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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This Amended and Restated Agreement and Plan of Merger (this "AGREEMENT"),
effective as of October 3, 1997, is made and entered into by and among Ringer
Corporation, a Minnesota corporation ("RINGER"), SRI Acquisition Corp., a
Georgia corporation and wholly owned subsidiary of Ringer ("MERGER SUBSIDIARY"),
and Southern Resources, Inc., a Georgia corporation ("SRI"). Merger Subsidiary
and SRI are hereinafter sometimes collectively referred to as the "CONSTITUENT
CORPORATIONS."
WHEREAS, the respective Boards of Directors of Ringer, Merger Subsidiary
and SRI have determined that it is advisable and in the best interests of the
respective corporations and their shareholders that Merger Subsidiary be merged
with and into SRI in accordance with the Georgia Business Corporation Code (the
"GEORGIA CODE") and the terms of this Agreement, pursuant to which SRI will be
the surviving corporation as a wholly owned subsidiary of Ringer (the "MERGER");
WHEREAS, it is intended that for federal income tax purposes the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"), and that the Merger will
be accounted for as a "pooling of interests" under generally accepted accounting
principles; and
WHEREAS, Ringer, Merger Subsidiary and SRI desire to make certain
representations, warranties, covenants, indemnities and agreements in connection
with, and establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the foregoing, the representations,
warranties, covenants, indemnities and agreements set forth in this Agreement,
and other good and valuable consideration, the adequacy and receipt of which is
hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.01 THE MERGER. At the Effective Time (as defined in Section 1.03 hereof),
and subject to the terms and conditions of this Agreement and the Certificate of
Merger (as defined in Section 1.03 hereof), the Merger Subsidiary shall be
merged with and into SRI, the separate existence of the Merger Subsidiary shall
cease, and SRI shall continue as the surviving corporation under the corporate
name of "Southern Resources, Inc." In its capacity as the corporation surviving
the Merger, SRI is hereinafter sometimes referred to as the "SURVIVING
CORPORATION."
1.02 EFFECT OF MERGER. The effect of the Merger shall be as set forth in
Article 11 of the Georgia Code, and the Surviving Corporation shall succeed to
and possess all the properties, rights, privileges, immunities, powers,
franchises and purposes, and be subject to all the duties, liabilities, debts,
obligations, restrictions and disabilities, of the Constituent Corporations, all
without further act or deed.
1.03 EFFECTIVE TIME. The consummation of the Merger shall be effected as
promptly as practicable, but in no event more than three business days, after
the satisfaction or waiver of the conditions set forth in Article VIII of this
Agreement, and the parties hereto will cause a certificate of merger with
respect to the Merger (the "CERTIFICATE OF MERGER") to be executed, delivered
and filed with the Secretary of State of the State of Georgia in accordance with
the Georgia Code and will make all other filings or recordings required by
Georgia law in connection with the Merger and the transactions contemplated by
this Agreement. The Merger shall become effective at the time and date of the
filing of the Certificate of Merger with the Secretary of State of the State of
Georgia. The time at which the Merger shall become effective is referred to
herein as the "EFFECTIVE TIME." The day during which the Effective Time shall
occur is referred to herein as the "EFFECTIVE DATE."
1.04 DIRECTORS AND OFFICERS. From and after the Effective Time, the
directors of the Surviving Corporation shall be the persons who were the
directors of Merger Subsidiary immediately prior to the Effective Time. From and
after the Effective Time, the officers of the Surviving Corporation shall be the
persons who were the
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officers of the Merger Subsidiary immediately prior to the Effective Time. Such
directors and officers of the Surviving Corporation shall hold office for the
term specified in, and subject to the provisions contained in, the articles of
incorporation and bylaws of the Surviving Corporation and applicable law. If, at
or after the Effective Time, a vacancy shall exist on the board of directors or
in any of the offices of the Surviving Corporation, such vacancy shall be filled
in the manner provided in the articles of incorporation and bylaws of the
Surviving Corporation.
1.05 ARTICLES OF INCORPORATION; BYLAWS. At and after the Effective Time and
until further amended in accordance with applicable law, the articles of
incorporation and bylaws of Merger Subsidiary as in effect immediately prior to
the Effective Time shall be the articles of incorporation and bylaws of the
Surviving Corporation.
1.06 TAKING OF NECESSARY ACTION; FURTHER ACTION. Ringer, Merger Subsidiary
and SRI, respectively, shall each use its reasonable best efforts to take all
such action as may be necessary or appropriate to effectuate the Merger under
the Georgia Code at the time specified in Section 1.03. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all properties, rights, privileges, immunities,
powers and franchises of either of the Constituent Corporations, the officers of
the Surviving Corporation are fully authorized in the name of each Constituent
Corporation or otherwise to take, and shall take, all such lawful and necessary
action.
1.07 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") will take place at the offices of Xxxxxx & Xxxxxxx,
000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, 00000 on a date to be specified
by the parties (the "Closing Date"), which shall be no later than the third
business day after satisfaction or waiver of the conditions set forth in Article
VIII hereof, and will be effective as of the Effective Time. At the Closing, the
parties shall deliver to each other the documents required to be delivered
pursuant to Article VIII hereof.
ARTICLE II
MERGER CONSIDERATION/EFFECT ON CAPITAL STOCK
2.01 EFFECT ON CAPITAL STOCK.
(a) Conversion of SRI Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Ringer, Merger Subsidiary, SRI,
the Surviving Corporation or the holder of any of the following shares of SRI
capital stock:
(i) Each share of Common Stock, par value $1.00 per share, of SRI
("SRI COMMON STOCK"), issued and outstanding immediately prior to the
Effective Time shall be converted into and become a right to receive 9,000
shares of Common Stock, par value $.01 per share, of Ringer ("RINGER COMMON
STOCK"); and
(ii) Each share of SRI's capital stock issued and outstanding
immediately prior to the Effective Time and owned by Ringer, Merger
Subsidiary or SRI ("CANCELED SHARES") shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
The shares of Ringer Common Stock referred to in subparagraph (i) above are
collectively referred to herein as the "MERGER CONSIDERATION." The shares of SRI
Common Stock that are issued and outstanding immediately prior to the Effective
Time, other than Canceled Shares, are collectively referred to herein as the
"SHARES," and the holders thereof are referred to herein as the "HOLDERS."
(b) Conversion of Merger Subsidiary Capital Stock. Each share of Common
Stock, par value $.01 per share, of Merger Subsidiary ("MERGER SUBSIDIARY
STOCK"), issued and outstanding immediately prior to the Effective Time shall be
converted into and become a right to receive one share of Common Stock, par
value $.10 per share, of the Surviving Corporation ("SURVIVING CORPORATION
STOCK").
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2.02 DEPOSIT PROCEDURES. At or prior to the Effective Time, Ringer shall
deposit or shall cause, the Merger Consideration and any dividends or
distributions relating to the Ringer Common Stock constituting a part of such
Merger Consideration to be deposited with First Trust, National Association, or
such other bank or trust company as may be designated by Ringer and acceptable
to SRI's management (the "PAYING AGENT"), for the benefit of the Holders and
Ringer to be distributed pursuant to the terms of this Agreement and the Paying
Agent Agreement (as defined in Section 12.03).
2.03 HOLDBACK AND ESCROW. Ten percent (10%) of the Merger Consideration
(the "GENERAL CLAIMS HOLDBACK AMOUNT") shall be subject to Ringer's Offset Right
(as defined in Section 11.02), and an additional ten percent (10%) of the Merger
Consideration (the "SPECIFIED CLAIMS HOLDBACK AMOUNT") shall be subject to
claims with respect to Ringer's rights to indemnification as provided in the
Shareholders' Agreement (as defined in Section 12.01). The General Claims
Holdback Amount and the Specified Claims Holdback Amount (collectively the
"HOLDBACK AMOUNTS") shall be held in escrow by the First Trust, National
Association, or such other bank or trust company as may be designated by Ringer
and acceptable to SRI's management (the "ESCROW AGENT") in accordance with this
Section 2.03 and subject to Section 11.02 and the terms of the Shareholders'
Agreement.
2.04 EXCHANGE PROCEDURES.
(a) The Paying Agent shall distribute the Merger Consideration in exchange
for Shares pursuant to the terms of this Agreement. Ringer shall make available
to the Paying Agent from time to time as needed, cash sufficient to pay cash in
lieu of fractional shares as described in this Section 2.04 and in Section 2.05.
(b) The Escrow Agent shall hold the General Claims Holdback Amount and the
Specified Claims Holdback Amount, including any dividends paid in respect
thereof prior to the Effective Time, in separate escrow accounts (respectively,
the "GENERAL CLAIMS ESCROW FUND" and the "SPECIFIED CLAIMS ESCROW FUND" and
collectively the "ESCROW FUNDS"), for the benefit of the Holders of Shares and
subject to Ringer's Offset Right pursuant to Section 11.02 (in the case of the
General Claims Escrow Fund) and rights to indemnification as provided in the
Shareholders' Agreement (in the case of the Specified Claims Escrow Fund).
Except as contemplated by this Section 2.04, Section 2.06(d), Section 11.02 and
the Shareholders' Agreement, the Escrow Funds shall not be used for any other
purpose.
(c) As soon as reasonably practicable after the Effective Time, the Paying
Agent shall mail to each record holder of a certificate or certificates that
immediately prior to the Effective Time represented Shares (the "CERTIFICATES"),
(i) a letter of transmittal (which shall be in customary form) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for such Holder's Shares. The letter of transmittal shall specify that delivery
of Certificates shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent. Upon surrender of a Certificate that immediately prior to the Effective
Time represented outstanding shares of SRI Common Stock for cancellation to the
Paying Agent, together with such letter of transmittal, duly executed, and such
other documents as may be required pursuant to such instructions, the Paying
Agent shall distribute in exchange therefor, subject to escrow of the
appropriate portions thereof included in the Holdback Amounts pursuant to
Section 2.03 (the "HOLDBACK SHARES"), (i) certificates representing the number
of whole shares of Ringer Common Stock issuable to such Holder pursuant to
Section 2.01 and (ii) cash in lieu of any fractional share thereof in accordance
with Section 2.05, and the Certificate so surrendered shall forthwith be
canceled. The shares of Ringer Common Stock initially distributed to the Holders
after deducting the Holdback Amounts are referred to herein as the "INITIAL
DISTRIBUTION AMOUNTS." Until surrendered as contemplated by this Section 2.04,
each Certificate shall be deemed at any time after the Effective Time to
represent solely the right to receive the portion of the Merger Consideration
attributable to the Shares formerly represented by such Certificate.
(d) If there is a transfer of Share ownership that is not registered in the
transfer records of SRI, a certificate representing the proper number of shares
of Ringer Common Stock may be issued to a person other than the person in whose
name the Certificate so surrendered is registered, if, upon presentation to the
Paying Agent, such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other Taxes (as defined in Section 3.15(k) hereof) required
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by reason of the issuance of shares of Ringer Common Stock to a person other
than the registered holder of such Certificate or establish to the reasonable
satisfaction of Ringer that such tax has been paid or is not applicable.
(e) Subject to the provisions of Section 11.02 and the Shareholders"
Agreement, as the case may be, in the event Ringer exercises its Offset Right
against all or a portion of the General Claims Holdback Amount as provided in
Section 11.02 or its rights to indemnification against all or a portion of the
Specified Claims Holdback Amount as provided in the Shareholders' Agreement, the
Paying Agent promptly shall distribute to Ringer from the appropriate Holdback
Amount the number of Shares of Ringer Common Stock determined by dividing the
offset amount or the indemnification amount, as the case may be, by the closing
sale price per share of the Ringer Common Stock as reported on the Nasdaq Stock
Market for the trading day immediately preceding the Effective Date. Ringer
Common Stock delivered to Ringer to fund Offset Rights or rights to
indemnification pursuant to the Shareholders' Agreement shall constitute a
post-closing reduction of the Merger Consideration rather than a payment of a
liability by Holders of Shares.
2.05 NO FRACTIONAL SHARES.
(a) No certificates or scrip representing fractional shares of Ringer
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a shareholder of Ringer.
(b) Notwithstanding any other provision of this Agreement, each Holder of
Shares exchanged pursuant to the Merger who would otherwise have been entitled
to receive a fraction of a share of Ringer Common Stock (after taking into
account all Certificates delivered by such Holder) with respect to the Initial
Distribution Amounts or the release of any portion of the Holdback Amounts shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Ringer Common Stock multiplied by the closing sale
price per share of the Ringer Common Stock as reported on the Nasdaq Stock
Market for the trading day immediately preceding the Effective Date.
(c) No certificates representing fractional shares of Ringer Common Stock
shall be issued to Ringer in connection with the exercise of its Offset Right or
its rights to indemnification pursuant to the Shareholders' Agreement.
2.06 OTHER EXCHANGE MATTERS.
(a) Rights of Holders of SRI Capital Stock. On and after the Effective Time
and until surrendered for exchange, each Certificate representing Shares shall
be deemed for all purposes, except as provided in Section 2.05, to evidence
ownership of and to represent the right to receive such Holder's proportionate
share of the Merger Consideration to be paid therefor pursuant to Section 2.01
and Section 2.02. The record Holder of such Certificate shall, after the
Effective Time, be entitled to vote the shares of Ringer Common Stock into which
such Shares shall have been converted (including any Shares of Ringer Common
Stock then outstanding and included in the Holdback Amounts) on any matters on
which the holders of record of Ringer Common Stock, as of any date subsequent to
the Effective Date, shall be entitled to vote. After the Effective Date, there
shall be no further registration of transfers on the records of the Surviving
Corporation of outstanding certificates formerly representing Shares of SRI
Common Stock and, if a certificate formerly representing such Shares is
presented to the Paying Agent, it shall be canceled and exchanged for such
Holder's Merger Consideration as provided in Section 2.04. In any matters
relating to such Certificates, Ringer may rely conclusively upon the record of
shareholders maintained by SRI containing the names and addresses of the Holders
of record of Shares at the Effective Time.
(b) Distributions with Respect to Unexchanged Shares. Ringer will pay no
dividends and make no other distributions with respect to Ringer Common Stock to
the Holder of any unsurrendered Certificate evidencing Shares of SRI Common
Stock of shares of Ringer Common Stock included in such Holder's proportionate
share of the Merger Consideration, and Ringer will make no cash payment in lieu
of fractional shares to any such Holder pursuant to Section 2.05, until the
Holder of such Certificate surrenders such Certificate. Following surrender of
any such Certificate, the Paying Agent, on behalf of Ringer, shall pay to the
record holder of the certificate representing shares of Ringer Common Stock
issued in exchange for such Certificate,
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without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Ringer Common Stock to which such
holder is entitled pursuant to Section 2.05 and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Ringer Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such whole shares of Ringer
Common Stock.
(c) No Further Ownership Rights in SRI Capital Stock. The Merger
Consideration delivered upon the surrender for exchange of Shares in accordance
with the terms hereof (including any cash paid pursuant to Section 2.05 or
Section 2.06(b)) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such Shares.
(d) Termination of Delivery Obligation. The Paying Agent shall deliver to
Ringer upon demand any portion of the Merger Consideration that remains
undistributed by the Paying Agent more than one year after the Effective Time.
Holders of Certificates who have not theretofore complied with this Article II
shall thereafter look only to Ringer for payment of their claims for Merger
Consideration as to which they may be entitled under Section 2.01 and Section
2.02, including any dividends or distributions with respect to Ringer Common
Stock.
(e) No Liability. None of Ringer, Merger Subsidiary, SRI, the Escrow Agent
or the Paying Agent shall be liable to any person in respect of any shares of
Ringer Common Stock (or dividends or distributions with respect thereto) or cash
in the Holdback Amounts delivered to a public official pursuant to any
applicable abandoned property, escheat, or similar law.
(f) Investment of Merger Consideration. The Escrow Agent shall invest any
cash included in the Escrow Fund in interest bearing accounts guaranteed,
directly or indirectly, by the federal government. Any interest and other income
resulting from such investments shall become part of the Escrow Fund and shall
be taxable to Ringer.
