<PAGE>
As filed with the Securities and Exchange Commission on April 3, 1997
Registration No. ________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------
Amendment #2 to Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------
CONESTOGA ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 6719 23-2565087
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification No.) Identification No.)
202 East First Street
Birdsboro, PA 19508
(610) 582-8711
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-----------------------
JOHN R. BENTZ
President
202 East First Street
Birdsboro, PA 19508
(610) 582-8711
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------------
Copies to:
JOHN S. HIBSCHMAN, ESQUIRE DAVID S. ANTZIS, ESQUIRE
Miller and Murray, LLP Saul, Ewing, Remick & Saul
542 Court Street 1055 Westlakes Drive
P.O. Box 942 Berwyn, PA 19312
Reading, PA 19603-0942 (610) 251-5055
(610) 376-6651
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effectiveness of this Registration Statement and upon
consummation of the merger of Infocore, Inc. with and into a subsidiary of the
Registrant described in the enclosed Proxy Statement/Prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following box
[ ].
----------------------
CALCULATION OF REGISTRATION FEE
-------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Security Being Being Price Offering Registation
Registered Registered Per Share (1) Price (1) Fee
- ------------------- ---------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Common Stock,
$5.00 Par Value 200,000 $0.288 $1,666,465 $574.64
</TABLE>
- --------------------------------------------------------------------------------
(1) Based on the book value of all of the outstanding shares of Infocore, Inc.
for which Registrant is offering to exchange the shares being registered.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to such Section
8(a), may determine.
================================================================================
<PAGE>
April 9, 1997
Dear Shareholder:
We invite you to attend a Special Meeting (the "Infocore Meeting") of
Shareholders to be held at 661 Moore Road, King of Prussia, Pennsylvania 19406
on Monday, April 21, 1997, at 10:00 a.m., local time.
In a recent mailing, I appraised you of our merger discussions with
Conestoga Enterprises, Inc. with whom we have worked as a joint venture
partner in the successful effort to acquire 4 PCS licenses in the recent FCC
auctions. At this writing, we have completed a number of important steps in
the merger process including the completion of the SEC review process.
At the Infocore Meeting, shareholders will be asked to consider and vote
upon approval of the Agreement and Plan of Merger dated as of March 14, 1997
(the "Merger Agreement") among Infocore, Conestoga Enterprises, Inc. ("CEI")
and CI Merger Corporation, a wholly owned subsidiary of CEI ("Merger Sub").
Pursuant to the Merger Agreement, Infocore would be merged (the "Merger") with
and into Merger Sub, with Merger Sub being the surviving corporation. In
connection with the Merger and as more fully described in the accompanying
Joint Proxy Statement/Prospectus, shares of Infocore common stock, par value
$.02 per share (the "Infocore Common Shares"), outstanding as of the effective
time of the Merger will be converted into and become a right to receive shares
of CEI common stock, par value $5.00 per share ("CEI Common Shares"). All
outstanding Infocore Common Shares shall in the aggregate be converted into
200,000 CEI Common Shares.
Your attention is directed to the attached Proxy Statement/Prospectus
which contains a more complete description of the terms of the Merger and
provides detailed financial, business and other information concerning
Infocore and CEI.
After careful consideration of the terms of the Merger Agreement, the
board of directors of Infocore has determined that the Merger is in the best
interests of Infocore and its shareholders. ACCORDINGLY, YOUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
It is very important that your shares be represented at the Infocore
Meeting, whether or not you plan to attend in person. The affirmative vote of
a majority of the Infocore Common Shares present and entitled to vote at the
Infocore Meeting is required to approve the Merger Agreement. We urge you to
execute, date and return the enclosed proxy card in the enclosed postage-paid
envelope as soon as possible to assure that your shares will be voted at the
meeting. On behalf of the Board of Directors, we thank you for your support
and urge you to vote "FOR" approval of the Merger Agreement.
Infocore shareholders will be entitled to exercise statutory dissenters'
rights with respect to the Merger. To exercise such rights, Infocore
shareholders must provide written notice of their intention to dissent to
Infocore prior to the vote at the Infocore Meeting. Returned proxies which do
not contain voting instructions will be voted "FOR" approval of the Merger.
Sincerely,
Harrison H. Clement, Jr.
President and Chief Executive Officer
<PAGE>
INFOCORE, INC.
661 Moore Road
King of Prussia, PA 19406
(610) 337-9611
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Infocore
Meeting") of Infocore, Inc. ("Infocore") will be held at 661 Moore Road, King
of Prussia, Pennsylvania 19406 on Monday, April 21, 1997, at 10 a.m., local
time. A Proxy Card and a Joint Proxy Statement/Prospectus for the Infocore
Meeting are enclosed. The Infocore Meeting is for the purpose of considering
and acting upon:
1. A proposal to approve the Agreement and Plan of Merger dated as of
March 14, 1997 (the "Merger Agreement") among Infocore, Conestoga Enterprises,
Inc. ("CEI") and CI Merger Corporation, a wholly owned subsidiary of CEI
("Merger Sub"). Pursuant to the Merger Agreement, and as more fully described
in the accompanying Joint Proxy Statement/Prospectus, shares of Infocore
common stock, par value $.02 per share (the "Infocore Common Shares"),
outstanding as of the effective time of the Merger will be converted into and
become a right to receive shares of CEI common stock, par value $5.00 per
share ("CEI Common Shares"). All outstanding Infocore Common Shares shall in
the aggregate be converted into 200,000 CEI Common Shares.
2. Such other matters as may properly come before the Infocore Meeting
or any adjournment thereof.
Any action may be taken on any one of the foregoing proposals at the
Infocore Meeting on the date specified above, or on any date or dates to
which, by original or later adjournment, the Infocore Meeting may be
adjourned. Pursuant to the Bylaws of Infocore, the Board of Directors has
fixed the close of business on April 7, 1997, as the record date for
determination of the shareholders entitled to vote at the Infocore Meeting and
any adjournments thereof.
You are requested to complete, sign and date the enclosed proxy card,
which is solicited by the Board of Directors, and to promptly mail it in the
enclosed envelope. The giving of such proxy does not affect your right to
vote in person in the event you attend the Infocore Meeting.
Infocore shareholders will be entitled to exercise statutory dissenters'
rights with respect to the Merger. To exercise such rights, Infocore
shareholders must provide written notice of their intention to dissent to
Infocore prior to the vote at the Infocore Meeting. Returned proxies which do
not contain voting instructions will be voted "FOR" approval of the Merger.
BY ORDER OF THE BOARD OF DIRECTORS
Henry M. Stringer
Secretary
King of Prussia, Pennsylvania
April 9, 1997
IMPORTANT: PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY. THE PROMPT
RETURN OF PROXIES WILL SAVE INFOCORE THE EXPENSE OF FURTHER REQUESTS FOR
PROXIES TO ENSURE A QUORUM. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
CONESTOGA ENTERPRISES, INC.
Cross-Reference Sheet
<TABLE>
<CAPTION>
Item Number Location in Proxy
in Form S-4 Statement/Prospectus
- ----------- --------------------
<S> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus........................... Facing Page; Cross-Reference Sheet;
Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus.................. Available Information; Incorporation
of Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of
Earnings-to-Fixed Charges and Other
Information.......................... Cover Page of Proxy
Statement/Prospectus; Summary; Risk
Factors
4. Terms of the Transaction............. Notices of Special Meeting of
Shareholders; Summary; The Merger;
Description of Capital Stock of CEI;
Comparison of Shareholder Rights
5. Pro Forma Financial Information...... *
6. Material Contacts with the Company
Being Acquired....................... The Merger
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to Be Underwriters............ *
8. Interests of Named Experts and
Counsel.............................. Legal Opinions; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.......................... *
10. Information with Respect to S-3
Registrants.......................... *
11. Incorporation of Certain Incorporation of Documents by
Information by Reference............. Reference
12. Information with Respect to S-2 or
S-3 Registrants...................... *
13. Incorporation of Certain
Information by Reference............. *
14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants.......................... *
15. Information with Respect to S-3
Companies............................ *
16. Information with Respect to S-2 or
S-3 Companies........................ *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
17. Information with Respect to
Companies Other Than S-3 or S-2
Companies........................... Summary; Business of Infocore;
Security Ownership of Certain
Beneficial Owners and Management
of Infocore
18. Information if Proxies, Consents or
Authorizations are to be Solicited.. Notice of Special Meeting of
Shareholders; Cover Page of Proxy
Statement/Prospectus; Summary; The
Infocore Meeting; The Merger;
Incorporation of Documents by
Reference
19. Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange Offer... *
</TABLE>
- -----------------------
*Omitted because the item is inapplicable or the answer thereto is negative.
<PAGE>
Proxy Statement/Prospectus
INFOCORE, INC.
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
APRIL 21, 1997
--------------------
CONESTOGA ENTERPRISES, INC.
PROSPECTUS FOR
200,000 SHARES OF CEI COMMON STOCK
PAR VALUE $5.00 PER SHARE
This Proxy Statement/Prospectus is being furnished to holders of common
stock, $.02 par value ("Infocore Common Shares"), of Infocore, Inc., a
Pennsylvania corporation ("Infocore"), in connection with the solicitation of
proxies by Infocore's Board of Directors (the "Infocore Board") for use at a
Special Meeting of Shareholders (the "Infocore Meeting") to be held at 661
Moore Road, King of Prussia, Pennsylvania 19406, on Monday, April 21, 1997 at
10:00 a.m., local time. At the Infocore Meeting, shareholders of Infocore
will be asked to consider and vote upon (i) a proposal to approve the
Agreement and Plan of Merger dated as of March 14, 1997 (the "Merger
Agreement") among Infocore, Conestoga Enterprises, Inc., a Pennsylvania
corporation ("CEI") and CI Merger Corporation, a wholly owned subsidiary of
CEI ("Merger Sub"), and (ii) such other business as may properly come before
the Infocore Meeting or any adjournment thereof.
Pursuant to the Merger Agreement, Infocore would be merged (the "Merger")
with and into Merger Sub, with Merger Sub being the surviving corporation.
All outstanding Infocore Common Shares shall in the aggregate be converted
into 200,000 CEI Common Shares.
This Proxy Statement/Prospectus also constitutes a prospectus of CEI
filed as part of a registration statement filed with the Securities and
Exchange Commission (the "Commission") relating to 200,000 CEI Common Shares
issuable pursuant to the Merger Agreement. All information contained in this
Proxy Statement/Prospectus with respect to CEI and its subsidiaries has been
supplied by CEI, and all information with respect to Infocore has been
supplied by Infocore.
Shareholders should carefully consider the information under "RISK
FACTORS" beginning on page 14 in determining how to vote with respect to the
matters to be considered at the Infocore Meeting and, with respect to Infocore
shareholders, whether to exercise dissenters' rights.
This Proxy Statement/Prospectus does not cover any resales of the CEI
Common Shares issuable in the Merger by any shareholders deemed to be
affiliates of Infocore or CEI. No person is authorized to make use of this
Proxy Statement/Prospectus in connection with any such resale.
THE CEI COMMON SHARES ISSUABLE IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Proxy Statement/Prospectus and the accompanying proxy cards and
notices of special meeting are first being mailed to shareholders of Infocore
on or about April 9, 1997.
The date of this Proxy Statement/Prospectus is April 9, 1997
<PAGE>
No person is authorized to give any information or to make any representations
other than those contained in this Proxy Statement/Prospectus and, if given or
made, such other information or representations must not be relied upon as
having been authorized by CEI or Infocore. This Proxy Statement/Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, any
security other than the securities covered by this Proxy Statement/Prospectus,
or the solicitation of a proxy to or from any person in any jurisdiction where
it is unlawful to make such offer or solicitation of an offer or proxy
solicitation. Neither the delivery of this Proxy Statement/Prospectus nor any
distribution of securities made hereunder shall, under any circumstances,
create any implication that there has been no change in the information about
CEI or Infocore contained in this Proxy Statement/Prospectus since the date
hereof.
AVAILABLE INFORMATION
CEI is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, accordingly, files
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed with the Commission are
available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and at Seven World Trade Center, New York, New York 10048.
Copies of such documents may also be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Certain of such reports, proxy
statements and other information is also available from the Commission over
the Internet at http://www.sec.gov. CEI Common Shares (symbol: CENI) is
authorized for quotation on the Nasdaq Small-Cap Market. Such materials and
other information concerning CEI, therefore, can also be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
CEI has filed with the Commission under the Securities Act of 1933,
as amended (the "Securities Act"), a Registration Statement on Form S-4
(including all amendments and exhibits thereto, the "Registration Statement")
with respect to the CEI Common Shares issuable pursuant to the Merger
Agreement. This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
The Registration Statement is available for inspection and copying as set
forth above. Statements contained in this Proxy Statement/Prospectus as to
the contents of any contract or other document are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
This Proxy Statement/Prospectus incorporates by reference documents
relating to CEI which are not presented herein or delivered herewith. These
documents (not including exhibits thereto, unless such exhibits are
specifically incorporated by reference herein) are available without charge to
any person, including any beneficial owner, to whom this Proxy
Statement/Prospectus is delivered, upon written or oral request directed to
Conestoga Enterprises, Inc., 202 East First Street, Birdsboro, PA 19508,
telephone number (610) 582-8711, Attention: Kenneth A. Benner, Secretary. In
order to ensure timely delivery of the documents, any request should be made
no later than April 16, 1997.
-2-
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
Certain documents previously filed by CEI (File No. 33-30715) with
the Commission pursuant to the Exchange Act are hereby incorporated by
reference in this Joint Proxy Statement/Prospectus as follows:
(1) the Annual Report on Form 10-K for the year ended December 31,
1996.
All documents filed by CEI pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the date of the
Infocore Meeting shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of filing thereof. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein, or in
any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy
Statement/Prospectus. All information appearing in this Proxy
Statement/Prospectus should be read in conjunction with, and is qualified in
its entirety by, the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference, except
to the extent set forth in the immediately preceding statement.
-3-
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION .....................................................
INCORPORATION OF DOCUMENTS BY REFERENCE ...................................
SUMMARY ...................................................................
The Companies ........................................................
CEI .............................................................
Infocore, Inc. ..................................................
The Infocore Meeting .................................................
General .........................................................
Matters to be Considered at the Infocore Meeting ................
Record Date; Shares Outstanding; Quorum; Vote Required ..........
The Merger ...........................................................
Terms of the Merger .............................................
Recommendation of the Infocore Board of Directors ...............
Opinion of CEI Financial Advisor ................................
Conditions to the Merger ........................................
Certain Covenants ...............................................
Effective Time ..................................................
Termination; Waiver; Amendment ..................................
Fees and Expenses ...............................................
Dissenters' Rights ..............................................
Certain Federal Income Tax Consequences .........................
Accounting Treatment ............................................
Interest of Certain Persons in the Merger .......................
Comparison of Shareholder Rights ................................
Selected Historical Financial Data ...................................
Selected Historical Financial Data ..............................
Market Price Data ....................................................
RISK FACTORS ..............................................................
Competitive Industry .................................................
Effect of Regulation .................................................
Limited Trading Market for CEI Common Shares .........................
Personal Communication Services ......................................
Effect of Substantial Indebtedness and Preferred Stock on Future
Operations ......................................................
Dilution to Earnings .................................................
Dividend Policy ......................................................
Regulated/Nonregulated Revenue Mix ...................................
Integration of the Operations of Infocore and CEI.....................
THE INFOCORE MEETING ......................................................
General ..............................................................
Matters to be Considered at the Infocore Meeting .....................
Infocore Record Date; Shares Outstanding; Quorum .....................
Vote Required ........................................................
Effect of Abstentions ................................................
Voting, Revocation and Solicitation of Proxies .......................
THE MERGER ................................................................
Background of the Merger .............................................
Merger Negotiations ..................................................
Infocore's Reasons for the Merger; Recommendation of the Infocore
Board of Directors ..............................................
CEI's Reasons for the Merger .........................................
Opinion of CEI Financial Advisor .....................................
Terms of the Merger ..................................................
Interest of Certain Persons in the Merger ............................
Accounting Treatment .................................................
-4-
<PAGE>
Certain Federal Income Tax Consequences ..............................
Dissenters' Rights ...................................................
RESALE RESTRICTIONS .......................................................
DESCRIPTION OF CAPITAL STOCK OF CEI .......................................
CEI Common Shares ....................................................
CEI $3.42 Series A Preferred Shares ..................................
Pennsylvania Anti-Takeover Law Provisions ............................
COMPARISON OF SHAREHOLDER RIGHTS ..........................................
Introduction .........................................................
Dividends ............................................................
Voting Rights Generally ..............................................
Classified Board of Directors ........................................
Number of Directors ..................................................
Removal of Directors .................................................
Filling Vacancies on the Board of Directors ..........................
Call of Special Shareholders' Meeting ................................
Notice of Shareholders' Meeting ......................................
Quorum Requirements and Adjournment of Meetings ......................
Action Without Meeting ...............................................
Dissenters' Rights ...................................................
Limitations on Directors' Liability ..................................
Indemnification ......................................................
State Anti-Takeover Law Provisions ...................................
Amendment of Articles of Incorporation ...............................
Amendment of Bylaws ..................................................
BUSINESS OF INFOCORE ......................................................
Description of Business ..............................................
Security Ownership of Certain Beneficial Owners and Management of
Infocore ........................................................
EXPERTS ...................................................................
CEI ..................................................................
LEGAL OPINIONS ............................................................
APPENDIX A - MERGER AGREEMENT
APPENDIX B - FAIRNESS OPINION OF JSI FINANCIAL SERVICES
APPENDIX C - PROVISIONS REGARDING DISSENTERS' RIGHTS
APPENDIX D - TAX OPINION OF SAUL, EWING, REMICK & SAUL
-5-
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
This summary does not purport to be complete and is qualified in its
entirety by the more detailed information appearing elsewhere or
incorporated by reference in this Proxy Statement/Prospectus and the
Appendices hereto. Shareholders are urged to read this entire Proxy
Statement/Prospectus, including the Appendices hereto. Certain terms used
in this summary and elsewhere in this Proxy Statement/Prospectus are used
as defined in this summary or elsewhere in this Proxy Statement/Prospectus.
The Companies
CEI
Conestoga Enterprises, Inc. ("CEI"), incorporated in the Commonwealth of
Pennsylvania in 1989, is a holding company with wholly owned subsidiaries
engaged in various aspects of the telecommunications business.
CEI's principal subsidiaries are Conestoga Telephone and Telegraph
Company ("CTT") and Buffalo Valley Telephone Company ("BVT"), both of which
are local exchange carriers ("LEC"). CTT, incorporated in 1902, furnishes
communication services, mainly local and toll telephone service, to an area
of approximately 300 square miles, including parts of Berks, Chester,
Lancaster and Montgomery Counties in Pennsylvania. CTT provides service to
approximately 48,150 access lines. The population of CTT's service area is
estimated to be 120,400. BVT was originally founded in 1904 and provides
local telephone service to Union and Northumberland Counties in Central
Pennsylvania. BVT provides service to approximately 19,100 telephone
access lines. The population of BVT service area is estimated to be
32,000.
Other subsidiaries include Northern Communications, Inc. ("NCI"), which
is engaged in the resale of long distance service as a non-regulated
business, Conestoga Mobile Systems, Inc. ("CMS"), which is engaged in the
provision of paging services, and Conestoga Investment Corporation ("CIC"),
which is an investment company incorporated in the State of Delaware to
hold certain CEI investments. CMS provides service to approximately 4,700
paging access lines.
CEI owns interests in two joint ventures which provide cellular telephone
services in the Reading, Harrisburg, Lancaster and York Metropolitan
Areas. In 1995, CTT acquired an 11.85% interest in a partnership that
provides Internet and similar computer services in Pennsylvania east of the
Susquehanna River.
CEI owns a 60% interest in Conestoga Wireless Company ("CWC"), which was
formed by CEI and Infocore in March 1995 to bid in the auctions by the
Federal Communications Commission for bandwidth to provide Personal
Communication Services ("PCS"), a wireless telecommunications technology.
CWC was successful in bidding for radio spectrum "D" bandwidth in the
Reading, Pottsville and Williamsport, Pennsylvania basic trading areas and
for "F" bandwidth in the Sunbury basic trading area. These territories
cover nine (9) counties in Pennsylvania with a population of 840,000.
CEI's executive offices are located at 202 East First Street, Birdsboro,
Pennsylvania 19508, and its telephone number is (610) 582-8711.
Infocore, Inc.
Infocore, Inc., a Pennsylvania corporation ("Infocore"), is a
diversified telecommunications services company founded in 1981, which
designs, installs and maintains telephone and computer systems and resells
local exchange and toll services. Infocore Wireless, Inc., a wholly owned
subsidiary, owns a 40% interest in CWC.
Infocore's offices are located at 661 Moore Road, King of Prussia,
Pennsylvania 19406, and its telephone number is (610) 337-9611.
- --------------------------------------------------------------------------------
-6-
<PAGE>
- --------------------------------------------------------------------------------
The Infocore Meeting
General
The special meeting of the shareholders of Infocore will be held
on Monday, April 21, 1997, at 10:00 a.m., local time, at 661 Moore Road,
King of Prussia, Pennsylvania 19406 (the "Infocore Meeting").
Matters to be Considered at the Infocore Meeting
At the Infocore Meeting, holders of common stock, par value $.02
per share, of Infocore ("Infocore Common Shares"), will be asked to
consider and vote upon (i) a proposal to approve the Agreement and Plan of
Merger dated as of March 14, 1997 (the "Merger Agreement") among Infocore,
CEI and CI Merger Corporation, a wholly owned subsidiary of CEI ("Merger
Sub"), and (ii) such other business as may properly come before the
Infocore Meeting or any adjournment thereof. See "THE INFOCORE MEETING--
Matters to be Considered at the Infocore Meeting."
Record Date; Shares Outstanding; Quorum; Vote Required
Only holders of record of Infocore Common Shares at the close of
business on April 7, 1997 (the "Infocore Record Date"), will be entitled to
notice of, and to vote at, the Infocore Meeting. Each Infocore Common Share
outstanding on the Infocore Record Date entitles its holder, as of that date, to
one vote. As of the Infocore Record Date, there were 5,778,956 Infocore Common
Shares outstanding and entitled to be voted at the meeting, held by
approximately 142 shareholders of record, and outstanding options to acquire an
additional 921,731 Inforce Common Shares. The presence in person or by proxy of
the holders of a majority of the Infocore Common Shares entitled to vote at the
Infocore Meeting shall constitute a quorum at the Infocore Meeting. See "THE
INFOCORE MEETING--Infocore Record Date; Shares Outstanding; Quorum, Vote
Required." Pursuant to the applicable provisions of the Pennsylvania Business
Corporation Law ("PBCL") and Infocore's bylaws (the "Infocore Bylaws"), the
affirmative vote of a majority of the Infocore Common Shares present and
entitled to vote at the Infocore Meeting is required to approve the Merger
Agreement. See "THE INFOCORE MEETING--Vote Required."
As of the Infocore Record Date, directors and executive officers of
Infocore beneficially owned approximately 1,228,004 Infocore Common Shares or
approximately 21.24% of the Infocore Common Shares entitled to vote at the
Infocore Meeting, and such persons also hold options to acquire an additional
719,000 Infocore Common Shares. See "BUSINESS OF INFOCORE--Security Ownership of
Certain Beneficial Owners and Management of Infocore." The directors and
executive officers of Infocore have indicated that they intend to vote all of
such shares in favor of approval of the Merger Agreement. See "THE INFOCORE
MEETING--Vote Required."
The Merger
Terms of the Merger
Pursuant to the Merger Agreement, Infocore would be merged (the
"Merger") with and into Merger Sub, with Merger Sub being the surviving
corporation. All outstanding Infocore Common Shares (including Infocore Common
Shares acquired pursuant to the exercise of outstanding options between the
Infocore Record Date and the Effective Time) shall in the aggregate be converted
into 200,000 CEI Common Shares (the "Merger Consideration"), less fractional
shares and Dissenters' shares.
No fractional CEI Common Shares will be issued. Holders of
Infocore Common Shares who would otherwise be entitled to receive a
fractional share of CEI Common Stock instead will receive a cash payment
determined by multiplying the fractional interest to which such holder
would otherwise be entitled by the Market Value of a CEI Common Share. See
"THE MERGER--Terms of the Merger."
INFOCORE SHAREHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES FOR INFOCORE
COMMON SHARES TO CEI OR INFOCORE UNTIL THEY HAVE RECEIVED A RETURN
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<PAGE>
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INSTRUCTION FORM. INFOCORE SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES
WITH THE ENCLOSED PROXY CARD.
Recommendation of the Infocore Board of Directors
The consideration to be received by holders of Infocore Common Shares in
the Merger was negotiated by the Infocore Board in light of various factors,
including Infocore's and CEI's recent operating results, current financial
condition and perceived future prospects. THE BOARD OF DIRECTORS OF INFOCORE
BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF INFOCORE SHAREHOLDERS, HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT INFOCORE'S
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT. See "THE MERGER--
Infocore's Reasons for the Merger; Recommendation of the Infocore Board of
Directors."
Opinion of CEI Financial Advisor
JSI Financial Services ("JSI") rendered its opinion to the Board of
Directors of CEI (the "CEI Board") on March 14, 1997 to the effect that the
consideration to be paid by CEI to holders of Infocore Common Shares in the
Merger is fair to the CEI shareholders from a financial point of view. This
opinion, which is attached to this Proxy Statement/Prospectus as Appendix B,
should be read in its entirety with respect to the assumptions made and other
matters considered by JSI in rendering such opinion. CEI has agreed to pay JSI
$15,000 for acting as its financial advisor in connection with the Merger.
See "THE MERGER--Opinion of CEI Financial Advisor."
Conditions to the Merger
Consummation of the Merger is subject to various conditions, including
the approval of the Merger Agreement by the requisite vote of the shareholders
of Infocore and the satisfaction of various conditions set forth in the
Agreement and Plan of Merger dated as of March 14, 1997, among CEI, Merger Sub
and Infocore ("Merger Agreement"), a copy of which is attached hereto as
Appendix A. Among other conditions, the Merger is conditioned upon the exercise
of dissenters' rights by holders of not more than 10% of the Infocore Common
Stock. See "THE MERGER--Terms of the Merger--Conditions to the Merger". CEI's
obligations are also conditioned upon Harrison H. Clement, Jr., President and
Chief Executive Officer of Infocore, and Henry M. Stringer, Senior Vice
President of Infocore, entering into employment agreements with Merger Sub
providing for their continued employment after the Merger.
Certain Covenants
Upon consummation of the Merger, the separate existence of Infocore and
its board of directors will terminate, but the directors and officers of CEI and
Merger Sub will continue in office. See "THE MERGER--Terms of the Merger."
Infocore has agreed that, except as described below, it will not
initiate discussions or negotiations relating to a transaction involving a
merger, consolidation, sale or similar transaction involving a significant
portion of the stock or assets of Infocore (an "Acquisition Transaction").
Infocore, however, is permitted to disclose information to, and to engage in
discussions and negotiations with, a person who makes a bona fide offer to
engage in such an Acquisition Transaction on terms which are more favorable to
the Infocore shareholders than the Merger, and who can reasonably be expected to
consummate such an Acquisition Transaction on the terms that have been proposed,
and which disclosure, discussions and negotiations, in the judgment of Infocore,
shall be required by reason of the fiduciary obligations of the Infocore Board.
See "THE MERGER--Terms of the Merger."
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Effective Time
Once the conditions to the Merger have been satisfied, the Merger will
become effective upon the filing and acceptance of articles of merger by the
Corporation Bureau of the Commonwealth of Pennsylvania (the "Effective Time").
See "THE MERGER--Terms of the Merger; Effective Time."
Termination; Waiver; Amendment
The Merger Agreement may be terminated at any time before the Closing
Date in a number of circumstances, including (i) by mutual consent of the
parties, (ii) by either party if the Effective Time shall not have occurred on
or before November 1, 1997 (except under certain circumstances), and (iii) by
either party upon a material breach of any representation, warranty, covenant or
agreement by the other party.
In addition, if requested by the Infocore Board pursuant to the
fiduciary obligations of Infocore's directors, Infocore may terminate the Merger
Agreement (subject to its obligations to pay the termination fee described
below) in order to accept an offer for an Acquisition Transaction other than the
Merger which the Infocore Board concludes is more favorable to the Infocore
shareholders than the Merger. See "THE MERGER--Terms of the Merger--Termination;
Waiver; Amendment."
Prior to the Effective Time, any provision of the Merger Agreement may
be waived or amended under certain circumstances, as set forth in the Merger
Agreement. See "THE MERGER--Terms of the Merger--Termination; Waiver;
Amendment."
Fees and Expenses
Except as described below, whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
costs.
In the following circumstances, Infocore has agreed to pay CEI a break-
up fee in the amount of $100,000: (1) the Merger Agreement being terminated by
CEI due to (i) Infocore's representations and warranties contained in the Merger
Agreement not being true and correct in all material respects when made or as of
the Closing Date; or (ii) Infocore's failure to perform in all material respects
all obligations and comply in all material respects with all agreements,
undertakings, covenants and conditions required by the Merger Agreement to be
performed or complied with by it at or prior to the Effective Date; (2) the
Merger Agreement being terminated by Infocore in order to enter into an
Acquisition Transaction; or (3) the Merger Agreement being terminated by either
CEI or Infocore as a result of the failure to obtain Infocore shareholder
approval of the Merger Agreement and the transactions contemplated thereby.
In the following circumstance, CEI has agreed to pay Infocore a break-up
fee in the amount of $100,000: the Merger Agreement being terminated by Infocore
due to (i) CEI's or Merger Sub's representations and warranties contained in the
Merger Agreement not being true and correct in all material respects when made
or as of the Closing Date; or (ii) the failure of CEI or Merger Sub to perform
in all material respects all obligations and comply in all material respects
with all agreements, undertakings, covenants and conditions required by the
Merger Agreement to be performed or complied with by CEI at or prior to the
Effective Date.
Dissenters' Rights
Pursuant to the PBCL, the holders of Infocore Common Shares will have
the right to dissent from approval of the Merger, and to demand and receive the
"fair value" of their Infocore Common Shares. In order to assert such
dissenters' rights, an Infocore shareholder must (i) file a written notice of
intention to dissent with Infocore prior to the shareholder vote at the Infocore
Meeting, (ii) refrain from voting in favor of the Merger, (iii) file a written
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demand for payment and deposit the certificates representing his or her shares
in accordance with the terms of the notice to demand payment that will be sent
by Infocore, and (iv) comply with certain other statutory procedures set forth
in the PBCL. Proxies which are returned but which do not contain voting
instructions will be voted in favor of the Merger Agreement, which will result
in a forfeiture of dissenters' rights with respect to the Merger. A copy of the
applicable sections of the PBCL are attached to this Joint Proxy
Statement/Prospectus as Appendix C. Any deviation from the procedures set forth
in such statutory provisions may result in the forfeiture of dissenters' rights
with respect to the Merger. Accordingly, shareholders wishing to assert
dissenters' rights are urged to read carefully "THE MERGER--Dissenters' Rights"
and Appendix C to this Proxy Statement/Prospectus.
CEI shareholders are not entitled to dissenters' rights in this
transaction.
Certain Federal Income Tax Consequences
It is intended that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that, accordingly,
for federal income tax purposes: (i) Infocore, Merger Sub and CEI will each be
a "party to a reorganization" within the meaning of Section 368(b) of the Code,
(ii) no gain or loss will be recognized by Infocore by reason of the Merger,
(iii) except for any cash received in lieu of any fractional shares, no gain or
loss will be recognized by holders of Infocore Common Shares who, pursuant to
the Merger, receive solely CEI Common Shares in exchange for their Infocore
Common Shares, (iv) the basis of the CEI Common Shares to be received by an
Infocore shareholder will generally be the same as the basis of the Infocore
Common Shares surrendered in exchange therefor, less any basis attributable to
any fractional shares for which cash is received, and (v) the holding period of
the CEI Common Shares to be received by a shareholder of Infocore will include
the period during which the Infocore Common Shares surrendered in exchange
therefor were held, provided that the Infocore Common Shares surrendered were
held as a capital asset as of the Effective Time.
Infocore's obligation to consummate the Merger is conditioned upon
receipt of an opinion of Saul, Ewing, Remick & Saul, tax counsel to Infocore,
substantially to the effect that the federal income tax consequences of the
Merger are as summarized above. Such an opinion of Saul, Ewing, Remick & Saul is
attached to this Proxy Statement/Prospectus as Appendix D. See "THE MERGER--
Certain Federal Income Tax Consequences."
EACH INFOCORE SHAREHOLDER IS ENCOURAGED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO PARTICULAR FACTS AND CIRCUMSTANCES WHICH MAY BE UNIQUE TO SUCH
SHAREHOLDER AND NOT COMMON TO INFOCORE SHAREHOLDERS AS A WHOLE AND ALSO AS TO
ANY ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES ARISING OUT OF THE
MERGER AND/OR ANY SALE THEREAFTER OF CEI COMMON SHARES RECEIVED IN THE MERGER.
Accounting Treatment
The Merger will be accounted for as a purchase of Infocore by CEI for
accounting and financial reporting purposes. See "THE MERGER--Accounting
Treatment."
Interest of Certain Persons in the Merger
Certain directors and officers of Infocore have interests in the Merger
that are in addition to their interests as shareholders of Infocore generally.
These include the employment agreements between Harrison H. Clement, Jr.,
President and Chief Executive Officer of Infocore, and Henry M. Stringer, Senior
Vice President of Infocore, and Merger Sub upon which the Merger is conditioned.
See "THE MERGER--Terms of the Merger--Employment Contracts" and "THE MERGER--
Interest of Certain Persons in the Merger."
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Comparison of Shareholder Rights
Upon the exchange of shares in the Merger, holders of Infocore Common
Shares will become holders of CEI Common Shares. The rights of shareholders of
CEI are governed by the PBCL and by the CEI Articles and the bylaws of CEI (the
"CEI Bylaws"). The rights of common shareholders of CEI differ from the rights
of holders of Infocore Common Shares with respect to certain matters. For a
description of these differences, see "COMPARISON OF SHAREHOLDER RIGHTS."
Selected Historical Financial Data
The following tables present selected historical financial data for CEI
and Infocore. The selected financial data set forth below for CEI for each of
the years in the five-year period ended December 31, 1996 and for Infocore for
each of the years in the three-year period ended December 31, 1996, are derived
from the financial statements of CEI and Infocore, respectively. The historical
financial information is not necessarily indicative of future operations or the
actual results that would have occurred had the Merger been consummated at the
beginning of the periods presented and should not be construed as representative
of future operations. Information regarding CEI and Infocore has been provided
by CEI and Infocore, respectively.
Selected Historical Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
At or For the Year Ended December 31,
--------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CEI
Operating revenues................. $ 42,899 $32,553 $31,703 $30,078 $29,071
Net income......................... 8,506 6,531 6,294 6,136 6,373
Net income per common share(1)..... 1.91 1.70 1.64 1.60 1.66
Dividends per common share(1)...... 1.20 1.20 1.11 1.10 1.09
Total assets....................... 119,852 58,595 55,799 53,232 52,041
Long-term debt and redeemable
preferred 39,998 4,645 5,035 5,425 5,815
stock, net of current
maturities..................
Net book value per common
share(1)..................... 13.98 10.94 10.38 9.80 9.30
</TABLE>
- -----------------------
(1) Per share data has been adjusted to reflect a 5% stock dividend paid to CEI
shareholders of record as of January 31, 1995.
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<PAGE>
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<TABLE>
<CAPTION>
At or For the Year Ended December 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Infocore
Operating revenues........... $7,627 $6,936 $5,809
Net income................... 454 304 43
Net income per common share.. .07 .05 .01
Dividends per common share... -- -- --
Total assets................. 2,437 2,833 1,686
Long-term debt, net of
current maturities.....
-- -- 21
Net book value per common
share.................. .29 .21 .15
</TABLE>
Market Price Data
There is no established public trading market for Infocore Common
Shares, and accordingly, there are no published market quotations for such
stock. Trading in Infocore Common Shares is limited and sporadic. In addition,
Infocore is not subject to the requirement of filing periodic reports with the
Securities and Exchange Commission. The absence of an established market and
publicly available current information regarding Infocore may affect the prices
at which Infocore Common Shares are traded. Infocore has no history of paying
dividends.
CEI Common Shares are included for quotation on the Nasdaq Small Cap
Market. The following table sets forth the high and low sales prices for CEI
Common Shares as reported by NASDAQ for the periods indicated below.
<TABLE>
<CAPTION>
Cash Dividends
High Sale Low Sale Declared
--------- -------- --------
<S> <C> <C> <C>
1995
First Quarter (1) $ 25.71 $ 24.00 $ .30
Second Quarter 26.50 24.50 .30
Third Quarter 28.25 25.25 .30
Fourth Quarter 29.50 27.00 .30
1996
First Quarter 29.00 27.50 .30
Second Quarter 28.75 24.00 .30
Third Quarter 24.50 22.875 .30
Fourth Quarter 24.75 22.875 .30
1997
First Quarter 26.50 23.50 .30
</TABLE>
- ----------------------------
(1) Share information has been adjusted to reflect a 5% stock dividend
payable to CEI shareholders of record as of January 31, 1995.
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On February 10, 1997, the last day on which a trade occurred prior to
the announcement of the Merger on February 14, 1997, the closing sale price of a
CEI Common Share on the Nasdaq Small Cap Market was $23.50.
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<PAGE>
RISK FACTORS
The consideration to be received by holders of Infocore Common Shares
pursuant to the Merger consists of CEI Common Shares. In addition to the other
information contained in this Proxy Statement/Prospectus, holders of Infocore
Common Shares should consider carefully the following risk factors relating to
CEI and the CEI Common Shares before deciding how to vote with respect to the
Merger:
Competitive Industry
CEI engages in various aspects of the telecommunications industry which
are becoming increasingly competitive. As a result of technological and
regulatory developments, CEI faces the risk of new or increased competition in
virtually all businesses in which it engages. It is not possible to predict the
future effect of these developments on the telecommunications industry in
general or on CEI in particular.
