EXHIBIT 99.2
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AGREEMENT AND PLAN OF MERGER
AMONG
NOVA CORPORATION
CHURCH MERGER CORP.
AND
PMT SERVICES, INC.
DATED AS OF JUNE 17, 1998
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, is made, entered into and effective as of
the 17th day of June, 1998 (this "Agreement"), among NOVA CORPORATION, a
Georgia corporation ("Parent"), CHURCH MERGER CORP., a Tennessee corporation
and a wholly-owned subsidiary of Parent ("Sub"), and PMT SERVICES, INC., a
Tennessee corporation (the "Company") (Sub and the Company being hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub and the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein,
whereby each issued and outstanding share of Common Stock, par value $.01 per
share, of the Company ("Company Common Stock") not owned directly or
indirectly by Parent or the Company will be converted into shares of Parent
Common Stock, par value $.01 per share ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger, which is intended to be a "merger of equals," is
in furtherance of and consistent with their respective long-term business
strategies and is in the best interest of their respective shareholders;
WHEREAS, each of Parent and Company has granted to the other an option to
purchase up to 19.9% of its Common Stock, all pursuant to the Stock Option
Agreements of even date herewith (collectively, the "Stock Option
Agreements").
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, and in
accordance with the Tennessee Business Corporation Act (the "TBCA"), Sub shall
be merged with and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the TBCA.
1.2 EFFECTIVE TIME. The Merger shall become effective when Articles of
Merger (the "Articles of Merger"), executed in accordance with the relevant
provisions of the TBCA, are filed with the Secretary of State of the State of
Tennessee; provided, however, that, upon mutual consent of the Constituent
Corporations, the Articles of Merger may provide for a later date of
effectiveness of the Merger not more than 30 days after the date the Articles
of Merger are filed. When used in this Agreement, the term "Effective Time"
shall mean the later of the date and time at which the Articles of Merger are
filed or such later time established by the Articles of Merger. The filing of
the Articles of Merger shall be made on the date of the "Closing" (as defined
in Section 1.16).
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1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Section ▇▇-▇▇-▇▇▇ of the TBCA.
1.4 CHARTER AND BYLAWS. At the Effective Time, the Amended and Restated
Charter of the Company, as in effect immediately prior to the Effective Time,
shall be the Charter of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law. At the Effective Time, the
Bylaws of the Company, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter changed or
amended as provided therein or by the Amended and Restated Charter of the
Surviving Corporation or by applicable law. At the Effective Time, the board
of directors and officers of the Surviving Corporation shall be comprised of
the individuals identified on Schedule 1.4 attached hereto.
1.5 CONVERSION OF SECURITIES. As of the Effective Time, by virtue of the
Merger and without any action on the part of Sub, the Company, or the holders
of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value $.01 per
share, of Sub shall cease to be outstanding and shall be converted into one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(b) All shares of Company Common Stock that are held in the treasury of
the Company or by any wholly-owned "Subsidiary" (as defined in Section 2.1)
of the Company shall be canceled and no capital stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof, each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled in accordance with Section
1.5(b)) shall be converted into 0.715 (such number being the "Conversion
Number") validly issued, fully paid and nonassessable shares of Parent
Common Stock. All such shares of Company Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and
retired and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive
(i) any dividends and other distributions in accordance with Section 1.7,
(ii) certificates representing the shares of Parent Common Stock into which
such shares are converted, and (iii) any cash, without interest, in lieu of
fractional shares to be issued or paid in consideration therefor pursuant
to Section 1.8 upon the surrender of such certificate in accordance with
Section 1.6.
1.6 PARENT TO MAKE CERTIFICATES AVAILABLE.
(a) Exchange of Certificates. Parent shall authorize a commercial bank
reasonably acceptable to the Company (or such other person or persons as
shall be acceptable to Parent and the Company) to act as Exchange Agent
hereunder (the "Exchange Agent"). As soon as practicable after the
Effective Time, Parent shall deposit with the Exchange Agent, in trust for
the holders of shares of Company Common Stock converted in the Merger, (i)
certificates representing the shares of Parent Common Stock issuable
pursuant to Section 1.5(c) in exchange for outstanding shares of Company
Common Stock, and (ii) cash, as required to make payments in lieu of any
fractional shares pursuant to Section 1.8 (such cash and shares of Parent
Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the
Parent Common Stock contemplated to be issued pursuant to Section 1.5(c)
out of the Exchange Fund. Except as contemplated by Sections 1.8 and 1.9,
the Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
Parent shall cause the Exchange Agent to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock converted in the
Merger (the "Certificates") a letter of transmittal (which shall be in
customary form, shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual delivery of
the Certificates to the Exchange Agent, and shall contain instructions for
use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Parent Common Stock and cash in lieu of
fractional shares).
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Upon surrender for cancellation to the Exchange Agent of a Certificate,
together with such letter of transmittal, properly executed and duly
executed in accordance with the instructions thereon, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Parent Common Stock into which
the shares represented by the surrendered Certificate shall have been
converted at the Effective Time pursuant to this Article I, cash in lieu of
any fractional share in accordance with Section 1.8, and certain dividends
and other distributions in accordance with Section 1.7, and any Certificate
so surrendered shall forthwith be canceled.
1.7 DIVIDENDS; TRANSFER TAXES; WITHHOLDING. No dividends or other
distributions that are declared on or after the Effective Time on Parent
Common Stock, or that are payable to the holders of record thereof on or after
the Effective Time, will be paid to any person entitled by reason of the
Merger to receive a certificate representing Parent Common Stock until such
person surrenders the related Certificate or Certificates, as provided in
Section 1.6, and no cash payment in lieu of fractional shares will be paid to
any such person pursuant to Section 1.8 until such person shall so surrender
the related Certificate or Certificates. Subject to the effect of applicable
law, there shall be paid to each record holder of a new certificate
representing such Parent Common Stock: (i) at the time of such surrender or as
promptly as practicable thereafter, the amount of any dividends or other
distributions theretofore paid with respect to the shares of Parent Common
Stock represented by such new certificate and having a record date on or after
the Effective Time and a payment date prior to such surrender; (ii) at the
appropriate payment date or as promptly as practicable thereafter, the amount
of any dividends or other distributions payable with respect to such shares of
Parent Common Stock and having a record date on or after the Effective Time
but prior to such surrender and a payment date on or subsequent to such
surrender; and (iii) at the time of such surrender or as promptly as
practicable thereafter, the amount of any cash payable with respect to a
fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the person entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any cash or certificate representing
shares of Parent Common Stock is to be paid to or issued in a name other than
that in which the Certificate surrendered in exchange therefor is registered,
it shall be a condition of such exchange that the Certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates for
such shares of Parent Common Stock in a name other than that of the registered
holder of the Certificate surrendered, or shall establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not applicable. Parent
or the Exchange Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as Parent or the Exchange Agent is
required to deduct and withhold with respect to the making of such payment
under the Code or under any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock in respect of
which such deduction and withholding was made by Parent or the Exchange Agent.
1.8 NO FRACTIONAL SECURITIES. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates pursuant to this Article I, and no Parent
dividend or other distribution or stock split shall relate to any fractional
share, and no fractional share shall entitle the owner thereof to vote or to
any other rights of a security holder of Parent. In lieu of any such
fractional share, each holder of Company Common Stock who would otherwise have
been entitled to a fraction of a share of Parent Common Stock upon surrender
of Certificates for exchange pursuant to this Article I will be paid an amount
in cash (without interest), rounded to the nearest cent, determined by
multiplying (i) the per share closing price on the New York Stock Exchange,
Inc. (the "NYSE") of Parent Common Stock (as reported in the NYSE Composite
Transactions) on the date of the Effective Time (or, if the shares of Parent
Common Stock do not trade on the NYSE on such date, the first date of trading
of shares of Parent Common Stock on the NYSE after the Effective Time) by (ii)
the fractional interest to which such holder would otherwise be entitled. As
promptly as practicable after the determination of the amount of cash, if any,
to be paid to holders of fractional share interests, the Exchange Agent shall
so notify the Parent, and the Parent shall deposit such amount with the
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Exchange Agent and shall cause the Exchange Agent to forward payments to such
holders of fractional share interests subject to and in accordance with the
terms of Section 1.7 and this Section 1.8.
1.9 RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund which remains
undistributed to the former shareholders of the Company for one year after the
Effective Time shall be delivered to Parent, upon demand of Parent, and any
such former shareholders who have not theretofore complied with this Article I
shall thereafter look only to Parent for payment of their claim for Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock,
and any dividends or distributions with respect to Parent Common Stock.
Neither Parent nor the Surviving Corporation shall be liable to any former
holder of Company Common Stock for any such shares of Parent Common Stock,
cash and dividends, and/or distributions held in the Exchange Fund which are
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
1.10 ADJUSTMENT OF CONVERSION NUMBER. In the event of any reclassification,
stock split or stock dividend with respect to Parent Common Stock, any change
or conversion of Parent Common Stock into other securities, any adjustment
pursuant to Section 7.1(g) hereof, or any other dividend or distribution with
respect to the Parent Common Stock other than normal quarterly cash dividends
as the same may be adjusted from time to time pursuant to the terms of this
Agreement (or if a record date with respect to any of the foregoing should
occur) prior to the Effective Time, appropriate and proportionate adjustments,
if any, shall be made to the Conversion Number, and all references to the
Conversion Number in this Agreement shall be deemed to be to the Conversion
Number as so adjusted.
1.11 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to Section
1.8) shall be deemed to have been issued in full satisfaction of all rights
pertaining to the shares of Company Common Stock represented by such
Certificates.
1.12 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made on the records of the Company.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, the Exchange Agent or the Parent, such Certificates shall be
canceled and exchanged as provided in this Article I.
1.13 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, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct (but consistent with
the practices the Parent applies to its own shareholders), as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Certificate the shares of Parent Common Stock, any cash in lieu
of fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 1.8, and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
1.14 [INTENTIONALLY OMITTED.]
1.15 FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest in, to or under any
of the rights, privileges, powers, franchises, properties or assets of either
of the Constituent Corporations, or (b) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and
directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as
may be necessary, desirable or proper to vest, perfect or confirm the
Surviving Corporation's right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of such
Constituent Corporation and otherwise to carry out the purposes of this
Agreement.
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1.16 CLOSING. The closing of the transactions contemplated by this Agreement
(the "Closing") and all actions specified in this Agreement to occur at the
Closing shall take place at the offices of Long ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP at 10:00
a.m., local time, no later than the second business day following the day on
which the last of the conditions set forth in Article VI shall have been
fulfilled or waived, or at such other time and place as Parent and the Company
shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the Company as
follows:
2.1 ORGANIZATION, STANDING AND POWER. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Georgia and Tennessee, respectively, and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each Subsidiary of Parent is duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is organized
and has the requisite corporate (in the case of a Subsidiary that is a
corporation) or other power and authority to carry on its business as now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power or authority would not, individually or in
the aggregate, have a "Material Adverse Effect" (as defined in this Section
2.1) on Parent. Except as set forth on Schedule 2.1, Parent and each of its
Subsidiaries are duly qualified to do business, and are in good standing, in
each jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification necessary,
except where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. For purposes of this
Agreement, (a) "Material Adverse Change" or "Material Adverse Effect" means,
when used with respect to Parent or the Company, as the case may be, any
change or effect that is materially adverse to the business, prospects,
assets, liabilities, results of operation or financial condition of Parent and
its Subsidiaries, taken as a whole, or the Company and its Subsidiaries, taken
as a whole, as the case may be, and (b) "Subsidiary" means any corporation,
partnership, joint venture or other legal entity of which Parent or the
Company, as the case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation, partnership, joint venture or other legal entity.
2.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital stock
of Parent consists of 50,000,000 shares of Parent Common Stock, par value $.01
per share, and 5,000,000 shares of Preferred Stock, without par value (the
"Parent Preferred Stock"); provided, however, that if Parent's shareholders,
at or prior to the "Parent Shareholder Meeting" (as defined in Section 5.1),
approve an amendment to Parent's Articles of Incorporation which increases the
authorized capital stock of Parent, then the authorized capital stock as of
the Effective Time will be as so increased. At June 12, 1998 (except with
respect to the representation and warranty made in subsection (v) below, which
is made as of the date hereof), (i) 34,253,368 shares of Parent Common Stock
were issued and outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights or rights of first refusal, (ii)
no shares of Parent Common Stock were held in the treasury of Parent or by the
Subsidiaries of Parent, (iii) 5,250,000 shares of Parent Common Stock
originally were reserved for future issuance, and of such shares, 3,017,284
are reserved for future issuance as of June 12, 1998, pursuant to Parent's
1991 Employees' Stock Option and Stock Appreciation Rights Plan, as amended,
the 1996 Employees' Stock Incentive Plan, as amended, and 1996 Directors'
Stock Option Plan (collectively, the "Parent Option Plans"), (iv) 50,000
shares of Parent Common Stock were reserved for issuance pursuant to the
Warrant Agreement between Parent and ▇▇▇▇▇▇▇ Financial Services, L.P. (the
"▇▇▇▇▇▇▇ Warrant"), and (v) 6,816,420 shares of Parent Common Stock were
reserved for issuance pursuant to the Stock Option Agreement, of even date
herewith, between Parent and Company (the "Parent Stock Option Agreement"). No
shares of Parent Preferred Stock are outstanding. All of the shares of Parent
Common Stock issuable in exchange for Company Common Stock at the Effective
Time in accordance with this Agreement will be, when so issued, duly
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authorized, validly issued, fully paid and nonassessable and free of
preemptive rights or rights of first refusal. As of the date of this
Agreement, except for (a) this Agreement, (b) the ▇▇▇▇▇▇▇ Warrant, (c) the
Parent Stock Option Agreement, and (d) stock options covering not in excess of
2,526,496 shares of Parent Common Stock under the Parent Option Plans
(collectively, the "Parent Options"), there are no options, warrants, calls,
rights or agreements to which Parent or any of its Subsidiaries is a party or
by which any of them is bound obligating Parent or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of Parent or any of its Subsidiaries or obligating
Parent or any of its Subsidiaries to grant, extend or enter into any such
option, warrant, call, right or agreement. Since June 12, 1998, Parent has not
issued any shares of its capital stock, or securities convertible into or
exchangeable for such capital stock. Each outstanding share of capital stock
of each Subsidiary of Parent is duly authorized, validly issued, fully paid
and nonassessable, and, except as set forth on Schedule 2.2, each such share
is owned by Parent or another Subsidiary of Parent, free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on voting rights, charges and other encumbrances of
any nature whatsoever. Except as set forth in Schedule 2.2, Exhibit 21 to
Parent's Annual Report on Form 10-K for the year ended December 31, 1997, as
filed with the Securities and Exchange Commission (the "SEC") (the "Parent
Annual Report"), is a true, accurate and correct statement in all material
respects of all of the information required to be set forth therein by the
regulations of the SEC.
