AGREEMENT OF MERGER
AMONG
METRO-TEL CORP.,
METRO-TEL ACQUISITION CORP.,
XXXXXXX-ATLANTIC CORP.,
XXXXXXX XXXXXXX and
XXXXXXX X. XXXXXXX
Dated as of July 1, 1998
TABLE OF CONTENTS
Page
INTRODUCTION...............................................................1
RECITALS...................................................................1
ARTICLE 1: THE MERGER......................................................1
1.1 Merger............................................................1
1.2 Continuing Corporate Existence....................................1
1.3 Effective Date....................................................2
1.4 Corporate Government..............................................2
1.5 Rights And Liabilities of The Surviving Corporation...............2
1.6 Closing...........................................................3
1.7 Tax Consequences..................................................3
ARTICLE 2: CONVERSION OF SHARES; TREATMENT OF OPTIONS......................3
2.1 Conversion of Shares..............................................3
2.2 Additional Shares to be Issued....................................4
2.3 Fractional Shares.................................................4
2.4 Stock Options.....................................................4
2.5 Adjustment........................................................4
ARTICLE 3: REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................5
3.1 Organization And Good Standing of The Company.....................5
3.2 Capitalization of The Company.....................................5
3.3 Due Authorization; Binding Effect.................................5
3.4 Capital Stock of Company Subsidiaries And Other Ownership
Interests........................................................6
3.5 Corporate Power And Authority.....................................6
3.6 Absence of Restrictions And Conflicts.............................6
3.7 Financial Statements And Records of The Company...................7
3.8 No Material Undisclosed Liabilities...............................7
3.9 Absence of Certain Changes........................................7
3.10 Tax Returns; Taxes................................................9
3.11 Title, Condition of Assets.......................................10
3.12 Intellectual Property............................................12
3.13 Contracts........................................................12
3.14 Licenses and Permits.............................................13
3.15 Compliance With Laws.............................................14
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3.16 Insurance And Surety Agreements..................................14
3.17 Relationships....................................................14
3.18 Employee Benefit Plans...........................................15
3.19 Labor Relations..................................................16
3.20 Environmental Matters............................................16
3.21 Questionable Payments............................................17
3.22 Brokers And Finders..............................................17
3.23 Accuracy of Information Furnished................................17
ARTICLE 4: REPRESENTATIONS AND WARRANTIES OF PARENT.......................17
4.1 Organization And Good Standing of Parent.........................17
4.2 Capitalization of Parent.........................................17
4.3 Due Authorization, Binding Effect................................18
4.4 Capital Stock of Company Subsidiaries and Other Ownership
Interests........................................................18
4.5 Corporate Power and Authority....................................18
4.6 Absence of Restrictions and Conflicts............................19
4.7 Parent SEC Reports...............................................19
4.8 Financial Statements and Record of Parent........................20
4.9 No Material Undisclosed Liabilities..............................20
4.10 Absence of Certain Changes.......................................20
4.11 Tax Returns; Taxes...............................................22
4.12 Title, Condition of Assets.......................................23
4.13 Intellectual Property............................................24
4.14 Contracts........................................................24
4.15 Licenses and Permits.............................................25
4.16 Insurance and Surety Agreements..................................26
4.17 Relationships....................................................26
4.18 Employee Benefit Plans...........................................26
4.19 Labor Relations..................................................27
4.20 Questionable Payments............................................28
4.21 Brokers and Finders..............................................28
4.22 Compliance with Laws.............................................28
4.23 Accuracy of Information Furnished................................28
ARTICLE 5: COVENANTS OF THE COMPANY AND PARENT............................29
5.1 Notice of Any Material Change....................................29
5.2 Cooperation......................................................29
5.3 Public Disclosure................................................29
5.4 Submission to Parent Shareholders................................30
5.5 Proxy Statement..................................................30
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ARTICLE 6: COVENANTS OF THE COMPANY AND AGREEMENT
SHAREHOLDERS..........................................30
6.1 Access...........................................................30
6.2 Conduct of Business Prior to Closing Date........................31
6.3 Shareholder Approval.............................................32
6.4 No Solicitations.................................................32
6.5 Best Efforts.....................................................33
ARTICLE 7: COVENANTS OF PARENT ...........................................33
7.1 Access...........................................................33
7.2 Conduct of Business Prior to Closing Date........................33
7.3 No Solicitations.................................................35
7.4 Tax Certifications...............................................34
7.5 Best Efforts.....................................................35
ARTICLE 8: SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNITY.............................................35
8.1 Survival.........................................................35
8.2 Indemnification..................................................36
ARTICLE 9: CONDITIONS PRECEDENT...........................................36
9.1 Conditions to Each Party's Obligations...........................36
9.2 Conditions to Obligations of The Company.........................37
9.3 Conditions to Obligations of Parent..............................38
ARTICLE 10: REGISTRATION RIGHTS...........................................39
10.1 Demand Registration Rights for Registrable Securities: Filing of
Registration Statement...........................................39
10.2 Piggyback Registrations..........................................40
10.3 Expenses of Registration.........................................40
10.4 Furnishing of Documents..........................................41
10.5 Amendments and Supplements.......................................41
10.6 Duration.........................................................41
10.7 Further Information..............................................41
10.8 Indemnification..................................................42
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ARTICLE 11: MISCELLANEOUS.................................................43
11.1 Termination......................................................43
11.2 Expenses.........................................................44
11.3 Entire Agreement.................................................45
11.4 Counterparts.....................................................45
11.5 Notices..........................................................45
11.6 Successors And Assigns...........................................46
11.7 Governing Law....................................................46
11.8 Waiver And Other Action..........................................46
11.9 Severability.....................................................47
11.10 Section Headings.................................................47
11.11 Construction.....................................................47
APPENDIX I................................................................A1
Articles of Merger........................................................A1
Amended and Restated Plan of Merger.......................................A2
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AGREEMENT OF MERGER
INTRODUCTION
This Agreement of Merger (the "Agreement") is made as of the
1st day of July, 1998, among Metro-Tel Corp., a Delaware corporation ("Parent");
Metro-Tel Acquisition Corp., a Florida corporation (the "Subsidiary"), which is
a wholly-owned direct subsidiary of Parent; Xxxxxxx-Atlantic Corp., a Florida
corporation ( the "Company"); and each of Xxxxxxx Xxxxxxx and Xxxxxxx X.
Xxxxxxx, sole shareholders of the company (each an "Agreement Shareholder" and,
collectively, the "Agreement Shareholders").
RECITALS
The respective Boards of Directors of the Parent and the Company, as
well as the Agreement Shareholders, have determined that it is in the best
interests of their respective corporations to cause the Subsidiary to merge into
the Company, all upon the terms and provisions, and subject to the conditions,
hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto covenant and agree as follows:
ARTICLE 1
THE MERGER
1.1 MERGER. In accordance with the provisions of the Florida
Business Corporation Act ("FBCA"), at the Effective Date (as hereinafter
defined), the Subsidiary shall be merged (the "Merger") into the Company, and
the Company shall be the surviving corporation (from and after the Effective
Date, as defined in Section 1.3, the "Surviving Corporation") and as such shall
continue to be governed by the laws of the State of Florida.
1.2 CONTINUING CORPORATE EXISTENCE. Except as may otherwise be
set forth herein, the corporate existence and identity of the Company, with all
its purposes, powers, rights, privileges, immunities and franchises, shall
continue unaffected and unimpaired by the Merger, and the corporate existence
and identity of the Subsidiary, with all its purposes, powers, rights,
privileges, immunities and franchises, at the Effective Date, shall be merged
with and into that of the Company, and the Surviving Corporation shall be vested
fully therewith and the separate corporate existence and identity of the
Subsidiary shall thereafter cease except to the extent continued by statute.
1.3 EFFECTIVE DATE. The Merger shall become effective upon the
filing of Articles of Merger and Amended and Restated Plan of Merger attached
hereto as Appendix I with the Department of State of the State of Florida
("Department of State") on the Closing Date (as defined herein) or as soon as
thereafter practicable pursuant to Section 607.1105 of the FBCA (the "Effective
Date").
1.4 CORPORATE GOVERNMENT.
(a) The Articles of Incorporation of the Company, as in
effect on the Effective Date, shall continue in full force and effect, and shall
be the Articles of Incorporation of the Surviving Corporation.
(b) The Bylaws of the Company, as in effect as of the
Effective Date, shall continue in full force and effect and shall be the Bylaws
of the Surviving Corporation.
(c) From and after the Effective Date, Xxxxxxx X. Xxxxxxx
shall be the President and Chief Executive Officer of the Surviving Corporation
and Parent, and Xxxxxxxxx X. Xxxxxxxxxx shall be the Chief Financial Officer of
the Surviving Corporation and Parent.
(d) At the Effective Time the Boards of Directors of the
Surviving Corporation and Parent shall (a) be set at five members, and (b)
consist of (i) three members to be designated by the Surviving Corporation prior
to the filing of the Proxy Statement referred to in Section 5.6 hereof, and (ii)
two members to be designated by Parent prior to the filing of such Proxy
Statement.
1.5 RIGHTS AND LIABILITIES OF THE SURVIVING CORPORATION. At
the Effective Date, the Surviving Corporation shall have the following rights
and obligations:
(a) The Surviving Corporation shall have all the purposes,
powers, rights, privileges, immunities and franchises, and shall be subject to
all the duties and liabilities, of a corporation organized under the laws of the
State of Florida.
(b) The Surviving Corporation shall possess all of the
purposes, powers, rights, privileges, immunities and franchises, of either a
public or private nature, of the Company and the Subsidiary, and all property,
real, personal and mixed, all debts due on whatever account, including
subscription to shares, all other chooses in action and every other interest of
or belonging or due to the Company and the Subsidiary shall be taken and deemed
to be transferred or vested in the Surviving Corporation without further act or
deed.
(c) The Surviving Corporation shall thenceforth be
responsible and liable for all liabilities and obligations of the Company and
the Subsidiary, and any claim existing or action or proceeding pending by or
against the Subsidiary or the Company may be prosecuted as if the Merger had not
occurred or the Surviving Corporation may be substituted in its place.
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Neither the rights of creditors nor any liens upon the property of the
Subsidiary or the Company shall be impaired by the Merger.
1.6 CLOSING. Consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Xxxxxxxxx
Xxxxxxx Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, P.A., commencing at 11:00 a.m., local
time, (i) within five (5) business days after the date on which the annual
meeting of Parent's Shareholders described in Section 6.3 (the "Annual Meeting")
occurs or (ii) as soon as possible thereafter when each of the other conditions
set forth in Article 9 have been satisfied or waived; and shall proceed promptly
to conclusion, or at such other place, time and date as shall be fixed by mutual
agreement between Parent and the Company. The day on which the Closing shall
occur is referred to herein as the "Closing Date". At the Closing, each party
will cause to be prepared, executed, delivered and filed with the Department of
State of the State of Florida Articles of Merger and all other appropriate and
customary documents as any party or its counsel may reasonably request for the
purpose of consummating the transactions contemplated by this Agreement. All
actions taken at the Closing shall be deemed to have been taken simultaneously
at the time the last of any such actions is taken or completed.
1.7 TAX CONSEQUENCES. It is intended that the merger shall
constitute a reorganization described in Sections 368(a)(1)(A) and 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code. The parties shall treat the transactions contemplated
hereby consistently with such intention.
ARTICLE 2
CONVERSION OF SHARES; TREATMENT OF OPTIONS
2.1 CONVERSION OF SHARES.
(a) As of the Effective Date, by virtue of the Merger and
without any action on the part of any holder thereof:
(i) Subject to Section 2.2 below, each of
the 339,500 shares of Common Stock, $.50 par value,
of the Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Date
shall be converted into 13.90561 shares of Common
Stock, $.25 par value, of Parent ("Parent Common
Stock");
(ii) Each share of Company Common Stock
issued and held immediately prior to the Effective
Date in the Company's treasury shall be cancelled and
retired
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without payment of any consideration therefor and
shall cease to exist; and
(iii) Each share of Common Stock, par value
$.001 per share, of the Subsidiary issued and
outstanding immediately prior to the Effective Date
shall be converted into one share of Common Stock,
par value $.001 per share, of the Surviving
Corporation.
2.2 ADDITIONAL SHARES TO BE ISSUED. As additional
consideration for the shares of Company Common Stock owned by the Agreement
Shareholders, if ISOs for less than 500,000 Shares are granted pursuant to
Section 2.4 of this Agreement, as of the Effective Date Parent shall deliver to
each of the Agreement Shareholders one-half of the number of Shares that,
together with the number of Shares covered by the ISOs granted pursuant to
Section 2.4 of this Agreement, aggregate 500,000 Shares.
2.3 FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of the Company Common Stock certificates, and notwithstanding anything
contained in Section 2.1 to the contrary, the number of shares of Parent Common
Stock to which each holder of Company Common Stock shall be entitled at the
Effective Time shall be rounded (up or down, as the case may be) to the closest
whole number of shares of Parent Common Stock.
2.4 STOCK OPTIONS. At the Closing, Parent shall deliver to the
Agreement Shareholders' designees, who shall be employees of the Company on the
Closing Date other than the Agreement Shareholders, Incentive Stock Options
("ISOs") under the Company's 1991 Stock Option Plan (as amended October 25,
1996) (the "Stock Option Plan"), effective as of the Effective Date, providing
for ISOs on shares of Parent Common Stock ("Shares"), at an exercise price of
the greater of (i) the fair market value per Share (as defined in paragraph 6 of
the Stock Option Plan) on the Closing Date or (ii) $1.00 per Share (the
"Exercise Price"), for the number of Shares that, multiplied by the Exercise
Price per Share, yields an aggregate Exercise Price of $500,000.
2.5 ADJUSTMENT. If, between the date of this Agreement and the
Effective Date the outstanding shares of Company Common Stock or Parent Common
Stock shall have been changed into a different number of shares or a different
class by reason of any stock dividend, split-up, stock combination, exchange of
shares, reclassification, readjustment or the like with a record date within
such period, the number of shares of Parent Common Stock issued pursuant to the
Merger and all other relevant amounts shall be adjusted to appropriately reflect
such change.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and
Subsidiary, subject to the terms and conditions contained herein, as follows:
3.1 ORGANIZATION AND GOOD STANDING OF THE COMPANY. The Company
is a corporation duly organized, validly existing and active under the laws of
the State of Florida.