In recent years, the telecommunications industry has been influenced by
rapid technological change in areas such as transmission capacity, switching
equipment, digital systems, fiber-optic cable, FAX, mobile and wireless
communications technologies, computer hardware and software, computer networking
and the Internet. The technological developments have resulted in an increase in
demand for telecommunications services, and also have, or soon will, make
possible the offering of a wide range of new, interactive, broadband
telecommunications services, including interactive video. These changes create
the opportunity for existing and new services to be delivered in a number of
different ways by a variety of different providers.
The telecommunications industry has also been marked by an increasing
trend toward deregulation and increased competition. In recent years,
competitive access providers ("CAPs") and system bypass offered by long distance
(interexchange or "IXC") carriers, have emerged to offer alternative access for
the origination and termination of long distance calls than the local loop of
the local exchange carriers ("LECs"). These alternative access providers
represent a competitive inroad into a significant source of LEC revenue --
network access charges.
In addition, the recently enacted Telecommunications Act of 1996 (the
"Act"), among other things, will open the local telephone markets of LECs to new
competitors, such as AT&T, MCI, Sprint, cable television providers and other
LECs, many of which have substantially greater technical, financial, marketing
and personnel resources than CEI. The Act will also permit LECs to enter into
new lines of business such as the long distance telephone business, and the sale
of television services over telephone lines, satellite or (in certain
circumstances) cable. CEI expects that any such new lines of business will be
more competitive and involve a higher degree of risk than CEI's traditional LEC
operations.
There can be no assurance that CEI's business and profitability will not
be adversely affected as technological and regulatory changes permit new
competitors to access CEI's customer base and provide telecommunications
services within CEI's traditional local franchise area. In addition, there can
be no assurance that CEI will have the financial, technical or managerial and
other resources necessary to successfully invest, operate and compete in the new
business opportunities presented by these fundamental changes to the
telecommunications industry.
Effect of Regulation
CEI's local exchange telephone subsidiaries, CTT and BVT, are subject to
a rate making process regulated by the Pennsylvania Public Utility Commission
(the "PaPUC"). Consequently, the ability of CEI's telephone subsidiaries to
generate increased income and cash flow is largely dependent on their ability to
increase their subscriber base, obtain higher message volumes and control their
expenses. The PaPUC continually reviews the appropriateness of the earnings of
public utilities. Consequently, the PaPUC could at any time initiate a review of
the appropriateness of the earnings of CTT or BVT and take action concerning
their rates.
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<PAGE>
An amendment to the Pennsylvania Public Utility Act passed in 1993,
commonly referred to as Chapter 30, provides for streamlined rate regulation and
a method for determining rates other than the rate base/rate of return
regulation and procedures traditionally provided for in the Pennsylvania Public
Utility Act. Chapter 30 provides for what are being called "price caps" under a
price stability mechanism in which a telephone company's annual revenues from
non-competitive services may be permitted to increase or decrease from the
previous year's total as a result of price changes based upon the annual change
in the gross domestic product price index, as calculated by the United States
Department of Commerce, minus a productivity offset, with no limitation on the
profits or losses that may be earned by a regulated telephone company. In order
to avail itself of the changed rate determination procedures permitted by
Chapter 30, the utility must commit itself to provide universal broadband
services by 2015. Broadband services are defined as a "communication channel
using any technology and having a bandwidth equal to or greater than 1.544
megabits per second." The PaPUC is exerting substantial pressure on the LECs to
avail themselves of the alternate pricing procedure provided in Chapter 30.
Although CEI is evaluating its alternatives under Chapter 30, it has not yet
determined whether it wishes to avail itself of the Chapter 30 alternate pricing
procedures and what effect such pricing would have upon CEI and its LEC
subsidiaries, if elected. The effect of complying with Chapter 30 on the
earnings and profits of CEI cannot now be determined.
Limited Trading Market for CEI Common Shares
CEI's Common Shares are listed on the NASDAQ Small Cap Market, which
market provides a trading market for CEI Common Shares. Since CEI Common Shares
were listed with NASDAQ in June 1994, an average of 18,758 shares have traded
each month. Because of such limited trading, sales of significant amounts of CEI
Common Shares may be difficult and any such sales might have a material adverse
effect upon the prevailing market price for CEI Common Shares.
Personal Communication Services
In March 1995, CEI and Infocore formed Conestoga Wireless Company
("CWC"). CEI owns 60%, and a wholly owned subsidiary of Infocore, Infocore
Wireless, owns 40% of CWC. CWC was formed to bid in the Federal Communication
Commission's ("FCC") auctions for personal communication service ("PCS")
bandwidth. PCS is a wireless communications service based on lower power and a
higher frequency bandwidth than cellular service. It is anticipated to be more
reliable, of better quality and less expensive than cellular.
CWC was a successful bidder in the FCC auctions for PCS in the basic
trading areas of Reading, Pottsville, Sunbury and Williamsport, Pennsylvania,
which cover nine (9) counties in Southeastern and Central Pennsylvania with a
population of 840,000. It is anticipated that the licenses will be issued to CWC
by June 1, 1997.
CEI anticipates spending as much as $17,000,000 during 1997 to develop
portions of its PCS system. The total cost over ten (10) years fully to develop
the system is estimated to be as much as $45,000,000. As the result of the
acquisition of Infocore, CEI will bear the entire financial burden and risk of
building and implementing the PCS system.
CEI anticipates funding CWC's 1997 PCS expenditures through internally
generated earnings, liquidation of certain investment assets and borrowing. CEI
anticipates funding the balance of the costs of PCS through internally generated
earnings, borrowing or raising additional equity.
PCS will be a highly competitive business. CWC will compete with
cellular service providers and other PCS service providers throughout its entire
PCS license area. At least three service providers have licenses or systems to
compete with CWC in each part of its PCS license area. The PCS system will be in
competition with cellular service which is already well established in its
entire license area.
The implementation of CWC's PCS business will involve the start up of a
new business in wireless communication. There do not exist historical financial
statements from which to prepare pro forma financial
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<PAGE>
statements with respect to such business. The start-up of CWC's PCS business is
a venture for which there can be no assurance of success.
Effect of Substantial Indebtedness and Preferred Stock on Future Operations
At December 31, 1996, CEI had approximately $28 million of long-term
debt outstanding and approximately $12.8 million of $3.42 Series A Convertible
Preferred Shares, as compared to approximately $63.1 million of common
shareholder equity. This resulted in a ratio of debt and preferred stock to
equity of approximately 40%/60%. CEI will incur substantial additional
indebtedness in order to develop and construct the PCS system and infrastructure
with the probable result that the ratio of debt and preferred stock to equity
will be weighed even more heavily in favor of debt and preferred stock.
Although such a level of debt and preferred stock is not unusual in the
telephone industry, such additional debt combined with the existing and
preferred stock will have important consequences on CEI's future operations,
including (i) CEI will incur significant interest expense along with significant
preferred stock dividend and principal repayment obligations, (ii) CEI is
subject to significant unscheduled preferred stock redemption obligations
because the outstanding CEI $3.42 Series A Preferred Shares may be "put" by the
holders thereof beginning in June 1998; (iii) CEI's increased leverage may make
it more vulnerable to economic downturns and reduce its flexibility in
responding to changing business and economic conditions; and (iv) payment of
dividends on CEI Common Shares, or future increases in the dividend rate on CEI
Common Shares, may be restricted by covenants in CEI's debt instruments or by
the level of financial resources needed to service CEI's additional debt and
preferred stock.
Dilution to Earnings
The purchase price being paid by CEI in the Merger with Infocore is in
excess of the current book value of Infocore's assets. This purchase price in
excess of Infocore's book value will be accounted for by CEI as "goodwill",
which will be amortized over a period not to exceed ten (10) years. This
goodwill amortization will each year result in a non-cash charge to CEI's
reported earnings. It is possible, therefore, that if the Merger is consummated,
reported earnings per CEI Share will be diluted below present earnings levels.
See "SUMMARY--Selected Historical Financial Data."
In addition, the financing of the costs of implementing the PCS system
is also likely to have a dilutive effect upon CEI earnings per share. The
interest costs of borrowings to finance the PCS system will be substantial and
are likely initially to lower reported earnings. If additional CEI stock is sold
for equity financing, such additional stock is likely to lower the reported
earnings per CEI share. Furthermore, the loss of the income from any
investment assets sold to finance the implementation of PCS could also have a
dilutive effect on CEI's earnings.
Dividend Policy
CEI has paid quarterly dividends since 1990. CTT paid dividends from
1909 through 1989. CEI does not intend to alter this policy in the foreseeable
future. However, as a holding company, CEI's ability to pay dividends on its
common stock and preferred stock will be dependent upon, among other factors,
its earnings, financial condition and cash requirements at the time such payment
is considered, and the payment of dividends to CEI by its subsidiaries. CEI's
local exchange telephone subsidiaries, CTT and BVT, are subject to rate
regulation by the PaPUC, and the amount of earnings and dividends of such
subsidiaries may be affected by such regulation. The dilutive effect of the
acquisition of Infocore and, even more significantly, the dilutive effect of the
implementation of CWC's PCS system could have a significant impact upon CEI's
continued ability to pay, or increase, dividends. See "RISK FACTORS--Effect of
Regulation."
Regulated/Nonregulated Revenue Mix
The proportion of CEI's revenues derived from its nonregulated
activities have been increasing in recent years. It increased from 11.6% in 1994
to 13.9% in 1996. Infocore's revenues are wholly nonregulated. The
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<PAGE>
addition of Infocore's revenues to CEI's revenues in 1996 would have increased
CEI's 1996 nonregulated revenues to approximately 27%. PCS revenues will also be
nonregulated revenues. Consequently, as CWC's offering of PCS services goes on
line, an increasing portion of CEI's revenues will be derived from its
nonregulated business.
The shift from regulated to nonregulated revenues will afford CEI the
opportunity for higher rates of return from prices that are not limited by PaPUC
regulation. However, at the same time such shift will expose CEI to fluctuating
rates of return from prices governed by market forces, not regulation. The
regulated revenue base of CTT and BVT, even with the advent of competition, has
provided CEI with a relatively stable earnings base. With the growth of CEI's
nonregulated business, this stable earnings base will increasingly constitute a
smaller portion, and the fluctuating earnings base governed by market forces a
greater portion, of the revenues of CEI and its subsidiaries. As a result of
such shift, CEI will be more vulnerable to competition and economic downturns
which may reduce its ability to respond to changing business and economic
conditions. Consequently, the payment of dividends on CEI's Common Shares, or
future increases in the dividend rate on CEI Common Shares, could be impacted by
the revenue shift from regulated to nonregulated revenues.
Integration of the Operations of Infocore and CEI
As with any acquisition, there will be a period of substantial
adjustment as the management and employees of Infocore become integrated with
those of CEI. The businesses of Infocore and CEI are quite different. CEI
basically provides land line telephone services to many subscribers. Infocore
provides what are essentially consulting services to a much smaller customer
base.
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<PAGE>
THE INFOCORE MEETING
General
This Joint Proxy Statement/Prospectus is being furnished to holders of
Infocore Common Shares in connection with the solicitation of proxies by the
Infocore Board to be used at the Infocore Meeting or any adjournment thereof.
A proxy card has been enclosed with the Joint Proxy Statement/Prospectus
for use by holders of Infocore Common Shares.
The Meeting will be held on Monday, April 21, 1997, at 10 a.m., local
time, at 661 Moore Road, King of Prussia, Pennsylvania 19406.
Matters to be Considered at the Infocore Meeting
At the Infocore Meeting, shareholders of Infocore will consider and vote
upon a proposal to approve and adopt the Merger Agreement. Shareholders of
Infocore will also consider such other matters as may properly come before the
Infocore Meeting or any adjournment thereof.
If the Merger Agreement is not approved at the Infocore Meeting, it is
anticipated that Infocore's annual shareholders' meeting would be held in July
1997. If the Merger is approved, it is not anticipated that Infocore would hold
its 1997 annual meeting unless the Merger Agreement is terminated.
Infocore Record Date; Shares Outstanding; Quorum
Only shareholders of record of Infocore at the close of business on
April 7, 1997 (the "Infocore Record Date"), will be entitled to receive notice
of the Infocore Meeting, and only holders of record of Infocore Common Shares as
of the Infocore Record Date will be entitled to vote at the Infocore Meeting. At
the close of business on April 7, 1997, there were issued and outstanding
5,778,956 Infocore Common Shares, and outstanding options to acquire an
additional 921,731 Infocore Common Shares. Each Infocore Common Share entitles
the holder to one vote. The presence at the Infocore Meeting, in person or by
proxy, of shareholders entitled to cast a majority of the votes at the Infocore
Meeting will constitute a quorum at the Infocore Meeting.
Vote Required
Pursuant to the applicable provisions of the PBCL and Infocore's bylaws
(the "Infocore Bylaws"), the affirmative vote of a majority of the outstanding
Infocore Common Shares present and entitled to vote at the Infocore Meeting is
required to approve the Merger Agreement.
As of the Infocore Record Date, directors and executive officers of
Infocore were the beneficial owners of approximately 1,228,004 Infocore Common
Shares, or approximately 21.24% of the outstanding Infocore Common Shares
entitled to vote at the Infocore Meeting, and such persons also held options to
acquire an additional 719,000 Infocore Common Shares. See "BUSINESS OF
INFOCORE--Security Ownership of Certain Beneficial Owners and Management of
Infocore." The directors and executive officers of Infocore have indicated that
they intend to vote all such shares in favor of the Merger Agreement.
Effect of Abstentions
Holders of Infocore Common Shares entitled to vote at the Infocore
Meeting may withhold authority to vote on the Merger Agreement. Such abstention
will be considered as shares present and entitled to vote at the Infocore
Meeting, for the purposes of determining the quorum and the required vote for
approval of the Merger Agreement, but will not be counted as votes cast in the
affirmative. Therefore, abstentions by holders of Infocore Common Shares will
have the effect of a vote against the Merger Agreement.
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Voting, Revocation and Solicitation of Proxies
All Infocore Common Shares represented by properly executed proxies
received in time for the Infocore Meeting will be voted at the Infocore Meeting
in the manner specified by the holders thereof, unless such proxies have been
revoked prior to the vote. Proxies which do not contain voting instructions will
be voted for approval of the Merger Agreement.
It is not expected that any matter other than those referred to herein
will be brought before the Infocore Meeting. If, however, other matters are
properly presented, the persons named as proxyholders will vote in accordance
with their judgment with respect to such matters. In the event that Infocore's
management desires to adjourn the Infocore Meeting in order to solicit
additional votes in favor of the Merger, the persons named in the Infocore proxy
card shall not be permitted to use the discretionary authority granted by such
proxy card to vote in favor of any such adjournment any Infocore shares which
were voted against the Merger.
A shareholder who executes and returns a proxy on the enclosed form has
the power to revoke it at any time before it is voted. The giving of a proxy
does not affect the right of shareholders to attend the Infocore Meeting and
vote in person. A shareholder's presence at the Infocore Meeting, however, will
not in itself revoke the shareholder's proxy. A shareholder may revoke a proxy
at any time prior to its exercise by filing with the Secretary of Infocore, at
or before the Infocore Meeting, a duly executed revocation or a proxy bearing a
later date. Neither attendance at the Infocore Meeting nor voting in person at
the Infocore Meeting will in itself constitute revocation of a proxy.
Infocore will bear the cost of soliciting proxies from its shareholders.
Proxies may be solicited by directors, officers and employees of Infocore. Such
directors, officers and employees will not be specifically compensated for such
services, but may be reimbursed for reasonable out-of-pocket expenses incurred
in connection therewith.
SHAREHOLDERS OF INFOCORE SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR
PROXY CARDS. AS DESCRIBED BELOW UNDER THE HEADING "THE MERGER--EXCHANGE
PROCEDURES," EACH INFOCORE SHAREHOLDER WILL BE PROVIDED WITH MATERIALS FOR
EXCHANGING INFOCORE COMMON SHARES AS PROMPTLY AS PRACTICABLE AFTER THE EFFECTIVE
TIME OF THE MERGER.
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THE MERGER
The information contained in this Proxy Statement/Prospectus regarding
the Merger is not intended to be a complete description of all facts
regarding the Merger and is qualified in all respects by reference to the
Merger Agreement attached to this Proxy Statement/Prospectus as Appendix A
and incorporated herein by reference. Shareholders of Infocore are urged
to read carefully the Merger Agreement. For a summary description of the
Merger, see "SUMMARY--The Merger."
Background of the Merger
Infocore
Infocore is a telecommunications company founded in 1981 which
provides communication services to a variety of customers in Southeastern
Pennsylvania. It provides resale of long distance services, maintenance
services for customers' communication systems and the design and
installation of customers' communication systems. It has also been active
in the PCS area and has provided the expertise for the participation of CWC
in the PCS auctions.
Infocore Common Shares are not listed on the Nasdaq National Market,
the Nasdaq Small-Cap Market or any stock exchange, and Infocore is not
subject to the reporting requirements of the Exchange Act. There is no
market maker holding an inventory position in Infocore Common Shares, and
the trading market for Infocore Common Shares is extremely thin.
Historically, Infocore has operated in an extremely competitive
environment. It has operated in many ways as a consulting company and its
primary attractiveness is the knowledge and expertise of its employees.
Industry Overview
In recent years, the telecommunications industry has been experiencing
rapid and fundamental changes. These changes have resulted from three
long-term telecommunications industry trends: (i) rapid advancements in
telecommunications technology; (ii) increasing demand for
telecommunications services; and (iii) increased competition.
Technological advancements in transmission capacity, including
advancements in switching equipment, the development of digital systems,
the development of fiber-optic cable, the advent of wireless technology
such as cellular and PCS, and even the ability to enhance the capacity of
basic twisted copper wire, have greatly increased the speed and delivery
capability of the telecommunications infrastructure. Technological
developments in equipment and systems, including the advent of mobile
telephones, computers, network software technologies, FAX, and the Internet
with its world-wide computer web, have all greatly increased the demand for
telecommunications services. These changes are also blurring the divisions
which formerly separated the computer, video, telephone, and cable
television industries.
The combination of advances in transmission and equipment technology
will soon make possible the offering of a wide range of new, interactive
broadband telecommunication services, including interactive video and
enhanced data transmission, which may further enhance the demand for
telecommunications services. All of these changes create the opportunity
for existing and new services to be delivered by a number of different
service providers. These changes provide growth opportunities to LECs, so
long as (1) they have sufficient size and capital to make the necessary
capital investments, (2) they can successfully operate in new markets that
differ from traditional regulated telco operations; and (3) they have the
manpower with the expertise to develop and provide the enhanced services
and systems.
Deregulation and competition are a principal focus of the
telecommunications industry both at the Federal and state levels. The LECs
will be under pressure to give competitors access to their local loops and
switching centers. This could divert revenue from the LECs. However, the
LECs will still own their local loops and switches, and the time and cost
of building competitive systems will be substantial. The LECs will have
the
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right to charge competitive amounts for such access, and such charges
should reflect the cost for their competitors to build competitive systems.
Although the shape of future telecommunications industry regulation
cannot be predicted, it is likely that the incremental progress of
deregulation will continue to open new markets to service providers. As an
example, in recent years, competitive access providers ("CAPs") and system
bypass offered by long distance (interexchange or "IXC") carriers, have
emerged to offer alternative access for the origination and termination of
long distance calls based on the local loop. These alternative access
providers represent a competitive inroad into a significant source of LEC
revenue--network access charges.
The combination of technological innovation, increased demand and
competition is greatly altering the telecommunications industry. Without a
doubt, the LECs will likely be faced with increasing challenges to their
historical revenue base. LECs will also have a variety of investment
options in a changing technological, competitive and regulatory
environment. These investment options offer the opportunity to take
advantage of the increasing demand for telecommunications services.
Infocore Strategic Options
In 1995, the Board of Directors and executive officers of Infocore
identified wireless telephony as an area of major opportunity for the
Company and formed a joint venture with CEI to pursue the ownership of
broadband PCS licenses. At the same time, management decided to re-focus
on the sale and service of customer premise equipment as a continuing
source of profitability. In the opinion of the Board of Directors, there
were several strategic options to enhance shareholder value: achieve
accelerated growth in the company's core business by acquisition, or raise
new equity to fund wireless ventures. These options were constrained by
Infocore's small size and limited access to capital.
Since that time, however, the Board of Directors and executive
officers have recognized that success in winning licenses to provide PCS
services requires substantial capital for Infocore to preserve its equity
ownership level in the wireless venture. Extensive conversations with
investment bankers have suggested that the company may have difficulty
raising additional equity. Efforts to identify suitable acquisitions have
been unsuccessful.
Merger Negotiations
In December 1996, management of CEI and Infocore held preliminary
discussions about the possibility of merging the two companies. Because of
shared values and traditions and similar views about the future shape of
the telecommunications industry, there was consensus to continue exploring
a possible merger. The Infocore Board was apprised of these discussions
during its regularly scheduled meeting on December 16, 1996.
At a strategic planning session with Conestoga's Board on December 23,
1996, CEI management determined that part of Conestoga's strategic plan
would be to achieve growth through the acquisition of firms providing
services within the telecommunications industry. In that planning session
it was also mentioned that the acquisition of Infocore might fit within
such strategic plan.
Management reviewed its discussion with Infocore at the monthly
meeting of CEI Board on January 28, 1997. The board discussed the
possibility of acquiring Infocore and established a general range of the
amount of stock it would be willing to exchange for all of the outstanding
stock of Infocore. The board gave management permission to pursue the
negotiations with Infocore.
Following further informal and formal discussions between management
of the two companies, a special meeting of the Board of Directors of
Infocore was held on February 6, 1997. Infocore's legal counsel was
present at this meeting. The purpose of the meeting was to review the
status of negotiations with CEI regarding the proposed business combination
between CEI and Infocore and to authorize a special committee of the Board
to assist in the evaluation and negotiation of a merger agreement between
the two companies. The Board members, with the input of counsel, discussed
the appropriate decision-making process that the Board had to
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undertake in order to fulfill its fiduciary duties to Infocore and its
shareholders in properly evaluating a proposed merger price with CEI.
There was discussion that the engagement of an investment banker to render
a fairness opinion was not desirable in this particular instance because of
the difficulty in establishing market comparables with Infocore's business
and the high cost of obtaining such an opinion in the context of the
relatively small purchase price for the business combination. Management
agreed to prepare and distribute to the Board a detailed evaluation of the
expected range of merger prices in light of Infocore's financial results
and industry, as well as publicly available financial and other information
regarding CEI.
On February 10, 1997, Messrs. Clement and Cenerazzo, as
representatives of Infocore, and Messrs. Bentz and Kramer, on behalf of
CEI, met at CEI's offices to negotiate the terms of the merger. During the
course of that meeting, the parties were able to resolve, through
negotiation, all substantial issues relating to the merger transaction.
The Board of Directors of CEI held a special meeting on February 10,
1997 to consider the acquisition of Infocore. CEI's legal counsel was
present at the meeting. The Board discussed the proposed acquisition in
terms of the assets and value of Infocore to be acquired, the consideration
CEI should pay and the conditions that should attach to the transaction.
The Board authorized management to execute a letter of intent and a
definitive merger agreement to acquire Infocore for 200,000 shares of CEI
common stock provided that the principal officers of Infocore enter into
acceptable employment agreements which include a covenant not to compete
after the acquisition.
Another special meeting of the Board of Directors of Infocore and its
counsel was held on February 11, 1997. The purpose of the meeting was to
review current negotiations between Infocore management and CEI regarding
their business combination and the proposed terms of the transaction.
Management reviewed CEI's proposal that Infocore shareholders would receive
200,000 shares of CEI common stock in the aggregate. The Board extensively
discussed whether the proposed terms of the merger transaction was a fair
proposal and maximized value for Infocore's shareholders. The Board
unanimously resolved to approve the transaction with CEI upon the terms and
conditions discussed during the meeting, and directed that the transaction
be submitted to the shareholders of Infocore for their approval.
A letter of intent between CEI and Infocore relating to the business
combination was negotiated and executed on February 13, 1997. Following
the execution of the letter of intent, Infocore and CEI proceeded with the
due diligence effort. In connection with this due diligence review, CEI
utilized the services of several professional organizations, including
Miller and Murray, LLP, Beard and Company, Inc., its independent
accountant, and JSI Financial Services. The purpose of the due diligence
program was to further evaluate Infocore's management team and various
operational, financial and legal matters relating to Infocore. In
connection with this process, during the period from the middle of February
through early March, 1997, several telephone conferences, meetings and
facility site visits were scheduled by representatives of CEI with the
management of Infocore.
Simultaneous with the due diligence review of Infocore by CEI, counsel
for CEI commenced the preparation of the Merger Agreement. Following
distribution and review of the first draft of such document,
representatives of Infocore and CEI management and their counsel met on
March 6, 1997 to negotiate the Merger Agreement. The parties held several
additional telephone conferences to continue their negotiation of the
Agreement over the next several days. The Merger Agreement was approved at
an Infocore Board meeting held on March 10, 1997 and signed on March 14,
1997, and its execution was announced by CEI on March 14, 1997 through a
press release.
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Infocore's Reasons for the Merger; Recommendation of the Infocore Board of
Directors
The Infocore Board believes that the Merger will benefit Infocore,
its shareholders, employees and customers for the reasons discussed below.
The Infocore Board believes that the proposed transaction with CEI offers
Infocore's shareholders very favorable value for their Infocore shares, and
liquidity of their investment.
In reaching its determination and recommendations above, the Infocore
Board considered a number of factors, including, without limitation, the
following material factors:
- The Infocore Board's belief that, based on its familiarity with
Infocore's business, financial condition, earnings and prospects,
as well as the current conditions in the telecommunications
industry, the terms of the Merger Agreement are attractive to
Infocore shareholders.
- The Infocore Board's consideration of the fact that the Infocore
shareholders have no market for the Infocore Common Shares and
that the CEI Common Shares will be publicly listed on NASDAQ,
thereby providing a significant increase in the liquidity of the
investment of Infocore shareholders.
- The fact that the Merger was structured to qualify as a tax-free
exchange so that the Infocore shareholders will be able to
convert their shares of Infocore stock into CEI Common Shares
without incurring a federal income tax liability.
- The Infocore Board's review of the strategic option of remaining
independent. The Infocore Board concluded that Infocore would be
at a competitive disadvantage as a small independent company in
attempting to consummate acquisitions to expand its core
business, as well as to finance its 40% ownership position in
CWC. The Infocore Board believed that there is a substantial
risk of Infocore being unable to maintain its 40% ownership
position in CWC in the future because of the substantial capital
investment requirements which will accompany its build-out of the
PCS system.
- The Infocore Board's consideration that from time to time in the
past, there have been informal discussions between Infocore
management and third parties about the possible acquisition of
Infocore, and the merger consideration being offered by CEI was
attractive in light of such prior discussions. Based upon its
experience, the Infocore Board did not believe that it was likely
that attractive offers from additional potential acquirors would
materialize.
- The Infocore Board's consideration of CEI's willingness to
maintain the independent operations of Infocore and initially to
retain the continued employment of all Infocore employees
following the Merger. The Infocore Board believed that the career
opportunities of Infocore employees will be enhanced by the CEI
affiliation and that there appears to be a natural fit between
Infocore and CEI in operational alignment, values and traditions.
- The Infocore Board's belief that most Infocore customers will
continue to do business with the new entity because of the
reputation of CEI and the wider range of communication services
which Infocore will be able to offer in the future.
The Infocore Board did not assign any specific or relative weights to
the factors under its consideration.
FOR THE FOREGOING REASONS, THE BOARD OF DIRECTORS OF INFOCORE BELIEVES
THAT THE MERGER IS IN THE BEST INTERESTS OF INFOCORE SHAREHOLDERS, HAS
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE INFOCORE SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
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CEI's Reasons for the Merger
The CEI Board believes that the Merger will benefit CEI, its shareholders
and employees and will also benefit the Infocore shareholders who receive CEI
Common Shares in the Merger. CEI's strategic long range plan includes growth
through acquisitions and participation in the expansion of the communications
industry and the developing technologies available thereto. The CEI Board
believes that the Merger offers CEI the opportunity to make a strategic
acquisition that, by increasing the telecommunication services it is capable of
offering and broadening its pool of talented telecommunication professionals,
will greatly increase the capacity of CEI to compete in a competitive market and
consequently increase the value of the CEI shares. CEI plans to operate Infocore
following the Merger as a stand-alone subsidiary. The CEI Board has concluded,
in view of the foregoing and the factors set forth below, that the Merger is in
the best interests of CEI. In reaching its determinations and recommendations
above, the CEI Board considered a number of factors, including, without
limitation, the following material factors:
. The CEI Board's strategic plan includes growth through the
acquisition of service providers to the telecommunication
industry, including firms like Infocore.
. The CEI Board's belief, based on its familiarity with the
business of CEI and Infocore, and the combined financial
conditions, earnings and prospects of the two companies, as well
as the current conditions in the telecommunications industry,
that the terms of the Merger Agreement are attractive to CEI
shareholders.
. The CEI Board's belief that the addition of Infocore's
telecommunications services offerings, areas of expertise, and
pool of talented employees will enable CEI and Infocore in
combination better to take advantage of many of the opportunities
currently available in the telecommunications industry, such as
becoming a PCS provider, providing ISDN and other broadband
services to their subscribers and expanding data communication
services, while at the same time achieving cost savings due to
economies of scale.
. The CEI Board's belief that the provision of PCS services through
a wholly owned subsidiary, CWC, combined with the knowledge and
expertise of Infocore's employees in the procurement, development
and marketing of PCS, will greatly enhance CEI's ability
successfully to provide PCS services.
. The CEI Board's confidence in, and respect for, the talented
employees of Infocore who will be able to make a major
contribution to CEI's future growth and economic well-being.
. The opinion of JSI Financial Services that as of the date of such
opinion (March 14, 1997), the consideration to be paid pursuant
to the Merger was fair, from a financial point of view, to the
shareholders of CEI. The written opinion of JSI Financial
Services, updated as of the date of this Proxy
Statement/Prospectus, is reproduced in full as Appendix C hereto,
and CEI's shareholders are urged to read the opinion carefully in
its entirety. See "THE MERGER--Opinion of CEI Financial
Advisor."
The CEI Board did not assign any specific or relative weights to the factors
under its consideration.
FOR THE FOREGOING REASONS, THE BOARD OF DIRECTORS OF CEI BELIEVES THAT THE
MERGER IS IN THE BEST INTERESTS OF CEI SHAREHOLDERS; HAS ENTERED INTO THE MERGER
AGREEMENT; AND HAS APPROVED THE ISSUANCE OF CEI COMMON SHARES TO THE INFOCORE
SHAREHOLDERS IN THE MERGER.
Opinion of CEI Financial Advisor
CEI retained JSI Financial Services ("JSI") to act as its financial advisor
in connection with a potential purchase of Infocore, to consider the proposed
consideration offered by CEI (the "Consideration") and to provide an opinion as
to the fairness, from a financial point of view, to the CEI shareholders of the
Consideration to be paid in the Merger. JSI was selected to act as CEI's
financial advisor based upon its qualifications, expertise and reputation as an
advisor to firms engaged in the telecommunications industry.
JSI provides business and financial intermediation, valuation, strategic
and business planning, and syndication services to clients in the
telecommunications, broadcasting and cable industries. JSI has performed
valuations of telecommunications concerns for a variety of purposes, including
mergers and acquisitions, divestitures, gift and estate taxes, employee stock
ownership plans, financial restructurings, and other objectives.
On March 14, 1997, JSI delivered its opinion to CEI that, based upon and
subject to the considerations set forth therein, as of such date the
Consideration to be paid to the shareholders of Infocore by CEI pursuant to the
Merger Agreement was fair, from a financial point of view, to the shareholders
of CEI. This opinion (the "JSI Opinion"), was updated as of the date of this
Proxy Statement/Prospectus. The JSI Opinion is based upon economic, market and
other conditions in effect as of the date thereof. No limitations were imposed
by the CEI Board upon JSI with respect to the investigations made or procedures
followed by them in rendering the JSI Opinion. The JSI Opinion, which sets
forth assumptions made, material reviewed, matters considered and limits on the
review, is attached hereto as Appendix C to this Proxy Statement/Prospectus and
is incorporated herein by reference. JSI has consented to the inclusion of its
opinion in this Proxy Statement/Prospectus and has reviewed the following
summary of its opinion.
In rendering its opinion, JSI, among other things, considered (i) the
nature and economic outlook of the telecommunications industry; (ii) the
financial and operating history of CEI and Infocore; (iii) CEI's and Infocore's
earnings and cash flow for the last three years and management's assessment of
future earnings and cash flow; (iv) price and trading ranges for CEI Common
Shares over the prior 33 months; and (v) the estimated value of identifiable
assets and benefits associated with the Infocore acquisition.
In rendering the opinion, JSI reviewed specific documents, relied upon
information and performed procedures as follows: (i) reviewed CEI's and
Infocore's audited financial statements for the periods December 31, 1994
through December 31, 1996; (ii) reviewed Securities and Exchange Commission
Forms 10-K filed by CEI for the fiscal years ending December 31, 1991 through
December 31, 1995; (iii) reviewed the history of CEI's stock transfer prices for
the period June 1, 1994 through March 14, 1997; (iv) reviewed the Merger
Agreement; (v) had discussions with CEI management about the Merger and current
and future business prospects for both CEI and Infocore; and (vi) performed such
other analysis and considered such other factors as it deemed appropriate.
In rendering their opinion, JSI relied, without independent verification,
on the accuracy and completeness of all financial and other information that was
publicly available or furnished to it by CEI, Infocore and/or their advisors.
Nature and Economic Outlook Of The Telecommunications Industry. In
--------------------------------------------------------------
rendering their opinion, JSI considered the nature and economic outlook of the
telecommunications industry. It pointed out that since the divestiture of AT&T
in 1984, LECs have experienced significant revenue growth due, in large part, to
the imposition of a federal access charge structure and cost recovery system
which provides for the regulated returns of the LECs. This, in addition to
advances in technologies and services (e.g., digital switching, distribution
over fiber optic cable, and enhanced regulated and unregulated service offerings
as a result of enhanced switching capabilities), subscriber growth due to
increasing population, access line growth due to increasing demands from
existing subscribers (e.g., home facsimile machines and Internet access), and
decreasing operating cost structures due to technological and system advances,
as well as efficiencies due to economies of scale, have enhanced the
profitability of telecommunications properties.
JSI stated that it continues to believe that the outlook for continued
growth and expansion of independent telephone companies appears favorable for a
number of reasons. First, subscribership will continue to grow as the
telecommunications needs of end users expand. The widespread use of the
Internet, data communications, wireless services, and broadband services will
expand the use of the telecommunications network. Second, as technology
improves and new services continue to be brought to market, the provider of
those services will continue to grow. The direct link that the LEC has to the
end user well positions the LEC to be the primary future provider of
telecommunications services. Third, as competition becomes a reality in the LEC
market, there is room for the LECs to grow. As the regulatory environment moves
to a more competitive nature, the ability for more rural LECs to expand into
more urban markets as a competitive local exchange carrier (CLEC) is enhanced.
Rural LECs already have the switching network (usually with digital capacity),
existing operational systems and infrastructure, a distribution network (which
is increasingly fiber optic), and the management know-how to successfully
compete in these areas.
The acquisition of Infocore should support CEI's growth and expansion into
the areas of opportunity described above. Infocore with its experience in data
communications and wireless services has technical expertise that can assist CEI
to take advantage of such expanded use of the telecommunications network and
help CEI make such new technology and services available to its customers.
JSI reported that it considered the current nature and economic outlook of
the telecommunications industry, as well as the nature of the services rendered
by Infocore and economic outlook therefor when arriving at its opinion regarding
the overall fairness of the Merger Agreement. It reviewed the competitive
threats presented both by emerging competitive technologies, such as PCS, and
threats posed by federal and state legislative initiatives to deregulate the
local telephone business. It acknowledged the competitive threat technological
and regulatory developments pose to the independent LEC's traditional monopoly,
but posited that such developments will only enhance, in the long-run, the
inherent value of communications properties, provided such properties are
properly managed and strategically positioned for the future. It stated its
belief that a continually increasing customer base and entering related but non-
traditional lines of business are core strategies for the communications
provider of tomorrow and reported that CEI's management has articulated a
strategy consistent with this belief, including growth, both within the
telephone industry, as well as into other businesses, such as PCS, through
acquisition and internal growth. JSI perceives CEI's management to be well
positioned to seize the opportunities of the future communications business.
The Merger with Infocore will assist CEI's efforts to enter related lines of
business. Accordingly, JSI concluded that the current nature and economic
outlook of the telecommunications industry reflected favorably upon the Infocore
acquisition.
CEI's and Infocore's Financial and Operating History. JSI reviewed the
----------------------------------------------------
financial and operating history of CEI and Infocore to gain appreciation of the
operational benefits and synergies of the Merger. JSI stated its belief that
the Merger would provide benefits to CEI through the addition of management with
enhanced experience in non-traditional but related lines of business. JSI also
stated its belief that the association will benefit Infocore through enhanced
exposure to CEI's customer base and the expansion of distribution channels for
its traditional services.
CEI's and Infocore's Earnings and Cash Flow Analysis. JSI reviewed recent
----------------------------------------------------
financial and operating performance of CEI and Infocore and discussed the
anticipated impact of the Merger on consolidated earnings and cash flow with
CEI's management. The focus of JSI's review of earnings and cash flow was to
determine the impact the Merger would have on CEI's earnings per share.
Projections provided by CEI management indicated the Merger would not dilute
CEI's projected 1997 earnings per share.
