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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 EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): July 15, 1996
MCLEOD, INC.
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(Exact name of registrant as specified in its charter)
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Delaware 0-20763 58-421407240
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification
Number)
221 Third Avenue SE, Suite 500, Cedar Rapids, IA 52401
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: (319) 364-0000
Exhibit Index on Page: .
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Total Number of Pages: .
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 15, 1996, McLeod, Inc. (the "Company") consummated the
acquisition (the "Acquisition") of Ruffalo, Cody & Associates, Inc., an Iowa
corporation ("Ruffalo, Cody"), from the shareholders of Ruffalo, Cody by means
of a forward triangular merger pursuant to an Agreement and Plan of
Reorganization, dated as of July 12, 1996 (the "Agreement"), by and among the
Company, Ruffalo, Cody and certain shareholders of Ruffalo, Cody. Pursuant to
the Agreement, (i) McLeod Merging Co., a newly incorporated Iowa corporation
and a wholly owned subsidiary of the Company, was merged with and into Ruffalo,
Cody, with McLeod Merging Co. (which has been renamed "Ruffalo, Cody &
Associates, Inc.") being the surviving corporation, (ii) the outstanding shares
of Ruffalo, Cody common stock were converted into the right to receive cash
and/or shares of the Company's Class A Common Stock (the "Class A Common
Stock"), and (iii) the outstanding options to purchase shares of Ruffalo, Cody
common stock were converted into options to purchase shares of Class A Common
Stock (the "Substitute Options"). Under the Agreement, each issued and
outstanding share of Ruffalo, Cody common stock was converted into the right to
receive a maximum of approximately 0.7 of a share of Class A Common Stock.
As a result of arms'-length negotiations between the Company and
Ruffalo, Cody, and after considering, among other things, the current stage of
development of the Company's business and operations, and the market for the
Company's services, the Company agreed to purchase Ruffalo, Cody for a maximum
aggregate purchase price of approximately $20 million (based on the agreed
value of the Class A Common Stock used in determining the exchange ratio, based
upon the price range of the Class A Common Stock reported by the Nasdaq Stock
Market prior to execution of the Agreement). The maximum consideration to be
paid by the Company consists of approximately $4.9 million in cash, 474,807
shares of Class A Common Stock issuable in exchange for Ruffalo, Cody common
stock, and 158,009 shares of Class A Common Stock issuable upon the exercise
of the Substitute Options. On July 15, 1996, the Company paid an aggregate of
approximately $4.8 million in cash and issued 361,420 shares of Class A Common
Stock to the shareholders of Ruffalo, Cody, and granted to the Ruffalo, Cody
option holders Substitute Options to purchase 158,009 shares of Class A Common
Stock. An additional $50,782 in cash and 113,387 shares of Class A Common
Stock were placed into escrow and will be delivered to the shareholders of
Ruffalo, Cody over a period of 18 months, contingent upon certain conditions
relating to Ruffalo, Cody's ongoing revenues. The Company will record the
Acquisition as a purchase for accounting purposes.
Clark E. McLeod, Chairman, Chief Executive Officer, Director
and stockholder of the Company, is a shareholder of Ruffalo, Cody. Paul D.
Rhines, a Director of the Company, is a Director of Ruffalo, Cody and is a
general partner of
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Allsop Venture Partners III, L.P., a stockholder of the Company and a
shareholder of Ruffalo, Cody. The Company established a Special Committee of
its Board of Directors, consisting of disinterested directors, which was
authorized to, and did, evaluate the terms of the Acquisition as negotiated by
the officers of the Company, including, but not limited to, the fairness of the
Acquisition to, and in the best interests of, the stockholders of the Company.
Other than with respect to Messrs. McLeod and Rhines and arrangements in
connection with the Acquisition, there is no material relationship between
Ruffalo, Cody and the Company or any affiliates, directors or officers of the
Company or any of their associates.
As a result of the Acquisition, Ruffalo, Cody shareholders and
option holders could own a maximum (based on the maximum number of shares of
Class A Common Stock that may be issued to the shareholders of Ruffalo, Cody
pursuant to the Agreement and to the option holders of Ruffalo, Cody upon
exercise of the Substitute Options) of approximately 1.2 percent, in the
aggregate, of the outstanding voting stock of the Company (consisting of the
Class A Common Stock and the Class B Common Stock of the Company). Ruffalo,
Cody is a corporation specialized in a number of direct marketing and
telemarketing services. The Company intends to continue to operate Ruffalo,
Cody in a manner similar to which it was operated prior to the Acquisition.
The source of funds used for the cash portion of the
Acquisition was a portion of the proceeds from the Company's initial public
offering of Class A Common Stock in June 1996.
The foregoing description of the Agreement does not purport to
be complete and is qualified in its entirety by the terms and conditions of the
Agreement, which is filed as Exhibit 2 to this Current Report on Form 8-K and
is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Company Acquired
It is not practicable to provide the required financial
statements for Ruffalo, Cody at this time. The statements will be filed as
soon as they are prepared and not later than 60 days after the date this
Current Report on Form 8-K is required to be filed with the Securities and
Exchange Commission.
(b) Pro Forma Financial Information
It is not practicable to provide the required pro forma
financial statements for the Company at this time. The statements will be
filed as soon as they are prepared and not later than 60 days after the date
this Current Report on Form 8-K is required to be filed with the Securities and
Exchange Commission.
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(c) Exhibits.
2. Agreement and Plan of Reorganization, dated as of July 12,
1996, by and among McLeod, Inc., Ruffalo, Cody & Associates,
Inc., and certain shareholders of Ruffalo, Cody & Associates,
Inc.
99. Press Release, dated July 15, 1996, regarding the agreement to
acquire Ruffalo, Cody & Associates, Inc.
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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.
Date: July 29, 1996 McLEOD, INC.
By: /s/ BLAKE O. FISHER, JR.
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Blake O. Fisher, Jr.
Chief Financial Officer and
Treasurer
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EXHIBIT INDEX
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PAGE NUMBER IN
EXHIBIT NUMBER EXHIBIT SEQUENTIAL NUMBERING SYSTEM
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2. Agreement and Plan of Reorganization, dated
as of July 12, 1996, by and among McLeod,
Inc., Ruffalo, Cody & Associates, Inc., and
certain shareholders of Ruffalo, Cody &
Associates, Inc.
99. Press Release, dated July 15, 1996, regarding
the agreement to acquire Ruffalo, Cody &
Associates, Inc.
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EXHIBIT 2
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made
effective as of July 12, 1996, (the "Agreement Date"), by and among Ruffalo,
Cody & Associates, Inc., an Iowa corporation with offices in Cedar Rapids, Iowa
("COLA"), the shareholders of COLA listed in Exhibit A (the "COLA
Shareholders"), and McLeod, Inc. ("MIDWEST") a Delaware corporation with offices
in Cedar Rapids, Iowa.
A. Subject to the terms of this Agreement, COLA will be merged with and
into a new Iowa corporation, McLeod Merging Co., that was organized as a
wholly-owned subsidiary of MIDWEST ("MERGECO") in a forward triangular merger
(the "Merger") with MERGECO to be the surviving corporation of the Merger, all
pursuant to the terms and conditions of this Agreement and a Plan of Merger in
substantially the form of Exhibit B (the "Plan of Merger") and applicable law.
B. Upon the effectiveness of the Merger, all the outstanding shares of COLA
Common Stock (as defined below) will be converted into shares of the Midwest
Common Stock (as defined below) and cash, all as provided in this Agreement and
the Plan of Merger.
The parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms will
have the meanings set forth below:
1.1. "MIDWEST Common Stock" means the Class A Common Stock, $0.01 par
value, of MIDWEST.
1.2. "COLA Common Stock" means the Class A Common Stock, no par value, of
COLA.
1.3. The "Effective Time" means the time and date on which the Articles of
Merger reflecting the Merger substantially in the form of Exhibit C (the
"Articles of Merger") are filed with the office of the Iowa Secretary of
State and the Merger becomes effective under Iowa law.
2. PLAN OF REORGANIZATION.
2.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time, COLA will be merged with and into MERGECO pursuant to
this Agreement and the Plan of Merger and in accordance with applicable
provisions of the laws of the State of Iowa as follows:
2.1.1. Conversion of COLA Shares. Each share of COLA Common Stock
issued and outstanding, immediately prior to the Effective Time will
by virtue of the Merger and at the Effective Time, and without the
need for any
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further action on the part of any holder thereof, be converted into the
right to receive cash and/or shares of MIDWEST Common Stock as set forth
on Exhibit 2.1.1 attached, subject to Section 2.1.4.
2.1.2. Conversion of Options. All options to purchase COLA Common
Stock outstanding immediately prior to the Effective Time will by virtue
of the Merger and at the Effective Time, and without the need for any
further action on the part of any holder thereof, be converted into
options to purchase shares of MIDWEST Common Stock under the 1996
Midwest Employee Stock Option Plan and cash as set forth on Exhibit
2.1.2 attached. It is the intention of the parties that such options
(except for options to Stan Campbell) to purchase shares of MIDWEST
Common Stock would qualify immediately after the Effective Time as
incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") to the extent the
corresponding options to purchase shares of COLA Common Stock qualified
as incentive stock options immediately before the Effective Time.
2.1.3. Termination of Option Plan. Effective at the Effective Time, all
options outstanding under the COLA Incentive Stock Option Plan shall
immediately terminate and be null and void.
2.1.4 Contingent Payments in Escrow. At the Closing, out of the cash
and shares of Midwest Common Stock to be delivered to COLA Shareholders
and option holders pursuant to Section 2.1.1 and options to be granted
pursuant to 2.1.2, $50,782, 113,387 shares to MIDWEST Common Stock will
be placed in escrow with Norwest Bank pursuant to the terms of the
Escrow Agreement attached as Exhibit D with the cash and shares to be
distributed subject to achievement by COLA of the conditions set forth
in the Escrow Agreement.
2.2 Effects of the Merger. In addition to the foregoing effects of the
Merger, at and upon the Effective Time, each of the following will occur: (a)
the separate existence of COLA will cease and COLA will be merged with and into
MERGECO, and MERGECO will be the surviving corporation of the Merger (the
"Surviving Corporation") pursuant to the terms of the Plan of Merger; (b) the
Articles of Incorporation and Bylaw of MERGECO, as in effect immediately prior
to the Effective Time, will continue unchanged and will be the Articles of
Incorporation and Bylaws of the Surviving Corporation until thereafter duly
amended, except that Article I of MERGECO's Articles of Incorporation will be
amended as of the Effective Time to change MERGECO's name to "Ruffalo, Cody &
Associates, Inc."; (c) each share of MERGECO Common Stock outstanding
immediately prior to the Effective Time will continue to be an identical
outstanding share of the common stock of the Surviving Corporation and will be
owned by MIDWEST; (d) the Board of Directors of MERGECO will initially consist
of Clark E. McLeod, Stephen C.
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Gay, Blake O. Fisher, Jr. and Albert P. Ruffalo and the officers of
MERGECO will initially be Albert P. Ruffalo - President, Stephen C. Gray
- CEO, Blake O. Fisher, Jr. - Chief Financial Officer, and Casey D.
Mahon - Secretary; (e) the Merger will have all of the effects provided
by applicable law, from and after the Effective Time.
2.3. Further Assurances. COLA and each of the COLA Shareholders
agrees that if, at any time after the Effective Time, MIDWEST considers
or is advised that any further acts, deeds, assignments or assurances
are reasonably necessary or desirable to vest the Surviving Corporation
with full right, title and possession to any property or rights of COLA,
then MIDWEST and its proper officers and directors may execute and
deliver all such proper deeds, assignments and assurances and do all
other things necessary or desirable to vest the Surviving Corporation
with full right, title and possession to such property or rights and
otherwise to carry out the purpose of this Agreement, in the name of
COLA or otherwise.
2.4. Tax Free Exchange. The parties intend to adopt this Agreement
as a tax-free plan or reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code by
virtue of the provisions of Section 368(a)(2)(D) of the Code. The
parties believe that the value of the cash and MIDWEST Common Stock to
be issued to the Cola Shareholders in the Merger is equal, in each
instance, to the value of the COLA Common Stock to be surrendered in
exchange therefor. Except for cash to be paid as provided in Section
2.1, no consideration that could constitute "other property" within the
meaning of Section 356 of the Code is being paid by MIDWEST for the COLA
Common Stock in the Merger. The parties agree not to take a position on
any tax returns, before any taxing authority or otherwise, inconsistent
with this Section. In addition, MIDWEST represents as of the Agreement
Date, and as of the Closing Date (as that term is defined in Section
7.1), that it presently intends to continue COLA's historic business or
use a significant portion of COLA's business assets in a business. At
the Closing (as that term is defined in Section 7.1), officers of each
of MIDWEST and COLA shall execute and deliver officers' certificates in
the forms of Exhibits 2.4A and 2.4B, respectively. The provisions and
representations contained or referred to in this Section 2.4 shall
survive until the expiration of the applicable statute of limitations.