3.2 CAPITALIZATION OF THE COMPANY.
(a) The authorized capital stock of the Company consists
of 600,000 shares of common stock, $.50 par value. As of the close of business
on June 30, 1998, there are 339,500 shares of Company Common Stock issued and
outstanding. There are no shares of Company Common Stock held in the Company's
treasury. All of the issued and outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights.
(b) Other than as set forth in Section 3.2(b) of the
Company's Disclosure Schedule, there are no voting trusts, shareholder
agreements or other voting arrangements to which the Company is a party or, to
the knowledge of the Company, to which any of the shareholders of the Company
are a party or bound.
(c) There is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call, put or other right
obligating the Company to issue, sell, exchange, or otherwise dispose of, or to
purchase, redeem or otherwise acquire, shares of, or securities convertible into
or exchangeable for, capital stock of the Company.
(d) Each Agreement Shareholder owns 50% of the Company's
issued and outstanding Company Common Stock.
3.3 DUE AUTHORIZATION; BINDING EFFECT. The Company has the
corporate power and authority to execute and deliver this Agreement and, subject
to the approval of this Agreement by its shareholders, to perform its
obligations under this Agreement and the other documents executed or to be
executed by the Company in connection with this Agreement. The execution,
delivery and performance by the Company of this Agreement and the other
documents executed or to be executed by Company in connection with this
Agreement and the Merger have been duly authorized by the Board of Directors of
the Company, and the Agreement Shareholders have committed to approve this
Agreement. This Agreement and the other documents which have been executed and
which will be executed by the Company in connection
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with this Agreement have been, or will have been when executed and delivered, as
the case may be, duly executed and delivered by the Company and are, or will be
when executed and delivered, the legal, valid and binding obligations of the
Company enforceable in accordance with their terms except that (a)
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights; (b) the availability of equitable
remedies may be limited by equitable principles of general applicability; and
(c) rights to indemnification and contribution may be limited by considerations
of public policy. Upon the filing of the Articles of Merger and the Amended and
Restated Plan of Merger, annexed hereto as Appendix I, with the Department of
State of the State of Florida, the Merger will be a valid and effective merger
under the FBCA. No shareholder of the Company is entitled to assert dissenter's
rights under Section 607.1302 of the FBCA. The transactions contemplated herein
do not constitute a "control-share acquisition" and are not otherwise subject to
the provisions of Section 607.0902 of the FBCA.
3.4 CAPITAL STOCK OF COMPANY SUBSIDIARIES AND OTHER OWNERSHIP
INTERESTS. The Company is not the record or beneficial owner of any equity
interest in any corporation, joint venture, partnership or other entity.
3.5 CORPORATE POWER AND AUTHORITY. The Company has the
corporate power and authority and all licenses and Governmental Permits (as
defined in Section 3.14) required by governmental authorities to own, lease and
operate their properties and assets and to carry on its business as currently
being conducted, except where the failure to have any such licenses and
Governmental Permits would not, individually or in the aggregate, have a
material adverse effect on the business, results of operation, working capital,
assets, liabilities, condition (financial or otherwise) or prospects of the
Company.
3.6 ABSENCE OF RESTRICTIONS AND CONFLICTS. Except as set forth
in Section 3.6 of the Disclosure Schedule, the execution, delivery and
performance of this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, subject only to the
approval of this Agreement by the Company's shareholders, violate or conflict
with, constitute a breach of or default under, result in the loss of any benefit
under or permit the acceleration of any obligation under (i) any term or
provision of the Articles of Incorporation or Bylaws of the Company, (ii) any
Contract (as defined in Section 3.13) or Governmental Permit (as defined in
Section 3.14) except where any such violations, conflicts, breaches, defaults,
losses of benefit or accelerations would not, individually or in the aggregate,
have a material adverse effect on the business, results of operation, working
capital, assets, liabilities, condition (financial or otherwise) or prospects of
the Company, (iii) any judgment, decree or order of any court or governmental
authority or agency to which the Company is a party or by which the Company or
any of its properties is bound, or (iv) any statute, law, regulation or rule
applicable to the Company except where any such violations, conflicts, breaches,
defaults, losses of benefit or accelerations would not, individually or in the
aggregate, have a material adverse effect on the business, results of operation,
working capital, assets, liabilities, condition (financial or otherwise) or
prospects of the
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Company. Except for compliance with the applicable requirements of the
Securities Act of 1933 (the "Securities Act"), the Securities Exchange Act of
1934 (the "Exchange Act"), and applicable state securities laws and the filing
of Articles of Merger with the Department of State, no consent, approval, order
or authorization of, or registration, declaration, except as set forth in
Section 3.6 of the Disclosure Schedule, or filing with, any governmental agency
or public or regulatory unit, agency, body or authority (under any Governmental
Permit or otherwise) or any third party (under any contract or otherwise) is
required in connection with the execution, delivery or performance of this
Agreement by the Company or the consummation of the transactions contemplated
hereby or the ownership and operation by the Surviving Corporation of its
businesses and properties after the Effective Date in substantially the same
manner as now owned and operated.
3.7 FINANCIAL STATEMENTS AND RECORDS OF THE COMPANY. The
Company has delivered to Parent and the Subsidiary true, correct and complete
copies of the balance sheets of the Company as of December 31, 1997 (the
"Company Balance Sheet") and December 31, 1996 and the statements of income and
undistributed shareholders' earnings, and statements of cash flows of the
Company for the fiscal years then ended, including the notes thereto, in each
case examined by and accompanied by the report thereon of BDO Xxxxxxx, LLP. (the
"Company Financial Statements"). The Company Financial Statements have been
prepared from, and are in accordance with, the books and records of the Company
and present fairly, in all material respects, the assets, liabilities and
financial position of the Company as of the dates thereof, and its results of
operations and changes in financial position for the periods then ended, in each
case in conformity with generally accepted accounting principles, consistently
applied, except as noted therein. Since December 31, 1997, there has been no
change in accounting principles applicable to, or methods of accounting utilized
by, the Company. The books and records of the Company have been and are being
maintained in accordance with good business practice, reflect only valid
transactions, are complete and correct in all material respects, and present
fairly in all material respects the basis for the financial position and results
of operations of the Company set forth in the Company Financial Statements.
3.8 NO MATERIAL UNDISCLOSED LIABILITIES. There are no material
liabilities or obligations of the Company of any nature, whether absolute,
accrued, contingent or otherwise, other than the liabilities and obligations
that are reflected, accrued, or reserved against on the Company Balance Sheet
(for which the reserves are appropriate and reasonable) and those incurred in
the ordinary course of business and consistent with past practices since
December 31, 1997.
3.9 ABSENCE OF CERTAIN CHANGES.
(a) Since December 31, 1997, the Company has operated in
the ordinary course of business and in a manner consistent with the manner in
which it operated prior to January 1, 1998. Without limiting the generality of
the foregoing, the Company has not (except as may result from the transactions
contemplated by this Agreement or as set forth in Section 3.9(a) of the
Company's Disclosure Schedule) to any material extent:
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(i) suffered any material adverse change in
its business, results of operations, working capital,
assets, liabilities, condition (financial or
otherwise), prospects or the manner of conducting its
business;
(ii) suffered any damage or destruction to,
or loss of, assets, whether or not covered by
insurance, which property or assets are material to
the operations or business of the Company;
(iii) forgiven, compromised, canceled,
released, waived or permitted to lapse any material
rights or claims;
(iv) entered into or terminated any
agreement, commitment or transaction, or agreed to
make any changes in any leases or agreements, other
than leases, agreements, transactions and commitments
entered into in the ordinary course of business;
(v) written up, written down or written off
the book value of any material amount of assets other
than in the ordinary course of business;
(vi) declared, paid or set aside for payment
any dividend or distribution with respect to the
Company's capital stock;
(vii) redeemed, purchased or otherwise
acquired, or sold or granted or otherwise disposed
of, directly or indirectly, any of the Company's
capital stock or securities or any rights to acquire
such capital stock or securities which are
outstanding as of the date of this Agreement;
(viii) failed to pay or discharge when due
any liabilities, the failure to pay or discharge
which will have, individually or in the aggregate, a
material adverse effect on the business, working
capital, assets, liabilities, condition (financial or
otherwise) or prospects of the Company;
(ix) encumbered assets, purchased or sold
any assets outside the ordinary course of business or
made any material capital expenditure;
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(x) entered into any employment, consulting,
compensation or collective bargaining agreement with
any person or group;
(xi) entered into, adopted or amended any
employee benefit plan;
(xii) entered into any other transaction
other than in the ordinary course of business; or
(xiii) entered into any agreement to do any
of the foregoing.
(b) The Company is not aware of any pending or
contemplated legislation or changes in rules, regulations or administrative
orders which, if enacted or implemented, would, individually or in the
aggregate, have a material adverse effect on the business, results of
operations, working capital, assets, liabilities, condition (financial or
otherwise) or prospects of the Company.
3.10 TAX RETURNS; TAXES.
(a) The Company has duly filed or caused to be filed on a
timely basis (giving effect to properly obtained extensions of time) with the
appropriate authorities all Tax Returns (as defined below) required to be filed
by it and all such Tax Returns are true, correct and complete in all material
respects; has paid in full on a timely basis all Taxes (as defined below)
required to be paid; and has fully accrued on its books or has established
adequate reserves on its latest balance sheet (a true and correct copy of which
has been provided to Parent), prepared in accordance with generally accepted
accounting principles consistently applied, for all Taxes which have accrued but
not are yet due; and has timely and properly collected or withheld, paid over
and reported to the appropriate governmental authorities all Taxes required to
have been collected or withheld by it. The Company has no tax liabilities other
than those reflected on the Company Financial Statements and those arising in
the ordinary course of business since the date thereof. The Company has made
available to Parent true, complete and correct copies of the Company's federal
income tax and other Tax Returns filed by it.
(b) No Taxing authority has asserted any adjustment that
could result in an additional Tax for which the Company is or may be liable;
there is no pending audit, examination, investigation, dispute, proceeding or
claim (collectively, "Proceeding") relating to any Tax for which the Company is
or may be liable and, to the knowledge of the Company, no Taxing authority is
contemplating such a Proceeding; no statute of limitations with respect to any
Tax for which the Company or is or may be liable has been waived or extended;
and the Company is not a party or subject to any Tax sharing or any Tax
allocation agreement, arrangement or understanding.
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(c) The Company is not a "consenting corporation" within
the meaning of Section 341(f) of the Code (or any comparable state, local or
foreign Tax provision). The Company is not a party to any contract, agreement,
plan or arrangement that, individually or collectively, could give rise to any
payment that would not be deductible by reason of Section 162, 280G or 404 of
the Code (or any comparable state, local or foreign Tax provision). The Company
does not have any "tax-exempt use property" within the meaning of Section 168(h)
of the Code (or any comparable state, local or foreign Tax provision). The
Company has never made or been required to make an election under Section 338 of
the Code (or any comparable state, local or for eign Tax provision).
(d) The Company is not, and was not at any time during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code and the regulations thereunder.
(e) For purposes of this Agreement, "Tax" shall mean any
tax, fee, levy, assessment or other governmental charge imposed by the United
States, any state, local or foreign government or subdivision or agency of any
of the foregoing, including without limitation, any income, franchise, gross
receipts, property, sales, use, service, value added, withholding, social
security, estimated, accumulated earnings, transfer, license, privilege,
payroll, profits, capital stock, employment, unemployment, excise, ad valorem,
severance, stamp, occupancy, customs or occupation tax for which the taxpayer is
or may be liable, including without limitation, as a member of a consolidated
group pursuant to Treasury Regulation ss.1.1502-6 (or any comparable state,
local or foreign Tax provision), as a transferee under Section 6901 of the Code
(or any comparable state, local or foreign Tax provision) or under any Tax
sharing or Tax allocation agreement, arrangement or understanding.
(f) For purposes of this Agreement, "Tax Returns" shall
mean all returns, amended returns, declarations, reports, estimates, information
returns and statements relating to Taxes which are or were filed or required to
be filed under applicable law, whether on a consolidated, combined, unitary or
separate basis or otherwise.
3.11 TITLE, CONDITION OF ASSETS.
(a) The Company has good and marketable title to all of
the Assets (as hereinafter defined) reflected on the Company Balance Sheet, and
all Assets thereafter acquired by it (except for Assets disposed of by it in the
ordinary course of business). All such Assets are used in connection with the
operation of the businesses of the Company. Except as set forth in Section
3.11(a) of the Disclosure Schedule, the Assets are subject to no mortgage,
security interest, pledge, lien, claim, encumbrance or charge, or restraint or
transfer whatsoever other than Permitted Liens (as hereinafter defined) and no
currently effective financing statement with respect to any of its Assets has
been filed under the Uniform Commercial Code in any jurisdiction. Section
3.11(a) of the Disclosure Schedule sets forth a description of the indebtedness
secured by the financing statements listed thereon, including the principal
balance of such indebtedness and
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accrued but unpaid interest thereon as at December 31, 1997 and interest rate
applicable thereto. Except with respect to the constituent instruments
underlying the financing statements listed in Section 3.11(a) of the Disclosure
Schedule, the Company is not a party to any financing statement or any security
agreement authorizing any secured party thereunder to file any financing
statement. No person other than the Company has any right to the use or
possession of any of the Assets. All Assets which are real property or tangible
personal property, whether owned or leased, are in good operating condition and
repair, excepting normal wear and tear, and are sufficient to enable the Company
to operate its business in a manner consistent with its operation during the
immediately preceding twelve (12) months.
(b) Set forth on Section 3.11(b) of the Disclosure
Schedule is a true and correct list of leases, conditional sales, licenses or
similar arrangements to which the Company is a party or to which the Company or
any Asset used by the Company in connection with the operation of its business
is subject. The Company has delivered to Parent a complete and correct copy of
each lease, conditional sale, license and other arrangement listed in Section
3.11(b) of the Disclosure Schedule. All of said arrangements are valid, binding
and enforceable in accordance with their respective terms and are in full force
and effect. The Company is not in default under one or more of such
arrangements, except to the extent such defaults would not, individually or in
the aggregate, have a material adverse effect on the business, results of
operations, working capital, assets, liabilities, condition (financial or
otherwise) or prospects of the Company and has not received any written notice
alleging any default, set-off, or claim of default. To the knowledge of the
Company, the parties to such arrangements are not in default of their respective
obligations under any of such arrangements, and there has not occurred any event
which, with the passage of time or giving of notice (or both), would constitute
such a default or breach under any of such arrangements.