2.3 AUTHORITY.
(1) The respective Boards of Directors of Parent and Sub have, on or
prior to the date of this Agreement at a meeting duly called and held and
not subsequently rescinded or modified in any way, (i) unanimously adopted
this Agreement in accordance with the Georgia Business Corporation Code
(the "GBCC") and the TBCA, respectively, (ii) resolved to recommend the
approval of this Agreement to their respective shareholders, (iii) directed
that this Agreement be submitted to their respective shareholders for
approval, (iv) (with respect to Parent) approved the amendment of its
Articles of Incorporation, the amendment of its 1996 Employees' Stock
Incentive Plan and any other amendments or actions necessary to consummate
the Merger (collectively, the "Parent Amendments"), (v) (with respect to
Parent) resolved to recommend the Parent Amendments to its shareholders,
and (vi) (with respect to Parent) directed that the Parent Amendments be
submitted to its shareholders for approval.
(2) Each of Parent and Sub has all requisite corporate power and
authority to enter into this Agreement and, subject to approval by the
shareholders of Parent of this Agreement and the transactions contemplated
hereby (including but not limited to the Parent Amendments) and the
issuance of Parent Common Stock in connection with the Merger (the "Share
Issuance"), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Parent and Sub, subject to (x) approval by the shareholders of Parent of
this Agreement and the transactions contemplated hereby, including without
limitation, the Share Issuance and the Parent Amendments, and (y) the
filing of appropriate Merger documents as required by the TBCA. This
Agreement has been duly executed and delivered by ▇▇▇▇▇▇ and Sub and
(assuming the valid authorization, execution and delivery of this Agreement
by the Company) this Agreement constitutes the valid and binding obligation
of Parent and Sub enforceable against each of them in accordance with its
terms. The Merger, the Share Issuance, the Parent Amendments, and the
filing of a joint proxy statement and a registration statement on Form S-4
(or other appropriate form) with the SEC by Parent under the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act") and the Securities Act of 1933,
as amended (together with the rules and regulations promulgated thereunder,
the "Securities Act"), for the purpose of registering the shares of Parent
Common Stock to be issued in the Merger and seeking approval of this
Agreement, the transactions contemplated hereby, the Parent Amendments, and
the Share Issuance by the shareholders of Parent (together with any
amendments or supplements thereto, whether prior to or after the effective
date thereof, the "Registration Statement") have been duly authorized by
Parent's Board of Directors.
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2.4 CONSENTS AND APPROVALS; NO VIOLATION. Assuming that all consents,
approvals, authorizations and other actions described in this Section 2.4 have
been obtained and all filings and obligations described in this Section 2.4
have been made, and except as set forth in Schedule 2.4 (including the
required consents, approvals, authorizations and other actions identified
therein), the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under, any provision of (i) the Articles of
Incorporation or Bylaws of Parent, (ii) any provision of the comparable
charter or organization documents of any of Parent's Subsidiaries, (iii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
Parent or any of its Subsidiaries or (iv) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in
the case of clauses (ii), (iii) or (iv), any such violations, defaults,
rights, liens, security interests, charges or encumbrances that, individually
or in the aggregate, would not have a Material Adverse Effect on Parent, or
prevent the consummation of any of the transactions contemplated hereby. No
filing or registration with, or authorization, consent or approval of, any
domestic (federal and state), foreign or supranational court, commission,
governmental body, regulatory agency, authority or tribunal (each, a
"Governmental Entity") is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement
by Parent or Sub or is necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement, except for (i) in
connection, or in compliance, with the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities
Act and the Exchange Act, (ii) the filing of the Articles of Merger with the
Secretary of State of the State of Tennessee and appropriate documents with
the relevant authorities of other states in which Parent or any of its
Subsidiaries is qualified to do business, (iii) such filings and consents as
may be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Merger or by the transactions contemplated by this Agreement, (iv) such
filings, authorizations, orders and approvals as may be required by state
takeover laws (the "State Takeover Approvals"), (v) such filings and consents
as may be required under any state or foreign laws pertaining to debt
collection, the issuance of payment instruments or money transmission, (vi)
applicable requirements, if any, of state securities or "blue sky" laws ("Blue
Sky Laws") and the NYSE, and (vii) such other consents, orders,
authorizations, registrations, declarations and filings, the failure of which
to be obtained or made would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, or prevent the consummation of any of the
transactions contemplated hereby.
2.5 SEC DOCUMENTS AND OTHER REPORTS. Parent has filed all required
documents, reports and schedules with the SEC since December 31, 1996
(collectively, the "Parent SEC Documents"). As of their respective dates, the
Parent SEC Documents complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and, at the
respective times they were filed, none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except
as set forth in Schedule 2.5, the consolidated financial statements
(including, in each case, any notes thereto) of Parent included in the Parent
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with generally accepted
accounting principles (except as may be indicated therein or in the notes
thereto) applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto) and fairly presented in all
material respects the consolidated financial position of Parent and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments described
therein). Except as set forth in Schedule 2.5, Parent has not, since December
31, 1997, made any change in the accounting practices or policies applied in
the preparation of financial statements.
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2.6 REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. None of the
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the Registration Statement, the joint proxy statement/prospectus
included therein (together with any amendments or supplements thereto, the
"Joint Proxy Statement") relating to the "Shareholder Meetings" (as defined in
Section 5.1) or any other document filed with any other regulatory agency in
connection herewith will: (i) in the case of the Registration Statement, at
the time it becomes effective, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading; (ii) in the case of
the Joint Proxy Statement, at the time of the mailing of the Joint Proxy
Statement, the time of each of the Shareholder Meetings, and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading; or, (iii) in the case of any other filing required by any
regulatory agency in connection herewith, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make statements therein, in light of the
circumstances under which they are made, not misleading. If, at any time prior
to the Effective Time, any event with respect to Parent, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration Statement, such
event shall be so described, and an appropriate amendment or supplement shall
be promptly filed with the SEC and, as required by law, disseminated to the
shareholders of Parent and the Company. The Registration Statement (except for
portions thereof that relate only to the Company or any of its Subsidiaries)
and the Joint Proxy Statement (except for portions thereof that relate only to
the Company or any of its Subsidiaries) will comply as to form in all material
respects with the provisions of the Securities Act and the Exchange Act, as
applicable.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on Schedule
2.7, since December 31, 1997: (A) Parent and its Subsidiaries have not
incurred any material liability or obligation (indirect, direct or
contingent), or entered into any material oral or written agreement or other
transaction, that is not in the ordinary course of business or that would
result in a Material Adverse Effect on Parent, excluding any changes and
effects resulting from changes in economic, regulatory or political conditions
or changes in conditions generally applicable to the industries in which
Parent and Subsidiaries of Parent are involved and except for any such changes
or effects resulting from this Agreement, the transactions contemplated
hereby, or the announcement thereof; (B) Parent and its Subsidiaries have not
sustained any loss or interference with their business or properties from
fire, flood, windstorm, accident or other calamity (whether or not covered by
insurance) that has had a Material Adverse Effect on Parent; (C) other than
any indebtedness incurred by Parent after the date hereof as permitted by
Section 4.1(a)(vi), there has been no material change in the consolidated
indebtedness of Parent and its Subsidiaries, and no dividend or distribution
of any kind declared, paid or made by Parent on any class of its stock; and
(D) there has been no event causing a Material Adverse Effect on Parent,
excluding any changes and effects resulting from changes in economic,
regulatory or political conditions or changes in conditions generally
applicable to the industries in which Parent and Subsidiaries of Parent are
involved and which do not affect Parent in a manner materially
disproportionate to the effect on the Company) and except for any such changes
or effects resulting from this Agreement, the transactions contemplated hereby
or the announcement thereof.
2.8 PERMITS AND COMPLIANCE. Except as set forth on Item 2 of Schedule 2.8,
each of Parent and its Subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any Governmental Entity
necessary for Parent or any of its Subsidiaries to own, lease and operate its
properties or to carry on its business as it is now being conducted
(collectively, the "Parent Permits"), except where the failure to have any of
the Parent Permits would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, and, as of the date of this Agreement, no
suspension or cancellation of any of the Parent Permits is pending or, to the
"Knowledge of Parent" (as defined in this Section 2.8), threatened, except
where the suspension or cancellation of any of the Parent Permits would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Neither Parent nor any of its Subsidiaries is in default or violation of (A)
its charter, bylaws or other organizational documents, (B) any applicable law,
ordinance, administrative or governmental rule or regulation, (C) any order,
decree or judgment
9
of any Governmental Entity having jurisdiction over Parent or any of its
Subsidiaries, or (D) any provisions of the rules and regulations of VISA
U.S.A., Inc., VISA International, Inc., MasterCard International, Inc. and any
successor organizations or associations (collectively, the "Credit Card
Associations"), except, in the case of clauses (A), (B), (C) and (D), for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on Parent. Except as disclosed in Schedule 2.8, as of the date
hereof there is no contract or agreement that is material to the business,
financial condition or results of operations of Parent and its Subsidiaries,
taken as a whole. Except as set forth in Schedule 2.8, as of the date of this
Agreement, no event of default or event that, but for the giving of notice or
the lapse of time or both, would constitute an event of default exists or,
upon the consummation by Parent of the transactions contemplated by this
Agreement, will exist under any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money, any guarantee of any
agreement or instrument for borrowed money or any lease, contractual license
or other agreement or instrument to which Parent or any of its Subsidiaries is
a party or by which Parent or any such Subsidiary is bound or to which any of
the properties, assets or operations of Parent or any such Subsidiary is
subject, other than any defaults that, individually or in the aggregate, would
not have a Material Adverse Effect on Parent. Set forth in Schedule 2.8 is a
description of any material changes to the amount and terms of the
indebtedness of the Parent and its Subsidiaries as described in the Parent
Annual Report. For purposes of this Agreement, "Knowledge of Parent" means the
actual knowledge of the individuals identified in Schedule 2.8.
2.9 TAX MATTERS.
(a) Tax Definitions. For purposes of this Agreement, the following
definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however denominated,
including any interest, penalties or other additions to tax that may
become payable in respect thereof, imposed by any federal, territorial,
state, local or foreign government or any agency or political
subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state income
taxes), payroll and employee withholding taxes, unemployment insurance,
social security taxes, sales and use taxes, ad valorem taxes, excise
taxes, franchise taxes, gross receipts taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes, transfer taxes, workers' compensation, Pension
Benefit Guaranty Corporation premiums and other governmental charges,
and other obligations of the same or of a similar nature to any of the
foregoing, which a party is required to pay, withhold or collect.
(ii) The term "Return" or "Tax Return" shall mean all reports,
estimates, declarations of estimated tax, information statements and
returns relating to, or required to be filed in connection with, any
Taxes, including information returns or reports with respect to backup
withholding and other payments to third parties.
(b) Returns Filed and Taxes Paid. Except as otherwise disclosed in
Schedule 2.9(b), or except as would not have a Material Adverse Effect on
Parent: (i) all Returns required to be filed by or on behalf of Parent and
each of its Subsidiaries have been duly filed on a timely basis and such
Returns are correct, true, and complete; (ii) all Taxes shown to be payable
on the Returns or on subsequent assessments with respect thereto have been
paid in full on a timely basis, and no other Taxes are payable by Parent or
any of its Subsidiaries with respect to items or periods covered by such
Returns or with respect to any taxable periods ending prior to the date of
this Agreement; (iii) Parent and each of its Subsidiaries has withheld and
paid over all Taxes required to have been withheld and paid over, and
complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party; and (iv) there are
no liens on any of the assets of Parent or any of its Subsidiaries with
respect to Taxes, other than liens for Taxes not yet due and payable.