2.5. Purchase Accounting. The parties acknowledge that the Merger
will be treated as a purchase for accounting purposes.
3. REPRESENTATIONS AND WARRANTIES OF COLA AND THE COLA SHAREHOLDERS. COLA
and the COLA Shareholders, jointly and severally, represent and warrant to
MIDWEST that, except as set forth in a letter addressed to MIDWEST dated the
Agreement Date and delivered by COLA and the COLA Shareholders to MIDWEST
concurrent herewith (the "COLA Disclosure Letter") (the contents of which
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COLA Disclosure Letter shall be deemed to be representations and warranties
made jointly and severally to MIDWEST by COLA and the COLA Shareholders under
this Section 3, and which may be updated up to the Closing to reflect changes
that are not material, consistent with the conditions to closing set forth in
Section 9) each of the representations and statements in this Section are true
and correct as of the Agreement Date and as of the Closing Date.
3.1. Organization and Good Standing. Each of COLA and its sole
subsidiary (i) is a corporation duly organized, validly existing, and in
good standing under the laws of Iowa, (ii) has the corporate power and
authority to own, operate and lease its properties and to carry on its
business as now conducted and as proposed to be conducted, and (iii) is
qualified or has applied to qualify to transact business as a foreign
corporation in each jurisdiction in which the nature of its business or
the ownership or leasing or its properties makes such qualification
necessary, other than where a failure to be so qualified would not
reasonably be expected to have a material adverse effect on its present
or expected operations or financial condition.
3.2. Power. COLA and the COLA Shareholders, as applicable, have the
right, power, legal capacity and authority to enter into, execute and
deliver this Agreement and all agreements to which COLA is or will be a
party or to which any COLA Shareholder is or will be a party that are to
be executed pursuant to this Agreement (collectively, the "COLA
Ancillary Agreements") and subject to the approval of the Merger by the
COLA Shareholders, for the consummation of the transactions contemplated
by such Agreements. The execution and delivery of this Agreement and
each of the COLA Ancillary Agreements and the consummation of the
transactions contemplated by such Agreements have been duly and validly
approved and authorized by all necessary corporate action on the part of
COLA's Board of Directors.
3.3. Authorization. No filing, authorization, consent, approval or
order, governmental or otherwise, is necessary or required for the
execution and delivery of this Agreement and the COLA Ancillary
Agreements by COLA and the COLA Shareholders or the consummation of the
transactions contemplated by such Agreements, except for (a) the filing
of the Articles of Merger with the office of the Iowa Secretary of
State, and the filing of appropriate Merger documents with the relevant
authorities of other states in which COLA is qualified to do business,
if any, (b) such filings as may be required to comply with federal and
state securities laws, and (c) the approval of the Merger by the COLA
Shareholders.
3.4. Validity. This Agreement and the COLA Ancillary Agreements are,
or when executed by COLA and/or the COLA Shareholders, as applicable,
will be, valid and binding obligations of COLA and/or the COLA
Shareholders, as applicable, and enforceable in accordance with their
respective terms, except as to the effect, if any, of (i) applicable
bankruptcy and other similar laws affecting the
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rights of creditors generally, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies; provided, however,
that the Merger will not become effective until the Articles of Merger
reflecting the Merger are filed with the office of the Iowa Secretary of State.
3.5. Capitalization of COLA. COLA is capitalized as follows.
3.5.1. Outstanding Stock. The authorized capital stock of COLA
consists of 5,000,000 shares of COLA Common Stock, of which a total of
934,268 shares are issued and outstanding, all of which are now owned
and held, and all of which at the Effective Time will be owned and held,
only by the shareholders of COLA Common Stock as set forth on Exhibit
3.5 ("All COLA Shareholders"), and no other shares of the capital stock
of COLA are authorized, issued or outstanding. All issued and
outstanding shares of COLA Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, are not subject to any
claim, lien, preemptive right, or right of rescission, and have been
offered, issued, sold and delivered by COLA, in compliance with all
registration or qualification requirements (or applicable exemptions) of
all applicable federal and state securities laws. A list of all holders
of COLA Common Stock, and the number of shares held by each has been
delivered by COLA to MIDWEST and is reflected on Exhibit 3.5.
3.5.2. No Options, Warrants or Rights. Except for options to purchase
an aggregate of 257,750 shares of COLA Common Stock ("COLA Options")
under COLA's (1) Nonqualified Stock Option Plan of Ruffalo, Cody &
Associates, Inc.; (2) Ruffalo, Cody & Associates, Inc. Incentive Stock
Option Plan; and (3) Outside Director Nonqualified Stock Option Plan of
Ruffalo, Cody & Associates, Inc. (the "Option Plans") granted to
employees, independent contractors, and directors of COLA, as disclosed
on Exhibit 2.1.2, there are no options, warrants, exchangeable or
convertible securities, puts, calls, commitments, conversion privileges
or preemptive or other rights or agreements of any character to which
COLA is a party or by which COLA is bound outstanding to issue,
transfer, deliver, sell, redeem, purchase or otherwise acquire (whether
directly or indirectly) or cause to be issued, transferred, delivered,
sold, redeemed, purchased or otherwise acquired, (i) any shares of
COLA's capital stock, or (ii) any securities convertible into or
exchangeable for any shares of COLA's capital stock, and COLA has no
obligation to grant, issue, extend, or enter into any such option,
warrant, exchangeable or convertible security, put, call, commitment,
conversion privilege or preemptive or other rights or agreements. The
terms of the Option Plans permit the assumption or substitution of
options to purchase MIDWEST Common Stock as contemplated under Section
2.1.2 hereof, without the consent or approval of
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the COLA optionees or shareholders under the Option Plans or otherwise. The
COLA Options are qualified as incentive stock options under Section 422 of
the Code, other than the options granted to independent contractors, and
directors which are nonqualified. The COLA Disclosure Letter sets forth (i)
the name of each COLA Option holder of record, (ii) the number of shares of
COLA Common Stock issuable upon exercise of each such COLA Option, (iii)
the expiration date of each such COLA Option and (iv) the exercise price of
each such COLA Option. True and complete copies of all agreements and
instruments relating to the COLA Options have been made available to
MIDWEST and such agreements and instruments have not been amended, modified
or supplemented and there are no agreements or commitments to amend, modify
or supplement such agreements and instruments in each case from the form
made available to MIDWEST. COLA has no liability for dividends accrued but
unpaid. No person or entity holds or has any option, warrant or other right
to acquire any issued and outstanding shares of the capital stock of COLA
from any holder of shares of the capital stock of COLA.
3.5.3. No Voting Arrangements or Registration Rights. There are no voting
agreements, voting trusts, or other agreements or arrangements with respect
to the voting of COLA's outstanding securities and there are no rights of
first refusal or other restrictions (other than normal restrictions on
transfer under applicable federal and state securities laws) applicable to
any of COLA's outstanding securities or the conversion of any COLA
securities in the Merger. COLA is not under any obligation to register any
of its outstanding securities, or any securities that may be subsequently
issued, under the Securities Act of 1933.
3.6. Subsidiaries. Except for the subsidiary of COLA listed on Exhibit 3.6
("Subsidiary"), which is wholly-owned by COLA, COLA does not have any
subsidiaries or any interest, direct or indirect, in any corporation,
partnership, joint venture or other business entity. All issued and outstanding
shares of the capital stock of Subsidiary are validly issued, fully paid and
nonassessable and are owned and held solely by COLA free and clear of any
option, liens, security interests, claims, charges or encumbrances. There are
no outstanding options, warrants, exchangeable or convertible securities, puts,
calls, commitments, conversion privileges or preemptive or other rights or
agreements or any character to which Subsidiary is a party or by which
Subsidiary is bound to issue, transfer, deliver, sell, redeem, purchase or
otherwise acquire (whether directly or indirectly) or cause to be issued,
transferred, delivered, sold, redeemed, purchased or otherwise acquired, (i) any
shares of capital stock of Subsidiary, or (ii) any securities convertible into
or exchangeable for any shares of capital stock of Subsidiary, and Subsidiary
has no obligation to grant, issue, extend, or enter into any such option,
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warrant, exchangeable or convertible security, put, call, commitment,
conversion privilege or preemptive or other rights or agreements.
3.7. No Violation of Existing Agreements. Neither the execution and delivery of
this Agreement nor any COLA Ancillary Agreement, nor the consummation of the
transactions contemplated by such agreements, will conflict with, or (with or
without notice or lapse of time, or both) result in:
3.7.1. a termination, breach, impairment or violation of (i) any
provision of the Articles of Incorporation or Bylaws of COLA or
Subsidiary, as currently in effect or (ii) any federal, state, local
or foreign judgment, writ, decree, order, statute, rule or regulation
applicable to COLA or its Subsidiary or their respective assets or
properties; or
3.7.2. a termination, or a material breach, impairment or violation of,
any material instrument, agreement, contract or commitment to which
COLA or its Subsidiary is a party or by which COLA or its Subsidiary or
their respective assets or properties are bound. The consummation of the
Merger and the transfer to MERGECO of all material rights, licenses,
franchises, leases, and agreement of COLA and Subsidiary under this
Agreement will not require the consent of any third party.
3.8. Litigation. To the best of their knowledge, there is no action, suit,
arbitration, proceeding, claim, or investigation pending or threatened against
COLA, any COLA Shareholder, or Subsidiary before any court, administrative
agency or arbitrator (each a "Claim") that may reasonably be expected to have a
material adverse effect on the present or future operations or financial
condition of COLA or Subsidiary, if such Claim is decided adversely to COLA or
Subsidiary.
3.8.1. To the best of their knowledge, there is no basis for any person or
entity to assert a Claim against COLA or Subsidiary based upon (i)
ownership, rights to ownership, or options, warrants or other rights to
acquire ownership, of any shares of the capital stock of COLA or
Subsidiary, or (ii) any rights as a COLA Shareholder, including any
option, warrant or preemptive rights or rights to notice or to vote.
3.8.2. To the best of their knowledge, there is no basis for any party to
successfully assert a Claim for any material damages against COLA or
Subsidiary based on a claim that any product or service developed,
owned, marketed, or distributed by COLA or Subsidiary (i) was or is
defective in any material respect, or did not or will not perform in
accordance with any warranty, (ii) was not or is not suitable for a
use for which it was intended, (iii) omitted or omits necessary
information, or (iv) included or includes forms of documents, advice or
information that was negligently prepared
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and/or marketed, inaccurate or incomplete in any respect, or did not
conform to or comply with applicable law.
3.8.3. There is no judgment, decree, injunction, rule or order of any
governmental entity or agency, court or arbitrator outstanding against
COLA or its Subsidiary.
3.9. Taxes. COLA and its Subsidiary have (i) timely filed all federal,
state, local and foreign tax returns required to be filed and such returns are
true and correct in all material respects, (ii) timely paid all taxes required
to be paid in respect of all periods for which returns have been filed, (iii)
established an adequate accrual or reserve for the payment of all taxes payable
in respect of the periods subsequent to the periods covered by the most recent
applicable tax returns, (iv) made all necessary estimated tax payments, and (v)
no material liability for taxes in excess of the amount so paid or accruals or
reserves so established. Neither COLA nor its Subsidiary is delinquent in the
payment of any tax or is delinquent in the filing of any tax returns and no
deficiencies for any tax have been threatened, claimed, proposed or assessed.
Neither COLA nor its Subsidiary has received any notification that any material
issues have been raised (and are currently pending) by the Internal Revenue
Service or any other taxing authority (including but not limited to any sales
tax authority). No tax return of COLA or its Subsidiary has ever been audited
by the Internal Revenue Service or any state taxing agency or authority. No tax
liens have been filed against any assets of COLA or its Subsidiary. COLA is not
a "personal holding company" within the meaning of Section 542 of the Internal
Revenue Code. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any tax return of COLA or
Subsidiary for any period. For the purposes of this section, the terms "tax"
and "taxes" include all federal, state, local and foreign income, alternative
or add-on minimum income, gains, franchise, excise, property, sales, use,
employment, license, payroll, ad valorem, payroll, stamp, occupation,
recording, value added or transfer taxes, governmental charges, fees, customs
duties, levies or assessments (whether payable directly or by withholding),
and, with respect to such taxes, any estimated tax, interest and penalties or
additions to tax and interest on such penalties and additions to tax.
