AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
COMPUTONE CORPORATION,
XXXXX COMMUNICATIONS TECHNOLOGIES, INC.,
NEW COMPUTONE CORPORATION, XXXXX, L.L.C.
AND THE MEMBERS OF XXXXX L.L.C.
June 5, 1998
TABLE OF CONTENTS
-----------------
AGREEMENT AND PLAN OF REORGANIZATION..................................... -1-
RECITALS................................................................. -1-
ARTICLE I THE EXCHANGE.................................................. -1-
Section 1.1 Exchange of Interests.................................. -1-
---------------------
Section 1.2 Debt Conversion........................................ -2-
---------------
Section 1.3 Management Incentive Plan.............................. -2-
-------------------------
Section 1.4 Preliminary Exchange Closing........................... -2-
----------------------------
Section 1.5 Contingent Shares...................................... -3-
-----------------
Section 1.6 Managers............................................... -4-
--------
Section 1.7 Tax-Free Treatment..................................... -4-
------------------
Section 1.8 Accounting Treatment................................... -4-
--------------------
ARTICLE II THE MERGER................................................... -4-
Section 2.1 Effective Time of the Merger........................... -4-
----------------------------
Section 2.2 Closing................................................ -5-
-------
Section 2.3 Effects of the Merger.................................. -5-
---------------------
Section 2.4 Certificate of Incorporation........................... -5-
----------------------------
Section 2.5 Bylaws................................................. -5-
------
Section 2.6 Directors and Officers................................. -5-
----------------------
Section 2.7 Tax-Free Treatment..................................... -6-
------------------
Section 2.8 Accounting Treatment................................... -6-
--------------------
Section 2.9 Affiliate Restrictions................................. -6-
----------------------
ARTICLE III CONVERSION OF SECURITIES IN MERGER......................... -6-
Section 3.1 Conversion of Shares................................... -6-
--------------------
Section 3.2 Exchange of Certificates............................... -7-
------------------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF XXXXX AND PRINCIPAL
MEMBERS...................................................... -8-
Section 4.1 Existence. Good Standing. Compliance with Law.......... -8-
---------------------------------------------
Section 4.2 Capitalization of Xxxxx................................ -9-
-----------------------
Section 4.3 Authority.............................................. -9-
---------
Section 4.4 Consents and Approvals; No Violations.................. -9-
-------------------------------------
Section 4.5 Xxxxx Financial Statements............................. -10-
--------------------------
Section 4.6 Undisclosed Liabilities................................ -10-
-----------------------
Section 4.7 Absence of Certain Changes or Events................... -10-
------------------------------------
Section 4.8 Certain Agreements..................................... -11-
------------------
Section 4.9 Taxes.................................................. -12-
-----
i
Section 4.10 Title to Assets....................................... -13-
---------------
Section 4.11 Condition of Personal Property........................ -13-
------------------------------
Section 4.12 List of Contracts and Other Data...................... -13-
--------------------------------
Section 4.13 Business Property Rights.............................. -14-
------------------------
Section 4.14 Compliance with Applicable Law........................ -14-
------------------------------
Section 4.15 No Breach or Default.................................. -14-
--------------------
Section 4.16 Labor Controversies................................... -15-
-------------------
Section 4.17 Litigation............................................ -15-
----------
Section 4.18 Transactions with Affiliates.......................... -15-
----------------------------
Section 4.19 Environmental Matters................................. -15-
---------------------
Section 4.20 ERISA Plans........................................... -16-
-----------
Section 4.21 No Brokers............................................ -16-
----------
Section 4.22 Pooling Matters....................................... -17-
---------------
Section 4.23 Information Supplied.................................. -17-
--------------------
Section 4.24 No Misrepresentation or Omission...................... -17-
--------------------------------
ARTICLE IVA REPRESENTATIONS AND WARRANTIES OF MEMBERS.................. -17-
Section 4A.1 Capitalization of Xxxxx.......................... -17-
-----------------------
Section 4A.2 Authority........................................ -17-
---------
Section 4A.3 Consent and Approvals; No Violations............. -18-
------------------------------------
Section 4A.4 No Brokers....................................... -18-
----------
Section 4A.5 Ownership of Interest............................ -18-
---------------------
Section 4A.6 Information Supplied............................. -18-
--------------------
Section 4A.7 No Misrepresentations or Omission................ -19-
---------------------------------
ARTICLE V REPRESENTATIONS AND WARRANTIES OF COMPUTONE.................. -19-
Section 5.1 Existence. Good Standing. Compliance with Law.......... -19-
---------------------------------------------
Section 5.2 Capitalization of Computone............................ -19-
---------------------------
Section 5.3 Authority.............................................. -20-
---------
Section 5.4 Consents and Approvals; No Violations.................. -21-
-------------------------------------
Section 5.5 Computone SEC Documents................................ -21-
-----------------------
Section 5.6 Undisclosed Liabilities................................ -22-
-----------------------
Section 5.7 Absence of Certain Changes or Events................... -22-
------------------------------------
Section 5.8 Information Supplied.................................... -23-
--------------------
Section 5.9 Certain Agreements..................................... -24-
------------------
Section 5.10 Taxes.................................................. -24-
-----
Section 5.11 Title to Assets....................................... -25-
---------------
Section 5.12 Condition of Personal Property........................ -25-
------------------------------
Section 5.13 List of Contracts and Other Data...................... -25-
--------------------------------
Section 5.14 Business Property Rights.............................. -26-
------------------------
Section 5.15 Compliance with Applicable Law........................ -26-
------------------------------
Section 5.16 No Breach or Default.................................. -27-
--------------------
Section 5.17 Labor Controversies................................... -27-
-------------------
ii
Section 5.18 Litigation............................................ -27-
----------
Section 5.19 Transactions with Affiliates.......................... -28-
----------------------------
Section 5.20 Environmental Matters................................. -28-
---------------------
Section 5.21 ERISA Plans........................................... -28-
-----------
Section 5.22 No Brokers............................................ -29-
----------
Section 5.23 Pooling Matters....................................... -29-
---------------
Section 5.24 No Misrepresentation or Omission...................... -29-
--------------------------------
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF HC AND NEWCO............. -30-
Section 6.1 Existence. Good Standing. Compliance with Law......... -30-
---------------------------------------------
Section 6.2 Capitalization of HC.................................. -30-
--------------------
Section 6.3 Capitalization of Newco............................... -30-
-----------------------
Section 6.4 Authority............................................. -31-
---------
Section 6.5 Consents and Approvals; No Violations................. -31-
-------------------------------------
Section 6.6 Undisclosed Liabilities............................... -32-
-----------------------
Section 6.7 Absence of Certain Changes or Events.................. -32-
------------------------------------
Section 6.8 Information Supplied.................................. -33-
--------------------
Section 6.9 Certain Agreements.................................... -33-
------------------
Section 6.10 Taxes................................................ -33-
-----
Section 6.11 Title to Assets...................................... -34-
---------------
Section 6.12 Condition of Personal Property....................... -34-
------------------------------
Section 6.13 List of Contracts and Other Data..................... -34-
--------------------------------
Section 6.14 Business Property Rights............................. -35-
------------------------
Section 6.15 Compliance with Applicable Law....................... -35-
------------------------------
Section 6.16 No Breach or Default................................. -35-
--------------------
Section 6.17 Labor Controversies.................................. -36-
-------------------
Section 6.18 Litigation........................................... -36-
----------
Section 6.19 Transactions with Affiliates......................... -36-
----------------------------
Section 6.20 Environmental Matters................................ -36-
---------------------
Section 6.21 ERISA Plans.......................................... -37-
-----------
Section 6.22 No Brokers........................................... -37-
----------
Section 6.23 Pooling Matters...................................... -37-
---------------
Section 6.24 No Misrepresentation or Omission..................... -37-
--------------------------------
ARTICLE VII ADDITIONAL COVENANTS AND AGREEMENTS....................... -37-
Section 7.1 Conduct of Computone, HC, Newco and Xxxxx Prior to the
------------------------------------------------------
Preliminary Exchange Closing and the Merger Closing... -37-
---------------------------------------------------
Section 7.2 HC Governance......................................... -39-
-------------
Section 7.3 Stockholder Meeting................................... -39-
-------------------
Section 7.4 Legal Conditions to the Merger or Exchange............ -39-
------------------------------------------
Section 7.5 Cooperation........................................... -39-
-----------
Section 7.6 Satisfactory Affiliate Agreements..................... -40-
---------------------------------
Section 7.7 Expenses.............................................. -40-
--------
iii
Section 7.8 Public Announcements................................... -40-
--------------------
Section 7.9 Issuance of HC Common Stock and Xxxxx Options.......... -41-
---------------------------------------------
Section 7.10 Consents.............................................. -41-
--------
Section 7.11 Stockholders' Agreement............................... -41-
-----------------------
Section 7.12 Accountants' Letters.................................. -42-
--------------------
Section 7.13 Actions by Xxxxx...................................... -42-
----------------
Section 7.14 Role of HC and Computone.............................. -43-
------------------------
Section 7.15 Limitations on Certain Transactions................... -43-
-----------------------------------
Section 7.16 Commission Filings.................................... -43-
------------------
Section 7.17 Equity Financing...................................... -43-
----------------
ARTICLE VIII CONDITIONS TO THE PRELIMINARY EXCHANGE CLOSING............ -44-
Section 8.1 Conditions to Closing of HC............................ -44-
---------------------------
Section 8.2 Conditions to Closing of Xxxxx and the Members......... -45-
----------------------------------------------
Section 8.3 Conditions to Closing of HC, Xxxxx and the Members..... -46-
--------------------------------------------------
ARTICLE IX CONDITIONS TO THE MERGER CLOSING............................. -47-
Section 9.1 Conditions to Closing of Computone..................... -47-
----------------------------------
Section 9.2 Conditions to Closing of HC and Newco.................. -48-
-------------------------------------
Section 9.3 Conditions to Closing of HC, Newco and Computone....... -49-
------------------------------------------------
ARTICLE X COMPUTONE OPTIONS AND WARRANTS............................... -50-
Section 10.1 Computone's Stock Options and Warrants................ -50-
--------------------------------------
ARTICLE XI TERMINATION................................................. -50-
Section 11.1 Mutual Consent........................................ -50-
--------------
Section 11.2 By Any Party.......................................... -50-
------------
Section 11.3 By Computone.......................................... -51-
------------
Section 11.4 By Xxxxx.............................................. -51-
--------
Section 11.5 By HC................................................. -51-
-----
ARTICLE XII MISCELLANEOUS.............................................. -52-
Section 12.1 Notice................................................ -52-
------
Section 12.2 Binding Effect; Benefits.............................. -53-
------------------------
Section 12.3 Entire Agreement...................................... -53-
----------------
Section 12.4 Governing Law......................................... -53-
-------------
Section 12.5 Non-Survival of Representations, Warranties and
-----------------------------------------------
Agreements............................................ -53-
----------
Section 12.6 Counterparts.......................................... -53-
------------
Section 12.7 Headings.............................................. -54-
--------
Section 12.8 Waivers............................................... -54-
-------
Section 12.9 Merger of Documents................................... -54-
-------------------
Section 12.10 Incorporation of Schedules........................... -54-
--------------------------
Section 12.11 Assignability........................................ -54-
-------------
Section 12.12 Severability......................................... -54-
------------
iv
EXHIBIT A Certificate of Merger........................................ -65-
---------------------
EXHIBIT B Merger Agreement............................................. -66-
----------------
EXHIBIT C Form of Affiliates Agreement................................. -67-
----------------------------
EXHIBIT D Form of Stockholders Agreement............................... -68-
------------------------------
v
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement"), dated as of
the 5th day of June, 1998, is entered into by and among Computone Corporation, a
Delaware corporation ("Computone"), Xxxxx Communications Technologies, Inc., a
Delaware corporation ("HC"), New Computone Corporation, a Delaware corporation
("Newco"), Xxxxx, L.L.C., a Massachusetts limited liability company ("Xxxxx")
and the members of Xxxxx listed on Schedule A attached hereto (individually, a
----------
"Member" and collectively, the "Members").
RECITALS
--------
WHEREAS, the Board of Directors of HC and the Members deem it advisable and
in the best interests of HC, Ladia, the Members and the stockholders of HC for
the Members to exchange their Membership Interests (as hereinafter defined) in
Xxxxx for shares of common stock of HC, with the result that HC shall become a
member of Xxxxx (the "Exchange") and shall designate a second member of Xxxxx in
order to satisfy the requirements of the Massachusetts Limited Liability Company
Act; and
WHEREAS, the Board of Directors of Computone, HC and Newco deem it
advisable and in the best interests of their respective corporations and
stockholders for Newco to merge with and into Computone, with the separate
corporate existence of Newco ceasing and Computone being the surviving
corporation (the "Surviving Corporation") as a wholly-owned subsidiary of HC
(the "Merger"); and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), that the Exchange shall qualify as a tax-
free transfer under Section 351 of the Code and that this Agreement is intended
to be and is adopted as a plan of reorganization; and
WHEREAS, for accounting purposes, it is intended that both the Exchange and
the Merger shall be accounted for as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, the provisions and the
respective agreements set forth in this Agreement, and in order to set forth the
terms and conditions of the Exchange and the Merger and the mode of carrying the
same into effect, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
THE EXCHANGE
Section I.1 Exchange of Interests. Upon and subject to the terms and
---------------------
conditions hereof, at the Preliminary Exchange Closing (as defined in Section
1.5 hereof), (a) each Member shall transfer
all of such Member's interest in Xxxxx (individually, a "Membership Interest"
and collectively, the "Membership Interests") to HC and (b) in exchange for the
transfer of each Member's Membership Interest, HC shall issue and deliver to the
transferring Member (i) the number of shares (the "Initial Member Shares") of
the common stock, $0.01 par value, of HC (the "HC Common Stock") equal to such
Member's Membership Interest (as a percentage of all Membership Interests
outstanding at the Preliminary Exchange Closing Date) multiplied by 408,851,
subject to the adjustment contemplated by Section 7.17 hereof and (ii) the
contingent right to receive a pro rata share of certain additional shares of the
HC Common Stock pursuant to Section 1.5 hereof.
Section I.2 Debt Conversion. Upon and subject to the terms and conditions
---------------
hereof including the adjustment contemplated by Section 7.17 hereof, at the
Preliminary Exchange Closing, $250,000 of the original principal amount of the
debt evidenced by the demand note, dated October 22, 1997, issued by Xxxxx to
Coutts (Jersey) Limited in the original principal amount of $500,000 shall be
converted into (i) 21,518 shares of the HC Common Stock (the "1997 Note Shares")
and (ii) the contingent right to receive a pro rata share of certain additional
shares of the HC Common Stock pursuant to Section 1.5 hereof.
Section I.3 Management Incentive Plan. Prior to the Preliminary Exchange
-------------------------
Closing, HC will establish a management incentive plan for key employees of
Xxxxx (the "XX Xxxxx Incentive Plan") pursuant to which an aggregate of
1,661,465 shares of HC Common Stock will be reserved for issuance upon the
exercise of option granted thereunder. As of such Preliminary Exchange Closing,
Xxxxx and the Compensation Committee of HC's Board of Directors shall agree upon
the Ladia employees who shall be granted options (the "Xxxxx Options") under the
XX Xxxxx Incentive Plan and the number of shares of HC Common Stock which such
employees shall be entitled to purchase (the "Xxxxx Option Shares"). The Xxxxx
Options shall have an exercise price of $7.00 per Xxxxx Option Share, shall have
a term of ten years, shall be incentive options to the greatest extent possible
and shall contain such other terms and conditions as shall be approved by the
Compensation Committee of HC's Board of Directors after consideration of the
recommendations of Xxxxxxx Xxxxx.
Section I.4 Preliminary Exchange Closing. A preliminary closing of the
----------------------------
Exchange (the "Preliminary Exchange Closing") will take place at 10:00 a.m. on a
date to be specified by the parties, which shall be no later than the earlier to
occur of September 30, 1998 or the second business day after satisfaction or
waiver of the conditions set forth in Article VIII hereof (the "Preliminary
Exchange Closing Date") at the offices of Duane, Morris & Heckscher LLP, Xxx
Xxxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, unless another place or time is
agreed to in writing by the parties hereto. The Preliminary Exchange Closing
shall take place simultaneously with the Merger Closing (as defined in Section
2.2 hereof), and the Preliminary Exchange Closing Date shall be the same date as
the Effective Date (as defined in Section 2.1) of the Merger.
2
Section I.5 Contingent Shares.
-----------------
(a) If, during the period commencing May 1, 1998 and expiring April
30, 1999 (the "Revenues Measurement Period"), Xxxxx has at least $10,000,000 in
Cumulative Gross Revenues and maintains a Cumulative Gross Margin of not less
than 4%, the Members and the holder(s) of the 1997 Note Shares, as holders of
shares of the HC Common Stock, shall be entitled to receive at the Final
Exchange Closing (as hereinafter defined) the number of additional shares of the
HC Common Stock (the "Additional Shares") set forth below, subject to adjustment
as set forth in Section 7.17 hereof:
If Revenues are at least But less than Number of Additional Shares
------------------------ ------------- ---------------------------
$10,000,000 $15,000,000 737,776
$15,000,000 $20,000,000 2,039,770
$20,000,000 $25,000,000 4,109,590
$25,000,000 8,080,400
(b Each Member and holder of 1997 Note Shares shall be entitled to
receive at the Final Exchange Closing a number of Additional Shares equal to the
total number of Additional Shares multiplied by a fraction, the numerator of
which is the number of Initial Member Shares and/or 1997 Note Shares to which
such Member or holder is entitled pursuant to Section 1.1 hereof and the
denominator of which is the sum of the number of Initial Member Shares and 1997
Note Shares.
(c Promptly following the receipt by HC of the report of its regular
independent certified public accountants with respect to its audited financial
statements for the fiscal year ending April 2, 1999, HC shall calculate the
number of Additional Shares issuable with respect to the portion of the Revenues
Measurement Period ended on such date, based on Cumulative Gross Revenues and
Cumulative Gross Margins from May 1, 1998 through such date. Promptly following
the preparation by HC of its unaudited financial statements for the period from
April 3, 1999 through and including April 30, 1999, HC shall calculate the
number of Additional Shares issuable with respect to such period based on
Cumulative Gross Revenues and Cumulative Gross Margins from the Preliminary
Exchange Closing through the end of such Revenues Measurement Period. HC's
Board of Directors shall be authorized, in its discretion and based on its good
faith assessment of the business and prospects of Xxxxx, to reduce the specified
revenue thresholds that must be achieved in order for the Members and the
holder(s) of the 1997 Note Shares to be entitled to receive any particular
number of Additional Shares.
