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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
THE BISYS GROUP, INC.,
BI-HML ACQUISITION CORP.,
HML, INC., AND
HARRIS D. HOBBY, XXXXXX X. XXXXXXXX AND XXXXXX X. XXXXXXXXX
DATED AS OF MAY 28, 1999
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER
SECTION 1.01 The Merger..........................................................................
SECTION 1.02 Effect Of the Merger................................................................
SECTION 1.03 Consummation of the Merger..........................................................
SECTION 1.04 Charter; By-Laws; Directors and Officers............................................
SECTION 1.05 Further Assurances..................................................................
ARTICLE II CONVERSION OF SECURITIES............................................................
SECTION 2.01 Conversion of Securities of the Company.............................................
SECTION 2.02 Company Options.....................................................................
SECTION 2.03 Acquisition Common Stock............................................................
SECTION 2.04 Exchange of Certificates............................................................
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDERS......................
SECTION 3.01 Authority Relative to Agreement.....................................................
SECTION 3.02 Shareholders' Title to Stock........................................................
SECTION 3.03 Organization, Standing and Qualification............................................
SECTION 3.04 Stock of the Company; Company Options and Unit Options..............................
SECTION 3.05 Subsidiaries........................................................................
SECTION 3.06 Articles of Incorporation and By-Laws...............................................
SECTION 3.07 Execution and Performance of Agreement;Validity and Binding Nature..................
SECTION 3.08 Financial Statements................................................................
SECTION 3.09 Intellectual Rights.................................................................
SECTION 3.10 Software............................................................................
SECTION 3.11 Major Customers, Suppliers and Consultants..........................................
SECTION 3.12 Employment, Deferred Compensation or Similar Agreements; Collective Bargaining
Agreements; Employee Benefit Plans..................................................
SECTION 3.13 Real Estate.........................................................................
SECTION 3.14 Title to and Condition of Personal Property.........................................
SECTION 3.15 Accounts Receivable.................................................................
SECTION 3.16 Intentionally Omitted...............................................................
SECTION 3.17 Taxes...............................................................................
SECTION 3.18 Litigation..........................................................................
SECTION 3.19 Other Material Contracts and Commitments............................................
SECTION 3.20 Labor Relations.....................................................................
SECTION 3.21 Insurance...........................................................................
SECTION 3.22 Conduct of Business and Absence of Changes..........................................
SECTION 3.23 Compliance with Laws; Governmental Authorizations...................................
SECTION 3.24 Officers, Directors and Depositories................................................
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SECTION 3.25 Environmental Matters...............................................................
SECTION 3.26 Third Party and Governmental Consents...............................................
SECTION 3.27 Licenses and Permits................................................................
SECTION 3.28 Absence of Undisclosed Liabilities..................................................
SECTION 3.29 Loans to or from Officers, Directors, Shareholders or Employees.....................
SECTION 3.30 Contract Losses.....................................................................
SECTION 3.31 Year 2000 Compliance................................................................
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ARTICLE IV ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.......................
SECTION 4.01 Authority and Capacity Relative to Agreement........................................
SECTION 4.02 Execution and Performance of Agreement; Validity and Binding Nature.................
SECTION 4.03 Stock of the Company................................................................
SECTION 4.04 Additional Representations and Covenants of Shareholders............................
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT............................................
SECTION 5.01 Organization and Qualification......................................................
SECTION 5.02 Subsidiaries........................................................................
SECTION 5.03 Capitalization......................................................................
SECTION 5.04 Authority Relative to Agreement.....................................................
SECTION 5.05 Non-Contravention...................................................................
SECTION 5.06 Parent Public Information...........................................................
SECTION 5.07 Parent Financial Statements.........................................................
SECTION 5.08 Absence of Certain Changes or Events................................................
SECTION 5.09 Governmental Consents...............................................................
SECTION 5.10 Compliance with Law.................................................................
SECTION 5.11 Tax-Free Reorganization.............................................................
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF ACQUISITION.......................................
SECTION 6.01 Organization and Qualification......................................................
SECTION 6.02 Capitalization......................................................................
SECTION 6.03 Authority Relative to Agreement.....................................................
SECTION 6.04 Non-Contravention...................................................................
SECTION 6.05 Governmental Consents...............................................................
SECTION 6.06 Other Matters.......................................................................
ARTICLE VII COVENANTS...........................................................................
SECTION 7.01 Conduct of Company's Business.......................................................
ARTICLE VIII CONDITIONS TO THE MERGER............................................................
SECTION 8.01 Conditions to Each Party's Obligation to Effect the Merger..........................
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SECTION 8.02 Conditions to the Obligation of the Company and the Shareholders to Effect the
Merger..............................................................................
SECTION 8.03 Conditions to the Obligation of Parent and Acquisition to Effect the Merger.........
ARTICLE IX TERMINATION AND ABANDONMENT.........................................................
SECTION 9.01 Termination and Abandonment.........................................................
SECTION 9.02 Effect of Termination...............................................................
ARTICLE X MISCELLANEOUS.......................................................................
SECTION 10.01 Survival of Representations and Warranties..........................................
SECTION 10.02 Expenses, Etc.......................................................................
SECTION 10.03 Publicity...........................................................................
SECTION 10.04 Execution in Counterparts...........................................................
SECTION 10.05 Material Adverse Effect.............................................................
SECTION 10.06 Notices.............................................................................
SECTION 10.07 Waivers.............................................................................
SECTION 10.08 Entire Agreement....................................................................
SECTION 10.09 Applicable Law......................................................................
SECTION 10.10 Binding Effect, Benefits............................................................
SECTION 10.11 Assignability.......................................................................
SECTION 10.12 Amendments..........................................................................
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INDEX TO SCHEDULES AND EXHIBITS
Schedule Description
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2.02(a) Company Options Converted from Unit Options
3.02 Shareholders Agreements
3.03 States and Jurisdictions in which the Company does Business
3.04(a) Stock of the Company
3.04(b) Company Options
3.05 Subsidiaries
3.09 Intellectual Rights
3.10 Software
3.11(a) Major Customers
3.11(b) Major Suppliers
3.12(a) Employment Contracts and Deferred Compensation Agreements
3.12(b) Employee Benefit Plans
3.12(c) Multi-Employer Plans
3.13(a) Owned Real Property
3.13(b) Real Estate Leases
3.14 Liens
3.17 Tax Audits
3.18 Litigation
3.19(a) Material Contracts/Affiliates
3.20 Labor Relations
3.21 Insurance
3.22 Changes Since April 30, 1999
3.24 Officers, Directors and Depositories
3.26 Consents
3.27 Licenses and Permits
3.29 Related Party Loans
4.04(l) Shareholder Interests
7.17 Minority Interest Notes
Exhibit Section Ref. Description
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A 4.04(e) Form of Accredited Investor Certificate
B 7.12 Form of Registration Rights Agreement
C 8.02(d) Form of Opinion of Parent's Counsel to the Company and
the Shareholders
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D 8.03(h) Form of Opinion of Company's Counsel to Parent and
Acquisition
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
May 28, 1999, among THE BISYS GROUP, INC., a Delaware corporation, with an
address at 000 Xxxxx Xxxx, Xxxxxx Xxxxx, Xxx Xxxxxx 00000 ("Parent"), BI-HML
ACQUISITION CORP., a Georgia corporation and a wholly-owned subsidiary of
Parent, with an address at 000 Xxxxx Xxxx, Xxxxxx Xxxxx, Xxx Xxxxxx 00000
("Acquisition"), HML, INC., a Georgia corporation, with an address at 0000
Xxxxxxxxx Xxxx, X.X., Xxxxxxx, Xxxxxxx 00000 (the "Company"), and HARRIS D.
HOBBY ("Hobby"), having an address at 0000 Xxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx,
00000, XXXXXX X. XXXXXXXX ("Xxxxxxxx"), having an address at 0000 Xxxx Xxxxx
Xxxx, Xxxxxxx, Xxxxxxx 00000 and XXXXXX X. XXXXXXXXX ("Mungenast"), having an
address at 00000 Xxxx Xxx Xxxxx, Xxxx Xxxxx, Xxxxxxx 00000 (Hobby, Xxxxxxxx and
Xxxxxxxxx herein referred to from time to time collectively as the
"Shareholders" and individually each person as a "Shareholder"). The Company and
Acquisition are hereinafter sometimes referred to as the "Constituent
Corporations" and the Company as the "Surviving Corporation."
WHEREAS, the Company is engaged in the business of providing
training, consulting and outsourcing services to the financial services
industry;
WHEREAS, Parent, Acquisition and the Company desire that
Acquisition merge with and into the Company (the "Merger"), upon the terms and
conditions set forth herein and in accordance with the Georgia Business
Corporation Code (the "GBCC"), with the result that the Company shall continue
as the surviving corporation and the separate existence of Acquisition (except
as it may be continued by operation of law) shall cease;
WHEREAS, Parent, Acquisition and the Company desire that upon
the Merger, at the Effective Time (as hereinafter defined), all outstanding
shares of the capital stock of the Company be converted into the right to
receive fully paid and nonassessable shares of Common Stock, $.02 par value, of
Parent ("Parent Common Stock") and the outstanding shares of Acquisition be
converted into the right to receive fully paid and nonassessable shares of
Common Stock, $.01 par value, of the Surviving Corporation, as hereinafter
provided;
WHEREAS, Parent, Acquisition and the Company desire that,
immediately after the Effective Time and solely as a result of the Merger,
Parent will own all the issued and outstanding shares of the capital stock of
the Surviving Corporation; and
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WHEREAS, for Federal income tax purposes, it is intended that
(a) the Merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code"), (b) this Agreement constitutes
a plan of reorganization thereunder and (c) Parent, Acquisition and the Company
will each be a party to such reorganization within the meaning of Section 368(b)
of the Code;
WHEREAS, the respective Boards of Directors of the Company,
Parent and Acquisition have approved the Merger;
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants, agreements and conditions contained
herein, and in order to set forth the terms and conditions of the Merger and the
mode of carrying the same into effect, the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Subject to the terms and conditions
of this Agreement, at the Effective Time (hereinafter defined), in accordance
with this Agreement and the GBCC, Acquisition shall be merged with and into the
Company, the separate existence of Acquisition (except as it may be continued by
operation of law) shall cease, and the Company shall continue as the surviving
corporation under the name HML, Inc. unless and until the Articles of
Incorporation of the Company shall be further amended to change the name of the
Surviving Corporation.
SECTION 1.02 Effect Of the Merger. Upon the effectiveness of
the Merger, the Surviving Corporation shall succeed to and assume all the rights
and obligations of Acquisition and the Company in accordance with the GBCC, and
the Merger shall otherwise have the effects set forth in Section 14-2-1106 of
the GBCC.
SECTION 1.03 Consummation of the Merger. As soon as
practicable after the satisfaction or waiver of the conditions to the
obligations of the parties to effect the Merger set forth herein, provided that
this Agreement has not been terminated previously, the parties hereto will cause
the Merger to be consummated by filing with the Secretary of State of the State
of Georgia a properly executed Certificate of Merger in accordance with the
GBCC. The Merger shall be effective upon filing of such certificate or on such
later date as may be specified therein (the time of such effectiveness being the
"Effective Time").
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SECTION 1.04 Charter; By-Laws; Directors and Officers.
Immediately after the Effective Time, the Articles of Incorporation of the
Company shall be the Articles of Incorporation of the Surviving Corporation
until thereafter amended in accordance with the provisions thereof and as
provided by the GBCC. As of the Effective Time, the By-Laws of the Surviving
Corporation shall be the By-Laws of the Company as in effect immediately prior
to the Effective Time, until thereafter amended in accordance with the
provisions thereof and the Certificate of Incorporation of the Surviving
Corporation and as provided by the GBCC. The initial directors and officers of
the Surviving Corporation shall be the directors and officers set forth below,
in each case until their respective successors are duly elected and qualified.
Directors
Xxxx X. Xxxxxx
Xxxxxx X. Xxxxxxx
Officers
Xxxx X. Xxxxxx Chairman, President and Chief
Executive Officer
Xxxxxx Hobby Executive Vice President
Xxxxxx X. Xxxxxxxx Executive Vice President
Xxxxxx X. Xxxxxxxxx Executive Vice President
Xxxxxx X. Xxxxxxx Executive Vice President, Chief
Financial Officer and Treasurer
Xxxx X. Rybarcyzk Executive Vice President,
Human Resources
Xxxxx X. Dell Senior Vice President, General
Counsel and Secretary
Xxxxxx X. Xxxxxx Assistant Secretary
SECTION 1.05 Further Assurances. If at any time after the
Effective Time the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of such Constituent Corporation, all such other acts and things
necessary, desirable or proper to vest,
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perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities of the Company. By
virtue of the Merger and without any action on the part of the holders of the
common stock, $.01 par value, of the Company ("Company Common Stock"), at the
Effective Time all outstanding shares of the Company Common Stock (subject to
the terms of Section 2.04(c) below) shall be converted into the right to receive
fully paid and nonassessable shares of Parent Common Stock on the following
basis:
(a) Net Merger Price. The aggregate consideration to be paid
in connection with the Merger shall be paid in the form of Parent Common Stock
valued, as set forth below, at Eleven Million Three Hundred Fifty Thousand
Dollars ($11,350,000.00) less (i) the sum of One Hundred Seventy Six Thousand
Eight Hundred Six Dollars ($176,806.00) payable by the Company to a former
shareholder of the Company (the "Former Shareholder Obligation"), (ii) all
amounts payable by the Company to Cross Hill Financial Group Inc. or any
affiliate of Cross Hill Financial Group Inc. (formerly called Anchor Financial
Group LLC) (collectively "Cross Hill"), hereinafter referred to as the "Cross
Hill Obligation", (iii) the ascribed value (as set forth and described in
Section 2.02(c) below) of the outstanding Company Options (hereinafter defined),
which Company Options will be converted into options to purchase Parent Common
Stock pursuant to the terms hereof as of the Effective Time and (iv) all
amounts, if any, paid or payable by Parent, the Company, the Surviving
Corporation, Securities Consultants International, LLC, a Georgia limited
liability company ("SCI") and/or The Dover Group, LLC, a Georgia limited
liability company ("Dover Group") pursuant to Section 7.17 hereof to redeem
units in SCI and Dover Group held by persons other than the Company (the
"Minority Interests"), including, without limitation, all amounts payable in
respect of the Minority Interest Notes (hereinafter defined), (the "Net Merger
Price"). The Net Merger Price shall be divided by the average of the closing
price per share of Parent Common Stock (the "Average Price") as reported by the
National Association of Securities Dealers Inc. Automated Quotation System
("NASDAQ") for the trading days in the period beginning on the date of execution
of this Agreement and ending two (2) days immediately prior to the date on which
the Effective Time shall occur, provided that if there shall be fewer than
twenty (20)
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trading days in such period, then the Average Price shall be the average of the
closing price per share as quoted on NASDAQ for each of the last twenty (20)
trading days ending two (2) days prior to the Effective Time, which Average
Price shall be used to determine the number of shares of Parent Common Stock
into which the outstanding shares of Company Common Stock shall be converted in
the Merger (the "Aggregate Parent Common Stock Consideration").