Estimated Value of Identifiable Assets and Benefits. JSI reviewed the
---------------------------------------------------
overall fairness of the Consideration paid pursuant to the Merger by subtracting
from the aggregate consideration paid the estimated value of certain
identifiable assets and benefits to arrive at net consideration paid for the
Infocore operations. Identifiable assets and benefits included excess cash
above amounts considered necessary to support Infocore's operations, Infocore's
40% ownership of CWC, and Infocore's available tax loss carryforwards. The net
consideration paid for Infocore's operations was then compared to a valuation of
Infocore's operations based on traditional capitalization of earnings methods of
valuation.
Additional Analysis and Other Factors Considered. JSI performed other
------------------------------------------------
analyses and considered such other factors as it deemed necessary in coming to
an opinion on the overall fairness of the Merger to the CEI common shareholders.
The material procedures and factors were:
1. JSI considered the use of other traditional methods of valuation
including guideline company and discounted future income techniques. However,
given the satisfactory results of other analyses performed, the lack of reliable
financial data for guideline companies comparable in size and operating nature
to Infocore, and the size of the Merger relative to the total capitalization of
CEI, such alternative valuation methods were not deemed necessary.
2. The potential for an association with CEI to enhance the profitability
of Infocore. JSI believed that the consolidation of Infocore's and CEI's
operations would result in enhanced future revenue opportunities for the
combined entity.
3. JSI believed that Infocore's management and professional team is
capable and able to assist CEI in post-acquisition operational issues,
particularly with respect to the build-out and operation of CEI's PCS properties
and entry into related, non-traditional lines of business. The existence in
place of Infocore's management team was a positive influence on JSI's overall
conclusion.
In arriving at its Opinion, JSI considered the factors outlined above as
well as other factors salient to the transaction. This summary does not purport
to be a complete description of the analysis performed by JSI pursuant to its
engagement; the foregoing paragraphs, however, reflect all material analyses
performed by JSI. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Based on the foregoing analysis, JSI rendered the opinion that, as of the
date of this Proxy Statement/Prospectus, the Consideration to be paid pursuant
to the Merger is fair, from a financial point of view, to the shareholders of
CEI.
<PAGE>
Terms of the Merger
Effect of the Merger
Pursuant to the Merger Agreement, Infocore will be merged with and
into Merger Sub, with Merger Sub as the surviving entity (sometimes
referred to as the "Surviving Corporation") and a wholly owned subsidiary
of CEI, and the separate corporate existence of Merger Sub with all its
rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger. The shares of common stock of Merger Sub issued
and outstanding immediately prior to the Effective Time will remain
outstanding and unchanged after the Merger, and will thereafter constitute
all of the issued and outstanding capital stock of the Surviving
Corporation. The articles of incorporation and bylaws of Merger Sub in
effect immediately prior to the Merger will remain in effect as the
articles of incorporation and bylaws of the Surviving Corporation, except
that Article I of the articles of incorporation will be amended to read as
follows: "The name of the corporation is Infocore, Inc." The directors
and officers of Merger Sub immediately prior to the Merger will remain in
office as the directors and officers of the Surviving Corporation.
Merger Consideration
In connection with the Merger, each Infocore Common Share outstanding
as of the Effective Time, other than Infocore Common Shares held by persons
who have perfected dissenters' rights, will be converted into and become a
right to receive CEI Common Shares. For a description of the CEI Common
Shares, see "DESCRIPTION OF CAPITAL STOCK OF CEI."
Closing; Effective Time
The Merger Agreement provides that the Closing of the Merger will
occur on a mutually agreeable date no later than the fifth business day
after satisfaction or waiver of certain conditions set forth in the Merger
Agreement (the "Closing Date"). See "THE MERGER--Terms of the Merger--
Conditions to the Merger." On the Closing Date, or as soon thereafter as
practicable, the parties will execute and file in the office of the
Corporation Bureau of the Commonwealth of Pennsylvania appropriate articles
of merger (the "Articles of Merger") in accordance with the provisions of
the PBCL. The Merger will become effective (the "Effective Time") upon the
filing of the Articles of Merger, or the effective date specified therein,
whichever is later.
Representations and Warranties
Infocore, CEI and Merger Sub have made certain customary
representations and warranties as set forth in the Merger Agreement. The
representations and warranties relate to, among other things, proper
organization, powers and qualifications of each corporation; subsidiaries;
authorized capital stock; authorization of the Merger Agreement; absence of
conflict with other agreements; the consents and approvals that will be
required for the consummation of the Merger; compliance with law; adequacy
of financial statements; brokerage and other fees; absence of false or
misleading statements in the information supplied in connection with the
Merger; and absence of false or misleading statements in financial and
other documents. Infocore has made additional representations involving
the absence of certain adverse changes or events, litigation or liabilities
other than those previously disclosed; contracts; labor relations; employee
benefit plans; title to assets; compliance with applicable laws; insurance;
dividends and stock purchases; franchises, licenses or permits; patents and
trademarks; conduct of its business in the ordinary course; and tax free
reorganization matters. CEI and Merger Sub have made additional
representations as to the valid issuance of the CEI Common Shares in the
Merger; filing of all tax and other returns and reports; and the delivery
of, and absence of false information in, reports filed with the Commission.
Conduct of Business Pending the Merger
Infocore has agreed that (except as expressly contemplated or
permitted by the Merger Agreement or to the extent that CEI otherwise
consents in writing), between the date of the Merger Agreement and the
Effective Time (a) it will conduct its business in the ordinary course,
consistent with past practice; (b) it will conduct its
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business so as to cause the representations and warranties made in the
Merger Agreement to be true at the Closing Date; (c) it will use its
reasonable best efforts to maintain services of its employees and goodwill
with suppliers, customers and other third parties with whom it does
business; (d) it will not change its capital structure and will not issue
or sell any capital stock, options or other rights to acquire any capital
stock, or any securities convertible into capital stock, except for the
issuance of common stock as a result of the exercise of stock options
granted prior to the date of the Merger Agreement under the Infocore 1991
Stock Option Plan; (e) it will not declare, set aside or pay any dividends
or repurchase capital stock; (f) it will not amend its charter document or
bylaws; (g) it will not enter into or amend any employment contracts or
employee benefit plan, materially increase contributions to employee
benefit plans, or, except in the ordinary course consistent with past
practice, increase compensation, except for bonuses awarded to management
employees in an aggregate amount not to exceed $150,000 conditioned on use
to purchase common stock acquired by way of the exercise of options under
the Infocore 1991 Stock Option Plan; (h) it will not incur or guarantee any
debt, except in the ordinary course consistent with past practice; (i) it
will not sell or dispose of any assets except for sales of inventory in the
ordinary course of business consistent with past practice; (j) it will not
change in any material respect its accounting or tax practices, policies or
principles; (k) it will not cancel or waive any debts or claims having a
value of $10,000 in the aggregate; (l) it will pay all taxes as they become
due, file all federal, state, local and foreign tax returns within the time
and in the manner prescribed by law, and collect or withhold all taxes
required to be collected or withheld from employees, independent
consultants or other third parties; (m) it will not file any amended tax
return or enter into a settlement of any audit or other tax dispute with
the IRS or any other taxing authority; (n) it will not materially change
its existing pricing structure, fees and charges structure, marketing and
promotional plans and policies; and (o) it will not enter into, or modify,
any existing lease or contract, except in the ordinary course consistent
with past practice.
Certain Covenants
Pursuant to the Merger Agreement, each of Infocore and CEI has agreed,
from the date of the Merger Agreement to the Effective Time, (a) to
promptly inform the other party in writing if any information set forth in
the schedules called for in the Merger Agreement is not accurate or
complete in all material respects; (b) that Infocore will give CEI
reasonable access to its personnel, properties, books, contracts, documents
and records; (c) to obtain all consents, approvals and authorizations
required by the Merger Agreement; (d) to use reasonable best efforts to
satisfy all conditions of the Merger Agreement; and (e) to refrain from
making, issuing or releasing any public announcements concerning the Merger
without making a good faith effort to inform the other party.
Pursuant to the terms of the Merger Agreement, Infocore has agreed (a)
to call and hold a meeting of its shareholders for the purpose of voting on
the Merger Agreement; (b) prior to the Closing Date, to deliver to CEI
letters regarding affiliates for purposes of Rule 145 under the Securities
Act; and (c) to provide CEI with all proxy materials which Infocore intends
to use in connection with the Merger.
Pursuant to the terms of the Merger Agreement, CEI has also agreed (a)
to file the Registration Statement with the SEC to register the CEI Common
Shares to be issued in the Merger, and use its reasonable best efforts to
cause the Registration Statement to become effective; (b) to file all
applicable state securities applications and use its reasonable best
efforts to qualify the CEI Common Shares to be issued in such states; and
(c) to file an application with the Nasdaq Small Cap Market to list the CEI
Common Shares issuable in connection with the Merger, and to use its
reasonable best efforts to obtain approval of such application upon
official notice of issuance.
Employment Contracts with Infocore Employees
In the Merger Agreement and employment contracts referenced therein,
Merger Sub has agreed to employ Harrison H. Clement, Jr., President and
Chief Executive Officer of Infocore, and Henry M. Stringer, Senior Vice
President of Infocore, for a period of two years following the Effective
Date at their current salaries. They may only be terminated during such
period for due cause. During this two year period, Merger Sub has agreed
to provide them with the same benefits they are receiving from Infocore or
with benefits comparable thereto. The agreements also provide that, if
during such two year period a third party acquires control of CEI, Harrison
H. Clement, Jr. would be entitled to receive his salary for eighteen months
after his termination of
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employment within such two year period and Henry M. Stringer a salary for
twelve months thereafter. In turn, Messrs. Clement and Stringer agree not
to compete with CEI and its subsidiaries in the wireless business in the
CWC PCS license area during such two year period and not to solicit the
customers of CEI and its subsidiaries for one year after the termination of
their employment.
No Solicitation; Pursuit of Other Transactions
In the Merger Agreement, Infocore has agreed that, except as described
below, it will not, nor will it authorize any of its officers, directors,
employees, affiliates, investment bankers or other representatives or
agents to, directly or indirectly, solicit, encourage (including by way of
furnishing non-public information), initiate discussions or negotiations
relating to or take any other action to facilitate, any inquiries or the
making of any proposal for an "Acquisition Transaction," which is defined
in the Merger Agreement to mean the occurrence of any of the following
events: (i) Infocore is acquired by merger or otherwise by any person or
group, other than CEI, Merger Sub or any of their respective affiliates (a
"Third Party"); (ii) a Third Party acquires more than 30% in value of the
assets of Infocore; (iii) a Third Party acquires more than 30% of the
outstanding Infocore Common Shares; (iv) Infocore adopts and implements a
plan of liquidation relating to, or extraordinary dividend equal to, more
than 30% in value of the assets of Infocore; or (v) Infocore enters into a
preliminary or definitive agreement with a Third Party relating to any of
the transactions referred to in clauses (i) through (iv) above. Infocore
has agreed promptly to notify CEI orally and in writing of any inquiries or
proposals regarding an Acquisition Transaction.
Infocore, however, is permitted to disclose information to, and to
engage in discussions and negotiations concerning an Acquisition
Transaction with, a person who makes a bona fide offer to engage in an
Acquisition Transaction for consideration and on terms which are more
favorable to the Infocore shareholders than the terms of the Merger, and
who can reasonably be expected to consummate the Acquisition Transaction on
the terms that have been proposed, and which disclosure, discussions and
negotiations shall be required by reason of the fiduciary obligations of
the directors of Infocore.
In addition, Infocore is permitted, subject to its obligations to pay
CEI a termination fee, to terminate the Merger Agreement and accept an
offer for an Acquisition Transaction which the Infocore Board concludes is
more favorable to the Infocore shareholders than the Merger.
Conditions to the Merger
The obligations of Infocore, CEI and Merger Sub to consummate the
Merger are subject to, among other things, the satisfaction of the
following conditions: (a) the performance by Infocore, CEI and Merger Sub
of their respective obligations under the Merger Agreement and the accuracy
of their respective representations and warranties contained therein; (b)
approval of the Merger Agreement and the transactions contemplated thereby
by the shareholders of Infocore; (c) Harrison H. Clement, Jr., President
and Chief Executive Officer of Infocore and Henry M. Stringer, Senior Vice
President of Infocore, having executed and delivered to CEI employment
agreements; (d) the absence of any injunctions which would prevent the
consummation of the transactions contemplated by the Merger Agreement; (e)
the absence of any action, suit or proceeding against Infocore or CEI
brought by the Antitrust Division of the Department of Justice (the
"Antitrust Division") or the Federal Trade Commission (the "FTC")
challenging the Merger under federal antitrust laws; (f) the listing on the
NASDAQ Small Cap Market of the shares of CEI Common Stock issuable in
connection with the Merger; and (g) the effectiveness of the Registration
Statement and the absence of stop orders suspending the effectiveness.
The obligations of CEI and Merger Sub to consummate the Merger are
further subject to: (a) the receipt by CEI of letters from Infocore's
affiliates for purposes of Rule 145 under the Securities Act; (b) the
exercise of dissenters' rights by no more than 10% of the outstanding
Infocore Common Shares; (c) the receipt by CEI of an opinion dated the
Closing Date from Saul, Ewing, Remick & Saul, counsel to Infocore, in form
and substance reasonably satisfactory to CEI and its counsel; (d) the
receipt by CEI of the written resignations of those Infocore directors and
officers designated by CEI; and (e) all outstanding stock options granted
by Infocore pursuant to the Infocore 1991 Stock Option Plan having been
either (i) exercised and Infocore Common Stock issued pursuant thereto; or
(ii) effectively and conclusively relinquished and terminated by the
optionees. The
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obligations of Infocore to consummate the Merger are subject to the receipt
of an opinion from Saul, Ewing, Remick & Saul, tax counsel to Infocore, as
to certain tax matters.
The obligations of CEI to consummate the Merger is subject to the
receipt by CEI of the written opinion of JSI Financial Services that the
consideration to be paid by CEI in the Merger is fair to CEI's shareholders
from a financial point of view and to such opinion not being withdrawn
following the mailing of this Proxy Statement/Prospectus.
Waiver; Amendment
Prior to the Effective Time, any provision of the Merger Agreement may
be: (a) waived by the party benefitted by the provision, by board of
directors or authorized officer action, if in the judgment of such board or
such officer such waiver would not have a material adverse effect on the
benefits intended to its shareholders; or (b) amended or modified at any
time by an agreement in writing duly authorized and executed by each of the
parties, except that after approval of the Merger Agreement by the
shareholders of Infocore or CEI, no amendment which by law requires
approval by the shareholders of Infocore or CEI may be made without such
shareholder approval.
Termination
The Merger Agreement provides that, notwithstanding approval by the
shareholders of Infocore, the Merger Agreement may be terminated and the
transactions contemplated in the Merger Agreement abandoned at any time
prior to the Closing Date: (a) by mutual consent of CEI and Infocore, or
(b) by either Infocore or CEI in the event (i) of a material breach by the
other party of any representation, warranty, covenant or agreement
contained in the Merger Agreement, or (ii) if the Effective Time shall not
have occurred on or by November 1, 1997, unless the failure to do so is due
to the breach of the Merger Agreement by the party seeking to terminate or
the parties agree to extend the Effective Time beyond such date.
Infocore may terminate the Merger Agreement, subject to its
obligations to pay the termination fee described below, in order to accept
an offer for an Acquisition Transaction which the Infocore Board concludes
is more favorable to the Infocore shareholders than the Merger.
Fees and Expenses
Except as set forth below, whether or not the Merger is consummated,
all costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby shall be paid by the party incurring
such costs. If the Merger is consummated, costs incurred by Infocore will
ultimately be reflected in CEI's consolidated financial position.
In the three following circumstances, Infocore has agreed to pay CEI a
break-up fee of $100,000: (i) CEI terminates the Merger Agreement due to a
breach thereof by Infocore; (ii) Infocore terminates the Merger Agreement
in order to enter into an Acquisition Transaction; and (iii) either CEI or
Infocore terminates the Merger Agreement because the required approval of
Infocore's shareholders has not been obtained.
CEI has agreed to pay Infocore a break-up fee in the amount of
$100,000 if the Merger Agreement is terminated by Infocore due to a breach
thereof by CEI.
Conversion of Infocore Shares
On the Effective Date, all outstanding Infocore Common Shares shall in
the aggregate be converted into 200,000 CEI Common Shares except for
fractional shares and Dissenter's shares.
Shares of Infocore Common Stock which are outstanding immediately
prior to the Effective Date and which are held by shareholders who have
delivered to Infocore a timely written objection to the Plan of Merger and
who have not voted such shares in favor of the Merger ("Objecting Shares")
shall not be converted into
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shares of CEI Common Stock, but instead, the holders thereof shall be
entitled only to such dissenters' rights as are granted by the applicable
Pennsylvania law; provided, however, that if any holder of Objecting Shares
shall withdraw, lose, or forfeit his or her rights as a dissenting
shareholder under applicable Pennsylvania law, such Objecting Shares shall
thereupon be converted into CEI Common Stock in accordance with the terms
of the Plan of Merger. For a description of the Infocore shareholder
action required to perfect dissenters' rights, see "Terms of the Merger--
Dissenters' Rights."
No Fractional Shares
Neither fractional shares of CEI Common Stock nor script certificates
thereof will be issued in connection with the Merger, but in lieu thereof
each holder of shares of Infocore Common Stock otherwise entitled to a
fraction of a share of CEI Common Stock will be paid in cash an amount
equal to such fraction multiplied by an amount equal the average of the
last reported bid and ask prices per share of CEI Common Stock for the
Effective Date, as reported on the Nasdaq Quoted System. No such holder
will be entitled to dividends, voting rights or other rights in respect of
any such fractional shares.
Delivery of Shares
As soon as practicable after the Effective Date, each Infocore
shareholder will be mailed instructions, a form letter of transmittal and
any materials to be used to surrender certificates representing Infocore
Common Stock in exchange for certificates representing the CEI Common Stock
(and cash in lieu of fractional shares) which such holder is entitled to
receive pursuant to the Plan of Merger. All certificates so surrendered
will be cancelled.
Dividends or other distributions on CEI Common Stock which are
declared or made after the Effective Date will be withheld with respect to
shares of CEI Common Stock issued pursuant to the Merger until the
certificates for the Infocore Common Stock which were converted into said
shares of CEI Common Stock have been surrendered and replaced with CEI
Common Stock certificates. Dividends or other distributions so withheld
will not bear interest.
No transfer taxes will be payable by Infocore shareholders in
connection with the exchange of certificates representing Infocore Common
Stock for certificates representing CEI Common Stock, except that, if any
certificate is to be issued in the name other than that in which the
certificate of Infocore common stock surrendered in exchange therefor is
registered, it will be a condition of such exchange that the person
requesting such exchange pay CEI any transfer or other taxes required in
connection therewith or satisfy CEI that such tax has been paid or is not
applicable.
INFOCORE SHAREHOLDERS SHOULD NOT SURRENDER THEIR INFOCORE COMMON STOCK
CERTIFICATES FOR EXCHANGE UNTIL THEY HAVE RECEIVED INSTRUCTIONS AND OTHER
MATERIALS. HOWEVER, INFOCORE SHAREHOLDERS ARE URGED TO NOTIFY INFOCORE NOW
AT (610) 337-9611, IF THEIR CERTIFICATES ARE LOST, STOLEN OR DESTROYED, IN
ORDER TO BEGIN THE PROCESS OF ISSUANCE OF REPLACEMENT CERTIFICATES.
Interest of Certain Persons in the Merger
Certain directors and officers of Infocore have interests in the
Merger that are in addition to their interests as shareholders of Infocore
generally. These include CEI's agreement to employ Harrison H. Clement,
Jr., President and Chief Executive Officer of Infocore and Henry M.
Stringer, Senior Vice President of Infocore for two years after the
Effective Date under the terms of the employment agreements. See "THE
MERGER--Terms of the Merger--Employment Agreements."
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Accounting Treatment
The Merger will be treated as a purchase of Infocore by CEI for
accounting and financial reporting purposes. Under the purchase method of
accounting, the assets and liabilities of Infocore will be recorded on the
consolidated books of CEI at their fair values at the Effective Time. The
excess of the value of the consideration paid by CEI over the fair value of
the assets and liabilities acquired will be treated as goodwill and will be
amortized over a period not to exceed ten years.
Certain Federal Income Tax Consequences
The following is a summary of the anticipated material federal income
tax consequences of the Merger. Each shareholder's individual
circumstances may affect the tax consequences of the Merger to that
shareholder. In addition, no information is provided herein with respect
to the tax consequences of the Merger under applicable foreign, state or
local laws. Consequently, each Infocore shareholder is advised to consult
his own tax advisor as to the specific tax consequences of the Merger.
It is intended that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that,
accordingly, for federal income tax purposes: (i) Infocore, Merger Sub and
CEI will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code; (ii) no gain or loss will be recognized by
Infocore or CEI by reason of the Merger; (iii) except for any cash received
in lieu of any fractional shares, no gain or loss will be recognized by
holders of Infocore Common Shares who, pursuant to the Merger, receive
solely CEI Common Shares in exchange for their Infocore Common Shares, (iv)
the basis of the CEI Common Shares to be received by an Infocore
shareholder will generally be the same as the basis of the Infocore Common
Shares surrendered in exchange therefor, less any basis attributable to any
fractional shares for which cash is received; and (v) the holding period of
the CEI Common Shares to be received by a shareholder of Infocore will
include the period during which the Infocore Common Shares surrendered in
exchange therefor were held, provided that the Infocore Common Shares
surrendered were held as a capital asset on the date of the exchange
pursuant to the Merger.
Infocore's obligation to consummate the Merger is conditioned upon
receipt of an opinion of Saul, Ewing, Remick & Saul, tax counsel to
Infocore, substantially to the effect that the federal income tax
consequences of the Merger are as summarized above. Such an opinion of
Saul, Ewing, Remick & Saul is attached to this Proxy Statement/Prospectus
as Appendix D.
Assuming that the Merger satisfies all of the requirements of a
reorganization within the meaning of Section 368(a) of the Code, the Merger
will have the following tax consequences to an Infocore shareholder who
held Infocore Common Shares as a capital asset and will hold the CEI Common
Shares received in exchange therefor as a capital asset.
CEI Common Shares Received
No gain or loss will be recognized by an Infocore shareholder upon the
receipt of CEI Common Shares in exchange for Infocore Common Shares. The
tax basis of the CEI Common Shares received by an Infocore shareholder in
the Merger will equal the tax basis of the Infocore Common Shares
surrendered in exchange therefor and, provided that such Infocore Common
Shares were held as a capital asset as of the Effective Date, the holding
period of the CEI Common Shares received by the shareholder will include
the holding period for such Infocore Common Shares. An Infocore shareholder
who receives cash in lieu of a fractional share of CEI Common Stock will
generally recognize gain or loss to the extent that the cash received is
more, or less than, the shareholder's tax basis in such fractional share.
Dividends on CEI Shares
Distributions of cash or other property received by holders of CEI
Common Shares will be taxable dividends taxed at ordinary income tax rates
to the extent of the earnings and profits of CEI. Corporate holders,
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however, may be entitled to a dividends received deduction under Section
243 of the Code (a 70 percent deduction is provided for corporate
recipients which own less than 20 percent of CEI).
Sale of CEI Common Shares
A sale of CEI Common Shares received in the Merger will result in the
recognition of capital gain or loss to the seller (provided the CEI Common
Shares were held as a capital asset at the time of the sale). Gain or loss
will be computed by determining the difference between the sales price
realized by the holder and such holder's basis in the shares sold.
EACH INFOCORE SHAREHOLDER IS ENCOURAGED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO PARTICULAR FACTS AND CIRCUMSTANCES WHICH MAY BE UNIQUE TO
SUCH SHAREHOLDER AND NOT COMMON TO SHAREHOLDERS AS A WHOLE AND ALSO AS TO
ANY ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES ARISING OUT OF
THE MERGER AND/OR ANY SALE THEREAFTER OF CEI COMMON SHARES RECEIVED IN THE
MERGER.
Dissenters' Rights
General
Pursuant to the PBCL, any holder of Infocore Common Shares has the
right to dissent from the Merger and to obtain payment of the "fair value"
(as defined therein) of such holder's Infocore Common Shares, in the event
that the Merger is consummated. CEI shareholders will not have dissenters'
rights in connection with the Merger.
Any shareholder of Infocore who contemplates exercising a holder's
right to dissent is urged to read carefully the provisions of Subchapter D
of Chapter 15 of the PBCL attached to this Proxy Statement/Prospectus as
Appendix B. The following is a summary of the steps to be taken if the
right to dissent is to be exercised, and should be read in connection with
the full text Subchapter D of Chapter 15 of the PBCL. Each step must be
taken in the indicated order and in strict compliance with the applicable
provisions of the statute in order to perfect dissenters' rights. The
failure of any holder of Infocore Common Shares to comply with the
aforesaid steps will result in the holder receiving the consideration
contemplated by the Merger Agreement in the event that the Merger is
consummated. See "THE MERGER--Terms of the Merger--Merger Consideration."
Any written notice or demand which is required in connection with the
exercise of dissenters' rights, whether before or after the Effective Time,
must be sent to Infocore, Inc. at 661 Moore Road, Suite 110, King of
Prussia, PA 19406, Attention: Secretary.
Pursuant to the Merger Agreement, CEI is not obligated to consummate
the Merger if holders of more than 10% of the outstanding Infocore Common
Shares exercise dissenters' rights.
Fair Value
The term "fair value" means the value of an Infocore Common Share
immediately before consummation of the Merger taking into account all
relevant factors, but excluding any appreciation or depreciation in
anticipation of the Merger.
Notice of Intention to Dissent
An Infocore shareholder who wishes to dissent must file with Infocore,
prior to the vote of shareholders on the Merger at the Infocore Meeting, a
written notice of intention to demand payment of the fair value of such
holder's Infocore Common Shares if the Merger is effected, must effect no
change in the beneficial ownership of his Infocore Common Shares from the
date of such notice through the Effective Time, and must refrain from
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voting his Infocore Common Shares for approval of the Merger Agreement.
Neither a proxy nor a vote against approval of the Merger will constitute
the necessary written notice of intention to dissent.
Notice to Demand Payment
If the Merger Agreement is approved by the required vote of holders of
Infocore Common Shares, Infocore will mail a notice to all dissenters who
gave due notice of intention to demand payment and who refrained from
voting for approval of the Merger Agreement. The notice will state where
and when a written demand for payment must be sent and certificates for
Infocore Common Shares must be deposited in order to obtain payment, and
will include a form for demanding payment and a copy of Subchapter D of
Chapter 15 of the PBCL. The time set for receipt of the demand for payment
and deposit of stock certificates will be not less than 30 days from the
date of mailing of the notice.
Failure to Comply with Notice to Demand Payment, etc.
A holder of Infocore Common Shares who fails timely to demand payment
or fails timely to deposit his Infocore share certificates, as required by
Infocore's notice, will forfeit his dissenters' rights and will receive CEI
Common Shares plus cash for fractional shares in exchange for his Infocore
Common Shares.
Payment of Fair Value of Shares
Promptly after the Effective Time, or upon timely receipt of demand
for payment if the Merger already has been consummated, Infocore will
either remit to dissenters who have made demand and have deposited their
stock certificates the amount that Infocore estimates to be the fair value
of the Infocore Common Shares or give written notice that no such
remittance is being made. The remittance or notice will be accompanied by
(i) a closing balance sheet and statement of income of Infocore for a
fiscal year ending not more than 16 months before the date of remittance or
notice together with the latest available interim financial statements;
(ii) a statement of Infocore's estimate of the fair value of the Infocore
Common Shares; and (iii) a notice of the right of the dissenter to demand
supplemental payment under the PBCL accompanied by a copy of Subchapter D
of Chapter 15 of the PBCL.
Estimate by Dissenter of Fair Value of Shares
If a dissenter believes that the amount stated or remitted by Infocore
is less than the fair value of the Infocore Common Shares, a dissenter may
send to Infocore his own estimate of the fair value of the Infocore Common
Shares, which shall be deemed to be a demand for payment of the amount of
the deficiency. If Infocore remits payment of its estimated value of a
dissenter's Infocore Common Shares and the dissenter does not file his own
estimate within 30 days after the mailing by Infocore of its remittance,
the dissenter will be entitled to no more than the amount remitted to him
by Infocore.
Valuation Proceedings
If any demands for payment remain unsettled, within 60 days after the
latest to occur of (i) the Effective Date; (ii) timely receipt by Infocore
of any demands for payment; or (iii) timely receipt by Infocore of any
estimates by dissenters of fair value, Infocore may file in the Court of
Common Pleas of Montgomery County (the "Court") an application requesting
that the fair value of the Infocore Common Shares be determined by the
Court. In such case, all dissenters, wherever residing, whose demands have
not been settled, shall be made parties to the proceeding as in an action
against their shares, and a copy of the application shall be served on each
such dissenter.
If Infocore were to fail to file such an application, then any
dissenter, on behalf of all dissenters who have made a demand and who have
not settled their claim against Infocore, may file an application in the
name of Infocore at any time within the 30-day period after the expiration
of the 60-day period and request that the fair value be determined by the
Court. The fair value determined by the Court may, but need not, equal the
dissenters' estimates of fair value. If no dissenter files such an
application, then each dissenter entitled to do so
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shall be paid Infocore's estimate of the fair value of the Infocore Common
Shares and no more, and may bring an action to recover any amount not
previously remitted, plus interest at a rate the Court finds fair and
equitable.
Infocore intends to negotiate in good faith with any dissenting
shareholders. If after negotiation a claim cannot be settled, then
Infocore intends to file an application requesting that the fair value of
the Infocore Common Shares be determined by the Court.
Costs and Expenses
The costs and expenses of any valuation proceedings in the Court,
including the reasonable compensation and expenses of any appraiser
appointed by the Court to recommend a decision on the issue of fair value,
will be determined by the Court and assessed against Infocore except that
any part of the costs and expenses may be apportioned and assessed by the
Court against all or any of the dissenters who are parties and whose action
in demanding supplemental payment the Court finds to be dilatory, obdurate,
arbitrary, vexatious or in bad faith.
RESALE RESTRICTIONS
The CEI Common Shares issuable in connection with the Merger have been
registered under the Securities Act, but such registration does not cover
resales by shareholders of Infocore who may be deemed to control, be
controlled by or be under common control with Infocore or CEI at the time
of or after the Merger and who therefore may be deemed "affiliates" of
Infocore or CEI as that term is used in Rule 145 under the Securities Act.
Such affiliates may not sell the CEI Common Shares acquired in connection
with the Merger except pursuant to: (i) an effective registration
statement under the Securities Act covering such shares; (ii) the
conditions contemplated by paragraph (d) of Rule 145; or (iii) another
applicable exemption from the registration requirements of the Securities
Act. Rule 145, as currently in effect, imposes restrictions on the manner
in which such affiliates may make resales and also on the quantities of
resales which such affiliates, and others with whom they act in concert,
may make within any three-month period.
The Merger Agreement requires as a condition to the Merger that each
such affiliate of Infocore enter into an agreement not to sell CEI Common
Shares acquired in the Merger except in accordance with the requirements of
the Securities Act and the regulations thereunder.
Persons who may be deemed to be affiliates of Infocore include
directors, officers and certain large holders of Infocore Common Shares.
Management of Infocore will notify those persons whom it believes may be
such affiliates. Infocore shareholders who are not deemed to be affiliates
of Infocore or CEI may sell their CEI Common Shares without being subject
to the above restrictions.
DESCRIPTION OF CAPITAL STOCK OF CEI
As of March 14, 1997, CEI's authorized capital stock consisted of
10,000,000 CEI Common Shares, par value $5.00 per share, 4,477,227 shares
of which were issued and outstanding, and 900,000 CEI $3.42 Series A
Preferred Shares, 196,618 shares of which were issued and outstanding.
CEI Common Shares
The following description of the CEI Common Shares is not intended to
be complete and is qualified in its entirety by reference to CEI's
Articles, a copy of which is on file with the Commission.
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Voting Rights
Generally, with respect to all matters upon which shareholders are
entitled to vote (including the election of directors) or to which shareholders
are entitled to give consent, the holders of the outstanding CEI Common Shares
shall be entitled to cast one vote for each CEI Common Share held, provided that
each shareholder has cumulative voting rights in all elections for directors,
which is the right to cast as many votes in the aggregate as shall equal the
number of shares held by him or her multiplied by the number of directors to be
elected, and each shareholder may cast a whole number of votes for one candidate
or distribute such votes among two or more candidates.
Ranking
The CEI Common Shares rank, with respect to the payment of dividends
or distribution of assets upon liquidation, junior to the CEI $3.42 Series A
Preferred Shares.
Dividends and Distributions
The CEI Common Shares shall receive such dividends as are from time to
time declared by the CEI Board, subject to the prior payment of the dividends
due on the CEI $3.42 Series A Preferred Shares.
In the case of dividends or other distributions payable in stock or
stock split-ups or divisions, shares of the CEI Common Shares shall be
distributed only with respect to CEI Common Shares.
Liquidation Rights
In the event of dissolution, liquidation or winding up of CEI, whether
voluntary or involuntary, holders of the CEI Common Shares shall be entitled to
payment out of the assets of CEI ratably in accordance with the number of shares
held by them, respectively, subject to the prior liquidation rights of the CEI
$3.42 Series A Preferred Shares.
General
CEI serves as the transfer agent and registrar for CEI Common Shares.
CEI $3.42 Series A Preferred Shares
The following description of the material terms of the CEI $3.42
Series A Preferred Shares is not intended to be complete, and is qualified in
its entirety by reference to CEI's Articles, a copy of which is on file with the
Commission.
The CEI $3.42 Series A Preferred Shares were issued to some of the
shareholders of Buffalo Valley Telephone Company (BVT) as a form of payment for
CEI's acquisition of BVT.
Rank
The CEI $3.42 Series A Preferred Shares rank, with respect to the
payment of dividends or distribution of assets upon liquidation, senior to CEI's
Common Shares, or any other class or series of CEI stock expressly stated to
rank junior to the CEI $3.42 Series A Preferred Shares ("Junior Stock"). The CEI
$3.42 Series A Preferred Shares rank pari passu with any other class or series
of CEI Stock expressly stated to be on a parity with the CEI $3.42 Series A
Preferred Shares ("Parity Stock"). As discussed below under "--Voting Rights",
CEI may not issue any stock ranking senior to the CEI $3.42 Series A Preferred
Shares ("Senior Stock") without the consent of the holders, voting together as a
single class, of the CEI $3.42 Series A Preferred Shares and any outstanding
Parity Stock.
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Dividends
Holders of the CEI $3.42 Series A Preferred Shares are entitled to
receive, as and if declared by the CEI Board out of CEI funds legally available
therefor, cash dividends at an annual rate of $3.42 per share. Dividends are
paid in equal semi-annual installments of $1.71 and are cumulative. No interest
is payable in respect of any dividend payments which may be in arrears. So long
as CEI has funds legally available for such purpose, the CEI Board has a
mandatory duty to declare and pay dividends on the CEI $3.42 Series A Preferred
Shares (as well as to make required redemptions of CEI $3.42 Series A Preferred
Shares), and holders shall have the right to specifically enforce declaration
and payment of dividends (as well as required redemptions) to the extent
permitted by Section 1521(b) of the PBCL.
Unless full cumulative dividends on outstanding CEI $3.42 Series A
Preferred Shares have been paid, no dividend or other distribution (except in
Junior Stock) shall be declared or paid on any Junior Stock and no amount shall
be set aside or applied to the redemption, purchase or other acquisition of
Junior Stock other than by exchange therefor of Junior Stock or, with respect to
redemptions, purchases or other acquisitions of Junior Stock other than CEI
Common Shares, out of the proceeds of a substantially concurrent sale of shares
of Junior Stock.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of CEI, the
holders of CEI $3.42 Series A Preferred Shares shall be entitled to receive from
the assets of CEI payment in cash of $65 per share, plus a further amount equal
to unpaid cumulative dividends on CEI $3.42 Series A Preferred Shares accrued to
the date of payment, before any amount shall be paid or set aside for, or any
distribution of assets shall be made to, the holders of Junior Stock. If upon
any such liquidation, dissolution or winding up, the amounts payable with
respect to the holders of CEI $3.42 Series A Preferred Shares and any other
outstanding Parity Stock cannot be paid in full, then the holders of CEI $3.42
Series A Preferred Shares and such Parity Stock will share ratably in any such
distribution in proportion to the full respective preferential amounts
(including unpaid cumulative dividends, if any) to which they are entitled. None
of the following transactions will be considered a liquidation, dissolution or
winding up of CEI for these purposes: (i) a merger or consolidation of CEI with
any other corporation; (ii) a reorganization or division of CEI; (iii) the
purchase or redemption of all or part of any outstanding CEI stock; (iv) a sale
or transfer of all or any part of CEI's assets; or (v) a share exchange to which
CEI is a party.
Conversion Rights
The CEI $3.42 Series A Preferred Shares are convertible at the option
of the holder at any time into a number of whole shares of CEI Common Stock
equal to the liquidation preference of $65 divided by the conversion price in
effect at the time of such conversion (with fractional shares paid in cash as
described below). The right to convert CEI $3.42 Series A Preferred Shares which
have been called for redemption by CEI will terminate at the close of business
on the business day next preceding the redemption date unless CEI shall default
in paying the redemption price. See "--Redemption at the Option of CEI" below.
The conversion price of the currently issued and outstanding CEI $3.42
Series A Preferred Shares is $34.425.
The conversion price is subject to adjustment in certain events,
including: (i) dividends and other distributions on CEI Common Shares payable in
shares of any class or series of CEI capital stock; (ii) certain subdivisions,
combinations and reclassifications of CEI Common Shares; (iii) the issuance to
all holders of CEI Common Shares of rights, options or warrants entitling them
to subscribe for or purchase CEI Common Shares at less than the current market
price (as defined); and (iv) distributions to all holders of CEI Common Shares
of evidences of indebtedness of CEI or assets (excluding cash dividends) or
rights or warrants (other than the rights or warrants described in clause (iii)
above) to purchase or subscribe for any CEI securities.
