<PAGE> 1
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
SCHEDULE 14C INFORMATION
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
Payment of Filing Fee (check the appropriate box):
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11
(1) Title of each class of securities to which
transaction applies: Common
(2) Aggregate number of securities to which transaction
applies: 4,000,000
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is
calculated and state how it is determined): $1.078125
per share based on average bid and ask price as of
April 29, 1998.
(4) Proposed maximum aggregate value of transaction:
$4,312,500.00
(5) Total fee paid: $900.00
Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
(1) Amount Previously Paid;
(2) Form, Schedule or Registration Statement No.;
(3) Filing Party;
(4) Date Filed;
<PAGE> 2
NATIONAL DIAGNOSTICS, INC.
755 WEST BRANDON BOULEVARD
BRANDON, FLORIDA 33511
April 30, 1998
Dear Stockholder:
As you may be aware, on February 23, 1998, NATIONAL DIAGNOSTICS, INC.
(the "Company") entered into a Merger Agreement, as amended by a First Amendment
dated and made effective March 17, 1998 and by a Second Amendment dated and made
effective April 29, 1998 (the "Merger Agreement"), with AMERICAN ENTERPRISE
SOLUTIONS, INC., a Florida corporation ("AES"), providing for the merger (the
"Merger") of AES with and into the Company. The Merger Agreement, as amended, is
attached as Appendix A to the accompanying Information Statement. The closing of
the Merger is expected to occur during late May or early June, 1998, subject to
the satisfaction of certain closing conditions.
As permitted by Article Third of the Company's Articles of
Incorporation, and pursuant to applicable provisions of the Florida Business
Corporation Act, effective March 19, 1998, the Company's Board of Directors
amended the Company's Articles of Incorporation to provide for the issuance of
up to a maximum of 1,000,000 shares of Series A Preferred Stock (the "Company
Preferred Stock"). The rights and preference of the Company Preferred Stock are
set forth in the Articles of Amendment to the Company's Articles of
Incorporation which became effective on March 19, 1998. A copy of the Articles
of Amendment referred to hereinabove is attached as Appendix B to the
accompanying Information Statement.
Pursuant to the terms and conditions of a Stock Purchase Agreement (the
"Stock Purchase Agreement") dated March 19, 1998 by and between the Company and
AES, as of March 27, 1998 the Company had sold 500,000 shares of Company
Preferred Stock to AES for a purchase price of marketable securities valued in
excess of $2,000,000.00. Each share of Company Preferred Stock is convertible
into 44.11 shares of the Company's Common Stock (the "Company Common Stock"). On
March 27, 1998, AES exercised its conversion right and converted 131,185 shares
of Company Preferred Stock into 5,786,570 shares of Company Common Stock. On
March 30, 1998, Mr. Charles Broes, the current Chief Executive Officer of AES,
and Mr. Cardwell C. Nucklos, Ph.D, were appointed to the Company's Board of
Directors and on March 31, 1998, Mr. Charles Broes was appointed as the
Company's Chief Executive Officer.
The Board of Directors of the Company has approved the Merger of AES
with and into the Company. AES, owning beneficially and of record an aggregate
of approximately 65% of the issued and outstanding shares of Company Common
Stock and 100% of the issued and outstanding Company Preferred Stock, has
provided its written consent and approval of the Merger, thereby satisfying the
requirements of the Florida Business Corporation Act and the Company's Articles
of Incorporation for stockholder approval of the Merger. For this reason,
<PAGE> 3
the Company is not calling a special meeting of the stockholders in respect of
the proposed Merger and is not asking you for a proxy or consent.
Stockholders of the Company have the right to dissent from the Merger
under and pursuant to Sections 607.1301, 607.1302 and 607.1320 of the Florida
Business Corporation Act.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY. STOCKHOLDERS ARE URGED TO READ CAREFULLY
THIS INFORMATION STATEMENT IN ITS ENTIRETY.
The attached Information Statement is being provided to you pursuant to
Rule 14c-2 under the Securities Exchange Act of 1934, as amended. The
Information Statement contains a more detailed description of the Merger.
Very truly yours,
Charles Broes
Chief Executive Officer
2
<PAGE> 4
NATIONAL DIAGNOSTICS, INC.
755 WEST BRANDON BOULEVARD
BRANDON, FLORIDA 33511
- - --------------------------------------------------------------------------------
INFORMATION STATEMENT
- - --------------------------------------------------------------------------------
April 30, 1998
INTRODUCTION
This Information Statement is being furnished by the Board of Directors
of National Diagnostics, Inc., a Florida corporation (the "Company"), to holders
of the outstanding shares of Common Stock, no par value (the "Company Common
Stock") and holders of the outstanding shares of the Preferred Stock, no par
value (the "Company Preferred Stock") of the Company, in connection with the
Agreement and Plan of Merger, dated as of February 23, 1998 (the "Merger
Agreement"), by and between the Company and American Enterprise Solutions, Inc.,
a Florida corporation ("AES"), pursuant to which AES will be merged with and
into the Company, and the Company will be the surviving corporation (the
"Merger").
AES currently owns an aggregate of 5,786,570 shares of Company Common
Stock and 368,815 shares of Company Preferred Stock. Each share of Company
Preferred Stock is convertible into 44.11 shares of Company Common Stock. An
additional 3,093,430 shares of Company Common Stock are owned by stockholders
other than AES. Therefore, at the present time, an aggregate of 8,880,000 shares
of Company Common Stock are issued and outstanding. In conjunction with the
Merger, the Company proposes to issue a stock dividend to holders of Company
Common Stock based on the following formula:
x = $3.50 - y
---------
y
where x = the dividend (i.e., the number of additional shares
of Company Common Stock to be issued on each
outstanding share of Company Common Stock).
$3.50 = the valuation of each share of Company Common Stock,
based on projected revenues for 1998.
y = the average market price of each share of Company
Common Stock during the 5 business days immediately
preceding the closing date.
For example, if y = $1.125, each outstanding share of Company Common Stock will
receive a dividend of [3.50 - 1.125] = 2.11 shares of Company Common Stock.
------------
1.125
<PAGE> 5
The declaration and payment of such a dividend will require the
availability of approximately 18,745,680 additional shares of Company Common
Stock. However, because the Company's Articles of Incorporation currently
provide for the issuance of a maximum of 9,000,000 shares of Company Common
Stock, of which amount a total of 8,880,000 shares have already been issued and
are currently outstanding, at the present time the Company can only issue an
additional 120,000 shares of Company Common Stock. It will therefore be
necessary to amend the Company's Articles of Incorporation to, among other
things, provide for the issuance of at least an additional 18,625,680 shares of
Company Common Stock.
After payment of the contemplated stock dividend, a total of 27,505,680
shares of Company Common Stock will be issued and outstanding; 18,002,019 of
these shares (approximately 65%) will be owned by AES, and the remaining
9,623,661 shares (approximately 35%) will be owned by other stockholders of NDI.
Shortly after payment of the stock dividend described above, but before
the closing of the Merger, the Company will effect a stock combination
transaction of all issued and outstanding Company Common Stock in accordance
with the provisions of Section 607.10025 and 607.1003 of the Florida Business
Corporation Act (the "FBCA") such that AES will own approximately 2,000,000
shares of Company Common Stock and the other stockholders of NDI will own
approximately 1,000,000 shares of Company Common Stock.
In conjunction with the Merger, the approximately 2,000,000 shares of
Company Common Stock and 368,815 shares of Company Preferred Stock owned by AES
will be canceled.
It is anticipated that on the date of closing the Merger, there will be
approximately 6,000,000 shares of AES Common Stock issued and outstanding. In
conjunction with and upon consummation of the Merger, each outstanding share of
AES Common Stock will be exchanged for one share of Company Common Stock. As a
result of the Merger, the AES stockholders will own approximately 6,000,000
shares (85.7%) of the issued and outstanding Company Common Stock, while other
NDI stockholders will own approximately 1,000,000 (14.3%) of the issued and
outstanding Company Common Stock.
In accordance with the requirements of Section 607.1103 of the FBCA and
the Company's Articles of Incorporation, the Merger Agreement requires the
approval and adoption by the affirmative vote of the holders of a majority of
the outstanding shares of the Company Common Stock and 66 2/3% of the aggregate
votes entitled to be cast by the holders of the Company Preferred Stock. As of
March 27, 1998 there were 8,880,000 shares of Company Common Stock issued and
outstanding, each share of which was entitled to one (1) vote on the proposal to
approve and adopt the Merger Agreement, and 368,815 shares of Company Preferred
Stock issued and outstanding, each of which was entitled to eight (8) votes on
the proposal to approve and adopt the Merger Agreement. On April 3, 1998, AES,
as the record and beneficial owner of 5,786,570 shares of Company Common Stock,
or approximately 65% of the outstanding shares of Company Common Stock, and 100%
of the outstanding shares of
(ii)
<PAGE> 6
Company Preferred Stock, executed a written consent in favor of the approval and
adoption of the Merger Agreement (the "Stockholder's Consent"). Pursuant to
Section 607.1103 of the FBCA and the Company's Articles of Incorporation, no
additional approval by the Company's stockholders is required with respect to
the Merger Agreement.
The effective date of the Merger will be the date and time of the
filing of Articles of Merger with the Secretary of State of the State of Florida
(the "Effective Time"), which is scheduled to occur following satisfaction of
certain closing conditions, but not earlier than 20 days after the mailing of
this Information Statement.
THE TRANSACTION DESCRIBED HEREIN HAS NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") NOR HAS THE SEC PASSED
UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
This Information Statement is expected to be mailed on or about May 10,
1998 to holders of record of Company Common Stock and Company Preferred Stock on
May 10, 1998.
(iii)
<PAGE> 7
THIS INFORMATION STATEMENT IS DATED May 10, 1998.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION STATEMENT SUMMARY.......................................................................... 1
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY...................................................... 3
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING...................................................... 5
DISSENTERS' RIGHTS..................................................................................... 6
THE MERGER............................................................................................. 7
THE MERGER AGREEMENT................................................................................... 10
SOURCE AND AMOUNT OF FUNDS............................................................................. 12
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT............................................... 12
AVAILABLE INFORMATION.................................................................................. 13
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................ 14
</TABLE>
APPENDIX A: The Merger Agreement
ANNEX V: Form of Representation, Warranties and Covenants of the
directors and officers of AES
APPENDIX B: Articles of Amendment to Articles of Incorporation
APPENDIX C: Sections 607.1301, 607.1302 and 607.1320 of the Florida
Business Corporation Act
(iv)
<PAGE> 8
INFORMATION STATEMENT SUMMARY
The following is a brief summary of more detailed information contained
elsewhere, or incorporated by reference, in this Information Statement. Certain
capitalized terms used in this Summary are defined elsewhere in this Information
Statement. Reference is made to, and this Summary is qualified in its entirety
by, the more detailed information contained in this Information Statement and in
the Appendixes hereto. Stockholders are urged to read carefully this Information
Statement, including the Appendixes hereto, in its entirety.
GENERAL. This Information Statement is being delivered in connection
with the merger of AES with and into the Company. A copy of the Merger Agreement
is attached hereto as Appendix A.
THE COMPANY AND AES. The Company is a Florida corporation with its
principal executive offices at 755 West Brandon Boulevard, Brandon, FL 33511 and
its telephone number is (813) 661-9501. The Company's principal line of business
is the provision of full service diagnostic imaging services through outpatient
centers and mobile facilities located in Florida. Diagnostic imaging services
provided by the Company include magnetic resonance imaging, computer tomography,
ultrasound, nuclear medicine, general radiology, fluoroscopy, and mammography
and neurology studies. AES is a Florida corporation with its principal executive
offices located at 6313 Johnson Road, Suite 201, Tampa, FL 33634 and its
telephone number is (813) 882-6567. AES' principal line of business is the
acquisition of seasoned and profitable high growth firms with operations and
facilities to create community healthcare delivery systems. These systems are
designed to provide comprehensive delivery of all healthcare services while
electronically interactively linking with AES's proprietary internet-intranet
and virtual network gateways.
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING. The FBCA and the
Company's Article of Incorporation provide that the adoption of any plan of
merger by the Company requires the approval of the Company's Board of Directors
and the affirmative vote of the holders of a majority of the outstanding share
of the Company Common Stock entitled to vote thereon and 66 2/3% of the
aggregate votes entitled to be cast by the holders of the Company Preferred
Stock. The Board of Directors of the Company has authorized and approved the
Merger Agreement and the Merger. AES has a controlling voting interest in the
Company by virtue of its ownership of and right to vote 5,786,570 shares of
Company Common Stock, or approximately 65% of the outstanding shares of Company
Common Stock, and 368,815 shares of the Company Preferred Stock, or 100% of the
outstanding shares of Company Preferred Stock. On April 3, 1998, AES, as the
record and beneficial owner of 5,786,570 shares of Company Common Stock, or
approximately 65% of the outstanding shares of Company Common Stock, and 100% of
the outstanding shares of Company Preferred Stock, executed a written consent in
favor of the approval and adoption of the Merger Agreement (the "Stockholder's
Consent"). Pursuant to Section 607.1103 of the FBCA and the Company's Articles
of Incorporation, no additional approval by Company stockholders is required
with respect to the Merger Agreement.
<PAGE> 9
DISSENTERS' RIGHTS. Under the FBCA, holders of shares of Company Common
Stock who otherwise strictly comply with the applicable requirements of the FBCA
may dissent from the Merger and demand payment in cash of the fair value of
their shares of Company Common Stock. A copy of Sections 607.1301, 607.1302 and
607.1320 of the FBCA, pertaining to Dissenters' is attached hereto as Composite
Appendix C.
THE MERGER.
BACKGROUND TO THE MERGER. For a description of events leading
to the approval of the Merger Agreement by the Board of the Company, see "THE
MERGER -- Background to the Merger."
APPROVAL OF THE BOARD. On April 2, 1998, the Board of the
Company unanimously determined that the Merger Agreement and the Merger were
fair to and in the best interests of the stockholders of the Company and
approved and adopted the Merger Agreement and the Merger.
INTEREST OF CERTAIN PERSONS IN THE MERGER. The FBCA permits a
company to indemnify its officers and directors under certain specified
circumstances and also requires such indemnification under specified
circumstances. The Bylaws of AES, which will become the Bylaws of the surviving
company, also contain provisions providing for mandatory indemnification of
officers and directors in certain circumstances. Pursuant to these Bylaws, the
Company will be expected to indemnify and hold harmless the present and former
officers and directors of the Company in respect of any of their acts or
omissions occurring prior to the Effective Time.
OPINIONS OF FINANCIAL ADVISORS. The Board of Directors of the
Company did not obtain any opinions from any financial advisors that the terms
and conditions of the Merger are fair to the stockholders of the Company from a
financial point of view.
CONDITIONS TO THE MERGER. The Merger Agreement provides that
the respective obligations of each party to effect the Merger are subject to the
satisfaction on or prior to the Merger becoming effective (the "Effective Time")
of the following conditions: (1) the Merger Agreement shall have been adopted by
the stockholders of the Company in accordance with Florida law, (2) all actions
by or in respect of or filing with any governmental body, agency, official or
authority required to permit the consummation of the Merger shall have been
obtained, and (3) the performance by the parties in all material respects of
their respective obligations under the Merger Agreement prior to the Effective
Time and the truth in all material respects of the parties' representations and
warranties at the Effective Time. The condition set forth in clause (1) above
has been satisfied by the execution of the Stockholder's Consent by AES, the
holder of 65% of the Company Common Stock and 100% of the Company Preferred
Stock.
2
<PAGE> 10
In addition, the obligations of AES and the Company to effect
the Merger are subject to the satisfaction of the further following conditions:
(1) no action shall be instituted or pending by anyone before a court or any
other governmental agency or body challenging the Merger in any way or seeking
to restrain or prohibit AES' merger with and into the Company or to restrain or
prohibit the stockholders of AES from acquiring shares of Company Stock, (2)
each of the directors and officers of AES shall have executed and delivered the
Letter of Representations, Warrants and Covenants in the form attached to
Appendix A hereto, and (3) AES and the Company shall have completed, to their
respective satisfaction, due diligence examination of each other's sites,
properties, books, records and financial and operating data.
REGULATORY MATTERS. To the best of the parties' knowledge,
federal or state regulatory approval is required for the Merger.
SOURCE AND AMOUNT OF FUNDS. The total amount of funds required
to pay fees and expenses related to the Merger is estimated to be approximately
$100,000.00. The source of such funds will be a portion of the $2,000,000 in
cash and marketable securities received from AES in consideration for the
Company's sale of 500,000 shares of Company Preferred Stock to AES.
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY
Set forth below is certain selected financial information with respect
to the Company excerpted or derived from the information contained in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1996. Financial information pertaining to the fiscal year ended December 31,
1997 is unaudited, and the Company's Annual Report on Form 10-KSB has not yet
been filed with the Commission. More comprehensive financial information is
included in such reports and other documents filed by the Company with the
Securities and Exchange Commission (the "Commission") and incorporated herein by
reference, and the following selected financial data is qualified in its
entirety by reference to such reports and such other documents and all the
financial information (including any related notes) contained therein. Such
reports and other documents are available for inspection and copies thereof
should be obtainable in the manner set forth below under "AVAILABLE
INFORMATION".
3
<PAGE> 11
NATIONAL DIAGNOSTICS, INC.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1995 1996 1997
(unaudited)
<S> <C> <C> <C> <C>
OPERATING RESULTS
Revenues 3,708,603 6,232,515 8,876,652 9,942,050
Net Income ** 119535 (835,058) (1,241,661) (1,910,131)
**proforma amount
PER SHARE DATA
Net Income ** 119535 (835,058) (1,241,661) (1,910,131)
Dividends 0 0 0 0
Weighted Ave. No. of Shares 1,331,507 1,887,672 2,579,380 3,159,884
Book Value $ 1.48 $ 0.67 $ 0.11 ($ 0.33)
FINANCIAL POSITION
Total Assets 5,872,303 7,029,260 9,199,677 8,108,847
Short-term Debt 1,243,659 2,514,926 4,616,064 5,908,278
Long-Term Debt 2,656,011 3,240,903 4,310,595 3,258,948
Stockholders' equity 1,972,633 1,273,431 273,018 (1,058,379)
Total Capital 1,973,633 1,273,431 273,018 (1,058,379)
OTHER DATA
Debt as % of total Capital 197.7% 452.0% 3269.6% -866.2%
</TABLE>
4
<PAGE> 12
PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are traded on the OTB Bulletin Board under the symbol
"NATD." The following table sets forth, for each of the periods indicated, the
high and low reported sales prices per share as reported on the OTB Bulletin
Boards.
<TABLE>
<CAPTION>
1994 HIGH LOW
---- ---
<S> <C> <C>
Fourth Quarter (from October 12) $4-3/4 $3
1995
First Quarter $6-1/4 $1-7/8
Second Quarter $4 $1-1/2
Third Quarter $1-7/8 $1
Fourth Quarter $3-1/2 $1-11/16
1996
First Quarter $3-3/8 $2-5/16
Second Quarter $4-1/2 $2-1/2
Third Quarter $4 $2-1/2
Fourth Quarter $2-3/4 $1-11/16
1997
First Quarter $2-7/16 $1-1/4
Second Quarter $1-41/64 $0-13/6
Third Quarter $1-7/8 $0-5/8
Fourth Quarter $0-30/32 $0-14/32
</TABLE>
On February 23, 1998, the last day of trading activity before the
public announcement of the execution of the Merger Agreement, the high and low
sales prices per share of the Company Common Stock as reported on the OTB
Bulletin Board were $1.1875 and $1.1875, respectively. Share prices are as
reported on the OTB Bulletin Board based on published financial sources.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING
The FBCA and the Company's Article of Incorporation provide that the
adoption of any plan of merger by the Company requires the approval of the
Company's Board of Directors and
5
<PAGE> 13
the affirmative vote of the holders of a majority of the outstanding share of
the Company Common Stock entitled to vote thereon and 66 2/3% of the aggregate
votes entitled to be cast by the holders of the Company Preferred Stock. The
Board of Directors of the Company has authorized and approved the Merger
Agreement and the Merger. AES has a controlling voting interest in the Company
by virtue of its ownership of and right to vote 5,786,570 shares of Company
Common Stock, or approximately 65% of the outstanding shares of Company Common
Stock, and 368,815 shares of the Company Preferred Stock, or 100% of the
outstanding shares of Company Preferred Stock. On April 3, 1998, AES, as the
record and beneficial owner of 5,786,570 shares of Company Common Stock, or
approximately 65% of the outstanding shares of Company Common Stock, and 100% of
the outstanding shares of Company Preferred Stock, executed a written consent in
favor of the approval and adoption of the Merger Agreement (the "Stockholder's
Consent"). Pursuant to Section 607.1103 of the FBCA and the Company's Articles
of Incorporation, no additional approval by Company stockholders is required
with respect to the Merger Agreement.
DISSENTERS' RIGHTS
Holders of shares of the Company's stock are entitled to dissenters'
rights in accordance with Sections 607.1301, 607.1302 and 607.1320 of the FBCA
(which is reproduced in full in Appendix C hereto). Such dissenters' rights, if
the statutory procedures are complied with, would result in a determination of
the "fair value" of the shares of the Company's stock ("Shares") owned by such
holders, to be paid upon the amount determined to be the fair value.
No provision has been made by the Company, to allow access to the
Company's files by unaffiliated stockholders or to obtain counsel or appraisal
services at the expense of the Company.
THE FOLLOWING SUMMARY IS NOT A COMPLETE STATEMENT OF THE LAW RELATING TO
DISSENTERS RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX C.
THIS SUMMARY AND APPENDIX C SHOULD BE REVIEWED CAREFULLY BY ANY STOCKHOLDER WHO
WISHES TO EXERCISE STATUTORY DISSENTERS' RIGHTS.
Any stockholder entitled to dissenters' rights may, within 20 days
after the date of mailing of this Information Statement, file with the Company a
notice of his or her election to dissent. Such notice must inform the Company of
the Stockholder's name and address, the number, classes, and series of shares as
to which he or she dissents, and a demand for payment of the fair value of his
or her shares. A stockholder who elects to exercise dissenters' rights must mail
or deliver such stockholder's written notice of election to dissent to the
President of the Company at 755 West Brandon Boulevard, Brandon, Florida 33511.