(b) Exchange Value. Each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time and excluding any such
shares held in the treasury of the Company, which shall be cancelled as provided
in paragraph (e) below) (all such shares collectively referred to herein as the
"Exchange Shares") shall be converted into the right to receive the number of
shares of Parent Common Stock (the "Exchange Value"), determined by dividing the
Aggregate Parent Common Stock Consideration by the aggregate number of Exchange
Shares. If, prior to the Effective Time, Parent should split or combine the
outstanding shares of Parent Common Stock, or pay a stock dividend or other
stock distribution in Parent Common Stock, then the determination of the
Exchange Value shall be appropriately adjusted to reflect such split,
combination, dividend or other distribution.
(c) Treasury Stock. Any shares of capital stock held in the
treasury of the Company as of the Effective Time shall be cancelled and retired
as of the Effective Time and no capital stock of Parent, cash or other
consideration shall be paid or delivered in exchange therefor.
SECTION 2.02 Company Options. (a) Prior to the Effective Time,
each outstanding option to purchase units of SCI and/or Dover Group, all which
are set forth on Schedule 3.04(b) (the "Unit Options"), shall be converted into
a Company Option (hereinafter defined) as set forth on Schedule 2.02(a), which
Company Options shall not be exercisable prior to the Effective Time. Each stock
option to purchase shares of Company Common Stock outstanding immediately prior
to the Effective Time, including, without limitation such options as shall have
been issued upon conversion of the Unit Options (each, a "Company Option"),
whether or not then exercisable or vested, shall, at and after the Effective
Time, remain outstanding and shall be converted, subject to the terms of Section
2.02(d) below, into and become the right to purchase, subject to the
satisfaction of the vesting provisions and other terms applicable to
nonqualified stock options granted under Parent's stock option plans, that
number of shares of Company Common Stock subject to such Company Option
immediately prior to such conversion multiplied by the
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Exchange Value and rounded to the nearest whole share of Parent Common Stock.
(b) Notwithstanding anything herein or pursuant to
the terms of the Company Options to the contrary, the exercise price applicable
to each Company Option shall, upon such conversion to an option to purchase
Parent Common Stock (each such converted option hereinafter referred to as a
"Parent Stock Option"), be adjusted as follows: the option exercise price
applicable to each Company Option shall, upon conversion to a Parent Stock
Option, be adjusted to an exercise price per share of Parent Common Stock
calculated by dividing (x) the aggregate exercise price for all shares of
Company Common Stock subject to such Company Option immediately prior to such
conversation by (y) the number of shares of Parent Common Stock subject to such
Parent Stock Option immediately after such conversion and rounded down to the
nearest $.01.
(c) The ascribed value of the Company Common Stock
Options for the purposes of clause (iii) of Section 2.01(a) shall be the product
calculated by multiplying (A) Eleven Million Three Hundred Fifty Thousand
Dollars ($11,350,000.00), less the sum of the amounts determined under clauses
(i), (ii) and (iv) of Section 2.01(a), by (B) a fraction, the numerator of which
is (i) the number of shares of Company Common Stock subject to Company Options
outstanding immediately prior to the Effective Time (the "Number of Option
Shares"), and the denominator of which is (ii) the sum of (x) the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time, plus (y) the Number of Option Shares.
(d) As soon as practicable after the Effective Time,
Parent shall file a registration statement with the Securities and Exchange
Commission (the "SEC") and take such other actions as are reasonably necessary
so as to enable holders of Company Options to receive registered shares of
Parent Common Stock upon exercise of any such Parent Stock Options in accordance
with their terms.
SECTION 2.03 Acquisition Common Stock. At the Effective Time,
each of the One Hundred (100) shares of common stock, $.01 par value, of
Acquisition issued and outstanding immediately prior to the Effective Time shall
be converted into the right to receive one (1) share of the common stock, $.01
par value, of the Surviving Corporation, which shall constitute all of the
issued and outstanding shares of the Surviving Corporation after the Effective
Time.
SECTION 2.04 Exchange of Certificates. (a) Promptly after the
Effective Time, each Shareholder shall deliver to Parent
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the certificate or certificates representing their shares of Company Common
Stock (each, a "Certificate"), in form sufficient for transfer and cancellation
pursuant thereto, which shall thereupon be deemed terminated and of no further
force or effect. As a condition to the issuance of Parent Common Stock
hereunder, each holder of an interest in shares of Company Common Stock who is
not a party to this Agreement, shall submit the Certificate (or Certificates)
for such shares to Parent together with a letter of transmittal, in form and
substance satisfactory to Parent, containing such investment representations and
warranties and covenants, respectively, consistent with Section 4.04, as shall
be required by Parent (the "Transmittal Letter"). Upon surrender of a
Certificate (or Certificates) for cancellation to Parent in form sufficient for
transfer and cancellation pursuant hereto and delivery to Parent of such other
documents as may reasonably be required by Parent, the Shareholder surrendering
such Certificate (or Certificates), together with an executed Transmittal Letter
as applicable, shall be entitled to receive in exchange therefor (x) a
certificate evidencing that number of whole shares of Parent Common Stock which
such holder has the right to receive in respect of the shares of Company Common
Stock evidenced by such Certificate (or Certificates) and (y) a check
representing the amount of cash in lieu of fractional shares of Parent Common
Stock, if any, and unpaid dividends or other distributions, if any, to which
such holder is entitled pursuant to the provisions of this Section 2.04, after
giving effect to any applicable withholding tax, and the Certificate (or
Certificates) so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash in lieu of fractional shares and unpaid dividends
and distributions, if any, payable to the shareholders.
(b) No dividends or other distributions declared after the
Effective Time with respect to Parent Common Stock shall be paid with respect to
any shares of Company Common Stock represented by a Certificate until such
Certificate is surrendered for exchange as provided herein. After surrender of
any such Certificate, there shall be paid to the holder of the certificate
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
declared with respect to such whole shares of Parent Common Stock and not paid,
less the amount of any applicable withholding taxes thereon, 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 the date of such surrender and
with a payment date subsequent to the date of such surrender payable with
respect to such whole shares of Parent Common Stock, less the amount of any
applicable withholding taxes thereon.
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(c) No certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of Parent. Each holder of
shares of Company Common Stock who would otherwise have been entitled to receive
in the Merger a fraction of a share of Parent Common Stock (after taking into
account all certificates surrendered by such holder) shall be entitled to
receive, in lieu thereof, a check in an amount (without interest) equal to such
fractional part of a share of Parent Common Stock multiplied by the Average
Price.
(d) From and after the date of this Agreement, the stock
transfer books of the Company shall be closed, and there shall be no further
registrations of transfers of shares of Company Common Stock on the records of
the Company.
(e) In the event that any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting of a bond in such reasonable amount as
the Surviving Corporation may direct, Parent shall issue in exchange for such
Certificate the shares of Parent Common Stock and, if any, cash in lieu of
fractional shares and unpaid dividends and distributions on shares of Parent
Common Stock deliverable in respect thereof as provided herein.
(f) Promptly after the Effective Time, the Surviving
Corporation shall issue to Parent a certificate representing One (1) share of
the common stock of the Surviving Corporation, and Parent shall cause the
certificates representing the shares of the capital stock of Acquisition to be
cancelled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND SHAREHOLDERS
Each of the Company and each Shareholder, jointly and
severally, hereby represents and warrants to Parent and Acquisition, knowing and
intending that each of Parent and Acquisition is relying hereon in entering into
the transactions contemplated hereby, as follows:
SECTION 3.01 Authority Relative to Agreement. The Company has
all requisite power and authority to enter into and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Company and the
consummation by the Company
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of the transactions contemplated hereby have been duly authorized by the Board
of Directors of the Company and by the shareholders of the Company, and no other
corporate proceedings on the part of the Company or the Shareholders are
necessary to authorize this Agreement and the transactions contemplated hereby.
No shareholder of the Company has validly asserted, or has the legal right to
assert, dissenter's rights under the GBCC with respect to the Merger.
SECTION 3.02 Shareholders' Title to Stock. The shares of
Company Common Stock identified on Schedule 3.04(a) represent, collectively, all
of the issued and/or outstanding shares of capital stock or other equity
interests in the Company. Except as listed in Schedule 3.02, neither the Company
nor the Shareholders are parties to any shareholders agreement, buy-sell
agreement or similar agreement or arrangement.
SECTION 3.03 Organization, Standing and Qualification. The
Company is a corporation, duly organized, validly existing and in good standing
under the laws of the State of Georgia and has the corporate power and lawful
authority to own and hold its properties and conduct its business as now owned,
held and conducted in its state of incorporation and the states in which it has
qualified to do business. The Company is qualified and in good standing in all
states (or other jurisdictions) in which such qualification is required by
reason of the nature or extent of business conducted by the Company therein,
except where the failure to be so qualified would not have "Material Adverse
Effect" (hereinafter defined) on the Company or the Surviving Corporation. Such
states (and jurisdictions) are specified in Schedule 3.03 attached hereto. Each
of the subsidiaries of the Company is disclosed on Schedule 3.05 hereof (each a
"Subsidiary" and, collectively, the "Subsidiaries"). Each Subsidiary is a duly
organized corporation or limited liability company, as set forth on Schedule
3.05, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization and has the lawful power and lawful
authority to own and hold its properties and conduct its business as now owned,
held and conducted in the jurisdiction of its incorporation or organization and
the states in which it is qualified to do business. Each Subsidiary is qualified
and in good standing in all states (or other jurisdictions) in which such
qualification is required by reason of the nature or extent of business
conducted by such Subsidiary therein, except where the failure to be so
qualified would not have a Material Adverse Effect on the Company or the
Surviving Corporation.
SECTION 3.04 Stock of the Company; Company Options and Unit
Options. (a) The authorized capital stock of the Company consists in its
entirety of Ten Million (10,000,000)
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shares of Company Common Stock, $.01 par value, of which Two Million Nine
Hundred Nine Thousand (2,909,000) shares of Company Common Stock are validly
issued and outstanding, fully paid and nonassessable. The number of shares of
Company Common Stock owned of record by each holder thereof is set forth in
Schedule 3.04(a) hereof. Except as set forth on Schedule 3.04(b), neither the
Company nor SCI nor Dover Group or any of their Affiliates (hereinafter defined)
have any outstanding subscription, warrants, convertible securities,
obligations, options, or rights entitling others to acquire shares of capital
stock of the Company, or any outstanding securities, options, warrants, rights
or units or other equity interests of a Subsidiary or other instruments
convertible into shares of capital stock of the Company or units or other equity
interests of a Subsidiary.
(b) Schedule 3.04(b) accurately and completely sets
forth and identifies the respective holders of all Company Options and Unit
Options outstanding on the date hereof, the number of Company Options held by
each holder, the applicable exercise price and vesting schedule with respect
thereto. True, complete and correct copies of all agreements relating to said
Company Options and Unit Options have been delivered to Parent. The Company
shall have effectively converted all Unit Options to Company Options prior to
the Effective Time.
SECTION 3.05 Subsidiaries. There is no corporation,
partnership, joint venture, or other entity in which the Company has, directly
or indirectly, any investment or to which the Company has made an advance of
cash, other than the Subsidiaries and other entities listed on Schedule 3.05
attached hereto. The number of outstanding shares or units or other equity
interests of each Subsidiary and the name of each holder of record thereof is
set forth on Schedule 3.05. Neither the Company nor any Subsidiary is under any
obligation to acquire any securities from any person or entity.
SECTION 3.06 Articles of Incorporation and By-Laws. True and
complete copies of the Company's Articles of Incorporation (the "Articles of
Incorporation") and By-Laws (in each case together with any amendments thereto)
and true and complete copies of each of the constituent organizational documents
and instruments of each Subsidiary (in each case together with any amendments
thereto) have been delivered by the Company to Parent.
SECTION 3.07 Execution and Performance of Agreement; Validity
and Binding Nature. The execution and delivery of this Agreement, and the
performance by the Company of the terms of this Agreement and the transactions
contemplated hereby, will not result in a breach of any of the terms of, or
constitute a
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violation of or default under, the Articles of Incorporation or By-Laws of the
Company or any statute, any contract or commitment listed or required to be
listed on Schedule 3.11(a) or Schedule 3.19(a) hereto or any indenture, loan
agreement or debt instrument by which the Company or any of the Subsidiaries or
any of their respective properties are bound except as set forth on Schedule
3.19(a). This Agreement has been duly executed and delivered by the Company.
This Agreement is, and the documents and agreements executed and delivered by
the Company pursuant to the terms hereof, when duly executed and delivered by
all parties whose execution and delivery thereof is required, will be, legal,
valid, and binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, except to the extent that
enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity.
