<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 20, 1999
(January 6, 1999)
SIRROM CAPITAL CORPORATION
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(Exact name of registrant as specified in charter)
Tennessee 0-25174 62-1583116
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
500 Church Street, Suite 200, Nashville, TN 37219
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 256-0701
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
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Sirrom Capital Corporation, a Tennessee corporation (the "Company"), has
entered into an Agreement and Plan of Merger, dated as of January 6, 1999 (the
"Merger Agreement"), by and among The FINOVA Group, Inc., a Delaware corporation
("FINOVA"), FINOVA Newco, Inc., a Delaware corporation and newly formed,
wholly-owned subsidiary of Parent ("Merger Sub"), and the Company. Pursuant to
and subject to the terms and conditions of the Merger Agreement, Merger Sub will
be merged with and into the Company (the "Merger"), with the Company continuing
as the surviving corporation (the "Surviving Corporation"). As a result of the
Merger, the Company will become a wholly-owned subsidiary of FINOVA. At the
Effective Time (as defined in the Merger Agreement), each issued and outstanding
share of common stock of the Company (the "Company Common Stock"), will be
converted into the right to receive .1634 shares (the "Exchange Ratio") of
common stock of FINOVA. If the Effective Time of the Merger is after June 1,
1999, the Exchange Ratio would increase by .0005 shares. In addition, if the
Company has entered into a binding agreement for the settlement of securities
class action litigation, the cost of which to the Company is less than
$10,000,000, the Exchange Ratio would also increase, as specified in the Merger
Agreement. The Company has the right to terminate the Merger Agreement if the
average closing price of FINOVA Common Stock for the ten days ending
approximately five days before the Effective Time is below $40.6875 and the
decline in average closing price exceeds by more than 10% the percentage decline
in the Standard & Poor's Financial Index.
In connection with the execution of the Merger Agreement, each director and
Sirrom Partners, L.P. of the Company (the "Shareholders") entered into a Voting
Agreement with the Parent, dated as of January 6, 1999 (the "Voting Agreement"),
pursuant to which the Shareholders agreed to vote their shares of Company Common
Stock for the approval of the Merger Agreement and all other transactions
contemplated by the Merger Agreement.
The Merger is also subject to certain other conditions, including
termination or expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and approval by the Company's shareholders.
2
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Item 7(c). Exhibits
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2.01 Agreement and Plan of Merger, dated as of January 6, 1999, by and
among The FINOVA Group, Inc., FINOVA Newco, Inc. and Sirrom
Capital Corporation. (Schedules and other exhibits to this
document are omitted from this filing but the Company will
furnish supplemental copies of the omitted materials to the
Commission upon request.)
99.01 Voting Agreement, dated as of January 6, 1999, by and between
certain shareholders of Sirrom Capital Corporation and The FINOVA
Group, Inc. (Schedules and other exhibits to this document are
omitted from this filing but the Company will furnish
supplemental copies of the omitted materials to the Commission
upon request.)
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIRROM CAPITAL CORPORATION
Date: January 20, 1999 /s/ George M. Miller, II
----------------------------------------
George M. Miller, II
President and Chief Executive Officer
4
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EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Exhibit
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2.01 Agreement and Plan of Merger, dated as of January 6, 1999, by
and among The FINOVA Group, Inc., FINOVA Newco, Inc. and
Sirrom Capital Corporation. (Schedules and other exhibits to
this document are omitted from this filing but the Company will
furnish supplemental copies of the omitted materials to the
Commission upon request.)
99.01 Voting Agreement, dated as of January 6, 1999, by and between
certain shareholders of Sirrom Capital Corporation and The
FINOVA Group, Inc. (Schedules and other exhibits to this document
are omitted from this filing but the Company will furnish
supplemental copies of the omitted materials to the Commission
upon request.)
</TABLE>
5
<PAGE> 1
EXHIBIT 2.01
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AGREEMENT AND PLAN OF MERGER
AMONG
SIRROM CAPITAL CORPORATION
THE FINOVA GROUP INC.
AND FINOVA NEWCO INC.
Dated as of January 6, 1999
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TABLE OF CONTENTS
<TABLE>
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PAGE NO.
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ARTICLE I
THE MERGER.............................................................................................-1-
SECTION 1.1. THE MERGER...........................................................................-1-
SECTION 1.2. SHAREHOLDER MEETING, CLOSING, EFFECTIVE TIME OF THE MERGER...........................-2-
SECTION 1.3. CONVERSION AND CANCELLATION OF SECURITIES............................................-2-
SECTION 1.4. EXCHANGE OF CERTIFICATES.............................................................-3-
SECTION 1.5. EMPLOYEE BENEFIT PLANS; OPTIONS......................................................-5-
SECTION 1.6. NO DISSENTER OR APPRAISAL RIGHTS.....................................................-6-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................-6-
SECTION 2.1. ORGANIZATION, POWERS AND QUALIFICATIONS..............................................-6-
SECTION 2.2. SUBSIDIARIES.........................................................................-6-
SECTION 2.3. CAPITAL STOCK........................................................................-8-
SECTION 2.4. CHARTER, BYLAWS, MINUTE BOOKS AND RECORDS............................................-8-
SECTION 2.5. AUTHORITY; BINDING EFFECT............................................................-9-
SECTION 2.6. NO CONFLICT; APPROVALS...............................................................-9-
SECTION 2.7. GOVERNMENTAL CONSENTS AND APPROVALS..................................................-9-
SECTION 2.8. SEC REPORTS.........................................................................-10-
SECTION 2.9. FINANCIAL STATEMENTS................................................................-10-
SECTION 2.10. ABSENCE OF CERTAIN CHANGES..........................................................-11-
SECTION 2.11. INDEBTEDNESS; ABSENCE OF UNDISCLOSED LIABILITIES....................................-11-
SECTION 2.12. ASSETS..............................................................................-11-
SECTION 2.13. CONTRACTS...........................................................................-12-
SECTION 2.14. INSURANCE...........................................................................-12-
SECTION 2.15. FINANCING TRANSACTIONS..............................................................-13-
SECTION 2.16. AUTHORIZATIONS; COMPLIANCE WITH LAW.................................................-14-
SECTION 2.17. TAXES...............................................................................-14-
SECTION 2.18. ABSENCE OF LITIGATION; CLAIMS.......................................................-15-
SECTION 2.19. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS.......................................-16-
SECTION 2.20. LABOR MATTERS.......................................................................-17-
SECTION 2.21. ENVIRONMENTAL MATTERS...............................................................-18-
SECTION 2.22. INTELLECTUAL PROPERTY...............................................................-20-
SECTION 2.23. REGULATORY MATTERS..................................................................-21-
SECTION 2.24. ADEQUACY OF DISCLOSURE..............................................................-21-
SECTION 2.25. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS..................................-21-
SECTION 2.26. BOARD ACTION; VOTE REQUIRED.........................................................-22-
SECTION 2.27. YEAR 2000 COMPLIANT.................................................................-22-
SECTION 2.28. AFFILIATES..........................................................................-23-
SECTION 2.29. OPINION OF FINANCIAL ADVISORS.......................................................-23-
SECTION 2.30. BROKERS AND FINDERS.................................................................-23-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............................................-23-
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SECTION 3.1. ORGANIZATION AND POWERS.............................................................-24-
SECTION 3.2. AUTHORITY; BINDING EFFECT...........................................................-24-
SECTION 3.3. NO CONFLICT; APPROVALS..............................................................-24-
SECTION 3.4. GOVERNMENTAL CONSENTS AND APPROVALS.................................................-24-
SECTION 3.5. CAPITAL STOCK.......................................................................-25-
SECTION 3.6. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS..................................-25-
SECTION 3.7. SEC REPORTS.........................................................................-25-
SECTION 3.8. FINANCIAL STATEMENTS................................................................-26-
SECTION 3.9. ABSENCE OF CERTAIN CHANGES..........................................................-26-
SECTION 3.10. ABSENCE OF LITIGATION; CLAIMS; ABSENCE OF UNDISCLOSED LIABILITIES...................-26-
SECTION 3.11. COMPLIANCE WITH LAW.................................................................-27-
SECTION 3.12. BROKERS AND FINDERS.................................................................-27-
Section 3.13. ADEQUACY OF DISCLOSURE..............................................................-27-
ARTICLE IV
OTHER AGREEMENTS......................................................................................-27-
SECTION 4.1. CONDUCT OF THE COMPANY'S BUSINESS...................................................-27-
SECTION 4.2. PARENT'S UNDERTAKINGS...............................................................-30-
SECTION 4.3. ACCESS TO INFORMATION...............................................................-30-
SECTION 4.4. STOCKHOLDER VOTE; PROXY STATEMENT...................................................-30-
SECTION 4.5. COMMERCIALLY REASONABLE EFFORTS.....................................................-32-
SECTION 4.6. PUBLIC ANNOUNCEMENTS................................................................-32-
SECTION 4.7. NOTIFICATION........................................................................-32-
SECTION 4.8. SUBSEQUENT FINANCIAL STATEMENTS.....................................................-33-
SECTION 4.9. CONTROL OF OPERATIONS...............................................................-33-
SECTION 4.10. REGULATORY AND OTHER AUTHORIZATIONS.................................................-33-
SECTION 4.11. TAX-FREE REORGANIZATION.............................................................-34-
SECTION 4.12. TAKEOVER STATUTE....................................................................-34-
SECTION 4.13. INDEMNIFICATION OF DIRECTORS AND OFFICERS...........................................-34-
SECTION 4.14. NO SOLICITATION.....................................................................-35-
SECTION 4.15. CERTAIN MODIFICATIONS; FINANCIAL AND ACCOUNTING ADJUSTMENTS.........................-36-
Section 4.16. CONTINUING EMPLOYEES................................................................-36-
ARTICLE V
CONDITIONS TO CLOSING.................................................................................-37-
SECTION 5.1. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND PARENT AND MERGER SUB ............-37-
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY........................................-38-
SECTION 5.3. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB..............................-38-
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER.....................................................................-40-
SECTION 6.1. TERMINATION.........................................................................-40-
SECTION 6.2. EFFECT OF TERMINATION...............................................................-43-
SECTION 6.3. LIQUIDATED DAMAGES..................................................................-43-
SECTION 6.4. AMENDMENT...........................................................................-44-
SECTION 6.5. WAIVER..............................................................................-44-
</TABLE>
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<TABLE>
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ARTICLE VII
MISCELLANEOUS.........................................................................................-44-
SECTION 7.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........................................-44-
SECTION 7.2. ENTIRE AGREEMENT....................................................................-44-
SECTION 7.3. NOTICES.............................................................................-44-
SECTION 7.4. GOVERNING LAW.......................................................................-45-
SECTION 7.5. DESCRIPTIVE HEADINGS................................................................-45-
SECTION 7.6. PARTIES IN INTEREST.................................................................-46-
SECTION 7.7. COUNTERPARTS........................................................................-46-
SECTION 7.8. EXPENSES............................................................................-46-
SECTION 7.9. PERSONAL LIABILITY..................................................................-46-
SECTION 7.10. BINDING EFFECT; ASSIGNMENT..........................................................-46-
SECTION 7.11. SEVERABILITY........................................................................-46-
SECTION 7.12. LEGAL FEES AND COSTS................................................................-46-
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT"), dated as
of January 6, 1999, is made by and among Sirrom Capital Corporation, a Tennessee
corporation (the "COMPANY"), The FINOVA Group Inc., a Delaware corporation
("PARENT"), and FINOVA Newco Inc., a Delaware corporation and wholly-owned
subsidiary of Parent ("MERGER SUB").
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company and the sole stockholder of Merger Sub have each approved the
business combination described herein in which the Company will become a
subsidiary of Parent as a result of a merger of Merger Sub with and into the
Company upon the terms and subject to the conditions hereinafter set forth (the
"MERGER"), pursuant to which each outstanding share of Common Stock, no par
value ("COMPANY COMMON STOCK"), of the Company will be converted into the right
to receive shares of Common Stock, par value $.01 per share ("PARENT COMMON
STOCK"), of Parent in the manner set forth herein;
WHEREAS, the Boards of Directors of Parent and the Company have each
determined that the Merger and the other transactions contemplated hereby are
consistent with, and in furtherance of, their respective business strategies and
goals and have each approved the Merger upon the terms and conditions set forth
herein;
WHEREAS, the Board of Directors of Merger Sub and Parent, as the sole
stockholder of Merger Sub have approved and adopted this Agreement.
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "CODE"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the willingness of Parent and
Merger Sub to enter into this Agreement, each director of the Company has
entered into a Shareholders Agreement dated as of the date hereof (the
"SHAREHOLDERS AGREEMENT") pursuant to which such holders have agreed, INTER
ALIA, to vote all his or her shares of Company Common Stock in favor of the
Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth below, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Subject to the terms and conditions hereof and
in accordance with the General Corporation Law of the State of Delaware, as
amended (the "DGCL") and the Tennessee Business Corporation Act, as amended (the
"TBCA"), at the Effective Time (hereinafter defined): (a)
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Merger Sub shall be merged with and into the Company and the separate existence
of Merger Sub shall cease, (b) the Company, as the surviving corporation in the
Merger (the "SURVIVING CORPORATION"), (i) shall be a wholly-owned subsidiary of
Parent, (ii) shall continue its corporate existence under the laws of the State
of Tennessee, and (iii) shall succeed to all rights, assets, liabilities and
obligations of Merger Sub and the Company in accordance with the DGCL and the
TBCA; (c) the Amended and Restated Charter of the Company (the "CHARTER"), as in
effect immediately prior to the Effective Time, shall continue as the Charter of
the Surviving Corporation; (d) the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall continue as the Bylaws of the
Surviving Corporation; (e) the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation; and (f) the
officers of the Merger Sub immediately prior to the Effective Time shall
continue as the officers of the Surviving Corporation. From and after the
Effective Time, the Merger will have all the effects provided by applicable law.
SECTION 1.2. SHAREHOLDER MEETING, CLOSING, EFFECTIVE TIME OF THE
MERGER. The Company shall submit this Agreement, the Merger and the revocation
of the Company's election to be treated as a "Business Development Company"
under the Investment Company Act of 1940, as amended (the "1940 ACT") to the
holders of Company Common Stock for approval and adoption at the Shareholders
Meeting (hereinafter defined) to be held as soon as practicable following the
date of this Agreement in accordance with Section 4.4 hereof. Subject to the
Merger receiving all requisite shareholder approvals and subject to the other
provisions of this Agreement, the parties shall hold a closing (the "CLOSING")
on the next business day (or such later date as the parties hereto may agree)
following the later of (a) the Shareholders Meeting, or (b) the first business
day on which the last of the conditions set forth in Article V hereof is
fulfilled or waived (such later date, the "CLOSING DATE"), at 9:00 A.M. at the
offices of Morgan, Lewis & Bockius LLP at 1701 Market Street, Philadelphia,
Pennsylvania, or at such other time or place as the parties agree upon. Within
two business days after the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger (the "DELAWARE
CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware and
the articles of merger (the "TENNESSEE ARTICLES OF MERGER") with the Secretary
of State of the State of Tennessee in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL and the TBCA, as the case
may be (the date and time of such filings, or such other date or time agreed
upon by Parent and the Company and set forth therein, the "EFFECTIVE TIME").
SECTION 1.3. CONVERSION AND CANCELLATION OF SECURITIES.
(a) At the Effective Time, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Excluded Shares described in Section 1.3(b) hereof), by virtue of the Merger and
without any action on the part of the holder thereof, shall be converted into,
and become exchangeable for, the right to receive (i) .1634 shares (the
"EXCHANGE RATIO") of Parent Common Stock ("STOCK CONSIDERATION"); provided,
however, (x) if the Effective Time shall not have occurred by June 1, 1999, the
Exchange Ration shall be increased by .0005 shares, and (y) if the Company shall
have entered into a binding agreement for the settlement of the litigation
referred to in Part II, Item 1 of the Company's Form 10-Q for the Quarter Ended
September 30, 1998 (the "SETTLEMENT AGREEMENT"), the cost of which to the
Company is less than $10,000,000, the Exchange Ratio shall be increased by a
number of shares equal to .00027 times the quotient of (A) $10,000,000 less such
cost of such settlement by the Company, divided by (B) 1,000,000. The
consideration to be received by the holders of Company Common Stock pursuant to
this Section 1.3(a) is hereinafter referred to as the "MERGER CONSIDERATION."
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(b) At the Effective Time, each share of Company Common Stock
owned by Parent, Merger Sub or any other direct or indirect subsidiary of Parent
and each share of Company Common Stock owned by the Company or any direct or
indirect subsidiary of the Company and in each case not held on behalf of third
parties (collectively, "EXCLUDED SHARES"), shall by virtue of the Merger and
without any action on the part of the holder thereof, be automatically canceled
and retired and cease to exist, and no cash, securities or other property shall
be payable in respect thereof.
(c) At the Effective Time, each share of Merger Sub common
stock, par value $.01 per share ("MERGER SUB COMMON STOCK"), issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action by the holder thereof, be converted into one
validly issued, fully paid and nonassessable common share, no par value, of the
Surviving Corporation ("SURVIVING CORPORATION COMMON STOCK").
(d) If between the date of this Agreement and the Effective
Time, the outstanding shares of Company Common Stock shall be changed into a
different number of shares by reason of any reclassification, recapitalization,
split-up, combination or exchange of shares, or any dividend payable in stock
shall be declared thereon with a record date within such period, the Merger
Consideration shall be adjusted accordingly to provide to the holders of Company
Common Stock the same economic effect as contemplated by this Agreement.
SECTION 1.4. EXCHANGE OF CERTIFICATES.
(a) Prior to the Closing Date, the Parent shall select a bank
or trust company to act as exchange agent (the "EXCHANGE AGENT") in connection
with the surrender of certificates evidencing shares of Company Common Stock
converted into shares of Parent Common Stock pursuant to the Merger. At the
Effective Time, Parent shall deposit with the Exchange Agent one or more
certificates representing the aggregate number of shares of Parent Common Stock
to be issued in the Merger for the Merger Consideration (the "MERGER STOCK"),
which shares of Merger Stock shall be deemed to be issued at the Effective Time.
At and following the Effective Time, Parent shall deliver to the Exchange Agent
such cash as may be required from time to time to make payment of cash in lieu
of fractional shares in accordance with Section 1.4(h).
(b) As soon as practicable after the Effective Time, Parent
shall cause the Exchange Agent to mail to each person who was, at the Effective
Time, a holder of record of a certificate or certificates that immediately prior
to the Effective Time evidenced outstanding shares of Company Common Stock (the
"CERTIFICATES"), (i) a letter of transmittal specifying that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, which shall be in a form and
contain any other provisions as Parent and the Surviving Corporation may
reasonably agree and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Stock. Upon the proper surrender of
Certificates to the Exchange Agent, together with a properly completed and duly
executed letter of transmittal and such other documents as may be required by
the Exchange Agent, the holder of such Certificate shall be entitled to receive
in exchange therefor certificates representing the shares of the Merger Stock
that such holder has the right to receive pursuant to the terms hereof (together
with any dividend or distribution with respect thereto made after the Effective
Time and any cash paid in lieu of fractional shares pursuant to Section 1.4(h)),
and the Certificate so surrendered shall be canceled. If any portion of the
Merger Stock is to be paid to a person other than the person who is the record
holder of the Company Common Stock at the
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Effective Time, it shall be a condition to such payment that the certificate
evidencing the Company Common Stock so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that it be accompanied by all
documents required to properly evidence and effect such transfer and by evidence
reasonably satisfactory to the Surviving Corporation and Parent that any
applicable stock transfer tax has been paid.