(d For purposes of this Agreement, "Cumulative Gross Revenues" shall
mean, for any period, the accrued aggregate price per minute invoiced by Xxxxx
to all of its customers during such period, less any rebates, commissions,
discounts, returns or other credits granted or credited by Xxxxx to any customer
with respect to any such invoices, regardless of
3
when granted or credited and "Cumulative Gross Margins" shall mean, for any
period (i) the accrued aggregate price per minute invoiced by Xxxxx to all of
its customers during such period, less any rebates, commissions, discounts,
returns or other credits granted or credited by Xxxxx to any customer with
respect to any such invoices, regardless of when granted or credited, minus (ii)
the accrued aggregate cost per minute invoiced to Xxxxx by all of its suppliers
during such period divided by (iii) Ladia's Cumulative Gross Revenues for such
period.
(e) The final closing of the Exchange (the "Final Exchange Closing"),
will take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than May 31, 1999 (the "Final Exchange Closing Date") at the
offices of Duane, Morris & Heckscher LLP, Xxx Xxxxxxx Xxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx, 00000, unless another time or place is agreed to in writing by the
parties hereto. At the Final Exchange Closing, HC shall deliver to the Members
and the holder(s) of the 1997 Note Shares to Additional Shares to which they are
entitled pursuant to the provisions of this Section 1.5.
Section I.6 Managers. Subject to the provisions of Section 7.13 hereof,
--------
the Managers of Xxxxx on and immediately following the Preliminary Exchange
Closing Date shall be Xxxxxxx Xxxxx (who shall be designated as the Chair of the
Board of Managers under Ladia's Operating Agreement), Xxxxxx X. Xxxxx or his
designee and Xxxxxxx X. Xxxxxx, each of whom shall serve in accordance with the
Operating Agreement of Xxxxx (the "Operating Agreement"). The Operating
Agreement shall provide that any expansion of the Board of Managers beyond three
(3) members shall be effected in increments of two (2), one of whom in each case
shall be designated by Xxxxxxx Xxxxx and one of whom in each case shall be
designated by Xxxxxxx X. Xxxxxx. Such designation rights, and any rights to
remove a manager, shall be specified in the Operating Agreement. In her
capacity as Chair of the Board of Managers, Xxxxxxx Xxxxx shall have the powers
and shall function under the Operating Agreement as would the President and
Chief Executive Officer of corporate entity.
Section I.7 Tax-Free Treatment. The Exchange is intended to constitute a
------------------
tax-free transfer under Section 351 of the Code, and the parties shall not
report the Exchange on any tax return in a manner or take any action
inconsistent therewith.
Section I.8 Accounting Treatment. The parties intend that the Exchange
--------------------
shall be treated by HC as pooling of interests for accounting purposes.
4
ARTICLE II
THE MERGER
Section II.1 Effective Time of the Merger. Upon the terms and subject to
----------------------------
the conditions hereof, a certificate of merger (the "Certificate of Merger")
substantially in the form of Exhibit A attached hereto shall be duly prepared
---------
and executed by the Surviving Corporation (as defined in Section 2.3) and, not
later than the Merger Closing Date (as defined in Section 2.2), shall be
delivered to the Secretary of State of the State of Delaware for filing as
provided in the Delaware General Corporation Law (the "DGCL"). As soon as
practicable after the date hereof, Computone, Newco and HC shall enter into a
Plan of Merger substantially in the form of Exhibit B attached hereto (the
---------
"Merger Agreement") which shall provide for the Merger in accordance with the
laws of the State of Delaware. The Merger shall become effective upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (the "Effective Time"; the date on which the Effective Time occurs is
hereinafter referred to as the "Effective Date").
Section II.2 Closing. The closing of the Merger (the "Merger Closing")
-------
will take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the earlier to occur of September 30, 1998 or the second
business day after satisfaction or waiver of the conditions set forth in Article
IX hereof (the "Merger Closing Date") at the offices of Duane, Morris and
Heckscher LLP, Xxx Xxxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, unless
another place or time is agreed to in writing by the parties hereto. The Merger
Closing shall take place simultaneously with the Preliminary Exchange Closing,
and the Effective Date shall be the same date as the Preliminary Exchange
Closing Date.
Section II.3 Effects of the Merger. The Merger shall have the effects set
---------------------
forth in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time: (a) Newco shall merge with and into Computone,
which shall be the surviving corporation in the Merger (the "Surviving
Corporation") and a wholly owned subsidiary of HC; (b) the separate corporate
existence of Newco shall thereupon cease and (c) all the properties, rights,
privileges, powers and franchises of Computone and Newco shall vest in the
Surviving Corporation and all debts, liabilities and duties of Computone and
Newco shall become the debts, liabilities and duties of the Surviving
Corporation.
Section II.4 Certificate of Incorporation. The Certificate of
----------------------------
Incorporation of Computone as in effect on the Effective Date, as amended by the
Certificate of Merger, shall be the Certificate of Incorporation of the
Surviving Corporation, it being understood that such Certificate of
Incorporation does not and shall not contain any provision requiring the
approval of a greater percentage of outstanding shares eligible to vote on any
matter submitted to the stockholders for a vote than is set forth under the
DGCL.
Section II.5 Bylaws. The Bylaws of Computone as in effect on the Effective
------
Date shall be the Bylaws of the Surviving Corporation; provided, however, that
such Bylaws shall not contain any provision requiring the approval of a greater
percentage of outstanding shares eligible to vote on any matter submitted to the
stockholders for approval than is set forth under the DGCL.
Section II.6 Directors and Officers. The Directors of the Surviving
----------------------
Corporation on and immediately following the Effective Date shall be Xxxxxxx X.
Xxxxxx (Chair), Xxxxxxx Xxxxx and a person to be designated by Xxxxxxx Xxxxx on
5
or before Closing, each of whom shall serve in accordance with the Bylaws of the
Surviving Corporation. The officers of the Surviving Corporation on and
immediately following the Effective Date shall be determined by the Board of
Directors of the Surviving Corporation, each of whom will serve in accordance
with the Bylaws of the Surviving Corporation.
Section II.7 Tax-Free Treatment. The Merger is intended to constitute a
------------------
tax-free reorganization under Section 368(a) of the Code, and the parties shall
not report the Merger on any tax return in a manner or take any action
inconsistent therewith.
Section II.8 Accounting Treatment. The parties intend that the Merger
--------------------
shall be treated by Computone and HC as a pooling of interests for accounting
purposes.
Section II.9 Affiliate Restrictions. In addition to any other restrictions
----------------------
set forth herein, all of the Merger Shares (as defined in Section 3.1 hereof) to
be received by any Computone Affiliate (for purposes of Rule 145) shall be
subject to the restrictions imposed by the Securities Act of 1933, as amended
(the "Securities Act"), and Rule 145 promulgated thereunder, and the
certificates evidencing such shares shall bear a restrictive legend to reflect
such restrictions.
ARTICLE III
CONVERSION OF SECURITIES IN MERGER
Section III.1 Conversion of Shares. As of the Effective Date, by virtue of
--------------------
the Merger and without any action on the part of the holder of any shares of
common stock, par value $0.01 per share, of Computone (the "Computone Common
Stock") or the holder of any shares of common stock, par value $0.01 per share,
of Newco (the "Newco Common Stock"):
(a) Capital Stock of Computone. Each share of Common Stock, par value
--------------------------
$0.01 per share, of Computone except Dissenters' Shares (as hereinafter defined)
issued and outstanding immediately prior to the Effective Date shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, par value $0.01 per share, of HC (the
"Merger Shares").
(b) Capital Stock of Newco. Each share of Common Stock, par value
----------------------
$0.01 per share, of Newco issued and outstanding immediately prior to the
Effective Date shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of Common Stock, par value $0.01 per share,
of the Surviving Corporation.
(c) Cancellation of HC Shares. All HC Common Stock owned by Computone
-------------------------
as of the Effective Date shall be canceled and retired and shall cease to exist,
and no stock of HC or the Surviving Corporation or other consideration shall be
delivered in exchange therefor.
(d) Dissenters' Rights. Shares of Computone Common Stock that have not
------------------
been voted for adoption of the Merger and with respect to which appraisal rights
6
have been properly demanded in accordance with the DGCL ("Dissenters' Shares")
shall not be converted into HC Common Stock as set forth in Section 3.1(a) on
the Effective Date, but shall be converted into the right to receive from Newco
such consideration as may be determined to be due with respect to such
Dissenters' Shares pursuant to the provisions of the DGCL. Computone shall give
Newco (i) prompt notice of any written demands for appraisals, withdrawals of
demands for appraisal and any other instruments in respect thereof received by
Computone and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal. Computone will not, except
with the prior written consent of Newco, voluntarily make any payment with
respect to any demands for appraisal or settle or offer to settle any such
demands. The Surviving Corporation will pay all sums due to holders of
Dissenters' Shares.
Section III.2 Exchange of Certificates.
------------------------
(a) Exchange Agent. As of the Effective Time, HC shall deposit with an
--------------
agent designated by HC (the "Exchange Agent"), for the benefit of the holders of
Computone Common Stock (other than Dissenters' Shares), for exchange in
accordance with this Article III, through the Exchange Agent, certificates
representing the Merger Shares issuable pursuant to Section 3.1(a) in exchange
for outstanding Computone Common Stock.
(b) Exchange Procedures. As soon as practicable after the Effective
-------------------
Time, the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding Computone Common Stock (the
"Certificates") whose shares were converted pursuant to Section 3.1(a) into the
right to receive Merger Shares (i) a letter of transmittal and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing Merger Shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by HC, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of Merger Shares which such holder has the
right to receive pursuant to the provisions of this Article III, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Computone Common Stock which is not registered in the
transfer records of Computone, a certificate representing the proper number of
Merger Shares may be issued to a transferee if the Certificate representing such
Computone Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 3.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender a certificate representing Merger Shares.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions declared or made after the Effective Time with respect to
Merger Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate
7
with respect to the Merger Shares represented thereby until the holder of record
of such Certificate shall surrender such Certificate as provided herein. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing whole
Merger Shares 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 paid with respect to such Merger
Shares and (ii) at the appropriate payment date, the amount of dividends or
other distributions, if any, with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such Merger Shares.
(d) No Further Ownership Rights in Computone Common Stock. All Merger
-----------------------------------------------------
Shares issued upon the surrender for exchange of Computone Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Computone Common Stock subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which may
have been declared or made by Computone on such Computone Common Stock prior to
the date hereof and which remain unpaid at the Effective Time, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the Computone Common Stock which was outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article III.
(e) Termination of Exchange Fund. Any Merger Shares which remain
----------------------------
undistributed to the stockholders of Computone for one year after the Effective
Time shall be delivered to HC, upon demand, and any stockholders of Computone
who have not theretofore complied with this Article III shall thereafter look
only to HC for payment of their claim for Merger Shares and any dividends or
distributions with respect to Merger Shares.
(f) No Liability. None of Computone, HC or Newco, or any affiliate of
------------
any of them, shall be liable to any holder of shares of Computone Common Stock
for such shares (or dividends or distributions with respect thereto) delivered
to a public official to the extent required by any applicable abandoned
property, escheat or similar law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXXX AND
PRINCIPAL MEMBERS
The Xxxxx Nominee Trust, Xxxx Xxxxxxxx and Xxxxxxx Xxxxx (collectively, the
"Principal Members") and Xxxxx jointly and severally represent and warrant to
Computone and HC as follows:
Section IV.1 Existence. Good Standing. Compliance with Law. Xxxxx is a
---------------------------------------------
limited liability company duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts. Xxxxx is duly licensed or
qualified to do business as a foreign
8
limited liability company and is in good standing under the laws of any other
jurisdiction in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except for jurisdictions in which the failure to be so qualified or
to be in good standing would not have a material adverse effect on Ladia's
business as a whole. Xxxxx has all requisite power and authority to own its
properties and carry on its business as now conducted. The copies of Ladia's
Certificate of Organization and Operating Agreement which have been delivered to
Computone are complete and correct. Xxxxx is not in default with respect to any
order of any court, governmental authority or arbitration board or tribunal to
which Xxxxx is a party or is subject, and Xxxxx is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, except for
laws, ordinances, governmental rules or regulations the violation of which would
not have a material adverse effect on Ladia's business as a whole. Xxxxx has
obtained all licenses, permits and other authorizations and has taken all action
required by applicable law or governmental regulation necessary for the conduct
of its business as now conducted, except for licenses, permits, authorizations
or actions the violation of which or the failure to obtain or take which would
not have a material adverse effect on Ladia's business as a whole.
Section IV.2 Capitalization of Xxxxx.
-----------------------
(a) Schedule A sets forth a complete and accurate list of all
outstanding Membership Interests.
(b) Except as disclosed in Section 4.2 of the disclosure schedule
prepared by Xxxxx and attached hereto as Schedule B (the "Xxxxx Disclosure
----------
Schedule"), there are no outstanding rights, warrants, options, subscriptions,
agreements or commitments giving anyone any right to require Xxxxx or any Member
to sell or issue any Membership Interest.
(c) Except as disclosed in Section 4.2 of the Xxxxx Disclosure
Schedule, there are no outstanding contractual obligations of Xxxxx or any
Member to repurchase, redeem or otherwise acquire any Membership Interest.
(d) Xxxxx has no Subsidiaries. For purposes of this Agreement, a
"Subsidiary" is any corporation or other organization, whether incorporated or
unincorporated, (i) of which either a person (A) directly or indirectly owns
securities or interests having by their terms ordinary voting power to elect a
majority of the Board of Directors or other persons performing a similar
function with respect to such corporation or other organization or (B) is a
general partner (excluding any partnerships the general partnership interests of
which held by such person directly or indirectly do not have a majority of the
voting interest in such partnership) or (ii) which is otherwise deemed to be a
significant subsidiary of a person within the meaning of Regulation S-X
promulgated by the Securities and Exchange Commission (the "Commission") as in
effect on the date hereof.
Section IV.3 Authority. Xxxxx and, to the knowledge of Xxxxx and each
---------
Principal Member, each of the Members has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Xxxxx and the Members
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of Xxxxx and, to the knowledge of
Xxxxx and each Principal Member, the Members. This Agreement has been duly
executed and delivered by Xxxxx and, to the knowledge of Xxxxx and each
Principal Member, each Member and constitutes their valid and binding
obligation, enforceable against them in accordance with its terms.
9
Section IV.4 Consents and Approvals; No Violations. Except as set forth in
-------------------------------------
Section 4.4 of the Xxxxx Disclosure Schedule, the execution and delivery of this
Agreement by Xxxxx and the Members do not, and the consummation by Xxxxx and the
Members of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a material benefit under (i) any provision of
the Certificate of Organization or the Operating Agreement of Xxxxx or (ii) any
mortgage, indenture, lease, or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Xxxxx or, to the knowledge of Xxxxx
and each Principal Member, any Member or their respective properties or assets,
other than any such conflicts, violations, defaults, terminations, cancellations
or accelerations which individually or in the aggregate would not have a
material adverse effect on Ladia's business as a whole or on the Membership
Interests. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality (a "Governmental Entity") is
required by or with respect to Xxxxx or, to the knowledge of Xxxxx and each
Principal Member, any Member in connection with the execution and delivery of
this Agreement by Xxxxx or any Member or the consummation by Xxxxx or any Member
of the transactions contemplated hereby, except such consents, approvals,
orders, authorizations, registrations, declarations and/or filings which if not
obtained or made would not have a material adverse effect on Ladia's business as
a whole or on the Membership Interests.
Section IV.5 Xxxxx Financial Statements. Xxxxx has furnished a true and
--------------------------
complete copy of the unaudited balance sheet of Xxxxx as of December 31, 1997
and the related statements of income, Members' equity and cash flow and notes
thereto for the fiscal year then ended (the "Xxxxx Unaudited Financial
Statements"). Except as set forth on Section 4.5 of the Xxxxx Disclosure
Schedule, the Xxxxx Unaudited Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior periods (except as may be indicated in the notes thereto)
and fairly present the financial position of Xxxxx as at the dates thereof and
the results of its operations and changes in financial position for the period
then ended (subject to normal, recurring audit adjustments). Except as
disclosed in the Xxxxx Unaudited Financial Statements, or except as contemplated
by this Agreement or on account of the transactions contemplated hereby, since
December 31, 1997 there has not been any material adverse change in the results
of operations, financial condition, assets or business of Xxxxx taken as a
whole.
Section IV.6 Undisclosed Liabilities. Xxxxx has no liabilities, either
-----------------------
accrued, absolute, contingent or otherwise, of a nature required to be reflected
in a balance sheet or related notes prepared in accordance with generally
accepted accounting principles consistently applied which are not reflected or
provided for in the Xxxxx Unaudited Financial Statements except (i) those
arising after December 31, 1997 which are in the ordinary course of business and
which, in the aggregate, would not have a material effect on the financial
condition of Xxxxx and (ii) as and to the extent specifically described in
Section 4.6 of the Xxxxx Disclosure Schedule.
