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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 4, 1999
EQUITRAC CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA
(State or other jurisdiction of incorporation)
0-20189 59-1797862
(Commission File Number) (I.R.S. Employer Identification No.)
836 PONCE DE LEON BOULEVARD
CORAL GABLES, FLORIDA 33134
(Address of principal executive offices) (Zip Code)
(305) 442-2060
(Registrant's telephone number, including area code)
(NOT APPLICABLE)
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On June 4, 1999, Equitrac Corporation ("Equitrac"), a Florida
corporation, Chargeback Acquisition Corp. ("Merger Sub"), a Florida
corporation formed by Cornerstone Equity Investors IV, L.P.
("Cornerstone"), and John T. Kane and George P. Wilson, executive
officers and shareholders of Equitrac (collectively the
"Shareholders"), entered into an Amended and Restated Recapitalization
Agreement and Plan of Merger dated June 4, 1999 (the "Merger
Agreement"), pursuant to which Cornerstone together with the
Shareholders and certain other members of senior management of
Equitrac, will acquire Equitrac in a recapitalization and merger
transaction for $21.00 per share in cash. The Merger Agreement is on
substantially the same terms as the February 17, 1999 recapitalization
agreement and plan of merger between the parties, with the exception of
the reduction of the merger consideration to $21.00 from $25.25 per
share.
The Board of Directors of Equitrac and a special independent
committee of the Board of Directors have unanimously approved the
Merger Agreement. Prudential Securities Incorporated has rendered a
fairness opinion to the special committee in connection with the
transaction. Consummation of the transaction is subject to the approval
of Equitrac's shareholders and other customary conditions.
The foregoing summary of the Merger Agreement and transaction
is qualified in its entirety by reference to the text of the Merger
Agreement, the Voting Agreement dated as of February 17, 1999 (the
"Voting Agreement") by and among Merger Sub and the Shareholders,
Amendment No. 1 to the Voting Agreement dated June 4, 1999 and
Equitrac's Press Release dated June 4, 1999, which are attached hereto
as Exhibits 2.1, 2.2, 2.3 and 99.1, respectively, and are incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits
The following Exhibits are provided in accordance with the
provisions of Item 601 of Regulation S-K and are filed herewith unless
otherwise noted.
EXHIBIT INDEX
*2.1 Amended and Restated Recapitalization Agreement and Plan of
Merger dated June 4, 1999, among Equitrac Corporation,
Chargeback Acquisition Corp. and John T. Kane and George P.
Wilson.
2.2 Voting Agreement dated as of February 17, 1999 by and among
Chargeback Acquisition Corp. and John T. Kane and George P.
Wilson (incorporated by
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reference to Exhibit 2.2 to Equitrac Corporation's Form 8-K
dated February 17, 1999).
2.3 Amendment No. 1 to the Voting Agreement dated June 4, 1999 by
and among Chargeback Acquistion Corp. and John T. Kane and
George P. Wilson.
99.1 Press Release of Equitrac Corporation dated June 4, 1999.
*The exhibits and schedules thereto have been omitted but copies
thereof will be furnished supplementally to the Commission upon
request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EQUITRAC CORPORATION
Date: June 10, 1999 By: /s/ Scott J. Modist
------------------------------
Scott J. Modist
Senior Vice President
and Chief Financial Officer
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EXHIBIT 2.1
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
AMONG
CHARGEBACK ACQUISITION CORP.
SHAREHOLDERS
AND
EQUITRAC CORPORATION
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June 4, 1999
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TABLE OF CONTENTS
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ARTICLE I THE RECAPITALIZATION AND THE MERGER...........................................................2
SECTION 1.1 Issuance of Preference Stock.....................................................2
SECTION 1.2 Debt Financing...................................................................3
SECTION 1.3 The Merger.......................................................................3
SECTION 1.4 Effective Time; Closing..........................................................3
SECTION 1.5 Effect of the Merger.............................................................3
SECTION 1.6 Articles of Incorporation; By-laws...............................................3
SECTION 1.7 Directors and Officers...........................................................4
SECTION 1.8 Additional Actions...............................................................4
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES; DEPOSIT..................................4
SECTION 2.1 Effect on Capital Stock and Company Stock Options................................4
SECTION 2.2 Exchange of Certificates.........................................................6
SECTION 2.3 Company Stock Options; Plans.....................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................9
SECTION 3.1 Organization and Qualification; Subsidiaries.....................................9
SECTION 3.2 Articles of Incorporation and By-laws...........................................10
SECTION 3.3 Capitalization..................................................................10
SECTION 3.4 Authority Relative to this Agreement............................................11
SECTION 3.5 No Conflict; Required Filings and Consents......................................11
SECTION 3.6 SEC Filings; Financial Statements; Undisclosed Liabilities......................12
SECTION 3.7 Absence of Certain Changes or Events............................................13
SECTION 3.8 Absence of Litigation...........................................................15
SECTION 3.9 Stockholder Vote Required.......................................................15
SECTION 3.10 Opinion of Financial Advisor....................................................16
SECTION 3.11 Brokers.........................................................................16
SECTION 3.12 Company Action; State Takeover Statutes.........................................16
SECTION 3.13 Information Supplied............................................................16
SECTION 3.14 Environmental Matters...........................................................16
SECTION 3.15 Real Property...................................................................17
SECTION 3.16 Personal Property...............................................................18
SECTION 3.17 Contracts.......................................................................18
SECTION 3.18 Insurance Policies..............................................................19
SECTION 3.19 Compliance with Laws............................................................19
SECTION 3.20 Tax Matters.....................................................................19
SECTION 3.21 Employment Agreements...........................................................21
SECTION 3.22 Change of Control Provisions....................................................21
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SECTION 3.23 Employees.......................................................................21
SECTION 3.24 Permits.........................................................................21
SECTION 3.25 Employee Benefit Plans..........................................................21
SECTION 3.26 Intellectual Property Rights....................................................23
SECTION 3.27 Year 2000.......................................................................24
SECTION 3.28 Appraisal Rights................................................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MERGER SUB.................................................24
SECTION 4.1 Organization and Qualification; Subsidiaries....................................24
SECTION 4.2 Charter Documents and By-laws...................................................25
SECTION 4.3 Authority Relative to this Agreement............................................25
SECTION 4.4 No Conflict; Required Filings and Consents......................................25
SECTION 4.5 Interim Operations of Merger Sub................................................26
SECTION 4.6 Information Supplied............................................................26
SECTION 4.7 Brokers.........................................................................26
SECTION 4.8 Financing.......................................................................26
SECTION 4.9 Litigation......................................................................26
SECTION 4.10 Capitalization..................................................................26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS............................................27
SECTION 5.1 No Conflict; Required Filings and Consents......................................27
SECTION 5.2 Ownership of Owned Shares.......................................................27
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER.......................................................28
SECTION 6.1 Conduct of Business by the Company Pending the Merger...........................28
ARTICLE VII ADDITIONAL AGREEMENTS.......................................................................30
SECTION 7.1 Shareholders'Meeting............................................................30
SECTION 7.2 Preparation of Proxy Statement..................................................31
SECTION 7.3 Appropriate Action; Consents; Filings; Further Assurances.......................32
SECTION 7.4 Access to Information; Confidentiality..........................................34
SECTION 7.5 No Solicitation.................................................................34
SECTION 7.6 Indemnification and Insurance...................................................36
SECTION 7.7 Notification of Certain Matters.................................................38
SECTION 7.8 Public Announcements............................................................38
SECTION 7.9 Employment Agreements...........................................................39
SECTION 7.10 Assistance with Financing.......................................................40
SECTION 7.11 Stockholder Approval............................................................40
SECTION 7.12 Exchange Act and NASDAQ Filings.................................................40
SECTION 7.13 Noncompetition; Nonsolicitation.................................................40
SECTION 7.14 Representations.................................................................41
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SECTION 7.15 Voting Agreement................................................................41
SECTION 7.16 Guarantee.......................................................................41
ARTICLE VIII CONDITIONS TO THE MERGER...................................................................42
SECTION 8.1 Conditions to the Obligations of Each Party.....................................42
SECTION 8.2 Conditions to the Obligations of Merger Sub.....................................42
SECTION 8.3 Conditions to the Obligations of the Company and the
Shareholders....................................................................45
SECTION 8.4 Conditions to the Obligations of the Investors..................................45
SECTION 8.5 Conditions to the Obligations of the Shareholders...............................46
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER............................................................46
SECTION 9.1 Termination.....................................................................46
SECTION 9.2 Method of Termination; Effect of Termination....................................47
SECTION 9.3 Fees and Expenses...............................................................48
SECTION 9.4 Amendment.......................................................................49
SECTION 9.5 Waiver..........................................................................49
ARTICLE X GENERAL PROVISIONS............................................................................49
SECTION 10.1 Non-Survival of Representations, Warranties and Agreements......................49
SECTION 10.2 Notices.........................................................................50
SECTION 10.3 Certain Definitions.............................................................51
SECTION 10.4 Accounting Terms................................................................53
SECTION 10.5 Severability....................................................................53
SECTION 10.6 Entire Agreement; Assignment....................................................53
SECTION 10.7 Parties in Interest.............................................................53
SECTION 10.8 Specific Performance............................................................54
SECTION 10.9 Governing Law...................................................................54
SECTION 10.10 Headings........................................................................54
SECTION 10.11 Counterparts....................................................................54
SECTION 10.12 Construction....................................................................54
SECTION 10.13 Obligations of the Shareholders.................................................55
SECTION 10.14 Interpretation; Schedules and Exhibits..........................................55
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AMENDED AND RESTATED RECAPITALIZATION
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
dated June 4, 1999 (this "AGREEMENT") among Chargeback Acquisition Corp., a
Florida corporation, ("MERGER SUB"), Equitrac Corporation, a Florida corporation
(the "COMPANY"), and for purposes of Articles I, V, VII and VIII only, John T.
Kane and George P. Wilson (collectively, the "SHAREHOLDERS").
WHEREAS, the parties hereto have entered into that certain
Recapitalization Agreement and Plan of Merger, dated as of February 17, 1999
(the "ORIGINAL AGREEMENT");
WHEREAS, the parties hereto desire to amend and restate the Original
Agreement in its entirety as set forth below;
WHEREAS, Merger Sub is a new corporation formed by Cornerstone Equity
Investors IV, L.P. ("CORNERSTONE") and/or its affiliates;
WHEREAS, the Board of Directors of the Company has deemed it advisable
in connection with the transactions contemplated by this Agreement and subject
to the terms and conditions hereof that the Company amend its Articles of
Incorporation (the "PREFERENCE AMENDMENT") to provide for the authorization to
create and issue up to (i) 2,000,000 shares of Series A Preferred Stock, $0.01
par value (the "SERIES A PREFERENCE STOCK"), of the Company and (ii) 2,000,000
shares of Series B Preferred Stock, $0.01 par value (the "SERIES B PREFERENCE
STOCK" and, together with the Series A Preference Stock, the "PREFERENCE STOCK")
of the Company;
WHEREAS, immediately prior to the Effective Time (as defined below),
the Shareholders shall convert an aggregate of 273,465 shares of their Common
Stock, par value $0.01, of the Company (the "COMPANY COMMON STOCK") into Series
B Preference Stock in the amounts set forth on EXHIBIT A;
WHEREAS, immediately prior to the Effective Time, Cornerstone, its
affiliates and/or other investors (the "INVESTORS") shall make a $24,826,327
equity contribution into the Company for shares of Series A Preference Stock;
WHEREAS, the respective Boards of Directors of the Company and Merger
Sub have approved and declared advisable a merger (the "Merger") of Merger Sub
with and into the Company upon the terms and subject to the conditions set forth
in this Agreement, with the Company surviving the Merger (the "SURVIVING
CORPORATION"), and the Board of Directors of the Company has recommended that
the holders of shares of Company Common Stock (as such term is defined in
Section 3.03) approve the Merger and the other transactions contemplated by this
Agreement upon the terms of this Agreement;
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WHEREAS, the Boards of Directors of Merger Sub and Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective stockholders;
WHEREAS, the Merger described herein is subject to the approval of a
majority of the outstanding shares of Company Common Stock and satisfaction of
certain other conditions described in this Agreement;
WHEREAS, it is intended that the transactions contemplated by this
Agreement be recorded as a recapitalization of the Company for financial
reporting purposes; and
WHEREAS, the Surviving Corporation shall, contemporaneously with the
Merger, obtain the debt financing (the "DEBT FINANCING") described in the
Commitment Letters (as defined below) to fund a portion of the Merger
Consideration (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained and intending to be legally bound
hereby, Merger Sub, the Shareholders and the Company hereby agree as follows:
ARTICLE I
THE RECAPITALIZATION AND THE MERGER
SECTION 1.1 ISSUANCE OF PREFERENCE STOCK
(a) AUTHORIZATION. Upon the terms and subject to the
conditions set forth in this Agreement, immediately prior to the
Effective Time, the Company shall have amended its Articles of
Incorporation to authorize the creation, issuance and sale of
Preference Stock.
(b) CONVERSION OF COMPANY COMMON STOCK INTO PREFERENCE STOCK.
Upon the terms and subject to the conditions set forth in this
Agreement, immediately prior to the Effective Time, the Shareholders
agree to convert an aggregate of 273,465 shares of Company Common Stock
into Series B Preference Stock (the "PREFERENCE EXCHANGE"), as set
forth on EXHIBIT A, such that immediately after the Equity Contribution
and the Preference Exchange, the Shareholders will own an aggregate of
18.79% of the issued and outstanding Preference Stock of the Company,
as adjusted pursuant to Section 2.01(f).
(c) EQUITY CONTRIBUTION. Upon the terms and subject to the
conditions set forth in this Agreement, immediately prior to the
Effective Time, Cornerstone agrees, by affixing the signature of its
duly authorized officer on the signature page attached hereto, to make
an aggregate equity contribution of $24,826,327 into the Company (the
"EQUITY CONTRIBUTION") in exchange for that number of shares of Series
A Preference Stock such that immediately after the Equity Contribution
and the Preference Exchange, Cornerstone will own 81.21% of the issued
and outstanding Preference Stock of the Company, as
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adjusted pursuant to Section 2.01(f). Notwithstanding anything to the
contrary contained herein, Cornerstone may assign a portion of its
obligations pursuant to this Section 1.01 to the other Investors, but,
in no event, shall such assignment relieve Cornerstone of its
obligations under the Guarantee or this Agreement if such assignee does
not perform such obligations.
SECTION 1.2 DEBT FINANCING. Contemporaneously with the Merger, the
Surviving Corporation will consummate the Debt Financing.
SECTION 1.3 THE MERGER. Upon the terms and subject to the conditions
set forth in Article VII, and in accordance with Section 607.1101 of the Florida
Business Corporation Act ("FLORIDA LAW"), at the Effective Time (as defined
below), Merger Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Merger Sub shall cease, and the
Company shall be the surviving corporation of the Merger (the "SURVIVING
CORPORATION").
SECTION 1.4 EFFECTIVE TIME; CLOSING. As promptly as practicable, and in
no event later than five business days after the satisfaction or, if
permissible, waiver of the conditions set forth in Article VII (other than those
conditions that can only be satisfied on the Closing Date (as defined below)),
including, without limitation, the approval of the Merger by an affirmative vote
of a majority of the holders of the outstanding shares of the Company Common
Stock (as defined below), the parties hereto shall cause the Merger to be
consummated by filing articles of merger (the "ARTICLES OF MERGER") with the
Secretary of State of the State of Florida, in such form as is required by, and
executed in accordance with, Section 607.1105 of Florida Law. The term
"EFFECTIVE TIME" means the date and time of the filing of the Articles of Merger
with the Secretary of State of the State of Florida (or such later time as may
be agreed by the parties hereto and specified in the Articles of Merger).
Immediately prior to the filing of the Articles of Merger, a closing will be
held at the offices of Kirkland & Ellis, Citicorp Center, 153 East 53rd Street,
New York, New York 10022 (or such other place as the parties may agree) (the
date on which such closing takes place being the "CLOSING DATE").
SECTION 1.5 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Florida Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, immunities, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, without further act or deed, and all debts, liabilities,
obligations, restrictions, disabilities and duties of each of the Company and
Merger Sub shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
SECTION 1.6 ARTICLES OF INCORPORATION; BY-LAWS.
(a) From and after the Effective Time, subject to the terms of
Section 7.06, at the Effective Time, the Articles of Incorporation of
the Surviving Corporation shall be the Articles of Incorporation of
Merger Sub as in effect immediately prior to the Effective Time until
thereafter amended in accordance with its terms and as provided by
applicable Law and this Agreement, except that, as of the Effective
Time, Article I of such Articles
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of Incorporation shall be amended to read as follows: "The name of the
Corporation is Equitrac Corporation."
(b) From and after the Effective Time, subject to the terms of
Section 7.06, at the Effective Time, the By-laws of the Company, as in
effect immediately prior to the Effective Time, shall be the By-laws of
the Surviving Corporation until thereafter amended as provided by
applicable Law, the Articles of Incorporation of the Surviving
Corporation and such By-laws.
SECTION 1.7 DIRECTORS AND OFFICERS.
(a) DIRECTORS. From and after the Effective Time, the
directors of Merger Sub immediately prior to the Effective Time shall
be the directors of the Surviving Corporation until the earlier of
their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be, in accordance with the
Articles of Incorporation and By-laws of the Surviving Corporation,
applicable Law and this Agreement.