(c) Tax Deficiencies; Audits; Statutes of Limitations. Except as
otherwise disclosed in Schedule 2.9(c), or except as would not have a
Material Adverse Effect on Parent: (i) neither the Returns of
10
Parent nor any of its Subsidiaries have been audited by a government or
taxing authority, nor is any such audit in process; (ii) no deficiencies
exist or have been asserted (either in writing or verbally, formally or
informally) or are expected to be asserted with respect to Taxes of Parent
or any of its Subsidiaries, and neither Parent nor any of its Subsidiaries
has received notice (either in writing or verbally, formally or informally)
that it has not filed a Return or paid Taxes required to be filed or paid
by it; (iii) neither Parent nor any of its Subsidiaries is a party to any
action or proceeding for assessment or collection of Taxes, nor has such
event been asserted or threatened (either in writing or verbally, formally
or informally) against Parent or any of its Subsidiaries, or any of their
respective assets; (iv) no waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of Parent or any
of its Subsidiaries; and (v) Parent and each of its Subsidiaries have
disclosed on their federal income tax returns all positions taken therein
that could give rise to a substantial understatement penalty within the
meaning of Section 6662 of the Code.
(d) Tax Sharing Agreements. Except as otherwise disclosed in Schedule
2.9(d), neither Parent nor any of its Subsidiaries are a party to any tax
sharing agreement, and (i) the Parent has never been a party to a tax
sharing agreement, and (ii) to the Knowledge of Parent, none of its
Subsidiaries has ever been a party to any tax sharing agreement.
2.10 ACTIONS AND PROCEEDINGS. Except as set forth in Schedule 2.10, there
are no outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving Parent or any of its Subsidiaries, or
against or involving any of the present or former directors, officers,
employees, consultants, agents or shareholders of Parent or any of its
Subsidiaries, as such, any of its or their properties, assets or business or
any "Parent Plan" (as defined in Section 2.13) or any fiduciary, agent or
consultant of any Parent Plan that, individually or in the aggregate, would
have a Material Adverse Effect on Parent. As of the date of this Agreement,
there are no actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations pending or, to the Knowledge of Parent,
threatened against or involving Parent or any of its Subsidiaries or any of
its or their present or former directors, officers, employees, consultants,
agents or shareholders, as such, any of its or their properties, assets or
business or any Parent Plan or any fiduciary, agent or consultant of any
Parent Plan that, individually or in the aggregate, would have a Material
Adverse Effect on Parent. As of the date hereof, there are no actions, suits,
labor disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of Parent, threatened
against or affecting Parent or any of its Subsidiaries or any of its or their
present or former officers, directors, employees, consultants, agents or
shareholders, as such, or any of its or their properties, assets or business
or any Parent Plan or any fiduciary, agent or consultant of any Parent Plan
relating to the transactions contemplated by this Agreement.
2.11 [INTENTIONALLY OMITTED].
2.12 CERTAIN AGREEMENTS. As of the date of this Agreement, neither Parent
nor any of its Subsidiaries is a party to any "Plan" (as defined in this
Section 2.12), any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. For purposes of this Agreement, "Plan" shall
mean, with respect to an entity, all present and prior (including terminated
and transferred) plans, programs, agreements, arrangements, commitments and/or
methods of contribution or compensation whether formal or informal, oral or
written, whether funded or unfunded, and whether legally binding or not, which
provides any remuneration or benefits to, or covers any current or former
employee of such entity or any other individual who provides services to such
entity (including, but not limited to, any shareholder, officer, director,
employee or consultant of such entity), or any spouse, child or other
dependent of such current or former employee or individual, or which is
sponsored, maintained, adopted or contributed to (in whole or in part) by such
entity, and includes, but is not limited to, pension, retirement, profit
sharing, stock bonus, nonqualified deferred compensation, disability, medical,
dental, workers' compensation, health, life insurance, cafeteria, medical
reimbursement, dependent care assistance, incentive, bonus, restricted stock,
stock purchase, or stock option plans. No holder of any option to purchase
shares of Parent Common Stock, or shares of Parent Common Stock granted in
connection with the
11
performance of services for Parent or its Subsidiaries, is or will be entitled
to receive cash from Parent or any Subsidiary in lieu of or in exchange for
such option or shares as a result of the transactions contemplated by this
Agreement.
2.13 ERISA.
(a) With respect to each Plan of Parent or any "ERISA Affiliate" (as
defined in this Section 2.13) of Parent, Parent has made available to
Company a true and correct copy of (i) the most recent annual report (Form
5500) filed with the Internal Revenue Service (the "IRS"), (ii) the plan
documents of such Plan, (iii) each trust agreement, insurance contract or
administration agreement relating to such Plan, (iv) the most recent
summary plan description for each Plan for which a summary plan description
is required or the most recent employee communication explanation for each
other Plan, (v) the most recent actuarial report or valuation relating to a
Plan subject to Title IV of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and (vi) the most recent determination letter,
if any, issued by the IRS with respect to any Plan intended to be qualified
under section 401(a) of the Code. Each Plan of Parent or any ERISA
Affiliate of Parent complies in all material respects with ERISA, the Code
and all other applicable statutes and governmental rules and regulations,
and (i) no "reportable event" (within the meaning of Section 4043 of ERISA)
has occurred with respect to any "Parent Plan" (as defined in this Section
2.13), (ii) neither Parent nor any of its ERISA Affiliates has withdrawn
(or partially withdrawn) from any Parent Plan or "Parent Multiemployer
Plan" (as defined in this Section 2.13) or instituted, or is currently
considering taking, any action to do so, and (iii) no action has been
taken, or is currently being considered, to terminate any Parent Plan
subject to Title IV of ERISA. No Parent Plan, nor any trust created
thereunder, has incurred any "accumulated funding deficiency" (as defined
in Section 302 of ERISA), whether or not waived. To the best Knowledge of
Parent, no Parent Plan has engaged in a prohibited transaction with a
fiduciary or party-in-interest within the meaning of Section 4975 of the
Code or Section 406 of ERISA, unless a statutory exception exists for such
transaction.
(b) With respect to the Plans of Parent or any ERISA Affiliate of Parent,
no event has occurred and, to the Knowledge of Parent, there exists no
condition or set of circumstances in connection with which Parent or any
ERISA Affiliate of Parent could be subject to any liability under the terms
of such Plans, ERISA, the Code, any contract or document relating to such
Plans, or any other applicable law, which would have a Material Adverse
Effect on Parent. All Parent Plans that are intended to be qualified under
Section 401(a) of the Code have been determined by the Internal Revenue
Service to be so qualified, or a timely (within the meaning of Section
401(b) of the Code) application for such determination is now pending, and
Parent is not aware of any reason why any such Parent Plan is not so
qualified in operation. Neither Parent nor any of its ERISA Affiliates has
been notified by any Parent Multiemployer Plan that such Parent
Multiemployer Plan is currently in reorganization or insolvency under and
within the meaning of Section 4241 or 4245 of ERISA or that such Parent
Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA. Neither Parent nor any of its ERISA Affiliates has
any liability or obligation under any Plan or other contract or agreement
to provide benefits after termination of employment to any employee or
dependent of an employee other than as required by ERISA or as disclosed in
the Parent Annual Report. As used herein, (i) "Parent Plan" means a
"pension plan" (as defined in Section 3(2) of ERISA (other than a Parent
Multiemployer Plan)) or a "welfare plan" (as defined in Section 3(1) of
ERISA) established or maintained by Parent or any of its ERISA Affiliates
or as to which Parent or any of its ERISA Affiliates has contributed or
otherwise may have any liability, and (ii) "Company Multiemployer Plan"
means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to
which Parent or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability. With respect to any Parent
Plan which is subject to Title IV of ERISA, the fair market value of the
assets of such Plan are currently (and are expected to be as of the
Effective Time) greater than or equal to the present value of all "benefit
liabilities" (within the meaning of Section 4001(a)(6) of ERISA) of such
Parent Plan.
(c) Parent has made available to the Company true and complete (i) copies
of all severance and employment agreements with officers of Parent and each
ERISA Affiliate of Parent, (ii) copies of all severance programs and
policies of Parent with or relating to its employees; and (iii) copies of
all plans,
12
programs, agreements and other arrangements of Parent with or relating to
its employees which contain change of control or similar provisions. "ERISA
Affiliate" means, with respect to a person, any trade or business (whether
or not incorporated) which would be considered a single employer with such
person pursuant to Section 414(b), (c), (m) or (o) of the Code and the
regulations promulgated under those sections or pursuant to Section 4001(b)
of ERISA and the regulations promulgated thereunder.
2.14 COMPLIANCE WITH CERTAIN LAWS. The properties, assets and operations of
Parent and its Subsidiaries are in compliance in all material respects with
all applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to public and worker
health and safety (collectively, "Worker Safety Laws") and the protection and
clean-up of the environment and activities or conditions related thereto,
including, without limitation, those relating to the generation, handling,
disposal, transportation or release of hazardous materials (collectively,
"Environmental Laws"), except for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent. With respect to
such properties, assets and operations, including any previously owned, leased
or operated properties, assets or operations, there are no past, present or
reasonably anticipated future events, conditions, circumstances, activities,
practices, incidents, actions or plans of Parent or any of its Subsidiaries
that may interfere with or prevent compliance or continued compliance in all
material respects with applicable Worker Safety Laws and Environmental Laws,
other than any such interference or prevention as would not, individually or
in the aggregate with any such other interference or prevention, have a
Material Adverse Effect on Parent. The term "hazardous materials" shall mean
those substances that are regulated by, or form the basis for liability under,
any applicable Environmental Laws.
2.15 LIABILITIES. Except as set forth in Schedule 2.15 or except as fully
reflected or reserved against in the financial statements included in the
Parent Annual Report, or disclosed in the footnotes thereto, Parent and its
Subsidiaries had no liabilities (including, without limitation, tax
liabilities) at the date of such financial statements, absolute or contingent,
other than liabilities that, individually or in the aggregate, would not have
a Material Adverse Effect on Parent, and had no liabilities (including,
without limitation, tax liabilities) that were not incurred in the ordinary
course of business. Except as so reflected, reserved or disclosed, Parent and
its Subsidiaries have no commitments, other than any commitments which,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent.
2.16 LABOR MATTERS. Neither Parent nor any of its Subsidiaries is a party to
any collective bargaining agreement or labor contract. Neither Parent nor any
of its Subsidiaries has engaged in any unfair labor practice with respect to
any persons employed by or otherwise performing services primarily for Parent
or any of its Subsidiaries (the "Parent Business Personnel"), and there is no
unfair labor practice complaint or grievance against Parent or any of its
Subsidiaries by the National Labor Relations Board or any comparable state
agency pending or threatened in writing with respect to the Parent Business
Personnel, except where such unfair labor practice, complaint or grievance
would not have a Material Adverse Effect on Parent. There is no labor strike,
dispute, slowdown or stoppage pending or, to the Knowledge of Parent,
threatened against or affecting Parent or any of its Subsidiaries which may
interfere with the respective business activities of Parent or any of its
Subsidiaries, except where such dispute, strike or work stoppage would not
have a Material Adverse Effect on Parent. Parent and all of its Subsidiaries
are in compliance with all federal and state laws respecting employment and
employment practices, immigration, terms and conditions of employment, and
wages and hours, except where such noncompliance would not have a Material
Adverse Effect on Parent. With respect to the employees of Parent and/or its
Subsidiaries, to the Knowledge of Parent, no event has occurred and there
exists no condition or set of circumstances in connection with which Parent or
any of its Subsidiaries or any ERISA Affiliate of Parent could be subject to
any liability under any federal or state law handicap or disability
discrimination law, any federal, state or local fair employment practices or
nondiscrimination act, or any other applicable law which would have a Material
Adverse Effect on Parent.
2.17 INTELLECTUAL PROPERTY. Parent and its Subsidiaries have all patents,
trademarks, trade names, service marks, trade secrets, copyrights and other
proprietary intellectual property rights (collectively, "Intellectual Property
Rights") as are necessary in connection with the business of Parent and its
Subsidiaries, taken as a
13
whole, except where the failure to have such Intellectual Property Rights
would not have a Material Adverse Effect on Parent. Neither Parent nor any of
its Subsidiaries has infringed any Intellectual Property Rights of any third
party other than any infringements that, individually or in the aggregate,
would not have a Material Adverse Effect on Parent.
2.18 POOLING OF INTERESTS; REORGANIZATION. To the Knowledge of Parent,
neither Parent, any of its Subsidiaries, nor any of its directors or officers
has (i) taken any action or failed to take any action which action or failure
would jeopardize the treatment of the Merger as a pooling of interests for
accounting purposes or (ii) taken any action or failed to take any action
which action or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
2.19 REQUIRED VOTE OF PARENT SHAREHOLDERS. Except with respect to the Share
Issuance and the amendment of Parent's 1996 Employee Stock Incentive Plan, as
amended (the "1996 Plan"), the affirmative vote of a majority of the votes
entitled to be cast is required to approve this Agreement and the transactions
contemplated hereby, including without limitation the amendment of Parent's
Articles of Incorporation. The affirmative vote of the holders of a majority
of shares represented and entitled to vote on such amendment is required for
the amendment of the 1996 Plan, provided that a quorum is present at the
meeting at which such amendment is voted upon. The affirmative vote of a
majority of votes cast on a proposal in a proxy bearing on the Share Issuance,
in which the total vote cast on the Share Issuance represents over fifty
percent (50%) in interest of all securities entitled to vote on the proposal,
is required to approve the Share Issuance (the required shareholder votes
referred to in this sentence and two preceding sentences are collectively
referred to herein as the "Parent Required Vote"). Except for the vote of
Parent's shareholders approving this Agreement, the transactions contemplated
hereby, the Share Issuance, the amendment to Parent's Articles of
Incorporation which increases the authorized capital stock of Parent, and the
amendment of the 1996 Plan, no other vote of the shareholders of Parent is
required by law, the Articles of Incorporation or Bylaws of Parent or
otherwise in order for Parent to consummate the Share Issuance, the Merger and
the transactions contemplated hereby.