(c) As used herein, the term "Assets" means all tangible
and intangible assets including, without limitation, all real property, tangible
personal property (including, without limitation, fixed and moveable equipment,
trucks, cars and other vehicles, furnishings, inventory and supplies), contract
rights, leasehold interests, goodwill, tradenames, trademarks, and, to the
extent permitted by law, all permits, licenses and other governmental approvals.
(d) As used herein, the term "Permitted Liens" means:
(i) carriers', warehousemen's, mechanics,
materialmen's, repairmen's or other like liens
arising in the ordinary course of business which are
(i) not overdue for a period of more than 30 days or
(ii) being contested in good faith and by appropriate
proceedings, provided that if such contest has
continued for more than 30 days, the amount thereof
has been bonded at the end of such 30-day period;
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(ii) deposits to secure the performance of
bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations
of like nature incurred in the ordinary course of
business;
(iii) rights of lessors under leases set
forth in Section 3.11(b) of the Disclosure Schedule;
(iv) pledges or deposits in connection with
worker's compensation, unemployment insurance, and
other social security legislation; and
(v) liens for Taxes not yet due and payable.
3.12 INTELLECTUAL PROPERTY. Except as set forth in Section
3.12 of the Disclosure Schedule, the Company has no permits, licenses and
registrations granted to or by the Company (including applications therefor) for
the use of: its corporate name, any trade or service xxxx, copyright, patent,
process, operational manual, technique and similar property by the Company
(collectively, the "Proprietary Assets"). The Company owns all of the
Proprietary Assets necessary to operate its business. No claim has been asserted
by any person challenging the validity of any Proprietary Asset or the use
thereof by the Company. The Proprietary Assets used by the Company in its
operations may continue to be used by the Surviving Corporation without the
consent of, or payment of consideration to, any other person.
3.13 CONTRACTS. To the knowledge of the Company, Section 3.13
of the Disclosure Schedule contains a complete and correct list of all of the
following categories of material agreements, contracts, arrangements and
commitments ("Contracts"), including summaries of oral contracts (except
immaterial oral contracts terminable at will), to which the Company is bound,
including, without limitation:
(a) each contract or agreement for the employment or
retention of, or collective bargaining, severance or termination agreement with,
any director, officer, employee, consultant, agent, employee or group of
employees;
(b) each profit sharing, thrift, bonus, incentive,
deferred compensation, stock option, stock purchase, severance pay, pension,
retirement, hospitalization, insurance or other similar plan, agreement or
arrangement;
(c) each agreement or arrangement (including letter of
intent) for the purchase or sale of any assets, properties or rights outside the
ordinary course of business (by purchase or sale of assets, purchase or sale of
capital stock, merger or otherwise) which is currently in effect;
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(d) each contract which contains any provisions requiring
the Company to indemnify or act for, or guarantee the obligation of, any other
person or entity;
(e) each agreement restricting the Company from conducting
business of any nature anywhere in the world;
(f) each partnership or joint venture contract or similar
arrangement or agreement which is likely to involve a sharing of profits or
future payments with respect to the business (or any portion thereof) of the
Company;
(g) each lease, license, conditional sales contract or
similar arrangement for real or personal property or any Proprietary Asset; and
(h) each other agreement not made in the ordinary and
normal course of business which involves consideration of more than $15,000; and
(i) each letter of intent or agreement in principle to
enter into any Contract (whether or not binding, in whole or in part).
True, correct and complete copies of each Contract have been
provided or made available to Parent and, except as provided in Section 3.13 of
the Disclosure Schedule, each remains in full force and effect in accordance
with the copies provided to Parent. Each of the Contracts was entered into and
requires performance only in the ordinary course of business. The Company is not
in material default under any Contract and no default or right of set-off has
been asserted, either by or against the Company under any Contract. To the
knowledge of the Company, the parties to the Contracts, other than the Company,
are not in material default of any of their respective obligations under the
Contracts, and there has not occurred any event, which with the passage of time
or the giving of notice (or both), would constitute a material default or breach
under any Contract. All amounts payable by the Company under the Contracts are
on a current basis. No Contract is terminable nor requires a payment in the
event of the Merger or a change in control of the Company.
3.14 LICENSES AND PERMITS. Section 3.14 of the Disclosure
Schedule sets forth a description of all material licenses and other material
governmental or other regulatory permits, approvals and authorizations required
for the operation of the business of the Company to: (a) provide the services
which the Company is providing or the Company in the past has provided, (b) own
or hold under lease the properties and Assets it owns or holds under lease and
(c) perform all of its obligations under Contracts to which it is a party or
subject (collectively, the "Governmental Permits"). The Company has delivered to
Parent copies of all of the Governmental Permits. The Company owns, possesses or
has the legal right to use the Governmental Permits, free and clear of all
liens, pledges, claims or other encumbrances of any nature whatsoever. The
Company has obtained and possesses (and during all periods in which it has
provided services and conducted business possessed), in good standing, all
Governmental Permits required by applicable
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governmental authorities in order to perform such services and conduct such
businesses except where failure to have such Governmental Permits in good
standing would not, individually or in the aggregate, have a material adverse
effect on the business, working capital, results of operation, assets,
liabilities, condition (financial or otherwise) or prospects of the Company. The
Company is not in material default under any Governmental Permits, and the
Company has not received any notice of any default or any other claim or
proceeding relating to, any such Governmental Permits.
3.15 COMPLIANCE WITH LAWS. The Company has been in compliance
with all applicable laws, regulations, ordinances and administrative orders of
any jurisdiction to which it or its business or its use or occupancy of
properties or any part thereof are subject, except where the failure to be in
compliance would not, individually or in the aggregate, have a material adverse
effect on the business, results of operation, working capital, assets,
liabilities, condition (financial or otherwise) or prospects of the Company.
Except as set forth in Section 3.15 of the Disclosure Schedule, there is no
pending material suit, claim, action or litigation, or administrative,
arbitration or other proceeding or governmental investigation or inquiry, nor,
to the knowledge of the Com pany, are any such proceedings, investigations or
inquiries, threatened or contemplated nor (ii) are there any unasserted claims
(whether or not the potential claimant may be aware of the claim) of any nature
that might be asserted against the Company. Except as set forth in Schedule 3.15
of the Disclosure Schedule, the Company is not subject to any judgment, decree,
injunction or order of any court or any governmental restriction.
3.16 INSURANCE AND SURETY AGREEMENTS. Section 3.16 of the
Disclosure Schedule contains a complete and correct list of: (a) all policies of
malpractice, fire, liability and other forms of insurance held or owned by the
Company; and (b) all bonds, indemnity agreements and other agreements of
suretyship made for or held by the Company, including a brief description of the
character of the bond or agreement and the name of the surety or indemnifying
party. Section 3.16 of the Disclosure Schedule sets forth for each such
insurance policy the name of the insurer, the amount of coverage, the type of
insurance included under each such policy and of any claims made thereunder.
Such policies are owned by and payable solely to the Company, and said policies
or renewals or replacements thereof are outstanding and duly in force. All
insurance policies maintained by the Company is in full force and effect, all
premiums due on such policies have been paid, and the Company has not been
advised by any of its insurance carriers of an intention to terminate or modify
any such policies, nor has the Company failed to comply with any of the material
conditions contained in any such policies.
3.17 RELATIONSHIPS.
(a) Except as disclosed in Section 3.17 of the Disclosure
Schedule, no Agreement Shareholder, or affiliate of the Company has, or at any
time within the last two (2) years has had, an ownership interest in any
business, corporate or otherwise, that is a party to, or in any property that is
the subject of, any business relationship or arrangement of any kind relating to
the operation or business of, or which may be binding upon, the Company or its
Assets.
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(b) Section 3.17 of the Disclosure Schedule contains a
complete and correct list of all persons known by the Company to be affiliates
of the Company.
3.18 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 3.18 of the Disclosure
Schedule, there are no employee benefit plans (including previously-maintained
plans) or arrangements of any type (including, without limitation, plans
described in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended and the regulations thereunder ("ERISA")), under which the
Company has or in the future could have directly, or indirectly through a
Commonly Controlled Entity (within the meaning of section 414(b), (c), (m) and
(o) of the Internal Revenue Code of 1986, as amended and the regulations
thereunder ("Code")), any liability with respect to any current or former
employee of the Company or any Commonly Controlled Entity (collectively, the
"Benefit Plans"). No such Benefit Plan is "multiple employer plan" (within the
meaning of the Code or ERISA) or subject to Title IV of ERISA.
(b) With respect to each Benefit Plan (where applicable):
the Company has delivered to the Parent complete and accurate copies of (i) all
plan texts and agreements; (ii) all material employee communications; (iii) the
most recent annual report; (iv) the most recent annual and periodic accounting
of plan assets; (v) the most recent determination letter received from the
Internal Revenue Service; and (vi) the most recent actuarial valuation.
(c) With respect to each Benefit Plan: (i) if intended to
qualify under Code section 401(a) or 403(a), such Benefit Plan so qualifies, and
its related trust is exempt from taxation under Code section 501(a); (ii) such
Benefit Plan has been administered in accordance with its terms and applicable
law; (iii) no event has occurred and there exists no circumstance under which
the Company could directly, or indirectly through a Commonly Controlled Entity,
incur liability under ERISA, the Code or otherwise (other than routine claims
for benefits); (iv) there are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Company, threatened,
with respect to any Benefit Plan or against the assets of any Benefit Plan; (v)
no "accumulated funding deficiency" (as defined in section 302 of ERISA) has
occurred; (vi) no "prohibited transaction" (as defined in section 406 of ERISA
or in section 4975 of the Code) has occurred; (vii) no "reportable event" (as
defined n section 4043 of ERISA) has occurred; (viii) all contributions and
premiums due have been made on a timely basis; and (ix) all contributions made
or required to be made under any Benefit Plan meet the requirements for
deductibility under the Code, and all contributions which have not been made
have been properly recorded on the books of the Company or the applicable
Commonly Controlled Entity.
(d) With respect to each Benefit Plan which is a "welfare
plan" (as defined in ERISA section 3(1)): (i) no such plan provides medical or
death benefits (whether or not insured) with respect to current or former
employees beyond their termination of employment (other than coverage mandated
by law); (ii) there are no reserves, assets, surplus or prepaid
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premiums under any such plan; and (iii) the Company and any Commonly Controlled
Entity have complied with the requirements under Code section 4980B.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any individual to severance pay, or (ii)
accelerate the time of payment, vesting or increase the amount of compensation
due to any such individual.
3.19 LABOR RELATIONS. To the knowledge of the Company, the
Company is in compliance with all federal and state laws respecting employment
and employment practices, terms and conditions of employment, wages and hours,
and is not engaged in any unfair labor or unlawful employment practice. There is
no unlawful employment practice or discrimination charge pending or, to the
knowledge of the Company, threatened against the Company before the Equal
Employment Opportunity Commission or any other governmental authority. Except as
set forth in Section 3.19 of the Disclosure Schedule, there is no unfair labor
practice charge or complaint, grievance or arbitration against the Company
pending or, to the knowledge of the Company, threatened against the Company
before the National Labor Review Board or any other govern mental authority.
Since January 1, 1992 the Company has not experienced nor, to the knowledge of
the Company, is there threatened, any labor strike, dispute, slowdown or
stoppage or any representation question respecting its employees. There is no
collective bargaining agreement that is binding on the Company.
3.20 ENVIRONMENTAL MATTERS. Except as set forth in Section
3.20 of the Company's Disclosure Schedule, the Company has not received any
written communication from any person or entity (including any Governmental
Entity) stating that it may be a potentially responsible party under any
applicable state, federal and local laws, regulations and rules, including
common law, judgments, decrees and orders relating to pollution, the
preservation of the environment, and the release of material into the
environment ("Environmental Law") with respect to any actual or alleged
environmental contamination or the release of any hazardous substances; neither
the Company nor, to the Company's knowledge, any Governmental Entity is
conducting or has conducted any environmental remediation or environmental
investigation which could reasonably be expected to result in material liability
or expense for the Company under Environmental Law; and the Company has not
received any request for information under Environmental Law from any
Governmental Entity with respect to any actual or alleged environmental
contamination or the release of any hazardous substance, except, in each case,
for communications, environmental remediation and investigations and requests
for information which would not, individually or in the aggregate, have a
material adverse effect; (ii) the Company has not received any written
communication from any person or entity (including any Governmental Entity)
stating or alleging that the Company may have violated any Environmental Law, or
that the Company has caused or contributed, or has liability with respect to any
environmental contamination, except, in each case, for statements and
allegations of violations and statements and allegations of responsibility or
liability which would not, individually or in the aggregate, have a material
adverse effect; and (iii) to the Company's knowledge, the Company has no
liabilities under Environmental Law that,
-16-
individually or in the aggregate, have had or may reasonably be expected to
result in a material
adverse effect.
3.21 QUESTIONABLE PAYMENTS. Neither the Company, nor any
director, officer, affiliate or employee of the Company: (a) have used any
corporate funds of the Company to make any payment to any officer or employee of
any government, or to any political party or official thereof, where such
payment either (i) is unlawful under laws applicable thereto; or (ii) would be
unlawful under the Foreign Corrupt Practices Act of 1977, as amended; nor (b)
has used any corporate funds of the Company for making payments to any person if
such payment constituted an illegal payment, bribe, kickback, political
contribution or other similar questionable payment.
3.22 BROKERS AND FINDERS. None of the Company or any of its
officers, directors and employees has employed any broker, finder or investment
banker or incurred any liability for any investment banking fees, financial
advisory fees, brokerage fees or finders' fees in connection with the
transactions contemplated hereby.
