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Exhibit 2.2
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ENTEX INFORMATION SERVICES, INC.
ENTEX ACQUISITION CORP.
AND
RANDOM ACCESS, INC.
Dated as of May 15, 1995
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TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
THE MERGER
Section 1.01. The Merger................................................... 1
Section 1.02. Effective Time............................................... 1
Section 1.03. Effect of the Merger......................................... 2
Section 1.04. Articles of Incorporation; By-Laws........................... 2
Section 1.05. Directors and Officers....................................... 2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01. Conversion of Securities..................................... 2
Section 2.02. Conversion of Sub Common Stock............................... 2
Section 2.03. Exchange of Company Certificates and Cash.................... 3
Section 2.04. Stock Transfer Books......................................... 4
Section 2.05. Company Options.............................................. 4
Section 2.06. Dissenting Shares............................................ 4
Section 2.07. Closing...................................................... 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Organization and Qualification............................... 5
Section 3.02. Capitalization............................................... 5
Section 3.03. Subsidiaries................................................. 6
Section 3.04. Authorization................................................ 6
Section 3.05. SEC Filings.................................................. 6
Section 3.06. No Conflicts................................................. 7
Section 3.07. Consents and Approvals....................................... 7
Section 3.08. Financial Statements......................................... 8
Section 3.09. Absence of Certain Changes or Events......................... 8
Section 3.10. No Undisclosed Material Liabilities.......................... 9
Section 3.11. Proxy Statement.............................................. 9
Section 3.12. Fairness Opinion............................................. 10
Section 3.13. Brokers and Finders.......................................... 10
Section 3.14. Environmental Matters........................................ 10
(i)
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Section 3.15. Litigation................................................... 11
Section 3.16. ERISA Compliance............................................. 11
Section 3.17. Tax Matters.................................................. 12
Section 3.18. Change in Control Payments................................... 13
Section 3.19. Other Information............................................ 13
Section 3.20. Intellectual Property........................................ 13
Section 3.21. Insurance Coverage........................................... 14
Section 3.22. Inventory.................................................... 14
Section 3.23. Certain Transactions......................................... 14
Section 3.24. Contracts.................................................... 15
Section 3.25. Personnel.................................................... 15
Section 3.26. Compliance with Laws......................................... 16
Section 3.27. Expenses..................................................... 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 4.01. Organization and Power....................................... 16
Section 4.02. Authorization................................................ 16
Section 4.03. No Conflicts................................................. 17
Section 4.04. Consents and Approvals....................................... 17
Section 4.05. Proxy Statement.............................................. 17
Section 4.06. Financing of the Merger...................................... 17
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.01. Conduct of Business Between Execution of this Agreement and the
Effective Time........................................................... 18
Section 5.02. Consolidated Net Worth....................................... 20
Section 5.03. Mutual Covenants............................................. 21
Section 5.04. Access to Information; Confidentiality....................... 22
Section 5.05. Meeting of Shareholders...................................... 22
Section 5.06. Proxy Statement.............................................. 22
Section 5.07. Xxxx-Xxxxx-Xxxxxx Filing..................................... 22
Section 5.08. Public or Shareholder Communications......................... 23
Section 5.09. Additional Agreements........................................ 23
Section 5.10. Closing Conditions........................................... 23
Section 5.11. Parent Shareholder Approval.................................. 23
Section 5.12. No Solicitation.............................................. 23
Section 5.13. Distribution Agreement....................................... 24
Section 5.14. Indemnification.............................................. 24
Section 5.15. Directors' and Officers' Insurance........................... 24
(ii)
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ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.01. Conditions to Each Party's Obligation to Effect the Merger... 25
Section 6.02. Additional Conditions to the Obligations of the Company...... 25
Section 6.03. Additional Conditions to the Obligations of Parent and Sub... 26
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.01. Termination.................................................. 28
Section 7.02. Effect of Termination........................................ 28
Section 7.03. Amendment.................................................... 28
Section 7.04. Waiver....................................................... 29
ARTICLE VIII
FEES AND EXPENSES/GENERAL PROVISIONS
Section 8.01. Fees and Expenses............................................ 29
Section 8.02. Survival of Representations and Warranties................... 30
Section 8.03. Notices...................................................... 31
Section 8.04. Headings..................................................... 32
Section 8.05. Exhibits, Schedules and Annexes.............................. 32
Section 8.06. Counterparts................................................. 32
Section 8.07. Governing Law................................................ 32
Section 8.08. Pronouns..................................................... 32
Section 8.09. Time Periods................................................. 32
Section 8.10. No Strict Construction....................................... 32
Section 8.11. Entire Agreement............................................. 32
Section 8.12. Severability................................................. 32
Section 8.13. Successors and Assigns....................................... 33
LIST OF SCHEDULES AND ANNEXES
SCHEDULES
3.02 Capitalization
3.03 Matters Concerning Subsidiaries
3.05 Matters Concerning SEC Filings
3.06 No Conflicts
3.07 Consents and Approvals
3.09 Certain Changes or Events
3.14 Environmental Matters
3.15 Company Litigation
(iii)
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3.16 ERISA Compliance
3.17 Tax Matters
3.18 Change in Control Payments
3.20 Intellectual Property Matters
3.21(a) Insurance Policies
3.21(b) Insurance Claims
3.23 Certain Transactions
3.24(a) Contracts
3.24(b) Defaults Under Contracts
3.25 Personnel
3.27 Expenses
5.01 Conduct of Business between Execution of Agreement and Effective Time
5.02(e) Calculation of Tangible Net Worth
ANNEXES
Annex A Shareholder Agreement
Annex B Form of Opinion of Xxxx & Priest LLP
Annex C Consulting Agreement with Xxxxx X. Xxxxxxxx
Annex D Employment Agreement with Xxxxxxx X. Xxxxxxxx, Xx.
Annex E Purchase Agreement among the Company, Total Access LLC and Xxxxx X.
Xxxxxxxx
Annex F Form of Opinion of Stroock & Stroock & Xxxxx
(iv)
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AGREEMENT AND PLAN OF MERGER, dated as of May 15, 1995 (this "Agreement"), by
and among ENTEX INFORMATION SERVICES, INC., a Delaware corporation ("Parent"),
ENTEX Acquisition Corp., a Colorado corporation and a wholly owned subsidiary of
Parent ("Sub"), and RANDOM ACCESS, INC., a Colorado corporation (the "Company").
WHEREAS, the parties desire that Sub be merged (the "Merger") with and into
the Company, pursuant to which the Company will become a wholly owned subsidiary
of Parent, all upon the terms and conditions contained herein and in accordance
with the Colorado Business Corporation Act (the "Colorado Act");
WHEREAS, the Board of Directors of each of Parent, Sub and the Company deems
the Merger to be in the best interests of each of Parent, Sub, the Company and
their respective shareholders;
WHEREAS, in order to induce Parent and Sub to enter into this Agreement,
simultaneously with the execution hereof, Xxxxx X. Xxxxxxxx ("Xxxxxxxx"), the
Chairman of the Board and a principal shareholder of the Company, and Parent
have executed a Shareholder Agreement, substantially in the form of Annex A
hereto, pursuant to which, among other things, Xxxxxxxx has agreed not to
transfer the Shares (as hereinafter defined) beneficially owned by him except as
permitted by the terms of such Shareholder Agreement, and to vote the Shares
beneficially owned by him in favor of the approval of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Colorado Act, at the
Effective Time (as defined in Section 1.02), Sub shall be merged with and into
the Company, whereupon the Company will become a wholly owned subsidiary of
Parent. As a result of the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation in the Merger
(the "Surviving Corporation"). The name of the Surviving Corporation shall, by
virtue of the Merger, remain "Random Access, Inc."
Section 1.02. Effective Time. As promptly as reasonably practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VI, the parties hereto shall cause the Merger to be consummated by filing
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Colorado, in such form as required by, and executed in
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accordance with the relevant provisions of the Colorado Act (the date and time
of such filing being the "Effective Time").
Section 1.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the Colorado Act.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Sub and the Company shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Sub and the
Company shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 1.04. Articles of Incorporation; By-Laws. The Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation, unless
and until duly amended, altered or repealed. The By-Laws of the Company as in
effect immediately prior to the Effective Time shall be the By-Laws of the
Surviving Corporation, unless and until duly amended, altered or repealed.
Section 1.05. Directors and Officers. The directors of Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of Sub
shall be the initial officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01. Conversion of Securities. (a) Each share of common stock,
$0.0001 par value, of the Company (the "Shares") issued and outstanding
immediately prior to the Effective Time, other than Shares owned by Parent, Sub
or any other wholly owned subsidiary of Parent or held in the treasury of the
Company, all of which shall be cancelled (collectively, the "Cancelled Shares"),
and Shares held by Dissenting Shareholders (as defined in Section 2.06 hereof)
(collectively, the "Dissenting Shares"), shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive $3.50 net to the holder in cash (the "Merger Consideration"),
payable to the holder thereof, without interest thereon, upon the surrender of
the certificate representing such Share.
Section 2.02. Conversion of Sub Common Stock. Each share of common stock, par
value $0.0001 per share, of Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and exchangeable into one (1) share of
common stock of the Surviving Corporation and each certificate evidencing
ownership of any shares of capital stock of Sub shall evidence ownership of the
same number of shares of common stock of the Surviving Corporation.
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Section 2.03. Exchange of Company Certificates and Cash.
(a) Deposit of Merger Consideration. As of the Effective Time, Parent or
Sub shall deposit, or cause to be deposited, with or for the account of a bank
or trust company (the "Exchange Agent") selected by Parent prior to the
Effective Time, for the benefit of the holders of the Shares (other than
Canceled Shares and Dissenting Shares), for exchange in accordance with this
Article II, through the Exchange Agent, cash in the aggregate amount required to
be exchanged for the Shares (other than Canceled Shares and Dissenting Shares)
pursuant to Section 2.01 (the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Exchange Fund to holders of
the Shares (other than Canceled Shares and Dissenting Shares). The Exchange Fund
shall not be used for any other purpose. Any interest, dividends or other income
earned on the investment of the Exchange Fund while held by the Exchange Agent
shall be for the account of Parent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding Shares (other than Dissenting Shares) (the
"Certificates"), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for payment in cash therefor. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor cash in an amount equal to the product of the number of
Shares represented by such Certificate multiplied by the Merger Consideration,
and the Certificate so surrendered shall forthwith be cancelled. In the event of
a transfer of ownership of Shares which is not registered in the transfer
records of the Company, cash may be paid in accordance with this Article II to a
transferee if the Certificate evidencing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.03, each Certificate
shall represent for all purposes after the Effective Time only the right to
receive upon such surrender the Merger Consideration in cash multiplied by the
number of Shares evidenced by such Certificate, without any interest thereon;
and all other rights of such holder as a shareholder of the Company shall cease
at the Effective Time, except as otherwise required by the Colorado Act.
(c) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Shares for 180 days after the Effective
Time shall be delivered to Parent, upon demand, and any holders of Shares who
have not theretofore complied with this Article II shall thereafter look only to
Parent for payment of their claim for the Merger Consideration to which they are
entitled pursuant to this Agreement. Neither Parent nor the Company shall be
liable to any holder of the Shares for any cash from the Exchange Fund
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delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(d) Withholding Rights. Parent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Shares such amounts as Parent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Parent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the Shares in respect of which such deduction and withholding was made by
Parent.
Section 2.04. Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of Shares thereafter on the records of the Company. On or after the
Effective Time, any Certificates presented to the Exchange Agent or Parent for
any reason shall be cancelled and converted into the right to receive the Merger
Consideration in cash multiplied by the number of Shares evidenced by such
Certificate.
Section 2.05. Company Options. At the Effective Time (and subject to the
effectiveness of the Merger), each option to purchase Shares shall be canceled
in consideration of the payment by the Company to each holder thereof of an
amount in cash equal to the extent (if any) by which the Merger Consideration
exceeds the exercise price per share payable under such option, multiplied by
the number of Shares subject to such option. All incentive stock option plans
and non-qualified stock option plans maintained by the Company, and each option
issued under any of such plans, shall be amended, to the extent necessary, to
incorporate the terms of the preceding sentence and to delete any inconsistent
provisions thereof regarding the treatment of such options as a consequence of
the Merger. Parent shall be entitled to cause the Company to withhold for
amounts otherwise payable pursuant to this Section 2.05 any amount required to
be withheld under applicable tax laws.
Section 2.06. Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, any issued and outstanding Shares held by a person (a
"Dissenting Shareholder") who objects to the Merger and complies with all the
provisions of the Colorado Act concerning the right of shareholders of the
Company to dissent from the Merger and require appraisal of their Shares shall
not be converted as described in Section 2.01 but shall become the right to
receive such consideration as may be determined to be due to such Dissenting
Shareholder pursuant to the Colorado Act. If after the Effective Time, such
Dissenting Shareholder withdraws his demand for appraisal or fails to perfect or
otherwise loses his right of appraisal, in any case pursuant to the Colorado
Act, his Shares shall be deemed to be converted as of the Effective Time into
the right to receive the Merger Consideration, without interest. The Company
shall give Parent (i) prompt notice of any demands for appraisal of Shares
received by the Company and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, make any payment with
respect to, or settle, offer to settle or otherwise negotiate any such demands.
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Section 2.07. Closing. The closing of the Merger will take place at 10:00
a.m. not later than the third business day after the day on which there shall
have been satisfaction or waiver of the conditions set forth in Article VI, at
the offices of Xxxx & Priest LLP, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
unless another date or place is agreed to in writing by the parties hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.01. Organization and Qualification.
(a) Organization and Power. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
The Company has all requisite power and authority, corporate and otherwise, to
carry on its business as it is now being conducted and to own, lease and operate
its assets.
