1
Exhibit 2.1
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (hereinafter called "this Agreement"), executed
as of the 31st day of December, 1996, by and among Topro, Inc., a Colorado
corporation ("Topro"), on its behalf and on behalf of its wholly-owned
subsidiary, Topro ACS Corp., a newly formed Pennsylvania corporation ("Newco"),
and All Control Systems, Inc., a Pennsylvania corporation ("ACS").
The Boards of Directors of Topro, Newco and ACS: deem it advisable for
the mutual benefit of Topro, Newco and ACS, and their respective stockholders,
that Topro acquire ACS by the merger of Newco into ACS under the terms and
conditions hereinafter set forth, in a transaction intended to qualify as a
tax-free reorganization under Section 368(a)(2)(D) or (E) of the Internal
Revenue Code of 1986, as amended (the "Code"); expect that this transaction
will further certain of their business objectives; and have adopted resolutions
authorizing the transactions contemplated by this Agreement.
In consideration of the premises and of the mutual agreements,
representations, warranties and covenants contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE ARTICLE I
THE MERGER
Section 1.1 Actions to be Taken. Subject to the terms and conditions
of this Agreement, including the fulfillment (or waiver) of all conditions to
the obligations of the parties contained herein, at the Effective Time (as
hereinafter defined) and pursuant to the Pennsylvania Business Corporation Act
(the "Pennsylvania Statute"), the following shall occur:
(a) Newco shall be merged with and into ACS (such transaction
hereafter referred to as the "Merger"), and ACS shall be the surviving
corporation (the "Surviving Corporation"). The separate existence and
corporate organization of Newco shall cease upon filing of the Articles
of Merger with the Pennsylvania Secretary of State, and thereupon ACS
and Newco shall be a single corporation.
(b) The Articles of Incorporation of ACS attached as Exhibit
1.1(b) hereto shall constitute the articles of incorporation of the
Surviving Corporation.
(c) The By-Laws of ACS in the form attached as Exhibit 1.1(c)
shall constitute the by-laws of the Surviving Corporation.
(d) The officers and directors of ACS shall resign on the
Closing Date and the persons set forth on Schedule 1.1(d) shall be
the officers and directors, respectively, of the Surviving Corporation
until their successors shall have been elected and qualified.
2
(e) On a date to be mutually agreed upon by the parties
(the "Closing Date"), the parties shall execute the Exhibits and approve
the Schedules to this Agreement. Facsimile signatures may be used for
closing. On the Closing Date, Articles of Merger (the "Articles of
Merger"), shall be executed and forwarded for filing to the Secretary of
State of the Commonwealth of Pennsylvania. However, the effective date
of the Merger for accounting purposes shall be November 30, 1996, which
shall be referred to herein as the "Effective Time."
Section 1.2 Conversion of ACS Securities; Consideration. As of the
Effective Time, by virtue of the Merger and without any action on the part
of any holder thereof, 1,250 shares of ACS Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into 1,800,000
restricted shares (the "Base Share Consideration") of the common stock, par
value $.0001 per share, of Topro ("Topro Common Stock"). If additional ACS
shares are issued after the Effective Time but prior to the Closing Date, each
such share shall be exchanged for __________ shares of Topro Common Stock (the
"Additional Share Consideration"). The terms and conditions of the Additional
Share Consideration shall be governed exclusively by the Agreement Concerning
Additional Share Consideration attached hereto as Exhibit 1.2.
Section 1.3 Escrow. The parties acknowledge that all shares issued
under this agreement must be held in escrow pending the effective date of
Topro's registration statement on Form S-3 (the "S-3") which currently is being
reviewed by the Securities and Exchange Commission (the "SEC"). Therefore, the
parties agree to the escrow described in this Section 1.3 and in Section 1.4,
and the Base and Additional Share Consideration shall be subject to the Escrow
Agreement attached hereto as Exhibit 1.3. Upon notification to Topro of the
S-3's effectiveness, Topro shall immediately notify the escrow agent and all
shares held in the Escrow, except as otherwise provided in Section 1.4, shall
be promptly released to the ACS shareholders.
Section 1.4 Deferred Tax Liability; Escrow. The parties anticipate
that the termination of ACS' status as a Subchapter S corporation under the
Code will result in a deferred tax liability related to the capitalized
software costs reflected on the balance sheet of ACS, which deferred liability
is related to a prior tax benefit to the ACS shareholders. The parties
anticipate that the amount of the deferred tax liability related to the
capitalized software assumed by Topro as of the Closing Date (the "Capitalized
Software Deferred Tax") will total no more than $340,000. The parties believe
that the Capitalized Software Deferred Tax will be reduced as Topro recognizes
depreciation (for accounting purposes) on the capitalized software; provided
however, that certain dispositions of the software within a period of five full
fiscal years following the Closing Date would cause Topro to incur, as a tax
liability, the balance of the Capitalized Software Deferred Tax as of the date
of sale. The parties agree that any such future tax liability shall be borne
one-half by Topro and one-half by the ACS shareholders pro rata according to
their respective pre-merger interests in ACS. Therefore, the parties agree to
the following Escrow provisions relating to the Capitalized Software Deferred
Tax:
-2-
3
(a) After the S-3 is declared effective, there shall be
retained in the Escrow that number of shares of the Base Share
Consideration which, valued at $2.25 per share, is equal to one-half of
the Capitalized Software Deferred Tax. Such shares shall be issued in
the names of ACS shareholders in proportion to their ownership
interests, and the ACS shareholders shall exercise all benefits and
incidents of ownership; provided, however, that such shares shall be
subject to the Escrow Agreement (which may consist of one or more Escrow
Agreements) attached hereto as Exhibit 1.3.
(b) Subject to the provisions of Section 1.4(c), the shares
held in the Escrow shall be released in annual installments to the
former ACS shareholders at the rate of one share for each $4.50 total
reduction in the Capitalized Software Deferred Tax reflected on the June
30 audited financial statements of Topro; provided, however, that the
release of shares shall be effected as though the amount of capitalized
software costs as of the Closing Date are being or were to be fully
amortized over a period not exceeding five years, as set forth in the
Schedule of Product Amortization attached to and made a part of this
Agreement as Schedule 1.4(b), regardless of Topro's adoption of a longer
amortization period.
(c) During the escrow period for the Escrow, in the event
Topro's sale of the capitalized software to an unaffiliated third party
at arm's length, or any other event or action either beyond the control
of Topro or taken in the reasonable business judgment of Topro's Board
of Directors, causes the Capitalized Software Deferred Tax to become a
tax liability, shares held in the Escrow shall be cancelled at the rate
of one share per $4.50 of the total tax liability incurred.
(d) At any time while the Escrow remains in effect, the ACS
shareholders shall have the option to replace the escrowed shares,
valued at $2.25 per share, with cash or other collateral acceptable to
Topro. Any cash or other collateral held in the Escrow shall be
released to the ACS shareholders at the same rate as escrowed shares
would be released.
(e) In the event Fallon Tech (as defined below) or its
assignees exercise the right to purchase a license in the PDI related
technology, any Capitalized Software Deferred Tax which results from the
purchase of such a license shall not be incurred by the ACS shareholders
and shall not trigger the cancellation of any shares held in Escrow.
(f) The cancellation of shares and/or forfeiture of any
substitute collateral deposited to the Escrow shall be Topro's exclusive
means to enforce the ACS shareholders' responsibility for payment of any
tax liability related to the Capitalized Software Deferred Tax. The ACS
shareholders shall not be required to contribute any additional Topro
shares or other collateral to the Escrow.
(g) In the event the guarantee by Xxxxx Xxxxxx of any ACS
obligation is called by the creditor due to default and the default is
not cured by Topro or ACS within 30 days, then any shares remaining in
the Escrow shall be released.
-3-
4
Section 1.5 Issuance and Delivery of Topro Common Stock. Topro shall
cause the issuance of the Topro Common Stock upon surrender of certificates
representing shares of ACS Common Stock. All shares of Topro Common Stock into
which shares of ACS Common Stock are converted at the Closing Date pursuant to
Sections 1.2, 1.3 and 1.4 (collectively, the "Merger Shares") shall be deemed,
for all corporate purposes, to have been issued by Topro at the Closing Date.
The Merger Shares may be held in escrow, as described above.
Section 1.6 ACS Stock Transfer Books. At the Closing Date, the stock
transfer books of ACS shall be closed and no transfer of ACS Common Stock shall
thereafter be made on such stock transfer books until after the Effective Time.