3.23 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty in this Agreement (including information contained in the Disclosure
Schedule) made by the Company nor any information relating to the Company which
has been delivered by the Company to Parent contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not false or misleading. The Company has disclosed in the Disclosure
Schedule, and at all times through the Effective Date will disclose, to Parent,
all facts known to it that, individually or in the aggregate, are material to
the business, results of operations, working capital, assets, liabilities,
condition (financial or otherwise) or prospects of the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrant to the Company as follows:
4.1 ORGANIZATION AND GOOD STANDING OF PARENT. Parent and
Subsidiary are corporations duly organized, validly existing and in good
standing under the laws of the States of Delaware and Florida, respectively.
4.2 CAPITALIZATION OF PARENT.
(a) The authorized capital stock of Parent consists of
6,000,000 shares of common stock, $.025 par value, and 2,000,000 shares of
preferred stock, $1.00 par value. As
-17-
of March 31, 1998, there were (i) 2,054,046 shares of Parent Common Stock issued
and outstanding and no shares of Parent preferred stock issued and outstanding,
(ii) 225,000 shares of Parent Common Stock reserved for issuance under stock
option and other employee and director benefit plans, and (iii) 26,250 shares of
Parent Common Stock held in Parent's treasury. In addition, Parent will be
reserving 500,000 shares of Parent Common Stock for issuance pursuant to Section
2.3 and Section 2.4 of this Agreement. The Parent Common Stock to be issued
pursuant to the Merger, when issued and delivered, will be duly authorized,
validly issued, fully paid and nonassessable.
(b) There are no voting trusts, shareholder agreements or
other voting arrangements to which the Parent is a party or, to the knowledge of
the Parent, to which any of the shareholders of the Parent is a party or bound.
(c) Except as set forth in Parent SEC Reports (as defined
in Section 4.6 herein), there is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call, put or other right
obligating the Parent to issue, sell, exchange, or otherwise dispose of, or to
purchase, redeem or otherwise acquire, shares of, or securities convertible into
or exchangeable for, capital stock of the Parent.
4.3 DUE AUTHORIZATION, BINDING EFFECT. Each of Parent and
Subsidiary has the corporate power and authority to execute, deliver and perform
its obligations under this Agreement and the other documents executed or to be
executed by it in connection with this Agreement and to consummate the Merger.
The execution, delivery and performance by Parent and Subsidiary of this
Agreement and the other documents executed or to be executed by Parent or
Subsidiary, as applicable, in connection with this Agreement have been duly
authorized by all necessary corporate action. This Agreement and the other
documents which have been executed and which will be executed by Parent and
Subsidiary in connection with this Agreement have been, or will have been, as
the case may be, duly executed and delivered by Parent and Subsidiary and are,
or will be when executed and delivered, the legal, valid and binding obligations
of Parent and Subsidiary, as the case may be, enforceable in accordance with
their terms except that (i) enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights; (ii)
the availability of equitable remedies may be limited by equitable principles of
general applicability; and (iii) rights to indemnification and contribution may
be limited by considerations of public policy.
4.4 CAPITAL STOCK OF COMPANY SUBSIDIARIES AND OTHER OWNERSHIP
INTERESTS. Other than Subsidiary, Parent is not the record or beneficial owner
of any equity interest in any corporation, joint venture, partnership or other
entity.
4.5 CORPORATE POWER AND AUTHORITY. Parent has the corporate
power and authority and all licenses and Governmental Permits (as defined in
Section 3.15 except that, in lieu of pertaining to the Company, for purposes of
this Section, such definition shall pertain to Parent) required by governmental
authorities to own, lease and operate its properties and assets
-18-
and to carry on its business as currently being conducted, except where the
failure to have any such licenses and Governmental Permits would not,
individually or in the aggregate, have a material adverse effect on the
business, results of operation, working capital, assets, liabilities, condition
(financial or otherwise) or prospects of the Company.
4.6 ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution,
delivery and performance of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any benefit
under or permit the acceleration of any obligation under (i) any term or
provision of the Certificate of Incorporation or Bylaws of Parent or the
Articles of Incorporation or Bylaws of the Subsidiary, or (ii) any contract or
permits, except where such violations, conflicts, breaches, defaults, losses or
accelerations would not, individually or in the aggregate, have a material
adverse effect on the business, results of operation, working capital, assets,
liabilities, condition (financial or otherwise) or prospects of Parent and its
subsidiaries taken as a whole, or (iii) any judgment, decree or order of any
court or governmental authority or agency to which Parent or its subsidiaries is
a party or by which Parent or the subsidiaries or any of their properties are
bound, or (iv) any statute, law, regulation or rule applicable to Parent or its
subsidiaries, except where such violations, conflicts, breaches, defaults,
losses or accelerations would not, individually or in the aggregate, have a
material adverse effect on the business, results of operation, working capital,
assets, liabilities, condition (financial or otherwise) or prospects of Parent
and its subsidiaries taken as a whole. Except for compliance with the applicable
requirements of the Securities Act, the Exchange Act, and applicable state
securities laws and the filing of Articles of Merger with the Department of
State, and consents listed on the Disclosure Schedule, to the Parent's
knowledge, no consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental agency or public or regulatory
unit, agency, body or authority or, except for the approvals which have been
obtained, any third party is required in connection with the execution, delivery
or performance of this Agreement by Parent or the Subsidiary or the consummation
of the transactions contemplated hereby or the ownership and operation by the
Surviving Corporation of its businesses and properties after the Effective Date
in substantially the same manner as now owned and operated.
4.7 PARENT SEC REPORTS. Parent has made available to the
Company (i) Parent's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, (ii) proxy statements relating to Parent's
meetings of shareholders and (iii) all other reports or registration statements,
each as amended or supplemented prior to the date hereof, filed by Parent with
the SEC since January 1, 1995 (items (i) through (iii), as amended or
supplemented as described above, including all disclosures incorporated therein
by reference, being referred to as the "Parent SEC Reports"). As of their
respective dates, the Parent SEC Reports did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Since January 1, 1995, Parent has timely
filed all forms, reports and
-19-
documents with the SEC required to be filed by it pursuant to the federal
securities laws and the SEC's rules and regulations thereunder, each of which
Parent SEC Reports complied as to form, at the time such form, report or
document was filed, in all material respects with the applicable requirements of
the Securities Act and the Exchange Act and the applicable rules and regulations
thereunder.
4.8 FINANCIAL STATEMENTS AND RECORDS OF PARENT. Parent has
delivered to the Company true, correct and complete copies of: (i) the balance
sheets of Parent as of June 30, 1997 and June 30, 1996 and the related
statements of income, changes in stockholders' equity and cash flows of Parent
for the fiscal years then ended, including the notes thereto, as contained in
the Parent's Annual Report on Form 10-KSB for the year ended June 30, 1997, in
each case examined by and accompanied by the report thereon of Xxxxx Xxxxxxxx
LLP, and (ii) the consolidated balance sheets of Parent as of March 31, 1998
("Parent Balance Sheet") and the consolidated statements of operations and cash
flows of Parent for the fiscal quarters ended March 31, 1998 and 1997, including
the notes thereto, as contained in the Parent's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998 (all of the foregoing financial statements
in (i) and (ii) being referred to herein as the "Parent Financial Statements").
Parent Financial Statements have been prepared from, and are in accordance with,
the books and records of Parent and present fairly, in all material respects,
the assets, liabilities and financial position of Parent as of the dates thereof
and their results of operations and changes in financial position for the
periods then ended, in each case in conformity with generally accepted
accounting principles, consistently applied, except as noted therein. Since June
30, 1997, there has been no change in accounting principles applicable to, or
methods of accounting utilized by, Parent. The books and records of Parent have
been and are being maintained in accordance with good business practice, reflect
only valid transactions, are complete and correct in all material respects, and
present fairly in all material respects the basis for the financial position and
results of operations of Parent and its subsidiaries set forth in Parent
Financial Statements.
4.9 NO MATERIAL UNDISCLOSED LIABILITIES. There are no material
liabilities or obligations of Parent of any nature, whether absolute, accrued,
contingent or otherwise, other than the liabilities and obligations that are
reflected, accrued, or reserved against on the Parent Balance Sheet (for which
the reserves are appropriate and reasonable) and those incurred in the ordinary
course of business and consistent with past practices since March 31, 1998.
4.10 ABSENCE OF CERTAIN CHANGES.
(a) Since March 31, 1998, Parent has operated in the
ordinary course of business and in a manner consistent with the manner in which
it operated prior to March 31, 1998. Without limiting the generality of the
foregoing, Parent has not (except as may result from the transactions
contemplated by this Agreement):
(i) suffered any material adverse change in
its business, results of operations, working capital,
assets,
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liabilities, condition (financial or otherwise),
prospects or the manner of conducting its business;
(ii) suffered any damage or destruction to,
or loss of, assets, whether or not covered by
insurance, which property or assets are material to
the operations or business of Parent;
(iii) forgiven, compromised, canceled,
released, waived or permitted to lapse any material
rights or claims;
(iv) entered into or terminated any
agreement, commitment or transaction, or agreed to
make any changes in any leases or agreements, other
than leases, agreements, transactions and commitments
entered into in the ordinary course of business;
(v) written up, written down or written off
the book value of any amount of assets;
(vi) declared, paid or set aside for payment
any dividend or distribution with respect to Parent's
capital stock;
(vii) redeemed, purchased or otherwise
acquired, or sold or granted or otherwise disposed
of, directly or indirectly, any of Parent's capital
stock or securities or any rights to acquire such
capital stock or securities which are outstanding as
of the date of this Agreement;
(viii) failed to pay or discharge when due
any liabilities, the failure to pay or discharge
which will have, individually or in the aggregate, a
material adverse effect on the business, working
capital, assets, liabilities, condition (financial or
otherwise) or prospects of Parent.
(ix) encumbered assets, purchased or sold
any assets outside the ordinary course of business or
made any material capital expenditure;
(x) entered into any employment, consulting,
compensation or collective bargaining agreement with
any person or group;
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(xi) entered into, adopted or amended any
employee benefit plan;
(xii) entered into any other transaction
other than in the ordinary course of business; or
(xiii) entered into any agreement to do any
of the foregoing.
(b) Parent is not aware of any pending or contemplated
legislation or changes in rules, regulations or administrative orders which, if
enacted or implemented, would, individually or in the aggregate, have a material
adverse effect on the business, results of operations, working capital, assets,
liabilities, condition (financial or otherwise) or prospects of Parent.
4.11 TAX RETURNS; TAXES.
(a) Parent has duly filed or caused to be filed on a
timely basis (giving effect to properly obtained extensions of time) with the
appropriate authorities all Tax Returns (as defined below) required to be filed
by it and all such Tax Returns are true, correct and complete in all material
respects; has paid in full on a timely basis all Taxes (as defined below)
required to be paid; and has fully accrued on its books or has established
adequate reserves on its latest balance sheet (a true and correct copy of which
has been provided to the Company), prepared in accordance with generally
accepted accounting principles consistently applied, for all Taxes which have
accrued but not are yet due; and has timely and properly collected or withheld,
paid over and reported to the appropriate governmental authorities all Taxes
required to have been collected or withheld by it. Parent has no tax liabilities
other than those reflected on the Parent Financial Statements and those arising
in the ordinary course of business since the date thereof. Parent has made
available to the Company true, complete and correct copies of Parent's federal
income tax and other Tax Returns filed by it.
(b) No Taxing authority has asserted any adjustment that
could result in an additional Tax for which Parent is or may be liable; there is
no pending audit, examination, investigation, dispute, proceeding or claim
(collectively, "Proceeding") relating to any Tax for which Parent is or may be
liable and, to the knowledge of Parent, no Taxing authority is contemplating
such a Proceeding; no statute of limitations with respect to any Tax for which
Parent or is or may be liable has been waived or extended; and Parent are not a
party or subject to any Tax sharing or any Tax allocation agreement, arrangement
or understanding.
(c) Parent is not a party to any contract, agreement, plan
or arrangement that, individually or collectively, could give rise to any
payment that would not be deductible by reason of Section 162, 280G or 404 of
the Code (or any comparable state, local or foreign Tax provision). Parent does
not have any "tax-exempt use property" within the meaning of Section
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168(h) of the Code (or any comparable state, local or foreign Tax provision).
Parent has never made or been required to make an election under Section 338 of
the Code (or any comparable state, local or foreign Tax provision).
(d) Parent is not, and was not at any time during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code and the regulations thereunder.
(e) For purposes of this Agreement, "Tax" shall mean any
tax, fee, levy, assessment or other governmental charge imposed by the United
States, any state, local or foreign government or subdivision or agency of any
of the foregoing, including without limitation, any income, franchise, gross
receipts, property, sales, use, service, value added, withholding, social
security, estimated, accumulated earnings, transfer, license, privilege,
payroll, profits, capital stock, employment, unemployment, excise, ad valorem,
severance, stamp, occupancy, customs or occupation tax for which the taxpayer is
or may be liable, including without limitation, as a member of a consolidated
group pursuant to Treasury Regulation ss.1.1502-6 (or any comparable state,
local or foreign Tax provision), as a transferee under Section 6901 of the Code
(or any comparable state, local or foreign Tax provision) or under any Tax
sharing or Tax allocation agreement, arrangement or understanding.
(f) For purposes of this Agreement, "Tax Returns" shall
mean all returns, amended returns, declarations, reports, estimates, information
returns and statements relating to Taxes which are or were filed or required to
be filed under applicable law, whether on a consolidated, combined, unitary or
separate basis or otherwise.
4.12 TITLE, CONDITION OF ASSETS.
(a) Parent has good and marketable title to all of the
Assets reflected on the Parent Balance Sheet, and all Assets thereafter acquired
by them (except for Assets disposed of by it in the ordinary course of
business). All such Assets are used in connection with the operation of the
businesses of Parent. Except as set forth in Section 4.12(a) of the Disclosure
Schedule, the Assets are subject to no mortgage, security interest, pledge,
lien, claim, encumbrance or charge, or restraint or transfer whatsoever other
than Permitted Liens (as hereinafter defined) and no currently effective
financing statement with respect to any of its Assets has been filed under the
Uniform Commercial Code in any jurisdiction. Section 4.12(a) of the Disclosure
Schedule sets forth a description of the indebtedness secured by the financing
statements listed thereon, including the principal balance of such indebtedness
and accrued but unpaid interest thereon as at March 31, 1998 and interest rate
applicable thereto. Except with respect to the constituent instruments
underlying the financing statements listed in Section 4.12(a) of the Disclosure
Schedule, Parent is not a party to any financing statement or any security
agreement authorizing any secured paery thereunder to file any financing
statement. No person other than Parent has any right to the use or possession of
any of the Assets. All Assets which are real property or tangible personal
property, whether owned or leased, are in good operating condition and repair,
excepting normal wear and
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tear, and are sufficient to enable Parent to operate its business in a manner
consistent with its operation during the immediately preceding twelve (12)
months.