(g) Lost Certificates. If any Certificate shall have been lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen, or destroyed, and, if required by the
Surviving Corporation, upon the delivery to the Paying Agent of a bond in such
sum as the Surviving Corporation may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Paying Agent will
issue in exchange for such lost, stolen, or destroyed Certificate the Merger
Consideration and any cash in lieu of fractional shares, and unpaid dividends
and distributions on shares of Ringer Common Stock deliverable in respect
thereof, pursuant to this Agreement.
(h) Stock Transfer Books. At the Effective Time, the stock transfer books
of SRI shall be closed and there shall be no further registration of transfers
of shares of SRI's capital stock thereafter on the records of SRI. From and
after the Effective Time, the holders of certificates representing shares of
SRI's capital stock immediately prior to the Effective Time shall cease to have
any rights with respect to such shares of SRI's capital stock except as
otherwise provided in this Agreement or by law.
(i) Adjustments. If, between the date hereof and the date on which the last
payment of either Holdback Amount is made (the "LAST PAYMENT DATES"), shares of
Ringer Common Stock shall be changed into a security of a different issuer, a
different class of shares or cash by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares, readjustment,
purchase, merger or other transaction, then the term Ringer Common Stock, for
purposes of this Agreement shall thereafter be deemed to refer to such different
shares or cash.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SRI
SRI hereby represents and warrants to Ringer and Merger Subsidiary that,
except as set forth in the Disclosure Schedule delivered by SRI to Ringer and
Merger Subsidiary on the date hereof and initialed by representatives of Ringer
and SRI, including any amendments thereto made by SRI pursuant to Section 5.07
(the "DISCLOSURE SCHEDULE"):
3.01 ORGANIZATION AND STANDING. SRI is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of Georgia and
has the requisite corporate power and authority to execute and deliver this
Agreement, the Certificate of Merger and the agreements identified in Article
XII to which SRI is a party (the "SRI ANCILLARY AGREEMENTS") and to perform its
obligations hereunder and thereunder. The copies of the articles of
incorporation and bylaws of SRI set forth in the Disclosure Schedule reflect all
amendments made thereto and are correct and complete as of the date hereof.
3.02 EXECUTION, DELIVERY AND PERFORMANCE; VALID AND BINDING AGREEMENT. The
execution, delivery and performance of this Agreement, the Certificate of Merger
and the SRI Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
requisite corporate action of SRI and its shareholders, and no other corporate
proceedings on its part are necessary to authorize the execution, delivery and
performance of this Agreement, the Certificate of Merger and the SRI Ancillary
Agreements. This Agreement and the SRI Ancillary Agreements have been duly
executed and delivered by SRI and constitute the valid and binding obligations
of SRI and its shareholders, enforceable in accordance with their terms (subject
to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general application affecting creditors'
rights) and, and the Certificate of Merger, when executed and delivered by SRI,
will constitute the valid and binding obligation of SRI, enforceable in
accordance with its terms.
3.03 SUBSIDIARIES.
(a) "SUBSIDIARY" has the meaning ascribed to the term in Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission (the "SEC"). The
Disclosure Schedule lists all of the Subsidiaries of SRI, and with respect to
the capital stock of each such Subsidiary:
(i) SRI owns, directly or through another Subsidiary, 100% of the
issued and outstanding capital stock of each such Subsidiary;
(ii) All of such shares of such capital stock have been duly
authorized, are validly issued, fully paid and nonassessable, and are not
subject to preemptive rights created by statute, such Subsidiary's articles
of incorporation or bylaws, or any other agreement to which either SRI or
such Subsidiary is bound; and
(iii) There are no contracts, commitments, understandings or
arrangements by which SRI or any Subsidiary is or may be bound to sell or
otherwise transfer any of such capital stock or relating to SRI's right to
vote or dispose of shares of such capital stock.
(b) Each Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of its state of incorporation as listed on
the Disclosure Schedule.
(c) With the exception of the Subsidiaries, SRI does not own any stock,
partnership interest, joint venture interest or any other security or ownership
interest issued by any other corporation, organization, joint venture,
partnership, limited liability company or entity.
3.04 CORPORATE POWER AND AUTHORITY. SRI and each Subsidiary has the
corporate power and authority and all authorizations, licenses, permits and
certifications necessary to own and operate its properties and to carry on its
business as now conducted and presently proposed to be conducted. SRI and each
Subsidiary is qualified to do business as a foreign corporation in every
jurisdiction in which the nature of its business or its ownership of property
requires it to be so qualified, and where the failure to so qualify would have a
material adverse effect on the business or results of operations of SRI and the
Subsidiaries, taken as a whole ("MATERIAL ADVERSE EFFECT").
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3.05 NO BREACH. The execution, delivery and performance of this Agreement,
the Certificate of Merger and the SRI Ancillary Agreements by SRI and the
consummation by SRI of the transactions contemplated hereby and thereby do not
conflict with or result in any breach of any of the provisions of, constitute a
default under, result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
encumbrance upon any assets of SRI or any Subsidiary, or require any
authorization, consent, approval, exemption or other action by or notice to any
court, other governmental body or other "PERSON" (such term shall mean an
individual, corporation, partnership, association, joint-stock company, trust,
unincorporated organization, or government or political subdivision thereof)
under the provisions of the articles of incorporation or bylaws of SRI or any
Subsidiary or any contract, indenture, mortgage, lease, loan agreement or other
agreement, relationship, commitment, arrangement or instrument, written or oral,
by which SRI or any Subsidiary is bound or affected, or any law, statute, rule
or regulation or order, judgment or decree to which SRI or any Subsidiary is
subject.
3.06 GOVERNMENTAL AUTHORITIES; CONSENTS. Except for the filing of the
Certificate of Merger with the Secretary of State of the State of Georgia,
neither SRI nor any Subsidiary is required to submit any notice, report or other
filing with any governmental authority in connection with the execution or
delivery by SRI of this Agreement, the Certificate of Merger or the SRI
Ancillary Agreements or the consummation of the transactions contemplated hereby
or thereby. No consent, approval or authorization of any governmental or
regulatory authority is required to be obtained by SRI or any Subsidiary in
connection with the execution, delivery and performance of this Agreement, the
Certificate of Merger or the SRI Ancillary Agreements or the transactions
contemplated hereby or thereby.
3.07 CAPITAL STOCK OF SRI.
(a) On the date hereof, the authorized capital stock of SRI consists of
100,000 shares of SRI Common Stock, par value $.10, of which, as of the date
hereof, 500 shares are issued and outstanding. On the date hereof, SRI's capital
stock is held of record by the persons and in the amounts set forth in the
Disclosure Schedule. On the Effective Date, SRI's capital stock will be held of
record by the persons and in the amounts set forth in a disclosure schedule to
be provided to Ringer on the Effective Date. All such outstanding shares of
SRI's capital stock (i) have been duly authorized and are validly issued, fully
paid and nonassessable, (ii) are not subject to preemptive rights created by
statute, SRI's articles of incorporation or bylaws, or any other agreement to
which either SRI or, to the knowledge of SRI, SRI's shareholders are bound, and
(iii) were not issued in violation of any applicable securities laws that would
subject the Surviving Corporation to fines, penalties, or rescission or civil
damages that are material in amount. As used in this Agreement, "knowledge of
SRI" and similar words to that effect shall mean the actual knowledge of the
officers and directors of SRI and each of the Subsidiaries after due inquiry.
(b) There are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or otherwise acquire
from SRI any shares of SRI's capital stock or other securities of SRI of any
kind ("OUTSTANDING PURCHASE RIGHTS") (and there are no agreements or other
obligations of SRI to grant any Outstanding Purchase Rights), and there are no
agreements or other obligations (contingent or otherwise) that may require SRI
to repurchase or otherwise acquire any shares of SRI's capital stock.
(c) The Disclosure Schedule sets forth those persons who are, in SRI's
reasonable judgment, "affiliates" of SRI within the meaning of Rule 145
promulgated by the SEC under the Securities Act of 1933, as amended (the
"SECURITIES ACT").
3.08 FINANCIAL STATEMENTS. The Disclosure Schedule sets forth copies of (i)
the unaudited consolidated balance sheets, as of October 3, 1997, of SRI and the
Subsidiaries (the "LATEST BALANCE SHEET") and the unaudited consolidated
statements of earnings, Shareholders equity and cash flows of SRI and the
Subsidiaries for the fiscal year ended October 3, 1997 (such statements and the
Latest Balance Sheet being herein referred to as the "LATEST FINANCIAL
STATEMENTS"), and (ii) the audited consolidated balance sheets, as of September
30, 1996 and September 30, 1995, of SRI and the Subsidiaries and the audited
consolidated statements of earnings, Shareholders equity and cash flows of SRI
and the Subsidiaries for each of the years then ended (collectively, the "ANNUAL
FINANCIAL STATEMENTS"). The Latest Financial Statements and the Annual Financial
Statements are based upon the information contained in the books and records of
SRI and
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the Subsidiaries and fairly present the financial condition of SRI and the
Subsidiaries as of the dates thereof and respective results of operations for
the periods referred to therein. The Annual Financial Statements (including the
notes thereto) have been prepared in accordance with GAAP, consistently applied
through the periods indicated (except as indicated in the notes thereto), and
the Latest Financial Statements have been prepared in accordance with GAAP (as
such term applies to unaudited interim financial statements and thus such
statements may not contain all notes and may not contain prior period
comparative data which are required to be prepared in accordance with generally
accepted accounting principles in general and subject to normal year-end audit
adjustments), are consistent with the Annual Financial Statements.
3.09 ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected in the Latest
Balance Sheet, neither SRI nor any Subsidiary has any liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due, whether known or unknown, and regardless of when asserted) arising
out of transactions or events heretofore entered into, or any action or
inaction, or any state of facts existing, with respect to or based upon
transactions or events heretofore occurring, except liabilities which have
arisen after the date of the Latest Balance Sheet in the ordinary course of
business (none of which is a material uninsured liability for breach of
contract, breach of warranty, tort, infringement, claim or lawsuit).
3.10 NO MATERIAL ADVERSE CHANGES. Since the date of the Latest Balance
Sheet (the "Balance Sheet Date"), with the exception of seasonal business
changes in the ordinary course, there has been no material adverse change in the
assets, financial condition, operating results, distributor, customer, employee
or supplier relations, business condition or prospects of SRI and the
Subsidiaries, taken as a whole.
3.11 ABSENCE OF CERTAIN DEVELOPMENTS. Since the Balance Sheet Date, neither
SRI nor any Subsidiary has (except (i) in the ordinary course of its business
consistent with past practices or (ii) as described in the Disclosure Schedule):
(a) borrowed any amount or incurred or become subject to any liability in
excess of $5,000, except (i) current liabilities incurred in the ordinary course
of business and (ii) liabilities under contracts entered into in the ordinary
course of business;
(b) mortgaged, pledged or subjected to any lien, charge or any other
encumbrance, any of its assets with a fair market value in excess of $5,000,
except (i) liens for current property Taxes not yet delinquent, (ii) liens
imposed by law and incurred in the ordinary course of business for obligations
not yet delinquent with respect to claims by carriers, warehousemen, laborers,
materialmen and the like, (iii) liens in respect of pledges or deposits under
workers' compensation laws, or (iv) liens voluntarily created in the ordinary
course of business, all of which liens aggregate less than $25,000;
(c) discharged or satisfied any lien or encumbrance or paid any liability,
in each case with a value in excess of $5,000, other than current liabilities
(including the current portion of long-term liabilities) paid in the ordinary
course of business;
(d) sold, assigned or transferred (including, without limitation, transfers
to any employees, affiliates or shareholders) any tangible assets with a fair
market value in excess of $5,000, or canceled any debts or claims, in each case,
except in the ordinary course of business;
(e) sold, assigned or transferred (including, without limitation, transfers
to any employees, affiliates or shareholders) any patents, trademarks, trade
names, copyrights, trade secrets or other intangible assets;
(f) disclosed, to any person other than Ringer or Merger Subsidiary and
authorized representatives of Ringer or Merger Subsidiary, any proprietary
confidential information, other than pursuant to a confidentiality agreement
prohibiting the use or further disclosure of such information, which agreement
is identified in the Disclosure Schedule and is in full force and effect on the
date hereof;
(g) waived any rights of material value or suffered any extraordinary
losses or adverse changes in collection loss experience, whether or not in the
ordinary course of business or consistent with past practice;
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(h) declared or paid any dividends or other distributions with respect to
any shares of its capital stock other than to SRI or a Subsidiary or redeemed or
purchased, directly or indirectly, any shares of its capital stock or any
options, warrants or other rights to purchase the same;
(i) issued, sold or transferred any of its equity securities, securities
convertible into or exchangeable for its equity securities or options, warrants
or other rights to acquire its equity securities, or any bonds or debt
securities;
(j) taken any other action or entered into any other transaction other than
in the ordinary course of business and in accordance with past custom and
practice, or entered into any transaction with any Insider (as defined in
Section 3.23 hereof) other than employment arrangements otherwise disclosed in
this Agreement and the Disclosure Schedule, or the transactions expressly
contemplated by this Agreement;
(k) suffered any material theft, damage, destruction or loss of or to any
property or properties owned or used by it, whether or not covered by insurance;
(l) made or granted any bonus, or any wage, salary or compensation increase
to any director, officer, employee or consultant whose annual compensation in
the preceding fiscal year exceeded $50,000, or made or granted any increase in
any employee benefit plan or arrangement, or amended or terminated any existing
employee benefit plan or arrangement, or adopted any new employee benefit plan
or arrangement or made any commitment or incurred any liability to any labor
organization;
(m) made any single capital expenditure or commitment therefor in excess of
$5,000;
(n) made any loans or advances to, or guarantees for the benefit of, any
persons in excess of $5,000;
(o) made any charitable contributions or pledges in excess of $5,000;
(p) made any change in accounting principles or practices from those
utilized in the preparation of the Latest Financial Statements;
(q) experienced any amendment, modification or termination of any existing,
or entered into any new, contract, agreement, plan, lease, license, permit or
franchise which is, either individual or in the aggregate, material to its
business, operations, financial position or prospects, other than in the
ordinary course of business;
(r) experienced any labor dispute;
(s) experienced any change in any assumption underlying or method of
calculating any bad debt, inventory, contingency or other reserve;
(t) written off as uncollectible any note or account receivable, or
canceled any debts, other than in the ordinary course of business and consistent
with past practice;
(u) failed to replace or replenish inventory or supplies as such inventory
or supplies may have been depleted from time to time, collect accounts
receivable, pay accounts payable and has not shortened or lengthened the
customary payment cycles for any of its payables or receivables or otherwise
managed its working capital accounts other than in the ordinary course of
business and in a manner consistent with past practice;
(v) experienced any writedown or writeup of (or failed to writedown or
writeup in accordance with GAAP) the value of any inventories, receivables or
other assets, or revalued any of its assets;
(w) failed to maintain all material assets in accordance with good business
practice and in good operating condition and repair, ordinary wear and tear
excepted;
(x) experienced any lapse or termination of any material permit that was
issued or relates to its business, including any failure to renew any such
permit; or
(y) discontinued or altered, in any material respect, its advertising or
promotional activities or its pricing and purchasing policies.
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3.12 TITLE TO PROPERTIES.
(a) The real property listed as owned ("OWNED PROPERTY") or leased ("LEASED
PROPERTY") in the Disclosure Schedule constitutes all of the real property now
used or occupied by SRI or any Subsidiary, and ever owned used or occupied in
the past by SRI or any Subsidiary (including any and all structures, fixtures or
other improvements thereon, the "REAL PROPERTY"). Such Disclosure Schedule
includes the record title holder, location, uses thereof and SRI or Subsidiary
indebtedness thereon, if any, for all Real Property. SRI or a Subsidiary has
good and marketable fee simple title to all Owned Property, except for recorded
easements, covenants and other restrictions; utility easements; building
restrictions; zoning restrictions; and other easements, covenants and
restrictions existing generally with respect to properties of a similar
character, all of which are shown on such Disclosure Schedule and there are no
outstanding options to purchase the Owned Real Property. The Real Property has
access, sufficient for the conduct of the business of SRI as now conducted or as
presently proposed to be conducted, to public roads and to all utilities,
including electricity, sanitary and storm sewer, potable water, natural gas and
other utilities, used in the operation of the business of SRI at that location.