3.10. COLA Financial Statements. COLA has delivered to MIDWEST copies of each
of the following:
3.10.1. COLA's audited consolidated balance sheet as of December 31,
1995 (the "COLA Balance Sheet") and audited consolidated income
statement and consolidated statement of cash flows for the year then
ended (collectively with the COLA Balance Sheet, the "1995 COLA
Financial Statements"); and
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3.10.2. COLA's audited consolidated balance sheets as of, and COLA's
audited consolidated income statements and consolidated statement of
cash flows for each of the years in the two-year period ended December
31, 1995 (collectively the "COLA Financial Statements").
The COLA Financial Statements (a) accurately reflect the books and records
of COLA and Subsidiary, (b) fairly present the consolidated financial condition
of COLA and Subsidiary as of the respective dates indicated and the
consolidated results of operations and changes in financial position for the
respective periods specified, and (c) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis. Neither
COLA nor Subsidiary has any material debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is not reflected or reserved against in the COLA Balance
Sheet, except for those that may have been incurred after the date of the COLA
Balance Sheet in the ordinary course of COLA's business consistent with past
practice, and that are not material in amount either individually or
collectively. All reserves established by COLA and set forth in the COLA
Balance Sheet were reasonably adequate. At December 31, 1995, there were no
material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board
in March 1975) which are not adequately provided for in the COLA Balance Sheet
as required by such accounting statement.
3.11. Title to Properties. COLA and its Subsidiaries have good and
marketable title to all of their respective assets and properties reflected
on the COLA Balance Sheet, free and clear of all liens, mortgages, security
interests, claims, charges, restrictions or encumbrances. All machinery,
vehicles, equipment and other tangible personal property included in such
assets and properties are in good condition and repair, normal wear and
tear excepted. The COLA Disclosure Letter sets forth a list and brief
description of each real property or equipment lease which involves
payments by COLA or Subsidiary in excess of $100,000 annually. A true and
correct copy of each such lease of COLA and Subsidiary has been delivered
by COLA to MIDWEST prior to the date hereof. All leases of real or personal
property to which COLA or its Subsidiary is a party are fully effective and
afford COLA or the Subsidiary peaceful and undisturbed possession of the
subject matter of such leases. Any property (real or personal) covered by
the terms of such leases is presently occupied or used by COLA or
Subsidiary as lessee under the terms of such leases for its business and in
particular, in the case of any leases for real property, COLA or Subsidiary
is entitled, by the terms of such leases and under applicable laws, rules
and regulations, to use any leased premises for the purposes for which and
in the manner in which they are currently being used by COLA and
Subsidiary. All rentals due under such leases have been paid and there
exists no default under any such leases, and no event has occurred which,
upon the passage of time or giving of notice, or both, would result in any
default or prevent COLA or Subsidiary, currently or after consummation of
the transaction
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contemplated by this Agreement and the COLA Ancillary Agreement, from
exercising or obtaining the benefits thereunder or the benefits of any options
contained therein. Neither COLA nor its Subsidiary is in violation of any
zoning, building, safety or environmental ordinance, regulation or requirement
or other law or regulation applicable to the operation of owned or leased
properties (the violation of which would have a material adverse effect on its
business), or has received any notice of violation with which it has not
complied. Neither COLA nor its Subsidiary owns any real property.
3.12. Absence of Certain Changes. Since the date of the COLA Balance Sheet,
COLA and Subsidiary have conducted their business only in the ordinary course
in a manner consistent with past practice and, since such date, there has not
been with respect to COLA or its Subsidiary any:
3.12.1. material adverse change in the condition (financial or
otherwise), properties, assets, liabilities, businesses, operations,
results of operations or prospects of COLA and its Subsidiary, taken as
a whole;
3.12.2. amendments or changes in the Articles of Incorporation or
Bylaws of COLA or Subsidiary;
3.12.3. (i) incurrence, creation, assumption or guarantee by COLA or
its Subsidiary of (A) any mortgage, security interest, pledge, lien or
other encumbrance on any of the assets or properties of COLA or its
Subsidiary or (B) any material obligation or liability or any
indebtedness for borrowed money in excess of a cumulative aggregate
amount (computed with reference to all transactions described in (A) or
(B) of this clause) of $50,000; or (ii) issuance or sale of any debt or
equity securities of COLA or its Subsidiary or any options or other
rights to acquire from COLA or its Subsidiary, directly or indirectly,
any debt or equity securities of COLA or its Subsidiary;
3.12.4. payment or discharge of a material lien or liability for such
lien that was not either shown on the COLA Balance Sheet or incurred in
the ordinary course of business after the date of the COLA Balance
Sheet;
3.12.5. purchase, license, sale or other disposition, or any agreement
or other arrangement for the purchase, license, sale or other
disposition, of any of the assets or properties of COLA or its
Subsidiary other than in the ordinary course of business;
3.12.6. damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or
business of COLA or its Subsidiary;
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3.12.7. declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, the capital stock of
COLA or its Subsidiary, any split, combination or reclassification of
the capital stock of COLA or its Subsidiary, or any direct or indirect
redemption, purchase or other acquisition of the capital stock of COLA
or its Subsidiary, or any change in any rights, preferences, privileges
or restrictions of any outstanding security of COLA or its Subsidiary;
3.12.8. change or increase in the compensation payable or to become
payable to any of the officers, employees or agents of COLA or its
Subsidiary, or any bonus or pension, insurance or other benefit payment
or arrangement (including without limitation stock awards, stock
appreciation rights or stock option grants) made to or with any such
officers, employees or agents, except in connection with normal employee
salary or performance reviews or otherwise in the ordinary course of
business consistent with past practice;
3.12.9. change with respect to the management, supervisory or other key
personnel of COLA or its Subsidiary;
3.12.10. obligation or liability incurred by COLA or its Subsidiary to
any of their officers, directors or shareholders, except normal
compensation and expense allowances payable to officers;
3.12.11. making of any loan, advance or capital contribution to, or any
investment in, any officer, director or shareholder other than (i)
travel loans or advances made in the ordinary course of business of COLA
and (ii) other loans and advances in an aggregate amount which do not
exceed $25,000 outstanding at any time;
3.12.12. entering into, amendment, violation, relinquishment,
termination or non-renewal by COLA or its Subsidiary of any contract,
lease transaction, commitment or other right or obligation, other than
in the ordinary course of business;
3.12.13. transfer or grant of a right under the COLA IP Rights (as
defined in Section 3.15 below), except those transferred or granted in
the ordinary course of COLA's business consistent with past practices;
or
3.12.14. agreement or arrangement by COLA or its Subsidiary to take any
action which, if taken prior to the date of this Agreement, would have
made any representation or warranty of COLA and the COLA Shareholders as
set forth in this Agreement untrue or incorrect.
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3.13. Contracts and Commitments. Exhibit 3.13 sets forth a list of each of
the following written or oral contracts, agreements, commitments or other
instruments to which COLA or its Subsidiary is a party or by which COLA and
Subsidiary or any of their respective assets or properties are bound:
3.13.1. continuing contract for the future purchase, sale or
manufacture of products, material, supplies, equipment or services
requiring payment to or from COLA or its Subsidiary in an amount in
excess of $100,000 per annum which is not terminable on 120 days' or
less notice without cost or other liability to COLA or its Subsidiary at
or at any time after the Effective Time, or in which COLA or its
Subsidiary has granted or received manufacturing rights, "most favored
nations" pricing provisions or exclusive marketing rights relating to
any product, group of products or territory;
3.13.2. joint venture or partnership contract or agreement or other
agreement which has involved or is reasonably expected to involve a
sharing of profits or losses in excess of $25,000 per annum with any
other party;
3.13.3. contract or commitment for the employment of any officer,
employee or consultant of COLA or its Subsidiary or any other type of
contract or understanding with any officer, employee or consultant of
COLA or its Subsidiary which is not immediately terminable by COLA or
its Subsidiary without cost or other liability;
3.13.4. indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of money,
for a line of credit or for a leasing transaction of a type required to
be capitalized in accordance with Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board;
3.13.5. lease or other agreement under which COLA or its Subsidiary is
the lessee of or holds or operates any items of tangible personal
property or real property owned by any third party and under which
payments to such third party exceed $20,000 per annum;
3.13.6. agreement or arrangement for the sale of any assets,
properties or rights having a value in excess of $20,000, other than in
the ordinary course of business consistent with past practice;
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3.13.7. agreement containing any covenant purporting to
restrict COLA or its Subsidiary from engaging in any aspect of
its business or competing in any line of business in any
geographic area;
3.13.8. agreement involving any COLA IP Rights (as defined in
Section 3.15 below);
3.13.9. any agreement relating to the sale, issuance, grant,
exercise, award, purchase, repurchase or redemption of any
shares of capital stock or other securities of COLA or its
Subsidiary or any options, warrants or other rights to
purchase or otherwise acquire any such shares of capital stock,
other securities or options, warrants or other related rights; or
3.13.10. any other agreement, contract, commitment or instrument
that is material to the business of COLA or its Subsidiary or
involves a commitment in excess of $100,000.
A copy of each contract, agreement, commitment or other instrument
required to be listed on Exhibit 3.13 has been delivered to MIDWEST's General
Counsel.
3.14. No Default. To the best of their knowledge neither COLA nor its
Subsidiary, or any other party thereto, is in breach or default in
any material respect under any contract, agreement, commitment or
other instrument or obligation that is required to be listed on Exhibit
3.13 or that is otherwise material to the business of COLA or its
Subsidiary, and all such contracts, agreements, commitments or other
instruments or obligations are in full force and effect. Neither COLA
nor its Subsidiary is a party to any contract, agreement or arrangement
which has had or could reasonably be expected to have a material
adverse effect on its business or prospects. Neither COLA nor its
Subsidiary has any material liability for renegotiation of government
contracts or subcontracts, if any.
3.15. Intellectual Property. COLA and its Subsidiary own, license or
have the right to use all material Intellectual Property Rights (as
defined below) necessary or required for the conduct of their
respective businesses as presently conducted (collectively, the "COLA
IP Rights"), and such COLA IP Rights are sufficient for such
conduct of its business.
3.15.1. COLA and its Subsidiary have taken reasonable and
practicable steps designed to protect, preserve and maintain
the secrecy and confidentiality of all material COLA IP Rights
and all related proprietary rights. All granted and issued
patents, all registered trademarks and all copyrights listed
on Exhibit 3.15 are valid and subsisting.
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3.15.2. Exhibit 3.15 contains a list of all COLA IP Rights, including,
without limitation, all patents, patent applications, copyrights
(whether or not registered), copyright applications, trademarks or
service marks (whether or not registered) or trademark or service mark
applications.
3.15.3. To the best of their knowledge, as now used or proposed for
use by COLA or Subsidiary, none of the COLA IP Rights has infringed,
misappropriated or otherwise violated, or is likely to violate, directly
or indirectly, any Intellectual Property Right of any third party. To
the best knowledge of COLA and the COLA Shareholders, there is no
unauthorized use, infringement or misappropriation of any COLA IP Right
by any third party, employee or former employee.
3.15.4. As used in this Section 3.15, the term "Intellectual Property
Rights" means, collectively, all worldwide industrial and intellectual
property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications, trade
names, service marks, service mark applications, copyrights, copyright
applications, franchises, licenses, inventions, know-how, trade secrets,
customer lists, proprietary processes and formulae, software source and
object code, algorithms, architecture, structure, display screens,
layouts, inventions, development tools and all documentation and media
constituting, describing or relating to the above, including, without
limitation, manuals, memoranda and records.
3.16. Compliance with Laws. To the best of their knowledge, COLA and its
Subsidiary have complied in all material respects with all applicable federal,
state, local or foreign laws, ordinances, regulations, and rules, and all
orders, writs, injunctions, awards, judgments, and decrees applicable to them
and their respective assets, properties, and business (the violation of which
would have a material adverse effect upon their business). COLA and its
Subsidiary hold all permits, licenses and approvals from, and have made all
filings with, third parties, including government agencies and authorities,
that are necessary in connection with its present business.