(b) Set forth on Section 4.12(b) of the Disclosure
Schedule is a true and correct list of leases, conditional sales, licenses or
similar arrangements to which Parent is a party or to which Parent or any Asset
used by Parent in connection with the operation of its business is subject. The
Company has delivered to Parent a complete and correct copy of each lease,
conditional sale, license and other arrangement listed in Section 4.12(b) of the
Disclosure Schedule. All of said arrangements are valid, binding and enforceable
in accordance with their respective terms and are in full force and effect.
Parent is not in default under one or more of such arrangements, except to the
extent such defaults would not, individually or in the aggregate, have a
material adverse effect on the business, results of operations, working capital,
assets, liabilities, condition (financial or otherwise) or prospects of Parent
and has not received any written notice alleging any default, set-off, or claim
of default. To the knowledge of Parent, the parties to such arrangements are not
in default of their respective obligations under any of such arrangements, and
there has not occurred any event which, with the passage of time or giving of
notice (or both), would constitute such a default or breach under any of such
arrangements.
4.13 INTELLECTUAL PROPERTY. Except as set forth in Section
4.13 of the Disclosure Schedule, Parent has no proprietary assets. Parent owns
all of the Proprietary Assets necessary to operate its business. No claim has
been asserted by an person challenging the validity of any Proprietary asset or
the use thereof by Parent.
4.14 CONTRACTS. To the knowledge of Parent, Section 4.14 of
the Disclosure Schedule contains a complete and correct list of all of the
following categories of material agreements, contracts, arrangements and
commitments ("Contracts"), including summaries of oral contracts (except
immaterial oral contracts terminable at will), to which Parent is bound,
including, without limitation:
(a) each contract or agreement for the employment or
retention of, or collective bargaining, severance or termination agreement with,
any director, officer, employee, consultant, agent, employee or group of
employees;
(b) each profit sharing, thrift, bonus, incentive,
deferred compensation, stock option, stock purchase, severance pay, pension,
retirement, hospitalization, insurance or other similar plan, agreement or
arrangement;
(c) each agreement or arrangement (including letter of
intent) for the purchase or sale of any assets, properties or rights outside the
ordinary course of business (by purchase or sale of assets, purchase or sale of
capital stock, merger or otherwise) which is currently in effect;
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(d) each contract which contains any provisions requiring
Parent to indemnify or act for, or guarantee the obligation of, any other person
or entity;
(e) each agreement restricting Parent from conducting
business of any nature anywhere in the world;
(f) each partnership or joint venture contract or similar
arrangement or agreement which is likely to involve a sharing of profits or
future payments with respect to the business (or any portion thereof) of Parent;
(g) each lease, license, conditional sales contract or
similar arrangement for real or personal property or any Proprietary Asset; and
(h) each other agreement not made in the ordinary and
normal course of business which involves consideration of more than $15,000; and
(g) each letter of intent or agreement in principle to
enter into any Contract (whether or not binding, in whole or in part).
True, correct and complete copies of each Contract have been
provided or made available to the Company and, except as provided in Section
4.14 of the Disclosure Schedule, each remains in full force and effect in
accordance with the copies provided to the Company. Each of the Contracts was
entered into and requires performance only in the ordinary course of business.
Parent is not in material default under any Contract and no default or right of
set-off has been asserted, either by or against Parent under any Contract. To
the knowledge of Parent, the parties to the Contracts, other than Parent, are
not in material default of any of their respective obligations under the
Contracts, and there has not occurred any event, which with the passage of time
or the giving of notice (or both), would constitute a material default or breach
under any Contract. All amounts payable by Parent under the Contracts are on a
current basis. No Contract is terminable nor requires a payment in the event of
the Merger or a change in control of Parent
4.15 LICENSES AND PERMITS. Section 4.15 of the Disclosure
Schedule sets forth a description of all material licenses and other material
governmental or other regulatory permits, approvals and authorizations required
for the operation of the business of Parent to: (a) provide the services which
Parent is providing or Parent in the past has provided, (b) own or hold under
lease the properties and Assets it owns or hold under lease and (c) perform all
of its obligations under Contracts to which it is a party or subject
(collectively, the "Governmental Permits"). Parent has delivered to the Company
copies of all of the Governmental Permits. Parent owns, possesses or has the
legal right to use the Governmental Permits, free and clear of all liens,
pledges, claims or other encumbrances of any nature whatsoever. Parent has
obtained and possesses (and during all periods in which it has provided services
and conducted business possessed), in good standing, all Governmental Permits
required by applicable governmental authorities in order to perform such
services and conduct such businesses except where failure to have such
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Governmental Permits in good standing would not, individually or in the
aggregate, have a material adverse effect on the business, working capital,
results of operation, assets, liabilities, condition (financial or otherwise) or
prospects of Parent. Parent is not in material default under any Governmental
Permits, and Parent has not received any notice of any default or any other
claim or proceeding relating to, any such Governmental Permits.
4.16 INSURANCE AND SURETY AGREEMENTS. Section 4.16 of the
Disclosure Schedule contains a complete and correct list of: (a) all policies of
malpractice, fire, liability and other forms of insurance held or owned by
Parent; and (b) all bonds, indemnity agreements and other agreements of
suretyship made for or held by Parent, including a brief description of the
character of the bond or agreement and the name of the surety or indemnifying
party. Section 4.16 of the Disclosure Schedule sets forth for each such
insurance policy the name of the insurer, the amount of coverage, the type of
insurance included under each such policy and of any claims made thereunder.
Such policies are owned by and payable solely to Parent, and said policies or
renewals or replacements thereof are outstanding and duly in force. All
insurance policies maintained by Parent are in full force and effect, all
premiums due on such policies have been paid, and has not been advised by any of
its insurance carriers of an intention to terminate or modify any such policies,
nor has Parent failed to comply with any of the material conditions contained in
any such policies.
4.17 RELATIONSHIPS.
(a) Except as disclosed in Section 4.17 of the Disclosure
Schedule, no affiliate of Parent has, or at any time within the last two (2)
years has had, an ownership interest in any business, corporate or otherwise,
that is a party to, or in any property that is the subject of, any business
relationship or arrangement of any kind relating to the operation or business
of, or which may be binding upon, Parent or its Assets.
(b) Section 4.17 of the Disclosure Schedule contains a
complete and correct list of all persons known by the Company to be affiliates
of the Company.
4.18 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 4.18 of the Disclosure
Schedule, there are no employee benefit plans (including previously-maintained
plans) or arrangements of any type (including, without limitation, plans
described in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended and the regulations thereunder ("ERISA")), under which Parent
has or in the future could have directly, or indirectly through a Commonly
Controlled Entity (within the meaning of section 414(b), (c), (m) and (o) of the
Internal Revenue Code of 1986, as amended and the regulations thereunder
("Code")), any liability with respect to any current or former employee of
Parent or any Commonly Controlled Entity (collectively, the "Benefit Plans"). No
such Benefit Plan is "multiple employer plan" (within the meaning of the Code or
ERISA) or subject to Title IV of ERISA.
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(b) With respect to each Benefit Plan (where applicable):
Parent has delivered to the Company complete and accurate copies of (i) all plan
texts and agreements; (ii) all material employee communications; (iii) the most
recent annual report; (iv) the most recent annual and periodic accounting of
plan assets; (v) the most recent determination letter received from the Internal
Revenue Service; and (vi) the most recent actuarial valuation.
(c) With respect to each Benefit Plan: (i) if intended to
qualify under Code section 401(a) or 403(a), such Benefit Plan so qualifies, and
its related trust is exempt from taxation under Code section 501(a); (ii) such
Benefit Plan has been administered in accordance with its terms and applicable
law; (iii) no event has occurred and there exists no circumstance under which
Parent could directly, or indirectly through a Commonly Controlled Entity, incur
liability under ERISA, the Code or otherwise (other than routine claims for
benefits); (iv) there are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of Parent, threatened, with
respect to any Benefit Plan or against the assets of any Benefit Plan; (v) no
"accumulated funding deficiency" (as defined in section 302 of ERISA) has
occurred; (vi) no "prohibited transaction" (as defined in section 406 of ERISA
or in section 4975 of the Code) has occurred; (vii) no "reportable event" (as
defined n section 4043 of ERISA) has occurred; (viii) all contributions and
premiums due have been made on a timely basis; and (ix) all contributions made
or required to be made under any Benefit Plan meet the requirements for
deductibility under the Code, and all contributions which have not been made
have been properly recorded on the books of Parent or the applicable Commonly
Controlled Entity.
(d) With respect to each Benefit Plan which is a "welfare
plan" (as defined in ERISA section 3(1)): (i) no such plan provides medical or
death benefits (whether or not insured) with respect to current or former
employees beyond their termination of employment (other than coverage mandated
by law); (ii) there are no reserves, assets, surplus or prepaid premiums under
any such plan; and (iii) Parent and any Commonly Controlled Entity have complied
with the requirements under Code section 4980B.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any individual to severance pay, or (ii)
accelerate the time of payment, vesting or increase the amount of compensation
due to any such individual.
4.19 LABOR RELATIONS. To the knowledge of Parent, Parent is in
compliance with all federal and state laws respecting employment and employment
practices, terms and conditions of employment, wages and hours, and is not
engaged in any unfair labor or unlawful employment practice. There is no
unlawful employment practice or discrimination charge pending or, to the
knowledge of the Company, threatened against Parent before the Equal Employment
Opportunity Commission or any other governmental authority. Except as set forth
in Section 4.18 of the Disclosure Schedule, there is no unfair labor practice
charge or complaint, grievance or arbitration against Parent pending or, to the
knowledge of the Company, threatened against the Company before the National
Labor Review Board or any other governmental authority. Since January 1, 1992
Parent has not experienced nor, to the knowledge of Parent, is there threatened,
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any labor strike, dispute, slowdown or stoppage or any representation question
respecting its employees. There is no collective bargaining agreement that is
binding on Parent.
4.20 QUESTIONABLE PAYMENTS. Neither Parent, nor any director,
officer, affiliate or employee of Parent: (a) have used any corporate funds of
Parent to make any payment to any officer or employee of any government, or to
any political party or official thereof, where such payment either (i) is
unlawful under laws applicable thereto; or (ii) would be unlawful under the
Foreign Corrupt Practices Act of 1977, as amended; nor (b) has used any
corporate funds of Parent for making payments to any person if such payment
constituted an illegal payment, bribe, kickback, political contribution or other
similar questionable payment.
4.21 BROKERS AND FINDERS. Neither Parent nor the Subsidiary
nor any of their respective officers, directors and employees has employed any
broker, finder or investment banker or incurred any liability for any investment
banking fees, financial advisory fees, brokerage fees or finders' fees in
connection with the transactions contemplated hereby, except for the fees of
Xxxxxxx pursuant to that certain letter agreement dated July 21, 1997, as
amended, a true, complete and correct copy of which has been furnished to the
Company.
4.22 COMPLIANCE WITH LAWS. Parent has been and is in
compliance with all applicable laws, regulations, ordinances and administrative
orders of any jurisdiction to which its businesses or its use or occupancy of
properties or any part thereof are subject except where the failure to be in
compliance would not, individually or in the aggregate, have a material adverse
effect on the business, results of operation, working capital, assets,
liabilities, condition (financial or otherwise) or prospects of Parent and its
subsidiaries taken as a whole. Except as set forth in the Parent SEC Reports,
there is no pending material suit, claim, action or litigation, or
administrative, arbitration or other proceeding or governmental investigation or
inquiry, nor, to the best of Parent's knowledge, (i) are any such proceedings,
investigations or inquiries, threatened or contemplated nor (ii) are there any
unasserted claims (whether or not the potential claimant may be aware of the
claim) of any nature that might be asserted against Parent, which pending,
threatened, contemplated or unasserted matter are reasonably likely to have,
individually or in the aggregate, a material adverse effect on the business,
results of operations, working capital, assets, liabilities, condition
(financial or otherwise) or prospects of Parent and its subsidiaries taken as a
whole. Parent is not subject to any judgment, decree, injunction, or order of
any court or any governmental restriction applicable to Parent which is
reasonably likely (i) to have a material adverse effect on the business, results
of operations, working capital, assets, liabilities, condition (financial or
otherwise) or pros pects of Parent and its subsidiaries taken as a whole or (ii)
to cause limitation on the Surviving Corporation's ability to operate the
business of the Company after the Closing.
4.23 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty in this Agreement made by Parent nor any information relating to Parent
or its subsidiaries which has been delivered by Parent to the Company contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not false or misleading.
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ARTICLE 5
COVENANTS OF THE COMPANY AND PARENT
5.1 NOTICE OF ANY MATERIAL CHANGE. Each of the Company and
Parent shall, promptly after the first notice or occurrence thereof but not
later than the Closing Date, advise the other in writing of any event or the
existence of any state of facts that:
(a) would make any of its representations and warranties
in this Agreement untrue in any material respect as if such representation and
warranty had been made at and as of such intervening date; or
(b) would otherwise constitute, individually or in the
aggregate, a material adverse change in the business, results of operation,
working capital, assets, liabilities or condition (financial or otherwise) or
prospects of Parent or the Company.
5.2 COOPERATION. Each of the parties hereto shall, and shall
cause each of its Affiliates to, use its best efforts to:
(a) proceed promptly to make or give the necessary
applications, notices, requests and filings in order to obtain at the earliest
practicable date and, in any event, before the Closing Date, the approvals,
authorizations and consents necessary to consummate the transactions
contemplated by this Agreement;
(b) cooperate with and keep the others informed of any
matter which may result in a failure by such party to fulfill any covenant of
such party or which may provide the other party with a right to terminate this
Agreement; and
(c) take such actions as the other may reasonably request
to consummate the transactions contemplated by this Agreement and use its best
efforts and diligently attempt to satisfy, to the extent within its control, all
conditions precedent to the obligations to close this Agreement.