(b) Qualification. The Company is duly qualified or licensed to do
business as a foreign corporation in good standing in every jurisdiction where
the character of its properties, owned or leased, or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified will not be reasonably likely to have an effect which is material and
adverse to the business, financial condition or results of operations of the
Company and its Subsidiaries (as hereinafter defined) taken as a whole (a
"Company Material Adverse Effect").
(c) Articles of Incorporation and By-Laws. The Company has heretofore
delivered to Parent complete and correct copies of the Company's Articles of
Incorporation, as amended, and By-Laws, as amended, each as currently in effect.
Section 3.02. Capitalization. The authorized capital stock of the Company,
together with a description of treasury securities and a description of all
securities issued and outstanding as of May 9, 1995 is as set forth on Schedule
3.02 attached hereto. All securities identified on Schedule 3.02 as being issued
and outstanding securities are validly issued, fully paid and nonassessable.
Except as set forth on Schedule 3.02, there is no outstanding option, warrant,
right, call, subscription or other agreement or commitment which (a) calls for
the issuance, sale, pledge or other disposition of any shares of capital stock
of the Company or any securities convertible or exchangeable into, or other
rights to acquire, any shares of capital stock of the Company, (b) obligates the
Company to make any payments with respect to appreciation in shares of its
capital stock, (c) obligates the Company to grant, offer or enter into any of
the foregoing, or (d) relates to the voting, transfer or control of such capital
stock, securities or rights. Schedule 3.02 sets forth the exercise price of each
stock option currently outstanding.
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Section 3.03. Subsidiaries. Except as set forth in Schedule 3.03 attached
hereto, each Subsidiary of the Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power to carry on its business as it is now
being conducted. Each Subsidiary is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified will not
have a Company Material Adverse Effect. Other than Total Access Limited
Liability Company, a Colorado Limited Liability Company ("Total Access"), which
is 88%-owned by the Company, all of the outstanding shares of capital stock of
each are validly issued, fully paid and nonassessable and owned directly or
indirectly by the Company free and clear of all liens, claims or encumbrances
and were not issued in violation of any preemptive right. There are no existing
options, calls or commitments of any character relating to the issued or
unissued capital stock of any Subsidiary, or any securities convertible into, or
exchangeable or exercisable for, or otherwise evidencing the right to acquire,
any shares of capital stock of any Subsidiary. For purposes of this Agreement,
the term "Subsidiary" of the Company shall mean any corporation or other entity
a majority of whose outstanding voting stock or ownership interests entitled to
vote for the election of directors or other governing body is at the time owned
by the Company and/or one or more other Subsidiaries. The Subsidiaries listed on
Schedule 3.03 are inactive, and do not have liabilities of any kind whatsoever
(absolute, accrued, or contingent), other than liabilities of the Company
guaranteed by them, in excess of $10,000 in the aggregate.
Section 3.04. Authorization. The Company has all requisite corporate power to
enter into this Agreement, and all other documents and instruments to be
executed and delivered by it in connection herewith, and to carry out its
obligations hereunder and thereunder. Except with respect to the approval by the
shareholders of the Company of this Agreement and the Merger (a) the execution
and delivery of this Agreement and the due consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company, and (b) this Agreement
constitutes (and each document and instrument contemplated by this Agreement,
when executed and delivered in accordance with the provisions hereof, will
constitute) a valid and legally binding agreement of the Company enforceable in
accordance with its terms. The affirmative vote of the holders of two-thirds of
the Shares is the only vote of any class or series of capital stock of the
Company necessary to approve the Merger.
Section 3.05. SEC Filings.
(a) Except as set forth on Schedule 3.05 attached hereto, the Company has
filed with the Securities and Exchange Commission (the "SEC") all required
reports, schedules, forms, statements and other documents from February 28, 1992
through the date hereof, including (i) the annual reports on Form 10-K for all
fiscal years ended during such period, (ii) the quarterly reports on Form 10-Q
required for all fiscal quarters during such period, (iii) its proxy or
information statements relating to meetings of, or actions taken without a
meeting by, the shareholders of the Company held during such period and (iv) all
of its other reports, statements,
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schedules and registration statements filed with the SEC during such period (the
"SEC Documents").
(b) As of its filing date or, if amended, as of the date of its amendment,
as the case may be, each such report, proxy or information statement (as amended
or supplemented, if applicable), filed pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(c) Each such registration statement (as amended or supplemented, if
applicable) filed pursuant to the Securities Act of 1933, as amended (the
"Securities Act") on the date such statement, amendment or supplement became
effective did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
Section 3.06. No Conflicts. Except as set forth on Schedule 3.06 attached
hereto, the execution, delivery and performance of this Agreement by the Company
and the consummation of the transactions contemplated hereby:
(a) will not constitute a conflict with, breach or violation of or default
(or an event which with notice or lapse of time or both would become a default)
under: (i) the Company's Articles of Incorporation or By-Laws, as amended to
date, (ii) any material agreement, instrument, license, franchise or permit to
which the Company or any of its Subsidiaries is subject or by which any of them
is bound, (iii) any order, writ, injunction or decree to which the Company or
any of its Subsidiaries are subject or by which any of them is bound, or (iv)
any law, rule or regulation to which the Company or any of its Subsidiaries is
subject or by which any of them is bound, the violation of which would have a
Company Material Adverse Effect; and
(b) will not result in the creation of any lien, charge or encumbrance on
the properties or assets of the Company, except those created or imposed by or
through Parent or Sub.
Section 3.07. Consents and Approvals. Except: (i) for filings and approvals
required by: (a) the Secretary of State of the State of Colorado, (b) the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the
regulations promulgated thereunder (the "Xxxx- Xxxxx-Xxxxxx Act"); (c) the
Exchange Act; and (d) such other statutes, rules or regulations which may
require registrations, authorizations, consents or approvals relating to matters
that, in the aggregate, are not material to the Company and its Subsidiaries
taken as a whole; (ii) for the approval by the shareholders of the Company of
this Agreement and the transactions contemplated hereby, and except as set forth
on Schedule 3.07 attached hereto, neither the Company nor any of its
Subsidiaries is required to submit any notice, report or other filing with or
obtain any consent or approval from any governmental authority or third party in
connection with the execution and delivery by the Company of this Agreement or
the consummation of the transactions contemplated hereby.
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Section 3.08. Financial Statements.
The financial statements of the Company included in the annual reports
on Form 10-K filed by the Company with respect to the three most recently
completed fiscal years of the Company and the quarterly report on Form 10-Q
filed by the Company with the SEC with respect to the two quarters ended
February 28, 1995, as amended by Amendment No. 1 thereto dated April 25, 1995
(the "Amended February 28 Form 10-Q"), comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles, consistently applied (except as may be indicated
in the notes thereto or, in the case of the unaudited statements, as permitted
by Form 10-Q of the SEC), and fairly present (subject, in the case of the
unaudited statements, to normal, recurring adjustments, none of which are
anticipated to be material) the financial position, results of operations,
shareholders' equity and changes in financial position of the Company and its
Subsidiaries as at the dates and for the periods indicated.
Section 3.09. Absence of Certain Changes or Events. Except as set forth on
Schedule 3.09 attached hereto, since February 28, 1995, there has been no
Company Material Adverse Effect (whether or not covered by insurance), and there
has not been:
(a) any event, occurrence or development of a state of circumstances or
facts which has had or reasonably could be expected to have a Company Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or any
Subsidiary or any repurchase, redemption or other acquisition by the Company or
any Subsidiary of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Company or any Subsidiary;
(c) any amendment of any material term of any outstanding security of the
Company or any Subsidiary;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with past practices,
but in no event in the amount of more than $100,000 in the aggregate;
(e) any creation or assumption by the Company or any Subsidiary of any
lien on any material asset other than in the ordinary course of business
consistent with past practices, but in no event in respect of any obligation of
more than $100,000 in the aggregate;
(f) any making of any loan, advance or capital contributions to, or
investment in any person other than investments in cash equivalents made by, the
Company or any Subsidiary except those made in the ordinary course of business
consistent with past practices;
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(g) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any Subsidiary relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any Subsidiary of any contract or other right,
in either case, material to the Company and its Subsidiaries taken as a whole
other than transactions and commitments in the ordinary course of business
consistent with past practice and those contemplated by this Agreement, but in
no event representing commitments on behalf of the Company and its Subsidiaries
taken as a whole of more than $100,000 for any transaction or series of
transactions;
(h) any change in any method of accounting or accounting practice by the
Company or any Subsidiary, except for any such change required by reason of a
concurrent change in generally accepted accounting principles;
(i) any (i) grant of any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee of the
Company or any Subsidiary, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements of the Company or
any Subsidiary or (iv) increase in compensation, bonus or other benefits payable
to directors, officers or employees of the Company or any Subsidiary, other than
in the ordinary course of business consistent with past practice; or
(j) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any Subsidiary, which employees were not subject
to a collective bargaining agreement at February 28, 1995, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to such
employees.
Section 3.10. No Undisclosed Material Liabilities. There are no liabilities
of the Company or its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities disclosed in the Company's filings with the SEC or
otherwise reflected or reserved against in the Company's financial statements;
(b) liabilities incurred in the ordinary course of business consistent
with past practice, which individually or in the aggregate, would not have a
Company Material Adverse Effect; and
(c) liabilities under this Agreement or disclosed pursuant to this
Agreement.
Section 3.11. Proxy Statement. None of the information to be supplied by the
Company or any of its accountants, counsel or other authorized representatives
for inclusion in the Proxy Statement (as defined in Section 5.06) to be
distributed in connection with the Shareholders'
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Meeting (as defined in Section 5.05) will, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
the Shareholders' Meeting contain any untrue statement of a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, it being understood and agreed that no representation or warranty is
made by the Company with respect to any information supplied by Parent or Sub or
their accountants, counsel or other authorized representatives. If at any time
prior to the Effective Time any event with respect to the Company, its officers
and directors or any of its subsidiaries shall occur which is or should be
described in an amendment of, or a supplement to, the Proxy Statement, such
event shall be so described and the presentation in such amendment or supplement
of such information will not contain any statement which, at the time and in
light of the circumstances under which it is made, is false or misleading in any
material respect or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not false or misleading. The Proxy
Statement will comply as to form in all material respects with all applicable
laws, including the provisions of the Exchange Act and the rules and regulations
promulgated thereunder.
Section 3.12. Fairness Opinion. The Company has received the written opinion
of Xxxxxxxxx Xxxx & Co., Inc. ("Xxxxxxxxx Xxxx"), financial advisor to the
Company, that, as of the date of the opinion, the Merger Consideration to be
received by the holders of Shares is fair, from a financial point of view, to
such holders, and such opinion has not been withdrawn as of the date hereof. The
Company has delivered a copy of such opinion to Parent.
Section 3.13. Brokers and Finders. Except for fees and expenses payable to
Xxxxxxxxx Xxxx, no broker, finder or investment banker is entitled to any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the Company.
The fees (excluding out-of-pocket expenses that are payable in addition to such
fees) payable to Xxxxxxxxx Xxxx shall not exceed $100,000 for services in
rendering the opinion referred to in Section 3.12, and an additional $400,000
payable at the Effective Time.
Section 3.14. Environmental Matters. The Company and its Subsidiaries are,
and at all times in the past have been, in compliance with all applicable legal
requirements, laws, rules, orders and regulations related to environmental,
natural resource, health or safety matters, except where such non-compliance has
not had a Company Material Adverse Effect, including but not limited to those
promulgated, adopted or enforced by the United States Environmental Protection
Agency and by similar agencies in states in which the Company or its
Subsidiaries conduct their business. Except as set forth on Schedule 3.14
attached hereto, neither the Company nor any of its Subsidiaries is a party to
any suit, action, claim or proceeding now pending before any court, governmental
agency or board or other forum or, to the knowledge of the Company, threatened
by any person which if adversely determined, would have a Company Material
Adverse Effect (i) for alleged noncompliance with any environmental law, rule or
regulation or (ii) relating to the discharge or release into the environment of
any hazardous material, pollutant, or waste at or on a site presently or
formerly owned, leased or operated by the Company or any
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Subsidiary. There are no facts or circumstances known to the Company upon which
such a suit, action, claim or proceeding reasonably could be based.
Section 3.15. Litigation. Except as set forth in the SEC Documents or as set
forth on Schedule 3.15 attached hereto, there is no suit, action, claim or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, which, if adversely determined, individually
or in the aggregate with other such suits, actions, claims or proceedings, would
(i) have a Company Material Adverse Effect, (ii) materially and adversely affect
the Company's ability to perform its obligations under this Agreement or (iii)
prevent the consummation of any of the transactions contemplated by this
Agreement. The Company has provided to Parent all material information possessed
by the Company or its counsel regarding the facts and circumstances that are the
subject of the litigation and claims listed on Schedule 3.15 (the "Company
Litigation"), including, but not limited to, the investigation of the Company by
the SEC (the "SEC Investigation"). The litigation entitled Lane v. Intelligent
Electronics, Inc. (Civil Action No. 94-5-2071, D. Colorado) (the "Lane
Litigation") has been settled, and the Company has provided to Parent a written
statement of the material terms of such settlement.
Section 3.16. ERISA Compliance.