3.17. Certain Transactions and Agreements. To the best of their knowledge,
none of the officers or directors of COLA or its Subsidiary, nor any member of
their immediate families, has any direct or indirect ownership interest in any
entity that competes with, or does business with, or has any contractual
arrangement with COLA (except with respect to any interest in less than one
percent (1%) of the stock of any corporation whose stock is publicly traded).
None of such officers or directors, or any member of their immediate families,
is directly or indirectly interested in any contract or arrangement with COLA,
except for normal compensation for services as an officer, director or employee
that have been
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disclosed to MIDWEST. Neither COLA nor Subsidiary is indebted to any director,
officer, employee or agent of COLA or Subsidiary (except for amounts due as
normal salaries and bonuses and in reimbursement of ordinary expenses), and no
such person is indebted to COLA or Subsidiary. Neither COLA nor Subsidiary is a
party to any (i) agreement with any officer or other employee of COLA or
Subsidiary (A) the benefits of which are contingent, or the terms of which are
altered, upon the occurrence of a transaction involving COLA or Subsidiary of
the nature of any of the transactions contemplated by this Agreement or the COLA
Ancillary Agreements, (B) providing severance benefits or other benefits (which
are conditioned upon a change of control) after the termination of employment
of such employee regardless of the reason for such termination of employment or
(C) providing for bonuses, pensions, deferred compensation, retirement
payments, profit sharing or similar payments, which in the case of (A), (B) or
(C) is not terminable by COLA or Subsidiary on ten days notice or less without
penalty or obligation to make payments related to such termination, or (ii)
agreement or plan, including without limitation, any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
COLA Ancillary Agreements.
3.18. Employees. To the best of their knowledge, COLA and its Subsidiary are
in compliance in all material respects with all applicable laws, agreements,
contracts and other arrangements relating to employment, employment practices,
wages, hours, and terms and conditions of employment, including, but not
limited to, employee compensation matters. A list of all employees, officers
and consultants of COLA and its Subsidiary and their current compensation has
been made available to MIDWEST. Neither COLA nor its Subsidiary has any
employment contracts or consulting agreements currently in effect that are not
terminable at will (other than agreements for the sole purpose of providing for
the confidentiality of proprietary information or assignment of inventions).
3.19. Labor Relations. To the best of their knowledge, neither COLA nor its
Subsidiary (i) has ever been or is now subject to a union organizing effort,
(ii) is subject to any collective bargaining agreement with respect to any of
its employees, (iii) is subject to any other contract or agreement, written or
oral, with any trade or labor union, employees' association or similar
organization, and (iv) has any current labor disputes. COLA and its Subsidiary
have good labor relations, and have no knowledge of any facts indicating that
the consummation of the transactions contemplated hereby will have a material
adverse effect on such labor relations, and has no knowledge that any of its
key employees intends to leave its employ. There is neither pending nor, to the
best knowledge of COLA, threatened any labor dispute, strike or work stoppage
which affects or which may affect COLA's or Subsidiary's business. Neither COLA
nor Subsidiary, nor any agents, representatives or employees of COLA or
Subsidiary has committed any unfair
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labor practice as defined in the National Labor Relations Act of 1947, as
amended, and there is not now pending nor, to the best knowledge of COLA,
threatened any unfair labor practice charge against COLA or Subsidiary within
the jurisdiction of the National Labor Relations Board or any representative
thereof.
3.20. Employee Benefit Plans/ERISA. Exhibit 3.20 identifies (i) each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and (ii) all other written or formal
plans or agreements involving direct or indirect compensation or benefits
(including any employment agreements entered into between COLA or its Subsidiary
and any employee of COLA or its Subsidiary, but excluding workers' compensation,
unemployment compensation and other government-mandated programs) currently or
previously maintained, contributed to or entered into by COLA or its Subsidiary
under which COLA or its Subsidiary or any ERISA Affiliate (as defined below) has
any present or future obligation or liability (collectively, the "COLA Employee
Plans"). For purposes of this Section, "ERISA Affiliate" means any entity which
is a member of (A) a "controlled group of corporations," as defined in Section
414(b) of the Code, (B) a group of entities under "common control," as defined
in Section 414(c) of the Code, or (C) an "affiliated service group," as defined
in Section 414(m) of the Code, or treasury regulations promulgated under Section
414(o) of the Code, any of which includes COLA or its Subsidiary. Copies of all
COLA Employee Plans (and, if applicable, related trust agreements) and all
related amendments and written interpretations (including summary plan
descriptions) have been delivered to MIDWEST. All COLA Employee Plans which
individually or collectively would constitute an "employee pension benefit
plan," as defined in Section 3(2) of ERISA (collectively, the "COLA Pension
Plans"), are identified as such in Exhibit 3.20. All contributions due from COLA
or its Subsidiary with respect to any of the COLA Employee Plans have been made
as required under ERISA or have been accrued on the COLA Financial Statements as
of December 31, 1995. Each COLA Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including, without limitation, ERISA and the IRC
which are applicable to such COLA Employee Plans.
3.20.1. No COLA Pension Plan constitutes, or has since the enactment of
ERISA constituted, a "multi-employer plan," as defined in Section 3(37) of
ERISA. No COLA Pension Plan constitutes an Employee Stock Ownership Plan
as defined in Section 4975(e)(7) of the Code. No COLA Pension Plans are
subject to Title IV of ERISA. No "prohibited transaction," as defined in
Section 406 of ERISA or Section 4975 of the Code, has occurred with respect
to any COLA Employee Plan which is covered by Title I of ERISA which would
result in a material liability to COLA, excluding transactions effected
pursuant to a statutory or administrative
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exemption. Nothing done or omitted to be done and no transaction or
holding of any asset under or in connection with any COLA Employee Plan
has or will make COLA or any officer or director of COLA subject to any
material liability under Title I of ERISA or liable for any material tax
(as defined in Section 3.7) or penalty pursuant to Sections 4972, 4975,
4976 or 4979 of the Code or Section 502 of ERISA.
3.20.2. Any COLA Pension Plan which is intended to be qualified under
Section 401(a) of the Code (a "COLA 401(a) Plan") is so qualified and
has been so qualified during the period from its adoption to date, and
the trust forming a part of such plan is exempt from tax pursuant to
Section 501(a) of the Code. COLA has made available to MIDWEST a
complete and correct copy of the most recent Internal Revenue Service
determination letter with respect to each COLA 401(a) Plan. Nothing has
occurred since the date of the most recent applicable Internal Revenue
Service determination letter that would adversely affect the qualified
status of any COLA 401(a) Plan.
3.21. COLA Benefit Arrangements. Exhibit 3.21 lists each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' benefits, vacation benefits, severance
benefits, disability benefits, death benefits, hospitalization benefits,
retirement benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits
for employees, consultants or directors which (i) is not a COLA Employee Plan,
(ii) is entered into, maintained or contributed to by COLA or its Subsidiary
and (iii) covers any employee or former employee of COLA or its Subsidiary
(collectively, the "COLA Benefit Arrangements"). Each COLA Benefit Arrangement
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations
that are applicable to such COLA Benefit Arrangement.
3.22. Employee Benefit Costs. There has been no amendment, written
interpretation or announcement (whether or not written) by COLA or its
Subsidiary relating to, or change in employee participation or coverage under,
any COLA Employee Plan or COLA Benefit Arrangement that would increase
materially the expense of maintaining such COLA Employee Plan or COLA Benefit
Arrangement above the level of the expense incurred for such items for the year
ended December 31, 1995.
3.23. COBRA Notices. COLA or Subsidiary has provided to the individuals
entitled thereto all notices and coverages that are required by Section 4980B
of the
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Code and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), with respect to any "qualifying event" (as defined in Section
4980B(f)(3) of the Code) occurring prior to and including the Closing Date. No
material tax payable under Section 4980B of the Code has been incurred with
respect to any current or former employees (or their beneficiaries) of COLA.
3.24. Other Employee Matters. No benefit payable or which may become payable
by COLA or its Subsidiary pursuant to any COLA Employee Plan or any COLA
Benefit Arrangement or as a result of or arising under this Agreement shall
constitute an "excess parachute payment" (as defined in Section 280G(b)(1) of
the Code) which is subject to the imposition of an excise tax under Section
4999 of the Code, or which would not be deductible by reason of Section 280G of
the Code. Neither COLA nor its Subsidiary is a party to any agreement with any
executive officer or other key employee (i) the benefits of which are
contingent, or the terms of which would become materially altered because of
the transactions contemplated by this Agreement, (ii) that provides any term of
employment or compensation guarantee, or (iii) that provides severance benefits
or other benefits after the termination of employment of such employee
regardless of the reason for such termination of employment. Neither COLA nor
its Subsidiary is a party to any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, under which (i) the benefits will be materially increased, (ii)
the vesting of benefits of which will be materially accelerated, or (iii) the
calculation of the value of any of the benefits will be affected by the
transactions contemplated by this Agreement.
3.25. Corporate Documents. COLA has made available to MIDWEST for examination
all documents and information listed in the COLA Disclosure Letter or other
Exhibits of this Agreement, including, without limitation, the following: (i)
copies of COLA's Articles of Incorporation and Bylaws as currently in effect;
(ii) COLA's minute book containing all records of all proceedings, consents,
actions, and meetings of COLA's shareholders, board of directors and
committees; (iii) COLA's stock ledger and journal reflecting all stock
issuances and transfers; and (iv) all permits, orders, and consents issued by
any regulatory agency with respect to COLA, or any securities of COLA, and all
applications for such permits, orders, and consents.
3.26. No Brokers. Neither COLA nor any of the COLA Shareholders is obligated
for the payment of fees or expenses of any investment banker, broker or finder
in connection with the origin, negotiation or execution of this Agreement or
the transaction contemplated by this Agreement.
3.27. Books and Records. The books, records and accounts of COLA and its
Subsidiary (i) are in all material respects true, complete and correct, (ii)
have been maintained in accordance with good business practices on a basis
consistent with
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prior years, (iii) are stated in reasonable detail and accurately and fairly
reflect the transactions and dispositions of the assets of COLA and Subsidiary,
and (iv) are appropriately, accurately and fairly reflected in the COLA
Financial Statements.
3.28. Internal Controls. COLA and Subsidiary have devised and maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles or any other criteria applicable to such
statements, and to maintain accountability for assets, and (iii) the amount
recorded for assets on the books and records of COLA and Subsidiary is compared
with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
3.29. Insurance. COLA and its Subsidiary maintain, and at all times during the
prior three years have maintained, fire and casualty, general liability, product
liability, and sprinkler and water damage insurance in amounts which COLA
believes to be reasonably prudent for similarly sized and similarly situated
businesses under valid and enforceable policies issued by insurers of recognized
responsibility. Each such policy is listed and briefly described in the COLA
Disclosure Letter.
3.30. Environmental Matters. During the period that COLA and its Subsidiary
have leased or owned their properties or owned or operated any facilities, there
have been no disposals, releases or threatened releases of Hazardous Materials
(as defined below) on, from or under such properties or facilities. COLA has no
knowledge of any presence, disposals, releases or threatened releases of
Hazardous Materials on, from or under any of such properties or facilities,
which may have occurred prior to COLA or its Subsidiary having taken possession
of any of such properties or facilities.
3.30.1. The terms "disposal", "release", and "threatened release" have the
meaning as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as
amended ("CERCLA").
3.30.2. The term "Hazardous Materials" means any hazardous or toxic
substance, material or waste which is or becomes prior to the Closing
regulated under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous materials," "toxic substance"
or "hazardous chemical" under CERCLA, any similar federal, state or local
law, or regulations promulgated under any of the above laws or statutes.
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3.30.3. To the best knowledge of COLA and the COLA Shareholders,
none of the properties or facilities of COLA or its Subsidiary is in
violation of any federal, state or local law, ordinance, regulation
or order relating to industrial hygiene or to the environmental
conditions on, under or about such properties or facilities,
including, but not limited to, soil and ground water condition.
During the time that COLA or its Subsidiary have owned or leased
their respective properties and facilities, neither COLA nor its
Subsidiary nor, to COLA's or the COLA Shareholders' knowledge, any
third party, has used, generated, manufactured or stored on, under or
about such properties or facilities or transported to or from such
properties or facilities any Hazardous Materials.
3.30.4. During the time that COLA or its Subsidiary has owned or
leased their respective properties and facilities, there has been no
litigation brought or threatened against COLA or its Subsidiary, or
any lessor or owner of real property leased by COLA or its Subsidiary
by, or any settlement reached by COLA or its Subsidiary with, any
party or parties alleging the presence, disposal, release or
threatened release of any Hazardous Materials on, from or under any
of such properties or facilities.