(b) OFFICERS. From and after the Effective Time, the officers
of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation and shall hold office until the
earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be, in
accordance with the Articles of Incorporation and By-laws of the
Surviving Corporation, applicable Law and this Agreement.
SECTION 1.8 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are necessary or
desirable to (a) vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation its rights, title or interest in, to or under any of the
rights, properties or assets of the Company or its subsidiaries, or (b)
otherwise carry out the provisions of this Agreement, the Company and its
officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
deeds, assignments or assurances in law and to take all acts necessary, proper
or desirable to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
provisions of this Agreement, and the officers and directors of the Surviving
Corporation are authorized in the name of the Company or otherwise to take any
and all such action.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES; DEPOSIT
SECTION 2.1 EFFECT ON CAPITAL STOCK AND COMPANY STOCK OPTIONS. As of
the Effective Time, by virtue of the Merger and without any action on the part
of the holder of any Company Common Stock or any shares of capital stock of
Merger Sub:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding
share of capital stock of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into the right to
receive $1,000.
(b) CANCELLATION OF COMPANY OWNED STOCK. All shares of Company
Common Stock and Preference Stock (if any) that are held in the
treasury of the Company or by any wholly owned subsidiary of the
Company shall be canceled and retired and shall cease to exist without
any consideration payable therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Each share of Company
Common Stock issued and outstanding immediately prior to Effective Time
(other than shares of the Company Common Stock referred to in Section
2.01(b)) shall be converted into (as provided in and subject to the
limitations set forth in this Article II) the right to receive from the
Surviving Corporation in cash, without interest, $21.00 (the "MERGER
CONSIDERATION") without interest thereon upon surrender of the
certificate previously representing such share of Company Common Stock.
As of the Effective Time, all such shares of Company Common Stock shall
no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate
representing any such share of Company Common Stock shall cease to have
any rights with respect thereto, except the right to receive the cash
into which their shares of Company Common Stock have been converted by
the Merger as provided in this Section 2.01(c).
(d) CONVERSION OF PREFERENCE STOCK.
(i) Each share of Series A Preference Stock issued
and outstanding immediately prior to the Effective Time (other
than shares of Series A Preference Stock to be canceled
pursuant to Section 2.01(b)) shall be converted into (as
provided in and subject to the limitations set forth in this
Article II) and become one fully paid and nonassessable share
of Common Stock, par value $0.01, of the Surviving Corporation
(the "SURVIVING CORPORATION COMMON STOCK") and one fully paid
and nonassessable share of Series A Preferred Stock, par value
$0.01, of the Surviving Corporation (the "SURVIVING
CORPORATION SERIES A PREFERRED STOCK") having the terms set
forth on EXHIBIT B hereof and otherwise being acceptable to
Shareholders and Cornerstone, upon the surrender of the
certificates previously representing such shares of Series A
Preference Stock, such that immediately after the consummation
of the Merger, the Investors in the aggregate will own 81.21%
of the issued and outstanding Surviving Corporation Common
Stock and 81.21% of the issued and outstanding Surviving
Corporation Preferred Stock (as defined below).
(ii) Each share of Series B Preference Stock issued
and outstanding immediately prior to the Effective Time (other
than shares of Series B Preference Stock to be canceled
pursuant to Section 2.01(b)) shall be converted into (as
provided in and subject to the limitations set forth in this
Article II) and become
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one fully paid and nonassessable share of Surviving
Corporation Common Stock and one fully paid and nonassessable
share of Series B Preferred Stock, par value $0.01, of the
Surviving Corporation (the "SURVIVING CORPORATION SERIES B
PREFERRED STOCK" and, together with the Surviving Corporation
Series A Preferred Stock, the "SURVIVING CORPORATION PREFERRED
STOCK") having the terms set forth on EXHIBIT B hereof and
otherwise being acceptable to Shareholders and Cornerstone,
upon the surrender of the certificates previously representing
such shares of Series B Preference Stock, such that
immediately after the consummation of the Merger, the
Shareholders in the aggregate will own 18.79% of the issued
and outstanding Surviving Corporation Common Stock and 18.79%
of the issued and outstanding Surviving Corporation Preferred
Stock.
(e) CONVERSION OF COMPANY STOCK OPTIONS. Each Company Stock
Option (as defined in Section 2.03(a) hereof), issued and outstanding
immediately prior to the Effective Time shall be converted into (as
provided in and subject to the limitations set forth in this Article
II) the right to receive from the Surviving Corporation the Option
Consideration (as defined in Section 2.03(a) hereof) without interest
thereon. As of the Effective Time, all such Company Stock Options shall
no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of any such Company
Stock Option shall cease to have any rights with respect thereto,
except the right to receive the cash into which their Company Stock
Options have been converted by the Merger as provided in this Section
2.01(e) and Section 2.03(a).
(f) Notwithstanding any provision to the contrary, to the
extent requested by Merger Sub, the parties agree to amend this
Agreement prior to Closing to permit shares of Company Common Stock
and/or Company Stock Options (as defined below) owned by certain
employees of the Company to be converted into shares of Series B
Preference Stock with corresponding adjustments to be made to this
Agreement.
SECTION 2.2 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Merger Sub
shall, with the approval of the Company, designate a bank or trust
company to act as paying agent in the Merger (the "PAYING AGENT").
(b) At the Closing, Merger Sub shall deliver:
(i) to each Person identified on a list to be
provided to Merger Sub by the Company no later than five days
before the Closing who shall have surrendered to the Company
and the Merger Sub at the Closing one or more certificates,
which immediately prior to the Effective Time, represented
shares of Company Common Stock (such certificates, the
"Certificates"), the amount of cash into which the shares of
Company Common Stock represented by the Certificates so
surrendered have been converted pursuant to the provisions of
this Article II;
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(ii) to the Shareholders who shall have surrendered
to the Merger Sub at the Closing the certificates which,
immediately prior to the Effective Time, represented all of
the shares of outstanding Series B Preference Stock, the
securities of the Surviving Corporation into which the shares
of Series B Preference Stock represented by such certificates
have been converted pursuant to the provisions of this Article
II; and
(iii) to the Paying Agent, for the benefit of the
holders of Company Common Stock not so listed, funds in the
aggregate amount into which such shares of Company Common
Stock shall have been converted pursuant to the provisions of
this Article II.
(c) EXCHANGE PROCEDURE. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall mail to each
holder of record (other than the Investors) of Certificates not
surrendered pursuant to Section 2.02(b), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of the
Certificates to the address specified therein and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancellation
to the Paying Agent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Paying Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor from the Paying Agent the amount of cash
into which the shares of Company Common Stock theretofore represented
by such Certificate shall have been converted pursuant to Section 2.01,
and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of the shares of Company Common Stock
that is not registered in the transfer records of the Company, payment
may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes
required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the amount of
cash, without interest, into which the shares of Company Common Stock
theretofore represented by such Certificate shall have been converted
pursuant to Section 2.01. No interest will be paid or will accrue on
the cash payable upon the surrender of any Certificate. In the event
any Certificate shall have been lost, stolen or destroyed, upon making
of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed, the Surviving Corporation will pay in
exchange for such lost, stolen or destroyed Certificate, the cash
payable in respect of the shares represented by such Certificate as
determined in accordance with this Article II, except that when
authorizing such payment, the Board of Directors of the Surviving
Corporation, may, in its discretion and as a condition precedent to
such payment, require the owner of such lost, stolen or destroyed
Certificate to deliver a bond in such sum as it may reasonably direct
as
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indemnity against any claim that may be made against the Surviving
Corporation or the Paying Agent with respect to such Certificate.
(d) Merger Sub, Surviving Corporation and Paying Agent shall
be entitled to deduct and withhold from the Merger Consideration
otherwise payable or issuable pursuant to this Agreement to any holder
of Company Common Stock such amount as Merger Sub, Surviving
Corporation or Paying Agent is required to deduct and withhold with
respect to such payment or issuance under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of Company Common
Stock in respect of which such deduction and withholding was made.
(e) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
cash paid upon the surrender of Certificates in accordance with the
terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Company Common
Stock theretofore represented by such Certificates. At the Effective
Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company
Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Paying Agent for any reason, they shall be
canceled and exchanged as provided in this Article II.
(f) NO LIABILITY. At any time following the expiration of six
months after the Effective Time, the Surviving Corporation shall be
entitled to require the Paying Agent to deliver to it any funds
(including any interest received with respect thereto) which had been
made available to the Paying Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled
to look to the Surviving Corporation (subject to any applicable
abandoned property, escheat or similar law) only as general creditors
thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon;
PROVIDED, HOWEVER, with respect to any Certificates which shall not
have been surrendered prior to five years after the Closing Date, the
unclaimed cash payable in exchange for such Certificates shall, to the
extent permitted by applicable abandoned property, escheat or similar
law, become the property of the Surviving Corporation, free and clear
of all claims or interests of any Person previously entitled thereto.
Notwithstanding the foregoing, none of Merger Sub, the Shareholders,
the Company or the Paying Agent shall be liable to any person in
respect of any cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 2.3 COMPANY STOCK OPTIONS; PLANS.
(a) Except as set forth in this Section 2.03 and except to the
extent that Merger Sub and the holder of any option otherwise agree,
the Surviving Corporation shall promptly after the Effective Time pay
to each holder of an outstanding option to purchase
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Company Common Stock (a "COMPANY STOCK OPTION") issued pursuant to the
Company's Amended and Restated 1992 Stock Option Plan or the Company's
1992 Director's Stock Option Plan (collectively, the "COMPANY STOCK
OPTION PLANS"), in settlement of each such Company Stock Option,
whether or not exercisable or vested, an amount in respect thereof
equal to the product of (x) the excess, if any, of the Merger
Consideration over the exercise price of each such Company Stock
Option, and (y) the number of shares of Company Common Stock subject to
the Company Stock Option immediately prior to its settlement (the
"OPTION CONSIDERATION") (such payment to be net of applicable
withholding taxes). Upon receipt of the Option Consideration, the
Company Stock Option shall be canceled. The surrender of a Company
Stock Option to the Company in exchange for the Option Consideration
shall be deemed a release of all rights the holder had or may have had
in respect of that Company Stock Option.
(b) Prior to the Effective Time, the Company shall use its
best efforts to obtain any consents from holders of the Company Stock
Options and make any amendments to the terms of the Company Stock
Option Plans or arrangements that are necessary to give effect to the
transactions contemplated by Section 2.01(e) and this Section 2.03.
(c) Except as may otherwise be agreed by Merger Sub and the
Company, the Company Stock Option Plans shall terminate as of the
Effective Time, and no holder of Company Stock Options or any
participant in the Company Stock Option Plans shall have any rights
thereunder to acquire any equity securities of the Company, the
Surviving Corporation or any subsidiary thereof.
(d) Except as may otherwise be agreed by Merger Sub and the
Company, all other plans, programs or arrangements providing for the
issuance or grant of any other interest in respect of the capital stock
of the Company or any of its subsidiaries shall terminate as of the
Effective Time, and no participant in any such plans, programs or
arrangements shall have any rights thereunder to acquire any equity
securities of the Company, the Surviving Corporation or any subsidiary
thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a separate disclosure schedule referring to the
Sections contained in this Agreement, which has been delivered by the Company to
Merger Sub prior to the execution of this Agreement (the "COMPANY DISCLOSURE
SCHEDULE"), the Company hereby represents and warrants to Merger Sub that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of the Company and its subsidiaries is a corporation
duly incorporated, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite
corporate power and authority and all necessary
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governmental approvals to own, lease and operate the properties and
assets it currently owns, operates or holds under lease and to carry on
its business as it is now being conducted. Each of the Company and its
subsidiaries is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary,
except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a
Company Material Adverse Effect. The term "COMPANY MATERIAL ADVERSE
EFFECT" means, when used in connection with the Company, any change,
effect, event, occurrence, condition or development that is or is
reasonably likely to be materially adverse to (i) the business, assets,
liabilities, properties, results of operations, prospects or condition
(financial or otherwise) of the Company and its subsidiaries, taken as
a whole (excluding industry and general economic changes) or (ii) the
ability of the Company to perform its obligations under this Agreement.
(b) Except as set forth in Section 3.01 of the Company
Disclosure Schedule, the Company does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, limited liability company, joint venture or
other business association or entity. All outstanding shares of stock
of each subsidiary of the Company have been duly authorized and validly
issued and are fully paid and non-assessable, and are owned, directly
or indirectly, by the Company free and clear of any Liens, and there
are no outstanding options, warrants, convertible securities, calls,
rights, commitments, preemptive rights or agreements or instruments or
understandings of any character, obligating any subsidiary of the
Company to issue, deliver or sell, or cause to be issued, delivered or
sold, contingently or otherwise, additional shares of such subsidiary
or any securities or obligations convertible or exchangeable for such
shares or to grant, extend or enter into any such option, warrants,
convertible security, call, right, commitment, preemptive right or
agreement.
SECTION 3.2 ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
heretofore furnished to Merger Sub complete and correct copies of its Articles
of Incorporation and By-laws, each as amended to the date hereof. Such Articles
of Incorporation and By-laws are in full force and effect. The Company is not in
violation of any provision of its Articles of Incorporation or By-laws.
SECTION 3.3 CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 15,000,000 shares of Common Stock par value $0.01 per share
("COMPANY COMMON STOCK"), and (ii) no shares of Preference Stock as of the date
hereof (and 2,000,000 shares of Series A Preference Stock and 2,000,000 shares
of Series B Preference Stock after giving effect to the Preference Amendment).
As of the date hereof, there are 3,539,600 shares of Company Common Stock issued
and outstanding and no shares of Preference Stock issued or outstanding. Section
3.03 of the Company Disclosure Statement identifies and describes the number of
shares of Company Common Stock to be received upon exercise or conversion and
the exercise or conversion price of each outstanding Company Stock Option (the
"COMPANY COMMON STOCK
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<PAGE> 15
EQUIVALENTS"). Except for the Company Common Stock Equivalents or as
contemplated by this Agreement, there are no existing options, warrants,
convertible securities, calls, subscriptions, or other rights or other
agreements or commitments obligating the Company to issue, transfer or sell, or
caused to be issued, transferred or sold, contingently or otherwise, any shares
of capital stock of the Company or any other securities convertible into or
evidencing the right to subscribe for any such shares. Except as identified and
described in Section 3.03 of the Company Disclosure Statement, there are no
outstanding stock appreciation rights or similar phantom equity securities with
respect to the capital stock of the Company. All issued and outstanding shares
of Company Common Stock are duly authorized and validly issued, fully paid,
non-assessable and free of preemptive rights with respect thereto. All shares of
Preference Stock to be issued to (i) the Shareholders pursuant to the Preference
Exchange and (ii) the Investors in connection with the Equity Contribution,
shall, when issued, be duly authorized and validly issued, fully paid,
non-assessable and free of preemptive rights with respect thereto. The Company
has not had more than 300 shareholders of record at any time during the three
(3) years preceding the date hereof.
SECTION 3.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger and the Preference
Amendment, the adoption of this Agreement and the Preference Amendment by the
holders of a majority of the shares of Company Common Stock and the filing and
recordation of appropriate merger documents and the Preference Amendment as
required by Florida Law). This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Merger Sub, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the
Company does not, and the consummation by the Company of the
Transactions will not (i) conflict with or violate the Articles of
Incorporation or By-laws of the Company or any of its subsidiaries,
(ii) conflict with or violate any domestic (federal, state or local) or
foreign law, rule, regulation, order, judgment or decree (collectively,
"LAWS") applicable to the Company, its subsidiaries or by which any of
its properties or assets is bound or affected, except for such
conflicts or violations that, individually or in the aggregate, would
not have a Company Material Adverse Effect, or (iii) result in a
violation or breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give
to others any right of termination, amendment, acceleration or
cancellation
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<PAGE> 16
of, or result in the creation of a Lien on any property or asset of the
Company or its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or its subsidiaries
is a party or by which the Company, its subsidiaries or any of its
properties or assets is bound or affected, except as disclosed in
Section 3.05(a) of the Company Disclosure Schedule and except for any
violations, such breaches, defaults or other occurrences that,
individually or in the aggregate, would not have a Company Material
Adverse Effect and will not prevent or delay the consummation of the
Transactions.
(b) Except as disclosed in Section 3.05(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by
the Company do not, and the consummation by the Company of the
Transactions will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or
subdivision thereof, or any administrative, governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign or
supranational, except (i) for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the
Securities Act of 1933, as amended (the "SECURITIES ACT"), state
securities or "blue sky" laws ("BLUE SKY LAWS"), the rules of the
National Association of Securities Dealers ("NASD"), state takeover
laws, the pre-merger notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR ACT"), and filing and recordation of
appropriate merger documents as required by Florida Law, and (ii) where
failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, individually or in the
aggregate, is not reasonably likely to have a Company Material Adverse
Effect.
SECTION 3.6 SEC FILINGS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission
(the "SEC") since March 1, 1995 and has made available to the Merger
Sub all registration statements filed by the Company with the SEC,
including all exhibits filed in connection therewith (on all forms
applicable to the registration of securities) since March 1, 1995 and
prior to the date of this Agreement (collectively, the "COMPANY SEC
REPORTS"). As of their respective dates, the Company SEC Reports (i)
complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules
and regulations thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading. The Company will deliver to the Merger Sub as soon as
they become available true and complete copies of any Company SEC
Reports filed subsequent to the date hereof and prior to the Effective
Time.