Section 1.7 Filing of Merger Documents. As soon as practicable after
the Closing Date, ACS and Newco shall, in accordance with Section 1.1(e), cause
the Articles of Merger to be filed with the Secretary of State of the
Commonwealth of Pennsylvania and ACS, Newco and Topro will take such other and
further actions as may be required by the Pennsylvania Statute in connection
with such filing and in order to complete the Merger.
Section 1.8 Registration Rights. During the two year period commencing
at the Effective Time, the Merger Shares shall be subject to "piggyback" and
demand registration rights in accordance with the terms and limitations set
forth in Sections 7.1 and 7.3. These rights shall be subject to the conditions
imposed under the lock-up agreement required by Section 8.11.
Section 1.9 Agreements Concerning PDI and Fallon Tech.
(a) As of the date of this Agreement, PDI, an entity 70% owned
by Xxxxx Xxxxxx and members of his family, has acted as the sales agent
for precision dispensing applications, products, technology and know how
for the color process industry (together, the "Technology") developed by
ACS. PDI or Fallon Technology Corporation, a Pennsylvania corporation
to be formed and owned by Xxxxx Xxxxxx and members of his family
("Fallon Tech") or its assignees, at Xxxxx Xxxxxx'x sole election, will
remain the exclusive sales agent for the Technology in the color process
industry for a period of three years following the Closing. During this
period, no sales fees, commissions nor other compensation generated by
sales of the Technology will be paid nor accrue to Xx. Xxxxxx nor to
members of his family. During this period, ACS/Topro shall remain the
exclusive provider of system engineering associated with Fallon Tech
sales, subject to Section 1.9(b) below.
(b) In the event that ACS/Topro proves to be non-competitive
in providing system engineering to support precision dispensing
applications in the color industry, then PDI will have the right to seek
commercial proposals from other qualified system integrators to provide
system engineering for this market. A determination of "non-
competitive" requires demonstration of inability to meet market price or
delivery requirements on three consecutive projects substantially
similar in scope and size. ACS/Topro will have the right
-4-
5
to approve the selection of any other provider of system engineering.
Such approval may be granted for a portion of a project, a single
project or a number of specific projects and such approval will not be
unreasonably withheld. The approved provider of system engineering will
be licensed for the engineering and installation of the Technology for
the specific project(s) and will be contractually prohibited from any
other use. ACS/Topro will in the case of providing such approval and
granting the practice license receive a reasonable carried interest in
the project value, not to exceed five percent, negotiated on a project
by project basis.
(c) Any dispute with respect to calculations to be made under
this Section 1.10 which cannot be resolved by the parties will be
resolved as by each party designating one arbitrator. The two
arbitrators as so designated shall attempt to resolve the dispute by
their mutual agreement, and if they do not succeed in reaching such
agreement within 20 days of the designation of the latter of them, they
shall name a third arbitrator and a decision of the majority of the
arbitrators shall be final. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association and
the cost of such arbitration shall be borne by Topro unless a majority
of the arbitrators agree otherwise, in which case the respective parties
agree to pay their share of such costs as directed by the majority of
the arbitrators.
(d) Topro and ACS shall enter into an agreement (the "Option
Agreement") in the form attached hereto as Exhibit 1.9 granting Fallon
Tech or its assignees an option, exercisable during the three month
period commencing three years from the Closing Date, to purchase from
ACS and Topro an exclusive royalty free perpetual license for color
process applications of the Technology for a price equal to the value of
unamortized software costs related to the Technology carried on the ACS
and Topro books at the time of purchase. ACS and Topro will retain the
rights to all applications of the Technology other than for color
applications. In the event Fallon Tech or its assignees do not exercise
this option, Fallon Tech or its assignees shall be entitled to a license
to utilize the Technology and any enhancements thereto for color
applications processes for a license fee equal to five percent of gross
sales revenue over the remaining unamortized book life of the
Technology.
Section 1.10 Employment and Indemnification Agreements. Topro and
Xxxxx Xxxxxx shall enter into employment and indemnification agreements, both
in the form attached hereto.
Section 1.11 Exclusive Dealings. ACS agrees to negotiate with Topro
exclusively until January 31, 1997 or such other date as the parties mutually
agree.
ARTICLE ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TOPRO AND NEWCO
Topro and Newco represent, warrant to, and agree with, ACS as follows:
-5-
6
Section 2.1 Corporate Organization. Topro and each of its
subsidiaries (hereafter in this Article II, Topro and its subsidiaries other
than Newco are collectively referred to as "Topro") are corporations duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and each has all requisite corporate
power and authority to own, operate and lease its properties and to conduct its
business as it is now being conducted. Topro is duly qualified or licensed as
a foreign corporation in each other jurisdiction where it owns or leases
substantial properties, except where the failure to be so qualified or licensed
would not have a material adverse effect on the financial condition, properties
or businesses of Topro taken as a whole. Topro and Newco have each delivered
to ACS a true and complete copy of their Articles of Incorporation and By-Laws.
Section 2.2 Capitalization.
(a) The authorized capital stock of Topro consists of
10,000,000 shares of Preferred Stock, par value $.0001 per share, and
200,000,000 shares of Common Stock, par value $.0001 per share, of which
9,126,189 shares of Common Stock were outstanding on December 26, 1996.
All of the outstanding shares of Topro Common Stock have been validly
issued and are fully paid and nonassessable. As of December 26, 1996,
Topro had reserved authorized shares of Topro Common Stock for issuance
pursuant to outstanding common stock purchase warrants, options and
other rights as set forth on Schedule 2.2 of this Agreement. As
detailed on Schedule 2.2, Topro has granted to the holders of certain of
its outstanding securities certain rights to have such securities
registered for public sale pursuant to the 1933 Act.
(b) Except as set forth above, Topro does not have any shares
of its capital stock issued or outstanding. Except as set forth above
and on Schedule 2.2 hereof, Topro does not have any outstanding
subscriptions, options, warrants, rights or other agreements or
commitments obligating Topro to issue shares of its capital stock.
(c) The authorized capital stock of Newco consists of 1,000
shares of Common Stock, par value $.01 per share, of which 100 shares
are issued and outstanding, all of which are owned of record and
beneficially by Topro.
(d) To the best knowledge of Topro management, Topro's
outstanding securities have been issued in compliance with all
applicable federal and state securities laws.
Section 2.3 Authorization, Execution and Delivery. Topro and Newco
each has the corporate power to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Topro
and Newco and the consummation of the transactions contemplated hereby have
been duly authorized by all requisite corporate action; no other corporate
proceedings on the part of Topro are necessary to authorize this Agreement and
the transactions contemplated hereby.
-6-
7
Section 2.4 Reports; Accuracy of Information. Topro has previously
furnished to ACS true and complete copies of: its Annual Report on Form 10-K
for its fiscal year ended June 30, 1996, including audited financial
statements; its Quarterly Report on Forms 10-QSB for the periods ended
September 30, 1996, and all of its Current Reports on Forms 8-K filed since
June 30, 1996 (each as amended), (collectively the "Topro Reports"). Each of
the balance sheets included in the Topro Reports (including any related notes
and schedules) fairly presents the consolidated financial position of Topro as
of its date, and the other financial statements included in the Topro Reports
(including any related notes and schedules), fairly present the consolidated
results of operations or other information included therein of Topro for the
periods or as of the dates therein set forth, and, with respect to the
unaudited financial statements, all adjustments necessary for a fair
presentation of results for such periods have been made. The audited
statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except and unless otherwise stated therein).
None of the Topro Reports contained, as of its date, any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 2.5 Absence of Changes. Except as described in the Topro
Reports, since September 30, 1996, there has not been any material adverse
change in the financial condition, properties or business of Topro taken as a
whole.
Section 2.6 Compliance with Laws. To the best knowledge of Topro
management, the business of Topro is not being conducted in violation of any
applicable law, ordinance, regulation, decree or order of any governmental
entity, except for violations which either singly or in the aggregate do not
and are not expected to have a material adverse effect on the financial
condition, properties or businesses of Topro taken as a whole.
Section 2.7 Legal Proceedings. Except for matters, if any, referred
to in the Topro Reports or on Schedule 2.7 hereto, (i) no material
investigation or review by any governmental entity with respect to Topro is
pending or, to the best of Topro's knowledge, threatened, nor has any
governmental entity indicated to Topro an intention to conduct the same, and
(ii) there is no action, suit or proceeding pending or, to the best of Topro'
knowledge, threatened against or affecting Topro at law or in equity, or before
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, which either singly or in the
aggregate is likely to result in any material adverse change in the financial
condition, properties or businesses of Topro taken as a whole.