3.31. Disclosure. No statement by COLA or the COLA Shareholders contained
in this Agreement, its exhibits, the COLA Disclosure Letter, or any of the
certificates or documents to be delivered by COLA or the COLA Shareholders
to MIDWEST under this Agreement, taken together, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which such statements were
made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF MIDWEST.
MIDWEST hereby represents and warrants to COLA that each of the
representations and statements in this Section 4 are true and correct, except as
set forth in a letter addressed to COLA dated as of the Agreement and delivered
by MIDWEST to COLA concurrently with the signing of this Agreement (the "MIDWEST
Disclosure Letter"). The contents of the MIDWEST Disclosure Letter shall be
deemed to be representations and warranties made to COLA by MIDWEST under this
section 4.
4.1. Organization and Good Standing. MIDWEST and each of its subsidiaries
(i) is a corporation duly organized, validly existing, and in good standing
under the laws of the state of its incorporation, (ii) has the corporate
power and authority to own, operate and lease its properties and to carry
on its business as now conducted and as proposed to be conducted, and (iii)
is qualified to transact business as a foreign corporation in each
jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, other
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than where a failure to be so qualified would not reasonably be expected to
have a material adverse effect on its present or expected operations or
financial condition. Upon its formation and prior to the Effective Time,
MERGECO will be a corporation duly organized, validly existing and in good
standing under the laws of the State of Iowa, and will have the corporate power
and authority to own, operate and lease its properties and to carry on its
business as proposed to be conducted.
4.2. Power. MIDWEST has the right, power, legal capacity and authority to
enter into, execute and deliver this Agreement and all related agreements to
which it will be a party in accordance with this Agreement (collectively, the
"MIDWEST Ancillary Agreements") and, subject to the approval of the Merger, for
the consummation of the transactions contemplated in such Agreements. The
execution and delivery of this Agreement and each of the MIDWEST Ancillary
Agreements and the consummation of the transactions contemplated in such
Agreements have been duly and validly approved and authorized by all necessary
corporate action by the board of directors of MIDWEST. Upon MERGECO's
formation, MERGECO will have the right, power, legal capacity and authority to
execute and perform its obligations under the Plan of Merger and all other
agreements to which MERGECO is to be a party that are to be executed by MERGECO
pursuant to this Agreement.
4.3. Authorization. No filing, authorization, consent, approval or order,
governmental or otherwise, is necessary or required for the execution and
delivery of this Agreement and the MIDWEST Ancillary Agreements by MIDWEST or
the consummation of the transactions contemplated in such Agreements, except
for (a) the filing of the Articles of Merger with the Office of the Iowa
Secretary of State, and the filing of appropriate Merger documents with the
relevant authorities of other states in which MIDWEST or MERGECO is qualified
to do business, if any, (b) the filing of such filings as may be required to
comply with federal and state securities laws; and (c) the filings required by
the HSR Act.
4.4. Validity. This Agreement and the MIDWEST Ancillary Agreements are valid
and binding obligations of MIDWEST, and enforceable in accordance with their
respective terms, except as to the effect, if any, of (i) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, and (ii)
rules of law governing specific performance, injunctive relief and other
equitable remedies; provided, however, that the Merger will not become
effective until the Articles of Merger are filed with the office of the Iowa
Secretary of State.
4.5. Capitalization of MIDWEST. MIDWEST is capitalized as follows:
4.5.1. Stock. The authorized capital stock of MIDWEST consists of
75,000,000 shares of MIDWEST Class A Common Stock $0.01 par value,
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25,000,000 shares of MIDWEST Class B Common Stock $0.01 par value,
2,000,000 shares of MIDWEST Preferred Stock $0.01 par value, and 1,150,000
shares of MIDWEST Class A Preferred Stock $5.50 par value. At the close of
business on July 12, 1995, 45,836,448 shares of MIDWEST Common Stock and
Class B Common Stock were issued and outstanding, and no shares of
Preferred Stock or Class A Preferred Stock have been issued, no shares of
MIDWEST capital stock were held by MIDWEST in its treasury and 7,166,979
shares of MIDWEST Common Stock were reserved for issuance upon the exercise
of outstanding options to purchase MIDWEST Class A Common Stock ("MIDWEST
Options"). All outstanding shares of MIDWEST Common Stock are validly
issued, fully paid and nonassessable and not subject to preemptive rights.
4.5.2. No Other Commitments. Except for the MIDWEST Options disclosed in
Section 4.5.1. and as listed in the MIDWEST Disclosure Letter, there are no
options, warrants, convertible or other securities, calls, commitments,
conversion privileges or preemptive or other rights or agreements
(collectively, "Stock Rights Agreements") outstanding to purchase or
otherwise acquire (whether directly or indirectly) (i) any shares of
MIDWEST's authorized but unissued capital stock, or (ii) any securities
convertible into or exchangeable for any shares of MIDWEST's capital stock.
MIDWEST has no obligations to grant, issue, extend, or enter into any Stock
Rights Agreements. MIDWEST has no liability for dividends accrued but
unpaid.
4.5.3. No Voting Arrangements or Registration Rights. Except for that
certain Investor Agreement dated as of April 1, 1996, among MIDWEST and
certain of its stockholders, to the knowledge of MIDWEST, there are no
voting agreements, voting trusts, rights of first refusal or other
restrictions (other than normal restrictions on transfer under applicable
federal and state securities laws) applicable to any of MIDWEST's
outstanding securities. MIDWEST is not under any obligation to register any
of its presently outstanding securities or any securities that may be
subsequently issued under the Securities Act of 1933.
4.6 No Violation of Existing Agreements. Neither the execution and delivery
of this Agreement nor any MIDWEST Ancillary Agreement, nor the consummation of
the transactions contemplated by such agreements, will conflict with, or (with
or without notice or lapse of time, or both) result in:
4.6.1. a termination, breach, impairment or violation of (i) any provision
of the Articles of Incorporation or Bylaws of MIDWEST, as currently in
effect or (ii) any federal, state, local or foreign judgment, writ, decree,
order,
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statute, rule or regulation applicable to MIDWEST or its assets or
properties; or
4.6.2. a termination, or a material breach, impairment or violation of,
any material instrument, agreement, contract or commitment to which
MIDWEST is a party or by which MIDWEST is bound. The transfer of the
MIDWEST Common Stock to COLA under this Agreement will not require the
consent of any third party with respect to any material rights,
licenses, franchises, leases or agreements of MIDWEST.
4.7. Litigation. There is no action, suit, claim, arbitration, proceeding,
or investigation pending or threatened, to the best knowledge of MIDWEST,
against MIDWEST before any court, administrative agency or arbitrator (each a
"Claim") that may reasonably be expected to have a material adverse effect on
the present or future operations or financial condition of MIDWEST, if such
Claim is decided adversely to MIDWEST.
4.7.1. To the best of MIDWEST's knowledge, there is no basis for any
person or entity to assert a Claim against MIDWEST based upon (i)
ownership, rights to ownership, or options, warrants or other rights to
acquire ownership, of any shares of the capital stock of MIDWEST, or
(ii) any rights as a MIDWEST shareholder, including any option, warrant
or preemptive rights or rights to notice or to vote.
4.7.2. To the best of MIDWEST's knowledge, there is no basis for any
party to successfully assert a Claim for any material damages against
MIDWEST based on a claim that any product or service developed, owned,
marketed, or distributed by MIDWEST (i) was or is defective in any
material respect, or did not or will not perform in accordance with any
warranty, (ii) was not or is not suitable for a use for which it was
intended, (iii) omitted or omits necessary information, or (iv) included
or includes forms of documents, advice or information that was
negligently prepared and/or marketed, inaccurate or incomplete in any
respect, or did not conform to or comply with applicable law.
4.7.3. There is no judgment, decree, injunction, rule or order of any
governmental entity or agency, court or arbitrator outstanding against
MIDWEST.
4.8. Disclosure. MIDWEST's final prospectus, dated June 10, 1996, in
connection with the initial public offering of MIDWEST Common Stock (the
"MIDWEST Prospectus"), this Agreement, the exhibits and schedules hereto, and
any certificates or documents to be delivered to COLA pursuant to this
Agreement as of their respective dates did not, and when taken together, do not
contain or will
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not contain any untrue statement of a material fact or omit or will omit to
state any material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which such
statements were made, not misleading.
4.9. MIDWEST Financial Statements. The financial statements of MIDWEST
included in the MIDWEST Prospectus complied as to form in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the Securities and Exchange Commission ("SEC")
with respect thereto, were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may have been indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form S-1 promulgated by
the SEC) and fairly present (subject, in the case of the unaudited
statements, to normal year end audit adjustments) the consolidated
financial position of MIDWEST and its consolidated subsidiaries as at the
respective dates thereof and the consolidated results of their operations
and cash flows.
5. COLA PRECLOSING COVENANTS.
During the period from the Agreement Date until the earlier to occur of
(i) the Effective Time or (ii) the termination of this Agreement in accordance
with Section 10, COLA and the COLA Shareholders each jointly and severally
covenant and agree with MIDWEST as follows:
5.1 Advice of Changes. COLA or the COLA Shareholders will promptly advise
MIDWEST in writing (a) of any event occurring subsequent to the Agreement
Date that would render any representation or warranty of COLA or the COLA
Shareholders contained in this Agreement, if made on or as of the date of
such event or the Closing Date, untrue or inaccurate in any material
respect and (b) of any material adverse change in COLA's or Subsidiary's
business, results of operations or financial condition; provided, however,
that the delivery of any notice pursuant to this Section 5.1 shall not cure
any breach of any representation or warranty or otherwise limit or affect
the remedies available hereunder to MIDWEST under this Agreement. COLA
shall deliver to MIDWEST within fifteen (15) days after the Closing Date,
an unaudited balance sheet and statement of operations, which financial
statements shall be prepared in the ordinary course of business, in
accordance with COLA's books and records and generally accepted accounting
principles and shall fairly present the financial position of COLA as of
the respective dates and the results of COLA's operations for the periods
then ended.
5.2. Maintenance of Business. COLA will, and will cause Subsidiary to use
its best efforts to carry on and preserve its business and its
relationships with customers, suppliers, employees and others in
substantially the same manner as it
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has prior to the Agreement Date. If COLA becomes aware of a material
deterioration in the relationship with any customer, supplier or key employee,
it will promptly bring such information to the attention of MIDWEST in writing
and, if requested by MIDWEST, will exert its best efforts to restore the
relationship.
5.3. Conduct of Business. Except as otherwise provided in Exhibit 5.3 hereto,
COLA will, and will cause Subsidiary to, continue to conduct its business and
maintain its business relationships in the ordinary and usual course and will
not, without the prior written consent of the Chief Executive Officer of MIDWEST
(which consent will not be unreasonably withheld):
5.3.1. borrow or lend any money other than advances for travel and expenses
that are incurred in the ordinary course of business consistent with past
practice;
5.3.2. enter into any transaction or agreement not in the ordinary course
of business;
5.3.3. encumber or permit to be encumbered any of its assets except in the
ordinary course of its business consistent with past practice and to an
extent which is not material;
5.3.4. dispose of any of its assets except in the ordinary course of
business consistent with past practice;
5.3.5. enter into any material lease or contract for the purchase or sale
of any property, real or personal, except in the ordinary course of
business consistent with past practice;
5.3.6. pay any bonus, increased salary or special remuneration to any
officer, employee or consultant (except for normal salary increases
consistent with past practices not to exceed 10% of such officer's,
employee's or consultant's base annual compensation, except pursuant to
existing arrangements previously disclosed to and approved in writing by
MIDWEST) or enter into any new employment or consulting agreement with any
such person;
5.3.7. change any of its accounting methods;
5.3.8. declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise acquire
any of its capital stock;
5.3.9. amend or terminate any contract, agreement or license to which it is
a party except those amended or terminated in the ordinary course of
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business, consistent with past practice, and which are not material in
amount or effect;
5.3.10. guarantee or act as a surety for any obligation except for the
endorsement of checks and other negotiable instruments in the ordinary
course of business, consistent with past practice, which are not
material in amount;
5.3.11. waive or release any material right or claim except in the
ordinary course of business, consistent with past practice or agree to
any audit assessment by any tax authority or file any federal or state
income or franchise tax return unless copies of such returns have been
delivered to MIDWEST for its review prior to filing;
5.3.12. issue or sell any shares of its capital stock of any class
(except upon the exercise of an option or warrant currently
outstanding), or any other of its securities, or issue or create any
warrants, obligations, subscriptions, options, convertible securities,
or other commitments to issue shares of capital stock, or accelerate the
vesting of any outstanding option or other security;
5.3.13. split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or affecting any
other of its securities;
5.3.14. merge, consolidate or reorganize with, or acquire any entity;
5.3.15. amend its Articles of Incorporation or Bylaws;
5.3.16. license any of its technology or intellectual property except
in the ordinary course of business consistent with past practice;
5.3.17. substantially decrease, in scope of coverage or policy limit,
any insurance coverage or issue any certificates of insurance;
5.3.18. agree to any audit assessment by any tax authority or file
any federal or state income or franchise tax return unless copies of
such returns have first been delivered to MIDWEST for its review prior
to filing; or
5.3.19. agree to do, or permit any Subsidiary to do or agree to do,
any of the things described in the preceding clauses 5.3.1. through
5.3.18.