10
Section IV.7 Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
Section 4.7 of the Xxxxx Disclosure Schedule, since December 31, 1997, Xxxxx has
not:
(a) incurred any obligation or liability (fixed or, to the knowledge
of Xxxxx and Xxxxxxx Xxxxx, contingent), except normal trade or business
obligations incurred in the ordinary course of business and consistent with past
practice, and except in connection with this Agreement and the transactions
contemplated hereby;
(b) discharged or satisfied any lien, security interest or encumbrance
or paid any obligation or liability (fixed or contingent), other than in the
ordinary course of business and consistent with past practice;
(c) mortgaged, pledged or subjected to any lien, security interest or
other encumbrance any of its assets or properties (other than mechanic's,
materialman's and similar statutory liens arising by operation of law, liens for
current real and personal property taxes incurred but not yet due and payable,
purchase money security interests arising as a matter of law between the date of
delivery and payment and other liens of an immaterial nature);
(d) transferred, leased or otherwise disposed of any of its assets or
properties except in the ordinary course of business and consistent with past
practice or, except in the ordinary course of business and consistent with past
practice, acquired any assets or properties;
(e) canceled or compromised any debt or claim, except in the ordinary
course of business and consistent with past practice;
(f) waived or released any rights of material value;
(g) transferred or granted any rights under any concessions, leases,
licenses, agreements, patents, inventions, trademarks, trade names, service
marks or copyrights or with respect to any know-how;
(h) made or granted any wage or salary increase applicable to any
group or classification of employees generally, entered into any employment
contract with, or made any loan to, or entered into any material transaction of
any other nature with, any member, officer or employee of Xxxxx;
(i) entered into any transaction, contract or commitment which
provides for a period of performance which extends beyond twelve (12) months
from the date hereof or involves payment of or receipt after the date hereof of
amounts in excess of one percent of Ladia's net sales for the year ended
December 31, 1997, except (i) contracts listed in Section 4.7 of the Xxxxx
Disclosure Schedule, (ii) this Agreement and the transactions contemplated
hereby, (iii) ordinary course of business contracts for the purchase of
materials from vendors if such contracts are supported by firm released customer
purchase orders, and (iv) ordinary course of business orders for Ladia's
products; or
11
(j) suffered any casualty loss or damage to any of its properties
(whether or not such loss or damage shall have been covered by insurance) which
adversely affects in any material respect its ability to conduct business.
Section IV.8 Certain Agreements. Except as disclosed in Section 4.8 of
------------------
the Xxxxx Disclosure Schedule, or as contemplated by this Agreement, Xxxxx is
not a party to any (i) agreement with any executive officer or other key
employee of Xxxxx (A) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving
Xxxxx of the nature of any of the transactions contemplated by this Agreement,
(B) providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits (which are conditioned upon a change of
control) after the termination of employment of such employee regardless of the
reason for such termination of employment or (ii) agreement or plan, including,
without limitation, any stock option plan, stock appreciation right plan or
stock purchase plan, any of the benefits of which will be materially increased,
or the vesting of benefits of which will be materially accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
Section IV.9 Taxes.
-----
(a) Xxxxx (i) has duly and timely filed or caused to be filed all
federal, state, local and foreign tax returns (including, without limitation,
consolidated and/or combined tax returns) required to be filed by it which
relate to Xxxxx or with respect to which Xxxxx is liable or otherwise in any way
subject, which returns were true, correct and complete in all material respects,
(ii) has paid or fully accrued for all taxes shown to be due and payable on such
returns (which taxes are all the taxes due and payable under such returns or
pursuant to any assessment received by Xxxxx), and (iii) has properly accrued,
charged or established adequate reserves for all such taxes arising in respect
of Xxxxx for periods subsequent to the periods covered by such returns. Except
as set forth in Section 4.9 of the Xxxxx Disclosure Schedule, (A) no claims for
taxes have been asserted against Xxxxx, and no deficiency for any taxes has been
proposed, asserted or assessed which has not been resolved or paid in full, (B)
no tax return or taxable period of Xxxxx is under audit, investigation or
examination and Xxxxx has not received notice of any pending audit,
investigation or examination, (C) there are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any tax return for
any period of Xxxxx, (D) no issue or claim has been asserted for taxes by any
taxing authority for any prior period, the adverse determination of which could
for any prior, current or future period result in a deficiency which could have
a material adverse effect on Xxxxx, (E) there are no tax liens upon the assets
of Xxxxx other than liens for taxes not yet due and (F) no power of attorney has
been granted by Xxxxx with respect to any matter relating to taxes which is
currently in force, other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not have a material adverse effect on Xxxxx.
Copies of all federal and state income (or franchise) tax returns of Xxxxx have
been made available for inspection by Computone.
12
(b) Collapsible Corporation Status. No consent or agreement has been
------------------------------
made under Section 341 of the Code by or on behalf of Xxxxx or any predecessor
thereof.
(c) FIRPTA Status. Xxxxx is not, and has not been at any time during
-------------
the five year period preceding the date hereof, a "United States real property
holding corporation" as defined in Section 897 of the Code and the regulations
promulgated thereunder.
(d) Parachute Payments. No payments by Xxxxx to its officers,
------------------
directors, employees or consultants under any contract, plan or agreement,
including but not limited to this Agreement, or payments contemplated by this
Agreement, constitute "parachute payments" within the meaning of Section 280G of
the Code.
Section IV.10 Title to Assets. Section 4.10 of the Xxxxx Disclosure
---------------
Schedule sets forth a list of all real property owned or leased by Xxxxx, and
the aggregate monthly rental or other fee payable under any such lease. Except
as listed in Section 4.10 of the Xxxxx Disclosure Schedule, Xxxxx has good and
marketable title to its assets, free and clear of all security interests,
mortgages, encumbrances, liens or charges of any kind or character, except liens
for taxes not yet due and payable and such imperfections of title, liens and
easements as do not materially detract from or interfere with the present use of
the properties subject thereto or affected thereby, or otherwise materially
impair the present business operations of such properties.
Section IV.11 Condition of Personal Property. All of Ladia's tangible
------------------------------
personal property, equipment, fixtures and inventories used in the ordinary
course of its business are in good, merchantable condition, reasonable wear and
tear excluded, or in reasonably repairable condition, are suitable for the
purposes for which they are being used, and are valued at the lower of cost or
market in the Xxxxx Unaudited Financial Statements. No value in excess of
applicable reserves has been given to any inventory in the Xxxxx Unaudited
Financial Statements with respect to obsolete or discontinued products. All of
the inventories and equipment, including equipment leased to others, are well
maintained and in good operating condition.
Section IV.12 List of Contracts and Other Data. Section 4.12 of the Xxxxx
--------------------------------
Disclosure Schedule sets forth the following:
(a) all of Ladia's registered patents, trademarks, trade names,
service marks and copyrights, if any, used in connection with the operation of
its business, and all applications, if any, pending for patents or for
trademarks, trade names, service marks or copyright registrations;
(b) all collective bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus plans, deferred compensation
agreements, employee pension or retirement plans, employee stock purchase and
stock option plans, group life insurance, hospitalization insurance or other
plans or arrangements providing for benefits to employees of Xxxxx, if any;
(c) all contracts (including, without limitation, mortgages,
indentures and loan agreements) to which Xxxxx is a party, or to which it or any
of its assets or properties are subject and which are not specifically referred
13
to in Sections 4.12(a) or 4.12(b) above, and which provide for a period of
performance which extends beyond twelve (12) months from the date hereof or
involve payment of or receipt after the date hereof of amounts in excess of one
percent of Ladia's net sales for the year ended December 31, 1997, provided that
the foregoing shall not be deemed to include (i) ordinary course of business
purchase orders for materials from vendors if such purchase orders are supported
by firm released customer purchase orders for the Xxxxx products or (ii)
ordinary course of business orders for the Xxxxx products; and
(d) the names and current annual compensation rates of the top ten
(10) paid employees of Xxxxx.
True and complete copies of all documents and complete descriptions of all
oral understandings, if any, referred to in this Section 4.12 have been provided
or made available to Computone and its counsel.
Section IV.13 Business Property Rights. To the knowledge of Xxxxx, Xxxxx
------------------------
owns or has valid rights to use all designs, know-how, trade secrets, patents,
trademarks, trade names, service marks and copyrights, if any, which are
reasonably necessary to, or used primarily in, the conduct of its business (the
"Xxxxx Intellectual Property") without conflict with the rights of others.
Except as set forth in Section 4.13 of the Xxxxx Disclosure Schedule: (i) no
claim is pending or, to Ladia's knowledge, threatened to the effect that the
present or past operation of Xxxxx infringes upon or conflicts with the rights
of others with respect to any Xxxxx Intellectual Property, where such
infringement or conflict is reasonably likely to have a material adverse effect
on Ladia's business as a whole; (ii) no claim is pending or, to Ladia's
knowledge, threatened to the effect that any Xxxxx Intellectual Property is
invalid or unenforceable and (iii) no contract, agreement or understanding with
any party exists which would prevent the continued use by Xxxxx (as currently
used by Xxxxx) of any Xxxxx Intellectual Property.
Section IV.14 Compliance with Applicable Law. Xxxxx holds all permits,
------------------------------
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of its business (the "Xxxxx Permits"),
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals which would not, individually or in the aggregate, have a
material adverse effect on Xxxxx. Xxxxx is in compliance with the terms of the
Xxxxx Permits, except where the failure to comply would not have a material
adverse effect on Ladia's business as a whole. The business of Xxxxx is not
being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations which individually or in the
aggregate do not and, insofar as reasonably can be foreseen, in the future will
not, have a material adverse effect on Ladia's business as a whole. Except as
set forth in Section 4.14 of the Xxxxx Disclosure Schedule, as of the date of
this Agreement, no investigation or review by any Governmental Entity with
respect to Xxxxx is pending or, to the knowledge of Xxxxx and each Principal
Member, threatened, nor has any Governmental Entity notified Xxxxx orally or in
writing of an intention to conduct the same, other than, in each case, those the
outcome of which, as far as reasonably can be foreseen, in the future will not
have a material adverse effect on Ladia's business as a whole.
14
Section IV.15 No Breach or Default. Except as set forth in Section 4.15 of
--------------------
the Xxxxx Disclosure Schedule, Xxxxx is not in default under any material
contract to which it is a party or by which it is bound, nor has any event
occurred which, after the giving of notice or the passage of time or both, would
constitute a default under any such contract. Xxxxx has no reason to believe
that the parties to such contracts will not fulfill their obligations under such
contracts in all material respects or are threatened with insolvency. Xxxxx is
not a party to or bound by any mortgage, lien, lease, agreement, instrument,
order, judgment or decree which would prohibit or conflict with in any way the
execution or performance of this Agreement or prohibit the consummation of any
of the transactions provided for in this Agreement.
Section IV.16 Labor Controversies. Xxxxx is not a party to any collective
-------------------
bargaining agreement. Except as set forth in Section 4.16 of the Xxxxx
Disclosure Schedule, there are no controversies between Xxxxx and any of its
employees which might reasonably be expected to materially adversely affect the
conduct of its business, or any unresolved labor grievances or unfair labor
practice or labor arbitration proceedings pending or, to the knowledge of Xxxxx
and each Principal Member, threatened relating to its business, and, to the
knowledge of Xxxxx and each Principal Member, there are no organizational
efforts presently being made or threatened involving any of Ladia's employees.
Except as set forth in Section 4.16 of the Xxxxx Disclosure Schedule, Xxxxx has
not received notice of any claim that Xxxxx has not complied with any laws
relating to the employment of labor, including any provisions thereof relating
to wages, hours, collective bargaining, the payment of social security and
similar taxes, equal employment opportunity, employment discrimination and
employment safety, or that Xxxxx is liable for any arrears of wages or any taxes
or penalties for failure to comply with any of the foregoing.
Section IV.17 Litigation. Except as set forth in Section 4.17 of the
----------
Xxxxx Disclosure Schedule, there is no action, suit or proceeding with respect
to Xxxxx involving claims by or against Xxxxx or any its properties pending or,
to the knowledge of Xxxxx or any Principal Member, threatened, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality. There are no
orders, judgments, injunctions or decrees of any court or governmental agency
with respect to which Xxxxx has been named or is a party which apply, in whole
or in part, to the business of Xxxxx or any of its properties, or which would
result in a material adverse change in the business or prospects of Ladia's
business as a whole.
Section IV.18 Transactions with Affiliates. Except as set forth in
----------------------------
Section 4.18 of the Xxxxx Disclosure Statement, since December 31, 1997, there
have been no transactions to which Xxxxx has been a party in which any director
or officer of Xxxxx or any Principal Member or a member of any such person's
immediate family had or will have any direct or indirect interest.
Section IV.19 Environmental Matters. As of the date hereof, Xxxxx is in
---------------------
compliance with all applicable local, county, state, federal and foreign legal
requirements relating to the use, storage, handling, transport and disposal of
materials, hazardous materials and hazardous substances (the "Hazardous
Materials") including, but not limited to, the Resources Compensation and
15
Recovery Act (42 U.S.C. Section 6902 et seq.) and the Comprehensive
Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. Section
9601). Xxxxx has no knowledge of any condition that would cause Xxxxx to incur
liability or be a responsible party with respect to Ladia's real properties
under any environmental or health regulation or act. To the knowledge of Xxxxx,
(i) none of Ladia's properties has ever been used as a sanitary land fill or as
a storage or dump site for Hazardous Materials, (ii) none of the listed
properties is contaminated with any Hazardous Materials, and (iii) Xxxxx has not
been responsible for spilling Hazardous Materials on its properties.
Section IV.20 ERISA Plans.
-----------
(a) With respect to each employee benefit plan (including, without
limitation, any "employee benefit plan", as defined in Section 3(d) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and any
material bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other plan, arrangement or understanding (whether or not legally
binding) (all the foregoing being herein called the "Xxxxx Benefit Plans"),
maintained or contributed to by Xxxxx, Xxxxx has made available to Computone, or
will deliver to Computone, within 30 days after the date hereof, a true and
correct copy of (i) the most recent annual report (Form 5500) filed with the
Internal Revenue Service (the "IRS"), if any, (ii) such Xxxxx Benefit Plan,
(iii) each trust agreement and group annuity contract, if any, relating to such
Xxxxx Benefit Plan and (iv) the most recent actuarial report or valuation
relating to each Xxxxx Benefit Plan subject to Title IV of ERISA.
(b) Except as set forth in Section 4.20 of the Xxxxx Disclosure
Schedule, with respect to the Xxxxx Benefit Plans, individually and in the
aggregate, no event has occurred and, to the knowledge of Xxxxx and each
Principal Member, there exists no condition or set of circumstances in
connection with which Xxxxx could be subject to any liability that is reasonably
likely to have a material adverse effect on Ladia's business as a whole (except
liability for benefits claims and funding obligations payable in the ordinary
course), under ERISA, the Code or any other applicable law.
(c) Except as set forth in Section 4.20 of the Xxxxx Disclosure
Schedule, with respect to the Xxxxx Benefit Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the Xxxxx
Financial Statements which obligations are reasonably likely to have a material
adverse effect on Ladia's business as a whole.
Section IV.21 No Brokers. Except as disclosed in Section 4.21 of the
----------
Xxxxx Disclosure Schedule, neither Xxxxx nor, to the knowledge of Xxxxx and each
Principal Member any Member has entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
Xxxxx or any Member to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
16
Agreement or the consummation of the transactions contemplated hereby, and
neither Xxxxx nor any Principal Member has knowledge of any other claim or basis
for claim for payment by it of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
Xxxxx and each Principal Member shall indemnify and hold Computone and HC
harmless from and against any obligation with respect to any such fees,
brokerage or agent's commissions or other like payments.
Section IV.22 Pooling Matters. Neither Xxxxx nor any of Principal Members
---------------
has, based upon consultation with Ladia's independent accountants, taken or
agreed to take any action that would affect the ability of HC to account for the
business combination to be effected by the Exchange as a pooling of interests.
Section IV.23 Information Supplied. None of the information supplied by
--------------------
Xxxxx or any Principal Member for inclusion in the Registration Statement and
the Proxy Statement (as such terms are defined in Section 5.4 hereof) included
therein, at the date the Registration Statement is filed with the Commission
and at the time it becomes effective and at the time of the meeting of
Computone's stockholders to be held in connection with the Merger contains or
will contain any untrue statement of a material fact or omits or will omit to
state any 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 IV.24 No Misrepresentation or Omission. No representation or
--------------------------------
warranty made by Xxxxx in this Article IV or in any other Article or Section of
this Agreement, or in any certificate or other document furnished or required to
be furnished by Xxxxx pursuant hereto, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which they are made.
ARTICLE IVA
REPRESENTATIONS AND WARRANTIES OF MEMBERS
Each Member severally represents and warrants to Computone and HC as
follows:
Section 4A.1 Capitalization of Xxxxx.
-----------------------
(a) Schedule A sets forth an accurate description of such Member's
Membership Interest.
(b) There are not outstanding rights, warrants, options,
subscriptions, agreements or commitments giving anyone any right to require such
Member to sell such Member's Membership Interest.
17
(c) Such Member has no outstanding contractual obligation to acquire
any Membership Interest.
Section 4A.2 Authority. Such Member has all requisite power and authority
---------
to enter into this Agreement and to consummate the transactions contemplated to
be consummated by such Member. The execution and delivery of this Agreement by
such Member and the consummation of the transactions contemplated to be
consummated by such Member have been duly authorized by all necessary action on
the part of such Member. This Agreement has been duly executed and delivered by
such Member and constitutes such Member's valid and binding obligation,
enforceable against such Member in accordance with its terms.
Section 4A.3 Consent and Approvals; No Violations. The execution and
------------------------------------
delivery of this Agreement by such Member do not, and the consummation by such
Member of the transactions contemplated to be consummated by such Member will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time or both) or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under any mortgage indenture, lease or other agreement or instrument, permit,
concession, franchise, license, judgement, order, decree, statute, law,
ordinance, rule or regulation applicable to such Member or such Member's
properties or assets other than any such conflicts, violations, defaults,
terminations, cancellations or accelerations that individually or in the
aggregate would not have a material adverse effect on such Member's Membership
Interest. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to such Member in connection with the execution and delivery of this
Agreement by such Member or the consummation by such Member of the transactions
contemplated to be consummated by such Member, except such consents, approvals,
orders, authorizations, registrations, declarations and filings which, if not
obtained or made, would not have a material adverse effect on such Member's
Membership Interest.
Section 4A.4 No Brokers. Such Member has not entered into any contract,
----------
arrangement or understanding with any person or firm which may result in the
obligation of such Member to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
and such Member has no knowledge of any claim or basis for claim for payment by
such Member of any finder's fees, brokerage or agent's commission or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby by such Member. Such Member
shall indemnify and hold Computone and HC harmless from and against any
obligation with respect to any such fees, brokerage or agent's commissions or
other like payments.