Section 2.8 Validity of Merger Shares. All of the Merger Shares to be
issued in the Merger pursuant to Section 1.2 will, upon such issuance, be
validly issued and outstanding, fully paid and nonassessable. The Merger
Shares, including shares held in the Escrow, shall be issued in compliance with
all applicable state and federal securities laws.
-7-
8
Section 2.9 Continuity of Business Enterprise. Topro will continue at
least one significant historic business line of ACS, or use at least a
significant portion of ACS' historic business assets in a business, in each
case within the meaning of Treasury Reg. Section 1.368-1(d).
ARTICLE ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACS
ACS represents, warrants to, and agrees with, Topro and Newco as
follows:
Section 3.1 Corporate Organization. ACS and each of its subsidiaries,
which are listed on Schedule 3.1 hereto, are corporations duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation and each is duly qualified or licensed as a
foreign corporation in each other jurisdiction where it owns or leases
substantial properties. Except as set forth on Schedule 3.1, ACS has no
subsidiaries. Each such corporation has the requisite corporate power and
authority to own, operate and lease its properties and to conduct its business
as it is now being conducted. ACS has previously delivered to Topro a true and
complete copy of its Articles of Incorporation and Bylaws and those of each of
its subsidiaries.
Section 3.2 Capitalization. The authorized capital stock of ACS
consists of 5,000,000 shares of Common Stock ("ACS Common Stock"). As of the
date of this Agreement there are 1,250 shares of ACS Common Stock issued and
outstanding. All of the outstanding shares of ACS Common Stock have been
validly issued and are fully paid and nonassessable. As of the date hereof,
ACS has reserved no shares of ACS Common Stock for issuance. Except as set
forth above ACS does not have any shares of its capital stock issued or
outstanding. ACS does not have any outstanding subscriptions, options,
warrants, rights or other agreements or commitments obligating ACS to issue
shares of its capital stock.
Section 3.3 Authorization, Execution and Delivery. Except as set
forth in Schedule 3.3, ACS has the corporate power to enter into this Agreement
and to carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by its Board of Directors and shareholders, and no other
corporate proceedings on the part of ACS or its subsidiaries are necessary to
authorize this Agreement and the transactions contemplated hereby. Neither ACS
nor any of its subsidiaries is subject to or obligated under any charter,
by-law or contract provision or any note, mortgage, lease, agreement, bond,
indenture, instrument, license, franchise or permit, or subject to any order,
judgment, injunction, writ or decree, which would be breached or violated by
the execution or consummation of this Agreement. Other than in connection with
or in compliance with the provisions and requirements of the Pennsylvania
Statute, the 1933 Act , and the securities or blue sky laws of the various
states, no authorization, consent or approval of, or filing with, any public
body or authority is necessary for the completion by ACS of the transactions
contemplated by this Agreement, except for such authorizations, consents,
approvals or filings, the failure to obtain or make which would not have a
material adverse effect on ACS' business.
-8-
9
Section 3.4 Accuracy of Information. ACS has previously furnished to
Topro true and complete copies of audited financial statements ("ACS audited
statements") for the fiscal year ended December 31, 1995 and the unaudited,
consolidated financial statements as of and for the period ended September 30,
1996, ("ACS unaudited statements"). The ACS audited statements and the ACS
unaudited statements are at times collectively referred to as the "ACS
Reports." Each of the balance sheets included in the ACS audited statements
and the ACS unaudited statements (including any related notes and schedules)
fairly presents the financial position of ACS as of its date and the other
financial statements included in the ACS Reports (including any related notes
and schedules) fairly present the results of operations or other information
included therein of ACS for the periods or as of the dates therein set forth
and, with respect to the ACS unaudited statements, all adjustments necessary
for a fair presentation of results for such periods have been made. The ACS
audited statements have been prepared in accordance with generally accepted
accounting principles consistently applied (except and unless otherwise stated
therein). Neither the ACS audited statements nor the ACS unaudited statements
contains any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All project contracts and job orders reflected on the books of
ACS at June 30, 1996 are bona fide.
Section 3.5 Absence of Changes. Except as described in Schedule 3.5,
since September 30, 1996, there has not been any material adverse change in the
working capital, financial condition, assets, liabilities, reserves, business,
operations or prospects of ACS or any of its subsidiaries, and neither ACS nor
any of its subsidiaries has:
(a) waived or surrendered any right of material value;
(b) discharged or satisfied or paid any material lien or
encumbrance or debt or obligation other than current liabilities in the
ordinary course of business;
(c) authorized or made any capital expenditures or commitments
for capital expenditures exceeding in the aggregate $10,000;
(d) assumed, guaranteed, or agreed to assume or guarantee, any
material debt, liability or other obligation of any person, firm or
corporation;
(e) made, declared or authorized any dividends or other
distribution on any shares of the capital stock;
(f) engaged in any material transaction outside the ordinary
course of business;
(g) entered into or extended any employment contract with any
officer or employee for a term extending beyond the Effective Time;
-9-
10
(h) paid, loaned or advanced (other than the payment of
salaries or reimbursement of expenses in the ordinary course of
business) any amounts to, or sold, transferred or leased any properties
or assets to, any of its officers or directors or any "affiliate" or
"associate" of any of its officers or directors (as such terms are
defined in the rules and regulations under the 1933 Act);
(i) made any material change in any method of accounting or
accounting practice;
(j) made any material change in any pension, retirement,
profit-sharing or other employee benefit plan or arrangement;
(k) incurred any material indebtedness or leasehold expense
except in the ordinary course of business;
(l) agreed, whether in writing or otherwise, to do any of the
foregoing; or
(m) suffered any damages, destruction or loss, whether or not
covered by insurance, materially adversely affecting the business or
properties of ACS and its subsidiaries taken as a whole.
Section 3.6 Compliance with Laws. To the best knowledge of ACS'
management, the business of ACS and each of its subsidiaries is not being
conducted in violation of any applicable law, ordinance, regulation, decree or
order of any governmental entity, including, but not limited to laws,
ordinances or regulations relating to environmental protection, except for
violations which either singly or in the aggregate do not and are not expected
to have a material adverse effect on ACS' business taken as a whole. There is
no past or present violation known to ACS of any law, ordinance or regulation
relating to environmental protection, whether or not such violation is expected
to have a material adverse effect on ACS' business.
Section 3.7 Legal Matters. Except as described on Schedule 3.7, to
the best knowledge of ACS' management: (i) there is no material investigation
or review by any governmental entity with respect to ACS or any of its
subsidiaries threatened or pending, nor has any governmental entity indicated
an intention to conduct the same, and (ii) there is no action, suit or
proceeding threatened or pending against or affecting ACS or any of its
subsidiaries at law or in equity, or before any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, which either singly or in the aggregate is likely to result in
any material change in ACS' business.
Section 3.8 Material Agreements and Plans; ERISA. Attached as
Schedule 3.8 hereto is an accurate and complete list, setting forth all
material leases, contracts, mortgages, deeds of trust, loans, commitments,
undertakings and other agreements and plans, including any open contracts and
purchase orders, bonus, deferred compensation, pension, profit-sharing,
retirement or other benefit
-10-
11
plan, to which ACS on any of its subsidiaries is a party or is subject, and ACS
does not know of any material default or defaults under any of such agreements
or plans on the part of any party subject thereto. Except as set forth on
Schedule 3.8 hereto, neither ACS nor any of its subsidiaries now has or ever
has had in effect any "Plan" as such term is defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") nor incurred any liability
under, nor been in violation of, ERISA.
Section 3.9 Continuation of Business. There are no events that, to
the best knowledge of ACS, threaten to materially disrupt, prevent or impair
the conduct of the business of ACS and its subsidiaries or which would disrupt
the ability of the Surviving Corporation, as a subsidiary of Topro, to continue
to conduct the business currently being conducted by ACS and its subsidiaries.
Section 3.10 Tax Returns. ACS and each of its subsidiaries have duly
filed all tax reports and returns which have been required to be filed by them
and have duly paid or adequately reserved for all taxes and other charges shown
on such reports and returns to be due or claimed to be due from them by
federal, state or other taxing authorities. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable
to any such federal, state, local or other income tax returns for any period.
Section 3.11 Absence of Undisclosed Liabilities. Neither ACS nor any
of its subsidiaries has any material liabilities or obligations of any nature
(absolute, accrued, contingent or otherwise) which are not disclosed on the ACS
unaudited financial statements. To the best knowledge of ACS' management, ACS
and each of its subsidiaries is in substantial compliance with all laws and
regulations applicable to operation of its business and all contracts and
agreements by which it is bound.