(c) Except as otherwise expressly provided herein, the
Surviving Corporation shall pay all charges and expenses of the Parent, the
Merger Sub and the Company, including those of the Exchange Agent, in connection
with the exchange of Certificates for shares of Merger Stock. Any Merger Stock
or other cash delivered to the Exchange Agent pursuant to Section 1.4(a) hereof,
and not exchanged pursuant to Section 1.4(b) hereof for Company Common Stock or
for fractional interests pursuant to Section 1.4(h) hereof within six months
after the Effective Time, shall be returned by the Exchange Agent to the
Surviving Corporation which shall thereafter act as exchange agent subject to
the rights of holders of Company Common Stock hereunder.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and no transfer of shares of Company Common Stock shall
thereafter be made.
(e) None of Parent, Merger Sub, the Company, the Surviving
Corporation or the Exchange Agent will be liable to any holder of shares of
Company Common Stock for any shares of Merger Stock, dividends or distributions
with respect thereto, or cash payable in lieu of fractional shares pursuant to
Section 1.4(h) hereof delivered to a state abandoned property administrator or
other public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) If any Certificates shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificates to be lost, stolen or destroyed, the Exchange Agent will
deliver in exchange for such lost, stolen or destroyed Certificates, the Merger
Stock for the shares represented thereby, deliverable in respect thereof, as
determined in accordance with the terms hereof. When authorizing such payment in
exchange for any lost, stolen or destroyed Certificates, the person to whom the
Merger Stock is to be issued, as a condition precedent to such delivery, shall
give Parent a bond satisfactory to Parent against any claim that may be made
against Parent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
(g) No dividend or other distribution declared or made after
the Effective Time with respect to the Merger Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Merger Stock issuable upon surrender thereof until the
holder of such Certificate shall surrender such Certificate in accordance with
Section 1.4(b). Subject to the effect of applicable law, following surrender of
any such Certificate there shall be paid, without interest, to the record holder
of certificates representing whole shares of Merger Stock issued in exchange
therefor: (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Merger Stock; and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender of such Certificate and a
payment date subsequent to such surrender payable with respect to such whole
shares of Merger Stock. No holder of Company Common Stock shall be entitled to
any interest on any cash amounts payable for fractional interests pursuant to
Section 1.4(h) hereof.
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<PAGE> 9
(h) No certificates or scrip evidencing fractional shares of
Merger Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests shall not entitle the owner thereof to any
rights of a stockholder of Parent. In lieu of any such fractional shares, each
holder of a Certificate previously evidencing Company Common Stock, upon
surrender of such Certificate for exchange pursuant to this Article I, shall be
paid an amount in cash (without interest), rounded to the nearest cent,
determined by multiplying (a) the closing price for a share of Parent Common
Stock on the NYSE Composite Transaction Tape on the first business day
immediately following the Effective Time, by (b) the fractional interest to
which such holder would otherwise be entitled (after taking into account all
shares of Company Common Stock held of record by such holder at the Effective
Time).
SECTION 1.5. EMPLOYEE BENEFIT PLANS; OPTIONS. At the Effective Time,
each option or warrant granted by the Company to purchase shares of Company
Common Stock, which is outstanding and unexercised immediately prior thereto,
shall be assumed by Parent and converted into an option or warrant to purchase
shares of Parent Common Stock on the same terms and conditions as are in effect
for the original option or warrant as of the Closing Date as adjusted as set
forth below. Each such option or warrant that is converted shall be converted
into an option or warrant to purchase such number of shares of Parent Common
Stock at such exercise price as is determined as provided below (and otherwise
having the same duration and other terms as the original option or warrant):
(a) the number of shares of Parent Common Stock to be subject
to the new option or warrant shall be equal to the product of (i) the number of
shares of Company Common Stock subject to the original option or warrant, and
(ii) the Exchange Ratio, the product being rounded, if necessary, up or down, to
the nearest whole share; and
(b) the exercise price per share of Parent Common Stock under
the new option or warrant shall be equal to (i) the exercise price per share of
Company Common Stock under the original option or warrant divided by (ii) the
Exchange Ratio, rounded, if necessary, up or down, to the nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code. Prior to the Effective Time,
the Board of Directors of the Company shall take such action as may be required
under the governing option plans and agreements to effectuate the foregoing.
Prior to the Effective Time, Parent shall reserve for issuance
the number of shares of Parent Common Stock necessary to satisfy Parent's
obligations under this Section 1.5. Promptly after the Effective Time (but in no
event later than five business days thereafter), Parent shall file with the
Securities and Exchange Commission (the "SEC") a registration statement on an
appropriate form under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "SECURITIES ACT"), with respect to the shares of
Parent Common Stock subject to options to acquire Parent Common Stock issued
pursuant to this Section 1.5, and shall use its best efforts to maintain the
current status of the prospectus contained therein, as well as comply with
applicable state securities or "blue sky" laws, for so long as such options
remain outstanding.
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SECTION 1.6. NO DISSENTER OR APPRAISAL RIGHTS. Pursuant to Section
48-23-102 of the TBCA, the holders of shares of Company Common Stock shall not
have any dissenters or appraisal rights with respect to this Agreement or the
Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to, and agrees with, Parent and
Merger Sub as follows, except as set forth on a Disclosure Schedule delivered by
the Company concurrently with the execution and delivery of this Agreement (the
"COMPANY SCHEDULE"), each of which exceptions shall specifically identify the
relevant subsection hereof to which it relates and shall be deemed to be
representations and warranties as if made hereunder:
SECTION 2.1. ORGANIZATION, POWERS AND QUALIFICATIONS. (a) The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Tennessee. The Company has all requisite corporate power
and authority to carry on its business as it has been and is now being conducted
and to own, lease and operate the properties and assets used in connection
therewith. The Company is duly qualified as a foreign corporation authorized to
do business and is in good standing in every jurisdiction in which such
qualification is required, all of which jurisdictions are disclosed in the
COMPANY SCHEDULE, except where the failure to be so qualified would not have a
Company Material Adverse Effect. As used in this Agreement, "COMPANY MATERIAL
ADVERSE EFFECT" shall mean any fact, condition, event, development or occurrence
which, individually or when taken together with all other such facts,
conditions, events, developments or occurrences other than changes in the
general economic conditions and other conditions affecting financial
institutions or the credit market generally, would reasonably be expected to
have a material adverse effect on the financial condition, operating results,
business or prospects of the Company and the Subsidiaries (hereinafter defined),
taken as a whole.
(b) The Company (i) has qualified for and validly elected to
be treated as a business development company under the 1940 Act; such election
has not been revoked or rescinded and is in full force and effect, and (ii) is
in compliance with the 1940 Act and the rules and regulations promulgated
thereunder.
(c) The Company (i) has been licensed by the Tennessee
Department of Financial Institutions to operate as a business industrial
development company ("BIDCO") under the laws of the State of Tennessee and (ii)
has been granted a California lenders license by the Department of Corporations
of the State of California and each such license has not been revoked or
rescinded and is in full force and effect.
SECTION 2.2. SUBSIDIARIES.
(a) "SUBSIDIARY" means, with respect to any party, any
corporation, limited liability company, partnership, joint venture, or other
business association or entity, at least a majority of the voting securities or
economic interests of which is directly or indirectly owned or controlled by
such party or by any one or more of its Subsidiaries, except where such
ownership or control results solely from such party's ownership or control of
unexercised warrants or convertible debt instruments issued by
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<PAGE> 11
such entity. As used in this Agreement, "JOINT VENTURE" means, with respect to
any party, any corporation, limited liability company, partnership, joint
venture or other business association or entity in which (i) such party or any
one or more of its Subsidiaries, directly or indirectly, owns or controls more
than five percent (5%) and less than a majority of any class of the outstanding
voting securities or economic interests, or (ii) such party or a Subsidiary of
such party is a general partner; provided, however, that the term Joint Venture
shall not include any party, any corporation, limited liability company,
partnership, joint venture or other business association or entity in which the
Company or any of its Subsidiaries owns or controls any equity interests solely
pursuant to a Financing Transaction (hereinafter defined), (collectively,
"PORTFOLIO COMPANIES").
(b) The COMPANY SCHEDULE lists each Subsidiary and each Joint
Venture of the Company, the jurisdiction of its organization and the amount of
its securities outstanding and the owners thereof. Each Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each Subsidiary has all requisite power and
authority to carry on its business as it has been and is now being conducted and
to own, lease and operate the assets and properties used in connection
therewith. Each Subsidiary is duly qualified as a foreign corporation authorized
to do business and is in good standing in every jurisdiction in which such
qualification is required, all of which jurisdictions are disclosed in the
COMPANY SCHEDULE except where the failure to be so qualified would not have a
Company Material Adverse Effect. All issued and outstanding shares of capital
stock of each Subsidiary have been duly authorized, are validly issued and
outstanding, are fully paid and nonassessable and were issued in compliance with
all applicable federal and state securities laws, and, except as set forth on
the COMPANY SCHEDULE, are lawfully owned of record and beneficially by the
Company or another Subsidiary free and clear of all pledges, liens, claims,
security interests and other charges or defects in title of any nature
whatsoever ("LIENS"). There are no existing subscriptions, options, warrants,
convertible securities, calls, commitments, agreements, conversion rights or
other rights of any character (contingent or otherwise) calling for or requiring
the issuance, transfer, sale or other disposition of any shares of the capital
stock of any Subsidiary, or calling for or requiring the issuance of any
securities or rights convertible into or exchangeable for shares of capital
stock of any Subsidiary, nor is the Company or any Subsidiary subject to any
obligation (contingent or otherwise) to repurchase, redeem or otherwise acquire
shares of capital stock of any Subsidiary, in any case except as set forth in
the COMPANY SCHEDULE. Except for the Subsidiaries, the Joint Ventures or the
Portfolio Companies or as set forth in the COMPANY SCHEDULE, neither the Company
nor any Subsidiary directly or indirectly (i) owns or controls any shares of any
corporation nor has any voting securities of, nor the right to share in the
income or losses of, either of record, beneficially or equitably, any
association, partnership, limited liability company, joint venture or other
legal entity, or (ii) is a general partner of any partnership.
(c) Sirrom Investments Inc. ("SII"), a wholly owned subsidiary
of the Company, has obtained a license from the Small Business Administration
("SBA") to operate as a small business investment company; such license has not
been revoked or rescinded and is in full force and effect, and is in compliance
with the Small Business Investment Act of 1958 and all applicable SBA
Regulations. SII and Sirrom Funding Corporation ("SFC"), a wholly owned
subsidiary of the Company, are each registered investment companies under the
1940 Act; each such registration has not been revoked or rescinded and is in
full force and effect, and is in compliance with the 1940 Act and the rules and
regulations promulgated thereunder.
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SECTION 2.3. CAPITAL STOCK. The Company has authorized capital stock
consisting of 75,000,000 shares of Company Common Stock. As of December 31,
1998: (i) 37,229,196 shares of Company Common Stock were issued and outstanding,
(ii) no shares of Company Common Stock were held as treasury shares, and (iii)
7,199,098 shares of the Company Common Stock were reserved for issuance under
the Company stock option or equity compensation plans (the "COMPANY STOCK
PLANS") (including 5,707,098 shares reserved for issuance under the Company's
Amended and Restated 1996 Incentive Stock Option Plan, 4,519,718 of which were
subject to outstanding options and 1,167,350 of which were reserved for future
option grants, 1,000,000 shares reserved for issuance under the Company's
Amended and Restated 1994 Employee Plan, 633,786 of which were subject to
outstanding options and 358,214 of which were reserved for future grants, and
492,000 shares reserved for issuance under the Company's Amended and Restated
1995 Stock Option Plan for Non-Employee Directors, 200,400 of which were subject
to outstanding options and 260,000 of which were reserved for future option
grants). The COMPANY SCHEDULE lists all option holders, the date each option to
purchase Company Common Stock was granted, the Company Stock Plan under which
such options were granted, the number of shares subject to each such option, the
expiration date of each such option and the price at which such option may be
exercised under the applicable Company Stock Plan. Since December 31, 1998, (i)
no additional shares of capital stock have been reserved for issuance by the
Company, (ii) the only issuances of shares of capital stock of the Company have
been issuances of Company Common Stock upon the exercise of outstanding Company
stock options listed in the COMPANY SCHEDULE and (iii) no shares of Company
Common Stock came to be held by the Company as treasury shares. All of the
issued and outstanding shares of Company Common Stock have been duly authorized
and are validly issued and outstanding, fully paid and nonassessable, and were
issued in compliance with all applicable federal and state securities laws, in
all material respects. No shares of capital stock issued by the Company are or
were at the time of their issuance subject to preemptive rights. There are no
existing subscriptions, options, warrants, convertible securities, calls,
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) calling for or requiring the issuance, transfer, sale
or other disposition of any shares of the capital stock of the Company or of any
Subsidiary, or calling for or requiring the issuance of any securities or rights
convertible into or exchangeable for shares of capital stock of the Company or
of any Subsidiary, nor is the Company or any Subsidiary subject to any
obligation (contingent or otherwise) to repurchase, redeem or otherwise acquire
shares of capital stock of the Company or any Subsidiary, in any case except as
set forth on the COMPANY SCHEDULE and as contemplated by this Agreement. There
are no voting trusts or other agreements or understandings to which the Company
is a party, nor, to the knowledge of the Company, to which any shareholder of
the Company is a party, with respect to the voting of capital stock of the
Company, other than this Agreement, or the Shareholders Agreement.
SECTION 2.4. CHARTER, BYLAWS, MINUTE BOOKS AND RECORDS. The copies of
the Charter and all amendments thereto and of the Bylaws, as amended, of the
Company and the Subsidiaries which have been delivered to Parent are true,
correct and complete copies thereof as in effect on the date hereof. The minute
books of the Company and the Subsidiaries which have been made available for
inspection contain minutes, which are accurate and complete in all material
respects, of all meetings and accurate consents in lieu of meetings of the Board
of Directors (and any committee thereof) and of the shareholders of the Company
and the Subsidiaries since the respective dates of incorporation. The books and
records of the Company and each Subsidiary accurately reflect, in all material
respects, the transactions to which the Company or the Subsidiary is a party or
by which their properties are subject or bound, and the assets and liabilities
of the Company or the Subsidiary.
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<PAGE> 13
SECTION 2.5. AUTHORITY; BINDING EFFECT. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby and thereby. All necessary
action, corporate or otherwise, required to have been taken by or on behalf of
it by applicable law, its charter document or otherwise to authorize (i) the
approval, execution and delivery on its behalf of this Agreement and (ii) its
performance of its obligations under this Agreement and the consummation of the
transactions contemplated hereby and thereby have been taken, including the
receipt of the unanimous approval by the Company's Board of Directors, except
that the adoption of this Agreement must be approved by the affirmative vote of
a majority of the votes of all outstanding shares of Company Common Stock of
record on the record date for the Shareholders Meeting ("REQUIRED COMPANY
SHAREHOLDER APPROVAL"). This Agreement constitutes the Company's valid and
binding agreement, enforceable against it in accordance with its terms, except
(a) as the same may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws of general application relating to or affecting creditors'
rights, including without limitation, the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, and (b) for the
limitations imposed by general principles of equity and commercial
reasonableness.
SECTION 2.6. NO CONFLICT; APPROVALS. Except as set forth in the COMPANY
SCHEDULE, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and thereby will not, (a)
violate or conflict with the Company's Charter or Bylaws or the comparable
organizational documents of any of its Subsidiaries, or (b) constitute a breach
or default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any Lien, third party right of termination,
cancellation, material modification or acceleration, or loss of any benefit,
under any Contract (hereinafter defined) to which the Company or any Subsidiary
is a party or by which it is bound, or (c) subject to the consents, approvals,
orders, authorizations, filings, declarations and registrations specified in
Section 2.7 or in the COMPANY SCHEDULE, conflict with or result in a violation
of any permit, concession, franchise or license or any law, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their properties
or assets, except, in the case of clauses (b) and (c), for any such breaches,
defaults, Liens, third party rights, cancellations, modifications, accelerations
or losses of benefits, conflicts or violations which would not have a Company
Material Adverse Effect and would not impair the ability of the Company to
perform its obligations under this Agreement or prevent or delay the
consummation of any of the transactions contemplated hereby and thereby.
SECTION 2.7. GOVERNMENTAL CONSENTS AND APPROVALS. Except as set forth
on the COMPANY SCHEDULE, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby or thereby will
require any consent, approval, order, authorization, or permit of, or filing
with or notification to, any local, state, federal or foreign court,
administrative agency, commission or other governmental or regulatory authority,
agency or instrumentality ("GOVERNMENTAL ENTITY"), except (a) the filing of the
Registration Statement (hereinafter defined) with the SEC in accordance with the
Securities Act, and the entry of an order by the SEC permitting such
Registration Statement to become effective, and compliance with applicable state
securities laws, (b) the filing of the Proxy Statement (hereinafter defined) and
related proxy materials with the SEC in accordance with the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE
ACT"), (c) the filings with and consents of the Commission to withdraw the
Parent's election to be treated as a business development company and to
deregister each subsidiary that has registered as an investment company in
accordance with the 1940 Act, (d) notification pursuant to, and expiration or
termination of the waiting period under, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as
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<PAGE> 14
amended, and the rules and regulations thereunder (the "HSR ACT"), (e) the
filings with and consents or approvals of the SBA, (f) the filings with and
consent of the Tennessee Department of Financial Institutions and the California
Department of Corporations, (g) the filing and recording of the Delaware
Certificate of Merger in accordance with the DGCL and the Tennessee Articles of
Merger in accordance with the TBCA, and (h) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent it from performing its obligations under this
Agreement without having a Company Material Adverse Effect.
SECTION 2.8. SEC REPORTS. The Company has filed all required forms,
reports and documents with the SEC since January 1, 1995 (collectively, the
"COMPANY'S SEC REPORTS"), including without limitation the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (the "COMPANY 1997 FORM
10-K") and the Company's Quarterly Report on Form 10-Q for the quarter ending
September 30, 1998. The Company's SEC Reports have complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act. As of their respective dates, none of the Company's SEC Reports, including,
without limitation, any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. There have been
filed as exhibits to, or incorporated by reference in, the Company 1997 Form
10-K and all subsequently filed Forms 10-Q, all contracts which, as of the date
thereof, were material as described in Item 601(b)(10) of Regulation S-K except
as set forth on the COMPANY SCHEDULE. The Company has heretofore delivered to
Parent, in the form filed with the SEC, all of the Company's SEC Reports.
SECTION 2.9. FINANCIAL STATEMENTS. The Company has delivered to Parent
true and complete copies of (a) consolidated balance sheets of the Company and
Subsidiaries at December 31, 1997 and 1996 and the related consolidated
statements of earnings, changes in shareholders' equity and statements of cash
flow for the years then ended, together with the notes thereto, audited by
Arthur Andersen LLP (the "COMPANY'S AUDITORS"), and (b) unaudited consolidated
balance sheets of the Company and Subsidiaries at September 30, 1998 and 1997
and related consolidated statements of income, changes in shareholders' equity
and statements of cash flow for the periods ended September 30, 1998 and 1997,
all of which have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods involved,
subject in the case of interim financial statements to normal year-end
adjustments and to the absence of full footnotes. Such balance sheets, including
the related notes, fairly present the consolidated financial position, assets
and liabilities (whether accrued, absolute, contingent or otherwise) of the
Company and Subsidiaries at the dates indicated and such consolidated statements
of income, changes in shareholders' equity and statements of cash flow fairly
present the consolidated results of operations, changes in shareholders' equity
and cash flow of the Company and Subsidiaries for the periods indicated. The
unaudited consolidated financial statements as at and for the periods ended
September 30, 1998 and 1997 contain all adjustments, which are solely of a
normal recurring nature, necessary to present fairly the financial position at
September 30, 1998 and 1997 and the results of operations and changes in
shareholders' equity and financial position for the periods then ended. The
audited consolidated balance sheet of the Company and its Subsidiaries at
December 31, 1997 (the "AUDIT DATE") described above is referred to herein as
the "COMPANY 1997 BALANCE SHEET." The audited consolidated financial statements
of the Company and its Subsidiaries as at and for the year ended December 31,
1997 are referred to herein as the "COMPANY AUDITED FINANCIAL STATEMENTS."