5.4 Shareholder Approval. COLA will hold a special meeting of its
shareholders or will solicit the written consent of its shareholders (such COLA
shareholders' meeting or the solicitation of the written consent of the
shareholders of COLA is hereinafter referred to as the "COLA Shareholder
Vote"), to the Merger
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and related matters for the consideration and approval of the shareholders of
COLA, which approval will be recommended by COLA's Board of Directors. Such
meeting will be called, held and conducted, and any proxies or written consents
will be solicited, in compliance with applicable law.
5.5. Necessary Consents. COLA will use its best efforts to obtain such written
consents and take such other actions as may be necessary or appropriate in
addition to those set forth in Sections 5.4, 5.9 and 5.12 to allow the
consummation of the transactions contemplated hereby and to allow the Surviving
Corporation to carry on COLA's business after the Closing.
5.6. Litigation. COLA will notify MIDWEST in writing promptly after learning
of any material action, suit, arbitration, proceeding or investigation by or
before any court, arbitrator or arbitration panel, board or governmental
agency, initiated by or against it or any Subsidiary, or known by it to be
threatened against it or any Subsidiary.
5.7. No Other Negotiations. From the Agreement Date until the earlier of
termination of this Agreement or the Effective Time, COLA and the COLA
Shareholders will not, and will not authorize or permit any officer, director,
employee or affiliate of COLA, or any other person, on its or their behalf to,
directly or indirectly, solicit or encourage any offer from any party or
consider any inquiries or proposals received from any other party, participate
in any negotiations regarding, or furnish to any person any information with
respect to, or otherwise cooperate with, facilitate or encourage any effort or
attempt by any person (other than MIDWEST), concerning any agreement or
transaction regarding the possible disposition of all or any substantial
portion of COLA's business, assets or capital stock by merger, consolidation,
sale of assets or any other means of business combination. COLA will promptly
notify MIDWEST orally and in writing of any such inquiries or proposals.
5.8. Access to Information. Until the Closing, COLA will allow MIDWEST and
its agents reasonable access to the files, books, records and offices of COLA
and each Subsidiary, including, without limitation, any and all information
relating to COLA's taxes, commitments, contracts, leases, licenses, and real,
personal and intangible property and financial condition, subject to the terms
of the Confidentiality Agreement between COLA and MIDWEST dated as of June 18,
1996. COLA will cause its accountants to cooperate with MIDWEST and its agents
in making available all financial information reasonably requested, including
without limitation the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants.
5.9. Satisfaction of Conditions Precedent. COLA will use its best efforts to
satisfy or cause to be satisfied all the conditions precedent which are set
forth in Section 9, and COLA will use its best efforts to cause the transactions
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contemplated by this Agreement to be consummated, and, without limiting
the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give
all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions contemplated
hereby.
5.10. COLA Investment Agreement. COLA will cause each of the COLA
Shareholders (and any other shareholders of COLA, if any, who may
receive MIDWEST Common Stock in the Merger) to execute and deliver to
MIDWEST, on or prior to the Closing, the Investment Agreement in
substantially the form of Exhibit 5.10 (the "COLA Investment
Agreement").
5.11. Blue Sky Laws. COLA shall use its best efforts to assist MIDWEST
to the extent necessary to comply with the securities and Blue Sky laws
of all jurisdictions which are applicable in connection with the
Merger.
5.12. Regulatory Approvals. COLA will execute and file, or join in the
execution and filing, of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of
any governmental body, federal, state, local or foreign, which may be
reasonably required, or which MIDWEST may reasonably request, in
connection with the consummation of the transactions contemplated by
this Agreement. COLA will use its best efforts to obtain, and to
cooperate with MIDWEST in obtaining, all such authorizations, approvals
and consents (including but not limited to any clearance from the
Federal Trade Commission or the United States Department of Justice
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act").
6. MIDWEST PRECLOSING COVENANTS.
During the period from the Agreement Date until the earlier to occur of
(i) the Effective Time or (ii) the termination of this Agreement in accordance
with Section 10, MIDWEST covenants and agrees as follows:
6.1. Advice of Changes. MIDWEST will promptly advise COLA in writing
(a) of any event occurring subsequent to the Agreement Date that would
render any representation or warranty of MIDWEST contained in this
Agreement, if made on or as of the date of such event or the Closing
Date, untrue or inaccurate in any material respect and (b) of any
material adverse change in MIDWEST's business, results of operations or
financial condition; provided, however, that the delivery of any notice
pursuant to this Section 6.1 shall not cure any breach of any
representation or warranty or otherwise limit or affect the remedies
available hereunder to COLA or the COLA Shareholders under this
Agreement.
6.2. Regulatory Approvals. MIDWEST will execute and file, or join in
the execution and filing, or any application or other document that may
be necessary
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in order to obtain the authorization, approval or consent of any governmental
body, federal, state, local or foreign, which may be reasonably required, or
which COLA may reasonably request, in connection with the consummation of the
transactions contemplated by this Agreement. MIDWEST will use its best efforts
to obtain, and to cooperate with COLA to obtain, all such authorizations,
approvals and consents (including but not limited to any clearance from the
Federal Trade Commission or the United States Department of Justice under the
HSR Act).
6.3. Satisfaction of Conditions Precedent. MIDWEST will use its best
efforts to satisfy or cause to be satisfied all the conditions precedent which
are set forth in Section 8, and MIDWEST will use its best efforts to cause the
transactions contemplated by this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to effect the transactions contemplated hereby.
6.4. Blue Sky Laws. MIDWEST shall take such steps as may be necessary to
comply with the securities and Blue Sky laws of all jurisdictions which are
applicable in connection with the Merger.
6.5. Necessary Consents. MIDWEST will use its best efforts to obtain such
written consents and take such other actions as may be necessary or appropriate
in addition to those set forth in Sections 6.2, 6.3 and 6.7 to allow the
consummation of the contemplated hereby and to allow MIDWEST to carry on COLA's
business after the Closing.
6.6. Litigation. MIDWEST will notify COLA in writing promptly after
learning of any material action, suit, arbitration, proceeding or investigation
by or before any court, arbitrator or arbitration panel, board or governmental
agency, initiated by or against MIDWEST or known by it to be threatened against
it.
6.7 MERGECO. MIDWEST will cause MERGECO to be promptly formed in
accordance with Iowa law. Subject to MIDWEST's rights to terminate this
Agreement and abandon the Merger for any reason in accordance with this
Agreement (including without limitation the failure of any condition in Section
9 to be satisfied), to the fullest extent permitted by law, MIDWEST shall cause
MERGECO and its Board of Directors to approve, execute and deliver all
documents required to be executed and delivered by MERGECO pursuant to this
Agreement.
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7. CLOSING MATTERS.
7.1. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions for consummation of the
Merger (the "Closing") will take place at the offices of Shuttleworth &
Ingersoll, P.C., on July 15, 1996 at 2:00 p.m., Central Time (or such
other time of day as MIDWEST and COLA may agree) on the earliest date
practicable after the satisfaction or waiver of the conditions to
Closing set forth in Sections 8 and 9 hereof (the "Closing Date").
Concurrently with the Closing, the Articles of Merger will be filed in
the office of the Iowa Secretary of State.
7.2. Exchange of Certificates.
7.2.1. At the Closing, each holder of shares of COLA capital
stock will surrender the certificate(s) for such shares (each a
"COLA Certificate"), duly endorsed as requested by MIDWEST, to
MIDWEST for cancellation. Promptly after the Effective Time and
receipt of such COLA Certificates, MIDWEST will issue to each
tendering holder a certificate for the number of shares of MIDWEST
Common Stock to which such holder is entitled pursuant to Section
2.1.1 hereof and will wire transfer to each tendering holder cash
in the amount payable to such holder under Section 2.1.1 hereof in
accordance with the written wire transfer instructions provided by
such holder to MIDWEST. The cash and shares to be placed in escrow
pursuant to Section 2.1.4 shall be delivered to Norwest Bank,
N.A., the Escrow Agent.
7.2.2. No dividends or distributions payable to holders of
record of MIDWEST Common Stock after the Effective Time, or cash
payable in lieu of fractional shares, will be paid to the holder
of any unsurrendered COLA Certificate until such holder surrenders
such COLA Certificate to MIDWEST as provided above. Subject to the
effect, if any, of applicable escheat and other laws, following
surrender of any COLA Certificate, there will be delivered to the
person entitled thereto, without interest, the amount of any
dividends and distributions therefor paid with respect to MIDWEST
Common Stock so withheld as of any date subsequent to the
Effective Time and prior to such date of delivery.
7.2.3. After the Effective Time there will be no further
registration of transfers on the stock transfer books of COLA or
its transfer agent of the COLA Common Stock. If, after the
Effective Time, COLA Certificates are presented for any reason,
they will be canceled and exchanged as provided in this Section
7.2.
7.2.4. Until COLA Certificates representing COLA Common Stock
outstanding prior to the Merger are surrendered pursuant to
Section 7.2.1
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above, such COLA Certificates will be deemed, for all
purposes, to evidence ownership of the number of shares
of MIDWEST Common Stock into which the COLA Common Stock
would have been converted pursuant to Section 2.1.1.
8. CONDITIONS TO OBLIGATIONS OF COLA.
COLA's obligations hereunder are subject to the fulfillment or
satisfaction, on or prior to the Closing, of each of the following conditions
(any one or more of which may be waived by COLA, but only in a writing signed
by COLA):
8.1. Accuracy of Representations and Warranties. The representations
and warranties of MIDWEST as set forth in section 4 (as qualified
by the MIDWEST Disclosure Letter, as such may be amended to disclose
changes that are not material in accordance with this Agreement) shall
be true and accurate in every material respect on and as of the Closing
with the same force and effect as if they had been made at the Closing
and COLA shall have received a certificate to that effect executed by
MIDWEST's President and Chief Financial Officer.
8.2. Covenants. MIDWEST shall have performed and complied in all
material respects with all of its covenants contained in Section 6 on
or before the Closing, and COLA shall have received a certificate to
such effect signed by MIDWEST's President and Chief Financial Officer.
8.3. Compliance with Law. There shall not be outstanding or
threatened, or enacted or adopted, any order, decree, temporary
preliminary or permanent injunction, legislative enactment, statute,
regulation, action, proceeding or any judgment or ruling by any court,
arbitrator, governmental agency, authority or entity, or any other fact
or circumstance, that, directly or indirectly, challenges, threatens,
prohibits, enjoins, restrains, suspends, delays, conditions, or renders
illegal or imposes limitations on (or is likely to result in a
challenge, threat to, or a prohibition, injunction, restraint,
suspension, delay or illegality of, or to impose limitations on) the
transaction contemplated by this Agreement.
8.4. Government Consents. There shall have been obtained at or prior
to the Closing Date such permits or authorizations, and there shall have
been taken such other action by any regulatory authority having
jurisdiction over the parties and the actions proposed to be taken under
this Agreement, as may be required to lawfully consummate the proposed
transaction, including but not limited to requirements under applicable
federal and state securities laws.
8.5. Opinion of MIDWEST's Counsel. COLA shall have received from
counsel to MIDWEST, an opinion in the form of Exhibit 8.5.
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8.6. Documents. COLA shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably
deemed necessary by COLA's legal counsel to consummate the transactions
contemplated by this Agreement.
8.7. No Litigation. No litigation or proceeding shall be threatened or
pending for the purpose or with the probable effect of enjoining or
preventing the consummation of any of the transactions contemplated by this
Agreement, or which could be reasonably expected to have a material adverse
effect on the present or future operations or financial condition of
MIDWEST.