Section 3.12 Accounts Receivable. As of Effective Time all accounts
receivable reflected on the books of ACS are bona fide, good and collectible
and without set-off or counterclaim except as set forth on Schedule 3.12.
Attached hereto as Exhibit 3.12 is a listing of ACS's accounts payable and
accounts receivable as of December 31, 1996.
Section 3.13 Ownership of ACS Common Stock. All of the issued and
outstanding shares of ACS Common Stock are owned of record and beneficially by
the ACS Shareholders as set forth on Schedule 3.13.
Section 3.14 Project Contracts and Job Orders. Except as described in
Schedule 3.14, all project contracts and job orders reflected on the books of
ACS are bona fide and without set-off.
Section 3.15 Employment Practices. ACS and each of its subsidiaries is
in compliance in all material respects with all federal, state and local laws
and regulations respecting the employment of its employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. To the best knowledge of ACS' management there are no actual or
threatened claims of employees or former employees of ACS or any of its
subsidiaries. To ACS' knowledge,
-11-
12
there are no pending investigations involving ACS or any of its subsidiaries by
the U.S. Department of Labor, or any other governmental agency responsible for
the enforcement of such federal, state or local laws and regulations. To the
best of ACS's knowledge there is no unfair labor practice charge or complaint
against ACS or any of its subsidiaries pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or, to the best knowledge of ACS, threatened against or
involving ACS or any of its subsidiaries or any predecessor entity, and none
has ever occurred. To the best knowledge of ACS, there is no union
organization activity with respect to the employees of ACS or any of its
subsidiaries. No collective bargaining agreement or modification thereof is
currently being negotiated by ACS or any of its subsidiaries. No grievance or
arbitration is pending under any expired or existing collective bargaining
agreements of ACS or any of its subsidiaries.
ARTICLE ARTICLE IV
COVENANTS OF ACS
Section 4.1 Regular Course of Business. Except as otherwise
consented to in writing by Topro, prior to the Effective Time, ACS and each of
its subsidiaries will carry on its business in the ordinary course only, and,
without limiting the generality of the foregoing, ACS and each of its
subsidiaries will use its best efforts to preserve its present business
organization intact, keep available the services of its present officers and
employees, and preserve its present relationships with customers, suppliers and
other persons having business dealings with it.
Section 4.2 Restricted Activities and Transactions. Except as
described in Schedule 4.2 or as otherwise consented to in writing by Topro, or
contemplated by Section 8.11 hereof, prior to the Closing Date, neither ACS nor
any of its subsidiaries will:
(a) amend its certificate or articles of incorporation or
bylaws;
(b) issue, sell or deliver, or agree to issue, sell or
deliver, any shares of any class of capital stock or any securities
convertible into any such shares or convertible into securities in turn
so convertible, or any options, warrants or other rights calling for the
issuance, sale or delivery of any such shares or convertible securities,
declare or pay any dividend or make any distribution on its capital
stock in cash, stock or property, subdivide shares of capital stock into
a greater number of shares, or redeem, repurchase or otherwise acquire
any shares of capital stock;
(c) discharge or satisfy or pay any lien, encumbrance, debt or
obligation other than in the ordinary course of business;
(d) sell, transfer or otherwise dispose of any of its assets
otherwise than in the normal course of business;
-12-
13
(e) incur or assume or authorize or commit to any
expenditure(s) in excess of $10,000 in the aggregate other than in the
ordinary course of business;
(f) assume or guarantee, or agree to assume or guarantee, any
debt, liability or other obligation of any person, firm or corporation;
or
(g) acquire control of any other corporation, association,
joint venture, partnership, business trust or other business entity, or
acquire control or ownership of all or a substantial portion of the
assets of any of the foregoing or merge, consolidate or otherwise
combine with any other corporation (except as provided for in this
Agreement), or enter into any agreement providing for any of the
foregoing.
Section 4.3 Advice of Changes. Until the Closing Date, ACS will
promptly advise Topro in writing (i) after acquiring knowledge thereof, of any
event occurring subsequent to the date of this Agreement which would render any
representation or warranty of ACS contained in this Agreement, if made on or as
of the date of such event or the Effective Time, untrue or inaccurate in any
material respect and (ii) of any material adverse change in ACS' business.
Section 4.4 Access to Records and Properties. Topro may, prior to the
Closing Date, through its employees, agents and representatives, make or cause
to be made a detailed review of the business and financial condition of ACS,
and make or cause to be made such investigation as it deems necessary or
advisable of the properties, assets, businesses, books and records of ACS. ACS
agrees to furnish such assistance as Topro reasonably may request in conducting
such review and investigation and will provide, and will cause its independent
public accountants to provide, Topro and its employees, agents and
representatives full access to all books, records (including tax returns filed
or in preparation), personnel and premises of ACS and the work papers and other
records of its independent public accountants and shall provide to Topro such
other information concerning the business of ACS as Topro reasonably may
request. Any such review described in this section shall be undertaken during
normal business hours following reasonable notice to ACS.
Section 4.5 Brokerage. ACS has retained no broker or finder to assist
it in the transactions contemplated hereby, and owes no person a commission,
brokerage fee, or finders' fee as a result hereof. ACS will indemnify and hold
Topro harmless from any claim for brokerage or finder's or investment advisor's
fees or commissions arising out of the transactions contemplated hereby by any
person claiming to have been engaged by ACS.
ARTICLE ARTICLE V
COVENANTS OF TOPRO
Section 5.1 Advice of Changes. Topro will promptly advise ACS in
writing after acquiring knowledge thereof, (i) of any event occurring
subsequent to the date of this Agreement which would render any representation
or warranty of Topro contained in this Agreement, if made on or as of the date
of such event or at the Effective Time, untrue or inaccurate in any material
-13-
14
respect and (ii) of any material adverse change in the business of Topro and
its significant subsidiaries taken as a whole.
Section 5.2 Brokerage. Topro has utilized the services of Bathgate
XxXxxxxx & Associates LLC in connection with this transaction, and Topro shall
be solely responsible for payment of fees due to Bathgate XxXxxxxx & Associates
LLC. Other than Bathgate XxXxxxxx & Associates LLC, Topro has retained no
broker or finder to assist it in the transactions contemplated hereby, and owes
no person a commission, brokerage fee, or finders' fee as a result hereof.
Topro will indemnify and hold ACS and the ACS shareholders harmless from any
claim for brokerage or finder's or investment advisor's fees or commissions
arising out of the transactions contemplated hereby by any person claiming to
have been engaged by Topro.
Section 5.3 Conduct of Business of Newco. From the date of this
Agreement to the Closing Date, Newco shall not engage in any activities of any
nature except as contemplated by this Agreement.
Section 5.4 Guarantee of Newco Obligations. Topro shall cause Newco
to perform in a timely manner all its obligations, and to comply with all its
agreements, in this Agreement and in the Articles of Merger.
Section 5.5 Employment and Compensation of Certain Persons. On or
prior to the Closing Date, Topro and ACS will determine which of the current
employees of ACS will become employees of the Surviving Corporation and the
compensation and benefits to be paid to such employees, to be listed on
Schedule 5.5.
Section 5.6 Access to Records and Properties. ACS may, prior to the
Closing Date, through its employees, agents and representatives, make or cause
to be made a detailed review of the business and financial condition of Topro,
and make or cause to be made such investigation as it deems necessary or
advisable of the properties, assets, businesses, books and records of Topro.
Topro agrees to furnish such assistance as ACS may reasonably request in
conducting such review and investigation and will provide, and will cause its
independent public accountants to provide, ACS and its employees, agents and
representatives full access to all books, records (including tax returns filed
or in preparation), personnel and premises of Topro and the audit work papers
and other records of its independent public accountants and shall provide to
ACS such other information concerning Topro's business as ACS may reasonably
request.
Section 5.7 Regular Course of Business. Prior to the Closing Date,
Topro will use its best efforts to preserve its present business organization
intact, keep available the services of its present officers and employees, and
preserve its present relationships with customers, suppliers and other persons
having business dealings with it.