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<PAGE> 15
SECTION 2.10. ABSENCE OF CERTAIN CHANGES. (a) Except as described in
the COMPANY SCHEDULE, since September 30, 1998, the Company and the Subsidiaries
have conducted their business solely in the ordinary course consistent with past
practice and policies and procedures, to the extent the Company has adopted any
such policies and procedures (the "ORDINARY COURSE"). Except as otherwise
disclosed on the COMPANY SCHEDULE, since September 30, 1998, the Company and the
Subsidiaries have not:
(a) suffered any Company Material Adverse Effect;
(b) been subject to any other events or conditions of any
character that would have a Company Material Adverse Effect or impair the
ability of the Company to perform its obligations under this Agreement or
prevent or delay the consummation of any of the transactions contemplated
hereby;
(c) made any material change to their respective accounting
methods, principles or practices;
(d) been subject to any revaluation of any assets of the
Company or any of its Subsidiaries that, individually or in the aggregate has
had, or would reasonably be expected to have a Company Material Adverse Effect,
including writing down the value of loans, warrants or other securities held by
the Company;
(e) incurred any material liabilities, other than liabilities
incurred in the Ordinary Course or discharged or satisfied any material Lien, or
paid any material liabilities, other than in the Ordinary Course or failed to
pay or discharge when due any liabilities of which the failure to pay or
discharge has caused or will cause any material damage or risk of material loss
to it or any of its material assets or properties; or
(f) taken or been subject to any other action or event that
would have required the consent of Parent pursuant to Section 4.1 hereof.
SECTION 2.11. INDEBTEDNESS; ABSENCE OF UNDISCLOSED LIABILITIES. The
COMPANY SCHEDULE discloses as of the date hereof all indebtedness for money
borrowed of the Company or any Subsidiary, accurately disclosing for each such
indebtedness the payee, the original principal amount of the loan, the current
unpaid balance of the loan, the interest rate and the maturity date. Except as
set forth on the COMPANY SCHEDULE, neither the Company nor the Subsidiaries have
any material indebtedness, liability or obligation of any kind (whether known or
unknown, accrued, absolute, asserted or unasserted, contingent or otherwise)
except (a) as and to the extent reflected, reserved against or otherwise
disclosed in the Company 1997 Balance Sheet, or (b) for liabilities and
obligations incurred subsequent to the Audit Date in the ordinary course of
business and which do not have a Company Material Adverse Effect or impair the
ability of the Company to perform its obligations under this Agreement or
prevent or delay the consummation of any of the transactions contemplated
hereby.
SECTION 2.12. ASSETS. Except as described in the COMPANY SCHEDULE, the
Company and the Subsidiaries have good and marketable title to all their real
and personal properties and assets, including, without limitation, those assets
and properties reflected in the Company 1997 Balance Sheet in the amounts and
categories reflected therein, free and clear of all Liens, except (a) the lien
of current taxes not yet due and payable, (b) properties, interests, and assets
disposed of by the Company or any
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<PAGE> 16
Subsidiary since the Audit Date solely in the Ordinary Course, (c) such secured
indebtedness as is disclosed in the Company 1997 Balance Sheet covering the
properties referred to therein, and (d) such imperfections of title, easements
and encumbrances, if any, as are not substantial in character, amount or extent
and do not materially detract from the value, or interfere with the present or
proposed use, of the properties subject thereto ("PERMITTED LIENS").
SECTION 2.13. CONTRACTS.
(a) The COMPANY SCHEDULE lists each written or oral contract,
agreement, arrangement, lease, instrument, mortgage or commitment to which the
Company or a Subsidiary is a party or may be bound or to which their respective
properties or assets may be subject ("CONTRACT") (i) which is material to the
Company or a Subsidiary; (ii) which is with any present or former employee or
for the employment of any person or consultant or which is a non-compete
arrangement with any employee of the Company or a Subsidiary; (iii) which is a
severance agreement, program or policy of the Company or a Subsidiary with or
relating to its employees; (iv) under the terms of which any of the rights or
obligations of a party thereto will be modified or altered as a result of the
transactions contemplated hereby or which contain change in control provisions;
(v) which involves a material commission, representative, franchise,
distributorship, or sales agency arrangement; (vi) which is a material
conditional sale or lease arrangement; (vii) which involves a material license,
or other material arrangement which relates in whole or in part to any material
software, patent, trademark, trade name, service mark or copyright or to any
material ideas, technical assistance or other know-how of or used by the Company
or a Subsidiary in the conduct of its business; (viii) which represents any
material confidentiality or non-disclosure arrangement pursuant to which the
Company or a Subsidiary has agreed to keep confidential information obtained
from any other person; (ix) which is an arrangement limiting or restraining the
Company or any Subsidiary or any successor thereto from engaging or competing in
any manner or in any business; or (x) under which the Company or any Subsidiary
guarantees the payment or performance by others or in any way is or will be
liable with respect to material obligations of any other person.
(b) All Contracts are valid and binding and in full force and
effect as to the Company on the date of this Agreement except to the extent they
have previously expired in accordance with their terms or except to the extent
that their invalidity would not have a Company Material Adverse Effect. None of
the Company, the Subsidiaries nor, to the Company's knowledge, any other
parties, have violated any provision of, or committed or failed to perform any
act which with notice, lapse of time or both would constitute a default under
the provisions of, any Contract, the termination or violation of which, or the
default under which, might have a Company Material Adverse Effect. True and
complete copies of all Contracts listed on the COMPANY SCHEDULE or listed in the
Company 1997 Form 10-K, together with all amendments thereto through the date
hereof, have been delivered to Parent.
(c) The Company terminated the Portfolio Purchase Agreement,
dated as of December 4, 1998, by and between the Company and Tandem Capital LLC
on or before the date hereof pursuant to the terms of such agreement and has
paid Tandem Capital LLC all liquidated damages or other expenses associated with
the termination of such agreement.
SECTION 2.14. INSURANCE. The COMPANY SCHEDULE accurately sets forth all
policies of insurance, other than title insurance policies, held by or on behalf
of the Company. The COMPANY SCHEDULE lists all outstanding claims thereunder in
excess, individually or in the aggregate, of $25,000.
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<PAGE> 17
All such policies of insurance are in full force and effect, and no notice of
cancellation has been received. In the reasonable judgment of the Company, such
policies are in amounts which are adequate in relation to the business and
properties of the Company, and all premiums to date have been paid in full.
SECTION 2.15. FINANCING TRANSACTIONS.
(a) The COMPANY SCHEDULE sets forth for each financing
transaction conducted by the Company or any Subsidiary (the "FINANCING
TRANSACTIONS") the following information as of September 30, 1998 and as of the
last day of the month prior to the Closing Date: the name and address of the
borrower; the principal amount of the loan and the remaining term of the note;
whether the debt is subordinate; the amount of shares for which a warrant has
been issued to the Company and the exercise price thereto; the terms and amounts
of any additional equity interest held by the Company or any Subsidiary in the
borrower; and the value reflected on the Company's books of any debt or equity
interest in such party.
(b) Accurate and complete copies of each of the agreements,
contracts, leases and other instruments entered into by the Company or its
Subsidiaries, as the case may be, with respect to the Financing Transactions
(the "FINANCING DOCUMENTS") are in the files of the Company and have been made
available to Parent. The original execution copy of the Financing Documents are
in the possession of the Company, a trustee under a securitization transaction
or a secured lender to the Company. The Company has caused to be filed UCC-1
financing statements with respect to all or substantially all of the property
pledged to the Company pursuant to any Financing Transaction and has made such
other filings or notifications, or taken possession or has obtained certificates
of title, as are necessary to give the Company a perfected security interest in
and lien upon any such property.
(c) Each of the Financing Documents is valid and enforceable
in accordance with its terms except as may be limited by bankruptcy laws or
other similar laws affecting rights of creditors generally or general principals
of commercial reasonableness; the Company is, and to the Company's actual
knowledge all other parties thereto are, in compliance in all material respects
with the provisions thereof; the Company is not, and to the Company's actual
knowledge no other party thereto is, in default in the performance, observance
or fulfillment of any material obligation, covenant or condition contained
therein, except as disclosed in the COMPANY SCHEDULE; and, to the Company's
actual knowledge, no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. Each of
the Financing Documents accurately and completely describes the terms of the
Financing Transaction and there have been no amendments, modifications or
waivers that are not reflected therein.
(d) There has been no adverse determination in any
administrative proceeding or in any court of law, nor any adverse settlement,
ongoing administrative proceeding or other similar action, which would
materially impair the ability of the Company to realize the current value of the
Financing Transactions.
(e) With respect to each Financing Transaction in which the
Company has been issued securities or warrants to acquire securities, to the
Company's knowledge, each such security was issued in compliance with the
requirements of the Securities Act and the Company has not taken any actions
which would violate the restrictions imposed upon the Company in connection with
such securities under the applicable securities laws, pursuant to contract or
otherwise.
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SECTION 2.16. AUTHORIZATIONS; COMPLIANCE WITH LAW. (a) The Company and
the Subsidiaries hold all licenses, franchises, certificates, consents, permits,
approvals, certificates of public convenience and necessity, and authorizations
("AUTHORIZATIONS") from all Governmental Entities and other persons (including
without limitation all required Authorizations which may be issued or required
by the SBA, the Internal Revenue Service (the "IRS") or the SEC) which are
necessary for the lawful conduct of their respective businesses and their use
and occupancy of their assets and properties in the manner heretofore conducted,
used and occupied, except where the failure to hold any of the foregoing would
not have a Company Material Adverse Effect or impair the ability of the Company
to perform its obligations under this Agreement or prevent or delay the
consummation of any of the transactions contemplated hereby. A complete and
correct list of the material Authorizations held by the Company and the
Subsidiaries are set forth in the COMPANY SCHEDULE. All of such Authorizations
are valid, in good standing and in full force and effect and the Company and the
Subsidiaries have duly performed in all material respects all of their
respective obligations under such Authorizations. No event has occurred with
respect to the material Authorizations which permits, or after notice or lapse
of time or both would permit, revocation or termination thereof or would result
in any other material impairment of the rights of the holder of any of the
Authorizations, and no terminations thereof have been, to the knowledge of the
Company, threatened.
(b) The Company and each of the Subsidiaries is in compliance
with all applicable laws, statutes, ordinances, codes, rules, regulations,
orders or directives of any Governmental Entities (collectively, "LAWS"), except
where such violations would not have a Company Material Adverse Effect, and the
Company has not received any notice from a Governmental Entity within five years
of the date hereof of any violation of any Law.
SECTION 2.17. TAXES.
(a) All federal, state, local and foreign tax returns,
reports, statements and other similar filings required to be filed by the
Company or the Subsidiaries (the "TAX RETURNS") on or prior to the date hereof
or with respect to taxable periods ending on or prior to the date hereof with
respect to any federal, state, local or foreign taxes, assessments,
deficiencies, fees and other governmental charges or impositions (including,
without limitation, all income tax, unemployment compensation, social security,
payroll, sales and use, excise, privilege, property, ad valorem, transfer,
franchise, license, school and any other tax or similar governmental charge or
imposition (including interest, penalties or additions with respect thereto)
under the laws of the United States or any state or municipal or political
subdivision thereof or any foreign country or political subdivision thereof)
("TAXES") have been timely filed with the appropriate Governmental Entities in
all jurisdictions in which such Tax Returns are required to be filed, and all
such Tax Returns correctly reflect the liabilities of the Company and the
Subsidiaries for Taxes for the periods, property or events covered thereby.
(b) All Taxes, including, without limitation, those which are
called for by the Tax Returns, or heretofore or hereafter claimed to be due with
respect to taxable periods ending on or before the Effective Time by any taxing
authority from the Company and the Subsidiaries, have been fully paid or
properly accrued. Except as set forth in the COMPANY SCHEDULE, the accruals for
Taxes contained in the Company 1997 Balance Sheet are adequate to cover the tax
liabilities of the Company and the Subsidiaries as of the Audit Date and include
adequate provision for all deferred taxes, and nothing has occurred subsequent
to that date to make any of such accruals inadequate.
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(c) Neither the Company nor the Subsidiaries have received any
notice of assessment or proposed assessment in connection with any Taxes or Tax
Returns and there are no pending tax examinations of or tax claims asserted
against the Company or the Subsidiaries or any of their respective assets or
properties. Neither the Company nor any Subsidiary has extended, or waived the
application of, any statute of limitations of any jurisdiction regarding the
assessment or collection of any Taxes.
(d) There are no Tax liens (other than any lien for current
Taxes not yet due and payable) on any of the assets or properties of the Company
or the Subsidiaries, except to the extent that any such lien would not have,
individually or in the aggregate, a Company Material Adverse Effect. The Company
has no knowledge of any basis for any additional assessment of any Taxes. The
Company and the Subsidiaries have made all deposits required by law to be made
with respect to employees' withholding and other employment taxes, including
without limitation the portion of such deposits relating to taxes imposed upon
the Company or the Subsidiaries.
(e) The representation and warranties contained in the Company
Tax Certificate (hereinafter defined) are true and correct.
(f) The Company, SII and SFC have each qualified for and
validly elected to be treated as a Regulated Investment Company (a "RIC") under
Subchapter M of the Code. Each of the Company, SII and SFC have taken all steps
necessary, including making all required distributions, to maintain such
entity's status as an RIC. The accruals on the Company's books for distributions
to shareholders are sufficient to satisfy the applicable regulations under
Subchapter M of the Code for maintenance of its status as a RIC.
SECTION 2.18. ABSENCE OF LITIGATION; CLAIMS.
(a) Except as set forth in the COMPANY SCHEDULE there are no
claims, actions, suits, proceedings or investigations pending or, to the
knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, or with respect to which any director, officer, employee or agent
is or may be entitled to claim indemnification from the Company or any
Subsidiary, before any Governmental Entity or arbitrator, which, if decided
adversely to the Company or such Subsidiary, would have a Company Material
Adverse Effect or impair the ability of the Company to perform its obligations
under this Agreement or prevent or delay the consummation of any of the
transactions contemplated hereby, nor is there any judgement, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its Subsidiaries having or which, insofar as
reasonably can be foreseen, in the future would have such effect, nor, to the
knowledge of the Company, are there any state of facts which could give rise to
such a claim.
(b) The securities litigation set forth in the COMPANY
SCHEDULE is covered by the Company's director and officer insurance policies, no
insurance carriers of such policies have denied, or threatened to deny, coverage
of such litigation, except as set forth in the COMPANY SCHEDULE, and any amount
that the Company would owe under such litigation would not exceed the Company's
total insurance program (excluding deductibles).
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SECTION 2.19. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS.
(a) The COMPANY SCHEDULE lists all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any current or
former employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of the Company, any
trade or business (whether or not incorporated) which is a member of a
controlled group including the Company or which is under common control with the
Company (an "ERISA AFFILIATE") within the meaning of Section 414 of the Code, or
any Subsidiary of the Company, as well as each plan with respect to which the
Company or an ERISA Affiliate could incur liability under Section 4069 (if such
plan has been or were terminated) or Section 4212(c) of ERISA (together, the
"EMPLOYEE PLANS"), excluding former agreements under which the Company has no
remaining obligations and any of the foregoing that are required to be
maintained by the Company under the laws of any foreign jurisdiction. With
respect to each Employee Plan, as applicable, a copy of (i) each such written
Employee Plan (other than those referred to in Section 4(b)(4) of ERISA),
together with all amendments, trust agreements, insurance policies and service
agreements; (ii) the three most recently filed Forms 5500 or 5500 C/R and any
financial statements attached thereto; (iii) the most recent IRS determination
letter; (iv) the most recent summary plan description; (v) all reports submitted
within the preceding three years by third-party administrators, actuaries,
investment managers, consultants, or other independent contractors, has been
furnished to Parent and (vi) with respect to each Employee Plan under which
health benefits are provided, a statement as to the actual and contingent
labilities of each such plan to the extent that no insurance or trust fund
assets are available to provide such benefits.
(b) (i) Except as set forth in the COMPANY SCHEDULE, or as
required by Section 4980B of the Code, none of the Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person and
none of the Employee Plans is a 'multiemployer plan' as such term is defined in
Section 3(37) of ERISA; (ii) there has been no breach of any fiduciary duty, as
described in Section 404 of ERISA, or no 'prohibited transaction', as such term
is defined in Section 406 of ERISA or Section 4975 of the Code, with respect to
any Employee Plan, which could be reasonably expected to result in any material
liability of the Company or any of its Subsidiaries; (iii) all Employee Plans
are in compliance in all material respects with the requirements prescribed by
any and all applicable statutes (including ERISA and the Code), orders, or
governmental rules and regulations currently in effect with respect thereto
(including all applicable requirements for notification to participants or the
Department of Labor, the IRS or Secretary of the Treasury), all Employee Plans
have been operated at all times in all material respects in accordance with
their terms, and the Company and each of its Subsidiaries have performed all
material obligations required to be performed by them under, are not in any
material respect in default under or violation of, and have no knowledge of any
material default or violation by any other party to, any of the Employee Plans;
(iv) each Employee Plan (other than a standardized prototype Plan which is
subject to a favorable IRS opinion) intended to qualify under Section 401(a) of
the Code and each trust intended to qualify under Section 501(a) of the Code is
the subject of a favorable determination letter from the IRS, and nothing has
occurred which may reasonably be expected to impair such determination; (v) all
contributions required to be made to any Employee Plan pursuant to Section 412
of the Code, or the terms of the Employee Plan or any collective bargaining
agreement, have been made on or before their due dates and a reasonable amount
has been accrued for contributions to each Employee Plan for the current plan
years; (vi) with respect to each Employee Plan, no 'reportable event' within the
meaning of Section 4043 of ERISA (excluding any such event for which the 30 day
notice
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requirement has been waived under the regulations to Section 4043 of ERISA) nor
any event described in Section 4062, 4063, 4604 or 4041 of ERISA has occurred;
(vii) neither the Company nor any ERISA Affiliate has incurred, nor reasonably
expects to incur, any liability under Title IV of ERISA (other than liability
for premium payments to the Pension Benefit Guaranty Corporation arising in the
ordinary course); (viii) neither the Company nor any ERISA Affiliate has
incurred any liability for any excise, income or other taxes or penalties with
respect to any Employee Plan, and no event has occurred and no circumstance
exists that could be reasonably expected to give rise to any such liability;
(ix) there are no pending or threatened claims against any Employee Plan (other
than routine claims for benefits) or against any fiduciary of an Employee Plan
with respect to such plan, nor is there any reasonable basis for such a claim;
(x) no Employee Plan is presently under audit or examination (nor has notice
been received of a potential audit or examination) by any governmental entity;
and (xi) no matters are pending with respect to any Employee Plan under any
governmental corrective or remedial program.
