
For Immediate Release
US ORDER AND COLONIAL DATA TECHNOLOGIES SIGN DEFINITIVE MERGER
AGREEMENT
Merger Began As Strategic Alliance
"Combined Strength in Electronic World of Information Appliances,
Electronic Commerce and Information Services."
NEW MILFORD, CT, and HERNDON, VA, August 5 - Colonial Data
Technologies (NASDAQ:CDTX) and US Order (NASDAQ:USOR) announced
today that they have signed a definitive agreement to merge the
two companies as equals into a new public company expected to be
named TriTech Corporation.
Colonial Data is a market leader in the design, distribution and
service of caller identification-based information appliances for
major Bell and other telephone companies. US Order is a
technology leader in the fast-emerging smart telephone and online
electronic information service and commerce businesses, including
electronic banking and bill paying.
For each share held, stockholders of Colonial Data and US Order
will receive one share of stock in the new company. TriTech
should begin operations with over $50 million in cash and no
long-term debt. Current holders of Colonial Data stock would
own, after the merger, 49% of the new company while current
holders of US Order stock would own 51%. The consummation of the
merger is subject to certain conditions, including obtaining
approval of the stockholders in each company.
William F. Gorog, US Order's Chairman and Chief Executive
Officer, will be Chairman of the Board of the new company.
Robert J. Schock, Chairman and Chief Executive Officer of
Colonial Data, will be Vice Chairman and Chief Executive Officer.
John C. Backus, President, and Chief Operating Officer of US
Order, will hold the same position at the new company.
"This is a classic marriage of technology and distribution," said
Gorog. "Our products and services need their customers.
Colonial Data brings a quality manufacturing, distribution and
service infrastructure as well as excellent customer
relationships with major Bell and other telephone companies.
Their expertise will help spur the growth of our technology-laden
products in the electronic commerce, information appliance and
interactive application markets, each of which is forecast to
grow rapidly through the end of this decade."
The merger of equals is a natural evolution of the strategic
alliance formed between the two companies in January 1995 to
jointly design, develop, manufacture and market a revolutionary
smart telephone. The smart telephone, developed by US Order and
marketed by both companies, is the first true "information
appliance" available at a mass market price that combines the
power of an on-line service in the package of a telephone. Under
the brand name Telesmart 4000(TM), the smart telephone is being
marketed worldwide by Colonial Data. US Order is also marketing
the smart telephone to retailers nationwide under the
Intelifone(TM) brand, and hopes to have the product broadly
available this Fall in over 2500 retail stores at a suggested
retail price of $299.
"US Order has a technology blueprint for the next century," said
Schock of Colonial Data. "Our two-pronged strategy has always
contemplated a full line of Caller ID products, from adjuncts to
telephones, as well as a recurring revenue customer base, which
today includes leasing, customer service and repair services."
Schock noted, "US Order's technology fits right into our strategy
by providing a high-end smart telephone, recurring revenue
information services, and expertise in the electronic commerce
arena, which, with the advent of smart cards, will cross over
into our information appliance market. In addition, the positive
reception their Intelifone is seeing at retail gives us a full
line of information appliances to offer to retailers, including
Caller ID adjunct units, feature phones, cordless Caller ID
phones, smart phones, and home office and small business systems.
We look forward to packaging US Order's information services with
our information appliance line and building a satisfied
subscriber base."
The companies said that it became clear during their eighteen
month working relationship that they would be stronger as one
company than they were as separate entities. "Although our
working relationship was quite strong," said Backus of US Order,
"our markets, products and underlying technologies require us to
move quickly and efficiently. We believe that we will do that
better as one company with a common, overarching mission."
After the merger, TriTech will be well positioned in the
electronic commerce market, selling its bill payment and home
banking products to financial institutions. In the information
appliance market, the new company will offer an integrated line
of telephone-based products through both telephone companies and
retailers. In the information services market, TriTech will work
to deliver "small screen on-line services" to users of smart
telephones, digital PCS phones, alphanumeric pagers and personal
digital assistants.
The respective corporate headquarters, Colonial Data in
Connecticut and US Order in Virginia, will be maintained pending
evaluation of possible tax incentives by the various localities.
Colonial Data Technologies designs, develops and markets
telecommunications products that support intelligent network
services being introduced by the leading domestic and
international telephone operating companies. The company has
concentrated its development and marketing efforts on products
and services that supply Caller ID and other intelligent network
services. The company also repairs and refurbishes
telecommunications products for its customers.
US Order develops and markets products and services for the
financial services and telecommunications industries. The
company's financial service products include bank-branded
customer service, voice response systems and data translation
systems. Its telecommunications products include the Intelifone
2000/Telesmart 4000 smart phone plus a complete package of
interactive applications. Over 50 banks and telephone companies
currently use the company's products and services.
"Safe harbor" statement under the Private Securities Litigation
Reform Act of 1995: This release contains forward looking
statements that are subject to risks and uncertainties,
including, but not limited to, the impact of competitive
products, product demand and market acceptance risks, reliance on
key strategic alliances, fluctuations in operating results,
delays in development of highly complex products and other risks
detailed from time to time in US Order's and Colonial Data
Technologies' filings with the Securities and Exchange
Commission. These risks could cause the companies' actual
results for 1996 and beyond to differ materially from those
expressed in any forward looking statements made by, or on behalf
of, US Order and Colonial Data Technologies.
# # #
Contact For US Order: Contact For Colonial Data:
John C. Backus Timothy R. Wells
President Executive VP
(703) 834-9480 (860) 210-3000
Media Contact: Richard L. Stern Investor Contact: Donna Stein
Stem & Co. Media Contact: Lee Foley
(212) 777-7722 Morgan-Walke Associates, Inc.
Investor Contact: Doug Poretz (212) 850-5600
Douglas Poretz Ltd.
(703) 506-1778