A notice of election to dissent must be executed by or for the
stockholder of record, fully and correctly, as such stockholder's name appears
on the certificate or certificates representing
6
<PAGE> 14
the stockholder's Shares. If the Shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian, or custodian, such notice of election
to dissent must be executed by the fiduciary. If the Shares are owned of record
by more than one person, as in a joint tenancy or tenancy in common, such notice
of election to dissent must be executed by all joint owners. An authorized
agent, including an agent for two or more joint owners, may execute the notice
of election to dissent for a stockholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in electing to
dissent, such person is acting as agent for the record owner.
Upon filing a notice of election to dissent in compliance with the
requirements of the FBCA, a stockholder will not be entitled to vote for any
purpose the Shares subject to such notice or to receive payment of dividends or
other distributions on such Shares, except for dividends or distributions
payable to stockholders of record at a date prior to the date of filing the
notice.
A notice of election to dissent may be withdrawn in writing by the
stockholder at any time before an offer is made by the Company to pay for his or
her Shares. After such an offer is made, no such notice of election may be
withdrawn unless the Company consents thereto.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTIONS 607.1301, 607.1302 AND
607.1320 OF THE FBCA FOR EXERCISING DISSENTERS' RIGHTS MAY RESULT IN
THE LOSS OF SUCH RIGHTS.
THE MERGER
BACKGROUND TO THE MERGER. In early November, 1997, AES approached the
Company about a possible combination of AES and the Company. Preliminary
discussions between the parties ensued and AES indicated it had a serious
interest in pursuing the combination of the Company and AES.
There were no additional or further discussions between the Company and
AES between November 1997 and February 1, 1998. On February 1, 1998 negotiations
and discussions with AES were resumed.
On February 2, 1998, a Letter of Intent to merge was entered into
between AES and the Company wherein, among other things, the parties agreed to
keep confidential all technical, financial and other information received by
each of them concerning the other's operations. Thereafter the Company was given
certain confidential information concerning AES' business which it used to value
AES and to formulate an offer to acquire AES. Site visits to Company facilities
and AES facilities were also conducted.
Between February 2, 1998 and February 20, 1998, the parties held
several meetings for purposes of negotiations and discussions. At a meeting on
February 20, 1998, the terms of the
7
<PAGE> 15
Merger Agreement were negotiated in final form and discussions concerning due
diligence, document preparation and various legal issues were concluded. On
February 24, 1998 it was publicly announced that a definitive agreement to merge
has been entered into.
On March 17, 1998, pursuant to further discussions and consultations
the Company and AES executed a First Amendment to the Merger Agreement to
memorialize and set forth their mutual agreement on matters pertaining to, among
other things, the issuance of Company Common Stock to AES and the timing of the
stock combination transaction provided for in the Merger Agreement.
Special meetings of the Boards of Directors of the Company and of AES
were held on April 2, 1998. At those meetings the Merger and the terms of the
Merger Agreement were unanimously approved by the respective Boards of Directors
after presentations by their respective management. The Stockholder's Consent
was executed on April 3, 1998.
RECOMMENDATION OF BOARD. Prior to recommending the Merger, management
of the Company held negotiations and discussions with another company that was
apparently interested in merging with the Company. Those negotiations and
discussions proved fruitless and were therefore terminated. Management believed
and recommended to the Board that the transaction with AES represented the most
advantageous opportunity for the stockholders of the Company.
The Boards of Directors of the Company and AES in connection with the
actions taken to approve the Merger considered a number of factors, including
the following:
(I) FINANCIAL CONDITION, RESULTS OF OPERATIONS, FUTURE OF
THE COMPANY. The Board of the Company considered the financial condition,
results of operations, business and prospects of the Company, including its
prospects if it were to remain independent. If considered the Company's current
strategic plan, including the costs of such plan and the risks for the Company
involved in its implementation. The Board and also considered the highly
competitive environment in which the Company operates.
(II) OTHER POTENTIAL TRANSACTIONS. The Board of the Company
also considered the fact that no other offers under the favorable terms and
conditions agreed to by AES had been received. Although a prior party expressed
interest in considering the possibility of acquiring the Company that
acquisition did not materialize.
(III) HISTORICAL STOCK PRICE PERFORMANCE. The Board of the
Company reviewed the historical stock price performance of the Company and noted
that the successful consummation of the Merger may have a positive effect on the
price of the Company Common Stock.
8
<PAGE> 16
(iv) TERMS AND CONDITIONS OF THE MERGER. The Board of the
Company also considered the terms and conditions of the Merger Agreement
including the fact that each officer and director of AES will be required to
execute and deliver to the Company the form of Letter of Representations,
Warranties and Covenants attached to the Merger Agreement as APPENDIX V.
(v) OTHER CONSIDERATIONS. The Board of the Company also
considered the financial ability of AES to consummate the Merger. They also
considered the possible impact of the Merger and of alternatives thereto on the
Company's business and prospects.
The foregoing discussion of the information and factors considered and
given weight by the Board of Directors of the Company is not intended to be
exhaustive. In view of the variety of factors considered in connection with
their evaluation of the Merger, they did not find its practicable to, and did
not, quantify or otherwise assign relative weights to the specific factors
considered in reaching their determination. In addition, individual members of
the Board of the Company may have given different weights to different factors.
INTERESTS OF CERTAIN PERSONS IN THE MERGER.
INDEMNIFICATION. There are no provisions in the Merger
Agreement requiring the Company, as the surviving corporation, to indemnify and
hold harmless the present and former officers and directors of AES in respect of
any of their acts or omissions occurring prior to the Effective Time. However,
the FBCA permits a company to indemnify its officers and directors under certain
specified circumstances and also requires such indemnification under specified
circumstances. The Bylaws of AES, which will become the Bylaws of the surviving
company, also contain provisions providing for mandatory indemnification of
officers and directors in certain circumstances. Pursuant to these Bylaws, the
Company will be expected to indemnify and hold harmless the present and former
officers and directors of the Company in respect of any of their acts or
omissions occurring prior to the Effective Time.
CONFIDENTIALITY. The Letter of Intent and Merger Agreement requires the
parties thereto to keep confidential all technical, financial, operational, and
other proprietary information received from the other, regarding their
respective businesses, in connection with their preparation for and consummation
of the Merger.
ACCOUNTING TREATMENT OF THE MERGER. The Merger will be accounted for
under the "purchase" method of accounting, whereby the purchase price for the
Company will be allocated to the identifiable assets and liabilities of the
Company and its subsidiaries based on their respective fair values.
REGULATORY MATTERS. To the best of the parties' knowledge, federal or
state regulatory approval is not required for the Merger.
9
<PAGE> 17
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger
Agreement. This summary is not a complete description of the terms and
conditions of the Merger Agreement and is qualified in its entirety by reference
to the full text thereof, which is attached hereto as Appendix A. Capitalized
terms used and not otherwise defined herein shall have the meanings assigned to
them in the Merger Agreement.
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The Merger
Agreement provides that the respective obligations of each party to effect the
Merger are subject to the satisfaction on or prior to the Merger becoming
effective (the "Effective Time") of the following conditions: (1) the Merger
Agreement shall have been adopted by the stockholders of the Company in
accordance with Florida law, (2) all actions by or in respect of or fillings
with any governmental body, agency, official or authority required to permit the
consummation of the Merger shall have been obtained, and (3) the performance by
the parties in all material respects of their respective obligations under the
Merger Agreement prior to the Effective Time and the truth in all material
respects of the parties' representations and warranties at the Effective Time.
The condition set forth in clause (1) above has been satisfied by the execution
of the Stockholder's Consent by AES, the holder of 65% of the Company Common
Stock, and 100% of the Company Preferred Stock.
In addition, the obligations of AES and the Company to effect the
Merger are subject to the satisfaction of the further following conditions: (1)
no action shall be instituted or pending by anyone before a court or any other
governmental agency or body challenging the Merger in any way or seeking to
restrain or prohibit AES' merger with and into the Company or to restrain or
prohibit the stockholders of AES from acquiring shares of Company Stock, (2)
each of the directors and officers of AES shall have executed and delivered the
Letter of Representations, Warrants and Covenants in the form attached to
Appendix A hereto, and (3) AES and the Company shall have completed, to their
respective satisfaction, due diligence examination of each other's sites,
properties, books, records and financial and operating data.
TERMINATION OF THE MERGER AGREEMENT. The merger agreement may be
terminated and the Merger contemplated thereby may be abandoned at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company: (i) by mutual consent of the boards of directors of
the Company and AES; (ii) by AES (acting through its board of directors) if the
transactions contemplated by the Merger Agreement to take place at the Closing
shall not have been consummated by August 1, 1998, unless the failure of such
transactions to be consummated is due to the willful failure of AES to perform
any of its obligations under the Merger Agreement to the extent required to be
performed by it prior to or on the Closing Date; or (iii) by AES (acting through
its board of directors) on the one hand, or by the Company (acting through its
board of directors), on the other hand, if a material breach or default shall be
made by the other party in the observance or in the due and timely performance
of any of the covenants, agreements or conditions contained in the Merger
Agreement, and the curing of such default shall not have been made within 30
days after notice of the default is given. In the
10
<PAGE> 18
event the Merger Agreement is terminated as described in this paragraph, the
Merger Agreement shall forthwith become void and of no effect with no liability
on the part of any party to the Merger Agreement, except with respect to certain
specified provisions (including the provisions as to confidentiality,
indemnification, and the provisions described below under Fees and Expenses)
which survive the termination. Termination of the Merger Agreement in accordance
with the provisions specified in this paragraph does not release any party from
any liability for any willful breach by such party of the terms and provisions
of the Merger Agreement.
FEES AND EXPENSES. The Merger Agreement provides that all costs and
expenses in connection with the Merger Agreement and the transaction
contemplated by the Merger Agreement shall be paid by the party incurring such
cost and expense, whether or not the Merger is consummated. Neither the Company
nor AES is paying a fee to an investment banker, broker or other entity in
connection with the Merger.
CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that
the Company will conduct its business in the ordinary course consistent with
past practice. The Merger Agreement further provides that, during the period
from the date of the Merger Agreement to the Effective Time of the Merger, the
Company will not, without the prior consent of AES:
(i) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except
if it is in the normal course of business, consistent with
past practice or involves an amount not in excess of $5,000,
including contracts to provide services to customers;
(ii) increase the compensation payable or to become payable to any
officer, director, stockholder, employee or agent, or make any
bonus or management fee payment to any such person, except for
obligations under existing contracts or arrangements;
(iii) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties
whether now owned or hereafter acquired;
(iv) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(v) negotiate for the acquisition of any business or the start-up
of any new business;
(vi) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
11
<PAGE> 19
(vii) waive any of its material rights or claims, provided that may
negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past
practice;
(viii) commit a material breach or amend or terminate any of its
material agreements, permits, licenses or other rights;
(ix) enter into any other transaction (1) that is not negotiated at
arm's length with a third party not affiliated with the
Company, AES, their respective subsidiaries, or any officer,
director or stockholder of the Company, AES, or their
respective subsidiaries, as the case may be, or (2) outside
the ordinary course of business; or
(x) permit any alteration or change in the structure of the
capital stock owned by its shareholders (except that the
Company shall be allowed to effect the transactions provided
for in the Merger Agreement without being in violation of this
provision).
BOARD OF DIRECTORS. From and after the Effective Time, until successors
are duly elected or appointed and qualified in accordance with applicable law
the directors of the Company at the Effective Time shall be the directors of the
Company as the Surviving Corporation. Since the date of execution of the Merger
Agreement, Mr. Charles Broes, the current CEO of AES, and Mr. C. Nucklos, Ph.D.,
have been elected to the Company's Board.
SOURCE AND AMOUNT OF FUNDS
The total amount of funds required to pay fees and expenses related to
the Merger is estimated to be approximately $100,000.00. The source of such
funds will be a portion of the $2,000,000 in cash and marketable securities
received from AES in consideration for the Company's sale of 500,000 shares of
Company Preferred Stock to AES.
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information, as of March 31,
1998, regarding the beneficial ownership of shares of Company Common Stock and
Company Preferred Stock owned by each person known to the Company to own
beneficially more than five percent (5%) of the outstanding shares ("Five
Percent Stockholders"). The information with respect to the holdings of Five
Percent Stockholders is derived solely from the Company's review of Schedules
13D on file with the Commission; from correspondence received from and telephone
conversations with such stockholders; and correspondence from the Company's
Transfer Agent.
12
<PAGE> 20
<TABLE>
<CAPTION>
Title of Name and Address Number of Percentage
Class of Beneficial Owner Shares of Class
----- ------------------- ------ --------
<S> <C> <C> <C>
Common American Enterprise Solutions, Inc. 5,786,570 65.2%
6313 Johns Road, Suite 201
Tampa, FL 33634
Common Jugal Tanaja 1,135,000 12.8%
7270 Sawgrass Point Drive
Pinellas Park, FL 33782
Common Curtis L. Alliston 622,000 7.0%
755 West Brandon Blvd.
Brandon, FL 33511
Preferred American Enterprise Solutions, Inc. 368,815 100%
6313 Johns Road, Suite 201
Tampa, FL 33634
</TABLE>
The following table sets forth certain information, as of March 31,
1998, with respect to the Company Common Stock and Company Preferred Stock
beneficially owned by all Directors of the Company, each of the executive
officers of the Company and the Company's directors and executive officers as a
group:
<TABLE>
<CAPTION>
Amount and Nature Percentage
Name Title of Class of Beneficial Ownership of Class
---- -------------- ----------------------- --------
<S> <C> <C> <C>
Curtis L. Alliston Common 622,000 Direct 7.0%
Charles Broes 0 0
Charles Nucklos,Ph.D 0 0
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Exchange
Act and, in accordance therewith, is required to file reports and other
information with the Commission relating to its business, financial condition
and other matters. Information as of particular dates concerning the Company's
directors and officers, their remuneration, stock options and other matters, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located at 450 Fifth Street, N.W., Washington, DC 20549, and at
13
<PAGE> 21
the regional offices of the Commission located in the Northwestern Atrium
Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661, and Seven
World Trade Center, 13th Floor, New York, New York 10048. Such reports, proxy
statements and other information may also be obtained at the web site that the
Commission maintains at http://www.sec.gov. Copies should be obtainable, by
mail, upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, DC 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following document heretofore filed by the Company under the
Exchange Act with the Commission is incorporated herein by reference:
The Company's Annual Report on Form 10-KSB for the year ended December
31, 1996.
The Company's Quarterly Reports on Form 10-QSB for the periods ended
March 31, 1997, June 30, 1997, and September 30, 1997, respectively.
The Company will provide without charge to each person, including any
beneficial owner of such person, to whom a copy of this Information Statement
has been delivered, on written or oral request, a copy of any and all of the
documents referred to above that have been or may be incorporated by reference
herein other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference herein). Requests for such copies should
be directed to National Diagnostics, Inc., Attn: The President, 755 West Brandon
Boulevard, Brandon, Florida 33511.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Information
Statement and prior to the Effective Time shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Information Statement to the extent that a statement
contained herein or in any other reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Information
Statement.
14
<PAGE> 22
APPENDIX A
================================================================================
MERGER AGREEMENT
dated as of the 23rd day of February, 1998
by and between
NATIONAL DIAGNOSTICS, INC.,
a Florida corporation,
and
AMERICAN ENTERPRISE SOLUTIONS, INC.,
a Florida corporation,
================================================================================
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. THE MERGER....................................................................................A-1
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER.........................................A-1
1.2 EFFECTIVE TIME OF THE MERGER.........................................................A-1
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION................................................................A-1
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF AES AND
NDI..................................................................................A-2
1.5 EFFECT OF MERGER.....................................................................A-2
2. CONVERSION OF STOCK...........................................................................A-3
2.1 MANNER OF CONVERSION.................................................................A-3
2.2 CONSIDERATION........................................................................A-3
3. DELIVERY OF SHARES............................................................................A-4
3.1 SURRENDER OF CERTIFICATES REPRESENTING AES STOCK.....................................A-4
3.2 DELIVERY BY AES STOCKHOLDERS TO NDI..................................................A-5
3.3 DELIVERY BY NDI TO AES STOCKHOLDERS..................................................A-5
4. CLOSING.......................................................................................A-5
4.1 PLACE AND DATE OF CLOSING............................................................A-5
4.2 CLOSING DELIVERIES...................................................................A-5
5. REPRESENTATIONS AND WARRANTIES OF AES.........................................................A-6
5.1 DUE ORGANIZATION.....................................................................A-6
5.2 AUTHORIZATION; VALIDITY..............................................................A-6
5.3 CAPITAL STOCK OF AES.................................................................A-6
5.4 TRANSACTIONS IN CAPITAL STOCK, ACCOUNTING TREATMENT..................................A-7
5.5 NO BONUS SHARES......................................................................A-7
5.6 AES SUBSIDIARIES.....................................................................A-7
5.7 PREDECESSOR STATUS; ETC..............................................................A-7
5.8 SPIN-OFF BY AES......................................................................A-7
5.9 FINANCIAL STATEMENTS.................................................................A-7
5.10 LIABILITIES AND OBLIGATIONS..........................................................A-8
5.11 ACCOUNTS AND NOTES RECEIVABLE........................................................A-9
5.12 PERMITS AND INTANGIBLES..............................................................A-9
5.13 ENVIRONMENTAL MATTERS................................................................A-9
5.14 REAL AND PERSONAL PROPERTY..........................................................A-10
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS...........................A-11
5.16 TITLE TO REAL PROPERTY..............................................................A-11
5.17 INSURANCE...........................................................................A-11
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS.................................................A-12
</TABLE>
A-i
<PAGE> 24
<TABLE>
<S> <C> <C> <C>
5.19 EMPLOYEE BENEFIT PLANS..............................................................A-12
5.20 CONFORMITY WITH LAW; LITIGATION.....................................................A-13
5.21 TAXES...............................................................................A-13
5.22 NO VIOLATION........................................................................A-14
5.23 GOVERNMENT CONTRACTS................................................................A-14
5.24 ABSENCE OF CHANGES..................................................................A-14
5.25 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY................................................A-15
5.26 VALIDITY OF OBLIGATIONS.............................................................A-16
5.27 RELATIONS WITH GOVERNMENTS..........................................................A-16
5.28 DISCLOSURE..........................................................................A-16
5.29 BOARD APPROVAL......................................................................A-16
6. REPRESENTATIONS AND WARRANTIES OF NDI........................................................A-16
6.1 DUE ORGANIZATION....................................................................A-16
6.2 AUTHORIZATION; VALIDITY.............................................................A-17
6.3 CAPITAL STOCK OF NDI................................................................A-17
6.4 TRANSACTIONS IN CAPITAL STOCK, ACCOUNTING TREATMENT.................................A-17
6.5 NO BONUS SHARES.....................................................................A-17
6.6 NDI SUBSIDIARIES....................................................................A-17
6.7 PREDECESSOR STATUS; ETC.............................................................A-18
6.8 SPIN-OFF BY NDI.....................................................................A-18
6.9 FINANCIAL STATEMENTS; SECURITIES FILINGS............................................A-18
6.10 LIABILITIES AND OBLIGATIONS.........................................................A-18
6.11 ACCOUNTS AND NOTES RECEIVABLE.......................................................A-19
6.12 PERMITS AND INTANGIBLES.............................................................A-20
6.13 ENVIRONMENTAL MATTERS...............................................................A-20
6.14 REAL AND PERSONAL PROPERTY..........................................................A-21
6.15 SIGNIFICANT CUSTOMERS; NDI MATERIAL CONTRACTS AND COMMITMENTS.......................A-22
6.16 TITLE TO REAL PROPERTY..............................................................A-22
6.17 INSURANCE...........................................................................A-22
6.18 COMPENSATION; EMPLOYMENT AGREEMENTS.................................................A-22
6.19 EMPLOYEE BENEFIT PLANS..............................................................A-23
6.20 CONFORMITY WITH LAW; LITIGATION.....................................................A-23
6.21 TAXES...............................................................................A-24
6.22 NO VIOLATION........................................................................A-24
6.23 GOVERNMENT CONTRACTS................................................................A-25
6.24 ABSENCE OF CHANGES..................................................................A-25
6.25 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY................................................A-26
6.26 VALIDITY OF OBLIGATIONS.............................................................A-27
6.27 RELATIONS WITH GOVERNMENTS..........................................................A-27
6.28 DISCLOSURE..........................................................................A-27
6.29 BOARD APPROVAL......................................................................A-27
7. COVENANTS PRIOR TO CLOSING...................................................................A-27
</TABLE>
A-ii
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
7.1 ACCESS AND COOPERATION; DUE DILIGENCE...............................................A-27
7.2 CONDUCT OF BUSINESS PENDING CLOSING; SECURITIES FILINGS AND OTHER
OBLIGATIONS.........................................................................A-28
7.3 PROHIBITED ACTIVITIES...............................................................A-29
7.4 NOTICE TO BARGAINING AGENTS.........................................................A-32
7.5 NOTIFICATION OF CERTAIN MATTERS.....................................................A-32
7.6 AMENDMENT OF SCHEDULES..............................................................A-32
7.7 COOPERATION IN OBTAINING REQUIRED CONSENTS AND APPROVALS............................A-33
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND AES.............................................................................A-34
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS..........................A-34
8.2 NO LITIGATION.......................................................................A-34
8.3 REVERSE STOCK SPLIT/AUTHORIZATION OF ADDITIONAL NDI COMMON
STOCK...............................................................................A-34
8.4 NO MATERIAL ADVERSE CHANGE..........................................................A-34
8.5 OPINION OF COUNSEL..................................................................A-34
8.6 CONSENTS AND APPROVALS..............................................................A-34
8.7 CERTIFICATES........................................................................A-35
8.8 EXAMINATION OF FINANCIAL STATEMENTS.................................................A-35
8.9 REGISTRATION OF NDI COMMON STOCK TO BE ISSUED TO AES
STOCKHOLDERS........................................................................A-35
8.10 SHAREHOLDER APPROVAL................................................................A-35
8.11 DISSENTERS..........................................................................A-35
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF NDI...................................................A-36
9.1 REPRESENTATIONS AND WARRANTIES: PERFORMANCE OF OBLIGATIONS..........................A-36
9.2 OPINION OF COUNSEL..................................................................A-36
9.3 CERTIFICATES........................................................................A-36
9.4 SHAREHOLDER APPROVAL................................................................A-36
9.5 REPRESENTATIONS, WARRANTIES AND COVENANTS OF AES DIRECTORS AND
OFFICERS............................................................................A-36
10. INDEMNIFICATION..............................................................................A-37
10.1 INDEMNIFICATION BY AES DIRECTORS AND OFFICERS.......................................A-37
10.2 INDEMNIFICATION BY NDI..............................................................A-37
10.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND PLEDGES OF
INDEMNIFICATION.....................................................................A-37
10.4 THIRD PERSON CLAIMS.................................................................A-38
10.5 REMEDY..............................................................................A-39
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION....................................................A-39
11.1 AES' OFFICERS AND DIRECTORS.........................................................A-39
11.2 NDI.................................................................................A-39
</TABLE>
A-iii
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
11.3 DAMAGES.............................................................................A-40
11.4 SURVIVAL............................................................................A-40
12. FEDERAL SECURITIES ACT REPRESENTATIONS.......................................................A-40
13. GENERAL......................................................................................A-40
13.1 TERMINATION.........................................................................A-40
13.2 COOPERATION.........................................................................A-41
13.3 SUCCESSORS AND ASSIGNS..............................................................A-41
13.4 ENTIRE AGREEMENT....................................................................A-41
13.5 COUNTERPARTS........................................................................A-41
13.6 BROKERS AND AGENTS..................................................................A-42
13.7 EXPENSES............................................................................A-42
13.8 NOTICES.............................................................................A-42
13.9 GOVERNING LAW.......................................................................A-43
13.10 EXERCISE OF RIGHTS AND REMEDIES.....................................................A-43
13.11 TIME................................................................................A-44
13.12 REFORMATION AND SEVERABILITY........................................................A-44
13.13 NO THIRD PARTY BENEFICIARIES........................................................A-44
13.14 TAX FREE MERGER.....................................................................A-44
</TABLE>
A-iv
<PAGE> 27
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is made as of the _______ day
of February, 1998, by and between NATIONAL DIAGNOSTICS, INC., a Florida
corporation ("NDI") and AMERICAN ENTERPRISE SOLUTIONS, INC., a Florida
corporation ("AES").