SECTION 3.08 Financial Statements. The Company has delivered
to Parent (i) the unaudited consolidated balance sheet of the Company as of
April 30, 1999 (the "Balance Sheet"), (ii) the audited consolidated balance
sheet of Dover International, LLC ("Dover International") as of December 31,
1998 and the related audited consolidated statement of earnings and members'
equity and cash flows, and notes thereto, and (iii) the audited consolidated
balance sheet of Dover International as of December 31, 1997 and the related
unaudited consolidated statement of earnings, and notes thereto, audited by
Xxxxxxx & Xxxxx, certified public accountants, as applicable. The Balance Sheet
and said related financial statements and notes thereto as of said dates and for
such periods are hereinafter referred to collectively as the "Financial
Statements". Each of the Financial Statements (a) has been prepared from the
books and records of the Company, (b) has been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
with prior periods covered thereby, and (c) presents fairly in all material
respects the financial position of the Company or Dover International, as
applicable, as at its respective date and the results of the Dover
International's operations, members' equity and cash flows for such periods, as
applicable, subject, in the case of unaudited interim financial statements, to
year-end adjustments and footnotes. The books and records of the Company have
been kept, and will be kept to the Effective Time, in reasonable detail and in
accordance with the same accounting principles heretofore used consistently
applied and fairly and accurately reflect in all material respects, and will
fairly and accurately reflect to the Effective Time in all material respects,
all of the transactions of the Company.
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SECTION 3.09 Intellectual Rights. Schedule 3.09 attached
hereto contains a complete and correct list and accurate description of (a) all
registered trademarks and service marks, trademark and service xxxx
applications, and all unregistered trademarks, service marks, trade names, logos
and other symbols, names or marks used by the Company or any Subsidiary to
identify the Company or any Subsidiary or their respective products or services
to the extent those that are unregistered are material to the business of the
Company or a Subsidiary (the "Trademarks"), (b) all registered copyrights of the
Company or any Subsidiary (the "Copyrights"), and (c) all patents and patent
applications of the Company or any Subsidiary (the "Patent Rights"); in each
case (i) owned by the Company or a Subsidiary, or (ii) licensed to the Company
or a Subsidiary under valid and enforceable agreements, in each case exclusive
of the software described in Section 3.10 hereof. The Company and each
Subsidiary owns, or possesses adequate rights to use, all the Trademarks, the
Copyrights, and the Patent Rights, and all inventions, processes, designs,
formulas, trade secrets and other intellectual property rights or interests
necessary for the conduct of its business (collectively, the "Intellectual
Rights"), in each case free and clear of all licenses, liens, charges or
encumbrances, except as specified in Schedule 3.09 or licensed to the Company or
any Subsidiary under valid and enforceable agreements, and in each case
exclusive of such software. The protection of patents is not material to the
conduct of the business of the Company or any Subsidiary. Neither the Company
nor any Shareholder is aware of any infringements by any third parties of any
Intellectual Rights or any conflict with or infringement of asserted rights of
others with respect to the same.
SECTION 3.10 Software.
Neither the Company nor any Subsidiary owns or licenses
computer software or related programs other than (a) off-the-shelf software
licensed to the Company or a Subsidiary and used in the ordinary course of
business of the Company or a Subsidiary and (b) the software described in
Schedule 3.10, which is based on off-the-shelf and commercially available
software applications and is in some instances sold or licensed by the Company
or a Subsidiary to customers of the Company or a Subsidiary. No Shareholder is
aware of any infringement or conflict with the rights of others which arises out
of the use by the Company or a Subsidiary, or the sale or license by the Company
or a Subsidiary to customers of the Company or a Subsidiary, of any of the
software described on Schedule 3.10.
SECTION 3.11 Major Customers, Suppliers and Consultants.
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(a) Schedule 3.11(a) contains (i) the names and
business addresses of those customers of the Company and each Subsidiary which
individually accounted for $50,000 or more of the aggregate amount of revenues
received by the Company and each such Subsidiary during the twelve months ended
April 30, 1999, which amount of revenues for each such customer is set forth on
Schedule 3.19(a) (collectively, the "Major Customers"). Schedule 3.19(a)
identifies the respective contracts or commitments the Company and/or any such
Subsidiary has entered into with respect to the Major Customers which will
remain to be performed, in whole or in part, after the Effective Time in excess
of $50,000. True and complete copies of those contracts or commitments which are
in writing have been heretofore delivered to Parent, and written summary
descriptions of those contract commitments which are oral have heretofore been
delivered to Parent. To the knowledge of each Shareholder, no Major Customer has
expressed to the Company its intention to cancel or otherwise terminate its
relationship with the Company or a Subsidiary, and to the best knowledge of each
Shareholder, all of such contracts and commitments will continue in full force
and effect after the Effective Time.
(b) Schedule 3.11(b) contains the names and business
addresses of all of the suppliers and consultants (excluding temporary
subcontractors engaged by the Company in the ordinary course of business and who
are not material to the Company's business) from whom the Company or a
Subsidiary purchased, during the twelve (12) month period ending April 30, 1999,
goods and/or services, the aggregate cost of which exceeded Fifty Thousand
Dollars ($50,000) or which suppliers or consultants are in any event material to
the continued operation of the business of the Company or a Subsidiary in the
ordinary course (collectively, the "Major Suppliers"). Except as disclosed on
Schedule 3.11(b), neither the Company nor a Subsidiary has other suppliers or
consultants which are material to its business as presently conducted. No Major
Supplier listed in Schedule 3.11(b) has expressed to the Company or to any
Shareholder its intention to cancel or otherwise terminate its relationship with
the Company, and, to the knowledge of the Company and each Shareholder, a
continuing relationship with each such supplier is not in jeopardy.
SECTION 3.12 Employment, Deferred Compensation or Similar
Agreements; Collective Bargaining Agreements; Employee Benefit Plans.
(a) Except as disclosed in Schedule 3.12(a), neither the
Company nor a Subsidiary is a party to any agreement or employment contract or
deferred compensation or similar arrangement with any of its employees or former
employees. There
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are no collective bargaining agreements covering any employees of the Company or
a Subsidiary. The business of the Company and each Subsidiary is not affected by
any present strike or other labor disturbance involving its employees nor, to
the best knowledge of the Company or any Shareholder, is any union attempting to
represent, as collective bargaining agent, any person employed by the Company or
a Subsidiary.
(b) Except as disclosed in Schedule 3.12(b), neither the
Company nor a Subsidiary sponsors or maintains or is otherwise a party to or
liable under any plan, program, fund or arrangement (whether or not qualified
for Federal income tax purposes), whether benefiting a single individual or
multiple individuals, and whether funded or not, that is an "employee pension
benefit plan," or an "employee welfare benefit plan," as such terms are defined
in the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any incentive or other benefit arrangement for its employees, their dependents
and beneficiaries.
(c) Except as disclosed in Schedule 3.12(c) hereto, neither
the Company nor a Subsidiary has or contributes to any multi-employer plan (as
defined in Section 3(37) of ERISA), has incurred any liability under Section
4201 of ERISA for any complete or partial withdrawal from any multi-employer
plan and has not assumed any such liability by any prior owner of any of its
assets or properties.
(d) Each employee pension benefit plan maintained by the
Company or a Subsidiary is listed on Schedule 3.12(b) and complies in all
material respects with the requirements of ERISA. No "reportable event" within
the meaning of Section 403 of ERISA has occurred with respect to any such plan,
and neither the Company nor a Subsidiary has engaged in any "prohibited
transaction" within the meaning of Section 406(a) or (b) of ERISA or of Section
4975(c) of the Code for which a statutory or regulatory exemption is not
available to the Company or such Subsidiary with respect to any such plan; and
no such plan has been terminated in accordance with the procedures set forth in
Section 4041 or 4042 of ERISA.
(e) No liability has been incurred by the Company or a
Subsidiary for any material tax imposed by Section 4975 of the Code with respect
to any plan described in Schedule 3.12(b). The Company and each Subsidiary, as
applicable, has, and shall have, for all periods ending on or prior to the
Effective Time, administered each employee pension benefit plan and each
employee welfare benefit plan described in Schedule 3.12(b) in all material
respects in compliance with the reporting, disclosure and all other requirements
applicable thereto under ERISA, the Code or any other applicable law.
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SECTION 3.13 Real Estate.
(a) Schedule 3.13(a) contains a true and correct description
of all real estate owned by the Company or any Subsidiary or in which the
Company or a Subsidiary has any direct or indirect ownership interest (the
"Owned Real Estate"). The Owned Real Estate is owned by the Company or a
Subsidiary, as indicated in Schedule 3.13(a), in fee simple free and clear of
all liens and encumbrances except as set forth on Schedule 3.13(a) and except
for immaterial liens, restrictions and encumbrances. The Company has delivered
to Parent the most recent title report and survey covering the Owned Real
Property.
(b) Schedule 3.13(b) contains a true and correct list of all
leases, subleases or other agreements under which the Company or a Subsidiary is
lessee or subtenant or lessor or sublessor of real estate ("Leased Real
Estate"). True and complete copies of all such leases, subleases or other
agreements have been delivered by the Company to Parent.
(c) To the knowledge of each Shareholder, all Owned Real
Estate and Leased Real Estate (and improvements thereon) is in good operating
condition and repair, reasonable wear and tear excepted and taking into account
age and usage, and, to the knowledge of the Company and each Shareholder,
conforms in all material respects with all applicable building, zoning,
planning, environmental and other regulations, ordinances or laws, and the
Company has the right to use all real estate necessary in all material respects
to the conduct of its business as currently conducted.
SECTION 3.14 Title to and Condition of Personal Property. The
Company and each Subsidiary has merchantable title to all personal property
reflected in the Balance Sheet or acquired subsequent to the date of the Balance
Sheet (other than inventory disposed of since that date in the ordinary course
of business), free and clear of all liens or encumbrances except as described in
Schedule 3.14 hereto (the "Liens"). All of the personal property owned by the
Company and each Subsidiary is in good operating condition and repair,
reasonable wear and tear excepted and taking into account age and usage. The
Company and each Subsidiary owns or has the right to use all such personal
property necessary to the conduct of its business as currently conducted.
SECTION 3.15 Accounts Receivable. The accounts receivable of
the Company and Subsidiaries reflected in the Balance Sheet or acquired by the
Company or a Subsidiary
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subsequent to the date of the Balance Sheet (a) are true, bona fide accounts
receivable of the Company and Subsidiaries, created in the ordinary course of
business, and (b) have not at any time been placed for collection with any
attorney, collection agency or similar individual or firm. No Shareholder knows
or has reason to know of any offsets, credits or counterclaims to which such
accounts receivable are subject or that such accounts receivable are not fully
collectible in amounts not less than the aggregate amount thereof, net of
reserves established therefor on the books of the Company and Subsidiaries and
reflected in the Balance Sheet.
SECTION 3.16 Intentionally Omitted. INTENTIONALLY OMITTED.
SECTION 3.17 Taxes. The Company and each Subsidiary, as
applicable, has properly and correctly completed and filed all federal, state,
county, municipal and other tax returns, reports and declarations which are
required to be filed by it and has paid or accrued on the Financial Statements
all taxes, penalties and interest which have become (or may hereafter become)
due pursuant thereto or which became (or may hereafter become) due pursuant to
assessments. Neither the Company nor a Subsidiary has received any notice of
deficiency or assessment of additional taxes, and no tax audits are in process.
The last year for which the federal or state income taxes or other taxes of the
Company and Subsidiaries have been examined is set forth accurately and
completely on Schedule 3.17 hereto. Neither the Company nor a Subsidiary has
granted any waiver of any statute of limitation with respect to, or any
extension of a period for the assessment of, any federal, state, county,
municipal or other tax. On December 8, 1997, the Company duly filed with the
Internal Revenue Service an election to be taxed as an S Corporation, which
election is in effect on the date hereof.
SECTION 3.18 Litigation. Except as disclosed in Schedule 3.18,
there is no litigation, investigation or proceeding pending or, to the knowledge
of the Company and each director and officer of the Company, threatened,
involving the Company or any Subsidiary or any of their respective properties.
There are no outstanding orders, writs, injunctions or decrees of any court,
governmental agency or arbitration tribunal materially affecting or materially
limiting the conduct of the business of the Company or a Subsidiary.
SECTION 3.19 Other Material Contracts and Commitments. (a)
Except as disclosed in Schedule 3.19(a) or in another Schedule hereto, neither
the Company nor a Subsidiary is a party to, and none of its properties are bound
by, any of the following types of contracts or commitments, written or oral: (i)
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mortgages, indentures, security agreements and other agreements and instruments
relating to the borrowing of money or extension of credit or imposition of an
encumbrance on any of the assets of the Company or a Subsidiary, (ii) agreements
with any labor union or other collective bargaining unit, (iii) bonus or
compensation agreements (including nonqualified deferred compensation) which
have not been incurred in the ordinary course of business of the Company or a
Subsidiary consistent with past practices, (iv) profit-sharing, stock option,
pension, or retirement agreements, shareholder or similar agreements or
arrangements, trusts, or funds for the benefit of employees, (v) consulting,
sales agency, manufacturer's representative, distributorship or supply
agreements, (vi) other contracts and commitments which are non-cancelable by the
Company or a Subsidiary and which in any case require the payments or receipts
of more than $50,000 to be paid or received after the date hereof, (vii) any
contract for the purchase, sale or lease of real or personal property, either as
lessor or lessee, which contracts have not been fully performed as of the date
hereof, or which in any case involve payment in excess of $50,000; (viii) any
contract with any officer, director or with any employee of the Company or a
Subsidiary (other than agreements relating to current wage or salary payments
terminable by the Company on notice of thirty (30) days or less), (ix) any
contract or promissory note or other instrument with any Affiliate (as
hereinafter defined) of the Company or a Subsidiary, or (x) any guarantee or
obligation to provide funds or assume the debt of any person or entity. The
Company has delivered to Parent complete and correct copies of all written
contracts and commitments, together with all amendments thereto, and accurate
descriptions of all oral agreements, described in Schedule 3.19(a) or any other
Schedule hereto. Neither the Company nor a Subsidiary, as applicable, is in
default with respect to any such contract, and to the knowledge of each
Shareholder no other party to any such contract is in default with respect
thereto. Except as disclosed in Schedule 3.19(a), each such contract will
continue in full force and effect after the Effective Time without any right on
the part of any party thereto to terminate the same as a result of the
occurrence of the Merger. For purposes of this Agreement, "Affiliate" of the
Company or a Subsidiary means (i) any corporation, partnership, limited
liability company, trust or other entity in control of, controlled by or under
common control with the Company or a Subsidiary; and (ii) any officer, director,
trustee, general partner or general manager of any corporation, partnership,
limited liability company, trust or other entity in control of, controlled by or
under common control with the Company. Schedule 3.19(a) discloses all Affiliates
of the Company other than persons unrelated to the Company which may be deemed
to be under common control with the Company solely by reason of equity interests
in such persons being held by shareholders of the Company which are business
entities currently in existence.