Section 5.8 Restricted Activities and Transactions. Except as set
forth on Schedule 5.8 hereof, prior to the Closing Date, Topro will not:
-14-
15
(a) amend its certificate or articles of incorporation or
bylaws;
(b) issue, sell or deliver, or agree to issue, sell or
deliver, any shares of any class of capital stock of Topro or any
securities convertible into any such shares or convertible into
securities in turn so convertible, or any options, warrants or other
rights calling for the issuance, sale or delivery of any such shares or
convertible securities, declare or pay any dividend or make any
distribution on its capital stock in cash, stock or property, subdivide
shares of Topro Common Stock into a greater number of shares, or redeem,
repurchase or otherwise acquire any shares of Topro Common Stock;
(c) discharge or satisfy or pay any lien, encumbrance, debt or
obligation other than in the ordinary course of business;
(d) sell, transfer or otherwise dispose of any of its assets
otherwise than in the normal course of business;
(e) assume or guarantee, or agree to assume or guarantee, any
debt, liability or other obligation of any person, firm or corporation;
or
(f) acquire control of any other corporation, association,
joint venture, partnership, business trust or other business entity, or
acquire control or ownership of all or a substantial portion of the
assets of any of the foregoing or merge, consolidate or otherwise
combine with any other corporation (except as provided for in this
Agreement), or enter into any agreement providing for any of the
foregoing.
ARTICLE ARTICLE VI
MUTUAL COVENANTS
Section 6.1 Confidentiality. Topro and ACS will use their best
efforts to keep confidential any and all information furnished to one of them
by the other or such other's representatives or independent public accountants
in connection with the transactions contemplated by this Agreement, and the
business and financial review and investigation referred to in Section 4.4 and
Section 5.6, except to the extent any such information may be generally
available to the public, and Topro and ACS have instructed their respective
officers, employees and other representatives having access to such information
to comply with the obligation of confidentiality. In the event of termination
of this Agreement, each of Topro and ACS will promptly deliver to the other all
originals and copies of documents, work papers and other material containing
information concerning the other that was obtained from the other or its
agents, employees or representatives in connection with such transactions or
business and financial review and investigation, whether so obtained before or
after the execution hereof, will not use any information so obtained, will not
disclose or divulge such information to any other person and will keep
confidential any information so obtained; provided, however, that (after
reasonable measures have been taken to maintain confidentiality and after
giving
-15-
16
reasonable notice to the other parties to this Agreement specifying the
information involved and the manner and extent of the proposed use of
disclosure thereof) (i) any disclosure of such information may be made by a
party hereto to the extent required by applicable law or regulation or judicial
or regulatory process and (ii) such information may be used by such party as
evidence in or in connection with any pending or threatened litigation relating
to this Agreement or any transaction contemplated hereby. The obligations
arising under this Section 6.1 shall survive any termination or abandonment of
this Agreement. This paragraph does not abrogate the rights of any party to
this Agreement to petition a court for a determination of whether certain
information should not be publicly disclosed.
Section 6.2 Expenses. Whether or not the Merger is consummated, each
party shall bear its own costs and expenses in connection with this Agreement.
Section 6.3 Public Announcements. ACS and Topro agree, recognizing
that Topro has an obligation to disseminate material information to the public
and to its shareholders, that they will, to the maximum extent feasible, advise
and confer with each other prior to the issuance of any reports, statements or
releases (including reports, statements or releases to their respective
employees) pertaining to this Agreement and any transaction contemplated by
this Agreement.
Section 6.4 Further Assurances. Each party hereto agrees to execute
and deliver such instruments and take such other actions as any other party may
reasonably require in order to carry out the intent of this Agreement.
ARTICLE ARTICLE VII
REGISTRATION RIGHTS
Section 7.1 Piggyback Registration Rights. During the two year period
commencing at the Closing Date, whenever Topro files a registration statement
under the 1933 Act (including a "post-effective amendment" to a previous
registration statement) which relates to a current offering of securities of
Topro or any securityholder of Topro (except in connection with an offering on
Forms S-4 or S-8, or any other inappropriate form(s)), Topro shall offer to the
ACS Shareholders the opportunity to register or qualify the Merger Shares for
public sale; provided, however, that if the offering to which the proposed
registration statement relates is an underwritten offering and such underwriter
objects to the inclusion of the Merger Shares in such registration statement,
Topro shall be under no obligation to include the Merger Shares unless shares
held by other selling securityholders are included therein, in which case the
ACS Shareholders shall be entitled to have their Merger Shares included pro
rata with all other selling securityholders whose shares are to be included in
the registration statement. The Company shall give at least 30 days' prior
written notice to the ACS Shareholders of Topro's intention to file a
registration statement under the 1933 Act, which notice shall constitute an
offer to the ACS Shareholders to have their Merger Shares included in such
registration statement, and the ACS Shareholders shall notify Topro in writing
within ten days thereafter if the ACS Shareholders desire to accept such offer.
Neither the delivery of such notice nor the acceptance by the ACS Shareholders
of such offer shall obligate Topro to file such
-16-
17
registration statement and, notwithstanding the actual filing of the
registration statement, Topro may at any time prior to its effectiveness elect
not to pursue the registration without liability to the ACS Shareholders. In
the event of registration hereunder, Topro will pay all expenses necessary to
effect registration, including, without limitation, printing costs, blue sky
filing fees, other filing fees and fees and disbursements of counsel and
accountants for Topro; excluding, however, selling expenses of the ACS
Shareholders, such as commissions or underwriting discounts.
Section 7.2 Information for Registration Statement. The Merger
Shares held by the ACS Shareholders may be excluded from a registration
statement at the election of Topro in the event all information about such
shareholders reasonably necessary for Topro and its counsel to prepare the
registration statement is not furnished by the ACS Shareholders, after the ACS
Shareholders, upon written request of Topro or its counsel, has been given a
reasonable amount of time (not less than ten business days from the date such
request has been sent to the ACS Shareholders) to transmit the requested
information to Topro and/or its counsel.
Section 7.3 Demand Registration Rights. Subject to any relevant SEC
restrictions on filing, at any time after February 21, 1997, upon request of
the holders of at least 75% of the Merger Shares, Topro shall file, one time
only, at its expense, a registration statement under the 1933 Act to register
or qualify the Merger Shares for public sale on behalf of the ACS Shareholders.
Section 7.4 Indemnification of Topro. In the event of any registration
of the Merger Shares under the 1933 Act, the ACS Shareholders will agree to
indemnify and hold harmless Topro and each affiliate and controlling person, as
defined by the 1933 Act, of Topro, each officer or employee of Topro who signs
the registration statement, each director of Topro, any agent of Topro and each
underwriter, and any and all affiliates and controlling persons, as defined by
the 1933 Act, of such persons against any and all such losses, claims, damages
or liabilities as the ACS Shareholders and other selling securityholders are
indemnified against by Topro and will reimburse Topro and each of the foregoing
persons for any losses, claims, damages or liabilities (or actions in respect
thereof) and for any legal or any other expenses incurred by each such person,
if the untrue statement or alleged untrue statement or omission or alleged
omission of material fact in respect of which such loss, claim, damage or
liability is asserted was made in reliance solely upon and in conformity with
information furnished to Topro in writing by the ACS Shareholders or on its
behalf specifically for use in connection with the preparation of such
registration statement or prospectus.
Section 7.5 Indemnification of ACS Shareholders. In the event of any
registration under the 1933 Act of any of the Merger Shares, Topro will agree
to indemnify and hold harmless the ACS Shareholders and each agent,
underwriter, and each other affiliate and controlling person of the ACS
Shareholders, within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, and for any legal or other expenses
incurred by the ACS Shareholders to which the ACS Shareholders or such
underwriter or affiliate or controlling person may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof):
-17-
18
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained, at the
effective date of such registration statement, in any such
registration statement, any preliminary prospectus or final prospectus
contained therein or any amendment thereof or supplement thereto, or
any document incident to registration or qualification of the shares
covered thereby under state securities or blue sky laws; or
(b) arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein, or any violation by Topro of the 1933 Act or state securities
or blue sky laws applicable to Topro and relating to any action or
inaction required by Topro in connection with such registration or
qualification under such state securities or blue sky laws;
provided, however, that Topro will not be liable in any such case to any
indemnified person to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission of any material fact made in such registration
statement, said preliminary prospectus or said prospectus or said amendment or
supplement, or any document incident to registration or qualification under
state securities or blue sky laws, in reliance upon and in conformity with any
information furnished in writing to Topro or its counsel by such indemnified
person specifically for use in the preparation thereof or if such loss, claim,
damage, liability or action arose out of the violation of any duty to which the
ACS Shareholders may be subject, including the obligation to deliver a copy of
any prospectus, supplement or amendment to a purchaser of the Merger Shares and
such prospectus, supplement or amendment was made available to the ACS
Shareholders by Topro.