Section 4A.5 Ownership of Interest. Such Member owns its Membership
---------------------
Interest free and clear of any liens, claims, pledges or encumbrance of any
kind. The transfer by such Member of its Membership Interest to HC pursuant to
the Exchange will vest in HC good and marketable title to that Membership
Interest, free and clear of any liens, claims, pledges or encumbrances of any
kind.
18
Section 4A.6 Information Supplied. None of the information supplied by
--------------------
such Member for inclusion in the Registration Statement and the Proxy Statement
included therein, at the date the Registration Statement is filed with the
Commission and at the time it becomes effective and at the time of the meeting
of Computone's stockholders to be held in connection with the Merger contains or
will contain any untrue statement of a material fact or omits or will omit to
state any 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 4A.7 No Misrepresentations or Omission. No representation or
---------------------------------
warranty made by such Member in this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any 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.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF COMPUTONE
Computone represents and warrants to Ladia, the Members, HC and Newco as
follows:
Section V.1 Existence. Good Standing. Compliance with Law. Computone and
---------------------------------------------
each of its Subsidiaries is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation.
Computone and each of its Subsidiaries is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of any
other jurisdiction in which the character of the properties owned or leased by
it therein or in which the transaction of its business makes such qualification
necessary, except for jurisdictions in which the failure to be so qualified or
to be in good standing would not have a material adverse effect on Computone and
its Subsidiaries taken as a whole. Computone and each of its Subsidiaries has
all requisite corporate power and authority to own its properties and carry on
its business as now conducted. The copies of Computone's Certificate of
Incorporation and Bylaws which have been delivered to Xxxxx and HC are complete
and correct. Computone is not in default with respect to any order of any
court, governmental authority or arbitration board or tribunal to which
Computone is a party or is subject, and Computone is not in violation of any
laws, ordinances, governmental rules or regulations to which it is subject,
except for laws, ordinances, governmental rules or regulations the violation of
which would not have a material adverse effect on Computone's business as a
whole. Computone has obtained all licenses, permits and other authorizations and
has taken all action required by applicable law or governmental regulation
necessary for the conduct of its business as now conducted, except for licenses,
permits, authorizations or actions the violation of which or the failure to
obtain or take which would not have a material adverse effect on the business of
Computone and its subsidiaries taken as a whole.
Section V.2 Capitalization of Computone. Computone has authorized capital
---------------------------
stock of 10,000,000 shares of convertible redeemable preferred stock, $0.01 par
value, and 25,000,000 shares of common stock, $0.01 par value per share (the
"Computone Common Stock"). As of April 3, 1998, 7,386,623 shares of the
19
Computone Common Stock were issued and outstanding and no shares of Computone's
convertible redeemable preferred stock were issued or outstanding.
(a) There are no outstanding rights, warrants, options, subscriptions,
agreements or commitments giving anyone any right to require Computone to sell
or issue any capital stock or other securities, except that as of the close of
business on April 3, 1998:
(i) Computone had issued options under its Non-Qualified Equity
Incentive Plan to purchase an aggregate of 418,378 shares of the Computone
Common Stock (the "Computone Incentive Plan Shares") and had reserved an
additional 218,167 shares for future issuance under such Plan; and
(ii) Computone had issued warrants to purchase an aggregate of 372,013
shares of the Computone Common Stock (the "Computone Warrant Shares").
(b) Since April 3, 1998, Computone has not issued any additional stock
options, warrants or shares of the Computone Common Stock, except shares of the
Computone Common Stock which are described in Section 5.2 of the disclosure
schedule prepared by Computone and attached hereto as Schedule C (the "Computone
----------
Disclosure Schedule") and which were issuable upon the exercise of outstanding
options or warrants, in each case pursuant to the terms of (i) the applicable
agreements pursuant to which such options or warrants were issued, (ii) the
applicable Computone option plan and (iii) the Computone Certificate of
Incorporation.
(c) As of April 3, 1998, there were no outstanding contractual
obligations of Computone or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Computone or any of its
Subsidiaries.
(d) Section 5.2 of the Computone Disclosure Schedule lists all
Subsidiaries of Computone, the jurisdiction of incorporation of each such
Subsidiary of Computone and each jurisdiction where such Subsidiary of Computone
is qualified to do business. Computone owns, directly or indirectly, all of the
securities of each of the Subsidiaries of Computone, free and clear of all
liens, charges, pledges, security interest or other encumbrances, and all
capital stock of such Subsidiaries of Computone has been duly authorized and
validly issued and is fully paid and nonassessable. None of the Subsidiaries of
Computone has any commitment to issue or sell any shares of its capital stock or
any securities or obligations convertible into or exchangeable for, or giving
any person other than Computone or a Subsidiary of Computone any right to
acquire from a Subsidiary of Computone, any shares of its capital stock. Each
Subsidiary of Computone is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, has the
corporate power and all necessary authorizations to own all of its properties
and assets and to carry on its business as it is now being conducted, and, to
the extent required by law, is duly qualified to do business and is in good
standing in each jurisdiction in which it owns property or conducts business,
except where the failure to have such authorization or to be so qualified would
not have a material adverse affect on the business or operations of such
Subsidiary or Computone.
20
Section V.3 Authority. Computone has all requisite corporate power and
---------
authority to enter into this Agreement and the Merger Agreement and, subject
only to approval of this Agreement and the Merger Agreement by the stockholders
of Computone, to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Merger Agreement by
Computone and the consummation by Computone of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Computone, subject only to such approval by the stockholders of
Computone. This Agreement and the Merger Agreement have been duly executed and
delivered by Computone and, subject only to such approval by the stockholders of
Computone, constitute valid and binding obligations of Computone, enforceable
against Computone in accordance with their respective terms.
Section V.4 Consents and Approvals; No Violations. Except as set forth in
-------------------------------------
Section 5.4 of the Computone Disclosure Schedule, and except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the DGCL (all of which shall
have been made or obtained on or before the Preliminary Exchange Closing Date
and the Merger Closing Date), the execution and delivery of this Agreement and
the Merger Agreement do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit, under (i) any provision of the
Certificate of Incorporation or Bylaws of Computone or any Subsidiary of
Computone, or (ii) any mortgage, indenture, lease, or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Computone or any
Subsidiary of Computone or their respective properties or assets, other than any
such conflicts, violations, defaults, terminations, cancellations or
accelerations which individually or in the aggregate would not have a material
adverse effect on the business of Computone and its Subsidiaries taken as a
whole. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Computone or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the Merger Agreement by Computone or the
consummation by Computone of the transactions contemplated hereby or thereby,
except for the following, all of which shall have been accomplished on or before
the Preliminary Exchange Closing Date and the Merger Closing Date: (i) the
filing and effectiveness of a proxy statement relating to the meeting of
Computone's stockholders to be held in connection with the Merger (the "Proxy
Statement") under the Exchange Act, (ii) the filing and effectiveness of a
registration statement on Form S-4 (the "Registration Statement") with the
Commission in connection with the issuance of the Merger Shares pursuant to the
Merger and the Initial Member Shares, the 1997 Note Shares and the Additional
Shares pursuant to or in connection with the Exchange, which Registration
Statement shall include the Proxy Statement, (iii) the filing of such reports
under Section 13 of the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (iv) the filing of the
Certificate of Merger or the Merger Agreement and officers' certificates with
the Secretary of State of the State of Delaware and appropriate documents with
the relevant authorities of other states in which Computone is qualified to do
21
business, (v) such consents, approvals,. orders, authorizations, registration,
declarations and filings as may be required under applicable state securities
laws and the laws of any foreign country and (vi) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not have a material adverse effect on the business of Computone and
its Subsidiaries taken as a whole.
Section V.5 Computone SEC Documents. Computone has filed with the
-----------------------
Commission and has heretofore furnished to Xxxxx or to counsel for Xxxxx, a true
and complete copy of each form, report, and document required to be filed by
Computone with the Commission since April 4, 1997 (the "Computone SEC
Documents"). As of their respective filing dates: (i) the Computone SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and (ii) none of the Computone SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading except to the extent, if any, corrected by a subsequently
filed Computone SEC Document. At the time filed, the financial statements of
Computone included in the Computone SEC Documents (the "Computone Financial
Statements") complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, had been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission) and fairly
presented the consolidated financial position of Computone and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended
(subject, in the case of unaudited statements, to normal, recurring audit
adjustments). Except as disclosed in the Computone SEC Documents filed prior to
the date of this Agreement, or except as contemplated by this Agreement, since
April 4, 1997, there has not been any material adverse change in the results of
operations, financial condition, assets or business of Computone and its
Subsidiaries taken as a whole.
Section V.6 Undisclosed Liabilities. Except as set forth on Section 5.6 of
-----------------------
the Computone Disclosure Schedule, neither Computone nor any of its Subsidiaries
has any liabilities, either accrued, absolute, contingent or otherwise, of a
nature required to be reflected in a balance sheet or related notes prepared in
accordance with generally accepted accounting principles consistently applied
which are not reflected or provided for in the Computone Financial Statements
except those arising after April 4, 1997, (i) which are in the ordinary course
of business, (ii) which, in the aggregate would not have a material effect on
the financial condition of Computone, and (iii) the nature and extent of which
are specifically described in Section 5.6 of the Computone Disclosure Schedule.
Section V.7 Absence of Certain Changes or Events. Except as disclosed in
------------------------------------
Section 5.7 of the Computone Disclosure Statement, since April 4, 1997, neither
Computone nor any of its Subsidiaries has:
(a) incurred any obligation or liability (fixed or, to its knowledge,
contingent), except normal trade or business obligations incurred in the
22
ordinary course of business and consistent with past practice, and except in
connection with this Agreement and the transactions contemplated hereby;
(b) discharged or satisfied any lien, security interest or encumbrance
or paid any obligation or liability (fixed or contingent), other than in the
ordinary course of business and consistent with past practice;
(c) mortgaged, pledged or subjected to any lien, security interest or
other encumbrance any of its assets or properties (other than mechanic's,
materialman's and similar statutory liens arising by operation of law, liens for
current real and personal property taxes incurred but not yet due and payable,
purchase money security interests arising as a matter of law between the date of
delivery and payment and other liens of an immaterial nature);
(d) transferred, leased or otherwise disposed of any of its assets or
properties except in the ordinary course of business and consistent with past
practice or, except in the ordinary course of business and consistent with past
practice, acquired any assets or properties;
(e) canceled or compromised any debt or claim, except in the ordinary
course of business and consistent with past practice;
(f) waived or released any rights of material value;
(g) transferred or granted any rights under any concessions, leases,
licenses, agreements, patents, inventions, trademarks, trade names, service
marks or copyrights or with respect to any know-how;
(h) made or granted any wage or salary increase applicable to any
group or classification of employees generally, entered into any employment
contract with, or made any loan to, or entered into any material transaction of
any other nature with, any officer or employee of Computone or any of its
Subsidiaries;
(i) entered into any transaction, contract or commitment which
provides for a period of performance which extends beyond twelve (12) months
from the date hereof or involves payment of or receipt after the date hereof of
amounts in excess of one percent of Computone's net sales for the year ended
April 4, 1997, except (i) contracts listed in Section 5.13 of the Computone
Disclosure Schedule, (ii) this Agreement and the transactions contemplated
hereby, (iii) ordinary course of business contracts for the purchase of
materials from vendors if such contracts are supported by firm released customer
purchase orders, and (iv) ordinary course of business orders for Computone's
products; or
(j) suffered any casualty loss or damage to any of its properties
(whether or not such loss or damage shall have been covered by insurance) which
adversely affects in any material respect its ability to conduct business.
23
Section V.8 Information Supplied. None of the information supplied by
--------------------
Computone for inclusion in the Registration Statement, and the Proxy Statement
included therein, at the date the Registration Statement is filed with the
Commission and at the time it becomes effective and at the time of the meeting
of Computone's stockholders to be held in connection with the Merger, contains
or will contain any untrue statement of a material fact or omits or will omit to
state any 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.
Section V.9 Certain Agreements. Except as disclosed in Section 5.9 of the
------------------
Computone Disclosure Schedule, or as contemplated by this Agreement, neither
Computone nor any of its Subsidiaries is a party to any (i) agreement with any
executive officer or other key employee of Computone or any Subsidiary of
Computone (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Computone or
any Subsidiary of Computone of the nature of any of the transactions
contemplated by this Agreement and the Merger Agreement, (B) providing any term
of employment or compensation guarantee or (C) providing severance benefits or
other benefits (which are conditioned upon a change of control) after the
termination of employment of such employee regardless of the reason for such
termination of employment or (ii) agreement or plan, including; without
limitation, any stock option plan, stock appreciation right plan or stock
purchase plan, any of the benefits of which will be materially increased, or the
vesting of benefits of which will be materially accelerated, by the occurrence
of any of the transactions contemplated by this Agreement and the Merger
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement and the Merger
Agreement.
Section V.10 Taxes.
-----
(a) Computone and each of its Subsidiaries (i) has duly and timely
filed or caused to be filed all federal, state, local and foreign tax returns
(including, without limitation, consolidated and/or combined tax returns)
required to be filed by it which relate to Computone or any of its Subsidiaries
or with respect to which Computone or any of its Subsidiaries is liable or
otherwise in any way subject, which returns were true, correct and complete in
all material respects, (ii) has paid or fully accrued for all taxes shown to be
due and payable on such returns (which taxes are all the taxes due and payable
under such returns or pursuant to any assessment received by Computone or any of
its Subsidiaries), and (iii) has properly accrued, charged or established
adequate reserves for all such taxes arising in respect of Computone or any of
its Subsidiaries for periods subsequent to the periods covered by such returns.
Except as set forth in Section 5.10 of the Computone Disclosure Schedule, (A) no
claims for taxes have been asserted against Computone or any of its
Subsidiaries, and no deficiency-for any taxes has been proposed, asserted or
assessed which has not been resolved or paid in full, (B) no tax return or
taxable period of Computone or any of its Subsidiaries is under audit,
investigation or examination and none of Computone or any of its Subsidiaries
has received notice of any pending audit, investigation or examination, (C)
there are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return for any period of Computone or its
Subsidiaries, (D) no issue or claim has been asserted for taxes by any taxing
authority for any prior period, the adverse determination of which could for any
prior, current or future period result in a deficiency which could have a
material adverse effect on Computone and its Subsidiaries taken as a whole, (E)
24
there are no tax liens upon the assets of Computone or any of its Subsidiaries
other than liens for taxes not yet due and (F) no power of attorney has been
granted by Computone or any of its Subsidiaries with respect to any matter
relating to taxes which is currently in force, other than, in each case, those
the outcome of which, as far as reasonably can be foreseen, will not have a
material adverse effect on Computone and its Subsidiaries taken as a whole.
Copies of all federal and state income (or franchise) tax returns of Computone
or any of its Subsidiaries have been made available for inspection by HC and
Xxxxx.
(b) Collapsible Corporation Status. No consent or agreement has been
-----------------------
made under Section 341 of the Code by or on behalf of Computone or its
Subsidiaries or any predecessor thereof.
(c) FIRPTA Status. Computone is not, and has not been at any time
-------------
during the five year period preceding the date hereof, a "United States real
property holding corporation" as defined in Section 897 of the Code and the
regulations promulgated thereunder.
(d) Parachute Payments. No payments by Computone or its Subsidiaries
------------------
to its officers, directors, employees or consultants under any contract, plan or
agreement, including but not limited to this Agreement, or payments contemplated
by this Agreement constitute "parachute payments" within the meaning of Section
280G of the Code.
Section V.11 Title to Assets. Section 5.11 of the Computone Disclosure
---------------
Schedule sets forth a list of all real property owned or leased by Computone or
any of its Subsidiaries, and the aggregate monthly rental or other fee payable
under any such lease. Except as listed in Section 5.11 of the Computone
Disclosure Schedule, Computone and each of its Subsidiaries has good and
marketable title to its assets, free and clear of all security interests,
mortgages, encumbrances, liens or charges of any kind or character, except liens
for taxes not yet due and payable and such imperfections of title, liens and
easements as do not materially detract from or interfere with the present use of
the properties subject thereto or affected thereby, or otherwise materially
impair the present business operations of such properties.
Section V.12 Condition of Personal Property. All of Computone's and its
------------------------------
Subsidiaries' tangible personal property, equipment, fixtures and inventories
used in the ordinary course of its business are in good, merchantable condition,
reasonable wear and tear excluded, or in reasonably repairable condition, are
suitable for the purposes for which they are being used, and are valued at the
lower of cost or market in the Computone Financial Statements. No value in
excess of applicable reserves has been given to any inventory in the Computone
Financial Statements with respect to obsolete or discontinued products. All of
the inventories and equipment, including equipment leased to others, are well
maintained and in good operating condition.
Section V.13 List of Contracts and Other Data. Section 5.13 of the
--------------------------------
Computone Disclosure Schedule sets forth the following:
25
(a) all of Computone's and its Subsidiaries' registered patents,
trademarks, trade names, service marks and copyrights, if any, used in
connection with the operation of Computone's and its Subsidiaries' business, and
all applications, if any, pending for patents or for trademarks, trade names,
service marks or copyright registrations;
(b) all collective bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus plans, deferred compensation
agreements, employee pension or retirement plans, employee stock purchase and
stock option plans, group life insurance, hospitalization insurance or other
plans or arrangements providing for benefits to employees of Computone or any of
its Subsidiaries, if any;
(c) all contracts (including, without limitation, mortgages,
indentures and loan agreements) to which Computone or any of its Subsidiaries is
a party, or to which it or any of its assets or properties are subject and which
are not specifically referred to in Sections 5.13(a) or 5.l3(b) above and which
provide for a period of performance which extends beyond twelve (12) months from
the date hereof or involve payment of or receipt after the date hereof of
amounts in excess of one percent of Computone's net sales for the year ended
April 4, 1997, provided that the foregoing shall not be deemed to include (i)
ordinary course of business purchase orders for materials from vendors if such
purchase orders are supported by firm released customer purchase orders for
Computone's products or (ii) ordinary course of business orders for Computone's
products; and
(d) the names and current annual compensation rates of the top ten
(10) paid employees of Computone or any of its Subsidiaries.
True and complete copies of all documents and complete descriptions of all
oral understandings, if any, referred to in this Section 5.13 have been provided
or made available to HC, Xxxxx and their counsel.