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(b) Cross Hill is successor in interest to Anchor Finance
Group LLC. The payment by Parent of the Cross Hill Obligations as contemplated
by this Agreement will satisfy in full all of the Company's obligations to Cross
Hill and/or Anchor Financial Group LLC.
SECTION 3.20 Labor Relations. Except as disclosed in Schedule
3.20, the Company and each Subsidiary, in the conduct of its affairs, has
complied in all material respects with all applicable laws (including, without
limitation, labor and tax laws), and regulations relating to the hiring and
employment of employees and independent contractors, including, without
limitation, those related to discrimination, wages, hours, collective
bargaining, employee pension and welfare benefit plans, and the payment of (and
withholding for) income, Social Security and other taxes, and neither the
Company nor a Subsidiary is liable for any penalties or damages for failure to
comply with any of the foregoing. There are no unfair labor practice claims or
charges pending or to the knowledge of each Shareholder, threatened involving
the Company or a Subsidiary.
SECTION 3.21 Insurance. Schedule 3.21 hereto contains a list
and description (including the name of the insurer, coverage and expiration
date) of all insurance policies maintained by the Company or a Subsidiary.
Schedule 3.21 further lists all claims presently pending or threatened which are
covered by such policies. Neither the Company nor a Subsidiary has received
notice of cancellation or non-renewal of any of such policies.
SECTION 3.22 Conduct of Business and Absence of Changes.
Except as disclosed in Schedule 3.22, since April 30, 1999, the Company and each
Subsidiary has conducted its business in the regular and ordinary course and has
not (i) undergone any material adverse change in its condition (financial or
otherwise), assets, liabilities, business, or operations, (ii) sold or otherwise
disposed of any material amount of its assets outside of the ordinary course of
its business, (iii) declared, set aside, made or paid any cash or stock dividend
or distribution or purchased, issued or sold any shares of its capital stock or
other equity interest, (iv) incurred any indebtedness for borrowed money or
issued or sold any debt securities, (v) instituted any increase in the
compensation payable or to become payable to any officers or employees or any
changes in personnel policies or employees benefits, or (v) made any payment to
any Shareholder or holder of an equity interest except for payments described in
a Schedule hereto and regular salary and ordinary and necessary business
expenses.
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SECTION 3.23 Compliance with Laws; Governmental
Authorizations. The Company and each Subsidiary is in compliance, in all
material respects, with all statutes, laws, ordinances, rules, regulations,
judgments, orders, decrees, governmental permits and other governmental
authorizations or approvals applicable to it or any of its properties, and all
governmental authorizations or approvals necessary for the conduct of the
business of the Company and each Subsidiary have been duly and lawfully obtained
and are in full force and effect, and there are no proceedings pending or, to
the knowledge of the Company and each Shareholder, threatened which may result
in the revocation, cancellation or suspension, or any adverse modification, of
any thereof, the effect of which would result in a Material Adverse Effect on
the Company. Neither the Company nor a Subsidiary has received notice of any
alleged violation of any applicable statute, law, ordinance, rule, regulation,
judgment, order, decree, governmental permit or other governmental authorization
or approval necessary in any material respect for the conduct of the business of
the Company or a Subsidiary.
SECTION 3.24 Officers, Directors and Depositories. Schedule
3.24 hereto contains the names of all the officers and directors of the Company
and each Subsidiary and the names of all depositories of its funds and the names
of the officers and other persons empowered to sign instruments withdrawing
funds from said depositories.
SECTION 3.25 Environmental Matters.
(a) The business and operations of the Company and
each Subsidiary comply with all Federal, state and local laws, rules,
regulations and directives pertaining to the environment. No governmental agency
has asserted any claim or, to the knowledge of any Shareholder, threatened to
assert any claim against the Company or a Subsidiary in respect of its business,
any assets owned or leased by it, T 27 real properties leased by it, or the
condition, use or operation thereof by the Company or a Subsidiary, arising out
of any Federal, state or local law, rule, regulation or directive pertaining to
the environment.
(b) To the knowledge of each Shareholder, there are
nowhere on any Owned Real Property or any real property, used or otherwise under
the control of the Company or a Subsidiary any deposits, dumps, or tanks of
toxic or other poisonous, dangerous or noxious waste, fluids, solvents,
chemicals or effluents, all of which chemicals, fuels and fluids are properly
and safely stored, identified, labeled and maintained in accordance with
applicable industrial standards and all governmental or other laws or
regulations relating thereto. Neither the Company nor a Subsidiary discharges
and has discharged from any Owned Real
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Property, Leased Real Property or any real property, used or otherwise under its
control, whether by effluent, emission or other means, any noxious, toxic,
hazardous or deleterious matter or gases. All discharges of waste material and
other substances from the operating facilities of the Company and each
Subsidiary are in compliance with applicable law and covered by valid permits
and licenses, where required.
SECTION 3.26 Third Party and Governmental Consents. Except as
disclosed in Schedule 3.26 hereto, and except for the filing of a Certificate of
Merger with the Secretary of State of Georgia in accordance with the GBCC
(collectively, the "Required Consents"), no consent, authorization, approval,
order, license, certificate or permit of or from, or registration, declaration
or filing with, any governmental authority or any court or other tribunal or any
other person, firm or entity, nor under any contract, indenture, mortgage,
lease, license or other agreement or instrument to which the Company or a
Subsidiary is a party or by which the Company or a Subsidiary or any of their
respective assets or properties is subject or bound, is required by or with
respect to the Company or a Subsidiary in connection with the execution,
delivery or performance of this Agreement or of any other agreement, document or
instrument to be executed and delivered by the Company pursuant hereto or in
connection herewith or the consummation of the transactions contemplated hereby
or thereby.
SECTION 3.27 Licenses and Permits. The Company and each
Subsidiary has obtained all governmental consents, approvals, waivers and
permits and all consents, approvals or waivers of third parties required in
connection with the ownership of the assets of the Company and each Subsidiary
and the operation of the business of the Company and such Subsidiary as
presently and heretofore conducted, except those licenses, permits, consents,
approvals and waivers as to which the failure to obtain would not have a
Material Adverse Effect on the Company (herein collectively referred to as the
"Licenses"). The Licenses are listed on Schedule 3.27 attached hereto.
SECTION 3.28 Absence of Undisclosed Liabilities. Except as and
to the extent disclosed or accrued on the Financial Statements submitted to
Parent pursuant to the terms hereof, there exist no liabilities or obligations
of any nature whatsoever (whether absolute, contingent or otherwise, matured or
unmatured, or known or unknown) in respect of the business or assets of the
Company and Subsidiaries of the type required to be reflected in financial
statements prepared in accordance with GAAP, except for liabilities or
obligations incurred in the ordinary course of business after the date of the
Balance Sheet. Neither the Company nor any Shareholder knows of any basis for
assertion against the
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Company or a Subsidiary of any claim or liability of any nature in any amount
not fully disclosed in the Financial Statements.
SECTION 3.29 Loans to or from Officers, Directors,
Shareholders or Employees. Except as set forth in Schedule 3.29, neither the
Company nor a Subsidiary has outstanding any loans or advances to, or other
indebtedness from, any director, officer, Shareholder or employee of the Company
or a Subsidiary or any member of their respective families, and there are no
loans or advances made to the Company or a Subsidiary by, or indebtedness
incurred by or on behalf of the Company or a Subsidiary from, any director,
officer, Shareholder or employee of the Company or a Subsidiary or any member of
their respective families (the "Related Party Loans"). True and complete copies
of all promissory notes or other agreements or documents evidencing the Related
Party Loans have been heretofore delivered to Parent.
SECTION 3.30 Contract Losses. Adequate provision has been made
in the Financial Statements in accordance with GAAP for the known and
anticipated losses, if any, for any outstanding and uncompleted contracts with
customers of the Company and/or a Subsidiary.
SECTION 3.31 Year 2000 Compliance. The Company has (i)
reviewed its operations and the operations of each Subsidiary with a view to
assessing whether its business could be adversely affected by a Year 2000
Problem (hereinafter defined), (ii) developed a plan and timeline for addressing
the Year 2000 Problem on a timely basis, and (iii) to date, implemented that
plan in accordance with such timetable. The Company has a reasonable basis to
believe that its computer-based systems (and those of all of the Subsidiaries)
are able to process effectively dates, including dates before, on or after
January 1, 2000, without experiencing any Year 2000 Problem that could
reasonably be expected to have a Material Adverse Effect on the Company or the
Surviving Corporation. For purposes of this Agreement, a "Year 2000 Problem"
shall mean any significant risk that computer hardware, software or equipment
containing embedded microchips essential to the business or operations of the
Company or a Subsidiary or the Surviving Corporation will not, in the case of
dates or time periods occurring after December 31, 1999, function at least as
effectively and reliably as in the case of time periods occurring before January
1, 2000, including without limitation the making of accurate leap year
calculations.
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ARTICLE IV
ADDITIONAL
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants to Parent and
Acquisition, as to itself, severally and not jointly, as follows, knowing and
intending that each of Parent and Acquisition is relying hereon in entering into
the transactions contemplated hereby:
SECTION 4.01 Authority and Capacity Relative to Agreement.
Such Shareholder has all requisite power, authority and legal capacity to enter
into and perform each of its obligations hereunder.
SECTION 4.02 Execution and Performance of Agreement; Validity
and Binding Nature. The execution and delivery of this Agreement, and the
performance by such Shareholder of the terms of this Agreement and the
transactions contemplated hereby, will not result in a material breach of any of
the terms of, or constitute a violation or default under, any statute or
contract, indenture or other instrument by which such Shareholder or any of its
respective properties are bound, and no consent, approval, authorization or
order of any court or governmental authority is required in connection with the
execution and delivery of this Agreement by such Shareholder and the performance
by such Shareholder of the terms of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Shareholder and, together with the other documents and agreements to be executed
by all parties whose execution and delivery thereof is required, constitutes the
legal, valid and binding obligations of such Shareholder, enforceable against
such Shareholder in accordance with their respective terms, except to the extent
that enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity. Such
Shareholder has the legal right and authority to vote the shares of Company
Common Stock held of record by it in favor of the execution, delivery and
performance of this Agreement and the consummation of the Merger in accordance
with the provisions hereof.
SECTION 4.03 Stock of the Company. The number of shares of
Company Common Stock or units or other equity interests of a Subsidiary
beneficially owned by such Shareholder is as identified on Schedule 3.04(a)
opposite the respective Shareholder's name. The shares of Company Common Stock
or units
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or other equity interests of a Subsidiary beneficially owned by such Shareholder
are owned free and clear of all liens, claims, options, encumbrances or
restrictions whatsoever. Such Shareholder has the full legal right and power and
all authorizations and approvals required by law or otherwise to sell, transfer
and deliver such shares or units or other equity interests as contemplated
hereunder and to make the representations, warranties and agreements set forth
in this Agreement. Except with respect to the shares of the Company Common Stock
or units or other equity interests of a Subsidiary identified on Schedule
3.04(a) opposite the respective Shareholder's name, such Shareholder has no
outstanding claim against the Company or a Subsidiary or any right whatsoever
with respect to any shares of the capital stock of the Company or any units or
other equity interest of a Subsidiary, including without limitation any other
option, warrant or other right to acquire shares of the capital stock of the
Company or any securities, options or other instruments convertible or
exchangeable into shares of capital stock of the Company or units or other
equity interests of a Subsidiary. Except as set forth in Schedule 3.02, no
Shareholder is a party to any shareholders agreement, buy-sell agreement or
similar agreement or arrangement with respect to the Company Common Stock or
units or other equity interests in the Company or a Subsidiary.
SECTION 4.04 Additional Representations and Covenants of
Shareholders.
(a) Each Shareholder understands that the issuance of the
shares of Parent Common Stock pursuant to this Agreement is intended to be
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act") by reason of Section 4(2) thereof based, in part, upon the
representations, warranties and agreements of such Shareholder contained in this
Agreement.
(b) Each Shareholder understands that neither the SEC nor any
state securities commission has approved the Parent Common Stock or passed upon
or endorsed the merits of an investment therein or confirmed the accuracy or
adequacy of any information provided by Parent to the Shareholders or the
accuracy or adequacy of any of the representations, warranties and agreements of
Parent contained herein.
(c) Except as contemplated pursuant to Section 7.12 hereof,
such Shareholder is acquiring Parent Common Stock solely for its own account for
investment and not with a view to resale or distribution thereof, in whole or in
part. Such Shareholder has no agreement or arrangement, formal or informal,
written or oral, with any person to sell or transfer or otherwise dispose of
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all or any part of the Parent Common Stock, and has no present plans to enter
into any such agreement or arrangement.
(d) Such Shareholder did not become aware of the offer and
sale of Parent Common Stock through or as a result of any form of general
solicitation or general advertising including, without limitation, any article,
notice, advertisement or other communication published in any newspaper,
magazine or other media in connection with the offer and sale of Parent Common
Stock contemplated hereby and is not purchasing Parent Common Stock through or
as a result of any seminar or meeting to which such Shareholder was invited.
(e) Such Shareholder meets the requirements of at least one of
the categories of an "accredited investor", as defined in Rule 501(a)
promulgated under the Securities Act and as set forth in the form of Accredited
Investor Certification attached hereto as Exhibit A. In connection with the
closing of the transactions contemplated by this Agreement, such Shareholder
shall certify to Parent, in the form of the certification set forth in Exhibit
A, as to which category (or categories) of accredited investor is applicable to
such Shareholder.
(f) Such Shareholder, or such Shareholder together with its
purchaser representative, if any, has such knowledge and experience in
financial, tax, and business matters in general, and investments in securities
in particular, so as to enable such Shareholder to evaluate the merits and risks
of an investment in Parent Common Stock and to make an informed investment
decision with respect thereto.