WHEREAS, the respective Boards of Directors of NDI and AES (which
together are hereinafter collectively referred to as "Constituent Corporations")
deem it advisable and in the best interests of the Constituent Corporations and
their respective stockholders that AES merge with and into NDI pursuant to this
Agreement and the applicable provisions of the laws of the State of Florida,
such transaction sometimes being herein called the "Merger;" and
WHEREAS, the parties hereto intend that this transaction and the Merger
be treated, for tax purposes, as a tax free reorganization.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER. The
Constituent Corporations will cause Articles of Merger with respect to the
Merger to be signed and delivered to the Secretary of State of the State of
Florida in accordance with the requirements of Section 607.1105 of the Florida
Statutes.
1.2 EFFECTIVE TIME OF THE MERGER. The "Effective Time of the
Merger" shall be the date of filing the requisite Articles of Merger with the
Florida Secretary of State. At the Effective Time of the Merger, the separate
existence of AES shall cease. NDI shall be the surviving party in the Merger and
is hereinafter sometimes referred to as the "Surviving Corporation". The Merger
will be effected in a single transaction.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF
DIRECTORS OF SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Articles of Incorporation of NDI shall
be the Articles of Incorporation of the
Surviving Corporation until changed as
provided by law; provided that immediately
prior to the Closing (as herein defined),
AES shall change its name and NDI shall
change its name to American Enterprise
Solutions, Inc.
(ii) the By-laws of AES shall be the By-laws of
the Surviving Corporation until they shall
thereafter be duly amended;
A-1
<PAGE> 28
(iii) the Board of Directors of the Surviving
Corporation shall consist of the following
persons:
Benedict S. Maniscalco, M.D. Anthony Maniscalco
Charles Broes Ron Pion, M.D.
Dr. Frederick Iezzi Jody Simon
Ernest N. Burson, III
The Board of Directors of the Surviving Corporation shall hold office
subject to the provisions of the laws of the State of Florida and of the
Articles of Incorporation and By-laws of the Surviving Corporation.
(iv) the officers of the Surviving Corporation
shall be as follows:
CEO Charles Broes
President Ernest N. Burson, III
Secretary Charles Broes
Assistant Secretary Joy Stritikus
Treasurer Charles Broes
Each officer of the Surviving Corporation shall serve until his or her
successor is elected and qualified in accordance with the By-laws of the
Surviving Corporation.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF
AES AND NDI. The respective designations and numbers of outstanding shares and
voting rights of the outstanding capital stock of AES and NDI as of the date of
this Agreement are as follows:
(i) the authorized capital stock of AES ("AES
Stock") is 100,000,000 shares of AES common
stock, $0.0001 par value per share, of which
10,670,513 are currently issued and
outstanding; and
(ii) the authorized capital stock of NDI is:
A. 9,000,000 shares of common stock,
no par value ("NDI Common Stock"),
of which 3,093,430 shares are
currently issued and outstanding;
B. 1,000,000 shares of preferred
stock, no par value ("NDI Preferred
Stock"), none of which are
currently issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the
effect of the Merger shall be as provided in the applicable provisions of the
Florida Business Corporation Act. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time of the
A-2
<PAGE> 29
Merger (i) all the rights, privileges, powers and franchises, of a public as
well as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest of or belonging to or due to
AES shall be taken and deemed to be transferred to, and vested in, the Surviving
Corporation without further act or deed; and all property, rights and
privileges, powers and franchises and all and every other interest shall be
thereafter the property of the Surviving Corporation, as they were of AES, and
(ii) all debts, liabilities, duties and obligations of AES shall become the
debts, liabilities and duties of the Surviving Corporation and the Surviving
Corporation shall thenceforth be responsible and liable for all the debts,
liabilities, duties and obligations of AES and neither the rights of creditors
nor any liens upon the property of AES shall be impaired by the Merger, and such
rights and liens shall be enforced against the Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. As a consequence of the Merger, the
issued and outstanding AES Stock will be converted into NDI Common Stock. The
manner of converting the shares of AES Stock into shares of NDI Common Stock
shall be as follow: As of the Effective Time of the Merger, all of the shares of
AES Stock issued and outstanding immediately prior to the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the holder
thereof, automatically shall be deemed to represent that number of shares of NDI
Common Stock determined pursuant to Section 2.2 (ii) (B) below; and
All NDI Common Stock received by the stockholders of AES (collectively
the "AES STOCKHOLDERS") as of the Effective Time of the Merger shall have the
same voting, liquidation and other rights as all the other shares of outstanding
NDI Common Stock.
2.2 CONSIDERATION.
(i) AES STOCKHOLDERS will own, in the aggregate,
87.7% of the issued and outstanding NDI
Common Stock immediately after consummation
of the Merger. Each AES STOCKHOLDER shall be
entitled to receive such number of shares of
NDI Common Stock as set forth in Annex II
attached hereto.
(ii) To facilitate consummation of the
transactions provided for herein, and as a
condition to the Closing, NDI shall have:
A. Effected a 2.0670422 to 1 reverse
stock split of the 3,093,430 shares
of currently issued and outstanding
NDI Common Stock, so that NDI
shareholders will own an aggregate
of 1,496,549 shares of NDI Common
Stock immediately after the reverse
stock split and also immediately
upon and after the consummation of
the
A-3
<PAGE> 30
Merger; said aggregate amount of
NDI Common Stock being equal to
12.3% of the issued and outstanding
NDI Common Stock immediately after
consummation of the Merger; and
B. Authorized the issuance of an
aggregate of 10,670,513 shares of
NDI Common Stock for the pro rata
distribution to the AES
STOCKHOLDERS as set forth on Annex
II attached hereto; said aggregate
amount of NDI Common Stock being
equal to 87.7% of the issued and
outstanding NDI Common Stock
immediately after consummation of
the Merger. Each share of AES Stock
shall be converted into one (1)
share of NDI Common Stock as a
result of the Merger; provided,
however, that if AES issues
additional AES Stock prior to the
Closing (as that term is herein
defined), each share of AES Stock
will be converted into the number
of shares of NDI Common Stock
calculated by multiplying 1 by a
fraction, the numerator of which is
10,670,513 and the denominator of
which is the number of shares of
AES Stock then outstanding; and the
NDI shareholders will hold 12.3% of
the NDI Common Stock immediately
after the Merger.
3. DELIVERY OF SHARES.
3.1 SURRENDER OF CERTIFICATES REPRESENTING AES STOCK. At the
Closing, as defined in section 4 below:
(i) Subject to Section 4.2(b), the AES
STOCKHOLDERS, as the holders of all
certificates representing all issued and
outstanding shares of AES Stock, shall, upon
surrender of such certificates, be entitled
to receive the number of shares of NDI
Common Stock pursuant to Section 2.2 above,
all in accordance with their pro rata shares
(as set forth in Annex II hereto); and
(ii) Until the certificates representing AES
Stock have been surrendered by the AES
STOCKHOLDERS and replaced by certificates
representing NDI Common Stock, the
certificates for AES Stock shall, for all
corporate purposes be deemed to evidence the
right to receive shares of NDI Common Stock,
as set forth in Section 2.2.
3.2 DELIVERY BY AES STOCKHOLDERS TO NDI. The AES STOCKHOLDERS
shall deliver to NDI at Closing or as soon thereafter as is practicable, the
certificates representing AES Stock, duly endorsed in blank by the AES
STOCKHOLDERS, or accompanied by blank
A-4
<PAGE> 31
stock powers, (with signature guaranteed if so required by NDI) and with all
necessary transfer tax and other revenue stamps, acquired at AES' expense or the
AES STOCKHOLDERS' expense, affixed and canceled. The AES STOCKHOLDERS shall
promptly cure any deficiencies with respect to the endorsement of the
certificates or other documents of conveyance with respect to such AES Stock or
with respect to the stock powers accompanying any AES Stock.
3.3 DELIVERY BY NDI TO AES STOCKHOLDERS. NDI shall deliver to
the AES STOCKHOLDERS, at Closing or upon tender of the AES Stock, certificates
for shares of NDI Common Stock pursuant to Section 2.2 above.
4. CLOSING
4.1 PLACE AND DATE OF CLOSING. Delivery of the stock
certificates referred to in Section 3 above, and consummation of the other
transactions contemplated by this Agreement (hereinafter referred to as the
"Closing") shall take place at the offices of Foley & Lardner, 100 North Tampa
Street, Suite 2700, Tampa, FL (or at such other location as may be agreed upon
by AES and NDI) on July 31, 1998, or as soon as practicable after all conditions
to Closing shall have been satisfied or waived, or at such other time and date
as NDI and AES may mutually agree, which date shall be referred to as the
"Closing Date."
4.2 CLOSING DELIVERIES.
(a) At the Closing, each AES STOCKHOLDER shall deliver to
NDI, free and clear of all pledges, liens, transfer and stamp tax obligations,
encumbrances, claims and other charges thereon of every kind, the certificates
for AES Stock pursuant to Section 3 hereof.
(b) At the Closing NDI shall deliver to the AES
STOCKHOLDERS, free and clear of all pledges, liens, transfer and stamp tax
obligations, encumbrances, claims and other charges thereon of every kind, the
certificates for the NDI Common Stock pursuant to Section 3 hereof. The number
of shares of NDI Common Stock issued to the AES STOCKHOLDERS, as a group,
pursuant to the Merger shall be equal to 87.7% of the outstanding capital stock
of NDI immediately following the Merger.
(c) At the Closing, AES shall make available to NDI the
written resignations of all the directors and officers of AES effective as of
the Closing except for such directors and officers as are provided in Section
1.3 above, and shall cause to be made available to NDI all minute books, stock
record books, books of account, corporate seals, leases, contracts, agreements,
securities, bank, checking and money market accounts, other investments,
deposits, customer and subscriber lists, files and other documents, instruments
and papers belonging to AES and shall cause full possession and control of all
of the assets and properties of every kind and nature, tangible and intangible,
of AES and of all other things and matters pertaining to the operation of the
business of AES to be transferred and delivered to NDI . At the Closing, AES
shall also deliver to NDI and NDI shall deliver to AES, the certificates,
opinions and other instruments and documents referred to in Sections 8 and 9
hereof, respectively.
A-5
<PAGE> 32
5. REPRESENTATIONS AND WARRANTIES OF AES
AES represents and warrants to NDI as follows:
5.1 DUE ORGANIZATION. Each of AES and the subsidiaries of AES
identified in Schedule 5.6 hereto (the "AES Subsidiaries") is a corporation duly
organized, validly existing and is in good standing under the laws of its
jurisdiction of incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a material adverse effect on the business, operations, affairs, prospects,
properties, assets, profits or condition (financial or otherwise) of AES and the
AES Subsidiaries taken as a whole (a "Material Adverse Effect"). Schedule 5.1
hereto contains a list of all jurisdictions in which AES and each AES Subsidiary
is authorized or qualified to do business. True, complete and correct copies of
the Articles of Incorporation and Bylaws, each as amended, of AES and each AES
Subsidiary are attached hereto as part of Schedule 5. 1. Such Articles of
Incorporation and By-laws are referred to herein as the "AES Charter Documents."
The minute books of AES and each AES Subsidiary as heretofore made available to
NDI (and as shall be delivered to NDI at Closing) are correct and complete in
all material respects.
5.2 AUTHORIZATION; VALIDITY. The representatives of AES
executing this Agreement have the corporate power and authority to enter into
and bind AES to the terms of this Agreement. AES has the full legal right,
corporate power and authority to enter into this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement by AES and the
performance by AES of the transactions contemplated herein have been duly and
validly authorized by the Board of Directors of AES and this Agreement has been
duly and validly authorized by all necessary corporate action. This Agreement is
a legal, valid and binding obligation of AES enforceable in accordance with its
terms.
5.3 CAPITAL STOCK OF AES. The authorized capital stock of AES
is as set forth in Section 1.4(i) hereof. All of the issued and outstanding
shares of the capital stock of AES have been duly authorized and validly issued,
are fully paid and nonassessable and are owned of record and beneficially by the
AES STOCKHOLDERS in the amounts set forth in Annex I hereto free and clear of
all liens, encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of AES were offered, issued, sold and
delivered by AES in compliance with all applicable state and federal laws
concerning the issuance of securities. There are no preemptive rights with
respect to the AES stock.
5.4 TRANSACTIONS IN CAPITAL STOCK, ACCOUNTING TREATMENT.
Except as set forth in Schedule 5.4 hereto, no option, warrant, call, conversion
right or commitment of any kind exists which may obligate AES to issue any
shares of capital stock. Except as set forth in Schedule 5.4 hereto, AES has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. The voting stock structure of AES and
the AES
A-6
<PAGE> 33
Subsidiaries has not been materially altered or changed in contemplation of the
Merger. Except as provided in Schedule 5.4, the relative ownership of shares
among any of the respective stockholders of AES and the AES Subsidiaries has not
been materially altered or changed in contemplation of the Merger; provided,
however, that AES may continue to issue stock in acquisition transactions
between the date hereof and Closing.
5.5 NO BONUS SHARES. Except as set forth in Schedule 5.5
hereto, none of the shares of AES Stock was issued pursuant to awards, grants or
bonuses.
5.6 AES SUBSIDIARIES. AES has no subsidiaries other than those
listed on Schedule 5.6 hereto (previously defined as the AES Subsidiaries), and
except as set forth on Schedule 5.6 hereto, AES does not presently own, of
record or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity (other than the AES Subsidiaries),
nor is AES, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity. Schedule 5.6 hereto lists the number
of shares and class of authorized capital stock of the AES Subsidiaries, all of
which shares are owned by AES free and clear of all liens, encumbrances and
claims of every kind. Notwithstanding anything to the contrary herein contained,
AES may continue to acquire other businesses and companies between the date
hereof and the Closing Date.
5.7 PREDECESSOR STATUS; ETC. Set forth in Schedule 5.7 is a
listing of all names of all predecessor companies of AES, including without
limitation the names of any entities from whom AES has acquired material assets
other than in the normal and ordinary course of business and consistent with
past practice. Except as set forth in Schedule 5.7 hereto, AES has not at any
time been a subsidiary or division of another corporation or a party to an
acquisition which was later rescinded.
5.8 SPIN-OFF BY AES. There has not been any sale or spin-off
of material assets of either AES, any AES Subsidiary or any other person or
entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with AES ("Affiliates")
within the preceding year.
5.9 FINANCIAL STATEMENTS. AES (i) has delivered to NDI
(attached as Schedule 5.9 hereto) true, complete and correct copies of unaudited
unconsolidated balance sheets of certain AES Subsidiaries as of December 31,
1997 (the end of their most recent completed fiscal year), and unaudited
Statements of Income, Accumulated Deficit and Cash Flows for the same AES
Subsidiaries for the same periods and will deliver to NDI as soon as practicable
its own unaudited 1997 financial statements and those of its other subsidiaries
(collectively, the "AES Financials").
A-7
<PAGE> 34
5.10 LIABILITIES AND OBLIGATIONS.
(a) Except as disclosed on Schedule 5.10 attached hereto,
neither AES nor any AES Subsidiary is liable for or subject to any liabilities
exceeding an aggregate amount of $500,000, except for:
(i) those liabilities reflected or to be
reflected on the AES Financials and not
heretofore paid or discharged;
(ii) those liabilities arising in the ordinary
course of its business (which, in AES's
case, consists of acquiring other businesses
and companies) consistent with past practice
under any contract, commitment or agreement
specifically disclosed on any Schedule to
this Agreement or not required to be
disclosed thereon because of the term or
amount involved or otherwise;
(iii) those liabilities incurred in the ordinary
course of business (which, in AES's case,
consists of acquiring other businesses and
companies) and either not required to be
shown on the AES Financials or arising after
the date thereof; and
(iv) those liabilities incurred during the
routine operations of AES and consistent
with past practice (which, in AES's case,
consists of acquiring other businesses and
companies), the amount of which can be
determined only subsequent to the date of
the AES Financials.
For purposes of this Section 5.10 and Section 10 below, the term
"liabilities" shall include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute, contingent or
otherwise and whether known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
(b) AES has delivered to NDI, in the case of those liabilities
which are not fixed, a reasonable estimate of the maximum amount which may be
payable. For each such liability for which the amount is not fixed or is
contested, AES has provided to NDI (i) a summary description of the liability
together with (A) copies of all relevant documentation relating thereto, (B)
amounts claimed and any other action or relief sought and (C) name of claimant,
(ii) all other parties to the claim, suit or proceeding and the name of each
court or agency before which such claim, suit or proceeding is pending, and
(iii) the date such claim, suit or proceeding was instituted.
5.11 ACCOUNTS AND NOTES RECEIVABLE. AES has delivered to NDI
an accurate list (attached as Schedule 5.11 hereto) of the accounts and notes
receivable of AES and each AES Subsidiary as of a date not more than 90 business
days prior to the date hereof (including without limitation receivables from and
advances to employees and the AES STOCKHOLDERS). Prior
A-8
<PAGE> 35
to Closing, AES shall also update Schedule 5.11 and provide NDI with an accurate
list of all accounts and notes receivable as of the end of the month preceding
the month in which the Closing occurs. All lists of accounts and notes
receivable shall show the aging of all accounts and notes receivable showing
amounts due in 30-day aging categories. To the best knowledge of AES, except to
the extent reflected on Schedule 5.11, such accounts and notes are collectible
in the amount shown on Schedule 5.11, net of reserves reflected in the balance
sheet as of the Date of the AES Financials.
5.12 PERMITS AND INTANGIBLES. To the best of their knowledge,
each of AES and the AES Subsidiaries owns or holds all licenses, franchises,
permits and other governmental authorizations, including without limitation
permits, titles (including without limitation motor vehicle titles and current
registrations), title permits, licenses, franchises, certificates, trademarks,
trade names, patents, patent applications and copyrights, the absence of any of
which could have a Material Adverse Effect (the "AES Material Permits"). AES has
delivered to NDI an accurate list and summary description (attached as Schedule
5.12 hereto) of all AES Material Permits. To the knowledge of AES, the AES
Material Permits are valid, and AES has not received any notice that any
governmental authority intends to modify, cancel, terminate or not renew any AES
Material Permit. AES and each AES Subsidiary has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the AES Material Permits and other applicable orders, approvals,
variances, rules and regulations and is not in violation of any of the foregoing
except where such non-compliance or violation would not have a Material Adverse
Effect. The transactions contemplated by this Agreement will not result in a
default under or a breach or violation of, or adversely affect the rights and
benefits afforded to AES or any AES Subsidiary by, any AES Material Permit.
5.13 ENVIRONMENTAL MATTERS.
(a) To the best of their knowledge, each of AES and the AES
Subsidiaries has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), common laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to it and its properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws"), including without
limitation Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances (as such terms are currently defined in any
applicable Environmental Law), except to the extent that noncompliance with any
Environmental Law, either singly or in the aggregate, does not and would not
have a Material Adverse Effect;
(b) To the best of their knowledge, each of AES and the AES
Subsidiaries has obtained and adhered to all necessary permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances and has reported, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by AES or any AES Subsidiary where Hazardous Wastes or Hazardous
Substances have
A-9
<PAGE> 36
been treated, stored, disposed of or otherwise handled, except to the extent
that a failure to do so, either singly or in the aggregate, does not and would
not have a Material Adverse Effect;
(c) There have been no releases or threats of releases (as
defined in Environmental Laws) by AES or any of its subsidiaries at, from, in or
on any property owned or operated by AES or any AES Subsidiary except as
permitted by Environmental Laws or where such releases do not and would not have
a Material Adverse Effect;
(d) To the best of their knowledge, each of AES and the AES
Subsidiaries knows of no on-site or off-site location to which AES or any AES
Subsidiary has transported or disposed of Hazardous Wastes and Hazardous
Substances or arranged for the transportation of Hazardous Wastes and Hazardous
Substances, which site is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against AES, any AES Subsidiary, NDI or and NDI Subsidiary (as hereinafter
defined) for any clean-up cost, remedial work, damage to natural resources or
personal injury, including without limitation any claim under United States or
Florida environmental statutes, as amended; and
(e) To the best of their knowledge, neither AES nor any AES
Subsidiary has or will have any liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment, except to the
extent that such liability does not and would not have a Material Adverse
Effect.