All structures, fixtures and other improvements on all Owned Property are within
the lot lines and do not encroach on the properties of any other Person, and the
use and operation of all Owned Property are not in violation of any applicable
building, zoning, safety, environmental, subdivision and other laws, ordinances,
regulations, codes, permits, licenses and certificates and all restrictions and
conditions affecting title. Except as described in the Disclosure Schedule, no
portion of any Owned Property is located in a flood plain, flood hazard area or
designated wetlands area. Since January 1, 1992, neither SRI nor any Subsidiary
has received any written or oral notice of assessments for public improvements
against any Owned Property or any written or oral notice or order by any
governmental body, any insurance company that has issued a policy with respect
to any of such properties or any board of fire underwriters or other body
exercising similar functions (other than as disclosed in the insurance reports
disclosed hereunder) that (i) relates to material violations of building, safety
or fire ordinances or regulations, (ii) claims any material defect or deficiency
with respect to any of such properties or (iii) requests that performance of any
material repairs, alterations or other work to or in any of such properties or
in the streets bounding the same. Complete and correct copies of all material
written reports on such matters from any insurance company that has issued a
policy with respect to any of such properties since January 1, 1994, have been
delivered to Ringer. To the knowledge of SRI, there is no pending condemnation,
expropriation, eminent domain or similar proceeding affecting all or any portion
of the Owned Property.
(b) The leases for the Leased Property (the "LEASES") are in full force and
effect, and SRI or a Subsidiary holds a valid and existing leasehold interest
under each of the Leases for the term set forth in the Disclosure Schedule. SRI
has delivered to Ringer complete and accurate copies of each of the Leases, and
none of the Leases has been modified in any respect, except to the extent that
such modifications are disclosed by the copies delivered to Ringer. Neither SRI
nor any Subsidiary is in material default, and to the knowledge of SRI no
circumstances exist which, if unremedied, would, either with or without notice
or the passage of time or both, result in such default under any of the Leases;
nor to the knowledge of SRI is any other party to any of the Leases in default.
(c) SRI or a Subsidiary owns good and marketable title to each of the
tangible properties and tangible assets reflected on the Latest Balance Sheet or
acquired since the date thereof, free and clear of all liens and encumbrances,
except for (i) liens for current Taxes not yet delinquent, (ii) liens set forth
in the Disclosure Schedule, (iii) the properties subject to the Leases, (iv)
assets disposed of since the date of the Latest Balance Sheet in the ordinary
course of business, (v) liens imposed by law and incurred in the ordinary course
of business for obligations not yet due to carriers, warehousemen, laborers and
materialmen and (vi) liens in respect of pledges or deposits under workers'
compensation laws, all of which liens aggregate less than $25,000.
(d) All of the buildings, machinery, equipment, tools, jigs, fixtures,
vehicles and other tangible assets necessary for the conduct of the business of
SRI and the Subsidiaries are in reasonable working condition and repair,
ordinary wear and tear excepted, and are usable in the ordinary course of
business. There are no defects in such assets or other conditions relating
thereto which adversely affect the operation or value of such assets. SRI or a
Subsidiary owns or leases under valid leases, all buildings, machinery,
equipment and other tangible
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assets necessary for the conduct of its business as presently conducted, except
for defects of title that do not materially affect the use of such assets by SRI
and the Subsidiaries and except for such assets that can be purchased or leased
for nominal expenditures.
3.13 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the Latest
Balance Sheet and those arising thereafter are valid receivables, are not
subject to valid counterclaims or set-offs, and are collectible in accordance
with their terms, except to the extent of the bad debt reserve reflected on the
Latest Balance Sheet.
3.14 INVENTORY. The inventory of raw materials, work in process and
finished goods of SRI and each Subsidiary consists of items of a cost, quality
and quantity usable and, with respect to finished goods only, salable at the
normal profit levels of SRI and such Subsidiary in the ordinary course of the
business of SRI and such Subsidiary. The inventory of finished goods of SRI and
each Subsidiary is not slow-moving as determined in accordance with past
practices, obsolete or damaged and is merchantable and fit for its particular
use. SRI and each Subsidiary has on hand or has ordered and expects timely
delivery of such quantities of raw materials, and has on hand such quantities of
work in process and finished goods, in each case as are reasonably required to
timely fill current orders on hand which require delivery within 60 days and to
maintain the manufacture and shipment of products at its normal level of
operations. As of the date of the Latest Balance Sheet, the values at which such
inventory is carried on the Latest Balance Sheet are in accordance with GAAP.
The Disclosure Schedule contains a materially complete and accurate summary of
SRI's and each Subsidiary's inventory of raw materials, work in progress,
finished goods and reserve for obsolete and other inventory allowance or accrual
calculation schedules as of September 30, 1996 and October 3, 1997. The
book-to-physical inventory adjustment (i.e., the difference, if any, obtained by
subtracting the value of the physical inventory at cost from the general ledger
inventory balance) as of the Balance Sheet Date will not exceed $100,000 (the
amount of any such shortfall being referred to herein as the "Inventory
Adjustment Amount").
3.15 TAX MATTERS.
(a) Each of SRI, each Subsidiary and any affiliated, combined or unitary
group of which SRI or any Subsidiary is or was a member, any predecessor of SRI
or any Subsidiary, and any Plans (as defined in Section 3.21 hereof), as the
case may be (each, a "TAX AFFILIATE" and, collectively, the "TAX AFFILIATES"),
has: (i) timely filed (or has had timely filed on its behalf) all returns,
declarations, reports, estimates, information returns, and statements
("RETURNS") required to be filed or sent by it in respect of any Taxes or
required to be filed or sent by it by any taxing authority having jurisdiction
and all such Returns are true and correct in all material respects, except for
timing and categorization issues that would not have a Material Adverse Effect;
(ii) timely and properly paid (or has had paid on its behalf) all Taxes due and
payable with respect to the periods covered by such Returns; (iii) established
on its Latest Balance Sheet, in accordance with GAAP, reserves that are adequate
for the payment of any Taxes not yet due and payable for all Tax periods or
portions thereof ending on, prior to, or including the Closing Date, the amount
of which as of the Latest Balance Sheet Date is set forth in the Disclosure
Schedule; and (iv) complied with all applicable laws, rules, and regulations
relating to the withholding of Taxes and the payment thereof (including, without
limitation, withholding of Taxes under Sections 1441 and 1442 of the Code, or
similar provisions under any foreign laws), and timely and properly withheld
from individual employee wages or other payments to employees and paid over to
the proper governmental authorities all amounts required to be so withheld and
paid over under all applicable laws. True and correct copies of any and all
Returns filed by any Tax Affiliate have been provided to Ringer.
(b) There are no liens for Taxes upon any assets of SRI or any Subsidiary
or of any Tax Affiliate, except liens for Taxes not yet due. Neither SRI nor any
Subsidiary is a party to any tax sharing agreement or similar arrangement for
the payment or reimbursement of Taxes.
(c) No deficiency for any Taxes has been asserted, assessed or, to SRI's
knowledge, proposed against SRI, any Subsidiary or any Tax Affiliate that has
not been resolved and paid in full. No waiver, extension or comparable consent
given by SRI, any Subsidiary or any Tax Affiliate regarding the application of
the statute of limitations with respect to any Taxes or Returns is outstanding,
nor is any request for any such waiver or consent pending. There has been no Tax
audit or other administrative proceeding or court proceeding with
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regard to any Taxes or Returns, nor is any such Tax audit or other proceeding
pending, nor has there been any notice to SRI or any Subsidiary by any Taxing
authority regarding any such Tax, audit or other proceeding, or, to the
knowledge of SRI, is any such Tax audit or other proceeding threatened with
regard to any Taxes or Returns. SRI does not expect the assessment of any
additional Taxes of SRI, any Subsidiary or any Tax Affiliate and is not aware of
any unresolved questions, claims or disputes concerning the liability for Taxes
of SRI, any Subsidiary or any Tax Affiliate which would exceed the estimated
reserves established on its books and records.
(d) Neither SRI, any Subsidiary nor any Tax Affiliate is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code, and the consummation of the transactions
contemplated by this Agreement will not be a factor causing payments to be made
by SRI, any Subsidiary or any Tax Affiliate that are not deductible (in whole or
in part) under Section 280G of the Code.
(e) Neither SRI, any Subsidiary nor any Tax Affiliate has requested any
extension of time within which to file any Return, which Return has not since
been filed.
(f) No property of SRI, any Subsidiary or any Tax Affiliate is property
that SRI or such Subsidiary or Tax Affiliate is or will be required to treat as
being owned by another person under the provisions of Section 168(f)(8) of the
Code (as in effect prior to amendment by the Tax Reform Act of 1986) or is "tax-
exempt use property" within the meaning of Section 168 of the Code.
(g) Neither SRI nor any Subsidiary or Tax Affiliate is required to include
in income any adjustment under Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by SRI or any Tax Affiliate as a
result of the Tax Reform Act of 1986 and neither SRI nor any Subsidiary or Tax
Affiliate has knowledge that the Internal Revenue Service has proposed any such
adjustment or change in accounting method.
(h) All transactions that could give rise to an understatement of federal
income tax (within the meaning of Section 6661 of the Code as it applied prior
to repeal) or an underpayment of tax (within the meaning of Section 6662 of the
Code) were reported in a manner for which there is substantial authority or were
adequately disclosed (or, with respect to Returns filed before the Effective
Time, will be reported in such a manner or adequately disclosed) on the Returns
required in accordance with Sections 6661(b)(2)(B) and 6662(d)(2)(B) of the
Code.
(i) Neither SRI, nor any Subsidiary or Tax Affiliate has engaged in any
transaction that would result in a deemed election under Section 338(e) of the
Code, and neither SRI nor any Subsidiary or Tax Affiliate will engage in any
such transaction within any applicable "consistency period" (as such term is
defined in Section 338 of the Code).
(j) Neither SRI, a nor any Subsidiary or Tax Affiliate has filed any
consent under Section 341(f) of the Code.
(k) For purposes of this Agreement, the term "TAXES" means all taxes,
charges, fees, levies, or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp, occupation, property, or
other taxes, customs duties, fees, assessments, or charges of any kind
whatsoever, including, without limitation, all interest and penalties thereon,
and additions to tax or additional amounts imposed by any taxing authority,
domestic or foreign, upon SRI or any Tax Affiliate.
3.16 CONTRACTS AND COMMITMENTS.
(a) The Disclosure Schedule lists the following agreements, whether written
or, to SRI's knowledge, oral, to which SRI or any Subsidiary is a party (or by
which SRI or any Subsidiary or their assets are bound): (i) collective
bargaining agreement or contract with any labor union; (ii) bonus, pension,
profit sharing, retirement or other form of deferred compensation plan, other
than as described in the Disclosure Schedule; (iii) hospitalization insurance or
other welfare benefit plan or practice, whether formal or informal, other than
as described in the Disclosure Schedule; (iv) stock purchase or stock option
plan; (v) contract for the
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employment of any officer, individual employee or other person on a full-time or
consulting basis or relating to severance pay for any such person, other than
SRI's and the Subsidiaries normal employment practices generally affecting all
employees or classes of employees (such as hourly or salaried classes of
employees); (vi) agreement with employees and with consultants, vendors,
customers or other third parties requiring confidential treatment of SRI or
Subsidiary confidential information and/or transfer to SRI or any Subsidiary of
intellectual property rights created by employees and with consultants, vendors,
customers or other third parties; (vii) contract, agreement or understanding
relating to the voting of SRI's or any Subsidiary's capital stock or the
election of directors of SRI or any Subsidiary; (viii) agreement or indenture
relating to the borrowing of money, to letters of credit or to mortgaging,
pledging or otherwise placing a lien on any of the assets of SRI or any
Subsidiary; (ix) guaranty of any obligation for borrowed money or otherwise; (x)
lease or agreement under which it is lessee of, or holds or operates any
property, real or personal, owned by any other party; (xi) lease or agreement
under which it is lessor of, or permits any third party to hold or operate, any
property, real or personal, for which the annual rental exceeds $5,000; (xii)
contract or group of related contracts with the same party (other than any
contract or group of related contracts for the purchase or sale of products or
services) continuing over a period of more than six months from the date or
dates thereof, not terminable by it on 30 days' or less notice without penalty
and involving more than $5,000; (xiii) contract which prohibits SRI or any
Subsidiary from freely engaging in business anywhere in the world; (xiv)
contract for the distribution of the products of SRI or any Subsidiary
(including any distributor, sales and original equipment manufacturer contract);
(xv) franchise agreement; (xvi) license agreement or agreement providing for the
payment of royalties or other compensation by SRI or any Subsidiary in
connection with intellectual property rights licensed from third parties; (xvii)
license agreement or agreement providing for the receipt of royalties or other
compensation by SRI or any Subsidiary in connection with intellectual property
rights owned, controlled or otherwise licensable by SRI or any Subsidiary;
(xviii) contract or commitment for capital expenditures in excess of $5,000,
(xix) agreement for the sale of any capital asset in excess of $5,000; (xx)
contract with any affiliate which in any way relates to SRI or any Subsidiary
(other than for employment on customary terms); or (xxi) agreement with vendors,
customers or other third parties requiring confidential treatment of
confidential information of such vendors, customers or other third parties;
(xxii) other agreement which is either material to the business of SRI or any
Subsidiary or was not entered into in the ordinary course of business (other
than agreements required to be listed in the Disclosure Schedule).
(b) The Disclosure Schedule lists the following agreements, whether oral or
written, to which SRI or any Subsidiary is a party or by which SRI or any
Subsidiary or any of their assets are bound: (i) contract or group of related
contracts with the same party for the purchase of products or services by SRI or
any Subsidiary under which the undelivered balance of such products or services
is in excess of $5,000; (ii) contract or group of related contracts with the
same party for the sale of products or services by SRI or any Subsidiary under
which the undelivered balance of such products or services (including, without
limitation, any free upgrades or ongoing services) has a sales price in excess
of $5,000; and (iii) sales agreement or other customer commitment (other than
the standard form of purchase order) which entitles any purchaser to a rebate or
right of set-off, to return any product of SRI or any Subsidiary after
acceptance thereof or to delay the acceptance thereof, to receive future
services, upgrades or enhancements, or which varies in any material respect from
SRI's or any Subsidiary's standard form agreements for sales.
(c) SRI and each Subsidiary has performed all material obligations required
to be performed through the date hereof by it in connection with the contracts
or commitments required to be disclosed in the Disclosure Schedule and has not
been notified of any claim of material default under any contract or commitment
required to be disclosed in the Disclosure Schedule; neither SRI nor any
Subsidiary has any present expectation or intention of not fully performing any
material obligation pursuant to any contract or commitment required to be
disclosed in the Disclosure Schedule; and neither SRI nor any Subsidiary has
knowledge of any material breach or anticipated material breach by any other
party to any contract or commitment required to be disclosed in the Disclosure
Schedule.
(d) Prior to the date of this Agreement, Ringer has been supplied with a
correct and complete copy of each written contract or commitment referred to in
the Disclosure Schedule, together with all known amendments, waivers or other
changes thereto.
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3.17 INTELLECTUAL PROPERTY RIGHTS.
(a) The Disclosure Schedule describes: (i) all patents and all
registrations for trademarks, service marks, trade names, corporate names,
copyrights and mask works that have been issued to SRI or any Subsidiary; and
(ii) each pending patent application or application for registration for
trademarks, service marks, trade names, corporate names, copyrights and mask
works that SRI or any Subsidiary has made with respect to intellectual property
owned by, or otherwise controlled by, SRI or any Subsidiary and used in,
developed for use in or necessary to the conduct of the business of SRI or any
Subsidiary as now conducted or as planned to be conducted as described herein
(the "OWNED INTELLECTUAL PROPERTY RIGHTS"). Except as set forth in the
Disclosure Schedule, SRI and each Subsidiary owns and possesses all right, title
and interest, or holds such other interest as is identified in the Disclosure
Schedule, in and to the rights set forth under such caption free and clear of
all liens, security interests or other encumbrances and has the full right to
exploit such Owned Intellectual Property Rights without payment of compensation
to any other party.