(a) The Company has delivered to Parent correct and complete copies of all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all other bonus,
deferred compensation, pension, profit-sharing, retirement, medical, group life,
disability income, stock purchase, stock option, incentive or other
employee-related plans, programs, contracts, agreements and arrangements
(sometimes referred to herein collectively as "Benefit Plans") currently
maintained, or contributed to, or required to be maintained or contributed to,
by the Company or any other person or entity that, together with the Company, is
treated as a single employer under Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code") (each a "Commonly
Controlled Entity") for the benefit of any current or former employees, officers
or directors of the Company or any Subsidiary. Except as disclosed on Schedule
3.16 attached hereto, the Company also has delivered to Parent complete and
correct copies of (x) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Benefit Plan (if any such report
was required) including all schedules thereto, (y) the most recent summary plan
description for each Benefit Plan for which such summary plan description is
required and (z) each currently effective trust agreement and group annuity
contract relating to any Benefit Plan. Except as disclosed on Schedule 3.16
attached hereto, the Company has no obligation or liability with respect to any
employee benefit plan (as defined under Section 3(3) of ERISA) or any other
bonus, deferred compensation, pension, profit sharing, retirement, medical,
group life, disability income, stock purchase, stock option, incentive or other
employee related plans, programs, contracts, agreements or arrangements, other
than such Benefit Plans currently maintained, contributed to or required to be
maintained or contributed to by the Company or any Company Controlled Entity.
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(b) Each Benefit Plan has been administered in accordance with its terms
in all material respects except where the failure to do so either singly or in
the aggregate would not have a Company Material Adverse Effect. Except as
disclosed on Schedule 3.16 attached hereto, the Company and each Benefit Plan
are in compliance with applicable provisions of ERISA and the Code, except for
any noncompliance that singly or in the aggregate would not have a Company
Material Adverse Effect. Except as provided in Section 2.05 or pursuant to the
plans or agreements disclosed on Schedule 3.18 attached hereto, the consummation
of the transactions contemplated herein will not directly or indirectly cause
the payment, or the acceleration of any payment, under any Benefit Plan of any
amount to any person.
(c) All Benefit Plans intended to be qualified under Section 401(a) of the
Code have been the subjects of determination letters from the Internal Revenue
Service to the effect that such Benefit Plans are qualified and exempt from
Federal income taxes under Section 401(a) and 501(a), respectively, of the Code
and no such determination letter has been revoked nor, to the knowledge of the
Company, has revocation been threatened. Except as set forth on Schedule 3.16
attached hereto, no such Benefit Plan has been amended since the date of its
most recent determination letter or application therefor in any respect that, to
the knowledge of the Company, would have a Company Material Adverse Effect.
(d) Neither the Company nor any Commonly Controlled Entity maintains,
contributes to, or at any time maintained, contributed to or was obligated to
contribute to, any Benefit Plan which is subject to Title IV of ERISA or Section
412 of the Code.
(e) None of the Company, any Subsidiary, any officer of the Company, or
any Subsidiary or any other person or persons, has engaged in a non-exempt
"prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) or any other breach of fiduciary responsibility that
could subject the Company or any officer of the Company to direct or indirect
tax, penalty or liability under ERISA, the Code or other applicable law which
would have a Company Material Adverse Effect.
(f) With respect to any Benefit Plan that is an employee welfare benefit
plan, (x) no such Benefit Plan is funded through a "welfare benefit fund", as
such term is defined in Section 419(a) of the Code, and (y) each such Benefit
Plan that is a "group health plan", as such term is defined in Section
5000(b)(1) of the Code, complies in all material respects with the applicable
requirements of Section 4980B(f) of the Code and Part 6 of Title I of ERISA
except where the failure to do so would not individually or in the aggregate
have a Company Material Adverse Effect.
Section 3.17. Tax Matters.
(a) The Company, and if applicable each Subsidiary, has filed all Federal
income tax returns and all other tax returns and reports required to be filed by
them, the failure to file which would have a Company Material Adverse Effect.
All such returns are complete and correct in all material respects. The Company,
and if applicable each Subsidiary, has paid or
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has made provisions for payment for all taxes and all material taxes for which
no return was required to be filed, the nonpayment of which would have a Company
Material Adverse Effect, and the most recent consolidated financial statements
of the Company contained in the SEC Reports reflect an adequate reserve for all
taxes payable for all taxable periods and portions thereof through the date of
such financial statements, except where the failure to maintain such reserve
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
(b) Except as set forth on Schedule 3.17 attached hereto, no audits
concerning taxes of the Company and, if applicable, any Subsidiary are currently
being conducted and no notice regarding commencement of such an audit has been
received.
(c) Except as set forth on Schedule 3.17 attached hereto, no proposed or
assessed deficiencies for any taxes are currently pending against the Company,
or if applicable any Subsidiary, and no requests for waivers of the time to
assess any such taxes are pending, in either case which, individually or in the
aggregate, would have a Company Material Adverse Effect.
(d) Except as set forth in Schedule 3.17, the Company is not aware of any
basis for the assertion of any deficiency against the Company or, if applicable,
any Subsidiaries for taxes which, if adversely determined, either individually
or in the aggregate, would have a Company Material Adverse Effect with respect
to the tax return of the Company and its Subsidiaries for the taxable years as
to which the statute of limitations has not expired.
(e) As used in this Agreement, "taxes" shall include all Federal, state,
local and foreign income, property, sales, excise, employment, payroll, custom
duty and any other governmental fee or assessment, and penalties, in addition to
any liability to a third party for such amounts, of any nature whatsoever.
Section 3.18. Change in Control Payments. Except as set forth on Schedule
3.18 attached hereto, neither the Company nor its Subsidiaries have any plans or
agreements to which they are parties, or to which they are bound, pursuant to
which payments or acceleration of benefits may be required upon a "change of
control" of the Company.
Section 3.19. Other Information. None of the documents or written information
delivered to Parent in connection with the transactions contemplated by this
Agreement (unless amended or corrected in writing prior to the date hereof)
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
Section 3.20. Intellectual Property. The Company and each Subsidiary has
exclusive ownership of or rights to use each registered patent, registered
trademark, registered tradename, registered service xxxx and registered
copyright (collectively, the "Registered Intellectual Property"), and to the
knowledge of the Company, the Company and each Subsidiary has exclusive
ownership of or rights to use each material patent application, unregistered
trademark,
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trademark application, unregistered trade name, unregistered service xxxx,
unregistered copyright and other trade secret or proprietary intellectual
property (the "Other Intellectual Property" and collectively with the Registered
Intellectual Property, the "Intellectual Property") owned by or used in and
material to its business and the current use by the Company and each Subsidiary
of such Intellectual Property does not infringe the rights of any other person,
except for any such infringements that do not, individually or in the aggregate,
have a Company Material Adverse Effect. Except set forth on Schedule 3.20
attached hereto, to the knowledge of the Company, no other person is infringing
the rights of the Company or any Subsidiary in any such Intellectual Property,
except for any such infringements, that do not, individually or in the
aggregate, have a Company Material Adverse Effect.
Section 3.21. Insurance Coverage.
(a) Set forth on Schedule 3.21(a) attached hereto is a true and complete
list of all insurance policies currently owned by the Company (the "Company
Insurance Policies"), setting forth, for each such policy, the policy number,
the date of inception of the policy and the period of coverage, the insurer, and
a general description of the risks insured against under such policy. The
Company has heretofore delivered to Parent a true and complete copy of each of
the Company Insurance Policies, including all endorsements, amendments or
supplements thereto. Each of the Company Insurance Policies has been validly
obtained, all premiums required to be paid with respect thereto have been paid
in full, and each of the Company Insurance Policies is in full force and effect.
(b) Set forth on Schedule 3.21(b) attached hereto is a true and complete
list of each and every pending claim made with respect to the Company Insurance
Policies where the amount of damage or potential liability exceeds $10,000.
Section 3.22. Inventory.
(a) The values at which all inventories are carried on the books of the
Company and its Subsidiaries (copies of which books previously have been
provided by the Company to Parent), including without limitation the reserves
with respect thereto, have been calculated in accordance with generally accepted
accounting principles consistent with past practices.
(b) Consistent with past practices, taking into account the reserves for
inventory, the inventories reflected on the books of the Company and its
Subsidiaries are: (i) in all material respects in good and merchantable
condition; (ii) generally usable for the purposes for which they are intended,
or salable in the ordinary course of business; and (iii) not excessive in
material respects in kind or amount in the context of the Company's business
taken as a whole. The inventories reflected on the books of the Company and its
Subsidiaries include any and all inventory held on consignment by third parties.
Section 3.23. Certain Transactions. Except as set forth in the SEC Documents
or as set forth on Schedule 3.23 attached hereto, none of the officers or
directors of the Company or any
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of its Subsidiaries is presently a party to any transaction with the Company or
any of its Subsidiaries (other than for services as employees, officers and
directors), including without limitation any contract, agreement or other
arrangement (i) providing for the furnishing of services to or by, (ii)
providing for rental of real or personal property to or from, or (iii) otherwise
requiring payments to or from, any officer or director, any member of the family
of any officer or director or any corporation, partnership, trust or other
entity in which any officer or director has a substantial interest or is an
officer, director, trustee or partner.
Section 3.24. Contracts. Except as set forth on the Exhibit Index to the
Company's annual report on form 10-K for the fiscal year ended August 31, 1994,
or as set forth on Schedule 3.24(a) attached hereto, there are no outstanding
agreements, commitments, purchase orders, or contracts, written or oral, express
or implied, to which the Company or any of its Subsidiaries is a party or to
which they are bound which (i) involve the payment or receipt by the Company or
any of its Subsidiaries of more than $1,000,000 under any one of such contracts,
or (ii) have an initial term of more than 150 days and are not cancelable
without significant penalties by the Company or such Subsidiary on 60 days' or
less notice or (iii) otherwise would be required to be included as an exhibit to
an annual report of the Company on Form 10-K under the regulations promulgated
by the SEC under the Exchange Act. Except as set forth on Schedule 3.24(b)
attached hereto, the Company and its Subsidiaries are not in default in respect
of any such agreement, commitment, purchase order or contract, or any other
material agreement, commitment, purchase order, or contract, and, except as so
disclosed, the Company has no knowledge of any facts or circumstances existing
as of the date hereof which would reasonably indicate that the Company or any of
its Subsidiaries will be or may be in default in respect of any such agreement,
commitment, purchase order or contract subsequent to the date hereof.
Section 3.25. Personnel.
(a) Schedule 3.25 contains a correct and complete list of:
(i) all employment, severance, bonus, profit sharing,
percentage compensation and pension or retirement plans; stock purchase and
stock option plans; contracts or agreements with present or former directors,
officers or employees that are not terminable on 60 days' or less notice without
penalty to the Company; and all consulting agreements, to which the Company or
any of its Subsidiaries is a party or to which they are bound as of the date of
this Agreement;
(ii) all group insurance programs in effect for employees
of the Company and its Subsidiaries; and
(iii) all accrued but unused vacation, holiday and
sick-time on the account of each employee of the Company and its Subsidiaries.
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Neither the Company nor any of its Subsidiaries is in default
with respect to any of its obligations listed above.
Section 3.26. Compliance with Laws. Except as disclosed in this
Agreement or in the Schedules hereto, the operations of the business of the
Company and its Subsidiaries as heretofore or currently conducted were not and
are not in violation of, nor is the Company or any of its Subsidiaries in
default under, or violation of, any federal, state, local or foreign law,
statute or regulation or any order, judgment or decree of any federal, state,
local or foreign governmental authority, regulatory or administrative agency,
commission, court or tribunal to which the Company or any of its Subsidiaries
are bound, except for such violations or defaults as have not had a Company
Material Adverse Effect. The Company and its Subsidiaries have been duly granted
all authorizations necessary for the conduct of its business as currently
conducted, except those, the failure of which to obtain, has not had a Company
Material Adverse Effect.
Section 3.27. Expenses. Schedule 3.27 attached hereto sets forth a
description of the expenses of the Company and its Subsidiaries which the
Company estimates that it will incur, or has already incurred, in connection
with the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub, jointly and severally, hereby represent and warrant to
the Company as follows:
Section 4.01. Organization and Power.
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Parent has all requisite
corporate power to enter into this Agreement, and all other documents and
instruments to be executed and delivered by it in connection herewith, and to
carry out its obligations hereunder and thereunder.
(b) Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado. Sub has all requisite
corporate power to enter into this Agreement, and all other documents and
instruments to be executed and delivered by it in connection herewith, and to
carry out its obligations hereunder and thereunder. Sub is a wholly-owned
subsidiary of Parent, has been organized solely for the purpose of consummating
the Merger and has conducted no business or operations of any nature.
Section 4.02. Authorization. The execution and delivery of this Agreement
and the due consummation by Parent and Sub of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of Parent and Sub. This Agreement constitutes (and each document and
instrument contemplated by this Agreement,
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when executed and delivered in accordance with the provisions hereof, will
constitute) a valid and legally binding agreement of each of Parent and Sub and
enforceable against them in accordance with its terms.
Section 4.03. No Conflicts. The execution, delivery and performance of this
Agreement by Parent and Sub and the consummation of the transactions
contemplated hereby will not constitute a conflict with, breach or violation of
or default (or an event which with notice or lapse of time or both would become
a default) under (a) Parent's Certificate of Incorporation or By-Laws, as
amended to date; (b) Sub's Articles of Incorporation or By-laws, as amended to
date; (c) any material agreement, instrument, license, franchise or permit to
which Parent or Sub is subject or by which Parent or Sub is bound; (e) any
order, writ, injunction or decree to which Parent or Sub is subject or by which
Parent or Sub is bound; or (f) to the best of Parent's or Sub's respective
knowledge, any law, rule or regulation to which Parent or Sub is subject or to
which it is bound.