5.14 REAL AND PERSONAL PROPERTY. AES has delivered to NDI an
accurate list (attached as Schedule 5.14 hereto) of all owned and leased real
property, all personal property included in "depreciable plant, property and
equipment" on the AES Financials and all other personal property owned or leased
by AES or any AES Subsidiary with a value in excess of $100,000 (i) as of the
date of the AES Financials and (ii) acquired since the date of the AES
Financials, including in each case true, complete and correct copies of leases
for material equipment and all real properties on which are situated buildings,
warehouses, workshops, garages and other structures used in the operation of the
business of AES and the AES Subsidiaries. All personal property, material
machinery and equipment of AES and the AES Subsidiaries listed on Schedule 5.14
are in good working order and condition, ordinary wear and tear excepted. All
leases set forth on Schedule 5.14 are in full force and effect and constitute
valid and binding agreements of AES or the AES Subsidiary and, to the knowledge
of AES, the other parties thereto in accordance with their respective terms. All
fixed assets used by AES or any AES Subsidiary that are material to the
operation of their business are either owned by AES or the AES Subsidiary or
leased under an agreement listed on Schedule 5.15. Schedule 5.14 includes
without limitation true, complete and correct copies of all title reports and
title insurance policies received or owned by AES or any AES Subsidiary that are
still in effect. Schedule 5.14 also includes a summary description of all plans
or projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of AES has made any material expenditure in the two-year period
prior to the date of this Agreement, which if pursued by AES or any AES
Subsidiary would require additional material expenditures of capital.
A-10
<PAGE> 37
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND
COMMITMENTS. Schedule 5.15 hereto contains an accurate list of (i) all
significant customers (i.e. those customers representing 5% or more of AES's
revenues for the 12 months ending on the date of the AES Financials, or who have
paid to AES $100,000 or more in any of the past four fiscal quarters) and (ii)
all material contracts, commitments, leases, instruments, agreements, licenses
or permits to which AES or any AES Subsidiary is a party or by which it or its
properties are bound (including without limitation contracts with significant
customers, joint venture or partnership agreements, contracts with any labor
organizations, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) (i) as of the date of the AES Financials and (ii) entered into since
the date of the AES Financials (collectively, the "AES Material Contracts").
Schedule 5.15 hereto includes true, complete and correct copies of the AES
Material Contracts. Except to the extent set forth on Schedule 5.15 hereto, (i)
none of AES's significant customers have canceled or substantially reduced or,
to the knowledge of AES are currently attempting or threatening to cancel or
substantially reduce service, (ii) AES and the AES Subsidiaries have complied
with all of their respective material commitments and obligations and are not in
default under any of the AES Material Contracts and no notice of default has
been received with respect to any thereof and (iii) there are no AES Material
Contracts that were not negotiated at arm's length with third parties not
affiliated with AES or any officer, director or AES STOCKHOLDER. AES is not
bound by or subject to (and none of its respective assets or properties is bound
by or subject to) any arrangement with any labor union. No employees of AES or
any AES Subsidiary are represented by any labor union or covered by any
collective bargaining agreement and, to the best of AES's knowledge, no campaign
to establish such representation is in progress. There is no pending or, to the
best of AES's knowledge, threatened labor dispute involving AES or any AES
Subsidiary and any group of their employees nor has AES or any AES Subsidiary
experienced any labor interruptions over the past year and AES considers its
relationship with its employees to be good.
5.16 TITLE TO REAL PROPERTY. AES and each AES Subsidiary does
not own any real property except as set forth on Schedule 5.16 hereto.
5.17 INSURANCE. AES has delivered to NDI an accurate list
(attached as Schedule 5.17 hereto) as of the Date of the AES Financials of all
insurance policies carried by AES and the AES Subsidiaries and all insurance
loss runs or workmen's compensation claims received for the past policy year.
Also attached to Schedule 5.17 are true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. Such
insurance policies are currently in full force and effect and shall remain in
full force and effect through the Closing Date.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS. AES has delivered to
NDI an accurate list (attached as Schedule 5.18 hereto) showing all officers and
directors of AES and each AES Subsidiary, and of all employees of AES and the
AES Subsidiaries currently earning, on an annualized basis (including
commissions) in excess of $150,000 per year (the "AES Key Employees"), listing
all employment agreements with such officers, directors and AES Key Employees
and the rate of compensation (and the portions thereof attributable to salary,
bonus
A-11
<PAGE> 38
and other compensation, respectively) of each of such persons as of (i) the date
of the AES Financials and (ii) the date hereof. AES has provided to NDI true,
complete and correct copies of all employment contracts, commitments and
arrangements with persons listed on Schedule 5.18.
5.19 EMPLOYEE BENEFIT PLANS. All employee benefit plans,
programs and policies (whether formal or informal, and whether maintained for
the benefit of a single individual or more than one individual) maintained or
contributed to by AES or any AES Subsidiary for the benefit of any current or
former employee of AES or any AES Subsidiary or in which such employees are
entitled to participate are listed in Schedule 5.19 (the "AES Benefit Plans"),
and copies of all such written plans and policies, written descriptions of all
such oral plans and policies, and all other documentation relating to such plans
and policies have been delivered or made available to NDI. Except as disclosed
on Schedule 5.19:
(i) each AES Benefit Plan and the administration
thereof complies, and has at all times complied,
in all material respects with the requirements
of all applicable law;
(ii) no suit, actions or other litigation (excluding
claims for benefits incurred in the ordinary
course of plan activities) have been brought
against or with respect to any AES Benefit Plan;
(iii) all required contributions to AES Benefit Plans
have been made, and all benefits accrued under
any unfunded AES Benefit Plan will have been
paid, accrued or otherwise adequately reserved
in accordance with GAAP and AES and the AES
Subsidiaries have performed all material
obligations required to be performed under the
AES Benefit Plans; and
(iv) no employee of AES or any AES Subsidiary is
represented by a labor union or organization, no
labor union or organization has been certified
or recognized as a representative of any such
employee, there are no pending or, to the
knowledge of AES, threatened representation
campaigns concerning union representation
involving any employee or efforts of any labor
union or organization (or representatives
thereof) to organize any employees. If
reasonably requested by NDI, AES will terminate
any AES Benefit Plan substantially
contemporaneously with the Closing.
5.20 CONFORMITY WITH LAW; LITIGATION. To the best of their
knowledge, neither AES nor any AES Subsidiary has violated any law or regulation
or any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it, which violations in the aggregate would have a
A-12
<PAGE> 39
Material Adverse Effect; and except to the extent set forth in Schedule 5.10,
there are no material claims, actions, suits or proceedings, pending or, to the
knowledge of AES, threatened, against or affecting AES or any AES Subsidiary, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received.
5.21 TAXES. Except as set forth in Schedule 5.21, (i) AES and
each AES Subsidiary has timely filed or will timely file all requisite federal,
state and other Tax (as defined below) returns, reports and forms ("AES
Returns") for all periods ended on or before the Closing Date; (ii) there are no
examinations in progress or claims against AES for Taxes for any period or
periods and no notice of any claim for Taxes, whether pending or threatened, has
been received; (iii) the amounts shown as accruals for Taxes on the AES
Financials are sufficient for the payment of all Taxes, whenever determined, for
all fiscal periods ended on or before that date; (iv) AES and each AES
Subsidiary has a taxable year ending on December 31 in each year; (v) AES and
each AES Subsidiary currently utilizes the accrual method of accounting for
income Tax purposes and such method of accounting has not changed in the past
year; (vi) AES and each AES Subsidiary has paid or has fully accrued for all
Taxes, whenever determined, with respect to periods ending on or before the
Closing Date; and (vii) copies of (1) any Tax examinations, (2) extensions of
statutory limitations for the collection or assessment of Taxes and (3) the AES
Returns for the last three (3) fiscal years are included as part of Schedule
5.21. If AES has undergone a sales tax audit with the Florida Department of
Revenue within the last year, in regard to that audit, AES specifically
represents that it has paid all amounts due and has no further liability
whatsoever in regard to said audit or any other sales tax matters and, further,
that no additional sales tax is due in connection with any reclassification of
any assets of AES.
Upon the request of NDI, AES shall provide NDI copies of all
AES Returns other than those previously provided pursuant to clause (vii)(3) of
the preceding sentence.
For purposes of this Agreement, the term "Tax" shall be
understood to include any tax or similar governmental charge, impost or levy
(including without limitation income taxes, franchise taxes, transfer taxes or
fees, sales taxes, use taxes, gross receipts taxes, value added taxes,
employment taxes, excise taxes, ad valorem taxes, property taxes, withholding
taxes, payroll taxes, minimum taxes or windfall profit taxes) together with any
related penalties, fines, additions to tax or interest, imposed by the United
States or any other country or any state, county, local or foreign government or
subdivision or agency thereof.
5.22 NO VIOLATION. To the best of their knowledge, neither
AES, any AES Subsidiary or any other party thereto is (i) in violation of any
AES Charter Document or (ii) in default under any AES Material Contract (the AES
Material Contracts, together with the AES Charter Documents, being referred to
herein as the "AES Material Documents"); and, except as set forth in the
Schedules attached to this Agreement, (a) the rights and benefits of AES and the
AES Subsidiaries under the AES Material Documents will not be materially and
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the
A-13
<PAGE> 40
performance of the obligations hereunder and the consummation of the
transactions contemplated hereby will not result in any material violation or
breach or constitute a default under, any of the terms or provisions of the AES
Material Documents or the AES Charter Documents. If any of the AES Material
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect or give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit, then (i) AES will
furnish all requisite notices and use its best efforts to obtain the necessary
consents and approvals before consummation of the Merger; or (ii) the current
officers and directors of AES will cooperate with NDI in furnishing the
requisite notices and in obtaining the necessary consents and approvals after
consummation of the Merger.
5.23 GOVERNMENT CONTRACTS. Except as set forth on Schedule
5.23 neither AES nor any AES Subsidiary is a party to any governmental contracts
subject to price redetermination or renegotiation.
5.24 ABSENCE OF CHANGES. Since February 21, 1998, except as
contemplated herein or as set forth on Schedule 5.24, there has not been:
(i) any changes that, individually or in the
aggregate, have had a Material Adverse
Effect;
(ii) any damage, destruction or loss (whether or
not covered by insurance) materially
adversely affecting the properties or
business of AES or any AES Subsidiary;
(iii) any change in the authorized capital of AES
or any AES Subsidiary or in their
outstanding securities or any change in
their ownership interests or any grant of
any options, warrants, calls, conversion
rights or commitments; provided, however,
that AES may continue to issue stock and
securities in connection with acquisitions
and financing of businesses and companies
(iv) any work interruptions, labor grievances or
claims filed, or any similar event or
condition of any character, materially
adversely affecting the business or future
prospects of AES or any AES Subsidiary;
(v) any sale or transfer, or any agreement to
sell or transfer, any material assets,
property or rights of AES or any AES
Subsidiary to any person, including without
limitation the AES STOCKHOLDERS and their
affiliates;
(vi) any cancellation, or agreement to cancel,
any indebtedness or other obligation owing
to AES or any AES Subsidiary, including
without
A-14
<PAGE> 41
limitation any indebtedness or obligation of
any of the AES STOCKHOLDERS or any affiliate
thereof, provided that AES and the AES
Subsidiaries may negotiate and adjust bills
in the course of good faith disputes with
customers in a manner consistent with past
practice;
(vii) any plan, agreement or arrangement granting
any preferential rights to purchase or
acquire any interest in any of the assets,
property or rights of AES or any AES
Subsidiary or requiring consent of any party
to the transfer and assignment of any such
assets, property or rights;
(viii) any waiver of any material rights or claims
of AES or any AES Subsidiary;
(ix) any material breach, amendment or
termination of any material contract,
agreement, license, permit or other right to
which AES or any AES Subsidiary is a party;
or
(x) any transaction by AES or any AES Subsidiary
outside the ordinary course of business.
5.25 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. AES has delivered
to NDI an accurate schedule (Schedule 5.25) as of the date of this Agreement,
of:
(i) the name of each financial institution in
which AES or any AES Subsidiary has an
account or safe deposit box;
(ii) the names in which the accounts or boxes are
held;
(iii) the type of account; and
(iv) the name of each person authorized to draw
thereon or have access thereto.
Schedule 5.25 also sets forth the name of each
person, corporation, firm or other entity holding a general or special power of
attorney from AES or any AES Subsidiary and a description of the terms of such
power.
5.26 VALIDITY OF OBLIGATIONS. The execution and delivery
of this Agreement by AES and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of AES,
and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of AES.
A-15
<PAGE> 42
5.27 RELATIONS WITH GOVERNMENTS. Neither AES nor any of the
AES Subsidiaries have made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action which would cause AES or any AES Subsidiary to
be in violation of the United States Foreign Corrupt Practices Act of 1977, as
amended, or any law of similar effect.
5.28 DISCLOSURE. No representation or warranty by AES
contained in this Agreement, and no representation, warranty or statement
contained in any list, certificate, Schedule or other instrument, document,
agreement or writing furnished or to be furnished to, or made with, NDI pursuant
hereto or in connection with the negotiation, execution or performance hereof,
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make any statement herein or
therein not misleading.
5.29 BOARD APPROVAL. The Board of Directors of AES has
approved the Merger and the terms of this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF NDI
NDI represents and warrants to AES as follows:
6.1 DUE ORGANIZATION. Each of NDI and the subsidiaries of NDI
identified in Schedule 6.6 hereto (the "NDI Subsidiaries") is a corporation duly
organized, validly existing and is in good standing under the laws of its
jurisdiction of incorporation, and is duly authorized and qualified to do
business under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a material adverse effect on the business, operations, affairs, prospects,
properties, assets, profits or condition (financial or otherwise) of NDI and the
NDI Subsidiaries taken as a whole (a "Material Adverse Effect"). Schedule 6.1
hereto contains a list of all jurisdictions in which NDI and each NDI Subsidiary
is authorized or qualified to do business. True, complete and
correct copies of the Articles of Incorporation and Bylaws, each as amended, of
NDI and each NDI Subsidiary are attached hereto as part of Schedule 6.1. Such
Articles of Incorporation and By-laws are referred to herein as the "NDI Charter
Documents." The minute books of NDI and each NDI Subsidiary as heretofore made
available to AES are correct and complete in all material respects.
6.2 AUTHORIZATION; VALIDITY. The representatives of NDI
executing this Agreement have the corporate power and authority to enter into
and bind NDI to the terms of this Agreement. NDI has the full legal right,
corporate power and authority to enter into this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement by NDI and the
performance by NDI of the transactions contemplated herein have been duly and
validly authorized by the Board of Directors of NDI and this Agreement has been
duly and validly authorized by all necessary corporate action. This Agreement is
a legal, valid and binding obligation of NDI enforceable in accordance with its
terms.
A-16
<PAGE> 43
6.3 CAPITAL STOCK OF NDI. The authorized capital stock of NDI
is as set forth in Section 1.4(ii) hereof. All of the issued and outstanding
shares of the capital stock of NDI have been duly authorized and validly issued,
are fully paid and nonassessable and are owned of record and beneficially by the
stockholders of NDI (collectively, the "NDI STOCKHOLDERS"). All of the issued
and outstanding shares of the capital stock of NDI were offered, issued, sold
and delivered by NDI in compliance with all applicable state and federal laws
concerning the issuance of securities. There are no preemptive rights with
respect to the NDI Common Stock.
6.4 TRANSACTIONS IN CAPITAL STOCK, ACCOUNTING TREATMENT.
Except as set forth in Schedule 6.4 hereto, no option, warrant, call, conversion
right or commitment of any kind exists which may obligate NDI to issue any
shares of capital stock. Except as set forth in Schedule 6.4 hereto, NDI has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. The voting stock structure of NDI and
the NDI Subsidiaries has not been materially altered or changed in contemplation
of the Merger, except that NDI shall be allowed to effect the transactions
provided for in Section 2.2(ii) hereof without being in violation of the
provisions of this Section 6.4.
6.5 NO BONUS SHARES. Except as set forth in Schedule 6.5
hereto, none of the shares of NDI Common Stock was issued pursuant to awards,
grants or bonuses.
6.6 NDI SUBSIDIARIES. NDI has no subsidiaries other than those
listed on Schedule 6.6 hereto (previously defined as the NDI Subsidiaries), and
except as set forth on Schedule 6.6 hereto, NDI does not presently own, of
record or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity (other than the NDI Subsidiaries),
nor is NDI or any NDI Subsidiary, directly or indirectly, a participant in any
joint venture, partnership or other noncorporate entity. Schedule 6.6 hereto
lists the number of shares and class of authorized capital stock of the NDI
Subsidiaries, all of which shares are owned by NDI free and clear of all liens,
encumbrances and claims of every kind.
6.7 PREDECESSOR STATUS; ETC. Set forth in Schedule 6.7 is a
listing of all names of all predecessor companies of NDI, including without
limitation the names of any entities from whom NDI has acquired material assets
other than in the normal and ordinary course of business and consistent with
past practice. Except as set forth in Schedule 6.7 hereto, NDI has not at any
time been a subsidiary or division of another corporation or a party to an
acquisition which was later rescinded.
6.8 SPIN-OFF BY NDI. There has not been any sale or spin-off
of material assets of either NDI, any NDI Subsidiary or any other person or
entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with NDI ("Affiliates")
within the preceding three (3) years.
A-17
<PAGE> 44
6.9 FINANCIAL STATEMENTS; SECURITIES FILINGS. NDI (i) has
delivered to AES (attached as Schedule 6.9 hereto) true, complete and correct
copies of NDI's audited Balance Sheets as of December 31, 1994, 1995, and 1996
(the end of each of its three most recent completed fiscal years), and audited
Statements of Income, Accumulated Deficit and Cash Flows for the same periods
(collectively, the "NDI Financials") and (ii) has delivered to NDI (also
attached as Schedule 6.9 hereto) true, complete and correct copies of NDI's
unaudited Balance Sheet (the "NDI Interim Balance Sheet") as of November 30,
1997 (the "Balance Sheet Date") and related Statement of Income, and
Supplementary Information for the eleven (11) month period then ended
(collectively, the "NDI Interim Financials"; and together with the NDI
Financials, the "NDI Financial Statements"). The NDI Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (such principles
on such basis being referred to herein as "GAAP"), subject, in the case of the
NDI Interim Financials to normal year-end audit adjustments, and to the omission
of footnote information. Each of the Balance Sheets included in the NDI
Financial Statements presents fairly the consolidated financial condition of NDI
as of the dates indicated thereon, and each of the Statements of Income, Cash
Flows and Retained Earnings included in the NDI Financial Statements presents
fairly the results of its consolidated operations for the periods indicated
thereon, subject in the case of the NDI Interim Financials, to year end
adjustments. NDI has also delivered to AES copies of NDI's most recent Forms
10-K, 10-Q and 8-K as filed with the Securities and Exchange Commission, and
copies of all Forms 3, 4, 5, and 13D received by NDI since January 1997.
6.10 LIABILITIES AND OBLIGATIONS.
(a) Except as disclosed on Schedule 6.10 attached hereto,
neither NDI nor any NDI Subsidiary is liable for or subject to any liabilities
exceeding an aggregate amount of $500,000, except for:
(i) those liabilities reflected on the NDI
Interim Balance Sheet and not heretofore
paid or discharged;
(ii) those liabilities arising in the ordinary
course of its business consistent with past
practice under any contract, commitment or
agreement specifically disclosed on any
Schedule to this Agreement or not required
to be disclosed thereon because of the term
or amount involved or otherwise;
(iii) those liabilities incurred, consistent with
past practice, in the ordinary course of
business and either not required to be shown
on the NDI Interim Balance Sheet or arising
since the Balance Sheet Date, which
liabilities in the aggregate are of a
character and magnitude consistent with past
practice; and
A-18
<PAGE> 45
(iv) those liabilities incurred during the
routine operations of NDI and consistent
with past practice, the amount of which can
be determined only subsequent to the Balance
Sheet Date and which were incurred or in
process prior to or on the Balance Sheet
Date, such as utilities, delivery expenses,
maintenance expenses and the like not
material in amount individually and in the
aggregate and for which appropriate
adjustments are typically made at year end
during the audit process or which would be
made in accordance with GAAP, if any interim
financial statements were to be audited.
For purposes of this Section 6.10 and Section 10 below, the term
"liabilities" shall include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, either accrued, absolute, contingent or
otherwise and whether known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured.
(b) NDI has delivered to AES, in the case of those liabilities
which are not fixed, a reasonable estimate of the maximum amount which may be
payable. For each such liability for which the amount is not fixed or is
contested, NDI has provided to AES (i) a summary description of the liability
together with (A) copies of all relevant documentation relating thereto, (B)
amounts claimed and any other action or relief sought and (C) name of claimant,
(ii) all other parties to the claim, suit or proceeding and the name of each
court or agency before which such claim, suit or proceeding is pending, and
(iii) the date such claim, suit or proceeding was instituted.
6.11 ACCOUNTS AND NOTES RECEIVABLE. NDI has delivered to AES
an accurate list (attached as Schedule 6.11 hereto) of the accounts and notes
receivable of NDI and each NDI Subsidiary as of a date not more than 90 business
days prior to the date hereof (including without limitation receivables from and
advances to employees and the NDI STOCKHOLDERS). Prior to Closing, NDI shall
also update Schedule 6.11 and provide NDI with an accurate list of all accounts
and notes receivable as of the end of the month preceding the month in which the
Closing occurs. All lists of accounts and notes receivable shall show the aging
of all accounts and notes receivable showing amounts due in 30-day aging
categories. To the best knowledge of NDI, except to the extent reflected on
Schedule 6.11, such accounts and notes are collectible in the amount shown on
Schedule 6.11, net of reserves reflected in the balance sheet as of the Balance
Sheet Date.
6.12 PERMITS AND INTANGIBLES. To the best of their knowledge,
each of NDI and the NDI Subsidiaries owns or holds all licenses, franchises,
permits and other governmental authorizations, including without limitation
permits, titles (including without limitation motor vehicle titles and current
registrations), title permits, licenses, franchises, certificates, trademarks,
trade names, patents, patent applications and copyrights, the absence of any of
which could have a Material Adverse Effect (the "NDI Material Permits"). NDI has
delivered to AES an accurate list and summary description (attached as Schedule
6.12 hereto) of all NDI Material Permits. To
A-19
<PAGE> 46
the knowledge of NDI, the NDI Material Permits are valid, and NDI has not
received any notice that any governmental authority intends to modify, cancel,
terminate or not renew any Material Permit. NDI and each NDI Subsidiary has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the NDI Material Permits and
other applicable orders, approvals, variances, rules and regulations and is not
in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect. The transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded to NDI or any
NDI Subsidiary by, any NDI Material Permit.