(b) The Disclosure Schedule describes all agreements granting to SRI or any
Subsidiary rights in patents, patent applications, trademarks, service marks,
trade names, corporate names, copyrights, mask works, trade secrets or other
intellectual property rights used in or necessary to the conduct of the business
of SRI as now conducted or as planned to be conducted as described herein (the
"LICENSED-IN INTELLECTUAL PROPERTY RIGHTS"). All such agreements are in force
and neither SRI nor any Subsidiary is in breach of any such agreement.
(c) The Disclosure Schedule describes all products marketed or that have
been marketed by SRI or any Subsidiary within the past two years and identifies
the method(s) of intellectual property protection utilized by SRI or any
Subsidiary with respect to such products.
(d) The Disclosure Schedule describes all agreements granting to third
parties any rights in Owned Intellectual Property Rights and any agreements to
grant intellectual property rights that SRI or any Subsidiary may acquire in the
future.
(e) Except as disclosed in the Disclosure Schedule, all of the Owned
Intellectual Property Rights will be assumed by, and will become intellectual
property rights of, the Surviving Corporation in the Merger, without the
requirement that any consent to assignment be obtained or any payment (other
than government filing or registration fees) be made. Except as disclosed in the
Disclosure Schedule, all licenses of the Licensed-In Intellectual Property
Rights will be assumed by, and will become valid agreements of, the Surviving
Corporation in the Merger, without the requirement that any consent to
assignment be obtained or any payment be made (other than future royalties as
provided in such agreements).
(f) SRI and each Subsidiary have taken all commercially reasonable steps to
acquire, protect and maintain the Owned Intellectual Property Rights. Without
limiting the generality of the foregoing, (i) all employees, contract workers,
consultants and other agents of SRI and each Subsidiary have executed agreements
sufficient to vest in SRI or such Subsidiary ownership or the right to use the
Owned Intellectual Property Rights on which they have performed services in the
business of SRI or such Subsidiary as currently conducted without the payment of
royalties or penalties; (ii) all maintenance, annuity, renewal and other such
fees and filings due on Owned Intellectual Property Rights have been paid or
made; and (ii) SRI has no knowledge of any defects in the Owned Intellectual
Property Rights that would lead to any of them becoming invalid or
unenforceable.
(g) Except as disclosed in the Disclosure Schedule, neither SRI nor any
Subsidiary has received any notice of, nor are there any facts known to SRI or
any Subsidiary which indicate a likelihood of, any infringement or
misappropriation by, or conflict from, any third party with respect to the Owned
Intellectual Property Rights or any Licensed-In Intellectual Property Rights
that are exclusively licensed to SRI or any Subsidiary; and no claim by any
third party contesting the validity of any Owned Intellectual Property Rights
has been made, is currently outstanding or, to the knowledge of SRI, is
threatened;
(h) Except as disclosed in the Disclosure Schedule, neither SRI nor any
Subsidiary has received any notice of any infringement, misappropriation or
violation by SRI or any Subsidiary of any intellectual property rights of any
third parties and neither SRI nor any Subsidiary, to its knowledge, has
infringed, misappropriated
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or otherwise violated any such intellectual property rights; and to the
knowledge of SRI, no infringement, misappropriation or violation of any
intellectual property rights of any third parties has occurred or will occur
with respect to products currently being sold by SRI or any Subsidiary or with
respect to the products currently under development (in their present state of
development) or with respect to the conduct of the business of SRI or any
Subsidiary as now conducted.
(i) Except as disclosed in the Disclosure Schedule, neither SRI nor any
Subsidiary has entered into any agreement restricting SRI or any Subsidiary from
selling, leasing or otherwise distributing any of its current products or
products under development to any class of customers, in any geographic area,
during any time period or in any segment of the market.
(j) To SRI's knowledge, SRI and each Subsidiary has the right to make
available to the Surviving Corporation all trade secrets and other confidential
information entrusted to SRI or any Subsidiary by third parties.
(k) There are no known quality defects in the designs contained in the
Owned Intellectual Property Rights and such designs comply with all applicable
laws.
3.18 LITIGATION. The Disclosure Schedule contains a detailed description of
all actions, suits, proceedings, orders or investigations pending or, to the
knowledge of SRI, threatened against SRI or any Subsidiary, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, nor
is there any basis therefor.
3.19 WARRANTIES; PRODUCTS.
(a) The Disclosure Schedule lists all claims outstanding, pending or, to
the knowledge of SRI, threatened for breach of any warranty relating to any
products sold by SRI or any Subsidiary prior to the date hereof. The description
of the product warranties and other material terms of sale of SRI and each
Subsidiary set forth in the Disclosure Schedule are correct and complete. The
reserves for warranty claims on the Latest Balance Sheet are consistent with
SRI's and each Subsidiary's prior practices and are fully adequate to cover all
warranty claims made or to be made against any products of SRI or any Subsidiary
sold prior to the date thereof.
(b) SRI's and each Subsidiary's current products have performed, and shall
perform after the Effective Time, substantially in accordance with SRI's and
such Subsidiary's technical specifications applicable to such products and
parts, subject to repair and replacement claims consistent with SRI's and such
Subsidiary's past experience. The foregoing representation and warranty:
(i) is contingent upon proper use of the products and parts in the
applications for which they were intended as indicated in SRI's and such
Subsidiary's accompanying user manual or similar documentation for the
products and parts; and
(ii) does not apply to any product or part which (A) has been altered,
except by SRI or such Subsidiary or at SRI's and such Subsidiary's
direction, (B) has not been installed, operated, repaired or maintained in
accordance with any installation, handling, maintenance or operating
instructions supplied by SRI or such Subsidiary, or (C) has been damaged by
acts of nature, vandalism, burglary, neglect, misuse or accident.
3.20 EMPLOYEES. (a) To the knowledge of SRI, no executive employee of SRI
or any Subsidiary and no group of the employees of SRI or any Subsidiary has any
plans to terminate his, her or their employment; (b) SRI and each Subsidiary has
complied with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other Taxes; (c) neither SRI nor any
Subsidiary has any labor relations problem pending and SRI's labor relations are
satisfactory; (d) there are no workers' compensation claims pending against SRI
or any Subsidiary nor is SRI or any Subsidiary aware of any facts that would
give rise to such a claim; (e) no employee of SRI or any Subsidiary is subject
to any secrecy or noncompetition agreement or any other agreement or restriction
of any kind that would impede in any way the ability of such employee to carry
out fully all activities of such employee in furtherance of the business of SRI
or any Subsidiary; and (f) no
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employee or former employee of SRI or any Subsidiary, or any predecessor has any
claim with respect to any Intellectual Property Rights. The Disclosure Schedule
lists, as of the date set forth in the Disclosure Schedule, each employee of SRI
or any Subsidiary. The Disclosure Schedule also states the position, title,
remuneration (including any scheduled salary or remuneration increases), date of
employment and accrued vacation pay of each such employee as of such date.
3.21 EMPLOYEE BENEFIT PLANS.
(a) For the purpose of this Agreement, "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended, and the term "Plan" means
every employee benefit plan (whether or not covered by ERISA) which is
maintained or contributed to by SRI or any Subsidiary for the benefit of present
or former employees, including those intended to provide: (i) medical, surgical,
health care, hospitalization, dental, vision, workers' compensation, life
insurance, death, disability, legal services, severance, sickness or accident
benefits, (ii) pension, profit sharing, stock bonus, retirement, supplemental
retirement or deferred compensation benefits (whether or not tax qualified),
(iii) bonus, incentive compensation, stock option, stock appreciation right,
phantom stock or stock purchase benefits, or (iv) salary continuation,
unemployment, supplemental unemployment, termination pay, vacation or holiday
benefits.
(b) The term "PLAN" shall also include every such plan: (i) which SRI or
any Subsidiary has committed to implement, establish, adopt or contribute to in
the future, (ii) for which SRI or any Subsidiary is or may be financially liable
as a result of the direct sponsor's affiliation to SRI or any Subsidiary or its
owners (whether or not such affiliation exists at the date of this Agreement and
notwithstanding that the plan is not maintained by SRI or any Subsidiary for the
benefit of its employees or former employees), (iii) which is in the process of
terminating (but such term does not include any plan that has been terminated
and completely wound up prior to the date of this Agreement such that neither
SRI nor any Subsidiary has any present or potential liability with respect to
such arrangement), or (iv) for or with respect to which SRI or any Subsidiary is
liable under any common law successor doctrine, express successor liability
provisions of law, provisions of a collective bargaining agreement, labor or
employment law or agreement with a predecessor employer.
(c) The Disclosure Schedule sets forth all Plans by name and brief
description identifying: (i) the type of Plan, (ii) the funding arrangements for
the Plan, (iii) the sponsorship of the Plan, and (iv) the participating
employers in the Plan.
(d) Each Plan identified in the Disclosure Schedule is further identified
on such Disclosure Schedule by reference to such one or more of the following
characteristics as may apply to such Plan: (i) defined contribution plan as
defined in Section 3(34) of ERISA or Section 414(i) of the Code, (ii) defined
benefit plan as defined in Section 3(35) of ERISA or Section 414(j) of the Code,
(iii) plan which is or is intended to be tax qualified under Section 401(a) or
403(a) of the Code, (iv) plan which is or is intended to be an employee stock
ownership plan as defined in Section 4975(e)(7) of the Code (and whether or not
such plan has entered into an exempt loan), (v) nonqualified deferred
compensation arrangement, (vi) employee welfare benefit plan as defined in
Section 3(1) of ERISA, (vii) multiemployer plan as defined in Section 3(37) of
ERISA or Section 414(f) of the Code, (viii) plan maintained by more than one
employer as defined in Section 413(c) of the Code (a "multiple employer plan"),
(ix) plan providing benefits after separation from service or termination of
employment, (x) plan maintained or contributed to by SRI or any Subsidiary which
owns any SRI or other employer securities as an investment, (xi) plan which
provides benefits (or provides increased benefits or vesting) as a result of a
change in control of SRI or any Subsidiary, (xii) plan which is maintained
pursuant to collective bargaining, and (xiii) a plan funded, in whole or in
part, through a voluntary employees' beneficiary association exempt from tax
under Section 501(c)(9) of the Code.
(e) The Disclosure Schedule sets forth the identity of each corporation,
trade or business (separately for each category below that applies): (i) which
is (or was during the preceding five years) under common control with SRI or any
Subsidiary within the meaning of Section 414(b) or (c) of the Code, (ii) which
is (or was during the preceding five years) in an affiliated service group with
SRI or any Subsidiary within the meaning of Section 414(m) of the Code, (iii)
which is (or was during the preceding five years) the legal employer of persons
providing services to SRI or any Subsidiary as leased employees within the
meaning of Section 414(n) of the Code, and (iv) with respect to which SRI or any
Subsidiary is a successor employer for
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purposes of group health or other welfare plan continuation rights (including
Section 601 et. seq. of ERISA) or the Family and Medical Leave Act.
(f) To the extent that they exist, SRI has furnished Ringer with true and
complete copies of: (i) the most recent determination letter, if any, received
by SRI or any Subsidiary from the Internal Revenue Service regarding each Plan,
(ii) the most recent determination or opinion letter ruling from the Internal
Revenue Service that each trust established in connection with Plans which are
intended to be tax exempt under Section 501(a) or (c) of the Code are so tax
exempt, (iii) all pending applications for rulings, determinations, opinions, no
action letters and the like filed with any governmental agency (including but
not limited to the Department of Labor, Internal Revenue Service, Pension
Benefit Guaranty Corporation and the SEC), (iv) the financial statements for
each Plan for the three most recent fiscal or Plan years (in audited form if
required by ERISA) and, where applicable, Annual Report/Return (Form 5500) with
disclosure schedules, if any, and attachments for each Plan, (v) the most
recently prepared actuarial valuation report for each Plan (including but not
limited to reports prepared for funding, deduction and financial accounting
purposes), (vi) Plan documents, trust agreements, insurance contracts, service
agreements and all related contracts and documents (including any employee
summaries and material employee communications) with respect to each Plan, and
(vii) collective bargaining agreements (including side agreements and letter
agreements) relating to the establishment, maintenance, funding and operation of
any Plan.
(g) The Disclosure Schedule identifies each employee of SRI or any
Subsidiary who is: (i) absent from active employment due to short or long term
disability, (ii) absent from active employment on a leave pursuant to the Family
and Medical Leave Act or a comparable state law, (iii) absent from active
employment on any other leave or approved absence (together with the reason for
such leave or absence), (iv) absent from active employment due to military
service (under conditions that give the employee rights to re-employment), or
(v) not an "at will" employee, except as "at will" status may be modified by
employee handbooks or employment practices applicable generally to all employees
or categories of employees (such as hourly and salaried categories).
(h) With respect to continuation rights arising under federal or state law
as applied to plans that are group health plans (as defined in Section 601 et.
seq. of ERISA), the Disclosure Schedule identifies: (i) each employee, former
employee or qualifying beneficiary who has elected continuation, and (ii) each
employee, former employee or qualifying beneficiary who has not elected
continuation coverage but is still within the period in which such election may
be made.
(i) Except as set forth in the Disclosure Schedule: (i) all Plans intended
to be tax qualified under Section 401(a) or Section 403(a) of the Code are so
qualified; (ii) all trusts established in connection with Plans which are
intended to be generally tax exempt under Section 501(a) or (c) of the Code are
generally tax exempt; (iii) to the extent required either as a matter of law or
to obtain the intended tax treatment and tax benefits, all Plans comply in all
material respects with the requirements of ERISA and the Code; (iv) all Plans
have been administered in all material respects in accordance with the documents
and instruments governing the Plans; (v) all reports and filings with
governmental agencies (including but not limited to the Department of Labor,
Internal Revenue Service, Pension Benefit Guaranty Corporation and the SEC)
required in connection with each Plan have been timely made; (vi) all
disclosures and notices required by law or Plan provisions to be given to
participants and beneficiaries in connection with each Plan have been properly
and timely made; (vii) to SRI's knowledge, no Plan, separately or in the
aggregate, requires or would result in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code, and the consummation
of the transactions contemplated by this Agreement will not be a factor in
causing payments to be made by Ringer or SRI or any Subsidiary that are not
deductible (in whole or in part) because of the application of Section 280G of
the Code; (viii) and SRI and each Subsidiary has made a good faith effort to
comply with the reporting and taxation requirements for FICA Taxes with respect
to any deferred compensation arrangements under Section 3121(v) of the Code.
(j) Except as set forth in the Disclosure Schedule: (i) all contributions,
premium payments and other payments required to be made in connection with the
Plans as of the date of this Agreement have been made; (ii) all contributions,
premium payments and other payments due from SRI or any Subsidiary in connection
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with the Plans but not made as of the date of this Agreement have been accounted
for in accordance with GAAP on the Latest Balance Sheet; (iii) no contribution,
premium payment or other payment has been made in support of any Plan that is in
excess of the allowable deduction for federal income tax purposes for the year
with respect to which the contribution was made (whether under Section 162,
Section 280G, Section 404, Section 419, Section 419A of the Code or otherwise);
and (iv) with respect to each Plan that is subject to Section 301 et. seq. of
ERISA or Section 412 of the Code, neither SRI nor any Subsidiary is liable for
any accumulated funding deficiency as that terms is defined in Section 412 of
the Code and the projected benefit obligations determined as of the date of this
Agreement do not exceed the assets of the Plan.
(k) Except as set forth in the Disclosure Schedule: (i) no action, suit,
charge, complaint, proceeding, hearing, investigation or claim is pending with
regard to any Plan other than routine uncontested claims for benefits; (ii)
except as based upon plans maintained by Ringer or its affiliates, the
consummation of the transactions contemplated by this Agreement will not cause
any Plan to increase benefits payable to any participant or beneficiary; (iii)
except as based upon plans maintained by Ringer or its affiliates, the
consummation of the transactions contemplated by this Agreement will not: (A)
entitle any current or former employee of SRI or any Subsidiary to severance
pay, unemployment compensation or any other payment, benefit or award, or (B)
accelerate or modify the time of payment or vesting, or increase the amount of
any benefit, award or compensation due any such employee; (iv) to SRI's
knowledge, no Plan is currently under examination or audit by the Department of
Labor, the Internal Revenue Service or the Pension Benefit Guaranty Corporation;
(v) neither SRI nor any Subsidiary has any actual or potential liability arising
under Title IV of ERISA as a result of any Plan that has terminated or is in the
process of terminating; (vi) neither SRI nor any Subsidiary has any actual or
potential liability under section 4201 et. seq. of ERISA for either a complete
withdrawal or a partial withdrawal from a multiemployer Plan; and (vii) with
respect to the Plans, neither SRI nor any Subsidiary has any liability (either
directly or as a result of indemnification) for (and the transaction
contemplated by this Agreement will not cause any liability for): (A) any excise
Taxes under section 4971 through section 4980B, section 4999, section 5000 or
any other section of the Code, (B) any penalty under section 502(i), section
502(l), Part 6 of Title I or any other provision of ERISA, or (C) any excise
Taxes, penalties, damages or equitable relief as a result of any prohibited
transaction, breach of fiduciary duty or other violation under ERISA or any
other applicable law.