(b) Each of the financial statements (including, in each case,
any notes and schedules thereto) contained in the Company SEC Reports
complied as to form with the
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applicable accounting requirements and rules and regulations of the SEC
and was prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout
the periods indicated (except as may be indicated in the notes
thereto), and each fairly presented in all material respects the
consolidated financial position, results of operations and cash flows
of the Company and the consolidated Subsidiaries as at the respective
dates thereof and for the respective periods indicated therein in
accordance with GAAP (subject, in the case of unaudited statements (the
"INTERIM FINANCIAL STATEMENTS"), to normal and recurring year-end
adjustments none of which would, individually or in the aggregate, have
a Company Material Adverse Effect).
(c) Since February 28, 1999, except as disclosed in the
Company SEC Reports and Section 3.06 of the Company Disclosure
Statement, there has not been any Company Material Adverse Effect, or
any event, condition or development which the Company believes is
reasonably likely to result in a Company Material Adverse Effect;
PROVIDED, HOWEVER, that any changes, effects, events, occurrences,
conditions or developments substantially consistent with items 1, 2, 3,
4, 7, 9 and 10 of the Disclosed Information (as defined in Section
8.02(f)) shall not be deemed to constitute a Company Material Adverse
Effect.
(d) Neither the Company nor its subsidiaries have any material
liabilities or obligations (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated and whether due or to
become due, including any liability for taxes) other than such
liabilities or obligations (i) disclosed in the Company Disclosure
Statement, (ii) that have been specifically disclosed or provided for
in the most recent audited consolidated balance sheet of the Company
filed with the SEC, (iii) that have been incurred in the ordinary
course of business consistent with past practice since the date of the
most recent audited consolidated balance sheet of the Company filed
with the SEC, or (iv) that are not required by GAAP to have been
included in the Company's consolidated balance sheet and would not,
individually or in the aggregate, have a Company Material Adverse
Effect.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in Section 3.07 of the Company Disclosure Statement or the Company SEC Reports
or as contemplated by this Agreement, since February 28, 1999, neither the
Company nor its subsidiaries have, directly or indirectly:
(a) redeemed, purchased, otherwise acquired, or agreed to
redeem, purchase or otherwise acquire, any shares of capital stock of
the Company, or declared, set aside or paid any dividend or otherwise
made a distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock;
(b) authorized for issuance, issued, sold, delivered, granted
or issued any options, warrants, calls, subscriptions or other rights
for, or otherwise agreed or
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<PAGE> 18
committed to issue, sell, deliver or grant any shares of any class of
capital stock of the Company or any securities convertible into or
exchangeable or exercisable for shares of any class of capital stock of
the Company or its subsidiaries, other than pursuant to and in
accordance with (i) the Company Stock Option Plans or (ii) the terms of
the Company Common Stock Equivalents listed in Section 3.03 of the
Company Disclosure Statement;
(c) (i) except in the ordinary course of business and
consistent with past practice, created or incurred any indebtedness for
borrowed money, (ii) assumed, guaranteed, endorsed or otherwise as an
accommodation become responsible for the obligations of any other
individual, firm or corporation, made any loans or advances to any
other individual, firm or corporation, (iii) entered into any
commitment or transaction material to the Company or its subsidiaries,
(iv) incurred any liabilities except for liabilities which,
individually and in the aggregate, would not have a Company Material
Adverse Effect; or (v) mortgaged, pledged or subjected to any lien or
encumbrance, any asset having a book or market value in excess of
$500,000;
(d) instituted any change in its accounting methods,
principles or practices;
(e) revalued any of its respective assets, including without
limitation, writing down the value of inventory or writing off notes or
accounts receivables except for amounts previously reserved as
reflected in the February 28, 1999 balance sheet;
(f) suffered any damage, destruction or loss, whether covered
by insurance or not, except for such as would not, individually and in
the aggregate, have a Company Material Adverse Effect;
(g) suffered any adverse change, or any development involving
a prospective adverse change, except for those changes or prospective
changes which, individually and in the aggregate, would not have a
Company Material Adverse Effect; PROVIDED, HOWEVER, that any changes,
effects, events, occurrences, conditions or developments substantially
consistent with items 1, 2, 3, 4, 7, 9 and 10 of the Disclosed
Information (as defined in Section 8.02(f)) shall not be deemed to
constitute a Company Material Adverse Effect;
(h) granted any increase in the base compensation of, or made
any other material change in the employment terms for, any of its
directors, officers and employees, except for increases or changes
reflecting or based upon changed responsibilities or duties made in the
ordinary course of business consistent with past practice;
(i) adopted, modified or terminated any bonus, profit-sharing,
incentive, severance or other plan or contract for the benefit of any
of its directors, officers and employees other than changes which do
not materially increase the aggregate cost of such plan or contract;
(j) except for provision of services or sales in the ordinary
course of business and consistent with past practice and except for the
sale of the Company's computer service division, (i) sold, leased,
licensed, transferred or otherwise disposed of any of its
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assets or property having a book or market value, in excess of $250,000
or (ii) entered into, or consented to the entering into of, any
agreement granting a preferential right to sell, lease or otherwise
dispose of any of such assets;
(k) entered into any new line of business, or incurred or
committed to incur any capital expenditures, obligations or liabilities
in connection therewith in excess of $1,000,000 in the aggregate;
(l) acquired or agreed to acquire by merging or consolidating
with, or agreed to acquire by purchasing a substantial portion of the
assets of, or in any other manner, any business of any other person;
(m) made any cancellation or waiver of (i) any right material
to the operation of the business of the Company or its subsidiaries, or
(ii) any debts or claims against any affiliate of the Company;
(n) made any disposition of, or failed to keep in effect any
material right in, to or for the use of any material patent, trademark,
service mark, trade name, copyright or trade secret of the Company or
its subsidiaries;
(o) entered into any agreement, arrangement or transaction
with any affiliate of the Company; or
(p) agreed to (i) do any of the things described in the
preceding clauses (a) through (o) other than as expressly contemplated
or provided for in this Agreement or (ii) take, whether in writing or
otherwise, any action which, if taken prior to the date of this
Agreement, would have made any representation or warranty in this
Article III untrue or incorrect.
SECTION 3.8 ABSENCE OF LITIGATION. Except as disclosed in the Company
SEC Reports or in Section 3.08 of the Company Disclosure Schedule, there is no
claim, action, proceeding or investigation pending or, to the Company's
Knowledge, threatened against the Company, its subsidiaries, or any of its
properties or assets, before any court, arbitrator or Governmental Authority,
which, individually or when aggregated with other claims, actions, proceedings
or investigations or product liability claims (or claims, actions, proceedings
or investigations which are reasonably likely to result from facts and
circumstances that have given rise to such a claim, action, proceeding or
investigation), would have a Company Material Adverse Effect. As of the date
hereof, neither the Company nor its subsidiaries nor any of its properties or
assets is subject to any order, writ, judgment, injunction, decree,
determination or award having, individually or in the aggregate, a Company
Material Adverse Effect.
SECTION 3.9 STOCKHOLDER VOTE REQUIRED. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock is the
only vote of the holders of any class or series of capital stock of the Company
necessary to approve the Merger, this Agreement, the Preference Amendment and
the transactions contemplated hereby.
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SECTION 3.10 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion, dated as of the date hereof, of Prudential Securities Incorporated (the
"COMPANY FINANCIAL ADVISOR"), to the effect that the Merger Consideration is
fair to the Company stockholders (other than the Shareholders) from a financial
point of view.
SECTION 3.11 BROKERS. No broker, finder or investment banker (other
than the Company Financial Advisor) is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of the Company. The Company has heretofore furnished to
Merger Sub a complete and correct copy of all agreements between the Company and
the Company Financial Advisor pursuant to which such firm would be entitled to
any payment relating to the Merger, and there has been no amendments to such
agreements.
SECTION 3.12 COMPANY ACTION; STATE TAKEOVER STATUTES. The Company's
Board of Directors (at a meeting duly called and held) has by requisite vote of
directors (i) approved and adopted this Agreement and the Transactions, and such
approval is sufficient to render inapplicable to this Agreement and the
Transactions, the provisions of Sections 607.0901, 607.0902 and 607.1302 of the
Florida Law to the extent, if any, any such section is applicable to this
Agreement and the Transactions and (ii) agreed to recommend that the
stockholders of the Company approve and adopt this Agreement and the
Transactions.
SECTION 3.13 INFORMATION SUPPLIED. The Proxy Statement (as defined
below) and any other document to be filed with the SEC or any Governmental
Authority in connection with the Transactions(the "OTHER FILINGS") will not, at
the respective times filed with the SEC or other Governmental Authority contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
The Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
SECTION 3.14 ENVIRONMENTAL MATTERS.
(a) With respect to the Leased Premises, neither the Company
nor its subsidiaries has caused or allowed the generation, treatment,
storage or disposal of hazardous wastes or substances (as such terms
are defined in any applicable Law with respect to environmental matters
and including petroleum and petroleum by-products) at such location
other than materials incidental to the operation of the Company's
business that have been and are currently used in compliance with
applicable Law, except where such noncompliance would not have a
Company Material Adverse Effect.
(b) Each of the Company and its subsidiaries has complied with
all applicable Law with respect to environmental matters, except where
such noncompliance would not have a Company Material Adverse Effect.
(c) Since January 1, 1995, neither the Company nor its
subsidiaries have received any written notice from any Governmental
Authority or any other
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person alleging that the Company or its subsidiaries is liable under or
in breach of any applicable Law with respect to environmental matters,
except where such liability or breach would not have a Company Material
Adverse Effect.
(d) Except as disclosed in Section 3.14 of the Company
Disclosure Statement, to the Company's Knowledge, neither the Company
nor its subsidiaries have either expressly or by operation of law,
assumed, undertaken or otherwise become subject to any liability of any
other person under applicable Law with respect to environmental
matters, including without limitation any obligation for corrective or
remedial action.
SECTION 3.15 REAL PROPERTY.
(a) Section 3.15 of the Company Disclosure Statement
identifies by street address all real estate leased, subleased or
otherwise occupied pursuant to an agreement (the "LEASES") by the
Company or its subsidiaries involving an amount in excess of $150,000
in annual rent (the "LEASED PREMISES"). The Leased Premises are leased
to the Company or its subsidiaries pursuant to written leases, copies
of which have been made available to Merger Sub. With respect to each
Lease: (i) the Company or its subsidiaries, as applicable, have a good
and valid leasehold interest in and to all of the Leased Premises, and,
to the Company's Knowledge, such leasehold interest is subject to no
Liens other than those disclosed on Section 3.15 of the Company
Disclosure Statement and those which would not have a material adverse
effect on the Company's leasehold interest; (ii) each Lease is in full
force and effect and is enforceable in accordance with its terms and
neither the Company nor its subsidiaries have assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in
such Lease; (iii) there exists no default by the Company or condition
which, with the giving of notice, the passage of time or both, could
become a default by the Company under any Lease; and (iv) except as
disclosed on Section 3.15 of the Company Disclosure Statement, no
consent, waiver, approval or authorization is required from the
landlord under any Lease as a result of the execution of this Agreement
or the consummation of the transactions contemplated hereby.
(b) The Leased Premises constitute all of the real property
owned, leased, occupied or otherwise utilized in connection with the
business of the Company or its subsidiaries as currently conducted. The
Leased Premises are in good condition and repair (subject to normal
wear and tear) and is sufficient and appropriate for the conduct of
business by the Company and its subsidiaries. To the Company's
Knowledge, (i) all permits, licenses and other approvals necessary to
the current occupancy and use of the Leased Premises have been
obtained, are in full force and effect had have not been violated by
the Company in any material respect and (ii) there exists no violation
by the Company of any material covenant, condition, restriction,
easement, agreement or order affecting any portion of the Leased
Premises. All facilities located on the Leased Premises are supplied
with adequate utilities and other services necessary for the conduct of
the Company's business as currently conducted. There is no pending or,
to the Knowledge of the Company, threatened condemnation proceeding, or
material lawsuit or
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administrative action affecting an portion of the Leased Premises to
which the Company or its subsidiaries is a named party.
SECTION 3.16 PERSONAL PROPERTY.
(a) Each of the Company and its subsidiaries has good title to
all personalty of any kind or nature which the Company or its
subsidiaries purport to own, free and clear of all Liens, except for
(i) Liens disclosed on Section 3.16 of the Company Disclosure
Statement, (ii) Liens for non-delinquent taxes and non-delinquent
statutory liens arising other than by reason of default, (iii)
statutory Liens of landlords, liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business
for sums not yet due; (iv) Liens incurred or deposits made in the
ordinary course of business in connection with worker's compensation,
unemployment insurance and other types of social security, (v) purchase
money Liens, and (vi) Liens which do not materially detract from the
value or use of said personalty. The Company and its subsidiaries, as
lessees, have the right under valid and subsisting leases to use,
possess and control all personalty leased by and material to the
Company or its subsidiaries as now used, possessed and controlled by
the Company or its subsidiaries, as applicable.
(b) All machinery, equipment and other tangible assets
currently being used by the Company or its subsidiaries which are owned
or leased by the Company or its subsidiaries are in good operating
condition, maintenance and repair, ordinary wear and tear excepted, are
usable in the ordinary course of business and are reasonably adequate
and suitable for the uses to which they are being put, except where any
other condition of any machinery, equipment or other tangible asset
would not have a Company Material Adverse Effect.
SECTION 3.17 CONTRACTS. Section 3.17 of the Company Disclosure
Statement is a complete list of all written agreements of the Company or its
subsidiaries (other than contracts or leases for the sale in the ordinary course
of business of the Company's services or products) that are currently in effect
(except for those set forth in clause (x) below) and that are (i) leases, sales
contracts and other agreements with respect to any property, real or personal,
of the Company or its subsidiaries which provide for the receipt or expenditure
by the Company or its subsidiaries after the date of this Agreement, of more
than $150,000; (ii) contracts or commitments for capital expenditures or
acquisitions in excess of $150,000 for one project or set of related projects;
(iii) guarantees of third party obligations; (iv) agreements (including non
competition agreements) which restrict the kinds of businesses in which the
Company or its subsidiaries may engage or the geographical area in which any of
them may conduct their business; (v) indentures, mortgages, loan agreements or
other agreements relating to the borrowing of money by the Company, the granting
of Liens by the Company or lines of credit by the Company, in each case,
involving an amount in excess of $150,000; (vi) collective bargaining
agreements; (vii) material licenses, agreements, assignments or contracts
(whether as licensor or licensee, assignor or assignee) relating to any patent
and trademark rights; (viii) brokerage or finder's agreements; (ix) joint
venture agreements, partnership agreements or similar agreements; (x) stock
purchase agreements, asset purchase agreements or other acquisition or
divestiture agreements executed
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within the last five years, in each case, involving an amount in excess of
$150,000; (xi) employment, consulting or management agreements; or (xii)
agreements or other arrangements with any director or executive officer of the
Company or its affiliates (other than customary at will employment arrangements)
(all items required to be disclosed in Section 3.17 of the Company Disclosure
Statement being hereinafter referred to as "CONTRACTS"). True and correct copies
of all the Contracts have been made available to Merger Sub. Except as disclosed
in Section 3.17 of the Company Disclosure Statement, (i) all Contracts are valid
and subsisting and in full force and effect, and each of the Company and its
subsidiaries has duly performed its obligations thereunder in all material
respects to the extent such obligations have accrued, and (ii) no breach or
default thereunder by the Company, its subsidiaries, or, to the Company's
Knowledge, by any other party thereto, has occurred, except where such breach or
default would not reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.18 INSURANCE POLICIES. Section 3.18 of the Company Disclosure
Statement contains a summary description of all material insurance policies of
the Company and its subsidiaries, and each such policy is in full force and
effect. No written notice of cancellation or termination has been received by
the Company or its subsidiaries with respect to any such policy. To the
Knowledge of the Company, there are no pending claims against such insurance by
the Company or its subsidiaries as to which the insurers have denied coverage or
otherwise reserved rights.
SECTION 3.19 COMPLIANCE WITH LAWS. Except for matters relating to
environmental matters (which are the subject of Section 3.14), neither the
Company nor its subsidiaries are in violation of or have violated or failed to
comply with any Law or Judgment applicable to its business or operations, except
for violations and failures to comply that would not, individually or in the
aggregate, be reasonably likely to result in a Company Material Adverse Effect.
SECTION 3.20 TAX MATTERS.
(a) The Company and each subsidiary of the Company has filed
all Tax Returns that it was required to file prior to the date hereof.
All such Tax Returns were correct and complete in all respects. All
Taxes owed by any of the Company and each subsidiary of the Company
(whether or not shown on any Tax Return) have been paid. None of the
Company or any subsidiary of the Company currently is the beneficiary
of any extension of time within which to file any Tax Return. No claim
has ever been made by an authority in a jurisdiction where any of the
Company or any subsidiary of the Company does not file Tax Returns that
the Company so not filing is or may be subject to taxation by that
jurisdiction. To the Company's Knowledge, there are no security
interests on any of the assets of any of the Company or any subsidiary
of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) Each of the Company and each subsidiary of the Company has
withheld and paid all Taxes required to have been withheld and paid by
applicable Law.
(c) To the Company's Knowledge, there is no dispute or claim
concerning any Tax liability of any of the Company or any subsidiary of
the Company. Section 3.20
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of the Company Disclosure Statement lists all federal, state and
foreign income Tax Returns filed with respect to any of the Company and
any subsidiary of the Company for taxable periods ended on or after
December 31, 1995, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of
audit. The Company has delivered to the Investor correct and complete
copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by any of the
Company or any subsidiary of the Company since December 31, 1996.