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In the event of any (i) capital reorganization of CEI; (ii) merger,
consolidation or share exchange of CEI with or into another corporation; (iii)
division of CEI; or (iv) sale, lease, exchange or other disposition of all or
substantially all of the property and assets of CEI as a result of which other
than solely cash shall be exchanged for CEI Common Shares, all holders of CEI
$3.42 Series A Preferred Shares will thereafter have the right to convert CEI
$3.42 Series A Preferred Shares into the kind and amount of securities, stock or
other assets which the holders would have been entitled to receive upon such
reorganization, merger, consolidation, share exchange, division, sale, lease,
exchange or other disposition if the holders had held the number of CEI Common
Shares issuable upon conversion of their CEI $3.42 Series A Preferred Shares
immediately prior to such reorganization, merger, consolidation, share exchange,
division, sale, lease, exchange or other disposition.
No adjustment of the conversion price will be required to be made
until cumulative adjustments amount to 1% or more of the conversion price as
last adjusted, except that any adjustments which are not required to be made
shall be carried forward and taken into account in calculating each subsequent
adjustment.
Upon conversion of any CEI $3.42 Series A Preferred Shares, CEI shall
deliver to the holder of the shares, together with the certificates for the CEI
Common Shares issued upon conversion, payment for all accrued and unpaid
cumulative dividends on such shares through the date of conversion.
Fractional CEI Common Shares will not be issued upon conversion. In
lieu thereof, CEI will either pay a cash adjustment based upon market price of
CEI Common Shares on the business day preceding the date of conversion or
deliver a scrip certificate of CEI in respect of such fractional share.
CEI will reserve a number of CEI Common Shares sufficient for the
satisfaction of any scrip certificates and the conversion of all outstanding CEI
$3.42 Series A Preferred Shares. For so long as CEI Common Shares are listed or
included for quotation or trading on any securities exchange or market or
trading system, CEI will list or include on any such exchange, market or system
all CEI Common Shares issuable upon conversion of the outstanding CEI $3.42
Series A Preferred Shares.
Redemption at the Option of CEI
The CEI $3.42 Series A Preferred Shares are not subject to any mandatory
redemption or sinking fund provision. Commencing on May 31, 2000, the fourth
anniversary of the Closing Date of CEI's acquisition of BVT, the CEI $3.42
Series A Preferred Shares issued in such transaction will be redeemable for
cash, at the option of CEI, on at least 30 but not more than 60 days notice, in
whole or in part from time to time. The redemption price shall equal the
applicable percentage of $65 per share specified below, plus an amount equal to
the accrued and unpaid cumulative dividends to the redemption date:
<TABLE>
<CAPTION>
Beginning of the
Anniversary of the
Effective
Date (5/31/96) Percentage
--------------------- -----------
<S> <C>
Fourth............... 103.00%
Fifth................ 102.00%
Sixth................ 101.00%
Seventh and
thereafter......... 100.00%
</TABLE>
Any CEI $3.42 Series A Preferred Shares which have been called for
redemption may be converted into CEI Common Shares at any time prior to the
close of business on the business day prior to the redemption date.
Unless full cumulative dividends due on outstanding CEI $3.42 Series A
Preferred Shares have been paid and all prior redemptions at the option of the
holders have been made, CEI may not redeem any CEI $3.42 Series A Preferred
Shares or shares of Parity Stock unless all outstanding CEI $3.42 Series A
Preferred Shares
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are redeemed, and CEI may not purchase or otherwise acquire any CEI $3.42 Series
A Preferred Shares or shares of Parity Stock except in accordance with a
purchase or exchange offer made simultaneously to all holders of CEI $3.42
Series A Preferred Shares and shares of Parity Stock which, in the reasonable
opinion of the CEI Board, will result in fair and equitable treatment among all
such shares. If less than all of the outstanding CEI $3.42 Series A Preferred
Shares shall be called for redemption, the particular shares to be redeemed
shall be selected by lot or by such other equitable manner as may be prescribed
by the CEI Board.
Redemption at the Option of the Holders
Commencing on May 30, 1998, the second anniversary of the Closing Date of
CEI's acquisition of BVT and at any time or from time to time thereafter, each
holder of CEI $3.42 Series A Preferred Shares issued in such transaction shall
have the right, at such holder's option, to require CEI to redeem all or a
portion of such holder's CEI $3.42 Series A Preferred Shares at a redemption
price of $65, plus an amount equal to the accrued and unpaid cumulative
dividends thereon to the redemption date. Requests for redemption by holders of
CEI $3.42 Series A Preferred Shares will be irrevocable and (unless CEI shall
default in making the requested redemption) shall terminate all conversion
rights of the holder with respect to the CEI $3.42 Series A Preferred Shares to
be redeemed.
Holders may not exercise their optional redemption right for less than
100 shares of CEI $3.42 Series A Preferred Shares (or, if less than 100, all
shares of CEI $3.42 Series A Preferred Shares owned by such holder). As of each
March 31, June 30, September 30 and December 31, CEI shall redeem all CEI $3.42
Series A Preferred Shares for which a notice of optional redemption has been
received by CEI prior to the close of business on the immediately preceding
February 15, May 15, August 15 or November 15, respectively. CEI shall also
redeem all CEI $3.42 Series A Preferred Shares for which a notice of optional
redemption has been received by CEI during the 30 day period following the date
of mailing by CEI to the holders of a notice of a reclassification, capital
reorganization, merger, consolidation, share exchange, division, sale, lease,
exchange or other disposition of assets, liquidation, dissolution or winding-up
relating to CEI.
Voting Rights
Except as indicated below or as required by law, holders of CEI $3.42
Series A Preferred Shares will have no voting rights. In the event that (i)
dividends upon the CEI $3.42 Series A Preferred Shares shall be in arrears in an
amount equal to three full semi-annual dividends thereon or (ii) any redemption
of CEI $3.42 Series A Preferred Shares at the option of the holder has not been
made as required, the number of directors constituting the full CEI Board shall
be increased by two, and the holders of the CEI $3.42 Series A Preferred Shares,
voting noncumulatively separately as a single class together with the holders of
any other shares of CEI preferred stock having similar voting rights then
exercisable, shall be entitled to elect two additional members of the CEI Board
until all accumulated and unpaid dividends have been paid and all required
redemptions have been made.
Without the affirmative vote of the holders of at least a majority of the
CEI $3.42 Series A Preferred Shares, CEI may not amend, alter, change or repeal
any of the express terms of the CEI $3.42 Series A Preferred Shares.
In addition, without the affirmative vote of the holders of at least a
majority of the CEI $3.42 Series A Preferred Shares then outstanding or, if
holders of other series of CEI preferred stock have the right to vote as a class
on such matter under CEI's Articles, the holders of at least a majority of CEI
$3.42 Series A Preferred Shares and other series of CEI preferred stock voting
as a single class, CEI shall not (i) authorize or permit any shares of Senior
Stock to be outstanding; (ii) increase the authorized number of shares of Senior
Stock; or (iii) merge, consolidate, divide or participate in a share exchange
with any other corporation if the corporation surviving or resulting from such
transaction would have outstanding shares of Senior Stock in excess of the
number of shares of Senior Stock of CEI permitted to be outstanding immediately
prior to such merger, consolidation, division or share exchange.
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When holders of CEI $3.42 Series A Preferred Shares have the right to
vote as described above, each holder of a CEI Series A Preferred Share shall be
entitled to one vote or fraction thereof, for each $10.00 or fraction thereof,
of the $65 liquidation preference represented by such CEI Series A Preferred
Share.
No Trading Market
The CEI $3.42 Series A Preferred Shares is not listed on Nasdaq or any
securities exchange. An active public trading market for the CEI $3.42 Series A
Preferred Shares has not developed since it was issued as part of the
acquisition of BVT.
No Rating
CEI has not applied for a rating of the CEI $3.42 Series A Preferred
Shares from Moody's, S&P or any other statistical rating organization.
Miscellaneous
CEI serves as the transfer agent, conversion agent and registrar for the
CEI $3.42 Series A Preferred Shares. Holders of CEI $3.42 Series A Preferred
Shares have no preemptive rights with respect to any shares of capital stock of
CEI or any other securities of CEI convertible into or carrying rights or
options to purchase any such shares.
Pennsylvania Anti-Takeover Law Provisions
CEI is subject to various statutory "anti-takeover" provisions of the
PBCL, including Subchapters 25E and F of the PBCL.
Subchapter 25E (relating to control transactions) provides that if any
person or group acquires 20% or more of the voting power of a covered
corporation, the remaining shareholders may demand from such person or group the
fair value of their shares, including a proportionate amount of any control
premium. Subchapter 25F (relating to business combinations) delays for five
years and imposes conditions upon "business combinations" between an "interested
shareholder" and the corporation. The term "business combination" is defined
broadly to include various transactions utilizing a corporation's assets for
purchase price amortization or refinancing purposes. An "interested shareholder"
is defined generally as the beneficial owner of at least 20% of a corporation's
voting shares. Subchapters 25E and F contain a wide variety of transactional and
status exemptions, exclusions and safe harbors. The foregoing descriptions are
qualified in their entirety by reference to the applicable statutory provisions
incorporated herein by reference.
The CEI Bylaws, however, render several other "anti-takeover" provisions
of the PBCL inapplicable to CEI, including Subchapters 25G (relating to control-
share acquisitions), 25H (relating to disgorgement), 25I (relating to certain
required severance payments) and 25J (relating to labor contracts), as well as a
standard of required director conduct giving directors broader discretion than
is permitted under the traditional rule of director conduct to consider the
interests of a wide range of groups affected by its decisions and to reject
proposed acquisitions or changes in control. The CEI Board of Directors has
adopted and is submitting to its shareholders for approval at CEI's Annual
Meeting of Shareholders scheduled for May 3, 1997, a by-law amendment which
makes applicable to CEI the aforementioned broader discretion for directors to
consider the interests of various interest groups and to reject proposed
acquisitions or changes in control.
The PBCL permits an amendment of the corporation's articles or other
corporate action, if approved by shareholders generally, to provide mandatory
special treatment for specified groups of nonconsenting shareholders of the same
class by providing, for example, that shares of common stock held only by
designated shareholders of record, and no other shares of common stock, shall be
cashed out at a price determined by the corporation, subject to applicable
dissenters' rights.
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COMPARISON OF SHAREHOLDER RIGHTS
Introduction
Upon consummation of the Merger holders of Infocore Common Shares,
whose rights presently are governed by the PBCL and Infocore's Articles and
Bylaws, will become holders of CEI Common Shares. Accordingly, their rights will
be governed by the PBCL and CEI's Articles and Bylaws. Certain differences arise
from differences between the Infocore Articles and the Infocore Bylaws, on the
one hand, and the CEI Articles and CEI Bylaws, on the other hand, as well as
from differences in treatment under the PBCL in certain instances of publicly
traded or "registered" corporations, such as CEI, as compared to privately held
"non-registered" corporations, such as Infocore. The following discussion is not
intended to be a complete statement of all differences and is qualified in its
entirety by reference to applicable Pennsylvania corporate laws and the Articles
and Bylaws of Infocore and CEI. See "INCORPORATION OF DOCUMENTS BY REFERENCE"
and "AVAILABLE INFORMATION."
Dividends
Holders of Infocore Common Shares are entitled to receive such
dividends as may be declared by the Infocore Board from time to time. Infocore
has never paid a cash dividend on the common shares.
Holders of CEI $3.42 Series A Preferred Shares are entitled to
cumulative semi-annual cash dividends of $1.71 ($3.42 annually) per share. CEI
Preferred Shares have preference over CEI Common Shares as to dividends. See
"DESCRIPTION OF CAPITAL STOCK OF CEI--CEI $3.42 Series A Preferred Shares."
Holders of CEI Common Shares are entitled to receive such dividends as
may be declared by the CEI Board from time to time. CEI and its predecessor
publicly held corporation, CTT, have maintained a policy of paying cash
dividends since 1909, and CEI does not intend to alter this policy in the
foreseeable future. During 1996 CEI has paid dividends on the CEI Common Shares
at the annual rate of $1.20 per share. If all of the outstanding options to
acquire 921,731 Infocore Common Shares are exercised with the result that
6,700,687 Infocore Common Shares are issued and outstanding on the Closing Date,
the Common Stock Exchange Ratio will be .0298477 CEI Common Share for each
Infocore Common Share. Consequently, Infocore shareholders will receive 2.98477
CEI Common Shares for each 100 Infocore Common Shares and, under CEI's current
dividend policy, will receive annual dividends totalling $3.58 for each 100
shares of Infocore common converted to CEI common. See "DESCRIPTION OF CAPITAL
STOCK OF CEI -- CEI Common Shares."
Voting Rights Generally
With respect to most matters on which shareholders are entitled
to vote, holders of Infocore Common Shares are entitled to one vote per share.
Holders of Infocore Common Shares are not entitled to cumulate their votes for
the election of directors. Any action to be taken by vote of the Infocore
shareholders shall be authorized upon the affirmative vote of a majority of the
Infocore Common Shares represented and entitled to vote at a shareholders
meeting.
Except as required by law or as described below, holders of CEI $3.42
Series A Preferred Shares have no voting rights. If CEI fails to pay dividends
in an amount equal to three full semi-annual dividends or fails to redeem CEI
$3.42 Series A Preferred Shares when required, holders of CEI $3.42 Series A
Preferred Shares, voting as a class together with any other CEI preferred
shareholders having a similar right,will be entitled to elect two directors to
the CEI Board. Holders of CEI $3.42 Series A Preferred Shares also have voting
rights in limited circumstances where CEI desires to take specified corporate
actions that may be adverse to the rights and preferences of the CEI $3.42
Series A Preferred Shares. Where any such voting rights apply, each CEI
Preferred Share shall have one vote (or fraction thereof) for each $10 (or
fraction thereof) of liquidation preference of such shares. See "DESCRIPTION OF
CAPITAL STOCK OF CEI--CEI $3.42 Series A Preferred Shares."
With respect to all matters on which shareholders are entitled to vote
(excluding the election of directors), CEI Common Shares are entitled to one
vote per share. Holders of CEI common Shares are entitled to cumulate their
votes for the election of directors. See "DESCRIPTION OF CAPITAL STOCK OF CEI--
CEI Common Shares." Except for the election of directors, in general, any action
to be taken by vote of the CEI
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shareholders shall be authorized upon the affirmative vote of a majority of the
votes cast at a shareholders meeting.
Classified Board of Directors
The PBCL permits a corporation's Board of Directors to be divided into
various classes serving staggering terms of office. The CEI Bylaws provide that
the CEI Board be divided into three classes of directors of three directors
each. At each annual meeting of shareholders, one class of directors is elected
to serve for a three-year term. Classification of directors has the effect of
making it more difficult for shareholders to change the composition of the Board
of Directors. At least two annual meetings of shareholders, instead of one, will
generally be required to effect a change in the majority of the Board of
Directors. Such classification provisions could have the effect of discouraging
a third party from initiating a proxy contest, making a tender offer or
otherwise attempting to obtain control of CEI.
Infocore's Board is not classified. Any shareholders seeking to elect
its designees to a majority of the seats on the Infocore Board, therefore, could
do so at any annual meeting.
Number of Directors
The Infocore Bylaws establish the number of directors as at least one
and not more than eleven. The CEI Bylaws establish the number of directors at
nine.
Removal of Directors
Infocore directors may be removed from office without cause by
shareholder vote. CEI directors may only be removed for cause by shareholder
vote. This removal restriction strengthens the anti-takeover effect of the
classified board provision in the CEI Bylaws.
Filling Vacancies on the Board of Directors
The Infocore Bylaws provide that vacancies occurring on the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors, even if the number of remaining directors constitutes less than a
quorum. Any director so chosen shall serve for the balance of the unexpired
term.
The CEI Bylaws provide that vacancies occurring on the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors, even if the number of remaining directors constitutes less than a
quorum. Any director so chosen shall have a term of office equal to the
unexpired portion of the term of the director whose place shall be vacant.
Call of Special Shareholders' Meeting
Special meetings of the shareholders of Infocore may be called by (i)
the board of directors, (ii) the chairman of the board or the president, or
(iii) at the request of the holders of not less than 20% of all the outstanding
shares of Infocore entitled to vote at such meeting. Special meetings of CEI's
shareholders may be called by (i) the president, (ii) the Board of Directors or
(iii) the president upon the written request of the holders of not less than 20%
of all outstanding shares of CEI entitled to vote at such meeting, provided such
request specifies the purpose of the meeting. No business other than that stated
in the notice of meeting may be acted upon at a CEI special shareholders'
meeting.
Notice of Shareholders' Meeting
Notice of an Infocore shareholders' meeting must be delivered at least
ten days prior to the day named for a meeting called to consider a fundamental
change under Chapter 19 of the PBCL or five days prior thereto in any other
case. Notice of a CEI shareholders' meeting must be given at least ten days
before the date of the meeting, unless a greater period of notice is required by
law in a particular case.
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Quorum Requirements and Adjournment of Meetings
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares entitled to vote at a meeting constitutes a quorum for an
Infocore and a CEI shareholders' meeting. A majority of the outstanding shares
represented at the meeting, even if less than a quorum, may adjourn an Infocore
or CEI shareholders' meeting from time to time. Notice of adjournment is not
required.
Shareholders present at a duly convened Infocore shareholders'
meeting may continue to transact business until adjournment of the meeting,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. In the case of an Infocore shareholders' meeting called for the election
of directors, such meeting may be adjourned for any period not exceeding 15
days; and those Infocore shareholders who attend a meeting which had previously
been adjourned shall, even if they are less than a quorum, constitute a quorum
for the purpose of electing directors, but for no other purpose.
If a quorum is not present at a CEI shareholders' meeting, no
business may be transacted except to adjourn the meeting to a future time.
Action Without Meeting
Infocore and CEI shareholders may take action only at a shareholders'
meeting or by unanimous written consent.
Dissenters' Rights
Under the PBCL, shareholders are generally entitled to dissent
from, and demand payment of the fair value of their shares in connection with a
plan of merger, consolidation, share exchange, asset transfer or division. In
accordance with the PBCL, holders of Infocore Common Shares are entitled to
dissenters' rights in connection with the Merger. See "THE MERGER--Dissenters'
Rights."
Dissenters' rights under the PBCL would be available to holders of CEI
Common Shares in connection with a plan of merger, consolidation, share
exchange, asset transfer or division to which CEI is a party. CEI is not a party
to the Merger.
Limitations on Directors' Liability
As permitted by the PBCL, both the Infocore and CEI Bylaws provide that
directors shall not be personally liable to the corporation or its shareholders
for monetary damages for any action taken, or any failure to take any action,
unless the director has breached or failed to perform the duties of his or her
office under applicable Pennsylvania law and the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness. These provisions,
however, do not apply to the responsibility or liability of a director pursuant
to any criminal statute or the liability of a director for the payment of taxes
pursuant to local, state or federal law.
Indemnification
Sections 1741 and 1742 of the PBCL generally provide that a corporation
may indemnify directors and officers against liabilities they may incur in such
capacity provided that the particular person acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. In the case of actions against
a director or officer by or in the right of the corporation, the power to
indemnify extends only to expenses (not judgments and amounts paid in
settlement) and such power generally does not exist if the person otherwise
entitled to indemnification shall have been adjudged to be liable to the
corporation unless it is judicially determined that, despite the adjudication of
liability but in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnification for specified expenses. Section 1743
of the PBCL also requires a corporation to indemnify directors and officers
against expenses they
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<PAGE>
may incur in defending actions against them in such capacities if they are
successful on the merits or otherwise in the defense of such actions.
Section 1746 of the PBCL also grants a corporation broad authority,
beyond the power granted under Sections 1741 and 1742, to indemnify its
directors, officers and other agents for liabilities and expenses incurred in
such capacity, except in circumstances where the act or failure to act giving
rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness. Pursuant to the authority of
Section 1746 of the PBCL, both the CEI and Infocore Bylaws provide for
indemnification of directors, officers and other agents of the corporation to
the extent otherwise permitted by Section 1741 of the PBCL and also in certain
circumstances not otherwise permitted by Sections 1741 and 1742 of the PBCL.
State Anti-Takeover Law Provisions
The PBCL contains certain "anti-takeover" provisions that are only
applicable to "registered" corporations. These provisions do not apply to
Infocore. Because CEI is a registered corporation, these provisions could be
applicable to CEI. See "DESCRIPTION OF CAPITAL STOCK OF CEI--Pennsylvania Anti-
Takeover Law Provisions."
Subchapter 25E of the PBCL is a "cash-out" antitakeover statute
which generally provides that if any person or group acquires 20% or more of the
voting power of a corporation, the remaining shareholders may demand from such
person or group the fair value of their shares, including a proportionate amount
of any control premium.
Under Subchapter 25F of the PBCL, CEI is prohibited from engaging in
specified business combination transactions with an interested stockholder
(defined in general as any beneficial owner of at least 20% of CEI's outstanding
voting power) during the five-year period following the date such person became
an interested stockholder unless (i) the business combination or share
acquisition is approved by CEI's Board prior to the date such person becomes an
interested stockholder, (ii) the business combination is approved by unanimous
vote of the holders of all outstanding common stock, or (iii) the interested
shareholder owns at least 80% of CEI's outstanding voting power, the business
combination is approved by a majority of the holders of CEI voting shares (not
including shares held by the interested shareholder), and the interested
shareholder complies with specified procedural and minimum fair price criteria.
After the five-year period, a business combination may be effected if (i) the
transaction is approved by a majority of the outstanding CEI voting power (not
including shares held by the interested shareholder), or (ii) the transaction is
approved by a majority of the outstanding CEI voting power (including shares
held by the interested shareholder) and the interested shareholder complies with
specified procedural and minimum fair price criteria. CEI is also subject to
another Pennsylvania law provision (PBCL Section 2538) which requires certain
fundamental transactions with an interested shareholder to be approved by a
majority of the corporation's directors who are unaffiliated with such
shareholder.
Amendment of Articles of Incorporation
Persons holding at least 10% of the Infocore Common Shares may propose
amendments to the Infocore Articles. Because CEI is a registered corporation,
under the PBCL, CEI shareholders are not entitled to propose amendments to the
CEI Articles, and all amendments must first be approved by the CEI Board.
Except for the general requirement that charter amendments affecting
any particular class or series of stock be approved by the affected class or
series, proposed amendments to the Infocore and the CEI Articles require
shareholder approval by the affirmative vote of a majority of the votes cast by
all shareholders entitled to vote thereon. For a description of the amendments
to the CEI Articles requiring a separate class vote, see "DESCRIPTION OF CAPITAL
STOCK OF CEI--CEI $3.42 Series A Preferred Shares--Voting Rights."
Amendment of Bylaws
The Infocore Bylaws may be amended by a majority vote of the
shareholders entitled to vote thereon at any regular or special meeting duly
convened after notice to the shareholders for that purpose. In addition, the
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<PAGE>
Board of Directors may, by a majority vote, amend the Bylaws, subject to the
power of the shareholders to change such action, provided that the specific
amendment does not relate to any subject that is committed expressly to the
shareholders by any provision of the PBCL.
The CEI Bylaws may be amended at any regular or special meeting of the
CEI shareholders by a majority vote of all the shares represented and entitled
to vote at the meeting.
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<PAGE>
BUSINESS OF INFOCORE
Description of Business
Infocore is a diversified regional communication services provider with
its executive offices located at 661 Moore Road, King of Prussia, Pennsylvania
19406, telephone number (610) 337-9611. As of December 31, 1996, Infocore had
approximately 542 customers.
Founded in 1981, Infocore provides a broad array of premise equipment
and network services, primarily to commercial markets throughout Southeastern
Pennsylvania. The sale and service of customer premise equipment, which includes
the sale and service of voice and data communications equipment, including
business telephone systems, local area networks and computer-telephone
integration, contributed approximately 53% of Infocore's revenues in 1996.
Infocore's resale of local and long distance services contributed approximately
47% of its 1996 revenues. In 1995, Infocore formed a wholly owned subsidiary,
Infocore Wireless ("IW"), to pursue ownership of PCS licenses. On March 9, 1995,
Conestoga Enterprises, Inc. and IW formed CWC, a Pennsylvania limited liability
company. On January 14, 1997, CWC was a successful bidder in the Federal
Communications Commission's PCS radio spectrum D, E and F Block Auction. CWC was
the high bidder for radio spectrum licenses in four basic trading areas:
Reading, Pottsville, Sunbury and Williamsport. These territories cover nine
Pennsylvania counties with a total population of approximately 840,000.
Security Ownership of Certain Beneficial Owners and Management of Infocore
The following table sets forth as of April 7, 1997 certain information
regarding the beneficial ownership of Infocore Common Shares by (i) each
director and executive officer of Infocore, (ii) all directors and executive
officers of Infocore as a group, and (iii) each other person known by Infocore
to own beneficially more than 5% of the Infocore Common Shares .
<TABLE>
<CAPTION>
Beneficial Ownership of
Infocore Common Shares (1)
Number of Percent of
Shares Total
--------- ----------
<S> <C> <C>
Directors:
Anthony G. Abbot........................... 0 *
John A. Cenerazzo (2)...................... 197,500 3.4%
Harrison H. Clement, Jr. (3)............... 359,401 6.2%
Robert D. Hedberg (4)...................... 104,970 1.8%
Harry G. Rieger, Jr. (5)................... 200,000 3.4%
John F. Stoviak............................ 15,000 *
Milton S. Stearns, Jr...................... 125,000 2.1%
Henry M. Stringer.......................... 120,300 2.0%
Executive Officers:
William D. Chamblin, III................... 33,500 *
James Chukinas............................. 12,500 *
David E. Sonon............................. 125,000 2.1%
All Directors and Officers as a Group (11
persons)(6)............................... 1,293,171 22.3%
Other 5% Shareholders:
Joseph C. Abeles (7)....................... 628,875 10.8%
</TABLE>
- ---------------------------------
* Less than 1%
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<PAGE>
(1) Except as indicated in the footnotes to this table, the persons named
in this table have sole voting and investment power with respect to
all Infocore Common Shares indicated above.
(2) Includes 4,375 shares owned by Mr. Cenerazzo's wife as to which Mr.
Cenerazzo disclaims beneficial ownership.
(3) Includes 10,000 shares owned by Mr. Clement's wife and 350 shares
owned by his daughter as to which Mr. Clement disclaims beneficial
ownership.
(4) Includes 25,442 shares held in trusts as to which Mr. Hedberg has
voting and investment power.
(5) Includes 25,000 shares owned by Mr. Rieger's wife as to which Mr.
Rieger disclaims beneficial ownership.
(6) The Infocore directors and executive officers as a group also hold
options to acquire an additional 719,000 Infocore Common Shares.
(7) Includes 118,750 shares owned by Mr. Abeles' wife as to which Mr.
Abeles disclaims beneficial ownership and 100,000 shares owned by
Abeles Associates as to which Mr. Abeles shares voting and investment
power. Mr. Abeles' address is 220 East 42nd Street, New York, New
York 10017.
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<PAGE>
EXPERTS
CEI
The consolidated financial statements of CEI included in its Annual
Report on Form 10-K for the year ended December 31, 1996 have been audited by
Beard & Company, Inc., independent accountants, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report, given upon the authority of said firm as experts in accounting and
auditing.
LEGAL OPINIONS
The legality of the CEI Common Shares to be issued in connection with
the Merger is being passed upon by Miller and Murray, LLP, Reading,
Pennsylvania. James H. Murray, a partner in Miller and Murray, LLP, is Vice
President and a Director of CEI. Partners of Miller and Murray, LLP beneficially
own CEI Common Shares as follows: James H. Murray, 37,099 CEI Common Shares;
John S. Hibschman, 5,055 CEI Common Shares; William F. Colby, Jr., 2,413 CEI
Common Shares; and Brian R. Ott, 125 CEI Common Shares. The tax consequences of
the Merger are being passed upon by Saul, Ewing, Remick & Saul, Berwyn,
Pennsylvania, tax counsel to Infocore. Certain legal matters relating to
Infocore will be passed upon at the Effective Time by Saul, Ewing, Remick &
Saul, Berwyn, Pennsylvania, special counsel to Infocore.
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<PAGE>
APPENDIX A
---------------------------------------------
---------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
CONESTOGA ENTERPRISES, INC.,
INFOCORE, INC.
and
CI MERGER CORPORATION
Dated as of March 14, 1997
---------------------------------------------
---------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<C> <C> <S> <C>
ARTICLE I
DEFINITIONS .............................................. 1
ARTICLE II
PLAN OF MERGER .............................................. 3
2.1 The Merger .............................................. 3
2.2 Conversion and Exchange of Shares............................... 3
2.3 Timing .............................................. 4
2.4 Dissenters' Rights.............................................. 4
2.5 Surrender and Exchange of Infocore Certificates................. 4
2.6 Articles of Incorporation, By-laws, and
Directors and Officers of Sub................................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INFOCORE................................. 7
3 Representations and Warranties of Infocore...................... 7
3.1 Organization, Powers and Qualifications......................... 7
3.2 Subsidiaries .............................................. 7
3.3 Capital Stock .............................................. 7
3.4 Authority .............................................. 7
3.5 Conflict with Other Agreements, Consents and
Approvals .............................................. 8
3.6 Compliance with Law............................................. 8
3.7 Financial Statements............................................ 9
3.8 Absence of Undisclosed Liabilities.............................. 9
3.9 Absence of Adverse Changes...................................... 9
3.10 Tax and Other Returns and Reports............................... 9
3.11 Dividends and Stock Powers...................................... 10
3.12 Assets .............................................. 10
3.13 Accounts Receivable............................................. 11
3.14 Contracts .............................................. 11
3.15 Litigation .............................................. 11
3.16 Insurance .............................................. 12
3.17 Labor Meetings .............................................. 12
3.18 Employee Benefit Plans.......................................... 12
3.19 Franchises, Licenses, Permits, Etc.............................. 13
3.20 Patents and Trademarks.......................................... 13
3.21 Ordinary Course .............................................. 14
3.22 Brokerage and Other Fees........................................ 15
3.23 Information Supplied............................................ 15
3.24 Disclosure .............................................. 16
3.25 Tax Fee Reorganization Matters.................................. 16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE IV
<C> <C> <S> <C>
REPRESENTATIONS AND WARRANTIES OF CEI AND SUB............................... 17
4 Representations and Warranties of CEI and Sub.................... 17
4.1 Organization, Powers and Qualifications.......................... 17
4.2 Subsidiaries ............................................... 17
4.3 Authority ............................................... 17
4.4 Capital Stock ............................................... 17
4.5 Valid Issuance of CEI Stock, Etc................................. 18
4.6 Conflict with Other Agreements, Consents and
Approvals ............................................... 18
4.7 Financial Statements............................................. 19
4.8 Brokerage ............................................... 19
4.9 Reports ............................................... 19
4.10 Information Supplied............................................. 19
4.11 Disclosure ............................................... 20
4.12 Tax Matters ............................................... 20
4.13 Absence of Adverse Changes....................................... 20
ARTICLE V
COVENANTS ............................................ 20
5.1 Conduct of Business Prior to Closing............................. 20
5.2 Updating of Schedules............................................ 22
5.3 Access ............................................... 22
5.4 Proxy Material, Registration Statement, Other
Filings and Applications....................................... 23
5.5 Shareholder Meeting.............................................. 24
5.6 Third Party Consents............................................. 24
5.7 Satisfaction of Conditions....................................... 24
5.8 Public Announcements............................................. 24
5.9 Other Proposals ............................................... 24
5.10 Affiliates ............................................... 25
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF CEI AND SUB.................................... 26
6 Conditions to Obligations of CEI and Sub to
Consummate the Merger.......................................... 26
6.1 Representations, Warranties, and Covenants of
Infocore ............................................... 26
6.2 Infocore Shareholder Approval.................................... 26
6.3 Employment Agreements............................................ 26
6.4 No Injunctions ............................................... 26
6.5 No Antitrust Litigation.......................................... 27
6.6 NASDAQ Listing ............................................... 27
6.7 Securities Laws ............................................... 27
6.8 Affiliate Letters ............................................... 27
6.9 Dissenters' Rights............................................... 27
6.10 Legal Opinion ............................................... 27
6.11 Resignations ............................................... 27
6.12 Fairness Opinion ............................................... 27
</TABLE>
<PAGE>
<TABLE>
<C> <C> <S> <C>
6.13 Exercise of Stock Options........................................ 27
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF INFOCORE....................................... 28
7 Conditions to Obligations of Infocore to
Consummate the Merger ....................................... 28
7.1 Representations, Warranties, and Covenants
of CEI and Sub .............................................. 28
7.2 Infocore Shareholder Approval.................................... 28
7.3 No Injunctions ............................................... 28
7.4 No Antitrust Litigation ......................................... 28
7.5 NASDAQ Listing ............................................... 28
7.6 Securities Laws ............................................... 29
7.7 Tax Opinion ............................................... 29
ARTICLE VIII
TERMINATION, WAIVER AND AMENDMENT........................................... 29
8.1 Termination ............................................... 29
8.2 Effect of Termination............................................ 31
8.3 Waiver of Terms ............................................... 31
8.4 Amendment of Agreement........................................... 31
8.5 Fees and Expenses ............................................... 31
ARTICLE IX
GENERAL PROVISIONS 32
9.1 Cooperation ............................................... 32
9.2 Counterparts ............................................... 32
9.3 Contents of Agreement, Etc....................................... 32
9.4 No Survival of Representations and Warranties.................... 33
9.5 Section Headings, Gender and "Person"............................ 33
9.6 Notices ............................................... 33
9.7 Governing Law ............................................... 34
</TABLE>
LIST OF EXHIBITS
A. Letter regarding Affiliates
B. Employment Agreements
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of March 14, 1997, among
CONESTOGA ENTERPRISES, INC. ("CEI"), a Pennsylvania corporation, INFOCORE,
INC. ("Infocore"), a Pennsylvania corporation, and CI MERGER CORPORATION
("Sub"), a Pennsylvania corporation and a wholly owned subsidiary of CEI.
Background
The Boards of Directors of CEI, Sub and Infocore deem it
advisable and in the best interests of the shareholders of their respective
corporations that Infocore be acquired by CEI through the merger of
Infocore with and into Sub (the "Merger") pursuant to the Pennsylvania
Business Corporation Law (the "Corporation Law") in accordance with the
provisions of this Agreement (together with the Schedules attached hereto,
this "Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and intending to be legally bound hereby, the
parties agree that they will carry out and consummate this Agreement.
ARTICLE I
DEFINITIONS
The following terms shall have the following meanings,
respectively, when used in this Agreement (applicable to both the singular
and plural forms of the terms defined):
Acquisition Transaction - as defined in Section 5.9.
-----------------------
Authorizations - as defined in Section 3.19.
--------------
Benefit Plans - as defined in Section 3.18(a).
-------------
CEI - Conestoga Enterprises, Inc., a Pennsylvania corporation.
---
CEI Balance Sheet - as defined in Section 4.7.
-----------------
CEI Common Stock - the shares of the common stock, par value
----------------
$5.00 per share, of CEI.
CEI Financial Statements - as defined in Section 4.7.
------------------------
CEI Material Adverse Effect - a material adverse effect on the
---------------------------
business, condition (financial or otherwise), assets, liabilities or
operations of CEI and its Subsidiaries taken as a whole.
CEI Schedule - as defined in Section 4.
------------
CEI SEC Documents - as defined in Section 4.9.
-----------------
Closing - as defined in Section 2.3(b).
-------
Closing Date - as defined in Section 2.3(b).
------------
Code - the Internal Revenue Code of 1986, as amended.
----
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<PAGE>
Contracts - as defined in Section 3.14(a).
---------
Corporation Law - the Pennsylvania Business Corporation Law, as
---------------
amended from time to time.
Dissenters' Shares - as defined in Section 2.4.
------------------
Dissenting Shareholder - as defined in Section 2.4.
----------------------
Effective Date - as defined in Section 2.3(b).
--------------
ERISA - the Employment Retirement Income Security Act of 1974, as
-----
amended.
IRS - the Internal Revenue Service.
---
Infocore - Infocore, Inc., a Pennsylvania corporation.
--------
Infocore Balance Sheet - as defined in Section 3.7(a).
----------------------
Infocore Common Stock - the shares of common stock, par value
---------------------
$.02 per share, of Infocore.
Infocore Financial Statements - as defined in Section 3.7(a).
-----------------------------
Infocore Material Adverse Effect - a material adverse effect on
--------------------------------
the business, condition (financial or otherwise), assets, liabilities or
operations of Infocore and its Subsidiaries taken as a whole, including,
without limitation, any item which individually would have an adverse
economic effect on Infocore of more than $100,000.
Infocore Schedule - as defined in Section 3.
-----------------
Merger - the merger of Sub with and into Infocore described in
------
Section 2.1.
1933 Act - the Securities Act of 1933, as amended.
--------
1934 Act - the Securities Exchange Act of 1934, as amended.
--------
Old Certificates - as defined in Section 2.5(a).
----------------
Prospectus and Proxy Statement - as defined in Section 3.23.
------------------------------
Registration Statement - as defined in Section 2.3(a).
----------------------
Representatives - as defined in Section 5.9.
---------------
SEC - the Securities and Exchange Commission.
---
Sub - CI Merger Corporation, a Pennsylvania corporation.
---
Sub Common Stock - the shares of the common stock, without par
----------------
value, of Sub.
Subsidiary - an entity of which the referenced person owns or
----------
controls fifty percent (50%) or more of the legal or beneficial ownership
interests therein.
Surviving Corporation - as defined in Section 2.1.
---------------------
Third Party - as defined in Section 5.9.