(l) Except as set forth in the Disclosure Schedule: (i) all accruals
required under FAS 106 have been properly accrued on the financial statements of
SRI; (ii) no condition, agreement or Plan provision limits the right of SRI or
any Subsidiary to amend, cut back or terminate any Plan (except to the extent
such limitation arises under ERISA); (iii) neither SRI nor any Subsidiary has
any liability for life insurance, death or medical benefits after separation
from employment other than: (A) death benefits under the Plans set forth in the
Disclosure Schedule or (B) health care continuation benefits described in
section 4980B of the Code.
3.22 INSURANCE. The Disclosure Schedule lists and briefly describes each
insurance policy maintained by SRI or any Subsidiary with respect to the
properties, assets and operations of SRI or such Subsidiary and sets forth the
date of expiration of each such insurance policy. All of such insurance policies
are in full force and effect. Neither SRI nor any Subsidiary is in default with
respect to its obligations under any of such insurance policies.
3.23 AFFILIATE TRANSACTIONS. Other than pursuant to this Agreement, no
officer, director or employee of SRI or any Subsidiary or any member of the
immediate family of any such officer, director or employee, or any entity in
which any of such persons owns any beneficial interest (other than any publicly
held corporation whose stock is traded on a national securities exchange or in
the over-the-counter market and less than one percent of the stock of which is
beneficially owned by any of such persons) (collectively "INSIDERS"), has any
agreement with SRI or any Subsidiary (other than normal employment arrangements)
or any interest in any property, real, personal or mixed, tangible or
intangible, used in or pertaining to the business of SRI or any Subsidiary
(other than ownership of capital stock of SRI). None of the Insiders has any
direct or indirect interest (other than beneficial ownership of less than one
percent of the stock of a publicly held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market) in any
competitor, supplier or customer of SRI or any Subsidiary or in any person, firm
or entity from whom or to whom SRI or any Subsidiary leases any property. For
purposes of this Section 3.23, the members of the immediate family of
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an officer, director or employee shall consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law of such officer, director or employee. All agreements and
transactions between SRI or any Subsidiary and any Insider identified in the
Disclosure Schedule were made for bona fide business purposes on terms
comparable to what could be obtained from an unaffiliated third party.
3.24 CUSTOMERS AND SUPPLIERS. The Disclosure Schedule lists the 15 largest
distributors and the 15 largest suppliers of each Subsidiary for the
eleven-month period ended August 31, 1997, and sets forth opposite the name of
each such customer or supplier the approximate amount of gross sales or
purchases by such Subsidiary attributable to such customer or supplier for such
period. Except as set forth on the Disclosure Schedule, since the Balance Sheet
Date, no customer or supplier listed in the Disclosure Schedule has informed SRI
or any Subsidiary that it will stop or materially decrease the rate of business
done with SRI or any Subsidiary.
3.25 DISTRIBUTORS. The Disclosure Schedule lists (a) all former
distributors of SRI or any Subsidiary that have been terminated since January 1,
1994 and the circumstances surrounding such termination; (b) all litigation and
disputes between SRI or any Subsidiary and any of their past or present
distributors, including any claims initiated by any distributor against SRI or
any Subsidiary, whether such litigation dispute resulted in a settlement,
financial payment or not; (c) to SRI's knowledge, all buying consortium
arrangements by which any distributor of SRI or any Subsidiary purchases goods
(including wholegoods, parts, supplies or other goods) or services from SRI or
any Subsidiary; and (d) all distributors of SRI or any Subsidiary that, to SRI's
knowledge, sell or distribute goods or services other than those of SRI or any
Subsidiary. There are no enforceable agreements with any distributor except as
set forth in the Disclosure Schedule. Each distributor of SRI and each
Subsidiary may be terminated without penalty or other liability other than the
repurchase of inventory and potential liability for floor plan exposure upon at
least 30 days' prior written notice, except as otherwise provided by distributor
protection laws in some states.
3.26 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The Disclosure Schedule lists
all officers and directors of SRI and each Subsidiary and all of the bank
accounts of SRI and each Subsidiary (designating each authorized signer).
3.27 COMPLIANCE WITH LAWS; PERMITS.
(a) Except as set forth in the Disclosure Schedule, SRI, each Subsidiary,
and their respective predecessors and respective officers, directors, agents and
employees have complied in all material respects with all applicable laws,
regulations and other requirements, including, but not limited to, federal,
state, local and foreign laws, ordinances, rules, regulations and other
requirements pertaining to product labeling, consumer products safety, equal
employment opportunity, employee retirement, affirmative action and other hiring
practices, occupational safety and health, workers' compensation, unemployment
and building and zoning codes to which SRI or any Subsidiary (including any
product of SRI or any Subsidiary) may be subject, and, since January 1, 1992,
SRI has received no notice of any allegation or claim of any noncompliance and
no claims have been filed against SRI or any Subsidiary alleging a violation of
any such laws, regulations or other requirements. SRI has no knowledge of any
action, pending or threatened, to change the zoning or building ordinances or
any other laws, rules, regulations or ordinances affecting the Real Property.
Neither SRI nor any Subsidiary is relying on any exemption from or deferral of
any such applicable law, regulation or other requirement that would not be
available to the Surviving Corporation after the Effective Time.
(b) SRI and each Subsidiary has, in full force and effect, all material
licenses, permits and certificates, from federal, state, local and foreign
authorities (including, without limitation, federal and state agencies
regulating occupational health and safety) necessary to conduct its business and
own and operate its properties (other than Environmental Permits, as such term
is defined in Section 3.28(b) hereof) (collectively, the "PERMITS"). SRI and
each Subsidiary has conducted its business in substantial compliance with all
material terms and conditions of the Permits.
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(c) Neither SRI nor any Subsidiary has made or agreed to make gifts of
money, other property or similar benefits (other than incidental gifts of
articles or general promotion and entertainment expenditures of nominal value)
to any actual or potential customer, supplier, governmental employee or any
other person in a position to assist or hinder SRI or any Subsidiary in
connection with any actual or proposed transaction.
3.28 ENVIRONMENTAL MATTERS.
(a) As used in this Section 3.28, the following terms shall have the
following meanings:
(i) "HAZARDOUS MATERIALS" means any dangerous, toxic or hazardous
pollutant, contaminant, chemical, waste, material or substance as defined
in or governed by any federal, state or local law, statute, code,
ordinance, regulation, rule or other requirement relating to such substance
or otherwise relating to the environment or human health or safety,
including without limitation any waste, material, substance, pollutant or
contaminant that (i) might present a hazard to or cause any injury to human
health or safety or to the environment (ii) might cause a nuisance,
trespass, toxic tort or other common law claim with respect to SRI, any
Subsidiary or the Real Property, or (iii) might subject SRI or any
Subsidiary to any imposition of costs or liability under any Environmental
Law (as defined in Section 3.28(a)(ii) hereof).
(ii) "ENVIRONMENTAL LAWS" means all applicable federal, state and
local laws, rules, regulations, codes, ordinances, orders, decrees,
directives, permits, licenses and judgments relating to pollution,
contamination or protection of the environment (including, without
limitation, all applicable federal, state and local laws, rules,
regulations, codes, ordinances, orders, decrees, directives, permits,
licenses and judgments relating to Hazardous Materials) in effect as of the
date of this Agreement.
(iii) "RELEASE" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any
other release or threatened release, however defined, whether intentional
or unintentional, of any Hazardous Material.
(iv) "CLEANUP" means the removal, remediation, decommissioning,
abatement, corrective action or other response with respect (including,
without limitation, testing, monitoring, sampling or investigation of any
kind) any Release or presence or other discovery of Hazardous Materials
(including,without limitation, chlorinated solvents, asbestos-containing
material, pesticides, insecticides, fungicides) or other adverse
environmental or safety conditions to the satisfaction of all applicable
governmental agencies, in compliance with applicable Environmental Laws.
(v) "REGULATORY ACTIONS" shall mean any claim, demand, action or
proceeding brought or instigated by any governmental agency in connection
with any Environmental Law (including, without limitation, civil, criminal
and/or administrative proceedings), whether or not seeking costs, damages,
penalties, or expenses.
(vi) "THIRD-PARTY CLAIMS" shall mean any claim, demand, suit,
proceeding, cause of action, penalty, cost, injunction or demand for
payment or compensation, asserted by any person or entity, whether or not
involving any injury or threatened injury to human health or safety,
property, the environment or natural resources, based on any Release of
Hazardous Materials or other adverse environmental or safety conditions, or
based on any action in negligence, trespass, strict liability, nuisance,
toxic tort or other Environmental Law or common law involving environmental
or safety matters.
(b) SRI, each Subsidiary and the Real Property are in compliance with all
applicable Environmental Laws. To the knowledge of SRI, all ownership or use of
the Real Property by any owners thereof or operators thereon other than SRI or
the Subsidiaries was at all times in compliance with all applicable
Environmental Laws, except where any such noncompliance, individually or in
aggregate, would not have a Material Adverse Effect.
(c) SRI and each Subsidiary has obtained, and maintained in full force and
effect, all environmental permits, licenses, certificates of compliance,
approvals and other authorizations necessary to conduct its business and operate
the Real Property (collectively, the "ENVIRONMENTAL PERMITS"). A correct and
complete copy of each such Environmental Permit shall be provided by SRI to
Ringer at least 14 days prior to the
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Effective Time. SRI and each Subsidiary has conducted its business in compliance
with all terms and conditions of the Environmental Permits. SRI and each
Subsidiary has filed all reports and notifications required to be filed under
and pursuant to all applicable Environmental Laws.
(d) (i) No Hazardous Materials have been generated, treated, contained,
handled, located, used, manufactured, processed, buried, incinerated, deposited,
stored, or released on, under or about any part of the Real Property that would
cause the Surviving Corporation or Ringer to incur response, remediation or
other costs related to Cleanup in order to comply with applicable Environmental
Laws or that would subject the Surviving Corporation or Ringer to fines or
penalties, (ii) the Real Property and any improvements thereon, contain no
asbestos, urea, formaldehyde, radon at levels above natural background,
polychlorinated biphenyls ("PCB"s) or pesticides that would cause the Surviving
Corporation or Ringer to incur response, remediation or other costs related to
Cleanup in order to comply with applicable Environmental Laws or that would
subject the Surviving Corporation or Ringer to fines, penalties, Regulatory
Actions or Third Party Claims, and (iii) no aboveground or underground storage
tanks are located on, under or about the Real Property.
(e) Neither SRI nor any Subsidiary has received any notice alleging in any
manner that it is, or might be potentially responsible for any Release of
Hazardous Materials, or any costs or liabilities arising under or for violation
of Environmental Laws.
(f) No expenditure, including penalties, fines or response, remediation or
other costs of Cleanup arising under applicable Environmental Laws, will be
required in order for Ringer, Merger Subsidiary or the Surviving Corporation to
comply with any Environmental Laws in effect at the time of the Effective Time
in connection with the operation or continued operation of the business of SRI
or any Subsidiary or the Real Property in a manner consistent with the current
operation thereof by SRI or any Subsidiary, other than expenditures comparable
to SRI's or such Subsidiary's historical level of expenditures for compliance
with Environmental Laws.
(g) Neither SRI, any Subsidiary nor the Real Property is or has been listed
on the United States Environmental Protection Agency National Priorities List of
Hazardous Waste Sites (the "NATIONAL PRIORITIES LIST"), or any other list,
schedule, law, inventory or record of hazardous or solid waste sites maintained
by any federal, state or local agency.
(h) SRI has disclosed and delivered to Ringer all environmental reports and
investigations which SRI or any Subsidiary or any of their agents,
representatives, consultants or counsel has obtained, ordered or reviewed with
respect to the business of SRI, any Subsidiary or the Real Property.
(i) To the knowledge of SRI, no part of the business of SRI, any Subsidiary
or the Real Property has been used as a landfill, dump or other disposal,
storage, transfer, handling or treatment area for Hazardous Materials, or as a
gasoline service station or a facility for selling, dispensing, storing,
transferring, disposing or handling petroleum and/or petroleum products.
(j) No lien has been attached or filed against SRI, any Subsidiary or the
Real Property in favor of any governmental or private entity for (i) any
liability or imposition of costs under or violation of any applicable
Environmental Law; or (ii) any Release of Hazardous Materials or other
environmental condition.
(k) The storage, transportation, handling, use or disposal, if any, by SRI
or any Subsidiary of Hazardous Materials on or under the Real Property and/or
disposal elsewhere, if any, of Hazardous Materials generated on or from the Real
Property is currently, and at all times has been, in compliance in all material
respects with all applicable Environmental Laws. Neither SRI nor any Subsidiary
has transported or arranged for the transportation or any Hazardous Materials or
other material or substances to any location which is: (i) listed on the
National Priorities List, or (ii) listed for possible inclusion on the National
Priorities List, in the Comprehensive Environmental Response, Compensation and
Liabilities Act of 1980 ("CERCLA") or on any similar state list.
3.29 BROKERAGE. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by
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this Agreement based on any arrangement or agreement made by or on behalf of SRI
or any Subsidiary, other than fees for financial advisory services that have
been paid or accrued at or prior to the Effective Date.
3.30 SHAREHOLDER AGREEMENTS. On or prior to the date hereof, SRI has
delivered to Ringer an executed copy of the Shareholder Agreement as described
in Section 12.01 hereof.
3.31 DISCLOSURE. Neither this Agreement nor any of the exhibits hereto nor
any of the documents delivered by or on behalf of SRI or any Subsidiary pursuant
to Article VIII hereof, the Disclosure Schedule or any of the financial
statements referred to in Section 3.08 hereof contains any untrue statement of a
material fact regarding SRI or any of the other matters dealt with in this
Article III relating to SRI or any Subsidiary or the transactions contemplated
by this Agreement. This Agreement, the exhibits hereto, the documents delivered
to Ringer by or on behalf of SRI or any Subsidiary pursuant to Article VIII
hereof, the Disclosure Schedule and the financial statements referred to in
Section 3.08 hereof do not omit any material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading, and there is no fact which has not been
disclosed to Ringer of which SRI has knowledge is aware which materially affects
adversely or could reasonably be anticipated to materially affect adversely the
business, including the operating results, assets, customer relations, employee
relations and business prospects, of SRI.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RINGER
AND MERGER SUBSIDIARY
Ringer and Merger Subsidiary, jointly and severally, hereby represent and
warrant to SRI that:
4.01 INCORPORATION AND CORPORATE POWER. Each of Ringer and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Minnesota and the State of Georgia,
respectively, with the requisite corporate power and authority to execute and
deliver this Agreement and the agreements identified in Article XII to which it
is a party (the "RINGER ANCILLARY AGREEMENTS") and perform its obligations
hereunder and thereunder. The Merger Subsidiary has the requisite corporate
power and authority to execute and deliver the Certificate of Merger and perform
its obligations thereunder.
4.02 EXECUTION, DELIVERY AND PERFORMANCE; VALID AND BINDING AGREEMENT. The
execution, delivery and performance of this Agreement and the Ringer Ancillary
Agreements by Ringer and Merger Subsidiary, and the Certificate of Merger by
Merger Subsidiary, and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by all requisite corporate
action other than approval of the Merger by the holders of a majority of the
outstanding share of Ringer Common Stock, and no corporate proceedings on their
part other than such approval are necessary to authorize the execution, delivery
or performance of this Agreement, the Ringer Ancillary Agreements or the
Certificate of Merger. This Agreement and the Ringer Ancillary Agreements have
been duly executed and delivered by Ringer and Merger Subsidiary and constitute
the valid and binding obligations of Ringer and Merger Subsidiary, enforceable
in accordance with their terms (subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application affecting creditors' rights), and the Certificate of Merger,
when executed and delivered by Merger Subsidiary, will constitute the valid and
binding obligation of Merger Subsidiary, enforceable in accordance with its
terms.