Section V.14 Business Property Rights. To the knowledge of Computone,
------------------------
Computone owns or has valid rights to use all designs, know-how, trade secrets,
patents, trademarks, trade names, service marks and copyrights, if any, which
are reasonably necessary to, or used primarily in, the conduct of Computone's
and its Subsidiaries' businesses (the "Computone Intellectual Property") without
conflict with the rights of others. Except as set forth in Section 5.14 of the
Computone Disclosure Schedule: (i) no claim is pending or, to Computone's
knowledge, threatened to the effect that the present or past operation of
Computone or its Subsidiaries infringes upon or conflicts with the rights of
others with respect to any Computone Intellectual Property, where such
infringement or conflict is reasonably likely to have a material adverse effect
on Computone and its Subsidiaries taken as a whole; (ii) no claim is pending or,
to Computone's knowledge, threatened to the effect that any Computone
Intellectual Property is invalid or unenforceable and (iii) no contract,
agreement or understanding with any party exists which would prevent the
continued use by Computone or its Subsidiaries (as currently used by Computone
or its Subsidiaries) of any Computone Intellectual Property.
26
Section V.15 Compliance with Applicable Law. Computone and its
------------------------------
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Computone Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals which would
not, individually or in the aggregate, have a material adverse effect on the
business of Computone and its Subsidiaries taken as a whole. Computone and its
Subsidiaries are in compliance with the terms of the Computone Permits, except
where the failure to comply would not have a material adverse effect on
Computone and its Subsidiaries taken as a whole. The businesses of Computone
and its Subsidiaries are not being conducted in violation of any law, ordinance
or regulation of any Governmental Entity, except for possible violations which
individually or in the aggregate do not, and, insofar as reasonably can be
foreseen, in the future will not, have a material adverse effect on the business
of Computone and its Subsidiaries taken as whole. Except as set forth in
Section 5.15 of the Computone Disclosure Schedule, as of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
Computone and its Subsidiaries is pending or, to the best knowledge of
Computone, threatened, nor has any Governmental Entity notified Computone orally
or in writing of an intention to conduct the same, other than, in each case,
those the outcome of which, as far as reasonably can be foreseen, in the future
will not have a material adverse effect on the business of Computone and its
Subsidiaries taken as a whole.
Section V.16 No Breach or Default. Except as set forth in Section 5.16 of
--------------------
the Computone Disclosure Schedule, neither Computone nor any of its Subsidiaries
is in default under any material contract to which it is a party or by which it
is bound, nor has any event occurred which, after the giving of notice or the
passage of time or both, would constitute a default under any such contract.
Neither Computone nor any of its Subsidiaries has reason to believe that the
parties to such contracts will not fulfill their obligations under such
contracts in all material respects or are threatened with insolvency. Neither
Computone nor any of its Subsidiaries is a party to or bound by any mortgage,
lien, lease, agreement, instrument, order, judgment or decree which would
prohibit or conflict with in any way the execution or performance of this
Agreement or prohibit the consummation of any of the transactions provided for
in this Agreement.
Section V.17 Labor Controversies. Neither Computone nor any of its
-------------------
Subsidiaries is a party to any collective bargaining agreement. Except as set
forth in Section 5.17 of the Computone Disclosure Schedule, there are no
controversies between Computone and any of its employees or any Subsidiary of
Computone and any of its employees which might reasonably be expected to
materially adversely affect the conduct of its business, or any unresolved labor
grievances or unfair labor practice or labor arbitration proceedings pending, or
to the knowledge of Computone or such Subsidiary threatened relating to its
business, and to the knowledge of Computone or such Subsidiary there are no
organizational efforts presently being made or threatened involving any of
Computone's or any of its Subsidiaries' employees. Neither Computone nor any of
its Subsidiaries has received notice of any claim that Computone or such
27
Subsidiary has not complied with any laws relating to the employment of labor,
including any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination and employment safety, or that Computone
or such Subsidiary is liable for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing.
Section V.18 Litigation. Except as set forth in Section 5.18 of the
----------
Computone Disclosure Schedule there is no action, suit or proceeding with
respect to Computone or any of its Subsidiaries involving claims by or against
Computone, any of its Subsidiaries or any of their respective properties,
pending or, to the knowledge of Computone, threatened, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality. There are no orders,
judgments, injunctions or decrees of any court or governmental agency with
respect to which Computone or any of its Subsidiaries has been named or is a
party which apply, in whole or in part, to the business of Computone or any of
its Subsidiaries or any of their respective properties, or which would result in
a material adverse change in the business or prospects of Computone and its
Subsidiaries taken as a whole.
Section V.19 Transactions with Affiliates. Except as set forth in the
----------------------------
Section 5.19 of the Computone Disclosure Statement, since April 4, 1997, there
have been no transactions to which Computone or any of its Subsidiaries has been
a party in which any director, officer or 5% stockholder of Computone or a
member of his immediate family had or will have any direct or indirect interest.
Section V.20 Environmental Matters. As of the date hereof, Computone is in
---------------------
compliance with all applicable local, county, state, federal and foreign legal
requirements relating to the use, storage, handling, transport and disposal of
materials, hazardous materials and hazardous substances (the "Hazardous
Materials") including, but not limited to, the Resources Compensation and
Recovery Act (42 U.S.C. Section 6902 et seq.) and the Comprehensive
Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. Section
9601). Computone has no knowledge of any condition that would cause Computone to
incur liability or be a responsible party with respect to Computone's real
properties under any environmental or health regulation or act. To the knowledge
of Computone, (i) none of Computone's properties has ever been used as a
sanitary land fill or as a storage or dump site for Hazardous Materials, (ii)
none of the listed properties is contaminated with any Hazardous Materials; and
(iii) Computone has not been responsible for spilling Hazardous Materials on its
properties.
Section V.21 ERISA Plans.
-----------
(a) With respect to each employee benefit plan (including, without
limitation, any "employee benefit plan", as defined in Section 3(d) of the
ERISA), and any material bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, insurance or other plan, arrangement or understanding (whether
or not legally binding) (all the foregoing being herein called the "Computone
Benefit Plans"), maintained or contributed to by Computone or any of its
Subsidiaries, Computone has made available to HC and Xxxxx, or will deliver to
HC and Xxxxx within 30 days after the date hereof, a true and correct copy of
(i) the most recent annual report (Form 5500) filed with the IRS, if any, (ii)
such Computone Benefit Plan, (iii) each trust agreement and group annuity
28
contract, if any, relating to such Computone Benefit Plan and (iv) the most
recent actuarial report or valuation relating to each Computone Benefit Plan
subject to Title IV of ERISA.
(b) With respect to the Computone Benefit Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of Computone and its
Subsidiaries, there exists no condition or set of circumstances in connection
with which Computone and its Subsidiaries could be subject to any liability that
is reasonably likely to have a material adverse effect on the business of
Computone and its Subsidiaries taken as a whole (except liability for benefits
claims and funding obligations payable in the ordinary course), under ERISA, the
Code or any other applicable law.
(c) Except as set forth in Section 5.21 of the Computone Disclosure
Schedule, with respect to the Computone Benefit Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the Computone
Financial Statements, which obligations are reasonably likely to have a material
adverse effect on Computone and its Subsidiaries, taken as a whole.
Section V.22 No Brokers. Except as disclosed in Section 5.22 of the
----------
Computone Disclosure Schedule, Computone has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Computone to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
and Computone is not aware of any other claim or basis for claim for payment of
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby. Computone shall indemnify and hold HC,
Xxxxx and the Members harmless from and against any obligation with respect to
any such fees, brokerage or agent's commissions or other like payments.
Section V.23 Pooling Matters. Neither Computone nor any of its affiliates
---------------
has, to its knowledge and based upon consultation with its independent
accountants, taken or agreed to take any action that would affect the ability of
Computone and HC to account for the business combination to be effected by the
Merger as a pooling of interests.
Section V.24 No Misrepresentation or Omission. No representation or
--------------------------------
warranty made by Computone in this Article V or in any other Article or Section
of this Agreement, or in any certificate or other document furnished or required
to be furnished by Computone pursuant hereto, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which they are made.
29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF HC AND NEWCO
HC and Newco jointly and severally represent and warrant to Xxxxx, the Members
and Computone as follows:
Section VI.1 Existence. Good Standing. Compliance with Law. Each of HC
---------------------------------------------
and Newco is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Each of HC and Newco is duly
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of any other jurisdiction in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except for jurisdictions in which
the failure to be so qualified or to be in good standing would not have a
material adverse effect on the business of HC and Newco taken as a whole. Each
of HC and Newco has all requisite corporate power and authority to own its
properties and carry on its business as now conducted. The copies of the
Certificate of Incorporation and Bylaws of HC and Newco which have been
delivered to Xxxxx and Computone are complete and correct. Neither HC nor Newco
is in default with respect to any order of any court, governmental authority or
arbitration board or tribunal to which HC or Newco is a party or is subject.
Neither HC nor Newco is in violation of any laws, ordinances, governmental rules
or regulations to which it is subject, except for laws, ordinances, governmental
rules or regulations the violation of which would not have a material adverse
effect on HC's or Newco's business as a whole. HC and Newco have obtained all
licenses, permits and other authorizations and has taken all action required by
applicable law or governmental regulation necessary for the conduct of their
respective business as now conducted, except for licenses, permits,
authorizations or actions the violation of which or the failure to obtain or
take which would not have a material adverse effect on the business of HC and
Newco taken as a whole. HC and Newco were organized in May 1998 and neither has
conducted any material operations to date.
Section VI.2 Capitalization of HC. HC has authorized capital stock of
--------------------
10,000,000 shares of convertible redeemable preferred stock, $0.01 par value per
share, and 50,000,000 shares of common stock, $0.01 par value per share (the "HC
Common Stock"). As of the date of this Agreement, one share of the HC Common
Stock was issued and outstanding and owned beneficially and of record by
Computone (which share shall be canceled and retired, and shall cease to exit,
upon the Effective Time of the Merger, as provided in Section 3.1(c)), and no
shares of HC convertible redeemable preferred stock were issued or outstanding.
There are no outstanding rights, warrants, options, subscriptions, agreements or
commitments giving anyone any right to require HC to sell or issue any capital
stock or other securities. HC has no Subsidiaries other than Newco.
Section VI.3 Capitalization of Newco. Newco has authorized capital stock
-----------------------
of 100 shares of common stock, $0.01 par value per share (the "Newco Common
Stock"). As of the date of this Agreement, one share of the Newco Common Stock
was issued and outstanding and owned beneficially and of record by HC. There
30
are no outstanding rights, warrants, options, subscriptions, agreements or
commitments giving anyone any right to require Newco to sell or issue any
capital stock or other securities. Newco has no Subsidiaries.
Section VI.4 Authority. Each of HC and Newco has all requisite corporate
---------
power and authority to enter into this Agreement and the Merger Agreement and,
subject only to approval of this Agreement and the Merger Agreement by the
stockholders of Computone, to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of HC and Newco. This Agreement and the Merger Agreement have been duly
executed and delivered by HC and Newco and constitute valid and binding
obligations of HC and Newco, enforceable against them in accordance with their
respective terms.
Section VI.5 Consents and Approvals; No Violations. Except for filings,
-------------------------------------
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act and the
DGCL (all of which shall have been made or obtained on or before the Preliminary
Exchange Closing Date and the Merger Closing Date), the execution and delivery
by HC and Newco of this Agreement and the Merger Agreement do not, and the
consummation by HC and Newco of the transactions contemplated hereby and thereby
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under (i) any provision of the Certificate of Incorporation or
Bylaws of HC or Newco, or (ii) any mortgage, indenture, lease, or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to HC or
Newco or their respective properties or assets, other than any such conflicts,
violations, defaults, terminations, cancellations or accelerations which
individually or in the aggregate would not have a material adverse effect on the
business of HC and Newco taken as a whole. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to HC or Newco in connection with the
execution and delivery of this Agreement or the Merger Agreement by HC and Newco
or the consummation by HC and Newco of the transactions contemplated hereby or
thereby, except (i) the filing and effectiveness of the Proxy Statement under
the Exchange Act, (ii) the filing and effectiveness of the Registration
Statement with the Commission in connection with the issuance of the Merger
Shares pursuant to the Merger and the Initial Member Shares, the 1997 Note
Shares and the Additional Shares pursuant to or in connection with the Exchange,
which Registration Statement shall include the Proxy Statement, (iii) the filing
of such reports under Section 13 of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby, (iv)
the filing of the Certificate of Merger of the Merger Agreement and officers'
certificates with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which HC
or Newco is qualified to do business, (v) such consents, approvals, orders,
authorizations, registration, declarations and filings as may be required under
applicable state securities laws and the laws of any foreign country and (vi)
such other consents, authorizations, filings, approvals and registrations which
if not obtained or made would not have a material adverse effect on the business
of HC and Newco taken as a whole.
31
Section VI.6 Undisclosed Liabilities. Neither HC nor Newco has any
-----------------------
liabilities, either accrued, absolute, contingent or otherwise, of a nature
required to be reflected in a balance sheet or related notes prepared in
accordance with generally accepted accounting principles consistently applied.
Section VI.7 Absence of Certain Changes or Events. Since their respective
------------------------------------
dates of formation, neither HC nor any Newco has:
(a) incurred any obligation or liability (fixed or, to its knowledge,
contingent), except in connection with this Agreement and the transactions
contemplated hereby;
(b) discharged or satisfied any lien, security interest or encumbrance
or paid any obligation or liability (fixed or contingent);
(c) mortgaged, pledged or subjected to any lien, security interest or
other encumbrance any of its assets or properties (other than mechanic's,
materialman's and similar statutory liens arising by operation of law, liens for
current real and personal property taxes incurred but not yet due and payable,
purchase money security interests arising as a matter of law between the date of
delivery and payment and other liens of an immaterial nature);
(d) transferred, leased or otherwise disposed of any of its assets or
properties or acquired any assets or properties;
(e) canceled or compromised any debt or claim;
(f) waived or released any rights of material value;
(g) transferred or granted any rights under any concessions, leases,
licenses, agreements, patents, inventions, trademarks, trade names, service
marks or copyrights or with respect to any know-how;
(h) made or granted any wage or salary increase applicable to any
group or classification of employees generally, entered into any employment
contract with, or made any loan to, or entered into any material transaction of
any other nature with, any officer or employee of HC or Newco;
(i) entered into any transaction, contract or commitment which
provides for a period of performance which extends beyond twelve (12) months
from the date hereof except this Agreement and the transactions contemplated
hereby; or
(j) suffered any casualty loss or damage to any of its properties
(whether or not such loss or damage shall have been covered by insurance) which
adversely affects in any material respect its ability to conduct business.
32
Section VI.8 Information Supplied. None of the information supplied by HC
--------------------
or Newco for inclusion in the Registration Statement, and the Proxy Statement
included therein, at the date the Registration Statement is filed with the
Commission and at the time it becomes effective and at the time of the meeting
of Computone's stockholders to be held in connection with the Merger, contains
or will contain any untrue statement of a material fact or omits or will omit to
state any 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.
Section VI.9 Certain Agreements. Except as contemplated by this Agreement,
------------------
neither HC nor Newco is a party to any (i) agreement with any executive officer
or other key employee of HC or Newco (A) the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving HC or Newco of the nature of any of the transactions
contemplated by this Agreement and the Merger Agreement, (B) providing any term
of employment or compensation guarantee or (C) providing severance benefits or
other benefits (which are conditioned upon a change of control) after the
termination of employment of such employee regardless of the reason for such
termination of employment or (ii) agreement or plan, including; without
limitation, any stock option plan, stock appreciation right plan or stock
purchase plan, any of the benefits of which will be materially increased, or the
vesting of benefits of which will be materially accelerated, by the occurrence
of any of the transactions contemplated by this Agreement and the Merger
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement and the Merger
Agreement.
33
Section VI.10 Taxes.
-----
(a) HC and Newco (i) have duly and timely filed or caused to be filed
all federal, state, local and foreign tax returns (including, without
limitation, consolidated and/or combined tax returns) required to be filed by it
which relate to HC or Newco or with respect to which HC or Newco is liable or
otherwise in any way subject, which returns were true, correct and complete in
all material respects, (ii) have paid or fully accrued for all taxes shown to be
due and payable on such returns (which taxes are all the taxes due and payable
under such returns or pursuant to any assessment received by HC or Newco), and
(iii) have properly accrued, charged or established adequate reserves for all
such taxes arising in respect of HC or Newco for periods subsequent to the
periods covered by such returns. No claims for taxes have been asserted against
HC or Newco and no deficiency-for any taxes has been proposed, asserted or
assessed which has not been resolved or paid in full. No tax return or taxable
period of HC or Newco is under audit, investigation or examination and neither
HC nor Newco has received notice of any pending audit, investigation or
examination. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return for any period of HC
or Newco. No issue or claim has been asserted for taxes by any taxing authority
for any prior period, the adverse determination of which could for any prior,
current or future period result in a deficiency which could have a material
adverse effect on HC or Newco taken as a whole. There are no tax liens upon the
assets of HC or Newco other than liens for taxes not yet due. No power of
attorney has been granted by HC or Newco with respect to any matter relating to
taxes which is currently in force, other than, in each case, those the outcome
of which, as far as reasonably can be foreseen, will not have a material adverse
effect on HC or Newco taken as a whole. Copies of all federal and state income
(or franchise) tax returns of HC or Newco have been made available for
inspection by Ladia, the Members and Computone.
(b) Collapsible Corporation Status. No consent or agreement has been
-----------------------
made under Section 341 of the Code by or on behalf of HC or Newco or any
predecessor thereof.
(c) FIRPTA Status. Neither HC nor Newco is , and neither has at any
-------------
time during the five year period preceding the date hereof been, a "United
States real property holding corporation" as defined in Section 897 of the Code
and the regulations promulgated thereunder.
(d) Parachute Payments. No payments by HC or Newco to its officers,
------------------
directors, employees or consultants under any contract, plan or agreement,
including but not limited to this Agreement, or payments contemplated by this
Agreement constitute "parachute payments" within the meaning of Section 280G of
the Code.