5.3 PUBLIC DISCLOSURE. Subject to their respective legal
obligations, neither the Company nor Parent shall issue any press release or
otherwise publicize the transactions contemplated herein without the consent or
approval of the other; provided, however, the parties hereto consent to the
issuance of the press release which the parties have simultaneously herewith
approved, and providing copies hereof to any governmental agency which legal
counsel to a party may advise such party may be required and providing
additional information, limited in scope to the discussion contained in the
press release, in response to unsolicited questions resulting from such press
release or reports.
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5.4 SUBMISSION TO PARENT SHAREHOLDERS. The Parent shall call a
meeting of its shareholders as soon as practicable following the execution and
delivery of this Agreement for the purpose of obtaining the approval of the
requisite number of its shareholders respecting (i) the Merger and the other
transactions contemplated by this Agreement and the other Merger Documents (ii)
issuance of the ISOs provided for in Section 2.3 hereof, and (iii) the amendment
and restatement of the Certificate of Incorporation of Parent (the "Parent
Shareholder Approval"). The Parent Corporation, through its Board of Directors,
shall recommend such approval to its shareholders in accordance with applicable
laws, unless the Board of Directors in good faith believes its fiduciary duty
requires otherwise.
5.5 PROXY STATEMENT.
(a) Parent shall promptly file a proxy statement (which
proxy statement, together with any and all amendments and supplements thereto
and all information incorporated by reference therein, is referred to herein as
the "Proxy Statement"), under and pursuant to the provisions of the Securities
Act. Parent agrees to use its best efforts to respond to the comments of the
SEC, and Parent shall promptly mail the Proxy Statement to its shareholders.
(b) The Company agrees to provide as promptly as
practicable to Parent such information concerning its business and financial
statements and affairs as, in the reasonable judgment of Parent, may be required
or appropriate for inclusion in the Proxy Statement or in any amendments or
supplements thereto, and to cause its counsel and auditors to cooperate with
Parent's counsel and auditors in the preparation of the Proxy Statement.
(c) The Company represents, warrants and covenants to
Parent that none of the information supplied by it for inclusion or
incorporation by reference, and Parent and Sub sidiary represent, warrant and
covenant to the Company that none of the information supplied by them for
inclusion or incorporation by reference, in the Proxy Statement, will, at the
date mailed to shareholders of Parent and at the time of the meeting of
shareholders of Parent to be held to approve this Agreement, contain any untrue
statement of a material fact or 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.
ARTICLE 6
COVENANTS OF THE COMPANY AND AGREEMENT SHAREHOLDERS
6.1 ACCESS. During the period until the Effective Date, the
Company shall afford to Parent and Parent's officers, employees, accountants,
counsel, and other authorized representatives, full access during regular
business hours to the assets, properties, books, Contracts, commitments and
records of the Company and will furnish or use its best efforts to cause its
representatives to furnish promptly to Parent such additional financial and
operating data and other documents and information (certified if requested and
reasonably susceptible to certification)
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relating to its business and properties as Parent or its representatives may
from time to time reasonably request. No investigation pursuant to this Section
6.1 shall effect, add to or subtract from any representation or warranty
contained in this Agreement, any condition to the obligations of the parties
hereto to consummate the Merger, nor the right of the Parent to indemnification
pursuant to Section 8.2 hereunder.
6.2 CONDUCT OF BUSINESS PRIOR TO CLOSING DATE. During the
period until the Closing Date, the Company shall (unless otherwise consented to
in writing by Parent) conduct its operations in the ordinary and usual course of
business consistent with past and current practices, and shall use its best
efforts to maintain and preserve intact its business organization and goodwill,
to retain the services of its key officers and employees, and to maintain
satisfactory relationships with its customers, suppliers and others having
business relationships with it. Without limiting the foregoing, the Company
without the prior approval of Parent:
(a) shall not incur additional obligations, or prepay any
obligations, for borrowed money, encumber assets, purchase or sell any assets
outside the ordinary course of business, commit to material capital expenditures
or increase or authorize an increase in employee compensations or benefits
(except that the Company (i) may reasonably borrow under its $2,250,000 existing
line of credit commitment, and (ii) may borrow from an institution on terms
reasonably satisfactory to Parent, an amount sufficient to pay bonuses to the
Agreement Shareholders and the distribution to the Agreement Shareholders
pursuant to Section 6.2 (e) (ii) of this Agreement, in an aggregate amount equal
to the Company's earnings and profits for the period January 1, 1998 to and
including the Closing Date);
(b) shall confer, from time to time, with one or more
representatives of Parent as reasonably requested to report material operational
matters and the general status of ongoing operations;
(c) shall notify Parent of any emergency or other change
in the normal course of the Company business and of any governmental complaints,
investigations, hearings or inquiries (or communications indicating that the
same may be contemplated) including, without limitation, complaints,
investigations, hearings or inquiries relating to any Governmental Permits held
by the Company or which could result from the consummation of the transaction
contemplated hereby;
(d) shall not issue or sell any shares of the capital
stock of the Company or issue, sell or grant options, warrants or rights to
purchase or subscribe to any of the capital stock of the Company or rights or
obligations convertible into or exchangeable for any shares of the capital stock
of the Company, or make any changes (by stock dividend, split-up, combination,
recapitalization, reclassification, reorganization or otherwise) in the capital
structure of the Company;
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(e) shall not declare, pay or set aside for payment any
dividend or other distribution in respect of the capital stock or other equity
securities of the Company, provided, however that the Company may pay to the
Agreement Shareholders, an amount equal to the sum of (i) the Company's
Accumulated Adjustments Account and (ii) the Company's earnings and profits from
January 1, 1998, to and including the Closing Date, and the Company shall not
redeem, purchase or otherwise acquire any shares of the capital stock or other
securities of the Company or rights or obligations convertible into or
exchangeable for any shares of the capital stock or other securities of the
Company;
(f) shall not settle, compromise or discharge any lawsuit,
claim or proceeding where the proposed settlement amount for all such
settlements, compromises and discharges would exceed $25,000;
(g) shall not intentionally take any action that, and
shall not intentionally fail to take any action the failure to take which, would
cause or permit any of its representations and warranties contained in this
Agreement to be untrue in any material respect at the Closing; or
(h) shall not enter into any agreement, understanding,
arrangement or letter of intent (whether or not binding in whole or in part) to
do any of the things which it has covenanted not to do without the prior
approval of the Parent.
6.3 SHAREHOLDER APPROVAL. The Agreement Shareholders agree to
vote or cause to be voted, at a meeting of the Company's shareholders to be
called and held as soon as practicable, all shares of Company Common Stock over
which they have, directly or indirectly, voting control, in favor of the
approval of this Agreement and all transactions contemplated hereby.
6.4 NO SOLICITATIONS. From May 12, 1998 until the Effective
Date or, if earlier, the date this Agreement is terminated or abandoned as
provided in Section 10.1, neither the Company nor any Agreement Shareholder
shall (nor did they) directly or indirectly (i) solicit or initiate any
discussion with or (ii) enter into negotiations or agreements with, or furnish
any information to, any corporation, partnership, person or other entity or
group (other than Parent, an Affiliate of Parent or their authorized
representatives) concerning any proposal for a merger, sale of substantial
assets, sale of shares of stock or securities or other takeover or business
combination transaction (the "Acquisition Proposal") involving the Company, and
the Company and the Agreement Shareholders will instruct their officers,
directors, advisors and financial and legal representatives and consultants
(collectively, the "Representatives") not to take any action contrary to the
foregoing provisions of this sentence; provided, however, that the Company and
its Representatives shall not be prohibited from taking any action described in
clause (ii) above to the extent such action is taken by, or upon the authority
of, the Board of Directors of the Company in the exercise of the Board's good
faith judgment as to its fiduciary duties to the shareholders of the Company,
which judgment is based upon the written advice of independent, outside legal
counsel that a failure of the Board of Directors of the Company to take such
action would be likely to constitute a breach of its fiduciary duties to such
shareholders. The Company will notify Parent
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promptly in writing if the Company becomes aware that any inquiries or proposals
are received by, any information is requested from or any negotiations or
discussions are sought to be initiated with, the Company with respect to an
Acquisition Proposal. Each time, if any, that the Board of Directors of the
Company determines, upon written advice of such legal counsel and in the
exercise of its good faith judgment as to its fiduciary duties to shareholders,
that it must enter into negotiations with or furnish any information that is not
publicly available to, any corporation, part nership, person or other entity or
group (other than Parent, an Affiliate of Parent or their representatives)
concerning any Acquisition Proposal, the Company will give Parent prompt notice
of such determination (which shall include a copy of the written advice of such
legal counsel).
6.5 BEST EFFORTS. The Company shall use its best efforts to
cause all of the conditions precedent set forth in Sections 9.1 and 9.3 hereof
to be fulfilled.
ARTICLE 7
COVENANTS OF PARENT
7.1 ACCESS. During the period until the Effective Date, Parent
shall afford to the Company and the Company's officers, employees, accountants,
counsel, and other authorized representatives, full access during regular
business hours to the assets, properties, books, Contracts, commitments and
records of Parent and will furnish or use its best efforts to cause its
representatives to furnish promptly to the Company such additional financial and
operating data and other documents and information (certified if requested and
reasonably susceptible to certification) relating to its business and properties
as the Company or its representatives may from time to time reasonably request.
No investigation pursuant to this Section 6.1 shall effect, add to or subtract
from any representation or warranty contained in this Agreement, any condition
to the obligations of the parties hereto to consummate the Merger, nor the right
of the Company to indemnification pursuant to Section 8.2 hereunder.
7.2 CONDUCT OF BUSINESS PRIOR TO CLOSING DATE. During the
period until the Closing Date, Parent shall (unless otherwise consented to in
writing by the Company) conduct its operations in the ordinary and usual course
of business consistent with past and current practices, and shall use its best
efforts to maintain and preserve intact its business organization and goodwill,
to retain the services of its key officers and employees, and to maintain
satisfactory relationships with its customers, suppliers and others having
business relationships with it. Without limiting the foregoing, Parent without
the prior approval of the Company:
(a) shall not incur additional obligations, or prepay any
obligations, for borrowed money, encumber assets, purchase or sell any assets
outside the ordinary course of business, commit to material capital expenditures
or increase or authorize an increase in employee compensation or benefits;
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(b) shall confer, from time to time, with one or more
representatives of the Company as reasonably requested to report material
operational matters and the general status of ongoing operations;
(c) shall notify the Company of any emergency or other
change in the normal course of the Company business and of any governmental
complaints, investigations, hearings or inquiries (or communications indicating
that the same may be contemplated) including, without limitation, complaints,
investigations, hearings or inquiries relating to any Governmental Permits held
by Parent or which could result from the consummation of the transaction
contemplated hereby;
(d) shall not issue or sell any shares of the capital
stock of Parent or issue, sell or grant options, warrants or rights to purchase
or subscribe to any of the capital stock of Parent or rights or obligations
convertible into or exchangeable for any shares of the capital stock of Parent,
or make any changes (by stock dividend, split-up, combination, recapitalization,
reclassification, reorganization or otherwise) in the capital structure of
Parent;
(e) shall not declare, pay or set aside for payment any
dividend or other distribution in respect of the capital stock or other equity
securities of Parent, and not redeem, purchase or otherwise acquire any shares
of the capital stock or other securities of Parent or rights or obligations
convertible into or exchangeable for any shares of the capital stock or other
securities of Parent;
(f) shall not settle, compromise or discharge any lawsuit,
claim or proceeding where the proposed settlement amount for all such
settlements, compromises and discharges would exceed $25,000;
(g) shall not intentionally take any action that, and
shall not intentionally fail to take any action the failure to take which, would
cause or permit any of its representations and warranties contained in this
Agreement to be untrue in any material respect at the Closing; or
(h) shall not enter into any agreement, understanding,
arrangement or letter of intent (whether or not binding in whole or in part) to
do any of the things which it has covenanted not to do without the prior
approval of the Company.
7.3 NO SOLICITATIONS. From May 12, 1998 until the Effective
Date or, if earlier, the date this Agreement is terminated or abandoned as
provided in Section 10.1, Parent shall not (nor did it) directly or indirectly
(i) solicit or initiate any discussion with or (ii) enter into negotiations or
agreements with, or furnish any information that is not publicly available to,
any corporation, partnership, person or other entity or group (other than the
Company, an Affiliate of the Company or their authorized representatives)
concerning any Acquisition Proposal involving Parent, and Parent will instruct
its Representatives not to take any action contrary to the foregoing provisions
of this sentence; provided, however, that Parent and its Representatives shall
not be
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prohibited from taking any action described in clause (ii) above to the extent
such action is taken by, or upon the authority of, the Board of Directors of
Parent in the exercise of the Board's good faith judgment as to its fiduciary
duties to the shareholders of the Company, which judgment is based upon the
written advice of independent, outside legal counsel that a failure of the Board
of Directors of Parent to take such action would be likely to constitute a
breach of its fiduciary duties to such shareholders. Parent will notify the
Company promptly in writing if Parent becomes aware that any inquiries or
proposals are received by, any information is requested from or any negotiations
or discussions are sought to be initiated with, Parent with respect to an
Acquisition Proposal. Each time, if any, that the Board of Directors of Parent
determines, upon written advice of such legal counsel and in the exercise of its
good faith judgment as to its fiduciary duties to shareholders, that it must
enter into negotiations with or furnish any information that is not publicly
available to, any corporation, partnership, person or other entity or group
(other than Parent, an Affiliate of the Company or their Representatives)
concerning any Acquisition Proposal, Parent will give the Company prompt notice
of such determination (which shall include a copy of the written advice of such
legal counsel).
7.4 TAX CERTIFICATIONS. For purposes of ensuring that the
Merger will be treated as a tax-free reorganization under Sections 368(a)(1)(A)
and 368(a)(2)(E) of the Code, each of Parent and Subsidiary have delivered to
Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, P.A., counsel to the Company,
a letter in the form heretofore approved by the parties.