4.03 NO BREACH. The execution, delivery and performance of this Agreement
and the Ringer Ancillary Agreements by Ringer and Merger Subsidiary, and the
Certificate of Merger by Merger Subsidiary, and the consummation by Ringer and
Merger Subsidiary of the transactions contemplated hereby and thereby do not
conflict with or result in any breach of any of the provisions of, constitute a
default under, result in a violation of, result in the creation of a right of
termination or acceleration or any lien, security interest, charge or
encumbrance upon any assets of Ringer or Merger Subsidiary, or require any
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of the articles of
incorporation or bylaws of either Ringer or Merger Subsidiary, or any contract,
indenture, mortgage, lease, loan agreement or other agreement, relationship,
commitment, arrangement or instrument, written or
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oral, by which either Ringer or Merger Subsidiary is bound or affected (other
than Ringer's agreements with its principal lender), or any law, statute, rule
or regulation or order, judgment or decree to which either Ringer or Merger
Subsidiary is subject.
4.04 MERGER SUBSIDIARY. All of the outstanding capital stock of Merger
Subsidiary is owned by Ringer free and clear of any lien, claim or encumbrance
or any agreement with respect thereto. Since the date of its incorporation,
Merger Subsidiary has not engaged in any activity of any nature except in
connection with or as contemplated by this Agreement, the Certificate of Merger
or the Ringer Ancillary Agreements.
4.05 GOVERNMENTAL AUTHORITIES; CONSENTS. Except for the filing of the
Certificate of Merger with the Secretary of State of the State of Georgia, and
any consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state and federal
securities laws and the laws of any foreign country, (a) neither Ringer nor
Merger Subsidiary is required to submit any notice, report or other filing with
any governmental authority in connection with the execution or delivery by it of
this Agreement, the Certificate of Merger or the consummation of the
transactions contemplated hereby or thereby, and (b) no consent, approval or
authorization of any governmental or regulatory authority or any other party or
person is required to be obtained by either Ringer or Merger Subsidiary in
connection with its execution, delivery and performance of this Agreement, the
Certificate of Merger or the Ringer Ancillary Agreements or the transactions
contemplated hereby or thereby.
4.06 BROKERAGE. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of Ringer or Merger
Subsidiary.
4.07 SEC DOCUMENTS. Ringer has filed all required reports, schedules,
forms, statements, and other documents with the SEC since January 1, 1995
(together with later filed documents that revise or supersede earlier filed
documents, the "RINGER SEC DOCUMENTS"). As of their respective dates, the Ringer
SEC Documents complied as to form in all material respects with the requirements
of the Securities Act, or the Exchange Act, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such Ringer SEC
Documents. None of the Ringer SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Ringer included in the Ringer SEC Documents complied as of their
respective dates of filing with the SEC as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-QSB of the Exchange Act) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto),
and fairly present the consolidated financial position of Ringer and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the Ringer SEC Documents, and except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice, neither Ringer nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles to be set forth in a
consolidated balance sheet of Ringer and its consolidated subsidiaries or in the
notes thereto which, individually or in the aggregate, would have, a material
adverse effect on the business or results of operations of Ringer.
4.08 CAPITAL STOCK.
(a) The capital stock of Ringer consists only of Ringer Common Stock, and
except as hereinafter provided, the Ringer SEC Documents set forth Ringer's
capitalization in all material respects. All outstanding shares of Ringer Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. None of such shares were issued in violation of any applicable
securities laws that would subject Ringer to fines, penalties or rescission or
civil damages that are material in amount. Ringer Common Stock is registered
pursuant to Section 12(b) of the Exchange Act and is listed on the NASDAQ
National
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Market System and all Ringer Common Stock issued as part of the Merger
Consideration will, upon issuance, be so registered and listed.
(b) Ringer owns, beneficially and of record, all issued and outstanding
shares of Merger Subsidiary Stock, which shares are validly issued, fully paid,
and non-assessable, and free and clear of all liens.
(c) Except as set forth in this Section 4.08 and except for changes since
the date of Ringer's most recent Ringer SEC Document resulting from the exercise
of employee and director options, (i) no shares of Ringer Common Stock or other
voting securities of Ringer are outstanding, (ii) no securities of Ringer
convertible into or exchangeable for shares of capital stock or voting
securities of Ringer are outstanding, and (iii) no options or other rights to
acquire from Ringer, and no obligation of Ringer to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of Ringer are outstanding (the items in clauses (i),
(ii) and (iii) being referred to collectively as the "RINGER SECURITIES." No
obligations of Ringer to repurchase, redeem or otherwise acquire any Ringer
Securities are outstanding.
4.09 CURRENT PLANS OR INTENTIONS. Ringer does not have any current plan or
intention to take any of the following actions within the two-year period
immediately following the Effective Date:
(a) Liquidate SRI or any Subsidiary;
(b) Merge SRI or any Subsidiary with or into another corporation, except if
SRI or such Subsidiary is the surviving corporation; or
(c) Cause SRI or any Subsidiary to sell or otherwise dispose of any of its
assets to any entity other than an SRI subsidiary, with the following exceptions
(i) sales or dispositions in the ordinary course of business or (ii) sales or
dispositions which would not violate the "substantially all" test as defined in
Rev. Proc. 777-37, 1977-2 C.B. 568 Section 3.01.
Except as expressly contemplated herein, it is the present intention of Ringer
to continue the line of business presently conducted by SRI and the
Subsidiaries.
4.10 DUE AUTHORIZATION OF STOCK ISSUED IN MERGER. Any shares of Ringer
Common Stock issued by Ringer to SRI's shareholders pursuant as part of the
Merger Consideration will, upon such issuance and delivery in accordance with
the terms of this Agreement, be duly authorized, validly issued, fully paid and
nonassessable and free of any preemptive rights of Ringer's shareholders.
ARTICLE V
COVENANTS OF SRI
5.01 CONDUCT OF THE BUSINESS. SRI and each Subsidiary shall observe each
term set forth in this Section 5.01 and agrees that, from the date hereof until
the Effective Time, unless otherwise consented to by Ringer in writing:
(a) The business of SRI and each Subsidiary shall be conducted only in, and
neither SRI nor any Subsidiary shall take any action except in, the ordinary
course of SRI's or such Subsidiary's business, on an arm's-length basis and in
accordance in all material respects with all applicable laws, rules and
regulations and SRI's or such Subsidiary's past custom and practice;
(b) Neither SRI nor any Subsidiary shall, directly or indirectly, do or
permit to occur any of the following: (i) issue or sell any additional shares of
capital stock, or any options, warrants, conversion privileges or rights of any
kind to acquire any shares of, any of its capital stock, (ii) sell, pledge,
dispose of or encumber any of its assets, except in the ordinary course of
business; (iii) amend or propose to amend its articles of incorporation or
bylaws; (iv) split, combine or reclassify any outstanding shares of capital
stock, or declare, set aside or pay any dividend or other distribution payable
in cash, stock, property or otherwise with respect to shares of capital stock;
(v) redeem, purchase or acquire or offer to acquire any shares of capital stock
or other securities; (vi) acquire (by merger, exchange, consolidation,
acquisition of stock or assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or material assets thereof;
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(vii) incur any indebtedness for borrowed money or issue any debt securities
except the borrowing of working capital in the ordinary course of business and
consistent with past practice and the borrowing of money for facility expansion,
the upgrading of computer and paint systems, telephone system, production
equipment and tooling, in accordance with the capital spending plan previously
provided to Ringer; (viii) accelerate or defer, beyond the normal collection
cycle, or defer collection of manufacturers' rebates, promotional allowances and
other accounts receivable; or, other than in the ordinary course of business and
consistent with past practice, (ix) accelerate or defer the payment of
undisputed accounts payable or other accrued expenses owed to trade creditors or
other third parties having business relationships with SRI or any Subsidiary;
(x) enter into or propose to enter into, or modify or propose to modify, any
Lease or exercise or waive any option, or consent to any modification, act or
omission by any landlord requiring tenant's consent under any Lease; (xi) enter
into or propose to enter into or modify or propose to modify any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 5.01(b); (xii) purchase inventories or supplies for its business;
(xiii) sell, lease, license or otherwise dispose of any assets or properties;
(xiv) accelerate or defer the construction of improvements at any of the
locations of its business; or (xv) accelerate or defer the purchase of fixtures,
equipment, leasehold improvements, vehicles, other items of machinery and
equipment and other capital expenditures;
(c) Except as contemplated herein, neither SRI nor any Subsidiary shall,
directly or indirectly, (i) enter into or modify any employment, severance or
similar agreements or arrangements with, or grant any bonuses, salary increases,
severance or termination pay to, any officers or directors or consultants; or
(ii) in the case of employees, officers or consultants who earn in excess of
$50,000 per year, take any action with respect to the grant of any bonuses,
salary increases, severance or termination pay or with respect to any increase
of benefits payable in effect on the date hereof other than in the ordinary
course of business and consistent with past practice;
(d) Except as contemplated herein, neither SRI nor any Subsidiary shall
adopt or amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit plan,
trust, fund or group arrangement for the benefit or welfare of any employees or
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or arrangements for the benefit or welfare of any director;
(e) Neither SRI nor any Subsidiary shall cancel or terminate its current
insurance policies or cause any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies providing coverage equal to or greater than the coverage under the
canceled, terminated or lapsed policies for substantially similar premiums are
in full force and effect;
(f) SRI and each Subsidiary shall (i) use its best efforts to preserve
intact its business organization and goodwill, keep available the services of
its officers and employees as a group and maintain satisfactory relationships
with suppliers, distributors, customers and others with which it has business
relationships; (ii) confer on a regular and frequent basis with representatives
of Ringer to report operational matters and the general status of ongoing
operations; (iii) not intentionally take any action which would render, or which
reasonably may be expected to render, any representation or warranty made by it
in this Agreement untrue at the Effective Time; (iv) notify Ringer of any
emergency or other change in the normal course of its business or in the
operation of its properties and of any governmental or third party complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) if such emergency, change, complaint, investigation or hearing
would be material, individually or in the aggregate, to the business, operations
or financial condition of SRI or any Subsidiary or to SRI's, Ringer's or Merger
Subsidiary's ability to consummate the transactions contemplated by this
Agreement; and (v) promptly notify Ringer in writing if SRI shall discover that
any representation or warranty made by it in this Agreement was when made, or
has subsequently become, untrue in any respect;
(g) Except as set forth in the Disclosure Schedule, SRI and each Subsidiary
shall (i) file any Tax returns, elections or information statements with respect
to any liabilities for Taxes of SRI or any Subsidiary or other matters relating
to Taxes of SRI or any Subsidiary which pursuant to applicable law must be filed
(after taking into account any properly applicable extensions of the due date of
such returns, elections or
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information statements) prior to the Closing Date; provided, however, that
neither SRI nor any Subsidiary shall file any such Tax returns, or other
returns, elections, claims for refund or information statements with respect to
any liabilities for Taxes (other than federal, state or local sales, use,
withholding or employment tax returns or statements for any Tax period, or
consent to any adjustment or otherwise compromise or settle any matters with
respect to Taxes, without prior consultation with and consent of Ringer (which
consent shall not be unreasonably withheld); (ii) promptly upon filing provide
copies of any such Tax returns, elections or information statements to Ringer;
(iii) make or rescind any such Tax elections or other discretionary positions
with respect to Taxes taken by or affecting SRI only upon prior consultation
with and consent of Ringer (which consent shall not be unreasonably withheld);
(iv) not amend any Return; (v) not change the rate or policy for any accrual or
reserve for Taxes or otherwise accrue therefor in a manner inconsistent with its
practices for previous periods as reflected in the Latest Financial Statements;
and (vi) not change any of its methods of reporting income or deductions for
federal income Tax purposes from those employed in the preparation of the
federal income Tax returns for the taxable year ended September 30, 1996, except
for changes required by changes in law; and
(h) SRI shall not perform any act referenced by (or omit to perform any act
which omission is referenced by) the terms of Section 3.11, except in the
ordinary course of business and consistent with past practice or as stated in
the Disclosure Schedule under the caption referencing such Section.
5.02 ACCESS TO BOOKS AND RECORDS. Between the date hereof and the Effective
Time, SRI shall afford to Ringer and its authorized representatives full access
at all reasonable times and upon reasonable notice to the offices, properties,
books, records, officers, employees and other items of SRI, and the work papers
of Xxxxx & Xxxxxx, P.C., SRI's independent accountants ("SRI'S ACCOUNTANT"),
relating to work done by SRI's Accountant and otherwise provide such assistance
as is reasonably requested by Ringer in order that Ringer may have a full
opportunity to make such investigation and evaluation as it shall reasonably
desire to make of the business and affairs of SRI and each Subsidiary. In
addition, SRI, each Subsidiary and their respective officers and directors shall
cooperate fully (including providing introductions, where necessary) with Ringer
and to enable Ringer to contact such third parties, including customers,
prospective customers, specifying agencies, vendors or suppliers of SRI and each
Subsidiary as Ringer deems reasonably necessary to complete its due diligence.
5.03 REGULATORY FILINGS. SRI and each Subsidiary shall make, or cause to be
made all filings and submissions under any laws or regulations applicable to SRI
or such Subsidiary for the consummation of the transactions contemplated herein.
SRI and each Subsidiary will coordinate and cooperate with Ringer in exchanging
such information, will not make any such filing without providing to Ringer a
final copy thereof for its review and consent at least two full business days in
advance of the proposed filing date and will provide such reasonable assistance
as Ringer may request in connection with all of the foregoing.
5.04 FINANCIAL STATEMENTS. SRI shall have prepared and delivered to Ringer
consolidated quarterly and monthly financial statements for any periods ending
at least 15 days prior to the Effective Time.
5.05 CONDITIONS. SRI shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in Section 8.01 to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof. Without limiting the
generality of the foregoing, SRI shall obtain, prior to the Effective Time, all
consents or waivers to the transactions contemplated herein that may be required
under any of the agreements or commitments of SRI or any Subsidiary that are
material to SRI's or any Subsidiary's business.
5.06 NO NEGOTIATIONS. Except as consented to in writing by Ringer, from the
date hereof until the Effective Time, neither SRI nor any Subsidiary shall,
directly or indirectly, through any officer, director, agent, affiliate,
employee or otherwise, solicit, initiate or encourage submission of any proposal
or offer from any person, group or entity relating to any acquisition of the
capital stock or business of SRI or any Subsidiary, or all or a material portion
of the assets of SRI or any Subsidiary, or other similar transaction or business
combination involving the business of SRI or any Subsidiary, and shall not
participate in any negotiations or discussions regarding or furnish to any other
person any information with respect to, or otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage any effort or attempt by
any other person or
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entity to do or seek such acquisition or other transaction. SRI agrees that it
shall take the necessary steps to promptly inform, and cause each Subsidiary to
inform, any such third party of the obligations undertaken in this Agreement and
this Section 5.06. SRI agrees that it immediately shall inform Ringer in writing
of any such inquiry and shall keep Ringer informed, on a current basis, of the
status and terms of any such proposals or offers and the status of any such
discussions or negotiations.
5.07 NOTIFICATION; AMENDMENT TO DISCLOSURE SCHEDULE.
(a) SRI shall give prompt notice to Ringer of (i) the occurrence or failure
to occur of any event or the discovery of any information, which occurrence,
failure or discovery would be likely to cause any representation or warranty by
SRI contained in this Agreement to be untrue, inaccurate or incomplete after the
date hereof in any material respect or, in the case of any representation or
warranty given as of a specific date, would be likely to cause any such
representation or warranty on its part contained in this Agreement to be untrue,
inaccurate or incomplete in any material respect as of such specific date, and
(ii) any material failure of SRI to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereunder.