Section VI.11 Title to Assets. Neither HC nor Newco owns or leases any
---------------
real property. HC and Newco have good and marketable title to its assets, free
and clear of all security interests, mortgages, encumbrances, liens or charges
of any kind or character, except liens for taxes not yet due and payable and
such imperfections of title, liens and easements as do not materially detract
from or interfere with the present use of the properties subject thereto or
affected thereby, or otherwise materially impair the present business operations
of such properties.
34
Section VI.12 Condition of Personal Property. All of HC's and Computone's
------------------------------
tangible personal property, equipment, fixtures and inventories used in the
ordinary course of its business are in good, merchantable condition, reasonable
wear and tear excluded, or in reasonably repairable condition, are suitable for
the purposes for which they are being used, and are valued at the lower of cost
or market. No value in excess of applicable reserves has been given to any
inventory with respect to obsolete or discontinued products. All of the
inventories and equipment, including equipment leased to others, are well
maintained and in good operating condition.
Section VI.13 List of Contracts and Other Data. Neither HC nor Newco has:
--------------------------------
(a) any registered patents, trademarks, trade names, service marks and
copyrights or any applications pending for patents or for trademarks, trade
names, service marks or copyright registrations;
(b) any collective bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus plans, deferred compensation
agreements, employee pension or retirement plans, employee stock purchase and
stock option plans, group life insurance, hospitalization insurance or other
plans or arrangements providing for benefits to employees of HC or Newco;
(c) any contracts (including, without limitation, mortgages,
indentures and loan agreements) to which it is a party, or to which it or any of
its assets or properties are subject and which are not specifically referred to
in Sections 6.13(a) or 6.l3(b) above and which provide for a period of
performance which extends beyond twelve (12) months from the date hereof; and
(d) any employees.
Section VI.14 Business Property Rights. To the knowledge of HC and Newco,
------------------------
HC and Newco own or have valid rights to use all designs, know-how, trade
secrets, patents, trademarks, trade names, service marks and copyrights, if any,
which are reasonably necessary to, or used primarily in, the conduct of HC's and
Newco's businesses (the "HC/Newco Intellectual Property") without conflict with
the rights of others. No claim is pending or, to HC's or Newco's knowledge,
threatened to the effect that the present or past operation of HC or Newco
infringes upon or conflicts with the rights of others with respect to any
HC/Newco Intellectual Property, where such infringement or conflict is
reasonably likely to have a material adverse effect on HC and Newco taken as a
whole. No claim is pending or, to HC's or Newco's knowledge, threatened to the
effect that any HC/Newco Intellectual Property is invalid or unenforceable. No
contract, agreement or understanding with any party exists which would prevent
the continued use by HC or Newco (as currently used by HC or Newco) of any
HC/Newco Intellectual Property.
Section VI.15 Compliance with Applicable Law. HC and Newco hold all
------------------------------
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "HC/Newco Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not,
35
individually or in the aggregate, have a material adverse effect on the business
of HC and Newco taken as a whole. HC and Newco are in compliance with the terms
of the HC/Newco Permits, except where the failure to comply would not have a
material adverse effect on HC and Newco taken as a whole. The business of HC
and Newco are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations which
individually or in the aggregate do not, and, insofar as reasonably can be
foreseen, in the future will not, have a material adverse effect on the business
of HC and Newco taken as whole. As of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to HC and Newco
is pending or, to the best knowledge of HC or Newco, threatened, nor has any
Governmental Entity notified HC or Newco orally or in writing of an intention to
conduct the same, other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, in the future will not have a material adverse
effect on the business of HC and Newco taken as a whole.
Section VI.16 No Breach or Default. Neither HC nor Newco is in default
--------------------
under any material contract to which it is a party or by which it is bound, nor,
to HC's and Newco's knowledge, has any event occurred which, after the giving of
notice or the passage of time or both, would constitute a default under any such
contract. Neither HC nor Newco has reason to believe that the parties to such
contracts will not fulfill their obligations under such contracts in all
material respects or are threatened with insolvency. Neither HC nor Newco is a
party to or bound by any mortgage, lien, lease, agreement, instrument, order,
judgment or decree which would prohibit or conflict with in any way the
execution or performance of this Agreement or prohibit the consummation of any
of the transactions provided for in this Agreement.
Section VI.17 Labor Controversies. Neither HC nor Newco is a party to any
-------------------
collective bargaining agreement. There are no controversies between HC or Newco
and any of their respective employees which might reasonably be expected to
materially adversely affect the conduct of its business, or any unresolved labor
grievances or unfair labor practice or labor arbitration proceedings pending, or
to the knowledge of HC or Newco threatened relating to its business, and to the
knowledge of HC or Newco there are no organizational efforts presently being
made or threatened involving any of HC's or Newco's employees. Neither HC nor
Newco has received notice of any claim that HC or Newco has not complied with
any laws relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining, the payment of social security
and similar taxes, equal employment opportunity, employment discrimination and
employment safety, or that HC or Newco is liable for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing.
Section VI.18 Litigation. There is no action, suit or proceeding with
----------
respect to HC or Newco involving claims by or against HC, Newco or any of their
respective properties pending to the knowledge of HC or Newco, threatened, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality.
There are no orders, judgments, injunctions or decrees of any court or
governmental agency with respect to which HC or Newco has been named or is a
party which apply, in whole or in part, to the business of HC or Newco or any of
their respective properties, or which would result in a material adverse change
in the business or prospects of HC and Newco taken as a whole.
36
Section VI.19 Transactions with Affiliates. Since their respective dates
----------------------------
of formation, there have been no transactions to which HC or Newco has been a
party in which any director, officer or 5% stockholder of HC or Newco or a
member of his immediate family had or will have any direct or indirect interest.
Section VI.20 Environmental Matters. As of the date hereof, HC and Newco
---------------------
are in compliance with all applicable local, county, state, federal and foreign
legal requirements relating to the use, storage, handling, transport and
disposal of materials, hazardous materials and hazardous substances (the
"Hazardous Materials") including, but not limited to, the Resources Compensation
and Recovery Act (42 U.S.C. Section 6902 et seq.) and the Comprehensive
Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. Section
9601). Neither HC nor Newco has any knowledge of any condition that would cause
HC or Newco to incur liability or be a responsible party with respect to HC's or
Newco's real properties under any environmental or health regulation or act. To
the knowledge of HC and Newco, (i) none of HC's or Newco's properties has ever
been used as a sanitary land fill or as a storage or dump site for Hazardous
Materials, (ii) none of the listed properties is contaminated with any Hazardous
Materials; and (iii) neither HC nor Newco has been responsible for spilling
Hazardous Materials on its properties.
Section VI.21 ERISA Plans. There is no employee benefit plan (including,
-----------
without limitation, any "employee benefit plan", as defined in Section 3(d) of
the ERISA), or any material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan, arrangement or understanding
(whether or not legally binding), maintained or contributed to by HC or Newco.
Section VI.22 No Brokers. Neither HC nor Newco has entered into any
----------
contract, arrangement or understanding with any person or firm which may result
in the obligation of HC or Newco to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
and neither HC nor Newco is aware of any other claim or basis for claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby. HC and Newco shall
indemnify and hold Xxxxx, the Members and Computone harmless from and against
any obligation with respect to any such fees, brokerage or agent's commissions
or other like payments.
Section VI.23 Pooling Matters. None of HC, Newco or any of their
---------------
affiliates has, to its knowledge and based upon consultation with its
independent accountants, taken or agreed to take any action that would affect
the ability of Computone and HC to account for the business combination to be
effected by the Merger as a pooling of interests.
Section VI.24 No Misrepresentation or Omission. No representation or
--------------------------------
warranty made by HC or Newco in this Article VI or in any other Article or
37
Section of this Agreement, or in any certificate or other document furnished or
required to be furnished by HC or Newco pursuant hereto, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they are made.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
The parties further covenant and agree as follows:
Section VII.1 Conduct of Computone, HC, Newco and Xxxxx Prior to the
------------------------------------------------------
Preliminary Exchange Closing and the Merger Closing. During the period from the
---------------------------------------------------
date hereof until the occurrence of the Effective Date and the Preliminary
Exchange Closing Date:
(a) Computone and Xxxxx each will conduct its operations according to
its ordinary course of business and will use commercially reasonable efforts to
maintain and preserve its business organization and relationships with agents
and all others.
(b) Except as disclosed by Computone, HC or Newco to Xxxxx or by Xxxxx
to Computone in writing prior to the date hereof, Xxxxx shall not, without the
prior written consent of Computone, and none of Computone, HC or Newco shall,
without the prior written consent of Xxxxx:
(i) incur any indebtedness for borrowed money, assume, guarantee,
endorse (other than endorsement of accounts receivable for collection) or
otherwise become responsible for the obligations of any other individual, firm
or corporation, or make any loans or advances to any individual, firm or
corporation, except any indebtedness borrowed under a line of credit agreement
with a bank which is in effect as of the date hereof;
(ii) make, declare or pay any dividend, or declare or make any
distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its outstanding capital stock or membership interests
except for shares of such capital stock purchasable from employees or
consultants at the original purchase price upon termination of employment or
consulting in accordance with such party's usual and customary practice, or
authorize the creation or issuance of any additional shares of its capital stock
or membership interests or any options, calls or commitments relating to its
capital stock or membership interests or any securities or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire from it, any shares of its capital stock or membership
interests, or agree to take any such action;
(iii) except as necessary to consummate the transactions contemplated
in this Agreement, take any action to amend its Certificate of Incorporation or
Bylaws or Certificate of Organization or Operating Agreement;
38
(iv) mortgage, pledge or otherwise encumber any of its properties
or assets;
(v) sell or transfer any of its properties or assets or cancel,
release or assign any indebtedness owed to it or any claims held by it, except
in the ordinary course of business;
(vi) make any investment of a capital nature in excess of $250,000 for
any single project either by purchase of stock or securities, contributions to
capital, property transfer or otherwise, or by the purchase of any property or
assets of any other individual, firm or corporation;
(vii) enter into or terminate any contract or agreement, or make any
change in any of its leases or contracts, other than in the ordinary course of
business;
(viii) increase in any manner the compensation or fringe benefits of
any of its officers or any employees earning over $50,000 annually or pay or
agree to pay any pension or retirement allowance not required by any existing
plan or agreement to any officers or employees, or commit itself to any pension,
retirement or profit-sharing plan or agreement or employment agreement with or
for the benefit of any officer, employee or other person provided that Xxxxx
may, without Computone's consent, hire up to three new employees with individual
annual compensation of up to $250,000 and may hire additional new employees with
aggregate annual compensation of up to $250,000;
(ix) permit any insurance policy (excluding, however, those policies
for which no replacement is available at a cost comparable to that currently in
effect) naming it as a beneficiary or a loss payable payee to be canceled or
terminated or any of the coverage thereunder to lapse, unless simultaneously
with such termination or cancellation replacement policies providing
substantially the same coverage are in full force and effect, other than in the
ordinary course of business; or
(x) take any other action which, although not expressly prohibited by
the foregoing provisions of this Section 7.1(b), would result or would be
reasonably likely to result in any of such party's representations and
warranties set forth in this Agreement being untrue or in any of the conditions
to the Merger or the Exchange set forth in Article VIII or Article IX not being
satisfied.
Section VII.2 HC Governance. Prior to the Preliminary Exchange Closing and
-------------
the Merger Closing, the stockholders and Board of Directors of HC shall take
such action as is necessary to cause the full Board of Directors of HC to
consist of the following persons as of the Preliminary Exchange Closing and the
Merger Closing: Xxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxx Xxxxx, Xxxxxx Xxxxx
or his designee and two designees of the Computone Board of Directors.
Section VII.3 Stockholder Meeting. Computone shall call a meeting of its
-------------------
stockholders to be held as promptly as practicable after the date hereof for the
39
purpose of voting upon this Agreement, the Merger Agreement and related matters.
Computone will, through its Board of Directors, unanimously recommend to its
stockholders (consistent with fiduciary duties) approval of such matters.
Section VII.4 Legal Conditions to the Merger or Exchange. Each party will
------------------------------------------
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on such party with respect to the Merger or
the Exchange and will promptly cooperate with and furnish information to the
other party in connection with any such requirements imposed upon any other
party or any Subsidiary of such other party in connection with the Merger or the
Exchange. Each party will take, and will cause its Subsidiaries to take, all
reasonable actions to obtain (and to cooperate with the other party and its
Subsidiaries in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity, or other third party, required to be
obtained or made by such party or its Subsidiaries (or by the other party or its
Subsidiaries) in connection with the Merger or the Exchange or the taking of any
action contemplated thereby or by this Agreement.
Section VII.5 Cooperation. HC shall (i) prepare and file with the
-----------
Commission, as soon as is reasonably practicable after the date hereof, the
Registration Statement with respect to the Merger Shares issuable in the Merger,
the Initial Member Shares, the 1997 Note Shares and the Additional Shares (the
Initial Member Shares and the Additional Shares being hereinafter sometimes
referred to collectively as the "Exchange Shares") issuable in connection with
or pursuant to the Exchange, in each case as contemplated by this Agreement,
which Registration Statement shall include the Proxy Statement, (ii) use
commercially reasonable efforts to have the Registration Statement declared
effective by the Commission under the Securities Act as promptly as possible,
(iii) prepare and file with the Commission such supplements or amendments to the
Registration Statement as may be required by the Securities Act and/or the rules
and regulations thereunder, (iv) take all such action as may be required under
state blue sky or securities laws in connection with the transactions
contemplated by this Agreement, and (v) cooperate with Xxxxx, the Members, Newco
and Computone in determining whether any filings are required to be made or
consents required to be obtained in any jurisdiction prior to the Effective Date
and the Preliminary Exchange Closing Date in connection with the consummation of
the transactions contemplated by this Agreement and in making any such filings
promptly and in seeking to obtain timely any such consents. HC, Newco,
Computone, the Members and Xxxxx shall each furnish to one another's counsel all
such information as may be required in connection with the foregoing actions
including without limiting the generality of the foregoing the preparation by
Xxxxx of such audited financial statements for inclusion in the Registration
Statement as HC's independent accountants determine to be necessary pursuant to
Regulation S-X promulgated by the Commission.
Section VII.6 Satisfactory Affiliate Agreements. Xxxxx, on or prior to the
---------------------------------
date hereof, shall have caused to be delivered to HC a list, reviewed by Ladia's
counsel, identifying all persons who were in its opinion, at the time such list
is prepared, affiliates of Xxxxx for purposes of Rule 145 promulgated by the
Commission under the Securities Act ("Affiliates"). Xxxxx shall furnish such
information and documents as HC may reasonably request for the purpose of
reviewing such list. Xxxxx shall cause each person who is identified as an
40
"Affiliate" in the list furnished pursuant to this Section 7.6 to execute a
written agreement at or prior to the Preliminary Exchange Closing Date (the
"Affiliate Agreement"), substantially in the form of Exhibit C attached hereto,
---------
that such person will not offer or sell or otherwise dispose of any Exchange
Shares issued to such person pursuant to this Agreement in violation of the
Securities Act or the rules and regulations promulgated by the Commission
thereunder.
Section VII.7 Expenses. All costs and expenses incurred in connection with
--------
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
Section VII.8 Public Announcements. No party hereto and none of their
--------------------
respective affiliates shall issue, or permit any agent or affiliate to issue,
any press releases or otherwise make, or permit any agent or affiliate to make,
any public statements with respect to this Agreement and the transactions
contemplated hereby without the prior written consent of each other party.
Notwithstanding the foregoing, if the parties cannot agree to the content of any
such press release or public statement, either party may, after furnishing the
proposed text thereof to the other parties and at least 24 hours' prior
consultation, issue, or permit any agent or affiliate to issue, any such press
release or make any such public statement which such party's legal counsel deems
to be required by law.
Section VII.9 Issuance of HC Common Stock and Xxxxx Options.
---------------------------------------------
(a) HC will, on the Preliminary Exchange Closing Date and on the Final
Exchange Closing Date, issue or cause to be issued or deliver or cause to be
delivered, from the authorized but unissued shares of the HC Common Stock,
certificates for the Exchange Shares for which the Xxxxx Membership Interests
are to be exchanged pursuant to Article I of this Agreement. HC at all times
shall maintain a sufficient number of authorized but unissued shares of the HC
Common Stock to enable HC to issue the Exchange Shares.
(b) HC will, promptly following the Effective Date, issue or cause to
be issued or deliver or cause to be delivered, from the authorized but unissued
shares of the HC Common Stock, certificates for the shares of the HC Common
Stock into which the Computone Common Stock outstanding on the Effective Date
shall then be converted and the shares of the HC Common Stock to be issued upon
the exercise thereafter of stock options and warrants assumed by HC in
accordance with Article X of this Agreement. HC at all times shall maintain a
sufficient number of authorized but unissued shares of the HC Common Stock to
enable HC to issue the shares contemplated by the preceding sentence.
(c) HC at all times shall maintain a sufficient number of authorized
but unissued shares of the HC Common Stock to enable HC to issue the Xxxxx
Option Shares issuable on exercise of the Xxxxx Options. As soon as practicable
after the Preliminary Exchange Closing Date, HC shall take such actions as shall
be necessary to assure that the Xxxxx Option Shares are registered on a Form S-8
registration statement filed with the Commission under the Securities Act.
41
Section VII.10 Consents. Each party will use commercially reasonable
--------
efforts to obtain the written consents, if required, of all third parties,
including, but not limited to, governmental or regulatory agencies, foreign or
domestic, to the contracts listed on the Disclosure Schedule of such party and
will furnish to the other party executed copies of those consents on or before
the Effective Date and the Preliminary Exchange Closing Date.
Section VII.11 Stockholders' Agreement'. Simultaneously with the issuance
------------------------
of the 1997 Note Shares, the holders of the 1997 Note Shares shall have entered
into a stockholders' agreement with Xxxxxxx Xxxxx substantially in the form of
Exhibit D attached hereto (the "Stockholders' Agreement") pursuant to which the
---------
holders of the 1997 Note Shares shall have given Xxxxxxx Xxxxx (a) an
irrevocable proxy coupled with an interest to vote all of the 1997 Note Shares
and any Additional Shares issued to such holders pursuant to Section 1.5 hereof
on all matters submitted to the HC stockholders for a vote and (b) a right of
first refusal, to continue for a period of ten (10) years after the Exchange
Closing Date, to acquire some or all of the 1997 Note Shares and any Additional
Shares issued to such holders pursuant to Section 1.5 hereof if and when any one
or more of the holders thereof determine to dispose of such shares.