7.5 BEST EFFORTS. Parent and Subsidiary shall use their best
efforts to cause all of the conditions precedent in Sections 9.1 (subject in the
case of Section 9.1(a) to the judgment of its Board of Directors) and 9.2 hereof
to be fulfilled.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY
8.1 SURVIVAL. The representations, warranties, covenants and
agreements contained in this Agreement, or in any document delivered pursuant to
the provisions of, or in connection with, this Agreement shall not survive the
making of this Agreement and any examination made by or on behalf of the parties
hereto, the Closing and the Merger; provided, however, that the representations,
warranties, covenants and agreements respecting Taxes, contained in Section 3.10
of this Agreement, shall continue to survive until three months subsequent to
the date on which all taxable periods of the Company prior to the Effective Date
shall be closed to any further assessment of Taxes by the expiration of the
applicable statutes of limitations, after giving effect to any extensions
thereof by waiver or otherwise. Notwithstanding the foregoing, any claim
respecting Taxes made by an Indemnified Party (as defined in Section 8.2) under
the provisions of Section 8.2 within the period described above, shall be
considered to be timely made even if such claim is not resolved until after the
expiration of the aforesaid period.
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8.2 INDEMNIFICATION.
(a) The Agreement Shareholders hereby agree to indemnify
and hold Parent, the Surviving Corporation and their affiliates (collectively,
the "Indemnified Parties") harmless from and against the full amount of any
loss, claim, damage, liability, cost or expense (including attorneys' fees),
judgments, fines and amounts paid in settlement of any claim, action, suit,
proceeding or investigation, resulting to the Indemnified Parties (collectively,
a "Loss"), either directly or indirectly, from any breach of or inaccuracy in
the surviving representations, warranties covenants and agreements respecting
Taxes, made by the Company or the Agreement Shareholders in Section 3.10 of this
Agreement, or in any certificate or document delivered by or on behalf of the
Company or the Agreement Shareholders pursuant to any of the provisions of, or
in connection with Section 3.10 of this Agreement. If it is determined that, as
a matter of public policy, the indemnification provided for in this Section 8.2
is unavailable to an Indemnified Party as contemplated, then, to the extent not
determined to be prohibited by public policy, the Indemnifying Party shall
contribute to the amount paid or payable by the Indemnified Party as a result of
such Loss in such proportion as is appropriate to reflect not only the relative
benefits received by the Indemnified Party and the indemnifying party from the
transactions contemplated by this Agreement, but also the relative fault of the
Indemnified Party and the indemnifying party, as well as any other relevant
equitable considerations.
(b) No Agreement Shareholder shall be entitled to assert,
and no Agreement Shareholder shall assert, any right to subrogation,
contribution or reimbursement against Parent, the Surviving Corporation or any
shareholder of the Company, the Surviving Corporation or Parent with respect to
any amounts paid or payable by such Agreement Shareholder under this Section
8.2.
ARTICLE 9
CONDITIONS PRECEDENT
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. Except as may be
waived by both the Company and Parent, the respective obligations of each party
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction, on or before the Closing Date, of each of the following
conditions:
(a) CORPORATE APPROVALS. This Agreement shall have been
approved and adopted by the affirmative vote of the holders of a majority of all
of the outstanding shares of Company Common Stock. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Parent.
(b) LITIGATION; ILLEGALITY. No action or proceeding before
any court or administrative agency, by any government agency or any other person
shall have been
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instituted or threatened challenging or otherwise relating to the Merger, or
which otherwise would, if adversely determined, materially and adversely affect
Parent or the Company. No action, statute, rule or regulation shall have been
proposed or enacted by any state, Federal or foreign government or governmental
agency which would render the parties unable to consummate the Merger or make
the Merger illegal or prohibit, restrict or delay consummation of the Merger.
(c) GOVERNMENTAL CONSENTS. Other than the filing of
Articles of Merger, as described in Article 1, all authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations or
terminations of waiting periods imposed by any governmental authority, the
failure to obtain which would have a material adverse effect on Parent and its
subsidiaries, including the Surviving Corporation and its subsidiaries, taken as
a whole, shall have been filed, occurred or been obtained.
9.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. Except as may be
waived by the Company, the obligations of the Company to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
on or before the Closing Date of each of the following conditions:
(a) COMPLIANCE WITH COVENANTS AND CONDITIONS. Parent shall
have, or shall have caused to be, satisfied or complied with and performed in
all material respects all terms, covenants and conditions of this Agreement to
be complied with or performed by Parent on or before the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES. The representations
and warranties made by Parent in Sections 4.1, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8,
4.9, 4.10 and (except for changes contemplated in this Agreement which pertain
to Section 4.2) 4.11 of this Agreement and in all certificates and other
documents delivered by Parent to the Company pursuant hereto or in connection
with the transactions contemplated hereby shall have been true and correct as of
the date hereof, and shall be true and correct in all material respects at the
Closing Date with the same force and effect as if such representations and
warranties had been made at and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
(c) TAX OPINION. The Company shall have received the
opinion of Xxxxxxxxx Traurig Xxxxxxx Xxxxxx Xxxxx and Xxxxxxx, P.A., counsel to
the Company, dated as of the Closing Date, substantially to the effect that, on
the basis of facts and representations set forth in such opinion consistent with
the state of facts existing at the Effective Date, for federal income tax
purposes that (i) the Merger constitutes a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code; (ii) no gain or loss will be
recognized by the Company's shareholders as a result of the Merger; (iii) the
tax basis of the Parent Common Stock to be received by the shareholders of the
Company will be equal to the tax basis of their Company Common Stock and
(assuming that the shareholder holds the Company Common Stock as a capital asset
at the Effective Date) the holding period of their Parent Common Stock will
include the
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holding period of the Company Common Stock; and (iv) the Company will not
recognize gain or loss as a result of the Merger.
(d) OPINION. The Company shall have received an opinion of
Xxxxxx Xxxxxx Flattau & Klimpl, LLP, counsel to Parent, dated as of the Closing
Date, in form and substance reasonably satisfactory to the Company and its
counsel, as to the matters specified in Section 4.1, the last sentence of
Section 4.2(a) and Section 4.3.
(e) MATERIAL ADVERSE CHANGES. Subsequent to March 31,
1998, there shall have occurred no material adverse change in the business,
results of operations or prospects, of Parent.
(f) CERTIFICATES. The Company shall have received a
certificate or certificates, executed on behalf of Parent by an executive
officer of Parent, to the effect that the conditions contained in Sections
9.2(a), (b) and (d) have been satisfied.
(g) OTHER. The Company shall have received such other
instruments, documents and certificates, if any, which are required to be
delivered pursuant to the provisions of this Agreement or which may be
reasonably requested.
9.3 CONDITIONS TO OBLIGATIONS OF PARENT. Except as may be
waived by Parent, the obligations of Parent to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each of the following conditions:
(a) COMPLIANCE WITH COVENANTS AND CONDITIONS. The Company
and the Agreement Shareholders shall have, or shall have caused to be, satisfied
or complied with and performed in all material respects all terms, covenants and
conditions of this Agreement to be complied with or performed by them on or
before the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made by the Company in this Agreement, the
Company Disclosure Schedule and in all certificates and other documents
delivered by the Company pursuant hereto or in connection with the transactions
contemplated hereby shall have been true and correct in all material respects as
of the date hereof, and shall be true and correct in all material respects at
the Closing Date with the same force and effect as if such representations and
warranties had been made at and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
(c) OPINION. Parent shall have received (i) an opinion of
Xxxxxxxxx Xxxxxxx Xxxxxxx Xxxxxx Xxxxx and Xxxxxxx, P.A., counsel for the
Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to Parent and its counsel, as to the matters specified in Section
3.1, the last sentence of Section 3.2(a), and Section 3.3.
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(d) MATERIAL ADVERSE CHANGES. Since December 31, 1997
there shall have occurred no material adverse change in the business, results of
operations, customer or employee relations, working capital, assets, condition
(financial or otherwise) or prospects of the Company, other than as set forth in
Schedule 3.9.
(e) WAREHOUSE AND OFFICE LEASE. The Company shall have
obtained the written consent of Xxxxxxx X. Xxxxxxx to the assignment to the
Surviving Corporation of the October 6, 1995 lease between Xxxxxxx X. Xxxxxxx
and the Company covering 000 X.X. 00 Xxxxxx, 000 X.X. 67 Street, and 000 X.X. 00
Xxxxxx, Xxxxx, Xxxxxxx 00000 (the "Premises"), which written consent shall
contain an absolute and unconditional indemnification and hold harmless of the
Parent, the Company, the Surviving Corporation and their affiliates from and
against the full amount of any loss, claim, damage, liability, cost or expense
(including attorneys' fees), judgments, fines and amounts paid in settlement of
any claim, action, suit, proceeding or investigation relating to any alleged
violations of Environmental Law with respect to any actual or alleged
environmental contamination or the release of any hazardous substances at or on
the Premises.
(f) WEISSCO. The Company shall have entered into an
agreement, on terms reasonably satisfactory to Parent, with Weissco Development
Inc. ("Weissco") and the Agreement Shareholders, pursuant to which, among other
things, Weissco agrees to pay 100% of its pre-tax profits to the Surviving
Corporation as a management fee.
(g) AEROTECH. The Company shall have acquired from
Aero-Tech USA, Inc. all of its right, title and interest in and to the name
"Aerotech".
(h) CERTIFICATES. Parent shall have received a certificate
or certificates, executed on behalf of the Company, to the effect that the
conditions in Sections 9.3(a), (b), (d), (e), (f) and (g) have been satisfied.
(i) OTHER. Parent shall have received such other
instruments, documents, and certificates, if any, which are required to be
delivered pursuant to the provisions of this Agreement or which may be
reasonably requested.
ARTICLE 10
REGISTRATION RIGHTS
The Agreement Shareholders and any Holder (as defined herein)
shall have the following registration rights with respect to the Parent Common
Stock issued to them hereunder (the "Registrable Securities"):
10.1 DEMAND REGISTRATION FOR REGISTRABLE SECURITIES: FILING OF
REGISTRATION STATEMENT. Parent, at its own expense, will prepare and file, as
promptly as practicable after receipt of a written request from the Holder(s) of
at least fifty (50%) percent
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of the Registrable Securities, a registration statement on such appropriate form
of the Securities and Exchange Commission (the "Commission") as shall be
selected by Parent to effect the registration of such number of Registrable
Securities specified in such request for resale from time to time by such
Holder(s) thereof (the "Registration Statement") and shall undertake to cause
such Registration Statement to become effective and remain effective so as to
cause such Registrable Securities to be registered under the Securities Act, and
registered, qualified or exempted under the state securities laws of such
jurisdictions as any Holder reasonably requests until such time as such
Registrable Securities may be resold pursuant to Rule 144, as promulgated under
the Securities Act. For purposes of this Article, a person is deemed to be a
"Holder" of Registrable Securities whenever such person is the record owner of
such stock.
10.2 PIGGYBACK REGISTRATIONS. If, at any time, Parent proposes
or is required to register any of its Common Stock under the Securities Act
(other than pursuant to (i) registrations on such form or similar form(s) solely
for registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or a merger or consolidation, or (ii) a demand
registration under Section 10.1) on a registration statement on Form S-1, Form
S-2 or Form S-3 (or an equivalent general registration form then in effect),
whether or not for its own account, Parent shall give prompt written notice of
its intention to do so to each of the Holders of record of Registrable
Securities. Upon the written request of any Holder, made within 15 days
following the receipt of any such written notice (which request shall specify
the maximum number of Registrable Securities intended to be disposed of by such
Holder and the intended method of distribution thereof), Parent shall use its
best efforts to cause all such Registrable Securities, the Holders of which have
so requested the registration thereof, to be registered under the Securities Act
(with the Common Stock which Parent at the time proposes to register) to permit
the sale or other disposition by the Holders (in accordance with the intended
method of distribution thereof) of the Registrable Securities to be so
registered. No registration effected under this Section 10.2 shall relieve
Parent of its obligations to effect demand registration. If, at any time after
giving written notice of its intention to register any Common Stock and prior to
the effective date of the registration statement filed in connection with such
registration, Parent shall determine for any reason not to register or to delay
registration of such Common Stock, Parent may, at its election, give written
notice of such determination to all Holders of record of Registrable Securities
and (i) in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
abandoned registration, without prejudice, however, to the rights of Holders
under Section 10.1, and (ii) in the case of a determination to delay such
registration of its Common Stock, shall be permitted to delay the registration
of such Registrable Securities for the same period as the delay in registering
such other equity securities. Any Holder shall have the right to withdraw its
request for inclusion of its Registrable Securities in any registration
statement pursuant to this Section 10.2 by giving written notice to Parent of
its request to withdraw; provided, however that (i) such request must be made in
writing prior to the earlier of the execution of the underwriting agreement or
the execution of the custody agreement with respect to such registration and
(ii) such withdrawal shall be irrevocable and, after making such withdrawal, a
Holder shall no longer have any right to include Registrable Securities in the
registration as to which such withdrawal was made.
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10.3 EXPENSES OF REGISTRATION. Parent shall pay all expenses
in connection with the registration, qualification and/or exemption of the
Registrable Securities, including any SEC and state securities or "blue-sky"
laws registration and filing fees, printing expenses, fees and disbursements of
Parent's counsel and accountants, transfer agent's and registrar's fees, fees
and disbursements of experts used by Parent in connection with such
registration, qualification and/or exemption, and expenses incidental to any
amendment or supplement to the Registration Statement or prospectuses contained
therein. Parent shall not, however, be liable for any sales, broker's or
underwriting commissions upon sale by any Holder of any of the Registrable
Securities.
10.4 FURNISHING OF DOCUMENTS. Parent shall furnish to the
Holders such reasonable number of copies of the Registration Statement, such
prospectuses as are contained in the Registration Statement and such other
documents as the Holder may reasonably request in order to facilitate the
offering of the Registrable Securities.
10.5 AMENDMENTS AND SUPPLEMENTS. Parent shall prepare and
promptly file with the SEC and promptly notify the Holders of the filing of such
amendments or supplements to the Registration Statement or prospectuses
contained therein as may be necessary to correct any statements or omissions if,
at the time when a prospectus relating to the Registrable Securities is required
to be delivered under the Securities Act, any event shall have occurred as a
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Parent shall also
advise the Holders promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of the Registration Statement or the initiation or threatening of
any proceeding for that purpose and promptly use its reasonable best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such stop
order should be issued. If, after a Registration Statement becomes effective,
Parent advises the Holders that Parent considers it appropriate that the
Registration Statement (and all other registration statements of Parent then
effective and outstanding) be amended, the Holders shall suspend any further
sales of the Registrable Securities until Parent advises the Holders that the
Registration Statement has been amended, which amendment shall be made promptly.