-----------
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<PAGE>
Unclaimed Shares - as defined in Section 2.5(e).
----------------
ARTICLE II
PLAN OF MERGER
2.1 The Merger. On the Effective Date Infocore shall be merged
----------
with and into Sub pursuant to this Agreement and the separate existence of
Infocore shall cease. Sub shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"), and the
separate corporate existence of Sub with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger.
The Infocore 1991 Stock Option Plan shall be terminated as of the Effective
Date.
2.2 Conversion and Exchange of Shares.
---------------------------------
(a) CEI Common Stock. The shares of CEI Common Stock issued
----------------
and outstanding immediately prior to the Effective Date shall, on the
Effective Date, continue to be issued and outstanding.
(b) Sub Common Stock. The shares of Sub Common Stock issued
----------------
and outstanding immediately prior to the Effective Date shall remain
outstanding and unchanged after the Merger and shall thereafter constitute
all of the issued and outstanding shares of the capital stock of the
Surviving Corporation.
(c) Infocore Common Stock. Upon the Effective Date, the
---------------------
shares of Infocore Common Stock issued and outstanding and held by any
person, except for Dissenters' Shares, shall, by virtue of the Merger and
without any action on the part of the holder thereof, become and be
converted into that number of shares of CEI Common Stock as is equal to the
number of shares of Infocore Common Stock held by such person multiplied by
a fraction, the numerator of which is 200,000 and the denominator of which
is the number of shares of Infocore Common Stock issued and outstanding
immediately prior to the Effective Date.
2.3 Timing.
------
(a) Shareholder Approval. Infocore shall submit this
--------------------
Agreement to its shareholders for approval as provided in Section 5.5
hereof. In connection with such meeting, Infocore and CEI shall each take,
as promptly as practical, such reasonable steps as shall be necessary for
the preparation and filing by CEI of a registration statement under the
1933 Act on Form S-4 (the "Registration Statement") with the SEC and shall
use its reasonable best efforts to cause the Registration Statement to
become effective as soon as practicable.
(b) Closing and Effective Date. The parties shall hold a
--------------------------
closing (the "Closing") on a mutually agreeable date (the "Closing Date")
no later than the fifth business day after the satisfaction or waiver of
the conditions set forth in Article V and Article VI of this Agreement, at
10:00 A.M., local time, at the offices of CEI, or at such other place or
time as the parties agree upon. On the Closing Date or as soon thereafter
as is practicable, the parties shall execute and file in the offices of the
Corporation Bureau of the Commonwealth of Pennsylvania appropriate Articles
of Merger in accordance with the provisions of the Corporation Law. The
"Effective Date" shall be the date of filing the Articles of Merger.
2.4 Dissenters' Rights. The shares of Infocore Common Stock
------------------
("Dissenters' Shares") held by any shareholder of Infocore who has
exercised dissenters' rights pursuant to the Corporation Law (a "Dissenting
Shareholder") shall not be converted pursuant to this plan unless and until
the holder thereof shall have failed to perfect or shall have effectively
withdrawn or lost such holder's rights to dissent from the Merger under the
Corporation Law, and shall be entitled to receive only the payment to the
extent provided for by the Corporation Law. If any such holder shall fail
to perfect or shall have effectively withdrawn or lost the right to
dissent, the Dissenters' Shares held by such Dissenting Shareholder shall
thereupon be treated as though such shares had been converted into shares
of CEI Common Stock pursuant to the terms hereof.
2.5 Surrender and Exchange of Infocore Certificates.
-----------------------------------------------
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<PAGE>
(a) Delivery of Certificates. As soon as feasible after the
------------------------
Effective Date, CEI will, upon surrender of all certificates for Infocore
Common Stock ("Old Certificates") held by an Infocore shareholder,
accompanied by a duly executed letter of transmittal in proper form (if
required by CEI), issue and deliver to such Infocore shareholder a
certificate representing the number of shares of CEI Common Stock to which
such Infocore shareholder is entitled under the terms of the Merger, and a
check for fractional shares as provided below.
(b) No Fractional Shares. No certificates for fractional
--------------------
shares of CEI Common Stock shall be issued in connection with the Merger.
In lieu thereof, CEI shall issue to any holder of Infocore Common Stock
certificates otherwise entitled to a fractional share, upon surrender of
such certificates as provided above, a check for an amount of cash equal to
the fraction of a share represented by the certificates so surrendered
multiplied by an amount equal to the sum of the average of the last
reported bid and ask prices per share of CEI Common Stock for the Effective
Date, as reported on the NASDAQ Quotation System.
(c) Dividends. If any dividend on CEI Common Stock is
---------
declared after the Effective Date, the declaration shall include dividends
on all shares of CEI Common Stock into which shares of Infocore Common
Stock have been converted under this Agreement, but no former holder of
Infocore Common Stock shall be entitled to receive payment of any such
dividend until surrender of the shareholder's Old Certificates have been
effected in accordance with the instructions furnished by CEI. Upon
surrender for exchange of a shareholder's Old Certificates, such
shareholder shall be entitled to receive from CEI an amount equal to all
such dividends declared and for which the payment date has occurred,
without interest thereon and less the amount of taxes, if any, which may
have been imposed or paid thereon, on the shares of CEI Common Stock into
which the shares represented by such Old Certificates have been converted.
(d) Closing of Stock Transfer Books. After the Effective
-------------------------------
Date, there shall be no transfer on the stock transfer books of Infocore or
CEI of shares of Infocore Common Stock. If Old Certificates are presented
for transfer after the Effective Date, they shall be cancelled and
certificates representing shares of CEI Common Stock and cash for
fractional shares shall be issued in exchange therefor as provided herein.
(e) Unclaimed Merger Consideration. To the extent permitted
------------------------------
by law, in the event that any Old Certificates have not been surrendered
for exchange in accordance with this Section on or before the second
anniversary of the Effective Date, CEI may at any time thereafter, with or
without notice to the holders of record of such Old Certificates, sell for
the accounts of any or all of such holders any or all of the shares of CEI
Common Stock which such holders are entitled to receive under Subsection
(a) hereof (the "Unclaimed Shares"). Any such sale may be made by public or
private sale or sales at any broker's board or on any securities exchange
in such manner and at such times as CEI shall determine. If in the opinion
of counsel for CEI it is necessary or desirable, any Unclaimed Shares may
be registered for sale under the 1933 Act and applicable state laws. CEI
shall not be obligated to make any sale of Unclaimed Shares if it shall
determine not to do so, even if notice of sale of the Unclaimed Shares has
been given. The net proceeds of any such sale of Unclaimed Shares shall be
held for holders of the unsurrendered Old Certificates whose Unclaimed
Shares have been sold, to be paid to them upon surrender of the Old
Certificates. From and after any such sale, the sole right of the holders
of the unsurrendered Old Certificates whose Unclaimed Shares have been sold
shall be the right to collect the net sale proceeds held by CEI for their
respective accounts, and such holders shall not be entitled to receive any
interest on such net sale proceeds held by CEI.
(f) Escheat. If outstanding certificates for shares of
-------
Infocore Common Stock are not surrendered prior to the date on which such
certificates would otherwise escheat to or become the property of any
governmental unit or agency, the unclaimed items shall, to the extent
permitted by abandoned property and any other applicable law, become the
property of CEI (and to the extent not in its possession shall be paid over
to it), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, neither CEI nor
its agents or any other person shall be liable to any former holder of
Infocore Common Stock for any property delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) Lost or Stolen Certificates. In the event any Old
---------------------------
Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such Old Certificate to be
lost, stolen or destroyed and, if required by CEI, the posting by such
person of a bond in such amount as CEI may
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direct as indemnity against any claim that may be made against it with
respect to such Certificate, CEI will issue in exchange for such lost,
stolen or destroyed Old Certificate, a certificate for that number of
shares of CEI Common Stock into which such Old Certificates have been
converted pursuant to this Agreement and cash for fractional shares as
provided herein.
2.6 Articles of Incorporation, By-laws, and Directors and
-----------------------------------------------------
Officers of Sub. The Articles of Incorporation and By-laws of Sub in
---------------
effect immediately prior to the Merger shall remain in effect as the
Articles of Incorporation and By-laws of the Surviving Corporation, except
that Article I of the Articles of Incorporation of Sub shall be amended to
read as follows: "The name of the Corporation is Infocore, Inc." The
directors of Sub immediately prior to the Merger shall remain in office as
the directors of the Surviving Corporation. Provided they have executed
and delivered the employment agreements referred to in Section 6.3,
Harrison H. Clement, Jr. shall become the President and Chief Executive
Officer of the Surviving Corporation and Henry M. Stringer shall become the
Senior Vice President of the Surviving Corporation as of the Effective Date
and all other officers of Sub immediately prior to the Merger shall remain
in office as officers of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INFOCORE
3. Representations and Warranties of Infocore. Infocore
------------------------------------------
represents and warrants to CEI and Sub as follows, except as set forth in a
disclosure schedule (the "Infocore Schedule") delivered by Infocore
contemporaneously with the execution of this Agreement:
3.1 Organization, Powers and Qualifications. Infocore is a
---------------------------------------
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania. Infocore has all requisite
corporate power and authority to carry on its business as it has been and
is now being conducted and to own, lease and operate the properties and
assets used in connection therewith. Infocore is duly qualified as a
foreign corporation authorized to do business and is in good standing in
every jurisdiction in which such qualification is required, other than such
jurisdictions where the failure so to qualify would not have an Infocore
Material Adverse Effect. The Infocore Schedule sets forth a complete and
correct copy of the Articles of Incorporation and By-laws (together with
all amendments thereto and restatements thereof) of Infocore.
3.2 Subsidiaries. Other than Infocore Wireless, Inc., Infocore
------------
does not have any Subsidiaries.
3.3 Capital Stock. As of March 1, 1997, the authorized capital
-------------
stock of Infocore consists of 12,000,000 shares of Infocore Common Stock,
par value $.02 per share, of which 5,778,956 shares were issued and
outstanding and 188,919 shares were held as treasury shares. All of the
issued and outstanding shares have been duly authorized and are validly
issued and outstanding, fully paid and nonassessable. No shares of capital
stock issued by Infocore are or were at the time of their issuance subject
to preemptive rights. There are no existing subscriptions, options,
warrants, calls, commitments, agreements, plans, conversion rights or other
rights of any character (contingent or otherwise) providing for the
issuance, sale, purchase, redemption, transfer, voting or registration, at
any time, or upon the happening of any stated event, of any shares of the
capital stock of Infocore whether or not presently issued or outstanding,
except for outstanding options to purchase shares of Infocore Common Stock
granted pursuant to the Infocore 1991 Stock Option Plan, all of which
outstanding options are listed on the Infocore Schedule.
3.4 Authority. The execution and delivery of this Agreement and
---------
the consummation of the transactions contemplated hereby have been
authorized by all necessary corporate action on the part of the Board of
Directors of Infocore and, subject to the approval by the shareholders of
Infocore of this Agreement in accordance with the Corporation Law, no other
corporate proceedings on the part of Infocore are necessary to authorize
this Agreement or the carrying out of the transactions contemplated hereby.
This Agreement is binding and enforceable upon Infocore in accordance with
its terms, subject to any bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights.
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3.5 Conflict with Other Agreements; Consents and Approvals.
------------------------------------------------------
With respect to the following:
(a) the Articles of Incorporation or By-laws of, or any
securities issued by, Infocore or any Subsidiary,
(b) any law, statute, rule or regulation applicable to
Infocore or any Subsidiary,
(c) any Contract to which Infocore or any Subsidiary is a
party or may be bound or any Authorization held by Infocore or
any Subsidiary, and
(d) any judgment, order, injunction, decree or ruling of any
court, arbitrator or governmental or regulatory official, body or
authority applicable to Infocore or any Subsidiary,
the execution, delivery and performance by Infocore of this Agreement and
the transactions contemplated hereby will not (i) result in any violation,
conflict or default, or give to others any interest or rights, including
rights of termination, cancellation or acceleration which would have an
Infocore Material Adverse Effect, (ii) result in the creation of any lien
upon any assets of Infocore or any Subsidiary or (iii) require any
authorization, consent, approval or exemption by any person, which has not
been obtained, or any notice to or filing which has not been given or done,
other than filings pursuant to the 1933 Act and applicable state securities
laws, the shareholder approval referred to in Section 3.4 hereof, and the
filing of appropriate merger documentation under the Corporation Law.
3.6 Compliance with Law. Infocore and its Subsidiaries and
-------------------
their use and occupancy of their assets and properties wherever located,
are and have been in compliance with all applicable laws, statutes, rules,
regulations, judgments, orders, injunctions, decrees and rulings of any
court, arbitrator or of any governmental or regulatory official, body or
authority applicable to them (including, without limitation, the Americans
with Disabilities Act and all laws, rules and regulations relating to the
protection of the environment, health and safety, and the generation,
storage, handling or disposal of hazardous wastes and hazardous materials),
the non-compliance with which, or the violation of which, would have an
Infocore Material Adverse Effect, and neither Infocore nor any Subsidiary
has received any claim or notice of any such non-compliance or violation
nor is aware of any actual or potential non-compliance or violation.
Infocore and the Subsidiaries have duly and timely filed all reports and
filings that are required to be filed or provided under such laws,
statutes, rules, regulations, or which are otherwise required and have paid
all assessments required thereunder.
3.7 Financial Statements.
--------------------
(a) Infocore has provided CEI with the audited balance
sheets of Infocore as of December 31, 1996 and 1995 and the related
statements of income, retained earnings and cash flows for the two years
ended December 31, 1996. Following the date hereof, Infocore will deliver
to CEI, within 30 days following the end of each calendar month, an
unaudited monthly balance sheet and income statement for Infocore. Such
financial statements have been, or will be, prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods involved (except as may be indicated in the notes thereto and
except for the omission of footnote information in the case of unaudited
statements), and fairly present or will fairly present (subject, in the
case of unaudited statements to normal recurring audit adjustments which in
the aggregate are not material) the financial position of Infocore at the
dates indicated and the results of operations and cash flows of Infocore
for the periods indicated (such financial statements are hereinafter
referred to as the "Infocore Financial Statements"). The balance sheet of
Infocore at December 31, 1996 described above is referred to herein as the
"Infocore Balance Sheet".
(b) Infocore's books and records are complete and in
reasonable detail, and accurately and fairly reflect the transactions and
dispositions of Infocore's assets.
3.8 Absence of Undisclosed Liabilities. Infocore has no
----------------------------------
liabilities or obligations (direct or indirect, contingent or absolute,
matured or unmatured) of any nature, except for liabilities and obligations
(i) in the amounts and categories reflected, reserved against or given
effect to in the Infocore Financial Statements, (ii)
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described in, or disclosed pursuant to, this Agreement, or (iii) incurred
in the ordinary course of business since December 31, 1996.
3.9 Absence of Adverse Changes. Since December 31, 1996, there
--------------------------
has been no change in the business, assets, liabilities, financial
condition, results of operations or prospects of Infocore and its
Subsidiaries, taken as a whole, which would constitute an Infocore Material
Adverse Effect.
3.10 Tax and Other Returns and Reports. All federal, state,
---------------------------------
local and foreign tax returns, reports and statements required to be filed
by Infocore or any Subsidiary have been filed within the time and in the
manner prescribed by law. Such returns correctly reflected the facts
regarding the income, businesses, assets, operations and activities of
Infocore and any Subsidiary. Such returns correctly reflected all taxes
due or payable by Infocore or any Subsidiary through the date of this
Agreement. Taxes shown to be due and payable thereon have been paid or
adequately reserved, and there are no pending assessments, asserted
deficiencies or claims for additional taxes which have not been paid.
There are no material deficiencies which representatives of the IRS or any
other taxing authority have advised Infocore are expected to be included in
an audit report, and no material special charges, penalties, interest or
fines are being asserted against Infocore or any of its Subsidiaries with
respect to payment or failure to pay any taxes. None of the federal tax
returns filed by Infocore have been audited by the IRS. In the opinion of
Infocore's management, the reserve or accrual for taxes shown on the
Infocore Balance Sheet is sufficient for payment of all unpaid federal,
state, local and foreign taxes of Infocore and its Subsidiaries through
such date.
3.11 Dividends and Stock Purchases. Since December 31, 1996
-----------------------------
Infocore has not declared, set aside or paid any dividend, or made or
agreed to make any other distribution or payment in respect of shares of
Infocore's capital stock nor has it redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or otherwise acquire any shares of
Infocore's capital stock.
3.12 Assets. Infocore and its Subsidiaries have good and
------
marketable title to all material assets owned by them constituting real
property and good title to all material assets owned by them constituting
personal property, including without limitation those assets reflected in
the Infocore Financial Statements in the amounts and categories reflected
therein, free and clear of all mortgages, liens, pledges, charges or
encumbrances or other third party interests of any nature whatsoever,
except (a) the lien of current taxes not yet due and payable, (b) assets
disposed of by Infocore or any Subsidiary since December 31, 1996 solely in
the ordinary course of business consistent with past practice, (c) such
secured indebtedness, financing or capital lease obligations, or purchase
money security interest as are disclosed in the Infocore Financial
Statements covering the properties referred to therein, and (d) such other
imperfections of title, easements, mortgages, liens, pledges, charges and
encumbrances, if any, as do not materially detract from the value, or
interfere with the present or proposed use, of the assets subject thereto.
All tangible assets material to the operation of Infocore's business are in
good working order and repair and comply in all material respects with
applicable rules, regulations and standards regarding their intended use.
Infocore's tangible assets meet, in all material respects, all current
industry technical performance standards for assets of their particular
design. Infocore has an inventory of spare parts and other materials
relating to its business of the type, nature and amount consistent with
Infocore's past practices and good industry practices.
3.13 Accounts Receivable. The accounts receivable reflected on
-------------------
the Infocore Balance Sheet and arising thereafter to and including the
Effective Date, arose, and will arise, from bona fide transactions in the
ordinary course of business and are and will be fully collectible, subject
to any reserve for doubtful accounts on the Infocore Balance Sheet. The
amount of accounts receivable reflected on the Infocore Balance Sheet is
accurately reflected in the invoices and statements rendered by Infocore
and its Subsidiaries.
3.14 Contracts.
---------
(a) The Infocore Schedule sets forth each contract,
agreement, note, debenture, bond, lease, mortgage, license, understanding,
or arrangement to which Infocore or any Subsidiary is a party or may be
bound, except for (i) those that may be terminated without liability or
penalty on not more than thirty days notice, (ii) those under which the
executory obligation requiring future performance of Infocore or any
Subsidiary involves an individual amount of less than $1,000, or (iii)
those under which the sole executory obligation of Infocore consists of
outstanding equipment warranties (collectively the "Contracts").
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<PAGE>
(b) All Contracts are in force in accordance with their
terms. Neither Infocore nor any Subsidiary (nor any other party) has
violated any material provision of, or committed or failed to perform any
act which with notice, lapse of time or both would constitute a material
default under the provisions of, any Contract. The Infocore Schedule
identifies all Contracts which require the consent or approval of third
parties to the execution and delivery of this Agreement or to the
consummation and performance of the transactions contemplated hereby.
3.15 Litigation. No claim, action, suit, arbitration, or other
----------
proceeding is pending, or known by Infocore to be threatened against
Infocore or any Subsidiary or any of their properties before any court,
governmental or regulatory official, body or authority, arbitrator or
mediator. To the knowledge of Infocore, no investigation is pending or
threatened against Infocore or any Subsidiary or any of their properties
before any court, governmental or regulatory official, body or authority,
arbitrator or mediator. There are no judgments, consent decrees,
injunctions, or any other judicial or administrative mandates of any nature
outstanding against Infocore or any Subsidiary. There are no claims,
actions, suits or other proceedings pending, or known by Infocore to be
threatened, against any director or officer of Infocore. To the knowledge
of Infocore, no events have occurred which could reasonably be expected to
form the basis for a claim or other proceedings against Infocore's
directors or officers for breach of fiduciary duty.
3.16 Insurance. Each of Infocore and its Subsidiaries maintains
---------
insurance coverage on its structures, facilities, machinery, equipment and
other assets and properties and with respect to its employees and
operations which covers liabilities and risks customarily insured against
by similar businesses on customary terms. The Infocore Schedule contains a
complete and accurate description of the insurance coverage applicable to
Infocore and its Subsidiaries, including amounts and lines of coverage,
terms, expiration date, premium and loss experience history by line of
coverage. All such policies are occurrence, rather than claims made
policies. There are no provisions in such policies for retroactive or
retrospective premium adjustments. The insurance binders and policies
listed on the Infocore Schedule are valid and in full force and effect and
will continue in full force and effect until the Effective Date. Neither
Infocore nor any Subsidiary has been refused any insurance by an insurance
carrier to which it has applied for insurance during the past three years.
Infocore and each Subsidiary has complied in all material respects with the
provisions of such policies.
3.17 Labor Matters. Neither Infocore nor any Subsidiary is a
-------------
party to or bound by any collective bargaining agreements with respect to
any employees of Infocore or any Subsidiary. Since December 31, 1996,
there has not been, nor to the knowledge of Infocore was there or is there
threatened, any strike, slowdown, picketing or work stoppage by any union
or other group of employees against Infocore or any Subsidiary or any of
their premises, or any other labor trouble or other occurrence, event or
condition of a similar character which may have an Infocore Material
Adverse Effect.
3.18 Employee Benefit Plans.
----------------------
(a) With respect to each employee benefit plan (including,
without limitation, any "employee benefit plan," as defined in Section 3(3)
of ERISA) (all the foregoing being herein called "Benefit Plans"),
maintained or contributed to by Infocore or any of its Subsidiaries,
Infocore has made available to CEI a true and correct copy of (i) the most
recent annual report (Form 5500) filed with the IRS, (ii) such Benefit
Plan, (iii) each trust agreement and group annuity contract, if any,
relating to such Benefit Plan and (iv) the most recent actuarial report or
valuation relating to any Benefit Plan subject to Title IV of ERISA.
(b) With respect to the Benefit Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of Infocore,
there exists no condition or set of circumstances in connection with which
Infocore or any of its Subsidiaries is subject to any liability that could
be reasonably expected to have an Infocore Material Adverse Effect, under
ERISA, the Code or any other applicable law. All Benefit Plans conform to,
and have been administered and operated in compliance, in all material
respects, with the requirements of the applicable plan documents, ERISA,
the Code and any other applicable law.
(c) With respect to the Benefit Plans, individually and in
the aggregate, there are no material funded benefit obligations for which
contributions have not been made or properly accrued and there are no
material unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted
-8-
<PAGE>
in accordance with generally accepted accounting principles, on the
consolidated financial statements of Infocore and its Subsidiaries.
(d) Each Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service. No such Benefit Plan has been
completely or partially terminated since December 31, 1992.
(e) No Benefit Plan, nor any fiduciary thereof, has engaged
in a transaction which is reasonably likely to subject any Benefit Plan, or
any fiduciary thereof, to any material taxes or penalties for a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) or any material penalty under Section 502 of ERISA.
3.19 Franchises, Licenses, Permits, Etc. Infocore and its
----------------------------------
Subsidiaries own or possess in the operation of their respective businesses
all franchises, licenses, permits, consents, approvals, rights, waivers and
other governmental authorizations ("Authorizations") which are material to
the conduct of the business of Infocore and its Subsidiaries, taken as a
whole. Neither Infocore nor any Subsidiary is in material default, or has
received any notice of any claim or material default, with respect to any
such Authorization or any notice of any other material claim or proceeding
or threatened proceeding relating to any such Authorization or claimed lack
of any necessary material Authorization. Neither the execution or delivery
of this Agreement nor the consummation of the transactions contemplated
hereby will require any notice or consent under or have any material
adverse effect upon any such Authorization.
3.20 Patents and Trademarks. Except as set forth on the Infocore
----------------------
Schedule, Infocore does not own, license or use in its business any
material patents, trademarks, copyrights or other intellectual property
assets. Infocore and its Subsidiaries own (free and clear of all liens)
all such patents, trademarks, tradenames, copyrights and applications with
respect thereto and other intellectual property, have entered into a
subsisting license agreement with respect thereto, or otherwise have
adequate authority to use such intellectual property in the conduct of
Infocore's business. Neither Infocore nor any Subsidiary has received any
notice or other information with respect to any alleged infringement or
unlawful use of any such asset nor has Infocore or any Subsidiary granted
or agreed to grant any license to use any such asset.
3.21 Ordinary Course. Since December 31, 1996, Infocore and its
---------------
Subsidiaries have conducted their business solely in the ordinary course
consistent with past practice. Without limitation of the foregoing, since
December 31, 1996, Infocore (except as otherwise expressly disclosed to CEI
pursuant to this Agreement):
(a) has not made any change in its authorized, issued or
outstanding capital stock and has not granted any options or other rights
to acquire, whether directly or contingently, any of its capital stock, nor
has it permitted any third party to acquire, or gained any rights to
acquire, any shares of capital stock of any Subsidiary, except for the
issuance of Infocore Common Stock as a result of the exercise of stock
options granted prior to the date of this Agreement under the Infocore 1991
Stock Option Plan;
(b) has not declared, set aside, or paid any dividend or
made any other distribution in respect of, nor repurchased any of, its
capital stock;
(c) has not suffered any physical damage or destruction to
its assets which would have an Infocore Material Adverse Effect;
(d) has not been the subject of any actual or threatened
organized campaign, strike, slowdown, picketing or work stoppage by any
union or other group of employees, or any other labor trouble or other
occurrence, event or condition of a similar character which may have an
Infocore Material Adverse Effect;
(e) has not entered into or amended any employment contracts
or any employee benefit plan or arrangement, increased the rate of
compensation (or other bonus or benefit) payable or to become payable by it
to any officer or any other executive employee except for bonuses awarded
to management employees in an aggregate amount not to exceed $150,000,
provided such bonuses are expressly conditioned upon the recipient's use of
the bonus
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<PAGE>
amount for payment of the purchase price of Infocore Common Stock acquired
by way of the exercise of options under the Infocore 1991 Stock Option
Plan, extended any credit or made any loans to any employee, made any
general increase in compensation or rate of compensation (or other bonus or
benefit) payable or to become payable to hourly employees or salaried
employees except in the ordinary course of business consistent with past
practice;
(f) has not incurred or guaranteed any debt except in the
ordinary course of business consistent with past practice;
(g) has not encumbered, sold or disposed of any assets
(tangible or intangible) except for sales of inventory in the ordinary
course of business consistent with past practice;
(h) has not changed in any material respect its accounting
and tax practices, policies or principles;
(i) has not cancelled or waived any debts or claims having a
value of $1,000 in the aggregate;
(j) has paid all taxes as they become due, filed all
federal, state, local and foreign tax returns, reports and statements
required to be filed within the time and in the manner prescribed by law,
and collected or withheld all taxes required to be collected or withheld
from employees, independent consultants or other third parties;
(k) has not filed any amended tax return or entered into a
settlement or any audit or other tax dispute with the IRS or any other
taxing authority;
(l) has not received any communication (oral or written)
from any customer, supplier or governmental or regulatory agency which
constitutes (or which could reasonably be expected to result in) an
Infocore Material Adverse Effect;
(m) has not changed in any material respect its existing
pricing structure, fees and charges structure, marketing and promotional
plans and policies; and
(n) has not entered into any (or modified any existing)
lease, contract, commitment or agreement or engaged in any transaction
(including without limitation any borrowing, capital expenditures, capital
financing, leasing arrangement or purchase commitment) except in the
ordinary course of business consistent with past practice.
3.22 Brokerage and Other Fees. In connection with the
------------------------
transactions contemplated by this Agreement, no broker, finder or similar
agent has been employed by or on behalf of Infocore, and no person with
which Infocore has had dealings or communications of any kind is entitled
to any brokerage or finder's fee or other commission in connection with the
transactions.
3.23 Information Supplied. None of the information supplied or
--------------------
to be supplied by Infocore or any of its Subsidiaries for inclusion or
incorporation by reference in the prospectus and proxy statement forming a
part of the Registration Statement (the "Prospectus and Proxy Statement")
to be filed with the SEC by CEI in connection with the issuance of CEI
Common Stock pursuant to the Merger or any other documents to be filed with
the SEC in connection with the transactions contemplated hereby will, at
the respective times such documents are filed, and, in the case of the
Registration Statement, when it becomes effective and at all times
necessary to comply with the 1933 Act, and, with respect to the Prospectus
and Proxy Statement, when mailed and, as amended or supplemented, at all
times through the Closing Date, contain any untrue statement of material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances in which they are made,
not misleading. All documents filed by Infocore and its Subsidiaries with
the SEC and any other regulatory agency in connection with the Merger will
comply in all material respects with the provisions of all applicable rules
and regulations.
3.24 Disclosure. No representation or warranty hereunder or
----------
information contained in the Infocore Financial Statements, the Infocore
Schedule or any certificate, statement, or other document delivered by
Infocore
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hereunder contains any untrue statement of material fact or omits to state
a material fact necessary in order to make the statements contained therein
or herein, in light of the circumstances in which they are made, not
misleading.
3.25 Tax Free Reorganization Matters.
-------------------------------
(a) To the best of the knowledge of the management of
Infocore, there is no current plan or intention by the shareholders of
Infocore to sell, exchange or otherwise dispose of a number of shares of
CEI Common Stock received in the Merger that would reduce the former
Infocore shareholders' ownership of CEI Common Stock to a number of shares
having a value, as of the date of the Merger, of less than fifty percent
(50%) of the value of all of the formerly outstanding capital stock of
Infocore as of the same date. For purposes of this representation, shares
of Infocore Common Stock exchanged for cash in lieu of fractional shares
will be treated as outstanding Infocore stock on the date of the Merger.
(b) As a result of the Merger, Infocore will transfer and
Sub will acquire at least ninety percent (90%) of the fair market value of
the net assets and at least seventy percent (70%) of the fair market value
of the gross assets held by Infocore immediately prior to the Merger. For
purposes of this representation, the amount of Infocore assets used to pay
Infocore reorganization expenses will be included as assets of Infocore
held immediately prior to the Merger.
(c) The liabilities of Infocore assumed by Sub and the
liabilities to which the transferred assets of Infocore are subject, if
any, were incurred by Infocore in the ordinary course of its business.
(d) Infocore will pay its expenses, if any, incurred in
connection with the Merger.
(e) Infocore is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
(f) Infocore is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CEI AND SUB
4. Representations and Warranties of CEI and Sub. CEI and Sub
---------------------------------------------
represent and warrant to Infocore as follows, except as set forth in a
disclosure schedule (the "CEI Schedule") delivered by CEI contemporaneously
with the execution of this Agreement:
4.1 Organization, Powers and Qualifications. CEI is a
---------------------------------------
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania. CEI has all requisite corporate
power and authority to carry on its business as it has been and is now
being conducted and to own, lease and operate the properties and assets
used in connection therewith. CEI is duly qualified as a foreign
corporation authorized to do business and is in good standing in every
jurisdiction in which such qualification is required, other than such
jurisdictions where the failure so to qualify would not have a CEI Material
Adverse Effect.
4.2 Subsidiaries. Sub and each other Subsidiary of CEI is duly
------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each such Subsidiary has all requisite
power and authority to carry on its business as it has been and is now
being conducted and to own, lease and operate the assets and properties
used in connection therewith. Each such Subsidiary is duly qualified to do
business and is in good standing in each jurisdiction in which such
qualification is required, other than such jurisdiction where the failure
so to qualify would not have a CEI Material Adverse Effect. All issued and
outstanding shares of capital stock of Sub have been duly authorized, are
fully paid and nonassessable, and are owned of record and beneficially by
CEI free and clear of all pledges, liens, claims, security interests and
other charges or defects in title of any nature whatsoever.
4.3 Authority. The execution and delivery of this Agreement and
---------
the consummation of the transactions contemplated hereby have been
authorized by all necessary corporate action on the part of the Boards of
Directors and shareholders (if necessary) of CEI and Sub and no other
corporate proceedings on the part of CEI or Sub are necessary to authorize
this Agreement or to carry out the transactions contemplated hereby. This
Agreement is binding and enforceable upon CEI and Sub in accordance with
its terms, subject to any bankruptcy, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights.
4.4 Capital Stock.
-------------
(a) As of March 1, 1997, the authorized capital stock of CEI
consists of: (i) 10,000,000 shares of CEI Common Stock, par value $5.00
per share, of which 4,482,227 shares were issued and outstanding and 86,273
shares were held as treasury shares, and (ii) 900,000 shares of Series A
Convertible Preferred Stock, par value of $65.00 per share, of which
196,618 shares were issued and outstanding and no shares were held as
treasury shares.
(b) All of the issued and outstanding shares of the CEI's
capital stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, and were issued in compliance
with all applicable federal and state securities laws. No shares of capital
stock issued by CEI are or were at the time of their issuance subject to
preemptive rights.
4.5. Valid Issuance of CEI Stock, Etc. The CEI Common Stock
--------------------------------
which will be issued in connection with the Merger, when issued and
delivered in accordance with the terms hereof, will be duly and validly
issued, fully paid and nonassessable and will be issued in compliance with
all applicable federal and state securities laws.
4.6 Conflict with Other Agreements; Consents and Approvals.
------------------------------------------------------
With respect to the following:
(a) the By-laws of, or any securities issued by, CEI or any
of its Subsidiaries,
(b) any law, statute, rule or regulation applicable to CEI
or any of its Subsidiaries,
(c) any contract to which CEI or any of its Subsidiaries is
a party or may be bound or any Authorization held by CEI or any
of its Subsidiaries, and
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<PAGE>
(d) any judgment, order, injunction, decree or ruling of any
court, arbitrator or governmental or regulatory official, body or
authority applicable to CEI or any of its Subsidiaries,
the execution, delivery and performance by CEI of this Agreement and the
transactions contemplated hereby will not (i) result in any violation,
conflict or default, or give to others any interest or rights, including
rights of termination, cancellation or acceleration which would have a CEI
Material Adverse Effect, or (ii) require any authorization, consent,
approval or exemption by any person, the failure to obtain which would have
a CEI Material Adverse Effect, which has not been obtained, or any notice
to or filing which has not been given or done, other than the consent of
Bank of Pennsylvania under CEI's current term loan agreement, filings
pursuant to the 1933 Act, the 1934 Act, and applicable state securities
laws, and the filing of appropriate merger documentation under the
Corporation Law.
With respect to the Articles of Incorporation of CEI, the
execution, delivery and performance by CEI of this Agreement and the
transactions contemplated hereby will not (i) result in any violation,
conflict or default, or give to others any interest or rights, including
rights of termination, cancellation or acceleration or (ii) require any
authorization, consent, approval or exemption by any person which has not
been obtained or any notice to or filing which has not been given or done.
4.7 Financial Statements. The financial statements of CEI
--------------------
included in the CEI SEC Documents comply as to form in all material
respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared
in accordance with generally accepted accounting principles consistently
applied throughout the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC), and fairly present (subject, in the case of
unaudited statements to normal recurring audit adjustments which in the
aggregate are not material) the consolidated financial position of CEI and
its Subsidiaries at the dates indicated and the consolidated results of
operations and cash flows of CEI and its Subsidiaries for the periods
indicated (such financial statements are hereinafter referred to as the
"CEI Financial Statements"). The consolidated balance sheet of CEI and its
Subsidiaries at December 31, 1996 described above is referred to herein as
the "CEI Balance Sheet". Except as disclosed in the CEI SEC Documents, CEI
is not a party to any material probable business combination for which
financial statements are required to be disclosed pursuant to Section 3-05
of Regulation S-X under the 1933 Act.
4.8 Brokerage. In connection with the transactions contemplated
---------
by this Agreement, no broker, finder or similar agent has been employed by
or on behalf of CEI, and no person with which CEI has had dealings or
communications of any kind is entitled to any brokerage or finder's fee or
other commission in connection with the transactions other than its
financial advisor, JSI Financial Services.
4.9 Reports. CEI has previously furnished Infocore with true
-------
and complete copies of (i) each final prospectus and definitive proxy
statement filed by CEI with the SEC since December 31, 1995, and (ii) each
report filed by CEI with the SEC with respect to the year ended December
31, 1995 or any months or periods ending thereafter (the "CEI SEC
Documents"). None of such documents or other communications contained as
of the date of such document any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Each of such documents which
is subject to the 1933 Act or the 1934 Act, or the regulations promulgated
thereunder, complied in all material respects when filed in form with such
Acts and the applicable regulations thereunder. Each of the CEI SEC
Documents was timely filed and all reports required to be filed by CEI with
the SEC from the date of this Agreement through the Effective Date shall be
timely filed.
4.10 Information Supplied. None of the information supplied or
--------------------
to be supplied by CEI or any of its Subsidiaries for inclusion or
incorporation by reference in the Registration Statement (including the
Prospectus and Proxy Statement) to be filed with the SEC by CEI in
connection with the issuance of CEI Common Stock pursuant to the Merger or
any other documents to be filed with the SEC in connection with the
transactions contemplated hereby will, at the respective times such
documents are filed, and, in the case of the Registration Statement, when
it becomes effective and at all times necessary to comply with the 1933
Act, and, with respect to the Prospectus and Proxy Statement, when mailed
and at all times through the Closing Date contain any untrue statement of
material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances in which they are
made, not
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<PAGE>
misleading. All documents filed by CEI and its Subsidiaries with the SEC
and any other regulatory agency in connection with the Merger will comply
in all material respects with the provisions of all applicable rules and
regulations.
4.11 Disclosure. No representation or warranty hereunder or
----------
information contained in the CEI Financial Statements, the CEI Schedule or
any written certificate, statement, or other document delivered by CEI
hereunder contains any untrue statement of material fact or omits to state
a material fact necessary in order to make the statements contained therein
or herein, in light of the circumstances in which they are made, not
misleading.