Section 4.04. Consents and Approvals. Except for filings, approvals or
consents required by (a) the Secretary of State of the State of Colorado; (b)
the Xxxx-Xxxxx-Xxxxxx Act; (c) the Exchange Act; (d) Parent's lenders pursuant
to certain credit agreements with such lenders, which consents have been
obtained; and (e) such other statutes, rules or regulations which may require
registrations, authorizations, consents or approvals relating to matters that,
in the aggregate, are not material to Parent, neither Parent nor Sub is required
to submit any notice, report or other filing with or obtain any consent or
approval from any governmental authority or third party in connection with the
execution and delivery by Parent or Sub of this Agreement or the consummation of
the transactions contemplated hereby.
Section 4.05. Proxy Statement. None of the information to be supplied by
Parent or Sub or any of their accountants, counsel or other authorized
representatives for inclusion in the Proxy Statement will, at the time of the
mailing of the Proxy Statement and any amendments or supplements thereto, and at
the time of the Shareholders' Meeting contain any untrue statement of a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect to
Parent or Sub, or their officers and directors or any of the subsidiaries of
Parent shall occur which is or should be described in an amendment of, or a
supplement to, the Proxy Statement, Parent will notify the Company in writing of
such event.
Section 4.06. Financing of the Merger. Parent has all funds, or appropriate
commitments for funds (complete copies of which have been provided to the
Company), necessary for the exchange of the Shares pursuant to the Merger.
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ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.01. Conduct of Business Between Execution of this Agreement and
the Effective Time. During the period commencing on the date of this Agreement
and continuing until the Effective Time, the Company covenants and agrees that
the business of the Company and the Company's Subsidiaries shall be conducted
only in the regular and ordinary course of business, consistent with past
practice; and that it shall use all reasonable efforts to preserve intact its
business, keep available the services of its current officers and employees and
preserve its relationships with desirable customers, suppliers, licensors,
licensees, distributors and others having business dealings with it. Without
limiting the generality of the foregoing, except as set forth on Schedule 5.01
attached hereto, neither the Company nor any of its Subsidiaries shall, without
the prior written consent of Parent:
(a) adjust, split, combine or reclassify any shares of capital stock;
(b) make, declare, set aside or pay any dividend or make any other
distribution on, or directly or indirectly issue, sell, pledge, grant, redeem,
repurchase or otherwise acquire, any shares of its or any Subsidiary's capital
stock, any securities or obligations convertible into or exchangeable for any
shares of its capital stock, or any options, warrants or other rights to acquire
any shares of its capital stock except the issuance of stock pursuant to the
exercise of employee stock options outstanding on the date hereof;
(c) grant any stock option or appreciation rights or other rights to
share in the equity value of the Company or any Subsidiary;
(d) make any changes in the Articles of Incorporation or By-laws, as
amended to date, of the Company or any Subsidiary;
(e) acquire, sell, lease, encumber, transfer or dispose of any assets
outside the ordinary course of business, except pursuant to obligations in
effect on the date hereof;
(f) incur any indebtedness for borrowed money or guarantee any
indebtedness or issue or sell securities or warrants or rights to acquire any
debt securities or guarantee (or become liable for) any debt of others or make
any loans, advances or capital contributions or mortgage, pledge or otherwise
encumber any assets or create or suffer any material lien thereupon, except
pursuant to obligations or any guarantees thereof which in the aggregate do not
exceed $100,000;
(g) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
any payment, discharge or satisfaction (i) in the ordinary course of business
consistent with past practice; (ii) in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the financial
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statements (or the notes thereto) of the Company and (iii) of amounts described
on Schedule 3.25;
(h) notwithstanding any provision of clause (g) of this Section 5.01,
pay, discharge or satisfy any claims, liabilities or obligations in connection
with the Company Litigation, including, but not limited to, the SEC
Investigation, it being understood and agreed that the Company shall keep Parent
fully informed of all material developments in connection with the Company
Litigation, including, but not limited to, the SEC Investigation, and that
Parent shall have the right to participate in all decisions with respect to the
management, defense and settlement of the Company Litigation, including, but not
limited to, the SEC Investigation;
(i) change any of the accounting principles or practices used by it
(except as required by generally accepted accounting principles);
(j) except as required by law or contemplated by this Agreement (i)
enter into, adopt, amend or terminate any employee benefit plan or any
agreement, arrangement, plan or policy between the Company and one or more of
its directors or executive officers, (ii) increase in any manner the
compensation or fringe benefits of any director, officer or employee or (iii)
grant any bonus to any of its executive officers or pay any termination,
severance or other benefit not required by any plan and arrangement as in effect
on the date hereof;
(k) make or enter into any agreement, commitment or contract, except
those in the ordinary course of business for the purchase or sale of products in
amounts not exceeding $100,000 in any instance and not giving rise to
obligations extending beyond 90 days from the date hereof;
(l) make or enter into any lease of real property or extend or amend
any existing lease of real property;
(m) intentionally take, or enter into an agreement to take, any action
that would result in any of the conditions to the Merger set forth in Article VI
not being satisfied; or
(n) agree to, or make any commitment to take any of the actions
prohibited by this Section 5.01; or take any action, or agree or commit to take
any action that would make any representation or warranty of the Company
hereunder inaccurate in any respect at, or as of any time prior to the Effective
Time, or omit or agree or commit to omit to take any action necessary to prevent
any such representation or warranty from being inaccurate in any respect at any
such time.
(o) terminate the employment of any employee whose annual compensation
exceeds $40,000.
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Section 5.02. Consolidated Net Worth.
(a) As promptly as practicable after May 31, 1995, the Company will
prepare and deliver to Parent unaudited financial statements for the Company and
its consolidated subsidiaries as of May 31, 1995 (the "May 31 Financial
Statements"). The May 31 Financial Statements shall include line items
consistent with the financial statements of the Company included in the Amended
February 28 Form 10-Q and shall be prepared in accordance with generally
accepted accounting principles applied on a consistent basis with those used in
preparing the financial statements included in the Amended February 28 Form
10-Q.
(b) The May 31 Financial Statements shall be audited by the Company's
independent accountants, Deloitte & Touche LLP ("Deloitte & Touche"), and the
Company will use its best efforts to cooperate with Deloitte & Touche to enable
such firm to complete its audit as promptly as practicable and to express its
opinion as to the fairness of the presentation of the May 31 Financial
Statements. The Company will conduct a physical count of all the inventory of
the Company and its consolidated subsidiaries as of May 31, 1995. This physical
count will be observed by Deloitte & Touche as part of such firm's examination
of the May 31 Financial Statements in accordance with generally accepted
auditing standards. Representatives of Parent, Parent's lenders, and KPMG Peat
Marwick LLP ("KPMG Peat Marwick"), Parent's independent accountants, shall have
the right to observe such count and to review the Company's compilation of such
physical inventory and the workpapers of Deloitte & Touche relating to its
observations of the physical inventory conducted by the Company.
(c) As promptly as practicable after the delivery by the Company of the
May 31 Financial Statements, Deloitte & Touche shall use its best efforts to
complete its audit of the May 31 Financial Statements and to express its opinion
thereon. Prior to expressing its opinion, Deloitte & Touche shall deliver to
Parent and Sub a draft of the May 31 Financial Statements and its draft opinion
thereon (the "Audited Financial Statements"). Deloitte & Touche shall also
deliver to Parent and the Company a draft report (the "Tangible Net Worth
Report") setting forth the amount of the Tangible Net Worth of the Company as of
May 31, 1995, together with a statement by Deloitte & Touche to the effect that
such report has been prepared in accordance with generally accepted accounting
principles applied on a consistent basis with those used in preparing the
financial statements included in the Amended February 28 Form 10-Q and the terms
of this Agreement. Representatives of the Company and its independent
accountants, KPMG Peat Marwick, shall have the opportunity to examine the
workpapers, schedules and other documents prepared or used by Deloitte & Touche
in connection with the draft report on the audit of the May 31 Financial
Statements and the preparation of the draft Tangible Net Worth Report.
(d) Parent shall have a period of twenty (20) days after delivery of
the draft Audited Financial Statements and the draft Tangible Net Worth Report
to present in writing to the Company objections Parent may have to the matters
set forth therein, which objections shall be set forth in reasonable detail. If
no objections are raised within such twenty (20) day period, the draft Audited
Financial Statements and draft Tangible Net Worth Report shall be deemed
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accepted and approved by Parent. If Parent shall raise any objections within
such twenty (20) day period, and, Parent and the Company are unable to resolve
such dispute within ten (10) days after such objections are raised, then the
specific matters in dispute shall be submitted to a nationally recognized firm
of independent accountants agreed upon by Parent and the Company (the
"Arbitrating Accountants"), which firm shall make a final and binding
determination as to such matter or matters within ten (10) days after the
submission of such matters to such Arbitrating Accountants. The fees and
expenses of the Arbitrating Accountants shall be borne equally by Parent and the
Company. The parties shall use their best efforts to resolve all disputes with
respect to the Audited Financial Statements and the Tangible Net Worth Report by
July 31, 1995.
(e) For purposes of this Agreement, the "Tangible Net Worth" of the
Company shall mean the stockholders' equity of the Company, reduced by amounts
reflected on the Company's balance sheet as "Other Assets", including, but not
limited to, franchise rights and vendor authorizations, goodwill and other
intangible assets, and deposits, and giving effect to (i) the acquisition by the
Company of all of the outstanding common stock of Advanced Systems and
Peripherals, Inc. ("ASAP"), and (ii) the payment of accrued costs and settlement
costs and legal fees and expenses of approximately $175,000 (taking into account
applicable tax benefits) in connection with the settlement of the Lane
Litigation. By way of example, Schedule 5.02(e) attached hereto sets forth a
calculation of the Tangible Net Worth of the Company as of February 28, 1995,
based upon the pro forma balance sheet of the Company as of such date set forth
in Note 5 to the financial statements included in the Amended February 28 Form
10-Q, and giving effect to the ASAP acquisition and the settlement of the Lane
Litigation as of such date.
Section 5.03. Mutual Covenants.
(a) Compliance with Laws. Each party covenants and agrees to use its
best efforts to comply promptly with (and furnish information to the other
parties in connection with) any and all requirements that federal or state law
may impose on it or them, as the case may be, with respect to the Merger.
(b) Cooperation in Connection with Proceedings. Each party covenants
and agrees that if any action, suit, proceeding or investigation of the nature
specified in Section 6.01(c) hereof is commenced, it shall cooperate with the
others and shall use its best efforts to defend against the same and respond
thereto.
(c) Notification of Certain Events. Each party covenants and agrees to
give prompt written notice to the others of (i) the occurrence (or
non-occurrence) of any event the occurrence (or non-occurrence) of which would
be likely to cause (A) any representation or warranty contained in this
Agreement to be untrue or inaccurate or (B) any covenant, agreement or condition
in this Agreement not to be complied with or satisfied; and (ii) any failure by
such first party to comply with or satisfy any covenant, agreement or condition
contained in this Agreement.
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Section 5.04. Access to Information; Confidentiality.
(a) Information of the Company. The Company covenants and agrees to
afford Parent and Parent's accountants, counsel and other representatives, full
access, during normal business hours during the period prior to the Effective
Time or the earlier termination of this Agreement, to all of the properties,
books, contracts, commitments and records of the Company and its Subsidiaries,
and, during such period, shall furnish promptly to Parent a copy of each report,
schedule and other document filed or received thereby during such period
pursuant to the requirements of federal and state securities laws.
(b) Confidentiality Covenants of Parent. Parent covenants and agrees
that until the Effective Time, it shall continue to be bound by the terms of the
Confidentiality Agreement, dated November 21, 1994, as amended by the supplement
thereto dated February 3, 1995, between the Company and Parent.
Section 5.05. Meeting of Shareholders. The Company shall, promptly after
the date of this Agreement, take all action necessary in accordance with the
Colorado Act and its Articles of Incorporation and By-Laws to convene a meeting
of the Company's shareholders to act on the Merger Agreement (the "Shareholders'
Meeting"), and the Company shall consult with Parent in connection therewith.
The Company shall use its reasonable best efforts to solicit from shareholders
of the Company proxies in favor of the approval and adoption of the Merger
Agreement and to secure the vote or consent of shareholders required by the
Colorado Act to approve and adopt the Merger Agreement, unless otherwise
required by the applicable fiduciary duties of the directors of Company, as
determined by such directors in good faith after consultation with independent
legal counsel (which may include the Company's regularly engaged legal counsel).
Section 5.06. Proxy Statement. As promptly as practicable after the
execution of this Agreement, the Company shall prepare and file with the SEC a
proxy statement and a form of proxy, in connection with the vote of the
Company's shareholders with respect to the Merger (such proxy statement,
together with any amendments thereof or supplements thereto, in each case in the
form or forms mailed to the Company's shareholders, being the "Proxy
Statement"). Each of Parent and the Company shall furnish all information
concerning it and the holders of its capital stock as the other may reasonably
request in connection with such actions. As promptly as practicable the Company
shall mail the Proxy Statement to its shareholders. The Proxy Statement shall
include the recommendation of the Company's Board of Directors in favor of the
Merger unless otherwise required by the applicable fiduciary duties of the Board
of Directors of the Company, as determined by such directors in good faith after
consultation with legal counsel.
Section 5.07. Xxxx-Xxxxx-Xxxxxx Filing. To the extent required by law, the
respective ultimate parent entities of the Company and Parent shall file
Notification and Report Forms under the Xxxx-Xxxxx-Xxxxxx Act with the Federal
Trade Commission and the Antitrust Division
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of the Department of Justice. The parties shall cooperate and consult with each
other with respect to the preparation of the Notification and Report Forms and
any other submissions, including, but not limited to, responses to written or
oral comments or requests for additional information or documenting material by
the Federal Trade Commission or the Antitrust Division of the Department of
Justice, required to be made pursuant to the Xxxx-Xxxxx-Xxxxxx Act in connection
with the transactions contemplated hereby. The filing fee associated with such
filings shall be borne equally by Parent and the Company.