(c) The COMPANY SCHEDULE provided pursuant to Section 1.5
hereof sets forth a true and complete list of each current or former employee,
officer or director of the Company or any of its Subsidiaries who holds any
option to purchase Company Common Stock as of the date hereof, together with the
number of shares of Company Common Stock which are subject to such option, the
date of grant of such option, the extent to which such option is vested (or will
become vested within six months from the date hereof, or as a result of, the
Merger), the option price of such option (to the extent determined as of the
date hereof), whether such option is intended to qualify as an incentive stock
option within the meaning of Section 422(b) of the Code (an "ISO"), and the
expiration date of such option. The COMPANY SCHEDULE also sets forth the total
number of such ISOs and such nonqualified options.
(d) Except as disclosed on the COMPANY SCHEDULE, any amount
that could be received (whether in cash or property or the vesting of property)
as a result of any of the transactions contemplated by this Agreement by any
employee, officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in Proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Employee Plan currently in effect
would not be characterized as an "excess parachute payment" (as such term is
defined in Section 280G of the Code).
SECTION 2.20. LABOR MATTERS. There are no controversies pending or, to
the knowledge of the Company, threatened, between the Company or any of its
Subsidiaries and any of their respective employees. Neither the Company nor any
of its Subsidiaries is party to any collective bargaining agreement or other
labor agreement with any union or labor organization and no union or labor
organization has been recognized by the Company or any of its Subsidiaries as an
exclusive bargaining representative for employees of the Company or any of its
Subsidiaries. To the Company's knowledge, there is no current union
representation question involving employees of the Company or any of its
Subsidiaries, nor does the Company have knowledge of any significant activity or
proceeding of any labor organization (or representative thereof) or employee
group to organize any such employees. Neither the Company nor any of its
Subsidiaries has made any commitment not in collective bargaining agreements
listed on the COMPANY SCHEDULE that would require the application of the terms
of any collective bargaining agreements entered into by the Company or any of
its Subsidiaries to Parent, to any Joint Venture of Parent, or to any Subsidiary
of Parent (other than the Company or its Subsidiaries). Except as disclosed in
the COMPANY SCHEDULE, (a) there is no material active arbitration under any
collective bargaining agreement involving the Company or any of its
Subsidiaries, (ii) there is no material unfair labor practice, grievance,
employment discrimination or other labor or employment
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related charge, complaint or claim against the Company or any of its
Subsidiaries pending before any court, arbitrator, mediator or governmental
agency or tribunal, or, to the Company's knowledge, threatened, (iii) there is
no strike, picketing or work stoppage by, or any lockout of, employees of the
Company or any of its Subsidiaries pending, or to the Company's knowledge,
threatened, against or involving the Company or any of its Subsidiaries, and
(iv) there is no active arbitration under any collective bargaining agreement
involving the Company or any of its Subsidiaries regarding the employer's right
to move work from one location or entity to another, or to consolidate work
locations, or involving other similar restrictions on business operations. There
is no proceeding, claim, suit, action or governmental investigation pending or,
to the knowledge of the Company, threatened, relating to labor matters in
respect of which any director, officer, employee or agent of the Company or any
of its Subsidiaries is or may be entitled to claim indemnification from the
Company or a Subsidiary pursuant to their respective charters or bylaws or under
any indemnification agreements.
SECTION 2.21. ENVIRONMENTAL MATTERS.
(a) The Company and each of the Subsidiaries is in material
compliance with all applicable Environmental Laws (hereinafter defined) and
neither the Company nor any of the Subsidiaries has received any written or, to
the Company's knowledge, oral, communication from any person or Governmental
Entity that alleges that the Company or any of the Subsidiaries is not in
compliance with applicable Environmental Laws where such non-compliance would
have a Company Material Adverse Effect.
(b) The Company and each of the Subsidiaries has obtained or
has applied for all material Environmental Permits (hereinafter defined)
necessary for the construction of their facilities or the conduct of their
operations, and all such material Environmental Permits are effective or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and the Company and the Subsidiaries are in material compliance with
all terms and conditions of such material Environmental Permits. Neither the
Company nor any of the Subsidiaries has knowledge of any past or present events,
conditions, circumstances, activities, practices, incidents, actions or plans
that may interfere with, or prevent, future continued material compliance on the
part of the Company or any of the Subsidiaries with the material Environmental
Permits. Neither the Company nor any of the Subsidiaries has knowledge of
matters or conditions that would preclude reissuance or transfer of any material
Environmental Permit, including amendment of such instrument, to Parent or one
of its Subsidiaries where such action is necessary to maintain compliance with
Environmental Laws in all material respects.
(c) Neither the Company nor any of the Subsidiaries has
knowledge of any current Environmental Law or Environmental Permit imposing any
future requirement which could reasonably be expected to result in the accrual
of a material cost not disclosed in writing to Parent.
(d) There is no Environmental Claim (hereinafter defined)
pending or, to the knowledge of the Company, threatened (i) against the Company
or any of the Subsidiaries, (ii) against any person or entity whose liability
for any Environmental Claim the Company or any of the Subsidiaries has or may
have retained or assumed either contractually or by operation of law, or (iii)
against any real or personal property or operations which the Company or any of
the Subsidiaries owns, leases or manages, in whole or in part.
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<PAGE> 23
(e) The Company has no knowledge of any Releases (hereinafter
defined) of any Hazardous Material (hereinafter defined) that would be
reasonably likely to form the basis of any Environmental Claim against the
Company or any of the Subsidiaries, against any person or entity whose liability
for any Environmental Claim the Company or any of the Subsidiaries has or may
have retained or assumed either contractually or by operation of law, against
any person or entity that has executed a guarantee in favor of the Company or in
which the Company has an equity interest or affecting any assets that are
pledged as collateral to the Company.
(f) The Company has no knowledge, with respect to any
predecessor of the Company or any of the Subsidiaries, of any Environmental
Claim pending or threatened, or of any Release of Hazardous Materials that would
be reasonably likely to form the basis of any material Environmental Claim
against the Company or any of the Subsidiaries.
(g) To the Company's knowledge, the Company has disclosed to
Parent all facts which the Company reasonably believes form the basis of a
material current or future cost relating to any environmental matter affecting
the Company and the Subsidiaries which would or reasonably could have a Company
Material Adverse Effect.
(h) Neither the Company nor any of its Subsidiaries, nor, to
the knowledge of the Company, any owner of premises leased or operated by the
Company or any of its Subsidiaries has filed any notice with respect to such
premises under federal, state, local or foreign law indicating past or present
treatment, storage or disposal of Hazardous Materials, as regulated under 40
C.F.R. Parts 264- 267 or any state, local or foreign equivalent or is engaging
or has engaged in business operations involving the generation, transportation,
treatment, recycling or disposal of any waste regulated under the Environmental
Laws that pertain to radioactive materials or the nuclear power industry,
including, without limitation, requirements of Volume 10 of the Code of Federal
Regulations.
(i) Except as set forth in the COMPANY SCHEDULE, none of the
properties owned, leased or operated by the Company, the Subsidiaries or, to the
knowledge of the Company, any predecessor thereof are now or were in the past,
listed on the National Priorities list of Superfund Sites, the CERCLIS
Information System, or any other comparable state or local environmental
database.
(j) The Merger will not require any governmental approvals
under the Environmental Laws, including those that are triggered by sales or
transfers of businesses or real property.
(k) As used in this Section 2.20:
(i) "ENVIRONMENTAL CLAIM" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person or entity (including
any federal, state, local or foreign Governmental Entity having jurisdiction
over the Company or the Subsidiaries) alleging potential liability of the
Company or the Subsidiaries (including, without limitation, potential
responsibility for or liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (A) the presence, or Release or threatened
Release into the environment, of any Hazardous Materials at any location,
whether or not owned, operated, leased
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<PAGE> 24
or managed by the Company or any of the Subsidiaries (including but not limited
to obligations to clean up contamination resulting from leaking underground
storage tanks); or (B) circumstances forming the basis of any violation or
alleged violation by the Company or the Subsidiaries of any Environmental Law;
or (C) any and all claims by any third party against the Company or the
Subsidiaries seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence or Release of any
Hazardous Materials, but with respect to the foregoing, only if an adverse
determination would or reasonably could have a Company Material Adverse Effect,
individually or in the aggregate.
(ii) "ENVIRONMENTAL LAWS" means all applicable
foreign, federal, state and local laws (including the common law), rules,
requirements and regulations relating to pollution, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations relating to
Releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
(iii) "HAZARDOUS MATERIALS" means (A) any petroleum
or any by-products or fractions thereof, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, any form of natural gas,
explosives, and polychlorinated biphenyls; (B) any chemicals, materials or
substances, whether waste materials, raw materials or finished products, which
are now defined as or included in the definition of 'hazardous substances,'
'hazardous wastes,' 'hazardous materials,' 'extremely hazardous substances,'
'restricted hazardous wastes,' 'toxic substances,' 'toxic pollutants,'
'pollutants,' 'contaminants,' or words of similar import under any Environmental
Law; and (C) any other chemical, material or substance, whether waste materials,
raw materials or finished products, regulated or forming the basis of liability
under any Environmental Law in a jurisdiction in which the Company or any of the
Subsidiaries operates.
(iv) "RELEASE" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including without limitation ambient air,
atmosphere, soil, surface water, groundwater or property).
SECTION 2.22. INTELLECTUAL PROPERTY.
(a) The Company and each of its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications, and
tangible or intangible proprietary information or materials that are used in its
or any of its Subsidiaries' businesses as currently conducted, and to the actual
knowledge of its executive officers all patents, trademarks, trade names,
service marks and copyrights held by it and/or its Subsidiaries are valid and
subsisting, except for any failures to so own, be licensed or possess or to be
valid and subsisting, as the case may be, that, individually or in the
aggregate, will not have a Company Material Adverse Effect.
(b) Except as disclosed in the Company's SEC Reports filed
prior to the date hereof or as is not reasonably likely to have a Company
Material Adverse Effect:
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(i) it and its Subsidiaries are not, nor will any of
them be as a result of the execution and delivery of this Agreement or the
performance of its obligations hereunder, in violation of any licenses,
sublicenses and other agreements as to which it or any of its Subsidiaries is a
party and pursuant to which it or any Subsidiary is authorized to use any
third-party patents, trademarks, service marks and copyrights ("THIRD-PARTY
INTELLECTUAL PROPERTY RIGHT");
(ii) to its knowledge, no claims as of the date
hereof with respect to (A) the
patents, registered and material unregistered trademarks and service marks,
registered copyrights, trade names, and any applications therefor owned by it or
any of its Subsidiaries (the "OWNED INTELLECTUAL PROPERTY RIGHTS"); (B) any
trade secrets material to it; or (C) Third-Party Intellectual Property Rights,
are currently pending or, threatened by any person or entity; and
(iii) to its knowledge, there is no unauthorized use,
infringement or misappropriation of any of the Owned Intellectual Property
Rights by any third party, including any of its or any of its Subsidiaries'
employees or former employees.
SECTION 2.23. REGULATORY MATTERS.
(a) Except as disclosed in the COMPANY SCHEDULE, there are no
proceedings or investigations pending or, to the Company's knowledge,
threatened, before any domestic or foreign court, administrative, governmental
or regulatory body in which any of the following matters are being considered,
nor has the Company or any of its Subsidiaries received written notice or
inquiry from any such body, government official, consumer advocacy or similar
organization or any private party, indicating that any of such matters should be
considered or may become the object of consideration or investigation: (i)
reduction of principal amount of outstanding loans or warrants; (ii) reduction
of earnings or (iii) refunds of amounts previously charged to customers.
(b) Except as disclosed in the COMPANY SCHEDULE, neither the
Company nor any of its Subsidiaries has any outstanding regulatory commitments
regarding (i) reduction of principal amount of outstanding loans or warrants;
(ii) reduction of earnings or (iii) refunds of amounts previously charged to
customers, to or by any domestic or foreign court, administrative, governmental
or regulatory body, government official, consumer advocacy or similar
organization.
SECTION 2.24. ADEQUACY OF DISCLOSURE. The Company has made available to
Parent copies of all documents listed or referred to in the COMPANY SCHEDULE
hereto or referred to herein. Such copies are, and all documents and materials
delivered or made available in connection with Parent's investigation of the
Company in connection with the transactions contemplated hereby are, true and
complete and include all amendments, supplements and modifications thereto or
waivers currently in effect thereunder. No representation or warranty by the
Company in this Agreement nor any certificate, schedule, statement, document or
instrument furnished or to be furnished to Parent pursuant hereto, or in
connection with the negotiation, execution or performance of this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make any statement herein or therein not misleading.
SECTION 2.25. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by the Company for inclusion in the registration statement
of Parent on Form S-4 pursuant to which shares of Parent Common Stock will be
registered with the SEC (the "REGISTRATION STATEMENT")
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does not and will not contain, at the time the information is supplied and when
the Registration Statement is declared effective by the SEC, any untrue
statement of a material fact nor does or will it omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement not misleading. The
information supplied by the Company for inclusion in the proxy
statement/prospectus (the "PROXY STATEMENT") to be sent to the shareholders of
the Company in connection with the special meeting of the Company's shareholders
to consider this Agreement and the Merger (the "SHAREHOLDERS MEETING") does not
and will not, at the time the Proxy Statement is first mailed to shareholders,
at the time of the Shareholders Meeting, or at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
was made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made in the
Proxy Statement not false or misleading or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Shareholders Meeting which has become false
or misleading; provided, however, that no representation or warranty is made by
the Company with respect to information related to, or supplied by, the Parent,
its affiliates or advisors. If at any time prior to the Effective Time any event
relating to the Company or any of its affiliates should be discovered by the
Company which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement, the Company shall promptly inform
Parent.
SECTION 2.26. BOARD ACTION; VOTE REQUIRED. (a) The Board of Directors
of the Company has unanimously determined that the transactions contemplated by
this Agreement are in the best interests of the Company and its shareholders and
has resolved to recommend to such shareholders that they vote in favor thereof.
(b) The provisions of Section 48-35-205 of the TBCA will not
apply to this Agreement or any of the transactions contemplated hereby or
thereby. No other "fair price," "moratorium," "control share acquisition" or
other form of antitakeover statute or regulation (each a "TAKEOVER STATUTE") as
in effect on the date hereof or any anti-takeover provision in the Company's
Charter or Bylaws is applicable to the Company, the shares of Company Common
Stock, the Merger or the other transactions contemplated by this Agreement.
(c) The Company has been advised by each of its directors and
executive officers that each such person intends to vote their respective shares
of Company Common Stock in favor of the approval and adoption of this Agreement
and the Merger.
(d) The holders of shares of Company Common Stock do not have
any dissenters or appraisal rights with respect to this Agreement or the Merger
pursuant to Section 48-23-102 of the TBCA.
SECTION 2.27. YEAR 2000 COMPLIANT. The Company and each of its
Subsidiaries has taken preliminary steps to identify and analyze both internally
developed and acquired software which is material to its operations and utilizes
date embedded codes that may experience operations problems when the Year 2000
is reached and, where problems have arisen, has made, or have coordinated with
customers, suppliers, financial institutions and others with which it has
business relationships that are material to the Company's business to make, all
necessary modifications to the identified software to make such software Year
2000 compliant. Except as disclosed in the Company SEC Reports, the Company and
its Subsidiaries have not incurred, and do not expect to incur, significant
operating
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<PAGE> 27
expenses to be Year 2000 compliant, and business operations have not been
disrupted and, to the Company's knowledge, its customers have not experienced
any material interruption of service as a result of making such software Year
2000 compliant. "YEAR 2000 COMPLIANT" means, with respect to the Company's and
each Subsidiaries' information technology, the information technology is
designed to be used prior to, during and after the calendar Year 2000 A.D., and
the information technology used during each such time period will accurately
receive, provide and process date/time data (including, without limitation,
calculating, comparing and sequencing) from, into and between the 20th and 21st
centuries, including the years 1999 and 2000, and leap-year calculations and
will not materially malfunction, cease to function, or provide invalid or
incorrect results as a result of date/time data, to the extent that other
information technology, used in combination with the information technology
being acquired, properly exchanges date/time data with it. "INFORMATION
TECHNOLOGY," means computer software, computer firmware, computer hardware
(whether general or specific purpose), and other similar or related items of
automated, computerized, or software system(s) that are used or relied on by the
Company or the Subsidiary in the conduct of its business.
SECTION 2.28. AFFILIATES. Except for the persons listed on the COMPANY
SCHEDULE there are no persons who, to the knowledge of the Company, may be
deemed to be affiliates of the Company under Rule 145 under the Securities Act.
Concurrently with the execution and delivery of this Agreement, the Company has
delivered to Parent an executed letter agreement, substantially in the form of
Exhibit A hereto, from each of such persons.
SECTION 2.29. OPINION OF FINANCIAL ADVISORS. The Company has received
the opinions of Goldman Sachs and Robinson Humphrey (the "COMPANY FINANCIAL
ADVISORS"), each as of the date hereof, to the effect that, as of such date, the
Merger Consideration is fair from a financial point of view to the holders of
Company Common Stock and a copy of each such opinion has been made available to
Parent.
SECTION 2.30. BROKERS AND FINDERS. The COMPANY SCHEDULE lists all those
financial advisors, including the Company Financial Advisors, employed or
retained by the Company and the amounts that are due such persons in connection
with this Agreement and the transactions contemplated hereby. Neither the
Company nor any Subsidiary nor any of their respective officers, directors or
employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated herein, except that the Company has employed those financial
advisors listed on the COMPANY SCHEDULE pursuant to the terms of engagement
letters, a true and complete copy of each of which has previously been furnished
to Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each represents and warrants to the
Company as follows, except as set forth on a Disclosure Schedule delivered by
Parent concurrently with the execution and delivery of this Agreement (the
"PARENT SCHEDULE"), each of which exceptions shall specifically identify the
relevant subsection hereof to which it relates and shall be deemed to be
representations and warranties made hereunder:
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SECTION 3.1. ORGANIZATION AND POWERS. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and the
Merger Sub has all requisite corporate power and authority to carry on its
business as it has been and is now being conducted and to own, lease and operate
the properties and assets used in connection therewith.
SECTION 3.2. AUTHORITY; BINDING EFFECT. Each of Parent and Merger Sub
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. All necessary
action, corporate or otherwise, required to have been taken by or on behalf of
each of Parent and Merger Sub by applicable law, each of their respective
charter document(s) or otherwise to authorize (i) the approval, execution and
delivery on their behalf of this Agreement and (ii) their performance of their
obligations under this Agreement and the consummation of the transactions
contemplated hereby has been taken. This Agreement constitutes a valid and
binding agreement of each of Parent and Merger Sub, enforceable against each of
Parent and Merger Sub in accordance with its terms, except (A) as the same may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws of
general application relating to or affecting creditors' rights, including
without limitation, the effect of statutory or other laws regarding fraudulent
conveyances and preferential transfers, and (B) for the limitations imposed by
general principles of equity and commercial reasonableness.