6.13 ENVIRONMENTAL MATTERS.
(a) To the best of their knowledge, each of NDI and the NDI
Subsidiaries has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), common laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to it and its properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws"), including without
limitation Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances (as such terms are currently defined in any
applicable Environmental Law), except to the extent that noncompliance with any
Environmental Law, either singly or in the aggregate, does not and would not
have a Material Adverse Effect;
(b) To the best of their knowledge, each of NDI and the NDI
Subsidiaries has obtained and adhered to all necessary permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances and has reported, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by NDI or any NDI Subsidiary where Hazardous Wastes or Hazardous
Substances have been treated, stored, disposed of or otherwise handled, except
to the extent that a failure to do so, either singly or in the aggregate, does
not and would not have a Material Adverse Effect;
(c) There have been no releases or threats of releases (as
defined in Environmental Laws) by NDI or any of its subsidiaries at, from, in or
on any property owned or operated by NDI or any NDI Subsidiary except as
permitted by Environmental Laws or where such releases do not and would not have
a Material Adverse Effect;
(d) To the best of their knowledge, each of NDI and the NDI
Subsidiaries knows of no on-site or off-site location to which NDI or any NDI
Subsidiary has transported or disposed of Hazardous Wastes and Hazardous
Substances or arranged for the transportation of Hazardous Wastes and Hazardous
Substances, which site is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against NDI or any NDI Subsidiary for any clean-up cost, remedial work, damage
to natural resources or personal injury, including without limitation any claim
under United States or Florida environmental statutes, as amended; and
A-20
<PAGE> 47
(e) To the best of their knowledge, neither NDI nor any NDI
Subsidiary has or will have any liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment, except to the
extent that such liability does not and would not have a Material Adverse
Effect.
6.14 REAL AND PERSONAL PROPERTY. NDI has delivered to AES an
accurate list (attached as Schedule 6.14 hereto) of all owned and leased real
property, all personal property included in "depreciable plant, property and
equipment" on the NDI Interim Balance Sheet and all other personal property
owned or leased by NDI or any NDI Subsidiary with a value in excess of $100,000
(i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date,
including in each case true, complete and correct copies of leases for material
equipment and all real properties on which are situated buildings, warehouses,
workshops, garages and other structures used in the operation of the business of
NDI and the NDI Subsidiaries. All personal property, material machinery and
equipment of NDI and the NDI Subsidiaries listed on Schedule 6.14 are in good
working order and condition, ordinary wear and tear excepted. All leases set
forth on Schedule 6.14 are in full force and effect and constitute valid and
binding agreements of NDI or the NDI Subsidiary and, to the knowledge of NDI,
the other parties thereto in accordance with their respective terms. All fixed
assets used by NDI or any NDI Subsidiary that are material to the operation of
their business are either owned by NDI or the NDI Subsidiary or leased under an
agreement listed on Schedule 6.15. Schedule 6.14 includes without limitation
true, complete and correct copies of all title reports and title insurance
policies received or owned by NDI or any NDI Subsidiary that are still in
effect. Schedule 6.14 also includes a summary description of all plans or
projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of NDI has made any material expenditure in the two-year period
prior to the date of this Agreement, which if pursued by NDI or any NDI
Subsidiary would require additional material expenditures of capital.
6.15 SIGNIFICANT CUSTOMERS; NDI MATERIAL CONTRACTS AND
COMMITMENTS. Schedule 6.15 hereto contains an accurate list of (i) all
significant customers (i.e. those customers representing 5% or more of NDI's
revenues for the 12 months ending on the Balance Sheet Date, or who have paid to
NDI $100,000 or more in any of the past four fiscal quarters) and (ii) all
material contracts, commitments, leases, instruments, agreements, licenses or
permits to which NDI or any NDI Subsidiary is a party or by which it or its
properties are bound (including without limitation contracts with significant
customers, joint venture or partnership agreements, contracts with any labor
organizations, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) (i) as of the Balance Sheet Date and (ii) entered into since the
Balance Sheet Date (collectively, the "NDI Material Contracts"). Schedule 6.16
hereto includes true, complete and correct copies of the NDI Material Contracts.
Except to the extent set forth on Schedule 6.15 hereto, (i) none of NDI's
significant customers have canceled or substantially reduced or, to the
knowledge of NDI are currently attempting or threatening to cancel or
substantially reduce service, (ii) NDI and the NDI Subsidiaries have complied
with all of their respective material commitments and obligations and are not in
default under any of the NDI Material Contracts and no notice of default has
been
A-21
<PAGE> 48
received with respect to any thereof and (iii) there are no NDI Material
Contracts that were not negotiated at arm's length with third parties not
affiliated with NDI or any officer, director or NDI STOCKHOLDER of NDI. NDI is
not bound by or subject to (and none of its respective assets or properties is
bound by or subject to) any arrangement with any labor union. No employees of
NDI or any NDI Subsidiary are represented by any labor union or covered by any
collective bargaining agreement and, to the best of NDI's knowledge, no campaign
to establish such representation is in progress. There is no pending or, to the
best of NDI's knowledge, threatened labor dispute involving NDI or any NDI
Subsidiary and any group of their employees nor has NDI or any NDI Subsidiary
experienced any labor interruptions over the past three (3) years and NDI
considers its relationship with its employees to be good.
6.16 TITLE TO REAL PROPERTY. NDI and each NDI Subsidiary does
not own any real property except as set forth on Schedule 6.16 hereto.
6.17 INSURANCE. NDI has delivered to AES an accurate list
(attached as Schedule 6.17 hereto) as of the Balance Sheet Date of all insurance
policies carried by NDI and the NDI Subsidiaries and all insurance loss runs or
workmen's compensation claims received for the past three (3) policy years. Also
attached to Schedule 6.17 are true, complete and correct copies of all current
insurance policies, all of which are in full force and effect. Such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Closing Date.
6.18 COMPENSATION; EMPLOYMENT AGREEMENTS. NDI has delivered to
AES an accurate list (attached as Schedule 6.18 hereto) showing all officers and
directors of NDI and each NDI Subsidiary, and of all employees of NDI and the
NDI Subsidiaries currently earning, on an annualized basis (including
commissions) in excess of $150,000 per year ("NDI Key Employees"), listing all
employment agreements with such officers, directors and NDI Key Employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the date hereof. NDI has provided to AES true,
complete and correct copies of all employment contracts, commitments and
arrangements with persons listed on Schedule 6.18.
6.19 EMPLOYEE BENEFIT PLANS. All employee benefit plans,
programs and policies (whether formal or informal, and whether maintained for
the benefit of a single individual or more than one individual) maintained or
contributed to by NDI or any NDI Subsidiary for the benefit of any current or
former employee of NDI or any NDI Subsidiary or in which such employees are
entitled to participate are listed in Schedule 6.19 (the "NDI Benefit Plans"),
and copies of all such written plans and policies, written descriptions of all
such oral plans and policies, and all other documentation relating to such plans
and policies have been delivered or made available to AES. Except as disclosed
on Schedule 6.19:
(i) each NDI Benefit Plan and the administration
thereof complies, and has at all times
complied, in all material respects with the
requirements of all applicable law;
A-22
<PAGE> 49
(ii) no suit, actions or other litigation
(excluding claims for benefits incurred in
the ordinary course of plan activities) have
been brought against or with respect to any
NDI Benefit Plan;
(iii) all required contributions to NDI Benefit
Plans have been made, and all benefits
accrued under any unfunded NDI Benefit Plan
will have been paid, accrued or otherwise
adequately reserved in accordance with GAAP
and NDI and the NDI Subsidiaries have
performed all material obligations required
to be performed under the NDI Benefit Plans;
and
(iv) no employee of NDI or any NDI Subsidiary is
represented by a labor union or
organization, no labor union or organization
has been certified or recognized as a
representative of any such employee, there
are no pending or, to the knowledge of NDI,
threatened representation campaigns
concerning union representation involving
any employee or efforts of any labor union
or organization (or representatives thereof)
to organize any employees.
6.20 CONFORMITY WITH LAW; LITIGATION. To the best of their
knowledge, neither NDI nor any NDI Subsidiary has violated any law or regulation
or any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it, which violations in the aggregate would have a Material
Adverse Effect; and except to the extent set forth in Schedule 6.10, there are
no material claims, actions, suits or proceedings, pending or, to the knowledge
of NDI, threatened, against or affecting NDI or any NDI Subsidiary, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it and no notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received.
6.21 TAXES. Except as set forth on Schedule 6.21, (i) NDI and
each NDI Subsidiary has timely filed or will timely file all requisite federal,
state and other Tax (as defined below) returns, reports and forms ("NDI
Returns") for all periods ended on or before the Closing Date; (ii) there are no
examinations in progress or claims against NDI for Taxes for any period or
periods and no notice of any claim for Taxes, whether pending or threatened, has
been received; (iii) the amounts shown as accruals for Taxes on the NDI Interim
Balance Sheet are sufficient for the payment of all Taxes, whenever determined,
for all fiscal periods ended on or before that date; (iv) NDI and each NDI
Subsidiary has a taxable year ending on December 31 in each year; (v) NDI and
each NDI Subsidiary currently utilizes the accrual method of accounting for
income Tax purposes and such method of accounting has not changed in the past
three (3) years; (vi) NDI and each NDI Subsidiary has paid or has fully accrued
for all Taxes, whenever determined, with respect to periods ending on or before
the Closing Date; and (vii) copies of (1) any Tax examinations, (2) extensions
of statutory limitations for the collection or
A-23
<PAGE> 50
assessment of Taxes and (3) the NDI Returns for the last three (3) fiscal years
are included as part of Schedule 6.21. If NDI has undergone a sales tax audit
with the Florida Department of Revenue within the last year, in regard to that
audit, NDI specifically represents that it has paid all amounts due and has no
further liability whatsoever in regard to said audit or any other sales tax
matters and, further, that no additional sales tax is due in connection with any
reclassification of any assets of NDI.
Upon the request of AES, NDI shall provide AES copies of all
NDI Returns other than those previously provided pursuant to clause (vii)(3) of
the preceding sentence.
For purposes of this Agreement, the term "Tax" shall be
understood to include any tax or similar governmental charge, impost or levy
(including without limitation income taxes, franchise taxes, transfer taxes or
fees, sales taxes, use taxes, gross receipts taxes, value added taxes,
employment taxes, excise taxes, ad valorem taxes, property taxes, withholding
taxes, payroll taxes, minimum taxes or windfall profit taxes) together with any
related penalties, fines, additions to tax or interest, imposed by the United
States or any other country or any state, county, local or foreign government or
subdivision or agency thereof.
6.22 NO VIOLATION. To the best of their knowledge, neither
NDI, any NDI Subsidiary nor any other party thereto is (i) in violation of any
NDI Charter Document or (ii) in default under any NDI Material Contract (the NDI
Material Contracts, together with the NDI Charter Documents, being referred to
herein as the "NDI Material Documents"); and, except as set forth in the
Schedules attached to this Agreement, (a) the rights and benefits of NDI and the
NDI Subsidiaries under the NDI Material Documents will not be materially and
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under, any of the terms or
provisions of the NDI Material Documents or the NDI Charter Documents. If any of
the NDI Material Documents requires notice to, or the consent or approval of,
any governmental agency or other third party to any of the transactions
contemplated hereby to remain in full force and effect or give rise to any right
to termination, cancellation or acceleration or loss of any right or benefit,
then NDI shall furnish all requisite notices and use its best efforts to obtain
the necessary consents and approvals either before or after consummation of the
Merger.
6.23 GOVERNMENT CONTRACTS. Except as set forth on Schedule
6.23 neither NDI nor any NDI Subsidiary is a party to any governmental contracts
subject to price redetermination or renegotiation.
6.24 ABSENCE OF CHANGES. Since November 30, 1997, except as
contemplated herein or as set forth on Schedule 6.24, there has not been:
(i) any changes that, individually or in the
aggregate, have had a Material Adverse
Effect;
A-24
<PAGE> 51
(ii) any damage, destruction or loss (whether or
not covered by insurance) materially
adversely affecting the properties or
business of NDI or any NDI Subsidiary;
(iii) any change in the authorized capital of NDI
or any NDI Subsidiary or in their
outstanding securities or any grant of any
options, warrants, calls, conversion rights
or commitments;
(iv) any declaration or payment of any dividend
or distribution in respect of the capital
stock or any direct or indirect redemption,
purchase or other acquisition of any of the
capital stock of NDI or any NDI Subsidiary;
(v) any increase in the compensation, bonus,
sales commissions or fee arrangement payable
or to become payable by NDI or any NDI
Subsidiary to any of its officers,
directors, NDI STOCKHOLDERS, employees,
consultants or agents, except for ordinary
and customary bonuses and salary increases
for employees in accordance with past
practice;
(vi) any work interruptions, labor grievances or
claims filed, or any similar event or
condition of any character, materially
adversely affecting the business or future
prospects of NDI or any NDI Subsidiary;
(vii) any sale or transfer, or any agreement to
sell or transfer, any material assets,
property or rights of NDI or any NDI
Subsidiary to any person, including without
limitation the NDI STOCKHOLDERS and their
affiliates;
(viii) any cancellation, or agreement to cancel,
any indebtedness or other obligation owing
to NDI or any NDI Subsidiary, including
without limitation any indebtedness or
obligation of any of the NDI STOCKHOLDERS or
any affiliate thereof, provided that NDI and
the NDI Subsidiaries may negotiate and
adjust bills in the course of good faith
disputes with customers in a manner
consistent with past practice;
(ix) any plan, agreement or arrangement granting
any preferential rights to purchase or
acquire any interest in any of the assets,
property or rights of NDI or any NDI
Subsidiary or requiring consent of any party
to the transfer and assignment of any such
assets, property or rights;
A-25
<PAGE> 52
(x) any purchase or acquisition of, or
agreement, plan or arrangement to purchase
or acquire, any property, rights or assets
outside of the ordinary course of business
of NDI and the NDI Subsidiaries;
(xi) any waiver of any material rights or claims
of NDI or any NDI Subsidiary;
(xii) any material breach, amendment or
termination of any material contract,
agreement, license, permit or other right to
which NDI or any NDI Subsidiary is a party;
or
(xiii) any transaction by NDI or any NDI Subsidiary
outside the ordinary course of businesses.
6.25 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. NDI has delivered
to AES an accurate schedule (Schedule 6.25) as of the date of this Agreement,
of:
(i) the name of each financial institution in
which NDI or any NDI Subsidiary has an
account or safe deposit box;
(ii) the names in which the accounts or boxes are
held;
(iii) the type of account; and
(iv) the name of each person authorized to draw
thereon or have access thereto.
Schedule 6.25 also sets forth the name of each person,
corporation, firm or other entity holding a general or special power of attorney
from NDI or any NDI Subsidiary and a description of the terms of such power.
6.26 VALIDITY OF OBLIGATIONS. The execution and delivery of
this Agreement by NDI and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of NDI,
and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of NDI.
6.27 RELATIONS WITH GOVERNMENTS. Neither NDI nor any of the
NDI Subsidiaries have made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action which would cause NDI or any NDI Subsidiary to
be in violation of the United States Foreign Corrupt Practices Act of 1977, as
amended, or any law of similar effect.
6.28 DISCLOSURE. No representation or warranty by NDI
contained in this Agreement, and no representation, warranty or statement
contained in any list, certificate,
A-26
<PAGE> 53
Schedule or other instrument, document, agreement or writing furnished or to be
furnished to, or made with, AES pursuant hereto or in connection with the
negotiation, execution or performance hereof, contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make any statement herein or therein not misleading.
6.29 BOARD APPROVAL. The Board of Directors of NDI has approved the
Merger and the terms of this Agreement.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE.
(a) Between the date of this Agreement and the Closing Date, AES will
afford to the officers and authorized representatives of NDI access to all of
the sites, properties, books and records of AES and the AES Subsidiaries (at
which AES may have its representatives present) and will furnish NDI with such
additional financial and operating data and other information as to the business
and properties of AES and the AES Subsidiaries as NDI may from time to time
reasonably request. The AES STOCKHOLDERS and AES will cooperate with NDI, its
agents, representatives, accountants, auditors and counsel in the preparation of
any documents or other material which may be required in connection with this
Agreement. NDI will treat and cause the treatment of all information obtained in
connection with the negotiation and performance of this Agreement or the due
diligence investigations conducted with respect hereto as confidential in
accordance with the provisions of Section 12 hereof. If, for any reason, no
Closing occurs under this Agreement, all such information will be returned to
AES.
(b) Between the date of this Agreement and the Closing Date, NDI will
afford to the officers and authorized representatives of AES access to all
sites, properties, books and records of NDI and the NDI Subsidiaries (at which
NDI may have its representatives present) and will furnish AES with such
additional financial and operating data and other information as to the business
and properties of NDI and the NDI Subsidiaries as AES may from time to time
reasonably request. NDI will cooperate with AES, its agents, representatives,
accountants, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by this Agreement. AES will treat and cause the treatment of all
information obtained in connection with the negotiation and performance of this
Agreement as confidential in accordance with the provisions of Section 12
hereof. If for any reason, no Closing occurs under this Agreement, all such
information will be returned to NDI.
A-27
<PAGE> 54
7.2 CONDUCT OF BUSINESS PENDING CLOSING; SECURITIES FILINGS AND
OTHER OBLIGATIONS.
(a) Between the date hereof and the Closing Date, each of NDI, AES and
their respective subsidiaries will:
(i) carry on their respective businesses in
substantially the same manner as they have
heretofore and not introduce any material
new method of management, operation or
accounting;
(ii) maintain their respective properties and
facilities, including those held under
leases, in as good working order and
condition as at present, ordinary wear and
tear excepted;
(iii) perform all of their respective obligations
under agreements relating to or affecting
their assets, properties or rights;
(iv) keep in full force and effect present
insurance policies or other comparable
insurance coverage;
(v) use reasonable efforts to maintain and
preserve their business organization intact,
retain their respective present employees
and maintain their respective relationships
with suppliers, customers and others having
business relations with NDI, AES or their
respective subsidiaries, as the case may be;
(vi) maintain compliance with all permits, laws,
rules and regulations, consent orders, and
all other orders of applicable courts,
regulatory agencies and similar governmental
authorities;
(vii) maintain present material debt and lease
instruments and not enter into new or
amended debt or lease instruments, without
the knowledge and consent of each other;
except that AES shall have the right to
consummate additional acquisition and
financing transactions and incur debt
pursuant thereto without being in violation
of this clause; and
(viii) maintain or reduce present salaries and
commission levels for all officers,
directors, employees and agents, except for
ordinary and customary bonuses and salary
increases for employees (other than
employees who are also AES STOCKHOLDERS or
NDI STOCKHOLDERS, as the case may be) in
accordance with past practice; except that
AES will have the right to enter into
compensation arrangements with personnel
retained or hired as a result of or in
connection with the acquisition transactions
provided for in clause 7.2(a)(vii) above and
to grant raises in compensation
A-28
<PAGE> 55
levels to employees who are promoted or
performance bonuses to employees who meet
the criteria therefor.
(b) Between the date hereof and the Closing Date:
(i) NDI will file for registration (under the
Securities Act of 1933) of the NDI common
stock to be issued to the AES STOCKHOLDERS
as provided for herein;
(ii) NDI will prepare and distribute proxy
statements to allow the NDI STOCKHOLDERS to
vote upon and approve the Merger and related
transactions provided for herein;
(iii) Each of AES and the AES Subsidiaries will
cause to be prepared audited financial
statements for the 1997 fiscal year; and
(iv) Each of AES, NDI and their respective
subsidiaries will cooperate with each other
in order to facilitate and effect the
actions called for in this Section 7.2(b).
7.3 PROHIBITED ACTIVITIES.
(a) Between the Balance Sheet Date and the Closing Date, each of NDI
and the NDI Subsidiaries have not and from the date hereof, without prior
written consent of AES, will not:
(i) make any change in their respective
Certificate of Incorporation or By-laws,
except that NDI's amendment of its By-laws
on February 18, 1998 shall not constitute a
violation of this provision;
(ii) issue any securities, options, warrants,
calls, conversion rights or commitments
relating to its securities of any kind,
except that NDI shall be allowed to effect
the reverse stock split and issue the
securities provided for in Section 2.2(ii)
above without being in violation of this
provision;
(iii) declare or pay any dividend, or make any
distribution in respect of their respective
stock whether now or hereafter outstanding,
or purchase, redeem or otherwise acquire or
retire for value any shares of their
respective stock;
(iv) enter into any contract or commitment or
incur or agree to incur any liability or
make any capital expenditures, except if it
is in the normal course of business,
consistent with past practice or involves
A-29
<PAGE> 56
an amount not in excess of $5,000, including
contracts to provide services to customers;
(v) increase the compensation payable or to
become payable to any officer, director,
Stockholder, employee or agent, or make any
bonus or management fee payment to any such
person, except for obligations under
existing contracts or arrangements;
(vi) create, assume or permit to exist any
mortgage, pledge or other lien or
encumbrance upon any assets or properties
whether now owned or hereafter acquired;
(vii) sell, assign, lease or otherwise transfer or
dispose of any property or equipment except
in the normal course of business;
(viii) negotiate for the acquisition of any
business or the start-up of any new
business;
(ix) merge or consolidate or agree to merge or
consolidate with or into any other
corporation;
(x) waive any of their respective material
rights or claims, provided that each of them
may negotiate and adjust bills in the course
of good faith disputes with customers in a
manner consistent with past practice;
(xi) commit a material breach or amend or
terminate any of their respective material
agreements, permits, licenses or other
rights;
(xii) enter into any other transaction (1) that is
not negotiated at arm's length with a third
party not affiliated with NDI, AES, their
respective subsidiaries, or any officer,
director or Stockholder of NDI, AES, or
their respective subsidiaries, as the case
may be, or (2) outside the ordinary course
of business; or
(xiii) permit any alteration or change in the
structure of the capital stock owned by
their respective shareholders (except that
NDI shall be allowed to effect the
transactions provided for in Section 2.2(ii)
above without being in violation of this
provision).