(d) None of the Company nor any subsidiary of the Company has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(e) None of the Company nor any subsidiary of the Company has
filed a consent under Code Section 341(f) concerning collapsible
corporations. None of the Company nor any subsidiary of the Company has
made any payments, is obligated to make any payments, or is a party to
any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Section 280G.
None of the Company nor any subsidiary of the Company has been a United
States real property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). Each of the Company and any subsidiary of the
Company has disclosed on its federal, state, local and foreign Tax
Returns all positions taken therein that could give rise to a
substantial understatement of, federal, state, local and foreign Tax
within the meaning of Code Section 6662 or similar provisions under any
state, local or foreign Law. None of the Company nor any subsidiary of
the Company is a party to any Tax allocation or sharing agreement.
Neither the Company nor any subsidiary of the Company has been a member
of an affiliated group filing a consolidated federal income Tax Return
other than a group the common parent of which is the Company.
(f) None of the Company nor any subsidiary of the Company has
any liability for the Taxes of any person other than the Company and
the subsidiaries of the Company (i) under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign law), (ii) as a
transferee or successor, (iii) by contract, or (iv) otherwise.
(g) Except as disclosed on Section 3.20(h) of the Company
Disclosure Statement, none of the Company nor any subsidiary of the
Company will be required to make an adjustment to taxable income under
Code Section 481 (or any similar provision of state, local, or foreign
law) for any period ending on or after the Closing Date by reason of a
voluntary change in accounting method initiated by the Company or any
subsidiary of the Company on or prior to the Closing Date and neither
the Internal Revenue Service nor any other governmental authority has
initiated or proposed any such change in accounting method.
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(h) Except as disclosed on Section 3.20(i) of the Company
Disclosure Statement, none of the Company nor any subsidiary of the
Company is a "controlled foreign corporation" within the meaning of
Code Section 957.
(i) None of the Company nor any subsidiary of the Company owns
an interest in an entity either treated as a partnership or whose
separate existence is ignored for federal income tax purposes.
SECTION 3.21 EMPLOYMENT AGREEMENTS. Except as disclosed on Section 3.21
of the Company Disclosure Statement, there are no employment, consulting,
severance or indemnification arrangements, agreements or understandings between
the Company and any directors, officers, or other employees of the Company.
SECTION 3.22 CHANGE OF CONTROL PROVISIONS. Except as disclosed on
Section 3.22 of the Company Disclosure Statement, none of the arrangements,
agreements or understandings set forth in Article III hereof and none of the
Company's employee benefit plans, programs or arrangements contain any provision
that would become operative as the result of a change of control of the Company
or that will become operative as a result of the Transactions.
SECTION 3.23 EMPLOYEES. To the Knowledge of the Company, as of the date
of this Agreement, no key employee, or group of employees, of the Company or its
subsidiaries has any plans to terminate employment with the Company. Each of the
Company and its subsidiaries has complied in all material respects with all laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity and collective bargaining, and does not have any
labor relations problems (including, without limitation, threatened or actual
strikes or work stoppages or material grievances) other than such problems that
would not have a Company Material Adverse Effect.
SECTION 3.24 PERMITS. Each of the Company and its subsidiaries has all
Permits, except for those Permits the failure to have would not, individually or
in the aggregate, have a Company Material Adverse Effect. Section 3.24 of the
Company Disclosure Statement contains a complete list of the material Permits,
exclusive of any Permits with respect to state or local sales, use or other
Taxes or business or occupational licenses. To the Knowledge of the Company, all
of the Permits are in full force and effect except where the failure to be so in
effect would not have a Company Material Adverse Effect. No outstanding notice
of cancellation or termination has been delivered to the Company or its
subsidiaries in connection with any such Permit nor, to the Knowledge of the
Company, has any such cancellation or termination been threatened. To the
Knowledge of the Company, no application, action or proceeding for the
modification of any such Permits is pending or threatened that may result in the
revocation, modification, nonrenewal or suspension of any material Permits. Each
of the Company and its subsidiaries has filed when due all documents required to
be filed with any Governmental Authority in connection with such Permits and, at
the time of the filing thereof, all such filings were accurate and complete in
all material respects.
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SECTION 3.25 EMPLOYEE BENEFIT PLANS.
(a) Section 3.25 of the Company Disclosure Statement contains
a list of each employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
and each plan, program, policy, practice, arrangement or contract
(whether group or individual) providing for payments, deferred
compensation or benefits or reimbursements to employees or former
employees (or their beneficiaries or dependents) of the Company or with
respect to which the Company has any liability or potential liability.
For purposes of this Section 3.25, "Company" shall be deemed to include
any entity required to be aggregated with the "Company" under Section
414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA, at any
relevant time. Each item listed in Section 3.25 of the Company
Disclosure Statement is a "BENEFIT PLAN."
(b) Each Benefit Plan that is intended to be qualified within
the meaning of Section 401(a) of the Code has received a determination
from the Internal Revenue Service (the "IRS") that such Benefit Plan is
qualified under Section 401(a) of the Code, and, to the Company's
Knowledge, nothing has occurred since the date of such determination
that could adversely affect the qualification of such Benefit Plan.
(c) The Company does not have any liability or potential
liability (including, but not limited to, withdrawal liability) with
respect to (i) any "employee pension benefit plan" (as such term is
defined in Section 3(2) of ERISA) that is subject to Section 302 of
Title I of ERISA, Title IV of ERISA or Section 412 of the Code, or (ii)
any "multiemployer plan" (as such term is defined in Section 3(37) of
ERISA).
(d) Except as disclosed on Section 3.25 of the Company
Disclosure Statement, none of the Benefit Plans obligates the Company
to pay any separation, severance, termination or similar benefit solely
as a result of any transaction contemplated by this Agreement or solely
as a result of a change in control or ownership within the meaning of
Section 280G of the Code.
(e) Each Benefit Plan and any related trust, insurance
contract or fund has been maintained, funded and administered in
compliance in all material respects with its respective terms and in
compliance in all material respects with all applicable laws and
regulations, including, but not limited to, ERISA and the Code.
(f) The Company has complied with the health care continuation
requirements of Part 6 of Subtitle B of Title I of ERISA; and the
Company has no obligation under any Benefit Plan or otherwise to
provide health or life insurance benefits to former employees of the
Company or any other person, except as specifically required by Part 6
of Subtitle B of Title I of ERISA.
(g) With respect to each Benefit Plan, the Company has
provided the Merger Sub with true, complete and correct copies of (to
the extent applicable) (i) all documents pursuant to which the Benefit
Plan is maintained, funded and administered, (ii) the most recent
annual report (Form 5500 series) filed with the IRS (with applicable
attachments), (iii) the most recent financial statement, (iv) the most
recent summary plan description
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provided to participants, and (v) the most recent determination letter
received from the IRS.
(h) With respect to each Benefit Plan, all required or
recommended (in accordance with historical practices) payments,
premiums, contributions, reimbursements or accruals for all periods (or
partial periods) ending prior to or as of the Closing shall have been
made or properly accrued on the November 30, 1998 balance sheet. None
of the Benefit Plans has any material unfunded liabilities.
SECTION 3.26 INTELLECTUAL PROPERTY RIGHTS.
(a) Section 3.26 of the Company Disclosure Statement sets
forth a complete and correct list of all: (i) patented or registered
Intellectual Property Rights and pending patent applications and other
applications for registrations of Intellectual Property Rights owned or
filed by or on behalf of the Company or its subsidiaries; (ii) all
trade names and unregistered trademarks and service marks owned or used
by the Company or its subsidiaries and material to the conduct of its
business; and (iii) all material licenses or similar agreements or
arrangements for Intellectual Property Rights to which the Company or
its subsidiaries is a party (either as a licensor or licensee).
(b) Except as disclosed in Section 3.26 of the Company
Disclosure Statement: (i) each of the Company and its subsidiaries owns
and possesses all right, title and interest in and to, or has a valid
and enforceable license to use, all of the Intellectual Property Rights
necessary for the operation of the business of the Company and its
subsidiaries as currently conducted free and clear of all encumbrances,
licenses or other restrictions; (ii) no claim by any third party
contesting the validity, enforceability, use or ownership of any of the
material Intellectual Property Rights owned or used by the Company or
its subsidiaries has been made, is currently outstanding or is
threatened, and to the Knowledge of the Company, there are no grounds
for the same; (iii) the loss or expiration of any Intellectual Property
Right owned or used by the Company or its subsidiaries would not have a
Company Material Adverse Effect, and no such loss or expiration is
threatened, pending or reasonably foreseeable; (iv) neither the Company
nor its subsidiaries have received any notices of, and, to the
Company's Knowledge, there is no infringement or misappropriation by,
or conflict with, any third party with respect to the Intellectual
Property Rights owned or used by the Company or its subsidiaries
(including, without limitation, any demand or request that the Company
or its subsidiaries license any rights from a third party); (v) neither
the Company nor its subsidiaries, to the Company's Knowledge, have
infringed, misappropriated or otherwise conflicted with any
Intellectual Property Rights or other rights of any third parties and,
to the Company's Knowledge, there is no infringement, misappropriation
or conflict which will occur as a result of the continued operation of
the business of the Company and its subsidiaries as currently conducted
and as currently proposed to be conducted; and (vi) each of the Company
and its subsidiaries has taken commercially reasonable steps to
protect, maintain and safeguard the material Intellectual Property
Rights owned or used by the Company or its subsidiaries.
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SECTION 3.27 YEAR 2000. The Company is currently in the process of
implementing a new enterprise wide information system that is designed to be
Year 2000 Compliant (as defined below) (and that, to the Company's Knowledge, is
Year 2000 Compliant) (the "NEW SYSTEM"), which will replace all of the computer
software computer firmware, computer hardware (whether general or special
purpose), and other similar or related items of automated, computerized, and/or
software system(s) that are material to the Company's financial and
informational systems (collectively, the "SYSTEM SOFTWARE"). The Company expects
to complete the implementation of the New System on or before June 30, 1999, and
the Company is using and will continue to use commercially reasonable efforts to
complete such implementation on or before June 30, 1999. To the best of the
Company's Knowledge, except as disclosed on Section 3.27 of the Company
Disclosure Statement, all current versions of the product lines sold, licensed,
rendered, or otherwise provided by the Company or its subsidiaries to customers
in the conduct of their businesses are Year 2000 Compliant. "YEAR 2000
COMPLIANT" means, with respect to any System Software, that such System Software
will (i) operate prior to, during and after the calendar year 2000 without error
relating to the date related data, and (ii) properly recognize and indicate
dates in the calendar year 2000 and beyond as both input and output.
SECTION 3.28 APPRAISAL RIGHTS. None of the holders of shares of Company
Common Stock has any appraisal or dissenter rights under Florida Law in
connection with this Agreement, the Merger, the Preference Amendment or the
other Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Except as disclosed in a separate disclosure schedule referring to the
Sections contained in this Agreement, which has been delivered by the Merger Sub
to the Company prior to the execution of this Agreement (the "MERGER SUB
DISCLOSURE SCHEDULE"), Merger Sub hereby represents and warrants to the Company
that:
SECTION 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Merger Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Merger Sub is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that, individually or in the
aggregate, would not have a Merger Sub Material Adverse Effect. The term "MERGER
SUB MATERIAL ADVERSE EFFECT" means, when used in connection with the Merger Sub,
any change, effect, event, occurrence, condition or development that is or is
reasonably likely to be materially adverse to (i) the business, assets,
liabilities, properties, results of operations, prospects or condition
(financial or otherwise) of the Merger Sub (excluding industry and general
economic changes) or (ii) the ability of Merger Sub to perform its obligations
under this Agreement.
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SECTION 4.2 CHARTER DOCUMENTS AND BY-LAWS. Merger Sub has heretofore
furnished to the Company a complete and correct copy of the Articles of
Incorporation and By-laws, each as amended to date, of Merger Sub. Such charter
documents are in full force and effect. Merger Sub is not in violation of any
provision of its charter documents.
SECTION 4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Merger Sub has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by Merger Sub and the consummation by
Merger Sub of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Merger Sub are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the filing and recordation
of appropriate merger documents as required by Florida Law). This Agreement has
been duly and validly executed and delivered by Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of Merger Sub enforceable against Merger Sub in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
SECTION 4.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Merger Sub
does not, and the consummation of the Transactions by Merger Sub will
not (i) conflict with or violate the charter documents, By-laws or
other organizational documents of Merger Sub, (ii) conflict with or
violate any Law applicable to Merger Sub or by which any property or
asset of Merger Sub is bound or affected, except for such conflicts or
violations which would not, individually or in the aggregate, have a
Merger Sub Material Adverse Effect, or (iii) result in a violation or
any breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Merger Sub is a
party or by which Merger Sub or any property or asset of Merger Sub is
bound or affected, except for any such breaches or defaults which,
individually or in the aggregate, would not have a Merger Sub Material
Adverse Effect.
(b) The execution and delivery of this Agreement by Merger Sub
does not, and the consummation of this Agreement by Merger Sub will not
require any consent, approval, authorization or permit of, or filing
with or notification to, any government or subdivision thereof, or any
administration, governmental or regulatory authority, agency,
commission, tribunal or body, domestic, foreign or supranational,
except (i) for applicable requirements, if any, of the Exchange Act,
the Securities Act, Blue Sky Laws, the rules of any applicable stock
exchange, state takeover laws, the pre-merger notification requirements
of the HSR Act, and filing and recordation of appropriate merger
documents as required by Florida Law or any other applicable state law,
and (ii) where the failure to obtain such other consents, approvals,
authorizations, or permits,
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or to make such filings or notifications, individually or in the
aggregate is not reasonably likely to have a Merger Sub Adverse Effect.
SECTION 4.5 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities (other than those incident to its
organization and the execution of this Agreement) and has conducted its
operations only as contemplated hereby.
SECTION 4.6 INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Merger Sub specifically for inclusion or incorporation by
reference in the Proxy Statement or the Other Filings, at the respective time
filed with the SEC or such other Governmental Authority, and, in addition, in
the case of the Proxy Statement, at the date it is first mailed to the Company's
shareholders or at the time of the Shareholders Meeting (as defined below),
contains or will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
SECTION 4.7 BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger based upon arrangements made by or on behalf of Merger Sub.
SECTION 4.8 FINANCING. Cornerstone has received written commitments
from (a) Fleet National Bank, ("FLEET"), dated April 23, 1999 and as amended
June 3, 1999 (the "FLEET COMMITMENT LETTER"), pursuant to which Fleet has
committed, subject to the terms and conditions contained therein, to provide up
to $46,000,000 in financing for the Transactions and (b) Mainsail Capital, an
affiliate of Fleet ("MAINSAIL"), dated April 23, 1999 and as amended June 3,
1999 (the "MAINSAIL COMMITMENT LETTER" and, together with the Fleet Commitment
Letter, the "COMMITMENT LETTERS"), pursuant to which Mainsail has committed,
subject to the terms and conditions contained therein, to provide up to
$9,000,000 in financing for the Transactions. The proceeds from the Debt
Financing, to the extent funded pursuant to the Commitment Letters, together
with the Equity Contribution, shall provide sufficient funds to pay, pursuant to
the Merger, the Merger Consideration and the Option Consideration and to pay all
fees and expenses related to the Transactions. Merger Sub and/or the Investors
have delivered true, correct and complete copies of the Commitment Letters to
the Company.
SECTION 4.9 LITIGATION. There is no (i) claim, action, suit or
proceeding pending or, to the best knowledge of the Merger Sub threatened
against Merger Sub, before any court, arbitrator or Governmental Authority, or
(ii) outstanding judgment, order, writ, injunction or decree of any court,
arbitrator or Governmental Authority in a proceeding to which Merger Sub or any
of its assets is subject except, in the case of clauses (i) and (ii) above, such
as would not, individually or in the aggregate, have a Merger Sub Material
Adverse Effect.
SECTION 4.10 CAPITALIZATION. Immediately prior to the Effective Time,
the authorized capital stock of Merger Sub will consist of shares of Common
Stock, par value $0.01 per share and shares of preferred stock, par value $0.01
per share. Except as provided in, or contemplated by, this Agreement, there are
no authorized or outstanding options, warrants, convertible
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securities, calls, rights, commitments, preemptive rights or agreements or
instruments or understandings of any character, to which Merger Sub is a party
or by which Merger Sub is bound, obligating Merger Sub to issue, deliver or
sell, or cause to be issued, delivered or sold, contingently or otherwise,
additional shares of capital stock of Merger Sub or any securities or
obligations convertible into or exchangeable for such shares or to grant, extend
or enter into any such option, warrant, convertible security, call, right
commitment, preemptive right or agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder hereby severally but not jointly represents and
warrants to the Company that:
SECTION 5.1 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by such
Shareholder does not, and the consummation of the Transactions by such
Shareholder will not, (i) violate any Law applicable to such
Shareholder, (ii) prevent or materially delay the consummation of the
Merger or (iii) result in a violation or any breach of or constitute a
default (or an event which with notice or lapse of time or both would
become a default) under any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which such Shareholder is a party.
(b) The execution and delivery of this Agreement by such
Shareholder does not, and the consummation of the Transactions by such
Shareholder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any government or
subdivision thereof, or any administrative, governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign or
supranational, except for applicable requirements, if any, of the
Exchange Act, the Securities Act, Blue Sky Laws, the rules of any
applicable exchange, state takeover laws, the pre-merger notification
requirements of the HSR Act, and filings and recordation of appropriate
merger documents as required by Florida Law or any other applicable
state law.