2.20 OPERATIONS OF SUB. Sub is a direct, wholly-owned subsidiary of Parent,
was formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
2.21 BROKERS. No broker, investment banker or other person, other than
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent.
2.22 OPINION OF FINANCIAL ADVISOR. Parent has received the opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ dated as of the date hereof (which opinion is written or,
if initially given verbally, shall immediately hereafter be memorialized in a
written opinion to be delivered to Parent), to the effect that, as of the date
hereof, the Conversion Number is fair to Parent's shareholders from a
financial point of view (the "Parent Fairness Opinion").
2.23 STATE TAKEOVER STATUTES. The Board of Directors of Parent has, to the
extent such statutes are applicable, (a) taken all action necessary to exempt
the Company, its Subsidiaries and "Affiliates" (as defined in this Section
2.23), the Merger, this Agreement and the transactions contemplated hereby
from Sections 14-2-1110 through 14-2-1133 of the GBCC and (b) taken all action
necessary to satisfy the provisions of Sections 14-2-1110 through 14-2-1133 of
the GBCC. To the Knowledge of Parent, no other state takeover statutes are
applicable to the Merger, this Agreement and the transactions contemplated
hereby. For purposes of this Section 2.23 and Section 3.19, an "Affiliate" of
a party means any person or entity controlling, controlled by, or under common
control with such party. For the purposes of this definition, "control" shall
mean, as to any entity, the power to direct or cause the direction of the
management and policies of such entity through (i) control of a majority of
the members of the Board of Directors of such entity, or (ii) ownership of
fifty percent (50%) or more of the total outstanding voting securities of such
entity. "Controlling" and "controlled" shall have a correlative meaning.
14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
3.1 ORGANIZATION, STANDING AND POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Tennessee and has the requisite corporate power and authority to carry on
its business as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the failure to be
so organized, existing or in good standing or to have such power or authority
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character
of their properties owned or held under lease or the nature of their
activities makes such qualification necessary, except where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
3.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital stock
of the Company consists of 100,000,000 shares of Company Common Stock, par
value $.01 per share, and 10,000,000 shares of Preferred Stock, par value $.01
per share ("Company Preferred Stock"). At the close of business on June 12,
1998 (except with respect to the representation and warranty in subsection (v)
below which is made as of the date hereof), (i) 48,911,724 shares of Company
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and free of preemptive rights or rights of first
refusal, (ii) no shares of Company Common Stock were held in the treasury of
the Company or by the Subsidiaries of the Company, (iii) 5,145,000 shares of
Company Common Stock were reserved for future issuance pursuant to the
Company's 1994 Incentive Stock Plan, as amended and restated, 1994 Non-
Employee Director Stock Option Plan, as amended and restated, 1997 Executive
Stock Incentive Plan, the 1997 Non-Qualified Stock Option Plan, and the Non-
Employee Director Restricted Stock Award Plan (collectively, the "Company
Stock Option Plans"), (iv) 10,000 shares of Company Common Stock, in the
aggregate, were reserved for issuance pursuant to Stock Purchase Warrants
issued to each of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ in connection with an
acquisition by the Company of a merchant portfolio (collectively, the "Company
Warrants"), and (v) 9,733,433 shares of Company Common Stock were reserved for
issuance pursuant to the Stock Option Agreement, of even date herewith,
between the Company and Parent (the "Company Stock Option Agreement"). No
shares of Company Preferred Stock are outstanding. As of the date of this
Agreement, except for (a) stock options covering not in excess of 3,090,873
shares of Company Common Stock under the Company Stock Option Plans
(collectively, the "Company Options"), (b) the Company Warrants or (c) the
Company Stock Option Agreement, there are no options, warrants, calls, rights
or agreements to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of the Company or any of its Subsidiaries
or obligating the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, right or agreement. Since June 12, 1998,
the Company has not issued any shares of its capital stock, or securities
convertible into or exchangeable for such capital stock. Each outstanding
share of capital stock of each Subsidiary of the Company that is a corporation
is duly authorized, validly issued, fully paid and nonassessable and, except
as disclosed in the "Company SEC Documents" (as defined in Section 3.5) or
Schedule 3.2, each such share is owned by the Company or another Subsidiary of
the Company, free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on voting rights,
charges and other encumbrances of any nature whatsoever. Except as disclosed
in Schedule 3.2, Exhibit 21.1 to the Company's Annual Report on Form 10-K, as
amended, for the year ended July 31, 1997, as filed with the SEC (the "Company
Annual Report"), is a true, accurate and correct statement in all material
respects of all of the information required to be set forth therein by the
regulations of the SEC.
15
3.3 AUTHORITY.
(a) The Board of Directors of the Company has on or prior to the date of
this Agreement at a meeting duly called and held and not subsequently
rescinded or modified in any way (i) unanimously adopted this Agreement in
accordance with the TBCA, (ii) resolved to recommend the approval of this
Agreement to the Company's shareholders and (iii) directed that this
Agreement be submitted to the Company's shareholders for approval.
(b) The Company has all requisite corporate power and authority to enter
into this Agreement and, subject to approval by the shareholders of the
Company of this Agreement, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to (x) approval of this Agreement by the shareholders of
the Company and (y) the filing of appropriate Merger documents as required
by the TBCA. This Agreement has been duly executed and delivered by the
Company and (assuming the valid authorization, execution and delivery of
this Agreement by Parent and Sub) constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms. The Merger, the transactions contemplated hereby, the
filing of the Joint Proxy Statement, and the inclusion of other necessary
materials in the Registration Statement, with the SEC has been duly
authorized by the Company's Board of Directors.
3.4 CONSENTS AND APPROVALS; NO VIOLATION. Assuming that all consents,
approvals, authorizations and other actions described in this Section 3.4 have
been obtained and all filings and obligations described in this Section 3.4
have been made, and except as set forth in Schedule 3.4 (including the
required consents, approvals, authorizations and other actions identified
therein), the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any provision of (i) the Amended and
Restated Charter or Bylaws of the Company, (ii) any provision of the
comparable charter or organization documents of any of the Company's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or (iv) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (ii),
(iii) or (iv), any such violations, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company, or prevent the
consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement
by the Company or is necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement, except for (i) in
connection, or in compliance, with the provisions of the HSR Act, the
Securities Act and the Exchange Act, (ii) the filing of the Articles of Merger
with the Secretary of State of the State of Tennessee and appropriate
documents with the relevant authorities of other states in which the Company
or any of its Subsidiaries is qualified to do business, (iii) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or by the transactions contemplated by this Agreement,
(iv) such filings, authorizations, orders and approvals as may be required to
obtain the State Takeover Approvals, (v) such filings and consents as may be
required under any state or foreign laws pertaining to debt collection, the
issuance of payment instruments or money transmission, (vi) applicable
requirements, if any, of Blue Sky Laws and the Nasdaq National Market, and
(vii) such other consents, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company or prevent the consummation of any of the transactions contemplated
hereby.
16
3.5 SEC DOCUMENTS AND OTHER REPORTS. The Company has filed all required
documents, reports and schedules with the SEC since December 31, 1996 (the
"Company SEC Documents"). As of their respective dates, the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except as set forth
in Schedule 3.5, the consolidated financial statements (including, in each
case, any notes thereto) of the Company included in the Company SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles (except as may be indicated therein or in the notes thereto)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments described
therein). Except as disclosed in Schedule 3.5, the Company has not, since July
31, 1997, made any change in the accounting practices or policies applied in
the preparation of financial statements.
3.6 REGISTRATION STATEMENT AND JOINT PROXY STATEMENT. None of the
information to be supplied by the Company for inclusion or incorporation by
reference in the Registration Statement, the Joint Proxy Statement or any
other document filed with any other regulatory agency in connection herewith,
will: (i) in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading; (ii) in the case of the Joint Proxy
Statement, at the time of the mailing of the Joint Proxy Statement, the time
of each of the Shareholder Meetings and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading; or (iii) in the case of any other filing required by any
regulatory agency in connection herewith, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior
to the Effective Time any event with respect to the Company, its officers and
directors or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement or the Registration Statement,
information concerning such event shall be supplied by the Company to Parent
and its representatives in connection with their preparation and prompt filing
with the SEC of an appropriate amendment or supplement and, as required by
law, disseminated to the shareholders of the Company. The Joint Proxy
Statement (except for portions thereof that relate only to Parent or any of
its Subsidiaries) will comply as to form in all material respects with the
provisions of the Exchange Act.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in Schedule
3.7, since July 31, 1997, (A) the Company and its Subsidiaries have not
incurred any material liability or obligation (indirect, direct or
contingent), or entered into any material oral or written agreement or other
transaction, that is not in the ordinary course of business or that would
result in a Material Adverse Effect on the Company, excluding any changes and
effects resulting from changes in economic, regulatory or political conditions
or changes in conditions generally applicable to the industries in which the
Company and Subsidiaries of the Company are involved and except for any such
changes or effects resulting from this Agreement, the transactions
contemplated hereby or the announcement thereof; (B) the Company and its
Subsidiaries have not sustained any loss or interference with their business
or properties from fire, flood, windstorm, accident or other calamity (whether
or not covered by insurance) that has had a Material Adverse Effect on the
Company; (C) other than any indebtedness incurred by the Company after the
date hereof as permitted by Section 4.1(b)(vi), there has been no material
change in the consolidated indebtedness of the Company and its Subsidiaries,
and no dividend or distribution of any kind declared, paid or made by the
Company on any class of its stock; and (D) there has been no event causing a
Material Adverse Effect on the Company, excluding any changes and effects
resulting from changes in economic,
17
regulatory or political conditions or changes in conditions generally
applicable to the industries in which the Company and Subsidiaries of the
Company are involved and which do not affect the Company in a manner
materially disproportionate to the effect on Parent) and except for any such
changes or effects resulting from this Agreement, the transactions
contemplated hereby or the announcement thereof.
3.8 PERMITS AND COMPLIANCE. Each of the Company and its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for the Company or any of its
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (collectively, the "Company Permits"),
except where the failure to have any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company, and, as of the date of this Agreement, no suspension or cancellation
of any of the Company Permits is pending or, to the "Knowledge of the Company"
(as defined in this Section 3.8), threatened, except where the suspension or
cancellation of any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on Company. Neither the Company nor
any of its Subsidiaries is in default or violation of (A) its charter, bylaws
or other organizational documents, (B) any applicable law, ordinance,
administrative or governmental rule or regulation, (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over the Company or
any of its Subsidiaries, or (D) any provisions of the rules and regulations of
the Credit Card Associations, except, in the case of clauses (A), (B), (C), or
(D) for any violations that, individually or in the aggregate, would not have
a Material Adverse Effect on the Company. Except as disclosed in Schedule 3.8,
as of the date hereof there is no contract or agreement that is material to
the business, financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole. Except as set forth in Schedule 3.8, as of
the date of this Agreement, no event of default or event that, but for the
giving of notice or the lapse of time or both, would constitute an event of
default exists or, upon the consummation by the Company of the transactions
contemplated by this Agreement, will exist under any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
contractual license or other agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties, assets or operations of
the Company or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. Set forth in Schedule 3.8 is a description of any material
changes to the amount and terms of the indebtedness of the Company and its
Subsidiaries as described in the Company Annual Report. "Knowledge of the
Company" means the actual knowledge of the individuals identified in Schedule
3.8.
3.9 TAX RETURNS.
(a) Returns Filed and Taxes Paid. Except as otherwise disclosed in
Schedule 3.9(a), or except as would not have a Material Adverse Effect on
the Company: (i) all Returns required to be filed by or on behalf of the
Company and each of its Subsidiaries have been duly filed on a timely basis
and such Returns are correct, true, and complete; (ii) all Taxes shown to
be payable on the Returns or on subsequent assessments with respect thereto
have been paid in full on a timely basis, and no other Taxes are payable by
the Company or any of its Subsidiaries with respect to items or periods
covered by such Returns or with respect to any taxable periods ending prior
to the date of this Agreement; (iii) the Company and each of its
Subsidiaries have withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and
backup withholding requirements, including maintenance of required records
with respect thereto, in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party; and (iv)
there are no liens on any of the assets of the Company or any of its
Subsidiaries with respect to Taxes, other than liens for Taxes not yet due
and payable.
(b) Tax Deficiencies; Audits; Statutes of Limitations. Except as
otherwise disclosed in Schedule 3.9(b), or except as would not have a
Material Adverse Effect on the Company: (i) neither the Returns of the
Company nor any of its Subsidiaries have been audited by a government or
taxing authority, nor is any such audit in process; (ii) no deficiencies
exist or have been asserted (either in writing or verbally, formally or
informally) or are expected to be asserted with respect to Taxes of the
Company or any of its
18
Subsidiaries, and neither the Company nor any of its Subsidiaries has
received notice (either in writing or verbally, formally or informally)
that it has not filed a Return or paid Taxes required to be filed or paid
by it; (iii) neither the Company nor any of its Subsidiaries is a party to
any action or proceeding for assessment or collection of Taxes, nor has
such event been asserted or threatened (either in writing or verbally,
formally or informally) against the Company or any of its Subsidiaries, or
any of their respective assets; (iv) no waiver or extension of any statute
of limitations is in effect with respect to Taxes or Returns of the Company
or any of its Subsidiaries; and (v) the Company and each of its
Subsidiaries have disclosed on their federal income tax returns all
positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code.