(b) Between the Date of the AES Financials and the Closing Date, each
of AES and the AES Subsidiaries have not and from the date hereof, without prior
written consent of NDI, will not:
A-30
<PAGE> 57
(i) make any change in their respective
Certificate of Incorporation or By-laws;
(ii) declare or pay any dividend, or make any
distribution in respect of their respective
stock whether now or hereafter outstanding,
or purchase, redeem or otherwise acquire or
retire for value any shares of their
respective stock;
(iii) merge or consolidate or agree to merge or
consolidate with or into any other
corporation; provided that AES may do so if
it is the surviving corporation in such a
transaction;
(iv) commit a material breach or amend or
terminate any of their respective material
agreements, permits, licenses or other
rights;
(v) enter into any other transaction (1) that is
not negotiated at arm's length with a third
party not affiliated with AES, any of its
subsidiaries, or any officer, director or
Stockholder of AES, or any of its
subsidiaries, as the case may be, or (2)
outside the ordinary course of business
(which, in AES's case, consists of acquiring
businesses and companies); or
(vi) permit any alteration or change in the
structure of the capital stock owned by
their respective shareholders, except that
AES shall be entitled to issue stock and
securities in connection with any
acquisition undertaken between the date
hereof and the Closing.
7.4 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date,
each of NDI and AES shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under applicable collective bargaining
agreements, and shall provide each other with proof that any required notice has
been sent.
7.5 NOTIFICATION OF CERTAIN MATTERS. AES shall give prompt
notice to NDI of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of AES contained herein to be untrue or inaccurate in
any material respect at or prior to the Closing and (ii) any material failure of
AES to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. NDI shall give prompt
notice to AES of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty of NDI contained herein to be untrue or inaccurate in
any material respect at or prior to the Closing and (ii) any material failure of
NDI to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. The delivery of any notice pursuant
to this Section 7.5 shall not be deemed to (i) modify the representations or
warranties hereunder of the party delivering such notice, which modification
A-31
<PAGE> 58
may only be made pursuant to Section 7.6, (ii) modify the conditions set forth
in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
7.6 AMENDMENT OF SCHEDULES. Each party hereto agrees that,
with respect to the representations and warranties of such party contained in
this Agreement, such party shall have the continuing obligation until the
Closing to supplement or amend promptly the Schedules hereto with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in the
Schedules because of its material nature and material significance to the Merger
and transactions contemplated hereby, provided that no amendment or supplement
to a Schedule that constitutes or reflects a material adverse change may be made
unless NDI, in the case of an amendment or supplement by AES, or AES, in the
case of an amendment or supplement by NDI consents to such amendment or
supplement and, provided, further, that the acceptance of any amendment or
supplement to any schedule shall operate as a waiver of any claim under Section
10 or otherwise by the consenting party solely with respect to the item or items
set forth in such amendment or supplement. For all purposes of this Agreement,
including without limitation for purposes of determining whether the conditions
set forth in Sections 8 and 9 have been fulfilled, the Schedules hereto shall be
deemed to be the Schedules as amended or supplemented pursuant to this Section
7.6. In the event that NDI or AES seeks to amend or supplement a Schedule
pursuant to this Section 7.6, and NDI or AES, as the case may be, does not
consent to such amendment or supplement as required by this Section 7.6, each
party shall have all rights and remedies provided by law.
7.7 COOPERATION IN OBTAINING REQUIRED CONSENTS AND APPROVALS.
Each party hereto shall cooperate in obtaining all consents and approvals
required by Section 8.6. In connection therewith, if required, AES, NDI and
their respective Stockholders shall file all notices and other information and
documents required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, as promptly as practicable after the date hereof.
7.8 MANAGEMENT OF NDI PRIOR TO CLOSING. AES and NDI agree that
AES will manage the business of NDI from the date of execution hereof until the
Closing Date or earlier termination hereof. The parties anticipate that AES may
fund, in the form of demand loans, certain of NDI's operating deficits and
capital needs for its business in the course of AES's management, though it
shall not be obligated to do so. In order for AES to effectively manage the
business of NDI prior to the Closing, and in order for NDI to provide AES
sufficient assurances of repayment of any funds advanced to NDI should the
transactions contemplated herein not close, the parties agree that Charles Broes
and Ernest N. Burson, III shall be appointed to the Board of Directors of NDI,
effective upon the execution hereof, and should either or both fail or refuse to
serve during the period hereof, they shall be replaced by such other nominees as
AES may select. NDI agrees to cause such appointments to be made upon the
execution hereof. Curtis Alliston will continue to serve on the NDI Board of
Directors until the Closing Date. Additionally, NDI will use its best efforts to
cause Curtis Allison and certain other shareholders (but not more than nine
other shareholders) holding an aggregate of at least 51%
A-32
<PAGE> 59
of NDI's stock (or as much as can be obtained) to grant to NDI's Board of
Directors irrevocable proxies to vote their shares for the election of directors
(but for no other purpose) as soon as practicable after the date hereof. Such
proxies will be satisfactory in form and substance to AES and its counsel and
will survive any termination of this Agreement. AES will not charge a management
fee for its services rendered under this Section 7.8, but it will be entitled to
reimbursement for all direct, out-of-pocket costs incurred by it in rendering
management services hereunder, including costs of wages, benefits, and
employment taxes for employees (other than directors) who work for NDI. NDI
shall execute promissory notes from time to time to evidence all indebtedness
owed to AES pursuant to this paragraph. Such promissory notes will be
satisfactory in form and substance to AES and its counsel, and, at AES's option,
shall be secured by a blanket lien on the assets of NDI to secure repayment of
the notes. Any such lien will be satisfactory in form and substance to AES and
its counsel, but will be subordinate to existing liens.
At the time of Closing of the Merger, AES shall release the
proxies granted to it by Curtis Alliston and others. In the event the Merger
does not close for any reason, the proxies granted hereunder shall remain in
full force and effect until such time as NDI repays to AES all funds advanced by
it and all costs incurred by AES pursuant to this Section 7.8; provided,
however, that the duration of the proxies shall not exceed any period prescribed
by law. Upon repayment of all funds advanced and reimbursement of all costs
incurred by AES under this Section 7.8, AES shall cause Charles Broes and Ernest
N. Burson, III, or their successors or other nominees, to resign from NDI's
Board of Directors and shall release its lien on NDI's assets. The covenants
contained in this Section 7.8 shall survive any termination hereof.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
AES
The obligations of AES to close the transactions hereunder are subject
to satisfaction of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS. All representations and warranties of NDI contained in Section 6
and elsewhere in this Agreement shall be true and correct as of the Closing Date
as though such representations and warranties had been made as of that time; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by NDI on or before the Closing Date shall have been duly complied
with and performed; and a certificate to the foregoing effect dated the Closing
Date and signed by the President or any Vice President of NDI shall have been
delivered to AES.
8.2 NO LITIGATION. No action or proceeding before a court or
any other governmental agency or body shall have been instituted or threatened
to restrain or prohibit the merger of AES with and into NDI, and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
AES STOCKHOLDERS' acquisition of NDI Common Stock and no governmental agency or
body shall have taken any other action or made any request of
A-33
<PAGE> 60
AES as a result of which AES reasonably deems it inadvisable to proceed with the
transactions hereunder.
8.3 REVERSE STOCK SPLIT/AUTHORIZATION OF ADDITIONAL NDI COMMON
STOCK. NDI shall have effected the reverse stock split and authorized issuance
of the NDI Common Stock provided for in Section 2.2 (ii) above, and shall have
authorized such amendments to its articles of incorporation as may be needed to
increase NDI's authorized common stock to at least 100,000,000 shares.
8.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in
the business, operations, affairs, prospects, properties, assets, profits or
condition (financial or otherwise) of NDI and its subsidiaries, taken as a
whole, shall have occurred; and AES shall have received a certificate signed by
NDI dated the Closing Date to such effect.
8.5 OPINION OF COUNSEL. AES shall have received an opinion
from Foley & Lardner, counsel for NDI, dated the Closing Date, in the form
annexed hereto as Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and
filings with any governmental authority or agency or third party relating to the
consummation by AES and NDI of the transactions contemplated herein shall have
been obtained and made.
8.7 CERTIFICATES. NDI and each NDI Subsidiary, as the case may
be, shall have delivered to AES (i) copies of their respective Certificate of
Incorporation, certified by the Secretary of State of the jurisdiction of their
incorporation, (ii) copies of their respective By-laws, certified by their
respective Secretary, (iii) copies of all resolutions authorizing this Agreement
and the transactions contemplated hereby, certified by their respective
Secretary, (iv) a certificate of the Secretary of NDI as to the incumbency of
the officers of NDI executing this Agreement and any other document relating to
the transactions contemplated hereby, (v) a certificate, dated as of a date no
later than ten days prior to the Closing Date, duly issued by the pertinent
Secretary of State, showing that NDI and each NDI Subsidiary are each in good
standing and authorized to do business.
8.8 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing
Date, AES shall have had sufficient time to review the unaudited balance sheets
of NDI as of the end of any months and/or fiscal quarters following the Balance
Sheet Date, the unaudited statements of income and cash flows of NDI for any
fiscal quarters following the quarter ended on the Balance Sheet Date, and any
audited financial information prepared by NDI's accountants for the use of or at
the request of NDI or AES, disclosing no material adverse change in the
financial condition of NDI or the results of its operations from the financial
statements as of the Balance Sheet Date delivered by NDI pursuant to Section 6.9
hereof.
8.9 REGISTRATION OF NDI COMMON STOCK TO BE ISSUED TO AES
STOCKHOLDERS. NDI shall have prepared and filed with the SEC a registration
statement under the Securities Act
A-34
<PAGE> 61
of 1933 on the appropriate form with respect to the NDI Common Stock to be
issued to AES STOCKHOLDERS pursuant to the Merger (the "S-4 Registration
Statement"), and the S-4 Registration Statement shall have been declared
effective and shall not be the subject of any stop order or proceeding seeking a
stop order, and the NDI Common Stock to be issued to AES STOCKHOLDERS shall have
been authorized for listing on the NASDAQ Small Cap market, upon official notice
of issuance.
8.10 SHAREHOLDER APPROVAL. The Shareholders of NDI and AES
shall have approved the Merger and the terms of this Agreement, including any
actions to be taken hereunder for which separate shareholder approval is
required.
8.11 DISSENTERS. The parties entered into a letter of intent
to undretake this transaction on February 4, 1998, and thereupon issued a press
release announcing the transaction. To fix the price to be received by persons
exercising dissenters' rights, the parties agree that the highest traded price
of NDI Common Stock within the five days prior to the announcement of the
transaction is the fair value of NDI Common Stock. Accordingly, as a condition
of AES to close the transactions hereunder, holders of at least ninety percent
(90%) of the voting stock of each AES and NDI shall not exercise dissenters'
rights under the applicable statutes.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF NDI
The obligations of NDI to close the transactions hereunder are subject
to the satisfaction of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES: PERFORMANCE OF
OBLIGATIONS. All the representations and warranties of AES contained in this
Agreement shall be true, correct and complete on and as of the Closing Date with
the same effect as though such representations and warranties had been made on
and as of such date; each and all of the agreements and obligations of AES to be
performed on or before the Closing Date pursuant to the terms hereof shall have
been performed; and AES shall have delivered to NDI a certificate dated the
Closing Date and signed by NDI to both such effects.
9.2 OPINION OF COUNSEL. NDI shall have received an opinion
from Agliano, Hodges & Whittemore, P.A., counsel to AES, dated the Closing Date,
in the form annexed hereto as Annex IV.
9.3 CERTIFICATES. AES shall have delivered to NDI (i) a copy
of the Articles of Incorporation of AES and each AES Subsidiary certified by an
appropriate authority in the state of its incorporation, (ii) a copy of the
By-laws of AES and each AES Subsidiary certified by the Secretary of AES, or the
Secretary of the AES Subsidiary, as the case may be, (iii) copies of all
resolutions authorizing this Agreement and the transactions contemplated hereby,
certified by the Secretary of AES, (iv) a certificate of the Secretary of AES as
to the incumbency of the officers of AES executing this Agreement and any other
document relating to the transactions
A-35
<PAGE> 62
contemplated hereby, (v) certificates, each dated as of a date no later than ten
days prior to the Closing Date, duly issued by the appropriate governmental
authority in the state of incorporation of AES and each AES Subsidiary, and in
each state in which AES and each AES Subsidiary is authorized to do business,
showing AES and each AES Subsidiary is in good standing and authorized to do
business and, to the extent available, that all franchise and/or income tax
returns and taxes for AES and each AES Subsidiary for all periods prior to the
Closing have been filed and paid.
9.4 SHAREHOLDER APPROVAL. The shareholders of AES and NDI
shall have approved and consented to the Merger and the terms of this Agreement,
including any actions to be taken hereunder for which separate shareholder
approval is required.
9.5 REPRESENTATIONS, WARRANTIES AND COVENANTS OF AES DIRECTORS
AND OFFICERS. Each of the directors and officers of AES shall have executed and
delivered to NDI a letter in the form of that attached hereto as Annex V.
10. INDEMNIFICATION
10.1 INDEMNIFICATION BY AES DIRECTORS AND OFFICERS. Each AES
officer and member of the AES Board of Directors shall be bound by the
indemnification provisions set forth in that certain letter (in the form of
Annex V hereto) which shall be signed by each AES Director and officer and
delivered to NDI as a condition to Closing.
10.2 INDEMNIFICATION BY NDI. NDI covenants and agrees that it
will indemnify, defend, protect and hold harmless each AES STOCKHOLDER from,
against and in respect of:
(a) all losses, liabilities, and claims suffered, sustained,
incurred or paid by such AES STOCKHOLDER in connection with, resulting from or
arising out of
(i) any breach of any representation or warranty of
NDI set forth in this Agreement or any
certificate or other writing delivered by NDI in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement
on the part of NDI in this Agreement; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and other
expenses (including without limitation reasonable attorneys' fees and expenses)
incident to any of the foregoing or to the enforcement of this Section 10.2.
10.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND PLEDGES OF
INDEMNIFICATION. Except as provided in Section 10.5 hereof, the representations
warranties and pledges of indemnification given or made by the parties to this
Agreement or in any certificate
A-36
<PAGE> 63
or other writing furnished in connection herewith, and the right to assert an
indemnification claim hereunder or under any certificate or other writing
furnished in connection herewith, shall survive the Closing until the earlier of
(a) the date of completion of the first audit of financial statements containing
combined operations for those items that would be expected to be encountered in
the audit process or (b) the first anniversary of the Closing Date (such earlier
date being referred to herein as the "Expiration Date") and shall thereafter
terminate and be of no further force or effect, except that representations,
warranties and pledges of indemnification set forth in Sections 5.30 and 6.26
hereof shall survive the Closing without limitation. Any representation or
warranty as to which a claim (including without limitation a contingent claim)
shall have been asserted during the survival period shall continue in effect
with respect to such claim until such claim shall have been finally resolved or
settled. Notwithstanding any investigation or audit conducted before or after
the Closing Date or the decision of any party to complete the Closing, each
party shall be entitled to rely upon the representations and warranties of the
other party or parties set forth herein.
10.4 THIRD PERSON CLAIMS. Promptly after (i.e., within 30 days
after) any indemnified party hereto (hereinafter the "Indemnified Party") has
received notice of or has knowledge of any claim by a person not a party to this
Agreement ("Third Person"), or the commencement of any action or proceeding by a
Third Person, the Indemnified Party shall, as a condition precedent to a claim
with respect thereto being made against any party obligated to provide
indemnification pursuant to Section 10.1 or 10.2 hereof (hereinafter the
"Indemnifying Party"), give the Indemnifying Party written notice of such claim
or the commencement of such action or proceeding (a "Claim Notice"). Such notice
shall state the nature and the basis of such claim and a reasonable estimate of
the amount thereof. The Indemnifying Party shall have the right to defend and
settle, at its own expense and by its own counsel, any such matter so long as
the Indemnifying Party pursues the same in good faith and diligently, provided
that the Indemnifying Party shall not settle any criminal proceeding without the
consent of the Indemnified Party. If the Indemnifying Party undertakes to defend
or settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. All Indemnified Parties shall use the same counsel, which shall be the
counsel selected by Indemnifying Party, provided that if counsel to the
Indemnifying Party shall have a conflict of interest that prevents counsel for
the Indemnifying Party from representing Indemnified Party, Indemnified Party
shall have the right to participate in such matter through counsel of its own
choosing and Indemnifying Party will reimburse the Indemnified Party for the
expenses of its counsel. In the absence of a conflict situation as described
herein, an Indemnified Party shall have the option, at the expense of such
Indemnified Party, to select and utilize counsel other than that selected by an
Indemnifying Party. After the Indemnifying Party has notified the Indemnified
Party of its intention to undertake to defend or settle any such asserted
liability, and for so long as the Indemnifying Party diligently pursues such
defense, the Indemnifying Party shall not be liable for any additional legal
expenses incurred by the Indemnified Party in connection with any defense or
settlement of such asserted liability,
A-37
<PAGE> 64
except to the extent such participation is requested by the Indemnifying Party,
in which event the Indemnified Party shall be reimbursed by the Indemnifying
Party for reasonable additional legal expenses and out-of-pocket expenses. If
the Indemnifying Party desires to accept a final and complete settlement of any
such Third Person claim and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person and the Indemnified Party shall reimburse the
Indemnifying Party for any additional costs of defense (including without
limitation reasonable attorneys fees) which it subsequently incurs with respect
to such claim and all additional costs of settlement or judgment. If the
Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however that, except as otherwise provided herein, under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. Nothing herein shall be deemed to prevent the
Indemnified Party from making a claim hereunder for potential or contingent
claims or demands provided the Claim Notice sets forth the specific basis for
any such potential or contingent claim or demand to the extent then feasible and
the Indemnified Party has reasonable grounds to believe that such a claim or
demand may be made. The Indemnified Party's failure to promptly deliver a Claim
Notice to the Indemnifying Party shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the Indemnified Party unless
the failure to give such prompt notice materially and adversely prejudiced the
Indemnifying Party.
10.5 REMEDY. The indemnification provided for in this Section
10 shall not be the exclusive remedy in any action seeking damages or any other
form of monetary relief brought by any party to this Agreement against another
party hereto. If either party hereto unjustifiably terminates this Agreement,
then the terminating party shall be obligated to pay liquidated damages to the
non-terminating party in an amount equal to all costs and expenses (including
reasonable attorneys' fees) incurred by the non-terminating party in preparation
for and in contemplation of the Merger and other transactions provided for
hereunder. Nothing herein shall be construed to limit the right of a party
hereto, in a proper case, to seek injunctive relief for a breach of this
Agreement. Nothing herein shall be deemed to limit or restrict in any manner any
rights or remedies which any party hereto has, or might have, at law, in equity
or otherwise, against any other party hereto based on any willful
misrepresentation, willful breach of warranty or willful failure to fulfill any
covenant or agreement set forth herein.
A-38
<PAGE> 65
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
11.1 AES' OFFICERS AND DIRECTORS. Each of AES' officers and
directors shall execute and deliver to NDI a letter in the form as that attached
hereto as Annex V, and shall be bound by the representations, warranties and
covenants thereof, including, but not limited to those pertaining to
confidential information.
11.2 NDI. NDI recognizes and acknowledges that it had in the
past, currently has, and in the future may possibly have, access to certain
confidential information of AES and/or the AES Subsidiaries, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of AES's and/or the AES Subsidiaries'
respective businesses. NDI agrees that, prior to or after the Closing, or if
there shall not be a Closing, it and its officers, directors, and agents will
not disclose confidential information with respect to AES and/or AES
Subsidiaries to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to authorized representatives of AES
and to counsel and other advisers to AES, provided that such advisers to AES
(other than counsel) agree to the confidentiality provisions of this Section
12.2, unless (i) such information becomes known to the public generally through
no fault of NDI, (ii) disclosure is required by law or the order of any
governmental authority under color of law, or (iii) the disclosing party
reasonably believes that such disclosure is required in connection with the
defense of a lawsuit against the disclosing party, provided, that prior to
disclosing any information pursuant to clause (i), (ii) or (iii) above, NDI
shall, if possible, give prior written notice thereof to AES and provide AES
with the opportunity to contest such disclosure. In the event of a breach or
threatened breach by NDI of the provisions of this Section, AES shall be
entitled to an injunction restraining NDI from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
AES from pursuing any other available remedy for such breach or threatened
breach, including without limitation the recovery of damages.
11.3 DAMAGES. Because of the difficulty of measuring economic
losses as a result of the breach of the covenants provided for in Section 12.1
above and the covenants contained in this Section 12.2, and because of the
immediate and irreparable damage that would be caused for which they would have
no other adequate remedy, the parties hereto agree that, in the event of a
breach by any of them, or by the AES directors and officers, as the case may be,
of the foregoing covenants, the covenants may be enforced against the breaching
party by injunctions and restraining orders.
11.4 SURVIVAL. The obligations of the parties under this
Article 11 shall survive the termination of this Agreement.
12. FEDERAL SECURITIES ACT REPRESENTATIONS. Each AES STOCKHOLDER
shall deliver to NDI a letter containing such representations, warranties and
covenants as the parties deem necessary to enable NDI to fulfill its obligations
under federal and state securities laws. Such letter shall be executed and
delivered by each AES STOCKHOLDER as a condition to delivery of the NDI Common
Stock to such AES STOCKHOLDER, and shall,
A-39
<PAGE> 66
at a minimum, contain representations and warranties that the AES Stock is free
and clear of liens and encumbrances.
13. GENERAL
13.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date solely:
(i) by mutual consent of the boards of directors of
NDI and AES;
(ii) by AES (acting through its board of directors)
if the transactions contemplated by this
Agreement to take place at the Closing shall not
have been consummated by August 1, 1998, unless
the failure of such transactions to be
consummated is due to the willful failure of AES
to perform any of its or his obligations under
this Agreement to the extent required to be
performed by it prior to or on the Closing Date;
or
(iii) by AES (acting through its board of directors)
on the one hand, or by NDI (acting through its
board of directors), on the other hand, if a
material breach or default shall be made by the
other party in the observance or in the due and
timely performance of any of the covenants,
agreements or conditions contained herein, and
the curing of such default shall not have been
made within 30 days after notice of the default
is given.
13.2 COOPERATION. AES, the AES STOCKHOLDERS and NDI (as the
case may be) shall each deliver or cause to be delivered to the other on the
Closing Date, and at such other times and places as shall be reasonably agreed
to, such additional instruments as the other may reasonably request for the
purpose of carrying out this Agreement. In connection therewith, if required,
the President or Chief Financial Officer of AES will execute any documentation
reasonably required by NDI's independent public accountants (in connection with
such accountant's audit of AES) or the NASD in connection with the listing of
the securities of the Surviving Corporation for trading on the NASDAQ Small Cap
Market. The present officers, directors and employees of AES shall cooperate
with NDI on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any filing obligations,
actions, proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
13.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of
the parties hereunder may not be assigned (except by operation of law) and shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
A-40
<PAGE> 67
13.4 ENTIRE AGREEMENT. This Agreement (which includes the
Schedules and Annexes hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the AES STOCKHOLDERS,
AES and NDI and supersede any prior agreement and understanding relating to the
subject matter of this Agreement. This Agreement, upon execution, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance with
its terms and may be modified or amended only by a written instrument executed
by AES and NDI, acting through their respective officers, duly authorized by
their respective Boards of Directors; provided, however, that this Agreement may
not be amended in any manner that materially and adversely affects the rights,
liabilities, or obligations hereunder of the shareholders of AES or NDI
following approval by such affected shareholders, unless such affected
shareholders approve such amendment.