Section 5.08. Public or Shareholder Communications. From and after the date
of this Agreement, except as required by law, the Company, Parent and Sub will
not, with respect to the transactions contemplated hereby, issue any press
release or make any public statements or, in the case of the Company, mail any
communications or letters to its shareholders generally, except with the prior
approval of the other party or as required by law. With respect to any
communication required by law, the party making such communication agrees to use
its best efforts to provide a copy of the text of such communication to the
other party prior to its release.
Section 5.09. Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by the Merger and this Agreement, including, but not
limited to, using its best efforts to obtain all necessary waivers, consents,
authorizations and approvals of or exemptions by any governmental authority or
third party, and effecting all necessary registrations and filings. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party shall take all such necessary action.
Section 5.10. Closing Conditions. Each of the Company and Parent will use
its best efforts to cause the conditions set forth in Article VI to be
satisfied; provided, however, this provision shall not require any party to
waive any condition.
Section 5.11. Parent Shareholder Approval. Parent covenants and agrees to
(a) vote the shares of capital stock of Sub held by Parent to approve and adopt
this Agreement and the transactions contemplated hereby, and (b) cause Parent to
take any and all actions as may be necessary or appropriate to consummate the
Merger in accordance with the terms of this Agreement.
Section 5.12. No Solicitation.
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, representative or agent of the Company or any of
its subsidiaries, solicit or encourage the initiation of any inquiries or
proposals regarding any merger, sale of substantial assets, sale of shares of
capital stock (including, without limitation, by way of a tender offer) or
similar transactions involving the Company or any subsidiaries of the Company
(any of the foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"). The Company
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shall immediately cease and cause to be terminated all existing discussions and
negotiations, if any, with any parties conducted heretofore with respect to any
Acquisition Proposal. Nothing contained in this Section 5.12 shall prevent the
Board of Directors of the Company from considering, negotiating, approving and
recommending to the shareholders of the Company, a bona fide Acquisition
Proposal not solicited in violation of this Agreement, provided the Board of
Directors of the Company determines in good faith (upon advice of counsel) that
it is required to do so in order to discharge properly its fiduciary duties.
(b) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any Subsidiary in connection with an Acquisition Proposal or for access to the
properties, books or records of the Company or any Subsidiary by any person or
entity that informs the Board of Directors of the Company or such Subsidiary
that it is considering making, or has made, an Acquisition Proposal. Such notice
to Parent shall be made orally and in writing, and shall indicate whether the
Company is providing or intends to provide the person making the Acquisition
Proposal with access to information concerning the Company as provided in
Section 5.12(c).
(c) If the Board of the Company receives a request for commercial
nonpublic information by a person who makes a bona fide Acquisition Proposal,
and the Board of Directors determines in good faith and upon the advice of
counsel that it is required to cause the Company to act as provided in this
Section 5.12(c) in order to discharge properly its fiduciary duties, then,
provided the person making the Acquisition Proposal has executed a
confidentiality agreement substantially similar to the one then in effect
between the Company and Parent, the Company may provide such person with access
to information regarding the Company.
Section 5.13. Distribution Agreement. The Company, if requested by Parent,
will promptly exercise its right to terminate the Reseller Agreement between the
Company and Intelligent Electronics, Inc., and will enter into a mutually
acceptable Distribution Agreement with Parent.
Section 5.14. Indemnification. From and after the Effective Time, Parent
and the Surviving Corporation shall maintain in effect the rights to
indemnification of the Company's officers and directors provided for in the
Company's Articles of Incorporation and By-laws as in effect on the date hereof,
and provided in the resolution adopted by the Board of Directors of the Company
on the date hereof regarding the indemnification by the Company of its officers
and directors, a true and complete copy of which has heretofore been delivered
to Parent, regarding indemnification for acts and omissions occurring prior to
the Effective Time, including, but not limited to, this Agreement and the
transactions contemplated by this Agreement.
Section 5.15. Directors' and Officers' Insurance. The Company shall deliver
to Parent a binder (the "D&O Insurance Binder") validly obtained from an insurer
approved by Parent, evidencing such insurer's irrevocable commitment to provide
directors' and officers' insurance covering the directors and officers of the
Company for the period beginning on June 3, 1995 and
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ending not earlier than three years after the Effective Time, on terms and
conditions (including, but not limited to, scope and limits of coverage) at
least as favorable as the directors' and officers' insurance policies covering
the Company's directors and officers in effect on the date hereof.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.01. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the shareholders of the
Company required by applicable law or by the Company's Articles of Incorporation
or By-Laws;
(b) The waiting period applicable to the consummation of the Merger
under the Xxxx-Xxxxx-Xxxxxx Act shall have expired;
(c) No preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect, which would prevent the consummation of the
Merger; and
(d) All actions by or in respect of or filing with any governmental
regulatory or administrative agency or commission required to consummate the
Merger shall have been obtained or made.
Section 6.02. Additional Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to each of the
following conditions:
(a) Each of Parent and Sub shall have performed in all material
respects each obligation to be performed by it hereunder at or prior to the
Effective Time; and
(b) The representations and warranties of Parent and Sub set forth in
this Agreement shall be true and correct in all material respects at and as of
the Effective Time as if made at and as of such time, except as affected by
transactions contemplated or permitted by this Agreement and except to the
extent that any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall have been true and correct
as of such date.
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(c) Parent shall have delivered to the Company certificates issued by
appropriate governmental authorities evidencing the good standing of Parent in
the State of Delaware and of Sub in the State of Colorado.
(d) Parent and Sub shall have delivered to the Company copies,
certified by the Secretary of an Assistant Secretary, of the resolutions adopted
by the Boards of Directors of Parent and Sub, authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, and by Parent as the sole shareholder of Sub, approving this Agreement
and the Merger.
(e) Parent shall have delivered to the Company a certificate of its
Chief Executive and Chief Financial Officers, certifying as to the fulfillment
of the conditions to the obligations of the Company set forth in this Article
VI; and
(f) The Company shall have received the opinion of Xxxx & Priest LLP,
counsel to Parent and Sub, substantially in the form of Annex B hereto.
Section 6.03. Additional Conditions to the Obligations of Parent and Sub.
The obligations of Parent and Sub to effect the Merger are also subject to each
of the following conditions:
(a) The Company shall have performed in all material respects each
obligation to be performed by it hereunder at or prior to the Effective Time;
(b) The representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects at and as of the
Effective Time as if made at and as of such time, except as affected by
transactions contemplated or permitted by this Agreement and except to the
extent that any of such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true and
correct as of such date;
(c) The consents of third parties set forth on Schedule 3.07 attached
hereto, required to consummate the transactions contemplated hereby, shall have
been obtained;
(d) The Company shall have delivered to Parent certificates issued by
appropriate governmental authorities (i) evidencing the good standing of the
Company in the State of Colorado and as a foreign corporation in each
jurisdiction in which it has qualified to do business as a foreign corporation,
and (ii) evidencing the good standing of each Subsidiary of the Company (other
than the Subsidiaries listed on Schedule 3.03 attached hereto) in its
jurisdiction of organization or incorporation and as a foreign corporation in
which it has qualified to do business as a foreign corporation;
(e) The Company shall have delivered to Parent copies, certified by the
Secretary or Assistant Secretary, of the resolutions adopted by the Board of
Directors of the Company
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authorizing the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, and by the shareholders of the Company
approving this Agreement and the Merger;
(f) The Tangible Net Worth of the Company as reflected on the
consolidated balance sheet of the Company as of May 31, 1995, determined in
accordance with Section 5.02, shall be not less than $14,650,000;
(g) Parent shall have received funding under its existing financing
commitments sufficient to enable Sub to consummate the Merger and pay related
fees and expenses;
(h) No Company Material Adverse Effect shall have occurred, it being
understood that the failure by US West to reaffirm its intention to continue in
effect its existing agreement with the Company after the Effective Time shall
constitute a Company Material Adverse Effect;
(i) No event which is reasonably likely to be material and adverse to
the business, financial condition or results of operations of Parent and its
subsidiaries taken as a whole (a "Parent Material Adverse Effect") shall have
occurred;
(j) By not later than immediately prior to the Effective Time, Parent,
Xxxxxxxx and the Company shall have entered into a Consulting Agreement
substantially in the form of Annex C hereto;
(k) By not later than immediately prior to the Effective Time, the
employment agreement of Xxxxxxx X. Xxxxxxxx, Xx. shall have been amended and
restated as set forth in Annex D hereto;
(l) By not later than immediately prior to the Effective Time, the
Company, Total Access and Xxxxxxxx shall have entered into a Purchase Agreement
substantially in the form of Annex E hereto pursuant to which (i) the Company
shall acquire from Xxxxxxxx all of his right, title and interest in Total
Access, and (ii) Xxxxxxxx shall acquire from Total Access all of the right,
title and interest of Total Access in and to certain real property more
particularly described in such Purchase Agreement and the transactions
contemplated by such Purchase Agreement shall have been consummated, it being
understood that, with the approval of Parent (which shall not be unreasonably
withheld), the parties to the Purchase Agreement may amend such Purchase
Agreement such that no party thereto will incur a disproportionate disadvantage
with respect to the federal income tax treatment of the transactions
contemplated by such Purchase Agreement;
(m) the D&O Insurance Binder shall have been obtained and shall be in
full force and effect;
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(n) All incentive stock option and non-qualified stock option plans of
the Company, and each option issued under any of such plans, shall have been
amended, to the extent necessary in accordance with Section 2.05 hereof;
(o) Appraisal rights under the Colorado Act shall have been perfected
by the holders of not more than 10 per cent (10%) of the outstanding shares;
(p) The Company shall have delivered to Parent and Sub the certificate
of its Chief Executive and Chief Financial Officers, certifying as to the
fulfillment of the conditions to the obligations of Parent and Sub set forth in
this Article VI; and
(q) Parent and Sub shall have received the opinion of Stroock & Stroock
& Xxxxx, substantially in the form of Annex F hereto.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of the Company, (a) by the mutual written consent of the Board of
Directors of Parent, Sub and the Company or (b) by either Parent or the Company
if (i) any court of competent jurisdiction in the United States or other United
States governmental body shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the Merger
(which the party seeking to terminate this Agreement has used its best efforts
to have reversed or lifted without paying any material amounts not reasonably
expected for the transactions contemplated hereby) and such order, decree,
ruling or other action shall have become final and nonappealable, (ii) the
Effective Time shall not have occurred by September 30, 1995, but, the right to
terminate in such event shall not be available to any party whose failure to
fulfill any obligations hereunder has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date, (c) by Parent
upon the occurrence of any Trigger Event described in clauses (i) through (iv)
of Section 8.01(b) or (d) by the Company upon the occurrence of either of the
events described in Section 8.01(c).
Section 7.02. Effect of Termination. Except as set forth in Section 5.02 or
Section 8.01 hereof, in the event of termination of this Agreement as provided
above, this Agreement shall forthwith become void and there shall be no
liability on the part of Parent, Sub or the Company.
Section 7.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time before or after approval hereof by the shareholders of the Company,
but, after such approval, no amendment shall be made which reduces the amount or
changes the form of consideration to be paid in the Merger or in any way
adversely affects the rights of holders of the Shares without the further
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approval of such holders. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of each of the parties hereto.
Section 7.04. Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken by their respective Boards of Directors, may (a) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the representations and
warranties of the other parties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
satisfaction of any of the conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
Notwithstanding anything to the contrary set forth herein, the following
conditions precedent to the consummation of the Merger may not be waived by
either party hereto: (i) the approval of the Merger and this Agreement by the
shareholders of the Company pursuant to the Colorado Act; (ii) the expiration or
earlier termination of all applicable waiting periods under the Xxxx-Xxxxx
Xxxxxx Act, with no outstanding requests for additional information or
clarification or notices indicating that further action will be taken by the
Federal Trade Commission or the Antitrust Division of the Department of Justice
with respect to the Merger; and (iii) the execution by all necessary parties of
the Articles of Merger to be filed with the Colorado Secretary of State.
ARTICLE VIII
FEES AND EXPENSES/GENERAL PROVISIONS
Section 8.01. Fees and Expenses.
(a) Except as otherwise expressly provided in this Agreement, all costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense.
(b) If this Agreement is terminated as a result of the occurrence of
any of the events set forth below (a "Trigger Event"):
(i) the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or an agreement in
principle with respect to any Acquisition Proposal;
(ii) any representations or warranty made by the Company in,
or pursuant to, this Agreement shall not have been true and correct in all
material respects when made and any such failures to be true and correct could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect or the Company shall have failed to observe or perform
in any material respect any of its obligations under this Agreement;
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(iii) the Board of Directors of the Company shall have
withdrawn or materially modified in a manner adverse to Parent or Sub its
approval or recommendation of the Merger or this Agreement, in any such case
whether or not such withdrawal or modification is required by the fiduciary
duties of the Board of Directors; or
(iv) the Company's shareholders shall have failed to approve
the Merger at the Shareholders' Meeting;
and, at the time of such termination, Parent is not in breach of any material
provision of this Agreement, then the Company shall pay Parent promptly, but in
no event later than two business days after the termination of the Agreement, a
cash termination fee of $1,250,000, on account of fees, costs and out-of-pocket
expenses incurred by Parent or Sub (including, without limitation, fees and
expenses payable to all legal, accounting, financial, public relations and other
professional advisors) arising out of, in connection with or related to the
Merger or the transactions contemplated by this Agreement.