SECTION 3.3. NO CONFLICT; APPROVALS. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, (i) violate or conflict with the Parent's or Merger Sub's charter or
bylaws, or (ii) constitute a breach or default (or an event that with notice or
lapse of time or both would become a breach or default) or give rise to any
lien, third party right of termination, cancellation, material modification or
acceleration, or loss of any benefit, under any contract to which the Parent or
any subsidiary is a party or by which it is bound, or (iii) subject to the
consents, approvals, orders, authorizations, filings, declarations and
registrations specified in Section 3.4 or in the PARENT SCHEDULE in response
thereto, conflict with or result in a violation of any permit, concession,
franchise or license or any law, rule or regulation applicable to the Parent or
any of its subsidiaries or any of their properties or assets, except, in the
case of clauses (ii) and (iii), for any such breaches, defaults, liens, third
party rights, cancellations, modifications, accelerations or losses of benefits,
conflicts or violations which would not have a Parent Material Adverse Effect
and do not impair the ability of the Parent to perform its obligations under
this Agreement or prevent or delay the consummation of any of the transactions
contemplated hereby. As used in this Agreement, "PARENT MATERIAL ADVERSE EFFECT"
shall mean any fact, condition, event, development or occurrence which,
individually or when taken together with all other such facts, conditions,
events, developments or occurrences, other than changes in the general economic
conditions and other conditions affecting financial institutions or the credit
market generally, would reasonably be expected to have a material adverse effect
on the financial condition, operating results, business or prospects of Parent
and its subsidiaries (hereinafter defined), taken as a whole.
SECTION 3.4. GOVERNMENTAL CONSENTS AND APPROVALS. Except as set forth
on the PARENT SCHEDULE, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will require any
consent, approval, order, authorization, or permit of, or filing with or
notification to, any Governmental Entity, except (a) the filing of the
Registration Statement with the SEC in accordance with the Securities Act and
the entry of an order by the SEC permitting such
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Registration Statement to become effective, and compliance with applicable state
securities laws, (b) the filing of a registration statement with the SEC in an
appropriate form with respect to the shares of Parent Common Stock subject to
options to acquire Parent Common Stock issued pursuant to Section 1.5 hereof,
(c) notification pursuant to, and expiration or termination of the waiting
period under the HSR Act, (d) the filing and recording of the Certificate of
Merger in accordance with the DGCL, and (e) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent it from performing its obligations under this
Agreement without having a Parent Material Adverse Effect.
SECTION 3.5. CAPITAL STOCK.
(a) Parent has authorized capital stock consisting of
100,000,000 shares of Parent Common Stock. As of December 31, 1998: (i)
55,840,059 shares of Parent Common Stock were issued and outstanding and (ii)
2,714,616 shares of Parent Common Stock were held as treasury shares. All of the
issued and outstanding shares of Parent have been duly authorized and are
validly issued and outstanding, fully paid and nonassessable, and were issued in
compliance with all applicable Federal and state securities laws. No shares of
capital stock issued by Parent are or were at the time of their issuance subject
to preemptive rights. The shares of Parent Common Stock to be delivered to the
Stockholders at the Effective Time, when delivered in accordance with the terms
of this Agreement, will be valid and legally issued shares of Parent capital
stock, fully paid and nonassessable and, subject to registration under the
Securities Act and approval for listing by The New York Stock Exchange (the
"NYSE"), all of such shares will be approved for quotation on the principal
stock exchange on which Parent Common Stock is traded.
(b) The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, of which 1,000 shares are outstanding. All of the
issued and outstanding shares of Merger Sub are owned beneficially, and of
record by Parent.
SECTION 3.6. REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information supplied by the Parent for inclusion in the Registration Statement
shall not contain, at the time the Registration Statement is declared effective
by the SEC, any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement not misleading.
The information supplied by the Parent for inclusion in the Proxy Statement
shall not, at the time the Proxy Statement is first mailed to shareholders, at
the time of the Stockholders Meeting, or at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
was made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made in the
Proxy Statement not false or misleading or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders Meeting which has become false
or misleading; provided, however, that no representation or warranty is made by
the Parent with respect to information related to, or supplied by, the Company,
its affiliates or advisors. If at any time prior to the Effective Time any event
relating to the Parent or any of its affiliates should be discovered by the
Parent which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement, the Parent shall promptly inform the
Company.
SECTION 3.7. SEC REPORTS. Parent has filed all required forms, reports
and documents with the SEC since January 1, 1995 (collectively, the "PARENT'S
SEC REPORTS"), including without limitation
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Parent's Annual Report on Form 10-K for the year ended December 31, 1997 and the
Parent's Quarterly Report on Form 10-Q for the quarter ending September 30,
1998. The Parent's SEC Reports have complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act. As of their
respective dates, none of Parent's SEC Reports, including, without limitation,
any financial statements or schedules included or incorporated by reference
therein, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 3.8. FINANCIAL STATEMENTS. The Parent has delivered to the
Company true and complete copies of (a) consolidated balance sheets of the
Parent and its subsidiaries at December 31, 1997 and 1996 and the related
consolidated statements of earnings, changes in stockholders' equity and
statements of cash flow for the years then ended, together with the notes
thereto, audited by Deloitte & Touche LLP (the "PARENT'S AUDITORS") and (b)
unaudited consolidated balance sheets of Parent and its subsidiaries at
September 30, 1998 and 1997 and related consolidated statements of income,
changes in shareholders' equity and statements of cash flows for the periods
ended September 30, 1998 and 1997, all of which have been prepared in accordance
with GAAP consistently applied throughout the periods involved, subject in the
case of interim financial statements to normal year-end adjustments and to the
absence of full footnotes. Such balance sheets, including the related notes,
fairly present the consolidated financial position, assets and liabilities
(whether accrued, absolute, contingent or otherwise) of the Parent and its
subsidiaries at the dates indicated and such consolidated statements of income,
changes in stockholders' equity and statements of cash flow fairly present the
consolidated results of operations, changes in stockholders' equity and cash
flow of the Parent and its subsidiaries for the periods indicated. The unaudited
consolidated financial statements as at and for the periods ended September 30,
1998 and 1997 contain all adjustments, which are solely of a normal recurring
nature, necessary to present fairly the financial position at September 30, 1998
and 1997 and the results of operations and change in shareholders' equity and
financial position for the periods then ended. The audited consolidated balance
sheet of Parent and its subsidiaries at December 31, 1997 described above is
referred to herein as the "PARENT 1997 BALANCE SHEET."
SECTION 3.9. ABSENCE OF CERTAIN CHANGES. Except as otherwise disclosed
on the PARENT SCHEDULE, since September 30, 1998, the Parent and its
subsidiaries have not been subject to any other events or conditions of any
character that would have a Parent Material Adverse Effect or impair the ability
of Parent to perform its obligations under this Agreement or prevent or delay
the consummation of any of the transactions contemplated hereby.
SECTION 3.10. ABSENCE OF LITIGATION; CLAIMS; ABSENCE OF UNDISCLOSED
LIABILITIES. There are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of Parent, threatened against Parent or any of its
subsidiaries, or any properties or rights of Parent or any of its subsidiaries,
before any Governmental Entity or arbitrator, which, if decided adversely to
Parent or such subsidiary, would have a Parent Material Adverse Effect or impair
the ability of Parent to perform its obligations under this Agreement or prevent
or delay the consummation of any of the transactions contemplated hereby, nor is
there any judgement, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Parent or any of its subsidiaries
having or which, insofar as reasonably can be foreseen, in the future would have
such effect. Neither Parent nor its Subsidiaries have any material indebtedness,
liability or obligation of any kind (whether known or unknown, accrued,
absolute, asserted or unasserted, contingent or otherwise) except (a) as and to
the extent reflected,
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reserved against or otherwise disclosed in the Parent 1997 Balance Sheet, or (b)
for liabilities and obligations incurred subsequent to December 31, 1997 in the
ordinary course of business and which do not have a Parent Material Adverse
Effect or impair the ability of the Parent to perform its obligations under this
Agreement or prevent or delay the consummation of any of the transactions
contemplated hereby.
SECTION 3.11. COMPLIANCE WITH LAW. Parent and each of its Subsidiaries
is in compliance with all applicable Laws, except where such violations would
not have a Parent Material Adverse Effect.
SECTION 3.12. BROKERS AND FINDERS. Neither the Parent nor any of its
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated herein, except that the Parent has
employed Credit Suisse First Boston as its financial advisor.
SECTION 3.13. ADEQUACY OF DISCLOSURE. The Parent has made available to
Company copies of all documents listed or referred to in the PARENT SCHEDULE
hereto or referred to herein. Such copies are, and all documents and materials
delivered or made available in connection with Company's investigation of the
Parent in connection with the transactions contemplated hereby are, true and
complete and include all amendments, supplements and modifications thereto or
waivers currently in effect thereunder. No representation or warranty by the
Parent in this Agreement nor any certificate, schedule, written statement,
document or instrument furnished or to be furnished to Company pursuant hereto,
or in connection with the negotiation, execution or performance of this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make any statement herein or therein not misleading.
ARTICLE IV
OTHER AGREEMENTS
SECTION 4.1. CONDUCT OF THE COMPANY'S BUSINESS. The Company covenants
and agrees that, between the date of this Agreement and the Effective Time,
unless Parent shall otherwise consent in writing, and except as otherwise
expressly contemplated hereby or on the COMPANY SCHEDULE, the business of the
Company and the Subsidiaries shall be conducted only in, and such entities shall
not take any action except in, the Ordinary Course; the Company and its
Subsidiaries will use their commercially reasonable efforts to preserve
substantially intact the business organization of the Company and its
Subsidiaries, to keep available the services of those of its present officers,
employees and consultants and to preserve the present relationships of the
Company and its Subsidiaries with customers, suppliers and other persons with
which the Company and the Subsidiaries have significant business relations; and
the Company and its Subsidiaries will advise each of its respective officers of
their fiduciary duty to the Company prior to the Effective Time to operate the
business in due course, maintain the confidentiality of information arising from
or generated by the business of the Company and to avoid taking any action which
would have a Company Material Adverse Effect. By way of amplification and not
limitation, except as otherwise expressly contemplated by this Agreement or the
COMPANY SCHEDULE, the Company agrees on behalf of itself and its Subsidiaries
that, without the prior written consent of Parent, they will, between the date
of this Agreement and the Effective Time:
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(a) not directly or indirectly do any of the following: (i)
amend or propose to amend its Charter or Bylaws; (ii) split, combine or
reclassify any outstanding shares of its capital stock, or declare, set aside or
pay any dividend payable in cash, stock, property or otherwise with respect to
such shares; (iii) redeem, purchase, acquire or offer to acquire any shares of
its capital stock; (iv) issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of, any additional shares of, or securities convertible
or exchangeable for, or any options, warrants or rights of any kind to acquire
any shares of, its capital stock of any class or other property or assets
whether pursuant to any rights agreement, stock option plans described in the
COMPANY SCHEDULE or otherwise, PROVIDED, HOWEVER, that (a) the Company may issue
options in the Ordinary Course, which options shall have an exercise price per
share of not less than (i) the Starting Price (hereinafter defined) divided by
(ii) the Exchange Ratio, the product being rounded, if necessary, up or down, to
the nearest cent, and shall be granted in accordance with the amounts and
limitations set forth in the COMPANY SCHEDULE and (b) the Company may issue
shares of Company Common Stock pursuant to currently outstanding options
referred to in the COMPANY SCHEDULE in response to Section 2.3 above; (v)
accelerate, amend or change the period of exerciseability of options or
restricted stock granted under any of the Company Stock Plans or authorize cash
payments in exchange for any options granted under any of such plans except as
required by the terms of such plans or any related agreements in effect as of
the date of this Agreement, or (vi) enter into any contract, agreement,
commitment or arrangement with respect to any of the matters set forth in this
paragraph (a);
(b) not, directly or indirectly (i) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation, partnership,
limited liability company or other business organization or division thereof or
enter into or acquire any interest in any Joint Venture; (ii) issue, sell,
pledge, dispose of or encumber any assets (including without limitation
licenses, Authorizations or rights) of the Company or the Subsidiaries or enter
into any securitization transactions, excluding transactions between the Company
and its Subsidiaries and any transactions required under the Company's current
credit facilities; (iii) incur any indebtedness for borrowed money or issue any
debt securities; provided, however, the Company may incur indebtedness under the
Company's current credit facilities up to an amount of such facilities on the
date of this Agreement and any transactions made pursuant to the Company's
current credit facilities, (iv) make any commitments or agreements for capital
expenditures or capital additions or betterments exceeding in the aggregate
$100,000, except such as may be involved in ordinary repair, maintenance or
replacement of its assets; (v) enter into or modify any material contract, lease
or agreement except in the Ordinary Course; (vi) terminate, modify, assign,
waive, release or relinquish any material contract rights, including those
arising under any Financing Documents except in the Ordinary Course or under any
insurance policies, or amend any material rights or claims not in the Ordinary
Course or except as expressly provided herein; (vii) settle or consent to the
settlement of any litigation if such settlement, together with any related
litigation or claims, would cost the Company or any Subsidiary, directly or
indirectly (including pursuant to any indemnification obligations) more than
$10,000,000, provided, however, that the Company may settle any litigation
arising out of its relationships with the Portfolio Companies in the Ordinary
Course; (viii) other than in prior consultation with the Parent, restructure or
materially change the Company's or any Subsidiary's investment security
portfolio through purchases, sales or otherwise, or the manner in which such
portfolio is classified or reported, except in the Ordinary Course; (ix)
purchase any securities or create any loans in the Tandem Capital division, (x)
purchase any securities or create any loans for an amount exceeding $65,000,000
per quarter in the aggregate or $5,000,000 for any single borrower, or (xi)
enter into any contract, agreement, commitment or arrangement with respect to
any of the matters set forth in this paragraph (b);
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(c) not, directly or indirectly (i) initiate any litigation or
arbitration proceeding, except in the Ordinary Course, (ii) revalue any of its
assets, including writing down the value of inventory or writing off notes or
accounts receivable, other than in the Ordinary Course, or as required by GAAP
or any applicable laws, (iii) make any material change to their respective
accounting methods, principles or practices, or (iv) settle or compromise any
Tax liability, or prepare or file any Tax Return inconsistent with past practice
or, on any such Tax Return, take any position, make any election, or adopt any
method that is inconsistent with positions taken, elections made or methods used
in preparing or filing similar Tax Returns in prior periods;
(d) not, directly or indirectly, (i) grant any increase in the
salary or other compensation of its employees except in the Ordinary Course or
grant any bonus to any employee or enter into any employment agreement or make
any loan to or enter into any material transaction of any other nature with any
officer or employee of the Company, except as disclosed on the COMPANY SCHEDULE
or on the letter to Parent dated January 4, 1999; (ii) take any action to
institute any new severance or termination pay practices with respect to any
directors, officers or employees of the Company or to increase the benefits
payable under its severance or termination pay practices; (iii) adopt or amend,
in any respect, except as may be required by applicable law or regulation, any
bonus, profit sharing, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment or other employee benefit plan,
agreement, trust, fund, plan or arrangement for the benefit or welfare of any
directors, officers or employees;
(e) use reasonable best efforts to cause the persons listed on
the COMPANY SCHEDULE to enter into employment/consulting agreements prior to
Closing in the form substantially set forth in Exhibit B hereto, containing the
terms set forth opposite such person's name on the COMPANY SCHEDULE;
(f) not, directly or indirectly, take or omit to take any
action that is reasonably likely to result in a breach of any contract,
commitment or obligation if the result would, individually or in the aggregate,
have a Company Material Adverse Effect;
(g) not, directly or indirectly, take any action which would
cause its representations and warranties contained herein if made on and as of
the date of such action or agreement, untrue or incorrect in any material
respect;
(h) not, directly or indirectly, take (and will use reasonable
efforts to prevent any affiliate of the Company from taking) or agree in writing
or otherwise to take any action which could reasonably be expected to adversely
affect or delay the ability of any of the parties to obtain any approval of any
governmental or regulatory body required to consummate the transactions
contemplated hereby;
(i) not, directly or indirectly, take (and will use reasonable
efforts to prevent any affiliate of the Company from taking) or agree in writing
or otherwise to take, (i) any of the actions described in this Section 4.l, or
(ii) any action which could prevent it from performing, or cause it not to
perform, its obligations under this Agreement, or (iii) any action that would
cause the Merger not to be treated as a reorganization within the meaning of
Section 368(a) of the Code;
(j) the Company shall make sufficient distributions in order
to: (i) qualify as a RIC for the year ended December 31, 1998; and (ii) avoid
imposition of federal excise tax for the years ended
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October 31, 1998 (with respect to capital gain net income) and December 31, 1998
(with respect to ordinary income);
(k) from January 1, 1999 until the Closing, except to the
extent necessary to maintain its status as an RIC for the year ended December
31, 1998 and avoid federal excise tax for any period ending on or before
December 31, 1998, the Company shall operate and conduct its affairs as if it
were a C corporation and not an RIC for federal income tax purposes; and
(l) use reasonable best efforts to cause the Company's
accountants to perform such activities in connection with the quarterly
preparation and review of the Company's interim financial statements as they
have historically performed.
SECTION 4.2. PARENT'S UNDERTAKINGS. Parent will not, directly or
indirectly, take (and will use reasonable efforts to prevent any affiliate of
the Company from taking) any action that would cause the Merger not to be
treated as a reorganization within the meaning of Section 368(a) of the Code or
any action which would cause any of the Parent's representations and warranties
in this Agreement to be untrue or incorrect in any material respect, or prevent
it from performing or cause it not to perform, its obligation under this
Agreement. Parent shall as promptly as practicable following the date hereof
apply for approval for listing of Parent Common Stock to be issued pursuant to
the Merger on the NYSE upon official notice of issuance. Parent shall establish
a Retention Plan substantially in accordance with the terms and provisions set
forth in the PARENT SCHEDULE.
SECTION 4.3. ACCESS TO INFORMATION. Between the date of this Agreement
and the Closing Date, the Company will (a) give Parent and its authorized
representatives access, during regular business hours upon reasonable notice, to
all offices and other facilities and to all of its books and records, (b) permit
Parent to make such reasonable inspections as it may require, and (c) cause its
officers and those of its Subsidiaries to furnish Parent with such financial and
operating data and other information with respect to the business and properties
of the Company, as Parent may from time to time reasonably request and as the
Company may have on hand or be able to produce without undue hardship,
including, without limitation, such of the foregoing as parent deems necessary
for it to complete, prior to Closing, a due diligence review and valuation of
all of the Company's Financing Transactions. Between the date of this Agreement
and the Closing Date, Parent will cause its officers and those of its
Subsidiaries to furnish the Company with all financial and operating data and
other information with respect to the business and properties of Parent, as
Company may from time to time reasonably request and as Parent may have on hand
or be able to produce without undue hardship, provided, that the requested
information is of a type customarily provided to the Company's underwriters in
connection with a public offering of securities. All such access and information
obtained by Parent or Company and their respective authorized representatives
shall be subject to the terms and conditions of the letter agreement between the
Company and Parent dated May 20, 1998 (the "CONFIDENTIALITY AGREEMENT").
SECTION 4.4. STOCKHOLDER VOTE; PROXY STATEMENT.
(a) As promptly as practicable after the date hereof, the
Company shall take all action necessary in accordance with Rules 14a-1 ET. SEQ.
of the Exchange Act, the 1940 Act, the rules of the NYSE, the DGCL, the TBCA,
and its Charter and Bylaws to call, give notice of, convene and hold the
Shareholders Meeting as promptly as practicable (unless such date shall be
delayed due to circumstances reasonably beyond the control of the parties) to
consider and vote upon the approval and
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adoption of this Agreement and the transactions contemplated hereby, including
the revocation of the Company's status as a business development company under
the 1940 Act, and for such other purposes as may be necessary or desirable.