(g) Such Shareholder recognizes that it must bear the
substantial economic risks of the investment in Parent Common Stock
indefinitely, because none of the Parent Common Stock may be sold, transferred,
hypothecated or otherwise disposed of unless such Parent Common Stock is
registered under the Securities Act and applicable state securities laws or an
exemption from such registration is available. Legends shall be placed on the
certificates representing Parent Common Stock issuable stating that the shares
represented thereby have not been registered under the Securities Act or
applicable state securities laws, and appropriate notations thereof will be made
in Parent's stock books.
(h) Such Shareholder has adequate means of providing for its
current financial needs and foreseeable contingencies and has no need for
liquidity of its investment in Parent Common Stock for an indefinite period of
time. Such Shareholder's overall commitment to investments which are not readily
marketable is not excessive in view of its net worth and financial circumstances
and
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the purchase of the Parent Common Stock will not cause such commitment to become
excessive.
(i) Such Shareholder is not relying on Parent or any of its
employees or agents with respect to the legal, tax, economic and related
considerations of an investment in Parent Common Stock, other than as expressly
contained in the representations and warranties of Parent contained in Article V
hereof. There has been delivered to each Shareholder copies of this Agreement,
Parent's Annual Report on Form 10-K for the Fiscal Year Ended June 30, 1998,
Parent's 1998 Annual Report to Stockholders, Parent Quarterly Reports on Form
10-Q for the Quarters ended March 31, 1999 and December 31, 1998, Parent's Proxy
Statement for its Annual Meeting held on November 16, 1998, Parent's Financial
Statements (hereinafter defined) and the "Risk Factors" section of Parent's
Prospectus dated October 9, 1998 (collectively, the "Parent Public
Information"). Each Shareholder has read and fully understands the Parent Public
Information.
(j) Such Shareholder, or such Shareholder together with its
purchaser representative, if any, (i) has had the opportunity to obtain all
information requested by it for the purpose of verifying the Parent Public
Information or for any other purpose related hereto and (ii) has had the
opportunity to meet with representatives of Parent and to have them answer any
questions and provide such additional information regarding the terms and
conditions of the transactions contemplated hereby, the information with respect
to Parent included in the Parent Public Information and the business and
prospects of Parent deemed relevant by such Shareholder, all of which questions
have been answered and all of which requested information has been provided to
the full satisfaction of such Shareholder. Such Shareholder is aware that an
investment in Parent Common Stock is speculative and involves significant risks,
including, among other things, the risk of the loss of such Shareholder's entire
investment in Parent Common Stock.
(k) In evaluating the suitability of an investment in Parent,
and in deciding to enter into this Agreement, such Shareholder has not relied
upon any representation or other information (whether oral or written) other
than as set forth in the representations and warranties of Parent contained in
Article V of this Agreement and in the Parent Public Information. No oral or
written representations have been made, or oral or written information
furnished, to such Shareholder or such Shareholder together with its purchaser
representative, if any, in connection with the offer and sale of Parent Common
Stock that are in any way inconsistent with the representations and warranties
of Parent
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contained herein or any of the information contained in the Parent Public
Information.
(l) Except as described in Schedule 4.04(l) hereto, such
Shareholder has no beneficial interest, directly or indirectly, in any person,
firm, corporation, partnership or other entity which is or within the past two
years has been a supplier of any goods or services to the Company, including,
without limitation, any Major Supplier, or from which the Company has received
fees, including, without limitation, any Contract Party, other than as the
beneficial owner of 1% or less of the voting securities of a publicly held
corporation. The nature and amount of any such beneficial interest is disclosed
in Schedule 4.04(l).
(m) Such Shareholder is familiar with the business, historical
financial performance and prospects of the Company, including the risks
associated therewith.
(n) Such Shareholder is not required to obtain any spousal
consent in connection with the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and each
Shareholder as follows:
SECTION 5.01 Organization and Qualification. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own or lease and operate its properties and assets and to carry on its business
as it is now being conducted. Parent is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have a Material Adverse Effect on Parent.
SECTION 5.02 Subsidiaries. Each subsidiary of Parent is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own or lease and operate its properties and to carry on its
business as it is now being conducted. Each such subsidiary is duly qualified as
a foreign corporation to do business, and is in good standing, in
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each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified would not have a Material Adverse Effect on
Parent. All the outstanding shares of capital stock of Parent's subsidiaries are
validly issued, fully paid and nonassessable and are owned by Parent or by a
wholly-owned subsidiary of Parent.
SECTION 5.03 Capitalization. The authorized capital stock of
Parent consists of 80,000,000 shares of Parent Common Stock, and, as of April
26, 1999, 26,962,831 shares of Parent Common Stock were issued and outstanding,
all of which were validly issued and are fully paid and nonassessable. Except as
contemplated hereby and except for options and stock purchase rights outstanding
under Parent's employee stock purchase and stock option plans, and rights
outstanding under the Rights Agreement dated May 7, 1997 between Parent and Bank
of New York, as rights agent, no subscription, warrant, option, convertible
security, stock appreciation or other right (contingent or other) to purchase or
acquire any shares of any class of capital stock of Parent is authorized or
outstanding and there is not any agreement of Parent to issue any shares,
warrants, options or other such rights or to distribute to holders of any class
of its capital stock any evidences of indebtedness or assets. Parent does not
have any obligation (contingent or other) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof. At the Effective
Time, Parent will have sufficient authorized but unissued shares or treasury
shares of Parent Common Stock available for issuance in accordance with Article
II hereof.
SECTION 5.04 Authority Relative to Agreement. Parent has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Parent and the consummation by Parent of the transactions contemplated hereby
have been duly authorized by the Board of Directors of Parent, and no other
corporate proceedings on the part of Parent are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and constitutes the legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by general
principles of equity.
SECTION 5.05 Non-Contravention. The execution and delivery of
this Agreement by Parent and the consummation by
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Parent of the transactions contemplated hereby will not (i) conflict with any
provision of the Certificate of Incorporation or By-Laws of Parent or any of its
subsidiaries or (ii) result (with the giving of notice or the lapse of time or
both) in any violation of or default or loss of a benefit under, or permit the
acceleration of any obligation under, any mortgage, indenture, lease, agreement
or other instrument, permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its subsidiaries or any of their respective properties, other than any
such violation, default, loss or acceleration that would not materially
adversely affect the ability of Parent to consummate the transactions
contemplated hereby or to conduct the business of the Company and its
subsidiaries after the Effective Time.
SECTION 5.06 Parent Public Information. Parent has provided to
each Shareholder, or will provide each Shareholder prior to the shareholders'
meeting referred to in Section 7.01(j) hereof, a copy of the Parent Public
Information. The Parent Public Information does not, and will not, as of the
Effective Time, contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
SECTION 5.07 Parent Financial Statements. The consolidated
financial statements of Parent included in the Parent Public Information (the
"Parent Financial Statements") (a) have been prepared from the books and records
of Parent and its consolidated subsidiaries and (b) have been prepared in
accordance with GAAP consistently applied and consistent with prior periods,
subject, in the case of unaudited interim consolidated financial statements, to
year-end adjustments (which consist of normal recurring accruals) and the
absence of certain footnote disclosures. The consolidated financial statements
of Parent included in the Parent Public Information fairly present in all
material respects the financial position of Parent and its subsidiaries as of
their respective dates, and the related consolidated statements of operations,
shareholders' equity and cash flows included in the Parent Public Information
fairly present in all material respects the results of operations of Parent and
its subsidiaries for the respective periods then ended, subject, in the case of
unaudited interim financial statements, to year-end adjustments (which consist
of normal recurring accruals) and the absence of certain footnote disclosures.
SECTION 5.08 Absence of Certain Changes or Events. Except as
contemplated hereby and except for the issuance of Parent Common Stock pursuant
to employee benefit plans of Parent described in Section 5.03 above, since March
31, 1999, Parent has
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not (i) issued any Parent Common Stock or securities or obligations convertible
into or exchangeable for Parent Common Stock, (ii) incurred any material
liabilities (absolute or contingent), except in the ordinary course of business
or (iii) suffered any Material Adverse Effect on Parent and its consolidated
subsidiaries taken as a whole.
SECTION 5.09 Governmental Consents. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Federal, state, local or foreign governmental or regulatory authority is
required to be made or obtained by Parent in connection with the execution and
delivery of this Agreement by Parent or the consummation by Parent of the
transactions contemplated hereby, except for (i) filings pursuant to the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations promulgated by the SEC thereunder,
if applicable, (ii) filings with state securities agencies under state
securities or blue sky laws, if applicable,(iii) the filing with Nasdaq of an
application for the listing on the Nasdaq National Market of shares of Parent
Common Stock to be issued in connection with the Merger, (iv) the filing of a
Certificate of Merger with the Secretary of State of Georgia in accordance with
the GBCC, (v) any licenses, permits, franchises or other governmental
authorizations pertaining to the business of the Company and its subsidiaries
that are required as a result of the consummation of the transactions
contemplated hereby and (vi) such consents, approvals, orders or authorizations
which if not obtained, or registrations, declarations or filings which if not
made, would not materially adversely affect the ability of Parent to consummate
the transactions contemplated hereby or to conduct the business of the Company
and its subsidiaries, if any, after the Effective Time.
SECTION 5.10 Compliance with Law. Neither Parent nor any of
its subsidiaries is in default under any order of any court, governmental
authority or arbitration board or tribunal. Neither Parent nor any such
subsidiary has received notice of any alleged violation of any applicable laws,
ordinances and governmental rules and regulations to which Parent or any such
subsidiary is subject, including, without limitation, federal securities and
banking laws. Neither Parent nor any subsidiary has failed to obtain any
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its properties or to the conduct of its business, except where
the failure to obtain such licenses, permits, franchises or other governmental
authorizations would not have a Material Adverse Effect on Parent.
SECTION 5.11 Tax-Free Reorganization.
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(a) It is Parent's intention that the fair market value of the
Parent Common Stock and other consideration received by each Company shareholder
will be approximately equal to the fair market value of the Company Common Stock
surrendered in the Merger.
(b) Neither Parent nor any corporation that is related to
Parent (within the meaning of Treas. Reg. Section 1.368-1(e)(3)) has any present
plan or intention, following the Merger, to reacquire, or to cause any person or
corporation that is so related to Parent to acquire, any Parent Common Stock
from any Shareholder or any person who was a shareholder of the Company prior to
the Effective Time. Except for cash paid in lieu of fractional share interests
of Parent stock pursuant to the Merger, neither Parent nor any such person or
corporation related to Parent will, in connection with the Merger, purchase,
redeem, or otherwise reacquire any of the shares of Parent Common Stock issued
in the Merger. For purposes of this representation, any arrangement that would
result in a reduction of the risk of loss with respect to the holding of any
interest in the shares of Parent Common Stock shall constitute an acquisition of
such shares.
(c) Parent has not made and will not make any distributions to
its shareholders, other than normal dividend distributions, in contemplation of
or in connection with the Merger or pursuant to a plan or series of transactions
(as determined under Section 355(e)(2) of the Code). Parent has no present plan
or intention to make any distributions after the Merger in connection therewith
to holders of Parent Common Stock (other than dividends made in the ordinary
course of business).
(d) As a result of the Merger, Parent will acquire at least
80% of the total combined power of all classes of Company Common Stock entitled
to vote solely in exchange for Parent Common Stock. Parent has no present plan
or intention to sell, transfer or dispose of any capital stock of the Surviving
Corporation or to cause the Surviving Corporation to issue additional shares of
its capital stock.
(e) Parent has no present plan or intention, following the
Merger, to liquidate the Surviving Corporation, to merge the Surviving
Corporation with and into another corporation, to sell or otherwise dispose of
any of the capital stock of the Surviving Corporation, to cause the Surviving
Corporation to distribute to Parent or any of its subsidiaries any assets of the
Surviving Corporation or any of the Subsidiaries or the proceeds of any
borrowings incurred by the Surviving Corporation or any of the Subsidiaries, or
to cause the Surviving Corporation to sell or otherwise dispose of any of the
assets held by the Company or any
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of its subsidiaries at the time of the Merger, except for dispositions of such
assets in the ordinary course of business and transfers described in Section
368(a)(2)(C) of the Code or Treasury Regulation Section 1.368-2(k).
(f) Immediately following the Merger the Surviving Corporation
will hold (i) at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets that were held by the
Company immediately prior to the Merger and (ii) at least 90% of the fair market
value of the net assets and at least 70% of the fair market value of the gross
assets that were held by Acquisition immediately prior to the Merger. For
purposes of this representation, amounts paid to shareholders who receive cash
or other property (including cash in lieu of fractional shares of Parent Common
Stock) in connection with the Merger, assets of the Company used to pay its
reorganization expenses and all redemptions and distributions made by the
Company (other than dividends made in the ordinary course of business)
immediately preceding, or in contemplation of, the Merger will be included as
assets held by the Company immediately prior to the Merger. Following the
Merger, Parent will not cause or permit the Company to take any action that
would result in any violation of the "substantially all" test of Section
368(a)(2)(E) of the Code.
(g) Other than as provided in Section 7.02(c) hereof, Parent
and Acquisition will each pay their respective expenses incurred in connection
with the Merger. Neither Parent nor Acquisition has paid (directly or
indirectly) or has agreed to assume any expenses or other liabilities, whether
fixed or contingent, incurred or to be incurred by the Company or any of its
subsidiaries or any shareholder of the Company in connection with or as part of
the Merger or any related transactions.
(h) Following the Merger, Parent intends to cause the
Surviving Corporation to continue the Company's "historic business" or to use a
significant portion of the Company's "historic business assets" in a business
(as such terms are defined in Treasury Regulation Section 1.368-1(d)).
(i) Neither Parent nor Acquisition is an investment company as
defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(j) Neither Parent nor Acquisition will take, or cause the
Surviving Corporation to take, any position on any Federal, state or local
income or franchise tax return, or to take any other tax reporting position,
that is inconsistent with the treatment of the Merger as a "reorganization"
within the meaning of Section 368(a) of the Code, unless otherwise required by a
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"determination" (as defined in Section 1313(a)(1) of the Code) or by applicable
state or local tax law (and then only to the extent required by such applicable
state or local tax law).