ARTICLE ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF TOPRO AND NEWCO
The obligations of Topro and Newco under this Agreement to consummate
the Merger shall be subject to the satisfaction, or to the waiver by them in
the manner contemplated by Section 12.2, at the Closing Date and at the
Effective Time, of the following conditions:
Section 8.1 Representations and Warranties True. The representations
and warranties of ACS contained in this Agreement shall be in all material
respects true and accurate as of the date when made and, except for changes
expressly contemplated by this Agreement, at and as of the Closing Date and the
Effective Time as if made at such time.
Section 8.2 Performance of Covenants. ACS shall have performed and
complied in all material respects with each and every covenant, agreement and
condition required by this Agreement to be performed or complied with by it
prior to or at the Closing Date and the Effective Time.
Section 8.3 No Governmental or Other Proceeding or Litigation. No
order of any court or administrative agency shall be in effect which restrains
or prohibits any transaction contemplated hereby or that would limit or affect
Topro's right to the ownership of ACS; no suit, action,
-18-
19
investigation, inquiry or proceeding by any governmental body or other person
or entity shall be pending or threatened against Topro, Newco or ACS that
challenges the validity or legality, or seeks to restrain the completion, of
the transactions contemplated hereby or that seeks damages or other relief in
respect thereof or seeks to limit or otherwise affects Topro's right to the
ownership of ACS; and no written advice shall have been received by Topro,
Newco, ACS or their respective counsel from any governmental body, and remain
in effect, stating that an action or proceeding will, if the Merger is
completed or sought to be completed, be filed seeking to invalidate or restrain
the Merger or limit or otherwise affect Topro's right to the ownership of ACS.
Section 8.4 Approvals and Consents. Any consents or approvals of any
persons who are parties to contracts or other agreements to which ACS is also a
party or to which material properties of ACS are subject, the granting of which
is necessary for the completion of the Merger or for preventing the termination
of any right, privilege, license or agreement of ACS that is material to the
business of ACS, or to prevent any material loss or disadvantage to the
business of ACS by reason of the Merger, shall have been obtained, no such
consents or approvals shall have imposed a condition to such consent or
approval that in the reasonable opinion of Topro is unduly burdensome to the
consolidated financial position or operations of Topro or to the business of
ACS.
Section 8.5 Shareholder Approval and Investment Letters. The ACS
Shareholders shall have approved the Merger without exercising dissenter's
rights, and shall have executed a Subscription Agreement and Investment
Representation Letter in the form attached hereto as Exhibit 8.5.
Section 8.6 Opinion of Counsel. ACS shall have delivered to Topro
and Newco an opinion of counsel of recognized standing, dated the Closing Date
and addressed to Topro and Newco, and in form and substance reasonably
satisfactory to Topro, to the effect that based upon a review by them of the
Agreement, including all Exhibits and Schedules thereto, ACS' certificate of
incorporation, bylaws, and relevant corporate proceedings and contracts, and
examination of such statutes they deem necessary and such other investigation
by such counsel as they deem necessary to express such opinion on the matters
described in Exhibit 8.6.
Counsel's opinion as to the validity and enforceability of any and all
contracts and agreements referenced herein may exclude any opinion as to the
validity or enforceability of any indemnification or contribution provisions
thereof, or as the validity or enforceability of any such contract or agreement
may be limited by bankruptcy or other laws relating to or affecting creditor's
rights generally and by equitable principles.
Section 8.7 Certificate. ACS shall have furnished Topro with a
certificate of ACS in the form attached hereto as Exhibit 8.7, signed by its
President and its Chief Operating Officer and attested to by its Secretary or
any Assistant Secretary to the effect that ACS' representations and warranties
contained in this Agreement were in all material respects true and accurate as
at the date when made and, except for changes expressly contemplated by this
Agreement, at and as of the Closing Date and the Effective Time as though such
representations and warranties were made at such time and that ACS has
performed and complied in all material respects with all terms,
-19-
20
covenants and provisions of this Agreement required to be performed or complied
with by it prior to or at the Closing Date and the Effective Time.
Section 8.8 Financial Condition of ACS. At the Closing Date and the
Effective Time, there shall have been no material adverse change in the
business, prospects or condition, financial or otherwise of ACS, and ACS'
financial condition has not adversely changed materially from that described in
the unaudited financial statements previously supplied to Topro. At the Closing
Date ACS accounts payable will be in form and term acceptable to Topro.
Section 8.9 Financial Information of ACS. At the Closing Date, Topro
shall be satisfied that ACS has demonstrated its ability to provide financial
records and information sufficient to permit the timely preparation of
financial statements required to be filed by Topro pursuant to the 1934 Act.
Section 8.10 Availability of Exemptions. At the Closing Date, Topro
shall be reasonably satisfied that an exemption from the registration
requirements of the 1933 Act and applicable Blue Sky laws for the Merger
existed at the time any offer to the ACS Shareholders of Topro Common Stock was
made and that an exemption continues to exist at the Closing Date.
Section 8.11 Lock-up Letter. Each of the ACS Shareholders shall have
executed the Lock-up Letter, in the form attached to this Agreement as Exhibit
8.11. The restrictions imposed by the Lock-up Letter do not preclude
restrictions on resale which apply under the 1933 Act, nor modify the two-year
holding period which will apply, absent registration of the Merger Shares,
under Rule 144 of the 1933 Act as currently in effect.
Section 8.12 Indemnification and Hold Harmless Agreements. Topro
shall have received Indemnification and Hold Harmless Agreements in the form
attached hereto as Exhibit 8.12 executed by each executive officer and
director of ACS in their individual capacities, which agreements shall provide
in substance that Topro will be indemnified and held harmless by said persons
for a period of two years from the Effective Time for any liabilities,
penalties, claims or other obligations existing at any time from ACS' date of
incorporation through the Effective Time which such persons knew of or should
have known of after due inquiry and which are not disclosed in ACS' unaudited
financial statements or elsewhere herein.
Section 8.13 Due Diligence Review of ACS . Prior to the Closing Date,
Topro shall have completed a due diligence review of ACS' business and
financial condition, including projected cash flow, backlog, and other relevant
factors, the results of which are satisfactory to Topro in its sole discretion.
Section 8.14 Agreement for Exclusive Sales Representation. ACS shall
have entered into an Agreement for Exclusive Sales Representation in the form
attached hereto as Exhibit 8.14 with Fallon Tech for a three year period
commencing the Closing Date.
-20-
21
Section 8.15 Employment and Indemnification Agreements. Topro shall
have entered into an Employment Agreement and an Indemnification Agreement with
Xxxxx Xxxxxx in the forms attached hereto as Exhibits 8.15(a) and (b).
ARTICLE ARTICLE IX
CONDITIONS TO ACS' OBLIGATIONS
The obligations of ACS under this Agreement to complete the Merger
shall be subject to the satisfaction, or to the waiver by ACS in the manner
contemplated by Section 12.2, at or before the Effective Time, of the following
conditions:
Section 9.1 Representations and Warranties True. The representations
and warranties of Topro and Newco contained in this Agreement shall be in all
material respects true and accurate as of the date when made and, except for
changes expressly contemplated by this Agreement, at and as of the Closing Date
and the Effective Time, as if made at such time.
Section 9.2 Performance of Covenants. Topro and Newco shall have
performed and complied in all material respects with each and every covenant,
agreement and condition required by this Agreement to be performed or complied
with by each prior to or at the Closing Date and the Effective Time.
Section 9.3 No Governmental or Other Proceeding or Litigation. No
order of any court or administrative agency shall be in effect which restrains
or prohibits the Merger, no suit, action, investigation, inquiry or proceeding
by any governmental body or other person or entity shall be pending or
threatened against Topro, Newco or ACS that challenges the validity or
legality, or seeks to restrain the completion of the Merger, and no written
advice shall have been received by Topro, Newco, ACS or their respective
counsel from any governmental body, and remain in effect, stating that an
action or proceeding will, if the Merger is completed or sought to be
completed, be filed seeking to invalidate or restrain the Merger.
Section 9.4 Approvals and Consents. The approval of the shareholder
of Newco and of the shareholders of ACS required to approve the Merger and all
approvals of applications to public authorities, Federal, state, local or
foreign, the granting of which is necessary for the completion of the Merger,
shall have been obtained, and all waiting periods specified by law shall have
passed.
Section 9.5 Approval by Topro's Board of Directors. Topro's Board of
Directors shall have approved the Merger.
Section 9.6 No Change in Financial Condition. Topro's financial
condition shall not have changed materially from that described in its Form 10-
QSB for the quarter ended September 30, 1996.