4.12 Tax Matters. CEI has no present plan or intention to
-----------
reacquire any of the shares of CEI Common Stock it will issue to the
shareholders of Infocore pursuant to the Merger. Following the Effective
Date, Sub, CEI, and/or its affiliates will continue the historic business
of Infocore and its Subsidiaries as presently conducted. CEI presently
controls Sub within the meaning of Section 368(c) of the Code, and
following the Effective Date, Sub will not issue additional shares of its
stock that would result in CEI losing control of Sub within the meaning of
Section 368(c) of the Code.
4.13 Absence of Adverse Changes. Since December 31, 1996, there
--------------------------
has been no change in the business, assets, liabilities, financial
condition, results of operations or prospects of CEI and its Subsidiaries,
taken as a whole, which would constitute a CEI Material Adverse Effect.
ARTICLE V
COVENANTS
5.1 Conduct of Business Prior to Closing. From the date of this
------------------------------------
Agreement to the Effective Date, Infocore (except as expressly contemplated
or permitted by this Agreement, or to the extent that CEI shall otherwise
consent in writing) agrees as to itself and its Subsidiaries that it:
(a) will, and will cause each Subsidiary to, conduct and
operate its business only in the ordinary course consistent with past
practice;
(b) will not, and will cause each Subsidiary not to, conduct
its business in such a manner so as to cause the representations and
warranties made by it and its Subsidiaries herein not to be true on the
Closing Date as though such representations and warranties were made on and
as of such date;
(c) will, and will cause each Subsidiary to, use its
reasonable best efforts to keep available the services of the present
employees and agents of it and the Subsidiaries, and to maintain the
relations and goodwill with the suppliers, customers and any others having
business relations with it or its Subsidiaries;
(d) will make no change in its authorized, issued or
outstanding capital stock and will not grant any options or other rights to
acquire, whether directly or contingently, any of its capital stock, nor
will it permit any third party to acquire, or gain any rights to acquire,
any shares of capital stock of any Subsidiary, except for the issuance of
Infocore Common Stock as a result of the exercise of stock options granted
prior to the date of this Agreement under the Infocore 1991 Stock Option
Plan;
(e) will not declare, set aside, or pay any dividend or make
any other distribution in respect of, nor repurchase any of, its capital
stock;
(f) will not, and will not permit any Subsidiary to, modify
or amend its charter documents or By-laws;
(g) will not, and will not permit any Subsidiary to, enter
into or amend any employment contracts or any employee benefit plan or
arrangement, increase the rate of compensation (or other bonus or benefit)
payable or to become payable by it to any officer or any other executive
employee except for bonuses awarded to management employees in an aggregate
amount not to exceed $150,000, provided such bonuses are expressly
conditioned
-14-
<PAGE>
upon the recipient's use of the bonus amount for payment of the purchase price
of Infocore Common Stock acquired by way of the exercise of options under the
Infocore 1991 Stock Option Plan, extend any credit or make any loans to any
employee, make any general increase in compensation or rate of compensation (or
other bonus or benefit) payable or to become payable to hourly employees or
salaried employees except in the ordinary course of business consistent with
past practice, or make any material increase in the contributions to any
employee benefit program or arrangement;
(h) will not, and will not permit any Subsidiary to, incur or
guarantee any debt except in the ordinary course of business consistent with
past practice;
(i) will not, and will not permit any Subsidiary to, sell or
dispose of any assets (tangible or intangible) except for sales of inventory in
the ordinary course of business consistent with past practice;
(j) will not, and will not permit any Subsidiary to, change in
any material respect its accounting and tax practices, policies or principles;
(k) will not, and will not permit any Subsidiary to, cancel or
waive any debts or claims having a value of $10,000 in the aggregate;
(l) will, and will cause each Subsidiary to, pay all taxes as
they become due, file all federal, state, local and foreign tax returns, reports
and statements required to be filed by Infocore or any Subsidiary within the
time and in the manner prescribed by law, and collect or withhold all taxes
required to be collected or withheld from employees, independent consultants or
other third parties;
(m) will not, and will not permit any Subsidiary to, file any
amended tax return or enter into a settlement of any audit or other tax dispute
with the IRS or any other taxing authority;
(n) will not, and will not permit any Subsidiary to, change in
any material respect its existing pricing structure, fees and charges structure,
marketing and promotional plans and policies; and
(o) will not, and will not permit any Subsidiary to, enter into
any (or modify any existing) lease, contract, commitment or agreement or engage
in any transaction (including without limitation any borrowing, capital
expenditure, capital financing, leasing arrangement or purchase commitment)
except in the ordinary course of business consistent with past practice.
5.2 Updating of Schedules. From the date of this Agreement to
---------------------
the Closing Date, each of Infocore and CEI agrees that it will promptly inform
the other in writing if any information set forth in its Schedule is not
accurate and complete in all material respects as of such later date and will
promptly disclose to the other in writing any information which arises after the
date hereof and which would have been required to be included in its Schedule to
make such Schedule accurate and complete in all material respects as of such
later date; provided, however, that none of such disclosures shall be deemed to
modify, amend or supplement its representations and warranties or its Schedule
for purposes of any provision hereof unless the other shall have consented
thereto in writing.
5.3 Access. From the date of this Agreement to the Closing
------
Date, Infocore agrees that it will give to CEI and its financial advisers,
counsel, accountants and other representatives full access, during normal
business hours upon reasonable advance notice, to all personnel, properties,
books, contracts, documents and records with respect to its affairs as CEI may
reasonably request, including without limitation all work papers, schedules and
calculations relating to financial statements, and any other information that
may be necessary for CEI to conduct an audit of the books and records of
Infocore. Any information relating to Infocore shall be delivered subject to the
provisions regarding confidentiality set forth in Section 3 of the parties'
Letter of Intent dated February 13, 1997, shall be deemed to be Information as
defined therein, and CEI and Sub shall be bound by the provisions of Section 3
of such Letter of Intent which are incorporated herein by this reference.
5.4 Proxy Material, Registration Statement, Other Filings and
---------------------------------------------------------
Applications. In connection with the transactions contemplated by this
- ------------
Agreement:
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<PAGE>
(a) CEI shall file with the SEC the Registration Statement to
register under the 1933 Act the CEI Common Stock to be issued to the holders of
Infocore Common Stock in connection with this Agreement and shall use its
reasonable best efforts to cause the Registration Statement to become effective
and to provide Infocore with the necessary copies of the Prospectus and Proxy
Statement for mailing to the shareholders of Infocore at the earliest
practicable date after the effective date of the Registration Statement. CEI
shall file all such amendments to the Registration Statement as shall be
necessary to keep it current and effective until the Merger shall have been
consummated.
(b) In connection with the preparation of the Registration
Statement, Infocore shall provide CEI with all proxy material which Infocore
intends to use in connection with obtaining the necessary Infocore shareholder
approval for the Merger and the transactions contemplated hereby and all other
material which in the opinion of counsel for CEI is required by applicable law
to be sent to the shareholders of CEI in connection with such approval. Infocore
agrees to cause the Prospectus and Proxy Statement to be mailed to its
shareholders at the earliest practicable date after the effective date of the
Registration Statement.
(c) CEI shall file all applicable state securities or "blue sky"
applications and use its reasonable best efforts to qualify the CEI Common Stock
issuable pursuant to this Agreement under such applicable state securities or
"blue sky" laws prior to the Closing Date; provided, however, that CEI shall not
be required to consent to general service of process or qualify as a foreign
corporation or take any action that would subject CEI to any taxing authority to
which it is not now subject.
(d) CEI shall file an additional listing application with the
NASDAQ Small Cap Market covering the CEI Common Stock to be issued to the
holders of Infocore Common Stock in connection with this Agreement and shall use
its reasonable best efforts to obtain approval of such application upon official
notice of issuance.
(e) CEI shall promptly prepare and file with all other
governmental agencies (if any) all documents necessary for such agency (or
agencies) to approve the consummation of the transactions contemplated by this
Agreement. CEI shall use its reasonable best efforts to obtain all required
regulatory approvals as promptly as practical.
In connection with the preparation and filing of the Registration
Statement, any state securities or "blue sky" application, listing application,
or other regulatory application, or any amendment thereto pursuant to this
Section 5.4, the parties hereto shall provide to each other such information and
documents (or access thereto), and shall render such assistance, as the other
party may reasonably request or as may be necessary to carry out the provisions
of this Section 5.4.
5.5 Shareholder Meeting. Infocore shall call and hold a meeting
-------------------
of its shareholders to be held as soon as is practicable for the purpose of
voting on this Agreement. A majority of the Board of Directors of Infocore will
recommend to its shareholders approval of this Agreement and the Merger and
shall take all such actions consistent with the fiduciary obligations of such
Board to obtain such approvals as promptly as practicable, including without
limitation the solicitation of proxies.
5.6 Third Party Consents. Prior to the Effective Date, each of
--------------------
CEI and Infocore shall obtain all consents, approvals or authorizations of third
parties which are required to be obtained by each of them in order to effect the
transactions contemplated by this Agreement and such other consents, approvals
or authorizations the absence of which would have an Infocore Material Adverse
Effect or a CEI Material Adverse Effect, as appropriate.
5.7 Satisfaction of Conditions. Each party hereto will use all
--------------------------
reasonable best efforts to satisfy all the conditions to be satisfied by it to
effect the transactions contemplated hereby.
5.8 Public Announcements. Neither Infocore nor CEI will make,
--------------------
issue or release any oral or written public announcement or statement
concerning, or acknowledgment of the existence of, or reveal the terms,
conditions and status of, the transactions contemplated by this Agreement, or
any other communications to its shareholders or the investing public, directly
or indirectly (including, without limitation, press releases and statements to
securities analysts), without first making a good faith attempt to inform the
other of the contents of such announcement,
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<PAGE>
acknowledgment or statement and, unless in the opinion of counsel to such party
such statement or release is required by applicable law, without first obtaining
the consent of the other.
5.9 Other Proposals. Infocore hereby agrees that it shall not,
---------------
nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any of its or its Subsidiaries' officers, directors, employees, affiliates,
investment bankers or other representatives or agents (collectively, the
"Representatives") to, directly or indirectly, solicit, encourage (including by
way of furnishing non-public information), initiate discussions or negotiations
relating to or take any other action to facilitate, any inquiries or the making
of any proposal for an Acquisition Transaction. As used herein, the term
"Acquisition Transaction" shall mean the occurrence of any of the following
events: (i) Infocore is acquired by merger or otherwise by any "person" or
"group," as such terms are defined in Section 13(d) of the 1934 Act, other than
CEI, Sub or any of their respective affiliates (a "Third Party"); (ii) a Third
Party acquires more than thirty percent (30%) (as reflected in accordance with
generally accepted accounting principles on Infocore's most recent monthly
financial statements) in value of the total assets of Infocore and its
Subsidiaries, taken as a whole; (iii) a Third Party acquires more than thirty
percent (30%) of the outstanding Infocore Common Shares; (iv) Infocore adopts
and implements a plan of liquidation relating to, or extraordinary dividend
equal to, more than thirty percent (30%) in value of the total assets of
Infocore (as reflected in accordance with generally accepted accounting
principles on Infocore's most recent monthly financial statements); or (v)
Infocore enters into a preliminary or definitive agreement with a Third Party
relating to any of the transactions referred to in clauses (i) through (iv)
above. Infocore agrees that it shall promptly notify CEI orally and in writing
of any such inquiries or proposals. Any such notification shall include the
identity of the person making such proposal or request, the terms thereof, and
any other information with respect thereto as CEI may reasonably request.
Nothing contained in this Agreement shall be construed to prohibit Infocore from
(a) disclosing, under protection of an appropriate confidentiality agreement,
non-public information concerning Infocore to, and engaging in discussions and
negotiations concerning an Acquisition Transaction with, a person who has made a
bona fide offer to engage in an Acquisition Transaction for a consideration and
on terms which are more favorable to the Infocore shareholders than the terms of
the Merger, and who can reasonably be expected to consummate the Acquisition
Transaction on the terms that have been proposed, and which disclosure,
discussions and negotiations, in the judgment of Infocore, shall be required by
reason of the fiduciary obligations of the Board of Directors of Infocore and
(b) subject to Infocore's obligations under Section 8.5(a) hereof and only after
terminating this Agreement in accordance with Section 8.1(c)(iii) hereof,
accepting such offer for an Acquisition Transaction from such person which the
Board of Directors of Infocore concludes is more favorable to the Infocore
shareholders than the Merger contemplated hereby.
5.10 Affiliates. Prior to the Closing Date, Infocore shall
----------
deliver to CEI a letter identifying all persons who (in Infocore's reasonable
judgment) are, at the time this Agreement is submitted for approval to the
shareholders of Infocore, "affiliates" of Infocore for purposes of Rule 145
under the 1933 Act. Infocore shall use its reasonable best efforts to cause each
such person to deliver to CEI, on or prior to the Closing Date, a written
agreement, in the form attached hereto as Exhibit "A" acknowledging and agreeing
to abide by the limitations imposed by law in respect of the sale or other
disposition of CEI Common Stock received by such person pursuant to the Merger.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF CEI AND SUB
6. Conditions to Obligations of CEI and Sub to Consummate the
----------------------------------------------------------
Merger. The obligations of CEI and Sub to consummate the Merger provided for in
- ------
this Agreement shall be subject to satisfaction, on or before the Closing Date,
of the following conditions:
6.1 Representations, Warranties, and Covenants of Infocore. The
------------------------------------------------------
representations and warranties of Infocore herein contained and the information
contained in the Infocore Schedule and other documents delivered by Infocore in
connection with this Agreement shall be true and correct at the Closing Date in
all material respects with the same effect as though made at such time, except
to the extent waived hereunder or affected by the transactions contemplated
herein; Infocore shall have performed in all material respects all obligations
and complied in all material respects with all agreements, undertakings,
covenants and conditions required by this Agreement to be performed or complied
with by it at or prior to the Closing Date; and Infocore shall have delivered to
CEI a certificate in form and
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<PAGE>
substance satisfactory to CEI dated the Closing Date and signed by the Chairman
of the Board and the President and Chief Executive Officer of Infocore to such
effect.
6.2 Infocore Shareholder Approval. The requisite approval of
-----------------------------
this Agreement and the transactions contemplated hereby shall have been given by
the Board of Directors and the shareholders of Infocore.
6.3 Employment Agreements. Harrison H. Clement, Jr., President
---------------------
and Chief Executive Officer of Infocore and Henry M. Stringer, Senior Vice
President of Infocore shall have executed and delivered to CEI employment
agreements in the form attached hereto as Exhibit "B".
6.4 No Injunctions. No preliminary or permanent injunction or
--------------
other order, decree or ruling by any federal, state or provincial court in the
United States or by any United States governmental, regulatory or administrative
agency which prevents the consummation of the transactions contemplated by this
Agreement (including the Merger) shall have been issued and remain in effect;
provided, however, that each of the parties hereto shall have used its
- -------- -------
reasonable best efforts to prevent any such injunction or other order, and to
appeal as promptly as possible any such injunction or order that may be entered.
6.5 No Antitrust Litigation. No action, suit or proceeding
-----------------------
against CEI or Infocore brought by the Antitrust Division of the Department of
Justice or the Federal Trade Commission challenging the Merger under the federal
antitrust laws shall be pending or shall have been threatened by either such
agency.
6.6 NASDAQ Listing. The NASDAQ Small Cap Market shall have
--------------
approved the listing, upon official notice of issuance, of all CEI Common Stock
issuable in connection with this Agreement.
6.7 Securities Laws. The Registration Statement shall have been
---------------
declared effective by the SEC, no stop order shall have been issued or
proceedings instituted or threatened suspending the effectiveness of the
Registration Statement, and all approvals, consents, permits, licenses or
qualifications from authorities administering the securities laws of any state
having jurisdiction, required in the reasonable judgment of CEI for the
consummation of this Agreement and the Merger, shall have been obtained and
shall be in full force and effect.
6.8 Affiliate Letters. CEI shall have received the letters from
-----------------
Infocore's affiliates referenced in Section 5.10 hereof.
6.9 Dissenters' Rights. The holders of no more than ten percent
------------------
(10%) of the outstanding shares of Infocore Common Stock shall have effectively
exercised dissenters' rights pursuant to the Corporation Law.
6.10 Legal Opinion. CEI shall have received an opinion dated the
-------------
Closing Date from Saul, Ewing, Remick & Saul, counsel to Infocore, in the form
and substance reasonably satisfactory to CEI and its counsel.
6.11 Resignations. CEI shall have received the written
------------
resignations, in a form reasonably acceptable to CEI (which shall include a
representation with respect to the matters referred to in the last two sentences
of Section 3.15 hereof), of those Infocore directors and officers designated by
CEI.
6.12 Fairness Opinion. CEI shall have received the written
----------------
opinion of its financial advisor, JSI Financial Services, dated as of a date no
later than March 17, 1997 and not subsequently withdrawn, that the consideration
to be paid by CEI in the Merger is fair to CEI's shareholders from a financial
point of view.
6.13 Exercise of Stock Options. All outstanding stock options
-------------------------
granted by Infocore pursuant to the Infocore 1991 Stock Option Plan shall have
been either (i) exercised and Infocore Common Stock issued pursuant thereto or
(ii) effectively and conclusively relinquished and terminated by the optionees.
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<PAGE>
ARTICLE VII
CONDITIONS TO OBLIGATION OF INFOCORE
7. Conditions to Obligations of Infocore to Consummate the
-------------------------------------------------------
Merger. The obligations of Infocore to consummate the Merger provided for in
- ------
this Agreement shall be subject to satisfaction, on or before the Closing Date,
of the following conditions:
7.1 Representations, Warranties, and Covenants of CEI and Sub.
---------------------------------------------------------
The representations and warranties of CEI and Sub herein contained and the
information contained in the CEI Schedule and other documents delivered by CEI
and Sub in connection with this Agreement shall be true and correct at the
Closing Date in all material respects with the same effect as though made at
such time, except to the extent waived hereunder or affected by the transactions
contemplated herein; CEI and Sub shall have performed in all material respects
all obligations and complied in all material respects with all agreements,
undertakings, covenants and conditions required by this Agreement to be
performed or complied with by them at or prior to the Closing Date; and CEI
shall have delivered to Infocore a certificate in form and substance
satisfactory to Infocore dated the Closing Date and signed by the President and
by the Chief Financial Officer of CEI to such effect.
7.2 Infocore Shareholder Approval. The requisite approval of
-----------------------------
this Agreement and the transactions contemplated hereby shall have been given by
the shareholders of Infocore.
7.3 No Injunctions. No preliminary or permanent injunction or
--------------
other order, decree or ruling by any federal, state or provincial court in the
United States or by any United States governmental, regulatory or administrative
agency which prevents the consummation of the transactions contemplated by this
Agreement (including the Merger) shall have been issued and remain in effect;
provided, however, that each of the parties hereto shall have used its
- -------- -------
reasonable best efforts to prevent any such injunction or other order, and to
appeal as promptly as possible any such injunction or order that may be entered.
7.4 No Antitrust Litigation. No action, suit or proceeding
-----------------------
against CEI or Infocore brought by the Antitrust Division of the Department of
Justice or the Federal Trade Commission challenging the Merger under the federal
antitrust laws shall be pending or shall have been threatened by either such
agency.
7.5 NASDAQ Listing. The NASDAQ Small Cap Market shall have
--------------
approved the listing, upon official notice of issuance, of all CEI Common Stock
issuable in connection with this Agreement.
7.6 Securities Laws. The Registration Statement shall have been
---------------
declared effective by the SEC, no stop order shall have been issued or
proceedings instituted or threatened suspending the effectiveness of the
Registration Statement, and all approvals, consents, permits, licenses or
qualifications from authorities administering the securities laws of any state
having jurisdiction, required in the reasonable judgment of Infocore for the
consummation of this Agreement and the Merger shall have been obtained and shall
be in full force and effect.
7.7 Tax Opinion. Infocore shall have received an opinion of
-----------
Saul, Ewing, Remick & Saul, counsel to Infocore, to the effect that:
(a) The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and Infocore and CEI will each be a "party
to a reorganization" within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by Infocore by reason of
the Merger;
(c) Except for any cash received in lieu of any fractional
shares, no gain or loss will be recognized by holders of Infocore Common Stock
who receive pursuant to the Merger solely CEI Common Stock in exchange for the
shares of Infocore Common Stock which they hold;
(d) The basis of the CEI Common Stock to be received by the
Infocore shareholders will be, in each instance, the same as the basis of the
Infocore Common Stock surrendered in exchange therefore, less any basis
attributable to fractional shares for which cash is received; and
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<PAGE>
(e) The holding period of the CEI Common Stock to be received by
Infocore shareholders will include the period during which the Infocore Common
Stock surrendered in exchange therefore was held, provided the Infocore Common
Stock was a capital asset in the hands of the holder thereof on the Effective
Date.
ARTICLE VIII
TERMINATION, WAIVER AND AMENDMENT
8.1 Termination. This Agreement may be terminated by written
-----------
notice of termination at any time before the Effective Date (whether before or
after action by the shareholders of Infocore) only as follows:
(a) by mutual consent of CEI and Infocore;
(b) by CEI
(i) upon written notice to Infocore given at any time
if the representations and warranties of Infocore contained in
Article III hereof were not true and correct in all material
respects when made or as of the Closing Date (except to the
extent qualified by materiality in which event such
representations and warranties shall be true and correct) or if
Infocore fails to perform in all material respects all
obligations and comply in all material respects with all
agreements, undertakings, covenants and conditions required by
this Agreement to be performed or complied with by it at or prior
to the Effective Date (except to the extent such performance or
compliance is qualified by materiality in which event such
performance or compliance shall have failed to occur);
(ii) upon written notice to Infocore given at any time
after November 1, 1997, if the Effective Date shall not have
occurred on or before November 1, 1997 unless the absence of such
occurrence shall be due to the failure of CEI or any of its
Subsidiaries to perform in all material respects each of its
obligations under this Agreement required to be performed by it
at or prior to the Effective Date (except to the extent such
performance or compliance is qualified by materiality in which
event such performance or compliance shall have failed to occur);
and
(c) By Infocore
(i) upon written notice given to CEI at any time if the
representations and warranties of CEI and Sub contained in
Article IV hereof were not true and correct in all material
respects when made or as of the Closing Date (except to the
extent qualified by materiality in which event such
representations and warranties shall be true and correct) or if
CEI or Sub fails to perform in all material respects all
obligations and comply in all material respects with all
agreements, undertakings, covenants and conditions required by
this Agreement to be performed or complied with by it at or prior
to the Effective Date (except to the extent such performance of
compliance is qualified by materiality in which event such
performance or compliance shall have failed to occur);
(ii) upon written notice to CEI given at any time after
November 1, 1997 if the Effective Date shall not have occurred on
or before November 1, 1997 unless the absence of such occurrence
shall be due to the failure of Infocore or any of its
Subsidiaries to perform in all material respects each of its
obligations under this Agreement required to be performed by it
at or prior to the Effective Date (except to the extent such
performance or compliance is qualified by materiality in which
event such performance or compliance shall have failed to occur);
(iii) upon written notice to CEI by Infocore if
Infocore is terminating this Agreement in order to enter into an
Acquisition Transaction with a person not a party hereto,
provided that Infocore was entitled to pursue the proposal of
such Acquisition Transaction pursuant to the provisions of
Section 5.9 hereof.
-20-
<PAGE>
8.2 Effect of Termination. In the event of the termination of
---------------------
this Agreement and the abandonment of the Merger, the provisions of this
Agreement other than the provisions of Section 8.5 shall thereafter become void
and have no effect, and no party hereto shall have any liability to any other
party hereto or its shareholders or directors or officers in respect thereof,
except that nothing herein shall relieve any party from liability for any
willful breach thereof or from its obligations under the confidentiality
provisions of Section 3 of parties' Letter of Intent dated February 13, 1997,
referred to and incorporated by reference in Section 5.3.
8.3 Waiver of Terms. Any of the terms or conditions of this
---------------
Agreement may be waived at any time prior to the Effective Date by the party
which is, or whose shareholders are, entitled to the benefit thereof, by action
taken by the Board of Directors of such party, or by its chairman, president or
any vice president authorized to act for such party; provided, however, that
such waiver shall be in writing and shall be taken only if, in the judgment of
the Board of Directors or officer taking such action, such waiver will not have
a materially adverse effect on the benefits intended hereunder to the
shareholders of such corporation, and the other parties hereto may rely on the
delivery of such a waiver as conclusive evidence of such judgment and the
validity of the waiver.
8.4 Amendment of Agreement. Anything herein or elsewhere to the
----------------------
contrary notwithstanding, to the extent permitted by law, this Agreement may be
amended, supplemented or interpreted at any time prior to the Closing Date only
by written instrument duly authorized and executed by each of the parties
hereto; provided, however, that after approval by the shareholders of Infocore,
no amendment shall be made which by law requires further approval by the
shareholders without such further approval.
8.5 Fees and Expenses.
-----------------
(a) In the event that: (1) this Agreement is terminated by
CEI pursuant to Section 8.1(b)(i), (2) this Agreement is terminated by Infocore
pursuant to Section 8.1(c)(iii), or (3) this Agreement is terminated by either
CEI or Infocore as a result of the failure to obtain Infocore shareholder
approval of this Agreement and the transactions contemplated hereby, then in any
of such events Infocore will pay CEI within one business day following the date
of termination a break-up fee in the amount of $100,000, such fee being in the
nature of liquidated damages as exclusive compensation to CEI for any and all
claims and losses which CEI has or may have incurred in connection with this
Agreement and the transactions contemplated hereby. Infocore has agreed to this
provision in order to induce CEI to enter into this Agreement and as a means of
compensating CEI for the substantial direct and indirect monetary and other
costs incurred or to be incurred in connection with the Merger and for the loss
of its ability to pursue other advantageous transactions and the potential
adverse consequences if the Merger is not completed.
(b) In the event that this Agreement is terminated by
Infocore pursuant to Section 8.1(c)(i), CEI will pay Infocore within one
business day following the date of termination a break-up fee in the amount of
$100,000, such fee being in the nature of liquidated damages as exclusive
compensation to Infocore for any and all claims and losses which Infocore has or
may have incurred in connection with this Agreement and the transactions
contemplated hereby. CEI has agreed to this provision in order to induce
Infocore to enter into this Agreement and as a means of compensating Infocore
for the substantial direct and indirect monetary and other costs incurred or to
be incurred in connection with the Merger and for the loss of its ability to
pursue other advantageous transactions and the potential adverse consequences if
the Merger is not completed.
(c) Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
ARTICLE IX
GENERAL PROVISIONS
9.1 Cooperation. Subject to the terms and conditions herein
-----------
provided, each party shall cooperate with the other party in carrying out the
provisions of this Agreement and shall execute and deliver, or cause to be
executed and delivered, such governmental notifications and additional documents
and instruments and do, or cause to
-21-
<PAGE>
be done, all additional things necessary, proper or advisable under applicable
law to consummate and make effective the transactions contemplated hereby.
9.2 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any other counterpart.
9.3 Contents of Agreement, Etc. This Agreement sets forth the
--------------------------
entire understanding of the parties with respect to the subject matter hereof.
Any previous agreements or understandings between the parties regarding the
subject matter hereof, except for arrangements between the parties concerning
confidential information, are merged into and superseded by this Agreement.
Nothing herein express or implied is intended or shall be construed to confer
upon or to give any person, other than CEI and Infocore and their respective
shareholders, any rights or remedies under or by reason of this Agreement.
9.4 No Survival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement shall survive the Effective
Date.
9.5 Section Headings, Gender and "Person". The section headings
-------------------------------------
herein have been inserted for convenience of reference only and shall in no way
modify or restrict any of the terms or provisions hereof. The use of the
masculine or any other pronoun herein when referring to any person has been for
convenience only and shall be deemed to refer to the particular person intended
regardless of the actual gender of such person. Any reference to a "person"
herein shall include an individual, firm, corporation, partnership, trust,
government or political subdivision or agency or instrumentality thereof,
association, unincorporated organization or any other entity.
9.6 Notices. All notices, consents, waivers or other
-------
communications which are required or permitted hereunder shall be sufficient if
given in writing and delivered personally, by overnight mail service, by
facsimile transmission (which is confirmed) or by registered or certified mail,
return receipt requested, postage prepaid, as follows (or to such other
addressee or address as shall be set forth in a notice given in the same
manner):
If to CEI or Sub:
Conestoga Enterprises, Inc.
202 East First Street
Birdsboro, PA 19508
Attention: John R. Bentz, President
(610) 582-6475 (Fax)
With a required copy to:
Miller and Murray, LLP
542 Court Street
P. O. Box 942
Reading, PA 19603-0942
Attention: James H. Murray, Esquire
(610) 376-5243 (Fax)
If to Infocore:
Infocore, Inc.
661 Moore Road, Suite 110
King of Prussia, PA 19406
Attention: Harrison H. Clement, Jr., President and CEO
(610) 768-5238 (Fax)
-22-
<PAGE>
With a required copy to:
Saul, Ewing, Remick & Saul
1055 Westlakes Drive, Suite 150
Berwyn, PA 19312
Attention: David S. Antzis, Esquire
(610) 408-4401 (Fax)
All such notices shall be deemed to have been given three
business days after mailing if sent by registered or certified mail, one
business day after mailing if sent by overnight courier service or on the date
transmitted if sent by facsimile transmission.
9.7 Governing Law. This Agreement shall be governed by and
-------------
interpreted and enforced in accordance with the laws of the Commonwealth of
Pennsylvania without giving effect to any conflicts of law provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement and
Plan of Merger as of the date first above written.
CONESTOGA ENTERPRISES, INC.
By:______________________________
John R. Bentz, President
CI MERGER CORPORATION
By:______________________________
John R. Bentz, President
INFOCORE, INC.
By:______________________________
Harrison H. Clement, Jr.
President and CEO
-23-
<PAGE>
Exhibit "A"
EXHIBIT A TO AGREEMENT AND PLAN OF MERGER
Exhibit "A"
__________________, 1997
Conestoga Enterprises, Inc.
202 East First Street
Birdsboro, PA 19508
Attention: Executive Vice President
Dear Sir:
This letter is delivered to you in compliance with Section 5.10 of the
Agreement and Plan of Merger, dated March 14, 1997 (the "Agreement"), between
Infocore, Inc. ("Infocore"), Conestoga Enterprises, Inc. ("CEI") and CI Merger
Corporation ("Sub"), providing for the merger (the "Merger") of Infocore with
and into Sub.
Pursuant to the Merger, the shares of outstanding Infocore common stock will
be converted into shares of CEI Common Stock, par value $5.00 per share ("CEI
Common Stock").
The Merger is intended to qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"). In this regard, as we understand is customary
in such merger transactions, you are seeking representations and covenants from
persons who are Infocore directors, Infocore executive officers or who hold five
percent (5%) or more of the outstanding Infocore common stock concerning their
intentions, as of the date hereof, to hold and not to dispose of CEI Common
Stock that they receive in the Merger ("Merger Stock").
In addition, I understand that the resale by me of Merger Stock will be
subject to certain restrictions under the federal securities laws. In this
regard, as we understand is customary in such merger transactions, you are
seeking representations and covenants from persons who are Infocore directors,
Infocore executive officers or who hold five percent (5%) or more of the
outstanding Infocore common stock to the effect that any resale of such Merger
Stock will be performed in compliance with applicable federal securities laws.
Tax Matters
- -----------
The undersigned hereby represents to CEI that the undersigned has no plan or
intention to sell, exchange or otherwise dispose of any Merger Stock that is
received by the undersigned in the Merger. I understand that Saul, Ewing,
<PAGE>
Remick & Saul will rely upon such representations and covenants in delivering
its tax opinions concerning the Merger.
Securities Law Matters
- ----------------------
The undersigned hereby acknowledges, solely for the purpose of this
undertaking, that the undersigned may be deemed to be an "affiliate" of Infocore
as that term is used in paragraph (c) of Rule 145 under the Securities Act of
1933, as amended (the "Act").
The undersigned represents and warrants to you that any shares of Merger
Stock which the undersigned shall receive in exchange for shares of common stock
of Infocore are not being acquired by the undersigned with a view to their
distribution except to the extent and in the manner provided for in paragraph
(d) of Rule 145 under the Act.
The undersigned acknowledges that it has been advised by counsel for Infocore
of the provisions of the federal securities laws which relate to resales of
Merger Stock, to be received by the undersigned in connection with the Merger,
and the undersigned hereby undertakes to comply fully with such provisions. The
undersigned also agrees that CEI may place the legend set forth below on the
certificate or certificates for any or all Merger Stock to be received by
<PAGE>
Conestoga Enterprises, Inc.
___________________, 1997
Page 2
the undersigned in connection with the Merger, may file stop-transfer
instructions with respect to such shares with the transfer agent for such shares
and may refuse to transfer such shares except upon delivery to CEI of an
opinion, in form and substance satisfactory to CEI, of counsel acceptable to CEI
to the effect that the proposed transfer of some or all of such shares does not
violate federal securities laws.
Pursuant to the provisions of the preceding paragraph, the certificate or
certificates evidencing Merger Stock received by the undersigned may bear the
following legend:
"The shares represented by this certificate have been issued or
transferred to the registered owner hereof as of the result of a transaction
to which Rule 145 under the Securities Act of 1933, as amended, applies.
Such shares, therefore, are transferable only upon, and are otherwise subject
to, certain conditions specified in a certain letter dated _________________,
1997 from the registered owner hereof to Conestoga Enterprises, Inc. (a copy
of which is on file with the Secretary of Conestoga Enterprises, Inc.), and
no transfer of such shares shall be valid or effective until such conditions
have been fulfilled."
It is understood that CEI is required to file certain periodic reports under
the Securities Exchange Act of 1934, as amended, with the Securities and
Exchange Commission and that no sales of Merger Stock received by the
undersigned in the Merger may be made under Rule 145(d) unless CEI has informed
the undersigned that it has filed all such reports required to be filed during
the 12 months preceding a proposed sale. It is further understood that CEI will
promptly respond to requests by the undersigned as to the filing of such
reports.
Very truly yours,
------------------------------
Signature
------------------------------
Print Name
<PAGE>
Exhibit "B"
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made , 1997, by and between
------------------------
CI MERGER CORPORATION (the "Company"), a Pennsylvania corporation, and
HARRISON H. CLEMENT, JR. (the "Employee"), of
----------------------------
, Pennsylvania.
---------------
BACKGROUND
Pursuant to an Agreement and Plan of Merger dated March 14, 1997, by
and among Conestoga Enterprises, Inc. ("CEI"), Infocore, Inc. ("Infocore")
and the Company, Infocore in the near future will be merged with and into
the Company, which will be the surviving corporation. Pursuant to such plan
of merger (the "Plan of Merger"), as of the Effective Date of the merger
specified therein (the "Effective Date"), the corporate name of the Company
will become "Infocore, Inc.". The Employee is currently President and Chief
Executive Officer of Infocore and the parties have agreed that he shall be
employed by the Company as of the Effective Date under the terms and
provisions contained in this Agreement.
AGREEMENT
Therefore, each intending to be legally bound hereby, the parties
agree as follows:
1. Employment and Employment Duties. Under the terms and conditions
--------------------------------
contained in this Agreement, the Company employs the Employee as President
and Chief Executive Officer and the Employee accepts such employment. The
Employee's employment duties shall be those specified for the President of
the Company in the Company's by-laws and those additional duties,
commensurate with such position, assigned by the Board of Directors of the
Company (the "Board"). The Employee shall report directly to the Board. The
Employee's employment shall be on a full-time basis and he shall not be
engaged or employed in other business activities (whether for pecuniary
advantage or not) during the term of this Agreement, except that he shall
be permitted to serve on the boards of directors of business or charitable
organizations, provided such service does not materially affect the
performance
<PAGE>
of his employment duties for the Company. The Employee shall discharge his
employment duties in a diligent and conscientious fashion.
2. Term. The Employee's employment hereunder shall be for a period
----
of two (2) years, commencing upon the Effective Date. Notwithstanding the
foregoing: (i) the Company may terminate the Employee's employment at any
time (A) upon fifteen (15) days prior written notice for any reason or for
no reason, or (B) without prior notice for cause (as defined below); and
(ii) the Employee may terminate the Employee's employment at any time
without prior notice for any reason or for no reason. For purposes of this
Agreement, the Employee's employment shall be deemed to have been
terminated for cause in the event the Company terminates it as a result of:
(a) the Employee's breach of his confidentiality obligations
specified in Section 5;
(b) the willful failure or refusal by the Employee to perform any
of his material employment duties or his material obligations under this
Agreement which shall not have ceased or been corrected within fifteen (15)
days following a written warning from the Company; or
(c) the commission of any act or the failure to act by the
Employee which constitutes a crime or offense involving money or other
property of any of the CEI Companies (as defined in Section 5) or which
constitutes a felony in the jurisdiction involved.
3. Severance Compensation.
----------------------
3.1 General Rule. Unless the provisions of Section 3.2 apply,
------------
in the event of the termination of the Employee's employment by the Company
other than for cause prior to the expiration of the two (2) year term
referred to in Section 2, the Company shall be obligated to pay to the
Employee, within fifteen (15) days after the date of termination, an amount
equal to the greater of: (i) fifty percent (50%) of the Employee's annual
salary determined as of the date of termination of employment, or (ii) the
aggregate salary otherwise payable to the Employee for the balance of the
two (2) year term referred to in Section 2, determined as of the date of
termination of employment.