(k) None of the compensation to be received by any
shareholder-employee of the Company in respect of periods after the Effective
Time represents separate consideration for any of its Company Common Stock. None
of the Parent Common Stock that will be received by any shareholder-employee of
the Company in the Merger represents separately bargained for consideration
which is allocable to any employment agreement or arrangement (including a
covenant not to compete). The compensation paid to any shareholder-employees
will be for services actually rendered and/or for any covenant not to compete
and will be determined by bargaining at arm's-length.
(l) There is no intercorporate indebtedness existing between
Parent (or any of its subsidiaries, including Acquisition) and the Company or
any Subsidiary.
(m) No Company Common Stock will be redeemed for cash or other
property furnished by Parent or Acquisition in the Merger. Further, except as
expressly provided for in the Agreement, no liabilities of the Company or any
Subsidiary or of any of the holders of Company Common Stock will be assumed by
Parent, nor will any of the Company Common Stock acquired by Parent in
connection with the Merger be subject to any such liabilities.
(n) Acquisition is a corporation newly formed for the purpose
of participating in the Merger and at no time prior to the Merger has had assets
(other than nominal assets contributed upon the formation of Acquisition, which
assets will be held by the Surviving Corporation following the Merger),
liabilities or business operations.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUISITION
Acquisition represents and warrants to the Company and each
Shareholder as follows:
SECTION 6.01 Organization and Qualification. Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia and has all requisite corporate power and authority to
own or lease and operate its properties and assets and to carry on its business
as it is now being conducted. Acquisition is duly qualified as a foreign
corporation to do business, and is in good standing, in
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each jurisdiction in which the character of its properties owned or leased or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified would not have a Material Adverse Effect on the
financial condition, operating results or business of Acquisition.
SECTION 6.02 Capitalization. The authorized capital stock of
Acquisition consists of 1,000 shares of common stock, $.01 par value. As of the
date hereof, 100 shares of such common stock are validly issued and outstanding,
fully paid and nonassessable and are owned of record and beneficially by Parent,
and no shares of such common stock are held in the treasury of Acquisition.
Acquisition has no commitments to issue or sell any shares of such common stock
or any securities or obligations convertible into or exchangeable for, or giving
any person any right to subscribe for or acquire from Acquisition, any shares of
such common stock, and no securities or obligations evidencing any such rights
are outstanding.
SECTION 6.03 Authority Relative to Agreement. Acquisition has
all requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Acquisition and by Parent as its sole stockholder, and no other corporate
proceedings on the part of Acquisition are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Acquisition and constitutes the legal, valid and binding
obligation of Acquisition, enforceable against Acquisition in accordance with
its terms except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by principals
of equity.
SECTION 6.04 Non-Contravention. The execution and delivery of
this Agreement by Acquisition and the consummation by Acquisition of the
transactions contemplated hereby will not (i) conflict with any provision of the
Articles of Incorporation or By-Laws of Acquisition or (ii) result (with the
giving of notice or the lapse of time or both) in any violation of or default or
loss of a benefit under, or permit the acceleration of any obligation under, any
mortgage, indenture, lease, agreement, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Acquisition or its
properties, other than any such violation, default, loss or acceleration that
would not adversely affect the ability of Acquisition to consummate the
transactions contemplated hereby.
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SECTION 6.05 Governmental Consents. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Federal, state, local or foreign governmental or regulatory authority is
required to be made or obtained by Acquisition in connection with the execution
and delivery of this Agreement by Acquisition or the consummation by Acquisition
of the transactions contemplated hereby, except for (i) the filing of a
Certificate of Merger with the Secretary of State of the State of Georgia in
accordance with the GBCC, (ii) any licenses, permits, franchises or other
governmental authorizations pertaining to the business of Acquisition that are
required as a result of the consummation of the transactions contemplated hereby
and (iii) such consents, approvals, orders or authorizations which if not
obtained, or registrations, declarations or filings which if not made, would not
adversely affect the ability of Acquisition to consummate the transactions
contemplated hereby.
SECTION 6.06 Other Matters. Acquisition has been formed for
the sole purpose of effecting the Merger and, except as contemplated by this
Agreement, Acquisition has not conducted any business activities and does not
have any material liabilities or obligations.
ARTICLE VII
COVENANTS
SECTION 7.01 Conduct of the Company's Business. The Company
and each Shareholder covenants and agrees that, prior to the Effective Time,
unless Parent shall otherwise consent in writing or as otherwise expressly
contemplated by this Agreement:
(a) the business of the Company and each Subsidiary shall be
conducted only in, and neither the Company nor a Subsidiary shall take
any action except in, the ordinary course of business and consistent
with past practice; and
(b) The Company shall not, directly or indirectly, do any of
the following:
(i) sell, pledge, dispose of or encumber (or permit any of the
Subsidiaries to sell, pledge, dispose of or encumber) any assets of the
Company or any Subsidiary, except inventory and immaterial assets in
the ordinary course of business; (ii) amend or propose to amend its
Articles of Incorporation or By-Laws or the constituent instruments of
a Subsidiary; (iii) split, combine or reclassify any outstanding shares
of its capital stock or equity interests of a Subsidiary, or declare,
set aside or pay any dividend payable in cash,
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stock, property or equity interests of a Subsidiary or otherwise with
respect to such shares or equity interests; (iv) redeem, purchase,
acquire or offer to acquire (or permit Subsidiaries to redeem,
purchase, acquire or offer to acquire) any shares of its capital stock
or units or other equity interests of any class; or (v) enter into any
contract, agreement, commitment or arrangement with respect to any of
the matters set forth in this paragraph (b);
(c) Neither the Company nor a Subsidiary shall (i) issue,
sell, pledge or dispose of, or agree to issue, sell, pledge or dispose
of, any additional shares or units or other equity interests 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; (ii) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof (except
an existing wholly-owned subsidiary); (iii) incur any indebtedness for
borrowed money (other than borrowings under the Company's existing line
of credit in the ordinary course of the Company's business) or issue
any debt securities; (iv) enter into or modify any contract, lease,
agreement or commitment, except in the ordinary course of business and
consistent with past practice; (v) terminate, modify, assign, waive,
release or relinquish any contract rights or amend any rights or claims
not in the ordinary course of business; or (vi) settle or compromise
any claim, action, suit or proceeding pending or threatened against the
Company or a Subsidiary, or, if the Company or a Subsidiary may be
liable or obligated to provide indemnification, against the Company's
directors or officers, before any court, governmental agency or
arbitrator; provided that nothing herein shall require any action that
might impair the directors, general manager or officers of a Subsidiary
or otherwise affect the obligation of any insurance carrier under any
insurance policy maintained by the Company or a Subsidiary;
(d) Neither the Company nor a Subsidiary shall grant any
increase in the salary or other compensation of its employees, except
pursuant to the terms of employment agreements in effect on the date
hereof and listed on a Schedule hereto, 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
employee of the Company or a Subsidiary;
(e) The Company shall not take any action to institute any new
severance or termination pay practices with respect
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to any directors, officers, general manager or employees of the Company
or a Subsidiary or to increase the benefits payable under its severance
or termination pay practices;
(f) Neither the Company nor a Subsidiary shall adopt or amend,
in any respect, except as contemplated hereby or as may be required by
applicable law or regulation, any collective bargaining, 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, general managers or employees;
(g) The Company shall use its best efforts, to the extent not
prohibited by the foregoing provisions of this Section 7.01, to
maintain its relationships with the Major Customers and the Major
Suppliers, and, if and as requested by Parent or Acquisition, (i) the
Company shall use reasonable good faith efforts to make reasonable
arrangements for representatives of Parent or Acquisition to meet with
the Major Customers and Major Suppliers, as designated by Parent, in
order to ensure that the Company's relationships with such customers
and suppliers will remain in force under substantially the same terms
following the Effective Time as are in effect on the date hereof, and
(ii) the Company shall schedule, and the management of the Company
shall participate in, meetings of representatives of Parent or
Acquisition with employees of the Company or any of its subsidiaries;
(h) The Company or the Subsidiaries, as applicable, and the
other parties thereto shall terminate, effective as of the Effective
Time, each of the agreements disclosed in Schedule 3.02 to which they
are parties, except as otherwise set forth in such Schedule 3.02; and
any existing employment agreements with employees of the Company or a
Subsidiary.
(i) The Company shall use good faith efforts, dedicating all
resources required, to complete the Merger so that the Effective Time
shall occur not later than May 28, 1999; and
(j) The Company shall use its best efforts to obtain all
Required Consents.
SECTION 7.02 Certain Covenants of Parent.
(a) Parent covenants and agrees that, prior to the Effective
Time, unless the Company shall otherwise consent in writing or as
otherwise expressly contemplated by this
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Agreement, Parent shall not amend its Certificate of Incorporation or
By-Laws in a manner that could reasonably be expected to be materially
adverse to the Shareholders. Parent shall use good faith efforts,
dedicating all resources required, to complete the Merger so that the
Effective Time shall occur not later than May 28, 1999.
(b) Parent covenants and agrees that at the Effective Time,
Parent shall grant to certain key employees of the Surviving
Corporation other than the Shareholders, as determined by Parent in its
sole discretion after discussions with the Company, employee stock
options to purchase 15,000 shares of Parent Common Stock, all in
accordance with the terms of Parent's stock option plans in effect at
the Effective Time and subject to the terms of the Parent's standard
stock option agreement and restrictive covenants agreement.
(c) Parent covenants and agrees to pay in full as of the
Effective Time (i) the outstanding Related Party loans to the Company
from the Shareholders as shown on Schedule 3.29, (ii) the Former
Shareholder Obligation in the amount of One Hundred Seventy Six
Thousand Eight Hundred Six Dollars ($176,806.00) and (iii) the Minority
Interest Notes (hereinafter defined) pursuant to Section 7.17 hereof.
SECTION 7.03 Access to Information. (a) The Company shall, and
shall cause its officers, directors, employees, representatives and agents and
each Subsidiary to, afford, from the date hereof to the Effective Time, the
officers, employees, accountants, attorneys and other representatives and agents
of Parent reasonable and complete access, subject to the terms of the
Confidentiality Agreement (hereinafter defined), upon reasonable notice, to its
premises and its officers, employees, agents, properties, books, records and
workpapers, including auditors' workpapers to the extent permitted by the
Company's auditors, and shall furnish Parent all financial, operating and other
information and data as Parent, through its officers, accountants, attorneys and
other employees or agents, may reasonably request.
(b) Parent shall, and shall cause its officers, directors,
employees, representatives and agents to, afford, from the date hereof to the
Effective Time, the officers, employees, representatives and agents of the
Company reasonable access during regular business hours to its officers,
employees, agents, properties, books, records and workpapers, and shall furnish
the Company all financial, operating and other information and data as the
Company, through its officers, employees or agents, may reasonably request.
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(c) No investigation pursuant to this Section 7.03 shall
affect, add to or subtract from any representations or warranties of the parties
hereto or the conditions to the obligations of the parties hereto to effect the
Merger.
SECTION 7.04 Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, including, without limitation, using all reasonable efforts (without
the necessity of the payment of any material sum or the incurrence of any
material expense or obligation) to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings.
SECTION 7.05 Inquiries and Negotiations. (a) Neither the
Company nor any of its affiliates, shareholders, directors, officers, employees,
representatives or agents or any Subsidiary shall, through the Effective Time,
directly or indirectly, (i) solicit or initiate any discussions, submissions of
proposals or offers or negotiations with, or (ii) participate in any
negotiations or discussions with, or provide any information or data of any
nature whatsoever to, or otherwise cooperate in any other way with, or assist or
participate in, facilitate or encourage any effort or attempt by, any person,
other than Parent and its affiliates, representatives and agents, concerning any
merger, consolidation, sale of substantial assets, sale of shares of capital
stock or other securities, recapitalization, debt restructuring or similar
transaction involving the Company or any Subsidiary, or any division of the
Company or any Subsidiary. The Company shall immediately notify Parent if any
proposal, offer, inquiry or other contact is received by, any information is
requested from, or any discussions or negotiations are sought to be initiated or
continued with, the Company or a Subsidiary in respect of any such transaction,
and shall, in any such notice to Parent, indicate the identity of the offeror
and the terms and conditions of any proposals or offers or the nature of any
inquiries or contacts, and thereafter, without engaging in any conduct
prohibited hereby, shall keep Parent informed of the status and terms of any
such proposals or offers. Neither the Company nor a Subsidiary shall release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which the Company or a Subsidiary is a party.
SECTION 7.06 Employment and Non-Competition Agreements. (a) At
or prior to the Effective Time, the Company and each Subsidiary, as applicable,
shall terminate, effective immediately prior to the Effective Time, any and all
existing
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employment agreements with a Shareholder and each Shareholder shall enter into,
effective as of the Effective Time, a two-year employment agreement with Parent
and/or the Surviving Corporation in Parent's standard form (the "Employment
Agreements") and a non-competition agreement for the benefit of Parent and the
Surviving Corporation in Parent's standard form (the "Non-Competition
Agreements").
(b) In addition, at the Effective Time, Parent shall
grant to each Shareholder employee stock options to purchase 33,333 shares of
Parent Common Stock, all in accordance with the terms of Parent's stock option
plans in effect at the Effective Time and subject to the terms of the Parent's
standard stock option agreement and restrictive covenants agreement, provided
that such options as would otherwise vest at any time during the term of such
Shareholder's Employment Agreement shall vest in the event of such Shareholder's
early termination without cause.
SECTION 7.07 Notification of Certain Matters. The Company
shall give prompt notice to Parent and Acquisition, and Parent and Acquisition
shall give prompt notice to the Company, of (i) the occurrence, or failure to
occur, of any event that such party believes would be likely to cause any of its
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time and (ii) any material failure of the Company, Parent or
Acquisition, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that failure to
give such notice shall not constitute a waiver of any defense that may be
validly asserted.
SECTION 7.08 Indemnification.