SECTION 5.2 OWNERSHIP OF OWNED SHARES. Such Shareholder is the sole
record and beneficial owner of the Owned Shares owned by such Shareholder, free
and clear of any liens or encumbrances and free of any other limitation or
restriction (including, without limitation, any restriction on the right to
vote, sell or otherwise dispose of the Owned Shares or any interest therein)
except pursuant to this Agreement or applicable securities Laws. The Owned
Shares constitute all of the capital stock of the Company owned of record or
beneficially owned by such Shareholder.
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ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The
Company covenants and agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 6.01 of the Company Disclosure
Schedule or as otherwise expressly provided for in this Agreement, unless Merger
Sub shall otherwise agree in writing, the Company shall, and shall cause its
subsidiaries, to conduct its business in the ordinary course and in a manner
consistent in all material respects with past practice. The Company shall, and
shall cause its subsidiaries to, use all commercially reasonable efforts to (i)
preserve intact its business organization, (ii) keep available the services of
the current officers, employees and consultants of the Company and its
subsidiaries, (iii) preserve the current relationships of the Company and its
subsidiaries with customers, distributors, suppliers, licensors, licensees,
contractors and other persons with which the Company or its subsidiaries has
significant business relations, (iv) maintain all assets in good repair and
condition (except for ordinary wear and tear) other than those disposed of in
the ordinary course of business, (v) maintain all insurance necessary to the
conduct of the Company's business as currently conducted, (vi) maintain its
books of account and records in the usual, regular and ordinary manner, (vii)
maintain and protect all of its material Intellectual Property Rights in a
manner consistent in all material respects with past practice and (viii)
complete the implementation of the New System on or before June 30, 1999. By way
of amplification and not limitation, except as contemplated by this Agreement,
or as set forth in Section 6.01 of the Company Disclosure Schedule, the Company
shall not, and shall cause its subsidiaries not to, between the date of this
Agreement and the Effective Time, directly or indirectly do, or propose to do,
any of the following without the prior written consent of Merger Sub:
(a) amend or otherwise change its Articles of Incorporation or
By-laws, except to the extent contemplated by the Preference Amendment;
(b) issue, sell, pledge, dispose of, grant or encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance
of, (i) any shares of capital stock of any class of the Company (other
than in connection with the Preference Exchange or the Equity
Contribution) or its subsidiaries, or any options, warrants,
convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interests), of the Company
or its subsidiaries or (ii) any assets of the Company or its
subsidiaries, except for sales in the ordinary course of business
consistent with past practice and other asset sales for consideration
or having a fair market value aggregating not more than $150,000;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, or propose to redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock, other than
in connection with the Preference Exchange;
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(e) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) or agree to acquire
any corporation, partnership, limited liability company, or other
business organization or division thereof;
(f) (i) incur or agree to incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations
of any person, or make any loans, advances, or capital contributions to
or investments in, any other person, except in the ordinary course of
business consistent with past practice and in an amount not in excess
of $150,000; or (ii) authorize capital expenditures which are, in the
aggregate, in excess of $500,000;
(g) acquire, or agree to acquire, sell, lease or dispose of
any Real Estate or other material assets, other than sales or leases of
fixed assets (other than Real Estate) or sales of inventory, in each
case, in the ordinary course of business consistent with past practice;
(h) enter into, establish, adopt, amend or renew any material
employment, consulting, severance or similar agreement or arrangements
with any director, officer, or employee, or grant any salary or wage
increase (other than in the ordinary course consistent with past
practice);
(i) establish, adopt, amend or increase benefits under any
pension, retirement, stock option, stock purchase, savings, profit
sharing, deferred compensation, consulting, welfare benefit contract,
plan or arrangement (other than as may be required by applicable law);
(j) enter into any labor or collective bargaining agreement,
memorandum of understanding, grievance settlement or any other
agreement or commitment to or relating to any labor union;
(k) discharge or satisfy any material Lien or pay or satisfy
any material obligation or liability (fixed or contingent) except in
the ordinary course of business consistent with past practice, or
commence any voluntary petition, proceeding or action under any
bankruptcy, insolvency or other similar law;
(l) make or institute any change in accounting procedures or
practices in its accounting procedures and practices unless mandated by
GAAP;
(m) take any action that, if taken after February 28, 1999 but
prior to the date hereof, would have required to be disclosed in
Section 3.07 of the Company Disclosure Statement (provided that,
notwithstanding anything contained herein, no Company Material Adverse
Effect which occurred prior to the date hereof would have to be listed
on Section 3.07 of the Company Disclosure Statement);
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(n) enter into any agreement or other arrangement with any
director, officer, employee or stockholder of the Company, its
subsidiaries or any affiliate of the foregoing, except in the ordinary
course of business consistent with past practice;
(o) enter into any agreement or other arrangement that is
reasonably likely to be material to the business of the Company or its
subsidiaries, except in the ordinary course of business consistent with
past practice;
(p) make or change any election, change an annual accounting
period, adopt or change any accounting method, file any amended Tax
Return, enter into any closing agreement, settle any Tax claim or
assessment relating to the Company or its subsidiaries, surrender any
right to claim a refund of Taxes, consent to any extension or waiver of
the limitation period applicable to any Tax claim or assessment
relating to the Company or its subsidiaries, fail to timely file any
Tax Return, take a position on a Tax Return not in keeping with prior
practice or take any other similar action, or omit to take any action
relating to the filing of any Tax Return or the payment of any Tax, if
such election, adoption, change, amendment, agreement, settlement,
surrender, consent or other action or omission could have the effect of
increasing the present or future Tax liability or decreasing any
present or future Tax asset of the Company or its subsidiaries;
(q) take any action or omit to take any action which would
result in a violation of any applicable Law or would cause a breach of
any agreement, contract or commitment, which violation or breach would
have a Company Material Adverse Effect;
(r) license, assign or otherwise transfer to any person or
entity any rights to any material Intellectual Property Rights owned or
used by the Company or its subsidiaries, except in the ordinary course
of business consistent with past practice;
(s) fail to maintain or enforce any material Intellectual
Property Rights owned or used by the Company or its subsidiaries,
except in the ordinary course of business consistent with past
practice; or
(t) authorize or propose, or agree to take, any of the
foregoing actions prohibited under Section 6.01.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 SHAREHOLDERS' MEETING.
(a) Subject to the provisions of Section 7.05 and Section
9.01, the Company shall, consistent with applicable law, call and hold
a meeting of the holders of shares of Company Common Stock (the
"SHAREHOLDERS' MEETING") as promptly as practicable for the purpose of
voting upon the approval and adoption of this Agreement and the
Transactions. The Company, through its Board of Directors or a
committee thereof, shall
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recommend to its shareholders approval and adoption of this Agreement
and the Transactions, which recommendation shall be contained in the
Proxy Statement (as defined below); PROVIDED, HOWEVER, that the Board
of Directors of the Company or a committee thereof may fail to make its
recommendation to the shareholders of the Company or may withdraw,
modify or change its recommendation to the shareholders of the Company,
in accordance with Section 7.05(b). The Company shall solicit from the
holders of shares of Company Common Stock proxies in favor of the
approval and adoption of the Merger, and shall take all other action
necessary or advisable to secure the vote or consent of such holders
required by Florida Law.
(b) Merger Sub shall vote (or consent with respect to) any
shares of Company Common Stock beneficially owned by it, or with
respect to which it has the power (by agreement, proxy or otherwise) or
cause to be voted (or to provide a consent), in favor of the approval
and adoption of this Agreement at any meeting of the shareholders of
the Company at which this Agreement shall be submitted for approval and
adoption and at all adjournments or postponements thereof (or, if
applicable, by any action of the shareholders of the Company by consent
in lieu of a meeting).
SECTION 7.2 PREPARATION OF PROXY STATEMENT.
(a) The Company shall, as soon as practicable, but in any
event within thirty (30) days after the date hereof, prepare and file
(after providing Merger Sub with a reasonable opportunity to review and
comment thereon) preliminary proxy materials (including, without
limitation, a Schedule 13e-3 filing, if required to be filed under the
Exchange Act) relating to the meeting of the holders of shares of
Company Common Stock to be held in connection with the Transactions
(together with any amendments thereof or supplements thereto, the
"PROXY STATEMENT") (or, if requested by Merger Sub and applicable, an
information statement in lieu of a proxy statement pursuant to Rule 14C
under the Exchange Act, with all references herein to the Proxy
Statement being deemed to refer to such information statement, to the
extent applicable) with the SEC and shall use its commercially
reasonable efforts to respond to any comments of the SEC (after
providing Merger Sub with a reasonable opportunity to review and
comment thereon) and to cause the Proxy Statement to be mailed to the
Company's shareholders as promptly as practicable after responding to
all such comments to the satisfaction of the staff. The Company shall
notify Merger Sub promptly of the receipt of any comments from the SEC
and of any request by the SEC for amendments or supplements to the
Proxy Statement or for additional information and shall supply Merger
Sub with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC, on the other hand, with
respect to the Proxy Statement or the Transactions. The Company will
cause the Proxy Statement to comply in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder applicable to the Proxy Statement and the solicitation of
proxies for the Shareholders' Meeting (including any requirement to
amend or supplement the Proxy Statement) and each party shall furnish
to the other such information relating to it and its affiliates and the
Transactions and such further and supplemental information as may be
reasonably
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requested by the other party. If at any time prior to the Shareholders
Meeting there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, the Company shall
promptly prepare and mail to its shareholders such an amendment or
supplement; PROVIDED, that no such amendment or supplement to the Proxy
Statement will be made by the Company without providing the Merger Sub
the reasonable opportunity to review and comment thereon and without
the approval of Merger Sub, which approval shall not be unreasonably
withheld. The Company and its counsel shall permit Parent and its
counsel to participate in all communications with the SEC and its
staff, including all meetings and telephone conferences, relating to
the Proxy Statement, this Agreement or the Transactions.
(b) The Company agrees to include in the Proxy Statement the
unanimous recommendation of the voting members of the Company's Board
of Directors, subject to any modification, amendment or withdrawal
thereof, and represents that the Company's Financial Advisor has,
subject to the terms of its engagement letter with the Company,
consented to the inclusion of references to its opinion in the Proxy
Statement.
SECTION 7.3 APPROPRIATE ACTION; CONSENTS; FILINGS; FURTHER ASSURANCES.
(a) The Company and Merger Sub shall use their commercially
reasonable efforts to (i) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate the
Transactions and make effective the Merger as promptly as practicable,
(ii) take all reasonable actions required for the consummation of the
financing of the transactions contemplated hereby by Merger Sub;
PROVIDED, HOWEVER, that the effectiveness of any such action by the
Company shall be conditioned upon consummation of the Merger, (iii)
obtain expeditiously from any Governmental Authorities any consents,
licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Merger Sub or the Company or any of
their Subsidiaries in connection with the authorization, execution and
delivery of this Agreement and the consummation of the Transactions,
and (iv) as promptly as practicable, make all necessary filings, and
thereafter make any other required submissions, with respect to this
Agreement and the Transactions required under (A) the Securities Act
and the Exchange Act, and any other applicable federal or state
securities Laws, (B) the HSR Act and any related governmental request
thereunder and (C) any other applicable Law; PROVIDED, that Merger Sub
and the Company shall cooperate with each other in connection with the
making of all such filings, including providing copies of all such
documents to the non-filing party and its advisors prior to filing.
From the date of this Agreement until the Effective Time, each party
shall promptly notify the other party in writing of any pending or, to
the knowledge of the first party, threatened action, proceeding or
investigation by any Governmental Authority or any other person (i)
challenging or seeking material damages in connection with the Merger
or the conversion of the Company Common Stock into cash pursuant to the
Merger or (ii) seeking to restrain or prohibit the consummation of the
Transactions or otherwise limit the right of Surviving Corporation to
own or operate all or any portion of the
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businesses or assets of the Company or its Subsidiaries, which in
either case would have a Company Material Adverse Effect prior to or
after the Effective Time, or a Surviving Corporation Material Adverse
Effect after the Effective Time. The term "SURVIVING CORPORATION
MATERIAL ADVERSE EFFECT" means, when used in connection with the
Surviving Corporation, any change, effect, event, occurrence, condition
or development that is or is reasonably likely to be materially adverse
to the business, assets, liabilities, properties, results of
operations, prospects or condition (financial or otherwise) of the
Surviving Corporation or its subsidiaries, taken as a whole.
(b) The Company, the Shareholders and Merger Sub shall furnish
to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any
applicable Law (including all information required to be included in
the Proxy Statement) in connection with the transactions contemplated
by this Agreement.
(c) Each of Merger Sub and the Company shall give (or shall
cause its respective subsidiaries to give) any notices to third parties
and use, and cause its respective subsidiaries to use, their reasonable
efforts to obtain any third party consents, (A) necessary, proper or
advisable to consummate the Transactions, (B) disclosed or required to
be disclosed in the Company Disclosure Schedule or (C) required to
prevent a Company Material Adverse Effect from occurring prior to or
after the Effective Time or a Surviving Corporation Material Adverse
Effect from occurring after the Effective Time.
(i) In the event that Merger Sub or the Company shall
fail to obtain any third party consent described in subsection
(c)(i) above, it shall use its commercially reasonable
efforts, and shall take any such actions reasonably requested
by the other party, to minimize any adverse effect upon the
Company and Merger Sub, their respective subsidiaries, and
their respective businesses resulting, or which could
reasonably be expected to result after the Effective Time,
from the failure to obtain such consent.
(d) If any state takeover statute or similar statute or
regulation becomes applicable to this Agreement or any of the
Transactions, the Company and Merger Sub will take all action necessary
to ensure that the Merger and the other Transactions may be consummated
as promptly as practicable on the terms contemplated by this Agreement
and otherwise to minimize the effect of such statute or regulation on
the Merger and the other Transactions.
(e) If at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement,
including the execution of additional documents, the proper officers
and directors of each party to this Agreement (including the
Shareholders) shall take all such necessary action. At and after the
Effective Time, the officers and directors of the Surviving Corporation
will be authorized to execute and deliver, in the name and on behalf of
the Company, any other actions to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all
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right, title and interest in, to and under any of the rights,
properties or assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the
Merger.
SECTION 7.4 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) The Company and Merger Sub shall comply with, and shall
cause their respective Representatives (as defined below) to comply
with, to the extent permitted by applicable Law, all of their
respective obligations under the Confidentiality Agreement dated
November 6, 1998 (the "CONFIDENTIALITY AGREEMENT") between the Company
and Merger Sub. Notwithstanding the Confidentiality Agreement, the
Company acknowledges that Merger Sub may cause an information
memorandum to be prepared and used in connection with the consummation
of the financing of the Transactions; PROVIDED, that any recipient of
such information memorandum shall be subject to customary
confidentiality requirements.
(b) Subject to the Confidentiality Agreement, from the date
hereof to the Effective Time, the Company shall (and shall cause each
of its subsidiaries to) provide to Merger Sub (and its officers,
directors, employees, accountants, consultants, legal counsel, agents
and other representatives, collectively, "REPRESENTATIVES") access to
all information and documents which Merger Sub may reasonably request
regarding the business, assets, liabilities, employees and other
aspects of the Company or its subsidiaries.
(c) From the date hereof to the Effective Time, the Company
shall (and shall cause each of its subsidiaries to): (i) provide to
Merger Sub and its Representatives access at reasonable times upon
prior notice to the officers, employees, agents, properties, offices
and other facilities of the Company and its subsidiaries and to the
books and records thereof and (ii) furnish promptly such information
concerning the business, properties, contracts, assets, liabilities,
personnel and other aspects of the Company and its subsidiaries as
Merger Sub or its Representatives may reasonably request.
(d) No investigation by Merger Sub, whether prior to the
execution of this Agreement or pursuant to this Section 7.04, shall
affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto.
SECTION 7.5 NO SOLICITATION.
(a) The Company and the Shareholders shall not, and the
Company shall cause its subsidiaries not to, and the Company agrees
that it shall not authorize nor permit any of its directors, officers,
employees, agents or representatives to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing or
disclosing non-public information) any inquiries, discussions or the
making of any proposal with respect to any merger, consolidation or
other business combination involving the Company or acquisition of any
kind of a material portion of the assets or capital stock of the
Company
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or its subsidiaries (a "COMPETING TRANSACTION") or negotiate, explore
or otherwise communicate in any way with any person (other than Merger
Sub or its directors, officers, employees and representatives) with
respect to any Competing Transaction or enter into or consummate any
agreement, arrangement or understanding requiring it to abandon,
terminate or fail to consummate the Merger or any other transaction
contemplated by this Agreement; PROVIDED, HOWEVER, that prior to the
vote of the shareholders of the Company for approval of the Merger, the
Company (including, but not limited to, the officers and directors of
the Company who may be Shareholders) may, if and so long as the
Company's Board of Directors determines in good faith by a majority
vote, based upon the advice of its outside counsel that failing to take
such action would constitute a breach of the fiduciary duties of the
Company's Board of Directors under applicable law, in response to a
Competing Transaction from any person that was not solicited by the
Company and that did not otherwise result from the breach of this
Section 7.05, and subject to compliance with Section 7.05(c), (x)
furnish information with respect to the Company to such person pursuant
to a customary confidentiality agreement and (y) participate in
discussion or negotiations with such person regarding any Competing
Transaction; PROVIDED, that such proposal is not subject to conditions
that are materially different from those set forth in this Agreement
and such proposal is, in the business judgment of the Board of
Directors of the Company, more favorable to the stockholders of the
Company (other than the Shareholders) from a financial point of view
than the transactions contemplated by this Agreement (including any
adjustments to the terms and conditions of such transactions proposed
by Merger Sub is response to such Competing Transaction pursuant to
Section 7.05(b) below).