3.2 Change of Control. If, during the term of this Agreement,
-----------------
the Employee's employment with the Company is terminated within ninety (90)
days of the date of a change of control (as defined below), either
<PAGE>
by the Employee or by the Company other than for cause, the Company shall
pay to the Employee, within fifteen (15) days of the date of termination of
employment, an amount equal to the greater of: (i) the amount payable to
the Employee as determined by the application of the provisions of Section
3.1, or (ii) one and one-half (1.5) times the Employee's annual salary,
determined as of the date of termination of employment. The Company shall
be obligated to make such payment in lieu of, and not in addition to, the
Company's payment obligations under Section 3.1. For purposes of this
Agreement, a change of control shall be deemed to have occurred in the
event of: (i) the acquisition, directly or indirectly, by any person or
entity, or persons or entities acting in concert, whether by purchase,
merger, consolidation or otherwise, of voting power over that number of
voting shares of the capital stock of either the Company or CEI which, when
combined with the existing voting power of such persons or entities, would
enable them to cast fifty percent (50%) or more of the votes which all
shareholders of the Company or CEI, respectively, would be entitled to cast
in the election of directors of either the Company or CEI, or (ii) the
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company to a transferee other than CEI or a company or entity of which a
controlling interest is owned by CEI.
3.3 Termination for Cause. In the event of the termination of
---------------------
the Employee's employment at any time by the Company for cause, the Company
shall have no obligation to pay the Employee any sums following the
termination of his employment.
4. Compensation. As compensation for the performance of his
------------
employment duties, during the term hereof the Company shall pay or provide
to the Employee the following:
(a) A salary in the annual amount of One Hundred Two Thousand
Dollars ($102,000), payable in accordance with the Company's normal payroll
practices in effect from time to time. The Employee's salary shall be
reviewed by the Board at the same time and in the same manner as is
customary for the employees of CEI and its subsidiaries and may be
increased, in the sole discretion of the Board, based upon the Employee's
satisfactory performance of his employment duties.
(b) The provision of those fringe benefits which were provided to
the Employee in his position as President and CEO of Infocore as of the
Effective Date under plans or insurance policies maintained by the
<PAGE>
Company from time to time, but in no event having benefits less than
comparable to those of Infocore. Such fringe benefits include four (4)
weeks paid vacation, personal use of a Company automobile, medical health
and disability insurance coverage, inclusion in the Company's 401(k) profit
sharing plan and its officers' profit sharing plan, and reimbursement of
business expenses under policies similar to those in effect with Infocore.
(c) Maintenance of a life insurance policy insuring the
Employee's life with a death benefit of Three Hundred Fifty Thousand
Dollars ($350,000.00) payable to the beneficiary or beneficiaries
designated by the Employee.
5. Confidentiality. The Employee acknowledges that he has had, and
---------------
in fulfilling his duties under this Agreement he will have, access to
confidential information regarding the business and financial affairs of
the Company, CEI, and/or the other subsidiaries of CEI (collectively, the
"CEI Companies"). The Employee hereby agrees to hold all such information
in the strictest confidence, to discuss such information only with
authorized personnel of the CEI Companies, and, except as required by law
or compelled by legal process, to refrain from disclosing such information
to any other party, both during the term of this Agreement and after the
termination hereof. The provisions of this Section 5 shall not apply to
information which is or becomes generally available to or known by the
public other than as a result of disclosure by the Employee.
6. Covenant Not to Compete. The Employee agrees that, in order to
-----------------------
protect the legitimate interests and property rights of the Employer, for a
period of one (1) year after the termination of the Employee's employment
with the Company (regardless of the reason for the termination), the
Employee shall not:
(a) Engage, directly or indirectly, either as owner, partner,
agent, employee, consultant, member, or shareholder, or otherwise operate,
control, join or participate in, lend money to, or be connected with any
commercial enterprise or business which is engaged within the Territory (as
defined below) in any facet of the wireless telecommunications business
carried on by any of the CEI Companies as of the date of termination of the
Employee's employment;
(b) Approach, solicit, contact, or otherwise establish a business
relationship with any customer of any of the CEI Companies or any
prospective customer of any of the CEI Companies with whom any of such
companies has had significant contact on or before the date of termination
of the Employee's employment, for a
<PAGE>
purpose related to the business carried on by any of the CEI Companies as
of the date of termination of the Employee's employment;
(c) Assist any other person, partnership, corporation, limited
liability company, or other entity in the pursuit of the activities from
which the Employee is prohibited in engaging under the provisions of
Subsections (a) and (b) above; or
(d) Induce by active solicitation any present or future employees
or agents of the Company or the other CEI Companies to directly or
indirectly engage in any competitive business or to terminate their
employment with any of the CEI Companies.
For purposes of this Agreement, the term "Territory" shall mean those
geographical areas encompassed by the Reading, Pottsville, Sunbury, and
Williamsport Basic Trading Areas, as defined by the Federal Communications
Commission for the issuance of personal communication services licenses.
Nothing contained in this Section 6 shall prohibit the Employee from: (i)
investing in and owning securities issued by any publicly-held company
which are traded on any recognized securities exchange or in the over-the-
counter market; or (ii) accepting employment, after termination of his
employment with the Company, with a customer of the Company which is not a
significant customer.
7. Equitable Relief. The Employee recognizes and agrees that, in
----------------
the event of a breach or threatened breach of his covenants and obligations
contained in Section 5 and/or Section 6 of this Agreement, the Company will
suffer irreparable harm and damage, that such harm and damage may be
extremely difficult or impossible to quantify, and that therefore the
Company shall be entitled to injunctive relief. Nothing contained herein,
however, shall be construed as precluding the Company from pursuing any
other remedies available to it for such breach or threatened breach,
including the recovery of damages at law.
8. Restrictions Excessive. In the event the restrictions imposed by
----------------------
the covenant contained in Section 6 are deemed by any court having
jurisdiction to be unreasonable or otherwise unenforceable by reason of
their duration, territory or the scope of the activities prohibited, it is
agreed by the parties that such court may construe and enforce this
Agreement by reducing the time period, territory, or scope of activities to
an extent which such court deems to be reasonable and enforceable.
<PAGE>
9. Severability. If any provision or provisions of this Agreement
------------
shall be deemed to contravene or be invalid under the laws of any
jurisdiction where this Agreement is in force, the parties agree that such
contravention or invalidity shall not invalidate the entire Agreement, but
it shall be construed as not containing the particular provision or
provisions held to be invalid and the rights and obligations of the parties
shall be construed and enforced accordingly.
10. Miscellaneous.
-------------
(a) This Agreement shall be construed, interpreted and enforced
in accordance with the laws (but not the law of conflict of laws) of the
Commonwealth of Pennsylvania.
(b) This Agreement and its provisions shall be binding upon and
inure to the benefit of the respective legal representatives, successors,
heirs, and permitted assigns of the parties. The Employee shall not assign
any of his rights nor delegate any of his duties under this Agreement
without the prior written consent of the Company.
(c) This Agreement constitutes the entire Agreement between the
parties and supersedes all prior negotiations, understandings and
agreements of any nature whatsoever, whether oral or written, with respect
to the subject matter hereof. No amendment, waiver or discharge of any
provision of this Agreement shall be effective against any party, unless
that party shall have consented thereto in writing.
(d) The headings to the sections of this Agreement are inserted
only for convenience of reference and are not intended, nor shall they be
construed, to modify, define, limit or expand the intent of the parties as
expressed in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
WITNESS: ..................................................
CI MERGER CORPORATION
----------- ..................................................
By:
----------------------------------
...................................................
President
<PAGE>
----------- ..................................................
(SEAL)
-------------------------
..................................................
Harrison H. Clement, Jr.
INTENDING TO BE LEGALLY BOUND HEREBY, CONESTOGA ENTERPRISES, INC.
hereby guarantees the performance of all of the obligations of and payment
of all sums due from CI Merger Corporation under the foregoing Employment
Agreement.
..................................................
CONESTOGA ENTERPRISES, INC........................
..................................................
By:
-----------------------
..................................................
President
<PAGE>
Exhibit "B"
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made , 1997, by and between
------------------------
CI MERGER CORPORATION (the "Company"), a Pennsylvania corporation, and
HENRY M. STRINGER (the "Employee"), of
------------------------------------
, Pennsylvania.
----------------
BACKGROUND
Pursuant to an Agreement and Plan of Merger dated March 14, 1997, by
and among Conestoga Enterprises, Inc. ("CEI"), Infocore, Inc. ("Infocore")
and the Company, Infocore in the near future will be merged with and into
the Company, which will be the surviving corporation. Pursuant to such
plan of merger (the "Plan of Merger"), as of the Effective Date of the
merger specified therein (the "Effective Date"), the corporate name of the
Company will become "Infocore, Inc.". The Employee is currently Senior Vice
President of Infocore and the parties have agreed that he shall be employed
by the Company as of the Effective Date under the terms and provisions
contained in this Agreement.
AGREEMENT
Therefore, each intending to be legally bound hereby, the parties
agree as follows:
1. Employment and Employment Duties. Under the terms and conditions
--------------------------------
contained in this Agreement, the Company employs the Employee as Senior
Vice President and the Employee accepts such employment. The Employee's
employment duties shall include primary management of the Company's sales
and marketing functions and those additional duties, commensurate with his
position, assigned by the President and/or the Board of Directors of the
Company (the "Board"). The Employee shall report directly to the President.
The Employee's employment shall be on a full-time basis and he shall not be
engaged or employed in other business activities (whether for pecuniary
advantage or not) during the term of this Agreement. The Employee shall
discharge his employment duties in a diligent and conscientious fashion.
<PAGE>
2. Term. The Employee's employment hereunder shall be for a period
----
of two (2) years, commencing upon the Effective Date. Notwithstanding the
foregoing: (i) the Company may terminate the Employee's employment at any
time (A) upon fifteen (15) days prior written notice for any reason or for
no reason, or (B) without prior notice for cause (as defined below); and
(ii) the Employee may terminate the Employee's employment at any time
without prior notice for any reason or for no reason. For purposes of this
Agreement, the Employee's employment shall be deemed to have been
terminated for cause in the event the Company terminates it as a result of:
(a) the Employee's breach of his confidentiality obligations
specified in Section 5;
(b) the willful failure or refusal by the Employee to perform any
of his material employment duties or his material obligations under this
Agreement which shall not have ceased or been corrected within fifteen (15)
days following a written warning from the Company; or
(c) the commission of any act or the failure to act by the
Employee which constitutes a crime or offense involving money or other
property of any of the CEI Companies (as defined in Section 5) or which
constitutes a felony in the jurisdiction involved.
3. Severance Compensation.
----------------------
3.1 General Rule. Unless the provisions of Section 3.2 apply,
------------
in the event of the termination of the Employee's employment by the Company
other than for cause prior to the expiration of the two (2) year term
referred to in Section 2, the Company shall be obligated to pay to the
Employee, within fifteen (15) days after the date of termination, an amount
equal to the greater of: (i) fifty percent (50%) of the Employee's annual
salary determined as of the date of termination of employment, or (ii) the
aggregate salary otherwise payable to the Employee for the balance of the
two (2) year term referred to in Section 2, determined as of the date of
termination of employment.
3.2 Change of Control. If, during the term of this Agreement,
-----------------
the Employee's employment with the Company is terminated within ninety (90)
days of the date of a change of control (as defined below), either by the
Employee or by the Company other than for cause, the Company shall pay to
the Employee, within fifteen (15) days of the date of termination of
employment, an amount equal to the greater of: (i) the amount payable to
<PAGE>
the Employee as determined by the application of the provisions of Section
3.1, or (ii) the amount of the Employee's annual salary, determined as of
the date of termination of employment. The Company shall be obligated to
make such payment in lieu of, and not in addition to, the Company's payment
obligations under Section 3.1. For purposes of this Agreement, a change of
control shall be deemed to have occurred in the event of: (i) the
acquisition, directly or indirectly, by any person or entity, or persons or
entities acting in concert, whether by purchase, merger, consolidation or
otherwise, of voting power over that number of voting shares of the capital
stock of either the Company or CEI which, when combined with the existing
voting power of such persons or entities, would enable them to cast fifty
percent (50%) or more of the votes which all shareholders of the Company or
CEI, respectively, would be entitled to cast in the election of directors
of either the Company or CEI, or (ii) the sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company to a transferee other
than CEI or a company or entity of which a controlling interest is owned by
CEI.
3.3 Termination for Cause. In the event of the termination of
---------------------
the Employee's employment at any time by the Company for cause, the Company
shall have no obligation to pay the Employee any sums following the
termination of his employment.
4. Compensation. As compensation for the performance of his
------------
employment duties, during the term hereof the Company shall pay or provide
to the Employee the following:
(a) A salary in the annual amount of Ninety Thousand Dollars
($90,000), payable in accordance with the Company's normal payroll
practices in effect from time to time. The Employee's salary shall be
reviewed by the Board at the same time and in the same manner as is
customary for the employees of CEI and its subsidiaries and may be
increased, in the sole discretion of the Board, based upon the Employee's
satisfactory performance of his employment duties.
(b) The provision of those fringe benefits which were provided to
the Employee in his position as Senior Vice President of Infocore as of the
Effective Date under plans or insurance policies maintained by the Company
from time to time, but in no event having benefits less than comparable to
those of Infocore. Such fringe benefits include four (4) weeks paid
vacation, personal use of a Company automobile, medical health and
disability
<PAGE>
insurance coverage, inclusion in the Company's 401(k) profit sharing plan
and its officers' profit sharing plan, and reimbursement of business
expenses under policies similar to those in effect with Infocore.
(c) Maintenance of a life insurance policy insuring the
Employee's life with a death benefit of Three Hundred Fifty Thousand
Dollars ($350,000.00) payable to the beneficiary or beneficiaries
designated by the Employee.
5. Confidentiality. The Employee acknowledges that he has had, and
---------------
in fulfilling his duties under this Agreement he will have, access to
confidential information regarding the business and financial affairs of
the Company, CEI, and/or the other subsidiaries of CEI (collectively, the
"CEI Companies"). The Employee hereby agrees to hold all such information
in the strictest confidence, to discuss such information only with
authorized personnel of the CEI Companies, and, except as required by law
or compelled by legal process, to refrain from disclosing such information
to any other party, both during the term of this Agreement and after the
termination hereof. The provisions of this Section 5 shall not apply to
information which is or becomes generally available to or known by the
public other than as a result of disclosure by the Employee.
6. Covenant Not to Compete. The Employee agrees that, in order to
-----------------------
protect the legitimate interests and property rights of the Employer, for a
period of one (1) year after the termination of the Employee's employment
with the Company (regardless of the reason for the termination), the
Employee shall not:
(a) Engage, directly or indirectly, either as owner, partner,
agent, employee, consultant, member, or shareholder, or otherwise operate,
control, join or participate in, lend money to, or be connected with any
commercial enterprise or business which is engaged within the Territory (as
defined below) in any facet of the wireless telecommunications business
carried on by any of the CEI Companies as of the date of termination of the
Employee's employment;
(b) Approach, solicit, contact, or otherwise establish a business
relationship with any customer of any of the CEI Companies or any
prospective customer of any of the CEI Companies with whom any of such
companies has had significant contact on or before the date of termination
of the Employee's employment, for a purpose related to the business carried
on by any of the CEI Companies as of the date of termination of the
Employee's employment;
<PAGE>
(c) Assist any other person, partnership, corporation, limited
liability company, or other entity in the pursuit of the activities from
which the Employee is prohibited in engaging under the provisions of
Subsections (a) and (b) above; or
(d) Induce by active solicitation any present or future employees
or agents of the Company or the other CEI Companies to directly or
indirectly engage in any competitive business or to terminate their
employment with any of the CEI Companies.
For purposes of this Agreement, the term "Territory" shall mean those
geographical areas encompassed by the Reading, Pottsville, Sunbury, and
Williamsport Basic Trading Areas, as defined by the Federal Communications
Commission for the issuance of personal communication services licenses.
Nothing contained in this Section 6 shall prohibit the Employee from: (i)
investing in and owning securities issued by any publicly-held company
which are traded on any recognized securities exchange or in the over-the-
counter market; or (ii) accepting employment, after termination of his
employment with the Company, with a customer of the Company which is not a
significant customer.
7. Equitable Relief. The Employee recognizes and agrees that, in
----------------
the event of a breach or threatened breach of his covenants and obligations
contained in Section 5 and/or Section 6 of this Agreement, the Company will
suffer irreparable harm and damage, that such harm and damage may be
extremely difficult or impossible to quantify, and that therefore the
Company shall be entitled to injunctive relief. Nothing contained herein,
however, shall be construed as precluding the Company from pursuing any
other remedies available to it for such breach or threatened breach,
including the recovery of damages at law.
8. Restrictions Excessive. In the event the restrictions imposed by
----------------------
the covenant contained in Section 6 are deemed by any court having
jurisdiction to be unreasonable or otherwise unenforceable by reason of
their duration, territory or the scope of the activities prohibited, it is
agreed by the parties that such court may construe and enforce this
Agreement by reducing the time period, territory, or scope of activities to
an extent which such court deems to be reasonable and enforceable.
9. Severability. If any provision or provisions of this Agreement
------------
shall be deemed to contravene or be invalid under the laws of any
jurisdiction where this Agreement is in force, the parties agree that such
<PAGE>
contravention or invalidity shall not invalidate the entire Agreement, but
it shall be construed as not containing the particular provision or
provisions held to be invalid and the rights and obligations of the parties
shall be construed and enforced accordingly.
10. Miscellaneous.
-------------
(a) This Agreement shall be construed, interpreted and enforced
in accordance with the laws (but not the law of conflict of laws) of the
Commonwealth of Pennsylvania.
(b) This Agreement and its provisions shall be binding upon and
inure to the benefit of the respective legal representatives, successors,
heirs, and permitted assigns of the parties. The Employee shall not assign
any of his rights nor delegate any of his duties under this Agreement
without the prior written consent of the Company.
(c) This Agreement constitutes the entire Agreement between the
parties and supersedes all prior negotiations, understandings and
agreements of any nature whatsoever, whether oral or written, with respect
to the subject matter hereof. No amendment, waiver or discharge of any
provision of this Agreement shall be effective against any party, unless
that party shall have consented thereto in writing.
(d) The headings to the sections of this Agreement are inserted
only for convenience of reference and are not intended, nor shall they be
construed, to modify, define, limit or expand the intent of the parties as
expressed in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
WITNESS: ..................................................
CI MERGER CORPORATION
-------------- ..................................................
By:
-------------------
..................................................
President
-------------- ..................................................
(SEAL)
----------------------------
..................................................
Henry M. Stringer
INTENDING TO BE LEGALLY BOUND HEREBY, CONESTOGA ENTERPRISES, INC.
hereby guarantees the performance of all of the obligations of and payment
of all sums due from CI Merger Corporation under the foregoing Employment
Agreement.
<PAGE>
..................................................
CONESTOGA ENTERPRISES, INC.
..................................................
By:
--------------------
..................................................
President
<PAGE>
APPENDIX B
March 14, 1997
The Board of Directors
Conestoga Enterprises, Inc.
202 East First Street
Birdsboro, PA 19508-0448
Ladies and Gentlemen:
JSI Financial Services (JSI) has been retained by the Board of Directors of
Conestoga Enterprises, Inc., a Pennsylvania corporation (Conestoga), to express
an opinion as to the fairness, from a financial point of view, to Conestoga's
common shareholders of the consideration to be paid by Conestoga for 100% of the
outstanding shares of Infocore, Inc., a Pennsylvania corporation (Infocore),
pursuant to an Agreement and Plan of Merger dated March 14, 1997 by and between
Conestoga, Infocore and CI Merger Corporation (the "Merger Agreement").
Pursuant to the Merger Agreement, Conestoga will issue 200,000 shares of
Conestoga Common Stock in exchange for 100% of the outstanding common stock of
Infocore (the "Consideration").
JSI provides business and financial intermediation, valuation, strategic and
business planning, and syndication services to clients in the
telecommunications, broadcasting and cable industries. JSI has performed
valuations of telecommunications concerns for a variety of purposes including
mergers and acquisitions, divestitures, gift and estate taxes, employee stock
ownership plans, financial restructurings, and other objectives.
In arriving at our opinion, we have, among other things, (i) considered the
nature and economic outlook of the telecommunications industry, (ii) the
financial and operating history of Conestoga and Infocore, (iii) Conestoga's and
Infocore's earnings and cash flow for the last three years and management's
assessment for future earnings and cash flow, (iv) price and trading ranges for
Conestoga's Common Stock over the prior 33 months, and (v) the value of revenue
streams and other identifiable assets or benefits associated with the Infocore
acquisition.
Specific documents and information relied upon and procedures performed in
arriving at our opinion included reviewing Conestoga's and Infocore's audited
financial statements for the periods December 31, 1994 through December 31,
1996; reviewing Securities and Exchange Commission Forms 10-K filed by
Conestoga for the fiscal years ending December 31, 1991 through December 31,
1995; reviewing the history of Conestoga's stock transfer prices for the period
June 1, 1994 through March 14, 1997; reviewing the Merger Agreement; having
discussions with Conestoga management about the Merger and current and future
business prospects for both Conestoga and Infocore; and performing such
<PAGE>
other analysis and considering such other factors as we deemed appropriate.
In rendering this opinion, we have relied, without independent verification, on
the accuracy, completeness, and fairness of all financial and other information
that was publicly available or furnished to us by Conestoga, Infocore and/or
their advisors.
Based upon our analysis of the factors deemed relevant, it is our opinion that,
as of the date of this letter, the Consideration to be paid pursuant to the
Merger is fair, from a financial point of view, to the shareholders of
Conestoga.
Very truly yours,
JSI Financial Services
By: William E. King, CPA
<PAGE>
APPENDIX C
PROVISIONS OF
PENNSYLVANIA BUSINESS CORPORATION LAW RELATING TO
DISSENTERS' RIGHTS OF SHAREHOLDERS
----------------------------------
15 Pa. C.S.A. Sections 1571 through 1580, inclusive.
<PAGE>
(S) 1571. Application and effect of subchapter
(a) General rule.--Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special
treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of
election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedures).
(b) Exceptions.--
(1) Except as otherwise provided in paragraph (2), the holders of
the shares of any class or series of shares that, at the record date
fixed to determine the shareholders entitled to notice of and to vote
at the meeting at which a plan specified in any of section 1930,
1931(d), 1932(c) or 1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such shares
under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall
be available without regard to the exception provided in that
paragraph in the case of:
(i) Shares converted by a plan if the shares are not
converted solely into shares of the acquiring, surviving, new or
other corporation or solely into such shares and money in lieu of
fractional shares.
C-1
<PAGE>
(ii) Shares of any preferred or special class unless the
articles, the plan or the terms of the transaction entitle all
shareholders of the class to vote thereon and require for the
adoption of the plan or the effectuation of the transaction the
affirmative vote of a majority of the votes cast by all
shareholders of the class.
(iii) Shares entitled to dissenters rights under section
1906(c) (relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of
shares, obligations or otherwise, with or without assuming the
liabilities of the other corporation and with or without the
intervention of another corporation or other person, shall not be
entitled to the rights and remedies of dissenting shareholders
provided in this subchapter regardless of the fact, if it be the case,
that the acquisition was accomplished by the issuance of voting shares
of the corporation to be outstanding immediately after the acquisition
sufficient to elect a majority or more of the directors of the
corporation.
(c) Grant of optional dissenters rights.--The bylaws or a resolution
of the board of directors may direct that all or a part of the shareholders
shall have dissenters rights in connection with any corporate action or other
transaction that would otherwise not entitle such shareholders to dissenters
rights.
(d) Notice of dissenters rights.--Unless otherwise provided by
statute, if a proposed corporate action that would give rise to dissenters
rights under this subpart is submitted to a vote at a meeting of shareholders,
there shall be included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair
value of their shares by complying with the terms of this subchapter;
and
(2) a copy of this subchapter.
(e) Other statutes.--The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(f) Certain provisions of articles ineffective.--This subchapter may
not be relaxed by any provision of the articles.
(g) Cross references.--See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
(S) 1572. Definitions
The following words and phrases when used in this subchapter shall
have the meanings given to them in this section unless the context clearly
indicates otherwise:
"Corporation." The issuer of the shares held or owned by the
dissenter before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A plan of division may
designate which of the resulting corporations is the successor corporation for
the purposes of this subchapter. The successor corporation in a division shall
have sole responsibility for payments to dissenters and other liabilities under
this subchapter except as otherwise provided in the plan of division.
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<PAGE>
"Dissenter." A shareholder or beneficial owner who is entitled to and
does assert dissenters rights under this subchapter and who has performed every
act required up to the time involved for the assertion of those rights.
"Fair value." The fair value of shares immediately before the
effectuation of the corporate action to which the dissenter objects, taking into
account all relevant factors, but excluding any appreciation or depreciation in
anticipation of the corporate action.
"Interest." Interest from the effective date of the corporate action
until the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
(S) 1573. Record and beneficial holders and owners
(a) Record holders of shares.--A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(b) Beneficial owners of shares.--A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
(S) 1574. Notice of intention to dissent
If the proposed corporate action is submitted to a vote at a meeting
of shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
(S) 1575. Notice to demand payment
(a) General rule.--If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to
obtain payment.
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<PAGE>
(2) Inform holders of uncertificated shares to what extent
transfer of shares will be restricted from the time that demand for
payment is received.
(3) Supply a form for demanding payment that includes a request
for certification of the date on which the shareholder, or the person
on whose behalf the shareholder dissents, acquired beneficial
ownership of the shares.
(4) Be accompanied by a copy of this subchapter.
(b) Time for receipt of demand for payment.--The time set for receipt
of the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
(S) 1576. Failure to comply with notice to demand payment, etc.
(a) Effect of failure of shareholder to act.--A shareholder who fails
to timely demand payment, or fails (in the case of certificated shares) to
timely deposit certificates, as required by a notice pursuant to section 1575
(relating to notice to demand payment) shall not have any right under this
subchapter to receive payment of the fair value of his shares.
(b) Restriction on uncertificated shares.--If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(c) Rights retained by shareholder.--The dissenter shall retain all
other rights of a shareholder until those rights are modified by effectuation of
the proposed corporate action.
(S) 1577. Release of restrictions or payment for shares
(a) Failure to effectuate corporate action.--Within 60 days after the
date set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(b) Renewal of notice of demand payment.--When uncertificated shares
have been released from transfer restrictions and deposited certificates have
been returned, the corporation may at any later time send a new notice
conforming to the requirements of section 1575 (relating to notice to demand
payment), with like effect.
(c) Payment of fair value of shares.--Promptly after effectuation of
the proposed corporate action, or upon timely receipt of demand for payment if
the corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the
issuer of the shares held or owned by the dissenter for a fiscal year
ending not more than 16 months before the date of remittance or
notice together with the latest available interim financial
statements.
(2) A statement of the corporation's estimate of the fair value
of the shares.
C-4
<PAGE>
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of
this subchapter.
(d) Failure to make payment.--If the corporation does not remit the
amount of its estimate of the fair value of the shares as provided by subsection
(c), it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
(S) 1578. Estimate by dissenter of fair value of shares
(a) General rule.--If the business corporation gives notice of its
estimate of the fair value of the shares, without remitting such amount, or
remits payment of its estimate of the fair value of a dissenter's shares as
permitted by section 1577(c) (relating to payment of fair value of shares) and
the dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(b) Effect or failure to file estimate.--Where the dissenter does not
file his own estimate under subsection (a) within 30 days after the mailing by
the corporation of its remittance or notice, the dissenter shall be entitled to
no more than the amount stated in the notice or remitted to him by the
corporation.
(S) 1579. Valuation proceedings generally
(a) General rule.--Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578
(relating to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may
file in court an application for relief requesting that the fair value of
the shares be determined by the court.
(b) Mandatory joinder of dissenters.--All dissenters, wherever
residing, whose demands have not been settled shall be made parties to the
proceeding as in an action against their shares. A copy of the application shall
be served on each such dissenter. If a dissenter is a nonresident, the copy may
be served on him in the manner provided or prescribed by or pursuant to 42
Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and
international procedure)./1/
____________________
/1/42 Pa. C.S.A. (S) 5301 et. seq.
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<PAGE>
(c) Jurisdiction of the court.--The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(d) Measure of recovery.--Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(e) Effect of corporation's failure to file application.--If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
(S) 1580. Costs and expenses of valuation proceedings
(a) General rule.--The costs and expenses of any proceeding under
section 1579 (relating to valuation proceedings generally), including the
reasonable compensation and expenses of the appraiser appointed by the court,
shall be determined by the court and assessed against the business corporation
except that any part of the costs and expenses may be apportioned and assessed
as the court deems appropriate against all or some of the dissenters who are
parties and whose action in demanding supplemental payment under section 1578
(relating to estimate by dissenter of fair value of shares) the court finds to
be dilatory, obdurate, arbitrary, vexatious or in bad faith.
(b) Assessment of counsel fees and expert fees where lack of good
faith appears.--Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in
respect to the rights provided in this subchapter.
(c) Award of fees for benefits to other dissenters.--If the court
finds that the services of counsel for any dissenter were of substantial benefit
to other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law of
1988, as amended (the "PBCL"), provide that a business corporation may indemnify
directors and officers against liabilities that they may incur as such provided
that the particular person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. In the case of actions against
a director or officer by or in the right of the corporation, the power to
indemnify extends only to expenses (not judgments and amounts paid in
settlement) and such power generally does not exist if the person otherwise
entitled to indemnification shall have been adjudged to be liable to the
corporation unless it is judicially determined that, despite the adjudication of
liability but in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnification for specified expenses. Under Section
1743 of the PBCL, the corporation is required to indemnify directors and
officers against expenses they may incur in defending actions against them in
such capacities if they are successful on the merits or otherwise in the defense
of such actions. Under Section 1745 of the PBCL, a corporation may pay the
expenses of a director or officer incurred in defending an action or proceeding
in advance of the final disposition thereof upon receipt of an undertaking from
such person to repay the amounts advanced unless it is ultimately determined
that such person is entitled to indemnification from the corporation.
Section 1746 of the PBCL grants a corporation broad authority to
indemnify its directors, officers and other agents for liabilities and expenses
incurred in such capacity, except in circumstances where the act or failure to
act giving rise to the claim for indemnification is determined by a court to
have constituted willful misconduct or recklessness. Pursuant to the authority
of Section 1746 of the PBCL, the CEI Bylaws provide that in connection with any
action, suit or proceeding in which a person may be involved by reason of being
or having been a director, officer, employee or agent of CEI, the directors and
officers of CEI shall be indemnified to the fullest extent permitted by law,
except for liabilities arising under the Securities Act of 1933, as amended.
As authorized by Section 1747 of the PBCL, CEI maintains, on behalf of
its directors and officers, insurance protection against certain liabilities
arising out of the discharge of their duties, as well as insurance covering CEI
for indemnification payments made to its directors and officers for certain
liabilities. The premiums for such insurance are paid by CEI.
C-1
<PAGE>
Item 21. Exhibits
(a) Exhibits:
Exhibit
Number Description
------ -----------
2.1 Merger Agreement, dated March 14, 1997, by and among CEI,
Infocore and CI Merger Corporation is Appendix A to the Proxy
Statement/Prospectus included in Part I and is incorporated
herein by reference.
3.1 Articles of Incorporation of CEI. (1)
3.2 By-laws of CEI. (2)
5.1 Opinion of Miller and Murray, LLP regarding legality of the CEI
Common Shares being registered.
8.1 Opinion of Saul, Ewing, Remick & Saul regarding tax matters is
Appendix D to the Proxy Statement/Prospectus included in Part I
and is incorporated herein by reference.
10.1 Employment Contract of Harrison H. Clement, Jr. is part of
Exhibit B to Appendix A to the Proxy Statement/Prospectus
included in Part I and is incorporated herein by reference.
Written comment applies to 10.1 and 10.2. We do not need to
include employment agreements a second time.
10.2 Employment Contract of Henry M. Stringer
23.1 Consent of Miller and Murray, LLP (included in opinion filed as
Exhibit 5.1 hereto).
23.2 Consent of Saul, Ewing, Remick & Saul (included in its opinion
attached as Appendix D to the Proxy Statement/Prospectus included
in Part I and is incorporated herein by reference).
23.3 Consent of Beard and Company, Inc.
23.4 Consent of JSI Financial Services.
24.6 Powers of Attorney (included on the signature page).
99.1 Form of Infocore Proxy.
99.2 Form of Infocore Shareholder Letter of Transmittal.
- ------------------------------------
(1) Incorporated herein by reference to sequentially numbered pages
53-56 to CEI's Annual Report on Form 10-K for the year ended
December 31, 1992.
(2) Incorporated herein by reference to sequentially numbered 57-66
to CEI's Annual Report on Form 10-K for the year ended December
31, 1992.
C-2
<PAGE>
Item 22. Undertakings
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(3) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
C-3
<PAGE>
(6) The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
C-4
<PAGE>
APPENDIX D
_______________, 1997
Infocore, Inc.
661 Moore Road, Suite 110
King of Prussia, PA 19406
Re: Certain Federal Income Tax Consequences of the Agreement and Plan of Merger
among Conestoga Enterprises, Inc., Infocore, Inc. and CI Merger Corporation
----------------------------------------------------------------------------
Gentlemen:
We have acted as special tax counsel to Infocore, Inc., a Pennsylvania
corporation ("Infocore"), in connection with the proposed merger (the "Merger")
of Infocore with and into CI Merger Corporation, a Pennsylvania corporation
("Merger Sub"), pursuant to the terms of the Agreement and Plan of Merger among
Conestoga Enterprises, Inc., a Pennsylvania corporation ("CEI"), Infocore and
Merger Sub dated as of March 14, 1997 (the "Merger Agreement"), and as further
described in the Registration Statement on Form S-4 filed by CEI with the
Securities and Exchange Commission (the "Registration Statement").
This opinion is being rendered pursuant to your request and in accordance
with the requirements of Form S-4 and Section 7.7 of the Merger Agreement. All
capitalized terms, unless otherwise specified, have the meaning assigned to them
in the Registration Statement.
In rendering the opinion set forth below, we have relied upon certain
written representations and covenants of CEI and of Infocore ("Representation
Certificates"), as well as those representations set forth in Sections 3.25 and
4.12 of the Merger Agreement. In connection with this opinion, we have examined
and are relying upon (without any independent examination or review) the truth
and accuracy, at all relevant times, of the statements, covenants,
representations and warranties contained in the following documents: (i) the
Merger Agreement, (ii) the Representation Certificates, (iii) the Registration
Statement, and (iv) such other instruments and documents as we have deemed
necessary or appropriate in order to enable us to render the opinion below.
In our examination, we have also assumed, with your permission and without
independent investigation, that (i) original documents (including signatures)
are authentic, documents submitted to us as copies conform to the original
documents, and there has been (or will be by the date of the Merger) due
execution and delivery of all documents where due execution and delivery are
prerequisites to the effectiveness of those documents and (ii) the Merger will
be effective under the laws of the Commonwealth of Pennsylvania.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, pertinent judicial
<PAGE>
authorities, interpretive rulings of the Internal Revenue Service, all as in
effect as of today's date, and such other authorities as we have considered
relevant.
FACTS
-----
Infocore is a diversified telecommunications services company which
designs, installs and maintains telephone and computer systems and resells local
exchange and toll services. CEI is a holding company, with the wholly-owned
subsidiaries engaged in various aspects of the telecommunications business.
Pursuant to the Merger Agreement, Infocore will merge with and into Merger
Sub. Merger Sub will be the surviving corporation and will continue to be a
wholly-owned subsidiary of CEI following the Merger. By virtue of the Merger,
the Infocore Common Shares held by any person immediately prior to the Effective
Time will become and be converted into that number of CEI Common Shares as is
equal to the number of Infocore Common Shares held by such person multiplied by
a fraction, the numerator of which is 200,000 and the denominator of which is
the number of Infocore Common Shares issued and outstanding immediately prior to
the Effective Time. Holders of Infocore Common Shares who would otherwise be
entitled to receive a fractional share of CEI Common Stock will receive a cash
payment in lieu of such fractional share.
OPINIONS
--------
Based upon and subject to the foregoing, and based upon our reliance on
the accuracy of the representations set forth in the Merger Agreement and
Representation Certificates and subject to the assumptions and qualifications
set forth herein, we are of the opinion that for federal income tax purposes:
1. The Merger will, under current law, constitute a tax-free reorganization
under section 368(a) of the Code.
2. CEI, Merger Sub, and Infocore will each be a "party to a reorganization"
within the meaning of section 368(b) of the Code.
As a tax-free reorganization, the Merger will have the following federal income
tax consequences:
3. No gain or loss will be reorganized by Infocore (or by Merger Sub by reason
of being the successor to Infocore) by reason of the Merger.
4. Except for any cash received in lieu of any fractional shares, no gain or
loss will be recognized by holders of Infocore Common Shares who, pursuant
to the Merger, receive solely CEI Common Shares in exchange for their
Infocore Common Shares.
-2-
<PAGE>
5. The basis of the CEI Common Shares to be received by an Infocore
shareholder will be the same as the basis of the Infocore Common Shares
surrendered in exchange therefor, less any basis attributable to any
fractional share for which cash is received.
6. The holding period of the CEI Common Shares to be received by an Infocore
shareholder will include the period during which the Infocore Common Shares
surrendered in exchange therefor were held, provided that the Infocore
Common Shares were held as a capital asset by such Infocore shareholder at
the Effective Time.
This opinion represents and is based upon our best judgment regarding the
application of federal income tax laws arising under the Code, existing judicial
decisions, administrative regulations and published rulings and procedures. Our
opinion is not binding upon the Internal Revenue Service or the courts, and
there is no assurance that the Internal Revenue Service will not assert a
contrary position. Furthermore, no assurance can be given that future
legislative, judicial or administrative changes, on either a prospective or
retroactive basis, will not adversely affect the accuracy of the conclusions
stated herein. Nevertheless, we undertake no responsibility to advise you of any
new developments in the application or interpretation of the federal income tax
laws.
No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreement or to any transaction whatsoever, including
the Merger, if all the transactions described in the Merger Agreement are not
consummated in accordance with the terms of such Merger Agreement and without
waiver or breach of any material provision thereof or if all the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
This opinion is being furnished only to you in connection with the Merger
and solely for your benefit in connection therewith and may not be used or
relied upon for any other purpose and may not be circulated, quoted or otherwise
referred to for any purpose without our express written consent.