10.6 DURATION. Parent shall maintain the effectiveness of the
Registration Statement until such time as Parent reasonably determines, based on
an opinion of counsel, that the Holders will be eligible to sell all of the
Registrable Securities then owned by the Holders, without the need for continued
registration of the Registrable Securities, in the three month period
immediately following the termination of the effectiveness of the Registration
Statement.
10.7 FURTHER INFORMATION. If Registrable Securities owned by a
Holder is included in any registration, such Holder shall furnish Parent such
information regarding itself as Parent may reasonably request and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
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10.8 INDEMNIFICATION
(a) Parent will indemnify and hold harmless the Holders and each
person, if any, who controls a Holder within the meaning of the Securities Act,
from and against any and all losses, damages, liabilities, costs and expenses to
which the Holders or any such controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out of or
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that, Parent will not be liable in any such case to the extent that any
such loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in reliance upon and strict conformity with information furnished by or on
behalf of any Holder or such controlling person in writing specifically for use
in the preparation thereof.
(b) Each of the Holders, jointly and severally, will
indemnify and hold harmless Parent and each person, if any, who controls Parent
within the meaning of the Securities Act, from and against any and all losses,
damages, liabilities, costs and expenses to which Parent or any such controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written information furnished by or
on behalf of any Holder specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party of
notice of the commencement of any action involving the subject matter of
paragraph (a) or (b) of this Section 10.8, such indemnified party will, if a
claim thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the indemnifying party
of the commencement thereof, but the omission to so notify the indemnifying
party will not relieve it from any liability which it may have hereunder unless
the indemnifying party has been materially prejudiced thereby nor will such
failure to so notify the indemnifying party relieve it from any liability which
it may have to any indemnified party otherwise than hereunder. In case such
action is brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party shall have the, right
to participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the indemnifying
party and there
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is a conflict of interest which would prevent counsel for the indemnifying party
from also representing the indemnified party, the indemnified party or parties
shall have the right to select separate counsel to participate in the defense of
such action on behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless: (i)
the indemnified party shall have employed counsel in accordance with the
provisions of the preceding sentence; (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
or the action; or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
Notwithstanding anything to the contrary set forth in this Article 10, no
indemnifying party shall have the right to settle or compromise any action for
which it has assumed the defense without the express written consent of the
indemnified party.
(d) In the event any of the Registrable Securities are
sold by any Holder or Holders in an underwritten public offering consented to by
Parent, Parent shall provide indemnification to the underwriters of such
offering and any person controlling any such underwriter on behalf of the Holder
or Holders making the offering; provided, however, that Parent shall not be
required to consent to any such underwriting or to provide such indemnification
in respect of the matters described in the proviso to the first sentence of
Section 10.8(a).
ARTICLE 11
MISCELLANEOUS
11.1 TERMINATION.
(a) This Agreement and the transactions contemplated
hereby may be terminated at any time on or before the Closing Date:
(i) by mutual consent of the Company and
Parent;
(ii) by the Company or Parent if either
receive an Acquisition Proposal under circumstances
that do not violate the respective obligations under
Sections 6.4 or 7.3 hereof;
(iii) by the Company or Parent, if the other
party receives an Acquisition Proposal under
circumstances that
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violate that party's obligations under Sections 6.4
or 7.3 hereof;
(iv) by Parent if there has been a material
misrepresentation or breach of warranty in the
representations and warranties of the Company set
forth herein, or if there has been any material
failure on the part of the Company to comply with its
obligations hereunder which failure, if capable of
cure, is not cured within thirty (30) days after the
giving of written notice thereof to the Company by
Parent;
(v) by the Company if there has been a
material misrepresentation or breach of warranty in
the representations and warranties of Parent set
forth herein, or if there has been any material
failure on the part of Parent to comply with its
obligations hereunder which failure, if capa ble of
cure, is not cured within thirty (30) days after the
giving of written notice thereof to Parent by the
Company; or
(vi) by either Parent or the Company if the
transactions contemplated by this Agreement have not
been consummated by December 31, 1998, unless such
failure of consummation is due to the failure of the
terminating party to perform or observe any covenant,
agreement or condition hereof to be performed or
observed by it at or before the Closing Date.
(b) In the event of the termination of this Agreement
pursuant to Section 11.1(a) hereof, this Agreement, except for the provisions of
Section 11.2 of this Agreement, shall forthwith become void and have no effect,
without any liability on the part of any party or its Affiliates, directors,
officers or shareholders; provided, however, that nothing in this Section 11.1
or in Section 11.2 shall relieve any party to this Agreement of liability for
breach of this Agreement (it being understood that termination pursuant to
Section 11.1(a)(i), (ii) or (vi) other than as a result of a party's failure to
perform or observe a covenant, agreement or condition shall not be deemed to be
a breach of this Agreement).
11.2 EXPENSES. If the transactions contemplated by this
Agreement are not consummated, each party hereto shall pay its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby.
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11.3 ENTIRE AGREEMENT. This Agreement, the Disclosure Schedule
and the exhibits hereto contain the complete agreement among the parties with
respect to the transactions contemplated hereby and supersede all prior
agreements and understandings among the parties with respect to such
transactions. The parties hereto have not made any representation or warranty
except as expressly set forth in this Agreement, the Disclosure Schedule and any
certificate or schedule delivered pursuant hereto. The obligations of any party
under any agreement executed pursuant to this Agreement shall not be affected by
this Section.
11.4 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which, when so executed and delivered, shall be
deemed an original, and all such counterparts together shall constitute only one
original.
11.5 NOTICES. Any notices, requests, demands or other
communications required or permitted hereunder shall be in writing and shall be
(i) hand delivered, (ii) sent by Federal Express, Express Mail or similar
overnight delivery service, (iii) sent by certified or registered mail, return
receipt requested or (iv) sent by telecopy, in any case addressed as follows (or
to such other address as a party shall have designated by notice given to the
other party pursuant hereto), and shall be deemed given (i) when delivered if
hand delivered, (ii) the next business day after sent if given by Federal
Express, Express Mail or other overnight delivery service, (iii) the date
received if sent by certified or registered mail, return receipt requested or
(iv) the date transmitted if telecopied (such date to be confirmed by printed
confirmation produced by the trans mitting telecopier which shall specify the
date and time of such or transmission and that such transmission has been made
without error):
(i) If to the Company:
Xxxxxxx-Atlantic Corp.
000 X.X. 00 Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, President
Telecopier: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxxx Traurig Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
(ii) if to any Agreement Shareholder:
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Xxxxxxx-Atlantic Corp.
000 X.X. 00 Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, President
Telecopier: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxxxx Xxxxxxx Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx, P.A.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
(iii) if to Parent:
Metro-Tel Corp.
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxxxx
Telecopier: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx
Telecopier: (000) 000-0000
11.6 SUCCESSORS AND ASSIGNS. This Agreement and the rights,
interests and obligations hereunder shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
11.7 GOVERNING LAW. Except in instances where the laws of
another jurisdiction mandatorily govern, this Agreement shall be construed and
enforced in accordance with the laws of the State of Florida, without regard to
choice of law provisions.
11.8 WAIVER AND OTHER ACTION. Any provision of this Agreement
may be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may be amended, modified or supplemented, either prior
to or after approval of this
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Agreement by shareholders of the Company, only by a written instrument executed
by the party against which enforcement of the amendment, modification or
supplement is sought.
11.9 SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid or unenforceable, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision were never a part hereof; the
remaining provisions hereof shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance; and, in lieu of such illegal, invalid, or unenforceable provision,
there shall be added, automatically as part of this Agreement, a provision as
similar in its terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable.
11.10 SECTION HEADINGS. Section and other headings are for
reference purposes only and shall not affect the interpretation or construction
of this Agreement.
11.12 CONSTRUCTION. All words used herein shall be construed
to be of such gender or number as the circumstances require. Unless otherwise
specifically noted, the words "herein," "hereof," "hereby," "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular Section, subsection, paragraph, clause or other subdivision of this
Agreement. For purposes of determining when a corporate entity shall have
"knowledge" of a particular fact or other matter, the knowledge of any person
who is presently serving as a director or officer of such corporate entity shall
be attributable to the corporate entity.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
METRO-TEL CORP. XXXXXXX-ATLANTIC CORP.
By: /S/ Xxxxxxxxx X. Xxxxxxxxxx By: /S/ Xxxxxxx X. Xxxxxxx
---------------------------- ----------------------------------
Xxxxxxxxx X. Indelica Xxxxxxx X. Xxxxxxx, President
President
METRO-TEL ACQUISITION CORP.
/S/ Xxxxxxx Xxxxxxx
---------------------------------
Xxxxxxx Xxxxxxx
By: /S/ Xxxxxxxxx X. Xxxxxxxxxx /S/ Xxxxxxx X. Xxxxxxx
--------------------------- ----------------------------------
Xxxxxxxxx X. Xxxxxxxxxx Xxxxxxx X. Xxxxxxx
President
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APPENDIX I
ARTICLES OF MERGER
OF
METRO-TEL ACQUISITION CORP.
INTO
XXXXXXX-ATLANTIC CORP.
To the Secretary of State
State of Florida
Pursuant to the provisions of the Florida Business Corporation Act, the domestic
corporations herein named do hereby adopt the following articles of merger.
(a) Annexed hereto and made a part hereof is the Amended and
Restated Plan of Merger for merging Metro-Tel Acquisition Corp. with and into
Xxxxxxx-Atlantic Corp. as approved and adopted by written consent of the sole
shareholder of Metro-Tel Acquisition Corp. on , 1998, in accordance with the
provisions of Section 607.0704 of the Florida Business Corporation Act, and
approved and adopted at a meeting by the shareholders of Xxxxxxx-Atlantic Corp.,
on , 1998 pursuant to the provisions of Section 607.1103 of the Florida Business
Corporation Act.
(b) Xxxxxxx-Atlantic Corp., will continue its existence as the
surviving corporation under its present name pursuant to the provisions of the
Florida Business Corporation Act.
Executed on , 1998
METRO-TEL ACQUISITION CORP.
By:
Name:
Title:
XXXXXXX-ATLANTIC CORP.
By:
Name:
Title
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AMENDED AND RESTATED PLAN OF MERGER (the "Plan of Merger") adopted by
Metro-Tel Acquisition Corp., a business corporation organized under the laws of
the State of Florida, by resolution of its Board of Directors on _____ , 1998
and adopted by Xxxxxxx-Atlantic Corp., a business corporation organized under
the laws of the State of Florida, by resolution of its Board of Directors on
_____, 1998.
1 The names of the corporations planning to merge are Metro-Tel
Acquisition Corp., a business corporation organized under the laws of the State
of Florida, and Xxxxxxx-Atlantic Corp., a business corporation organized under
the laws of the State of Florida. The name of the surviving corporation into
which Metro-Tel Acquisition Corp. plans to merge is Xxxxxxx-Atlantic Corp.
2 Metro-Tel Acquisition Corp. and Xxxxxxx-Atlantic Corp. shall,
pursuant to the provisions of the Florida Business Corporation Act, be merged
with and into Xxxxxxx-Atlantic Corp., which shall be the surviving corporation
at the effective time and date of the merger and which is sometimes hereinafter
referred to as the "surviving corporation", and which shall continue to exist as
said surviving corporation under its present name pursuant to the provision of
the Florida Business Corporation Act. The separate existence of Metro-Tel
Acquisition Corp., which is sometimes hereinafter referred to as the
"non-surviving corporation", shall cease at the effective time and date of the
merger in accordance with the provisions of the Florida Business Corporation
Act.
3 The Articles of Incorporation, as amended to date, of the surviving
corporation at the effective time and date of the merger shall be the Articles
of Incorporation of said surviving corporation and said Articles of
Incorporation shall continue in full force and effect until further amended and
changed in the manner prescribed by the provisions of the Florida Business Cor
poration Act.
4 The present bylaws of the surviving corporation will be the bylaws of
said surviving corporation and will continue in full force and effect until
changed, altered or amended as therein provided and in the manner prescribed by
the provisions of the Florida Business Corporation Act.
5 As of the effective time and date of the merger and without any
action on the part of any holder thereof:
(i) Each share of common stock, $.001 par value, of
Xxxxxxx-Atlantic Corp. ("Company Common Stock") issued and outstanding
immediately prior to the effective time and date of the merger shall be
converted into 13.90561 shares of common stock, $.025 par value, of
Metro-Tel Corp. ("Parent Common Stock"), the sole shareholder of
Metro-Tel Acquisition Corp.
(ii) Each share of Company Common Stock issued and held
immediately prior to the effective time and date of the merger in the
treasury of Xxxxxxx-Atlantic Corp. shall be canceled and retired
without payment of any consideration therefor and shall cease to exist.
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(iii) Each share of common stock, $.001 par value, of
Metro-Tel Acquisition Corp., issued outstanding immediately prior to
the effective time and date of the merger shall be converted into one
share of common stock, $.001 par value, of the surviving corporation.
6 The Plan of Merger herein made and approved shall be submitted to the
shareholders of the surviving corporation for their approval or rejection in the
manner prescribed by the provisions of the Florida Business Corporation Act.
7 In the event that the Plan of Merger shall have been approved by the
Board of Directors of Metro-Tel Corp., the shareholder of the non-surviving
corporation entitled to vote thereon and by the shareholders entitled to vote of
the surviving corporation entitled to vote thereon in the manner prescribed by
the provisions of the Florida Business Corporation Act, the non-surviving
corporation and the surviving corporation hereby stipulate that they will cause
to be executed and filed and/or recorded any document or documents prescribed by
the laws of the State of Florida, and that they will cause to be performed all
necessary acts therein and elsewhere to effectuate the merger.
8 The Board of Directors and the proper officers of the non-surviving
corporation and the Board of Directors and the proper officers of the surviving
corporation, respectively, are hereby authorized and empowered to do any and all
acts and things, and to make, execute, deliver, file, and/or record any and all
instruments, papers, and documents which shall be or become necessary, proper or
convenient to carry out or put into effect any of the provisions of this Plan of
Merger or of the merger herein provided for.
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