Subject to Section 4.4(b), the Board of Directors of the Company shall use its
commercially reasonable efforts to solicit and secure from its shareholders such
approval and adoption of this Agreement and the transactions contemplated
hereby, which efforts may include, without limitation, soliciting shareholder
proxies therefor and to advise the other party upon its request, from time to
time, as to the status of the shareholder vote then tabulated.
(b) As promptly as practicable after the date hereof, the
Company and Parent shall jointly prepare and file with the SEC preliminary proxy
materials of the Company under the Exchange Act with respect to the Merger, and
a preliminary prospectus of Parent with respect to Parent Common Stock to be
issued in the Merger and will thereafter use their respective best efforts to
respond to any comments of the SEC with respect thereto and to cause the
Registration Statement to become effective, and the Proxy Statement and proxy to
be mailed to the Company's shareholders, as promptly as practicable. The Proxy
Statement shall include the unqualified recommendation of the Company's Board of
Directors that the Company's shareholders vote in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby, provided
that the Board of Directors of the Company may fail to make such recommendation
or may withdraw, modify or amend such recommendation in a manner adverse to the
Parent, if (but only if) the Board of Directors, after consultation with and
based upon the advice of independent legal counsel, determines that the making
of such recommendation or the failure to so withdraw, modify or amend such
recommendation would constitute a breach of the fiduciary duties of such
director to the shareholders of the Company.
(c) As soon as practicable after the date hereof, the Company
and Parent shall prepare and file any other filings required to be filed by each
under the Exchange Act or any other federal or state securities laws relating to
the Merger and the transactions contemplated hereby (collectively "OTHER
FILINGS") and will use their best efforts to respond to any comments of the SEC
or any other appropriate government official with respect thereto.
(d) The Company and Parent shall cooperate with each other and
provide to each other all information necessary in order to prepare the
Registration Statement, the Proxy Statement and the Other Filings (collectively,
the "SEC TRANSACTION FILINGS") and shall provide promptly to the other party any
information that such party obtains that could necessitate amending any such
document.
(e) The Company and Parent will notify the other party
promptly of the receipt of any comments from the SEC or its staff or any other
appropriate government official and of any requests by the SEC or its staff or
any other appropriate government official for amendments or supplements to any
of the SEC Transaction Filings or for additional information and will supply the
other party with copies of all correspondence between the Company or any of its
representatives or Parent and any of its representatives, as the case may be, on
the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. If at any time prior to the
Effective Time, any event shall occur that should be set forth in an amendment
of, or a supplement to, any of the SEC Transaction Filings, the Company and
Parent agree promptly to prepare and file such amendment or supplement and to
distribute such amendment or supplement as required by applicable law,
including, in the case of an amendment or supplement to the Proxy Statement,
mailing such supplement or amendment to the Company's shareholders. Parent shall
not be required to maintain the effectiveness of the
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Registration Statement for the purpose of resale by shareholders of the Company
who may be affiliates of the Company or Parent pursuant to Rule 145 under the
Securities Act.
(f) The information provided and to be provided by the Company
and Parent for use in SEC Transaction Filings shall at all times prior to the
Effective Time be true and correct in all material respects and shall not omit
to state any material fact required to be stated therein or necessary in order
to make such information not false or misleading, and the Company and Parent
each agree to promptly correct any such information provided by it for use in
the SEC Transaction Filings that shall have become false or misleading. The SEC
Transaction Filings, when filed with the SEC or any appropriate government
official, shall comply as to form in all material respects with all applicable
requirements of law.
(g) The Company and the Parent shall cooperate with each
other, provide to each other all information necessary for the preparation of
any presentations to any rating agency and participate, to the extent requested
in any reviews or discussions with any rating agency.
SECTION 4.5. COMMERCIALLY REASONABLE EFFORTS. Except as otherwise
provided herein, each of the parties hereto agrees to use its commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws, statutes, ordinances, codes, rules and regulations to
consummate and make effective the transactions contemplated by this Agreement in
the most expeditious manner practicable, including but not limited to the
satisfaction of all conditions to the Merger, and to consummate the Merger as
promptly as practicable, but in no event later than July 15, 1999.
SECTION 4.6. PUBLIC ANNOUNCEMENTS. The Company and Parent shall consult
with each other before issuing any press release or otherwise making any public
statements with any news media with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any such press release or
make any such public statement without the prior consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that a
party may, without the prior consent of the other party, issue such press
release or make such public statement as may be required by law or the
applicable rules of any stock exchange, including the NYSE, if it has used its
commercially reasonable efforts to consult with the other party and to obtain
such party's consent but has been unable to do so in a timely manner; PROVIDED,
FURTHER, that nothing contained herein shall prevent any party from promptly
making all filings with Governmental Entities and all disclosure as may, in its
good faith judgment, be required or advisable in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby (in which case the disclosing party shall advise the other
parties and provide them with a copy of the proposed disclosure or filing prior
to making the disclosure or filing). In this regard, the parties shall make a
joint public announcement of the Merger and the transactions contemplated
thereby immediately upon the signing of this Agreement.
SECTION 4.7. NOTIFICATION. Each party hereto shall, in the event of, or
promptly after obtaining knowledge of the occurrence or threatened occurrence
of, any fact or circumstance that would cause or constitute a breach of any of
its representations and warranties set forth herein, give notice thereof to the
other parties and shall use its best efforts to prevent or promptly to remedy
such breach, provided, however, that none of such notices shall be deemed to
modify, amend or supplement the representations and warranties of the such party
or the disclosure schedules of such party for the purposes of Article V hereof,
unless the other party shall have consented thereto in writing.
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SECTION 4.8. SUBSEQUENT FINANCIAL STATEMENTS. (a) Prior to the
Effective Time, the Company will consult with Parent prior to (i) making
publicly available its financial results for any period and (ii) the filing of,
and will timely file with the SEC, each Annual Report on Form 10-K, Quarterly
Report on Form 10-Q and Current Report on Form 8-K required to be filed by the
Company under the Exchange Act and the rules and regulations promulgated
thereunder and will promptly deliver to the Parent copies of each such report
filed with the SEC. All such reports will comply in all material respects with
all the applicable requirements of the Securities Act and the Exchange Act. All
contracts which are required to be filed as exhibits to, or incorporated by
reference in, the Company's 1998 Form 10-K will be filed or incorporated by
reference. As of their respective dates, none of such reports shall contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The respective audited
financial statements and unaudited interim financial statements of the Company,
included in such reports will fairly present the financial position of the
Company and its subsidiary as of the dates thereof and the results of its
operations and cash flows for the periods then ended in accordance with
generally accepted accounting principles applied on a consistent basis and,
subject, in the case of unaudited interim financial statements, to normal
year-end adjustments and any other adjustments described therein.
(b) The Parent will timely file with the SEC, each Annual Report on
Form 10-K, Quarterly Report on Form 10-Q and Current Report on Form 8-K required
to be filed by the Parent under the Exchange Act and the rules and regulations
promulgated thereunder and will promptly deliver to the Company copies of each
such report filed with the SEC. All such reports will comply in all material
respects with all the applicable requirements of the Securities Act and the
Exchange Act. As of their respective dates, none of such reports shall contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
respective audited financial statements and unaudited interim financial
statements of the Parent, included in such reports will fairly present the
financial position of the Parent as of the dates thereof and the results of its
operations and cash flows for the periods then ended in accordance with
generally accepted accounting principles applied on a consistent basis and,
subject, in the case of unaudited interim financial statements, to normal
year-end adjustments and any other adjustments described therein.
SECTION 4.9. CONTROL OF OPERATIONS. Nothing contained in this Agreement
shall give Parent, directly or indirectly, the right to control or direct the
Company's operations prior to the Effective Time. Prior to the Effective Time,
each of the Company and Parent shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
SECTION 4.10. REGULATORY AND OTHER AUTHORIZATIONS. (a) Each party
hereto agrees to use commercially reasonable efforts to comply with all legal
requirements which may be imposed on such party with respect to the Merger and
to obtain all Authorizations, consents, orders and approvals of Governmental
Entities and non-governmental third parties that may be or become necessary for
(i) its respective execution and delivery of, and the performance of its
respective obligations pursuant to, this Agreement and (ii) the ownership of the
Surviving Corporation by Parent, and each party will cooperate fully with the
other parties in promptly seeking to obtain all such authorizations, consents,
orders and approvals. Without limitation, the Company and Parent shall each make
an appropriate filing of a Notification and Report Form pursuant to the HSR Act
no later than 20 days after the date hereof and
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shall promptly respond to any request for additional information with respect
thereto. Each such filing shall request early termination of the waiting period
imposed by the HSR Act.
(b) Notwithstanding anything else to the contrary contained in
this Agreement, Parent shall have no obligation to oppose, challenge or appeal
any suit action or proceeding by any Governmental Entity before any court or
governmental authority, agency or tribunal, domestic or foreign or any order or
ruling by any such body (i) seeking to restrain or prohibit or restraining or
prohibiting the consummation of the Merger or any of the other transactions
contemplated by this Agreement, (ii) seeking to prohibit or limit or prohibiting
or limiting the ownership, operation or control by the Company, Parent or any of
their respective Subsidiaries of any portion of the business or assets of the
Company, Parent or any of their respective Subsidiaries or seeking to compel or
compelling the Company, Parent or any of their respective Subsidiaries to
dispose of, grant rights in respect of, or hold separate any portion of the
business or assets of the Company, Parent or any of their respective
subsidiaries. Neither the Company nor any of its Subsidiaries shall take or
agree to take any of the actions described in the immediately preceding sentence
without the prior written consent of Parent.
SECTION 4.11. TAX-FREE REORGANIZATION. Each of Parent and the Company
will use its best efforts to cause the Merger to qualify as a "reorganization"
within the meaning of Section 368(a) of the Code, and to enable its respective
counsel to render the opinions contemplated by Sections 5.2(c) and 5.3(h). Each
party shall make and shall use its best efforts to cause those of its respective
officers and shareholders that counsel to the parties shall reasonably request
to make, such representations and certifications as counsel to the parties shall
reasonably request to enable them to render such opinion, including, without
limitation, the representations of Parent contained in a certificate of Parent
(the "PARENT TAX CERTIFICATE") in a form satisfactory to Morgan, Lewis & Bockius
LLP and representations of the Company contained in a certificate of the Company
(the "COMPANY TAX CERTIFICATE") in a form satisfactory to Morgan, Lewis &
Bockius LLP.
SECTION 4.12. TAKEOVER STATUTE. If any Takeover Statute shall become
applicable to the transactions contemplated hereby each of the Company and
Parent and the members of their respective Boards of Directors shall grant such
approvals and take such actions as are reasonably necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated hereby.
SECTION 4.13. INDEMNIFICATION OF DIRECTORS AND OFFICERS. For a period
of four years after the Effective Time (or, if any claim or claims are asserted
or made within such four year period, until the final disposition of such claim,
if longer), Parent shall, or shall cause the Company, as the Surviving
Corporation, to (a) maintain in effect the current or similar provisions
regarding indemnification of officers and directors contained in the Charter and
Bylaws of the Company, and (b) indemnify the directors and officers of the
Company to the maximum extent to which the Company is permitted to indemnify
such officers and directors under its charter and bylaws and applicable law.
Parent hereby agrees, as of the Effective Time, to guarantee the Company's
indemnification obligations set forth in the preceding sentence. For the period
of time of such indemnification obligations, Parent shall cause the Company to
maintain in effect the director and officer insurance policies in effect on the
date hereof, or in the event that Parent shall consent to increase the amount of
coverage thereunder, such policies with such increased coverage in effect as of
Effective Time; provided, however, that Parent may substitute therefor policies
of at least the same coverage and amounts containing terms and conditions which
are
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not less advantageous than such policy and provided, further, that Parent shall
not be obligated to provide such coverage to the extent that the cost of such
coverage exceeds 150% of the cost of the current annual premium of such coverage
immediately prior to the Effective Time (which the Company represents is no more
than $119,000).
SECTION 4.14. NO SOLICITATION. (a) Without the prior written consent of
Parent, from and after the date hereof, the Company will not, and will not
authorize or permit any of the Subsidiaries or their officers, directors,
employees, financial advisors, agents and other representatives
("REPRESENTATIVES") to, directly or indirectly, (i) solicit, initiate or
encourage (including by way of furnishing non-public information) or take any
other action to facilitate knowingly any inquiries or the making of any proposal
which constitutes or may reasonably be expected to lead to an Acquisition
Proposal (as defined herein) from any person or (ii) engage in any discussion or
negotiations relating to any Acquisition Proposal; PROVIDED, HOWEVER, that
notwithstanding any other provision hereof, the Company may, (A) at any time
prior to the time the Company's shareholders shall have voted to approve this
Agreement engage in discussions or negotiations with a third party (and may
furnish such third party information concerning the Company and its business,
properties and assets to such party) who (without any solicitation, initiation,
encouragement, discussion or negotiation, directly or indirectly, by or with the
Company or the Representatives after the date hereof) makes an unsolicited bona
fide written Acquisition Proposal if, and only to the extent that, (1) the third
party has first made an Acquisition Proposal that is financially superior, with
respect to the holders of the Company Common Stock generally, to the
transactions contemplated by this Agreement and has demonstrated that the funds
necessary for the Acquisition Proposal are reasonably likely to be available (as
determined in good faith in each case by the Company's Board of Directors after
consultation with its financial advisors) (such an Acquisition Proposal, a
"SUPERIOR PROPOSAL"), and the Company's Board of Directors shall conclude in
good faith, after considering applicable provisions of state law on the basis of
advice of outside counsel, that such action is necessary for the Board of
Directors to avoid breaching its fiduciary duties to the shareholders of the
Company under applicable law, and (2) prior to furnishing such information to or
entering into discussions or negotiations with such person or entity, the
Company receives from such person or entity an executed confidentiality
agreement in substantially the same form as the Confidentiality Agreement, and
(3) the Company shall have fully complied with this Section 4.14; and/or (B)
comply with Rule 14e- 2 promulgated under the Exchange Act with regard to a
tender or exchange offer. As used herein, "ACQUISITION PROPOSAL" shall mean a
proposal or offer for a tender or exchange offer, merger, consolidation or other
business combination involving the Company or any Subsidiary of the Company or
any proposal to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of, the Company or any Subsidiary thereof.
(b) The Company shall immediately cease and terminate any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by the Company or its
Representatives with respect to the foregoing. The Company shall notify Parent
orally and in writing of any such inquiries, offers or proposals (including,
without limitation, the terms and conditions of any such proposal and the
identity of the person making it), within 24 hours of the receipt thereof, shall
keep Parent informed of the status and details of any such inquiry, offer or
proposal, and shall give Parent at least three business days prior written
notice of (i) any meeting of the Board of Directors of the Company to take any
action with respect to an Acquisition Proposal or to withdrawing or modifying,
in a manner adverse to Parent, its recommendation to the Company's shareholders
in favor of approval of the Merger, and (ii) any confidentiality or similar
agreement to be entered into with any person making such inquiry, offer or
proposal.
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(c) During the period from the date of this Agreement through
the Effective Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any of
its Subsidiaries is a party. During such period, the Company shall enforce, to
the fullest extent permitted under applicable law, the provisions of any such
agreement, including, but not limited to, by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court of the United States of America or of any state
having jurisdiction.
SECTION 4.15. CERTAIN MODIFICATIONS; FINANCIAL AND ACCOUNTING
ADJUSTMENTS. Prior to the Effective Time, the Company and Parent shall consult
with respect to business practices and policies and shall make such
modifications or changes to the Company's practices or policies as may be
mutually agreed upon and approved by the parties. The Company shall make (a) the
modifications and financial adjustments set forth in the COMPANY SCHEDULE, being
those modifications and adjustments necessary, as of December 31, 1998, to
prepare the financial statements of the Company as of such date in accordance
with GAAP and (b) provided that it has been advised in writing that all
conditions to Parent's obligations hereunder have been satisfied or waived,
those additional modifications and financial adjustments required to be made
prior to Closing in order to prepare the financial statements of the Company, as
of the quarter end immediately preceding the Closing Date, in accordance with
GAAP, which additional modifications and financial adjustments shall be made
after the Company shall have consulted with the Parent regarding same,
including, without limitation, Parent's due diligence review and valuation of
all the Company's Financing Transactions performed by Parent prior to Closing
pursuant to Section 4.3. The Company and Parent shall also consult with respect
to the character, amount and timing of other restructuring charges and financial
adjustments to be taken by the Company as mutually agreed upon and approved by
the parties, and shall take such charges and make such adjustments in accordance
with generally accepted accounting principles. The Company's representations,
warranties and covenants contained in this Agreement shall not be deemed to be
untrue or breached in any respect for any purpose as a consequence of any
modifications or changes to such policies or practices or any financial
adjustments which may be undertaken in accordance with this Section 4.15.
SECTION 4.16. CONTINUING EMPLOYEES. (a) From and after the Closing
Date, Parent shall, or shall cause the Surviving Corporation to, provide
benefits to continuing employees of the Company and its Subsidiaries
("CONTINUING EMPLOYEES") that, in the aggregate, are no less favorable than the
benefits such Continuing Employees were entitled to immediately prior to the
Effective Time. Notwithstanding the foregoing, nothing in this Section 4.16
shall require (i) the continuation of any benefit plan of any variety or prevent
the amendment or termination thereof (subject to the provision, in the
aggregate, of the benefits as provided in the preceding sentence) or (ii) Parent
or the Surviving Corporation to continue or maintain the employment of any
Continuing Employee.
(b) With respect to any benefits plans of Parent or its subsidiaries in
which the Continuing Employees participate after the Closing Date, Parent shall,
or shall cause the Surviving Corporation to: (i) waive any limitations to
pre-existing conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Continuing Employees
under any welfare benefit plan, as defined in Section 3(1) of ERISA, in which
such employees may be eligible to participate after the Closing Date (provided,
however, that no such waiver shall apply to a pre-existing condition of any
Continuing Employee who was, as of the Closing Date, excluded from participation
in a Company benefit plan by nature of such pre-existing condition), (ii)
provide each Continuing Employee with credit
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for any co-payments and deductibles paid prior to the Closing Date in satisfying
any applicable deductible or out-of-pocket requirements under any welfare
benefit plan in which such employees may be eligible to participate after the
Closing Date, and (iii) recognize all service of the Continuing Employees with
the Company for all welfare benefit purposes, except (i) for those benefit plans
of Parent for which the Company Employees were ineligible to participate or for
which there are no comparable plans at the Company and (ii) to the extent such
treatment would result in duplicative accrual on or after the Closing Date of
benefits for the same period of service.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND PARENT
AND MERGER SUB. The respective obligations of the Company, on the one hand, and
Parent and Merger Sub, on the other hand, to consummate the transactions
contemplated hereby are subject to the requirements that:
(a) SHAREHOLDER APPROVAL. This Agreement shall have been
approved and adopted by the requisite vote of the shareholders of the Company in
accordance with the TBCA and the Charter of the Company.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition shall have been issued and be in effect (i) restraining or
prohibiting the consummation of the Merger or any of the transactions
contemplated hereby or (ii) prohibiting or limiting the ownership, operation or
control by the Company, Parent or any of their respective subsidiaries of any
portion of the business or assets of the Company, Parent or any of their
respective subsidiaries, or compelling the Company, parent or any of their
respective Subsidiaries to dispose of, grant rights in respect of, or hold
separate any portion of the business or assets of the Company, parent or any of
their respective subsidiaries (except as contemplated by Section 4.10(b)
hereof); nor shall any action have been taken by a Governmental Entity or any
federal, state or foreign statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Entity or arbitrator, which is in effect and has the effect of
making the Merger illegal or otherwise prohibiting the consummation of the
Merger.