-21-
22
Section 9.7 Due Diligence Review of Topro. ACS shall have completed
a due diligence review of Topro's business and condition, the results of which
are satisfactory to ACS in its sole discretion.
Section 9.8 Approval by Topro's Board of Directors/Stock Options.
Topro's Board of Directors shall have approved the Merger and shall have
approved, subject to Topro shareholder approval at the next meeting of Topro
shareholders, adopted a new stock option plan, intended to comply with the
provisions of Section 16b-3 of the Securities Exchange Act of 1934 available to
provide certain exemptions from "short-swing" profit liability in connection
with options granted under the plan and, if deemed advisable by the Board,
permitting the grant of "incentive" options in compliance with Code provisions,
and providing for the grant of 150,000 compensatory options to key management
and other employees of ACS as designated in Schedule 9.8 attached hereto by ACS
management.
Section 9.9 Certificates. Topro and Newco shall have furnished ACS
with certificates of Topro and Newco, respectively, signed for Topro by its
President or any Vice President, its Controller and attested to by its
Secretary or any Assistant Secretary, and for Newco by its President or any
Vice President and its Secretary or any Assistant Secretary, to the effect that
the respective representations and warranties of such corporations contained in
this Agreement were in all material respects true and accurate as of the date
when made and, except for changes expressly contemplated by this Agreement, at
and as of the Closing Date and the Effective Time as though such
representations and warranties were made at the Closing Date and the Effective
Time, and that such corporations have respectively performed and complied in
all material respects with all terms, covenants and provisions of this
Agreement required to be performed or complied with by them prior to or at the
Closing Date and Effective Time.
Section 9.10 Opinion of Counsel. Topro shall have delivered to ACS an
opinion of counsel of recognized standing, dated the Closing Date and addressed
to ACS, and in form and substance reasonably satisfactory to ACS, to the effect
that based upon a review by them of the Agreement, including all Exhibits and
Schedules thereto, Topro's certificate of incorporation, bylaws, and relevant
corporate proceedings and contracts, and examination of such statutes they deem
necessary and such other investigation by such counsel as they deem necessary
to express such opinion on the matters described in Exhibit 9.10.
Counsel's opinion as to the validity and enforceability of any and all
contracts and agreements referenced herein may exclude any opinion as to the
validity or enforceability of any indemnification or contribution provisions
thereof, or as the validity or enforceability of any such contract or agreement
may be limited by bankruptcy or other laws relating to or affecting creditor's
rights generally and by equitable principles.
-22-
23
ARTICLE ARTICLE X
CLOSING; CLOSING DATE
Unless this Agreement shall have been terminated and the Merger herein
contemplated shall have been abandoned pursuant to a provision of Article XI
hereof, a closing (the "Closing") will be held as soon as practicable after the
execution of this Agreement at the offices of Topro, Inc. in Denver, Colorado,
or such other place as may be mutually satisfactory to the parties. At such
time and place, the documents referred to in Articles VIII and IX will be
exchanged by the parties and, as soon as practicable thereafter, the Articles
of Merger will be filed by ACS and Newco with the Secretary of State of
Pennsylvania. The exchange of documents at Closing may be effected through
simultaneous delivery of executed documents in counterpart and by use of
facsimile signatures.
ARTICLE ARTICLE XI
TERMINATION
Section 11.1 Termination and Abandonment. This Agreement may be
terminated and the Merger may be abandoned before the Closing Date,
notwithstanding any approval of this Agreement by the shareholders of the
parties:
(a) by the mutual consent of Topro, Newco and ACS;
(b) by Topro, Newco or ACS at any time after January 31, 1997
or such later date as shall have been agreed to in writing by the
parties, if at the time notice of such termination is given the Merger
for any reason shall not have become effective;
(c) by Topro or Newco if there has been a material
misrepresentation or material breach on the part of ACS in the
representations, warranties and covenants of ACS set forth herein, or
if there has been any material failure on the part of ACS to comply
with its obligations hereunder,
(d) by ACS if there has been a material misrepresentation or
material breach on the part of Topro or Newco in the representations,
warranties and covenants of Topro or Newco set forth herein, or if
there has been any material failure on the part of Topro or Newco to
comply with its obligations hereunder,
(e) by Topro or ACS if in the good faith judgment of the
Board of Directors of Topro or ACS , respectively, it is inadvisable
or impracticable to proceed with the Merger by reason of the threat,
institution or pendency of a formal investigation or legal proceedings
to restrain or prohibit completion of the Merger or to obtain other
relief in connection with this Agreement, or
(f) by Topro or ACS if due diligence conducted by either such
party is deemed unsatisfactory in such party's sole and absolute
discretion.
-23-
24
The exercise of the power of termination provided for by this Section
11.1 will be effective only after written notice thereof, signed on behalf of
the party for which it is given by its duly authorized officer, shall have been
given to the other parties and such power may be exercised only by the Board of
Directors of the party on whose behalf such written notice is given. If this
Agreement is terminated in accordance with this Section 11.1, then the Merger
shall be abandoned without further action by ACS and Newco, and their officers
shall not file the Articles of Merger with the Secretary of State of
Pennsylvania.
Section 11.2 Liability Upon Termination. In the event of termination
and abandonment of the Merger pursuant to Section 11.1(a), (b) or (e), no party
hereto shall have any liability or further obligation to another party except
as provided in Sections 4.5, 5.2, 6.1 and 6.2.
ARTICLE ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.1 Amendment and Modification. To the fullest extent
provided by applicable law, this Agreement may be amended, modified and
supplemented with respect to any of the terms contained herein by mutual
consent of ACS, Topro and Newco pursuant to action by their respective
officers, duly authorized by their respective Boards of Directors, by an
appropriate written instrument executed at any time prior to the Effective
Time.
Section 12.2 Materiality Threshold. An event or matter shall be
considered material: (i)with respect to ACS' business if it could result in
reduction in assets, increase in liabilities or reduction in revenues of at
least $10,000 on an individual basis or $30,000 in the aggregate; and (ii)with
respect to Topro's business if it could result in reduction in assets, increase
in liabilities or reduction in revenues of at least $50,000 in the aggregate.
Section 12.3 Mediation and Arbitration. Any disputes arising in
connection with this Agreement shall be resolved first by mediation, and if no
resolution can be attained, then by binding arbitration in accordance with the
rules of the American Arbitration Association.
Section 12.4 Waiver of Compliance. To the fullest extent permitted by
law, each of Topro, Newco and ACS may, pursuant to action by its respective
officers, duly authorized by its Board of Directors, by an instrument in
writing extend the time for or waive the performance of any of the obligations
of the others or waive compliance by the others with any of the covenants, or
waive any of the conditions to its obligations, contained herein. No such
extension of time or waiver shall operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 12.5 Survival of Representations and Warranties. The
respective representations and warranties of each party hereto contained in
Articles II and III shall be extinguished by and shall not survive the Closing.
The other representations contained herein shall survive the Closing for a
period of two years.
-24-
25
Section 12.6 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 12.7 Choice of Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado, without regard
to principles of conflict of laws.
Section 12.8 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered by hand or overnight
courier or mailed by registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other addresses for a party
as shall be specified by like notice) and shall be deemed given on the date on
which so hand-delivered, or on the business day following the day on which sent
by overnight courier or on the third business day following the date on which
so mailed:
If to Topro or Newco:
Topro, Inc.
ATTN: Xxxx Xxxxxxx, President
0000 X. Xxxxx Xxx.
Xxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx Key & Xxxxxxxx, P.C.
ATTN: Xxxxx X. Key, Esq.
0000 Xxxxxxx Xx., Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
If to ACS :
All Control Systems, Inc.
ATTN: Xxxxx Xxxxxx, President
000 Xxxxxxx Xxxx
Xxxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxx X. Xxxxx, Esq.
0 X. Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Section 12.9 Descriptive Headings. The descriptive headings are
for convenience of reference only and sell not control or affect the meaning or
construction of any provision of this agreement.
Section 12.10 Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto) (a) constitutes the entire agreement, and
supersedes all other prior agreements and
-25-
26
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, (b) is not intended to and shall not
confer upon any person other than the parties hereto any rights or remedies
hereunder and (c) shall not be assignable by operation of law or otherwise,
without the written consent of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date and year first written above.
TOPRO, INC.
Attest:
By:
------------------------- -----------------------------------
Xxxx Xxxxxxx, President
TOPRO ACS CORP.
Attest:
By:
------------------------- -----------------------------------
Xxxx Xxxxxxx, President
ALL-CONTROL SYSTEMS, INC.