(b) Neither the Company (or any of its subsidiaries) nor the
Board of Directors of the Company nor any committee thereof shall (i)
withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Merger Sub, the approval, adoption or recommendation by the
Board of Directors of the Company or any such committee of this
Agreement, the Merger or the other Transactions, (ii) approve or
recommend, or propose to approve or recommend, any Competing
Transaction, (iii) approve or recommend, or propose to approve or
recommend, or execute or enter into, any letter of intent, agreement in
principle, merger agreement, acquisition agreement, option agreement or
other relating to any Competing Transaction or propose or agree to do
any of the foregoing, or (iv) submit any Competing Transaction at the
Shareholder's Meeting for purposes of voting upon approval and adoption
of the Competing Transaction; PROVIDED, HOWEVER, that prior to the vote
of the shareholders of the Company for approval of the Merger, the
Company may, to the extent required by the fiduciary obligations of the
Board of Directors of the Company, as determined in good faith by a
majority vote of the Board of Directors of the Company based on the
advice of its outside counsel, and after compliance with the following
sentence, terminate this Agreement pursuant to Section 9.01(g)
(PROVIDED that concurrently with such termination the Company enters
into a definitive agreement containing the terms of a Competing
Transaction). If the Company shall exercise its right to terminate this
Agreement pursuant to this Section 7.05(b), the Company shall deliver
to Merger Sub (or at Merger Sub's direction, to Cornerstone) (i) by
check or wire transfer of same day funds in the
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amount of (A) Merger Sub's Reimbursable Expenses (as defined in Section
9.03(b)) as the same may have been estimated by Merger Sub in good
faith prior to the date of such delivery (subject to an adjustment
payment between the parties upon Merger Sub's definitive determination
of such Merger Sub's Reimbursable Expenses and (B) the amount of
Termination Fee as provided in Section 9.03(c) and (ii) written
acknowledgment from the Company and from the other person to the
Competing Transaction that the Company and such other person have
irrevocably waived any right to contest such payment. Notwithstanding
anything in this Agreement to the contrary, the Company may only
exercise its right to terminate this Agreement pursuant to this Section
7.05(b) at a time that is after the tenth business day following Merger
Sub's receipt of written notice (the "COMPETING NOTICE") advising
Merger Sub that the Board of Directors of the Company is prepared,
subject to any action taken by Merger Sub pursuant to this sentence, to
cause the Company to accept a Competing Transaction, specifying the
material terms and conditions of such Competing Transaction and
identifying the person making such Competing Transaction (it being
understood and agreed that any amendment or modification of a Competing
Transaction shall result in a new Competing Transaction for which a new
ten business day period following a new notice referred to above shall
be required under this sentence); PROVIDED, HOWEVER, that Merger Sub
shall have the right during such ten business day period after receipt
of the Competing Notice to offer to adjust the terms and conditions of
the Transactions by tendering to the Company a new proposal for such
terms and conditions (the "REVISED PROPOSAL"); PROVIDED, FURTHER, that
if the Revised Proposal, in the business judgment of the Board of
Directors of the Company, is substantially the same as the Competing
Transaction, or is more favorable to the stockholders of the Company
(other than the Shareholders) from a financial point of view than the
Competing Transaction, then, subject only to the amendment of this
Agreement to incorporate the terms and conditions of the Revised
Proposal, the Company shall reject the Competing Transaction and
recommend to its shareholders the approval and adoption of the Revised
Proposal.
(c) The Company promptly (and in any event within 12 hours of
the relevant event) shall advise Merger Sub orally and in writing of
any Competing Transaction or any inquiry with respect to or that could
reasonably be expected to lead to any Competing Transaction and the
identity of the person making any such Competing Transaction or
inquiry, and, in each case, the terms and conditions thereof, including
any amendment or other modification to the terms of any such Competing
Transaction or inquiry. The Company shall keep Merger Sub fully
apprised of the status of any proposal relating to a Competing
Transaction on a current basis.
(d) The Company shall not cancel, terminate, amend, modify or
waive any of the terms of any confidentiality or standstill agreement
executed with respect to the Company by any other party prior to the
date of this Agreement.
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SECTION 7.6 INDEMNIFICATION AND INSURANCE.
(a) The Surviving Corporation and the Company agree that,
except as may be limited by applicable Laws, for six years from and
after the Effective Time, the indemnification obligations set forth in
the Company's Articles of Incorporation and the Company's By-Laws, in
each case as of the date of this Agreement, shall survive the Merger
and shall not be amended, repealed or otherwise modified after the
Effective Time in any manner that would adversely affect the rights
thereunder of the individuals who on or at any time prior to the
Effective Time were entitled to indemnification thereunder with respect
to matters occurring prior to the Effective Time. In addition, the
Surviving Corporation and Company agree that, except as may be limited
by applicable Laws, the indemnification obligations of the Company as
set forth in other indemnification agreements to which it is a party
and as disclosed in Section 7.06 of the Company Disclosure Statement,
shall not be amended, repealed or otherwise modified after the
Effective Time except as permitted by the terms and provisions of those
agreements.
(b) The Company shall maintain in effect, for three years or
until the applicable statute of limitations expires but in no event
longer than four years, from and after the Effective Time, directors'
and officers' liability insurance policies covering the persons who are
currently covered in their capacities as such directors and officers
(the "COVERED PARTIES") by the Company's current directors' and
officers' policies and on terms not materially less favorable than the
existing insurance coverage with respect to matters occurring prior to
the Effective Time; PROVIDED, HOWEVER, in the event the annual premium
for such coverage exceeds an amount equal to 200% of the last annual
premium paid immediately prior to the date hereof by the Company for
such coverage, the Surviving Corporation shall notify the Covered
Parties who shall then elect as a group either (i) to allow the
Surviving Corporation to obtain as much comparable insurance as
possible for an annual premium equal to 200% of the last annual premium
paid immediately prior to the date hereof by the Company, or (ii) to
seek coverage from another carrier, in which event the Surviving
Corporation shall reimburse the Covered Parties the cost of such
alternate coverage up to an amount equal to 200% of the last annual
premium paid immediately prior to the date hereof by the Company for
such coverage.
(c) In addition to, and not in lieu of the foregoing, the
Surviving Corporation shall indemnify, defend and hold harmless all
officers and directors of the Company (the "INDEMNIFIED Parties") to
the fullest extent permitted by Florida Law and in the Articles of
Incorporation and By-laws of the Company, as in effect as of the date
hereof, from and against all liabilities, costs, expenses and claims
(including without limitation reasonable legal fees and disbursements,
which shall be paid, reimbursed or advanced by the Surviving
Corporation in a manner consistent with applicable provisions of the
Surviving Corporation's By-laws) arising out of the actions taken prior
to the Effective Time in performance of their duties as directors or
officers of the Company, in connection with the Merger and other
transactions contemplated hereby, which may be asserted against the
Indemnified Parties from and after the date of this Agreement PROVIDED,
HOWEVER, that Surviving Corporation's obligations to the Indemnified
Parties under this Section 7.06(d)
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shall not be effective until consummation of the Merger; PROVIDED,
FURTHER, that the Surviving Corporation shall not have any obligation
hereunder to any Indemnified Party if the indemnification of such
Indemnified Party in the manner contemplated hereby is determined
pursuant to a final non-appealable judgment rendered by a court of
competent jurisdiction to be prohibited by applicable Law or if the
indemnification of the Indemnified Party is not within the power of the
Surviving Corporation under Florida Law.
(d) In the event that any action, suit, proceeding or
investigation relating thereto or to the transactions contemplated by
this Agreement is commenced, whether before or after the Effective
Time, the parties hereto agree to cooperate and use their respective
reasonable efforts to vigorously defend against and respond thereto.
SECTION 7.7 NOTIFICATION OF CERTAIN MATTERS. From and after the date of
this Agreement until the Effective Time, each party hereto shall promptly notify
the other parties hereto of:
(a) the occurrence, or non-occurrence, of any event the
occurrence or non-occurrence of which would be reasonably likely to
cause any (i) representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect or (ii) any material
covenant or any condition to the obligations of any party to effect the
Merger not to be complied with or satisfied;
(b) the failure of any party hereto to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied
by it pursuant to this Agreement;
(c) the receipt of any notice or other communication from any
person alleging that the consent of such person is or may be required
in connection with the Transactions;
(d) the receipt of any notice or other communication from any
Governmental Authority in connection with the Transactions; and
(e) any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of the party, threatened against,
relating to or involving or otherwise affecting the Company or Merger
Sub, which relates to the consummation of the Transactions;
in each case, to the extent such event or circumstance is or becomes known to
the party required to give such notice; PROVIDED, HOWEVER, that the delivery of
any notice pursuant to this Section 7.07 shall not be deemed to be an amendment
of this Agreement or any Section in the Company Disclosure Schedule or the
Merger Sub Disclosure Statement and shall not cure any breach of any
representation or warranty requiring disclosure of such matter prior to the date
of this Agreement.
SECTION 7.8 PUBLIC ANNOUNCEMENTS. Merger Sub and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with
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respect to this Agreement or any of the Transactions. Prior to the Closing,
Merger Sub and the Company shall not issue any such press release or make any
such public statement without the prior consent of the other (which consent
shall not be unreasonably withheld), except as may be required by Law or any
listing agreement with the NASD or any national securities exchange to which
Merger Sub or the Company is a party and, in such case, shall use reasonable
effects to consult with all the parties hereto prior to such release or
statement being issued. The parties shall agree on the text of a joint press
release by which Merger Sub and the Company will announce the execution of this
Agreement.
SECTION 7.9 EMPLOYMENT AGREEMENTS.
(a) From and after the Effective Time, Merger Sub shall cause
the Surviving Corporation to honor all employment, severance,
termination and retirement agreements to which the Company is a party,
as such agreements are in effect on the date hereof.
(b) Merger Sub shall cause the Surviving Corporation, for a
period of one year following the Effective Date, to offer compensation
and benefits to Company's employees that are substantially equivalent
to the compensation and benefits that such employees enjoyed before the
Effective Time; PROVIDED, that nothing in this Section 7.09 shall
obligate the Surviving Corporation to renew any employment agreements
after their expiration or termination; PROVIDED, FURTHER, that nothing
in this sentence shall be deemed to limit or otherwise affect the right
of the Surviving Corporation to terminate employment or change the
place of work, responsibilities, status or designation of any employee
as the Surviving Corporation may determine in the exercise of its
business judgment and in compliance with applicable laws and subject to
Section 7.09(a).
(c) Prior to the Effective Time, John T. Kane and the Company
agree to terminate (i) the Employment Agreement, dated June 12, 1997
and amended May 27, 1998 ("KANE'S PREVIOUS EMPLOYMENT Agreement"), by
and between the Company and John T. Kane, and (ii) the Trust Agreement,
dated October 7, 1998 (the "TRUST AGREEMENT") by and between the
Company and Delaware Charter Guarantee & Trust Company, as trustee (the
"TRUSTEE") with respect to John T. Kane, and upon such termination, the
liabilities and obligations of the Company and such Shareholder under
such agreements shall be extinguished. In consideration for terminating
these agreements pursuant to this Section 7.09(c), the Company shall
cause the Trustee to pay to John T. Kane, the amount accumulated in
such trust for his benefit as of the date the Trust Agreement is
terminated.
(d) Prior to the Effective Time, George P. Wilson and the
Company agree to (i) terminate the Employment Agreement, dated June 12,
1997 and amended May 27, 1998 ("WILSON'S PREVIOUS EMPLOYMENT
AGREEMENT"), by and between the Company and George P. Wilson and upon
such termination, the liabilities and obligations of the Company and
such Shareholder under such agreement shall be extinguished and (ii)
amend the Trust Agreement with respect to George P. Wilson to eliminate
the requirement that, upon a Change of Control (as defined in the Trust
Agreement), the
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Company make an irrevocable contribution to the trust sufficient to pay
the retirement benefits that George P. Wilson would have been entitled
pursuant to Wilson's Previous Employment Agreement.
SECTION 7.10 ASSISTANCE WITH FINANCING. In order to assist with the
financing of the Transactions, at or prior to Closing, the Company shall, and
shall cause its subsidiaries to, take such commercially reasonable steps as are
necessary to cause the following to occur:
(a) At Cornerstone's request, with respect to each of the
Leased Premises, the Company shall deliver to Merger Sub a
nondisturbance agreement, a consent and waiver and/or an estoppel
letter executed by the landlord, lessor, landlord and/or licensor of
such Leased Premise, in each case, in form and substance reasonably
acceptable to Merger Sub;
(b) At Cornerstone's request, the Company shall furnish such
financial statements as may be reasonably requested by Merger Sub in
connection with the financing of the Transactions;
(c) At Cornerstone's request, the Company shall take or cause
to be taken any other actions necessary to consummate the financing of
the Transactions; and
(d) No actions taken by or on behalf of the Company in
connection with its obligation under this Section 7.10 or arising as a
result of the taking of such action shall constitute a breach of any
representation or warranty of the Company contained in this Agreement
for any purpose hereunder. Notwithstanding anything to the contrary set
forth herein, the effectiveness of any such actions by the Company
shall be conditioned upon the consummation of the Merger.
SECTION 7.11 STOCKHOLDER APPROVAL. The Company shall take all action
necessary in accordance with Florida Law and its Article of Incorporation and
By-laws to obtain the requisite approval and adoption of this Agreement and the
Transactions by the stockholders of the Company.
SECTION 7.12 EXCHANGE ACT AND NASDAQ FILINGS. Unless an exemption shall
be expressly applicable to the Company, or unless Merger Sub agrees otherwise in
writing, the Company will file with the SEC and the National Association of
Security Dealers ("NASD") all reports required to be filed by it pursuant to the
rules and regulations of the SEC and NASD (including, without limitation, all
required financial statements). Such reports and other information shall comply
in all material respects with all of the requirements of the SEC and NASD rules
and regulations, and when filed, will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
SECTION 7.13 NONCOMPETITION; NONSOLICITATION. For a period of three (3)
years from and after the Closing, the Shareholders shall not, directly or
indirectly, (i) own, manage, operate, join, control or participate in the
ownership, management, operation or control of, as stockholder
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or partner or any other similar capacity with any business which is in
competition with or potential competition with the business of the Company as
conducted immediately prior to the consummation of Merger, or (ii) solicit,
employ, retain as a consultant, interfere with or attempt to entice away from
the Company, the Surviving Corporation, or any successor to any of the
foregoing, any individual who is, has agreed to be or within one year of such
solicitation, employment, retention, interference or enticement has been,
employed or retained by the Company, the Surviving Corporation, or any successor
to any of the foregoing in a supervisory or more senior capacity. Ownership of
not more than 2% of the outstanding stock of any publicly traded company shall
not, in and of itself, be a violation of this Section 7.13. The restrictive
covenant contained in this Section 7.13 is a covenant independent of any other
provision of this Agreement, and the existence of any claim which the
Shareholders may allege against Merger Sub, the Company, the Surviving
Corporation or any of their affiliates, whether based on this Agreement or
otherwise, shall not prevent the enforcement of this covenant. The Shareholders
agree that a breach of this Section 7.13 shall cause irreparable harm to Merger
Sub, the Company, the Surviving Corporation and their affiliates, that Merger
Sub's, the Company's and the Surviving Corporation's remedies at law for any
breach or threat of breach of the provisions of this Section 7.13 shall be
inadequate, and that Merger Sub, the Company and/or the Surviving Corporation
shall be entitled to an injunction or injunctions to prevent breaches of this
Section 7.13 and to enforce specifically the terms and provisions hereof, in
addition to any other remedy to which Merger Sub, the Company and/or the
Surviving Corporation may be entitled at law or in equity. The three year period
shall be tolled during any period of violation of this Section 7.13 and during
any other period required for litigation during which Merger Sub, the Company
and/or the Surviving Corporation seeks to enforce this covenant. In the event
that this Section 7.13 shall be determined by an court of competent jurisdiction
to be unenforceable by reason of its extending for too long a period of time or
over too large a geographical area or by reason of its being too extensive in
any other respect, it shall be interpreted to extend only over the longest
period of time for which it may be enforceable, and/or over the largest
geographical area as to which it may be enforceable and/or to the maximum extent
in all other aspects as to which it may be enforceable, all as determined by
such court in such action.
SECTION 7.14 REPRESENTATIONS. Each of the Company and the Merger Sub
(a) will use reasonable best efforts to take all action necessary to render true
and correct as of the Closing its respective representations and warranties
contained in this Agreement, (b) will refrain from taking any action that would
render any such representation or warranty untrue or incorrect as of such time
and (c) will perform or cause to be satisfied each agreement, covenant or
condition to be performed or satisfied by it.
SECTION 7.15 VOTING AGREEMENT. Each of the Shareholders and Merger Sub
shall comply with all of their respective obligations under the Voting
Agreement.