8.8. Requisite Approvals. The principal terms of this Agreement shall have
been approved and adopted by MIDWEST's Board of Directors in accordance
with applicable law and MIDWEST's Certificate of Incorporation and Bylaws.
The principal terms of the Plan of Merger shall have been approved and
adopted by MERGECO's Board of Directors and shareholders in accordance with
applicable law and MERGECO's Articles of Incorporation and Bylaws.
8.9. Satisfactory Form of Legal and Accounting Matters. The form, scope
and substance of all legal matters contemplated by this Agreement,
including all closing documents, shall be reasonably acceptable to COLA's
counsel and independent public accountants.
8.10. No Material Adverse Change. There shall not have been any material
adverse change in the financial condition, properties, assets, liabilities,
business or operations of MIDWEST and its subsidiaries taken as a whole,
other than any change (a) in the market price of the MIDWEST Common Stock
or (b) that results from general economic conditions or conditions
generally affecting the communications industry.
9. CONDITIONS TO OBLIGATIONS OF MIDWEST. MIDWEST's obligations under this
Agreement are subject to the fulfillment or satisfaction of each of the
following conditions (any one or more of which may be waived by MIDWEST, but
only in a writing signed by MIDWEST) prior to the Closing.
9.1. Accuracy of Representations and Warranties. The representations and
warranties of COLA and the COLA Shareholders as set forth in section 3 (as
qualified by the COLA Disclosure Letter, as such may be amended to disclose
changes that are not material in accordance with this Agreement) shall be
true and accurate in every material respect on and as of the Closing and
MIDWEST shall have received a certificate to such effect executed by COLA's
President and Chief Financial Officer.
9.2. Covenants. COLA shall have performed and complied in all material
respects with all of its covenants contained in section 5 on or before the
Closing
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and MIDWEST shall have received a certificate to such effect signed by COLA's
President and Chief Financial Officer.
9.3. Compliance with Law. There shall not be outstanding or threatened, or
enacted or adopted, any order, decree, temporary, preliminary or permanent
injunction, legislative enactment, statute, regulation, action, proceeding or
any judgment or ruling by any court, arbitrator, governmental agency, authority
or entity, or any other fact or circumstance, that, directly or indirectly,
challenges, threatens, prohibits, enjoins, restrains, suspends, delays,
conditions, or renders illegal or imposes limitations on (or is likely to
result in a challenge, threat to, or a prohibition, injunction, restraint,
suspension, delay or illegality of, or to impose limitations on) the
transaction contemplated by this Agreement.
9.4. Government Consents. There shall have been obtained at or prior to the
Closing Date such permits or authorizations, and there shall have been taken
such other action by any regulatory authority having jurisdiction over the
parties and the actions proposed to be taken under this Agreement, as may be
required to lawfully consummate the proposed transaction, including but not
limited to requirements under applicable federal and state securities laws.
9.5. Opinion of COLA's Counsel. MIDWEST shall have received from counsel to
COLA, an opinion in substantially the form of Exhibit 9.5.
9.6. Consents. MIDWEST and/or COLA shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably deemed
necessary by MIDWEST to consummate the transactions contemplated by this
Agreement and to allow the Surviving Corporation to carry on COLA's business
after the Closing, including, without limitation, the written consent and
waiver of Sprint Communications Company L.P., in form and substance reasonably
satisfactory to MIDWEST, consenting to the Merger and waiving any right it may
have to terminate the Independent Contractor Sales Agreement entered into in
May, 1995, pursuant to Section 13(f) of the Agreement or otherwise, as a result
of this Agreement or the Merger.
9.7. No Litigation. No litigation or proceeding shall be threatened or pending
for the purpose or with the probable effect of enjoining or preventing the
consummation of any of the transactions contemplated by this Agreement, or
which could be reasonably expected to have a material adverse effect on the
present or future operations or financial condition of COLA.
9.8. Requisite Approvals. The principal terms of this Agreement shall have
been approved and adopted by COLA's Board of Directors in accordance with
applicable law and COLA's Articles of Incorporation and Bylaws, and by ALL
COLA's Shareholders.
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9.9. No Dissenting Shares. There shall be no holders of any shares
of COLA Common Stock who are attempting to exercise or perfect any
statutory appraisal rights of dissenting shareholders and all holders of
the issued and outstanding shares of COLA Common Stock shall have duly
and validly approved this Agreement, the Plan of Merger and the Merger
in accordance with all applicable laws.
9.10. Investment Agreement. Each COLA Shareholder (and any other
shareholder of COLA, if any, who may receive MIDWEST Common Stock in the
Merger) who is to receive MIDWEST Common Stock in the Merger shall have
executed and delivered a COLA Investment Agreement to MIDWEST in
accordance with Section 5.10.
9.11. Agreements from Certain Employees. Joseph P. Cunningham, Laura
L. Dement, Randy A. Snyder and Brian Donnelly shall each have executed
and delivered to MIDWEST an Employment, Confidentiality and
Non-Competition Agreement and Lock-Up Letter in substantially the form
of Exhibit 9.11.
9.12. Agreement from Ruffalo. Albert P. Ruffalo shall have executed
and delivered to MIDWEST, an Employment, Confidentiality and
Non-Competition Agreement and Lock-Up Letter in substantially the form
of Exhibit 9.12.
9.13. Termination of Rights. Any registration rights, rights of first
refusal, rights to any liquidation preference, redemption rights or any
similar rights of any COLA Shareholder shall have been terminated or
waived as of the Closing.
9.14. Satisfactory Form of Legal and Accounting Matters. The form,
scope and substance of all legal matters contemplated by this Agreement,
including all closing documents, shall be reasonably acceptable to
MIDWEST's counsel and independent public accountants.
9.15. No Material Adverse Change. There shall not have been any
material adverse change in the financial condition, properties, assets,
liabilities, business or operations of COLA taken as a whole, other than
any change that results from general economic conditions or conditions
generally affecting the industry.
9.16. No Exercise of COLA Options. No COLA Option shall have been
exercised during the period from the Agreement Date until the Closing.
10. TERMINATION OF AGREEMENT.
10.1. Termination. This Agreement may be terminated at any time prior
to the Closing, whether before or after approval by the shareholders of
COLA contemplated by this Agreement:
10.1.1. by the mutual written consent of COLA and MIDWEST.
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<PAGE> 35
10.1.2. unless otherwise agreed by the parties hereto, by MIDWEST or
COLA if the Closing shall not have occurred on or before July 19,
1996, provided that the right to terminate this Agreement under this
Section 10.1.2 shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such
date.
Any termination of this Agreement under this Section 10.1 will be effective
by the delivery of notice by the terminating party to the other parties hereto.
10.2. No Liability. Any termination of this Agreement in accordance with
this Section 10 will be without further obligation or liability upon any
party in favor of the other party hereto other than the obligations
provided in Section 11 hereof and in the Confidentiality Agreement dated as
of June 18, 1996 executed by COLA and MIDWEST providing for certain mutual
nondisclosure and nonuse agreements between COLA and MIDWEST which will
survive termination of this Agreement; provided, however, that (i) nothing
herein will limit the obligation of COLA and MIDWEST to use their best
efforts to cause the Merger to be consummated, as set forth in Section 5.9,
5.12 and 6.3 hereof, respectively, (ii) nothing herein shall relieve any
party from liability from any breach hereof, and (iii) each party shall be
entitled to any remedies at law or in equity for such breach.
11. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES, CONTINUING
COVENANTS.
11.1. Survival of Representations. All representations, warranties and
covenants of MIDWEST contained in this Agreement will remain operative and
in full force and effect, regardless of any investigation made by or on
behalf of COLA or the COLA Shareholders until the earlier of the
termination of this Agreement or the second (2nd) anniversary of the
Effective Time, whereupon such representations, warranties and covenants
will expire (except for covenants that by their terms survive for a longer
period). Unless otherwise specified herein, all representations, warranties
and covenants of COLA will remain operative and in full force and effect,
regardless of any investigation made by or on behalf of MIDWEST, and will
survive the Effective Time and continue until the second (2nd) anniversary
of the Effective Time, and covenants that by their terms survive thereafter
will continue to survive in accordance with their terms.
11.2. Agreement to Indemnify. Subject to the limitations set forth in this
Section 11, the COLA Shareholders shall jointly and severally indemnify and
hold harmless MIDWEST and the Surviving Corporation and their respective
officers, directors, agents, shareholders and employees, and each person,
if any, who controls or may control MIDWEST or the Surviving Corporation
within the meaning of the Securities Act (each hereinafter referred to
individually as an "Indemnified Person" and collectively as "Indemnified
Persons") from and against any
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<PAGE> 36
and all claims, demands, suits, actions, causes of actions, losses, costs,
damages, liabilities and expenses including, without limitation, reasonable
attorneys' fees, other professionals' and experts' reasonable fees and court or
arbitration costs (hereinafter collectively referred to as "Damages"):
11.2.1. Arising out of any misrepresentation or breach of or default
in connection with any of the representations, warranties and covenants
given or made by COLA or the COLA Shareholders in this Agreement, the
Plan of Merger or any certificate, document or instrument delivered by
or on behalf of COLA pursuant hereto (other than with respect to changes
that are not material in the truth or accuracy of the representations
and warranties of COLA under this Agreement after the date hereof if
COLA has advised MIDWEST of such changes in a written update to the COLA
Disclosure Letter that is delivered to MIDWEST prior to the Closing and
MIDWEST has nonetheless proceeded with the Closing); or
11.2.2. Arising out of any action, suit, arbitration, proceeding,
claim or investigation that is first brought after the Closing Date and
that arises from, concerns or relates to any product or services
licensed, sold or distributed by COLA prior to the Closing; or
11.2.3. Arising as a result of (i) any claim by a shareholder or
former shareholder or security holder of COLA, or any other person,
firm, corporation or entity seeking to assert, or based upon: ownership
or rights to ownership of any shares of stock of COLA (or shares of
stock of MIDWEST, cash or rights to receive cash or MIDWEST stock by
virtue of the conversion of COLA stock in the Merger); any rights of a
shareholder, including without limitation any options, warrants or
preemptive rights or rights to notice or to vote; any rights under the
Articles of Incorporation or Bylaws of COLA, any rights under any
agreement among COLA and its Shareholders, or any claim that his, her or
its shares were wrongfully repurchased by COLA; or (ii) any failure or
alleged failure of any shareholder of COLA to have good, valid and
marketable title to the issued and outstanding shares of COLA Stock held
by such shareholder, free and clear of all liens, claims, pledges,
options, adverse claims, assessments or charges of any nature
whatsoever, or to have full right, capacity and authority to vote such
COLA Stock in favor of the Merger and the other transactions
contemplated by this Agreement or the Plan of Merger.
11.3. Basket. The indemnification provided for in this Section 11 shall not
apply unless, and shall apply only to the extent that, the aggregate Damages
for which one or more Indemnified Persons seeks indemnification hereunder
exceeds One Million Dollars ($1,000,000) (the "Basket"). Notwithstanding the
foregoing, the provisions of this Section 11.3 shall not apply with respect to
any indemnification obligations of the COLA Shareholders under Section 11.5.
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<PAGE> 37
11.4. Limitation. Notwithstanding anything herein to the contrary,
except with respect to any claim for indemnification by an Indemnified
Person related to any matter set forth in Section 11.2.3 (for which there
shall be no time limit for MIDWEST to bring a claim for indemnification),
no claim for indemnification for Damages hereunder may be asserted by any
Indemnified Person unless such claim is first asserted on or before the
second (2nd) anniversary of the Effective Time. In addition, the maximum
liability of the COLA Shareholders to Indemnified Persons under this
Section 11 shall not exceed the aggregate sum of Eleven Million Dollar
($11,000,000); provided that such limitation on the COLA Shareholders'
indemnification obligations shall not apply to any claim or claims for
indemnification that involve fraudulent or willful misconduct on the party
of COLA or any COLA Shareholder. Notwithstanding the foregoing, the
provisions of this Section 11.4 shall not apply with respect to any
indemnification obligations of the COLA Shareholders under Section 11.5.