13.5 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the same
instrument.
13.6 BROKERS AND AGENTS. Each party represents and warrants
that it employed no broker or agent in connection with this transaction and
agrees to indemnify the other against all loss, cost, damages or expense arising
out of claims for fees or commission of brokers employed or alleged to have been
employed by such indemnifying party.
13.7 EXPENSES. NDI has and will pay the fees, expenses and
disbursements of NDI, NDI's agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement, including
without limitation the fees and expenses of Foley & Lardner, and (ii) AES has
and will pay the fees, expenses and disbursements of AES and AES's agents,
representatives, financial advisors, accountants and counsel incurred in
connection with the subject matter of this Agreement, including without
limitation the fees and expenses of Agliano, Hodges & Whittemore, P.A.
13.8 NOTICES. All notices of communication required or
permitted hereunder shall be in writing and may be given by depositing the same
with a recognized overnight courier service (such as Federal Express) addressed
to the party to be notified, or by delivering the same in person to an officer
or agent of such party.
(a) National Diagnostics, Inc.
737B West Brandon Blvd.
Brandon, FL 33511
Attention: Curtis L. Alliston
Telephone No.: (813) 661-9501
Telecopy No.: (813) 661-9601
A-41
<PAGE> 68
With a required copy to:
Foley & Lardner
100 N. Tampa Street, Suite 2700
Tampa, FL 33602
Attention: Martin A. Traber
Telephone No.: (813) 229-2300
Telecopy No.: (813) 229-4210
(b) If to AES prior to the Closing to:
American Enterprise Solutions, Inc.
5313 Johns Road, Suite 201
Tampa, FL 33634
Attention: Charles Broes, CEO
Telephone No.: (813) 261-0062
Telecopy No.: (813) 290-9030
With a required copy to:
Agliano, Hodges & Whittemore, P.A.
400 North Tampa Street
Suite 2630
Tampa, Florida 33602
Attention: Todd Hodges
Telephone No.: (813) 225-1515
Telecopy No.: (813) 224-0070
If to the AES STOCKHOLDERS, as follows:
C/O American Enterprise Solutions, Inc.
5313 Johns Road, Suite 201
Tampa, FL 33634
Attention: Charles Broes, CEO
Telephone No.: (813) 261-0062
Telecopy No.: (813) 290-9030
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 14.8 from time to time.
13.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive law of the State of Florida. Any
disputes arising out of, in connection with or with respect to this Agreement,
the subject matter hereof, the performance or nonperformance of any obligation
hereunder, or any of the transactions contemplated hereby shall
A-42
<PAGE> 69
be adjudicated in a court of competent civil jurisdiction sitting in the County
of Hillsborough, Florida and nowhere else. Each of the parties hereto hereby
irrevocably submits to the jurisdiction of such court for the purposes of any
suit, civil action or other proceeding arising out of, in connection with or
with respect to this Agreement, the subject matter hereof, the performance or
non-performance of any obligation hereunder, or any of the transactions
contemplated hereby (collectively, "Suit"). Each of the parties hereto hereby
waives and agrees not to assert by way of motion, as a defense or otherwise in
any such Suit, any claim that it is not subject to the jurisdiction of the above
courts, that such Suit is brought in an inconvenient forum, or that the venue of
such Suit is improper.
13.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise
provided herein, no delay of or omission in the exercise of any right, power or
remedy accruing to any party as a result of any breach or default by any other
party under this Agreement shall impair any such right, power or remedy, nor
shall it be construed as a waiver of or acquiescence in any such breach or
default, or of any similar breach or default occurring later; nor shall any
waiver of any single breach or default be deemed a waiver of any other breach or
default occurring before or after that waiver.
13.11 TIME. Time is of the essence with respect to this
Agreement.
13.12 REFORMATION AND SEVERABILITY. In case any provision of
this Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties, and if
such modification is not possible, such provision, shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby; provided, however, that if such provision relates to the
consideration to be received by the AES stockholders, such provision shall not
be modified nor severed, and the declaration of invalidity shall make the
Agreement voidable.
13.13 NO THIRD PARTY BENEFICIARIES. This Agreement is solely
between the parties hereto and no person not a party to this Agreement will have
any rights or privileges of any nature whatsoever either as the beneficiaries or
otherwise.
13.14 TAX FREE MERGER. Notwithstanding anything to the
contrary contained herein, it is the intent of the parties to effect this
transaction in the form of a merger (as defined in Section 368(a)(1)(a) of the
Internal Revenue Code of 1986, as amended) in which AES is the Merged
Corporation and NDI is the Surviving Corporation. This Agreement shall be
modified as necessary to reflect that intention of the parties.
A-43
<PAGE> 70
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NATIONAL DIAGNOSTICS, INC.
By:
--------------------------------------
Curtis L. Alliston, President & C.O.O.
AMERICAN ENTERPRISE SOLUTIONS, INC.
By:
--------------------------------------
Charles Broes, CEO
A-44
<PAGE> 71
ANNEX I
STOCKHOLDERS AND STOCK OWNERSHIP OF AES
The following is a list of the AES Stockholders and the number of outstanding
shares of AES Stock held by each such AES Stockholder.
<TABLE>
<CAPTION>
================================================================================
SHARES OF AES
STOCKHOLDER COMMON STOCK HELD
- - --------------------------------------------------------------------------------
<S> <C>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
TOTAL SHARES
================================================================================
</TABLE>
A-45
<PAGE> 72
ANNEX II
CONSIDERATION TO BE PAID TO AES STOCKHOLDERS AT CLOSING
<TABLE>
<CAPTION>
================================================================================
NUMBER OF SHARES OF
AES STOCKHOLDER NDI COMMON STOCK TO BE RECEIVED
- - --------------------------------------------------------------------------------
<S> <C>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
TOTAL SHARES
================================================================================
</TABLE>
A-46
<PAGE> 73
ANNEX III
FORM OF OPINION OF COUNSEL TO NDI
[Date]
American Enterprise Solutions, Inc.
5313 Johns Road
Suite 201
Tampa, Florida 33634
Ladies and Gentlemen:
We have acted as counsel to National Diagnostics, Inc., a Florida
corporation ("NDI") in connection with the transactions contemplated by the
Merger Agreement (the "Agreement") dated as of February __, 1998, by and between
NDI and American Enterprise Solutions, Inc.
("AES").
This opinion is being delivered to you pursuant to Section 8.5 of the
Agreement. All capitalized terms used herein, unless expressly defined herein,
shall have the meanings ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction, of such documents and corporate and public records as we
deemed to be necessary as a basis for the opinion hereinafter expressed. With
respect to such examination, we have assumed the genuineness of all signatures
appearing on all documents presented to us as originals, and the conformity to
the originals of all documents presented to us as conformed or reproduced
copies. Where factual matters material to such opinion were not independently
established, we have relied upon certificates of appropriate state and local
officials, upon representations of executive officers and responsible employees
and agents of NDI, and upon such other data as we deemed to be appropriate under
the circumstances. We also wish to advise you that when in the following opinion
we have made statements to our "knowledge" we shall mean (with respect to
matters of fact), that after an examination of documents made available to us by
NDI, and after inquiry of officers thereof but without any judgment or
litigation searches or any other independent factual investigation, we have no
reason to believe that such statements are factually incorrect. Statements made
to our "knowledge" shall furthermore refer only to then current actual knowledge
of attorneys of our firm who have worked on matters for NDI.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the qualifications and assumptions set
forth herein, we are of the following opinion:
1. NDI and each of the NDI Subsidiaries was duly organized and is
validly existing in good standing under the laws of its jurisdiction of
incorporation.
A-47
<PAGE> 74
2. To our knowledge, NDI has the required authorization and permits to
carry on its business as currently existing, except where the failure to be so
qualified or have such authorization and permits would not have a material
adverse effect on NDI.
3. The Agreement has been duly authorized, executed and delivered by
NDI and constitutes the valid and binding agreement of and is enforceable
against NDI in accordance with its terms.
4. Each share of NDI Common Stock to be issued to the AES STOCKHOLDERS
has been duly and validly authorized and issued. Upon consummation of the
transactions set forth in the Agreement, each of such shares will be fully paid
and nonassessable. There are no preemptive rights with respect to the capital
stock of NDI.
5. To our knowledge, (a) NDI is not in violation of any order (with
respect to NDI) issued by any court or agency (wherever located) and (b) there
are no claims, actions, suits or proceedings pending, or threatened against or
affecting NDI, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality wherever located, except in either case, where such violations,
claims, actions, suits or proceedings, either singly or in the aggregate, would
not have a material adverse effect on NDI.
6. To our knowledge, NDI is not in default, and has not received any
notice of default, under any contract or agreement to which it is a party,
except where such default would not have a material adverse effect on NDI.
7. To our knowledge, no notice to, consent, authorization, approval or
order of any court or governmental agency or body or, to our knowledge (and with
the exception of contracts with customers, as to which no opinion is rendered),
any other party to an NDI Material Contract (as defined in the Agreement) is
required in connection with the execution, delivery or consummation of the
Agreement by NDI and the stockholders of NDI except for such notices, consents,
authorizations, approvals or orders as have already been made or obtained.
8. The execution of the Agreement and the performance by NDI of its
obligations thereunder will not violate any of the terms or provisions of its
Certificate of Incorporation or By-laws or result in any breach of or default
under any lease, instrument, license, permit or any other NDI Material Contract
listed on Schedule 6.12 or 6.15 to the Agreement (with the exception of
contracts with customers, as to which no opinion is rendered), except (i) to the
extent specifically set forth on such Schedules; (ii) where such breaches or
defaults, either singly or in the aggregate, would not have a material adverse
effect on NDI.
The opinion set forth in paragraph 2 above is subject to the following
qualifications: (i) the enforceability of the respective obligations of NDI
under the Agreement are subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereafter in effect relating to
creditors' rights; (ii) the availability of equitable remedies, including
specific
A-48
<PAGE> 75
performance and injunctive relief, is subject to the discretion of the court
before which any proceeding therefor may be brought; (iii) we have assumed the
due authorization, execution and delivery of the Agreement by each of the other
parties thereto other than NDI; and (iv) no opinion is expressed as to the
enforceability of the non-competition provisions included therein.
We render the foregoing opinions as members of the Bar of the State of Florida
and express no opinion as to laws other than the laws of the State of Florida
and the federal laws of the United States of America.
Very truly yours,
FOLEY & LARDNER
By:
----------------------------------
A-49
<PAGE> 76
ANNEX IV
FORM OF OPINION OF COUNSEL TO AES
[Date]
National Diagnostics, Inc.
7373 West Brandon Blvd.
Brandon, Florida 33511
Ladies and Gentlemen:
We have acted as counsel to American Enterprise Solutions, Inc., a
Florida corporation ("AES") in connection with the transactions contemplated by
the Merger Agreement (the "Agreement") dated as of February __, 1998, by and
between National Diagnostics, Inc. and AES.
This opinion is being delivered to you pursuant to Section 9.2 of the
Agreement. All capitalized terms used herein, unless expressly defined herein,
shall have the meanings ascribed to such terms in the Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction, of such documents and corporate and public records as we
deemed to be necessary as a basis for the opinion hereinafter expressed. With
respect to such examination, we have assumed the genuineness of all signatures
appearing on all documents presented to us as originals, and the conformity to
the originals of all documents presented to us as conformed or reproduced
copies. Where factual matters material to such opinion were not independently
established, we have relied upon certificates of appropriate state and local
officials, upon representations of executive officers and responsible employees
and agents of AES, and upon such other data as we deemed to be appropriate under
the circumstances. We also wish to advise you that when in the following opinion
we have made statements to our "knowledge" we shall mean (with respect to
matters of fact), that after an examination of documents made available to us by
AES, and after inquiry of officers of AES but without any judgment or litigation
searches or any other independent factual investigation, we have no reason to
believe that such statements are factually incorrect. Statements made to
our"knowledge" shall furthermore refer only to then current actual knowledge of
attorneys of our firm who have worked on matters for AES.
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the qualifications and assumptions set
forth herein, we are of the following opinion:
1. AES and each of the AES Subsidiaries has been duly organized and is
validly existing in good standing status under the laws of its jurisdiction of
incorporation.
A-50
<PAGE> 77
2. To our knowledge, AES has the required authorization and permits to
carry on its business as currently existing, except where the failure to be so
qualified or have such authorization and permits would not have a material
adverse effect on AES.
3. The authorized and outstanding capital stock of AES is as
represented in the Agreement; each share of such stock has been duly and validly
authorized and issued, and, to our knowledge, is fully paid and nonassessable.
There are no preemptive rights with respect to the capital stock of AES.
4. To our knowledge, AES does not have any outstanding options,
warrants, calls, conversion rights or other commitments of any kind to issue or
sell any of its capital stock, except as provided in Schedule 5.4 to the
Agreement.
5. The Agreement has been duly authorized, executed and delivered by
AES and constitutes a valid and binding agreement of AES, enforceable against
AES, and its shareholders in accordance with its terms.
6. To our knowledge, AES is not in violation of any order (with respect
to AES) issued by any court or agency (wherever located), and there are no
claims, actions, suits or proceedings pending, or threatened against or
affecting AES, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality wherever located, except in either case, where such violations,
claims, actions, suits or proceedings, either singly or in the aggregate, would
not have a material adverse effect on AES.
7. To our knowledge, AES is not in default, and has not received any
notice of default, under any of the contracts or agreements listed on Schedule
5.15, except where such defaults, either singly or in the aggregate, would not
have a material adverse effect on AES.
8. To our knowledge, no notice to, consent, authorization, approval or
order of any court or governmental agency or body or, to our knowledge (and with
the exception of contracts with customers, as to which no opinion is rendered),
any other party to an AES Material Contract (as defined in the Agreement) is
required in connection with the execution, delivery or consummation of the
Agreement by AES and the stockholders of AES except for such notices, consents,
authorizations, approvals or orders as have already been made or obtained.
9. The execution of the Agreement and the performance by AES and the
AES STOCKHOLDERS of their respective obligations thereunder will not violate any
of the terms or provisions of AES' Certificate of Incorporation or the By-laws
of AES or result in any breach of or default under any lease, instrument,
license, permit or any other AES Material Contract listed on Schedule 5.12 or
5.15 to the Agreement (with the exception of contracts with customers, as to
which no opinion is rendered), except (i) to the extent specifically set forth
on such Schedules; (ii) where such breaches or defaults, either singly or in the
aggregate, would not have a material adverse effect on AES.
A-51
<PAGE> 78
The opinion set forth in paragraph 5 above is subject to the following
qualifications: (i) the enforceability of the obligations of AES under the
Agreement is subject to bankruptcy, insolvency, reorganization, moratorium and
other similar laws now or hereafter in effect relating to creditors' rights;
(ii) the availability of equitable remedies, including specific performance and
injunctive relief, is subject to the discretion of the court before which any
proceeding therefor may be brought; (iii) we have assumed the due authorization,
execution and delivery of the Agreement by each of the other parties thereto
other than AES and (iv) no opinion is expressed as to the enforceability of the
non-competition provisions included therein.
We render the foregoing opinions as members of the Bar of the State of
Florida and express no opinion as to laws other than the laws of such
jurisdiction and the federal laws of the United States of America.
Very truly yours,
AGLIANO, HODGES & WHITTEMORE, P.A.
By:
-------------------------------
A-52
<PAGE> 79
ANNEX V
FORM OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE DIRECTORS AND OFFICERS OF AES
[Date]
National Diagnostics, Inc.
7373 West Brandon Blvd.
Brandon, Florida 33511
Ladies and Gentlemen:
In connection with and as required by Sections 9.5, 10.1 and 11.1 of
the Merger Agreement (the "Agreement") dated as of February __, 1998, by and
between National Diagnostics, Inc., a Florida corporation ("NDI") and American
Enterprise Solutions, Inc., a Florida corporation ("AES"), I do hereby
acknowledge the facts set forth herein, and in consideration of the sum of $1.00
and other valuable consideration received from NDI, I do hereby make the
representations, warranties and covenants set forth herein to NDI in my capacity
as a director and/or officer of AES. All capitalized terms used herein but not
defined herein shall have the meaning ascribed to such term in the Agreement.
1. CONFIDENTIALITY. I recognize and acknowledge that I had in the past,
currently have, and in the future may possibly have, access to certain
confidential information of AES, the AES Subsidiaries, NDI, and/or the NDI
Subsidiaries such as lists of customers, operational policies, and pricing and
cost policies that are valuable, special and unique assets of AES, the AES
Subsidiaries, NDI, and/or the NDI Subsidiaries. I agree that I will not disclose
confidential information with respect to AES, the AES Subsidiaries, NDI, and/or
the NDI Subsidiaries, to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except to authorized
representatives of NDI and to counsel and other advisers to NDI, provided that
such advisers to NDI (other than counsel) agree to the confidentiality
provisions hereof, unless (i) such information becomes known to the public
generally through no fault of my own, (ii) disclosure is required by law or the
order of any governmental authority under color of law, or (iii) I reasonably
believe that such disclosure is required in connection with the defense of a
lawsuit against me, provided, that prior to disclosing any information pursuant
to clause (i), (ii) or (iii) above, I shall, if possible, give prior written
notice thereof to NDI and provide NDI with the opportunity to contest such
disclosure. In the event of a breach or threatened breach by me of the
confidentiality provisions hereof, NDI shall be entitled to an injunction
restraining me from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting NDI from pursuing
any other available remedy for such breach or threatened breach, including
without limitation the recovery of damages. Because of the difficulty of
measuring economic losses as a result of the breach of the covenants contained
in this Paragraph 1 and because of the immediate and irreparable damage that
would be caused for which NDI
A-53
<PAGE> 80
would have no other adequate remedy, I agree that, in the event of my breach of
the foregoing covenant contained herein, the covenant may be enforced against
the me by injunctions and restraining orders. My obligations under this
Paragraph 1 shall survive the termination of the Agreement and this letter.
2. DAMAGES. Because of the difficulty of measuring economic losses to
NDI as a result of a breach of the foregoing covenants, and because of the
immediate and irreparable damage that could be caused to NDI for which for which
it would have no other adequate remedy, I hereby agree that the foregoing
covenants may be enforced in the event of breach by injunctions and restraining
orders.
3. REASONABLE RESTRAINT. I hereby agree that the foregoing covenants
impose a reasonable restraint in light of the activities and business of NDI and
AES (including without limitation the subsidiaries thereof) on the date of the
Agreement and the current plans of NDI and AES; but it is also my intent that
such covenants be construed and enforced in accordance with the changing
activities and business of NDI and AES (including without limitation the
subsidiaries thereof) throughout the term of this covenant.
4. SEVERABILITY, REFORMATION. The covenants in this letter are
severable and separate, and the unenforceability of any specific covenant hereof
shall not affect the provisions of any other covenant hereof. Moreover, in the
event any court of competent jurisdiction shall determine that the scope, time
or territorial restrictions set forth herein are unreasonable, then it is my
intention that such restrictions be enforced to the fullest extent which the
court deems reasonable, and this letter shall thereby be reformed.
5. INDEPENDENT COVENANT. All of the covenants in this letter shall be
construed as an agreement independent of any other provision in the Agreement,
and the existence of any claim or cause of action of NDI against me, whether
predicated on this letter or otherwise, shall not constitute a defense to the
enforcement of such covenants. The covenants contained in this letter shall not
be affected by any breach of any other provision hereunder or under the
Agreement and shall have no effect if the transactions contemplated by the
Agreement are not consummated.
6. MATERIALITY. I hereby agree that this covenant is a material and
substantial part of the Agreement.
7. INDEMNIFICATION OF NDI. I hereby covenant and agree that I will
indemnify, defend, protect and hold harmless NDI from, against and in respect
of:
(a) all liabilities, losses, claims, damages, actions,
suits, proceedings, demands, assessments,
adjustments, settlement payments, deficiencies, costs
and expenses (including without limitation reasonable
attorneys' fees and expenses) (collectively,
"Claims") suffered, sustained, incurred or paid by
NDI in connection with, resulting from or arising out
of:
A-54
<PAGE> 81
(A) any breach of any of my representations or
warranties set forth herein, or in any
certificate or other writing delivered by me
in connection with the Merger;
(B) any nonfulfillment of any covenant or
agreement on my part in the Agreement;
(C) any claim by any person claiming by,
through, or under me involving the
transactions contemplated in the Agreement
or any prior transaction involving any
shares of, or options, warrants or other
rights to acquire, capital stock of AES or
any predecessor corporation; and
(b) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines,
judgments, costs and other expenses (including
without limitation reasonable attorneys' fees and
expenses) incident to any of the foregoing or to the
enforcement of my obligation hereunder and under the
Agreement.
Provided that the aggregate amount of my liability hereunder and under the
Agreement shall not exceed the amount of the proceeds received by me in
connection with the Merger.
8. SUCCESSORS AND ASSIGNS. This letter and my rights and obligations
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of my heirs and legal representatives.
IN WITNESS WHEREOF, I have set my hand hereunto as of the date first
written above.