SECTION 7.16 GUARANTEE. Cornerstone will be a substantial equity
investor in the Surviving Corporation. In that regard, Cornerstone has a
substantial interest in and a desire to assure that the Company enter into this
Agreement and that the Transactions are consummated. Therefore, as a material
inducement to the Company to enter into this Agreement and to consummate the
Transactions, Cornerstone, by affixing the signature of its duly authorized
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officer on the signature page attached hereto, hereby guarantees (the
"GUARANTEE"), absolutely and unconditionally as a primary obligor, to the
Company, the performance by Merger Sub of its covenants, duties and obligations
hereunder ("MERGER SUB OBLIGATIONS"); PROVIDED, that Cornerstone's aggregate
liability to the Company due to the Merger Sub Obligations shall not exceed, in
the aggregate, the Equity Contribution. The Guarantee shall be a continuing
guaranty and shall remain in effect until the earliest of (i) the Effective
Time, (ii) except for any obligation of Merger Sub pursuant to Section 9.03(d)
hereof, the termination of this Agreement and (iii) the time that Cornerstone
has, taken together with any amounts funded in connection with the Equity
Contribution, incurred and satisfied liabilities equal to or exceeding
$24,826,327.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the Company, Merger Sub and the Shareholders to consummate the
Merger are subject to the satisfaction (or, if permitted by applicable Law,
waiver by the party for whose benefit such condition exist) of the following
conditions:
(a) this Agreement and the Transactions shall have been
approved and adopted by the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock in
accordance with Florida Law and the Company's Articles of
Incorporation;
(b) any applicable waiting period under the HSR Act relating
to the Merger shall have expired or been terminated;
(c) no order, statute, rule, regulation, executive order,
stay, decree, judgment or injunction shall have been enacted, entered,
issued, promulgated or enforced by any Governmental Authority or a
court of competent jurisdiction which has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger or
of limiting or restricting the Surviving Corporation's or Merger Sub's
conduct or operation of the business of the Company after the Merger;
and
(d) all other necessary and material governmental and
regulatory clearances, consents, or approvals shall have been received.
SECTION 8.2 CONDITIONS TO THE OBLIGATIONS OF MERGER SUB. The
obligations of Merger Sub to consummate the Merger are subject to the
satisfaction or, if permitted by applicable Law, waiver by Merger Sub of the
following further conditions:
(a) The Company shall have performed all of its obligations
hereunder required to be performed by it at or prior to the Effective
Time; (ii) each of the representations and warranties of the Company
contained in this Agreement shall be true and correct, in each case as
of the Closing Date as if made at and as of such time; and
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(iii) Merger Sub shall have received a certificate signed by an
executive officer of the Company as to compliance with the conditions
set forth in this paragraph 8.02(a);
(b) Merger Sub shall have received an opinion, dated on or
about the Closing Date, of Greenberg Traurig, P.A., similar in form and
substance to opinions normally given in transactions of this kind and
which is reasonably satisfactory to Merger Sub;
(c) Each of the Shareholders shall have performed all of his
obligations hereunder required to be performed by it at or prior to the
Effective Time, including its obligation to consummate the Preference
Exchange; (ii) each of the representations and warranties of the
Shareholders contained in this Agreement shall be true and correct, in
each case as of the Closing Date, as if made at and as of such time;
and (iii) Merger Sub shall have received a certificate signed by the
Shareholders as to compliance with the conditions set forth in this
paragraph 8.02(c);
(d) Shareholders shall have executed and delivered a
Stockholders Agreement in form and substance reasonably satisfactory to
Merger Sub, containing the terms set forth in the term sheet annexed
hereto as EXHIBIT C;
(e) Surviving Corporation shall have obtained the Debt
Financing on the terms and conditions set forth in the Commitment
Letters or otherwise obtained debt financing sufficient to consummate
the Transactions and to pay all fees and expenses in connection
therewith and to provide working capital for the Surviving Corporation,
all on terms reasonably satisfactory to the Surviving Corporation and
the Investors;
(f) Each of the Company's revenues, taken as a whole, and
earnings before interest and taxes ("OPERATING INCOME"), taken as a
whole, for the first fiscal quarter of the fiscal year ending February
29, 2000 shall have been substantially consistent with the projected
revenues, taken as a whole, and Operating Income, taken as a whole, set
forth on the information listed on Section 8.02(f) of the Company
Disclosure Schedule (the "DISCLOSED INFORMATION"), which Disclosed
Information was previously provided by the Company to Merger Sub and
Cornerstone or their representatives;
(g) Since the date of this Agreement, no event shall have
occurred which has or which would reasonably be expected to have a
Company Material Adverse Effect; PROVIDED, HOWEVER, that any changes,
effects, events, occurrences, conditions or developments substantially
consistent with items 3, 4, 7, 9 and 10 of the Disclosed Information
shall not be deemed to constitute a Company Material Adverse Effect;
(h) The Company shall have amended its Articles of
Incorporation in connection with the Preference Amendment;
(i) The Shareholders shall have converted an aggregate of
273,465 shares of Company Common Stock into that number of shares of
Series B Preference Stock such that immediately after the Equity
Contribution and the Preference Exchange, the
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Shareholders will own an aggregate of 18.79% of the issued and
outstanding Preference Stock of the Company, as adjusted pursuant to
Section 2.01(f);
(j) The Company shall have issued to the Investors in exchange
for the Equity Contribution that number of shares of Series A
Preference Stock such that immediately after the Equity Contribution
and the Preference Exchange, the Investors will own 81.21% of the
issued and outstanding Preference Stock of the Company, as adjusted
pursuant to Section 2.01(f);
(k) All Company Stock Options shall be extinguished and as of
immediately prior to Closing, the Company shall have no liability or
obligation with respect to any such Company Stock Options, except as
provided in Section 2.03;
(l) All outstanding indebtedness for borrowed money of the
Company shall be paid in full, (ii) any letters of credit of the
Company shall be terminated and (iii) the Company shall have obtained
(x) the release of all liens or encumbrances on the capital stock of
the Company and all assets securing such Indebtedness and (y) the
release of all guarantees by the Company of indebtedness of any other
person for borrowed money. At the Closing, the Company shall provide or
arrange to be provided to Merger Sub all releases and other documents
in form and substance reasonably satisfactory to Merger Sub
demonstrating the release of such liens, encumbrances and guarantees;
(m) At the Closing, (i) the Company and George P. Wilson shall
execute and deliver the form of Employment Agreement attached hereto as
EXHIBIT D (with such amendments as the Company and George P. Wilson
shall mutually agree upon, the "EMPLOYMENT AGREEMENT"), (ii) Wilson's
Previous Employment Agreement shall terminate, and all obligations and
liabilities of the Company and George P. Wilson under such agreement
shall be extinguished and (iii) the Trust Agreement shall, with respect
to George P. Wilson, be amended to eliminate the requirement that, upon
a Change of Control (as defined in the Trust Agreement), the Company
make an irrevocable contribution to the trust sufficient to pay the
retirement benefits that George P. Wilson would have been entitled
pursuant to Wilson's Previous Employment Agreement;
(n) Each of (i) Kane's Previous Employment Agreement and (ii)
the Trust Agreement, with respect to John T. Kane, shall terminate, and
all obligations and liabilities of the Company and John T.
Kane under such agreement shall be extinguished; and
(o) The Company shall have obtained all consents,
authorizations, approvals and waivers from third parties, in form
reasonably acceptable to Merger Sub, which are necessary in order to
enable (i) the consummation of the Transactions and (ii) the Surviving
Corporation to conduct their business in all material respects after
the Closing Date on the same basis as conducted prior to the date
hereof, in each case, except for those failure of which to obtain would
not have a Company Material Adverse Effect.
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SECTION 8.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS. The obligations of the Company and the Shareholders to consummate
the Merger are subject to the satisfaction or, if permitted by applicable Law,
waiver by the Company or the Shareholders, as the case may be, of the following
further conditions:
(a) Merger Sub shall have performed all of their respective
obligations hereunder required to be performed by them at or prior to
the Effective Time; (ii) each of the representations and warranties of
Merger Sub contained in this Agreement shall be true and correct, in
each case as of the Closing Date as if made at and as of such time; and
(iii) the Company and Shareholders shall have received a certificate
signed by an executive officer of Merger Sub as to compliance with the
conditions set forth in this paragraph 8.03(a):
(b) The Company shall have received an opinion, dated on or
about the Closing Date, of Kirkland & Ellis, similar in form and
substance to opinions normally given in transactions of this kind and
which is reasonably satisfactory to the Company;
(c) Investors shall have made the Equity Contribution in
exchange for the Series A Preference Stock;
(d) Investors shall have executed and delivered a Stockholders
Agreement in form and substance reasonably satisfactory to
Shareholders, containing the terms set forth in the term sheet annexed
hereto as EXHIBIT C;
(e) Surviving Corporation shall have obtained the Debt
Financing on the terms and conditions set forth in the Commitment
Letters or otherwise obtained debt financing sufficient to consummate
the Transactions and to pay all fees and expenses in connection
therewith and to provide working capital for the Surviving Corporation;
(f) The Company shall have obtained all consents,
authorizations, approvals and waivers from third parties which are
necessary in order to enable (i) the consummation of the Transactions
and (ii) the Surviving Corporation to conduct their business in all
material respects after the Closing Date on the same basis as conducted
prior to the date hereof, in each case, except for those failure of
which to obtain would not have a Company Material Adverse Effect; and
(g) With respect to the obligations of the Company, the
Shareholders shall have converted an aggregate of 273,465 shares of
Company Common Stock into that number of shares of Series B Preference
Stock such that immediately after the Preference Exchange and the
Equity Contribution, the Shareholders will own an aggregate of 18.79%
of the issued and outstanding Preference Stock of the Company, as
adjusted pursuant to Section 2.01(f).
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SECTION 8.4 CONDITIONS TO THE OBLIGATIONS OF THE INVESTORS. The
obligations of Investors to make the Equity Contribution are subject to the
satisfaction or, if permitted by applicable Law, waiver by the Investor of the
following conditions:
(a) the conditions set forth in Section 8.01 of this
Agreement; and
(b) the conditions set forth in paragraphs (a), (c), (d), (e),
(f), (g), (h), (i), (j), (l) and (o) of Section 8.02, except that the
references to Merger Sub in paragraphs (a), (c), (d), (l), and (o)
shall be replaced by a reference to the Investors.
SECTION 8.5 CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDERS. The
obligations of the Shareholders to consummate the Preference Exchange are
subject to the satisfaction, or if, permitted by applicable Law, waiver by the
Shareholders of the following conditions:
(a) the conditions set forth in Section 8.01 of this
Agreement;
(b) the conditions set forth in paragraphs (e), (h) and (o) of
Section 8.02;
(c) the conditions set forth in paragraphs (a) (other than
subparagraph (iii)) and (d) of Section 8.03; and
(d) the Company shall have executed and delivered the
Employment Agreement with George P. Wilson and shall have entered into
a consulting services agreement with John T. Kane containing the terms
set forth in the term sheet annexed hereto as EXHIBIT E.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite approval and adoption of this Agreement and the transactions
contemplated hereby by the shareholders of the Company:
(a) by written consent of the Company and Merger Sub;
(b) by Merger Sub or the Company if (i) the waiting period
applicable to the consummation of the Merger under the HSR Act shall
not have expired or been terminated prior to September 30, 1999, (ii)
any court of competent jurisdiction in the United States or other
United States Governmental Authority shall have issued an order (other
than a temporary restraining order), decree or ruling, or taken any
other action, restraining, enjoining or otherwise prohibiting the
Merger (PROVIDED, HOWEVER, that neither party may terminate this
Agreement pursuant to this Section 9.01(b)(ii) prior to September 30,
1999 if the party subject to such order, decree or ruling is using its
reasonable best efforts to have such order, decree or ruling removed,
unless such order, decree or ruling shall have become final and
non-appealable), or (iii) the Effective Time shall not have occurred on
or before September 30, 1999; PROVIDED, that the right to terminate
this Agreement under this Section 9.01(b) shall not be available to any
party
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whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Effective Time to occur
on or before such date;
(c) by Merger Sub or the Company, if the Shareholders' Meeting
shall have been held and the holders of outstanding shares of Company
Common Stock shall have failed to approve and adopt this Agreement at
such meeting (including any adjournment or postponement thereof);
PROVIDED, that the right to terminate this Agreement under this Section
9.01(c) shall not be available to the Company if its failure to fulfill
any obligation under this Agreement has been the cause of or resulted
in the failure to obtain such shareholder approval;
(d) by Merger Sub if the Board of Directors of the Company or
any committee thereof (i) shall withdraw, modify in a manner adverse to
Merger Sub, or refrain from giving its approval or recommendation of
this Agreement or any of the Transactions or (ii) recommends a
Competing Transaction with respect to the Company to the Company's
stockholders pursuant to Section 7.05;
(e) by the Company, upon a breach of any representation,
warranty, or agreement set forth in this Agreement such that the
condition set forth in Section 8.03(a) would not be satisfied;
PROVIDED, HOWEVER, that, if such breach is curable by Merger Sub
through the exercise of its best efforts and Merger Sub continues to
exercise such best efforts, the Company may not terminate this
Agreement under this Section 9.01(e) for a period of 30 days from the
date on which the Company delivers to Merger Sub written notice setting
forth in reasonable detail the circumstances giving rise to such
breach;
(f) by Merger Sub, upon a breach of any representation,
warranty, or agreement set forth in this Agreement such that the
condition set forth in Section 8.02(a) or Section 8.02(c) would not be
satisfied; PROVIDED, HOWEVER, that, if such breach is curable by the
Company or the Shareholders, as the case may be, through the exercise
of its best efforts and the Company or the Shareholders, as the case
may be, continues to exercise such best efforts, Merger Sub may not
terminate this Agreement under this Section 9.01(f) for a period of 30
days from the date on which Merger Sub delivers to the Company or the
Shareholders, as the case may be, written notice setting forth in
reasonable detail the circumstances giving rise to such breach; or
(g) by the Company in accordance with Section 7.05(b).
SECTION 9.2 METHOD OF TERMINATION; EFFECT OF TERMINATION.
(a) Any such right of termination hereunder shall be exercised
by written notice of termination given by the terminating party to the
other parties hereto in the manner hereinafter provided in Section
10.02. Any such right of termination shall not be an exclusive remedy
hereunder but shall in addition to any other legal or equitable
remedies that may be available to any non-defaulting party hereto
arising out of any default hereunder by any other party hereto.
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(b) Except as provided in Section 10.01, in the event of the
termination of this Agreement pursuant to Section 9.01, this Agreement
shall forthwith become void, there shall be no liability under this
Agreement on the part of any of the parties hereto or any of their
respective officers or directors and all rights and obligations of any
party hereto shall cease, except for (i) fraud and (ii) as set forth in
Section 9.03; PROVIDED, HOWEVER, that nothing herein shall relieve any
party from liability for, or be deemed to waive any rights of specific
performance of this Agreement available to a party by reason of, any
intentional breach by the other party or parties of this Agreement.
SECTION 9.3 FEES AND EXPENSES.
(a) In the event that it is judicially determined that
termination of this Agreement was caused by an intentional breach of
this Agreement, then, in addition to the remedies at law or equity for
breach of this Agreement, the party so found to have intentionally
breached this Agreement shall indemnify and hold harmless the other
parties for their respective costs, fees and expenses of their counsel,
accountants, financial advisors and other experts and advisors as well
as fees and expenses incident to the negotiation, preparation and
execution of this Agreement and the attempted financing and
consummation of the Transactions, the related documentation and the
shareholders' meetings and consents ("COSTS").
(b) In the event that this Agreement is terminated pursuant to
paragraphs (b), (c), (d), (f) or (g) of Section 9.01, the Company
shall, within five business days of such termination, pay Merger Sub
(or at Merger Sub's direction, to Cornerstone) by wire transfer of
immediately available funds to an account specified by Merger Sub in
reimbursement for Merger Sub's expenses an amount in cash equal to the
aggregate amount of (i) the Costs incurred in connection with pursuing
the transactions contemplated by this Agreement (including without
limitation, legal, accounting, investment banking and commitment fees)
and (ii) out-of-pocket expenses (together with such Costs, the
"REIMBURSABLE EXPENSES"), in each case, of Merger Sub and Cornerstone
(as such Reimbursable Expenses may be estimated by Merger Sub in good
faith prior to the date of such payment, subject to an adjustment
payment between the parties upon Merger Sub's definitive determination
of such Reimbursable Expenses); PROVIDED, HOWEVER, that Merger Sub
shall have no right to receive Reimbursable Expenses pursuant to this
Section 9.03(b) if Merger Sub's failure to fulfill any obligation under
this Agreement caused or resulted in the termination of this Agreement.
For purposes of this Agreement, Merger Sub's Reimbursable Expenses
shall include the Costs and out-of-pocket expenses of Cornerstone
incurred in connection with this Agreement or on behalf of Merger Sub.
(c) In the event that this Agreement is terminated by Merger
Sub or the Company pursuant to Section 9.01(d) or Section 9.01(g), the
Company shall, within five business days of such termination, pay
Merger Sub (or at Merger Sub's direction, to Cornerstone) by wire
transfer of immediately available funds to an account specified by
Merger Sub a payment in the amount equal to $2,300,000 (the
"TERMINATION FEE").
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(d) In the event that this Agreement is terminated pursuant to
paragraph (e) of Section 9.01, Merger Sub shall, within five business
days of such termination, pay the Company in reimbursement for the
Company's expenses an amount in cash equal to the aggregate amount of
the Company's Reimbursable Expenses (as such Reimbursable Expenses may
be estimated by the Company in good faith prior to the date of such
payment, subject to an adjustment payment between the parties upon the
Company's definitive determination of such Reimbursable Expenses);
PROVIDED, HOWEVER, that the Company shall have no right to receive
Reimbursable Expenses pursuant to this Section 9.03(d) if the Company's
failure to fulfill any obligation under this Agreement caused or
resulted in the termination of this Agreement.