(c) If this Agreement is terminated by reason of (i) the failure by
Parent to satisfy the condition contained in Section 6.03(g) for any reason
other than as a consequence of a Company Material Adverse Effect, or (ii) the
failure by Parent to satisfy the condition contained in Section 6.03(i) and, at
the time of such termination, the Company is not in breach of any material
provision of this Agreement, then Parent shall pay to the Company promptly, but
in no event later than two business days after the termination of this Agreement
by reason of the failure by Parent to satisfy either of such conditions, a cash
termination fee of $1,250,000 on account of fees, costs and out-of-pocket
expenses incurred by the Company (including, without limitation, fees and
expenses payable to all legal, accounting, financial, public relations and other
professional advisors) arising out of, in connection with or related to the
Merger or the transactions contemplated by this Agreement.
Section 8.02. Survival of Representations and Warranties. Except as set
forth in the last sentence of this Section 8.02, the representations and
warranties made by each party contained in this Agreement or in any exhibit,
disclosure schedule, certificate or other instrument delivered pursuant to this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the other party, whether prior to or after
the execution of this Agreement. No representations and warranties contained in
this Agreement or in any exhibit, disclosure schedule, certificate or other
instrument delivered pursuant to this Agreement shall survive the consummation
of the Merger at the Effective Time.
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Section 8.03. Notices. All notices and other communications required or
permitted hereunder shall be in writing and delivered as follows:
if to Parent or Sub:
ENTEX Information Services, Inc.
Xxx Xxxxxxxxxxxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Vice President and
General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx & Priest LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Company:
Random Access, Inc.
0000 Xxxx Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Vice President and General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Stroock & Stroock & Xxxxx
Seven Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other address as may have been designated in a prior notice. Notices
sent by registered or certified mail, postage prepaid and with return receipt
requested, shall be deemed
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to have been given two (2) business days after being mailed, and otherwise
notices shall be deemed to have been given when received.
Section 8.04. Headings. The headings in this Agreement are intended solely
for convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
Section 8.05. Exhibits, Schedules and Annexes. The Exhibits, Schedules and
Annexes referred to in this Agreement shall be deemed to be an integral part of
this Agreement as if fully rewritten herein. To the extent applicable, a
disclosure set forth on any one such document will serve as a disclosure for
purposes of all other such documents.
Section 8.06. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same document.
Section 8.07. Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be governed by and construed and
enforced in accordance with the laws of the State of New York, as applied to
contracts made, executed and to be fully performed in such state by citizens of
such state, without regard to conflict of laws principles.
Section 8.08. Pronouns. The use of a particular pronoun herein shall not be
restrictive as to gender or number but shall be interpreted in all cases as the
context may require.
Section 8.09. Time Periods. Unless otherwise provided herein, any action
required hereunder to be taken within a certain number of days shall be taken
within that number of calendar days; provided, however, that if the last day for
taking such action falls on a weekend or a holiday, the period during which such
action may be taken shall be automatically extended to the next business day.
Section 8.10. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against either
party.
Section 8.11. Entire Agreement. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations and prior agreements between the parties are merged
into this Agreement, and there are no representations, warranties, covenants,
understandings, or agreements, oral or otherwise, in relation thereto among the
parties other than those incorporated herein and to be delivered hereunder.
Section 8.12. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision
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of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
Section 8.13. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto. Except as otherwise provided in
this Agreement, nothing in this Agreement is intended or shall be construed to
confer on any person other than the parties hereto any rights or benefits
hereunder.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
ENTEX INFORMATION SERVICES, INC.
By: /s/ Xxxxxx Xxxxx, Xx.
----------------------------------------
Xxxxxx X. Xxxxx, Xx.
Executive Vice President and
Chief Financial Officer
ENTEX ACQUISITION CORP.
By: /s/ Xxxxxx Xxxxx, Xx.
----------------------------------------
Xxxxxx X. Xxxxx, Xx.
Vice President
RANDOM ACCESS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
----------------------------------------
Xxxxxxx X. Xxxxxxxx, Xx.
President and
Chief Executive Officer
33
39
AMENDMENT NO.1 TO AGREEMENT AND PLAN OF MERGER
AMENDATORY AGREEMENT, dated as of June 27, 1995, by and among
ENTEX Information Services, Inc., a Delaware corporation ("Parent"), ENTEX
Acquisition Corp., a Colorado corporation and wholly owned subsidiary of Parent
("Sub"), and Random Access, Inc., a Colorado corporation (the "Company").
WHEREAS, Parent, Sub and the Company are parties to an Agreement
and Plan of Merger, dated as of May 15, 1995 (the "Agreement"); and
WHEREAS, the parties have mutually agreed that it is in their
respective best interests that the Agreement be amended as provided herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment of Section 2.01 of the Agreement. Section 2.01 of
the Agreement is hereby amended by deleting such Section as it currently exists
in its entirety and inserting in lieu thereof the following:
Section 2.01. Conversion of Securities. Each share of common
stock, $0.0001 par value, of the Company (the "Shares") issued and
outstanding immediately prior to the Effective Time, other than Shares
owned by Parent, Sub or any other wholly owned subsidiary of Parent or
held in the treasury of the Company, all of which shall be canceled
(collectively, the "Canceled Shares"), and Shares held by Dissenting
Shareholders (as defined in Section 2.06 hereof) (collectively, the
"Dissenting Shares"), shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into the right to
receive $3.25 net to the holder in cash (the "Merger Consideration"),
payable to the holder thereof, without interest thereon, upon the
surrender of the certificate representing such Share.
2. Amendment of Section 3.03 of the Agreement. Section 3.03 of
the Agreement is hereby amended by deleting the third sentence of such Section
as it currently exists in its entirety and inserting in lieu thereof the
following:
Other than Total Access Limited Liability Company, a Wyoming limited
liability company ("Total Access"), which is 88%-owned by the Company,
all of the outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable and owned directly or
indirectly by the Company free and clear of all liens, claims or
encumbrances and were not issued in violation of any preemptive right.
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3. Amendment of Section 5.02 of the Agreement. Section 5.02 of
the Agreement is hereby amended by deleting such Section as it currently exists
in its entirety and inserting in lieu thereof the following:
Section 5.02. Consolidated Net Worth.
(a) As promptly as practicable after the date hereof, the
Company will prepare and deliver to Parent unaudited financial
statements for the Company and its consolidated subsidiaries as
of May 31, 1995 (the "May 31 Financial Statements") and a report
(the "Tangible Net Worth Report") setting forth the amount of the
Tangible Net Worth of the Company as of May 31, 1995. The May 31
Financial Statements shall include line items consistent with the
financial statements of the Company included in the Amended
February 28 Form 10-Q and shall be prepared in accordance with
generally accepted accounting principles applied on a consistent
basis with those used in preparing the financial statements
included in the Amended February 28 Form 10-Q.
(b) The May 31 Financial Statements shall be audited by
Parent's independent accountants, KPMG Peat Marwick LLP ("KPMG
Peat Marwick"), and the Company will use its best efforts to
cooperate with KPMG Peat Marwick to enable such firm to complete
its audit as promptly as practicable and to express its opinion
as to the fairness of the presentation of the May 31 Financial
Statements. The Company shall use its best efforts to cause its
independent accountants, Deloitte & Touche LLP ("Deloitte &
Touche"), to cooperate with KPMG Peat Marwick in making available
to KPMG Peat Marwick all workpapers of Deloitte & Touche that
KPMG Peat Marwick may reasonably request in connection with such
audit. The Company will conduct a physical count of all the
inventory of the Company and its consolidated subsidiaries as of
May 31, 1995. This physical count will be observed by KPMG Peat
Marwick as part of such firm's examination of the May 31
Financial Statements in accordance with generally accepted
auditing standards. Representatives of Parent and Parent's
lenders shall have the right to observe such count and to review
the Company's compilation of such physical inventory and the
workpapers of KPMG Peat Marwick relating to its observations of
the physical inventory conducted by the Company. The fees and
expenses of KPMG Peat Marwick in conducting such audit shall be
paid by the Company.
(c) As promptly as practicable after the delivery by the
Company of the May 31 Financial Statements, KPMG Peat Marwick
shall use its best efforts to complete its audit of the May 31
Financial Statements and to express its opinion thereon. Prior to
expressing its opinion, KPMG Peat Marwick shall deliver to Parent
and the Company a draft of the May 31 Financial Statements and
its draft opinion thereon (the "Audited Financial Statements").
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41
KPMG Peat Marwick shall also deliver to Parent the Tangible Net
Worth Report, together with a statement by KPMG Peat Marwick to
the effect that such report has been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis with those used in preparing the financial statements
included in the Amended February 28 Form 10-Q and the terms of
this Agreement. Representatives of the Company shall have the
opportunity to examine the workpapers, schedules and other
documents prepared or used by KPMG Peat Marwick in connection
with the draft report on the audit of the May 31 Financial
Statements and the Tangible Net Worth Report.
(d) The Company shall have a period of twenty (20) days
after delivery of the draft Audited Financial Statements and the
draft Tangible Net Worth Report to present in writing to Parent
objections the Company may have to the matters set forth therein,
which objections shall be set forth in reasonable detail. If no
objections are raised within such twenty (20) day period, the
draft Audited Financial Statements and draft Tangible Net Worth
Report shall be deemed accepted and approved by the Company. If
the Company shall raise any objections within such twenty (20)
day period, and, Parent and the Company are unable to resolve
such dispute within ten (10) days after such objections are
raised, then the specific matters in dispute shall be submitted
to a nationally recognized firm of independent accountants agreed
upon by Parent and the Company (the "Arbitrating Accountants"),
which firm shall make a final and binding determination as to
such matter or matters within ten (10) days after the submission
of such matters to such Arbitrating Accountants. The fees and
expenses of the Arbitrating Accountants shall be borne equally by
Parent and the Company. The parties shall use their best efforts
to resolve all disputes with respect to the Audited Financial
Statements and the Tangible Net Worth Report by August 15, 1995.
(e) For purposes of this Agreement, the "Tangible Net
Worth" of the Company shall mean the stockholders' equity of the
Company, reduced by amounts reflected on the Company's balance
sheet as "Other Assets", including, but not limited to, franchise
rights and vendor authorizations, goodwill and other intangible
assets, and deposits, and giving effect to (i) the acquisition by
the Company of all of the outstanding common stock of Advanced
Systems and Peripherals, Inc. ("ASAP"), and (ii) the payment of
accrued costs and settlement costs and legal fees and expenses of
approximately $175,000 (taking into account applicable tax
benefits) in connection with the settlement of the Lane
Litigation; provided, however, that for purposes of determining
such Tangible Net Worth, the Company shall not be required to
include as additional goodwill as of May 31, 1995, any accrued
"earn-out" or additional purchase price consideration payable by
the Company in connection with the acquisition of ASAP or the
acquisition by the Company
-3-
42
on February 15, 1995 from Documatrix Corporation ("Documatrix")
of certain assets (the "Documatrix Assets"), and the assumption
by the Company of certain liabilities of Documatrix (the
"Documatrix Liabilities") in conjunction with the acquisition of
the Documatrix Assets. By way of example, Schedule 5.02(e)
attached hereto sets forth a calculation of the Tangible Net
Worth of the Company as of February 28, 1995, based upon the pro
forma balance sheet of the Company as of such date set forth in
Note 5 to the financial statements included in the Amended
February 28 Form 10-Q, and giving effect to the ASAP acquisition
and the settlement of the Lane Litigation as of such date.
4. Amendment of Section 5.15 of the Agreement. Section 5.15 of
the Agreement is hereby amended by deleting such Section as it currently exists
in its entirety and inserting in lieu thereof the following:
Section 5.15. Directors' and Officers' Insurance. The Company
shall deliver to Parent a binder (the "D&O Insurance Binder") validly
obtained from an insurer approved by Parent, evidencing such insurer's
irrevocable commitment to provide not less than $2.5 million of
directors' and officers' insurance covering the directors and officers
of the Company for the period beginning on June 8, 1995 and ending not
earlier the Effective Time and for non-cancellable "tail" coverage for
the period beginning at Effective Time and ending not earlier than one
year after the Effective Time, and otherwise containing terms and
conditions (including, but not limited to, scope of coverage) at least
as favorable as the directors' and officers' insurance policies covering
the Company's directors and officers in effect on May 15, 1995.
5. Addition of New Section 5.16 to the Agreement. The Agreement
is hereby amended by adding thereto a new Section 5.16, reading as follows:
Section 5.16. Documatrix Divestiture. The Company will use its
best efforts to negotiate, execute and deliver as promptly as
practicable one or more agreements or other documents satisfactory in
form and substance to Parent in its sole discretion (the "Documatrix
Divestiture Documents"), pursuant to which the Company will divest its
entire right, title and interest in and to the Documatrix Assets and
will be relieved of substantially all the Documatrix Liabilities, and to
consummate the transactions contemplated by the Documatrix Divestiture
Documents on or before August 11, 1995.
6. Amendment of Section 6.03(f) of the Agreement. Subparagraph
(f) of Section 6.03 of the Agreement is hereby amended by deleting such
Subsection as it currently exists in its entirety and inserting in lieu thereof
the following:
(f) The Tangible Net Worth of the Company as reflected on the
consolidated balance sheet of the Company as of May 31, 1995, determined
in accordance with Section 5.02, shall be not less than $13,500,000;
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43
7. Amendment of Section 6.03(l) of the Agreement. Subsection (l) of
Section 6.03 of the Agreement is hereby amended by deleting such Subsection as
it currently exists in its entirety and inserting in lieu thereof the following:
(l) By not later than immediately prior to the Effective Time,
the Company and Xxxxxxxx shall have entered into a Purchase Agreement,
and Total Access and Xxxxxxxx shall have entered into a Second Amendment
to the Operating Agreement of Total Access, each substantially in the
form of Annexes E-1 and E-2 hereto, pursuant to which the Company shall
acquire from Xxxxxxxx all of his right, title and interest in Total
Access and the transactions contemplated by such Purchase Agreement
shall have been consummated;
8. Addition of new Section 6.03(n) to the Agreement. The
Agreement is hereby amended by adding thereto after Subsection (m) of Section
6.03 thereof a new Subsection (n) of Section 6.03 thereof, reading as follows:
(n) The Documatrix Divestiture Documents shall have been executed
and delivered and the transactions contemplated thereby shall have been
consummated;
The Agreement is further amended by renumbering Subsections (n)
through (q) of Section 6.03 of the Agreement as they currently exist (prior to
giving effect to addition of the new Subsection (n) of Section 6.03 of the
Agreement as described in this Section 7, as Subsections (o) through (r) of
Section 6.03, respectively.