Attest:
By:
------------------------- -----------------------------------
Xxxxx Xxxxxx, President
-26-
27
LIST OF EXHIBITS
1.1(b) Articles of Incorporation of ACS
1.1(c) Bylaws of ACS
1.2 Agreement Concerning Additional Share Consideration
1.3 Escrow Agreement
1.9 Option Agreement
3.12 ACS Accounts Payable & Accounts Receivable as of December 31, 1996
8.5 Subscription Agreement and Investment Representation Letter - ACS
Shareholders
8.6 Matters to be included in Xxx X. Xxxxx, Attorney-at-Law, PC, Opinion
of Counsel
8.7 ACS Closing Certificate
8.11 Form of Lock-up Letter - ACS Shareholders
8.12 Form of Indemnification and Hold Harmless Agreement - ACS Executive
Officers and Directors
8.14 Agreement for Exclusive Sales Representation
8.15(a) Form of Employment Agreement for Xxxxx Xxxxxx
8.15(b) Form of Indemnification Agreement for Xxxxx Xxxxxx
9.9 Topro & Newco Closing Certificates
9.10 Matters to be included in Xxxxxxx Key & Xxxxxxxx, PC, Opinion of
Counsel
i
28
LIST OF SCHEDULES
1.1(d) Officers and Directors of ACS to be elected on the Closing Date
1.4(b) Product Amortizations
2.2 Topro Outstanding Options, Warrants and Registration Rights
2.7 Topro Legal Proceedings
3.1 ACS Subsidiaries
3.3 ACS Authority to enter into Agreement
3.5 ACS Material Changes since September 30, 1996
3.7 ACS Legal Matters
3.8 Material Agreements and Plans; ERISA
3.12 ACS Accounts Receivable Subject to Set off
3.13 ACS Shareholders
3.14 ACS Project Contracts and Job Orders Subject to Setoff
4.2 ACS Restricted Activities and Transactions
5.5 ACS Employees, Compensation and Benefits
5.8 Topro Restricted Activities and Transactions
9.8 Grant of Options to ACS Employees
ii
29
EXHIBIT 1.1(b)
ARTICLES OF INCORPORATION OF ACS
EXHIBIT 1.1(c)
BYLAWS OF ACS
EXHIBIT 1.2
AGREEMENT CONCERNING ADDITIONAL SHARE CONSIDERATION
EXHIBIT 1.3
ESCROW AGREEMENT
EXHIBIT 1.9
OPTION AGREEMENT
EXHIBIT 3.12
ACS ACCOUNTS PAYABLE AND ACCOUNTS RECEIVABLE
AS OF DECEMBER 31, 1996
EXHIBIT 8.5
SUBSCRIPTION AGREEMENT AND INVESTMENT
30
EXHIBIT 8.6
MATTERS TO BE INCLUDED IN XXX X. XXXXX OPINION LETTER
(a) ACS and each of its subsidiaries has been duly organized and
is validly existing as a corporation in good standing under the laws
of the states of their respective organization and each is duly
qualified to do business and is in good standing in all jurisdictions
in which the failure to so qualify would have a material adverse
effect on the business of ACS . No consent, authorization or order
of, and no filing with, any court, government agency or other body is
required in connection with the execution and delivery of the
Agreement or the Exhibits and Schedules hereto (the "Acquisition
Documents") and the consummation of the transactions herein and
therein contemplated, except for compliance with any applicable
federal and/or state securities laws.
(b) ACS has full power and authority to execute and deliver this
Agreement and the Acquisition Documents and to carry out the
transactions contemplated thereby and ACS has taken all requisite
corporate action to authorize the execution, delivery and performance
of the Acquisition Documents. The Agreement and the Acquisition
Documents have each been duly and validly authorized, executed and
delivered by ACS and are valid and binding agreements enforceable in
accordance with their terms.
(c) Neither the execution and delivery of the Agreement or the
Acquisition Documents, nor the consummation of any of the transactions
contemplated therein, nor the compliance by ACS with the terms and
provisions thereof, has conflicted with or will conflict with, or has
resulted in or will result in any violation of, the provisions of the
Articles of Incorporation or bylaws of ACS , or constitutes or will
constitute a default under, or has resulted in or will result in the
creation or imposition of any lien, charge or encumbrance on any
property or assets of ACS pursuant to the terms of any indenture,
mortgage, deed of trust, note, loan or credit agreement or any other
agreement or instrument evidencing an obligation for borrowed money or
any other material agreement or instrument to which ACS is a party or
by which ACS may be bound.
(d) The authorized capital stock of ACS consists of ___________
shares of $__ par value Common Stock ("ACS Common Stock") ; on the
date of this Agreement, there are ______ shares of Common Stock issued
and outstanding; as of the date of this Agreement, there are no other
securities issued and outstanding, or if such securities do exist,
such securities have been duly authorized, validly issued, and are
fully paid and nonassessable. Except as disclosed in this Agreement
(including any Schedule hereto), and, to the best of counsel's
knowledge, there are (i) no existing rights of any ACS shareholder to
require ACS to register any securities of ACS or to participate with
ACS in any registration by ACS of its securities, and (ii) no
outstanding warrants, options or rights to subscribe for or purchase
any capital stock or other securities from ACS .
31
(e) There is no litigation or government proceeding pending
against, or involving the properties or business of ACS , which might
materially and adversely affect the value or operation of the
properties or the business of ACS .
(f) Nothing has come to such counsel's attention that has caused
them to believe that the Agreement or the Acquisition Documents
contain an 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 light of the circumstances under which
they are made, not misleading.
Counsel's opinion as to the validity and enforceability of any and all
contracts and agreements referenced herein may exclude any opinion as to the
validity or enforceability of any indemnification or contribution provisions
thereof, or as the validity or enforceability of any such contract or agreement
may be limited by bankruptcy or other laws relating to or affecting creditor's
rights generally and by equitable principles.
32
EXHIBIT 8.7
ACS CLOSING CERTIFICATE
EXHIBIT 8.11
FORM OF LOCK-UP LETTER - ACS SHAREHOLDERS
EXHIBIT 8.12
FORM OF INDEMNIFICATION AND HOLD HARMLESS AGREEMENT -
ACS EXECUTIVE OFFICERS AND DIRECTORS
EXHIBIT 8.14
AGREEMENT FOR EXCLUSIVE SALES REPRESENTATION
EXHIBIT 8.15(a)
FORM OF EMPLOYMENT AGREEMENT FOR XXXXX XXXXXX
EXHIBIT 8.15(b)
FORM OF INDEMNIFICATION AGREEMENT FOR XXXXX XXXXXX
EXHIBIT 9.9
TOPRO & NEWCO CLOSING CERTIFICATES
EXHIBIT 9.10
MATTERS TO BE INCLUDED IN XXXXXXX KEY & XXXXXXXX, P.C.,
OPINION OF COUNSEL
33
SCHEDULE 1.1(d)
OFFICERS AND DIRECTORS OF ACS TO BE ELECTED ON THE EFFECTIVE DATE
President - Xxxxx Xxxxxx
CEO and Secretary - Xxxx Xxxxxxx
Sole Director - Xxxx Xxxxxxx
SCHEDULE 1.4(b)
PRODUCT AMORTIZATION
SCHEDULE 2.2
TOPRO OUTSTANDING OPTIONS, WARRANTS AND REGISTRATION RIGHTS
SCHEDULE 2.7
TOPRO LEGAL PROCEEDINGS
SCHEDULE 3.1
ACS SUBSIDIARIES
SCHEDULE 3.3
ACS AUTHORITY TO ENTER INTO AGREEMENT
SCHEDULE 3.5
ACS MATERIAL CHANGES SINCE SEPTEMBER 30, 1996
SCHEDULE 3.7
ACS LEGAL MATTERS
SCHEDULE 3.8
ACS MATERIAL AGREEMENTS AND PLANS; ERISA
SCHEDULE 3.12
ACS ACCOUNTS RECEIVABLE SUBJECT TO SET OFF
SCHEDULE 3.13
ACS SHAREHOLDERS
SCHEDULE 3.14
ACS PROJECT CONTRACTS AND JOB ORDERS SUBJECT TO SET OFF
34
SCHEDULE 4.2
ACS RESTRICTED ACTIVITIES AND TRANSACTIONS
SCHEDULE 5.5
ACS EMPLOYEE COMPENSATION & BENEFITS
SCHEDULE 5.8
TOPRO RESTRICTED ACTIVITIES AND TRANSACTIONS
SCHEDULE 9.8
GRANT OF OPTIONS TO ACS EMPLOYEES