Section VII.12 Accountants' Letters'.
---------------------
(a) Xxxxx Accountants. Xxxxx shall use commercially reasonable efforts
-----------------
to cause to be delivered to HC a letter of Xxxxxx Xxxxxxxx LLP (or such other
firm of independent certified public accountants as is acceptable to Computone),
dated a date within two business days before the date on which the Registration
Statement shall become effective, and addressed to HC, in form and substance
reasonably satisfactory to HC and Computone and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
(b) Computone's Accountants. Computone shall use commercially
-----------------------
reasonable efforts to cause to be delivered to HC a letter of BDO Xxxxxxx LLP,
Computone's independent auditors, dated a date within two business days before
the date on which the Registration Statement shall become effective, and
addressed to HC, in form and substance reasonably satisfactory to HC and Xxxxx
and customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
Section VII.13 Actions by Xxxxx. HC, Newco and Computone agree that, from
----------------
and after the Preliminary Exchange Closing and the Merger Closing and except as
specified below, Xxxxx, acting through its Board of Managers, and without
interference or the requirement of consent, authorization or approval from HC as
a holder of a Membership Interest in Xxxxx (or from any other holder or holders
of such a Membership Interest, the effective cooperation of which holder or
holders HC hereby agrees to obtain), shall have, except only in the specific
extraordinary circumstances hereinafter defined, exclusive control of Ladia's
business operations and finances. Such business operations and finances shall
include, but not be limited to, (i) the right to make acquisitions, either of
stock or assets or any combination thereof, of enterprises in the
telecommunications industry and (ii) the incurring of debt in any amount and on
any terms and conditions, provided only that such debt does not involve a
42
guaranty by HC and is not convertible into, and does not afford any rights to
acquire, any equity interest in Xxxxx or HC. For purposes of this Section 7.13,
the specific extraordinary circumstances in which Xxxxx shall be required to
obtain the authorization, approval or consent of HC shall include and be limited
to (A) the issuance by Xxxxx of any additional membership interests in Xxxxx of
any kind and (B) any expenditure in an amount in excess of $500,000. The
provisions of this Section 7.13 shall be null and void if either (A) the
employment by Xxxxx of Xxxxxxx Xxxxx is terminated for cause within the meaning
of her employment agreement with Xxxxx or (B) Xxxxx has not generated Cumulative
Gross Revenues during the first four full fiscal quarters following the
Preliminary Exchange Closing Date of at least $25,000,000, with a Cumulative
Gross Margin during the last such quarter of at least 4%, with such calculations
being based upon the unaudited financial statements of Xxxxx prepared by HC's
regular independent certified public accountants in connection with the filing
by HC of its periodic reports under the Exchange Act. HC, Computone and Newco
hereby agree that, prior to the Preliminary Exchange Closing and the Merger
Closing, Xxxxx may effect such amendments to its Operating Agreement and
Certificate of Organization as it shall deem necessary to reflect the provisions
of this Section 7.13 and to assure that the amendments so adopted may not
thereafter by modified, revoked or rescinded without the prior written consent
of Xxxxx.
Section VII.14 Role of HC and Computone. From and after the Preliminary
------------------------
Exchange Closing and the Merger Closing, HC and, to the extent applicable,
Computone, whether acting through their Boards of Directors or otherwise, shall
except to the extent contemplated by Section 7.13 hereof, (a) neither cause nor
permit any action to be taken, either directly or indirectly, which may
adversely affect the business, operations or prospects of Xxxxx or the ability
of Xxxxx and Xxxxxxx Xxxxx to pursue and achieve the targets leading to the
issuance of the Additional Shares and the vesting of the Xxxxx Options pursuant
to Section 1.5 and Section 1.3 hereof and (b) cooperate with and support Xxxxx,
Xxxxxxx Xxxxx and the Xxxxx Board of Managers in their management of the
business and affairs of Xxxxx and in their efforts to expand the growth of
Ladia's business.
Section VII.15 Limitations on Certain Transactions. During the Revenues
-----------------------------------
Measurement Period, HC will not, without Ladia's prior consent: (a) issue
additional shares of HC Common Stock or other equity in HC; (b) make any
distribution to holders of HC Common Stock from the proceeds of the sale of any
such additional shares of HC Common Stock or other equity of HC; or (c) sell or
otherwise transfer its membership interests in Xxxxx.
Section VII.16 Commission Filings. In connection with the intended
------------------
treatment of the Exchange and the Merger as a pooling of interests for
accounting purposes (as set forth in Section 1.8 and Section 2.8 hereof), HC
covenants and agrees that, as promptly as reasonably practicable and, in any
event, within forty-five (45) days after the end of the first full fiscal
quarter of HC beginning after the Final Exchange Closing Date, HC shall cause to
be filed with the Commission a completed Form 10-Q, including therein the
required statement of the financial results for the combined operations of HC,
Xxxxx and Computone as of the end of the fiscal quarter just completed.
43
Section VII.17 Equity Financing.
----------------
(a) On or before the Preliminary Exchange Closing Date, HC shall use
commercially reasonable efforts to raise $5,000,000 of additional equity (the
"Equity Financing").
(b) The number of Initial Member Shares, 1997 Note Shares and
Additional Shares to be issued to the Members and the holders of the 1997 Note
Shares shall be subject to increase based on the number of shares of HC Common
Stock issued by HC in the Equity Financing or into which the securities issued
by HC in the Equity Financing are convertible, directly or indirectly
(collectively, the "New HC Equity Shares") as follows:
(i) the aggregate number of additional shares of HC Common Stock
issuable to the holders of the Initial Member Shares and the 1997 Note Shares
shall equal 5.0% of (A) the number of New HC Equity Shares divided by (B) 0.95
with such shares being issued on a pro rata basis to the holders of the Initial
Member Shares and the 1997 Note Shares; and
(ii) The number of Additional Shares specified in the schedule set
forth in Section 1.5(a) shall be increased by a number of shares equal to (A)
the number of New HC Equity Shares; (B) divided by "x"; (C) multiplied by "y",
where "x" and "y" have the respective values set forth below opposite the
respective revenue levels below and (D) reduced by the number of shares issued
pursuant to Section 7.17(b)(i) hereof:
If Revenues are at least But less than x y
------------------------ ------------- - -
$10,000,000 $15,000,000 .875 .125
$15,000,000 $20,000,000 .768 .232
$20,000,000 $25,000,000 .643 .357
$25,000,000 .49 .51
ARTICLE VIII
CONDITIONS TO THE PRELIMINARY EXCHANGE CLOSING
Section VIII.1 Conditions to Closing of HC. The obligation of HC to effect
---------------------------
the Exchange shall be, unless waived, subject to and conditioned upon the
satisfaction at or prior to the Preliminary Exchange Closing Date of each of the
following conditions:
(a) All representations and warranties of Xxxxx and the Members
contained in this Agreement and in the Xxxxx Disclosure Schedule shall be true
and correct at and as of the Preliminary Exchange Closing Date in all material
respects and Xxxxx and the Members shall have performed, in all material
respects, all agreements and covenants and satisfied all conditions on their
44
part to be performed or satisfied by the Preliminary Exchange Closing Date
pursuant to the terms of this Agreement, and, with respect to matters relating
to Xxxxx, XX shall have received a certificate of an authorized member of the
Board of Managers of Xxxxx and of each Member, dated the Preliminary Exchange
Closing Date, to such effect.
(b) There shall have been no material adverse change since December
31, 1997 in the financial condition, operating results, business or affairs of
Xxxxx, and Xxxxx shall not have suffered any material loss (whether or not
insured) by reason of physical damage caused by fire, earthquake, accident or
other calamity which (i) substantially affects the value of its assets,
properties or business and (ii) has a material adverse effect on Ladia's
business as a whole, and HC shall have received a certificate of an authorized
officer of Xxxxx, dated the Preliminary Exchange Closing Date, to such effect.
(c) HC shall have received from Xxxxxxx & Xxxxxx LLP, counsel for
Xxxxx, an opinion, dated the Preliminary Exchange Closing Date, in form and
substance satisfactory to Computone and its counsel.
(d) Each of the current Xxxxx employees specified on Schedule D
-----------
attached hereto (each, a "Contracting Xxxxx Employee") shall have entered into
an employment agreement with HC (each, an "HC Employment Agreement") on terms
acceptable to HC and such employee.
(e) Xxxxx shall have delivered to HC certificates of the Secretary of
State of The Commonwealth of Massachusetts certifying as of a date reasonably
close to the Preliminary Exchange Closing Date that Xxxxx has filed all required
reports, paid all required fees and taxes and is, as of such date, in good
standing and authorized to transact business as a domestic limited liability
company.
(f) The Members shall have executed and delivered to HC appropriate
instruments transferring the Membership Interests in Xxxxx to HC.
(g) HC shall have received from each Xxxxx Affiliate an executed copy
of an Affiliates Agreement as contemplated by Section 7.6 hereof.
(h) All warrants, options or other rights to acquire any Membership
Interest in Xxxxx shall have been exercised or duly waived and terminated.
Section VIII.2 Conditions to Closing of Xxxxx and the Members. The
----------------------------------------------
obligation of Ladia and the Members to effect the Exchange shall be, unless
waived by Ladia, subject to and conditioned upon the satisfaction at or prior to
the Preliminary Exchange Closing Date of each of the following conditions:
(a) All representations and warranties of HC and Computone contained
in this Agreement and in the Computone Disclosure Schedule shall be true and
correct at and as of the Preliminary Exchange Closing Date in all material
respects and HC and Computone shall have performed all agreements and covenants
and satisfied all conditions on their part to be performed or satisfied by the
45
Preliminary Exchange Closing Date pursuant to the terms of this Agreement, and
the Members shall have received a certificate of an authorized officer of each
of HC and Computone, dated the Preliminary Exchange Closing Date, to such
effect.
(b) There shall have been no material adverse change since April 4,
1997 in the financial condition, operating results, business or affairs of
either HC or Computone, and neither HC nor Computone shall have suffered any
material loss (whether or not insured) by reason of physical damage caused by
fire, earthquake, accident or other calamity which (i) substantially affects the
value of its assets, properties or business and (ii) has a material adverse
effect on the business of HC and Computone taken as a whole, and Xxxxx and the
Members shall have received a certificate of authorized officers of HC and of
Computone, dated the Preliminary Exchange Closing Date, to such effect.
(c) HC and Computone shall have delivered to Xxxxx and the Members
certificates of the Secretary of State of Delaware certifying as of a date
reasonably close to the Preliminary Exchange Closing Date that HC and Computone
have filed all required reports, paid all required fees and taxes and are, as of
such date, in good standing and authorized to transact business as domestic
corporations.
(d) The Members shall have received from Duane, Morris & Heckscher
LLP, counsel for HC, an opinion dated the Preliminary Exchange Closing Date in
form and substance satisfactory to Xxxxx and its counsel.
(e) The holders of the Note Shares shall have entered into the
Stockholders Agreement as contemplated by Section 7.11 hereof.
(f) The Merger Closing shall have occurred.
(g) Each Contracting Xxxxx Employee shall have entered into an HC
Employment Agreement") on terms acceptable to HC and the Contracting Xxxxx
Employee.
(h) The Registration Statement shall have been declared effective by
the Commission under the Securities Act and by all applicable state securities
regulatory authorities.
(i) The Bylaws of Computone shall be in form and substance
satisfactory to HC, Computone and Xxxxx.
(j) Each of HC and Computone shall have delivered to Xxxxx a
certificate of its corporate secretary attaching thereto a true, correct and
complete copy of its Certificate of Incorporation and Bylaws and certifying:
(i) Resolutions of its stockholders and Board of Directors authorizing
execution of this Agreement and the execution, delivery and performance of all
agreements, documents and transactions contemplated hereby; and
46
(ii) the incumbency of its officers executing this Agreement and
all agreements and documents contemplated hereby.
Section VIII.3 Conditions to Closing of HC, Xxxxx and the Members. The
--------------------------------------------------
obligations of HC, Xxxxx and the Members to effect the Exchange shall be, unless
waived by both HC and Xxxxx, subject to and conditioned upon satisfaction at or
prior to the Preliminary Exchange Closing Date of each of the following
conditions:
(a) Any and all consents required from third parties relating to
contracts, licenses, leases and other instruments, material to the respective
businesses of Xxxxx and HC shall have been obtained.
(b) No temporary restraining order, preliminary injunction or
permanent injunction or other order preventing the consummation of the Exchange
or the Merger shall have been issued by any federal or state court and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against HC, Xxxxx or the Members of substantial
damages if the Exchange or the Merger is consummated, shall be pending which, in
the good faith judgment of Xxxxx or the Board of Directors of HC (acting upon
advice of their respective outside counsel) has a reasonable probability of
resulting in such order, injunction or damages. In the event any such order or
injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such order or injunction lifted.
(c) No statute, rule or regulation shall have been enacted by the
government of the United States or any state or agency thereof which would make
the consummation of the Exchange or the Merger illegal.
(d) Each of HC and Xxxxx shall have received an opinion from its own
outside counsel, in form and substance satisfactory to both parties and
substantially identical in form and substance, to the effect that, when the
Exchange is consummated in accordance with the terms of this Agreement, the
Exchange should be treated for Federal income tax purposes as a tax free
transfer within the meaning of Section 351 of the Code.
(e) HC and Xxxxx shall have received letters from Xxxxxx Xxxxxxxx LLP
(or such other firm of independent certified public accountants as is acceptable
to Computone) and BDO Xxxxxxx LLP, each dated as of the date hereof and
confirmed in writing at the Exchange Closing Date and addressed to HC and Xxxxx,
stating that (i) in the case of Xxxxxx Xxxxxxxx LLP (or such other firm), Xxxxx
qualifies as a poolable entity and, in the case of BDO Xxxxxxx LLP, HC qualifies
as a poolable entity and (ii) the Exchange will be treated as a pooling of
interests under Opinion No. 16 of the Accounting Principles Board.
(f) Except as disclosed on the Computone Disclosure Schedule or the
Xxxxx Disclosure Schedule, there shall be no pending or threatened litigation
47
against any of Xxxxx, any Member, HC or Computone or against their officers or
directors which may have a material adverse effect on HC, Xxxxx or Computone
after the Exchange and the Merger.
ARTICLE IX
CONDITIONS TO THE MERGER CLOSING
Section IX.1 Conditions to Closing of Computone. The obligation of
----------------------------------
Computone to effect the Merger shall be, unless waived, subject to and
conditioned upon the satisfaction at or prior to the Effective Date of each of
the following conditions:
(a) All representations and warranties of HC and Newco contained in
this Agreement shall be true and correct in all material respects at and as of
the Effective Date and HC and Newco shall have performed, in all material
respects, all agreements and covenants and satisfied all conditions on their
part to be performed or satisfied by the Effective Date pursuant to the terms of
this Agreement, and Computone shall have received a certificate of an authorized
officer of HC and Newco dated the Effective Date to such effect.
(b) Each of HC and Newco shall have delivered to Computone a
certificate of its corporate secretary attaching thereto a true, correct and
complete copy of its Certificate of Incorporation and Bylaws and certifying:
(i) Resolutions of its stockholder and Board of Directors
authorizing execution of this Agreement and the execution, performance and
delivery of all agreements, documents and transactions contemplated hereby; and
(ii) the incumbency of its officers executing this Agreement and
all agreements and documents contemplated hereby.
(c) HC shall have executed and delivered the Computone Option
Assumption Agreement (as defined in Section 10.1).
Section IX.2 Conditions to Closing of HC and Newco. The obligation of HC
-------------------------------------
and Newco to effect the Merger shall be, unless waived, subject to and
conditioned upon the satisfaction at or prior to the Effective Date of each of
the following conditions:
(a) All representations and warranties of Computone contained in this
Agreement and in the Computone Disclosure Schedule shall be true and correct at
and as of the Effective Date in all material respects and Computone shall have
performed all agreements and covenants and satisfied all conditions on its part
to be performed or satisfied by the Effective Date pursuant to the terms of this
Agreement, and HC and Newco shall have received a certificate of an authorized
officer of Computone dated the Effective Date to such effect.
48
(b) There shall have been no material adverse change since April 4,
1997 in the financial condition, operating results, business or affairs of
Computone, and Computone shall not have suffered any material loss (whether or
not insured) by reason of physical damage caused by fire, earthquake, accident
or other calamity which substantially affects the value of its assets,
properties or business, and HC and Newco shall have received a certificate of an
authorized officer of Computone dated the Effective Date to such effect.
(c) Computone shall have delivered to HC and Newco a certificate of
its corporate secretary attaching thereto a true, correct and complete copy of
its Certificate of Incorporation and Bylaws and certifying:
(i) Resolutions of its stockholders and its Board of Directors
authorizing execution of this Agreement and the execution, performance and
delivery by such party of all agreements, documents and transactions
contemplated hereby; and
(ii) the incumbency of its officers executing this Agreement and
all agreements and documents contemplated hereby.
Section IX.3 Conditions to Closing of HC, Newco and Computone. The
------------------------------------------------
obligations of HC, Newco and Computone to effect the Merger shall be, unless
waived by both, subject to and conditioned upon satisfaction at or prior to the
Effective Date of each of the following conditions:
(a) The stockholders of Computone shall have duly approved this
Agreement and the Merger in accordance with Delaware law and Certificate of
Incorporation and Bylaws of Computone.
(b) The Registration Statement registering the Merger Shares issuable
as provided under this Agreement shall have been declared effective by the
Commission and the Commission shall not have issued a stop order nor instituted
a proceeding to obtain a stop order relative to the Registration Statement.
(c) A Certificate of Merger or the Merger Agreement and officers'
certificate shall have been filed with the Secretary of State of the State of
Delaware and the Merger shall have become effective pursuant thereto.
(d) Any and all consents required from third parties relating to
contracts, licenses, leases and other instruments, material to the business of
Computone shall have been obtained.