9. Amendment of Annex C to the Agreement. Annex C to the
Agreement, the form of the Consulting Agreement to be entered into by Parent,
the Company and Xxxxx X. Xxxxxxxx, is hereby amended by deleting the whole
thereof as it currently exists, and substituting therefor the revised Annex C in
the form attached hereto.
10. Amendment of Annex E to the Agreement. Annex E to the
Agreement, the form of the Purchase Agreement to be entered into by the Company
and Xxxxx X. Xxxxxxxx, is hereby amended by deleting the whole thereof as it
currently exists, and substituting therefor revised Annexes E-1 and E-2 in the
form attached hereto.
11. Amendment of Section 8.01 of the Agreement. (a) Subsection
(b) of Section 8.01 of the Agreement is hereby amended by deleting such
Subsection as it currently exists in its entirety and inserting in lieu thereof
the following:
(b) If this Agreement is terminated as a result of the occurrence
of any of the events set forth below (a "Trigger Event"):
-5-
44
(i) the Company shall have entered into, or shall have publicly
announced its intention to enter into, an agreement or an
agreement in principle with respect to any Acquisition Proposal;
(ii) any representations or warranty made by the Company in, or
pursuant to, this Agreement shall not have been true and correct
in all material respects when made and any such failures to be
true and correct could reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect or the Company shall have failed to observe or perform in
any material respect any of its obligations under this Agreement;
(iii) the Board of Directors of the Company shall have withdrawn
or materially modified in a manner adverse to Parent or Sub its
approval or recommendation of the Merger or this Agreement, in
any such case whether or not such withdrawal or modification is
required by the fiduciary duties of the Board of Directors; or
(iv) the Company's shareholders shall have failed to approve the
Merger at the Shareholders' Meeting;
and, at the time of such termination, Parent is not in breach of any
material provision of this Agreement, then (A) if such termination is
due to a Trigger Event other than the event described in subclause (ii)
above, the Company shall pay Parent promptly, but in no event later than
two business days after the termination of the Agreement, a cash
termination fee of $1,050,000, on account of fees, costs and
out-of-pocket expenses incurred by Parent or Sub (including, without
limitation, fees and expenses payable to all legal, accounting,
financial, public relations and other professional advisors) arising out
of, in connection with or related to the Merger or the transactions
contemplated by this Agreement and (B) if such termination is due to a
Trigger Event described in subclause (ii) above the Company shall pay to
Parent a cash termination fee of $750,000, on account of such fees,
costs and out-of pocket expenses, of which $500,000 shall be paid
promptly, but in no event later than two business days after the
termination of the Agreement, and the remainder shall be paid, without
interest thereon, fourteen months after the termination of the
Agreement.
(b) Subsection (c) of Section 8.01 of the Agreement is hereby
amended by deleting such Subsection as it currently exists in its
entirety and inserting in lieu thereof the following:
(c) If this Agreement is terminated by reason of (i) the failure
by Parent to satisfy the condition contained in Section 6.03(g) for any
reason other than as a consequence of a Company Material Adverse Effect,
or (ii) the failure by Parent to satisfy the condition contained in
Section 6.03(i) and, at the time of such termination, the Company is not
in breach of any material provision of this Agreement, then
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Parent shall pay to the Company promptly, but in no event later than two
business days after the termination of this Agreement by reason of the
failure by Parent to satisfy either of such conditions, a cash
termination fee of $750,000 on account of fees, costs and out-of-pocket
expenses incurred by the Company (including, without limitation, fees
and expenses payable to all legal, accounting, financial, public
relations and other professional advisors) arising out of, in connection
with or related to the Merger or the transactions contemplated by this
Agreement, of which $500,000 shall be paid promptly, but in no event
later than two business days after such termination, and the remainder
shall be paid, without interest thereon, fourteen months after such
termination.
12. Defined Terms. Capitalized terms that are defined in the
Agreement and not otherwise defined in this Amendatory Agreement shall have the
meanings ascribed to them in the Agreement.
13. Representations and Warranties Restated. Except as set forth
on Schedule A hereto, each and every representation and warranty made by the
parties to the Agreement is hereby restated as of, and as if originally made on,
the date hereof.
14. Agreement Remains in Force. Except as expressly set forth in
this Amendatory Agreement, the Agreement remains unmodified and in full force
and effect.
15. Counterparts; Effect. This Amendatory Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same agreement.
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46
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Amendatory Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
ENTEX INFORMATION SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
----------------------------------------
Name:
Title: Executive Vice President and
Chief Financial Officer
ENTEX ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxx, Xx.
----------------------------------------
Name:
Title: Vice President
RANDOM ACCESS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------------
Name:
Title: Chairman
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Schedule A
Add to Schedule 3.09:
15. Losses from operations for the fiscal quarter ended May 31, 1995,
previously identified and disclosed to Parent, currently
estimated to be approximately $950,000 after taxes.
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48
ANNEX C
CONSULTING AGREEMENT
This Consulting Agreement, dated __________, 1995, is by and among
ENTEX INFORMATION SERVICES, INC., a Delaware corporation ("ENTEX"), RANDOM
ACCESS, INC., a Colorado corporation (the "Company") and XXXXX X. XXXXXXXX
(the "Consultant").
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated as of May 15, 1995, as amended, among ENTEX, ENTEX
Acquisition Corp., a Colorado corporation and a wholly owned subsidiary of
ENTEX ("Sub"), and the Company, ENTEX has agreed to acquire all of the issued
and outstanding Common Stock of the Company, through the merger of Sub with and
into the Company, on the terms and subject to the conditions set forth in the
Merger Agreement; and
WHEREAS, prior to the date hereof, Consultant has been employed by the
Company and possesses expertise regarding the Company's business and affairs
which ENTEX and the Company desire to retain and to use after the Effective
Time (as defined in the Merger Agreement); and
WHEREAS, ENTEX and the Company desire to engage the Consultant to
provide consulting services to the Company, and, if requested, to ENTEX, from
and after the Effective Time, on the terms and conditions set forth herein,
and the Consultant has agreed to accept such engagement and to provide such
consulting services.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
ARTICLE I
ENGAGEMENT AS CONSULTANT
Section 1.1 Engagement as Consultant. Effective as of the
Effective Time, ENTEX and the Company hereby engage the Consultant to provide
consulting services to the Company, and, if requested, to ENTEX and the
Consultant hereby accepts such engagement and agrees to provide consulting
services as provided herein.
Section 1.2 Consulting Services to be Provided. Subject to the
terms of this Agreement, the Consultant shall provide consulting services and
advice to ENTEX, the Company or both, with
49
respect to (i) the realization by ENTEX and the Company of maximum value from
the sale or other disposition of the real property, building and improvements
comprising the premises at 0000 Xxxx Xxxxx Xxxxxx, Xxxxxx Xxxxxxxx (the
"Headquarters Building") at which the Company's principal executive offices are
currently located, (ii) the Company's defense of litigation currently pending
against the Company and the Company's response to the currently pending
investigation of the Company by the Securities and Exchange Commission, (iii)
the development and implementation of cost savings and other operational
improvement programs for the Company at both the corporate and branch levels,
and (iv) such additional consulting services as ENTEX and the Company may
determine. During his engagement under this Agreement, Consultant shall devote
such time to the subject of his engagement hereunder during normal working hours
as will result in his performing his engagement in a diligent and professional
manner. The specific consulting services to be provided by the Consultant shall
be determined by any one of the Chief Executive Offices of the Company, the
President of ENTEX, or the Executive Vice President and Chief Financial Officer
of ENTEX.
Section 1.3 Expenses. The Consultant shall be permitted to incur reasonable
expenses incurred in connection with his engagement, including expenses for
travel and similar items consistent with ENTEX's expense reimbursement policy.
The Company or ENTEX, as the case may be, will reimburse the Consultant for all
such expenses upon the presentation by the Consultant, from time to time, of an
itemized account of such expenditures.
ARTICLE II
CONSULTING FEES
Section 2.1 Base Fees. As payment for services performed pursuant to his
engagement hereunder, ENTEX and/or the Company shall pay to the Consultant a
consulting fee at the rate of $225,000 per year, in equal monthly installments.
Section 2.2 Transaction Bonus. ENTEX and/or the Company will decide not
later than one year after the Effective Time regarding the sale or other
disposition of the Headquarters Building, and will advise the Consultant of
their decision. If the disposition of the Headquarters Building is consummated
within one year after the date on which such decision is made and the purchase
price obtained by the Company in such disposition (the "Purchase Price") is
equal to or exceeds $3,000,000, then the Consultant shall be entitled to receive
additional compensation, payable not later than 45 days after the consummation
of such disposition, of an amount in cash equal to the sum of (i) $25,000, plus
(ii) (A) 2.0% of the amount by which the Purchase Price exceeds $3,000,000 but
does not exceed $4,000,000; (B) 3.5% of the amount by which the Purchase
50
Price exceeds $4,000,000 but does not exceed $5,000,000; and (C) 5.0% of the
amount by which the Purchase Price exceeds $5,000,000. The Consultant
acknowledges and agrees that the terms, conditions and timing of any sale or
other disposition of the Headquarters Building remain subject to the sole
discretion and control of ENTEX, the Company or both ENTEX and the Company.
Section 2.3 Supplementary Payment. Not later than five business days after
the earlier to occur of (i) the consummation of any disposition of the
Headquarters Building pursuant to Section 2.3 or (ii) the end of the
contemplated term of the engagement as set forth in Section 3.1, ENTEX and/or
the Company will pay to the Consultant the sum of $100,000 in cash, together
with interest, if any, thereon at a rate per annum equal to the Prime Rate (as
hereinafter defined) plus 2.00%, for the period beginning six months after the
Effective Time and ending on the date of such payment. The payment described in
this Section 3.1 is hereinafter referred to as the "Supplementary Payment."
Section 2.4 Insurance. The Consultant shall be entitled to receive (on the
same terms and costs made available to senior employees of the Company) such
medical insurance coverage as is now offered by the Company to the senior
employees of the Company. The Consultant shall also be entitled to receive life
insurance coverage under the policies listed on Exhibit A attached hereto. The
Consultant shall be required to make such contributions to the cost of such
insurance coverages as may be required by the policies of the Company in effect
from time to time. If the insurance plan of the Company does not permit
consultants to be covered thereunder, then ENTEX or the Company shall pay to
the Consultant an amount in cash sufficient to permit the Consultant to
purchase insurance coverage comparable to the medical and life insurance
coverage offered by pursuant to this Section 2.03. The Consultant shall not be
eligible to participate in any 401(k) plan, pension plan, stock option, stock
purchase or similar plan of ENTEX or the Company.
Section 2.5 Automobile Allowance. The Consultant shall be entitled to
receive an automobile allowance of $700 per month on the same terms as are now
offered by the Company to the Consultant.
ARTICLE III
TERM OF ENGAGEMENT AS CONSULTANT AND TERMINATION
Section 3.1 Term. The Consultant's engagement hereunder shall commence at
the Effective Time and end on August 31, 1997, subject, however, to termination
during such period as provided herein.
51
Section 3.2 Termination by ENTEX or the Company. Notwithstanding any
provision of this Agreement to the contrary, the Consultant's engagement will
terminate upon his death or permanent disability, and ENTEX or the Company at
any time may terminate the Consultant's engagement at any time, with or without
cause, by giving Consultant written notice of such termination for cause, as
hereinafter defined. For the purpose of this Section 3.2, "for cause" shall
mean: (a) fraud, misappropriation or intentional material damage to the property
or business of ENTEX or the Company; (b) the Consultant being charged with a
felony; (c) conduct in an unprofessional, unethical, immoral or fraudulent
manner if such conduct continues or is uncorrected for 10 days following written
notice thereof to the Consultant; or (d) determination by ENTEX in good faith
that Consultant has wilfully neglected to perform the duties incident to his
engagement hereunder or committed gross negligence in the performance of the
duties incident to his engagement hereunder, following Consultant's failure to
cure any such failure of performance within 14 days after the delivery by ENTEX
or the Company of written notice to Consultant of such failure of performance.
Section 3.3 Termination by Consultant. The Consultant shall have the right
to terminate this Agreement and his engagement hereunder at any time by giving
ENTEX and the Company written notice of such termination.
Section 3.4 Effect of Termination. The rights and remedies of the
Consultant under this Section 3.4 of this Agreement shall survive termination
of his engagement under this Agreement.
In the event of termination of the Consultant's engagement by ENTEX or the
Company for any reason other than "for cause" as set forth in Section 3.2, the
Consultant shall receive at the option of ENTEX or the Company (i) either (A)
the base consulting fees provided for in Section 2.1 for the remainder of the
contemplated term of the engagement set forth in Section 3.1 or (B) a lump sum
payment paid within forty-five (45) days after the termination of his
engagement, equal to the base consulting fees provided for in Section 2.1 for
the remainder of the contemplated term of the engagement as set forth in Section
3.1, subject to the application of a present value discount based upon the
announced prime rate of interest of the lender which has made the largest loan
to ENTEX then outstanding (the "Prime Rate"), as in effect on the date of
termination, and (ii) the Supplementary Payment, if not previously paid.