(c) Tax Sharing Agreements. Except as otherwise disclosed in Schedule
3.9(c), neither the Company nor any of its Subsidiaries are a party to any
tax sharing agreement, and (i) the Company has never been a party to a tax
sharing agreement, and (ii) to the Knowledge of the Company, none of its
Subsidiaries has ever been a party to any tax sharing agreement.
3.10 ACTIONS AND PROCEEDINGS. Except as set forth in Schedule 3.10, there
are no outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its
Subsidiaries, or against or involving any of the present or former directors,
officers, employees, consultants, agents or shareholders of the Company or any
of its Subsidiaries, as such, any of its or their properties, assets or
business or any "Company Plan" (as defined in Section 3.13) or any fiduciary,
agent or consultant of any Company Plan that, individually or in the
aggregate, would have a Material Adverse Effect on the Company. As of the date
of this Agreement, there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to the
Knowledge of the Company, threatened against or involving the Company or any
of its Subsidiaries or any of its or their present or former directors,
officers, employees, consultants, agents or shareholders, as such, or any of
its or their properties, assets or business or any Company Plan or any
fiduciary, agent or consultant of any Company Plan that, individually or in
the aggregate, would have a Material Adverse Effect on the Company. As of the
date hereof, there are no actions, suits, labor disputes or other litigation,
legal or administrative proceedings or governmental investigations pending or,
to the Knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries or any of its or their present or former officers,
directors, employees, consultants, agents or shareholders, as such, or any of
its or their properties, assets or business or any Company Plan or any
fiduciary, agent or consultant of any Company Plan relating to the
transactions contemplated by this Agreement.
3.11 [INTENTIONALLY OMITTED].
3.12 CERTAIN AGREEMENTS. Except as set forth in Schedule 3.12, as of the
date of this Agreement, neither the Company nor any of its Subsidiaries is a
party to any agreement or Plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement. No holder of any option to
purchase shares of Company Common Stock, or shares of Company Common Stock
granted in connection with the performance of services for the Company or its
Subsidiaries, is or will be entitled to receive cash from the Company or any
Subsidiary in lieu of or in exchange for such option or shares as a result of
the transactions contemplated by this Agreement.
3.13 ERISA.
(a) With respect to each Plan of the Company or any ERISA Affiliate of
the Company, the Company has made available to Parent a true and correct
copy of (i) the most recent annual report (Form 5500) filed with the
Internal Revenue Service (the "IRS"), (ii) the plan documents of such Plan,
(iii) each trust agreement, insurance contract or administration agreement
relating to such Plan, (iv) the most recent summary plan description for
each Plan for which a summary plan description is required or the most
recent employee communication explanation for each other Plan, (v) the most
recent actuarial report or valuation relating to a Plan subject to Title IV
of ERISA, and (vi) the most recent determination letter, if any, issued by
the IRS with respect to any Plan intended to be qualified under section
401(a) of the Code. Each Plan of
19
the Company or any ERISA Affiliate of the Company complies in all material
respects with ERISA, the Code and all other applicable statutes and
governmental rules and regulations, and (i) no "reportable event" (within
the meaning of Section 4043 of ERISA) has occurred with respect to any
"Company Plan" (as defined in this Section 3.13), (ii) neither the Company
nor any of its ERISA Affiliates has withdrawn (or partially withdrawn) from
any Company Plan or "Company Multiemployer Plan" (as defined in this
Section 3.13) or instituted, or is currently considering taking, any action
to do so, and (iii) no action has been taken, or is currently being
considered, to terminate any Company Plan subject to Title IV of ERISA. No
Company Plan, nor any trust created thereunder, has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived. To the best Knowledge of the Company, no Company
Plan has engaged in a prohibited transaction with a fiduciary or party-in-
interest within the meaning of Section 4975 of the Code or Section 406 of
ERISA, unless a statutory exception exists for such transaction.
(b) With respect to the Plans of the Company or any ERISA Affiliate of
the Company, no event has occurred and, to the Knowledge of the Company,
there exists no condition or set of circumstances in connection with which
the Company or any ERISA Affiliate of the Company could be subject to any
liability under the terms of such Plans, ERISA, the Code, any contract or
document relating to such Plans, or any other applicable law, which would
have a Material Adverse Effect on the Company. All Company Plans that are
intended to be qualified under Section 401(a) of the Code have been
determined by the Internal Revenue Service to be so qualified, or a timely
(within the meaning of Section 401(b) of the Code) application for such
determination is now pending, and the Company is not aware of any reason
why any such Company Plan is not so qualified in operation. Neither the
Company nor any of its ERISA Affiliates has been notified by any Company
Multiemployer Plan that such Company Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of Section 4241
or 4245 of ERISA or that such Company Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA. Neither the
Company nor any of its ERISA Affiliates has any liability or obligation
under any Plan or other contract or agreement to provide benefits after
termination of employment to any employee or dependent of an employee other
than as required by ERISA or as disclosed in the Company Annual Report. As
used herein, (i) "Company Plan" means a "pension plan" (as defined in
Section 3(2) of ERISA (other than a Company Multiemployer Plan)) or a
"welfare plan" (as defined in Section 3(1) of ERISA) established or
maintained by the Company or any of its ERISA Affiliates or as to which the
Company or any of its ERISA Affiliates has contributed or otherwise may
have any liability, and (ii) "Company Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which
the Company or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability. With respect to any Company
Plan which is subject to Title IV of ERISA, the fair market value of the
assets of such Plan are currently (and are expected to be as of the
Effective Time) greater than or equal to the present value of all "benefit
liabilities" (within the meaning of Section 4001(a)(6) of ERISA) of such
Company Plan.
(c) The Company has made available to Parent true and complete (i) copies
of all severance and employment agreements with officers of the Company and
each ERISA Affiliate of the Company, (ii) copies of all severance programs
and policies of the Company with or relating to its employees; and (iii)
copies of all plans, programs, agreements and other arrangements of the
Company with or relating to its employees which contain change of control
or similar provisions.
3.14 COMPLIANCE WITH CERTAIN LAWS. The properties, assets and operations of
the Company and its Subsidiaries are in compliance in all material respects
with all applicable Worker Safety Laws and Environmental Laws, except for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. With respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or any of its Subsidiaries that may interfere
with or prevent compliance or continued compliance in all material respects
with applicable Worker Safety Laws and Environmental Laws, other than any such
interference or prevention as
20
would not, individually or in the aggregate with any such other interference
or prevention, have a Material Adverse Effect on the Company.
3.15 LIABILITIES. Except as fully reflected or reserved against in the
financial statements included in the Company Annual Report, or disclosed in
the footnotes thereto, the Company and its Subsidiaries had no liabilities
(including, without limitation, tax liabilities) at the date of such financial
statements, absolute or contingent, other than liabilities that, individually
or in the aggregate, would not have a Material Adverse Effect on the Company,
and had no liabilities (including, without limitation, tax liabilities) that
were not incurred in the ordinary course of business. Except as so reflected,
reserved or disclosed, the Company and its Subsidiaries have no commitments,
other than any commitments which, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
3.16 LABOR MATTERS. Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or labor contract. Neither the
Company nor any of its Subsidiaries has engaged in any unfair labor practice
with respect to any persons employed by or otherwise performing services
primarily for the Company or any of its Subsidiaries (the "Company Business
Personnel"), and there is no unfair labor practice complaint or grievance
against the Company or any of its Subsidiaries by the National Labor Relations
Board or any comparable state agency pending or threatened in writing with
respect to the Company Business Personnel, except where such unfair labor
practice, complaint or grievance would not have a Material Adverse Effect on
the Company. There is no labor strike, dispute, slowdown or stoppage pending
or, to the Knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries which may interfere with the respective
business activities of the Company or any of its Subsidiaries, except where
such dispute, strike or work stoppage would not have a Material Adverse Effect
on the Company. There is no labor strike, dispute, slowdown or stoppage
pending or, to the Knowledge of Company, threatened against or affecting
Company or any of its Subsidiaries which may interfere with the respective
business activities of Company or any of its Subsidiaries, except where such
dispute, strike or work stoppage would not have a Material Adverse Effect on
Company. The Company and all of its Subsidiaries are in compliance with all
federal and state laws respecting employment and employment practices,
immigration, terms and conditions of employment, and wages and hours, except
where noncompliance would not have a Material Adverse Effect on the Company.
With respect to the employees of Company and/or its Subsidiaries, to the
Knowledge of Company, no event has occurred and there exists no condition or
set of circumstances in connection with which Company, or any of its
Subsidiaries or any ERISA Affiliate of Company could be subject to any
liability under any federal or state law handicap or disability discrimination
law, any federal, state or local fair employment practices or
nondiscrimination act, or any other applicable law which would have a Material
Adverse Effect on Company.
3.17 INTELLECTUAL PROPERTY. The Company and its Subsidiaries have all
Intellectual Property Rights as are necessary in connection with the business
of the Company and its Subsidiaries, taken as a whole, except where the
failure to have such Intellectual Property Rights would not have a Material
Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries
has infringed any Intellectual Property Rights of any third party other than
any infringements that, individually or in the aggregate, would have a
Material Adverse Effect on the Company.
3.18 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of
BT ▇▇▇▇. ▇▇▇▇▇ Incorporated, dated the date hereof (which opinion is written
or, if initially given verbally, shall immediately hereafter be memorialized
in a written opinion to be delivered to Company), to the effect that, as of
the date hereof, the Conversion Number is fair to the Company's shareholders
from a financial point of view (the "Company Fairness Opinion").
3.19 STATE TAKEOVER STATUTES. The Board of Directors of the Company has, to
the extent such statutes are applicable, (a) taken all action necessary to
exempt Parent, its Subsidiaries and Affiliates, the Merger, this Agreement and
the transactions contemplated hereby from Sections ▇▇-▇▇▇-▇▇▇ through 48-103-
505 of the TBCA and (b) taken all action necessary to satisfy the provisions
of Sections ▇▇-▇▇▇-▇▇▇ through ▇▇-▇▇▇-▇▇▇ of the TBCA. To the Knowledge of the
Company, no other state takeover statutes are applicable to the Merger, this
Agreement and the transactions contemplated hereby.
21
3.20 REQUIRED VOTE OF COMPANY SHAREHOLDERS. The affirmative vote of the
holders of not less than a majority of the outstanding shares of Company
Common Stock is required to approve this Agreement (the "Company Required
Vote"). No other vote of the shareholders of the Company is required by law,
the Amended and Restated Charter or Bylaws of the Company or otherwise in
order for the Company to consummate the Merger and the transactions
contemplated hereby.
3.21 POOLING OF INTERESTS; REORGANIZATION. To the Knowledge of the Company,
neither it, any of its Subsidiaries, nor any of its directors or officers has
(i) taken any action or failed to take any action which action or failure
would jeopardize the treatment of the Merger as a pooling of interests for
accounting purposes or (ii) taken any action or failed to take any action
which action or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
3.22 BROKERS. No broker, investment banker or other person is entitled to
any broker's, finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement, other than BT ▇▇▇▇. ▇▇▇▇▇
Incorporated, and Bear, ▇▇▇▇▇▇▇ & Co. Inc., based upon arrangements made by or
on behalf of the Company.
3.23 EMPLOYMENT AGREEMENTS. Each of ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ has executed an employment agreement with Parent, such employment
agreements to be effective and deemed delivered only upon the Effective Time.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 CONDUCT OF BUSINESS PENDING THE MERGER.