(b) From time to time after the date hereof and prior to the Effective
Time, SRI shall promptly supplement or amend any of its representations and
warranties which apply to the period after the date hereof by delivering an
updated Disclosure Schedule to Ringer pursuant to this Section 5.8(b) with
respect to any matter hereafter arising which would render any such
representation or warranty after the date of this Agreement materially untrue,
inaccurate or incomplete as a result of such matter arising. Such supplement or
amendment to SRI's representations and warranties contained in an updated
Disclosure Schedule delivered pursuant to this Section 5.8(b) shall be deemed to
have modified the representations and warranties of SRI, and no such supplement
or amendment, or the information contained in such updated Disclosure Schedule,
shall constitute a breach of a representation or warranty of SRI; provided that
no such supplement or amendment may cure any breach of a covenant or agreement
of SRI under Articles V or VI. Within 15 days after receipt of such supplement
or amendment, Ringer may terminate this Agreement pursuant to Section 9.01(h)
hereof if the information in such supplement or amendment together with the
information in any and all of the supplements or amendments previously provided
by SRI indicate that SRI has suffered or is reasonably likely to suffer a
material adverse change (as described in Section 9.01(h).
ARTICLE VI
COVENANTS OF RINGER AND MERGER SUBSIDIARY
Ringer and Merger Subsidiary covenant and agree with SRI as follows:
6.01 REGULATORY FILINGS. Ringer or Merger Subsidiary shall, as promptly as
practicable after the execution of the Agreement, make or cause to be made all
filings and submissions under any laws or regulations applicable to Ringer and
Merger Subsidiary for the consummation of the transactions contemplated herein.
Ringer and Merger Subsidiary will coordinate and cooperate with SRI in
exchanging such information, will not make any such filing without providing to
SRI a final copy thereof for its review and consent at least two full business
days in advance of the proposed filing and will provide such reasonable
assistance as SRI may request in connection with all of the foregoing.
6.02 CONDITIONS. Ringer or Merger Subsidiary shall take all commercially
reasonable actions necessary or desirable to cause the conditions set forth in
Section 8.02 to be satisfied and to consummate the transactions contemplated
herein as soon as reasonably possible after the satisfaction thereof (but in any
event within three business days after such date).
6.03 PROXY STATEMENT. As promptly as practicable after the execution of
this Agreement, Ringer will file with the SEC a proxy statement under the
Securities Exchange Act soliciting approval of the Merger by the shareholders of
Ringer (as amended or supplemented by any amendment or supplement filed by
Ringer, the "PROXY STATEMENT"), and will use its best efforts to cause the Proxy
Statement to be approved for distribution to its shareholders. Ringer shall bear
the costs of SEC filing fees with respect to the Proxy Statement, the
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costs of printing the Proxy Statement and the costs of distributing the Proxy
Statement to Ringer shareholders.
6.04 STOCK EXCHANGE LISTINGS. Prior to issuance, Ringer will file all
documents required to be filed to list the Ringer Common Stock to be issued as
the Merger Consideration on the Nasdaq Stock Market and use its best efforts to
effect said listings.
ARTICLE VII
CONDUCT OF SRI AND RINGER AFTER THE ACQUISITION
During the period from the Effective Time until Ringer shall determine
otherwise, all employee compensation, benefit and welfare Plans of SRI shall
continue as stand-alone Plans, separate from those of Ringer, except as such
compensation arrangements may be modified pursuant to Section 7.02 hereof.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01 CONDITIONS TO RINGER'S AND MERGER SUBSIDIARY'S OBLIGATIONS. The
obligation of Ringer and Merger Subsidiary to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of the following
conditions at or before the Effective Time:
(a) The representations and warranties set forth in Article III hereof
shall be true and correct in all material respects at and as of the Effective
Time as though then made and as though the Effective Time had been substituted
for the date hereof throughout such representations and warranties (without
taking into account any disclosures by SRI of discoveries, events or occurrences
arising on or after the date hereof);
(b) SRI shall have performed in all material respects all of the covenants
and agreements required to be performed and complied with by it under this
Agreement prior to the Effective Time;
(c) SRI shall have obtained, or caused to be obtained, each consent and
approval necessary in order that the transactions contemplated herein not
constitute a breach or violation of, or result in a right of termination or
acceleration of, or creation of any encumbrance on any of SRI's or any
Subsidiary's assets pursuant to the provisions of, any agreement, arrangement or
undertaking of or affecting SRI or any Subsidiary or any license, franchise or
permit of or affecting SRI or any Subsidiary;
(d) This Agreement, the Certificate of Merger and the Merger shall have
been:
(i) duly and validly approved by the requisite vote of the
shareholders of Ringer, and
(ii) SRI shall have duly executed the Certificate of Merger;
(e) All material governmental filings, authorizations and approvals that
are required for the consummation of the transactions contemplated herein or by
the Certificate of Merger will have been duly made and obtained;
(f) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated herein or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by Ringer or Merger Subsidiary of all or a material
portion of the business or assets of SRI or any Subsidiary, or to cause Ringer
or Merger Subsidiary or any of their subsidiaries or SRI or any Subsidiary to
dispose of or to hold separately all or a material portion of the business or
assets of Ringer or Merger Subsidiary and their subsidiaries or of SRI or any
Subsidiary, as a result of the transactions contemplated hereby, (iii) seeking
to require direct or indirect transfer or sale by Ringer or Merger Subsidiary of
any of the shares of SRI Common Stock, (iv) seeking to invalidate or render
unenforceable any material provision of this Agreement or the Certificate of
Merger or any of the SRI
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Ancillary Agreements, or (v) otherwise relating to and materially adversely
affecting the transactions contemplated hereby;
(g) There shall not be any action taken, nor any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced, promulgated, issued or
deemed applicable to the transactions contemplated herein by any federal, state
or foreign court, government or governmental authority or agency, which would
reasonably be expected to result, directly or indirectly, in any of the
consequences referred to in Section 8.01(f) hereof;
(h) Ringer, in conducting its due diligence investigation of the business
and financial condition of SRI and the Subsidiaries, shall not have discovered
any fact or circumstance existing as of the Effective Time which previously had
not been disclosed to Ringer regarding the business, assets, properties,
condition (financial or otherwise), results of operations or prospects of SRI
which is, individually or in the aggregate with other such facts and
circumstances, materially adverse to SRI or any Subsidiary or to the value of
the shares of SRI's capital stock;
(i) There shall have been no damage, destruction or loss of or to any
property or properties owned or used by SRI or any Subsidiary, whether or not
covered by insurance, which, in the aggregate, has, or would be reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect;
(j) Ringer shall have received from SRI's legal counsel a written opinion,
dated the date of the Effective Time, addressed to Ringer and satisfactory to
Ringer's legal counsel, with respect to such matters as Ringer shall reasonably
request;
(k) Ringer shall have received from its principal lender such approvals,
waivers and consents as may be necessary to permit the consummation of the
Merger without causing Ringer to violate or be in default under any agreements
with such lender;
(l) Ringer shall have received from Deloitte & Touche LLP, independent
auditors for Ringer, letters, dated the date of or shortly prior to the date of
the mailing of the Proxy Statement and the Effective Date, stating its opinion
that the Merger will qualify for pooling-of-interests accounting treatment;
(m) Prior to the Effective Time, SRI shall have delivered to Ringer all of
the following:
(i) certificates of each of the chief executive officer and the chief
financial officer of SRI dated as of the date of the Effective Time,
stating that to the knowledge of such officers that the conditions
precedent set forth in subsections (a) and (b) above have been satisfied;
(ii) copies of the third party and governmental consents and approvals
and of the authorizations referred to in subsections (c), (d) and (e)
above;
(iii) the minute books, stock transfer records, corporate seal and
other materials related to the corporate administration of SRI and each
Subsidiary;
(iv) a copy of the articles of incorporation of SRI and each
Subsidiary as then in effect, certified by the Secretary of State of the
State of Georgia, and a Certificate of Existence from the Secretary of
State of the State of Georgia evidencing the good standing of SRI and each
Subsidiary in such state;
(vi) a copy of each of (A) the text of the resolutions adopted by
SRI's board of directors authorizing the execution, delivery and
performance of this Agreement and the Certificate of Merger and the
consummation of all of the transactions contemplated herein and (B) the
bylaws of SRI and each Subsidiary as then in effect; along with
certificates executed on behalf of SRI and each Subsidiary by its corporate
secretary certifying to Ringer that such copies are correct and complete
copies of such resolutions and bylaws, respectively, and that such
resolutions and bylaws were duly adopted and have not been amended or
rescinded;
(vii) incumbency certificates executed on behalf of SRI by its
corporate secretary certifying the signature and office of each officer
executing this Agreement, the Certificate of Merger and the SRI Ancillary
Agreements executed by SRI;
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(viii) an executed copy of each of the SRI Ancillary Agreements; and
(ix) such other certificates, documents and instruments as Ringer
reasonably requests related to the transactions contemplated herein.
(n) The offer and issuance of the Ringer Common Stock pursuant to this
Agreement shall be exempt from the registration requirements of the Securities
Act and all applicable state securities laws.
8.02 CONDITIONS TO SRI'S OBLIGATIONS. The obligations of SRI to consummate
the transactions contemplated by this Agreement are subject to the satisfaction
of the following conditions at or before the Effective Time:
(a) The representations and warranties set forth in Article IV hereof will
be true and correct in all material respects at and as of the Effective Time as
though then made and as though the Effective Time had been substituted for the
date hereof throughout such representations and warranties;
(b) Ringer and Merger Subsidiary shall have performed in all material
respects all the covenants and agreements required to be performed by them under
this Agreement and the Certificate of Merger prior to the Effective Time, and
Merger Subsidiary shall have executed the Certificate of Merger;
(c) All material governmental filings, authorizations and approvals that
are required for the consummation of the transactions contemplated herein will
have been duly made and obtained;
(d) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated herein or seeking to obtain material damages in
connection with such transactions, (ii) seeking to invalidate or render
unenforceable any material provision of this Agreement, the Certificate of
Merger or any of the Related Agreements, or (iii) otherwise relating to and
materially adversely affecting the transactions contemplated hereby or thereby;
(e) There shall not be any action taken, nor any statute, rule, regulation,
judgment, order or injunction, enacted, entered, enforced, promulgated, issued
or deemed applicable to the transactions contemplated herein by any federal,
state or foreign court, government or governmental authority or agency, which
would reasonably be expected to result, directly or indirectly, in any of the
consequences referred to in Section 8.02(d) hereof;
(f) Ringer shall have received all state securities law authorizations
necessary to carry out the transactions contemplated by this Agreement;
(g) At or prior to the Effective Time, Ringer shall have delivered to SRI
(i) a certificate of appropriate officer(s) of Ringer dated as of the Effective
Date, stating that to the knowledge of such officer(s) the conditions precedent
set forth in subsections (a) and (b) above have been satisfied, and (ii) an
executed copy of each of the Related Agreements;
(h) SRI shall have received the opinion of Xxxxxx & Xxxxxxx LLP, Xxxxxx'x
counsel, with respect to such matters as SRI shall reasonably request; and
(i) The shares of Ringer Common Stock to be issued as Merger Consideration
shall have been approved for listing on the Nasdaq Stock Market.
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ARTICLE IX
TERMINATION
9.01 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time:
(a) by the mutual consent of Ringer, Merger Subsidiary and SRI;
(b) by Ringer or SRI, if there has been a material misrepresentation, a
material breach of warranty or a material breach of covenant on the part of the
other in the representations, warranties and covenants set forth in this
Agreement;
(c) by Ringer or SRI, if there shall be a final nonappealable order of a
federal or state court in effect preventing consummation of the Merger, or there
shall be any action taken, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any governmental
authority or agency, foreign or domestic, which would make the consummation of
the Merger illegal and such action, statute, rule, regulation or order shall
have become final and unappealable;
(d) by Ringer or SRI, if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any governmental authority of agency, which would (i) prohibit
SRI's or Ringer's ownership or operation of all or a portion of SRI's or any
Subsidiary's business, or (ii) compel Ringer or SRI or any Subsidiary to dispose
of or hold separate all or a portion of the business or assets of SRI or such
Subsidiary or Ringer as a result of the Merger;
(e) by either Ringer or SRI, if the transactions contemplated herein have
not been consummated on or before January 31, 1998; provided that, neither will
be entitled to terminate this Agreement pursuant to this Section 9.01(e) if such
party's willful breach of this Agreement has prevented the consummation of the
transactions contemplated herein;
(f) by either Ringer or SRI, if any of the conditions to such party's
obligations to consummate the Merger described in Article VIII become impossible
to satisfy;
(g) by Ringer if the shareholders of Ringer shall have failed to approve
this Agreement and the Merger at the meeting described in the Proxy Statement
(including any adjournment or postponement thereof);
(h) by Ringer, if after the date hereof there shall have been a material
adverse change in the business, assets, properties, condition (financial or
otherwise), results of operations or prospects of SRI, or if an event (other
than a general industry or economic downturn or economic changes related to
seasonal conditions) shall have occurred which, so far as reasonably can be
foreseen, would result in any such change;
9.02 EFFECT OF TERMINATION. In the event of termination of this Agreement
by Ringer or SRI, as provided in Section 9.01, all provisions of this Agreement
shall terminate and there shall be no liability on the part of any of Ringer,
Merger Subsidiary or SRI, or their respective shareholders, officers or
directors, except (a) Sections 13.01 (press releases and announcements), 13.02
(expenses), 13.09 (governing law) and 13.10 (confidentiality) hereof shall
survive indefinitely, (b) the parties shall remain liable for willful breaches
of this Agreement prior to the time of such termination and (c) as provided in
Section 9.03.
ARTICLE X
THE SHAREHOLDERS' REPRESENTATIVE
10.01 APPOINTMENT. As used in this Agreement, the "SHAREHOLDERS'
REPRESENTATIVE" shall mean Xxxxx X. Xxxxxxx, or any person appointed as a
successor Shareholders' Representative pursuant to Section 10.02 hereof.
10.02 ELECTION AND REPLACEMENT. During the period ending upon the date when
all obligations under this Agreement have been discharged (including all
obligations pursuant to Section 11.02 hereof), SRI's Holders who, held a
majority of the aggregate voting power of the Shares (a "MAJORITY"), may, from
time to time upon written notice to the Shareholders' Representative and Ringer,
remove the Shareholders' Representative
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or appoint a new Shareholders' Representative to fill any vacancy created by the
death, incapacitation, resignation or removal of the Shareholders'
Representative. Furthermore, if the Shareholders' Representative dies, becomes
incapacitated, resigns or is removed by a Majority, the Majority shall appoint a
successor Shareholders' Representative to fill the vacancy so created. If the
Majority fails to appoint such successor within 10 business days after a written
request by Ringer to appoint such successor, then Ringer shall appoint such
successor, and shall advise Holders who held Shares of such appointment by
written notice. A copy of any appointment by the Majority of the Shareholders'
Representatives of any successor Shareholders' Representative shall be provided
to Ringer promptly after it shall have been effected.
10.03 AUTHORITY. On behalf of the Holders, the Shareholders' Representative
shall be authorized to take action and to make and deliver any certificate,
notice, consent or instrument required or permitted to be made or delivered
under this Agreement or under the documents referred to in this Agreement (an
"INSTRUMENT"), which the Shareholders' Representative determines in his
discretion to be necessary, appropriate or desirable, and, in connection
therewith, to hire or retain, at the sole expense of the Holders, such counsel,
investment bankers, accountants, representatives and other professional advisors
as they determine in their sole and absolute discretion to be necessary,
advisable or appropriate in order to carry out and perform their rights and
obligations hereunder. Any party receiving an Instrument from the Shareholders'
Representative shall have the right to rely in good faith upon such Instrument,
and to act in accordance with the Instrument without independent investigation.
10.04 NO LIABILITY OF RINGER. Ringer and the Surviving Corporation shall
have no liability to any shareholder of SRI or otherwise arising out of the acts
or omissions of the Shareholders' Representative or any disputes among SRI's
shareholders. Ringer and the Surviving Corporation shall have no direct
liability to SRI's shareholders under this Agreement or the other agreements
referred to herein and may rely entirely on their dealings with, and notices to
and from, the Shareholders' Representative to satisfy any obligations Ringer and
the Surviving Corporation might have under this Agreement, any agreement
referred to herein or otherwise to SRI's shareholders. Without limiting the
foregoing, delivery to the Escrow Agent of a portion of the Merger Consideration
shall extinguish any obligations of Ringer to SRI's shareholders with respect to
such portion, and Ringer shall have no liability for subsequent misdelivery to
any shareholder of SRI by the Paying Agent or any act or omission of the
Shareholders' Representative with respect to such cash or certificates.