(e) No temporary restraining order, preliminary injunction or
permanent injunction or other order preventing the consummation of the Merger or
the Exchange shall have been issued by any federal or state court and remain in
effect, and no litigation seeking the issuance of such an order or injunction,
or seeking the imposition against HC, Newco, the Surviving Corporation or
Computone of substantial damages if the Merger or the Exchange is consummated,
shall be pending which, in the good faith judgment of the Board of Directors of
49
HC, Newco or Computone (acting upon advice of their respective outside counsel)
has a reasonable probability of resulting in such order, injunction or damages.
In the event any such order or injunction shall have been issued, each party
agrees to use its reasonable efforts to have any such order or injunction
lifted.
(f) No statute, rule or regulation shall have been enacted by the
government of the United States or any state or agency thereof which would make
the consummation of the Merger illegal.
(g) Each of HC and Computone shall have received an opinion from its
own outside counsel in form and substance satisfactory to both parties and
substantially identical in form and substance, to the effect that, when the
Merger is consummated in accordance with the terms of this Agreement, the Merger
should be treated for Federal income tax purposes as a tax free reorganization
within the meaning of Section 368 of the Code.
(h) Newco and Computone shall have received a letter from BDO Xxxxxxx
LLP, dated as of the date hereof and confirmed in writing at the Effective Time
and addressed to Newco and Computone, stating that Newco and Computone qualify
as poolable entities and the Merger will be treated as a pooling of interests
under Opinion No. 16 of the Accounting Principles Board.
(i) Except as disclosed on the Computone Disclosure Schedule there
shall be no pending or threatened litigation against any of Newco, HC or
Computone or against their officers or directors which may have a material
adverse effect on the Surviving Corporation after the Merger.
(j) The Exchange Closing shall have occurred.
ARTICLE X
COMPUTONE OPTIONS AND WARRANTS
Section X.1 Computone's Stock Options and Warrants'. At the Merger
---------------------------------------
Closing, HC shall execute and deliver an agreement (the "Computone Option
Assumption Agreement") pursuant to which HC shall assume each option and warrant
to purchase shares of the Computone Common Stock (the "Computone Options")
outstanding at the Effective Date, and each Computone Option shall thereafter be
exercisable for a number of shares of the HC Common Stock equal to the number of
shares of the Computone Common Stock subject to such Computone Option
immediately prior to the Effective Date (the "HC Option"). The exercise price
per share of the HC Common Stock for such Computone Options so converted shall
be the exercise price per share specified in such Computone Options. Each HC
Option shall be upon the same terms and conditions as were applicable under the
Computone Option to purchase shares of the Computone Common Stock. HC will take
all corporate and other action necessary to reserve and make available
sufficient shares of HC Common Stock for issuance upon exercise of such HC
Options, will prepare and file with the Commission registration statements on
the appropriate forms relating to the issuance upon exercise of the shares of
50
the HC Common Stock underlying the HC Options held by Computone employees and
will use its best efforts to have such registration statements declared
effective as soon as practicable after the Effective Date and shall maintain the
effectiveness of such registration statements.
ARTICLE XI
TERMINATION
This Agreement may be terminated and the Merger and the Exchange abandoned
at any time before the Preliminary Exchange Closing Date and the Effective Date,
whether before or after adoption of this Agreement by the stockholders of
Computone, as follows:
Section XI.1 Mutual Consent. By mutual consent of the Members and Boards
--------------
of Directors of HC, Newco and Computone.
Section XI.2 By Any Party. By Ladia, any of the Members, Computone or HC
------------
if:
(a) there has been a material breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of another party
set forth in this Agreement and such breach of a covenant or agreement has not
been cured during a period of 45 days following the giving of written notice
thereof to the breaching party;
(b) the Merger Closing and the Effective Date of the Merger shall not
have occurred before December 31, 1998;
(c) the Preliminary Exchange Closing shall not have occurred before
December 31, 1998;
(d) (i) there shall be a final nonappealable order of a federal or
state court in effect preventing consummation of the Merger or the Exchange or
(ii) there shall be any action taken, or any statute, rule regulation or order
enacted, promulgated or issued by any Governmental Entity which would make
consummation of the Merger or the Exchange illegal; or
(e) there shall be any action taken, or any statute, rule, regulation
or order enacted, promulgated or issued by any Governmental Entity, which would
(i) prohibit the ownership by HC of all of the issued and outstanding capital
stock of Computone to be acquired in the Merger or the ownership by HC and by a
person controlled by HC of all of the issued and outstanding Membership
Interests in Xxxxx to be acquired in the Exchange, (ii) compel HC to dispose of
all or a material portion of (A) the issued and outstanding capital stock of
Computone to be acquired in the Merger or (B) the issued and outstanding
Membership Interests of Xxxxx to be acquired in the Exchange, (iii) compel HC to
cause the disposition of all or a material portion of the business or assets of
Computone or Xxxxx to be acquired as a result of the Merger or the Exchange,
(iv) render Newco, HC or Computone unable to consummate the Merger or (v) render
HC or the Members unable to consummate the Exchange.
51
Section XI.3 By Computone. By Computone's giving written notice to each
------------
other party if the conditions set forth in Sections 9.1 and 9.3 shall not have
been complied with or performed in all material respects, without fault on the
part of Computone, and such non-compliance or non-performance shall not have
been cured or eliminated within seven days following the meeting of the
stockholders of Computone.
Section XI.4 By Xxxxx. By Xxxxx'x giving written notice to each other
--------
party if the conditions set forth in Sections 8.2 or 8.3 shall not have been
complied with or performed in all material respects, without fault on the part
of Xxxxx or the Members, and such non-compliance or non-performance shall not
have been cured or eliminated within seven days following the meeting of the
stockholders of Computone.
Section XI.5 By HC. By HC's giving written notice to each other party if
-----
the conditions specified in Sections 8.1, 8.3, 9.2 or 9.3 shall not have been
complied with or performed in all material respects, without fault on the part
of HC, and such non-compliance or non-performance shall not have been cured or
eliminated within seven days following the meeting of the stockholders of
Computone.
ARTICLE XII
MISCELLANEOUS
Section XII.1 Notice. Any notice required or permitted hereunder shall be
------
in writing and shall be sufficiently given if personally delivered or mailed by
certified or registered mail, return receipt requested, addressed as follows:
If to Xxxxx:
Xxxxx, L.L.C.
00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xx. Xxxxxxx Xxxxx, President and CEO
copy to:
Xxxxxxx & Xxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. XxXxxxxx, Esquire
If to a Member:
To such Member's address as set forth on Schedule E
----------
hereto.
52
If to Computone, HC or Newco:
Computone Corporation
0000 Xxxxxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx X. Xxxxxx, Chairman
copy to:
Duane, Morris & Heckscher LLP
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxx X. Xxxxxx, Esquire
or to such other address as any party shall specify by written notice so given,
and shall be deemed to have been delivered as of the date so personally
delivered or mailed.
Section XII.2 Binding Effect; Benefits. Subject to Section 12.11, this
------------------------
Agreement shall be binding upon and shall inure to the benefit of the parties to
this Agreement and their respective 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
to this Agreement or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
Section XII.3 Entire Agreement. This Agreement, together with the Exhibits
----------------
and Schedules to this Agreement, and other documents contemplated hereby,
constitute the final written expression of all of the agreements among the
parties, and is a complete and exclusive statement of those terms. It
supersedes all understandings and negotiations concerning the matters specified
herein. Any representations, promises, warranties or statements made by any
party that differ in any way from the terms of this written Agreement and the
Exhibits and Schedules to this Agreement and other documents contemplated
hereby, shall be given no force or effect. The parties specifically represent,
each to the others, that there are no additional or supplemental agreements
between them related in any way to the matters contained in this Agreement
unless specifically included or referred to in this Agreement or in the
Schedules hereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party unless made in writing and signed by
all parties.
Section XII.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. THE PARTIES
AGREE THAT JURISDICTION AND VENUE WITH RESPECT TO ANY LAWSUIT BETWEEN OR AMONG
THE PARTIES INVOLVING THE INTERPRETATION, COMPLIANCE OR ENFORCEMENT OF ANY
PROVISION UNDER THIS AGREEMENT SHALL BE EXCLUSIVELY IN THE FEDERAL COURTS
LOCATED IN THE DISTRICT OF DELAWARE.
53
Section XII.5 Non-Survival of Representations, Warranties and Agreements.
----------------------------------------------------------
The representations, warranties and agreements in this Agreement shall terminate
on the Preliminary Exchange Closing Date and the Effective Date or upon the
termination of this Agreement pursuant to Article XI, as the case may be, except
that the agreements set forth in Sections 1.3, 1.5, 1.6, 1.7, 2.6, 2.7, 3.2,
7.6, 7.7, 7.9, 7.13, 7.14, 7.15, 7.16, 10.1 and this Section 12.5, and the
representation set forth in Section 4A.5, shall survive the Preliminary Exchange
Closing Date, the Effective Date, and the Final Exchange Closing Date
indefinitely and those set forth in Section 7.7 shall survive termination
indefinitely.
Section XII.6 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
Section XII.7 Headings. Headings of the Articles and Sections of this
--------
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section XII.8 Waivers. Any party hereto, may, by written notice to the
-------
other parties, (i) extend the time for the performance of any of the obligations
or other actions of the other parties under this Agreement; (ii) waive any
inaccuracies in the representations or warranties of the other parties contained
in this Agreement or in any document delivered pursuant to this Agreement; (iii)
waive compliance with any of. the conditions or covenants of the other parties
contained in this Agreement; or (iv) waive performance of any of the obligations
of the other parties 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 hereunder
shall not operate or be construed as a waiver of any prior or subsequent breach
of the same or any other provision hereunder.
Section XII.9 Merger of Documents. This Agreement and all agreements and
-------------------
documents contemplated hereby constitute one agreement and are interdependent
upon each other in all respects.
Section XII.10 Incorporation of Schedules. All Exhibits and Schedules
--------------------------
attached to this Agreement are by this reference incorporated herein and made a
part of this Agreement for all purposes as if fully set forth herein.
Section XII.11 Assignability. Neither this Agreement nor any of the
-------------
parties' rights hereunder shall be assignable without the prior written consent
of the other parties.
Section XII.12 Severability. If for any reason whatsoever, any one or more
------------
of the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid as applied to any particular case or in all cases, such
circumstances shall not have the effect of rendering such provision invalid in
any other case or of rendering any of the other provisions of this Agreement
inoperative, unenforceable or invalid.
54
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year hereinabove first
set forth.
COMPUTONE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
----------------------------
Title: Chairman
---------------------------
XXXXX COMMUNICATIONS TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
----------------------------
Title: Chairman
---------------------------
NEW COMPUTONE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
----------------------------
Title: Chairman
---------------------------
XXXXX, L.L.C.
By: Xxxxx, Corporation,
its Managing Member
By:
------------------------------
Xxxx X. Xxxxxxxx, President
MEMBERS:
/s/ Xxxxxxx Xxxxx
------------------------------------
Xxxxxxx Xxxxx
55
XXXXX INVESTMENT TRUST
By:
------------------------------------
Name:
----------------------------
Title:
---------------------------
---------------------------------------
Xxxxxxx Xxxxx
---------------------------------------
Xxxxxxxx Xxxxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx
---------------------------------------
W. Xxxxxxx Xxxxx
---------------------------------------
Xxxxx Xxxx
XXXXX, CORPORATION
By:
------------------------------------
Xxxx X. Xxxxxxxx, President
THE XXXXX NOMINEE TRUST
By:
------------------------------------
Name:
----------------------------
Title:
---------------------------
---------------------------------------
Xxxxx X. Xxxxxx
56
-----------------------------
Xxxxxx Xxxx
-----------------------------
Xxx Xxxx
-----------------------------
Xxxxxx Xxxxxxx
-----------------------------
Xxxxx X. Xxxxxxx
-----------------------------
F. Xxxxxx XxXxxxxxx
-----------------------------
Xxxxxxxxx Xxxxxx
-----------------------------
Xxxx Xxxxxxx
-----------------------------
Xxxxxxx Xxxxxxxxx
-----------------------------
Xxxxxxx Xxxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxxxx
-----------------------------
Xxxxxxx Xxxxxxxx
57
-------------------------------
Xxxxxxx Xxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxx
-------------------------------
Xxxxx Xxxxxxxx
-------------------------------
Xxxxxxx Xxxxx
58
SCHEDULE A
Xxxxx Members
-------------
-------------------------------------------------------------------------
PERCENTAGE
NAME MEMBERSHIP INTEREST
-------------------------------------------------------------------------
The Xxxxx Nominee Trust 61.186366%
-------------------------------------------------------------------------
Xxxxxxx Xxxxx 9.218798%
-------------------------------------------------------------------------
Xxxx X. Xxxxxxxx 7.923002%
-------------------------------------------------------------------------
Xxxxxxx Xxxxx 4.500000%
-------------------------------------------------------------------------
Xxxxx Investment Trust 2.867701%
-------------------------------------------------------------------------
Xxxxxxxxx Xxxxxx 1.874643%
-------------------------------------------------------------------------
Xxxxx X. Xxxxxxx 1.854489%
-------------------------------------------------------------------------
W. Xxxxxxx Xxxxx 1.836319%
-------------------------------------------------------------------------
Xxxxxxx Xxxxxxxxx 1.090984%
-------------------------------------------------------------------------
Xxxxx Xxxxxxxx 0.946058%
-------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 0.789818%
-------------------------------------------------------------------------
Xxxxx, Corporation 0.789818%
-------------------------------------------------------------------------
Xxx Xxxx 0.771948%
-------------------------------------------------------------------------
Xxxx Xxxxxxx 0.665603%
-------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxxx 0.665603%
-------------------------------------------------------------------------
Xxxxxxxx Xxxxxxxxx 0.638073%
-------------------------------------------------------------------------
Xxxxxxx Xxxxxxx 0.479440%
-------------------------------------------------------------------------
Xxxxx X. Xxxxxx 0.437220%
-------------------------------------------------------------------------
F. Xxxxxx XxXxxxxxx 0.404105%
-------------------------------------------------------------------------
Xxxxxx Xxxxxxx 0.394909%
-------------------------------------------------------------------------
Xxxxxxx Xxxxx 0.239720%
-------------------------------------------------------------------------
Xxxxxxx and Xxxxxxx Xxxxxxxx 0.212691%
-------------------------------------------------------------------------
59
-------------------------------------------------------------------------
Xxxxx Xxxx 0.106345%
-------------------------------------------------------------------------
Xxxxxx Xxxx 0.106345%
-------------------------------------------------------------------------
Total 100.000000%
-------------------------------------------------------------------------
SCHEDULE B
Xxxxx Disclosure Schedule
-------------------------
60
SCHEDULE C
Computone Disclosure Schedule
-----------------------------
61
SCHEDULE X
Xxxxx Employees to Sign Employment Contracts
--------------------------------------------
Xxxxxxx Xxxxx
Xxxx X. Xxxxxxxx
62
SCHEDULE E
Members' Addresses
------------------
-----------------------------------------------------------------------------
MEMBER ADDRESS
-----------------------------------------------------------------------------
Xxxxx, Xxxxxxx X. 0000 Xxxxxx Xxxxxx
and Xxxxx Investment Trust Xxxxx, XX 00000
-----------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
-----------------------------------------------------------------------------
Xxxxxx, Xxxxxx X. 000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
-----------------------------------------------------------------------------
Xxxxx, W. Xxxxxxx Xxxxxxx & Xxxxx
00 Xxxx Xxxxxx
Xxxxxx, XX 00000
-----------------------------------------------------------------------------
Xxxx, Xxxxx 00 Xxxxxxxx - 00xx Xxxxx
Xxx Xxxx, XX 00000
-----------------------------------------------------------------------------
Xxxxx Nominee Trust Xxxxx, Corporation
c/o Xxxx Xxxxxxxx, President
000 Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
-----------------------------------------------------------------------------
Xxxxx, Corporation c/o Xxxx Xxxxxxxx, President
000 Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
-----------------------------------------------------------------------------
Xxxxxx, Xxxxx X. 000 Xxx Xxxxxxx
Xxxx, XX 00000
-----------------------------------------------------------------------------
Xxxx, Xxxxxx 0000 Xxxxx Xxxx Xxxx
Xxxx Xxxx Xxx, XX 00000
-----------------------------------------------------------------------------
Xxxx, Xxxxxxx X.X. Xxx 00
Xxxxxxx, XX 00000
-----------------------------------------------------------------------------
Xxxxx, Xxxxxxx 00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
-----------------------------------------------------------------------------
Xxxxxxx, Xxxxxx X. 00 Xxxx Xxxx
Xxxxxxxxx, XX 00000
-----------------------------------------------------------------------------
63
-------------------------------------------------------------------------------
Maselan, Xxxxx X. Xxxxxxx & Xxxxx
00 Xxxx Xxxxxx
Xxxxxx, XX 00000
-------------------------------------------------------------------------------
XxXxxxxxx, X. Xxxxxx 000 Xxxxxxxxx Xxx., X.X.
Xx. Xxxxxxxxxx, XX 00000
-------------------------------------------------------------------------------
Xxxxxx, Xxxxxxxxx x/x Xxxxx, Xxxxxxxxxxx
00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
-------------------------------------------------------------------------------
Xxxxxxx, Xxxx 00 Xxxxxxxx Xxxx
Xxxx Xxxxxx, XX 00000
-------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxxx 00 Xxxxxxxxx Xxxxxx
Xxxxx, XX 00000
-------------------------------------------------------------------------------
Xxxxxxx, Xxxxxxx Xxxxxxx Xxxxxxx & Associates
0000 00xx Xxxxxx, XX
Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
-------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxxx x/x Xxxxx, Xxxxxxxxxxx
00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
-------------------------------------------------------------------------------
Xxxxxxxxx, Xxxxxxx & Xxxxxxx New Horizons Club
X.X. Xxx 00
Xxxxxx, XX 00000
-------------------------------------------------------------------------------
Xxxxxxxx, Xxxx X. 000 Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
-------------------------------------------------------------------------------
Xxxxxxxx, Xxxxx x/x Xxxxx, Xxxxxxxxxxx
00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
-------------------------------------------------------------------------------
Xxxxx, Xxxxxxx 0000 Xxxx Xxxxxxxx Xxxx
Xxxxx, XX 00000
-------------------------------------------------------------------------------
64