(a) Actions by Parent. Except as expressly permitted by clauses (i)
through (xiii) of this Section 4.1(a), during the period from the date of
this Agreement through the Effective Time, Parent shall, and shall cause
each of its Subsidiaries to, in all material respects carry on its business
in the ordinary course of its business as currently conducted and, to the
extent consistent therewith, use reasonable best efforts to preserve intact
its current business organizations, keep available the services of its
current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end
that its goodwill and ongoing business shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement, Parent shall not, and
shall not permit any of its Subsidiaries to, without the prior written
consent of the Company, which consent for purposes of Section 4.1(a)(iv),
may not be unreasonably withheld or delayed:
(i)(A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in
their capacity as such (other than dividends and other distributions by
Subsidiaries), (B) other than in the case of any Subsidiary, split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) subject to the
limitations of Section 4.4 and 5.9(b), purchase, redeem or otherwise
acquire any shares of capital stock of Parent or any other securities
thereof or those of any Subsidiary or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants
or options to acquire any such shares, voting securities, equity
equivalent or convertible securities, other than (A) the issuance of
shares of Parent Common Stock upon the exercise of Parent Options
outstanding on the date of this Agreement in accordance with their
current terms, (B) the issuance of shares of Parent Common Stock in
connection with acquisitions permitted pursuant to clause (iv) of this
paragraph (a); and (C) the issuance by any wholly-owned Subsidiary of
Parent of its capital stock to Parent or another wholly-owned
Subsidiary of Parent;
22
(iii) amend its Articles of Incorporation or Bylaws; provided,
however, that Parent may amend its Articles of Incorporation to
increase its authorized capital stock to 100,000,000 authorized shares
of Parent Common Stock (as referenced in Section 2.2 hereof);
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or
by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, except those
transactions in the ordinary course of business which Parent or any of
its Subsidiaries is obligated to consummate, and the consideration for
which consists solely of cash, pursuant to agreements to which Parent
or any of its Subsidiaries is a party in effect as of the date hereof;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than transactions that
are in the ordinary course of business consistent with past practice
and not material to Parent and its Subsidiaries taken as a whole;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to,
or other investments in, any other person, other than (A) in the
ordinary course of business consistent with past practice and (B)
indebtedness, loans, advances, capital contributions and investments
between Parent and any of its Subsidiaries or between any of such
Subsidiaries;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or
ownership of Parent or any Subsidiary;
(viii) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Parent Plan or
employment or consulting agreement, other than as required by law or by
this Agreement;
(ix) increase the compensation payable or to become payable to its
officers or employees, except for increases in the ordinary course of
business consistent with past practice in salaries or wages of
employees of Parent or any of its Subsidiaries who are not officers of
Parent or any of its Subsidiaries, or grant any severance or
termination pay to, or enter into any employment or severance agreement
with, any director or officer of Parent or any of its Subsidiaries, or
establish, adopt, enter into, or, except as may be required to comply
with applicable law, amend in any material respect or take action to
enhance in any material respect or accelerate any rights or benefits
under, any labor, collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee;
(x) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Subsidiary by any applicable
material federal, state or local law, rule, regulation, guideline or
ordinance;
(xi) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect
to accounting policies or procedures (other than actions required to be
taken by generally accepted accounting principles);
(xii) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability; or
(xiii) authorize, recommend or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(b) Actions by the Company. Except as expressly permitted by clauses (i)
through (xiii) of this Section 4.1(b), during the period from the date of
this Agreement through the Effective Time, the Company shall, and shall
cause each of its Subsidiaries to, in all material respects carry on its
business in the ordinary
23
course of its business as currently conducted and, to the extent consistent
therewith, use reasonable best efforts to preserve intact its current
business organizations, keep available the services of its current officers
and employees and preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, the Company shall not, and shall not permit
any of its Subsidiaries to, without the prior written consent of Parent,
which consent, for purposes of Section 4.1(b)(iv), may not be unreasonably
withheld or delayed:
(i)(A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its shareholders in
their capacity as such (other than dividends and other distributions by
Subsidiaries), (B) other than in the case of any Subsidiary, split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) subject to the
limitations set forth in Sections 4.4 and 5.9(b), purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any
other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants
or options to acquire any such shares, voting securities, equity
equivalent or convertible securities, other than (A) the issuance of
shares of Company Common Stock upon the exercise of Company Options
outstanding on the date of this Agreement in accordance with their
current terms, (B) the issuance of shares of Company Common Stock in
connection with acquisitions permitted pursuant to clause (iv) of this
paragraph (b), and (C) the issuance by any wholly-owned Subsidiary of
the Company of its capital stock to the Company or another wholly-owned
Subsidiary of the Company;
(iii) amend its Charter or Bylaws;
(iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or
by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets, except those
transactions in the ordinary course of business which the Company or
any of its Subsidiaries is obligated to consummate, and the
consideration for which consists solely of cash, pursuant to agreements
to which the Company or any of its Subsidiaries is a party in effect as
of the date hereof;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than transactions that
are in the ordinary course of business consistent with past practice
and not material to the Company and its Subsidiaries taken as a whole;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to,
or other investments in, any other person, other than (A) in the
ordinary course of business consistent with past practices and (B)
indebtedness, loans, advances, capital contributions and investments
between the Company and any of its Subsidiaries or between any of such
Subsidiaries;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or
ownership of the Company or any Subsidiary;
(viii) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Company Plan or
employment or consulting agreement, other than as required by law;
(ix) except as set forth in Schedule 4.1(b)(ix), increase the
compensation payable or to become payable to its officers or employees,
except for increases in the ordinary course of business consistent with
past practice in salaries or wages of employees of the Company or any
of its Subsidiaries who are not officers of the Company or any of its
Subsidiaries, or grant any severance or termination pay to, or
24
enter into any employment or severance agreement with, any director or
officer of the Company or any of its Subsidiaries, or establish, adopt,
enter into, or, except as may be required to comply with applicable
law, amend in any material respect or take action to enhance in any
material respect or accelerate any rights or benefits under, any labor,
collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;
(x) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Subsidiary by any applicable
material federal, state or local law, rule, regulation, guideline or
ordinance;
(xi) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect
to accounting policies or procedures (other than actions required to be
taken by generally accepted accounting principles);
(xii) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability; or
(xiii) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
4.2 NO SOLICITATION.
(a) The Company agrees that, from and after the date hereof, it shall
not, and shall not cause, authorize or permit its Subsidiaries or any of
its officers, directors, agents, attorneys, accountants, advisors,
affiliates and other representatives, or those of any of its Subsidiaries
to, solicit, participate in, or encourage inquiries or proposals with
respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions or negotiations with,
any person relating to, any "Company Takeover Proposal" (as such term is
defined in Section 4.2(c)); provided, however, that the Company may engage
in discussions or negotiations with, or furnish information concerning the
Company and its Subsidiaries, business, properties or assets to, any third
party which makes a Company Takeover Proposal if the Board of Directors of
the Company concludes in good faith on the basis of the advice of its
outside legal counsel (who may be its regularly engaged outside legal
counsel) that the failure to take such action would violate the fiduciary
obligations of such Board under applicable law. The Company shall promptly
(within 24 hours) advise Parent following the receipt by the Company of any
Company Takeover Proposal and the material terms thereof (including the
identity of the person making such Company Takeover Proposal), and advise
Parent of any developments with respect to such Company Takeover Proposal
immediately upon the occurrence thereof.
(b) Parent agrees that, from and after the date hereof, it shall not, and
shall not cause, authorize or permit its Subsidiaries or any of its
officers, directors, agents, attorneys, accountants, advisors, affiliates
and other representatives, or those of any of its Subsidiaries to, solicit,
participate in, or encourage inquiries or proposals with respect to, or
engage in any negotiations concerning, or provide any confidential
information to, or have any discussions or negotiations with, any person
relating to, any "Parent Takeover Proposal" (as such term is defined in
Section 4.2(d)); provided, however, that Parent may engage in discussions
or negotiations with, or furnish information concerning Parent and its
Subsidiaries, business, properties or assets to, any third party which
makes a Parent Takeover Proposal if the Board of Directors of Parent
concludes in good faith on the basis of the advice of its outside counsel
(who may be its regularly engaged outside counsel) that the failure to take
such action would violate the fiduciary obligations of such Board under
applicable law. Parent shall promptly (within 24 hours) advise the Company
following the receipt by Parent of any Parent Takeover Proposal and the
material terms thereof (including the identity of the person making such
Parent Takeover Proposal), and advise the Company of any developments with
respect to such Parent Takeover Proposal immediately upon the occurrence
thereof.
25
(c) "Company Takeover Proposal" means any tender offer or exchange offer,
proposal for a merger, consolidation or other business combination
involving the Company or any of its Subsidiaries or any proposal or offer
to acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of, the Company or any of its Subsidiaries, other
than by the transactions contemplated under, or otherwise permitted by,
this Agreement.
(d) "Parent Takeover Proposal" means any tender offer or exchange offer,
proposal for a merger, consolidation or other business combination
involving Parent or any of its Subsidiaries or any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of, Parent or any of its Subsidiaries, other than by
the transactions contemplated under, or otherwise permitted by, this
Agreement.
4.3 THIRD PARTY STANDSTILL AGREEMENTS. During the period from the date of
this Agreement through the Effective Time, neither Parent nor the Company
shall terminate, amend, modify or waive any provision of any confidentiality
or standstill agreement to which such party or any of its Subsidiaries is a
party (other than any involving the other party hereto). During such period,
Parent and the Company agree to enforce, to the fullest extent permitted under
applicable law, the provisions of any such agreements, including, but not
limited to, obtaining injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions thereof in any court of
the United States or any state thereof having jurisdiction.
4.4 POOLING OF INTERESTS; REORGANIZATION. During the period from the date of
this Agreement through the Effective Time, unless the other party shall
otherwise agree in writing, none of Parent, the Company or any of their
respective Subsidiaries (or Affiliates over which each has control) shall (a)
knowingly take or fail to take any action which action or failure would
jeopardize the treatment of the Merger as a pooling of interests for
accounting purposes or (b) knowingly take or fail to take any action which
action or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code. Between the
date of this Agreement and the Effective Time, Parent and the Company each
shall take all reasonable actions necessary to cause the characterization of
the Merger as a pooling of interests for accounting purposes (it being agreed
that such actions will include, if necessary, in the case of Parent, the sale
or transfer for fair value of all shares of Parent Common Stock that currently
are treasury shares). Following the Effective Time, neither Parent nor the
Company shall knowingly take any action, or fail to take any action, that
would jeopardize the characterization of the Merger as a "pooling of
interests" for accounting purposes.
4.5 NO PURCHASE OF SECURITIES; OTHER ACTIONS.
(a) Except as provided in this Agreement or pursuant to the Stock Option
Agreements of even date herewith, during the period from the date of this
Agreement through the earlier of (aa) the Effective Time, or (bb) the
termination of this Agreement, neither Parent nor any of its Subsidiaries
will, in any manner, (i) acquire, or offer to acquire, any equity
securities of the Company (including options to acquire securities), (ii)
acquire, or offer to acquire, any assets of the Company, or (iii) otherwise
act, alone or in concert with others, to seek to control or influence the
management, the Board of Directors or the policies of the Company. Neither
Parent nor any of its Subsidiaries will initiate any request for any waiver
of the foregoing provisions or any consent to any action which otherwise
would be prohibited thereby and may request such a waiver or consent only
if the Company has initiated such request in writing prior thereto.
(b) Except as provided in this Agreement or pursuant to the Stock Option
Agreements of even date herewith, during the period from the date of this
Agreement through the earlier of (aa) the Effective Time, or (bb) the
termination of this Agreement, neither Company nor any of its Subsidiaries
will, in any manner, (i) acquire, or offer to acquire, any equity
securities of Parent (including options to acquire securities),
(ii) acquire, or offer to acquire, any assets of Parent, or (iii) otherwise
act, alone or in concert with others, to seek to control or influence the
management, the Board of Directors or the policies of Parent. Neither the
Company nor any of its Subsidiaries will initiate any request for any
waiver of the foregoing provisions or any consent to any action which
otherwise would be prohibited thereby and may request such a waiver or
consent only if Parent has initiated such request in writing prior thereto.
26
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 SHAREHOLDER MEETINGS.
(a) The Company and Parent each shall duly take all lawful action to
call, give notice of, convene and hold a meeting of its shareholders
(respectively, the "Company Shareholder Meeting" and the "Parent
Shareholder Meeting" and, collectively, the "Shareholder Meetings") to be
held as promptly as practicable after the effective date of the
Registration Statement for the purpose of considering, voting upon, and
obtaining the Parent Required Vote and the Company Required Vote with
respect to the approval of this Agreement, the transactions contemplated
hereby and, in the case of Parent, for the additional purposes of
considering and voting upon the Share Issuance and the Parent Amendments.
The Company and Parent shall coordinate and cooperate with respect to the
timing of such meetings and shall use their reasonable best efforts to hold
such meetings on the same day.
(b) The Company and Parent shall take all lawful action to solicit the
adoption of this Agreement by the Company Required Vote and the Parent
Required Vote, respectively. Further, the Parent and Company will, through
their respective Boards of Directors, recommend to their respective
shareholders approval of the matters described in Section 5.1(a) above to
the effects set forth in Section 2.3(a) (with respect to Parent, the
"Parent Recommendation")) and 3.3(a) (with respect to Company, the "Company
Recommendation")) and shall not withdraw, rescind, modify, or materially
qualify in any adverse manner, or take any action or make any statement in
connection with its Shareholders Meeting materially inconsistent with such
recommendation (an "Adverse Change in Recommendation"); provided, however,
that a Board of Directors shall not be required to make such recommendation
or solicit the adoption of this Agreement by the Company Required Vote or
the Parent Required Vote, as the case may be, and shall be entitled to make
an Adverse Change in Recommendation, if such Board concludes in good faith
on the basis of the advice of its outside legal counsel (who may be its
regularly engaged outside legal counsel) that the making of such
recommendation, or the failure to make an Adverse Change in Recommendation,
would violate the fiduciary obligations of such Board under applicable law.
The parties acknowledge and agree that in no event will the exercise by a
party of the provisions of this Section 5.1(b) (allowing such party, for
instance, under certain specified circumstances and acting through its
Board of Directors, to withdraw, rescind, modify, or materially qualify in
any adverse manner its recommendation) excuse or relieve such party of its
obligation to hold its Shareholder Meeting as provided in Section 5.1(a)
above.
5.2 PREPARATION OF THE REGISTRATION STATEMENT AND THE JOINT PROXY
STATEMENT. The Company and Parent shall promptly prepare the Joint Proxy
Statement and Parent shall promptly prepare the Registration Statement, in
which the Joint Proxy Statement will be included, and Parent and Company shall
promptly thereafter file the Registration Statement and Joint Proxy Statement.
Each of Parent and the Company shall use its reasonable best efforts to cause
its financial advisor to reconfirm and reissue, as of the date of mailing of
the Joint Proxy Statement, the Parent Fairness Opinion and the Company
Fairness Opinion, respectively, for inclusion and reference in the Joint Proxy
Statement; provided, however, that in no event shall the reconfirmation and
reissuance of either the Parent Fairness Opinion or the Company Fairness
Opinion be a condition precedent to the obligations set forth in Section 5.1
above or a condition precedent to the mailing of the Joint Proxy Statement.