(e) Except as provided in this Section 9.03, all expenses
incurred by the parties hereto shall be borne solely and entirely by
the party which has incurred the same; PROVIDED, HOWEVER, that (i) the
Company shall bear all expenses related to printing, filing and mailing
the Proxy Statement and all SEC and other regulatory filing fees
incurred in connection with the Proxy Statement, and (ii) Merger Sub
and the Company shall bear equally all expenses incurred by the parties
hereto and their respective affiliates, if applicable, in connection
with any filing under the HSR Act due to the transactions contemplated
herein.
SECTION 9.4 AMENDMENT. This Agreement may be amended by the parties
hereto at any time prior to the Effective Time; PROVIDED, that after the
approval and adoption of this Agreement by the stockholders of the Company, no
amendment may be made which would (a) change the amount or the type of Merger
Consideration to be received by the shareholders of the Company pursuant to the
Merger, (b) change any other term or condition of the Agreement if such change
would materially and adversely affect the Company or the holders of shares of
Company Common Stock or Preference Stock or (c) without the vote of the
stockholders entitled to vote on the matter, change any term of the Articles of
Incorporation of the Company. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 9.5 WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of the other party contained herein or in any document,
certificate or writing delivered by the other party pursuant hereto and (c)
waive compliance with any agreement or condition to its obligations (other than
the conditions set forth in paragraphs (a) and (b) of Section 8.01) contained
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement and
any certificate delivered pursuant hereto by any person shall terminate at the
Effective Time or upon the termination of
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this Agreement pursuant to Section 9.01, as the case may be, except that the
agreements set forth in Articles I and II and Sections 7.03(e), 7.06, 7.09,
7.10, 7.13 and 7.14 shall survive the Effective Time indefinitely, and those set
forth in Sections 7.08, 9.02 and 9.03 and this Article X shall survive
termination indefinitely.
SECTION 10.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested)
or by a nationally recognized overnight courier service to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.02):
if to Merger Sub:
Cornerstone Equity Investors L.L.C.
717 Fifth Avenue
New York, New York 10022
Telecopy: (212) 826-6798
Attention: Mark Rossi, Michael Najjar and Stephen Larson
with copies to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Telecopy: (212) 446-4900
Attention: Frederick Tanne
if to the Company:
Equitrac Corporation
836 Ponce de Leon Boulevard
Coral Gables, Florida 33134
Telecopy: (305) 442-0687
Attention: George P. Wilson
with copies to:
Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Telecopy: (305) 579-0717
Attention: Kenneth C. Hoffman, Esq.
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SECTION 10.3 CERTAIN DEFINITIONS.
(a) "AFFILIATE" of a specified person means a person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person;
(b) "BENEFICIAL OWNER" with respect to any shares means a
person who shall be deemed to be the beneficial owner of such shares
(i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 promulgated under the Exchange Act)
beneficially owns, directly or indirectly, (ii) which such person or
any of its affiliates or associates has, directly or indirectly, (A)
the right to acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the
right to vote pursuant to any agreement, arrangement or understanding
or (iii) which are beneficially owned, directly or indirectly, by any
other persons with whom such person or any of its affiliates or
associates or any person with whom such person or any of its affiliates
or associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any such shares;
(c) "BUSINESS DAY" means any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or,
in the case of determining a date when any payment is due, any day on
which banks are not required or authorized to close in the City of
Miami, Florida;
(d) "CODE" means the Internal Revenue Code of 1986, as
amended;
(e) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management and policies of a person, whether through the
ownership of voting securities, as trustee or executor, by contract or
credit arrangement or otherwise;
(f) "GOVERNMENTAL AUTHORITY" means any United States (federal,
state or local), foreign or supra-national Government, or governmental,
regulatory or administrative authority, agency or commission;
(g) "INTELLECTUAL PROPERTY RIGHTS" means all patents, patent
applications and patent disclosures; all inventions (whether or not
patentable and whether or not reduced to practice); all trademarks,
service marks, trade dress, trade names and corporate names and all the
goodwill associated therewith; all mask works; all registered and
unregistered statutory and common law copyrights; all registrations,
applications and renewals for any of the foregoing; and all trade
secrets, confidential information, ideas, formulae, compositions,
know-how, manufacturing and production processes and techniques,
research information, drawings, specifications, designs, plans,
improvements, proposals, technical and computer data, documentation and
software, financial business and
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marketing plans, customer and supplier lists and related information,
marketing materials and all other proprietary rights;
(h) "KNOWLEDGE" means the actual knowledge, after reasonable
investigation, of any of John T. Kane, Chairman of the Board of
Directors, George P. Wilson, President and Chief Executive Officer,
Scott J. Modist, Chief Financial Officer and, for purposes of Section
3.20 only, Lilly O'Brien, the Tax Manager;
(i) "LIEN" shall mean, with respect to any property or asset,
any mortgage, pledge, security interest, lien (statutory or other),
charge, encumbrance or other similar restrictions or limitations of any
kind or nature whatsoever on or with respect to such property or asset;
(j) "OWNED SHARES" means the aggregate shares of Company
Common Stock owned beneficially and of record by the Shareholders as of
the date hereof (as such number may be reduced as a result of the
conversion of shares into Series B Preference Stock as contemplated by
this Agreement);
(k) "PERMITS" shall mean all franchises, licenses,
authorizations, approvals, permits, consents or other rights granted by
an Governmental Authority and all certificates of convenience or
necessity, immunities, privileges, licenses, concessions, consents,
grants, ordinances and other rights, of every character whatsoever
required for the conduct of business and the use of properties by the
Company as currently conducted or used.
(l) "PERSON" means an individual, corporation, limited
liability company, partnership, limited partnership, syndicate, person
(including, without limitation, a "person" as defined in Section
13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a
government;
(m) "REAL ESTATE" means, with respect to the Company or any
Subsidiary, as applicable, all of the fee or leasehold ownership right,
title and interest of such person, in and to all real estate and
improvements owned or leased by any such person and which is used by
any such person in connection with the operation of its business;
(n) "SUBSIDIARY" or "SUBSIDIARIES" of any person means any
corporation, partnership, joint venture or other legal entity of which
such person (either above or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body
of such corporation or other legal entity;
(o) "TAX" or "TAXES" means federal, state, county, local,
foreign or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise, utility,
environmental, communications, real or personal property, capital
stock, license, payroll, wage or other withholding, employment, social
security, severance,
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stamp, occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including deficiencies, penalties,
additions to tax, and interest attributable thereto) whether disputed
or not;
(p) "TAX RETURN" means any return, information report or
filing with respect to Taxes, including any schedules attached thereto
and including any amendment thereof; and
(q) "TRANSACTIONS" means the Merger, the Preference Amendment
and the other transactions contemplated hereby this Agreement.
(r) "VOTING AGREEMENT" means that certain Voting Agreement,
dated as February 17, 1999, by and among Merger Sub and the
Shareholders, as amended.
SECTION 10.4 ACCOUNTING TERMS. All accounting terms used herein which
are not expressly defined in this Agreement shall have the respective meanings
given to them in accordance with GAAP.
SECTION 10.5 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.
SECTION 10.6 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including
the Exhibits, the Merger Sub Disclosure Schedule and the Company Disclosure
Schedule, which are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein) and the Confidentiality Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof. This Agreement amends and restates the Original Agreement in its
entirety. This Agreement shall not be assigned by operation of law or otherwise
without the prior written consent of the other parties, except that Merger Sub
may assign all or any of its rights and obligations hereunder to any affiliate
of Merger Sub, and Merger Sub and the Company may assign their respective rights
and obligations hereunder as collateral security to any person providing
financing to Merger Sub and/or the Company; PROVIDED, that no such assignment
shall change the amount or nature of the Merger Consideration or relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations.
SECTION 10.7 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature
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whatsoever under or by reason of this Agreement, other than Section 7.06 (which
is intended to be for the benefit of the persons covered thereby and may be
enforced by such persons).
SECTION 10.8 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to specific performance of the terms hereof, in addition to any other remedy
at law or in equity.
SECTION 10.9 GOVERNING LAW. The provisions of this agreement and the
documents delivered pursuant hereto shall be governed by and construed in
accordance with the laws of the State of Florida (excluding any conflict of law
rule or principle that would refer to the laws of another jurisdiction). Each
party hereto irrevocably submits to the jurisdiction of the Circuit Court of the
State of Florida, Miami-Dade County, in any action or proceeding that is
otherwise permitted under this Agreement or any other agreement executed in
connection with this Agreement, and each party hereby irrevocably agrees that
all claims in respect of any such action or proceeding must be brought and/or
defended in such court; PROVIDED, HOWEVER, that matters which are under the
exclusive jurisdiction of the Federal courts shall be brought in the Federal
District Court for the Southern District of Florida. Each party hereto consents
to service of process by any means authorized by the applicable law of the forum
in any action brought under or arising out of this Agreement, and each party
irrevocably waives, to the fullest extent each may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY
JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
SECTION 10.10 HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.11 COUNTERPARTS. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 10.12 CONSTRUCTION. This Agreement and any documents or
instruments delivered pursuant hereto or in connection herewith shall be
construed without regard to the identity of the person who drafted the various
provisions of the same. Each and every provision of this Agreement and such
other documents and instruments shall be construed as though all of the parties
participated equally in the drafting of the same. Consequently, the parties
acknowledge and agree that any rule of construction that a document is to be
construed against the drafting party shall not be applicable either to this
Agreement or such other documents and instruments.
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SECTION 10.13 OBLIGATIONS OF THE SHAREHOLDERS. Notwithstanding anything
to the contrary set forth herein, the representations and warranties of each
Shareholder shall be limited to those set forth in Article V hereof. The
obligations of the Shareholders under this Agreement shall be limited to those
set forth in Sections 1.01(b), 7.03(b), 7.03(e), 7.05(a), 7.09(c), 7.09(d), 7.13
and 7.15 hereof. The conditions governing the obligations of the Shareholder
shall be governed by Sections 8.01, 8.03 and 8.05 hereof. Notwithstanding
anything to the contrary set forth herein, the Shareholders shall have no other
obligations under this Agreement. Notwithstanding anything to the contrary set
forth herein, it is understood that the obligations of the Shareholders under
this Agreement are limited to acts or omissions by such Shareholder in its
capacity as a stockholder of the Company and not in its capacity as an officer
or director of the Company.
SECTION 10.14 INTERPRETATION; SCHEDULES AND EXHIBITS. For purposes of
this Agreement, all representations and warranties contained herein shall be
deemed to have been made as of the date hereof, except for representations and
warranties contained herein that speak as of a specific date (which
representation and warranty shall speak as of such specific date). The schedules
and exhibits attached to the Original Agreement shall be deemed to be the
schedules and exhibits to this Agreement except that (a) Sections 3.06 and
8.02(f) of the Company Disclosure Schedule attached hereto shall be added to the
Company Disclosure Schedule attached to the Original Agreement and (b) Sections
3.03, 3.07, 3.08, 3.17, 3.17(viii), 3.21 and 3.25 of the Company Disclosure
Schedule attached hereto replaces Sections 3.03, 3.07, 3.08, 3.17, 3.17(viii),
3.21 and 3.25 of the Company Disclosure Schedule, respectively, attached to the
Original Agreement.
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IN WITNESS WHEREOF, Merger Sub, Shareholders and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
CHARGEBACK ACQUISITION CORP.
By: /s/ Stephen L. Larson
------------------------------------
Name: Stephen L. Larson
Title: Secretary
EQUITRAC CORPORATION
By: /s/ George P. Wilson
------------------------------------
Name: George P. Wilson
Title: President and Chief Executive
Officer
FOR PURPOSES OF ARTICLES I, V, VII AND VIII
ONLY SHAREHOLDERS
By: /s/ John T. Kane
------------------------------------
Name: John T. Kane
Title:
By: /s/ George P. Wilson
------------------------------------
Name: George P. Wilson
Title:
CORNERSTONE EQUITY INVESTORS IV, L.P.
HEREBY JOINS THIS AGREEMENT FOR THE EXPRESS
AND LIMITED PURPOSE SET FORTH IN SECTION 1.01(c)
AND SECTION 7.16 HEREOF.
CORNERSTONE EQUITY INVESTORS IV, L.P.
By: Cornerstone IV, L.L.C.
Its: General Partner
By: /s/ Stephen L. Larson
--------------------------------
Name: Stephen L. Larson
Title: Managing Director
56
<PAGE> 1
EXHIBIT 2.3
AMENDMENT NO. 1 TO THE
VOTING AGREEMENT
THIS AMENDMENT NO. 1 TO THE VOTING AGREEMENT (this "AMENDMENT
NO. 1") is dated as of June 4, 1999, and is entered into by and among Chargeback
Acquisition Corp., a Florida corporation ("MERGER SUB"), and John T. Kane and
George P. Wilson (collectively, the STOCKHOLDERS").
WHEREAS, the parties hereto have entered into that certain
Voting Agreement, dated as of February 17, 1999 (the "ORIGINAL AGREEMENT") (it
being understood that capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Original Agreement);
WHEREAS, the parties hereto desire to amend certain provisions
of the Original Agreement;
NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
1. The first recital of the Original Agreement is hereby
amended and restated to read in its entirety as follows:
"Merger Sub and Equitrac Corporation, a Florida corporation
(the "COMPANY"), propose to enter into an Amended and Restated
Recapitalization Agreement and Plan of Merger dated as of the date
hereof (as the same may be amended or supplemented, the "MERGER
AGREEMENT") providing for the merger of Merger Sub with and into the
Company, in which the Company is the surviving entity, upon the terms
and subject to the conditions set forth in the Merger Agreement.
Capitalized terms used but not defined herein shall have the meanings
set forth in the Merger Agreement as entered into on the date hereof."
2. The first paragraph of Section 1(a) of the Original
Agreement is hereby amended and restated to read in its entirety as follows:
"(a) AGREEMENT TO VOTE. At any meeting of stockholders of the
Company called for purposes that include approval of the Merger
Agreement and the Transactions, however called, or at any adjournment
thereof, or in connection with any written consent of the holders of
shares of Company Common Stock or Preference Stock, or in any other
circumstances in which the Stockholders are entitled to vote, consent
or give any other approval with respect to the Merger Agreement
(including any amendments thereof pursuant to Section 2.01(f) of the
Merger Agreement) and the Transactions, the Stockholders shall vote (or
cause to be voted) the Subject Shares in favor of adoption and approval
of the Merger Agreement (including any amendments thereof pursuant to
Section 2.01(f) of the
<PAGE> 2
Merger Agreement) and the Transactions and the approval of the terms
thereof and each of the other actions contemplated by this Agreement
and the Merger Agreement and any amendments hereto or, with each
Stockholder's written consent, thereto."
3. Except as expressly set forth herein, the terms of the
Original Agreement shall remain in full force and effect.
4. This Amendment No. 1 may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of this Amendment No.
1, provided receipt of copies of such counterparts is confirmed.
IN WITNESS WHEREOF, this Amendment No. 1 to the Voting
Agreement has been signed by or on behalf of each of the parties as of the day
first above written.
CHARGEBACK ACQUISITION CORP.
By: /s/ Stephen L. Larson
------------------------------
Name: Stephen L. Larson
Title: Secretary
STOCKHOLDERS
/s/ John T. Kane
---------------------------------
John T. Kane
/s/ George P. Wilson
---------------------------------
George P. Wilson
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
- ---------------------
EQUITRAC CORPORATION ANNOUNCES MANAGEMENT BUY-OUT
Coral Gables, Florida, June 4, 1999 -- Equitrac Corporation (Nasdaq/NM:
ETRC) and Cornerstone Equity Investors, LLC today announced that they have
entered into an amended and restated recapitalization agreement and plan of
merger. Pursuant to the agreement, Cornerstone will acquire all of the
outstanding shares of common stock of Equitrac, other than certain shares held
by John Kane, George Wilson and certain other members of senior management, for
$21.00 per share in cash. The agreement is on substantially the same terms as
the February 17, 1999 recapitalization agreement and plan of merger, with the
exception of the reduction of the merger consideration to $21.00 per share from
$25.25 per share.
The Board of Directors of Equitrac and a special independent committee
of the Board have unanimously approved the amended and restated recapitalization
agreement and plan of merger. Prudential Securities Incorporated has rendered a
fairness opinion to the special independent committee in connection with the
transaction. The transaction is subject to the approval of Equitrac's
shareholders and other customary conditions. It is expected that the transaction
will be consummated by mid-August.
Equitrac is a leading provider of computer system solutions to manage
office equipment resources. The Company's products are designed to allow users
to automatically track, record and report usage of office equipment. Equitrac's
wireless meter-reading products provide an automated system for copier dealers
and manufacturers to collect meter readings for photocopier lease and
maintenance programs based on cost per copy contracts.
Cornerstone Equity Investors, LLC, the general partner of Cornerstone
Equity Investors IV, LP, based in New York, is one of the largest private equity
groups in the United States with more than $1.2 billion in aggregate committed
capital. The firm specializes in sponsoring management buyouts of growth
companies in the business services, technology, healthcare and consumer products
industries. Cornerstone information is available via its homepage at
www.cornerstone-equity.com.
This press release does not constitute "proxy solicitation material"
within the meaning of Regulation 14A and Schedule 14A of the Securities Exchange
Act of 1934, as amended.
CONTACT:
Equitrac Corporation
George Wilson, President and CEO
(305) 442-2060