11.5. Special Indemnity. The COLA Shareholders shall jointly and severally
indemnify and hold harmless MIDWEST and the Surviving Corporation and their
respective officers, directors, agent, affiliates, shareholders and
employees, and each person, if any, who controls or may control MIDWEST or
the Surviving Corporation within the meaning of the Securities Act from and
against any and all damages arising in any manner from (i) any claim for
breach of Section 3.9 (taxes); (ii) Section 3.20 (Employee Benefit
Plans/ERISA); (iii) Section 3.21 (COLA Benefit Agreements); (iv) Section
3.22 (Employee Benefit Costs); (v) Section 3.23 (COBRA Notices); and (vi)
Section 3.30 (Environmental Matters).
12. INDEMNIFICATION BY MIDWEST. MIDWEST agrees to indemnify and hold harmless
ALL COLA Shareholders from and against any and all adverse tax consequences
incurred by them including interest and penalties arising out of any action or
omission by MIDWEST or MERGECO which action or omission within two years of the
Effective Date disqualifies the tax-free exchange treatment of the Merger.
13. MISCELLANEOUS.
13.1. Notice. Promptly after MIDWEST becomes aware of the existence of any
potential claim by an Indemnified Person for indemnity from the COLA
Shareholders under Section 11, MIDWEST will notify the COLA Shareholders of
such potential claim (provided that the failure of MIDWEST to give prompt
notice shall not affect the rights to indemnification, hereunder except to
the extent the COLA Shareholders demonstrate actual damage caused by such
failure) and will, to the extent that it can reasonably do so without
impairing its ability to adequately defend and respond to any such claim,
permit the COLA Shareholders to assist MIDWEST in the defense of such claim
and will cooperate with the COLA Shareholders in obtaining copies of any
records or other information which is relevant to the defense of such
claim. Prior to the settlement of any claim for which MIDWEST seeks
indemnity from a COLA Shareholder, MIDWEST will
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provide the COLA Shareholders with the terms of the proposed settlement and a
reasonable opportunity to comment on such terms.
13.2. Governing Law. The internal laws of the State of Iowa (irrespective of
its choice of law principles) will govern the validity of this Agreement, the
construction of its terms, and the interpretation and enforcement of the rights
and duties of the parties to this Agreement.
13.3. Assignment, Binding Upon Successors and Assigns. No party to this
Agreement may assign any of its rights or obligations under this Agreement
without the prior written consent of the other parties. This Agreement will be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns.
13.4. Severability. If any portion of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable so as to reasonably effect the intent of
the parties. The parties further agree to replace such invalid or unenforceable
provision with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of the void or
unenforceable provision.
13.5. Counterparts. This Agreement may be executed in separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.6. Other Remedies. Except as otherwise provided in this Agreement, any
and all remedies expressly conferred upon a party in this Agreement will be
deemed cumulative, with and not exclusive of any other remedy conferred by this
Agreement or by law. The exercise of any one remedy will not preclude the
exercise of any other remedy.
13.7. Amendment and Waivers. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach of this Agreement or default in the performance
of this Agreement will not be deemed to constitute a waiver of any other
default or any succeeding breach or default.
13.8. No Waiver. The failure of any party to enforce any of the provisions
of this Agreement shall not be construed to be a waiver of the right of such
party to enforce such provisions at a subsequent time.
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13.9. Expenses. Each party will bear its respective expenses and legal
fees incurred with respect to this Agreement, and the transactions
contemplated under this Agreement.
13.10. Attorneys' Fees. If a suit is brought to enforce or interpret
any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages,
reasonable attorneys' fees to be fixed by the court (including without
limitation, costs, expenses and fees on any appeal). The prevailing
party will be entitled to recover its costs of suit, regardless of
whether such suit proceeds to final judgment.
13.11. Notices. All notices and other communications required or
permitted under this Agreement will be in writing and will be either
hand delivered in person, sent by telecopier, sent by certified or
registered first class mail, postage prepaid, or sent by nationally
recognized express courier service. Such notices and other
communications will be effective upon receipt if hand delivered or sent
by telecopier, five (5) days after mailing if sent by mail, and one (1)
day after dispatch if sent by express courier, to the following
addresses, or such other addresses as any party may notify the other
parties in accordance with this section:
If to MIDWEST:
McLeod, Inc.
500 Town Centre
221 3rd Avenue SE
Cedar Rapids, Iowa 52401
If to COLA or the COLA Shareholders to the addresses set forth
on the signature pages.
or to such other address as a party may have furnished to the other
parties in writing pursuant to this section.
13.12. Construction of Agreement. This Agreement has been negotiated
by the respective parties and their attorneys and the language of this
Agreement and the related ancillary documents will not be construed for
or against either party. A reference to a section or an exhibit will
mean a section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings of this Agreement are for
reference purposes only and will not in any manner limit the
construction of this Agreement which will be considered as a whole.
13.13. Further Assurances. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to
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give such further written assurances as may be reasonably requested by any
other party to evidence and reflect the transactions contemplated by this
Agreement.
13.14. Absence of Third Party Beneficiary Rights. No provisions of this
Agreement (or any ancillary agreement) are intended, nor will be
interpreted, to provide or create any third party beneficiary rights or any
other rights of any kind in any client, customer, affiliate, shareholder,
partner or any party, unless specifically provided otherwise in this
Agreement, and, except as so provided, all provisions of this Agreement (or
any ancillary agreement) will be personal solely among the parties to this
Agreement (or the applicable ancillary agreement).
13.15. Public Announcement. Upon execution of this Agreement, MIDWEST and
COLA will issue a press release approved by both parties announcing the
agreement to enter into the Merger. Thereafter, MIDWEST may issue such
press release and make such other disclosures regarding the Merger, as it
determines are required under applicable securities laws.
13.16. Confidentiality. COLA and MIDWEST each confirm that they have
entered into a Confidentiality Agreement dated as of June 18, 1996 (the
"Confidentiality Agreement") and that they are each bound by, and will
abide by, the provisions of such Confidentiality Agreement (except that
MIDWEST will cease to be bound after the Merger becomes effective).
13.17. Entire Agreement. This Agreement and the related exhibits constitute
the entire understanding and agreement of the parties with respect to the
subject matter of this Agreement, and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties, other than the
Confidentiality Agreement. The express terms of this Agreement control and
supersede any course of performance of usage of the trade inconsistent with
any of the terms of this Agreement.
MCLEOD, INC.
By: /s/ Stephen C. Gray
--------------------
Name: Stephen C. Gray
Title: President
RUFFALO, CODY & ASSOCIATES, INC.
By: /s/ Albert P. Ruffalo
----------------------------
Albert P. Ruffalo, President
Address: 3181 Eagle Ct. N.E.
-----------------------
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/s/ Albert P. Ruffalo
- --------------------------------------
Albert P. Ruffalo
Address: 3181 Eagle Ct. N.E.
-----------------------------
Cedar Rapids, IA 52402
-----------------------------
/s/ Joseph P. Cunningham
- --------------------------------------
Joseph P. Cunningham
Address: 7150 Bettsy Ct. NE
-----------------------------
Cedar Rapids, IA 52411
-----------------------------
/s/ Laura L. Dement
- --------------------------------------
Laura L. Dement
Address: 3963 Sally Dr. NE
-----------------------------
Cedar Rapids, IA 52402
-----------------------------
/s/ Randy A. Snyder
- --------------------------------------
Randy A. Snyder
Address: 4820 Bever Ave. SE
-----------------------------
Cedar Rapids, IA 52403
-----------------------------
/s/ Brian P. Donnelly
- --------------------------------------
Brian P. Donnelly
Address: 7613 Princeton Dr. NE
-----------------------------
Cedar Rapids, IA 52402
-----------------------------
/s/ Clark E. McLeod
- --------------------------------------
Clark E. McLeod
Address:
-----------------------------
-----------------------------
/s/ Mary E. McLeod
- --------------------------------------
Mary E. McLeod
Address:
-----------------------------
-----------------------------
The COLA Shareholders
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EXHIBIT LIST
Exhibit A List of Ruffalo Management Shareholders
Exhibit B Plan of Merger
Exhibit C Articles of Merger
Exhibit D Escrow Agreement
Exhibit 2.1.1 Chart of Cash and Shares to be received by Ruffalo Shareholders
Exhibit 2.1.2 Chart of Options conversion
Exhibit 2.4A Officers Certificate
Exhibit 2.4B Officers Certificate
Exhibit 3.5 All Ruffalo Shareholders
Exhibit 3.6 Subsidiary List
Exhibit 3.13 List of Contracts
Exhibit 3.15 Intellectual Property
Exhibit 3.20 Employee Benefit Plans/ERISA
Exhibit 3.21 Benefit Arrangements
Exhibit 5.3 Conduct of Business
Exhibit 5.10 Investment Agreement
Exhibit 8.5 Opinion of Counsel
Exhibit 9.5 Opinion of Counsel
Exhibit 9.11 Employment Agreement and Lock-up Letter
Exhibit 9.12 Employment Agreement and Lock-up Letter
McLeod, Inc. agrees to furnish supplementally a copy of any of the exhibits
listed above to the Commission upon request.
<PAGE> 1
EXHIBIT 99
[MCLEOD LOGO]
McLeod, Inc.
221 3rd Avenue, SE Suite 500, Cedar Rapids, IA
Press Contact: Justin R Saylor
Financial Contact: Blake O. Fisher, CFO
Phone: (319)364-0000
FAX: (319)364-5555
FOR IMMEDIATE RELEASE
MCLEOD, INC. AGREES TO ACQUIRE RUFFALO, CODY & ASSOCIATES, INC.
Cedar Rapids, IA, Jul 15 -- MCLEOD, Inc. (NASDAQ:MCLD) announced today that it
has signed an agreement to acquire 100% of the outstanding shares of RUFFALO,
CODY & ASSOCIATES, Inc.'s common stock in a cash and stock transaction valued
at up to $21,000,000. This agreement will bring together two of eastern Iowa's
fastest growing companies. The agreement remains subject to the satisfaction of
certain conditions.
MCLEOD, Inc. is a provider of integrated local and long distance services to
small and medium-sized businesses primarily in Iowa and Illinois. On June 21,
1996, MCLEOD, Inc. introduced its PrimeLine service to residential customers in
the Cedar Rapids and Iowa City markets. PrimeLine includes local phone service,
long distance, voice mail, Internet access, and paging services.
The acquisition would provide MCLEOD, Inc. with direct marketing expertise and
resources needed to help accelerate its growth. RUFFALO, CODY & ASSOCIATES,
Inc. is headquartered in Cedar Rapids and currently employs over 550 full and
part-time staff. RUFFALO, CODY & ASSOCIATES, Inc. reported sales of $13.3
million for the fiscal year ended December 31, 1995 and specializes in a number
of direct marketing and telemarketing services, including telecommunications
and technology sales, as well as a variety of fund raising services. As a
wholly-owned subsidiary of MCLEOD, Inc., RUFFALO, CODY &
- --------------------------------------------------------------------------------
<PAGE> 2
ASSOCIATES, INC. would continue to operate with its existing management and
would continue in its fund raising and commercial sales operations.
The acquisition would bring together a number of executives who worked together
in the past. MCLEOD, Inc. employs several former Teleconnect executives,
including Chairman and CEO Clark McLeod, President and COO Steve Gray, among
others. RUFFALO, CODY & ASSOCIATES, Inc. President, Al Ruffalo, along with his
four senior executives and other senior management, were also part of the
Teleconnect organization.
"Strategically, this is a positive step in the right direction," said Steve
Gray. "It will provide MCLEOD, Inc. with the direct marketing resources we will
need to accomplish our growth plans." Al Ruffalo said, "I believe the
partnership with MCLEOD, Inc. is beneficial to all of our customers,
shareholders, and employees. I am looking forward to the new opportunities
this business combination will provide. Our expertise in direct marketing in
the telecommunications industry should prove valuable in the introduction of
MCLEOD, Inc.'s new products."
The acquisition agreement was signed on July 12, 1996 and it is anticipated
that the acquisition will be completed on Monday, July 15, 1996 with
approximately $4.9 million of the purchase price to be paid in the form of cash
and the remainder of the purchase price to be paid in the form of 632,816
shares of MCLEOD, Inc. class A common stock, which will be restricted as to
resale. Payment of a portion of the purchase price would be deferred pending
satisfaction of certain conditions relating to ongoing revenues of RUFFALO,
CODY & ASSOCIATES, Inc. Salomon Brothers served as financial advisor to MCLEOD,
Inc.
Prior to forming McLeod, Inc., Clark McLeod founded Teleconnect Company in 1980
which became Telecom*USA and grew to the nation's fourth largest long distance
carrier. In 1990, Telecom*USA was sold to MCI Communications Inc., for $1.25
billion dollars.