Further, in no event shall the reconfirmation or reissuance, at whatever date,
of the Parent Fairness Opinion or the Company Fairness Opinion, as the case
may be, constitute a condition precedent to Closing. Each of Parent and the
Company shall use its reasonable best efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing. As promptly as practicable after the
Registration Statement shall have become effective, each of Parent and the
Company shall mail the Joint Proxy Statement to its shareholders. Parent shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is now not so qualified) required to be taken under any applicable
state securities laws in connection with the issuance of Parent Common Stock
in the Merger, and the Company shall furnish all information concerning the
Company and the holders of Company Common Stock as may be reasonably requested
in connection with any such action. No amendment or supplement to the Joint
Proxy Statement or the
27
Registration Statement will be made by Parent or the Company without the prior
approval of the other party. Further, to the extent any such amendments or
supplements are required and consented to by each of Parent and the Company,
Parent or the Company, as the case may be, shall promptly prepare and file
such amendement or supplement, as the case may be. Parent and the Company each
will advise the other, promptly after it receives notice thereof, of the time
when the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the suspension
of the qualification of the Parent Common Stock issuable in connection with
the Merger for offering or sale in any jurisdiction, or of any request by the
SEC for amendment of the Joint Proxy Statement or the Registration Statement
or comments thereon and responses thereto or requests by the SEC for
additional information.
5.3 EMPLOYEE BENEFITS MATTERS. Exhibit 5.3 hereto sets forth certain
agreements among the parties hereto with respect to employee benefit matters
and is incorporated herein by reference.
5.4 ACCESS TO INFORMATION. Subject to currently existing contractual and
legal restrictions applicable to Parent or to the Company or any of their
Subsidiaries, each of Parent and the Company shall, and shall cause each of
its Subsidiaries to, afford to the accountants, counsel, financial advisors
and other representatives of the other party hereto reasonable access to, and
permit them to make such inspections as they may reasonably require of, during
normal business hours during the period from the date of this Agreement
through the Effective Time, all their respective properties, books, contracts,
commitments and records (including, without limitation, the work papers of
independent accountants, if available and subject to the consent of such
independent accountants) and, during such period, Parent and the Company
shall, and shall cause each of its Subsidiaries to, furnish promptly to the
other (i) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of
federal or state securities laws and (ii) all other information concerning its
business, properties and personnel as the other may reasonably request. No
investigation pursuant to this Section 5.4 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto. All information obtained by Parent or the
Company pursuant to this Section 5.4 shall be kept confidential in accordance
with that certain Mutual Non-Disclosure Agreement dated May 29, 1998 between
Parent and the Company (the "Non-Disclosure Agreement").
5.5 COMPLIANCE WITH THE SECURITIES ACT; POOLING PERIOD.
(a) Prior to the Effective Time, the Company shall cause to be prepared
and delivered to Parent a list (reasonably satisfactory to counsel for
Parent) identifying all persons who, at the time of the Company Shareholder
Meeting, in the Company's reasonable judgment, may be deemed to be
"affiliates" of the Company as that term is used in paragraphs (c) and (d)
of Rule 145 promulgated under the Securities Act (the "Rule 145
Affiliates"). The Company shall use its reasonable best efforts to cause
each person who is identified as a Rule 145 Affiliate in such list to
deliver to Parent on or prior to the Effective Time a written agreement, in
substantially the form of Exhibit 5.5(a) hereto. Parent shall publish, in a
manner that satisfies the "publication" requirements under applicable SEC
rules or accounting releases, financial results (including combined sales
and net income) covering at least 30 days of post-Merger operations no
later than 60 days following the first quarter-end that is at least 30 days
after the Effective Time. The period commencing 30 days prior to the
Effective Time and ending on the date of the publication of the post-Merger
financial results is referred to herein as the "Pooling Period."
(b) Prior to the Effective Time, Parent shall deliver to the Company a
list (reasonably satisfactory to counsel to the Company) identifying those
persons who may be, in Parent's reasonable judgment, at the time of the
Parent Shareholder Meeting, affiliates of Parent under applicable SEC
accounting releases with respect to pooling of interests accounting
treatment. Parent shall provide the Company such information and documents
as the Company shall reasonably request for purposes of reviewing such
list. Parent shall use its reasonable best efforts to deliver or cause to
be delivered to the Company, prior to the Effective Time, a written
agreement in substantially the form of Exhibit 5.5(b) hereto, executed by
each of such persons identified in the foregoing list.
28
(c) At the Effective Time, Parent and the persons listed on Schedule
5.5(c) shall have executed and delivered a Registration Rights Agreement in
the form attached as Exhibit 5.5(c).
5.6 STOCK EXCHANGE LISTINGS. Parent shall obtain approval for the listing of
the shares of Parent Common Stock to be issued in connection with the Merger.
5.7 FEES AND EXPENSES. Except as provided in this Section 5.7, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby including,
without limitation, the fees and disbursements of counsel, financial advisors
and accountants, shall be paid by the party incurring such costs and expenses,
provided that all printing expenses and filing fees shall be divided equally
between Parent and the Company.
5.8 COMPANY OPTIONS; STOCK PURCHASE PLAN.
(a) At the Effective Time, by virtue of the Merger and without any
further action on the part of the Company or the holder thereof, each
"Company Option" will be assumed or substituted by Parent in such manner
that Parent (i) is a corporation "issuing or assuming a stock option in a
transaction to which Section 424(a) applies" within the meaning of Section
424(a) of the Code or (ii) Parent, to the extent that Section 424 of the
Code does not apply to any such Company Options, would be such a
corporation were Section 424 of the Code applicable to such Company
Options. At the Effective Time, by virtue of the Merger and without any
further action on the part of the Company, the Parent or the holder of any
Company Option, each Company Option will be automatically converted into a
Parent Option to purchase a number of shares of Parent Common Stock equal
to the number of shares of Company Common Stock that could have been
purchased (assuming full vesting) under such Company Option multiplied by
the Conversion Number (rounded to the nearest whole number of shares of
Parent Common Stock) at a price per share of Parent Common Stock equal to
the per share option exercise price specified in the Company Option divided
by the Conversion Number (rounded to the nearest whole cent). Each such
Parent Option shall contain terms and provisions which are substantially
similar to those terms, conditions and provisions contained in the original
Company Option, except that references to the Company in such Company
Option will be deemed to refer to Parent and the date of grant of the
Parent Option for purposes of interpretation for terms, conditions and
provisions in the new Parent Option shall be deemed to be the date of grant
of such Company Option. For Federal income tax purposes, the date of grant
of the substituted Parent Option shall be the date on which the
corresponding Company Option was granted. At the Effective Time, for
purposes of interpretation of such new Parent Options, (i) all references
in any stock option plan of the Company shall be deemed to refer to Parent;
(ii) any stock option plan of the Company which governs a Company Option
shall continue to govern the Parent Option substituted therefor; and (iii)
Parent shall, as soon as practicable after the Effective Time, issue to
each holder of an outstanding Company Option a document evidencing the
foregoing issued and substituted Parent Option by Parent. At the Effective
Time, by virtue of the Merger and without any further action on the part of
the Company, each Company Option shall become fully vested pursuant to the
terms and provisions of the agreement pertaining to such option and the
plan (as amended and restated, if applicable) under which such option was
granted. It is the intention of the parties: (1) that, subject to
applicable law, the Company Options assumed by Parent qualify, following
the Effective Time, as incentive stock options, as defined in Section 422
of the Code, to the extent that the Company Options qualified as incentive
stock options prior to the Effective Time, (2) that each holder of a
Company Option shall receive a new Parent Option which preserves (but does
not increase) the excess of the fair market value of the shares subject to
the option immediately before the Effective Time over the aggregate option
price of such shares immediately before the Effective Time, (3) that the
terms, conditions, restrictions and provisions of the Parent Option be
identical to the terms, conditions, restrictions and provisions of the
Company Option for which it was substituted assuming that the Parent had
originally issued such Company Option for Parent Common Stock, and (4) any
terms, conditions, restrictions or provisions of an option applicable to a
number of shares rather than a percentage or fraction of shares should be
appropriately adjusted based upon the Conversion Number. No options shall
be issued by Company on or after the Effective Time under any stock option
plan currently maintained by the Company.
29
(b) With respect to each Company Option converted into a Parent Option
pursuant to Section 5.8(a), and with respect to the shares of Parent Common
Stock underlying such option, Parent shall file and keep current all
requisite registration statements, on Form S-8 or other appropriate form,
for as long as such options remain outstanding, which registration
statement shall include a prospectus meeting the requirements of General
Instruction C to Form S-8 with respect to affiliates of the Company,
subject at all times to compliance with all applicable federal and state
securities laws.
(c) Except as provided in Section 4.1(b)(ix), the Company agrees that it
will not grant any restricted stock, stock appreciation rights or limited
stock appreciation rights and also agrees that it will not permit cash
payments to holders of Company Options in lieu of the substitution therefor
of Parent Options, as described in this Section 5.8.
5.9 REASONABLE BEST EFFORTS; POOLING OF INTERESTS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including, but not limited to: (i) the
obtaining of all necessary actions or non-actions, waivers, consents and
approvals from all Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities)
and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including those in connection with the HSR Act and
State Takeover Approvals), (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated
or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement. No party to this Agreement shall consent to any voluntary delay
of the consummation of the Merger at the behest of any Governmental Entity
without the consent of the other parties to this Agreement, which consent
shall not be unreasonably withheld.
(b) Each of Parent and the Company agrees to take, together with their
respective accountants, all actions reasonably necessary in order to obtain
a favorable determination (if required) from the SEC that the Merger may be
accounted for as a pooling of interests in accordance with generally
accepted accounting principles.
(c) Each party shall use all reasonable best efforts to not take any
action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or
result in a breach of any covenant or agreement made by it in this
Agreement.
(d) Notwithstanding anything to the contrary contained in this Agreement,
in connection with any filing or submission required or action to be taken
by either Parent or the Company to effect the Merger and to consummate the
other transactions contemplated hereby, the Company shall not, without
Parent's prior written consent, commit to any divestiture transaction, and
neither Parent nor any of its Affiliates shall be required to divest or
hold separate or otherwise take or commit to take any action that limits
its freedom of action with respect to, or its ability to retain, the
Company or any of the material businesses, product lines or assets of
Parent or any of its Affiliates or that otherwise would have a Material
Adverse Effect on Parent.
5.10 PUBLIC ANNOUNCEMENTS. Parent and the Company will not issue any press
release with respect to the transactions contemplated by this Agreement or
otherwise issue any written public statements with respect to such
transactions other than upon mutual agreement and cooperation with the other
party, except as may be required by applicable law or by obligations pursuant
to any listing agreement with any national securities exchange. Parent and the
Company also agree to reasonably cooperate regarding any written
communications
30
which relate to the transactions contemplated by this Agreement made to their
employees during the period from the date hereof until the Effective Time.
5.11 STATE TAKEOVER LAWS. If any "fair price," "business combination",
"control share acquisition", or "greenmail" statute or other similar statute
or regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall use
their reasonable best efforts to obtain or grant such approvals and take such
actions as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
5.12 NOTIFICATION OF CERTAIN MATTERS. Parent shall use its reasonable best
efforts to give prompt notice to the Company, and the Company shall use its
reasonable best efforts to give prompt notice to Parent, of: (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which it is aware and which would be reasonably likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (y) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in all
material respects, (ii) any failure of Parent or the Company, as the case may
be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder or (iii) any change
or event which would be reasonably likely to have a Material Adverse Effect on
Parent or the Company, as the case may be; provided, however, that the
delivery of any notice pursuant to this Section 5.12 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
5.13 RESIGNATION OF DIRECTORS. The Company shall cause each director of the
Company to resign as a director of the Company immediately after the Effective
Time. Immediately thereafter, the Board of Directors of the Company shall be
comprised of the individuals identified on Schedule 1.4.
5.14 BOARD OF DIRECTORS OF PARENT. Effective at the Effective Time, the
Board of Directors of Parent shall consist of eleven (11) directors (the
"Directors"), that five (5) of such Directors shall have been duly appointed
by Parent, five (5) of such Directors shall have been duly appointed by the
Company, and one (1) Director shall have been nominated by Parent and approved
by the Company (and such Director shall not be employed by either Parent, the
Company, nor any Subsidiary or Affiliate thereof). Effective at the Effective
Time, the Parent's Board of Directors, and the Compensation Committee of the
Board of Directors, shall consist of the individuals identified on Schedule
5.14 attached hereto, and each of ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. Daily
shall serve, together with ▇▇▇▇▇ ▇. ▇▇▇▇▇, as a Vice Chairman of Parent.
5.15 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE. For six years from
and after the Effective Time, ▇▇▇▇▇▇ agrees not to, and agrees to cause the
Surviving Corporation not to, alter the provisions of the Company's Amended
and Restated Charter and Bylaws relating to indemnification of officers and
directors of the Company and its Subsidiaries for acts or omissions occurring
at or prior to the Effective Time. Parent shall cause the Surviving
Corporation to provide, for a period of six years from the Effective Time, the
Company's current directors and officers an insurance and indemnification
policy that provides coverage for events occurring prior to the Effective Time
(the "D&O Insurance") that is no less favorable than the Company's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, that the Surviving Corporation
shall not be required to pay an annual premium for the D&O Insurance in excess
of 300 percent of the last annual premiums paid prior to the date hereof
(which premiums the Company represents and warrants to be approximately
$85,000), but in such case shall purchase as much coverage as possible for
such amount.