(a) Indemnifiable Breaches. Subject to the terms and conditions
specified in this Section 7.08(a), each Shareholder shall be severally liable to
and shall severally indemnify, protect, defend and hold harmless Parent and its
successors and the Surviving Corporation and its successors, pursuant to the
terms of this Section 7.08, against any and all claims, damages, liabilities,
penalties, assessments, interest and expenses (including, without limitation,
reasonable attorneys' fees) (collectively, "Damages") sustained by Parent or the
Surviving Corporation, in excess of insurance proceeds or other amounts actually
received by Parent or the Surviving Corporation, arising out of (i) the breach
of any representation, warranty, covenant or other agreement made by the Company
or any Shareholder in or pursuant to this Agreement or any other agreement or
instrument executed and delivered by or on behalf of the Company and/or such
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Shareholder pursuant hereto or in connection herewith or (ii) claims by holders
of Minority Interests to the extent arising out of the redemption or purchase by
the Company or any Subsidiary of the Minority Interests pursuant to Section 7.17
hereof (although not arising out of any failure by Parent to pay the Minority
Interest Notes as provided in this Agreement) or (iii) claims by the holders of
Unit Options to the extent arising out of the conversion of Unit Options to
Company Options pursuant to Section 2.2(a) hereof, such breaches, failures or
claims being hereinafter referred to individually as an "Indemnifiable Breach"
and collectively as "Indemnifiable Breaches"; provided, however, that no
Shareholder shall be required to pay Parent and/or the Surviving Corporation, as
the case may be, pursuant to this Section 7.08, (i) an amount in excess of
one-third of the aggregate amount of all Damages resulting from all
Indemnifiable Breaches and (ii) in any event, in the aggregate, an amount in
excess of the dollar value equivalent of the Parent Common Stock, valued at the
Average Price, received by such Shareholder upon consummation of the Merger
pursuant to the terms hereof. Subject to the terms of the last sentence of this
Section 7.08, the indemnification obligations of Shareholders under this Section
7.08 shall apply to all Damages sustained by Parent, the Surviving Corporation
respect of Indemnifiable Breaches hereunder if and when the aggregate amount of
such Damages, including insurance proceeds actually received by Parent, and/or
the Surviving Corporation, exceeds $100,000 in the aggregate (the "Basket"), and
in the event the aggregate amount of the Damages, including insurance proceeds
actually received in connection therewith, sustained by Parent and/or the
Surviving Corporation in respect of Indemnifiable Breaches exceeds the Basket,
the indemnification obligations of the Shareholders under this Section 7.08
shall apply to all Damages actually sustained by Parent and/or the Surviving
Corporation in respect of Indemnifiable Breaches. Notwithstanding the foregoing,
the Basket shall not apply to Damages resulting from breaches with respect to
the representations, warranties and/or covenants set forth in Section 3.17 of
this Agreement relating to tax matters, amounts payable by Parent or the
Surviving Corporation in excess of $350,000.00 in respect of the Cross Hill
Obligation, or matters which are indemnifiable pursuant to clauses (ii) or (iii)
of this Section 7.08(a) hereinabove, subject to the limitations set forth in
said clauses (ii) and (iii), for which Damages and amounts Shareholders shall be
liable hereunder whether or not the Basket has been satisfied. Notwithstanding
anything herein to the contrary, no Shareholder shall have any liability for the
breach of any representation or warranty which, on or before the Effective Time,
Parent or Acquisition or any of their respective officers, employees, counsel or
other representatives actually knew was incorrect or false.
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(b) Satisfaction of Claims. Subject to the terms of the second
sentence of Section 7.08(d) below, any Shareholder shall be permitted to satisfy
such Shareholder's obligation(s) under this Section 7.08 in cash or by
delivering to Parent or the Surviving Corporation, as the case may be, shares of
Parent Common Stock in an amount equal to such Shareholder's liability based on
a per share value equal to the Average Price.
(c) Indemnification by Parent. Parent and Acquisition shall be
jointly and severally liable to, and shall jointly and severally indemnify,
protect, defend and hold harmless each Shareholder and its respective successors
against any and all claims, damages, liabilities and expenses (including
reasonable attorneys' fees) sustained by any Shareholder, resulting from or in
connection with the breach of any representation, warranty, covenant or other
agreement made by Parent or Acquisition in or pursuant to this Agreement or any
other agreement or instrument executed and delivered by or on behalf of Parent
and/or Acquisition pursuant hereto or in connection herewith.
(d) Other Remedies. Notwithstanding anything herein to the
contrary, any party hereto shall be entitled to (i) seek specific performance of
this Agreement and (ii) xxx for damages in the event of a wrongful termination
of this Agreement in violation of Article IX hereof or the failure to consummate
the transactions contemplated hereby through no fault of such party. Except as
referred to in clauses (i) and (ii) of this Section 7.08(d), Damages
indemnifiable hereunder shall be limited to actual Damages sustained by a party
hereto, and no claim for indemnity by a party hereto shall include indirect,
consequential or incidental Damages, provided that Damages shall include all
Damages to the extent that they are incurred by a third party and the party
seeking indemnification hereunder is finally determined to be liable therefor to
such third party. The remedies of a party hereto under this Agreement or
pursuant to any other agreement or instrument executed and delivered by or on
behalf of such party pursuant hereto or in connection herewith (other than any
employment agreement, confidentiality and noncompetition agreement or stock
option agreement) shall be limited to the rights and remedies set forth in this
Section 7.08, provided, however, that in the event of fraud or a knowing and
willful Indemnifiable Breach by a party hereto none of the limitations set forth
in this Section 7.08(d) on Damages recoverable by the party seeking
indemnification from such party shall apply and, in such case, such party shall
have all rights and remedies available to it at law or in equity. The terms of
this Section 7.08 are intended to benefit the parties hereto and any and all
claims for indemnification hereunder must be made in writing during the period
commencing on the date hereof and ending at the close of business on December
31, 2000. No claim for
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indemnification under or pursuant to this Agreement may be made after the second
anniversary date of the Effective Time.
(e) Indemnification Procedure; Third Party Claim. If any party
to this Agreement (an "Indemnitee") receives written notice of the assertion of
any claim or of the commencement of any action or proceeding by any person or
entity which is not a party to this Agreement (a "Third Party Claim") against or
affecting such Indemnitee, if such assertion were presumed to be true
(regardless of the actual outcome), for which a party could be obligated to
provide indemnification under this Agreement (an "Indemnifying Party") as a
result of or in connection with such claim, action or proceeding, such
Indemnitee will give such Indemnifying Party reasonably prompt written notice
thereof, but in any event no later than ten (10) calendar days after receipt of
such written notice of such Third Party Claim. The Indemnifying Party may
defend, if it so chooses, such Third Party Claim at such Indemnifying Party's
sole expense and by such Indemnifying Party's own counsel. The Indemnitee will
have the right to participate in the defense of any Third Party Claim assisted
by counsel of its own choosing at Indemnitee's sole expense. The Indemnifying
Party and the Indemnitee will cooperate with each other in good faith in such
defense. However, in the event the Indemnitee determines to participate in the
defense of a claim, the Indemnifying Party, or its counsel, shall make all
significant decisions relating to the defense, settlement or compromise of any
such claim (subject to and in accordance with this Section 7.08).
SECTION 7.09 Confidentiality. Except as otherwise provided in
that certain Confidentiality Agreement dated December 4, 1998 between the
Company and the Parent with regard to information about the Company (the
"Confidentiality Agreement"), Parent and Acquisition, on the one hand, and the
Company and the Shareholders, on the other, shall hold, and shall use their
respective best efforts to cause their respective officers, directors,
employees, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other parties furnished to such party in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by the
receiving party; (ii) in the public domain through no fault of the receiving
party; (iii) later lawfully acquired by such party from sources other than the
other parties; or (iv) independently developed by such party without the use of
such information; provided that each party may disclose such information to its
affiliates and its affiliates' officers, directors, employees, consultants,
advisors and agents,
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lenders and other investors in connection with the transactions contemplated by
this Agreement so long as such persons are informed by such party of the
confidential nature of such information and are directed by such party to treat
such information confidentially. If the transactions contemplated by this
Agreement are abandoned, such confidentiality shall be maintained and each party
shall, and shall use its best efforts to cause its respective officers,
directors, employees, consultants, advisors and agents to, destroy or deliver to
the other party(s), upon request, all documents and other materials, and all
copies thereof, obtained by such party or on its behalf from the other party(s)
in connection with this Agreement that are subject to such confidentiality. The
terms of this Section 7.09 shall survive indefinitely.
SECTION 7.10 Covenants of Shareholders. (a) Each Shareholder
hereby agrees not to:
(i) sell, transfer, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, encumbrance,
assignment or other disposition of, any shares of Company Common Stock
or any units or other equity interests of a Subsidiary owned by such
Shareholder;
(ii) grant any proxies or enter into a voting agreement or
other arrangement with respect to any shares of Company Common Stock or
any units or other equity interests of a Subsidiary owned by such
Shareholder, other than as provided herein; or
(iii) deposit any shares of Company Common Stock or any units
or other equity interests of a Subsidiary owned by such Shareholder
into a voting trust.
(b) Each Shareholder hereby agrees not to take any action that
would make any representation or warranty herein of such Shareholder untrue or
incorrect in any material respect or that would have the effect of preventing or
disabling such Shareholder from performing its obligations under this Agreement.
(c) Each Shareholder hereby agrees to surrender the
Certificates owned by such Shareholder in exchange for certificates representing
shares of Parent Common Stock and cash, if applicable, within five (5) business
days after the Effective Time.
SECTION 7.11 Transfer Restrictions After the Effective Time.
Each Shareholder hereby agrees that, from and
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after the Effective Time such Shareholder shall not offer, sell, or otherwise
dispose of the shares of Parent Common Stock received by such Shareholder in
connection with the Merger other than (i) pursuant to an effective registration
statement under the Securities Act, or (ii) otherwise pursuant to an exemption
from the registration requirements of the Securities Act.
SECTION 7.12 Registration Rights Agreements. Each Shareholder and each
other holder of shares of Company Common Stock shall be entitled to certain
registration rights upon receipt of Parent Common Stock in connection with the
Merger, as provided in the registration rights agreement in the form of Exhibit
B hereto (the "Registration Rights Agreement") and subject to the terms and
conditions of the Registration Rights Agreement, provided such person or entity
executes and delivers to Parent the Registration Rights Agreement. Parent
covenants and agrees to execute and deliver the Registration Rights Agreement at
the Effective Time.
SECTION 7.13 Repayment of Related Party Loans. Each Related Party Loan
shall be repaid by the obligor thereof immediately prior to the Effective Time.
SECTION 7.14 Year 2000. At the reasonable request of Parent or
Acquisition, the Company and the Shareholders shall provide Parent or
Acquisition, as the case may be, with assurances and substantiations (including,
without limitation, the results of internal or external audit reports),
reasonably acceptable to Parent and Acquisition, as to the capability of the
Company and each Subsidiary to conduct its business and operations before, on
and after January 1, 2000 without experiencing any Year 2000 Problems.
SECTION 7.15 Termination of Shareholders' Agreements and SCI Option
Agreement. Prior to the Effective Time, (i) the Company or a Subsidiary, as
applicable, and each Shareholder who is a party to a Shareholders' or similar
agreement disclosed in Schedule 3.02 will enter into a written agreement
terminating such agreement, as of the Effective Time, without further obligation
of the Company, any Subsidiary, Parent or the Surviving Corporation thereunder
and (ii) the Company, Dover International and Mungenast will enter into a
written agreement terminating the certain Stock Option Agreement (undated,
sometime in 1995) between Dover International and Mungenast pertaining to SCI
without further obligation of the Company, any Subsidiary, Parent or the
Surviving Corporation.
SECTION 7.16 Shareholder Sub-S Tax Liability. Immediately prior to the
Effective Date the Company will remit to each shareholder of the Company that
amount reasonably estimated by
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the Company to represent such shareholder's tax obligation for the undistributed
profits of the Company from January 1, 1999 through the Effective Time,
calculated using the anticipated marginal tax rate of 45.6%. The Company has
provided to Parent a written schedule showing the calculation thereof. Such
amount paid to each such shareholder shall be adjusted upward or downward, as
the case may be, as hereinafter set forth in this Section 7.16. In the event
that the actual undistributed profits of the Company from January 1, 1999
through the Effective Date (the "Actual Undistributed Profits") shall exceed the
amount of undistributed profits estimated for the calculation of amounts paid to
such shareholders immediately prior to the Effective Time (the "Estimated
Undistributed Profits"), an amount equal to 45.6% of the amount by which the
Actual Undistributed Profits exceed the Estimated Undistributed Profits shall be
paid by Parent or the Surviving Corporation to such shareholders in proportion
to their respective equity interests in the Company immediately prior to the
Effective Time. In the event that the Actual Undistributed Profits shall be less
than the Estimated Undistributed Profits, the Shareholders shall remit to Parent
and shall use their best efforts to cause such other shareholders to remit to
Parent an amount equal to 45.6% of the amount by which the Actual Undistributed
Profits are less than the Estimated Undistributed Profits. Parent or the
Surviving Corporation shall notify such shareholders in writing of its good
faith determination of the Actual Undistributed Profits and any amount to be
paid to such shareholders or remitted by such shareholders under this Section
7.16, which determination shall be binding on Parent, the Surviving Corporation
and such shareholders. The obligations of the parties under this Section 7.16
shall survive the Effective Time.
SECTION 7.17 Minority Interests. Prior to the Effective Time, the
Company and the Shareholders shall cause the Minority Interests to be redeemed
or purchased by SCI, Dover Group and/or the Company in consideration of the
issuance by the Company to the holders of the Minority Interests of
interest-free promissory notes as shown on Schedule 7.17 hereto (the "Minority
Interest Notes"), which Minority Interest Notes will be prepaid in full by
Parent to the holders of the Minority Interests immediately prior to the
Effective Time (except for the Minority Interest Note payable to Xxxxx Xxxxxx
which shall be paid in accordance with its terms), and which Minority Interest
Notes shall be in form and substance approved by Parent. Shareholders represent,
warrant, covenant and agree that the payment of the Minority Interest Notes and
the payments of amounts provided for in Section 7.16 will satisfy all
obligations of the Company and the Surviving Corporation to the holders of the
Minority Interests and to shareholders of the Company for undistributed profits
and/or the redemption of the Minority Interests.