Notwithstanding the foregoing, we hereby consent to the use of this
opinion as Appendix D to the joint proxy statement/prospectus forming a part of
the Registration Statement. We also consent to all references to our firm in
the Registration Statement. In giving such opinion, we do not thereby admit
that we are acting within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules or
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
Saul, Ewing, Remick & Saul
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Birdsboro,
Pennsylvania on March 26, 1997.
CONESTOGA ENTERPRISES, INC.
By: /s/ John R. Bentz
-------------------------
John R. Bentz
President
Signature Title Date
--------- ----- ----
/s/ F. M. Brown Chairman of the Board of March 25, 1997
- ----------------------------- Directors
/s/ John R. Bentz President and a Director March 25, 1997
- -----------------------------
/s/ James H. Murray Vice President and a Director March 25, 1997
- -----------------------------
/s/ Kenneth A. Benner Secretary/Treasurer and a March 25, 1997
- ----------------------------- Director
/s/ Albert H. Kramer Vice President, Finance and March 25, 1997
- ----------------------------- Administration (principal
financial officer)
/s/ Donald R. Breitenstein Controller and a Director March 25, 1997
- ----------------------------- (principal accounting officer)
/s/ Robert E. Myers Director March 25, 1997
- -----------------------------
/s/ Jean M. Ruhl Director March 25, 1997
- -----------------------------
/s/ John M. Sausen Director March 25, 1997
- -----------------------------
/s/ Richard G. Weidner Director March 25, 1997
- -----------------------------
S-1
<PAGE>
EXHIBIT 5.1
<PAGE>
MILLER AND MURRAY, LLP
Attorneys at Law
542 Court Street
P.O. Box 942
Reading, Pennsylvania 19603-0942
Telephone: (610) 376-6651
Telecopier: (610) 376-5243
March , 1997
Conestoga Enterprises, Inc.
202 East First Street
Birdsboro, Pennsylvania 19508
Re: Conestoga Enterprises, Inc. (the "Company) and
Infocore, Inc.
("Infocore") Registration Statement on Form S-4
--------------------------------------------------
Gentlemen:
We have acted as counsel for the Company, a Pennsylvania corporation, in
connection with the preparation of a registration statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange Commission
under the Securities Act of 1933 as amended (the "Act"), relating to the
proposed Agreement and Plan of Merger dated March 14, 1997 ("Merger Agreement")
by and among the Company, Infocore and CI Merger Corporation, a wholly owned
subsidiary of the Company whereby the Company will offer up to 200,000 shares of
Company Common Stock, par value $5 per share, to the Infocore shareholders under
the Merger Agreement. In connection thereto, we have reviewed (a) the
Registration Statement; (b) the Company's Articles of Incorporation and By-Laws;
and (c) a copy of the Merger Agreement. Our opinion, as set forth below is
limited to the Pennsylvania Business Corporation Law of 1988, as amended.
In our opinion, the issuance of the shares of Company Common Stock in
connection with the Merger Agreement will be legally issued, fully paid and non-
assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. The opinion expressed herein is for the sole benefit
of, and may be relied upon, only by the Company.
Very truly yours,
Miller and Murray, LLP
<PAGE>
EXHIBIT 10.1
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made , 1997, by and between
------------------------
CI MERGER CORPORATION (the "Company"), a Pennsylvania corporation, and
HARRISON H. CLEMENT, JR. (the "Employee"), of
---------------------------
, Pennsylvania.
- ---------------
BACKGROUND
Pursuant to an Agreement and Plan of Merger dated March 14, 1997, by
and among Conestoga Enterprises, Inc. ("CEI"), Infocore, Inc. ("Infocore")
and the Company, Infocore in the near future will be merged with and into
the Company, which will be the surviving corporation. Pursuant to such plan
of merger (the "Plan of Merger"), as of the Effective Date of the merger
specified therein (the "Effective Date"), the corporate name of the Company
will become "Infocore, Inc.". The Employee is currently President and Chief
Executive Officer of Infocore and the parties have agreed that he shall be
employed by the Company as of the Effective Date under the terms and
provisions contained in this Agreement.
AGREEMENT
Therefore, each intending to be legally bound hereby, the parties
agree as follows:
1. Employment and Employment Duties. Under the terms and conditions
--------------------------------
contained in this Agreement, the Company employs the Employee as President
and Chief Executive Officer and the Employee accepts such employment. The
Employee's employment duties shall be those specified for the President of
the Company in the Company's by-laws and those additional duties,
commensurate with such position, assigned by the Board of Directors of the
Company (the "Board"). The Employee shall report directly to the Board. The
Employee's employment shall be on a full-time basis and he shall not be
engaged or employed in other business activities (whether for pecuniary
advantage or not) during the term of this Agreement, except that he shall
be permitted to serve on the boards of directors of business or charitable
organizations, provided such service does not materially affect the
performance of his employment duties for the Company. The Employee shall
discharge his employment duties in a diligent and conscientious fashion.
<PAGE>
2. Term. The Employee's employment hereunder shall be for a period
----
of two (2) years, commencing upon the Effective Date. Notwithstanding the
foregoing: (i) the Company may terminate the Employee's employment at any
time (A) upon fifteen (15) days prior written notice for any reason or for
no reason, or (B) without prior notice for cause (as defined below); and
(ii) the Employee may terminate the Employee's employment at any time
without prior notice for any reason or for no reason. For purposes of this
Agreement, the Employee's employment shall be deemed to have been
terminated for cause in the event the Company terminates it as a result of:
(a) the Employee's breach of his confidentiality obligations
specified in Section 5;
(b) the willful failure or refusal by the Employee to perform any
of his material employment duties or his material obligations under this
Agreement which shall not have ceased or been corrected within fifteen (15)
days following a written warning from the Company; or
(c) the commission of any act or the failure to act by the
Employee which constitutes a crime or offense involving money or other
property of any of the CEI Companies (as defined in Section 5) or which
constitutes a felony in the jurisdiction involved.
3. Severance Compensation.
----------------------
3.1 General Rule. Unless the provisions of Section 3.2 apply,
------------
in the event of the termination of the Employee's employment by the Company
other than for cause prior to the expiration of the two (2) year term
referred to in Section 2, the Company shall be obligated to pay to the
Employee, within fifteen (15) days after the date of termination, an amount
equal to the greater of: (i) fifty percent (50%) of the Employee's annual
salary determined as of the date of termination of employment, or (ii) the
aggregate salary otherwise payable to the Employee for the balance of the
two (2) year term referred to in Section 2, determined as of the date of
termination of employment.
3.2 Change of Control. If, during the term of this Agreement,
-----------------
the Employee's employment with the Company is terminated within ninety (90)
days of the date of a change of control (as defined below), either by the
Employee or by the Company other than for cause, the Company shall pay to
the Employee, within fifteen (15) days of the date of termination of
employment, an amount equal to the greater of: (i) the amount payable to
<PAGE>
the Employee as determined by the application of the provisions of Section
3.1, or (ii) one and one-half (1.5) times the Employee's annual salary,
determined as of the date of termination of employment. The Company shall
be obligated to make such payment in lieu of, and not in addition to, the
Company's payment obligations under Section 3.1. For purposes of this
Agreement, a change of control shall be deemed to have occurred in the
event of: (i) the acquisition, directly or indirectly, by any person or
entity, or persons or entities acting in concert, whether by purchase,
merger, consolidation or otherwise, of voting power over that number of
voting shares of the capital stock of either the Company or CEI which, when
combined with the existing voting power of such persons or entities, would
enable them to cast fifty percent (50%) or more of the votes which all
shareholders of the Company or CEI, respectively, would be entitled to cast
in the election of directors of either the Company or CEI, or (ii) the
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company to a transferee other than CEI or a company or entity of which a
controlling interest is owned by CEI.
3.3 Termination for Cause. In the event of the termination of
---------------------
the Employee's employment at any time by the Company for cause, the Company
shall have no obligation to pay the Employee any sums following the
termination of his employment.
4. Compensation. As compensation for the performance of his
------------
employment duties, during the term hereof the Company shall pay or provide
to the Employee the following:
(a) A salary in the annual amount of One Hundred Two Thousand
Dollars ($102,000), payable in accordance with the Company's normal payroll
practices in effect from time to time. The Employee's salary shall be
reviewed by the Board at the same time and in the same manner as is
customary for the employees of CEI and its subsidiaries and may be
increased, in the sole discretion of the Board, based upon the Employee's
satisfactory performance of his employment duties.
(b) The provision of those fringe benefits which were provided to
the Employee in his position as President and CEO of Infocore as of the
Effective Date under plans or insurance policies maintained by the Company
from time to time, but in no event having benefits less than comparable to
those of Infocore. Such fringe benefits include four (4) weeks paid
vacation, personal use of a Company automobile, medical health and
disability
<PAGE>
insurance coverage, inclusion in the Company's 401(k) profit sharing plan
and its officers' profit sharing plan, and reimbursement of business
expenses under policies similar to those in effect with Infocore.
(c) Maintenance of a life insurance policy insuring the
Employee's life with a death benefit of Three Hundred Fifty Thousand
Dollars ($350,000.00) payable to the beneficiary or beneficiaries
designated by the Employee.
5. Confidentiality. The Employee acknowledges that he has had, and
---------------
in fulfilling his duties under this Agreement he will have, access to
confidential information regarding the business and financial affairs of
the Company, CEI, and/or the other subsidiaries of CEI (collectively, the
"CEI Companies"). The Employee hereby agrees to hold all such information
in the strictest confidence, to discuss such information only with
authorized personnel of the CEI Companies, and, except as required by law
or compelled by legal process, to refrain from disclosing such information
to any other party, both during the term of this Agreement and after the
termination hereof. The provisions of this Section 5 shall not apply to
information which is or becomes generally available to or known by the
public other than as a result of disclosure by the Employee.
6. Covenant Not to Compete. The Employee agrees that, in order to
-----------------------
protect the legitimate interests and property rights of the Employer, for a
period of one (1) year after the termination of the Employee's employment
with the Company (regardless of the reason for the termination), the
Employee shall not:
(a) Engage, directly or indirectly, either as owner, partner,
agent, employee, consultant, member, or shareholder, or otherwise operate,
control, join or participate in, lend money to, or be connected with any
commercial enterprise or business which is engaged within the Territory (as
defined below) in any facet of the wireless telecommunications business
carried on by any of the CEI Companies as of the date of termination of the
Employee's employment;
(b) Approach, solicit, contact, or otherwise establish a business
relationship with any customer of any of the CEI Companies or any
prospective customer of any of the CEI Companies with whom any of such
companies has had significant contact on or before the date of termination
of the Employee's employment, for a purpose related to the business carried
on by any of the CEI Companies as of the date of termination of the
Employee's employment;
<PAGE>
(c) Assist any other person, partnership, corporation, limited
liability company, or other entity in the pursuit of the activities from
which the Employee is prohibited in engaging under the provisions of
Subsections (a) and (b) above; or
(d) Induce by active solicitation any present or future employees
or agents of the Company or the other CEI Companies to directly or
indirectly engage in any competitive business or to terminate their
employment with any of the CEI Companies.
For purposes of this Agreement, the term "Territory" shall mean those
geographical areas encompassed by the Reading, Pottsville, Sunbury, and
Williamsport Basic Trading Areas, as defined by the Federal Communications
Commission for the issuance of personal communication services licenses.
Nothing contained in this Section 6 shall prohibit the Employee from: (i)
investing in and owning securities issued by any publicly-held company
which are traded on any recognized securities exchange or in the over-the-
counter market; or (ii) accepting employment, after termination of his
employment with the Company, with a customer of the Company which is not a
significant customer.
7. Equitable Relief. The Employee recognizes and agrees that, in
----------------
the event of a breach or threatened breach of his covenants and obligations
contained in Section 5 and/or Section 6 of this Agreement, the Company will
suffer irreparable harm and damage, that such harm and damage may be
extremely difficult or impossible to quantify, and that therefore the
Company shall be entitled to injunctive relief. Nothing contained herein,
however, shall be construed as precluding the Company from pursuing any
other remedies available to it for such breach or threatened breach,
including the recovery of damages at law.
8. Restrictions Excessive. In the event the restrictions imposed by
----------------------
the covenant contained in Section 6 are deemed by any court having
jurisdiction to be unreasonable or otherwise unenforceable by reason of
their duration, territory or the scope of the activities prohibited, it is
agreed by the parties that such court may construe and enforce this
Agreement by reducing the time period, territory, or scope of activities to
an extent which such court deems to be reasonable and enforceable.
9. Severability. If any provision or provisions of this Agreement
------------
shall be deemed to contravene or be invalid under the laws of any
jurisdiction where this Agreement is in force, the parties agree that such
<PAGE>
contravention or invalidity shall not invalidate the entire Agreement, but
it shall be construed as not containing the particular provision or
provisions held to be invalid and the rights and obligations of the parties
shall be construed and enforced accordingly.
10. Miscellaneous.
-------------
(a) This Agreement shall be construed, interpreted and enforced
in accordance with the laws (but not the law of conflict of laws) of the
Commonwealth of Pennsylvania.
(b) This Agreement and its provisions shall be binding upon and
inure to the benefit of the respective legal representatives, successors,
heirs, and permitted assigns of the parties. The Employee shall not assign
any of his rights nor delegate any of his duties under this Agreement
without the prior written consent of the Company.
(c) This Agreement constitutes the entire Agreement between the
parties and supersedes all prior negotiations, understandings and
agreements of any nature whatsoever, whether oral or written, with respect
to the subject matter hereof. No amendment, waiver or discharge of any
provision of this Agreement shall be effective against any party, unless
that party shall have consented thereto in writing.
(d) The headings to the sections of this Agreement are inserted
only for convenience of reference and are not intended, nor shall they be
construed, to modify, define, limit or expand the intent of the parties as
expressed in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
WITNESS: CI MERGER CORPORATION
By:
------------------------- ----------------------------------
President
(SEAL)
------------------------- ---------------------------
Harrison H. Clement, Jr.
<PAGE>
INTENDING TO BE LEGALLY BOUND HEREBY, CONESTOGA ENTERPRISES, INC.
hereby guarantees the performance of all of the obligations of and payment
of all sums due from CI Merger Corporation under the foregoing Employment
Agreement.
CONESTOGA ENTERPRISES, INC.
By:
-----------------------------
President
<PAGE>
EXHIBIT 10.2
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made , 1997, by and between
------------------------
CI MERGER CORPORATION (the "Company"), a Pennsylvania corporation, and
HENRY M. STRINGER (the "Employee"), of
-----------------------------------
, Pennsylvania.
-----------------
BACKGROUND
Pursuant to an Agreement and Plan of Merger dated March 14, 1997, by
and among Conestoga Enterprises, Inc. ("CEI"), Infocore, Inc. ("Infocore")
and the Company, Infocore in the near future will be merged with and into
the Company, which will be the surviving corporation. Pursuant to such plan
of merger (the "Plan of Merger"), as of the Effective Date of the merger
specified therein (the "Effective Date"), the corporate name of the Company
will become "Infocore, Inc.". The Employee is currently Senior Vice
President of Infocore and the parties have agreed that he shall be employed
by the Company as of the Effective Date under the terms and provisions
contained in this Agreement.
AGREEMENT
Therefore, each intending to be legally bound hereby, the parties
agree as follows:
1. Employment and Employment Duties. Under the terms and conditions
--------------------------------
contained in this Agreement, the Company employs the Employee as Senior
Vice President and the Employee accepts such employment. The Employee's
employment duties shall include primary management of the Company's sales
and marketing functions and those additional duties, commensurate with his
position, assigned by the President and/or the Board of Directors of the
Company (the "Board"). The Employee shall report directly to the President.
The Employee's employment shall be on a full-time basis and he shall not be
engaged or employed in other business activities (whether for pecuniary
advantage or not) during the term of this Agreement. The Employee shall
discharge his employment duties in a diligent and conscientious fashion.
2. Term. The Employee's employment hereunder shall be for a period
----
of two (2) years, commencing upon the Effective Date. Notwithstanding the
foregoing: (i) the Company may terminate the Employee's
<PAGE>
employment at any time (A) upon fifteen (15) days prior written notice for
any reason or for no reason, or (B) without prior notice for cause (as
defined below); and (ii) the Employee may terminate the Employee's
employment at any time without prior notice for any reason or for no
reason. For purposes of this Agreement, the Employee's employment shall be
deemed to have been terminated for cause in the event the Company
terminates it as a result of:
(a) the Employee's breach of his confidentiality obligations
specified in Section 5;
(b) the willful failure or refusal by the Employee to perform any
of his material employment duties or his material obligations under this
Agreement which shall not have ceased or been corrected within fifteen (15)
days following a written warning from the Company; or
(c) the commission of any act or the failure to act by the
Employee which constitutes a crime or offense involving money or other
property of any of the CEI Companies (as defined in Section 5) or which
constitutes a felony in the jurisdiction involved.
3. Severance Compensation.
----------------------
3.1 General Rule. Unless the provisions of Section 3.2 apply,
------------
in the event of the termination of the Employee's employment by the Company
other than for cause prior to the expiration of the two (2) year term
referred to in Section 2, the Company shall be obligated to pay to the
Employee, within fifteen (15) days after the date of termination, an amount
equal to the greater of: (i) fifty percent (50%) of the Employee's annual
salary determined as of the date of termination of employment, or (ii) the
aggregate salary otherwise payable to the Employee for the balance of the
two (2) year term referred to in Section 2, determined as of the date of
termination of employment.
3.2 Change of Control. If, during the term of this Agreement,
-----------------
the Employee's employment with the Company is terminated within ninety (90)
days of the date of a change of control (as defined below), either by the
Employee or by the Company other than for cause, the Company shall pay to
the Employee, within fifteen (15) days of the date of termination of
employment, an amount equal to the greater of: (i) the amount payable to
the Employee as determined by the application of the provisions of Section
3.1, or (ii) the amount of the Employee's annual salary, determined as of
the date of termination of employment. The Company shall be obligated to
make
<PAGE>
such payment in lieu of, and not in addition to, the Company's payment
obligations under Section 3.1. For purposes of this Agreement, a change of
control shall be deemed to have occurred in the event of: (i) the acquisition,
directly or indirectly, by any person or entity, or persons or entities acting
in concert, whether by purchase, merger, consolidation or otherwise, of voting
power over that number of voting shares of the capital stock of either the
Company or CEI which, when combined with the existing voting power of such
persons or entities, would enable them to cast fifty percent (50%) or more of
the votes which all shareholders of the Company or CEI, respectively, would be
entitled to cast in the election of directors of either the Company or CEI, or
(ii) the sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all, or substantially all, of the assets of the
Company to a transferee other than CEI or a company or entity of which a
controlling interest is owned by CEI.
3.3 Termination for Cause. In the event of the termination of
---------------------
the Employee's employment at any time by the Company for cause, the Company
shall have no obligation to pay the Employee any sums following the termination
of his employment.
4. Compensation. As compensation for the performance of his
------------
employment duties, during the term hereof the Company shall pay or provide to
the Employee the following:
(a) A salary in the annual amount of Ninety Thousand Dollars
($90,000), payable in accordance with the Company's normal payroll practices in
effect from time to time. The Employee's salary shall be reviewed by the Board
at the same time and in the same manner as is customary for the employees of CEI
and its subsidiaries and may be increased, in the sole discretion of the Board,
based upon the Employee's satisfactory performance of his employment duties.
(b) The provision of those fringe benefits which were provided to
the Employee in his position as Senior Vice President of Infocore as of the
Effective Date under plans or insurance policies maintained by the Company from
time to time, but in no event having benefits less than comparable to those of
Infocore. Such fringe benefits include four (4) weeks paid vacation, personal
use of a Company automobile, medical health and disability insurance coverage,
inclusion in the Company's 401(k) profit sharing plan and its officers' profit
sharing plan, and reimbursement of business expenses under policies similar to
those in effect with Infocore.
<PAGE>
(c) Maintenance of a life insurance policy insuring the
Employee's life with a death benefit of Three Hundred Fifty Thousand Dollars
($350,000.00) payable to the beneficiary or beneficiaries designated by the
Employee.
5. Confidentiality. The Employee acknowledges that he has had, and
---------------
in fulfilling his duties under this Agreement he will have, access to
confidential information regarding the business and financial affairs of the
Company, CEI, and/or the other subsidiaries of CEI (collectively, the "CEI
Companies"). The Employee hereby agrees to hold all such information in the
strictest confidence, to discuss such information only with authorized personnel
of the CEI Companies, and, except as required by law or compelled by legal
process, to refrain from disclosing such information to any other party, both
during the term of this Agreement and after the termination hereof. The
provisions of this Section 5 shall not apply to information which is or becomes
generally available to or known by the public other than as a result of
disclosure by the Employee.
6. Covenant Not to Compete. The Employee agrees that, in order to
-----------------------
protect the legitimate interests and property rights of the Employer, for a
period of one (1) year after the termination of the Employee's employment with
the Company (regardless of the reason for the termination), the Employee shall
not:
(a) Engage, directly or indirectly, either as owner, partner,
agent, employee, consultant, member, or shareholder, or otherwise operate,
control, join or participate in, lend money to, or be connected with any
commercial enterprise or business which is engaged within the Territory (as
defined below) in any facet of the wireless telecommunications business carried
on by any of the CEI Companies as of the date of termination of the Employee's
employment;
(b) Approach, solicit, contact, or otherwise establish a business
relationship with any customer of any of the CEI Companies or any prospective
customer of any of the CEI Companies with whom any of such companies has had
significant contact on or before the date of termination of the Employee's
employment, for a purpose related to the business carried on by any of the CEI
Companies as of the date of termination of the Employee's employment;
<PAGE>
(c) Assist any other person, partnership, corporation, limited
liability company, or other entity in the pursuit of the activities from which
the Employee is prohibited in engaging under the provisions of Subsections (a)
and (b) above; or
(d) Induce by active solicitation any present or future employees
or agents of the Company or the other CEI Companies to directly or indirectly
engage in any competitive business or to terminate their employment with any of
the CEI Companies.
For purposes of this Agreement, the term "Territory" shall mean those
geographical areas encompassed by the Reading, Pottsville, Sunbury, and
Williamsport Basic Trading Areas, as defined by the Federal Communications
Commission for the issuance of personal communication services licenses. Nothing
contained in this Section 6 shall prohibit the Employee from: (i) investing in
and owning securities issued by any publicly-held company which are traded on
any recognized securities exchange or in the over-the-counter market; or (ii)
accepting employment, after termination of his employment with the Company, with
a customer of the Company which is not a significant customer.
7. Equitable Relief. The Employee recognizes and agrees that, in
----------------
the event of a breach or threatened breach of his covenants and obligations
contained in Section 5 and/or Section 6 of this Agreement, the Company will
suffer irreparable harm and damage, that such harm and damage may be
extremely difficult or impossible to quantify, and that therefore the
Company shall be entitled to injunctive relief. Nothing contained herein,
however, shall be construed as precluding the Company from pursuing any
other remedies available to it for such breach or threatened breach,
including the recovery of damages at law.
8. Restrictions Excessive. In the event the restrictions imposed by
----------------------
the covenant contained in Section 6 are deemed by any court having jurisdiction
to be unreasonable or otherwise unenforceable by reason of their duration,
territory or the scope of the activities prohibited, it is agreed by the parties
that such court may construe and enforce this Agreement by reducing the time
period, territory, or scope of activities to an extent which such court deems to
be reasonable and enforceable.
9. Severability. If any provision or provisions of this Agreement
------------
shall be deemed to contravene or be invalid under the laws of any
jurisdiction where this Agreement is in force, the parties agree that such
<PAGE>
contravention or invalidity shall not invalidate the entire Agreement, but it
shall be construed as not containing the particular provision or provisions held
to be invalid and the rights and obligations of the parties shall be construed
and enforced accordingly.
10. Miscellaneous.
-------------
(a) This Agreement shall be construed, interpreted and enforced
in accordance with the laws (but not the law of conflict of laws) of the
Commonwealth of Pennsylvania.
(b) This Agreement and its provisions shall be binding upon and
inure to the benefit of the respective legal representatives, successors, heirs,
and permitted assigns of the parties. The Employee shall not assign any of his
rights nor delegate any of his duties under this Agreement without the prior
written consent of the Company.
(c) This Agreement constitutes the entire Agreement between the
parties and supersedes all prior negotiations, understandings and agreements of
any nature whatsoever, whether oral or written, with respect to the subject
matter hereof. No amendment, waiver or discharge of any provision of this
Agreement shall be effective against any party, unless that party shall have
consented thereto in writing.
(d) The headings to the sections of this Agreement are inserted
only for convenience of reference and are not intended, nor shall they be
construed, to modify, define, limit or expand the intent of the parties as
expressed in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
WITNESS: CI MERGER CORPORATION
________________ By:________________________
President
________________ _______________________(SEAL)
Henry M. Stringer
INTENDING TO BE LEGALLY BOUND HEREBY, CONESTOGA ENTERPRISES, INC.
hereby guarantees the performance of all of the obligations of and payment of
all sums due from CI Merger Corporation under the foregoing Employment
Agreement.
CONESTOGA ENTERPRISES, INC.
By:_____________________
President
<PAGE>
EXHIBIT 23.3
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and the related Proxy Statement/Prospectus
therein of our report, dated January 18, 1997, except for Note 13 as to which
the date is February 13, 1997, with respect to the consolidated financial
statements of Conestoga Enterprises, Inc. and subsidiaries included in its
Annual Report on Form 10-K for the year ended December 31, 1996.
Beard and Company, Inc.
Reading, Pennsylvania
March , 1997
<PAGE>
EXHIBIT 23.4
<PAGE>
CONSENT OF JSI FINANCIAL SERVICES
We hereby consent to the inclusion of our opinion as Appendix B to the Proxy
Statement/Prospectus filed as part of this Registration Statement on Form S-4 of
Conestoga Enterprises, Inc.. In giving such consent, we do not hereby admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
JSI FINANCIAL SERVICES
William E. King, CPA
Director
March , 1997
<PAGE>
EXHIBIT 99.1
<PAGE>
REVOCABLE PROXY
INFOCORE, INC.
SPECIAL MEETING OF SHAREHOLDERS
April 21, 1997
The undersigned hereby appoints Harrison H. Clement, Jr. and Henry M.
Stringer, with full powers of substitution, to act as attorneys and proxies for
the undersigned, to vote all shares of the common stock of Infocore, Inc. which
the undersigned is entitled to vote at the Special Meeting of Shareholders, to
be held at 661 Moore Road, King of Prussia, Pennsylvania 19406 on Monday, April
21, 1997, at 10:00 a.m., local time, and at any and all adjournments thereof, as
follows:
FOR AGAINST ABSTAIN
--- ------- -------
1. The approval of the Agreement and Plan of Merger [_] [_] [_]
(the "Merger Agreement") among Infocore, Inc.,
Conestoga Enterprises, Inc. and CI
Merger Corporation.
The Board of Directors recommends a vote "FOR" each of the listed
propositions.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED "FOR" THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, INCLUDING MATTERS RELATING TO THE CONDUCT OF THE
MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST
JUDGMENT; PROVIDED, HOWEVER THAT IF THIS PROXY IS VOTED
--------
AGAINST THE MERGER AGREEMENT, THIS PROXY MAY NOT BE VOTED IN FAVOR OF A PROPOSAL
TO ADJOURN THE SPECIAL MEETING SO THAT ADDITIONAL VOTES IN FAVOR OF THE MERGER
AGREEMENT MAY BE SOLICITED. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF
NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned may revoke this proxy prior to its exercise by filing
a subsequent proxy or a duly executed revocation with the Secretary.
The undersigned acknowledges receipt from Infocore, Inc. prior to the
execution of this proxy of Notice of the Meeting and a Proxy
Statement/Prospectus dated April 9, 1997.
Dated: ______________________, 1997
_______________________________ _____________________________
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
_______________________________ _____________________________
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
When signing as attorney, executor, administrator, trustee or guardian, please
give your full title. If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
<PAGE>
EXHIBIT 99.2
<PAGE>
CONESTOGA ENTERPRISES, INC.
LETTER OF TRANSMITTAL
(To Accompany Certificates for Shares of Infocore, Inc.)
PLEASE FOLLOW CAREFULLY THE INSTRUCTIONS BELOW
EXCHANGE AGENT:
If by Mail or by Hand:
Conestoga Enterprises, Inc.
202 East First Street
Birdsboro, PA 19508
Attn: Suzanne Torak
Gentlemen:
The undersigned, pursuant to the terms of an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of March 14, 1997, among Conestoga
Enterprises, Inc. ("CEI"), Infocore, Inc. ("Infocore") and CI Merger
Corporation, a wholly owned subsidiary of CEI, hereby surrenders to the Exchange
Agent the share certificates listed below in Box A representing shares of common
stock, par value $.02 per share, of Infocore ("Infocore Common Stock"). As a
registered owner of Infocore Common Stock, the undersigned hereby requests that
you deliver , as set forth below and in accordance with the Merger Agreement (i)
a certificate for shares of Common Stock, par value $5.00 per share, of CEI
("CEI Common Stock"), at the rate described in the Merger Agreement for each
share of Infocore Common Stock surrendered pursuant to this Letter of
Transmittal and (ii) a check for the cash payment in lieu of a fractional share
of CEI Common Stock, if any. (See Instruction 7 below.)
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----
BOX A: SURRENDERED CERTIFICATES FOR SHARES OF INFOCORE COMMON STOCK
PLEASE FILL IN
- --------------
Certificate Number
Numbers of Shares
------- ---------
Name and Address of Registered Owner
as Shown on the Share Records
Total Number of Shares
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----
(If additional space is required, attach a continuation sheet in substantially
the above form.)
Except as otherwise requested in special instructions in Boxes B and C, the
undersigned requested that the certificates representing shares of CEI Common
Stock and the check for cash payment of a fractional share (if any) to which the
undersigned is entitled be issued in the name and mailed to the address as set
forth above in Box A. Unless written instructions to the contrary are attached
hereto, a single CEI Common Stock certificate will be issued in exchange for
Infocore Common Stock certificates surrendered pursuant to this Letter of
Transmittal. (See Instruction 9 below.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----
BOX B: SPECIAL ISSUANCE INSTRUCTIONS
To be completed only if the CEI Common Stock certificate and check (if any)
is to be issued to other than the registered holder(s). (See instruction 4
below.)
Issue to:
Name
----------------------------------------------------------
(Please Print)
Address
-----------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
-2-
<PAGE>
(Give Zip Code)
Tax Identification Number or
Social Security Number
-------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----
-3-
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----
BOX C: SPECIAL MAILING INSTRUCTIONS
To be completed only if the CEI Common Stock certificate and check (if any)
is to be mailed to an address other than that listed in Box A or Box B.
Mailed to:
Name
---------------------------------------------------
(Please Print)
Address
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(Give Zip Code)
[_] Please check this box if the address listed here is the permanent address
to which future dividends and communications should be mailed.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----
BOX D: SIGNATURE GUARANTEE
(See Instruction 4)
To be completed ONLY if required by Instruction 4 below.
The undersigned hereby guarantees the signature(s) which appear(s) on this
Letter of Transmittal.
- -----------------------------------------------------
(Name of Firm Issuing Guarantee)
- -----------------------------------------------------
(Signature of Officer)
- -----------------------------------------------------
(Title of Officer Signing this Guarantee)
- -----------------------------------------------------
(Address of Guaranteeing Firm)
Dated: , 1997
----------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----
-4-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of this Letter of Transmittal
1. Use of Letter of Transmittal. This Letter of Transmittal, properly
filled in, dated and signed, together with your surrendered Infocore stock
certificates (the "Surrendered Certificates") and any other documents required
by these Instructions, should be sent by mail or delivered by hand to the
Exchange Agent, in each case at the appropriate address as set forth above. The
method of delivery of all documents is at the option and risk of the
shareholder, but if delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. A return envelope is enclosed for
your convenience.
2. Signatures. If you wish your CEI Common Stock certificate to be
issued in your name, this Letter of Transmittal must be signed by you or on your
behalf as the registered holder(s) of the Surrendered Certificates. In the case
of joint tenants, both must sign. If the Surrendered Certificates are
registered in different forms of the name of any person signing this Letter of
Transmittal (e.g., "John Smith" on one certificate and "J. Smith" on another),
it will be necessary for such person either to sign this Letter of Transmittal
in each way in which the certificates are registered or to sign as many Letters
of Transmittal as there are different forms of name. If the Surrendered
Certificates have been transferred or assigned, please follow Instruction 4.
3. Issuance of CEI Common Stock Certificate in Same Name. If the CEI
Common Stock certificate is to be issued in the name of the registered holder as
shown on the Surrendered Certificates, the Surrendered Certificates need not be
endorsed.
4. Issuance of CEI Common Stock Certificate in Different Names. If the
CEI Common Stock Certificate is to be issued in the name of someone other than
the registered owner of the Surrendered Certificates, please be guided by the
following:
a. Endorsement and Guarantee. The Surrendered Certificates must be
-------------------------
properly endorsed (or accompanied by appropriate stock powers properly executed
by the registered holder of such certificates) to the person who is to receive
the CEI Common Stock certificate. The signature of the registered holder on the
endorsement or stock powers must correspond with the name as written upon the
face of the Surrendered Certificates in every particular and must be guaranteed
by a commercial bank (not a savings bank or savings and loan association) or
trust company in the United States or by a member firm of any national
securities exchange or of the National Association of Securities Dealers, Inc.
("Qualified Guarantor").
-5-
<PAGE>
b. Transferee's Signature. This Letter of Transmittal must be
----------------------
signed by the transferee or by his agent, and should not be signed by the
transferor. The signature of such transferee or agent must be guaranteed by a
Qualified Guarantor as defined in Instruction 4(a).
c. Transfer Taxes. In the event that any transfer or other taxes
--------------
become payable by reason of the issuance of any CEI Common Stock certificate in
any name other than that of the registered holder, such transferee must pay such
tax to the Exchange Agent or CEI or must establish to the satisfaction of CEI
that such tax has been paid or is not payable.
d. Correction of or Change in Name. For a correction of name or for
-------------------------------
a change in name which does not involve a change of ownership, proceed as
follows: for a change in name by marriage, etc., the Surrendered Certificates
should be endorsed, e.g., "Mary Doe, now by marriage Mrs. Mary Jones," with the
signature guaranteed by a Qualified Guarantor as described in Instruction 4(a).
For a correction in name, the Surrendered Certificates should be endorsed, e.g.,
"James E. Brown, incorrectly inscribed as J.E. Brown" with the signature
guaranteed by a Qualified Guarantor as described in Instruction 4(a).
5. 31% Backup Withholding. In order to avoid "backup withholding" of
Federal income tax on the cash received, in lieu of a fractional share of CEI
Common Stock, a stockholder must, unless an exemption applies, provide the
Exchange Agent with his correct taxpayer identification number ("TIN") on the
Form W-9 accompanying this Letter of Transmittal and certify, under penalties of
perjury, that such number is correct. If the correct TIN is not provided, a $50
penalty may be imposed by the Internal Revenue Service and payments made in lieu
of a fractional share of CEI Common Stock may be subject to backup withholding
of 31%.
Backup withholding is not an additional Federal income tax. Rather,
the Federal income tax liability of persons subject to backup withholding will
be reduced by the amount of such tax withheld. If backup withholding results in
an overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
The TIN that must be provided on the Form W-9 is that of the
registered holder of the Surrendered Certificates or of the last transferee
appearing on the transfers attached to or endorsed on the Surrendered
Certificates. The TIN for an individual is his social security number.
Exempt persons (including, among others, corporations) are not subject
to backup withholdings and should indicate their exempt status on Form W-9. A
foreign person may qualify as an exempt person by submitting a statement, signed
under penalties of perjury, certifying such person's foreign status. Such
statements can be obtained from the Exchange Agent. A
-6-
<PAGE>
stockholder should consult his tax advisor as to his qualification for exemption
from backup withholdings and the procedure for obtaining such exemption.
For additional guidance, see the enclosed Form W-9.
6. Supporting Evidence. In case any Letter of Transmittal, certificate,
endorsement or stock power is executed by an agent, attorney, administrator,
executor, guardian, trustee, or in any other fiduciary or representative
capacity, or by an officer of a corporation on behalf of the corporation, there
should be submitted documentary evidence of appointment and authority to act in
such capacity (including court orders and corporate resolutions where necessary)
as well as evidence of the authority of the person making such execution to
assign, sell or transfer shares. Such documentary evidence of authority must be
in a form satisfactory to the Exchange Agent and submitted with the Letter of
Transmittal, Surrendered Certificates and/or stock power.
7. Cash Payment for Fractional Shares. CEI will not issue any fractional
shares of CEI Common Stock in connection with the Merger. Instead, CEI will pay
holders of a fractional share of CEI Common Stock an amount in cash (rounded to
the nearest whole cent) equal to (i) $_____ (the per share market value of CEI
Common Stock as determined pursuant to the Merger Agreement on the effective
date of the merger) times (ii) the fractional share to which such holder would
otherwise be entitled.
8. Additional Copies. Additional copies of this Letter of Transmittal or
the Form W-9 may be obtained from the Exchange Agent.
9. Multiple Certificates. If, for tax purposes, a holder of Infocore
Common Stock wished to maintain the separate tax bases and holding period of
certain blocks of Infocore Common Stock held by such holder, or otherwise have
multiple certificates issued for the CEI Common Stock, explicit instructions to
the Exchange Agent should be provided.
YOU ARE URGED TO COMPLETE AND RETURN THIS LETTER OF TRANSMITTAL PROMPTLY.
ANY DIVIDENDS AND OTHER DISTRIBUTIONS PAYABLE TO HOLDERS OF RECORD OF SHARES OF
CEI COMMON STOCK AFTER THE MERGER WILL NOT BE DELIVERED TO YOU BUT WILL BE HELD
(WITHOUT INTEREST) UNTIL YOU SURRENDER YOUR INFOCORE CERTIFICATE(S).
-7-