ARTICLE XI
SURVIVAL AND OFFSET
11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties of SRI contained in, or attached
to, this Agreement shall survive the Closing until the date upon which Ringer's
Accountant shall first release its audit report with respect to financial
consolidated financial statements of Ringer and its subsidiaries that include
SRI and the Subsidiaries (the "Offset Period") and shall have no further force
or effect thereafter.
11.02 RIGHT OF OFFSET.
(a) Subject to Section 11.02(f) hereof, Ringer shall have a right to offset
(the "OFFSET RIGHT"), from time to time, its "Losses" (as hereinafter defined)
against the General Claims Holdback Amount with respect to any loss, liability,
deficiency, damage, expense or cost (including reasonable legal expenses),
whether or not actually incurred or paid during the Offset Period (collectively,
the "LOSSES"), which Ringer, the Surviving Corporation or any of their
respective affiliates, officers, directors, employees or agents (the "PROTECTED
PARTIES") suffers, sustains or becomes subject to, as a result of:
(i) Any misrepresentation (a "MISREPRESENTATION") in any of the
representations and warranties of SRI contained in this Agreement or in any
of the exhibits, schedules, agreements, certificates and other documents
delivered or to be delivered by or on behalf of SRI pursuant to this
Agreement or otherwise attached to, or referenced or incorporated in, this
Agreement (collectively, the "RELATED DOCUMENTS");
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(ii) Any breach (a "BREACH") of, violation of, or failure to perform,
any agreement or covenant of SRI contained in this Agreement or any of the
Related Documents prior to the Effective Time;
(iii) Any Claim (as defined in Section 11.02(c) hereof) or threatened
Claim against the Protected Parties arising out of actions or inactions of
SRI with respect to SRI's business or the Real Property prior to the
Effective Time, including, but not limited to, all products liability
Claims arising out of actions or inactions prior to such time; and
(iv) Notwithstanding anything to the contrary contained in this
Section 11.02, the Ringer shall not exercise its Offset Right with respect
to any Loss other than the Inventory Adjustment Amount unless and until the
total amount of Losses, not taking into account the Inventory Adjustment
Amount, shall exceed $25,000, in which event it may exercise such right
with respect to the entire aggregate amount of Losses other than the
Inventory Adjustment Amount that equal or exceed $25,000.
Notwithstanding the foregoing, Losses as defined in this Section 11.02(a) shall
be reduced by the amount of any benefits or other similar payments received by
SRI or the Protected Parties from insurance companies insuring the claim that is
the subject of the Loss.
(b) Ringer may exercise its Offset Right, from time to time, in accordance
with the procedures set forth in paragraphs (c) and (d) of this Section 11.02,
against any payment or payments to be made out of the General Claims Holdback
Amount. Each time, if any, that Ringer exercises its Offset Right, Ringer shall
promptly deliver to the Shareholders' Representative a schedule signed by an
officer of Ringer reflecting the revised payments, after giving effect to such
exercise of its Offset Right, to be made to the Holders out of the General
Claims Holdback Amount. In the event Ringer exercises its Offset Right with
respect to Losses as a result of, in connection with or related to, any of the
matters described in Section 11.02(a) above, such offset shall be applied
against any payment or payments to be made out of the General Claims Holdback
Amount.
(c) In the event any of the Protected Parties becomes involved in any
legal, governmental or administrative proceeding which may result in Losses, or
if any such proceeding is threatened or asserted (any such third party action or
proceeding being referred to herein as a "CLAIM"), Ringer shall promptly notify
the Shareholders' Representative in writing of the nature of any such Claim and
Ringer's estimate of the Losses arising therefrom.
(i) The Shareholders' Representatives shall be entitled to contest and
defend such Claim; provided, that the Shareholders' Representative has a
reasonable basis for concluding such defense may be successful and
diligently contests and defends such Claim; provided, further, that, Ringer
in its sole and absolute discretion, may notify the Shareholders'
Representatives at any time that any such contest or defense must be
immediately terminated, in which case Ringer's Offset Right with respect to
such Claim shall thereupon terminate. Notice of the intention so to contest
and defend shall be given by the Shareholders' Representative to Ringer
within 20 days after Ringer provides notice of such Claim (but, in all
events, at least five business days prior to the date that an answer to
such Claim is due to be filed). Such contest and defense shall be conducted
by reputable attorneys employed by the Shareholders' Representative. Ringer
shall be entitled at any time, at its own cost and expense (which expense
shall not constitute a Loss unless the Shareholders' Representatives are
not adequately representing or, because of a conflict of interest between,
may not adequately represent, any interests of the Protected Parties, and
only to the extent that such expenses are reasonable), to participate in
such contest and defense and to be represented by attorneys of its own
choosing. If Ringer elects to participate in such defense, Ringer shall
cooperate with the Shareholders' Representative in the conduct of such
defense. Neither Ringer nor the Shareholders' Representative may concede,
settle or compromise any Claim without the consent of the other, which
consent shall not be unreasonably withheld; provided, that the
Shareholders' Representative may, without the consent of Ringer, settle any
Claim which is solely for money damages if the Shareholders' Representative
acknowledges that such Claim gives rise to a Loss that is subject to
Ringer's Offset Right hereunder and if the entire amount of the settlement
amount may be recovered by Ringer by means of Ringer's Offset Rights
hereunder. The Shareholders' Representatives shall have the right to have
the cost of defense, including reasonable legal expenses, paid or
reimbursed through the exercise of Ringer's Offset Rights. A request for
payment or reimbursement thereof shall constitute the
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acknowledgment of the Shareholders' Representative that such costs
constitutes a Loss that is subject to Ringer's Offset Rights.
Notwithstanding anything herein to the contrary, such Offset Rights shall
not be subject to the deductibles described in Section 11.02(b).
(ii) Notwithstanding the foregoing, if: (A) a Claim seeks equitable
relief against any of the Protected Parties, (B) the subject matter of a
Claim relates to the ongoing business of any of the Protected Parties,
which Claim, if decided against such Protected Party, would materially
adversely affect the ongoing business or reputation of such Protected
Party, or (C) the estimated Losses of the Protected Parties related to the
Claim exceed the amount Ringer may recover using its Offset Right
hereunder, then, in each such case, Ringer alone shall be entitled to
contest, defend and settle such Claim in the first instance and, if Ringer
does not contest, defend or settle such Claim, Shareholders' Representative
shall have the right to contest and defend (but not settle) such Claim.
(d) In the event Ringer (on behalf of itself or any Protected Party) should
have a claim giving rise to an Offset Right that does not involve a Claim,
Ringer shall deliver a notice (the "OFFSET NOTICE") of such claim with
reasonable promptness to the Shareholders' Representative and the Escrow Agent.
The Offset Notice shall include an estimate of Ringer's Losses relating to such
claim. If the Shareholders' Representative notifies Ringer that the
Shareholders' Representative does not dispute the claim described in the Offset
Notice, or if the Shareholders' Representative fails to notify Ringer within 20
days after delivery of the Offset Notice of any such dispute with respect to
such claim, the Losses in the amount specified in the Offset Notice will be
conclusively deemed Losses and Ringer may exercise its Offset Right with respect
to such amount in accordance with the Offset Notice. If the Shareholders'
Representative has timely disputed such claim, Ringer and the Shareholders'
Representative will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through the negotiations of such representatives
within 60 days after the date of the Offset Notice of such claim, the parties
agree to resolve such dispute through binding arbitration in accordance with
Section 13.05.
(e) In the event of a Claim under Section 11.02(c) or a dispute relating to
the Offset Notice under Section 11.02(d), the Escrow Agent will retain property
then held by it in escrow under this Agreement in an amount sufficient to
satisfy the estimated value of such Claim or disputed Offset Notice until the
resolution of such Claim or dispute.
(f) Notwithstanding anything contained in this Agreement to the contrary,
the right of Ringer to exercise its Offset Right hereunder shall be subject to
the following limitations:
(i) Ringer shall not be entitled to exercise its Offset Right with
respect to any Losses unless Ringer delivers to the Shareholders'
Representatives an Offset Notice under Section 11.02(d) or notice of a
Claim under Section 11.02(c) relating to such Losses prior to the end of
the Offset Period.
(ii) Except as provided in the Shareholders' Agreements, the Offset
Right shall be Ringer's sole and exclusive remedy with respect to any
Losses that any Protected Party may suffer, sustain or become subject to
pursuant to the terms of this Agreement, and Ringer agrees that it shall
not, and hereby waives all rights to, institute or maintain any suit,
proceeding or action against the Holders or utilize or exercise any other
legal or equitable remedy for the purpose of recovering damages or other
relief with respect to any Losses (including, without limitation, an action
seeking to recover any portion of the purchase price previously paid to
SRI's shareholders) except for suits, proceedings or actions necessary to
enforce or implement the Offset Right; provided that, (A) nothing herein
shall prevent a party from bringing an action based upon allegations of
fraud or other intentional misconduct with respect to another party hereto
in connection with this Agreement, and (B) nothing herein shall limit in
any manner any other legal rights or remedies which any Protected Party
which is a party to an agreement identified under Article XII has against
another party to such agreement in accordance with the terms and conditions
provided therein.
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ARTICLE XII
ANCILLARY AGREEMENTS
12.01 SHAREHOLDERS AGREEMENT. Simultaneous with the execution and delivery
of this Agreement, Ringer, SRI and each shareholder of SRI identified on
Schedule 12.01 will enter into a shareholder agreement identical in form to
Exhibit 12.01 (the "SHAREHOLDERS' AGREEMENT").
12.02 ESCROW AGREEMENT. Simultaneous with the execution and delivery of
this Agreement, Ringer, SRI, the Shareholders Representative and Escrow Agent
will enter into an escrow agreement substantially in the form of Exhibit 12.02
(the "ESCROW AGREEMENT").
12.03 PAYING AGENT AGREEMENT. Simultaneous with the execution and delivery
of this Agreement, Ringer, the Shareholders' Representative and Paying Agent
will enter into a paying agent agreement substantially in the form of Exhibit
12.03 (the "PAYING AGENT AGREEMENT").
ARTICLE XIII
MISCELLANEOUS
13.01 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Effective Time, no
party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to the employees, customers or suppliers of SRI or any
Subsidiary without prior written approval of the other party hereto, except that
Ringer may issue any such release (or other announcement) as it determines, in
its sole discretion, as may be necessary to comply with the requirements of this
Agreement or applicable law or by obligations pursuant to any listing agreement
with any national securities exchange. If Ringer determines any such press
release or public announcement is so required, Ringer shall use reasonable
efforts to consult in good faith with SRI (but shall not be required to obtain
SRI's consent) prior to issuing such press release or making such announcement.
13.02 EXPENSES. Except as otherwise expressly provided for herein, SRI, the
Shareholders' Representative, Ringer and Merger Subsidiary will each pay all of
their own expenses (including attorneys', financial advisors' and accountants'
fees) in connection with the negotiation of this Agreement, the performance of
their respective obligations under this Agreement and the Certificate of Merger
and the consummation of the transactions contemplated hereby and thereby
(whether consummated or not). Each party will indemnify and hold harmless the
other against the claims of any brokers or finders in respect of the Merger.
13.03 AMENDMENT AND WAIVER. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment or waiver
is sought to be enforced; provided, however, that after the approval of this
Agreement by SRI's shareholders, no amendment may be made which reduces the
Merger Consideration or which effects any changes which would materially
adversely affect SRI's shareholders without the further approval of SRI's
shareholders provided, however, the Shareholders' Representative may approve
waivers of and amendments to the covenants of Ringer and SRI described in
Article VII. No course of dealing between or among any persons having any
interest in this Agreement will be deemed effective to modify or amend any part
of this Agreement or any rights or obligations of any person under or by reason
of this Agreement.
13.04 NOTICES. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or three
days after being mailed, if mailed by first class mail, return receipt
requested, or when receipt is acknowledged, if sent by facsimile, telecopy or
other electronic transmission device. Notices,
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demands and communications to Ringer, Merger Subsidiary, SRI and the
Shareholders' Representative will, unless another address is specified in
writing, be sent to the address indicated below:
Notices to Ringer or Merger Subsidiary: with a copy to:
Ringer Corporation Xxxxxx & Xxxxxxx LLP
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000 000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000 Xxxxxxxxxxx, XX 00000
Attn: Chief Financial Officer Attn: Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
Notices to SRI: with a copy to:
Southern Resources, Inc. Cushing, Morris, Xxxxxxxxxx & Xxxxx LLP
X.X Xxx 000 0000 Xxxxxxxxxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxx 00000 000 Xxxxxxxxx Xxxxxx, X.X.
Attn: Chief Executive Officer Xxxxxxx, XX 00000
Attn: W. Xxxxxxx Xxxxxx
Facsimile:
>Notices to Shareholders' Representative: with a copy to:
Xxxxx X. Xxxxxxx Cushing, Morris, Xxxxxxxxxx & Xxxxx LLP
c/o Southern Resources, Inc. 0000 Xxxxxxxxxxxxx Xxxxx
X.X Xxx 000 229 Peachtree Street, N.E.
Fort Valley, Georgia 31030 Xxxxxxx, XX 00000
Attn: Chief Executive Officer Attn: W. Xxxxxxx Xxxxxx
Facsimile: (000) 000-0000
13.05 ARBITRATION. In the event this Section 13.05 is applicable to any
dispute between the parties, the parties agree to resolve such dispute through
binding arbitration by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration shall
be conducted in Minneapolis, Minnesota. Any award rendered shall be final and
conclusive upon the parties and a judgment thereon may be entered in any court
of competent jurisdiction. All costs and expenses, including reasonable
attorneys' fees and experts' fees, of all parties incurred in any dispute which
is determined by arbitration pursuant to this Section 13.05 shall be borne by
the party determined to be liable in respect of such dispute; provided, however,
that if complete liability is not assessed against only one party, the parties
shall share the total costs in proportion to their respective amounts of
liability so determined. Except where clearly prevented by the area in dispute,
both parties agree to continue performing their respective obligations under
this Agreement while the dispute is being resolved. All negotiation and
arbitration proceedings under this Section 13.05 shall be treated as
confidential information in accordance with the provisions of the
confidentiality agreement between Ringer and SRI, dated August 15, 1997 (the
"CONFIDENTIALITY AGREEMENT"). Any arbitrator shall be bound by an agreement
containing confidentiality provisions at least as restrictive as those contained
in the Confidentiality Agreement. Nothing herein shall preclude a party hereto
from seeking equitable relief to prevent any immediate, irreparable harm to its
interest, including multiple breaches of this Agreement or the Related
Documents. Otherwise, these procedures are exclusive and shall be fully
exhausted prior to the initiation of any litigation. Either party may seek
specific enforcement of any arbitrator's decision under this Section 13.05. The
other party's only defense to such a request for specific enforcement shall be
fraud by or on the arbitrator.
13.06 ASSIGNMENT. This Agreement and all of the provisions hereof will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto.
13.07 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 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
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prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
13.08 COMPLETE AGREEMENT. This Agreement, the Certificate of Merger and the
Related Agreements and other exhibits hereto, the Disclosure Schedule and the
other documents referred to herein contain the complete agreement between the
parties and supersede any prior understandings, agreements or representations by
or between the parties, written or oral, which may have related to the subject
matter hereof in any way; provided, that the Confidentiality Agreement shall
remain in force and effect without modification thereof.
13.09 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument. Any such counterpart may be delivered by facsimile. Any party
delivering a counterpart by facsimile shall deliver an original copy within 48
hours, provided that the failure to so deliver an original shall not effect the
enforceability of this agreement against such party.
13.10 GOVERNING LAW. The internal law, without regard for conflicts of laws
principles, of the State of Minnesota will govern all questions concerning the
construction, validity and interpretation of this Agreement and the performance
of the obligations imposed by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
RINGER CORPORATION
By
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Its
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SRI ACQUISITION CORP.
By
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Its
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SOUTHERN RESOURCES, INC.
By
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Its
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