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SECTION 7.18 Cross Hill Obligation. As of the Effective Time, Parent
shall pay to Cross Hill the Cross Hill Obligation.
SECTION 7.19. Tax Reorganization Status. Each of Parent, the Company
and the Surviving Corporation shall use their reasonable best efforts to cause
the Merger to qualify as a reorganization under the provisions of Section 368 of
the Code.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at the Effective Time of the following condition:
(a) no preliminary or permanent injunction or other order,
decree or ruling issued by any court of competent jurisdiction nor any
statute, rule, regulation or order entered, promulgated or enacted by
any governmental, regulatory or administrative agency or authority
shall be in effect that would prevent the consummation of the Merger as
contemplated hereby.
SECTION 8.02 Conditions to the Obligation of the Company and
the Shareholders to Effect the Merger. The obligation of the Company and the
Shareholders to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional conditions:
(a) Parent and Acquisition shall have performed and complied
in all material respects with all obligations and agreements required
to be performed and complied with by them under this Agreement at or
prior to the Effective Time;
(b) the representations and warranties of Parent and
Acquisition contained in this Agreement shall be true and correct in
all material respects at and as of the Effective Time as if made at and
as of such date, except as otherwise contemplated or permitted by this
Agreement;
(c) the Company shall have received a certificate signed by
the Chief Executive Officer or the Chief Financial Officer of Parent,
dated as of the Effective Time, to the effect that the conditions set
forth in paragraphs (a) and (b) above have been satisfied;
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(d) the Company shall have received the opinion of Xxxxxxx &
Xxxxxx, P.C., counsel to Parent and Acquisition, substantially in the
form of Exhibit C attached hereto.
SECTION 8.03 Conditions to the Obligation of Parent and
Acquisition to Effect the Merger. The obligation of Parent and Acquisition to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions:
(a) The Company shall have performed and complied in all
material respects with all obligations and agreements required to be
performed and complied with by it under this Agreement at or prior to
the Effective Time;
(b) The representations and warranties of the Company and the
Shareholders contained in this Agreement shall be true and correct in
all material respects at and as of the Effective Time as if made at and
as of such date, except as otherwise contemplated or permitted by this
Agreement;
(c) Parent shall have received a certificate signed by the
Chairman and Chief Executive Officer of the Company, dated as of the
Effective Time, to the effect that the conditions set forth in
paragraphs (a) and (b) above have been satisfied;
(d) Parent shall have received reasonable assurances that (1)
all relationships with Major Customers and Major Suppliers shall remain
in force after the Effective Time upon substantially the same terms in
effect prior to the Merger, except where any failure to receive such
assurance would not have a Material Adverse Effect on the Company, a
Subsidiary or the Surviving Corporation;
(e) Any and all existing employment agreements between the
Company or a Subsidiary, as applicable, and Shareholders shall have
been terminated effective on or prior to the Effective Time, and each
Shareholder shall have executed and delivered his Employment Agreement
and Noncompetition Agreement;
(f) Each Shareholder who is an accredited investor shall have
executed and delivered an Accredited Investor Certification in the form
of Exhibit A attached hereto;
(g) Parent shall have received payoff letters from each of
Wachovia Bank National Association and L&N Enterprises Group, Inc.
(formerly called ITI-Xxxx, Inc.) in respect of the Company's
obligations of indebtedness to each
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of them in form and substance reasonably satisfactory to Parent;
(h) Parent and Acquisition shall have received the opinion of
Xxxxx, Day, Xxxxxx & Xxxxx, counsel to the Company, substantially in
the form of Exhibit D attached hereto;
(i) Parent shall have determined, in its good faith judgment,
that the business of the Company shall have been operated, from April
30, 1999 through the Effective Time, in the normal and ordinary course
including, without limitation, that the Company, each Subsidiary and
the management employees of the Company and each Subsidiary shall have
used their reasonable good faith efforts to preserve the goodwill of
the business of the Company and each Subsidiary and to maintain and
keep the assets intact and that no additional liabilities have been
incurred, other than in the normal course of business;
(j) The Minority Interests shall have been redeemed or
purchased as contemplated by Section 7.17 hereof, and each Unit Option
shall have been converted to a Company Option as contemplated by
Section 2.02(a) hereof;
(k) Cross Hill Financial shall have released in writing the
Company and the Surviving Corporation from the Cross Hill Obligation in
form and substance reasonably satisfactory to Parent and Acquisition.
(l) The Company shall have received all Required Consents and
delivered same to Parent;
(m) Parent shall have received duly executed resignation
letters from all of the officers and directors of the Company.
ARTICLE IX
TERMINATION AND ABANDONMENT
SECTION 9.01 Termination and Abandonment. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time:
(a) by mutual action of the Boards of Directors of
Parent and the Company;
(b) by the Company, if all of the conditions set
forth in Section 8.03 shall have been complied with and
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performed and one or more of the conditions set forth in
Sections 8.01 and 8.02 shall not have been complied with or
performed in any material respect and such noncompliance or
nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by Parent and
Acquisition on or before June 30, 1999 (the "Drop Dead Date");
or
(c) by Parent or Acquisition, if all of the
conditions set forth in Section 8.02 shall have been complied
with and performed and one or more of the conditions set forth
in Sections 8.01 and 8.03 shall not have been complied with or
performed in any material respect and such noncompliance or
nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by the Company on or
before the Drop Dead Date.
SECTION 9.02 Effect of Termination. Except as provided in
Section 7.09 with respect to confidential information and except as provided in
Section 10.02 hereof with respect to expenses, in the event of the termination
of this Agreement and the abandonment of the Merger pursuant to Section 9.01,
this Agreement shall thereafter become void and have no effect, and no party
hereto shall have any liability to any other party hereto or its shareholders or
directors or officers in respect thereof, except that nothing herein shall
relieve any party from liability for any willful breach hereof.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Survival of Representations and Warranties. The
representations and warranties of Shareholders in this Agreement and in any
instrument delivered pursuant hereto shall survive the Effective Time until the
close of business on December 31, 2000, provided that this Section 10.01 shall
not limit any other covenant or agreement of the parties that by its terms
contemplates performances beyond such period.
SECTION 10.02 Expenses, Etc. (a) Whether or not the
transactions contemplated by this Agreement are consummated, neither the Company
and the Shareholders, on the one hand, and Parent and Acquisition, on the other
hand, shall have any obligation to pay any of the fees and expenses of the other
incident to the negotiation, preparation and execution of this Agreement,
including, without limitation, the fees and expenses of counsel, accountants,
consultants, investment bankers and other experts (collectively, the
"Professional Fees"), provided,
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however, that Professional Fees incurred by the Company and the Shareholders in
connection with the consummation of the Merger in excess of One Hundred Thousand
Dollars ($100,000.00) in the aggregate shall be the sole responsibility of the
Shareholders and shall not be paid out of Company funds either before or after
the Effective Time.
(b) Except for the Cross Hill Obligation, no person or entity
is entitled to receive from the Company or Parent any investment banking,
brokerage or finder's fee or fees for financial consulting or advisory services
in connection with this Agreement or the transactions contemplated hereby. The
Shareholders, on the one hand, and Parent and Acquisition, on the other hand,
shall indemnify the other and hold it harmless from and against any claims for
finders' fees or brokerage commissions in relation to or in connection with such
transactions as a result of any agreement or understanding between such
indemnifying party and any third party other than the Cross Hill Obligation,
which shall be paid by Parent.
SECTION 10.03 Publicity. The Company and Parent agree that
they will not issue any press release or make any other public announcement
concerning this Agreement or the transactions contemplated hereby without the
prior written consent of the other party, except that the Company, Parent or
Acquisition may make such public disclosure that it believes in good faith to be
required by law (in which event such party shall consult with the other prior to
making such disclosure).
SECTION 10.04 Execution in Counterparts. For the convenience
of the parties, this Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 10.05 Material Adverse Effect. As used in this
Agreement, the term "Material Adverse Effect" shall mean, with respect to any
entity, a material adverse effect on the assets, financial condition, operating
results or business of such party and its subsidiaries, taken as a whole. A
Material Adverse Effect as to the Company or any of the Subsidiaries shall be
measured in accordance with the foregoing definition on the assets, financial
condition, operating results or business of such entity and the Company and the
Subsidiaries taken as a whole as a consolidated group.
SECTION 10.06 Notices. All notices that are required or may be
given pursuant to the terms of this Agreement shall be in writing and shall be
sufficient if given in writing and delivered by hand or national overnight
courier service,
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transmitted by telecopy or mailed by registered or certified mail, postage
prepaid, as follows:
If to Parent and/or Acquisition, to:
The BISYS Group, Inc.
Overlook at Great Notch
000 Xxxxx Xxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Chairman and Chief Executive Officer
with a copy to:
The BISYS Group, Inc.
Overlook at Great Notch
000 Xxxxx Xxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
If to the Company or the Shareholders prior to the Effective
Time, to:
HML, Inc.
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: President
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
0000 Xxxxxxxx Xxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to the Shareholders subsequent to the Effective Time, to
their respective residential addresses as reflected in the
records of the Surviving Corporation.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 10.07 Waivers. The Company, on the one hand, and
Parent and Acquisition, on the other hand, may, by written notice to the other,
(i) extend the time for the performance of any of the obligations or other
actions of the other under this Agreement; (ii) waive any inaccuracies in the
representations or
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warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement; (iii) waive compliance with any of the conditions of
the other contained in this Agreement; or (iv) waive performance of any of the
obligations of the other under this Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 10.08 Entire Agreement. This Agreement, its Schedules,
the documents executed at the Effective Time in connection herewith, including
without limitation the documents included as Exhibits hereto, and the
Confidentiality Agreement constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof. No representation, warranty, promise,
inducement or statement of intention has been made by any party that is not
embodied in this Agreement or such other documents, and none of the parties
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or therein.
SECTION 10.09 Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to principles of conflict of laws.
SECTION 10.10 Binding Effect, Benefits. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective legal representatives and permitted successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any person other
than the parties hereto or their respective permitted successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 10.11 Assignability. Neither this Agreement nor any of
the parties' rights hereunder shall be assignable by any party hereto without
the prior written consent of the other parties hereto.
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SECTION 10.12 Amendments. This Agreement may be modified,
amended or supplemented at any time by action of the respective Boards of
Directors of the Company, Parent and Acquisition, and the Shareholders. Without
limiting the generality of the foregoing, this Agreement may only be amended,
varied or supplemented by an instrument in writing, signed by all of the parties
hereto.
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement and Plan of Merger as of the day and year first above written.
THE BISYS GROUP, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman, President
and Chief Executive
Officer
BI-HML ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxx
---------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman, President
and Chief Executive
Officer
HML, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: President
SHAREHOLDERS:
/s/ Harris D. Hobby
------------------------------
Harris D. Hobby
/s/ Xxxxxx X. Xxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxxx
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INDEX TO DEFINED TERMS
Term Section Reference
---- -----------------
"Acquisition" Recitals
"Actual Undistributed Profits" 7.16
"Affiliate" 3.19(a)
"Agreement" Recitals
"Aggregate Parent Common Stock 2.01(a)
Consideration"
"Articles of Incorporation" 3.06
"Average Price" 2.01(a)
"Balance Sheet" 3.08
"Basket" 7.08(a)
"Cap" 7.08(a)
"Certificate" 2.04
"Code" Recitals
"Company" Recitals
"Company Common Stock" 2.01
"Company Options" 2.02(a)
"Confidentiality Agreement" 7.09
"Constituent Corporations" Recitals
"Copyrights" 3.09
"Cross Hill" 2.01(a)
"Cross Hill Obligation" 2.01(a)
"Damages" 7.08(a)
"Dover Group" 2.01(a)
"Dover International" 3.08
"Drop Dead Date" 9.01(b)
"Effective Time" 1.03
"Employment Agreements" 7.06(a)
"ERISA" 3.12(b)
"Estimated Undistributed Profits" 7.16
"Exchange Act" 5.09
"Exchange Shares" 2.01(b)
"Exchange Value" 2.01(b)
"Financial Statements" 3.08
"Former Shareholder Obligation" 2.01(a)
"GAAP" 3.08
"GBCC" Recitals
"Hobby" Recitals
"Indemnifiable Breach" 7.08(a)
"Indemnifying Party" 7.08(e)
"Indemnitee" 7.08(e)
"Intellectual Rights" 3.09
"Xxxxxxxx" Recitals
"Leased Real Estate" 3.13(b)
"Licenses" 3.27
"Liens" 3.14
"Major Customers" 3.11(a)
"Major Suppliers" 3.11(b)
"Material Adverse Effect" 10.05
"Merger" Recitals
"Minority Interests" 2.01(a)
"Minority Interest Notes" 7.17
62
INDEX TO DEFINED TERMS (CONTINUED)
Term Section Reference
---- -----------------
"Mungenast" Recitals
"NASDAQ" 2.01(a)
"Net Merger Price" 2.01(a)
"Non-Competition Agreements" 7.06(a)
"Number of Option Shares" 2.02(c)
"Owned Real Estate" 3.13(a)
"Owned Source Codes" 3.10(c)
"Parent" Recitals
"Parent Common Stock" Recitals
"Parent Financial Statements" 5.07
"Parent Public Information" 4.04(i)
"Parent Stock Option" 2.02(b)
"Patent Rights" 3.09
"Professional Fees" 10.02(a)
"Registration Rights Agreement" 7.12
"Related Party Loans" 3.29
"Required Consents" 3.26
"SCI" 2.01(a)
"SEC" 2.02(d)
"Securities Act" 4.04(a)
"Shareholders" Recitals
"Shareholder's Percentage Share" 7.08(a)
"Subsidiaries" 3.03
"Subsidiary" 3.03
"Surviving Corporation" Recitals
"Third Party Claim" 7.08(e)
"Trademarks" 3.09
"Transmittal Letter" 2.04(a)
"Unit Options" 2.02(a)
"Year 2000 Problem" 3.31