If the Consultant's engagement is terminated "for cause" pursuant to
Section 3.2, if the Consultant dies, becomes permanently disabled, or the
Consultant voluntarily terminates his engagement, then neither ENTEX nor the
Company will be liable to Consultant for (1) any further consulting fees
pursuant to Section
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52
2.1, (ii) transaction bonus pursuant to Section 2.2, or (iii) Supplementary
Payment, after the date of the termination of the Consultant's engagement.
ARTICLE IV
DISCLOSURE OF INFORMATION
Section 4.1 Consultant Shall Not Disclose Information. The Consultant
recognizes and acknowledges that the list of the customers, any trade secrets
and/or any other proprietary information of ENTEX or the Company, as it may
exist from time to time, is a valuable, special, and unique asset of ENTEX and
the Company. The Consultant will not disclose the list of the customers, any
trade secrets and/or any other proprietary information of ENTEX or the Company,
or any part thereof to any person, firm, corporation, association, or other
entity for any reason or purpose whatsoever, except as may be required by law
and except for information that is publicly available through other sources.
Section 4.2 Breach of This Article IV. In the event of a breach or
threatened breach by the Consultant of the provisions of this Article IV, ENTEX,
the Company or both shall be entitled to an injunction restraining the
Consultant from breaching this Article IV in any manner, including without
limitation, restraining the Consultant from disclosing, in whole or in part, the
list of the customers of the Company, ENTEX or both, any trade secrets and/or
any other proprietary information of ENTEX, the Company or both, or from
rendering any services to any person, firm, corporation, association, or other
entity to whom such list, in whole or in part, has been disclosed or is
threatened to be disclosed. Nothing herein shall be construed as prohibiting
ENTEX, the Company or both from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of damages
from the Consultant. Should a court of law conclude that the provisions of this
Article IV are too broad to be enforceable, the parties hereto authorize such
court to narrow the scope of this Article IV are too broad to be enforceable,
the parties hereto authorize such court to narrow the scope of this Article IV
to the extent necessary to enable enforcement thereof.
ARTICLE V
COVENANT NOT TO COMPETE
Section 5.1 Covenant Not to Compete. In consideration of the mutual
covenants contained in this Agreement, the Consultant further covenants that
for a period of three years after the termination of his engagement hereunder,
the Consultant will not, within the State of Colorado and within 30 miles of
any existing business locations of ENTEX or the Company, directly or
indirectly,
53
own, manage, operate, control, act as a consultant to, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation or control of any businesses similar to the type of business
conducted by ENTEX or the Company at the time of the termination of the
Consultant's engagement hereunder.
Section 5.2 Breach of This Article V. In the event of a breach or
threatened breach by the Consultant of the provisions of this Article V,
ENTEX, the Company or both shall be entitled to an injunction restraining the
Consultant from breaching this Article in any manner, including without
limitation, restraining the Consultant from rendering any services to any
person, firm, corporation, association or other entity which services are
prohibited by this restrictive covenant. Nothing herein shall be construed as
prohibiting ENTEX, the Company or both from pursuing any other remedies
available to ENTEX, the Company or both for such breach or threatened breach,
including the recovery of damages from the Consultant. Should a court conclude
that the provisions of this Article V are too broad to be enforceable, the
parties hereto authorize such court to narrow the scope of this Article V to
the extent necessary to enable enforcement thereof.
ARTICLE VI
GENERAL MATTERS
Section 6.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to the conflict of laws principles thereof.
Section 6.2 No Waiver and Notification. No provision of this Agreement
may be modified, waived or discharged except by an agreement in writing signed
by the affected party. A modification, waiver or discharge of any term or
provision shall not be construed as a modification, waiver or discharge of any
other term or provision.
Section 6.3 Amendment. This Agreement may be amended, altered or revoked
at any time, in whole or in part, by filing with this Agreement a written
instrument setting forth such changes, signed by all of the parties.
Section 6.4 Assignment, Inurement. This Agreement and the rights
hereunder may not be assigned in whole or in part. Subject to this Section,
this Agreement shall be binding upon and shall inure to the benefit of any
successor or successors (including any successor by merger) of ENTEX and the
Company.
Section 6.5 Notice. For the purpose of this Agreement, notices and
demands shall be deemed given when mailed by United
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54
States certified or registered mail, return receipt requested, postage prepaid,
addressed (i) in the case of ENTEX, to Xxx Xxxxxxxxxxxxx Xxxxx, Xxx Xxxxx, Xxx
Xxxx 00000, Attention: Xxxxx X. Xxxxxxx, Vice President and General Counsel;
(ii) in the case of the Company to 0000 Xxxx Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxx
00000, Attention: Chief Executive Officer; and (iii) in the case of the
Consultant to 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000. The
parties may change such address by giving the other party notice of such change
in the aforesaid manner, except that notices of change of address shall only be
effective upon receipt.
Section 6.6 Construction. Throughout this Agreement the singular shall
include the plural, and the plural shall include the singular, and the masculine
and neuter shall include the feminine, wherever the context so requires.
Section 6.7 Text to Control. The headings of articles and sections are
included solely for the convenience of reference. If any conflict between any
heading and the text of this Agreement exists, the text shall control.
Section 6.8 Severability. If any provision of this Agreement is declared by
any court of competent jurisdiction to be invalid for any reason, such
invalidity shall not affect the remaining provisions. On the contrary, such
remaining provisions shall be fully severable, and this Agreement shall be
construed and enforced as if such invalid provisions never had been inserted in
the Agreement.
Section 6.9 Entire Agreement; Supersedes All Prior Agreements. This
Consulting Agreement represents the entire agreement of the parties with
respect to the subject matter hereof, and supersedes all agreements, written or
oral, of the parties hereto, including, but not limited to, the Amended
Employment Agreement dated August 11, 1993 between the Company and Xxxxx X.
Xxxxxxxx, which shall be deemed to be terminated immediately prior to the
Effective Time.
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55
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
ENTEX INFORMATION SERVICES, INC.
By:_____________________________
Name:
Title:
RANDOM ACCESS, INC.
By:_____________________________
Name:
Title:
________________________________
Xxxxx X. Xxxxxxxx
56
Annex E-1
PURCHASE AGREEMENT
FOR
TOTAL ACCESS LIMITED LIABILITY COMPANY INTEREST
This Purchase Agreement for an interest in Total Access Limited Liability
Company is entered into by and between Random Access, Inc., a Colorado
corporation (sometimes referred to herein as "Purchaser") and Xxxxx X. Xxxxxxxx
(sometimes referred to herein as "Seller"), executed effective as of June ____,
1995.
A. Total Access Limited Liability Company ("LLC") was formed on May 31,
1991, and its Operating Agreement executed effective as of September 24, 1991,
by and between Xxxxx X. Xxxxxxxx (sometimes referred to herein as "Xxxxxxxx")
and Building Access, a Colorado general partnership, each of whom owned a fifty
percent (50%) interest in the LLC.
B. A First Amendment to Operating Agreement of total Access Limited
Liability Company was executed effective as of May 20, 1994, by and between
Xxxxxxxx and Random Access, Inc. ("Random") whereby Random purchased Building
Access' fifty percent (50%) interest in the LLC, and invested a significant
amount of additional capital in the LLC resulting in a dilution in Xxxxxxxx'x
percentage interest in the LLC to twelve percent (12%) and an increase in
Random's percentage interest in the LLC to eighty-eight percent (88%).
C. Purchaser desires to purchase and Seller desires to sell Seller's
twelve percent (12%) interest ("Interest") in the LLC pursuant to the following
terms and conditions:
AGREEMENT
1. Sale of Interest. Seller hereby sells and Purchaser hereby purchases
Seller's twelve percent (12%) interest in the LLC. Simultaneous with the
execution of this Agreement, in consideration for the purchase by the Purchaser
of Seller's twelve percent (12%) interest in the LLC, Purchaser shall deliver
to the Seller its check for Ten Dollars ($10.00). Both Purchaser and Seller
acknowledge the sufficiency and adequacy of both the consideration transferred
and the consideration received in this transaction.
2. Representations and Warranties. Seller represents and warrants to
Purchaser as follows:
2.1 Ownership of Interest. Seller is the lawful owner of a twelve percent
(12%) interest in Total Access, free and clear of all liens, encumbrances,
restrictions and claims of
57
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every kind; Seller has full legal right, power and authority to enter into this
Agreement and to sell, assign, transfer and convey the interest so owned by him
pursuant to this Agreement; the delivery to Seller of the interest pursuant to
the provisions of this Agreement will transfer to the Company valid title
thereto, free and clear of all liens, encumbrances, restrictions and claims of
every kind. Seller makes no representations and warranties whatsoever as to the
condition or nature of the LLC's assets and Purchaser specifically acknowledges
that it has relied on its own inspection of the nature and quality of the assets
of the LLC.
2.2 Due Execution and Enforceability. This Agreement is a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application referring to or affecting
enforcement of creditors' rights and general principles of equity.
2.3 No Conflict. The execution, delivery and performance of this
Agreement will not result in any violation of, be in conflict with, or
constitute a default under: (i) any provision of any judgment, decree or order
to which Seller is a party or by which he is bound; (ii) any debt, mortgage,
indenture or any material contract obligation or commitment to which Seller is
a party or by he is bound; or (iii) any statute, rule or governmental
regulation applicable to Seller.
2.4 Brokers and Finders. Seller has not retained any investment
banker, broker or finder, nor is Seller liable nor will the Company be liable
for any broker's or finder's fee or any similar fee or charge, however
designated, in connection with the transactions contemplated by this Agreement.
3. Indemnification. Purchaser hereby agrees to indemnify and hold harmless
Seller from any and all claims or liabilities relating to the LLC, its
properties and its business operations. Specifically, Purchaser agrees to
assume all responsibility of Seller on that certain promissory note in the
approximate amount of $1,800,000 made payable to Bank One, N.A. which was
originally incurred by the LLC and its members in order to finance construction
of the LLC's property.
4. Attorneys' Fees. If any dispute arises between the parties to this
Agreement, then either party may submit the dispute to binding arbitration if
the other party so consents. In the event of any litigation or arbitration
between Purchaser and Seller to enforce any provision of this Agreement or any
right of either party, the unsuccessful party to such litigation
58
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or arbitration shall pay the successful party all costs and expenses, including
reasonable attorneys' fees, incurred.
5. COUNTERPART. This Agreement may be executed in several counterparts,
and as so executed shall constitute one Agreement, binding on all of the
parties hereto, notwithstanding that all of the parties are not signatory to
the original or to the same counterpart.
6. GOVERNING LAW. The terms and provisions of this Agreement shall be
governed by the laws of the State of Colorado.
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
set forth above.
RANDOM ACCESS, INC.,
a Colorado corporation
By:
-----------------------------------
Xxxxxxx X. Xxxxxxxx, Xx., President
---------------------------------------
Xxxxx X. Xxxxxxxx
59
Annex E-2
SECOND AMENDMENT
TO
OPERATING AGREEMENT
OF
TOTAL ACCESS LIMITED LIABILITY COMPANY
This Second amendment to the Operating Agreement of Total Access Limited
Liability Company, a Wyoming limited liability company ("LLC"), is hereby
executed by Xxxxx X. Xxxxxxxx ("Xxxxxxxx") and Random Access, Inc., a Colorado
corporation ("Random") effective as of June __, 1995.
BACKGROUND
A. The Operating Agreement of the LLC was executed effective as of
September 24, 1991, by and between Xxxxxxxx and Building Access, a Colorado
general partnership.
B. A First Amendment to the Operating Agreement of the LLC was executed
effective as of May 20, 1994, by and between Xxxxxxxx and Random.
C. Simultaneous with execution of this Amendment, Random has acquired
Xxxxxxxx'x twelve percent (12%) interest in the LLC pursuant to a Purchase
Agreement dated the date hereof.
AGREEMENT
1. CONSENT TO PURCHASE A COMPANY INTEREST. Xxxxxxxx hereby acknowledges
and consents to Random's purchase of his twelve percent (12%) interest in the
LLC.
2. ELECTION OF MANAGER. Random, the sole member, hereby agrees to elect
Xxxxxxx X. Xxxxxxxx as the sole Manager of the LLC.
3. FINAL COMPANY INTERESTS. As the result of the transaction referred to
above, Random shall own one hundred percent (100%) of the membership interest
in the LLC.
4. ADOPTION AND REAFFIRMATION OF OPERATING AGREEMENT. By executing this
Amendment, Random hereby accepts all terms and conditions of the LLC's
Operating Agreement and Random hereby affirms that, except as set forth in this
Amendment, all other provisions of the Operating Agreement shall remain in full
force and effect.
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IN WITNESS WHEREOF, this Second Amendment is executed effective as of the
date set forth above.
RANDOM ACCESS, INC.,
a Colorado corporation
By:
-----------------------------------
Xxxxxxx X. Xxxxxxxx, Xx., President
--------------------------------------
Xxxxx X. Xxxxxxxx
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Schedule 5.02(e)
Calculation of Tangible Net Worth
as of February 28, 1996 (Pro Forma)
Stockholders' Equity $18,909,000
-----------
Franchise rights and vendor
authorizations, net of accumulated
amortization $ 174,000
Goodwill and other intangible assets,
net of accumulated amortization -- Random
Access 1,936,000
Goodwill and other intangible assets -- ASAP 1,550,000
Deposits and other 109,000
Deposits -- ASAP 13,000
Lane Litigation settlement costs, net of
tax benefit of $70,000 105,000
-----------
3,887,000
Tangible Net Worth $15,022,000
===========