Signature:
--------------------------------
Print Name
--------------------------------
A-55
<PAGE> 82
LIST OF ANNEXES AND SCHEDULES
ANNEXES
Annex I - Stockholders and Stock Ownership of AES
Annex II - Consideration to be Paid to AES Stockholders at
Closing
Annex III - Form of Opinion of Counsel to NDI
Annex IV - Form of Opinion of Counsel to AES and AES
Stockholders
Annex V - Form of Representations, Warranties and Covenants of
the Directors and Officers of AES
AES SCHEDULES
Schedule 5.1 - Qualifications to Do Business
Schedule 5.4 - Outstanding Options
Schedule 5.5 - Bonus Shares
Schedule 5.6 - Subsidiaries
Schedule 5.7 - Names of Predecessor Companies
Schedule 5.9 - Financial Statements
Schedule 5.10 - Liabilities and Obligations
Schedule 5.11 - Accounts and Notes Receivable
Schedule 5.12 - Licenses, Franchises, Permits and other Governmental
Authorizations
Schedule 5.14 - Real Property, Leases and Significant Personal
Property
Schedule 5.15 - Significant Customers and Material Contracts
Schedule 5.16 - Title to Real Property
Schedule 5.17 - Insurance Policies and Claims
Schedule 5.18 - Officers, directors and Key Employees; Employment
Agreements; Compensation
Schedule 5.19 - Employee Benefit Plans
Schedule 5.21 - Tax Returns and Examinations
Schedule 5.23 - Government Contracts
Schedule 5.24 - Changes Since February 21, 1998
Schedule 5.25 - Bank Accounts; Powers of Attorney
NDI SCHEDULES
Schedule 6.1 - Qualifications to Do Business
Schedule 6.4 - Outstanding Options
Schedule 6.5 - Bonus Shares
Schedule 6.6 - Subsidiaries
Schedule 6.7 - Names of Predecessor Companies
Schedule 6.9 - Financial Statements
A-56
<PAGE> 83
Schedule 6.10 - Liabilities and Obligations
Schedule 6.11 - Accounts and Notes Receivable
Schedule 6.12 - Licenses, Franchises, Permits and other Governmental
Authorizations
Schedule 6.14 - Real Property, Leases and Significant Personal
Property
Schedule 6.15 - Significant Customers and Material Contracts
Schedule 6.16 - Title to Real Property
Schedule 6.17 - Insurance Policies and Claims
Schedule 6.18 - Officers, directors and Key Employees; Employment
Agreements; Compensation
Schedule 6.19 - Employee Benefit Plans
Schedule 6.21 - Tax Returns and Examinations
Schedule 6.23 - Government Contracts
Schedule 6.24 - Changes Since Balance Sheet Date
Schedule 6.25 - Bank Accounts; Powers of Attorney
A-57
<PAGE> 84
FIRST AMENDMENT
TO
MERGER AGREEMENT
BY AND BETWEEN
NATIONAL DIAGNOSTICS, INC.,
A FLORIDA CORPORATION
AND
AMERICAN ENTERPRISE SOLUTIONS, INC.,
A FLORIDA CORPORATION
EFFECTIVE MARCH 17, 1998
A-58
<PAGE> 85
FIRST AMENDMENT
This First Amendment (the "Amendment") is made and entered into as of
this 17th day of March, 1998 by and between NATIONAL DIAGNOSTICS, INC., a
Florida corporation ("NDI") and American Enterprise Solutions, Inc., a Florida
corporation ("AES").
RECITALS
WHEREAS, NDI and AES have entered into that certain Merger Agreement
(the "Agreement") dated February 23, 1998 pursuant to which it is contemplated
that AES will be merged (the "Merger") with and into NDI under the terms and
conditions specified in the Agreement; and
WHEREAS, Section 8.10 of the Agreement specifies that, as a condition
precedent to the obligations of AES and the stockholders of AES to consummate
the transactions provided for in the Agreement, among other things, the
shareholders of NDI shall have approved the Merger, the terms of the Agreement
and other actions to be taken thereunder for which such shareholder approval is
required; and
WHEREAS, AES and NDI have mutually agreed to proceed with the Merger
and the other transactions provided for under the Agreement in such a manner
that would not require the initial approval and consent of NDI's shareholders to
the Merger, the terms of the Agreement or other actions to be taken thereunder
for which such shareholder approval is required; and
WHEREAS, AES and NDI mutually intend that the Agreement be amended to
dispense with the need for the initial approval and consent of the shareholders
of NDI to the Merger, and the terms of the Agreement and other actions to be
take thereunder for which such shareholder approval is required; and
A-59
<PAGE> 86
WHEREAS, Section 2.2 of the Agreement specifies that, as a condition to
the closing of the Merger transaction, NDI shall have, among other things (i)
effected a reverse stock split of the currently issued and outstanding shares of
NDI common stock; and (ii) authorized the issuance of an additional 10,670,513
shares of NDI common stock for distribution to the AES stockholders; and
WHEREAS, NDI and AES have mutually agreed that it is in the best
interest of the parties that (i) the above-referenced reverse stock split should
not be effected until after consummation of the Merger; and (ii) NDI should
provide for the issuance of a total of 22,056,407 shares of NDI common stock for
distribution to AES stockholders as opposed to the 10,670,513 shares referred to
above; and
WHEREAS, because of the fact that NDI only has a total of 5,906,570
authorized but unissued shares of NDI common stock for immediate issuance to AES
stockholders, it is necessary to provide for a partial closing of the Merger
transaction (until additional shares of NDI common stock are authorized and made
available for distribution to AES stockholders).
NOW, THEREFORE, in consideration of the premises set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
1. The Agreement is hereby amended to delete the requirement contained
in Section 8.10 thereof and elsewhere that the approval and consent of NDI'S
shareholders to the Merger, the terms of the Agreement and other actions to be
taken thereunder shall be a condition precedent to the obligations of AES and
the AES stockholders under this Agreement.
A-60
<PAGE> 87
2. Section 2.2 and any and all other pertinent sections of the
Agreement are amended and modified to provide for and reflect the fact that (i)
NDI shall issue 5,906,570 shares of NDI common stock to AES stockholders upon
partial closing of the Merger, then (pursuant to an appropriate amendment to its
Articles of Incorporation to allow it to do so) issue an additional 16,149,837
shares of NDI common stock to AES stockholders shortly thereafter; and (ii) the
above-referenced reverse stock split shall be effected only after issuance of
the total of 22,057,407 shares of NDI common stock to AES stockholders (such
that the AES stockholders will own an aggregate of 87.7% of the issued and
outstanding shares of common stock of NDI after the reverse stock split).
3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
NATIONAL DIAGNOSTICS, INC.
By:
---------------------------
Name: Curtis L. Alliston
Title: President & C.O.O.
A-61
<PAGE> 88
AMERICAN ENTERPRISE SOLUTIONS, INC.
By:
---------------------------
Name: Charles Broes
Title: Chief Executive Officer
A-62
<PAGE> 89
SECOND AMENDMENT
TO
MERGER AGREEMENT
BY AND BETWEEN
NATIONAL DIAGNOSTICS, INC.,
A FLORIDA CORPORATION
AND
AMERICAN ENTERPRISE SOLUTIONS, INC.,
A FLORIDA CORPORATION
EFFECTIVE APRIL 29, 1998
A-63
<PAGE> 90
SECOND AMENDMENT
This Second Amendment (the "2nd Amendment") is made and entered into as
of this 29th day of April, 1998 by and between NATIONAL DIAGNOSTICS, INC., a
Florida corporation ("NDI" or the "Company") and AMERICAN ENTERPRISE SOLUTIONS,
INC., a Florida corporation ("AES").
RECITALS
WHEREAS, NDI and AES have entered into that certain Merger Agreement
dated February 23, 1998, as amended by that certain First Amendment dated March
17th, 1998 (the "Agreement"), pursuant to which it is contemplated that AES will
be merged (the "Merger") with and into NDI under the terms and conditions
specified in the Agreement; and
WHEREAS, AES and NDI have mutually agreed to proceed with the Merger
via the implementation and effectuation of the terms and conditions set forth
hereinbelow.
NOW, THEREFORE, in consideration of the premises set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
agree that the Agreement is hereby amended to incorporate and reflect the
following facts, terms and conditions:
AES currently owns an aggregate of 5,786,570 shares of Company
Common Stock and 368,815 shares of Company Preferred Stock. Each share
of Company Preferred Stock is convertible into 44.11 shares of Company
Common Stock. An additional 3,093,430 shares of Company Common Stock
are owned by stockholders other than AES. Therefore, at the present
time, an aggregate of 8,880,000 shares of Company Common Stock are
issued and outstanding. In conjunction with the Merger, the
A-64
<PAGE> 91
Company proposes to issue a stock dividend to holders of Company Common
Stock based on the following formula:
x = $3.50 - y
---------
y
where x = the dividend (i.e., the number of additional
shares of Company Common Stock to be issued on each
outstanding share of Company Common Stock).
$3.50 = the valuation of each share of Company Common Stock,
based on projected revenues for 1998.
y = the average market price of each share of Company
Common Stock during the 5 business days immediately
preceding the closing date.
For example, if y = $1.125, each outstanding share of Company Common Stock will
receive a dividend of [3.50 - 1.125] = 2.11 shares of Company Common Stock.
------------
1.125
The declaration and payment of such a dividend will require
the availability of approximately 18,745,680 additional shares of
Company Common Stock. However, because the Company's Articles of
Incorporation currently provide for the issuance of a maximum of
9,000,000 shares of Company Common Stock, of which amount a total of
8,880,000 shares have already been issued and are currently
outstanding, at the present time the Company can only issue an
additional 120,000 shares of Company Common Stock. It will therefore be
necessary to amend the Company's Articles of Incorporation to, among
other things, provide for the issuance of at least an additional
18,625,680 shares of Company Common Stock.
After payment of the contemplated stock dividend, a total of
27,505,680 shares of Company Common Stock will be issued and
outstanding; 18,002,019 of these shares
A-65
<PAGE> 92
(approximately 65%) will be owned by AES, and the remaining 9,623,661
shares (approximately 35%) will be owned by other stockholders of NDI.
Shortly after payment of the stock dividend described above,
but before the closing of the Merger, the Company will effect a stock
combination transaction of all issued and outstanding Company Common
Stock in accordance with the provisions of Section 607.10025 and
607.1003 of the Florida Business Corporation Act (the "FBCA") such that
AES will own approximately 2,000,000 shares of Company Common Stock and
the other stockholders of NDI will own approximately 1,000,000 shares
of Company Common Stock.
In conjunction with the Merger, the approximately 2,000,000
shares of Company Common Stock and 368,815 shares of Company Preferred
Stock owned by AES will be canceled.
It is anticipated that on the date of closing the Merger,
there will be approximately 6,000,000 shares of AES Common Stock issued
and outstanding. In conjunction with and upon consummation of the
Merger, each outstanding share of AES Common Stock will be exchanged
for one share of Company Common Stock. As a result of the Merger, the
AES stockholders will own approximately 6,000,000 shares (85.7%) of the
issued and outstanding Company Common Stock, while other NDI
stockholders will own approximately 1,000,000 (14.3%) of the issued and
outstanding Company Common Stock.
A-66
<PAGE> 93
This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
NATIONAL DIAGNOSTICS, INC.
By:
------------------------------
Name: Curtis L. Alliston
Title: President
AMERICAN ENTERPRISE SOLUTIONS, INC.
By:
------------------------------
Name: Charles Broes
Title: Chief Executive Officer
A-67
<PAGE> 94
APPENDIX B
NATIONAL DIAGNOSTICS, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
Pursuant to and in compliance with the requirements of Section
607.0602, Florida Statutes, National Diagnostics, Inc., a corporation organized
and existing under the laws of the State of Florida (the "Corporation"), hereby
adopts the following amendments to the Corporation's Articles of Incorporation.
Section 1 of Article Third of the Corporation's Articles of Incorporation is
amended to read as follows:
Section 1. Preferred Shares.
(a) The distinctive designation of the Preferred Shares shall be
"Series A Preferred Stock." The aggregate number of shares of
Series A Preferred Stock shall be one million (1,000,000). The
Series A Preferred Stock shall have no par value.
(b) Commencing on the date of purchase of shares of Series A
Preferred Stock, the holders of such shares shall be entitled
to receive dividends, but not exceeding $0.10 per share, when
and as declared by the Board of Directors, out of funds of the
Corporation at the time legally available for the declaration
of dividends. Such dividends may be payable at such intervals
as the Board of Directors may from time to time determine and
shall not be cumulative. As such, no right shall accrue to the
holders of shares of the Series A Preferred Stock by reason
of the fact that dividends on such shares are not, or have not
been, declared in any prior period.
B-1
<PAGE> 95
(c) The "Liquidation Price" of each share of Series A Preferred
Stock shall be $4.00 per share. In the event of any
liquidation, dissolution or winding up of the Corporation,
either voluntarily or involuntarily, the holders of each share
of Series A Preferred Stock shall be entitled to be paid an
amount equal to the Liquidation Price of $4.00 per share.
(d) In the event that the Corporation authorizes the redemption of
all or any of the shares of Series A Preferred Stock, the
"Redemption Price" for each share properly redeemed in
accordance with any terms and conditions specified by the
Corporation shall be $4.30 per share.
(e) At the election and option of the Board of Directors, a
sinking fund for the retirement of the Series A Preferred
Stock may be created out of net earnings of the Corporation,
if and when such earnings are deemed to be sufficient to allow
for such a sinking fund. The sinking fund, if created, shall
not be depleted in any way except for the retirement or
redemption of the Series A Preferred Stock; but until so used,
any sums to the credit of the sinking fund may be employed in
the business of the Corporation.
(f) (i) The holder(s) of the shares of Series A Preferred
Stock shall have the right to cast eight (8) votes,
for each share so held, as a separate class on any
matter or issue properly brought before the
shareholders of the Corporation, whether at a special
or annual meeting or by proxy, and on which the
shareholders of the Corporation shall be required to
vote.
B-2
<PAGE> 96
(ii) With respect to the election of members of the Board
of Directors of the Corporation, the holder(s) of the
shares of Series A Preferred Stock, voting as a
separate class, shall have the right to elect that
number of directors which constitutes fifty percent
(50%) of the authorized number of members of the
Board of Directors. If fifty percent (50%) is not a
whole number, then the holder(s) of the shares of
Series A Preferred Stock voting, as a separate class,
shall be entitled to elect the nearest higher number
of directors.
(iii) The holder(s) of the shares of Series A Preferred
Stock shall be entitled to vote, as a separate class,
on any and all matters and issues properly brought
before the shareholders of the Corporation, whether
at a special or annual meeting or by proxy, and on
which the shareholders of the Corporation are
required to vote. Furthermore, at least sixty-six and
two- thirds percent (66 2/3%) of the aggregate votes
entitled to be cast by the holder(s) of the shares of
Series A Preferred Stock shall be required for the
approval and implementation of any corporate action
upon which the shareholders of the Corporation are
required to vote.
(g) The holders of the shares of Series A Preferred Stock may
convert those shares at any time into shares of the Common
Stock of the Corporation at the ratio of 44.11 shares of
Common Stock per share of Series A Preferred Stock. The
consideration for such conversion of the shares of Series A
Preferred Stock shall be both a surrender of the shares of
Series A Preferred Stock as well as a closing
B-3
<PAGE> 97
of the transactions provided for in that certain Merger
Agreement (the "Merger Agreement") dated February 23, 1998, by
and between the Corporation and American Enterprise Solutions,
Inc., a Florida corporation. Concurrent with the closing of
the transactions provided for in the Merger Agreement, the
Board of Directors of the Corporation shall authorize the
conversion of all or a portion of the shares of Series A
Preferred Stock into shares of the Common Stock of the
Corporation at the rate of 44.11 shares of Common Stock per
shares of Series A Preferred Stock (based upon the
Corporation's current number of outstanding common shares, not
to be adjusted for any changes to the same). Any of the shares
of Series A Preferred Stock that are not converted into shares
of the Corporation's Common Stock upon the closing of the
transactions provided for in the Merger Agreement shall
continue to bear the right of conversion into shares of the
Corporation's Common Stock at the rate of 44.11 shares of the
Corporation's Common Stock per share of Series A Preferred
Stock (based upon the Corporation's current number of
outstanding common shares, not to be adjusted for any changes
to the same).
The foregoing amendments to the Corporation's Articles of Incorporation
were duly approved and adopted by the Board of Directors of the Corporation on
March , 1998. Pursuant to the provisions of Section 607.0602(4), Florida
Statutes, shareholder approval is not required for the effectiveness of the
foregoing amendments.
B-4
<PAGE> 98
IN WITNESS WHEREOF, National Diagnostics, Inc. has caused these
Articles of Amendment to its Articles of Incorporation to be executed by its
President and Chief Operating Officer on this _____ day of March, 1998.
NATIONAL DIAGNOSTICS, INC.
By:
---------------------------
Name: Curtis L. Alliston
Title: President and
Chief Operating Officer
B-5
<PAGE> 99
APPENDIX C
607.1301 DISSENTERS' RIGHTS; DEFINITIONS.--The following definitions
apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value
of the shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT.--
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his or her shares in the event of, any of
the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the
merger, or
2. If the corporation is a subsidiary that is merged
with its parent under s. 607.1104, and the shareholders would
have been entitled to vote on action taken, except for the
applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation, other than in the usual and
regular course of business, if the shareholder is entitled to vote on
the sale or exchange pursuant to s. 607.1202, including a sale in
dissolution but not including a sale pursuant to court order or a sale
for cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders within
1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a control-share
acquisition;
C-1
<PAGE> 100
(d) Consummation of a plan of share exchange to which the
corporation is a party as the corporation the shares of which will be
acquired, if the shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the
shareholder is entitled to vote on the amendment and if such amendment
would adversely affect such shareholder by:
1. Altering or abolishing any preemptive rights
attached to any of his or her shares;
2. Altering or abolishing the voting rights
pertaining to any of his or her shares, except as such rights
may be affected by the voting rights of new shares then being
authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or
reclassification of any of his or her shares, when such
exchange, cancellation, or reclassification would alter or
abolish the shareholder's voting rights or alter his or her
percentage of equity in the corporation, or effecting a
reduction or cancellation of accrued dividends or other
arrearages in respect to such shares;
4. Reducing the stated redemption price of any of the
shareholder's redeemable shares, altering or abolishing any
provision relating to any sinking fund for the redemption or
purchase of any of his or her shares, or making any of his or
her shares subject to redemption when they are not otherwise
redeemable;
5. Making noncumulative, in whole or in part,
dividends of any of the shareholder's preferred shares which
had theretofore been cumulative;
6. Reducing the stated dividend preference of any of
the shareholder's preferred shares; or
7. Reducing any stated preferential amount payable on
any of the shareholder's preferred shares upon voluntary or
involuntary liquidation; or
(f) Any corporate action taken, to the extent the
articles of incorporation provide that a voting or nonvoting
shareholder is entitled to dissent and obtain payment for his or her
shares.
(2) A shareholder dissenting from any amendment specified in
paragraph (1)(e) has the right dissent only as to those of his or her shares
which are adversely affected by the amendment.
C-2
<PAGE> 101
(3) A shareholder may dissent as to less than all the shares registered
in his or her name. In that event, the shareholder's rights shall be determined
as if the shares as to which he or she has dissented and his or her other shares
were registered in the names of different shareholders.
(4) Unless the articles of incorporation otherwise provide, this
section does not apply with respect to a plan of merger or share exchange or a
proposed sale or exchange of property, to the holders of shares of any class or
series which, on the record date fixed to determine the shareholders entitled to
vote at the meeting of shareholders at which such action is to be acted upon or
to consent to any such action without a meeting were either registered on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his or her
shares under this section may not challenge the corporate action creating his or
her entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.--
(1) (a) If a proposed corporate action creating dissenters' rights
under s. 607.1302 is submitted to a vote at a shareholders' meeting,
the meeting notice shall state that shareholders are or may be entitled
to assert dissenters' rights and be accompanied by a copy of ss.
607.1301, 607.1302, and 607.1320. A shareholder who wishes to assert
dissenters' rights shall:
1. Deliver to the corporation before the vote is
taken written notice of the shareholder's intent to demand
payment for his or her shares if the proposed action is
effectuated, and
2. Not vote his or her shares in favor of the
proposed action. A proxy or vote against the proposed action
does not constitute such a notice of intent to demand payment.
(b) If proposed corporate action creating dissenters' rights
under s. 607.1302 is effectuated by written consent without a meeting,
the corporation shall deliver a copy of ss. 607.1301, 607.1302, and
607.1320 to each shareholder simultaneously with any request for the
shareholder's written consent or, if such a request is not made, within
1 0 days after the date the corporation received written consents
without a meeting from the requisite number of shareholders necessary
to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his or her shares
C-3
<PAGE> 102
pursuant to paragraph (1)(a) or, in the case of action authorized by written
consent, to each shareholder, excepting any who voted for, or consented in
writing to, the proposed action.
(3) Within 20 days after the giving of notice to him or her, any
shareholder who elects to dissent shall file with the corporation a notice of
such election, stating the shareholder's name and address, the number, classes,
and series of shares as to which he or she dissents, and a demand for payment of
the fair value of his or her shares. Any shareholder failing to file such
election to dissent within the period set forth shall be bound by the terms of
the proposed corporate action. Any shareholder filing an election to dissent
shall deposit his or her certificates for certificated shares with the
corporation simultaneously with the filing of the election to dissent. The
corporation may restrict the transfer of uncertificated shares from the date the
shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
or her shares. After such offer, no such notice of election may be withdrawn
unless the corporation consents thereto. However, the right of such shareholder
to be paid the fair value of his or her shares shall cease, and the shareholder
shall be reinstated to have all his or her rights as a shareholder as of the
filing of his or her notice of election, including any intervening preemptive
rights and the right to payment of any intervening dividend or other
distribution or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim,
if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or
the shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value
by a court has been made or filed within the time provided in this
section; or
(d) A court of competent jurisdiction determines that such
shareholder is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within 10 days
after such corporate action is effected, whichever is later (but in no case
later than 90 days from the shareholders' authorization date), the corporation
shall make a written offer to each dissenting shareholder who has made demand as
provided in this section to pay an amount the corporation estimates to be the
fair value for such shares. If the corporate action has not been consummated
before the expiration of the 90-
C-4
<PAGE> 103
day period after the shareholders' authorization date, the offer may be made
conditional upon the consummation of such action. Such notice and offer shall be
accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and
not more than 12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the
12-month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such 12-month period, for
the portion thereof during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his or her shares shall be made within 90 days
after the making of such offer or the consummation of the proposed action,
whichever is later. Upon payment of the agreed value, the dissenting shareholder
shall cease to have any interest in such shares.
(7) If the corporation fails to make such offer within the period
specified therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his or her shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a copy
of the initial pleading in such proceeding upon each dissenting shareholder who
is a resident of this state in the manner provided by law for the service of a
summons and complaint and upon each nonresident dissenting shareholder either by
registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him or her within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
C-5
<PAGE> 104
(8) The judgment may, at the discretion of the court, include a fair
rate of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined
by the court and shall be assessed against the corporation, but all or any part
of such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of a
merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
C-6