31
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved by the requisite vote of
shareholders of the Company in accordance with applicable law, and the
Amended and Restated Charter and Bylaws of the Company, and the Share
Issuance, this Agreement, and the transactions contemplated hereby
(including, if applicable, any Conversion Number Adjustment pursuant to
Section 7.1(g)) shall have been approved by the requisite vote of the
shareholders of Parent in accordance with applicable rules of the NYSE,
applicable law and the Articles of Incorporation and Bylaws of Parent.
(b) Stock Exchange Listings. The Parent Common Stock issuable in the
Merger shall have been approved for listing on the NYSE, subject to notice
of issuance.
(c) HSR and Other Approvals.
(i) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(ii) All authorizations, consents, orders, declarations or approvals
of, or filings with, or terminations or expirations of waiting periods
imposed by, any Governmental Entity, which the failure to obtain, make
or occur would have the effect of making the Merger or any of the
transactions contemplated hereby illegal or would have a Material
Adverse Effect on Parent (assuming the Merger had taken place), shall
have been obtained, shall have been made or shall have occurred.
(d) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose, and no action
to limit, stop or prohibit the mailing of the Joint Proxy Statement to
shareholders, shall have been initiated or, to the Knowledge of Parent or
the Company, threatened by the SEC. All necessary state securities or blue
sky authorizations (including State Takeover Approvals) shall have been
received.
(e) No Order. No court or other Governmental Entity having jurisdiction
over the Company or Parent, or any of their respective Subsidiaries, shall
have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making the Merger or any of the transactions contemplated hereby
illegal.
6.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each of
Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time, each of the representations and warranties of Parent
and Sub contained in this Agreement that is qualified by materiality shall
be true and correct on and as of the Effective Time as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct as of such
certain date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement, and the Company
32
shall have received a certificate signed on behalf of each of Parent and
Sub by its Chief Executive Officer and its Chief Financial Officer to such
effect.
(b) Tax Opinion. The Company shall have received an opinion of counsel to
the Company, in form and substance reasonably satisfactory to the Company,
dated the Effective Time, substantially to the effect that on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will
each be a party to that reorganization within the meaning of Section
368(b) of the Code;
(ii) no gain or loss will be recognized by Parent, Sub or the Company
as a result of the Merger; and
(iii) except with respect to cash received in lieu of a fractional
share interest, no gain or loss will be recognized by the shareholders
of the Company upon the conversion of their shares of Company Common
Stock into shares of Parent Common Stock pursuant to the Merger, except
with respect to cash, if any, received in lieu of fractional shares of
Parent Common Stock.
In rendering such opinion, counsel to the Company shall receive and may
rely upon such representations as reasonably requested by counsel to the
Company from Parent, the Company, and others, including representations
from Parent substantially similar to the representations in Section 2.9
hereof and representations from the Company substantially similar to the
representations in Section 3.9 hereof.
(c) Pooling Opinion. The Company shall have received the opinion of Price
Waterhouse LLP, dated as of the date on which the Registration Statement
shall become effective and the Effective Time, to the effect that the
Merger qualifies for pooling-of-interests accounting treatment under
Accounting Principles Board Opinion No. 16 if consummated in accordance
with this Agreement.
6.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time, each of the representations and warranties of the
Company contained in this Agreement that is qualified by materiality shall
be true and correct on and as of the Effective Time as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct as of such
certain date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the Effective Time as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement, and Parent shall have received a certificate signed on behalf of
the Company by its Chief Executive Officer and its Chief Financial Officer
to such effect.
(b) Tax Opinion. Parent shall have received an opinion of counsel to
Parent, in form and substance reasonably satisfactory to the Company, dated
the Effective Time, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code, and the Company, Sub and Parent will
each be a party to that reorganization within the meaning of Section
368(b) of the Code;
33
(ii) no gain or loss will be recognized by Parent, Sub or the Company
as a result of the Merger; and
(iii) except with respect to cash received in lieu of a fractional
share interest, no gain or loss will be recognized by the shareholders
of the Company upon the conversion of their shares of Company Common
Stock into shares of Parent Common Stock pursuant to the Merger, except
with respect to cash, if any, received in lieu of fractional shares of
Parent Common Stock.
In rendering such opinion, counsel to Parent shall receive and may rely
upon such representations as reasonably requested by counsel to Parent from
Parent, the Company, and others, including representations from Parent
substantially similar to the representations in Section 2.9 hereof and
representations from the Company substantially similar to the
representations in Section 3.9 hereof.
(c) Pooling Opinion. Parent shall have received the opinion of ▇▇▇▇▇ &
Young LLP, dated as of the date on which the Registration Statement shall
become effective and the Effective Time, to the effect that the Merger
qualifies for pooling-of-interests accounting treatment under Accounting
Principles Board Opinion No. 16 if consummated in accordance with this
Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after any approval of the matters presented
in connection with the Merger by the shareholders of the Company or Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if the other party shall have failed
to comply in any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with prior to the date
of such termination, which failure to comply has not been cured within five
business days following receipt by such other party of written notice of
such failure to comply; provided, however, that if any such breach is
curable by the breaching party through the exercise of the breaching
party's best efforts and for so long as the breaching party shall be so
using its best efforts to cure such breach, the non-breaching party may not
terminate this Agreement pursuant to this paragraph;
(c) by either Parent or the Company, if there has been (i) a breach by
the other party (in the case of Parent, including any material breach by
Sub) of any representation or warranty that is not qualified as to
materiality which has the effect of making such representation or warranty
not true and correct in all material respects or (ii) a breach by the other
party (in the case of Parent, including any material breach by Sub) of any
representation or warranty that is qualified as to materiality, in each
case which breach has not been cured within five business days following
receipt by the breaching party of written notice of the breach; provided,
however, that if any such breach is curable by the breaching party through
the exercise of the breaching party's best efforts and for so long as the
breaching party shall be so using its best efforts to cure such breach, the
non-breaching party may not terminate this Agreement pursuant to this
paragraph;
(d) by Parent or the Company, if: (i) the Merger has not been effected on
or prior to the close of business on November 30, 1998 (the "Termination
Date", subject to extension as provided herein); provided, however, that
(A) the right to terminate this Agreement pursuant to this Section 7.1(d)
shall not be available to any party whose failure to fulfill any of its
obligations contained in this Agreement has been the cause of, or resulted
in, the failure of the Merger to have occurred on or prior to the aforesaid
date; and (B) the Termination Date may be extended prior to the termination
hereof by written notice of either Parent or the Company to the other to a
date not later than February 28, 1999, if the Merger shall not have been
consummated as a result of the Company or Parent having failed by November
30, 1998 to receive all required regulatory approvals or consents with
respect to the Merger necessary to satisfy the condition set
34
forth in Section 6.1(c); or (ii) any court or other Governmental Entity
having jurisdiction over a party hereto shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable;
(e) by Parent or the Company, if the shareholders of the Company do not
approve this Agreement and the transactions contemplated hereby at the
Company Shareholder Meeting or any adjournment or postponement thereof;
(f) by Parent or the Company, if the shareholders of Parent do not
approve this Agreement, the transactions contemplated hereby, and the Share
Issuance at the Parent Shareholder Meeting or any adjournment or
postponement thereof;
(g) by the Company, if the product of the Conversion Number and the
average closing price of Parent for the ten trading-day period immediately
preceding the day which is two (2) business days before the Closing Date
would result in each shareholder of the Company receiving consideration
with a value of less than $15.00 per share of the Company Common Stock held
by such shareholder as so measured; provided; however, that before the
Company may terminate this Agreement pursuant to this Section 7.1(g), the
Company shall provide written notice of such intent at least one (1)
business day prior to the Closing Date. After receipt of such notice,
Parent shall have until the Closing Date to notify the Company of its
election to submit to its shareholders for approval a "Conversion Number
Adjustment" (as defined in this Section 7.1(g)). So long as Parent secures
and delivers to the Company "Revised Shareholder Agreements" (as defined
herein), the Company shall not have the right to terminate this Agreement
pursuant to this Section 7.1(g) pending the approval of Parent's
shareholders of the Conversion Number Adjustment. For purposes of this
Section 7.1(g), "Conversion Number Adjustment" shall mean the appropriate
adjustment of the Conversion Number to provide that each shareholder of the
Company shall receive consideration at Closing with a value equal to $15.00
per share of Company Common Stock held by such shareholder; "Revised
Shareholder Agreements" shall mean those Shareholder Agreements executed by
the Company and certain shareholders of Parent of even date herewith, as
amended to provide that each such shareholder shall vote in favor of this
Agreement, the Merger, the Share Issuance, the Parent Amendments, and the
other transactions hereby contemplated, notwithstanding the adjustment of
the Conversion Number pursuant to this Section 7.1(g). Notwithstanding
anything to the contrary in this Section 7.1(g), the Conversion Number
Adjustment mechanism described herein may be invoked only once.
(h) by Parent, if: (i) the Board of Directors of the Company shall not
have made the Company Recommendation, or shall have resolved not to make
the Company Recommendation, or shall have made an Adverse Change in
Recommendation, or shall have resolved to do so; (ii) the Board of
Directors of the Company shall have recommended to the shareholders of the
Company any Company Takeover Proposal, or shall have resolved to do so; or
(iii) a tender offer or exchange offer for 20% or more of the outstanding
shares of capital stock of the Company is commenced, and the Board of
Directors of the Company fails to recommend against acceptance of such
tender offer or exchange offer by its shareholders (including by taking no
position with respect to the acceptance of such tender offer or exchange
offer by its shareholders);
(i) by the Company, if: (i) the Board of Directors of Parent shall not
have made the Parent Recommendation, or shall have resolved not to make the
Parent Recommendation, or shall have made an Adverse Change in
Recommendation, or shall have resolved to do so; or (ii) the Board of
Directors of Parent shall have recommended to the shareholders of Parent
any Parent Takeover Proposal, or shall have resolved to do so; or (iii) a
tender offer or exchange offer for 20% or more of the outstanding shares of
capital stock of the Company is commenced, and the Board of Directors of
Parent fails to recommend against acceptance of such tender offer or
exchange offer by its shareholders (including by taking no position with
respect to the acceptance of such tender offer or exchange offer by its
shareholders);
35
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement by
either Parent or the Company, as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability hereunder on the part of
the Company, Parent, Sub or their respective officers or directors (except for
the last sentence of Section 5.4 and the entirety of Section 5.7 and Article
VIII, which shall survive the termination); provided, however, that nothing
contained in this Section 7.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this Agreement.
7.3 AMENDMENT. This Agreement may be amended by the parties hereto, by or
pursuant to action taken by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the
Merger by the shareholders of Parent and the Company, but, after any such
approval, no amendment shall be made which by law requires further approval by
such shareholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4 WAIVER. At any time prior to the Effective Time, the parties hereto may
(i) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements in this Agreement or in any
Schedule, Exhibit or instrument delivered pursuant to this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that the agreements set
forth in Article I, Section 4.4, Section 5.14, Section 5.15 and this Article
VIII shall survive the Effective Time, and those set forth in the last
sentence of Section 5.4, Sections 5.7 and 7.2 and this Article VIII shall
survive termination.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
NOVA Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Chief Executive Officer
▇▇▇▇▇▇▇▇▇ ▇▇.: (▇▇▇) ▇▇▇-▇▇▇▇
36
with copies to:
Long ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Suite ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to
PMT Services, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇,
a Professional Limited Liability Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇ ▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 INTERPRETATION. When a reference is made in this Agreement to a Section,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
8.4 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, except
as provided in the last sentence of Section 5.4, constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof. This
Agreement, is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
8.6 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Tennessee, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto irrevocably waives its right to a trial by
jury in any action, proceeding or counterclaim arising out of or relating to
this Agreement or the actions of Parent, the Company, or Sub in the
negotiation, administration, performance and enforcement thereof.
8.7 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the
other parties.
8.8 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions
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contemplated hereby are not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
8.9 ENFORCEMENT OF THIS AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, such remedy being in addition to any other
remedy to which any party is entitled at law or in equity.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
and Plan of Merger to be signed by their respective officers thereunto duly
authorized all as of the date first written above.
"PARENT:"
NOVA CORPORATION
By: _________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Chief Executive Officer
"SUB:"
CHURCH MERGER CORP.
By: _________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Chief Executive Officer
"COMPANY:"
PMT SERVICES, INC.
By: _________________________________
▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer
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EXHIBIT 5.3
Similarly Situated Employees. The parties hereto agree it is their intent
that, from and after the Closing and subject to applicable law, the employees
of the Surviving Corporation and the employees of Parent, to the extent such
employees are similarly situated, shall have substantially equivalent benefits
(the "Similarly Situated Intent"), subject to the following understanding: (1)
immediately after the Closing, the Surviving Corporation (which will, as a
result of the Merger, become a wholly-owned subsidiary of Parent) and Parent
shall continue to maintain their separate respective plans (including employee
benefit plans), programs and arrangements for their respective employees
pursuant to the transactions contemplated by this Agreement, and (2) in
furtherance of the Similarly Situated Intent, the Surviving Corporation and
Parent may, from and after the Closing, take such steps as are reasonable and
appropriate to carry out the Similarly Situated Intent by having their
employees participate in unified plans (whether by plan mergers, adoption of
plans by a company, and/or modification of the eligibility provisions of
existing plans), by modifying existing separate plans so that they thereafter
provide substantially equivalent benefits, and/or by taking other measures
consistent with the Similarly Situated Intent, as the then current management
of the Surviving Corporation and Parent shall determine in their discretion.
The provisions hereof are not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
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