(c) NO LITIGATION. There shall not be any litigation or other
proceeding pending (exclusive of the litigation referred to in Section 2.18(b)
hereof) or threatened against the Company or any of its Subsidiaries which, in
the reasonable opinion of Parent, would restrain or invalidate the transactions
contemplated by this Agreement, would impair the ability of either party to
perform its obligations under this Agreement, prevent or delay the consummation
of any transaction contemplated thereby or would prevent Parent from realizing,
in its reasonable opinion, in all material respects the economic benefits of the
transactions contemplated by this Agreement that Parent currently anticipates
receiving therefrom.
(d) HSR ACT. Any waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated.
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(e) REGISTRATION STATEMENT. The Registration Statement shall
have been declared effective under the Securities Act and no stop orders with
respect thereto shall have been issued, and Parent shall have received all
requisite authorizations under all applicable state securities or blue sky laws
necessary to consummate the transaction.
(f) NYSE LISTING. Approval for listing by the NYSE upon
official notice of issuance of Parent Common Stock to be issued in the Merger
shall have been received by Parent.
SECTION 5.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the transactions contemplated hereby
are subject to the further requirements that:
(a) REPRESENTATIONS AND WARRANTIES. The representations of
Parent set forth in the Agreement shall be true and correct (without regard to
any materiality qualifier contained therein) in all material respects as of the
date of this Agreement and (except to the extent such representations speak of
an earlier date) as of the Closing Date as though made on and as of the Closing
Date. The Company shall have received a certificate signed on behalf of Parent
by the Chairman, President and Chief Executive Officer, Executive Vice
President- Corporate Development and the Chief Financial Officer or the Vice
President - Controller, Financial Accounting of the Parent to the foregoing
effect.
(b) PERFORMANCE OF OBLIGATIONS. Each of the obligations of
Parent and the Merger Sub to be performed on or before the Closing Date pursuant
to the terms of this Agreement shall have been duly performed in all material
respects on or before the Closing Date and at the Closing the Company shall have
received a certificate signed on behalf of Parent by the Executive Vice
President- Corporate Development and the Chief Financial Officer or the Vice
President - Controller, Financial Accounting of the Parent to the foregoing
effect.
(c) TAX OPINION. Bass, Berry & Sims PLC shall have delivered
to the Company its written opinion, dated as of the Closing Date, in form and
substance reasonably satisfactory to the Company, substantially to the effect
that (i) the Merger constitutes a reorganization under Section 368(a) of the
Code, (ii) Parent, Merger Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, (iii) Parent,
Merger Sub and the Company will not recognize any gain or loss for U.S. federal
income tax purposes as a result of the Merger and (iv) the shareholders of the
Company will not recognize any gain or loss for U.S. Federal income tax purposes
upon their exchange of the Company Common Stock solely for Parent Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Parent Common Stock).
(d) ABSENCE OF MATERIAL ADVERSE EFFECT. No Parent Material
Adverse Effect shall have occurred.
SECTION 5.3. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the transactions
contemplated hereby are subject to the further requirements that:
(a) REPRESENTATIONS AND WARRANTIES. The representations of
Company set forth in the Agreement shall be true and correct (without regard to
any materiality qualifier contained therein) in all material respects and the
representations of the Company set forth in Section 2.14(c) shall be true and
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correct as of the date of this Agreement and (except to the extent such
representations speak of an earlier date) as of the Closing Date as though made
on and as of the Closing Date. Parent shall have received a certificate signed
on behalf of Company by the Chief Executive Officer and the Chief Financial
Officer of the Company to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS. Each of the obligations of the
Company to be performed on or before the Closing Date pursuant to the terms of
this Agreement shall have been duly performed in all material respects on or
before the Closing Date. At the Closing Parent shall have received a certificate
signed on behalf of Company by the Chief Executive Officer and the Chief
Financial Officer of the Company to the foregoing effect.
(c) ABSENCE OF MATERIAL ADVERSE EFFECT. No Company Material
Adverse Effect shall have occurred.
(d) NO EQUITY RIGHTS IN SURVIVING CORPORATION. There shall not
be any securities, rights, warrants, options, or other instruments outstanding
which, after consummation of the Merger, would be convertible into or
exercisable for securities of the Surviving Corporation, and Parent shall be
satisfied that all outstanding options and warrants of the Company will become
options or warrants solely with respect to Parent Common Stock on the terms
described in Section 1.5 hereof.
(e) REGULATORY CONSENTS. All authorizations, consents, orders
or approvals of, or declarations or filings with, and all expirations of waiting
periods imposed by, any governmental body, agency or official (all of the
foregoing, "REGULATORY CONSENTS") which are necessary for the consummation of
the transactions contemplated hereby, other than immaterial Regulatory Consents
the failure to obtain which would have no material adverse effect on the
consummation of the transactions contemplated hereby and no Company Material
Adverse Effect, are listed on the COMPANY SCHEDULE and shall have been filed,
have occurred or have been obtained (all such permits, approvals, filings and
consents and the lapse of all such waiting periods being referred to as the
"REQUISITE REGULATORY APPROVALS") and all such Requisite Regulatory Approvals
shall be in full force and effect, provided, however, that a Requisite
Regulatory Approval shall not be deemed to have been obtained if in connection
with the grant thereof there shall have been an imposition by any state or
federal governmental body, agency or official of any condition, requirement,
restriction or change of regulation, or any other action directly or indirectly
related to such grant taken by such governmental body, which would reasonably be
expected to either have a Company Material Adverse Effect or prevent Parent from
realizing, in its reasonable opinion, in all material respects the economic
benefits of the transactions contemplated by this Agreement that Parent
currently anticipates receiving therefrom.
(f) NON-REGULATORY CONSENTS. The Company shall have obtained
the consent or approval of any person whose consent or approval shall be
required under any agreement or instrument which the Company is bound or to
which the Company's assets or business are subject or affected in order to
permit the consummation of the transactions contemplated hereby, except those
which the failure to obtain would not, individually or in the aggregate, have a
Material Adverse Effect on the Company; provided, that the Parent shall have
received the right to use, and ownership of the Harris Williams name. The Parent
shall have obtained the consent or approval of any person whose consent or
approval shall be required under any agreement or instrument which the Parent is
bound or to which the Parent's assets or business are subject or affected in
order to permit the consummation of the transactions contemplated hereby, except
those which the failure to obtain would not, individually or in the aggregate,
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have a Parent Material Adverse Effect; provided that the Parent shall have
obtained the necessary consents that this Agreement and the transactions
contemplated hereby shall not be considered "change of control" events under the
Employment and Noncompetition Agreements, dated May 16, 1996, between the
Company and Chris Williams and the Employment and Noncompetition Agreements,
dated May 16, 1996, between the Company and Hiter Harris.
(g) TAX OPINION. Morgan, Lewis & Bockius LLP shall have
delivered to Parent its written opinion, dated as of the Closing Date, in form
and substance reasonably satisfactory to Parent, substantially to the effect
that (i) the Merger constitutes a reorganization under Section 368 of the Code,
(ii) Parent, Merger Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (iii)
Parent, Merger Sub and the Company will not recognize any gain or loss for U.S.
federal income tax purposes as a result of the Merger.
(h) EMPLOYMENT/ CONSULTING ARRANGEMENTS. Each person listed on
the COMPANY SCHEDULE shall have entered into an employment agreement as
contemplated by Section 4.1(e), and each person listed on the COMPANY SCHEDULE
shall have entered into a severance agreement in the form of Exhibit C hereto
and a confidentiality, noncompetition and nonsolicitation agreement in the form
of Exhibit D hereto.
(i) 401(k) PLAN TERMINATION. The Company and its Subsidiaries
shall have taken all appropriate corporate action necessary to have terminated
their retirement and profit sharing plans maintained pursuant to Section 401(k)
of the Code or otherwise so that a distribution of assets under such plan may be
made to all participants and beneficiaries of such plan.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1. TERMINATION. This Agreement may be terminated (by written
notice by the terminating party to the other party) and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(a) By mutual written consent of each of Parent and the
Company;
(b) By either Parent or the Company if the Merger shall not
have been consummated on or before July 15, 1999 (the "TERMINATION DATE");
provided, however, that the right to terminate this Agreement under this Section
6.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing or the Effective Time to occur on or before the
Termination Date;
(c) By either Parent or the Company if a Governmental Entity
or arbitrator shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the parties shall use their commercially
reasonable efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have become final and nonappealable;
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(d) By Parent if the Company shall have breached, or failed to
comply with, in any material respect any of its obligations under this Agreement
or any representation or warranty made by the Company shall have been incorrect
in any material respect when made or shall have since ceased to be true and
correct in any material respect, and such breach, failure or misrepresentation
is not cured within 30 days after notice thereof and such breaches, failures or
misrepresentations, individually or in the aggregate, result or would reasonably
be expected to result in a Company Material Adverse Effect, and by the Company
if the Parent shall have breached, or failed to comply with, in any material
respect any of its obligations under this Agreement or any representation or
warranty made by the Parent shall have been incorrect in any material respect
when made or shall have since ceased to be true and correct in any material
respect, and such breach, failure or misrepresentation is not cured within 30
days after notice thereof and such breaches, failures or misrepresentations,
individually or in the aggregate, result or would reasonably be expected to
result in a Parent Material Adverse Effect;
(e) By Parent (i) if there has been a breach of any of the
representations, warranties, covenants or agreements set forth in Section
2.18(b), 4.1(b)(vii), 4.15, (ii) if Parent shall have determined, in its sole
discretion, that the Company has failed to make the additional modifications and
financial adjustments required to be made by the Company prior to the Closing
pursuant to Section 4.15(b) or (iii) if the Company's directors and officers
insurance policy, including any insurance binders currently in effect, is
revoked, in whole or in part, prior to the Effective Time and the Company has
not procured equivalent substitute insurance satisfactory to Parent.
(f) By Parent after the occurrence of an event which results
in a Company Material Adverse Effect or by the Company after the occurrence of
an event which results in a Parent Material Adverse Effect;
(g) By Parent if the Board of Directors of the Company or any
committee of the Board of Directors of the Company (i) shall withdraw or modify
in any manner adverse to Parent its approval or recommendation of this
Agreement, (ii) within 15 business days after Parent's request, shall fail to
reaffirm such approval or recommendation; provided that such a request is made
after the Board of Directors of Company has taken any of the actions specified
in clause (ii) of Section 4.14(a) hereof with respect to an Acquisition Proposal
and such Acquisition Proposal has not been rejected by such Board of Directors
or withdrawn, (iii) shall approve or recommend any acquisition of a material
portion of its assets or any tender offer for shares of its capital stock, in
each case, other than by Parent or an affiliate thereof, (iv) a tender offer or
exchange offer for any of the outstanding shares of the Company Common Stock
shall have been commenced or a registration statement with respect thereto shall
have been filed (other than by Parent or an affiliate thereof) and the Board of
Directors of the Company shall have recommended that the shareholders of the
Company tender their shares in such tender or exchange offer or publicly
announced its intention to take no position with respect to such tender or
exchange offer, or (v) shall resolve to take any of the actions specified in
this clause (g);
(h) By either Parent or the Company if the Required Company
Shareholder Approval shall fail to have been obtained at the Shareholders
Meeting, including any adjournments thereof;
(i) by the Company at any time during the five business day
period beginning on the Determination Date, if both of the following conditions
are satisfied:
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<PAGE> 46
(1) the Average Closing Price as of the Determination
Date shall be less than the product of $54.25 (the "STARTING PRICE")
and .75; and
(2) (i) the number obtained by dividing the Average
Closing Price as of the Closing Date by the Starting Price (such number
being referred to herein as the "PARENT RATIO") shall be less than (ii)
the number obtained by dividing the Index Price on the Determination
Date by the Index Price on the Starting Date and subtracting 0.10 from
such quotient (such number being referred to herein as the "INDEX
RATIO");
subject to the following four sentences. If the Company elects to exercise its
termination right pursuant to the immediately preceding sentence, it shall give
prompt written notice to Parent, which notice by the Company shall be
irrevocable. During the five-day period commencing with its receipt of such
notice, Parent shall have the option, of adjusting the Exchange Ratio to equal
the lesser of (i) a number equal to a quotient (rounded to the nearest
one-ten-thousandth), the numerator of which is the product of 0.75, the Starting
Price and the Exchange Ratio (as then in effect) and the denominator of which is
the Average Closing Price as of the Determination Date, and (ii) a number equal
to a quotient (rounded to the nearest one-ten-thousandth), the numerator of
which is the Index Ratio multiplied by the Exchange Ratio (as then in effect)
and the denominator of which is the Parent Ratio. If Parent makes an election
contemplated by the preceding sentence, within such five-day period it shall
give prompt written notice to the Company of such election and the revised
Exchange Ratio, whereupon no termination shall have occurred pursuant to this
Section 6.1(i) and this Agreement shall remain in effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be deemed to
refer to the Exchange Ratio as adjusted pursuant to this Section 6.1(i). For
purposes of this Section 6.1(i), the following terms shall have the meanings
indicated:
"Average Closing Price" means the average of the last reported sale
prices per share of Parent Common Stock as reported on the NYSE Composite
Transaction Tape for the ten consecutive trading days ending at the close of
business on the Determination Date.
"Determination Date" means the fifth trading day on the NYSE
immediately preceding the date on which all conditions to the Closing set forth
in Article V shall have been satisfied or waived (other than conditions that by
their terms, cannot be satisfied until the Closing Date).
"Index Price" on a given date means closing price of the Standard &
Poor's Financial Index as of 4:00 pm as reported on Bloomberg Information
Services.
In the event that between the date of this Agreement and the Effective
Time, the issued and outstanding shares of Parent Common Stock shall have been
affected or changed into a different number of shares of Parent Common Stock or
a different class of shares as a result of a stock split, reverse stock split,
stock dividend, spin-off, extraordinary dividend, recapitalization,
reclassification or other similar transaction with a record date within such
period, the prices of Parent Common Stock shall be appropriately adjusted for
purposes of applying this Section 6.1(i).
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<PAGE> 47
SECTION 6.2. EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement as provided
in Section 6.1 hereof, this Agreement shall forthwith become void and there
shall be no liability on the part of any of the parties, except as set forth in
the last sentence of Section 4.3 and Section 4.6 hereof, 6.2(b) and (c) and 6.3.
(b) If this Agreement is terminated (i) by the Parent pursuant
to Section 6.1(d) or (h) hereof or by Company pursuant to Section 6.1(h) hereof
and (x) at the time of such termination or prior to the Shareholders Meeting
there shall have been an Acquisition Proposal (whether or not such offer shall
have been rejected or shall have been withdrawn prior to the time of such
termination or of the Stockholders Meeting) and (y) within one year after
termination of the Agreement the Company shall have entered into an agreement
with respect to, or consummated, an Acquisition Proposal, or (ii) by Parent
pursuant to Section 6.1(d) due to a willful breach by the Company of any of its
obligations, representations or warranties under this Agreement and either (x)
or (y) of clause (i) above has occurred, or (iii) by Parent pursuant to Section
6.1(g), then the Company shall pay to Parent a cash termination fee of $13.8
million (the "TERMINATION FEE") less any Liquidated Damages, if any, previously
paid pursuant to Section 6.3 hereof within one business date of the following
date, as applicable:
(1) if such amount is payable under the preceding
clause (i) of this Section 6.2(b), the earliest date that the
conditions set forth in subclauses (x) and (y) of such clause (i) shall
have occurred;
(2) if such amount is payable under the preceding
clause (ii) of this Section 6.2(b), the earliest date that the
condition set forth in either subclause (x) or (y) of subclause (i) of
this Section 6.2(b) shall have occurred; or
(3) if such amount is payable under the preceding
clause (iii) of this Section 6.2(b), the date of termination.
(c) If the Company fails to promptly pay to Parent any
Termination Fee due under Section 6.2(b), Company shall pay the costs and
expenses (including reasonable legal and expert fees and expenses) in connection
with any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of any unpaid fee
at the publicly announced base rate of Citibank, N.A. from the date such fee was
required to be paid.
SECTION 6.3. LIQUIDATED DAMAGES. If this Agreement is terminated by
either Parent or Company, pursuant to Section 6.1(d) hereof, due to a willful
breach by the other party of any of its obligations, representations or
warranties under this Agreement, the breaching party agrees to pay the other
party liquidated damages equal to all expenses incurred by such other party in
connection with the negotiation, execution and performance of the transactions
contemplated hereby (including without limitation all fees and expenses payable
to the party's financial advisers and counsel), not to exceed $3,000,000. The
parties agree that the foregoing damages shall constitute liquidated damages and
not a penalty. Receipt of the foregoing damages shall constitute the sole and
exclusive remedy of the terminating party, at law or in equity, and shall
terminate each party's rights under this Agreement; provided, however, that
Parent shall also be entitled to receive any Termination Fee due or which become
due pursuant Section 6.2(b)(ii). Each of the parties hereto acknowledges and
agrees that this
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<PAGE> 48
Section 6.3 has been agreed upon, after negotiation, as reasonable under the
circumstances and that the foregoing damages constitute a reasonable estimate of
the damages of the parties.
SECTION 6.4. AMENDMENT. This Agreement may be amended by Parent and the
Company pursuant to a writing adopted by action taken by Parent and the Company
at any time before the Effective Time; provided, however, that, after approval
of this Agreement by the shareholders of the Company, no amendment may be made
which would alter or change the amount or kinds of consideration to be received
by the holders of Company Common Stock upon consummation of the Merger or which
would materially and adversely affect the holders of Company Common Stock,
except to the extent approved by the shareholders of the Company. This Agreement
may not be amended except by an instrument in writing signed by the Parties.
SECTION 6.5. WAIVER. At any time before the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only as against such party and only if set
forth in an instrument in writing signed by such party and any such waiver shall
not be deemed to apply to any other circumstances.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein shall not survive beyond the
Closing Date. This Section 7.1 shall not limit any covenant or agreement of the
parties hereto which by its terms requires performance after the Closing Date.
SECTION 7.2. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior written and oral and all contemporaneous oral agreements
and understandings with respect to the subject matter hereof.
SECTION 7.3. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, by telecopy, or by registered or certified mail (postage prepaid,
return receipt requested) or by overnight courier service to the respective
parties as follows:
IF TO PARENT OR MERGER SUB:
The FINOVA Group Inc.
1850 N. Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
Telecopy: (602) 207-1019
Attention: Glenn Gray
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<PAGE> 49
AND:
Telecopy: (602) 207-4099
Attention: Richard Lieberman
WITH A COPIES TO:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Telecopy: (215) 963-5299
Attention: N. Jeffrey Klauder
IF TO THE COMPANY:
Sirrom Capital Corporation
St. Cloud Corner
500 Church Street
Suite 200
Nashville, Tennessee 37219
Telecopy: (615) 256-9958
Attention: Maria-Lisa Caldwell
WITH A COPY TO:
Bass, Berry & Sims PLC
2700 First American Center
Nashville, TN 37238
Telecopy: (615) 742-6262
Attention: Bob F. Thompson
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy shall be deemed effective
on the first business day at the place of which such notice or communication is
received following the day on which such notice or communication was sent. Any
notice or communication sent by registered or certified mail shall be deemed
effective on the fifth business day at the place from which such notice or
communication was mailed following the day in which such notice or communication
was mailed.
SECTION 7.4. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
SECTION 7.5. DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
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<PAGE> 50
SECTION 7.6. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person
(including without limitation any employee of the Company or any Subsidiary) any
rights or remedies of any nature whatsoever under or by reason of this Agreement
except for Section 4.10 (which is intended to be for the benefit of the persons
provided for therein, and may be enforced by such persons).
SECTION 7.7. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 7.8. EXPENSES. Except as otherwise provided herein, all costs
and expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses except that Parent
and the Company shall share equally (i) the registration fees payable with
respect to filing the Proxy Statement and Registration Statement, and (ii) all
printing and mailing expenses incurred with respect to the Proxy Statement and
Registration Statement.
SECTION 7.9. PERSONAL LIABILITY. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect shareholder of any party hereto or any officer, director,
employee, agent, representative or investor of any party hereto.
SECTION 7.10. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to
the benefit of be binding upon the parties hereto and their respective legal
representatives and successors. This Agreement may not be assigned by any party
hereto.
SECTION 7.11. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstance in any other jurisdiction or to
other persons or circumstances in any jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
SECTION 7.12. LEGAL FEES AND COSTS. If any party hereto institutes any
action or proceeding, whether before a court or arbitrator, to enforce any
provision of this Agreement, the prevailing party therein shall be entitled to
received from the losing party reasonable attorneys' fees and costs incurred in
such action or proceeding, whether or not such action or proceeding is
prosecuted to judgment.
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<PAGE> 51
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
THE FINOVA GROUP INC.
By: /s/ GLENN E. GRAY
----------------------------------------
Name: Glenn E. Gray
Title: Vice President
FINOVA NEWCO INC.
By: /s/ GLENN E. GRAY
----------------------------------------
Name: Glenn E. Gray
Title: Vice President
SIRROM CAPITAL CORPORATION
By: /s/ CARL W. STRATTON
----------------------------------------
Name: Carl W. Stratton
Title: Chief Finanical Officer
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<PAGE> 1
EXHIBIT 99.01
VOTING AGREEMENT
VOTING AGREEMENT dated as of January 6, 1999, between The FINOVA Group
Inc., a Delaware corporation ("Parent"), and the persons listed on Schedule A
hereto (collectively, the "Securityholders").
WHEREAS, Parent, FINOVA Newco Inc., a Delaware corporation ("Merger
Sub"), and Sirrom Capital Corporation, a Tennessee corporation (the "Company"),
propose to enter into an Agreement and Plan of Merger, dated the date hereof (as
the same may be amended or supplemented, the "Merger Agreement") providing for
the merger of Merger Sub with and into the Company (the "Merger");
WHEREAS, each Securityholder, as of the date hereof, owns in the
aggregate (including shares held both beneficially and of record and other
shares held either beneficially or of record) the number of shares of common
stock, no par value, of the Company (the "Common Shares") set forth opposite
such Securityholder's name on Schedule A hereto and; such Common Shares, as they
may be adjusted by stock dividend, stock split, recapitalization, combination or
exchange of shares, merger, consolidation, reorganization or other chance or
transaction of or by the Company, together with securities that may be acquired
after the date hereof by such Securityholder including Common Shares issuable
upon the exercise of options to purchase Common Shares (as the same may be
adjusted as aforesaid), being collectively referred to herein as the
"Securities"; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that the Securityholders (who include all of the
members of the Board of Directors of the Company) enter into this Agreement
(capitalized terms not otherwise defined herein shall have the meanings set
forth in Merger Agreement);
NOW, THEREFORE, to induce Parent to enter into, and in consideration of
it entering into the Merger Agreement, and in consideration of the premises and
the representations, warranties and agreements contained herein, the parties
agree as follows:
1. COVENANTS OF THE SECURITYHOLDERS. Each Securityholder, severally and
not jointly, agrees as follows:
(a) The Securityholder shall not, except as contemplated by
the terms of this Agreement, (i) sell, transfer, pledge, assign or otherwise
dispose of, or enter into any Contract (as defined below), option or other
arrangement (including any profit sharing arrangement) or understanding with
respect to the sale, transfer, pledge, assignment or other disposition of, the
Securities to any person or entity other than Parent or Parent's designee, (ii)
enter into any voting arrangement, whether by proxy, voting agreement, voting
trust, power-of-attorney or otherwise, with respect to the Securities, or (iii)
take any other action that would in any way restrict, limit or interfere with
the performance of its obligations hereunder or the transactions contemplated
<PAGE> 2
hereby; provided, however, that any Securityholder that is an individual may
transfer all or any part of his or her Securities to any sibling or any other
member of his or her immediate family, any of his or her lineal descendants or
any trust for the benefit of any of them, if the recipient of the Securities
agrees in advance, in a writing delivered to Parent, to be bound by this
Agreement.
(b) Until the Merger is consummated or the Merger Agreement is
terminated, the Securityholder shall not, nor shall the Securityholder permit
any investment banker, financial adviser, attorneys accountant or other
representative or the Securityholder to, directly or indirectly (i) solicit,
initiate or encourage (including, by way of furnishing information), or take any
other action designed or reasonably likely to facilitate, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal or (ii) participate in any discussions or
negotiations regarding any Acquisition Proposal. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth in the
preceding sentence by an investment banker, financial advisor, attorney,
accountant or other representative or agent of the Securityholder, acting on
behalf of such Securityholder and not on behalf of the Company shall be deemed
to be a violation of this Section l(b) by the Securityholder. Notwithstanding
the foregoing, any Securityholder that is a director of the Company shall not
violate this Section 1(b) to the extent that the Company's Board of Directors is
permitted to act under Section 4.4(b) and 4.14(a) of the Merger Agreement.
(c) At any meeting of Securityholders of the Company called to
vote upon the Merger and the Merger Agreement or at any adjournment thereof or
in any other circumstances upon which a vote, consent or other approval
(including by written consent) with respect to the Merger and the Merger
Agreement is sought, each Securityholder shall vote (or cause to be voted) such
Securityholder's Securities in favor of the Merger, the adoption of the Merger
Agreement and the approval of the other transactions contemplated by the Merger
Agreement. At any meeting of Securityholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Securityholder's vote, consent or other approval is sought, such Securityholder
shall vote (or cause to be voted) such Securityholder's Securities against (i)
any merger agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the Company or
any other Acquisition Proposal (collectively, "Alternative Transactions") or
(ii) any amendment of the Company's Charter or by-laws or other proposal or
transaction involving the Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify, the Merger Agreement or any of the other transactions contemplated by
the Merger Agreement including any consent to the treatment of any Securities in
or in connection with such transaction (collectively, "Frustrating
Transactions").
<PAGE> 3
(d) No person executing this Agreement who is or becomes
during the term hereof a director or officer of the Company makes any agreement
or understanding herein in his or her capacity as such director or officer. Each
Securityholder signs solely in his or her capacity as the record holder and/or
beneficial owner of, or the trustee of a trust whose beneficiaries are the
beneficial owners of such Securityholder's Securities and nothing herein shall
limit or affect any actions taken by a Securityholder in its capacity as an
officer or director of the Company to the extent specifically permitted by the
Merger Agreement.
2. GRANT OF IRREVOCABLE PROXY COUPLED WITH AN INTEREST; APPOINTMENT OF
PROXY.
(a) Each Securityholder hereby irrevocably grants to, and
appoints, Samuel L. Eichenfield, Matthew Breyne, Glenn E. Gray or any other
individual designated by Parent, and each of them, such Securityholder's proxy
and attorney-in-fact with full power of substitution), for and in the name,
place and stead of such Securityholder, to vote such Securityholder's
Securities, or grant a consent or approval in respect of such Securities, at any
meeting of Securityholders of the Company or at any adjournment thereof or in
any other circumstances upon which their vote, consent or their approval is
sought, (i) in favor of the Merger, the adoption by the Company the Merger
Agreement and the approval of the other transactions contemplated by the Merger
Agreement, and (ii) against any Alternative Transaction or Frustrating
Transaction.
(b) Each Securityholder represents that any proxies heretofore
given in respect of such Securityholder's Securities are not irrevocable, and
that any such proxies are hereby revoked.
(c) EACH SECURITYHOLDER HEREBY AFFIRMS THAT THE PROXY SET
FORTH IN THIS SECTION 2 IS COUPLED WITH INTEREST AND IS IRREVOCABLE UNTIL SUCH
TIME AS THIS AGREEMENT TERMINATES IN ACCORDANCE WITH ITS TERMS. Such
Securityholder hereby further affirms that the irrevocable proxy is given in
connection with the execution of the Merger Agreement and that such irrevocable
proxy is given to secure the performance of the duties of such Securityholder
under this Agreement. Such Securityholder hereby ratifies and confirms all that
such irrevocable proxy may lawfully do or cause to be done by virtue hereof.
Such irrevocable proxy is executed and intended to be irrevocable in accordance
with provisions of Section 48-17-203(d) of the Tennessee Business Corporation
Act ("TBCA"). Such irrevocable proxy shall be valid until the later to occur of
(i) one year from the date hereof or (ii) termination of this Agreement in
accordance with its terms.
3. REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDERS.
Securityholder hereby, severally and not jointly, represents and warrants to
Parent as follows:
(a) The Securityholder has all requisite power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions
<PAGE> 4
contemplated hereby have been duly authorized by the Securityholder. This
Agreement has been duly executed and delivered by the Securityholder and
constitutes a valid and binding obligation of the Securityholders enforceable
against the Securityholder in accordance with its terms. Except for the
informational filings with the Securities and Exchange Commission, neither the
execution, delivery or performance of this Agreement by the Securityholder of
the transactions contemplated hereby will (i) require any filing with, or
permit, authorization, consent or approval of, any federal, state, local or
municipal foreign or other government or subdivision, branch, department or
agency thereof or any government or quasi-governmental authority of any nature,
including any court or other tribunal, (a "Governmental Entity"), (ii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default under, or give rise to any right of termination,
amendment, cancellation or acceleration under, or result in the creation of any
Lien upon any of the properties or assets of the Securityholder under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, permit, concession, franchise, contract, agreement or other
instrument or obligation (a "Contract") to which the Securityholder is a party
or by which the Securityholder or any of the Securityholder's properties or
assets, including the Securityholder's Securities, may be bound or (iii) violate
any judgment, order, writ, preliminary or permanent injunction or decree (an
"Order") or any statute, law, ordinance, rule or regulation of any Governmental
Entity (a "Law") applicable to the Securityholder or any of the Securityholder's
properties or assets, including the Securityholder's Securities.
(b) THE SECURITIES. The Securityholder's Securities and the
certificates representing such Securities are now, and it all times during the
term hereof will be, held by such Securityholder, or by a nominee or custodian
for the benefit of such Securityholder, and such Securities are not subject to
any proxies, voting trusts or agreements, understandings, arrangements or other
similar restrictions. The Securityholder owns of record or beneficially no
securities of the Company, or any options, warrants or rights exercisable for
securities of the Company, other than such Securityholder's Securities and
shares of Common Stock issuable upon the exercise of any Company options, in
each case as set forth on Schedule A hereto.
(c) BROKERS. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of such
Securityholder.
(d) MERGER AGREEMENT. The Securityholder understands and
acknowledges that Parent is entering into, the Merger Agreement in reliance upon
the Securityholder's execution and delivery of this Agreement.
4. BOARD APPROVAL. The Board of Directors of the Company has duly and
validly authorized and approved by all necessary corporate action, this
Agreement, the Merger Agreement and the transactions contemplated hereby and
thereby, so that by the execution and delivery hereof no restrictive provision
of any "fair price," "moratorium," "control-share
<PAGE> 5
acquisition," "interested shareholders" or other similar anti-takeover statute
or regulation (including, without limitation, Section 48-35-205 of the TBCA) or
restrictive provision of any applicable anti-takeover provision in the Articles
of Incorporation or by-laws of the Company is, or at the closing of the
transactions contemplated hereby will be, applicable to the Company, Parent, the
Securities, the Merger or any other transaction contemplated by this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby represents
and warrants to the Securityholders as follows:
(a) AUTHORITY. Parent has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Parent. This Agreement has been duly executed and delivered by Parent and
constitutes a valid and binding obligation of the Securityholders, constitutes a
valid and binding obligation of Parent enforceable in accordance with its terms.
6. FURTHER ASSURANCES. Each Securityholder will, from time to time,
execute and deliver, or cause to be executed and delivered. such additional or
further transfers, assignments, endorsements, consents and other instruments as
Parent may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement and to vest the power to vote such
Securityholder's Securities as contemplated by Section 2. Parent agrees to use
reasonable efforts to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements that may be imposed with respect to
the transactions contemplated by this Agreement.
7. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
8. TERMINATION. This Agreement, including all rights and obligations of
the parties hereunder, shall terminate upon the earlier of the termination of
the Merger Agreement pursuant to Section 6.1 thereof or the Effective Time,
PROVIDED, HOWEVER, that if the Merger Agreement is terminated pursuant to
Section 6.1(d), 6.1(g) or 6.1(h) of the Merger Agreement and at the time of
termination there shall have been an Acquisition Proposal, this Agreement shall
not terminate until the earlier of (i) four months following the termination of
the Merger Agreement or (ii) payment to the Parent of a Termination Fee pursuant
to Section 6.2.
<PAGE> 6
9. STOP TRANSFER. The Company agrees with, and covenants to, Parent
that the Company shall not register the transfer of any certificate representing
any Securityholder's Securities unless such transfer is made in accordance with
the terms of this Agreement.
10. GENERAL PROVISIONS.
(a) EXPENSES. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense.
(b) AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(c) NOTICE. All notices and other communications hereunder
shall be in writing and shall be deemed given upon receipt to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) if to Parent, to
The FINOVA Group Inc.
1850 N. Central Avenue
P.O. Box 2209
Phoenix, Arizona 85002-2209
Facsimile: (602) 207-1019
with a copy to:
Jeffrey N. Klauder
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
Facsimile: (215) 963-5694
and
(ii) if to a Securityholder, to the address set forth
under the name of such Securityholder on Schedule A hereto
with a copy to:
Bass, Berry & Sims PLC
2700 First American Center
Nashville, TN 37238
Telecopy: (615) 742-6262
Attention: Bob F. Thompson
<PAGE> 7
(d) INTERPRETATION. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation".
(e) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
(f) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
(g) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
any applicable conflicts of law, except that the provisions of the TBCA shall
apply with respect to the granting of the irrevocable proxy pursuant to Section
2(c) hereof.
(h) PUBLICITY. Except as otherwise required by law, court
process or the rules of a national securities exchange or the New York Stock
Exchange or as contemplated or provided in the Merger Agreement, for so long as
this Agreement is in effect, neither any Securityholder nor Parent shall issue
or cause the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement or the Merger
Agreement without the consent of the other parties, which consent shall not be
unreasonably withheld.
11. ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in a court of the United States. This
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto waives any right to trial by
jury with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
EACH SECURITYHOLDER AGREES THAT, IN CONNECTION WITH ANY
LEGAL SUIT OR PROCEEDING ARISING WITH RESPECT TO THIS AGREEMENT IT
SHALL SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT
<PAGE> 8
FOR THE DISTRICT OF DELAWARE AND AGREES TO VENUE IN SUCH COURTS. EACH
SECURITYHOLDER HEREBY APPOINTS THE SECRETARY OF THE COMPANY AS ITS AGENT FOR
SERVICE OF PROCESS FOR PURPOSES OF THE FOREGOING SENTENCE ONLY. EACH PARTY
HERETO WAIVES ANY RIGHT TO JURY TRIAL IN CONNECTION WITH ANY SUCH SUIT OR
PROCEEDING.
IN WITNESS WHEREOF Parent has caused this Agreement to be signed by its
officer thereunto duly authorized and each Securityholder has signed this
Agreement, all as of the date first written above.
THE FINOVA GROUP INC.
By: /s/ Glenn E. Gray
----------------------------------
Name: Glenn E. Gray
Title: Vice President
SECURITYHOLDER
By: /s/ E. Townes Duncan
----------------------------------
Name: E. Townes Duncan
SECURITYHOLDER
By: /s/ William D. Eberle
----------------------------------
Name: William D. Eberle
SECURITYHOLDER
By: /s/ Edward J. Mathias
----------------------------------
Name: Edward J. Mathias
<PAGE> 9
SECURITYHOLDER
By: /s/ Robert A. McCabe, Jr.
----------------------------------
Name: Robert A. McCabe, Jr.
SECURITYHOLDER
By: /s/ George M. Miller, II
----------------------------------
Name: George M. Miller, II
SECURITYHOLDER
By: /s/ John A. Morris, Jr., M.D.
----------------------------------
Name: John A. Morris, Jr., M.D.
SIRROM PARTNERS, L.P.
By: /s/ John A. Morris, Jr., M.D.
----------------------------------
Name: John A. Morris, Jr., M.D.
SECURITYHOLDER
By: /s/ Raymond H. Pirtle, Jr.
----------------------------------
Name: Raymond H. Pirtle, Jr.
SECURITYHOLDER
By: /s/ Keith M. Thompson
----------------------------------
Name: Keith M. Thompson
<PAGE> 10
SECURITYHOLDER
By: /s/ Christopher H. Williams, III
----------------------------------
Name: Christopher H. Williams, III
SECURITYHOLDER
By: /s/ L. Edward Wilson
----------------------------------
Name: L. Edward Wilson
JOINDER
The undersigned joins in the execution and delivery of this Agreement
for the sole purpose of agreeing to be bound by the provisions of Section 9 of
this Agreement.
SIRROM CAPITAL CORPORATION
By: /s/ David M. Traversi
----------------------------------
Name: David M. Traversi
Title: President
<PAGE> 11
SCHEDULE A TO EXHIBIT 2
<TABLE>
<CAPTION>
COMMON ADDITIONAL SECURITIES
NAME AND ADDRESS SHARES BENEFICIALLY OWNED
- ---------------- ------ ------------------
<S> <C> <C>
E. Townes Duncan 400 Options to purchase
Solidus 12,000 shares
30 Burton Hills Boulevard
Suite 100
Nashville, TN 37215
William D. Eberle 3,000 Options to purchase
13 Garland Road 32,000 shares
Concord, MA 01742
or
1059 Buttonwood Lane
Bandy Beach, Unit D-101
Sanibel, FL 33957
Edward J. Mathias 128,660 Options to purchase
The Carlyle Group 32,000 shares
1001 Pennsylvania Avenue, N.W.
Suite 220 S.
Washington, D.C. 20004
Robert A. McCabe, Jr. 200 Options to purchase
First American Bank 20,400 shares
First American Center
6th Floor
Nashville, TN 37237
George M. Miller, II 215,318 (Direct) Options to purchase
500 Church Street 190,830 (held by 1,224,680 shares
Suite 200 three trusts the
Nashville, TN 37219 trustee of which is
Mr. Miller's Wife)
John A. Morris, Jr., M.D. 716,112 (by
243 Medical Center South Sirrom, Ltd.)
2100 Pierce Avenue 3,402,296 (by
Nashville, TN 37212 Sirrom Partners,
L.P.)
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C>
Raymond H. Pirtle, Jr. 37,456 Options to purchase
Equitable Securities 44,000 shares
900 Nashville City Center
Nashville, TN 37219
Keith M. Thompson 11,000 Options to purchase
Republic Automotive Parts 16,000 shares
500 Wilson Pike Circle, Ste. 115
Brentwood, TN 37027
Christopher H. Williams, III 609,358
Harris Williams & Co.
707 East Main Street, 19th Floor
Richmond, VA 23219
L. Edward Wilson 107,327 Options to purchase
SRF, Inc. 44,000 shares
500 Church Street
Suite 200
Nashville, TN 37219
</TABLE>
